As filed with the Securities and Exchange Commission on December 30, 1999.
Registration Statement No. 33-_______________
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM SB-2
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
-----------------------------
eDiets.com, Inc.
-----------------------------
Delaware 65-0687110
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
-----------------------------
8980
(Primary Standard Industrial
Classification Code Number)
-----------------------------
3467 W. Hillsboro Boulevard
Deerfield Beach, Florida 33442
(954) 360-9022
(Address and Telephone Number
of Principal Executive Offices)
-----------------------------
David R. Humble, Chief Executive Officer
eDiets.com, Inc.
3467 W. Hillsboro Boulevard
Deerfield Beach, Florida 33442
(954) 360-9022
(Name, Address and Telephone Number of Agent for Service)
-------------------------
COPIES OF COMMUNICATIONS TO: Mark A. Pachman, Esquire
Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes Boulevard, Suite 1200
West Palm Beach, Florida 33401
(561) 686-3307
-------------------------
<PAGE>
Approximate Date of Commencement of Proposed Sale to the Public: As
soon as practicable after this Registration Statement becomes effective.
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of earlier effective
registration statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Title of Each Proposed Proposed
Class of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered Per Unit Price Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock (par value $.001 per share) 5,539,063(1) $ 2.00 $ 11,078,126 $ 2,924.63(9)
Warrants to purchase shares of Common Stock 1,815,625(2) -0- -0- -0-
Common Stock underlying the Warrants 1,815,625(8) $ 2.50 $4,539,062.50 $ 1,198.31(10)
Placement Agent's Warrants 640,625(3) -0- -0- -0-
Common Stock underlying Placement Agent's
Warrants 640,625(4)(8) $ 2.50 $1,601,562.50 $ 422.81(10)
Placement Agent's shares of Common Stock 150,000(4) $ 2.00 $ 300,000 $ 79.20(9)
Common Stock issuable upon exercise of
Executive Committee options 300,000(5)(8) $ 2.00 $ 600,000 $ 158.40(10)
<PAGE>
Common Stock underlying options issued
to Director 32,500(6)(8) $ 1.425 $ 46,312.50 $ 12.23(10)
Common Stock underlying warrants issued
to advertising agency 82,500(7)(8) $ 2.00 $ 165,000 $ 43.56(10)
=====================================================================================================================
Total $ 4,839.14
==========
=====================================================================================================================
</TABLE>
(1) Includes the registration for resale of the following: (i) 3,631,250
shares of Common Stock issued in a private placement completed in
December, 1999 (the "Private Placement"); (ii)907,813 shares of Common
Stock which the Company has agreed to issue to investors in the Private
Placement in the event that this Registration Statement has not become
effective and the Common Stock listed for trading on the Nasdaq SmallCap
Market by April 17, 2000; and (iii) 1,000,000 shares of Common Stock held
by the Company's Chief Executive Officer.
(2) Represents Warrants to purchase shares of Common Stock at an exercise
price of $2.50 per share issued to investors in the Private Placement and
the shares of Common Stock underlying the Warrants.
(3) Represents Warrants to purchase shares of Common Stock at an exercise
price of $2.50 per share issued to the Placement Agent in the Private
Placement.
(4) Includes the registration for resale of the following: (i) 150,000 shares
of Common Stock issued to the Placement Agent in the Private Placement in
connection with the acquisition by the Company of eDiets, Inc. (formerly
eDiets.com, Inc.) in November, 1999; and (ii) 640,625 shares of Common
Stock issuable upon the exercise of Placement Agent Warrants issued to
the Placement Agent in connection with the Private Placement.
(5) Represents the shares of Common Stock issuable upon exercise of stock
options granted to members of the Company's Executive Committee at an
exercise price of $2.00 per share.
(6) Represents the shares of Common Stock issuable upon exercise of options
issued to a director of the Company at an exercise price of $1.425 per
share.
(7) Represents shares of Common Stock issuable upon exercise of warrants
issued to an advertising agency at an exercise price of $2.00 per share.
(8) Pursuant to Rule 416, there are also being registered such indeterminable
shares of Common Stock as may become issuable pursuant to adjustment and
anti-dilution provisions contained in the Warrants, the Placement Agent's
Warrants and the stock option agreements.
(9) As of the date of this filing there is no trading price for the Company's
shares of Common Stock. Therefore, the registration fee has been
calculated by using a price of $2.00, which was the price per share paid
by the investors in the Private Placement.
(10) This has been calculated by using the exercise price of the warrants or
options.
<PAGE>
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
eDiets.com
-------------------------
Cross Reference Sheet
Pursuant to Item 501 of Regulation SB
<TABLE>
<CAPTION>
Form SB-2 Item No. and Caption Caption or Location in Prospectus
----------------------------------------------- -----------------------------------
<S> <C>
1. Front of the Registration Statement and Outside Outside Front Cover Page of
Front Cover of Prospectus Prospectus
2. Inside Front and Outside Back Cover Pages of Inside Front and Outside Back Cover
Prospectus Pages of Prospectus
3. Summary Information and Risk Factors Prospectus Summary; Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Not applicable
6. Dilution Not Applicable
7. Selling Security Holders Selling Security Holders
8. Plan of Distribution Plan of Distribution
9. Legal Proceedings Business
10. Directors, Executive Officers, Promoters and Management
Control Persons
11. Security Ownership of Certain Beneficial Owners Principal Stockholders
and Management
12. Description of Securities Description of Securities
13. Interest of Named Experts and Counsel Not Applicable
14. Disclosure of Commission Position on Management
Indemnification for Securities Act Liabilities
15. Organization within Last Five Years Business
16. Description of Business Business
17. Management's Discussion and Analysis and Plan of Management's Discussion and Analysis
Operation of Financial Condition and Results of
Operations
18. Description of Property Business - Properties
19. Certain Relationships and Related Transactions Management - Certain Transactions
20. Market for Common Equity and Related Stockholder Market for Common Stock and Related
Matters Stock Matters
<PAGE>
21. Executive Compensation Management - Executive Compensation
and Employment Agreements
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Accountants on Not Applicable
Accounting and Financial Disclosure
</TABLE>
<PAGE>
SUBJECT TO COMPLETION DATED December 30, 1999
PRELIMINARY PROSPECTUS
eDiets.com, Inc.
8,560,313 Shares of Common Stock
2,456,250 Warrants to Purchase Common Stock
Certain stockholders of eDiets.com, Inc. ("eDiets" or "we") are
offering up to 8,560,313 shares of our Common Stock, par value $.001 per share
("Common Stock"). These stockholders will be selling shares of Common Stock
which they own or which they can acquire by exercising certain outstanding
warrants or options. In addition, certain warrant holders will be selling up to
2,456,250 Warrants to acquire our Common Stock ("warrants"). For more complete
information, refer to the Prospectus sections entitled "Selling Security
Holders" and "Plan of Distribution".
We will not receive any proceeds from the resale of shares of Common
Stock and/or Warrants by the selling stockholders and selling warrantholders
(both of whom we will refer to as the "Selling Security Holders"). We have
agreed to pay the expenses of this offering. The Selling Security Holders will
pay any brokerage compensation in connection with their sale of the Common Stock
or Warrants.
Although our Common Stock has been publicly held, there has been no
trading market for the Common Stock. Whale Securities Co., L.P., which served as
the Placement Agent in our recently completed private placement (the "Placement
Agent"), has filed an application to initiate quotations in our freely tradable
shares of Common Stock in the "pink sheets" published by National Quotation
Bureau, Inc. Upon acceptance by the NASD of the application, it is anticipated
that a limited trading market will commence. We intend to apply for listing of
the Common Stock and Warrants on the Nasdaq SmallCap Market as soon as we meet
all of the listing requirements.
Our business is subject to many risks and an investment in our Common
Stock or Warrants will also involve significant risks. You should carefully
consider the various Risk Factors described on pages 8 through 17 before
investing in the Common Stock or Warrants.
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Neither the Securities and Exchange Commission nor any State Securities
Commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
-------------------------
The date of this Prospectus is __________, 2000.
2
<PAGE>
TABLE OF CONTENTS
PAGE
Prospectus Summary 4
Risk Factors 8
Use of Proceeds 17
Market for Common Stock and Related Stockholder Matters 18
Capitalization 18
Selected Financial Data 19
Management's Discussion and Analysis of Financial Condition and Results of
Operations 21
Business 26
Management 37
Principal Stockholders 43
Certain Transactions 45
Selling Security Holders 46
Plan of Distribution 49
Description of Securities 52
Legal Matters 54
Experts 54
Where You Can Find More Information 54
Historical Financial Statements F-1
Pro Forma Condensed Financial Statements F-27
3
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
Prospectus. This summary is not complete and does not contain all of the
information that you should consider before investing in the Common Stock or
Warrants of the Company. We urge you to read the entire Prospectus carefully.
You should note that in November, 1999 we acquired all of the capital stock of
eDiets, Inc., then known as eDiets.com, Inc. ("Original eDiets") through the
merger of eDiets Acquisition Corp., our recently organized wholly-owned
subsidiary, with and into Original eDiets. We shall use the term "the
Acquisition" in this Prospectus to refer to our acquisition of Original eDiets.
Upon completion of the Acquisition, we changed our name from Olas, Inc. to
eDiets.com, Inc. When we use the term "the Company" or "eDiets" in this
Prospectus, and when we describe our business, we refer to our combined company
and our combined operations following the Acquisition. When we use the term
"Olas", we mean our company prior to the Acquisition.
OUR BUSINESS
We are one of the original marketers of customized fee-based diet
programs exclusively online. We have developed a proprietary software engine
that enables us to create a diet program that is unique to each individual, then
deliver it directly to the individual's home or office via the Internet. Our
personalization features, low cost basis and centralized Internet distribution
create a unique competitive advantage when compared to the established offline
competitors, such as Weight Watchers International, Jenny Craig, Inc. and
similar companies, which operate thousands of "brick and mortar" storefronts
internationally.
At our Online Diet Center, we offer programs for both women and men. To
enroll in a program a consumer completes a questionnaire and our software system
automatically generates a personal profile and a diet recommendation. We use the
profile to create a private Online Diet Center for the consumer that functions
as their personal resource for custom meal plans, shopping lists and related
diet and nutrition information.
We also publish [email protected], an online diet information resource,
which is currently emailed twice a week to a community of over 700,000 consumers
who have completed our questionnaire, received a personal profile and have
provided us with an email address. Our web site also includes our Diet Store in
which we advertise a variety of health, fitness and nutrition products which our
users can purchase from third-party vendors.
We are a Delaware corporation with our executive offices located at
3467 W. Hillsboro Boulevard, Deerfield Beach, Florida 33442. Our telephone
number is (954) 360-9022, and our Internet address is www.ediets.com.
4
<PAGE>
THE OFFERING
Common Stock Offered by the Selling Stockholders
- ------------------------------------------------
8,560,313, which includes 3,631,250 shares of Common Stock purchased by
investors in our Private Placement; 1,815,625 shares of Common Stock underlying
Warrants issued to the investors in the Private Placement; 907,813 shares of
Common Stock which we have agreed to issue to the investors in the event that
this Registration Statement has not become effective and the Company's Common
Stock listed on the Nasdaq SmallCap Market by April 17, 2000; 1,000,000 shares
of Common Stock held by our Chief Executive Officer, David R. Humble; 150,000
shares of Common Stock held by the Placement Agent in our Private Placement;
640,625 shares of Common Stock issuable upon the exercise of Warrants we issued
to the Placement Agent; 300,000 shares of stock issuable upon the exercise of
options issued to members of our Executive Committee; 32,500 shares of Common
Stock issuable upon exercise of options granted to Isaac Kier, one of our
directors, in consideration of consulting services he rendered to us; and 82,500
shares of Common Stock issuable upon exercise of warrants we issued to an
advertising agency.
Warrants Offered by the Selling Warrantholders
- ----------------------------------------------
2,456,250, which includes 1,815,625 Warrants issued to the investors in the
Private Placement to purchase shares of Common Stock at an exercise price of
$2.50 and 640,625 Warrants issued to the Placement Agent to purchase shares of
Common Stock at an exercise price of $2.50.
RISK FACTORS
An investment in our securities involves a high degree of risk. For a
discussion of the risk factors, see the "Risk Factors" section.
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
The summary financial data presented below should be read in conjunction
with the more detailed financial statements of eDiets and notes thereto which
are included elsewhere in this Prospectus along with the section entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
OLAS
For the nine months ended September 30, 1999, Olas, Inc. (as our company
was called prior to the Acquisition) had income, comprised primarily of interest
income, of $14,646 and expenses of $38,082, resulting in a net loss for the
period of $23,436.
ORIGINAL EDIETS
The table below contains a summary of the historical financial
information of Original eDiets derived from the financial statements included
elsewhere in this Prospectus. The nine month Statement of Operations data at
September 30, 1998 and 1999 and actual balance sheet data at December 31, 1998
and September 30, 1999 are derived from the unaudited financial statements of
Original eDiets and include all adjustments, and consist only of normal
recurring adjustments, that management considers necessary to fairly present the
data. The results of operations for the nine months ended September 30, 1999 are
not necessarily indicative of the results which may be expected for the full
year. When you read this historical financial information, it is important that
you read along with it the historical financial statements, related notes, and
other financial information included elsewhere in this Prospectus.
STATEMENT OF OPERATIONS DATA
<TABLE>
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
------------------------ ------------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 247,795 $ 477,626 $ 254,973 $1,922,347
Cost of revenues 23,098 75,551 37,839 160,915
Sales and marketing 148,621 435,491 185,936 613,774
General and administrative 134,936 304,427 255,399 692,623
Depreciation and amortization 37,559 61,807 46,000 64,477
Net income (loss) (96,419) (399,650) (270,201) 390,558
(Loss) earnings
per common
share-basic
and diluted $ (0.02) $ (0.06) $ (0.04) $ 0.06
</TABLE>
6
<PAGE>
The following table below includes a summary of the historical
financial information of Original eDiets derived from the financial statements
included elsewhere in the Prospectus in addition to a pro forma basis, adjusted
to give the effect of the acquisition as if it had occurred on September 30,
1999 and to reflect the net proceeds received in November and December, 1999
from the Private Placement.
BALANCE SHEET DATA
September 30, 1999
December 31, ------------------------
1998 Actual Pro Forma(1)
---------- ---------- ----------
Working capital (deficiency) $ (604,687) $ (456,104) $6,403,553
Total assets 233,259 671,352 7,310,541
Total liabilities 834,986 755,867 735,547
Stockholders' equity
(capital deficiency) (601,727) (84,515) 6,574,994
(1) Gives effect to the Acquisition, including a $1,981,107 non-recurring
charge relating to the Acquisition, as if the Acquisition occurred on
September 30, 1999. Also gives effect to the completion of the Private
Placement in which the Company raised net proceeds of $6,218,520, as if
the Private Placement occurred on September 30, 1999.
7
<PAGE>
RISK FACTORS
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. YOU SHOULD CAREFULLY
CONSIDER THE RISKS DESCRIBED BELOW AND THE OTHER INFORMATION IN THIS PROSPECTUS
BEFORE DECIDING TO INVEST IN THE SHARES AND/OR WARRANTS.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE AN EXTREMELY LIMITED
OPERATING HISTORY.
Original eDiets was incorporated in March 1996 and launched its
Internet operations in early 1997. Before the Acquisition, we had not conducted
any meaningful operations since 1995. Accordingly, we have an extremely limited
operating history upon which you can evaluate our prospects. As a result of our
limited operating history, we do not have historical financial data for
sufficient number of periods upon which to forecast quarterly revenues and
results of operations. An investor in our securities must consider the risks,
uncertainties, expenses and difficulties frequently encountered by companies in
their early stages of development, particularly companies in new and rapidly
evolving markets, including the Internet market.
WE HAVE ONLY LIMITED REVENUES, HAVE INCURRED NET LOSSES IN OUR LAST TWO FISCAL
YEARS AND ANTICIPATE CONTINUING LOSSES.
We have only had limited revenues and have incurred net losses since
inception, except for modest profitability in the first nine months of 1999.
With the proceeds of the recently completed Private Placement, we intend to
aggressively expand our marketing and advertising efforts and accordingly, will
incur significant marketing expenditures. We do not expect that we will generate
sufficient revenues to cover these expenses in the near future and therefore we
anticipate a period of continuing losses.
SEASONAL AND CYCLICAL PATTERNS MAY AFFECT OUR BUSINESS AND OUR QUARTERLY
OPERATING RESULTS MAY FLUCTUATE.
We believe that sales of weight management programs in the traditional
industry generally are lower in the third and fourth quarters of each year.
Although we have not experienced material seasonal patterns to date, due to our
limited operating history it is difficult to predict a seasonable pattern of our
sales. However, as we make the transition to a more developed market, seasonal
and cyclical patterns may develop. As a result, if our Internet market follows
this same seasonal pattern as those in traditional mediums, we may experience
lower revenues in the third and fourth quarters of each year. Seasonal and
cyclical patterns in the general Internet environment may also affect our
revenues. For example, traffic levels on our web site may fluctuate during the
summer and year-end vacation and holiday periods. Accordingly, in the future,
our seasonal sales patterns may become more pronounced, may strain our
capabilities and may cause a shortfall in net sales as compared to expenses in
any given period. We do not believe that period-to-period comparisons of our
operating results are necessarily meaningful nor should they be relied upon as
indicative of future performance. In one or more future quarters our results of
operations may fall below the
8
<PAGE>
expectations of securities analysts and investors. In such event, the trading
price of the Common Stock, if and when an active trading market develops, would
likely be materially adversely affected.
TO MANAGE OUR GROWTH AND EXPANSION, WE NEED TO IMPROVE AND IMPLEMENT FINANCIAL
AND MANAGERIAL CONTROLS AND REPORTING SYSTEMS AND PROCEDURES. IF WE ARE UNABLE
TO DO SO SUCCESSFULLY, OUR RESULTS OF OPERATIONS WOULD BE IMPAIRED.
We have been engaged in an expansion of operations and, utilizing
proceeds of the recently completed Private Placement, we expect to experience a
significant period of growth in our business. This expansion has placed, and
will continue to place, a significant strain on our management, information
systems and resources. In order to manage our growth effectively, we will need
to improve and implement our financial and managerial controls and reporting
systems and procedures. If we do not do so, we may not be able to successfully
manage our operations which could cause us harm.
WE ARE DEPENDENT ON CONTINUED GROWTH IN USE OF THE INTERNET.
Our market is new and rapidly evolving. Our business would be adversely
affected if Internet usage does not continue to grow, particularly usage by
women. A number of factors may inhibit Internet usage, including:
o inadequate network infrastructure;
o security concerns;
o inconsistent quality of service; and
o lack of availability of cost-effective, high-speed service.
If Internet usage grows, the Internet infrastructure may not be able to
support the demands placed on it by this growth and its performance and
reliability may decline. In addition, web sites have experienced interruptions
in their service as a result of outages and other delays occurring throughout
the Internet network infrastructure. If these outages or delays frequently occur
in the future, Internet usage, as well as the usage of our web sites could grow
more slowly or decline.
BECAUSE WE HAVE LIMITED MARKETING EXPERIENCE AND DEPEND ON THIRD-PARTY PARTNERS,
WE MAY BE UNABLE TO SUCCESSFULLY BUILD OUR BRAND.
Successful promotion and marketing of our brand will depend on
aggressive acceleration of online marketing of our current offerings and
development and offering of additional programs and services and expansion of
our online and offline advertising and marketing relationships with other
Internet programs. We are substantially dependent upon third parties with which
we enter into marketing and advertising relationships to attract traffic to our
web site, primarily other web sites on which we advertise or with which we have
revenue sharing arrangements. If their traffic decreases or we incorrectly
determine that those web sites on which we advertise attract visitors likely to
use our services, our advertising efforts will be adversely affected. If our
brand building strategy is unsuccessful, the
9
<PAGE>
substantial marketing, advertising and public relations expenses we incur may
never be recovered. In addition, we may be unable to increase sufficiently our
future revenues and our business could be materially harmed.
WE ARE DEPENDENT ON SEVERAL MAJOR INTERNET PORTALS.
A significant portion of our online traffic has come from our
advertising arrangements with America Online and iVillage. During the first nine
months of 1999, approximately 16% and 13% of our revenues for this period were
attributed to visitors who reached our web site through America Online and
iVillage, respectively. In addition, we have recently entered into a significant
advertising agreement with Yahoo for advertising commencing on January 1 through
the end of 2000 and anticipate that an increasing portion of our revenues will
come from visitors who reach our web site through Yahoo. Our agreements with
America Online and iVillage both currently expire in the end of December 1999.
We have recently entered into a new agreement with iVillage which begins on
January 1 and ends on December 31, 2000. There is no obligation on the part of
America Online, iVillage or Yahoo to renew the agreements when they expire. Our
agreements with these advertisers do not prohibit them from carrying online
sites or developing and providing content that compete with our site. We are in
the process of negotiating a further agreement with America Online for
advertising during the year 2000. However, we may not reach an agreement with
America Online and may instead look to the other major portals in our
advertising program for the coming year. A discontinuance of our advertising on
iVillage or Yahoo or American Online (if we renew our advertising arrangements
with America Online) for any reason could materially adversely affect our
business, results of operations and financial condition.
OUR BUSINESS IS DEPENDENT ON OUR CHIEF EXECUTIVE OFFICER.
The success of our business will be largely dependent on the efforts of
David R. Humble, our Chief Executive Officer and Chairman of the Board, and
other key management personnel. Although the Company has entered into an
employment agreement with Mr. Humble, the loss of his services or other key
management personnel would have a material adverse effect on the Company's
business and prospects. Mr. Humble has other interests to which he devotes some
time, including various inventions and patents. We have "key man" life insurance
in the amount of $2,000,000 covering Mr. Humble.
The success of the Company will also be dependent upon its ability to
hire and retain additional qualified industry, programming, marketing, financial
and other personnel. Competition for qualified personnel is intense, and there
can be no assurance that the Company will be able to hire or retain additional
qualified personnel. Any inability to attract and retain such qualified
personnel would have a materially adverse effect on the Company. See
"Management."
10
<PAGE>
WE ARE CONTROLLED BY DAVID R. HUMBLE, WHOSE INTERESTS MAY DIFFER FROM OTHER
STOCKHOLDERS.
David R. Humble owns approximately 62% of our outstanding Common
Stock. Accordingly, he has the ability to determine the outcome of the election
of the Company's Board of Directors and other matters submitted to the Company's
stockholders for approval. Accordingly, investors will have little say in the
outcome of these matters. The interests of Mr. Humble may differ from the
interests of other stockholders. See "Management" and "Principal Stockholders."
IF WE DO NOT RESPOND TO RAPID CHANGES, OUR PROGRAMS AND SERVICES COULD BECOME
OBSOLETE AND WE COULD LOSE CUSTOMERS.
If we face material delays or are unsuccessful in introducing new
programs, services and products and enhancements, or our new offerings are not
favorably received, our customers may forego the use of our services and use
those of our competitors. The Internet and the online commerce industry are
rapidly changing. If competitors introduce new products and services embodying
new technologies, or if new industry standards and practices emerge, our
existing web site and proprietary technology and systems may become obsolete or
less attractive to potential customers. To remain competitive, we must continue
to enhance and improve the functionality and features of our programs, services
and products. These development efforts may require substantial time and
expense. We may be unable to respond quickly, cost-effectively or sufficiently
to technological developments, which could harm our business.
WE MAY BE UNABLE TO MEET OUR FUTURE CAPITAL REQUIREMENTS.
We may require substantial working capital to fund our business growth.
We believe that the net proceeds from the recently completed Private Placement,
together with our available funds, will be sufficient to meet our anticipated
needs for working capital and capital expenditures through at least the next 12
months as we accelerate our marketing campaign. However, due to unforeseen
circumstances, unanticipated changes in our plans or other factors beyond our
control, if our assumptions prove to be inaccurate, we may require financing
sooner. We cannot be certain that additional financing will be available to us
on favorable terms when required, or at all. If we raise additional funds
through the issuances of equity, equity-related or debt securities, such
securities may have rights, preferences or privileges senior to those of the
rights of the Common Stock and our stockholders may experience additional
dilution.
THE INTERNET IS SUBJECT TO MANY GOVERNMENTAL REGULATIONS WHICH MAY IMPACT OUR
ABILITY TO CONDUCT BUSINESS.
There is, and will be, an increasing number of laws and regulations
pertaining to the Internet. These laws or regulations may relate to liability
for information received from or transmitted over the Internet, online content
regulation, user privacy, taxation and quality of products and services. In
addition, the applicability to the Internet of existing laws governing
11
<PAGE>
intellectual property ownership and infringement, copyright, trademark, trade
secret, obscenity, libel, employment, personal privacy and other issues is
uncertain and developing. Any new law or regulation, or the adverse application
or interpretation of existing laws, may decrease the growth in the use of the
Internet or our web site. This could decrease the demand for our programs,
increase our cost of doing business or otherwise have a material adverse effect
on our business, financial condition or results of operations.
WE MAY BE SUBJECT TO CLAIMS BASED ON THE CONTENT WE PROVIDE ON THE INTERNET.
Because visitors to our web site may distribute our content to other
people, third parties might sue us for defamation, negligence, product
liability, copyright or trademark infringement, or other matters. These types of
claims have been brought, sometimes successfully, against other online services
in the past. We may also incur liability for the content on other web sites that
are linked to our web site or for content and materials that may be posted by
visitors in chat rooms or bulletin boards. Our email services may also subject
us to potential claims resulting from unsolicited email, lost or misdirected
messages, illegal or fraudulent use of email or interruptions or delays in email
service. We also enter into agreements with commerce partners that entitle us to
receive a share of any revenue from the purchase of goods and services through
direct links from our web site to their web sites. These arrangements may
subject us to additional claims, including product liability or personal injury
related to these products and services, because we provide access to these
products or services, even if we do not provide the products or services
ourselves. Our insurance, which covers commercial general liability, as well as
professional liability, may not adequately protect us against these types of
claims.
SATISFACTORY PERFORMANCE OF OUR WEB SITE IS CRITICAL TO OUR BUSINESS AND
REPUTATION.
We are dependent upon the continuous, reliable and secure operation of
Internet servers and related hardware and software. Our primary Internet data
center is located in a secure third-party facility in Virginia. Although the
facility provides power backup and increased security, we cannot assure you that
there will be no interruption in service. To the extent that service is
interrupted or delayed, we could experience a decrease in traffic, loss of
customers and revenue and harm to our reputation. Fire, floods, hurricanes,
power loss, telecommunications failures, break-ins and similar events could
damage these systems. Computer viruses, electronic break-ins and other similar
disruptive problems could also adversely affect the operation of our web site.
We do not presently have any formal disaster recovery plan, nor do we have
insurance coverage for business interruption.
Our web site must accommodate a high volume of traffic and deliver
information that is updated frequently. Our web site has in the past and may in
the future experience slower response times or decreased traffic for a variety
of reasons. In addition, our visitors depend on Internet service providers,
online service providers and other web site operators for access to our web
site. Many of them have experienced significant outages in the past and could
experience outages, delays and other difficulties due to system failures
unrelated to our systems in the future.
12
<PAGE>
WE NEED TO EXPAND OUR NETWORK INFRASTRUCTURE AND CUSTOMER SUPPORT CAPABILITIES
OR WE WILL NOT BE ABLE TO SERVICE OUR GROWING CUSTOMER BASE.
We will need to expand our network infrastructure and customer support
capabilities in anticipation of an expanded customer base. Expansion will
require us to make significant up-front expenditures for servicers, routers and
computer equipment, to increase bandwidth for Internet connectivity and to hire
and train additional customer support personnel. Expansion must be completed
without system disruptions. Failure to expand our network infrastructure or
customer service capabilities would materially adversely affect our business and
operations.
A LACK OF SECURITY OVER THE INTERNET MAY IMPACT OUR BUSINESS.
A significant barrier to electronic commerce and confidential
communications over the Internet has been the need for secure transmission of
confidential information. Internet usage could decline if any well-publicized
compromise of security occurred. We may incur significant costs to protect
against the threat of security breaches or to alleviate problems caused by such
breaches. Experienced programmers could attempt to penetrate our network
security. Programmers who are able to penetrate our network security could
misappropriate proprietary information or cause interruptions in our services,
and we could be required to expend capital and resources to protect against or
to alleviate problems. Moreover, because privacy is important to many of our
customers, any publicized compromise of our security could result in a loss of
customers. Security breaches could have a material adverse effect on our
business, results of operations and financial condition.
OUR NET SALES COULD DECREASE IF WE BECOME SUBJECT TO SALES AND OTHER TAXES AND
WE COULD BE REQUIRED TO PAY TAXES FOR PRIOR SALES.
If one or more states or any foreign country successfully asserts that
we should collect sales or other taxes on the sale of our services or products,
our net sales and results of operations could be harmed. We could also be
subject to claims for taxes on our prior sales. We do not currently collect
sales or other similar taxes. If we become obligated to collect sales taxes, we
will need to update our system that processes customers' orders to calculate the
appropriate sales tax for each customer order and to remit the collected sales
taxes to the appropriate authorities. These upgrades will increase our operating
expenses. In addition, our customers may be discouraged because they have to pay
sales tax, causing our net sales to decrease. As a result, we may need to lower
prices to retain these customers.
REGULATION REGARDING TRADE PRACTICES.
The Federal Trade Commission and certain states regulate advertising
and other consumer matters such as unfair and deceptive trade practices. The
State of Florida in which our corporate offices and center of operations is
located contains disclosure regulations for weight-loss providers with regard to
their program. In addition, the nature of our interactive Internet activities
may subject us to similar trade practices legislation of other states.
13
<PAGE>
Although we intend to conduct our operations in compliance with
applicable regulatory requirements and continually review our operations to
verify compliance, there can be no assurance that aspects of our operations will
not be reviewed and challenged by the regulatory authorities and that if
challenged, that we would prevail. Furthermore, there can be no assurance that
new laws or regulations governing weight loss or nutrition services providers
will not be enacted, or existing laws or regulations interpreted or implied in
the future in such a way as to have a material adverse impact on us.
WE ARE DEPENDENT ON OUR INTELLECTUAL PROPERTY.
Our success depends on the protection of our domain names, including
the "eDiets.com" domain name, original interactive proprietary software and
systems and the goodwill associated with our trademarks and other proprietary
intellectual property rights. We currently hold several relevant domain names,
including the "eDiets.com" domain name. A substantial amount of uncertainty
exists concerning the application of copyright and trademark laws to the
Internet and there can be no assurance that existing laws provide adequate
protection of our proprietary intellectual property or our domain names. We have
filed applications to register several of our trademarks and there can be no
assurance that we will be able to secure registration of these marks.
Enforcing our intellectual property rights could entail significant
expenses and could prove difficult or impossible. In addition, we cannot assure
you that third parties will not bring claims of copyright or trademark
infringement, patent violation or misappropriation of creative ideas or formats
against us with respect to our programs, services or content or any third-party
content carried by us. Any such claims, with or without merit, could be time
consuming to defend, result in costly litigation, divert management attention,
require us to enter into costly royalty or licensing arrangements or prevent us
from using important technologies, ideas or formats, any of which could
materially harm our business, financial condition or results of operations.
WE FACE SIGNIFICANT COMPETITION.
We currently compete with several non-Internet weight-loss companies.
Our major offline competitors are Weight Watchers International and Jenny Craig,
Inc. In addition, we compete with a number of Internet sites which provide free
diet and nutrition information. Currently we know of two other online
competitors aggressively marketing an online, program. Cyberdiet.com, offers a
free program with some similarities to our program. Recently Nutrisystem.com, an
affiliate of Nutri-System, Inc., which was an offline competitor, has begun to
market an online weight-loss program that is very similar to our program.
Although the Nutri-System program is not based on a membership fee, the program
is designed around Nutri-System pre-packaged and limited selections of food
products, which can only be purchased through the Nutrisystem.com website. It is
not possible to determine when, or in what form, the industry's response will be
to our programs as they become more highly visible. However, we anticipate that
the industry leaders can be expected to mount a meaningful form of Internet
response and given the rapid expansion of the Internet, other companies may
develop similar programs or health related sites that compete vigorously with
14
<PAGE>
our programs and services. Increased competition could result in reductions in
the prices we receive for our programs, lower margins, loss of customers and
reduced visitor traffic to our web site.
Most of our existing competitors and potential competitors have longer
operating histories, greater name recognition and significantly greater
financial, technical and marketing resources. This may allow them to devote
greater resources than we can for the development and promotion of their
services and products. These competitors may also engage in more extensive
marketing and advertising efforts, adopt more aggressive pricing policies and
make more attractive offers to advertisers and alliance partners. Accordingly,
we may not be able to compete successfully. Competitive pressures may have a
material adverse effect on our business, results of operations and financial
condition.
YEAR 2000 PROBLEMS MAY DISRUPT OUR BUSINESS.
There is a concern that many organizations may experience operational
difficulties at the beginning of the year 2000 as a result of the fact that many
currently installed computer systems and software products are coded to accept
only two-digit entries in the date code field. The costs of defending and
resolving year 2000-related disputes, and any liability we incur for year
2000-related damages, including consequential damages, could have a material
adverse effect on our business, financial condition and results of operations.
Based on our assessment to date, we believe that our internal systems are year
2000 compliant and will not produce erroneous results, fail to function, or
interrupt performance. Despite our testing, our systems may contain undetectable
errors or defects associated with the year 2000 and operational difficulties may
result. To the extent that our assessment is finalized without identifying any
additional material non-compliant information technology systems or
non-information technology systems that we operate or that are operated by third
parties, the likely worst-case year 2000 scenario is a systemic failure beyond
our control, such as a prolonged Internet, telecommunications or electrical
failure. Such a failure could prevent us from operating our business, prevent
visitors from accessing our web site, or change the behavior of consumers
accessing our web site. We believe that the primary business risks, in the event
of such a failure, would include lost revenue, increased operating costs, loss
of visitors to our web site, or other business interruptions of a material
nature, as well as claims of mismanagement, misrepresentation, or breach of
contract, any of which could have a material adverse effect on our business,
results of operations and financial condition. We have not made any contingency
plans to address such risks.
IT MAY BE DIFFICULT FOR A THIRD-PARTY TO ACQUIRE US.
Provisions of Delaware law and our Certificate of Incorporation and
by-laws could make it more difficult for a third-party to acquire us, even if it
would be beneficial to our stockholders.
15
<PAGE>
AN ACTIVE TRADING MARKET FOR OUR SECURITIES MAY NEVER DEVELOP.
Although our Common Stock has been publicly held, for the past several
years there had been no trading market for the stock. The Placement Agent has
filed an application to initiate quotations in our freely tradable shares of
Common Stock in the "pink sheets" published by the National Quotation Bureau,
Inc. Upon acceptance by the NASD, it is anticipated that a limited trading
market will commence. We intend to apply for listing of the Common Stock and
Warrants on the Nasdaq SmallCap Market as soon as we meet all of the listing
requirements. However, we cannot assure you that a substantial trading market
will develop (or be sustained, if developed) for the Common Stock and Warrants,
or that you will be able to resell your shares or liquidate your investment
without considerable delay, if at all.
IN THE EVENT AN ACTIVE TRADING MARKET IN OUR COMMON STOCK DEVELOPS, OUR STOCK
PRICE COULD BE EXTREMELY VOLATILE.
The trading price of the Common Stock may be highly volatile as a
result of factors specific to us or applicable to our market and industry in
general. These factors include:
o variations in our annual or quarterly financial results or those of our
competitors;
o changes by financial research analysts in their recommendations or
estimates of our earnings;
o conditions in the economy in general or in the Internet commerce sector
in particular;
o announcements of technological innovations or new products or services
by us or our competitors; and
o unfavorable publicity or changes in applicable laws and regulations, or
their judicial or administrative interpretations, affecting us or the
Internet commerce sector.
In addition, the stock market has recently been subject to extreme
price and volume fluctuations. This volatility has significantly affected the
market prices of securities issued by many companies for reasons unrelated to
the operating performance of these companies. In the past, following periods of
volatility in the market price of a company's securities, some companies have
been sued by their stockholders. If we were sued, it could result in substantial
costs and a diversion of management's attention and resources, which could
adversely affect our business.
THE NUMBER OF SHARES ELIGIBLE FOR FUTURE SALE COULD DEPRESS THE MARKET FOR THE
COMMON STOCK.
The timing and amount of sales of shares covered by this Registration
Statement could have a depressive effect on the then-market price of the Common
Stock. Furthermore, the possibility that a substantial number of other shares of
Common Stock may become tradable in
16
<PAGE>
the public market may also adversely affect prevailing market prices for the
Common Stock and could impair our ability to raise capital through the sale of
equity securities. Apart from the shares covered by this Registration Statement,
the following shares will be eligible for sale in the public market pursuant to
Rule 144 promulgated under the Securities Act of 1933 at the following times,
subject to certain volume and other restrictions under Rule 144 and to
agreements with the Placement Agent in the Private Placement restricting their
sale:
o 1,050,000 of the shares held by the Olas stockholders are currently
eligible for sale; and
o 6,814,065 shares will be eligible for sale beginning November, 2000.
Therefore, we cannot predict the effect, if any, that sales of these
securities or the availability of these securities for sale will have on the
market prices prevailing from time to time.
WE MAY NOT HAVE ANY ABILITY TO USE OUR TAX LOSS CARRY-FORWARDS.
Although we have significant net operating loss carry-forwards, as a
result of the Acquisition, it is unlikely that we will be able to use these tax
loss carry-forwards.
FORWARD-LOOKING STATEMENTS.
All statements other than statements of historical facts included in
this Prospectus, including, without limitation, statements regarding our future
financial position, business strategy, projected costs and plans, objectives of
our management for future operations and as adjusted proforma financial data,
are forward-looking statements. In addition, forward-looking statements
generally can be identified by the use of forward-looking terminology such as
"may," "will," "expect," "intend," "estimate," "anticipate," "believe," or
"continue" or the negative thereof or variations thereon or similar terminology.
Although we believe that the expectations reflected in such forward-looking
statements are reasonable, we cannot assure you that such expectations will
prove to have been correct. Such statements involve certain known and unknown
risks, uncertainties and other factors which may cause our actual results,
performance or achievements to be materially different from forward-looking
statements. Important factors that could cause actual results to differ
materially from our expectations are disclosed under "RISK FACTORS" and
elsewhere in this Prospectus, including, without limitation, in conjunction with
the forward-looking statements included in this Prospectus. All subsequent
written and oral forward-looking statements attributable to our company, or
persons acting on any of their behalf, are expressly qualified in their entirety
by the cautionary statements. We caution you not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof.
USE OF PROCEEDS
We will not receive any proceeds from the resale of the shares of
Common Stock or Warrants by the Selling Security Holders. We are registering the
shares of Common Stock and Warrants, and the shares of Common Stock upon the
exercise of the Warrants for resale pursuant to contractual terms incurred in
the Acquisition and the Private Placement.
17
<PAGE>
There is included in the Registration Statement of which this
Prospectus is a part an aggregate of 1,815,625 shares of Common Stock underlying
Warrants issued to investors in the Private Placement to purchase shares at
$2.50 per share, 640,625 Warrants issued to the Placement Agent in the Private
Placement to purchase shares at $2.50 per share, 300,000 options issued to
members of our Executive Committee to purchase shares at $2.00 per share, 32,500
options issued to one of our Directors to purchase shares at $1.425 per share
and 82,500 Warrants issued to our advertising agency to purchase shares at $2.00
per share. If all of these Warrants and options are exercised, the Company will
receive estimated gross proceeds of $6,951,938. Inasmuch as the holders of the
Warrants and options have no obligation to exercise, we are not in a position to
evaluate when and if such derivative securities will ever be exercised or the
amount of proceeds that may be realized. Accordingly, we are not able to
allocate at this time the proceeds that may be received from the exercise of
such securities, and any proceeds realized will be utilized for working capital
purposes.
MARKET FOR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
NO CURRENT TRADING MARKET
Although our shares of our Common Stock are publicly held, for several
years there had been no trading market for our Common Stock. The Placement Agent
in our Private Placement has filed an application to initiate quotations in our
freely tradable shares of Common Stock in the "pink sheets" published by the
National Quotation Bureau, Inc. Upon acceptance by the NASD, it is anticipated
that a limited trading market will commence. We intend to apply for listing of
the Common Stock and Warrants on the Nasdaq SmallCap market as soon as we meet
all of the listing requirements.
OUTSTANDING SHARES AND NUMBER OF HOLDERS
As of December 27, 1999, we had 12,645,315 shares of Common Stock
outstanding and approximately 213 stockholders of record.
DIVIDEND POLICY
We have never declared or paid cash dividends on our capital stock. We
currently intend to retain all available funds and any future earnings for use
in the operation and expansion of our business and do not anticipate paying any
cash dividends in the foreseeable future.
CAPITALIZATION
The following table sets forth as of September 30, 1999 the
capitalization (i) of Original eDiets on an actual basis and (ii) on a pro forma
basis, adjusted to give effect to the Acquisition as if it occurred on September
30, 1999, and to reflect the net proceeds received in November and December,
1999 from the Private Placement.
18
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
Actual Pro Forma
--------- -----------
<S> <C> <C>
Long-term debt $ -0- $ -0-
Stockholders' equity:
Common stock $.001 par value
10,000,000 Shares authorized, 6,215,733 shares issued
and outstanding on an actual basis; and 20,000,000
authorized, 12,645,315 Shares issued and outstanding
proforma as adjusted 6,216 12,645
Additional paid-in capital 213,696 8,847,883
Unearned compensation (1) (24,363) (24,363)
Accumulated deficit (2) (280,064) (2,261,171)
--------- -----------
Total stockholders' equity (2) $ (84,515) $ 6,574,994
--------- -----------
Total capitalization $ (84,515) $ 6,574,994
========= ===========
</TABLE>
(1) Represents deferred compensation expenses in connection with unvested
stock options granted at an exercise price lower than the fair market
value at the date of grant.
(2) Gives effect to a $1,981,107 non-recurring charge relating to the
Acquisition.
SELECTED FINANCIAL DATA
You should read the selected financial and operating data set forth
below in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and the notes
included elsewhere in this Prospectus.
OLAS
For the nine months ended September 30, 1999, Olas had income,
comprised primarily of interest income, of $14,646 and expenses of $38,082,
resulting in a net loss for the period of $23,436.
ORIGINAL EDIETS
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS DATA:
Nine Months Ended
December 31, Year Ended September 30,
------------------------ ------------------------
1997 1998 1998 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $ 247,795 $ 477,626 $ 254,973 $1,922,347
19
<PAGE>
Cost of revenues 23,098 75,551 37,839 160,915
Sales and marketing 148,621 435,491 185,936 613,774
General and administrative 134,936 304,427 255,399 692,623
Depreciation and amortization 37,559 61,807 46,000 64,477
Net income (loss) (96,419) (399,650) (270,201) 390,558
(Loss) earnings
per common
share-basic
and diluted $ (0.02) $ (0.06) $ (0.04) $ 0.06
</TABLE>
The following table below includes a summary of the historical
financial information of Original eDiets derived from the financial statements
included elsewhere in the Prospectus in addition to a pro forma basis, adjusted
to give the effect of the acquisition as if had occurred on September 30, 1999,
and to reflect the net proceeds received in November and December, 1999 from the
Private Placement.
BALANCE SHEET DATA:
September 30, 1999
December 31, ------------------------
1998 Actual Pro Forma(1)
---------- ---------- ----------
Working capital (deficiency) $ (604,687) $ (456,104) $6,403,553
Total assets 233,259 671,352 7,310,541
Total liabilities 834,986 755,867 735,547
Stockholders' equity
(capital deficiency) (601,727) (84,515) 6,574,994
(1) Gives effect to the Acquisition, including a $1,981,107 non-recurring
charge relating to the Acquisition, as if the Acquisition occurred on
September 30, 1999. Also gives effect to the completion of the Private
Placement in which the company raised net proceeds of $6,218,520 as if
the Private Placement occurred on September 30, 1999.
20
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
financial statements and notes to those statements and the other financial
information appearing elsewhere in this Prospectus.
OVERVIEW
We were originally formed in 1992 to acquire a predecessor company that
was formed in 1970. Our original business was the design, manufacture and
marketing of top-weight fabrics for use in the production of sportswear,
swimwear and activewear. In 1995, we sold substantially all of our operating
assets and until recently have not had an operating business.
In November 1999, we acquired eDiets.com, Inc., a Delaware corporation
("Original eDiets") by the merger of our wholly-owned subsidiary, eDiets
Acquisition Corp., into Original eDiets. Upon completion of the merger, Original
eDiets became our wholly-owned subsidiary. Therefore, the following discussion
is principally a discussion of the business and financial operations of Original
eDiets.
Original eDiets was incorporated in March 1996. By the end of 1997,
Original eDiets had completed development of the Original eDiets software,
conducted a proof-of-concept test, established price points and created an
Internet direct marketing campaign and began to generate revenues. In January
1998, Original eDiets became the first company to market customized fee-based
diet programs exclusively on the Internet.
To date, Original eDiets revenues have been derived almost exclusively
from the sale of its customized diet programs. Beginning in the fourth quarter
of 1998, Original eDiets began to generate some revenues from commissions with
third-party vendors on products and services advertised on its web site.
Revenues from customer subscriptions to our program are recognized on a
straight-line basis over the period of the subscription. Currently, the
subscription term is three months. The Company currently offers, and has in the
past offered, subscribers several payment options, including periodic payments
over the term of the subscription. Because revenues from customer subscription
are recognized over the period of the subscription, the related marketing
expenses may be incurred in a quarterly period prior to the recognition of the
corresponding revenue.
Since inception, Original eDiets incurred operating losses, except
during the nine months ended September 30, 1999. As of September 30, 1999,
Original eDiets had a net capital deficiency of $84,515. Because we intend to
aggressively expand our marketing and advertising efforts, we anticipate that we
will incur losses in the near future.
21
<PAGE>
In addition, we will incur a $1,981,107 non-recurring charge relating
to the Acquisition in the fourth quarter of 1999.
RESULTS OF OPERATIONS OF ORIGINAL EDIETS
The following table sets forth the results of operations for Original
eDiets expressed as a percentage of total revenues:
Year Ended Nine Months
December 31, Ended September 30,
------------------ ------------------
1997 1998 1998 1999
---- ---- ---- ----
Revenues 100% 100% 100% 100%
==== ==== ==== ====
Cost of revenues 9% 16% 15% 9%
Sales and marketing 60 91 73 32
General and administrative 55 64 100 36
Depreciation and amortization 15 13 18 3
Net income (loss) (39) (84) (106) 20
COMPARISON OF YEARS ENDED DECEMBER 31, 1998 TO DECEMBER 31, 1997
Revenues increased 93% to $477,626 for the year ended December 31, 1998
from $247,795 for the year ended December 31, 1997. The increase in revenues was
primarily due to the increase in the number of subscribers to the program over
the prior year, which was due to the Company's expansion of its advertising
efforts.
Cost of revenues consist primarily of Internet access and service
charges, salary payments to Original eDiets' dietitian and compensation expenses
recognized for the excess of fair market value over the exercise price of
options granted to the dietitian. Original eDiets cost of revenues increased to
$75,551, or 16% of revenues for the year ended December 31, 1998, from $23,098,
or 9% of revenues for the year ended December 31, 1997. The dollar and
percentage increases were primarily attributable to increased Internet access
and service charges required in connection with the expansion of our operations
and increased compensation payments to our dietitian.
Sales and marketing expenses consist primarily of Internet advertising
expenses. Sales and marketing expenses increased to $435,491, or 91% of
revenues, for the year ended December 31, 1998, from $148,621, or 60% of
revenues for the year ended December 31, 1997. The dollar increases in sales and
marketing were primarily due to Original eDiets more aggressive advertising
placements commencing during the second half of 1998 with several major Internet
portals, including several of the America Online web sites and Yahoo. Sales and
marketing expenses are incurred prior to the recognition of revenues from sales
generated from those efforts. Sales and marketing expenses, as a percentage of
revenues, increased
22
<PAGE>
primarily due to a significantly higher customer base and related deferred
revenue compared to the prior year.
General and administrative expenses consist primarily of salaries,
overhead and related costs for general corporate functions, including
professional fees. These expenses also include compensation expense for stock
options Original eDiets granted with an exercise price below the fair market
value. General and administrative expenses increased to $304,427, or 64% of
revenues, for the year ended December 31, 1998, from $134,936, or 55% of
revenues, for the year ended December 31, 1997. The dollar increase was
primarily due to the increase in professional fees, principally payments to
financial and business consultants, increases in travel expenses incurred as the
business operations expanded and to a lesser degree increases in salaries,
general overhead and compensation expenses related to stock option grants.
Depreciation and amortization expenses increased to $61,807, or 13% of
revenues, for the year ended December 31, 1998, from $37,559, or 15% of
revenues, for the year ended December 31, 1997. The dollar increase was
primarily attributable to the purchase of additional computer equipment.
As a result, Original eDiets net loss increased to $399,650 for the
year ended December 31, 1998 compared to $96,419 for the year ended December 31,
1997.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
Revenues increased 654% to $1,922,347 for the nine months ended
September 30, 1999 from $254,973 for the nine months ended September 30, 1998.
The increase in revenues was primarily due to the increase in the number of
subscribers to the program over the prior year period, which was due to the
Company's continuing expansion of its advertising program.
Cost of revenues consist primarily of Internet access and service
charges, revenue sharing, salary payments to Original eDiets' dietitian and
compensation expenses recognized for the excess of fair market value over the
exercise price of options granted to the dietitian. Original eDiets cost of
revenues increased to $160,915, or 9% of revenues, for the nine months ended
September 30, 1999 from $37,839, or 15% of revenues, for the nine months ended
September 30, 1998. The increase in cost of revenues was primarily attributable
to increased Internet access and service charges and revenue sharing incurred in
connection with the expansion of our operations and increased compensation
payments to our dietitian.
Sales and marketing expenses consist primarily of Internet advertising
expenses. Sales and marketing expenses increased to $613,774, or 32% of
revenues, for the nine months ended September 30, 1999 from $185,936, or 73% of
revenues, for the nine months ended September 30, 1998. The dollar increases in
sales and marketing were primarily due to Original eDiets more aggressive
advertising placements commencing during the second half of 1998 and continuing
into 1999 with several major Internet portals, including several of the American
Online web sites, iVillage and Yahoo. Sales and marketing expenses are incurred
prior to the recognition of revenues from sales generated from those efforts.
23
<PAGE>
General and administrative expenses consist primarily of salaries,
overhead and related costs for general corporate functions, including
professional fees. These expenses also include compensation expense for stock
options Original eDiets granted with an exercise price below the fair market
value. General administrative expenses increased to $692,623, or 36% of
revenues, for the nine months ended September 30, 1999 from $255,399, or 100% of
revenues, for the nine months ended September 30, 1998. The dollar increase was
primarily due to the increase in professional fees, principally payments to
financial and business consultants, increases in travel expenses incurred as the
business operations expanded and to a lesser degree increases in salaries,
general overhead and compensation expenses related to stock option grants.
Depreciation and amortization expenses increased to $64,477, or 3% of
revenues, for the nine months ended September 30, 1999 from $46,000 or 18% of
revenues, for the nine months ended September 30, 1998. The dollar increase was
primarily attributable to the purchase of additional office and computer
equipment.
As a result of the factors discussed above, Original eDiets net income
was $390,558 for the nine months ended September 30, 1999 compared to a net loss
of $270,201 for the nine months ended September 30, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Through the end of 1997, Original eDiets financed its cash requirements
primarily through loans from its Chief Executive Officer and sole stockholder,
David Humble. From 1998, as Original eDiets began to generate more meaningful
revenues, it financed its operations primarily through operating cash flow. Mr.
Humble has agreed to forgive the balance of his loans to Original eDiets, which
as of September 30, 1999 was $56,082, and have it treated as an additional
equity investment.
Original eDiets has a bank line of credit in the amount of $150,000,
which has been personally guaranteed by Mr. Humble. As of the date hereof,
Original eDiets has not borrowed any amounts under the line of credit.
As of September 30, 1999, Original eDiets had cash and cash equivalents
of $157,728. For the nine months ended September 30, 1999, operating activities
of Original eDiets provided cash of $546,670, primarily due to the net income it
achieved for the period. Net cash used in investing activities of Original
eDiets was $69,658, reflecting purchases of property and equipment. Net cash
used in financing activities of Original eDiets was $363,448, principally
reflecting repayments of borrowings to Mr. Humble in addition to deferred
offering costs incurred in connection with the private placement financing.
As of September 30, 1999, Olas had cash and cash equivalents of
$418,893.
In December 1999, we completed the Private Placement in which we sold
an aggregate of 145.25 Units, consisting of 25,000 shares of Common Stock and
12,500 Warrants each to purchase a share of Common Stock. We received net
proceeds of $6,218,520 in the Private Placement.
24
<PAGE>
Although we have no firm commitments to acquire a material amount of
capital assets, utilizing proceeds of the Private Placement, we intend to
dramatically expand our Internet marketing campaign. We have recently entered
into advertising arrangements which require substantial up-front capital
expenditures, and plan on entering into additional similar advertising
arrangements. In addition, we plan to add to our operating systems and our
facilities and equipment in anticipation of our expanded customer base and
offering of new programs.
We currently anticipate that the net proceeds of the Private Placement,
together with funds from our operations, will be sufficient to meet our
anticipated needs for working capital and capital expenditures through at least
the next 12 months.
YEAR 2000 READINESS
Many currently installed computer systems and software products are
coded to accept or recognize only 2-digit entries in the date code field. These
systems and software products will need to accept 4-digit entries to distinguish
21st century dates from 20th century dates. As a result, computer systems and/or
software used by many companies and governmental agencies may need to be
upgraded to comply with such Year 2000 requirements or risk system failure or
miscalculations causing disruptions of normal business activities.
STATE OF READINESS
We have made an assessment of the Year 2000 readiness of our operating
and administrative systems. Our assessment plan consisted of testing of our
internally developed information and computing systems with special attention to
their representation and manipulation of calendar dates. We have confirmed that
our internally developed software avoids Year 2000 concerns by either using a
full 4-digit date or using a binary value which is calculated using the year
1970 as a base, which methods will adjust for new centuries as well as leap
years. In addition, in our assessment plan, we contacted third-party vendors of
software, hardware and services that are related to the delivery of the services
to our users and the vendors have indicated that the products and services used
by us are currently Year 2000 compliant.
COSTS
To date, we have not incurred any material costs in identifying or
evaluating Year 2000 compliance issues. Most of our expenses have related to,
and are expected to continue to relate to, the operating costs associated with
time spent by employees in the evaluation process and Year 2000 compliance
matters generally. We do not presently anticipate that such expenditures will be
material.
25
<PAGE>
RISKS AND CONTINGENCY PLAN
While, based on our assessment to date, we believe that our internal
systems are Year 2000 compliant and will not produce erroneous results, fail to
function or interrupt performance, despite our testing, our systems may contain
undetectable errors or defects associated with Year 2000 and operational
difficulties may result. In addition, while vendors of our material software,
hardware and services have indicated that they are in compliance, we cannot
assure you that third-party software, hardware or services incorporated into our
systems upon which we are reliant will not need to be revised or replaced, which
could be time consuming and expensive. Further, we cannot assure you that
governmental agencies, utility companies, Internet access companies, third-party
service provides and others outside of our control will be Year 2000 compliant.
The likely worse-case Year 2000 scenario is a systematic failure beyond
our control, such as a prolonged Internet, telecommunications or electrical
failure. Such a failure could prevent us from operating our business, prevent
visitors from accessing our web site, or change the behavior of consumers
accessing our web site. We believe that the primary business risks, in the event
of such a failure, would include lost revenue, increased operating costs, loss
of visitors to our web site, or other business interruptions of a material
nature, as well as claims of mismanagement, misrepresentation or breach of
contract, any of which could have a material adverse effect on our business,
results of operations and financial condition.
We have not made any contingency plans to address these risks.
BUSINESS
OUR HISTORY
We were formed in 1992 to acquire a predecessor company that was formed
in 1970. Our original business was the design, manufacture and marketing of
top-weight fabrics for use in the production of sportswear, swimwear and
activewear. In 1995, we sold substantially all of our operating assets and until
November 1999 had not had an operating business.
In November 1999, we acquired eDiets.com, Inc., a Delaware corporation
("Original eDiets") through the merger of our newly formed subsidiary, eDiets
Acquisition Corp., with and into Original eDiets. Under the terms of the
Acquisition, we issued 7,814,065 shares of Common Stock to David R. Humble, the
sole stockholder of Original eDiets, and 985,935 shares were reserved for the
exercise of stock options granted to several of Original eDiets' current and
former employees and consultants prior to the Acquisition. In connection with
the Acquisition, we changed our name to eDiets.com, Inc. and Original eDiets,
which is now our wholly-owned subsidiary, changed its name to eDiets, Inc.
The discussion below is principally a discussion of the business of
Original eDiets.
26
<PAGE>
GENERAL
We are one of the original marketers of customized fee-based diet
programs exclusively online. We have developed a proprietary software engine
that enables us to create a diet program, which we call our eDiets program, that
is unique to each consumer, then deliver it directly to the consumer's home or
office via the Internet. We believe our personalization features, low cost basis
and centralized Internet distribution creates a unique competitive advantage in
a market, where the market leader, Weight Watchers International, operates a
decentralized network of brick and mortar storefronts.
At our Online Diet Center, we offer programs for both women and men.
Women currently represent 91% of our customers. To enroll in a program, a
consumer completes a questionnaire and their personal profile is automatically
generated. We use this profile to create a private Internet diet site for the
consumer to access for meal plans and other professional advice and information.
We also publish [email protected], an online diet information resource,
which is currently emailed twice a week to a community of over 700,000 consumers
who have completed our questionnaire, received a personal profile and have
provided us with an email address. Our web site also includes our Diet Store in
which we advertise a variety of health, fitness and nutrition products which our
users can purchase from third-party vendors.
During the first nine months of 1999, our web site had 2,038,128
visitors and 25,308 consumers from over 30 countries purchased subscriptions to
our personalized diet program. Based on our internally developed numbers, we
believe that our members spend on the average 77 minutes per month on our site
and have approximately 89 page-views a month.
Our revenues for 1998, which were generated exclusively from the sale
of our programs, were $477,626. For the first nine months of 1999, our revenues
were $1,922,347, substantially all of which were from the sale of our programs,
and the remaining portion from commissions we received from third-party vendors
on the products and services advertised on our web site, principally from our
Diet Store.
INDUSTRY OVERVIEW
About 58 million adult Americans (approximately 33% of all adult
Americans) are considered overweight or obese and face increased risk of chronic
illness. It is estimated that up to 40% of American females and up to 24% of
American males are trying to lose weight at any given time.
The weight-management industry consists of commercial weight-loss
centers and physician-directed programs. Programs that are provided by
physicians using prescription medication serve a relatively small segment of the
market and are relatively expensive. Magazines, books, periodicals and public
services offer unsupervised programs. The cost of these unsupervised programs
range from free to the cost of a book or tape. Supervised programs offered by
weight-loss clinics provide personal guidance and supervision, and cost
27
<PAGE>
substantially more than the eDiets program. Typically, the cost to the consumers
for a program that provides personal guidance similar to the eDiets program
ranges from $10-$14 per week, exclusive of food. Specialty foods offered by some
weight-loss clinics cost approximately $60 per week.
BACKGROUND
In 1997, we had completed development of the eDiets software, conducted
a proof-of-concept test, established price points and created an Internet direct
marketing campaign and began to generate revenue.
In January 1998, we became the first company to market a customized
fee-based diet program exclusively on the Internet. We tested new site formats,
marketing messages and pricing options designed to increase the number of site
visitors and improve the ratio of subscribers to site visitors to develop an
Internet direct marketing business model. During this period, we also increased
our Internet server and communications network capacity to support a higher
level of operations.
In mid-1998, we created [email protected], our online diet, fitness and
nutrition newsletter, offered free to consumers. During the second half of 1998,
we began placing advertisements with several major Internet portals, including
several of the America Online web sites, Yahoo and iVillage, to determine the
most productive media buys.
In February 1999, we completed development of proprietary software to
measure consumer response in real time to marketing, pricing and other elements
of a direct marketing campaign. This software uses certain elements of an
in-store marketing system. David Humble, our Chief Executive Officer, has filed
a patent application covering this system and licensed the rights to the
invention covered by the patent application to us for use in the scope of our
current business. Our system became operational in March 1999 and has allowed us
to significantly improve the yield on advertising expenditures.
OUR MARKET OPPORTUNITY
We believe consumers are becoming more interested in their general
health and appearance today. We see a growing trend towards natural solutions
for nutritional well-being and, accordingly, the potential to increase sales of
our current and future nutritional programs, products and services. We also
believe that many consumers find the conventional diet center experience to be
inconvenient and costly due to factors such as lack of privacy, travel time to
the diet center, special food requirements and scheduling demands.
Our online nutrition management center and personalized diet programs
were created to provide consumers with a convenient and productive experience in
a private and accessible online environment. The Internet provides a unique
opportunity for us to deliver our programs and services faster, more
conveniently and at less cost than Weight Watchers International, Jenny Craig,
Inc. and our other offline competitors. The key components of our solution
include:
28
<PAGE>
o PERSONALIZATION. Consumers benefit from a diet program that is
personalized for their individual needs, likes and goals. Our
system generates a custom diet for each individual based on
their individual characteristics, needs, likes and goals,
allows the individual to make modifications and provides a way
for the individual to communicate their progress so their
program can be updated periodically.
o CONVENIENCE. Our Online Diet Center is available to consumers
24 hours a day, 7 days a week, from their home or office, and
provides a range of services that are comparable to
conventional offline centers that have limited hours of
operation and require travel to and from their centers.
o PRIVACY. Diet and weight-loss can be a sensitive subject that
often requires frank discussions regarding solutions. Our
online meetings and bulletin boards allow members to choose
the option of being anonymous. This leads to more open and
productive discussions between members and our staff, and
within the eDiets community.
OUR STRATEGY
We believe there is an established need for conventional weight
management services internationally. Our primary positioning objective is to
establish personalization as a new and essential component of this service in
the mind of the consumer, and to identify eDiets as the originator of the
concept. In addition, we intend to establish nutrition management as a new
online category that includes consumers interested in fitness, healthy living,
the aging process and weight management. We also intend to establish eDiets as a
vertical Internet portal for diet and the leading online provider of
personalized nutrition management services. The key elements of our strategy to
reach these objectives include:
o FOCUS ON ONLINE MARKETING AND DISTRIBUTION. Our primary
advantage in the market is the economics of the Internet,
including the relative low cost of customer acquisition,
program distribution and customer communications compared to
offline weight management programs. We plan to accelerate the
online marketing of our current offerings and add additional
programs, services and products to become the primary online
destination for personalized diet-related advice, information
and products.
o COMMENCE AN OFFLINE MARKETING CAMPAIGN. We intend to advertise
in print media, on radio and through billboards, and may
utilize direct mailings.
o BUILD STRONG BRAND RECOGNITION. We are expanding our online
and offline public relations campaigns and creating
relationships with other Internet programs. As an integral
component of our brand development, we will seek to align with
a celebrity spokesperson to assist us in our branding
campaign.
o REACH MORE CONSUMERS. We believe the growth of the Internet
will provide us with opportunities to expand our marketing and
reach consumers in markets,
29
<PAGE>
such as medical offices, fitness centers, company intranets,
nutrition stores and related outlets at the retail level.
o ENHANCE E-COMMERCE OPERATIONS. We are actively seeking to
enhance and expand our Diet Store and plan to enter into
arrangements with third-party vendors to fulfill orders and
ship products under our name.
o PROMOTE REPEAT PURCHASES. Recognizing the value of an acquired
customer, we plan to implement long-term nutritional
management programs to encourage the continued participation
of eDiets members.
o EMPLOY NEW TECHNOLOGIES. As Internet streaming audio and video
become mainstream, we will seek to utilize these technologies
to feature recognized personalities to broadcast their advice,
information and motivational messages to our customer base.
THE EDIETS PROGRAM
Our eDiets program is a customized diet program based on a profile
provided by the user utilizing our proprietary software. To create an eDiets
program for the user, the software system analyzes personal goals, food
preferences and lifestyle, with nutrition content, to create a program that
varies by individual and by changes in the individual's needs. The
personalization feature eases the transition from the individual's current diet
to the eDiets diet, because it includes familiar food groups and is in a format
that fits the individual's lifestyle. The program includes a list of the "100
Best Supermarket Products", a personalized supermarket shopping list and weekly
email tips, advice and information.
To begin the program, consumers answer a series of profile questions
and select a food plan. The program offers three different food plans: a
convenience food plan, comprised of pre-packaged food products; a recipe plan,
which primarily contains food recommendations requiring preparation; or a
combination convenience and recipe food preparation format. This information
forms the individual's personal profile. Most use a credit card on our secure
server to subscribe (or may subscribe by phone or fax), and their first week's
program is delivered immediately after their credit card submission.
Prior to May 1999, subscribers had to log on and answer questions
regarding their personal weight management program and receive revised
personalized programs on a weekly basis. In May 1999, we introduced "My eDiets",
a means of creating a personal homepage for each eDiets member. With their My
eDiets custom page, members can visit their site at any time to receive progress
reports, access meal plans, shopping lists and hundreds of diet resources.
The current subscription term for the eDiets program is three months,
and the cost of the subscription varies between $70 and $85, depending on the
payment option selected by the subscriber. After the three months, members may
continue their subscription on a monthly basis at a cost of $5 per month.
Members have unlimited access to services during this period. We continually
evaluate the cost of our program and expect price changes in the future.
30
<PAGE>
Members are encouraged to attend regular online motivation meetings and
have access to chat rooms where they can receive community support 24 hours a
day, seven days a week. They receive guidance, have the opportunity to ask
questions and learn from others with the same goals. We believe that the online
meetings provide a more convenient and private means of sharing ideas and
experiences than traveling to conventional weight management storefronts, and
attending open meetings with strangers.
Women currently represent 91% of our customers. We recently began
testing a mens' version of the eDiets program. The mens' program is specifically
tailored to mens' emotional needs and physical considerations. We have not begun
to advertise the mens' program on other web sites.
The eDiets program was authored and is supervised by Donna M. De Cunzo,
R.D., L.D., our Director of Nutrition. The program consists exclusively of
professional advice and information and uses, as its basis, nutrition standards
established by the federal government. The program is designed around caloric
intake. Only foods that can be purchased at the supermarket are specified in the
eDiets program. We do not recommend, or market, diet pills or other
controversial products.
[email protected]
We publish [email protected], an online diet, fitness and nutrition
resource offered free to consumers. Currently, [email protected] generates
approximately two million page views per month and is mailed to a community of
over 700,000 consumers who have completed our questionnaire, received a personal
profile and provided us with an email address. The newsletter is delivered
bi-weekly to each subscriber. Information for the newsletter is obtained from
other Internet medical and health information providers and all material is
written and edited by the Company. The newsletter also contains reference to
certain health and nutrition related web sites of other companies with which we
have revenue arrangements.
THE DIET STORE
Our web site includes a Diet Store in which we advertise a variety of
health, nutrition and fitness products and services offered by third-party
vendors. The Diet Store is a section of our web site which aggregates into one
comprehensive storefront most of the opportunities found in our site where users
can find specific products or services offered by outside parties. Currently,
the primary categories of products advertised in the Diet Store are vitamins and
minerals and a broad range of fitness equipment and accessories. We receive
commissions of between 5% and 35% on third-party vendors' products sold through
our web site.
We have only recently established the Diet Store and have received only
minimal commissions on sales of the products advertised in the Diet Store to
date. However, we are actively seeking to enhance and expand the Diet Store and
plan to enter into arrangements with third-party vendors to fulfill orders and
ship products under our name.
31
<PAGE>
MARKETING AND PROMOTION
We are implementing a five part marketing plan to generate traffic to
our web site and attract customers. Our plan consists of:
o INTERNET ADVERTISING. A majority of our sales are generated
from direct response advertising on the Internet. We place
advertising banners on several major Internet online portals
and sites that target female audiences with health and
nutrition interests. We estimate that from 1% to 15% of the
consumers who visit the sites on which we advertise on a
regular basis, and viewed our advertising banners, responded
by "clicking through" to the eDiets site.
We have entered into advertising agreements with America
Online to carry our banners on Thrive at AOL and on the AOL
Health Channel, and with iVillage and Yahoo. Our agreement
with America Online expires on December 31, 1999 and while we
are negotiating with America Online for a renewal, we are not
certain whether we will have an advertising agreement with
them. Our agreements with iVillage and Yahoo run through the
end of 2000. We also advertise with Dr. Koop.com and other web
sites. In the first nine months of 1999, approximately 16% and
13% of our sales have been derived from visitors who reached
our web site through America Online and iVillage,
respectively. These percentages do not include persons who
initially visited our site through America Online or iVillage
but did not subscribe to the eDiets program until they
received our [email protected].
o [email protected]. Our newsletter, [email protected], is currently
our largest promotional tool. Approximately 33% of our sales
for the nine months ended September 30, 1999 came from
consumers who received the newsletter and decided to subscribe
to the eDiets program.
o SEARCH ENGINE LISTINGS. Approximately 7% of our sales for the
first nine months of 1999 was generated from keywords on
Internet search engines, such as Yahoo. Consumers may find the
eDiets program by typing in keywords such as "diet" or
"nutrition" on several of the leading Internet search engines.
They then "click-through" to the eDiets site for complete
details.
o REVENUE SHARING. In December 1998, we signed an agreement with
Microsoft's Link-Share, an Internet company that arranges
affiliate programs. These affiliate programs allow other
Internet sites to offer the eDiets program on their sites in
exchange for a specified commission. We also pay an annual fee
and a commission for each sale to Link-Share. As of September
30, 1999, we had approximately 1,360 affiliates under the
Link-share program. In addition to this affiliate program, in
early 1999, we began seeking arrangements with other web sites
for the display of the eDiets banner in exchange for a share
of the revenue from sale of subscriptions. Among the sites
that we currently have revenue sharing arrangements are Dr.
Koop, On Health and Greentree.
32
<PAGE>
o OFFLINE MARKETING CAMPAIGN. We intend to commence an offline
marketing campaign, in which we plan to advertise in print
media, on radio and through billboards, and may utilize direct
mailings.
Our short-term marketing objective and strategy is to significantly
increase our customer base by rapidly expanding our advertising program. At the
same time, we will attempt to continually improve the ratio of sales to site
visitors. We will seek to do this by continually changing our selling messages,
modifying our site architecture, changing our pricing strategy and introducing
additional payment options. Our longer term objective is to build a dominant
Internet brand across the diet, nutrition and fitness categories. To accomplish
this, we believe we will need to combine a broad-based Internet marketing
advertising program, with print and television campaign, add a celebrity
spokesperson and increase our direct marketing management personnel.
COMPETITION
We currently compete with several non-Internet weight-loss companies.
The two major offline companies are Weight Watchers International and Jenny
Craig, Inc. In addition, we compete with a number of Internet sites, such as
iVillage, Thrive and America Online Health Channel, which provide free diet and
nutrition information.
We were one of the original marketers of customized fee-based diet
programs exclusively online. We believe we can successfully capture market share
from the established offline competitors for the following reasons:
o CENTRAL POINT OF OPERATIONS. We market and distribute our
programs from a single facility via the Internet. This is a
more efficient system than operating a network of storefronts
with fixed costs and staffing.
o GEOGRAPHIC REACH. Conventional diet centers are typically
located in areas where the population is concentrated and
their use is limited by many convenience factors. As use of
the Internet expands, eDiets will be able to reach more
consumers.
o FRANCHISEES. Most conventional diet center companies have sold
territorial rights to their products and services to
franchisees, and may face difficulties adopting a
direct-to-consumer sales strategy.
For the leading non-Internet based companies such as Weight Watchers
International and Jenny Craig, Inc., the challenge of an Internet entry is their
investment in hard assets, lease commitments and, more importantly, their
franchised outlets. An Internet offer could cannibalize sales from existing
storefronts, including those of franchisees. At this time, the non-Internet
leaders have web sites, but they are limited to providing information, or
driving traffic to their conventional storefronts.
33
<PAGE>
A number of Internet sites such as iVillage, Thrive and America Online
Health Channel provide free diet and nutrition information. However, these major
sites have an advertising model and do not currently offer a fee-based program
or provide any personalization features.
We compete with Cyberdiet.com, which has had an Internet presence for
approximately three years offering free programs. Cyberdiet had introduced a
subscription fee-based diet program comparable to ours, but has recently changed
to a free program. In addition, we compete with Nutrisystem.com, a newly
launched online weight-loss program by Nutri-System, Inc. that is very similar
in design to our program. The Nutri-System program does not charge a
subscription fee; however, participation in its weight-loss plan does require
purchase of the Nutri System pre-packaged product line, which is only available
through the Nutrisystem.com website. We are also aware of two other programs
that compare to the eDiets programs, but are not aware of any marketing
campaigns for these programs.
It is not possible for us to determine when or in what form the
industry's response to the eDiets program will be once it becomes highly
visible. While it is relatively simple to give generalized diet advice, we
believe creating personalized and timely advice requires a number of diverse
resources and the development of proprietary software tools.
Nevertheless, should we achieve our goal and obtain a meaningful market
presence, the industry leaders can be expected to mount significant Internet
responses. Accordingly, we could experience increasingly intense competition in
our marketplace and our business and operations could be materially adversely
affected.
INTELLECTUAL PROPERTY, PROPRIETARY RIGHTS AND DOMAIN NAMES
Our success depends on the protection of our original interactive
proprietary software and systems and the goodwill associated with our trademarks
and other proprietary intellectual property rights. Our interactive personalized
diet programs are based on proprietary software that we have developed.
David R. Humble, our Chief Executive Officer and Chairman of the Board
has filed a patent application covering the means of using the Internet to
provide an interactive link in a store between consumers and the manufacturers
and retailers that market to consumers for the purpose of providing sales and
marketing information and measuring the response of the consumers to the sales
and marketing information. He has granted us a royalty free exclusive perpetual
license to utilize the aspects of the invention under the patent if a patent is
issued as it relates to our Internet marketing program. We have incorporated
limited aspects of this software into our software to measure consumer response
in real time to marketing, pricing and other elements of our program. For
example, we can continually change the format of the pages on our web site or
simultaneously offer several payment options and receive real time responses to
these modifications and options.
We attempt to protect our intellectual property and proprietary rights
through a combination of trademark and copyright law, trade secret protection,
and confidentiality agreements with our employees, and marketing and advertising
partners. We pursue
34
<PAGE>
the registration of our domain names, trademarks and service marks in the United
States. A substantial amount of uncertainty exists concerning the application of
copyright and trademark laws to the Internet and there can be no assurance that
existing laws provide adequate protection of our proprietary intellectual
property or our domain names. The steps we take to protect our proprietary
rights may not be adequate and third parties may infringe or misappropriate our
copyrights, trademarks, service marks and similar proprietary rights.
INFRASTRUCTURE OPERATIONS AND TECHNOLOGY
Our infrastructure has been designed to provide reliability and
scalability as it supports our operations. Our architecture currently consists
of several Dell Power Edge Servers running the Microsoft Windows NT Server
Operating System and Web Server Software from Microsoft and Netscape. The
servers are located in a secure third-party web hosting facility in Herndon,
Virginia. This facility will provide us with ready access to increased network
bandwidth, improved redundancy and disaster recovery, 24-hour onsite management
and support, and the security and protection of a reliable data center.
GOVERNMENT REGULATION
GENERAL
There is an increasing number of laws and regulations pertaining to the
Internet. In addition, a number of legislative and regulatory proposals are
under consideration by federal, state, local and foreign governments and
agencies. Laws or regulations may be adopted with respect to the Internet
relating to liability for information retrieved from or transmitted over the
Internet, online content regulation, visitor privacy, taxation and quality of
products and services. Moreover, the applicability to the Internet of existing
laws governing issues such as intellectual property ownership and infringement,
copyright, trademark, trade secret, obscenity, libel, employment and personal
privacy is uncertain and developing. Any new legislation or regulation, or the
application or interpretation of existing laws may have an adverse effect on our
business.
LIABILITY FOR INFORMATION RETRIEVED FROM OUR WEB SITE AND FROM THE INTERNET
Content may be accessed on our web site and this content may be
downloaded by visitors and subsequently transmitted to others over the Internet.
This could result in claims against us based on a variety of theories, including
negligence, copyright or trademark infringement. We could also be exposed to
liability with respect to third-party content that may be posted by visitors in
chat rooms or bulletin boards offered on our web site. It is also possible that
if any information contains errors or false or misleading information, third
parties could make claims against us for losses incurred in reliance on such
information. In addition, we may be subject to claims alleging that, by directly
or indirectly providing links to other web sites, we are liable for copyright or
trademark infringement or the wrongful actions of third parties through their
respective web sites. The Communications Decency Act of 1996 provides that,
under certain circumstances, a provider of Internet services shall not be
treated as a
35
<PAGE>
publisher or speaker of any information provided by a third-party content
provider. This safe harbor has been interpreted to exempt certain activities of
providers of Internet services. Our activities may prevent us from being able to
take advantage of this safe harbor provision. Any claims brought against us in
this respect may have a material and adverse effect on our business.
PRIVACY CONCERNS
The Federal Trade Commission is considering adopting regulations
regarding the collection and use of personal identifying information obtained
from individuals when accessing web sites, with particular emphasis on access by
minors. Such regulations may include requirements that companies establish
certain procedures to, among other things: (1) give adequate notice to consumers
regarding information collection and disclosure practices; (2) provide consumers
with the ability to have personally identifiable information deleted from a
company's database; (3) provide consumers with access to their personal
information and with the ability to rectify inaccurate information; (4) clearly
identify affiliations or a lack thereof with third parties that may collect
information or sponsor activities on a company's web site; and (5) obtain
express parental consent prior to collecting and using personal identifying
information obtained from children under 13 years of age. This regulation may
also include enforcement and redress provisions. While we have implemented and
intend to continue to implement programs designed to enhance the protection of
the privacy of our visitors, there can be no assurance that such programs will
conform with any regulations which may be adopted by the FTC. The FTC's
regulatory and enforcement efforts may adversely affect the ability to collect
personal information from visitors and customers which could have an adverse
effect on our marketing efforts.
TRADE PRACTICES REGULATIONS
The FTC and certain states regulate advertising and consumer matters
such as unfair and deceptive trade practices. The State of Florida where our
corporate offices and operations center is located regulate certain marketing
and disclosure requirements for weight loss providers. In addition, the nature
of our interactive Internet activities may subject us to similar legislation in
a number of other states. Although we intend to conduct our operation in
compliance with applicable regulatory requirements and continually review our
operations to verify compliance, there can be no assurance that aspects of our
operations will not be reviewed and challenged by the regulatory authorities and
that if challenged that we would prevail. Furthermore, we cannot give any
assurance that new laws or regulations governing weight loss and nutrition
services providers will not be enacted, or existing laws or regulations
interpreted or implied in the future in such way as to have a material adverse
impact on our business.
REGULATIONS OF OTHER JURISDICTIONS
Due to the global nature of the Internet, it is possible that, although
transmissions by us over the Internet originate primarily in the United States,
the governments of other foreign countries might attempt to regulate our
transmissions or prosecute us for violations of their
36
<PAGE>
laws. These laws may be modified, or new laws enacted, in the future. Any of
these developments could have a material adverse effect on our business, results
of operations and financial condition. In addition, as our service is available
over the Internet in multiple states and foreign countries, these jurisdictions
may claim that we are required to qualify to do business as a foreign
corporation in each state or foreign country. We have not qualified to do
business as a foreign corporation in any jurisdiction, except Florida. This
failure by us to qualify as a foreign corporation in a jurisdiction where we are
required to do so could subject us to taxes and penalties and could result in
our inability to enforce contracts in such jurisdictions. Any new legislation or
regulation, the application of laws and regulations from jurisdictions whose
laws do not currently apply to our business, or the application of existing laws
and regulations to the Internet and other online services could have a material
adverse effect on our business, financial condition and results of operations.
EMPLOYEES
We currently have 14 full-time employees. We have an arrangement with a
third-party professional employer service which provides services, including
payroll, human resources benefits and workers compensation administration, for
all of our employees, including our Chief Executive Officer, David R. Humble. We
believe our relationship with our employees is good.
FACILITIES
We currently lease approximately 2,600 square feet of office space in
Deerfield Beach, Florida, under a lease expiring on October 30, 2004 at a
current monthly rental, including lessor leasehold improvements repayment
obligation and pro-rated share of common area facilities expenses, of
approximately $3,382.
LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings.
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions held with
respect to each of our directors and executive officers:
NAME AGE POSITION
David R. Humble 64 Chairman of the Board and Chief
Executive Officer
Robert T. Hamilton 35 Chief Financial Officer
Steven Johnson 35 Chief Technology Officer
37
<PAGE>
Christine M. Brown 42 Director of Operations
Isaac Kier 47 Director
Matthew A. Gohd 43 Director
Dr. Bruce Yaffe 48 Director
James M. Meyer 63 Director
Cary S. Fitchey 47 Director
Lee S. Isgur 62 Director
DAVID R. HUMBLE has served as our Chairman of the Board and Chief
Executive Officer since the closing of the Acquisition in November 1999. Mr.
Humble has served as Chairman of the Board, President and Chief Executive
Officer of Original eDiets since he founded that company in March 1996. From
July 1995 to August 1996, he was a consultant to Advanced Promotion
Technologies, Inc., which was engaged in the development and marketing of
interactive electronic point of sale marketing systems in supermarkets. From
1987 to July 1995, he had served as Chairman of the Board of Advanced Promotion
Technologies, Inc. and additionally as the Chief Executive Officer until 1993.
Advanced Promotion Technologies, Inc. filed for bankruptcy protection in August
1996. From 1985 to 1987, he was the President, Chief Executive Officer and
Director of CheckRobot, Inc., which developed a self-service checkout system for
supermarkets. From 1968 to 1985, he served in a number of marketing and
operations capacities with Sensormatic Electronics Corporation, which develops
and markets electronic security and surveillance products, including Vice
President/Manufacturing and Vice President/Future Products and was a member of
its board of directors. Mr. Humble holds a number of technology patents,
including the original electronics security tag found on garments in retail
stores worldwide to protect against shoplifting.
ROBERT T. HAMILTON has served as our Chief Financial Officer and
Treasurer since November 1999. From July 1995 to November 1999 he was Manager,
Financial Reporting for Equinox Systems Inc., a public company engaged in the
design and development of serial input/output communication devices. Prior to
July 1995, Mr. Hamilton was an audit manager with Arthur Andersen LLP. Mr.
Hamilton is also a certified public accountant.
STEVEN JOHNSON has served as our Chief Technology Officer since
November 1999. Mr. Johnson had served as the Chief Technology Officer of
Original eDiets since November 1998 and prior to that had been its Director of
Software Development on a part-time basis. From November 1996 through November
1998, he served as a Senior Principal Engineer for Sensormatic Electronics
Corporation. From April 1991 to November 1996, he was the Manager for Software
Development for Advanced Promotion Technologies, Inc.
CHRISTINE M. BROWN has served as our Director of Operations, and
Secretary since November 1999 and of Original eDiets since July 1999. From
February 1999 to July 1999, she was a financial consultant to Original eDiets.
From March 1997 through June 1999 she was the Manager for Financial Reporting
for Iron Mountain Records Management, Inc., a
38
<PAGE>
company engaged in the management of off-site record storage. From June 1995 to
March 1997, she was the Director of Business Development of the Family
Behavioral Center in Delray Beach, Florida. From March 1988 through April 1995,
she was the Director of Operations for Advanced Promotion Technologies, Inc.
ISAAC KIER has served as our President, Chief Executive Officer and
Chairman of the Board since 1992 until November 1999. He was the President and
Chief Executive Officer since 1981 and Chairman of the Board since 1987 of Lida,
Inc., a predecessor company we acquired by merger in 1992. He was the Vice
President of Lida, Inc. from 1978 to 1981. After the Acquisition, in November
1999, he serves as a member of our Board of Directors and a member of our
Executive Committee. From April 1997, he has been a principal of First Americas
Partners, LLC, a $50 million investment partnership focusing on investments in
North and South America. From January 1998 to April 1998, he was interim
Chairman of the Board of Directors of Premier Cruises. From 1987 to 1997, he
also served as the Managing Partner of Dana Communications Limited, a
non-wireline cellular licensee.
MATTHEW A. GOHD has served as a member of our Board of Directors and a
member of our Executive Committee since November 1999. Mr. Gohd has served as
Managing Director, Capital Markets of Whale Securities Co., L.P., our Placement
Agent, since 1989. Mr. Gohd is also a Director of OnStage Entertainment, Inc. a
publicly-held company engaged in concert promotions.
BRUCE YAFFE, M.D. has served as a member of our Board of Directors
since November 1999. Dr. Yaffe is a prominent physician with a private practice
in internal medicine in New York, New York. He has been a practicing physician
since 1982. Dr. Yaffe is a consultant to BOARD ROOM REPORTS NEWSLETTER and
BOTTOM LINE PERSONAL NEWSLETTER. He is also a member of the Editorial Board of
ENVIRONMENTAL NUTRITION NEWSLETTER.
JAMES M. MEYER has served as a member of our Board of Directors since
December 1999. Although currently retired, Mr. Meyer was the Agency Manager of
James M. Meyer Agency, a corporate planning and insurance agency he founded in
1967. The agency, which offered sales and services provided by The Equitable
Company/AXA, grew into one of the top ten agencies in the insurance industry,
with almost 400 employees.
CARY S. FITCHEY has served as a member of our Board of Directors since
December 1999. Since October 1999 Mr. Fitchey has been a managing partner of FG
II Management Co., LLC., a venture capital firm primarily investing in
business-to-business and high-tech companies. In addition, since June 1998 he
has been the Managing Partner of British Pacific Partners, LLC which was formed
in 1998 for investment consulting services in potential industry consolidating
opportunities and a variety of advisory services to start-up organizations in
turn-around situations. From June 1994 to June 1998 Mr. Fitchey was a partner
with Dartford Partners, which invested in branded products concentrating on the
food and beverage categories such as Duncan Hines, Mrs. Buttersworth, Lenders
Bagels and others. From 1985 through 1993, Mr. Fitchey was Managing Director of
Triad Partners, Ltd., an advisory and investment company.
39
<PAGE>
LEE S. ISGUR has served as a member of our Board of Directors since
December 1999. Mr. Isgur has been the Managing Partner of Corporate Counselors,
a research and investment banking consulting firm since 1997. From 1994 to 1997,
he was Managing Director of Jeffries & Company, an investment banking firm. From
1991 to 1994, he was a partner at Volpe Welty Company, an investment banking
firm. From 1977 to 1991, he was employed by Paine Webber, an investment banking
firm, where he became a First Vice President. As an analyst and banker on Wall
Street for over 30 years, Mr. Isgur has participated in numerous public and
private offerings for both domestic and international companies over a broad
array of consumer, entertainment and technology industries. Mr. Isgur is a
director of Corporate Counselors and Toolz, Inc., publicly-held corporations.
Directors hold their offices until the next annual meeting of our
stockholders and until their successors have been duly elected and qualified or
earlier resignation, removal from office or death. Our executive officers serve
at the discretion of the Board of Directors. There are no family relationships
among any of our directors or executive officers.
KEY EMPLOYEE
DONNA M. DE CUNZO, R.D., L.D., age 32, has served as our Director of
Nutrition Services since November 1999. She has served as the Director of
Nutrition Services of Original eDiets since May 1996. From September 1995 to May
1996, she was the Director of Nutrition Services for Wellness Centers of
America. From May 1994 to February 1995, she was the Director of Consumer
Affairs for the Fleming Companies, a food wholesaler and from August 1993 to May
1994, she had a private nutrition counseling practice. Ms. De Cunzo is a
registered dietitian, licensed by the State of Florida.
COMMITTEES OF THE BOARD
We have established an Executive Committee which has all the authority
that may be delegated to such a committee under Delaware corporation law. The
Executive Committee is currently comprised of Messrs. Humble, Kier and Gohd. In
addition, we also intend to establish audit and compensation committees, each
consisting solely of independent directors.
DIRECTOR COMPENSATION
Our directors do not currently receive any cash compensation from us
for their services as members of the Board of Directors, although they are
reimbursed for travel and lodging expenses in connection with attendance at
Board and Committee meetings. Under our 1999 Stock Option Plan, non-employee
directors are eligible to receive nondiscretionary automatic
40
<PAGE>
grants of vested options to purchase 25,000 shares of Common Stock per year at
an exercise price equal to the market price of our Common Stock on the date of
grant. Upon their appointment to the Board, each of the current Directors,
except for Mr. Humble, received 25,000 vested options exercisable at $2.00 per
share. In addition, Messrs. Humble, Gohd and Kier, the members of our Executive
Committee, each received on the Initial Closing a one-time grant of options to
purchase 100,000 shares of Common Stock at an exercise price of $2.00 per share.
Please see "Stock Options".
EXECUTIVE COMPENSATION
Isaac Kier, who served as our Chief Executive Officer until November
1999, did not receive any compensation for his services for the fiscal years
ended December 31, 1996, 1997 and 1998. David R. Humble, our current Chief
Executive Officer and the Chief Executive Officer of Original eDiets since its
organization, has not received any compensation for his services to Original
eDiets for the periods from the organization of Original eDiets in March 1996
through December 31, 1998. Neither Mr. Kier nor Mr. Humble received any stock
option grants during the year ended December 31, 1998 from the Company, in the
case of Mr. Kier, or from Original eDiets, in the case of Mr. Humble, and
neither exercised any options during that year.
EMPLOYMENT AGREEMENTS
In November 1999, we entered into a three-year employment agreement
with Mr. Humble. He receives a base salary of $150,000 per year and a bonus to
be determined by the Compensation Committee, based on income before taxes. The
employment agreement contains a non-competition provision for the term of
employment and two years thereafter and a non-disclosure provision.
In November 1999, Robert T. Hamilton became our Chief Financial
Officer. We pay Mr. Hamilton an annual base salary of $100,000. We also granted
him 100,000 five-year stock options which vest in four semi-annual installments
over a two year period and are exercisable at $2.00 per share. In addition, we
agreed to grant him 15,000 additional options at the end of his first full year
at an exercise price equal to the fair market value at that time, if he achieves
agreed upon performance targets. While Mr. Hamilton does not have an employment
agreement for a fixed term, we have agreed that if we chose to terminate his
employment without cause, we shall provide him with four months of severance at
his then current salary.
STOCK OPTIONS
PLAN OPTIONS.
Under our 1999 Stock Option Plan adopted in October 1999 (the "Plan"),
1,830,000 shares of Common Stock are reserved for issuance upon the exercise of
stock options. The Plan provides for the grant of incentive stock options and
non-statutory stock options.
41
<PAGE>
Incentive stock options granted under the Plan are intended to qualify as
"incentive stock options" within the meaning of Section 422 of the Internal
Revenue Code. Non-statutory stock options granted under the Plan are not
intended to qualify as incentive stock options under the Code. The maximum term
of options under the Plan will be ten years. The Plan is administered by our
Compensation Committee. The Plan provides for the grant of discretionary options
to key employees and non-employees. It also provides for nondiscretionary
automatic options to be granted to members of the Board of Directors who receive
25,000 options on an annual basis at the fair market value at the date of grant.
As of the date of this Prospectus, we have granted options under the Plan to
purchase an aggregate of 731,500 shares, all exercisable at $2 a share.
NON-PLAN OPTIONS.
In connection with the Acquisition, we granted Isaac Kier vested
options to acquire 32,500 shares of Common Stock at a purchase price of $1.425
per share. Under a stock option program adopted in May of 1996, Original eDiets
granted stock options to several employees and consultants, including former
employees and consultants. Under the program, an aggregate of 825,942 options
were granted to 15 persons during the period from May 1996 through April 1999.
All of the options are exercisable over a period of five or ten years at $.01
per share and vest in monthly installments over a period of 1 year from the date
of grant. As of November 30, 1999, 769,120 options are vested. In addition, in
July 1999, Original eDiets granted an aggregate of 159,993 additional options to
a key employee exercisable over a period of ten years at a price of $2.00 per
share. The options vest in monthly installments over a period of two years from
the date of grant. All of the outstanding Original eDiets stock options were
assumed by the Company in connection with the Acquisition.
LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS
The Restated Certificate of Incorporation contains provisions
eliminating the personal liability of a director to the Company and its
stockholders for certain breaches of his or her fiduciary duty of care as a
director. These provisions do not, however, eliminate or limit the personal
liability of a director (i) for any breach of such director's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or knowing violation of law, (iii) under
Delaware Statutory provisions making directors personally liable, under a
negligence standard, for unlawful dividends or unlawful stock repurchases or
redemptions, or (iv) for any transaction from which the director derived an
improper personal benefit. The provisions offer persons who serve on the Board
of Directors of the Company protection against awards of monetary damages
resulting from breaches of their duty of care (except as indicated above),
including grossly negligent business decisions made in connection with takeover
proposals for the Company. As a result of this provision, the ability of the
Company or a stockholder to successfully prosecute an action against the
director for a breach of his duty of care has been limited. However, the
provisions do not affect the availability of equitable remedies such as an
injunction or rescission based upon a director's breach of his duty of care. The
SEC has taken the position that the provision will have no effect on claims
arising under the federal securities laws.
42
<PAGE>
The General Corporation Law of the State of Delaware permits
indemnification of directors, officers and employees of corporations under
certain conditions subject to certain limitations. Article Eighth of our
Restated Certificate of Incorporation states that we shall indemnify and shall
advance expenses on behalf of our officers, directors, employees and agents to
the fullest extent permitted by the General Corporation Law. In addition, we are
also a party to indemnification agreements with each of our directors and
officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Company pursuant to the foregoing provisions, or otherwise, we have been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of the Company in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, we will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of December 27,
1999 regarding beneficial ownership of our Common Stock by: (i) each person or
entity known by us to own beneficially 5% or more of our outstanding Common
Stock, (ii) each of our directors and (iii) all of our directors and executive
officers as a group.
Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and includes voting or investment power with
respect to the securities. The address for each listed director is: c/o
eDiets.com, Inc., 3467 W. Hillsboro Boulevard, Suite 2, Deerfield Beach, Florida
33442. Except as indicated by footnote, the persons named in the table have sole
voting and investment power with respect to all shares of Common Stock shown as
beneficially owned by them. The number of shares of Common Stock outstanding
used in calculating the percentage for each listed person includes the shares of
Common Stock underlying options or warrants held by such person that are
exercisable within 60 days of December 27, 1999, but exclude shares of Common
Stock underlying options or warrants held by any other person. The percentage of
beneficial ownership is based on 12,645,315 shares of Common Stock outstanding
as of December 27, 1999, before any consideration is given to outstanding
options, warrants or convertible securities.
Name and Address Number of Shares Percent
of Beneficial Owners Beneficially Owned of Class
- ---------------------------- ------------------ --------
David R. Humble 7,905,065(1) 62.0%
43
<PAGE>
FG II Management Co., LLC., 1,350,000(2) 10.34%
20 Dayton Avenue,
Greenwich, Connecticut 06430
Isaac Kier 914,929(3) 7.1%
Matthew Gohd 312,500(4) 2.0%
Dr. Bruce Yaffe 25,000(6) *
James M. Meyer 100,000(5) *
Cary S. Fitchey 25,000(6)(7) *
Lee S. Isgur 25,000(6)
All directors and executive 9,467,777(8) 70.0%
officers as a group (10 persons)
*Less than 1%
(1) Includes 100,000 shares issuable upon exercise of vested stock options.
(2) Includes 450,000 shares issuable upon the exercise of Warrants issued
in the Private Placement.
(3) Includes: (a) 157,500 shares issuable upon exercise of vested stock
options; (b) 62,500 shares issuable upon exercise of Warrants issued in
Private Placement; and (c) 125,000 shares and 62,500 shares issuable
upon the exercise of Warrants issued in the Private Placement to Coqui
Capital Partners, L.P., of which Mr. Kier is the general partner. Mr.
Kier disclaims beneficial ownership of shares held by Coqui Capital
Partners, L.P. except for his proportional interest therein.
(4) Includes: (a) 125,000 shares issuable upon exercise of vested stock
options; and (b) 62,500 shares issuable upon the exercise of Warrants
issued in the Private Placement. Does not include 25,000 shares and
12,500 shares issuable upon the exercise of Warrants issued in the
Private Placement to Porpoise Investors I, L.P. Mr. Gohd is the
President of the general partner of the general partner of Porpoise
Investors I, L.P. and disclaims beneficial ownership of these shares.
(5) Includes: (a) 25,000 shares issuable upon the exercise of vested stock
options; and (b) 25,000 shares issuable upon the exercise of Warrants
issued in the Private Placement.
(6) Represents shares issuable upon the exercise of vested stock options.
(7) Does not include 900,000 shares and 450,000 shares issuable upon the
exercise of Warrants held by FG II Management Co., LLC., of which Mr.
Fitchey is a managing partner.
(8) Includes an aggregate of 130,283 additional shares issuable upon
exercise of stock options that are vested or exercisable within 60 days
held by two executive officers.
44
<PAGE>
CERTAIN TRANSACTIONS
LOAN BY STOCKHOLDER
The start up development costs of Original eDiets was funded through
loans advanced to Original eDiets by David R. Humble, our Chairman of the Board
and Chief Executive Officer, in the period from the organization of Original
eDiets in March 1996 through 1998. A portion of the loans were repaid to Mr.
Humble in 1998 and 1999. As of September 30, 1999, the balance of the loans was
$56,082. In connection with the closing of the Acquisition, Mr. Humble agreed to
forgive the loans, which have been treated as an additional equity investment.
PATENT LICENSE
Mr. Humble has filed a patent application covering the means of using
the Internet to provide an interactive link in a store between consumers and the
manufacturers and retailers that market the consumers for the purpose of
providing sales and marketing information and measuring the response of the
consumers to the sales and marketing information. He has granted us an exclusive
royalty-free perpetual license to utilize the aspects of the invention and
improvements under the patent, if a patent is issued, as it relates to our
Internet marketing program.
BANK LINE
We have a bank credit line in the amount of $150,000. Mr. Humble has
personally guaranteed the credit line and has secured the line with a pledge of
a certificate of deposit in the sum of $150,000. As of the date of this
Prospectus, no amounts have been borrowed by us under the credit line.
45
<PAGE>
SELLING SECURITY HOLDERS
The following table sets forth certain information regarding the
beneficial ownership of shares of Common Stock and Warrants by the Selling
Security Holders as of December 27, 1999, and the number of shares of Common
Stock and Warrants covered by this Prospectus. None of the Selling Security
Holders has, or within the past three years has had, any position, office or
other material relationship with us, except as noted below. Except as
specifically set forth below, following the Offering, and assuming all of the
Common Stock offered by the Selling Stockholders has been sold, none of the
Selling Security Holders will beneficially own 1% or more of the Common Stock.
<TABLE>
<CAPTION>
Beneficial
Ownership
Number of of Shares
Number of Shares Warrants Owned After
Beneficially Owned Prior to the Offering
Name of Prior to the Number of Shares Offering and --------------------
Selling Security Holder Offering (1) Being Offered Being Offered Number Percent
- ----------------------- ------------ ------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C>
David R. Humble (2) 7,905,065 1,100,000 0 6,805,065 53.8
Issac Kier (3) 914,929 320,000 62,500 594,929 4.7
Matthew Gohd (4) 312,500 287,500 62,500 25,000(3)
Whale Securities Co., L.P. (5) 790,625 790,625 640,625 -0-
Murray & Renee Silverstein (6) (7) 18,750 18,750 6,250 -0-
Chet & Denise Gohd (6) (7) 18,750 18,750 6,250 -0-
Dr. Gabriel Golan (6) (7) 37,500 37,500 12,500 -0-
Robert Horwitz (6) (7) 75,000 75,000 25,000 -0-
Ricardo Koenigsberger (6) (7) 18,750 18,750 6,250 -0-
Robert A. Farmer (6) (7) 37,500 37,500 12,500 -0-
Raz Alon (6) (7) 37,500 37,500 12,500 -0-
Howard Park & June Y. Park (6) (7) 37,500 37,500 12,500 -0-
Ralph Kier (6) (7) (8) 115,760 37,500 12,500 78,260
Ilene Robbins (6) (7) 18,750 18,750 6,250 -0-
Jeffrey Davidson (6) (7) (9) 155,000 75,000 25,000 80,000
Edmondo Schwartz (6) (7) 37,500 37,500 12,500 -0-
James Meyer (6) (7) (10) 100,000 75,000 25,000 25,000
David E. Farber (6) (7) 18,750 18,750 6,250 -0-
Michael & Lynn Steinberg (6) (7) 37,500 37,500 12,500 -0-
Roger N. Gladstone (6) (7) 37,500 37,500 12,500 -0-
Mark Siegel (6) (7) 18,750 18,750 6,250 -0-
James A. Quella (6) (7) 56,250 56,250 18,750 -0-
Lawrence S. Coben (6) (7) 37,500 37,500 12,500 -0-
46
<PAGE>
Moshe Bamberger (6) (7) 37,500 37,500 12,500 -0-
Ronald Rotter (6) (7) 18,750 18,750 6,250 -0-
Elliott Broidy, IRA (6) (7) 300,000 300,000 100,000 -0-
Gross Foundation, Inc. (6) (7) 150,000 150,000 50,000 -0-
Ellis Enterprises (6) (7) 75,000 75,000 25,000 -0-
Marvin Weissman (6) (7) 18, 750 18,750 6,250 -0-
David Weiss (6) (7) 28,125 28,125 9,375 -0-
BNY Clearing Services LLC Cus FBO William 187,500 187,500 62,500 -0-
G. Walters, IRA (5) (6) (7)
Martin Chopp (6) (7) 75,000 75,000 25,000 -0-
Shimshon Mandel (6) (7) 37,500 37,500 12,500 -0-
Talbiya B. Investments, Ltd. (6) (7) 37,500 37,500 12,500 -0-
Nesher, Ltd. (6) (7) 37,500 37,500 12,500 -0-
Balmore Funds, S.A. (6) (7) 375,000 375,000 125,000 -0-
Coqui Capital Partners, L.P.(3) (6) (7) 187,500 187,500 62,500 -0-
Jay T. Snyder (6) (7) 18,750 18,750 6,250 -0-
John F. Cappiello (6) (7) 37,500 37,500 12,500 -0-
Overdrive Capital Corporation (6) (7) 75,000 75,000 25,000 -0-
John Pappajohn (6) (7) 75,000 75,000 25,000 -0-
Peter S. Knight (6) (7) 37,500 37,500 12,500 -0-
Lawrence W. Ruvo Living Trust (6) (7) 37,500 37,500 12,500 -0-
Vulcan Properties, Inc. (6) (7) 56,250 56,250 18,750 -0-
Mark Green (6) (7) 37,500 37,500 12,500 -0-
Porpoise Investors I, L.P. (4) (6) (7) 37,500 37,500 12,500 -0-
Magellan Acq. & Investment Co. (6) (7) 75,000 75,000 25,000 -0-
FG II Management Co., Inc. (6) (7) 1,350,000 1,350,000 450,000 -0-
Fred & Wendy Ordower (6) (7) 18,750 18,750 6,250 -0-
Sherleig Assoc., Inc. Profit Sharing, 225,000 225,000 75,000 -0-
Jack Silver, Trustee (6) (7)
Leopard Agressive Fund (6) (7) 75,000 75,000 25,000 -0-
Lewis Mitchell 37,500 37,500 12,500 -0-
Zakeni Limited 112,500 112,500 37,500 -0-
David F. Chazen 75,000 75,000 25,000 -0-
Harry Mittelman 18,750 18,750 6,250 -0-
Fred and Wendy Ordower 18,750 18,750 6,250 -0-
Peter Vita 37,500 37,500 12,500 -0-
Robert Kaplan 18,750 18,750 6,250 -0-
47
<PAGE>
Allison Koffman 18,750 18,750 6,250 -0-
PC Consulting, Inc. 37,500 37,500 12,500 -0-
Akhil Gupta 75,000 75,000 25,000 -0-
Jonathan D. Eilian 75,000 75,000 25,000 -0-
Barry S. Sternlicht 37,500 37,500 12,500 -0-
Robert Torricelli 18,750 18,750 6,250 -0-
Ira Greenspan 18,750 18,750 6,250 -0-
Eugene Minsky 18,750 18,750 6,250 -0-
DiMassimo Brand Advertising, Inc. (11) 27,500 27,500 -0- -0-
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or
investment power with respect to the securities, and includes any
shares of Common Stock which a person has the right to acquire within
60 days of December 27, 1999.
(2) David R. Humble has served as our Chairman of the Board and Chief
Executive Officer since November 1999 and was the Chairman of the
Board, President and Chief Executive Officer of Original eDiets since
March 1996. The number of shares he currently owns and the number he is
offering under this Prospectus includes 100,000 shares issuable upon
exercise of vested stock options.
(3) Isaac Kier is a director of our Company. He served as our President,
Chief Executive Officer and Chairman of the Board from 1992 until
November 1999. The shares he currently owns and the shares he is
offering under this Prospectus include 132,500 shares issuable upon
exercise of vested stock options and 62,500 issuable upon exercise of
Warrants he acquired in the Private Placement. Included in the shares
he currently owns are 125,000 shares and 62,500 shares issuable upon
the exercise of Warrants issued in the Private Placement to Coqui
Capital Partners, L.P., of which Mr. Kier is the general partner. These
shares are being offered under this Prospectus by Coqui Capital
Partners, L.P. Mr. Kier disclaims beneficial ownership of these shares,
except for his proportional interest in Coqui Capital Partners, L.P.
(4) Matthew Gohd has been a director of the Company since November 1999.
The shares he owns and those to be offered under this Prospectus
include: (a) 100,000 shares issuable upon exercise of vested stock
options; and (b) 62,500 shares issuable upon the exercise of Warrants
he acquired in the Private Placement. Mr. Gohd is the President of the
general partner of the general partner of Porpoise Investors I, L.P.
(5) Whale Securities Co., L.P. was the Placement Agent of our Private
Placement. The shares owned by the Placement Agent include 641,878
shares of Common Stock that may be acquired pursuant to warrants issued
to the Placement Agent in connection with the Private Placement.
William G. Walters is the Chairman of Whale Securities Co., L.P.
(6) Of the shares of Common Stock beneficially owned, two-thirds represent
shares of Common Stock owned and one-third represents shares of Common
Stock that may be immediately acquired pursuant to Warrants.
(7) In the event that this Registration Statement has not become effective
and our Common Stock listed on the Nasdaq SmallCap Market by April 17,
2000, each of these investors shall be issued shares of our Common
Stock in an amount equal to one-half of the number of shares issuable
upon exercise of the Warrants (the "Penalty Shares"). The Penalty
Shares are not included in the number of shares beneficially owned
prior to the Offering, the number of shares being offered and the
beneficial ownership after the Offering. If and when the Penalty Shares
are issued, they will be deemed included as shares offered under this
Prospectus.
(8) Ralph Kier served as a Director and Secretary of our Company from its
organization in 1992 until November 1999.
48
<PAGE>
(9) Jeffrey Davidson has served as a consultant to our Company since
November 1999. The shares currently owned by Mr. Davidson include
80,000 shares issuable upon the exercise of stock options that are
vested or may vest within sixty days of December 27, 1999.
(10) James Meyer became a Director of our Company in December 1999.
(11) DiMassimo Brand Advertising, Inc. serves as our advertising agency
pursuant to an Agreement dated as of November 15, 1999. Under this
Agreement, we issued 82,500 warrants to the agency which vest in equal
monthly installments of 6,875 over a period of twelve months from
November 15, 1999. The shares currently beneficially owned prior to the
offering and number of shares being offered represent those warrants
that are vested or may vest within sixty days of December 27, 1999. The
number of shares beneficially owned, and being offered under this
Prospectus, will include all the shares underlying the warrants, up to
82,500, that are vested as of or within sixty days of the date this
Registration Statement becomes effective.
PLAN OF DISTRIBUTION
The Selling Security Holders have advised us that they may offer the
shares of Common Stock and Warrants registered under this Prospectus to
purchasers from time to time:
o in transactions on the Nasdaq SmallCap Market System or in any other
market on which the Common Stock and Warrants may be quoted, in
negotiated transactions, or by a combination of these methods;
o at fixed prices that may be changed; at market prices prevailing at the
time of the resale;
o at prices related to such market prices; or
o at negotiated prices.
At the date of this Prospectus, the Selling Security Holders have not entered
into any underwriting arrangements. The Selling Security Holders may sell the
shares and Warrants registered under this Prospectus to or through:
o ordinary brokers' transactions;
o transactions involving cross or block trades;
o purchases by brokers, dealers or underwriters as principal and resale
by such purchasers for their own accounts pursuant to this Prospectus;
o "at the market" to or through market makers or into an existing market
for our Common Stock and Warrants;
o in other ways not involving market makers or established trading
markets, including direct sales to purchasers;
o through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise);
o in privately negotiated transactions;
o to cover short sales; or
49
<PAGE>
o any combination of the foregoing.
From time to time, one or more of the Selling Security Holders may
pledge, hypothecate or grant a security interest in some or all of the shares of
Common Stock registered under this Prospectus owned by them, and the pledgees,
secured parties or persons to whom such shares have been hypothecated shall,
upon foreclosure in the event of default, be deemed to be Selling Security
Holders under this Prospectus. The number of shares of Common Stock registered
under this Prospectus and beneficially owned by those Selling Security Holders
who so transfer, pledge, donate or assign those shares will decrease as and when
they take such actions. The plan of distribution for shares sold under this
Prospectus will otherwise remain unchanged, except that the transferees,
pledgees, donees or other successors will be Selling Security Holders under this
Prospectus. In addition, a Selling Security Holder may, from time to time, sell
short shares of Common Stock. In such instances, this Prospectus may be
delivered in connection with such short sales and the shares of Common Stock
offered hereby may be used to cover such short sales.
A Selling Security Holder may enter into hedging transactions with
broker-dealers and the broker-dealers may engage in short sales of the Common
Stock in the course of hedging the positions they assume with that Selling
Security Holder, including, without limitation, in connection with distributions
of the Common Stock by the broker-dealers. A Selling Security Holder also may
enter into option or other transactions with broker-dealers that involve the
delivery of the shares of Common Stock registered under this Prospectus to the
broker-dealers, who then may resell or otherwise transfer these shares. A
Selling Security Holder also may loan or pledge the shares of Common Stock
registered under this Prospectus to a broker-dealer and the broker-dealer may
sell the shares so loaned or upon a default may sell or otherwise transfer the
pledged shares.
Selling Security Holders may also resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act,
rather than pursuant to this Prospectus.
Brokers, dealers, underwriters or agents participating in the
distribution of the shares of Common Stock or Warrants registered under this
Prospectus as agents may receive compensation in the form of commissions,
discounts or concessions from the Selling Security Holders and/or purchasers of
the Common Stock or Warrants for whom the broker-dealers may act as agent, or to
whom they may sell as principal, or both (which compensation as to a particular
broker-dealer may be less than or in excess of customary commissions). The
Selling Security Holders and any broker-dealers who act in connection with the
sale of the shares of Common Stock or Warrants under this Prospectus may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933,
and any commissions they receive and proceeds of any sale of the shares of
Common Stock or Warrants may be deemed to be underwriting discounts and
commissions under the Securities Act of 1933. Neither we nor any of the Selling
Security Holders can presently estimate the amount of this compensation. We know
of no existing arrangements between any of the Selling Security Holders, any
other shareholder, broker, dealer, underwriter or agent relating to the sale or
distribution of the shares of Common Stock or Warrants registered under this
Prospectus.
50
<PAGE>
We will pay substantially all of the expenses relating to the
registration, offer and sale of the shares of Common Stock or Warrants
registered under this Prospectus to the public other than commissions or
discounts of underwriters, broker-dealers or agents. We also have agreed to
indemnify the Selling Security Holders and certain related persons against any
losses, claims, damages or liabilities under the Securities Act of 1933 or
otherwise that arise out of, or are based upon, any untrue or alleged untrue
statement of a material fact or the omission or alleged omission in stating a
material fact under this Registration Statement or Prospectus. To the extent
that indemnification for liabilities arising under the Securities Act of 1933
may be permitted to our directors, officers and controlling persons, we have
been advised that, in the opinion of the SEC, this indemnification is against
the public policy as expressed in the Securities Act of 1933 and is therefore,
unenforceable.
The following Selling Security Holders have agreed with the Placement
Agent that they will not sell or otherwise dispose of any of their Shares
without the written consent of the Placement Agent until at least April 17,
2000:
o David R. Humble
o Isaac Kier
o Matthew Gohd
o William G. Walters
51
<PAGE>
DESCRIPTION OF SECURITIES
CAPITAL STOCK
We are authorized to issue 21,000,000 shares of capital stock,
comprised of 20,000,000 shares of Common Stock, $.001 par value, and 1,000,000
shares of preferred stock, $.001 par value. As of December 27, 1999, there were
12,645,315 shares of Common Stock outstanding and no shares of preferred stock
outstanding.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held
of record on the applicable record date on all matters presented to a vote of
stockholders, including the election of directors. Holders of Common Stock have
no cumulative voting rights or preemptive rights to purchase or subscribe for
any stock or other securities, and there are no conversion rights or redemption
or sinking fund provisions with respect to this stock. All shares of Common
Stock are entitled to share equally in dividends from sources legally available
when, as and if declared by the Board of Directors and upon liquidation or
dissolution of the Company, whether voluntary or involuntary, to share equally
in our assets available for distribution to stockholders.
PREFERRED STOCK
The Board of Directors, without further approval of the stockholders,
is authorized to provide for the issuance of shares of preferred stock in one or
more series and to fix the dividend rights and terms, conversion rights, voting
rights, redemption rights, liquidation rights and other rights and restrictions
relating to any such series. The issuances of shares of preferred stock, while
providing flexibility in connection with possible financings, acquisitions and
other corporate purposes, could, among other things, adversely affect the voting
power of the holders of our other securities and may, under certain
circumstances, have the effect of deterring hostile takeovers or delaying
changes in control of our management.
WARRANTS
In connection with our Private Placement, we issued 1,815,625 Warrants
to investors in the Offering. The Warrants may be exercised at any time during a
period of three years ending on November 17, 2002. Each Warrant entitles the
holder to purchase one share of Common Stock at a price of $2.50 per share,
subject to adjustment in certain circumstances. The Warrants may be redeemed by
the Company on 30 days' prior written notice (the "Notice Period") in the event
that (a) the closing sale price of the Common Stock on the Nasdaq SmallCap
Market on all 20 trading days ending on the third trading day prior to the date
on which the Company gives notice of redemption (the "Call Date") has been at
least 200% of the then-effective exercise price of the Warrants (currently $5.00
per share), and (b) the Warrant shares are publicly tradable pursuant to a
registration statement filed with and declared effective by the SEC.
52
<PAGE>
Pursuant to our Placement Agent Agreement with Whale Securities Co.,
L.P., we issued a total of 640,625 warrants to the Placement Agent. These
warrants are exercisable at any time until November 17, 2004 at a price of $2.50
per share, subject to adjustment under certain circumstances. The Placement
Agent warrants are not redeemable. We have agreed with the Placement Agent that
immediately prior to the listing of the warrants on the Nasdaq SmallCap Market,
a securities exchange or the OTC Bulletin Board, we shall offer the holders of
the Placement Agent Warrants the option to exchange these warrants for an equal
number of Warrants which will be listed with the Warrants.
DELAWARE ANTI-TAKEOVER LAW
Provisions of Delaware law could make our acquisition by a third-party
and the removal of our incumbent officers and directors more difficult. We are
subject to Section 203 of the Delaware General Corporation Law, which regulates
corporate acquisitions. In general, Section 203 prohibits a publicly held
Delaware corporation from engaging in a "business combination" with an
"interested stockholder" for a period of three years following the date the
person became an interested stockholder, unless:
o the Board of Directors approved the transaction in which such
stockholder became an interested stockholder prior to the date the
interested stockholder attained such status;
o upon consummation of the transaction that resulted in the stockholder's
becoming an interested stockholder, he or she owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding shares owned by persons who are directors and also
officers; or
o on or subsequent to such date the business combination is approved by
the Board of Directors and authorized at an annual or special meeting
of stockholders.
TRANSFER AGENT
The transfer agent is Continental Stock Transfer Trust Company, Two
Broadway, New York, New York 10004.
53
<PAGE>
LEGAL MATTERS
The validity of the shares of Common Stock and Warrants offered by
Selling Security Holders will passed upon by the law firm of Nason, Yeager,
Gerson, White & Lioce, P.A., West Palm Beach, Florida.
EXPERTS
Ernst & Young LLP, independent certified public accountants, have
audited the financial statements of eDiets.com, Inc. at December 31, 1997 and
1998, and for each of the two years in the period ended December 31, 1998, and
the financial statements of Olas, Inc. at December 31, 1997 and 1998, and for
each of the two years in the period ended December 31, 1998, as set forth in
their reports. We have included these financial statements in the prospectus and
elsewhere in the registration statement in reliance on Ernst & Young LLP's
reports, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a Registration Statement containing this
Prospectus and encompassing any amendments thereto on Form SB-2 pursuant to the
Securities Act with respect to the common stock and warrants being offered in
this offering. This Prospectus does not contain all the information set forth in
the Registration Statement and the exhibits and schedules thereto, certain
portions of which are omitted as permitted by SEC rules and regulations.
Statements made in this Prospectus as to the contents of any contract, agreement
or other document referred to are not necessarily complete; with respect to any
contract, agreement or other document filed as an exhibit to the Registration
Statement, please refer to the exhibit for a more complete description of the
matter involved, and each statement shall be deemed qualified in its entirety by
reference to the Registration Statement and to the financial statements,
schedules and exhibits filed as a part thereof.
The Registration Statement filed by us with the SEC can be inspected
and copied at the public reference facilities maintained by the SEC at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and the
Regional Offices at the SEC located in the Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and at 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies of those filings can be obtained from
the SEC's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates and may also be obtained from the
website that the SEC maintains at http://www.sec.gov. You may also call the SEC
at 1-800-SEC-0330 for more information.
As of the date of this Prospectus, we will become subject to the
reporting requirements of the Exchange Act and, in accordance therewith, will
file reports, proxy statements and other information with the Commission. These
reports, proxy statements and other information can be inspected and copied at
the public reference facilities of the Commission set forth above, and copies of
these materials can be obtained from the Commission's Public Reference Section
54
<PAGE>
at prescribed rates. We intend to furnish our stockholders with annual reports
containing audited financial statements and any other periodic reports we deem
appropriate or as may be required by law.
55
<PAGE>
Index to Financial Statements
EDIETS.COM, INC. (F/K/A SELF/HELP TECHNOLOGIES, INC.)
Report of Independent Certified Public Accountants...........................F-2
Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999 (Unaudited)........................................F-3
Statements of Operations for the two years ended
December 31, 1998 and for the nine months ended
September 30, 1998 and 1999 (Unaudited)...................................F-4
Statements of Capital Deficiency for the two years
ended December 31, 1998 and for the nine months
ended September 30, 1999 (Unaudited)......................................F-5
Statements of Cash Flows for the two years ended
December 31, 1998 and for the nine months ended
September 30, 1998 and 1999 (Unaudited)...................................F-6
Notes to Financial Statements................................................F-7
OLAS, INC.
Report of Independent Certified Public Accountants..........................F-17
Balance Sheets as of December 31, 1997 and 1998
and September 30, 1999 (Unaudited).......................................F-18
Statements of Operations and Accumulated Deficit for the two years
ended December 31, 1998 and for the nine months ended
September 30, 1998 and 1999 (Unaudited)..................................F-19
Statements of Cash Flows for the two years ended
December 31, 1998 and for the nine months ended
September 30, 1998 and 1999 (Unaudited)..................................F-20
Notes to Financial Statements...............................................F-21
EDIETS.COM, INC. (F/K/A SELF/HELP TECHNOLOGIES, INC.)
PRO FORMA CONDENSED FINANCIAL STATEMENTS (UNAUDITED) .......................F-27
Pro forma Condensed Balance Sheet as of September 30, 1999..................F-28
Pro forma Condensed Statement of Operations for the
nine months ended September 30, 1999.....................................F-29
Pro forma Condensed Statement of Operations for the
year ended December 31, 1998.............................................F-31
F-1
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
We have audited the accompanying balance sheets of eDiets.com, Inc. (f/k/a
Self/Help Technologies, Inc.) (the Company) as of December 31, 1997 and 1998,
and the related statements of operations, capital deficiency and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of eDiets.com, Inc. (f/k/a
Self/Help Technologies, Inc.) at December 31, 1997 and 1998, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/Ernst & Young LLP
West Palm Beach, Florida
July 30, 1999, except for
the third paragraph of Note 8,
as to which the date is
November 17, 1999.
F-2
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------------------------------ -------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,997 $ 44,164 $ 157,728
Accounts receivable 10,244 18,547 55,688
Other current assets 957 4,288 30,265
------------------------------------ -------------------
Total current assets 16,198 66,999 243,681
Restricted cash 10,335 16,998 16,998
Property and equipment, net 108,536 149,262 154,443
Deferred offering costs - - 256,230
------------------------------------ -------------------
Total assets $ 135,069 $ 233,259 $ 671,352
==================================== ===================
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $ 82,610 $ 151,322 $ 420,001
Accrued liabilities 7,489 72,617 10,599
Deferred revenue 42,744 447,747 269,185
------------------------------------ -------------------
Total current liabilities 132,843 671,686 699,785
Due to shareholder 217,335 163,300 56,082
Commitments
Capital deficiency:
Common stock, $.001 par value--10,000,000 shares
authorized, 6,215,733 shares issued and outstanding 6,216 6,216 6,216
Additional paid-in capital 52,495 117,575 213,696
Unearned compensation (2,848) (54,896) (24,363)
Accumulated deficit (270,972) (670,622) (280,064)
------------------------------------ -------------------
Net capital deficiency (215,109) (601,727) (84,515)
------------------------------------ -------------------
Total liabilities and capital deficiency $135,069 $233,259 $671,352
==================================== ===================
</TABLE>
SEE ACCOMPANYING NOTES.
F-3
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
1997 1998 1998 1999
------------------------------------ -------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 247,795 $ 477,626 $ 254,973 $1,922,347
Costs and expenses:
Cost of revenues 23,098 75,551 37,839 160,915
Sales and marketing 148,621 435,491 185,936 613,774
General and administrative 134,936 304,427 255,399 692,623
Depreciation and amortization 37,559 61,807 46,000 64,477
------------------------------------ -------------------------------------
Total costs and expenses 344,214 877,276 525,174 1,531,789
------------------------------------ -------------------------------------
Net (loss) income $ (96,419) $ (399,650) $ (270,201) $ 390,558
==================================== =====================================
(Loss) earnings per common share -
basic and diluted $ (0.02) $ (0.06) $ (0.04) $ 0.06
==================================== =====================================
Weighted average number of common shares
outstanding:
Basic 6,215,733 6,215,733 6,215,733 6,215,733
==================================== =====================================
Diluted 6,215,733 6,215,733 6,215,733 6,897,938
==================================== =====================================
</TABLE>
SEE ACCOMPANYING NOTES.
F-4
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Statements of Capital Deficiency
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL NET
-------------------------- PAID-IN UNEARNED ACCUMULATED CAPITAL
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT DEFICIENCY
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1997 6,215,733 $6,216 $ 49,184 $ (7,472) $(174,553) $(126,625)
Stock options granted - - 5,400 (5,400) - -
Stock options vested or forfeited - - (2,089) 10,024 - 7,935
Net loss - - - - (96,419) (96,419)
--------------------------------------------------------------------------------
Balance at December 31, 1997 6,215,733 6,216 52,495 (2,848) (270,972) (215,109)
Stock options granted - - 66,700 (66,700) - -
Stock options vested or forfeited - - (1,620) 14,652 - 13,032
Net loss - - - - (399,650) (399,650)
--------------------------------------------------------------------------------
Balance at December 31, 1998 6,215,733 6,216 117,575 (54,896) (670,622) (601,727)
Stock options granted (unaudited) - - 96,121 (96,121) - -
Stock options vested (unaudited) - - - 126,654 - 126,654
Net income (unaudited) - - - - 390,558 390,558
--------------------------------------------------------------------------------
Balance at September 30, 1999
(unaudited) 6,215,733 $6,216 $213,696 $(24,363) $(280,064) $(84,515)
================================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
F-5
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
1997 1998 1998 1999
---------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net (loss) income $(96,419) $(399,650) $(270,201) $ 390,558
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Depreciation and amortization 37,559 61,807 46,000 64,477
Non-cash compensation 7,935 13,032 1,229 126,654
Changes in operating assets and
liabilities:
Accounts receivable (9,906) (8,303) 10,244 (37,141)
Other current assets - (3,331) (1,886) (25,977)
Restricted cash (10,335) (6,663) (6,663) -
Accounts payable and accrued
liabilities 42,136 133,840 (35,212) 206,661
Deferred revenue 42,406 405,003 292,876 (178,562)
---------------------------------------------------------------------------
Net cash provided by operating activities 13,376 195,735 36,387 546,670
INVESTING ACTIVITY
Purchases of property and equipment (83,750) (102,533) (62,705) (69,658)
---------------------------------------------------------------------------
Net cash used in investing activity (83,750) (102,533) (62,705) (69,658)
FINANCING ACTIVITIES
Borrowings from (repayments to)
shareholder, net 70,784 (54,035) 57,199 (107,218)
Payment of financing costs - - - (256,230)
---------------------------------------------------------------------------
Net cash provided by (used in) financing
activities 70,784 (54,035) 57,199 (363,448)
---------------------------------------------------------------------------
Increase in cash and cash equivalents 410 39,167 30,881 113,564
Cash and cash equivalents at beginning
of period 4,587 4,997 4,997 44,164
---------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 4,997 $ 44,164 $ 35,878 $ 157,728
===========================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
F-6
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
December 31, 1998
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
eDiets.com, Inc. (f/k/a Self/Help Technologies) (the Company) was incorporated
in the State of Delaware on March 18, 1996 for the purpose of developing and
marketing an Internet-based diet and nutrition program. In addition to a
personalized and regularly updated plan, subscribers to the Company's program
can also purchase related items and attend online motivational meetings. The
Company markets its program primarily through advertising and other promotional
arrangements on the World Wide Web.
On February 23, 1999, the Company's name was changed from Self/Help
Technologies, Inc. to eDiets.com, Inc.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
RESTRICTED CASH
Restricted cash on the accompanying balance sheet consists of funds held by a
financial institution as collateral for chargebacks related to credit card
transactions.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets,
which is approximately three years for equipment and computer hardware and
software, including internal use software, and approximately seven years for
furniture and fixtures.
F-7
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In March 1998, the AICPA issued Statement of Position (SOP) 98-1, ACCOUNTING FOR
THE COSTS OF COMPUTER SOFTWARE DEVELOPED FOR OR OBTAINED FOR INTERNAL USE. The
SOP, which was adopted by the Company as of its inception, requires
capitalization of certain costs incurred in connection with developing or
obtaining internal use software. Costs capitalized pursuant to SOP 98-1 are
included in property and equipment in the accompanying balance sheet.
DEFERRED OFFERING COSTS
Deferred offering costs are costs incurred in connection with the reverse merger
transaction and private placement financing described in Note 8.
REVENUE RECOGNITION
Revenues from customer subscriptions to the Company's program and paid in
advance are deferred and recognized on a straight-line basis over the period of
the subscription.
STOCK-BASED COMPENSATION
SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION, defines a fair value
method of accounting for issuance of stock options and other equity investments.
Under the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service period,
which is usually the vesting period. Pursuant to SFAS No. 123, companies are
encouraged, but not required, to adopt the fair value method of accounting for
employee stock-based transactions. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board (APB) Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, but are required to disclose
in a note to the financial statements pro forma net income amounts as if the
Company had applied the new method of accounting.
F-8
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
The Company accounts for employee stock-based compensation under APB No. 25 and
has complied with the disclosure requirements of SFAS No. 123.
LONG-LIVED ASSETS
The Company accounts for long-lived assets pursuant to SFAS No. 121, ACCOUNTING
FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED
OF, which requires impairment losses to be recorded on long-lived assets used in
operations when events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Management reviews long-lived assets
and the related intangible assets for impairment whenever events or changes in
circumstances indicate the assets may be impaired. An impairment loss is
recorded when the net book value of the assets exceeds their fair value, as
measured by projected undiscounted future cash flows.
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME
TAXES. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation allowance is recorded
when it is more likely than not that some portion or all of a deferred tax asset
will not be realized.
ADVERTISING EXPENSE
The Company expenses advertising costs as incurred. Advertising expenses
incurred for the years ended December 31, 1997 and 1998 totaled approximately
$140,000 and $435,000, respectively.
Production costs, which benefit periods within the fiscal year beyond the
interim period in which the expenditure is made, are capitalized and amortized
over the interim periods benefited. At September 30, 1999, production costs
totaling approximately $20,000 were reported as prepaid expenses.
F-9
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EARNINGS (LOSS) PER COMMON SHARE
Basic earnings (loss) per common share is calculated based on the weighted
average number of common shares outstanding during the period. Common
equivalents outstanding have not been included in the computation of diluted
loss per share for the years ended December 31, 1997 and 1998 and for the nine
months ended September 30, 1998 as their effect is anti-dilutive. Diluted
earnings per common share for the nine months ended September 30, 1999 reflects
the weighted-average effect of 682,205 common equivalent shares outstanding
during the period. Earnings (loss) per common share in the accompanying
statements of operations have been retroactively adjusted to reflect the
stock-split described in Note 6.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents in banks and
accounts receivable from credit card transaction processing companies. The
credit risk associated with cash and cash equivalents is considered low due to
the credit quality of the financial institutions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions. Actual results could differ from these estimates.
F-10
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
3. PROPERTY AND EQUIPMENT
Property and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
---------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C>
Furniture and fixtures $ 4,859 $ 4,859 $ 6,627
Office and computer equipment 51,244 90,989 158,879
Software 93,248 156,036 156,036
---------------------------------------------------------
149,351 251,884 321,542
Less accumulated depreciation
and amortization (40,815) (102,622) (167,099)
=========================================================
$108,536 $149,262 $154,443
=========================================================
</TABLE>
Software includes approximately $90,000 and $153,000 of costs associated with
internal-use software projects which have been capitalized pursuant to SOP 98-1
as of December 31, 1997 and 1998, respectively.
4. DUE TO SHAREHOLDER
Amounts due to shareholder represent expenditures paid and amounts advanced by
the Company's shareholder to finance the operations of the Company in its
start-up phase. The obligation is non-interest bearing and does not have a fixed
or determinable due date. The shareholder has entered into an agreement
providing for the conversion of the obligation to equity contingent upon the
completion of the reverse merger transaction described in Note 8. In addition,
the shareholder has agreed to not demand repayment of the obligations prior to
January 1, 2000. Thus, the related amounts have been classified as a long-term
liability in the accompanying balance sheets.
F-11
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
5. INCOME TAXES
The significant components of the Company's net deferred income taxes are as
follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
------------------------------------
<S> <C> <C>
Deferred tax assets:
Deferred compensation $ 5,969 $ 10,873
Start-up and organizational costs 28,758 19,909
Net operating loss carryforwards 90,507 242,915
------------------------------------
125,234 273,697
Valuation allowance (98,729) (238,265)
------------------------------------
Total deferred tax assets 26,505 35,432
Deferred tax liabilities:
Internally-developed software (25,570) (34,394)
Other fixed assets (935) (1,038)
------------------------------------
Net deferred income taxes $ - $ -
====================================
</TABLE>
The Company has incurred net losses since inception. At December 31, 1998, the
Company had approximately $646,000 in net operating loss carryforwards for U.S.
federal income tax purposes that expire in various amounts through 2018.
Realization of the resulting deferred tax assets, and the Company's other net
deferred tax assets, is not reasonably assured; therefore, they are fully
reserved with a valuation allowance.
The change in the valuation allowance for the years ended December 31, 1997 and
1998 was an increase of approximately $33,000 and $140,000, respectively,
resulting primarily from net operating losses generated during the periods. The
difference between the benefit for income taxes and the amount which results
from applying the federal statutory rate of 34% is primarily due to the increase
in the valuation allowance, resulting in no tax benefit reported in any of those
periods.
F-12
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (DEFICIT)
COMMON STOCK
The Company was initially capitalized through the issuance of 100 shares of
common stock, no par value, to its founder for capital contributions totaling
$40,000 through December 31, 1996. In July 1999, the Company's Articles of
Incorporation were amended, increasing the number of authorized shares of the
Company's common stock from 1,500 shares to 10,000,000 shares with a par value
of $.001 per share. In connection with the change in capital structure, a
62,157.33-for-1 stock split was declared, pursuant to which the founder's shares
were converted to an aggregate of 6,215,733 shares of the Company's new common
stock, which continued to represent 100% ownership of the Company at such time.
All share and per share amounts in the financial statements have been
retroactively adjusted to reflect the new capital structure.
A total of 784,267 shares of the Company's common stock have been reserved for
issuance upon the exercise of stock options.
STOCK OPTIONS
In May 1996, the Company adopted the "Startup Equity Program" (the Startup
Program), pursuant to which the Company granted stock options to certain
employees and consultants during the Company's start-up phase. All options
granted under the Startup Program are exercisable over a 10-year period from the
date of grant at an exercise price of $.01 per share and vest in equal monthly
installments over a period of 12 months from the date of grant. In addition, the
Company has granted additional stock options to certain employees and
non-employees, which are issuable at the discretion of the Company's Board of
Directors. All such additional options are exercisable over a 5-year period from
the date of grant at an exercise price of $.01 per share and vest in equal
monthly installments over a period of 12 months from the date of grant.
Certain options granted to employees during the periods presented were at an
exercise price lower than the estimated fair market value of the underlying
common stock at the grant date. Compensation expense has been recognized for the
excess of the estimated fair market value over the exercise price and totaled
approximately $6,000 and $13,000 for the years ended December 31, 1997 and 1998,
and approximately $127,000 for the nine months ended September 30, 1999,
respectively.
F-13
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
6. STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)
Pro forma information regarding net income is required by SFAS No. 123, and has
been determined as if the Company had accounted for its employee stock options
under the fair value method of that statement. The fair value of options granted
was estimated at the date of grant using the minimum value method with the
following assumptions: weighted average risk-free interest rate of 5.8% and 4.6%
for 1997 and 1998, respectively; no expected dividends; and weighted average
expected life of the options of five years. For purposes of pro forma
disclosures, the estimated fair value of the options is amortized to expense
over the options' vesting period. The effect of applying the fair value method
proscribed by SFAS No. 123 to the Company's options does not have a significant
impact of the Company's reported results of operations for the periods
presented. Because the determination of the fair value of all options is based
on the assumptions described above, and because additional option grants are
expected to be made in future periods, this pro forma information is not likely
to be representative of the pro forma effects on reported net income or loss for
future years.
No options were exercised or expired during 1997 and 1998. A summary of the
Company's stock option activity and related information is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1997 1998
------------------------------------
<S> <C> <C>
Outstanding at beginning of year 385,000 390,000
Granted 60,000 155,000
Forfeited (55,000) (18,000)
------------------------------------
Outstanding at end of year 390,000 527,000
====================================
Exercisable at end of year 360,000 397,417
====================================
Weighted average fair value of options
granted during the year $ 0.09 $ 0.43
====================================
</TABLE>
The weighted average remaining contractual life of options outstanding at
December 31, 1998 was 8.2 years.
F-14
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Notes to Financial Statements
7. COMMITMENTS
The Company leases its office space under a year-to-year lease expiring in
April, 2000. Rental expense amounted to approximately $11,000 and $22,000 for
the years ended December 31, 1997 and 1998, respectively.
8. SUBSEQUENT EVENTS
In March 1999, the Company entered into a revolving line of credit with its
primary bank. The facility provides for revolving borrowings of up to $150,000
and matures in March 2000. Outstanding borrowings under the line of credit are
collateralized by a certificate of deposit held by the Company's shareholder.
On June 23, 1999, the Company entered into a letter of intent for the reverse
merger of the Company with a public company, which has no operations (the
shell), pursuant to which all of the outstanding shares of common stock of the
Company would be exchanged for shares representing 88% of the common stock of
the shell. The transaction is subject to certain conditions, including approval
by the Board of Directors and stockholders of the Company and Board of Directors
of the shell and the successful completion of a private placement financing by
the post-merger company in the minimum amount of $4 million.
On November 17, 1999, the Company executed the reverse merger described above.
Concurrent with the merger, the initial closing by the post-merger Company was
completed. The private placement totaled $6,187,500 and consisted of 123.75
units of 25,000 shares of common stock and 12,500 warrants, each to purchase one
share of common stock, at an exercise price of $2.50 per share. In connection
with the transaction, an additional 150,000 shares of common stock and 640,625
warrants, each to purchase one share of common stock at an exercise price of
$2.50 per share, were issued to the placement agent, and options to purchase
32,500 shares of common stock at an exercise price of $1.425 were granted to a
stockholder of the post-merger Company. The Company will incur a $1,981,107
non-recurring charge in the fourth quarter of 1999 relating to the value of the
common shares retained by the shareholders of the shell in excess of the cash
received by the Company from the shell pursuant to the reverse merger.
F-15
<PAGE>
9. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)
In December 1999, the final closing of the private placement by the post-merger
Company was completed. Total proceeds raised from the private placement
financing was $7,262,500 based on the sale of 145.25 units of 25,000 shares and
12,500 warrants, each to purchase one share of common stock at an exercise price
of $2.50 per share.
In connection with the closing, the post-merger Company's advertising agency
received 82,500 warrants at an exercise price of $2.00 per share, as a result of
an agreement between the Company and the advertising agency.
F-16
<PAGE>
Report of Independent Certified Public Accountants
Board of Directors
eDiets.com, Inc.
We have audited the accompanying balance sheets of Olas, Inc. (the Company) as
of December 31, 1997 and 1998, and the related statements of operations and
accumulated deficit and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Olas, Inc. at December 31, 1997
and 1998, and the results of its operations and its cash flows for the years
then ended in conformity with generally accepted accounting principles.
/s/Ernst & Young LLP
West Palm Beach, Florida
December 9, 1999
F-17
<PAGE>
Olas, Inc.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998 1999
------------------------------------ -------------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 456,506 $ 423,619 $ 418,893
Restricted cash 70,000 - -
Accrued interest receivable 3,480 - -
Other current assets - 724 1,776
------------------------------------ -------------------
Total current assets 529,986 424,343 420,669
Equipment held for disposal 18,000 18,000 -
------------------------------------ -------------------
Total assets $ 547,986 $ 442,343 $ 420,669
==================================== ===================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accrued liabilities $ 129,000 $ 34,000 $ 35,762
------------------------------------ -------------------
Total current liabilities 129,000 34,000 35,762
Commitments
Stockholders' equity:
Preferred stock, $.01 par value--5,000,000 shares
authorized, no shares issued and outstanding - - -
Class A common stock, $.01 par value--10,000,000
shares authorized, 943,042 shares issued and
outstanding 9,430 9,430 9,430
Class B common stock, $.01 par value--10,000,000
shares authorized, 106,958 shares issued and
outstanding 1,070 1,070 1,070
Additional paid-in capital 14,457,200 14,457,200 14,457,200
Accumulated deficit (14,048,714) (14,059,357) (14,082,793)
------------------------------------ -------------------
Total stockholders' equity 418,986 408,343 384,907
------------------------------------ -------------------
Total liabilities and stockholders' equity $ 547,986 $ 442,343 $ 420,669
==================================== ===================
</TABLE>
SEE ACCOMPANYING NOTES.
F-18
<PAGE>
Olas, Inc.
Statements of Operations and Accumulated Deficit
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
1997 1998 1998 1999
------------------------------------ -------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
Costs and expenses:
General and administrative $ 97,000 $ 40,044 $ 36,875 $ 38,082
Bad debt expense 1,029,960 - - -
------------------------------------ -------------------------------------
Total costs and expenses 1,126,960 40,044 36,875 38,082
Other income 31,246 29,401 22,817 14,646
------------------------------------ -------------------------------------
Net loss (1,095,714) (10,643) (14,058) (23,436)
Accumulated deficit - beginning of
period (12,953,000) (14,048,714) (14,048,714) (14,059,357)
------------------------------------ -------------------------------------
Accumulated deficit - end of period $(14,048,714) $(14,059,357) $(14,062,772) $(14,082,793)
==================================== =====================================
Loss per common share--
basic and diluted $ (1.05) $ (0.01) $ (0.01) $ (0.02)
==================================== =====================================
Weighted average number of common shares
outstanding 1,044,402 1,050,000 1,050,000 1,050,000
==================================== =====================================
</TABLE>
SEE ACCOMPANYING NOTES.
F-19
<PAGE>
Olas, Inc.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, NINE MONTHS ENDED SEPTEMBER 30,
1997 1998 1998 1999
---------------------------------------------------------------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $(1,095,714) $(10,643) $(14,058) $(23,436)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Bad debt expense 1,029,960 - - -
Changes in operating assets and
liabilities:
Restricted cash 10,000 70,000 70,000 -
Accrued interest receivable 10,761 3,480 3,480 -
Other current assets - (724) (724) (1,052)
Accrued liabilities (132,102) (95,000) (95,000) 1,762
---------------------------------------------------------------------------
Net cash used in operating activities (177,095) (32,887) (36,302) (22,726)
INVESTING ACTIVITY
Proceeds from liquidation of property and
equipment 234,000 - - 18,000
---------------------------------------------------------------------------
Net cash provided by investing activity 234,000 - - 18,000
---------------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 56,905 (32,887) (36,302) (4,726)
Cash and cash equivalents at beginning
of period 399,601 456,506 456,506 423,619
===========================================================================
Cash and cash equivalents at end of period $ 456,506 $423,619 $420,204 $418,893
===========================================================================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Common stock issued in satisfaction of
obligation $ 20,000 $ - $ - $ -
===========================================================================
</TABLE>
SEE ACCOMPANYING NOTES
F-20
<PAGE>
Olas, Inc.
Notes to Financial Statements
December 31, 1998
(INFORMATION PERTAINING TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1998 AND 1999 IS UNAUDITED)
1. ORGANIZATION AND BASIS OF PRESENTATION
Olas, Inc., a Delaware corporation, is the successor company to Lida Inc.
(Lida), a designer, manufacturer and marketer of fabrics used primarily in the
production of women's sportswear, swimwear and activewear. Lida's operations
were divided into two primary areas - the Stretch Fabrics Business and the Print
Business. Lida's Print Business was discontinued with the closing of its
printing plant in July 1995. The Stretch Fabrics Business was sold as of August
31, 1995, at which time the name of the company was changed to Olas, Inc. (the
Company).
Concurrent with the sale of the Stretch Fabric Business in 1995, management of
the Company commenced liquidation of the remaining Print Business net assets. As
a result, the Company had adopted the liquidation basis of accounting effective
September 1, 1995. The Company's financial statements were prepared under the
liquidation basis of accounting through December 31, 1996. Liquidation of the
Print Business net assets was substantially completed in 1997, and the Company
has continued in existence as a legal entity. On November 17, 1999, the Company
acquired an unrelated operating entity in a transaction accounted for as a
reverse merger (See Note 7). Accordingly, effective January 1, 1997 the Company
adopted the going concern basis of accounting. This change in basis of
accounting did not have an effect on the valuation of assets or liabilities or
on the Company's results of operations. The accompanying financial statements
for the periods presented reflect activities related primarily to maintaining
the legal entity.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, the Company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash equivalents.
RESTRICTED CASH
Restricted cash in the accompanying balance sheet as of December 31, 1997
consists of a certificate of deposit with a financial institution that serves as
collateral for a letter of credit established in connection with the Company's
workers' compensation plan.
F-21
<PAGE>
Olas, Inc.
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
EQUIPMENT HELD FOR DISPOSAL
Equipment held for disposal is stated at its net realizable value as a result of
its pending liquidation.
INCOME TAXES
The Company accounts for income taxes under SFAS No. 109, ACCOUNTING FOR INCOME
TAXES. Deferred income tax assets and liabilities are determined based upon
differences between financial reporting and tax bases of assets and liabilities
and are measured using the enacted tax rates and laws that will be in effect
when the differences are expected to reverse. A valuation allowance is recorded
when it is more likely than not that some portion or all of a deferred tax asset
will not be realized.
LOSS PER COMMON SHARE
Loss per common share is calculated based on the weighted average number of
common shares outstanding during the period. Loss per common share in the
accompanying statements of operations has been retroactively adjusted to reflect
the stock-split described in Note 6.
CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of cash and cash equivalents in banks. The
credit risk associated with cash and cash equivalents is considered low due to
the credit quality of the financial institutions.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions. Actual results could differ from these estimates.
F-22
<PAGE>
Olas, Inc.
Notes to Financial Statements (continued)
3. NOTE RECEIVABLE
In connection with the sale of the Stretch Fabrics Business, the Company
received a note from the buyer that was originally due August 31, 2002 and
accrued interest at 7.75% per annum. In 1998, the buyer filed for protection
under U.S. bankruptcy laws. The Company has asserted an unsecured nonpriority
claim in the amount of the principal plus accrued interest as of the petition
date.
In August 1999, and as confirmed by the U.S. Bankruptcy Court in September 1999,
the Creditors' Committee filed an amended Plan of Liquidation, which projected a
distribution of approximately 4% on such unsecured nonpriority claims. As a
result of the uncertainty related to the Company's ultimate recovery, if any, on
its claim, the face amount of the note, plus interest accrued through December
31, 1996, was written off as of January 1, 1997 and is reflected as bad debt
expense in the accompanying statement of operations for the year ended December
31, 1997.
No interest has been accrued on the note beyond December 31, 1996.
4. ACCRUED LIABILITIES
Accrued liabilities at December 31, 1997 and 1998 consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
1997 1998
------------------------------------
<S> <C> <C>
Accrued workers' compensation $ 70,000 $ -
Accrued commissions on liquidation of property and
equipment 42,000 -
Liability for unclaimed outstanding checks - 24,000
Accrued professional fees and other 17,000 10,000
------------------------------------
$129,000 $34,000
====================================
</TABLE>
F-23
<PAGE>
Olas, Inc.
Notes to Financial Statements (continued)
5. INCOME TAXES
The Company's net deferred income taxes consist primarily of net operating loss
carryforwards of approximately $6,851,000 and $7,277,000 at December 31, 1997
and 1998, respectively. Realization of the resulting deferred tax assets is not
reasonably assured; therefore, they are fully reserved with a valuation
allowance, resulting in no net deferred income taxes.
The change in valuation allowance for the years ended December 31, 1997 and 1998
was an increase of approximately $41,000 and $426,000, respectively, resulting
primarily from net operating losses generated during the periods. The difference
between the benefit for income taxes and the amount which results from applying
the federal statutory rate of 34% is primarily due to the increase in valuation
allowance, resulting in no tax benefit reported in any of those periods.
At December 31, 1998, the Company had approximately $19,300,000 in net operating
loss carryforwards for U.S. federal income tax purposes that expire in various
amounts through 2018. As a result of the merger transaction discussed in Note 7,
utilization of the net operating loss carryforwards will be significantly
restricted under Internal Revenue Code Section 382 due to changes in ownership
of the Company's stock. Thus, the Compnay's ability to benefit from the net
operating loss carryfowards will be limited to an amount which has yet to be
determined.
6. STOCKHOLDERS' EQUITY
During 1997, 391,774 shares of the Company's Class B Common Stock were converted
to an equal number of shares of Class A Common Stock. At December 31, 1998, a
total of 106,958 shares of Class A Common Stock were reserved for the conversion
of the outstanding shares of Class B Common Stock. In connection with the merger
transaction discussed in Note 7, these outstanding shares of Class B Common
Stock were converted to an equal number of shares of Class A Common Stock.
During 1997, the Company issued 6,612 shares of Class A Common Stock in
satisfaction of an obligation of the Company. The shares issued were recorded at
a value of $20,000, representing the amount of the obligation satisfied.
F-24
<PAGE>
Olas, Inc.
Notes to Financial Statements (continued)
6. STOCKHOLDERS' EQUITY (CONTINUED)
In connection with the merger transaction discussed in Note 7, the Company's
Articles of Incorporation were amended, converting all of the Company's Class A
and Class B Common Stock into one class of common stock with a par value of
$.001 per share. In addition, the number of authorized shares of preferred stock
was decreased to 1,000,000 shares. In connection with the change in capital
structure, a 1-for-7.5618095 reverse stock split was declared. All share and per
share amounts in the financial statements have been retroactively adjusted to
reflect the reverse stock split.
7. SUBSEQUENT EVENTS
On November 17, 1999, the Company completed the merger of the Company with an
unrelated operating entity in a transaction accounted for as a reverse merger,
in which the acquired entity will continue the surviving corporation for
accounting purposes. Pursuant to the merger, the name of the Company was changed
to eDiets.com, Inc. Concurrent with the merger, the initial closing of a private
placement by the post-merger company was completed. The private placement
totaled approximately $6.2 million and consisted of 123.75 units of 25,000
shares of common stock and 12,500 warrants, each to purchase one share of common
stock at an exercise price of $2.50 per share. In connection with the
transaction, an additional 150,000 shares of common stock and 640,625 warrants,
each to purchase one share of common stock at an exercise price of $2.50 per
share, were issued to the placement agent, and options to purchase 32,500 shares
of common stock at an exercise price of $1.425 per share were granted to a
stockholder of the post-merger Company. Additionally, the surviving Company will
incur a $1,981,107 non-recurring charge in the fourth quarter of 1999 relating
to the value of the common shares retained by the shareholders of the Company in
excess of the cash surrendered by the Company, pursuant to the reverse merger.
In connection with the merger transaction the merger transaction, the
eDiets.com, Inc. 1999 Stock Option Plan (the Plan) was adopted, subject to
shareholder approval, providing for the grant of options to purchase up to
1,830,000 shares of common stock. Upon the adoption of the Plan, options for the
purchase of 692,000 shares of common stock at an exercise price of $2.00 per
share were granted to certain officers, directors and employees of the
post-merger company.
F-25
<PAGE>
8. EVENTS SUBSEQUENT TO DATE OF AUDITOR'S REPORT (UNAUDITED)
In December 1999, the final closing of the private placement by the post-merger
Company was completed. Total proceeds raised from the private placement
financing was $7,262,500 based on the sale of 145.25 units of 25,000
shares and 12,500 warrants, each to purchase one share of common stock at an
exercise price of $2.50 per share.
In connection with the closing, the post-merger Company's advertising agency
received 82,500 warrants at an exercise price of $2.00 per share, as a result of
an agreement between the Company and the advertising agency.
F-26
<PAGE>
Pro forma Condensed Financial Statements (Unaudited)
The following pro forma condensed balance sheet at September 30, 1999 gives
effect to the reverse acquisition of Olas, Inc. by eDiets.com, Inc. (the
Company) and the private offering of units of common stock and warrants (the
Offering) as if the transactions had occurred on September 30, 1999. The pro
forma condensed statements of operations for the year ended December 31, 1998
and the nine months ended September 30, 1999 give effect to the foregoing as if
the transactions had occurred on January 1, 1998 and 1999, respectively.
On November 17, 1999, the Company executed a reverse merger of a subsidiary of
Olas, Inc., a public "shell", with and into the Company, whereby all of the
outstanding shares of common stock of the Company were exchanged for 8,800,000
shares (88%) of the common stock of the shell. The shareholders of the shell
retained 1,200,000 shares (12%) of common stock. For accounting purposes, the
reorganization of the Company and Olas, Inc. is regarded as an acquisition by
the public company of all of the outstanding stock of the Company and was
accounted for as a recapitalization of the Company with the Company as the
acquirer (a reverse acquisition). In connection with this merger, during
November and December 1999, the Company completed the Offering consisting of
145.25 units of 25,000 shares of common stock and 12,500 redeemable warrants
each to purchase one share of common stock, at a price of $50,000 per unit,
resulting in gross proceeds of $7,262,500.
In connection with the above transaction, amounts owed to the Company's
shareholder were converted to equity. In addition, the Company entered into a
three-year employment agreement with its Chief Executive Officer providing for a
base salary of $150,000 per year. Since its inception, the Company's Chief
Executive Officer has not received any compensation for his services.
The pro forma financial data is presented for informational purposes only and
does not purport to project the financial position or results of operations for
any future period or as of any future date. The pro forma condensed financial
statements should be read in conjunction with the notes thereto and with the
financial statements and the notes thereto of the Company and the financial
statements and the notes thereto of Olas, Inc., all of which are included
elsewhere in the registration statement.
F-27
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Pro forma Condensed Balance Sheet (Unaudited)
September 30, 1999
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
AS REPORTED OLAS, INC. ADJUSTMENTS PRO FORMA
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 157,728 $ 418,893 $ 6,474,750 (4) $ 7,051,371
Accounts receivable 55,688 - - 55,688
Other current assets 30,265 1,776 - 32,041
------------------------------------------------------------------------
Total current assets 243,681 420,669 6,474,750 7,139,100
Restricted cash 16,998 - - 16,998
Property and equipment, net 154,443 - - 154,443
Deferred offering costs 256,230 - (256,230) (4) -
------------------------------------------------------------------------
Total assets $ 671,352 $ 420,669 $ 6,218,520 $ 7,310,541
========================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 420,001 $ - $ - $ 420,001
Accrued liabilities 10,599 35,762 - 46,361
Deferred revenue 269,185 - - 269,185
------------------------------------------------------------------------
Total current liabilities 699,785 35,762 - 735,547
Due to shareholder 56,082 - (56,082) (5) -
Stockholders' equity (capital deficiency):
Common stock 6,216 10,500 (10,500) (1) 12,645
1,598 (2)
1,200 (3)
3,631 (4)
Additional paid-in capital 213,696 14,457,200 (14,072,293) (1) 8,847,883
(1,598) (2)
2,398,800 (3)
(418,893) (3)
7,258,869 (4)
(1,043,980) (4)
18,688 (4)
(18,688) (4)
56,082 (5)
Unearned compensation (24,363) - - (24,363)
Accumulated deficit (280,064) (14,082,793) 14,082,793 (1) (2,261,171)
(1,981,107) (3)
------------------------------------------------------------------------
Total stockholders' equity (net capital
deficiency) (84,515) 384,907 6,274,602 6,574,994
------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 671,352 $ 420,669 $ 6,218,520 $ 7,310,541
========================================================================
</TABLE>
SEE ACCOMPANYING NOTES.
F-28
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Pro forma Condensed Statement of Operations (Unaudited)
Nine months ended September 30, 1999
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
AS REPORTED OLAS, INC. ADJUSTMENTS PRO FORMA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $1,922,347 $ - $ - $ 1,922,347
Costs and expenses:
Cost of revenues 160,915 - - 160,915
Sales and marketing 613,774 - - 613,774
General and administrative 692,623 38,082 112,500 (6) 843,205
Depreciation and amortization 64,477 - - 64,477
-----------------------------------------------------------------------
Total costs and expenses 1,531,789 38,082 112,500 1,682,371
Other income - 14,646 - 14,646
-----------------------------------------------------------------------
Net income (loss) $ 390,558 $(23,436) $(112,500) $ 254,622 (7)
=======================================================================
Earnings per common share - basic and
diluted $ 0.06 $ 0.02 (7)
================== ===================
Weighted average number of common
shares outstanding:
Basic 6,215,733 12,645,315
================== ===================
Diluted 6,897,938 13,485,060
================== ===================
</TABLE>
SEE ACCOMPANYING NOTES.
F-29
<PAGE>
(1) Reflects elimination of the historical equity accounts of Olas, Inc. and
adjustment to record the fair value of the net assets of Olas, Inc.
(2) Reflects adjustment of capital stock to reflect the new capital structure
of the Company as a result of the reverse acquisition.
(3) Reflects the value of the common shares retained by the shareholders of
Olas, Inc. (1,200,000 shares at a value of $2.00 per share), which has been
charged to equity to the extent of cash received by the Company from Olas,
Inc. pursuant to the reverse merger. Remaining value in excess of cash
received will be charged to expense in the period of the transaction
(see Note 7).
(4) Reflects the net proceeds of the Offering, 145.25 units at $50,000 per unit
basis, calculated as follows:
Gross proceeds $7,262,500
Less:
Placement commission (10%) (726,250)
Legal, accounting and other costs, net of $256,230
paid prior to September 30, 1999 (61,500)
=============
Net proceeds $6,474,750
=============
Also reflects the estimated fair value ($18,688) of stock options for the
purchase of 32,500 shares of common stock at an exercise price of $1.425
per share to be granted to a shareholder of Olas, Inc. as consideration for
his efforts in structuring the merger transaction. Warrants to purchase a
total of 640,625 shares of common stock at an exercise price of $2.50 per
share to be granted to the placement agent are considered to have a nominal
value and have not been reflected herein.
(5) Reflects the conversion of amounts due to shareholder to contributed
capital.
(6) Reflects nine months of annual salary of the Company's Chief Executive
Officer under new employment agreement.
(7) Does not include a non-recurring charge of $1,981,107, or $0.15 per share
on a diluted basis, relating to the value of the common shares retained by
the shareholders of Olas, Inc. (1,200,000 shares at a value of $2.00 per
share) in excess of the cash received by the Company from Olas, Inc.
pursuant to the reverse merger.
F-30
<PAGE>
eDiets.com, Inc.
(f/k/a Self/Help Technologies, Inc.)
Pro forma Condensed Statement of Operations (Unaudited)
Year ended December 31, 1998
<TABLE>
<CAPTION>
COMPANY PRO FORMA COMPANY
AS REPORTED OLAS, INC. ADJUSTMENTS PRO FORMA
-----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $ 477,626 $ - $ - $ 477,626
Costs and expenses:
Cost of revenues 75,551 - - 75,551
Sales and marketing 435,491 - - 435,491
General and administrative 304,427 40,044 150,000 (1) 494,471
Depreciation and amortization 61,807 - - 61,807
-----------------------------------------------------------------------
Total costs and expenses 877,276 40,044 150,000 1,067,320
Other income - 29,401 - 29,401
-----------------------------------------------------------------------
Net loss $ (399,650) $(10,643) $(150,000) $ (560,293) (2)
=======================================================================
Loss per common share - basic and diluted $ (0.06) $ (0.04) (2)
================== ===================
Weighted average number of common shares
outstanding - basic and diluted 6,215,733 12,645,315
================== ===================
</TABLE>
SEE ACCOMPANYING NOTES.
F-31
<PAGE>
(1) Reflects annual salary of the Company's Chief Executive Officer under new
employment agreement.
(2) Does not include a non-recurring charge of $1,976,381, or $0.16 per share
on a diluted basis, relating to the value of the common shares retained by
the shareholders of Olas, Inc. (1,200,000 shares at a value of $2.00 per
share) in excess of the cash received by the Company from Olas, Inc.
pursuant to the reverse merger.
F-32
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware provides for the
indemnification of officers and directors under certain circumstances against
expenses incurred successfully defending against a claim and authorizes Delaware
corporations to indemnify their officers and directors under certain
circumstances against expenses and liabilities incurred in legal proceedings
involving such persons because of their being or having been an officer or
director. The Restated Certificate of Incorporation of the Company provides for
indemnification of its officers and directors to the full extent authorized by
law. The Company is also a party to indemnification agreements with each of its
directors and officers.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses payable by the
Company in connection with the issuance and distribution of the securities being
registered hereunder. No expenses shall be borne by the Selling Security
Holders. All of the amounts shown are estimates, except for the SEC registration
and NASD application fees.
SEC Registration Fee $4,839.14
Printing and Engraving Expenses* 5,000
Accounting Fees and Expenses* 75,000
Legal Fees and Expenses* 50,000
Fees and Expenses for Qualification Under State Securities Laws* 5,000
Miscellaneous* 2,500
TOTAL $142,339.14
*Estimated
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In March 1996, the Company's subsidiary, eDiets, Inc., acquired by the
Company in November 1999 ("Original eDiets") issued 100 shares of its no par
Common Stock to its founder David R. Humble in consideration for $40,000. In
July 1999, Original eDiets undertook a 62,157.33-to-1 forward stock split and a
recapitalization under which Mr. Humble received 6,215,733 shares of Original
eDiets Common Stock $.001 par value per share for his 100 shares of no par
Common Stock. In connection with the issuance to Mr. Humble, Original
II-1
<PAGE>
eDiets relied on Section 4(2) under the Securities Act of 1933, as amended, (the
"Securities Act") as a transaction by an issuer not involving any public
offering. Mr. Humble had full access to information relating to Original eDiets
and represented that he had the required investment intent. In addition, the
securities bore appropriate restrictive legends.
In November 1999, we acquired Original eDiets through the merger of our
wholly-owned subsidiary, eDiets Acquisition Corp., with and into Original
eDiets. Under the terms of the merger agreement, we issued 7,814,065 shares of
our Common Stock to David R. Humble, the sole stockholder of Original eDiets. In
connection with this issuance, we relied upon the exemption from the
registration requirements pursuant to the provisions of Section 4(2) of the
Securities Act as a transaction by an issuer not involving any public offering.
Mr. Humble had full access to information relating to us and represented that he
had the required investment intent. In addition, the securities issued to him
bore an appropriate restrictive legend.
In November 1999, we issued 150,000 shares of our Common Stock to Whale
Securities Co., L.P. in consideration of its services to us in connection with
the Acquisition. In connection with the issuance, we relied on Section 4(2)
under the Securities Act as a transaction by an issuer not involving any public
offering. Whale Securities Co., L.P. had full access to information relating to
us and represented to us that it had the required investment intent.
In November and December 1999, we issued an aggregate of 3,631,250
shares of Common Stock and 1,815,625 Warrants to purchase Common Stock to 64
investors, pursuant to the terms of a confidential private placement memorandum
dated September 1, 1999 (the "Private Placement"). Each investor warranted and
represented to us in connection with their subscriptions that they were
purchasing the securities for investment and not with a view towards
distribution. The offering was conducted without a general solicitation or
advertisement, was made solely to accredited investors (as defined in Rule 501
of Regulation D) and accordingly, the Company relied upon the exemption from the
registration requirements of Section 5 of the Securities Act, pursuant to the
provisions of Section 4(2) of the Securities Act and Regulation D.
In connection with the Private Placement, Whale Securities Co., L.P.
acted as the Placement Agent on a best efforts basis. We raised gross proceeds
of $7,262,500, paid the Placement Agent commissions of $726,250 and issued
Warrants to the Placement Agent to purchase 640,625 shares of Common Stock.
II-2
<PAGE>
ITEM 27. EXHIBITS.
EXHIBIT NO. DESCRIPTION OF DOCUMENT
3.1 Restated Certificate of Incorporation
3.2 By-Laws
4.1 Form of Investors Warrant
4.2 Warrant Certificate dated November 17, 2004 issued to Whale Securities
Co., L.P. for 570,625 Warrants
4.2.2 Warrant Certificate dated December 23, 1999 issued to Whale Securities
Co., L.P. for 70,000 Warrants
4.3 Form of Registrant's Common Stock Certificate
4.4 Form of Registration Rights Agreement
4.5 Warrant Agreement dated November 17, 1999 between Registrant and Whale
Securities Co., L.P.
5.1 Opinion of Nason, Yeager, Gerson, White & Lioce, P.A.
10.1 1999 Stock Option Plan
10.2 Employment Agreement dated November 17, 1999 between
Registrant and David R. Humble
10.3 Form of Indemnification Agreement between the Registrant and each of
its Directors and Executive Officers*
10.4 Agreement and Plan of Merger and Reorganization dated as of August 30,
1999 among the Registrant, eDiets Acquisition Corp., eDiets.com, Inc.
and David R. Humble
10.5 License Agreement dated August 3, 1999 between eDiets, Inc. (formerly
eDiets.com, Inc.) and David R. Humble
10.6 Lease Agreement dated December 2, 1999 between The 3467 Partnership and
Registrant
10.7 Placement Agent Agreement dated November 17, 1999 between the
Registrant and Whale Securities Co., L.P.
10.8 Agreement dated December 22, 1999 between Registrant and iVillage, Inc.
10.9 Advertising Insertion Order Agreement dated September 29, 1999 between
Registrant and Yahoo!, Inc.
II-3
<PAGE>
10.10 Database Management and Direct Marketing Agreement dated August, 1999
between 24/7 Media, Inc. and Registrant
10.11 Confidential Alliance Member Cancellation Agreement dated August 3,
1999 between 24/7 Media, Inc. and Registrant
10.12 E-Mail Newsletter Management Agreement dated August 22, 1999 between
24/7 Media, Inc. and Registrant
10.13 Co-locate Service Agreement dated October 1999 with PSIWeb, Inc. and
Registrant
10.14 Equipment Lease Agreement between First Sierra Financial, Inc. and
Registrant
10.15 Agreement dated as of November 15, 1999 between DiMassimo Brand
Advertising, Inc. and Registrant
21.1 List of Subsidiaries
23.1 Consent of Nason, Yeager, Gerson, White & Lioce, P.A. (included in its
opinion filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP - eDiets.com, Inc.
23.3 Consent of Ernst & Young LLP - Olas, Inc.
27.1 eDiets.com, Inc. - Financial Data Schedule
27.2 Olas, Inc. - Financial Data Schedule
* To be filed by amendment.
II-4
<PAGE>
ITEM 28. UNDERTAKINGS.
The Company hereby undertakes that it will:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
Registration Statement; and
(iii) Include any additional or changed material information
on the plan of distribution.
2. For determining liability under the Securities Act, treat each
post-effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the initial bona
fide offering.
3. File a post-effective amendment to remove from registration any of
the securities that remain unsold at the end of the offering.
4. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the small business issuer pursuant to the foregoing provisions, or otherwise,
the small business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
II-5
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and authorized this Registration
Statement to be signed on its behalf by the undersigned, in the City of
Deerfield Beach, Florida on December 30, 1999.
eDiets.com, Inc., a Delaware corporation
By:
David R. Humble
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated; and further, that each of the persons who
signed below hereby appoints and constitutes David R. Humble, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to execute the any and all amendments to this registration
statement, and to file the same, together with all exhibits thereto with the
Securities and Exchange Commission, and such other agencies, offices and persons
as may be required by applicable law, and to execute such other documents in
connection therewith as may be required by applicable law, granting unto said
attorney-in-fact and agent, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that each said attorney-in-fact and
agent may lawfully do or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------- ---------------------------------------------- -------------------
<S> <C> <C>
/s/ DAVID R. HUBLE
- ---------------------
David R. Humble Chairman of the Board, Chief Executive Officer December 30, 1999
(Principal Executive Officer)
/s/ ROBERT T. HAMILTON
- ----------------------
Robert T. Hamilton Chief Financial Officer (Principal Financial and December 30, 1999
Accounting Officer)
/s/ ISAAC KIER
- ---------------------
Isaac Kier Director December 30, 1999
/s/ MATTHEW GOHD
- ---------------------
Matthew Gohd Director December 30, 1999
- ----------------------
Bruce Yaffe, M.D. Director December , 1999
/s/ JAMES M. MEYER
- ---------------------
James M. Meyer Director December 28, 1999
/s/ CAREY S. FITCHEY
- ---------------------
Carey S. Fitchey Director December 30, 1999
- ---------------------
Lee S. Isgur Director December , 1999
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT
3.1 Restated Certificate of Incorporation
3.2 By-Laws
4.1 Form of Investors Warrant
4.2 Warrant Certificate dated November 17, 2004 issued to Whale
Securities Co., L.P. for 570,625 Warrants
4.2.2 Warrant Certificate dated December 23, 1999 issued to Whale
Securities Co., L.P. for 70,000 Warrants
4.3 Form of Registrant's Common Stock Certificate
4.4 Form of Registration Rights Agreement
4.5 Warrant Agreement dated November 17, 1999 between Registrant and
Whale Securities Co., L.P.
5.1 Opinion of Nason, Yeager, Gerson, White & Lioce, P.A. 10.1 1999
Stock Option Plan 10.2
10.1 1999 Stock Option Plan
10.2 Employment Agreement dated November 17, 1999 between Registrant
and David R. Humble
10.4 Agreement and Plan of Merger and Reorganization dated as of August
30, 1999 among the Registrant, eDiets Acquisition Corp.,
eDiets.com, Inc. and David R. Humble
10.5 License Agreement dated August 3, 1999 between eDiets, Inc.
(formerly eDiets.com, Inc.) and David R. Humble
10.6 Lease Agreement dated December 2, 1999 between The 3467
Partnership and Registrant
10.7 Placement Agent Agreement dated November 17, 1999 between the
Registrant and Whale Securities Co., L.P.
10.8 Agreement dated December 22, 1999 between Registrant and iVillage,
Inc.
10.9 Advertising Insertion Order Agreement dated September 29, 1999
between Registrant and Yahoo!, Inc.
10.10 Database Management and Direct Marketing Agreement dated August,
1999 between 24/7 Media, Inc. and Registrant
10.11 Confidential Alliance Member Cancellation Agreement dated August
3, 1999 between 24/7 Media, Inc. and Registrant
10.12 E-Mail Newsletter Management Agreement dated August 22, 1999
between 24/7 Media, Inc. and Registrant
10.13 Co-locate Service Agreement dated October 1999 with PSIWeb, Inc.
and Registrant
10.14 Equipment Lease Agreement between First Sierra Financial, Inc. and
Registrant
10.15 Agreement dated as of November 15, 1999 between DiMassimo Brand
Advertising, Inc. and Registrant
21.1 List of Subsidiaries
23.1 Consent of Nason, Yeager, Gerson, White & Lioce, P.A. (included in
its opinion filed as Exhibit 5.1)
23.2 Consent of Ernst & Young LLP - eDiets.com, Inc.
23.3 Consent of Ernst & Young LLP - Olas, Inc.
27.1 Financial Data Schedule
27.2 Financial Data Schedule
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
OLAS, INC.
The original Certificate of Incorporation of OLAS, INC. (the
"Corporation") was filed by the Secretary of State on March 24, 1992 under the
name Lida, Inc. This Restated Certificate of Incorporation, which further amends
the Certificate of Incorporation of the Corporation, was duly adopted in
accordance with the provisions of Sections 242 and 245 of the Delaware General
Corporation Law by the affirmative vote of the holders of a majority of the
stock entitled to vote at a meeting of stockholders.
FIRST: The name of the Corporation is:
eDiets.com, Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle, 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage
<PAGE>
in any lawful act or activity for which a corporation may be organized under the
laws of the General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares which the Corporation
has authority to issue is 21,000,000 million shares, consisting of 20,000,000
shares of Common Stock, $.001 par value per share (the "Common Stock"), and
1,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred
Stock").
The presently issued and outstanding shares of Class A Common
Stock shall be combined in the ratio of one (1) new share of Common Stock for
each 7.5618095 shares of Class A Common Stock presently issued and outstanding.
The Board of Directors is authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such designation, powers, preferences and relative,
participating, optional or other special rights (including voting rights), and
qualifications, limitations or restrictions, as shall be established by
resolution of the Board of Directors in accordance with Section 151 of the
General Corporation Law.
FIFTH: Unless required by law or determined by the chairman of
the meeting to be advisable, the vote by stockholders on any matter, including
the election of directors, need not be
-2-
<PAGE>
by written ballot.
SIXTH: The Corporation reserves the right to in-crease or
decrease its authorized capital stock, or any class or series thereof, and to
reclassify the same, and to amend, alter, change or repeal any provision
contained in the Certificate of Incorporation under which the Corporation is
organized or in any amendment thereto, in the manner now or hereafter prescribed
by law, and all rights conferred upon stockholders in said Certificate of
Incorporation or any amendment thereto are granted subject to the aforementioned
reservation.
SEVENTH: The Board of Directors shall have the power at any
time, and from time to time, to adopt, amend and repeal any and all By-laws of
the Corporation.
EIGHTH: 1. Indemnification
The Corporation shall, and does hereby, indemnify to the
fullest extent permitted or authorized by the Delaware General Corporation Law
or judicial or administrative decisions, as the same exists or may hereafter be
amended or interpreted differently in the future (but, in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Corporation to provide broader indemnification rights
than permitted prior thereto), each person (including the current and future
heirs, beneficiaries, personal
-3-
<PAGE>
representatives and estate of such person) who was or is a party, or is
threatened to be made a party, or was or is a witness, to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (a "Proceeding") and whether the basis of such
Proceeding is an allegation of an action in an official capacity of such person
related to the Corporation or any other capacity while such person is serving as
an officer, director, employee or agent of the Corporation, against any
liability (which for purposes of this Article shall include any judgment,
settlement, penalty or fine) or cost, charge or expense (including attorneys'
fees) asserted against him or incurred by him by reason of the fact that such
indemnified person (1) is or was a director, officer or employee of the
Corporation or (2) is or was an agent of the Corporation as to whom the
Corporation, by action of its Board of Directors, has agreed to grant such
indemnity or (3) is or was serving, at the request of the Corporation, as a
director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise (including serving as a fiduciary of any
employee benefit plan) or (4) is or was serving as an agent of such other
corporation, partnership, joint venture, trust or other enterprise described in
clause (3) hereof as to whom the Corporation, by action of its Board of
Directors,
-4-
<PAGE>
has agreed to grant such indemnity. Each director, officer, employee or agent of
the Corporation to whom indemnification rights under this Section 1 of this
Article have been granted shall be referred to as an "Indemnified Person."
Notwithstanding the foregoing, except as specified in Section
3 of this Article, the Corporation shall not be required to indemnify an
Indemnified Person in connection with a Proceeding (or any part thereof)
initiated by such Indemnified Person unless such authorization for such
Proceeding (or any part thereof) was not denied by the Board of Directors of the
Corporation prior to sixty (60) days after receipt of notice thereof from such
Indemnified Person stating his intent to initiate such Proceeding and only upon
such terms and conditions as the Board of Directors may deem appropriate.
2. Advance of Costs, Charges and Expenses
Costs, charges and expenses (including attorneys' fees)
incurred by an officer, director, employee or agent who is an Indemnified Person
in defending a Proceeding shall be paid by the Corporation to the fullest extent
permitted or authorized by the Delaware General Corporation Law or judicial or
administrative decisions, as the same exists or may hereafter be amended or
interpreted differently in the future (but, in the case of any such future
amendment or interpretation, only to the extent that
-5-
<PAGE>
such amendment or interpretation permits the Corporation to provide broader
rights to advance costs, charges and expenses than permitted prior thereto), in
advance of the final disposition of such Proceeding, upon receipt of an
undertaking by or on behalf of the Indemnified Person to repay all amounts so
advanced in the event that it shall ultimately be determined by final judicial
decision that such person is not entitled to be indemnified by the Corporation
as authorized in this Article and upon such other terms and conditions, in the
case of an agent as to whom the Corporation has agreed to grant such indemnity,
as the Board of Directors may deem appropriate. The Corporation may, upon
approval of the Indemnified Person, authorize the Corporation's counsel to
represent such person in any Proceeding, whether or not the Corporation is a
party to such Proceeding. Such authorization may be made by the Board of
Directors by majority vote, including directors who are parties to such
Proceeding.
3. Procedure for Indemnification
Any indemnification or advance under this Article shall be
made promptly and in any event within sixty (60) days upon the written request
of the Indemnified Person (except in the case of a claim for an advancement of
costs, charges or expenses, in which case the applicable period shall be twenty
(20) days). The
-6-
<PAGE>
right to indemnification or advances as granted by this Article shall be
enforceable by the Indemnified Person in any court of competent jurisdiction if
the Corporation denies such request under this Article, in whole or in part, or
if no disposition thereof is made within sixty (60) days or twenty (20) days, as
may be applicable. Such Indemnified Person's costs and expenses incurred in
connection with successfully establishing his right to indemnification or
advancement of costs, charges or expenses, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action that the claimant has not met the standard of conduct, if any,
required by the Delaware General Corporation Law or judicial or administrative
decisions, as the same exists or may hereafter be amended or interpreted
differently in the future (but, in the case of any such future amendment or
interpretation, only to the extent that such amendment or interpretation does
not impose a more stringent standard of conduct than permitted prior thereto),
but the burden of proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors or any committee
thereof, its independent legal counsel, and its stockholders) to have made a
determination prior to the commencement of such action that indemnification of
the claimant or advancement for the claimant is proper in the
-7-
<PAGE>
circumstances because he has met the applicable standard of conduct, if any, nor
the fact that there has been an actual determination by the Corporation
(including its Board of Directors or any committee thereof, its independent
legal counsel, or its stockholders) that the claimant has not met such
applicable standard of conduct, shall be a defense to the action or create a
presumption that the claimant has not met the applicable standard of conduct.
4. Non-Exclusivity; Survival of Indemnification
The indemnification and advancement provided by this Article
shall not be deemed exclusive of any other rights to which those Indemnified
Persons may be entitled under any agreement, vote of stockholders or
disinterested directors or recommendation of counsel or otherwise, both as to
actions in such person's official capacity and as to actions in any other
capacity while holding such office or position, and shall continue as to an
Indemnified Person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, beneficiaries, personal
representatives and the estate of such person. All rights to indemnification and
advancement under this Article shall be deemed to be a contract between the
Corporation and each Indemnified Person who serves or served in such capacity at
any time while this Article is in
-8-
<PAGE>
effect. Any repeal or modification of this Article or any repeal or modification
of relevant provisions of the Delaware General Corporation Law or any other
applicable laws shall not in any way diminish any rights to indemnification of
such Indemnified Person, or the obligations of the Corporation arising
hereunder, for claims relating to matters occurring prior to such repeal or
modification.
5. Insurance
The Corporation may 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 (including serving as a fiduciary of an
employee benefit plan) against any liability asserted against him and incurred
by him in any such capacity or arising out of his status as such, whether or not
the Corporation would have the power to indemnify him against such liability
under the provisions of this Article or the applicable provisions of the
Delaware General Corporation Law.
6. Savings Clause
If this Article or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction,
-9-
<PAGE>
then the Corporation shall nevertheless indemnify and advance costs to each
Indemnified Person as to costs, charges and expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement with respect to any
Proceeding, including an action by or in the right of the Corporation, to the
full extent permitted by any applicable portion of this Article that shall not
have been invalidated and as permitted by the Delaware General Corporation Law.
-10-
<PAGE>
NINTH: No director of the Corporation shall be personally
liable to the Corporation or its stockholders for any monetary damages for
breaches of fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the General Corporation Law
of the State of Delaware; or (iv) for any transaction from which the director
derived an improper personal benefit. No repeal or amendment of this Article
shall adversely affect any rights of any person pursuant to this Article which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
Dated: November 17, 1999.
OLAS, INC.
By: /s/ ISAAC KIER
---------------------------
Name: Isaac Kier
Title: President
-11-
EXHIBIT 3.2
Adopted , 1999
OLAS, INC.
BY-LAWS
ARTICLE I
OFFICES
1. The location of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle, and the name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
2. The Corporation shall in addition to its registered office
in the State of Delaware establish and maintain an office or offices at such
place or places as the Board of Directors may from time to time find necessary
or desirable.
ARTICLE II
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation and may be in such form as the Board of
Directors may determine. Such seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
ARTICLE III
MEETINGS OF STOCKHOLDERS
1. All meetings of the stockholders shall be held at
<PAGE>
the principal office of the Corporation or at such other place as shall be
determined from time to time by the Board of Directors.
2. The annual meeting of stockholders shall be held on such
day and at such time as may be determined from time to time by resolution of the
Board of Directors, when they shall elect by plurality vote, a Board of
Directors to hold office until the annual meeting of stockholders held next
after their election and their successors are respectively elected and qualified
or until their earlier resignation or removal. Any other proper business may be
transacted at the annual meeting.
3. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise expressly provided by statute, by
the Certificate of Incorporation or by these By-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting (except as otherwise provided by statute). At such
adjourned meeting at which the requisite amount of voting stock shall be
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
4. At all meetings of the stockholders each stockholder having
the right to vote shall be entitled to vote in
-2-
<PAGE>
person, or by proxy appointed by an instrument in writing subscribed by such
stockholder and bearing a date not more than three years prior to said meeting,
unless such instrument provides for a longer period.
5. At each meeting of the stockholders each stockholder shall
have one vote for each share of capital stock having voting power, registered in
his name on the books of the Corporation at the record date fixed in accordance
with these By-law, or otherwise determined, with respect to such meeting. Except
as otherwise expressly provided by statute, by the Certificate of Incorporation
or by these By-laws, all matters coming before any meeting of the stockholders
shall be decided by the vote of a majority of the number of shares of stock
present in person or represented by proxy at such meeting and entitled to vote
thereat, a quorum being present.
6. Notice of each meeting of the stockholders shall be mailed
to each stockholder entitled to vote thereat not less than 10 nor more than 60
days before the date of the meeting. Such notice shall state the place, date and
hour of the meeting and, in the case of a special meeting, the purposes for
which the meeting is called.
7. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the Chief
Executive Officer, by the President or by the Board of Directors, and shall be
called by the Secretary at the request in writing of stockholders owning a
majority of the amount
-3-
<PAGE>
of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request by stockholders shall state the
purpose or purposes of the proposed meeting.
-4-
<PAGE>
8. Business transacted at each special meeting shall be
confined to the purpose or purposes stated in the notice of such meeting.
9. The order of business at each meeting of stockholders shall
be determined by the presiding officer.
ARTICLE IV
DIRECTORS
1. The business and affairs of the Corporation shall be
managed under the direction of a Board of Directors, which may exercise all such
powers and authority for and on behalf of the Corporation as shall be permitted
by law, the Certificate of Incorporation or these By-laws. Each of the directors
shall hold office until the next annual meeting of stockholders and until his
successor has been elected and qualified or until his earlier resignation or
removal.
2. The Board of Directors may hold their meetings within or
outside of the State of Delaware, at such place or places as it may from time to
time determine.
3. The number of directors comprising the Board of Directors
shall be such number as may be from time to time fixed by resolution of the
Board of Directors. In case of any increase, the Board shall have power to elect
each additional director to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified or his earlier
resignation or removal. Any decrease in the number of directors shall take
effect at the time of such action by the Board only to
-5-
<PAGE>
the extent that vacancies then exist; to the extent that such decrease exceeds
the number of such vacancies, the decrease shall not become effective, except as
further vacancies may thereafter occur, until the time of and in connection with
the election of directors at the next succeeding annual meeting of the
stockholders.
4. If the office of any director becomes vacant, by reason of
death, resignation, disqualification or otherwise, a majority of the directors
then in office, although less than a quorum, may fill the vacancy by electing a
successor who shall hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal.
5. The directors shall elect from among their members a
Chairman of the Board of Directors who shall serve until the next annual meeting
of directors and until his successor has been duly elected and qualify. The
Chairman shall preside at the meetings of the Board of Directors and at the
meetings of stockholders and shall perform such other duties as from time may be
assigned to him by the Board of Directors or the Executive Committee.
6. Any director may resign at any time by giving written
notice of his resignation to the Board of Directors. Any such resignation shall
take effect upon receipt thereof by the Board, or at such later date as may be
specified therein. Any such notice to the Board shall be addressed to it in care
of the Secretary.
-6-
<PAGE>
ARTICLE V
COMMITTEES OF DIRECTORS
1. By resolutions adopted by a majority of the whole Board of
Directors, the Board may designate an Executive Committee and one or more other
committees, each such committee to consist of one or more directors of the
Corporation. The Executive Committee shall have and may exercise all the powers
and authority of the Board in the management of the business and affairs of the
Corporation (except as otherwise expressly limited by statute), including the
power and authority to declare dividends and to authorize the issuance of stock,
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall have such of the powers and authority
of the Board as may be provided from time to time in resolutions adopted by a
majority of the whole Board.
2. The requirements with respect to the manner in which the
Executive Committee and each such other committee shall hold meetings and take
actions shall be set forth in the resolutions of the Board of Directors
designating the Executive Committee or such other committee.
ARTICLE VI
COMPENSATION OF DIRECTORS
The directors shall receive such compensation for their
services as may be authorized by resolution of the Board of Directors, which
compensation may include an annual fee and a
-7-
<PAGE>
fixed sum for expense of attendance at regular or special meetings of the Board
or any committee thereof. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE VII
MEETINGS OF DIRECTORS; ACTION WITHOUT A MEETING
1. Regular meetings of the Board of Directors may be held
without notice at such time and place, either within or without the State of
Delaware, as may be determined from time to time by resolution of the Board.
2. Special meetings of the Board of Directors shall be held
whenever called by the President of the Corporation or the Board of Directors on
at least 24 hours' notice to each director. Except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-laws, the purpose or purposes of any such special meeting need not be
stated in such notice, although the time and place of the meeting shall be
stated.
3. At all meetings of the Board of Directors, the presence in
person of a majority of the members of the Board of Directors shall be necessary
and sufficient to constitute a quorum for the transaction of business, and,
except as otherwise provided by statute, by the Certificate of Incorporation or
by these By-laws, if a quorum shall be present the act of a majority of the
directors present shall be the act of the Board.
-8-
<PAGE>
4. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting if all the members of the Board or such 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 of committee. Any director may participate
in a meeting of the Board, or any committee designated by the Board, by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this sentence shall constitute presence in person at such
meeting.
ARTICLE VIII
OFFICERS
1. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President, a Vice
President, a Treasurer and a Secretary. The Board may also choose one or more
Assistant Secretaries and Assistant Treasurers, and such other officers as it
shall deem necessary. Any number of offices may be held by the same person.
2. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors, or in such manner as the Board may prescribe.
3. The officers of the Corporation shall hold office until
their successors are elected and qualified, or until their earlier resignation
or removal. Any officer may be at any time
-9-
<PAGE>
removed from office by the Board of Directors, with or without cause. If the
office of any officer becomes vacant for any reason, the vacancy may be filled
by the Board of Directors.
4. Any officer may resign at any time by giving written notice
of his resignation to the Board of Directors. Any such resignation shall take
effect upon receipt thereof by the Board or at such later date as may be
specified therein. Any such notice to the Board shall be addressed to it in care
of the Secretary.
ARTICLE IX
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be the chief executive
officer of the Corporation. Subject to the supervision and direction of the
Board of Directors, he shall be responsible for managing the affairs of the
Corporation. He shall have supervision and direction of all of the other
officers of the Corporation and shall have the powers and duties usually and
customarily associated with the office of chief executive officer. In the
absence of the Chairman, the Chief Executive Officer shall preside at the
meetings of the Board of Directors and at the meetings of stockholders and shall
perform such other duties as from time may be assigned to him by the Board of
Directors or the Executive Committee.
ARTICLE X
PRESIDENT
The President shall be the chief operating officer of the
Corporation. Subject to the supervision and direction of the
-10-
<PAGE>
Board of Directors, he shall be responsible for the day to day operations of the
Corporation and shall have the powers and duties usually and customarily
associated with the office of chief operating officer.
ARTICLE XI
VICE PRESIDENT
The Vice President shall have such powers and perform such
duties as may be delegated to him by the Board of Directors, the Chief Executive
Officer or the President.
ARTICLE XII
TREASURER AND ASSISTANT TREASURER
1. The Treasurer shall have the custody of the corporate funds
and securities, and shall deposit or cause to be deposited under his direction
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Chief Executive
Officer, the President or the Board of Directors, or pursuant to authority
granted by it. He shall render to the Chief Executive Officer, the President and
the Board whenever they may require it an account of all his transactions as
Treasurer and of the financial condition of the Corporation. He shall have such
other powers and duties as may be delegated to him by the Chief Executive
Officer, the President or the Board.
2. The Assistant Treasurer shall, in case of the absence of
the Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall have such other powers and
-11-
<PAGE>
duties as may be delegated to him by the Chief Executive Officer or the
President.
ARTICLE XIII
SECRETARY AND ASSISTANT SECRETARY
1. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders, and shall record the minutes of all
proceedings in a book to be kept for that purpose. He shall perform like duties
for the committees of the Board when required.
2. The Secretary shall give, or cause to be given, notice of
meetings of the stockholders, of the Board of Directors and of the committees of
the Board. He shall keep in safe custody the seal of the Corporation, and when
authorized by the President, an Executive Vice President or a Vice President,
shall affix the same to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of an Assistant
Secretary. He shall have such other powers and duties as may be delegated to him
by the Chief Executive Officer or the President.
3. The Assistant Secretary shall, in case of the absence of
the Secretary, perform the duties and exercise the powers of the Secretary, and
shall have such other powers and duties as may be delegated to them by the Chief
Executive Officer or the President.
ARTICLE XIV
CERTIFICATES OF STOCK
The certificates of stock of the Corporation shall be
-12-
<PAGE>
numbered and shall be entered in the books of the Corporation as they are
issued. They shall exhibit the holder's name and number of shares and shall be
signed by the Chairman of the Board, the Vice Chairman of the Board, the
President, the Executive Vice President or the Senior Vice President, and by the
Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary.
ARTICLE XV
CHECKS
All checks, drafts and other orders for the payment of money
and all promissory notes and other evidences of indebtedness of the Corporation
shall be signed by such officer or officers or
-13-
<PAGE>
such other person as may be designated by the Board of Directors or pursuant to
authority granted by it.
ARTICLE XVI
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from
time to time by resolution duly adopted by the Board of Directors.
ARTICLE XVII
NOTICES AND WAIVERS
1. Whenever by statute, by the Certificate of Incorporation or
by these By-laws it is provided that notice shall be given to any director or
stockholder, such provision shall not be construed to require personal notice,
but such notice may be given in writing, by mail, by depositing the same in the
United States mail, postage prepaid, directed to such stockholder or director at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to be given at the time when the same shall be thus deposited.
Notice of regular or special meetings of the Board of Directors may also be
given to any director by telephone or by telex, telegraph or cable, and in the
latter event the notice shall be deemed to be given at the time such notice,
addressed to such director at the address hereinabove provided, is transmitted
by telex (with confirmed answerback), or delivered to and accepted by an
authorized telegraph or cable office.
2. Whenever by statute, by the Certificate of Incorporation
-14-
<PAGE>
or by these By-laws a notice is required to be given, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of any stockholder or
director at any meeting thereof shall constitute a waiver of notice of such
meeting by such stockholder or director, as the case may be, except as otherwise
provided by statute.
ARTICLE XVIII
INDEMNIFICATION
All persons who the Corporation is empowered to indemnify
pursuant to the provisions of Section 145 of the General Corporation Law of the
State of Delaware (or any similar provision or provisions of applicable law at
the time in effect) shall be indemnified by the Corporation to the full extent
permitted thereby. The foregoing right of indemnification shall not be deemed to
be exclusive of any other such rights to which those seeking indemnification
from the Corporation may be entitled, including, but not limited to, any rights
of indemnification to which they may be entitled pursuant to any agreement,
insurance policy, other by-law or charter provision, vote of stockholders or
directors, or otherwise. No repeal or amendment of this Article XVII shall
adversely affect any rights of any person pursuant to this Article XVII which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
-15-
<PAGE>
ARTICLE XIX
ALTERATION OF BY-LAWS
The By-laws of the Corporation may be altered, amended or
repealed, and new By-laws may be adopted, by the stockholders or by the Board of
Directors.
-16-
EXHIBIT 4.1
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE,
PURSUANT TO RULE 144 UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING
TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO
THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE
COMPANY, STATING THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS
AVAILABLE.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, NOVEMBER 17, 2002
No. W-2 __________ Warrants
EDIETS.COM, INC.
WARRANT
This warrant certificate (the "Warrant Certificate") certifies that
___________________ _____________________________________________ or registered
assigns, is the registered holder of warrants to purchase, at any time until
5:00 P.M. New York City time on November 17, 2002 (the "Expiration Date"), up to
_____ fully-paid and non-assessable shares, subject to adjustment in accordance
with Article 7 hereof (the "Warrant Shares"), of the common stock, par value per
$.001 share (the "Common Shares"), of eDiets.com, Inc., a Delaware corporation
(the "Company"), subject to the terms and conditions set forth herein. The
warrants represented by this Warrant Certificate and any warrants resulting from
a transfer or subdivision of the warrants represented by this Warrant
Certificate shall sometimes hereinafter be referred to, individually, as a
"Warrant" and, collectively, as the "Warrants." This Warrant Certificate is one
of a series of Warrant Certificates being issued as part of a private offering
(the "Private Placement") pursuant to the Company's Confidential Private
Offering Memorandum, dated September 1, 1999.
1. EXERCISE OF WARRANTS. Each Warrant is initially exercisable to
purchase one Warrant Share at an initial exercise price of $2.50 per Warrant
Share, subject to adjustment as set forth in Article 7 hereof, payable in cash
or by check to the order of the Company, or any combination of cash or check.
Upon surrender of this Warrant Certificate with the annexed Form of Election to
Purchase duly executed, together with payment of the Exercise Price (as
hereinafter defined) for the Warrant Shares purchased, at the Company's
principal offices (presently located at 3467 Hillsboro Boulevard, Deerfield
Beach, Florida 33442) the registered holder hereof (the "Holder" or "Holders")
shall be entitled to receive a certificate or certificates for the Warrant
Shares so purchased. The purchase rights represented by this Warrant Certificate
are exercisable at the option of the Holder, in whole or in part (but not as to
fractional Common Shares). In the case of the purchase of less than all the
Warrant Shares
<PAGE>
purchasable under this Warrant Certificate, the Company shall cancel this
Warrant Certificate upon its surrender and shall execute and deliver a new
Warrant Certificate of like tenor for the balance of the Warrant Shares
purchasable thereunder.
2. CASHLESS EXERCISE. At any time until the Expiration Date, the Holder
may, at its option, exchange the Warrants represented by this Warrant
Certificate, in whole or in part (a "Warrant Exchange"), into the number of
Warrant Shares determined in accordance with this Section 2, by surrendering
this Warrant Certificate at the principal office of the Company or at the office
of the transfer agent, accompanied by a notice stating such Holder's intent to
effect such exchange, the number of Warrant Shares to be exchanged and the date
on which the Holder requests that such Warrant Exchange occur (the "Notice of
Exchange"). The Warrant Exchange shall take place on the date specified in the
Notice of Exchange or, if later, the date the Notice of Exchange is received by
the Company (the "Exchange Date"). Certificates for the Warrant Shares issuable
upon such Warrant Exchange and, if applicable, a new Warrant Certificate (a
"Remainder Warrant Certificate") of like tenor evidencing the Warrants which
were subject to the surrendered Warrant Certificate and not included in the
Warrant Exchange, shall be issued as of the Exchange Date and delivered to the
Holder within three (3) business days following the Exchange Date. In connection
with any Warrant Exchange, the Holder's Warrant Certificate shall represent the
right to subscribe for and acquire (I) the number of Warrant Shares (rounded to
the next highest integer) equal to (A) the number of Warrant Shares specified by
the Holder in its Notice of Exchange (the "Total Warrant Share Number") less (B)
the number of Warrant Shares equal to the quotient obtained by dividing (i) the
product of the Total Warrant Share Number and the existing Exercise Price per
Warrant Share by (ii) the current Market Price (as hereinafter defined) of a
Common Share, and (II) a Remainder Warrant Certificate, if applicable. "Market
Price" at any date shall be deemed to be (i) the last reported sale price or the
day prior to such date, or (ii) in case no such reported sale takes place on
such day, the average of the last reported sale prices for the last three
trading days, in either case as (a) officially reported by the reporting
securities exchange on which the Common Shares are listed or admitted to trading
or as reported in the Nasdaq National Market System, or, (b) if the Common
Shares are not listed or admitted to trading on any national securities exchange
or quoted on the Nasdaq National Market System, the closing sale price as
furnished by (i) the National Association of Securities Dealers, Inc. through
Nasdaq or (ii) similar organization if Nasdaq is no longer reporting such
information, or (c) if such information is no longer reported by NASDAQ or
similar organization, the fair market value of the Common Shares as determined
in good faith by resolution of the independent directors of the Company, based
on the best information available to it for the day immediately preceding the
Exchange Date and the day of the Exchange Date, but in the case of any such
determination made under this clause (c), in no event less than the greater of W
the per Common Share price of the last sale or issuance by the Company or (y)
the last closing sale price as available under clause (a) or (b) above prior to
such date.
3. ISSUANCE OF CERTIFICATES. Upon the exercise of the Warrants,
certificates for the Warrant Shares purchased pursuant to such exercise shall be
issued forthwith (and in any event within three (3) business days thereafter)
without charge to the Holder, including, without limitation, any tax which may
be payable in respect of such issuance, and such certificates shall (subject to
the provisions of Article 4 hereof) be issued in the name of, or in such names
as
2
<PAGE>
may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and, upon exercise of the Warrants, the
certificates representing the Warrant Shares shall be executed on behalf of the
Company by the manual or facsimile signature of those officers required to sign
such certificates under applicable law.
The Warrant Certificates and, upon exercise of the Warrants, in part or
in whole, certificates representing the Warrant Shares shall bear a legend
substantially similar to the following:
"The securities represented by this certificate and/or the
securities issuable upon exercise thereof have not been
registered under the Securities Act of 1933, as amended
("Act"), and may not he offered or sold except (i) pursuant to
an effective registration statement under the Act, (ii) to the
extent applicable, pursuant to Rule 144 under the Act (or any
similar rule under such Act relating to the disposition of
securities), or (iii) upon the delivery by the holder to the
Company of an opinion of counsel, reasonably satisfactory to
counsel to the issuer, stating that an exemption from
registration under such Act is available."
4. RESTRICTION ON TRANSFER OF WARRANTS. The Holder of this Warrant
Certificate, by its acceptance, covenants and agrees that the Warrants and the
Warrant Shares issuable upon exercise of the warrants are being acquired as an
investment and not with a view to the distribution thereof.
5. REGISTRATION RIGHTS. The Holder shall be entitled to all of the
rights and subject to all of the obligations set forth in the Registration
Rights Agreement between the Holder and the Company, dated as of the date
hereof.
6. PRICE.
6.1 INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise
price of each Warrant shall be $2.50 per Warrant Share. The adjusted exercise
price shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price in accordance with the provisions of
Article 7 hereof.
6.2 EXERCISE PRICE. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
3
<PAGE>
7. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.
7.1 DIVIDENDS AND DISTRIBUTIONS. In case the Company shall at
any time after the date hereof pay a dividend in Common Shares or make a
distribution in Common Shares, then upon such dividend or distribution, the
Exercise Price in effect immediately prior to such dividend or distribution
shall be reduced to a price determined by dividing an amount equal to the total
number of Common Shares outstanding immediately prior to such dividend or
distribution multiplied by the Exercise Price in effect immediately prior to
such dividend or distribution, by the total number of Common Shares outstanding
immediately after such issuance or sale. For purposes of any computation to be
made in accordance with the provisions of this Section 7.1, the Common Shares
issuable by way of dividend or distribution shall be deemed to have been issued
immediately after the opening of business on the date following the date fixed
for determination of stockholders entitled to receive such dividend or
distribution.
7.2 SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding Common Shares, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
7.3 ADJUSTMENT IN NUMBER OF WARRANT SHARES. Upon each
adjustment of the Exercise Price pursuant to the provisions of this Article 7,
the number of Warrant Shares issuable upon the exercise of each Warrant shall be
adjusted to the next highest full Common Share by multiplying a number equal to
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares issuable upon exercise of the Warrants immediately prior to
such adjustment and dividing the product so obtained by the adjusted Exercise
Price.
7.4 RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of
any reclassification or change of the outstanding Common Shares (other than a
change in nominal value to no nominal value, or from no nominal value to nominal
value, or as a result of a subdivision or combination), or in the case of any
consolidation of the Company with, or merger of the Company into, another
corporation (other than a consolidation or merger in which the Company is the
surviving corporation and which does not result in any reclassification or
change of the outstanding Common Shares, except a change as a result of a
subdivision or combination of such shares or a change in nominal value, as
aforesaid), or in the case of a sale or conveyance to another corporation of the
property of the Company as an entirety, the Holder shall thereafter have the
right to purchase the kind and number of shares of stock and other securities
and property receivable upon such reclassification, change, consolidation,
merger, sale or conveyance as if the Holder were the owner of the Warrant Shares
issuable upon exercise of the Warrants immediately prior to any such events at a
price equal to the product of (i) the number of Warrant Shares issuable upon
exercise of the Warrants and (ii) the Exercise Price in effect immediately prior
to the record date for such reclassification, change, consolidation, merger,
sale or conveyance as if such Holder had exercised the Warrants.
4
<PAGE>
7.5 DETERMINATION OF OUTSTANDING SHARES. The number of Common
Shares at any one time outstanding shall include the aggregate number of shares
issued or issuable upon the exercise of outstanding options, rights and warrants
and upon the conversion or exchange of outstanding convertible or exchangeable
securities.
8. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES. This Warrant
Certificate is exchangeable without expense, upon the surrender hereof by the
registered Holder at the principal executive office of the Company, for a new
Warrant Certificate of like tenor and date representing in the aggregate the
right to purchase the same number of Warrant Shares in such denominations as
shall be designated by the Holder thereof at the time of such surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of this Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
9. ELIMINATION OF FRACTIONAL INTERESTS. The Company shall not be
required to issue certificates representing fractions of Common Shares and shall
not be required to issue scrip or pay cash in lieu of fractional interests, it
being the intent of the parties that all fractional interests shall be
eliminated by rounding any fraction up to the nearest whole number of Common
Shares.
10. RESERVATION OF SHARES. The Company covenants and agrees that it
will at all times reserve and keep available out of its authorized share
capital, solely for the purpose of issuance upon the exercise of the Warrants,
such number of Common Shares as shall be equal to the number of Warrant Shares
issuable upon the exercise of the Warrants, for issuance upon such exercise, and
that, upon exercise of the Warrants and payment of the Exercise Price therefor,
all Warrant Shares issuable upon such exercise shall be duly and validly issued,
fully paid, nonassessable and not subject to the preemptive rights of any
shareholder.
11. NOTICES TO WARRANT HOLDERS. Nothing contained in this Agreement
shall be construed as conferring upon the Holder or Holders the right to vote or
to consent or to receive notice as a stockholder in respect of any meetings of
stockholders for the election of directors or any other matter, or as having any
rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the following
events shall occur:
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
5
<PAGE>
(b) the Company shall offer to all the holders of its Common
Shares any additional Common Shares or other shares of capital stock of the
Company or securities convertible into or exchangeable for Common Shares or
other shares of capital stock of the Company, or any option, right or warrant to
subscribe therefor;
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; or
(d) the Company or an affiliate of the Company shall propose
to issue any rights to subscribe for Common Shares or any other securities of
the Company or of such affiliate to all the stockholders of the Company;
then, in any one or more of said events, the Company shall give written notice
of such event at least twenty (20) days prior to the date fixed as a record date
or the date of closing the transfer books for the determination of the
stockholders entitled to such dividend, distribution, convertible or
exchangeable securities or subscription rights, options or warrants, or entitled
to vote on such proposed dissolution, liquidation, winding up or sale. Such
notice shall specify such record date or the date of closing the transfer books,
as the case may be. Failure to give such notice or any defect therein shall not
affect the validity of any action taken in connection with the declaration or
payment of any such dividend or distribution, or the issuance of any convertible
or exchangeable securities or subscription rights, options or warrants, or any
proposed dissolution, liquidation, winding up or sale.
12. REDEMPTION OF WARRANTS. The Warrants are redeemable by the Company,
in whole or in part, on not less than thirty (30) days' prior written notice
(the "Notice Period") at a price of $.10 per Warrant at any time; provided that
W the closing sale price of the Common Stock on the Nasdaq SmallCap Market on
all twenty (20) trading days ending on the third trading day prior to the day on
which the Company gives notice of redemption (the "Call Date") has been at least
200% of the then effective exercise price of the Warrants and (ii) the Warrant
Shares are publicly tradable during the entire Notice Period, pursuant to a
registration statement filed with and declared effective by, the Securities and
Exchange Commission. Holders of the Warrants will have exercise rights until the
close of business on the date fixed for redemption.
13. NOTICES. All notices, requests, consents and other communications
hereunder shall be in writing and shall be deemed to have been duly made when
personally delivered, delivered by courier or sent by registered or certified
mail (return receipt requested, postage prepaid), facsimile transmission or
overnight courier:
(a) If to a registered Holder of the Warrants, to the address
of such Holder as shown on the Warrant register of the Company; or
(b) If to the Company, to the address set forth in Article 1
of this Agreement or to such other address as the Company may designate by
notice to the Holders.
6
<PAGE>
14. SUCCESSORS. All the covenants and provisions of this Agreement by
or for the benefit of the Company and the Holders inure to the benefit of their
respective successors and assigns hereunder.
15. GOVERNING LAW.
15.1 CHOICE OF LAW. This Warrant Certificate shall be deemed
to have been made and delivered in the State of New York and shall be governed
as to validity, interpretation, construction, effect and in all other respects
by the substantive laws of the State of New York, without giving effect to the
choice of laws rules thereof.
15.2 JURISDICTION AND SERVICE OF PROCESS. The Company and the
Holder each (a) agrees that any legal suit, action or proceeding arising out of
or relating to this Warrant Certificate, or any other agreement entered into
between the Company and the Holder pursuant to the Private Placement shall be
instituted exclusively in the New York State Supreme Court, County of New York
or in the United States District Court for the Southern District of New York,
(b) waives any objection which the Company or such Holder may have now or
hereafter based upon forum non conveniens or to the venue of any such suit,
action or proceeding, and (c) irrevocably consents to the jurisdiction of the
New York State Supreme Court, County of New York and the United States District
Court for the Southern District of New York in any such suit, action or
proceeding. The Company and the Holder each further agrees (a) to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York or
in the United States District Court for the Southern District of New York and
(b) that service of process upon the Company mailed by certified mail to it at
its address, or to the Holder at its address, shall be deemed in every respect
effective service of process upon the Company or the Holder, as the case may be,
in any suit, action or proceeding. FURTHER, BOTH THE COMPANY AND THE HOLDER
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION TO ENFORCE THE TERMS OF THIS WARRANT
CERTIFICATE AND IN CONNECTION WITH ANY DEFENSE, COUNTERCLAIM OR CROSSCLAIM
ASSERTED IN ANY SUCH ACTION.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be duly
executed as of this _____ day of _______________, 1999.
EDIETS.COM, INC.
7
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase Warrant Shares and herewith
tenders in payment for such Warrant Shares cash or a check payable to the order
of ______________________________ in the amount of $__________, all in
accordance with the terms hereof. The undersigned requests that a certificate
for such Warrant Shares be registered in the name of
________________________________________________________, whose address is
______________________________________________________________________________,
and that such certificate be delivered to
____________________________________________, whose address is
________________________________________________________________.
Dated: _________________________
Signature:_________________________________
(Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate.)
_______________________________________
_______________________________________
(Insert Social Security or Other
Identifying Number of Holder)
8
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED ______________________________
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint
________________________________________, Attorney, to transfer the within
Warrant Certificate on the books of the within-named Company, with full power of
substitution.
Dated: Signature:
Signature must conform in all respects to
name of holder as specified on the face of
the Warrant Certificate)
___________________________________
___________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
9
EXHIBIT 4.2
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED FOR PURPOSES OF PUBLIC
DISTRIBUTION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, NOVEMBER 17,2004
No. W-1 570,625 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Whale Securities Co., L.P. or
registered assigns, is the registered holder of 570,625 Warrants to purchase, at
any time from November 17, 1999 until 5:00 P.M. New York City time on November
17, 2004 ("Expiration Date"), up to 570,625 fully-paid and non-assessable shares
("Shares") of the common shares, par value per share (the "Common Shares"), of
eDiets.com, Inc., a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $2.50 per Share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of November
17, 1999 between the Company and Whale Securities Co., L.P. (the "Warrant
Agreement"). Payment of the Exercise Price may be made in cash, or by certified
or official bank check in New York Clearing House funds payable to the order of
the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable
<PAGE>
upon the exercise of the Warrants; provided, however, that the failure of the
Company to issue such new Warrant Certificates shall not in any way change,
alter, or otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
<PAGE>
All terms used in this Warrant Certificate which are defined M the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: November 17, 1999 EDIETS.COM, INC.
By: S/DAVID R. HUMBLE
Name: David R. Humble
Title: Chairman and Chief
Executive Officer
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase Common Shares and herewith tenders in
payment for such securities cash or a certified or official bank check
payable in New York Clearing House Funds to the order of eDiets.com, Inc. in the
amount of $____________ , all in accordance with the terms hereof. The
undersigned requests that a certificate for such securities be registered in the
name of _______________ whose address is _________________________, and that
such Certificate be delivered to _______________ whose address is
______________________________.
Dated: Signature:
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
_________________________
_________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint . Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: Signature:
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT 4.2.2
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED FOR PURPOSES OF PUBLIC
DISTRIBUTION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION
OF SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, NOVEMBER 17,2004
No. W-50 70,000 Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that Whale Securities Co., L.P. or
registered assigns, is the registered holder of 70,000 Warrants to purchase, at
any time from November 17, 1999 until 5:00 P.M. New York City time on November
17, 2004 ("Expiration Date"), up to 70,000 fully-paid and non-assessable shares
("Shares") of the common shares, par value per share (the "Common Shares"), of
eDiets.com, Inc., a Delaware corporation (the "Company"), at the initial
exercise price, subject to adjustment in certain events (the "Exercise Price"),
of $2.50 per Share upon surrender of this Warrant Certificate and payment of the
Exercise Price at an office or agency of the Company, but subject to the
conditions set forth herein and in the warrant agreement dated as of November
17, 1999 between the Company and Whale Securities Co., L.P. (the "Warrant
Agreement"). Payment of the Exercise Price may be made in cash, or by certified
or official bank check in New York Clearing House funds payable to the order of
the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby incorporated by reference in and made a part of this
instrument and is hereby referred to in a description of the rights, limitation
of rights, obligations, duties and immunities thereunder of the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable
<PAGE>
upon the exercise of the Warrants; provided, however, that the failure of the
Company to issue such new Warrant Certificates shall not in any way change,
alter, or otherwise impair, the rights of the holder as set forth in the Warrant
Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this Warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined M the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: December 23, 1999 EDIETS.COM, INC.
By: S/DAVID R. HUMBLE
Name: David R. Humble
Title: Chairman and Chief
Executive Officer
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase Common Shares and herewith tenders in
payment for such securities cash or a certified or official bank check
payable in New York Clearing House Funds to the order of eDiets.com, Inc. in the
amount of $____________ , all in accordance with the terms hereof. The
undersigned requests that a certificate for such securities be registered in the
name of _______________ whose address is _________________________, and that
such Certificate be delivered to _______________ whose address is
______________________________.
Dated: Signature:
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
_________________________
_________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificate.)
FOR VALUE RECEIVED hereby sells, assigns and transfers unto
________________________________________________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint . Attorney, to transfer the
within Warrant Certificate on the books of the within-named Company, with full
power of substitution.
Dated: Signature:
(Signature must conform in
all respects to name of
holder as specified on the
face of the Warrant
Certificate.)
(Insert Social Security or Other
Identifying Number of Assignee)
FRONT OF CERTIFICATE
NUMBER SHARES
eDiets.com, Inc.
SEE REVERSE FOR CERTAIN DEFINITIONS
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK CUSIP 280597 10 5
This Certifies That:
________________________________________________________________________________
is owner of ____________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARE OF C0MMON STOCK OF $.001 PAR VALUE EACH
eDiets.com, inc.
transferable on the books of the Corporation in person or by attorney upon
surrender of this certificate duly endorsed or assigned. This certificate and
the shares represented hereby are subject to the laws of the State of Delaware,
and to the Certificate of Incorporation and Bylaws of the Corporation, as now
or hereafter amended. This certificate is not valid until countersigned by the
Transfer Agent.
WITNESS the facisimile seal of the Corporation and the facisimile signatures of
its duly authorized officers.
COUNTERSIGNED
CONTINENTAL STOCK TRANSFER AND TRUST COMPANY
JERSEY CITY, NJ
TRANSFER AGENT
DATED: ____________________________ [CORPORATE SEAL EDIETS.COM, INC.]
/s/ CHRISTINE M. BROWN <ILLEGIBLE SIGNATURE>
SECRETARY CHIEF EXECUTIVE OFFICER
<PAGE>
BACK OF CERTIFICATE
THE FOLLOWING ABBREVIATIONS, WHEN USED IN THE INSCRIPTION ON THE FACE OF THIS
CERTIFICATE, SHALL BE CONSTRUED AS THOUGH THEY WERE WRITTEN OUT IN FULL
ACCORDING TO APPLICABLE LAWS OR REGULATIONS.
TEN COM - AS TENANTS IN COMMON
TEN ENT - AS TENANTS BY THE ENTIRETIES
JT TEN - AS JOINT TENANTS WITH RIGHT OF SURVIVORSHIP AND NOT AS TENANTS IN
COMMON
UNIF GIFT MIN ACT - ______________________CUSTODIAN______________________
(CUST) (MINOR)
UNDER UNIFORM GIFTS TO MINORS
ACT ______________
(STATE)
ADDITIONAL ABBREVIATIONS MAY ALSO BE USED THOUGH NOT IN ABOVE LIST.
FOR VALUE RECEIVED, ____________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________
________________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE OF ASSIGNEE)
________________________________________________________________________________
________________________________________________________________________________
__________________________________________________________________________SHARES
OF THE STOCK REPRESENTED BY THE WITHING CERTIFICATE, AND DO HEREBY IRREVOCABLY
CONSTITUTE AND APPOINT
________________________________________________________________________ATTORNEY
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHING NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ______________________________
______________________________________
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATSOEVER.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER, UPON REQUEST AND WITHOUT
CHARGE, A FULL STATEMENT OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS AND SERIES AUTHORIZED TO BE ISSUED, SO
FAR AS THE SAME HAVE BEEN DETERMINED, AND OF THE AUTHORITY, IF ANY, OF THE BOARD
TO DIVIDE THE SHARES INTO CLASSES OR SERIES AND TO DETERMINE AND CHANGE THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF ANY CLASS OR SERIES. SUCH
REQUEST MAY BE MADE TO THE SECRETARY OF THE CORPORATION OR TO THE TRANSFER AGENT
NAMED ON THIS CERTIFICATE.
THE SIGNATURE TO THE ASSIGNMENT MUST CORRESPOND TO THE NAME AS WRITTEN UPON THE
FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER AND MUST BE GUARANTEED BY A COMMERCIAL BANK OR TRUST
COMPANY OR A MEMBER FIRM OF A NATIONAL OR REGIONAL OR OTHER RECOGNIZED STOCK
EXCHANGE IN CONFORMANCE WITH A SIGNATURE GUARANTEE MEDALLION PROGRAM.
STOCK MARKET INFORMATION
WWW.PBSSEXCHANGE.COM COLUMBIA FINANCIAL PRINTING CO.
P.O. BOX 218, BETHPAGE, NY 11714
EXHIBIT 4.4
REGISTRATION RIGHTS AGREEMENT
AGREEMENT, dated as of the ____ day of November 1999, executed and
delivered by eDiets.com, Inc., a Delaware corporation, having its principal
place of business at 3467 Hillsboro Boulevard, Deerfield Beach, Florida 33442
(the "Company"), in favor of the Holders (as defined below).
WHEREAS, pursuant to the terms and conditions set forth in the
Confidential Private Offering Memorandum of the Company, dated September 1,
1999, including the exhibits thereto, and any and all supplements thereof and
amendments thereto, and all documents incorporated by reference therein
(collectively, the "Memorandum"), the Company is offering for sale (the
"Offering") up to one hundred sixty eight (168) units of the Company's
securities (the "Units"), each Unit consisting of (i) twenty five thousand
(25,000) shares (the "Unit Shares") of the common stock, par value $.001 per
share (the "Common Stock") of the Company, and (ii) twelve thousand five hundred
(12,500) warrants (tile "Warrants"), each to purchase one share of Common Stock
(the "Warrant Shares") and, pursuant to the terms and conditions set forth in
the Placement Agent Agreement entered into between the Company and Whale
Securities Co., L.P. ("Whale") in connection with the Offering (the "Placement
Agent Agreement"), the Company is issuing five-year warrants to the Placement
Agent, which are exercisable for shares of Common Stock ("Placement Agent
Warrant Shares"); and
WHEREAS, pursuant to the terms and conditions set forth in the
Memorandum, including those contained in the subscription agreement
("Subscription Agreement") which has been executed and delivered by or on behalf
of each of the initial purchasers of Units from the Company (the "Initial
Purchasers"), each of the Initial Purchasers is purchasing the Units for which
it has subscribed; and
WHEREAS, pursuant to the Subscription Agreements, the Company has
agreed to issue to the holders of the Warrants a number of shares of Common
Stock equal to one-half of the Warrants held by such holder (the "Additional
Shares") if the Common Stock has not been registered under the provisions of
Section 12(g) of the Securities Exchange Act of 1934 (the "Exchange Act") and
listed for trading on the Nasdaq SmallCap Market within six months following the
initial closing of the offering (the "Initial Closing"); provided that if the
final closing of the Offering takes place more than 45 days after the Initial
Closing, the six months shall be increased by the number of days which elapse
between the 45th day after the Initial Closing and the final closing of the
Offering; and
WHEREAS, pursuant to the terms of the Placement Agent Agreement, Whale
is acting as placement agent for the Company in connection with the Offering;
and
WHEREAS, the terms and conditions of the Offering provide for the
execution and delivery of this Agreement;
NOW, THEREFORE, in order to induce the Initial Purchasers to purchase
the Units and Whale to act as Placement Agent for the Offering, and for other
good and valuable
<PAGE>
consideration, the receipt and adequacy of which are hereby acknowledged by the
Company, the Company hereby agrees as follows:
1. MANDATORY REGISTRATION OF THE REGISTRABLE SECURITIES.
(a) The Company will include the Shares, Warrant Shares,
Placement Agent Warrant Shares and Additional Shares (collectively, the
"Registrable Securities") in a registration statement (the "Mandatory
Registration Statement") which the Company will prepare and file with the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Act"), as soon as possible but, in any event, within twelve
(12) months following the Initial Closing, and use its best efforts to have
declared effective by the SEC within 15 months following the Initial Closing so
as to permit the public trading of the Registrable Securities no later than 15
months following the Initial Closing.
(b) Once effective, the Company covenants and agrees to use
its best efforts to maintain the effectiveness of the Mandatory Registration
Statement until the earlier of (i) the date that all of the Registrable
Securities have been sold pursuant to a Mandatory Registration Statement or Rule
144 of the General Rules and Regulations promulgated under the Act ("Rule 144"),
or (ii) the date that the Holders of the Registrable Securities receive an
opinion of counsel to the Company that all of the Registrable Securities may be
freely traded (without limitation or restriction as to quantity or timing and
without registration under the Act) pursuant to Rule 144 or otherwise. If the
Company fails to keep the Mandatory Registration Statement continuously
effective during such period, then the Company shall, promptly upon tile request
of tile Holders of at least 51% of the unsold Registrable Securities included
therein, use its best efforts to update the Mandatory Registration Statement or
file a new registration statement covering the unsold Registrable Securities,
subject to the terms and provisions hereof, and, in the event the Company fails
to do so within 90 days after receipt of such request, the Company shall issue
to the Holder, on one occasion only, such number of additional shares of Common
Stock as is equal to one-quarter of the unsold Registrable Securities held by
such Holder, subject to adjustment for stock splits, stock dividends and
recapitalization (the "Penalty Shares"), without further consideration, and the
Company shall be obligated to cause the Penalty Shares, as well as the
Registrable Securities remaining unsold, to be registered promptly under the
Act, subject to the terms and provisions hereof.
(c) Anything herein contained to the contrary notwithstanding,
the provisions of this Agreement shall not apply to, and the term "Registrable
Securities" as used in this Agreement shall not include, any securities after
they have been sold by a Holder pursuant to an effective Registration Statement
(as hereinafter defined) under the Act or pursuant to Rule 144.
2. PIGGYBACK REGISTRATION. If, at any time during the six-year
period following the Initial Closing, the Company proposes to prepare and file
one or more registration statements or amendments, including post-effective
amendments, or supplements thereto covering any of the Company's equity or debt
securities held by the Company or any of its shareholders, in such case other
than pursuant to Form S-4 or Form S-8 or successor form (collectively, a
2
<PAGE>
"Piggyback Registration Statement"), it will give written notice of its
intention to do so by registered mail ("Notice"), at least thirty (30) business
days prior to the filing of each such Registration Statement, to each Person
(defined hereafter) who beneficially holds Registrable Securities and/or Penalty
Shares and each of the successors, assigns and transferees of each of such
Persons (individually, a "Holder" and collectively, "Holders"). "Person" as used
herein shall mean any individual, sole proprietorships, partnership,
corporation, association, joint venture, trust, unincorporated entity or other
entity, or the government of any country or sovereign state, or of any state,
province, municipality or other political subdivision thereof.
Upon the written request of a Holder or Holders, made within twenty
(20) business days after receipt of the Notice, that the Company include all or
a portion of the Registrable Securities and Penalty Shares held by such Holders
("Piggyback Securities") in the proposed Piggyback Registration Statement (each
such Holder, a "Requesting Holder"), the Company shall use its best efforts to
cause such Registration Statement to be declared effective under the Act, by the
SEC so as to permit the public sale by the Requesting Holders of their Piggyback
Securities pursuant thereto, at the Company's sole cost and expense and at no
cost or expense to the Requesting Holders. However, if, in the written opinion
of the Company's managing underwriter, if any, for the offering evidenced by
such Piggyback Registration Statement, the inclusion of all or a portion of the
Piggyback Securities, when added to the securities being registered, will exceed
the maximum amount of the Company's securities which can be marketed either (i)
at a price reasonably related to their then-current market value or (ii) without
otherwise materially adversely affecting the entire offering, then the Company
may exclude from such offering all or a portion of the Piggyback Securities.
If securities are proposed to be offered for sale pursuant to such
Piggyback Registration Statement by other security holders of the Company and
the total number of securities to be offered by the Requesting Holders and such
other selling security holders is required to be reduced pursuant to a request
from the managing underwriter (which request shall be made only for the reasons
and in the manner set forth above), the aggregate number of Piggyback Securities
to be offered by Requesting Holders pursuant to such Piggyback Registration
Statement shall equal the number which bears the same ratio to the maximum
number of securities that the underwriter believes may be included for all the
selling security holders (including the Requesting Holders) as the original
number of Piggyback Securities proposed to be sold by the Requesting Holders
bears to the total original number of securities proposed to be offered by the
Requesting Holders and the other selling security holders.
Notwithstanding the provisions of this Section 2, the Company shall
have the right at any time after it shall have given written notice pursuant to
this Section 2 (irrespective of whether any written request for inclusion of
Piggyback Securities shall have already been made) to elect not to file any such
proposed Piggyback Registration Statement or to withdraw the same after its
filing but prior to the effective date thereof.
3
<PAGE>
3. ADDITIONAL COVENANTS OF THE COMPANY WITH RESPECT TO
REGISTRATION.
(a) In connection with any registration of Registrable
Securities and/or Penalty Shares pursuant to Sections I or 2 above, the Company
shall furnish each Holder of Registrable Securities and/or Penalty Shares
included in a Mandatory Registration Statement or a Piggyback Registration
Statement (each of which is sometimes referred to as a "Registration Statement")
with such reasonable number of copies of such Registration Statement, related
preliminary prospectus and prospectus meeting the requirements of the Act, and
other documents necessary or incidental to the registration and public offering
of such Registrable Securities and/or Penalty Shares, as shall be reasonably
requested by the Holder to permit the Holder to make a public distribution of
such Registrable Securities and/or Penalty Shares.
(b) If any stop order shall be issued by the SEC in connection
with any Registration Statement filed pursuant to Sections I or 2 above, the
Company will use its best efforts to obtain the removal of such order.
(c) The Company shall pay all costs, fees, and expenses in
connection with all Registration Statements filed pursuant to Sections I and 2
above, including, without limitation, the Company's legal and accounting fees,
printing expenses, and blue sky fees and expenses; provided, however, that the
Holders shall be solely responsible for the fees of any counsel retained by the
Holders in connection with such registration and any transfer taxes or
underwriting discounts, commissions or fees applicable to the Registrable
Securities and Penalty Shares sold by the Holders pursuant thereto.
(d) The Company will use its best efforts to qualify any
Registrable Securities and Penalty Shares included in a Registration Statement
for sale in such states as the Holders of such securities shall reasonably
request, provided that no such qualification will be required in any
jurisdiction where, solely as a result thereof, the Company would be subject to
general service of process or to taxation or qualification as a foreign
corporation doing business in such jurisdiction.
(e) As promptly as practicable after becoming aware of such
event, and in no event later than two (2) business days after becoming aware of
such event, notify each Holder of the happening of any event of which the
Company has knowledge, as a result of which the prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, and use its best efforts promptly to
prepare a supplement or amendment to the Registration Statement or other
appropriate filing with the SEC to correct such untrue statement or omission,
and deliver a number of copies Of Such Supplement or amendment to each Holder as
such Holder may reasonably request.
(f) As promptly as practicable after becoming aware of such
event, and in no event later than two (2) business days after becoming aware of
such event, notify each Holder of the issuance by the SEC or any "blue sky" or
state regulatory authorities of any
4
<PAGE>
notice of effectiveness or any stop order or other suspension of the
effectiveness of the Registration Statement.
(g) Provide a transfer agent and registrar, which may be a
single entity, for the Common Stock not later than the effective date of the
Registration Statement.
(h) Take all other reasonable actions necessary to expedite
and facilitate disposition by the Holder of the Registrable Securities and/or
Penalty Shares pursuant to the Registration Statement.
(i) Neither the filing of a Registration Statement by the
Company pursuant to this Agreement nor the making of any request for
prospectuses by the Holder shall impose upon the Holder any obligation to
exercise the Holders' Warrants or placement Agent Warrants or to sell the
Holder's Registrable Securities or Penalty Shares.
(j) The Holder, upon receipt of notice from the Company that
an event of the kind described in Sections 3(e) or (f) has occurred which
requires a post-effective amendment to the Registration Statement or a
supplement to the prospectus included therein, shall promptly discontinue the
sale of Registrable Securities and/or Penalty Shares until the Holder receives a
copy of a supplemented or amended prospectus from the Company, which the Company
shall provide immediately after such notice.
4. INDEMNIFICATION AND CONTRIBUTION.
(a) In connection with any Registration Statement covering
Registrable Securities and/or Penalty Shares, the Company agrees to indemnify
and hold harmless each Holder, the affiliates of each such Holder, the
directors, partners, officers, employees and agents of each such Holder and each
person who controls any such Holder within the meaning of either the Act or the
Exchange Act against any and all losses, claims, damages or liabilities, joint
or several, to which they or any of them may become subject under the Act, the
Exchange Act or other Federal or state statutory law or regulation, at common
law or otherwise, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon any untrue statement
or alleged untrue statement of a material fact contained in a Registration
Statement as originally filed or in any amendment thereof, or in any preliminary
prospectus or prospectus, or in any amendment thereof or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each Such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that (i) the Company will not be liable
in any case to the extent that any Such loss, claim, damage or liability arises
out of or is based upon any Such untrue statement or alleged untrue statement or
omission of alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of any such
Holder specifically for inclusion therein, (ii) the Company will not be liable
to any indemnified party under this indemnity agreement with respect to any
Registration
5
<PAGE>
Statement or prospectus to the extent that any such loss, claim, damage or
liability of such indemnified party results from the use of the prospectus
during a period when the use of the prospectus has been suspended in accordance
with Section 2(c) hereof, provided that the Holders received prior notice of
such suspension, which notice shall be deemed to have been received by such
Holders within 48 hours after the giving thereof, and (iii) the Company shall
not be liable to any indemnified party with respect to any preliminary
prospectus to the extent that any such loss, claim, damage or liability of such
indemnified party results from the fact that such indemnified party sold
Registrable Securities or Penalty Shares to a person as to whom there was not
sent or given, at or prior to the written confirmation of such sale, a copy of
the prospectus or of the prospectus as then amended or supplemented in any case
where such delivery is required by the Act, if the loss, claim, damage or
liability of such indemnified party results from an untrue statement or omission
of a material fact contained in the preliminary prospectus which was corrected
in the prospectus or in the prospectus as then amended or supplemented. This
indemnity agreement will be in addition to any liability which the Company may
otherwise have. The Company also agrees to indemnify and provide contribution to
each person who may be deemed to be an underwriter (for purposes of the Act)
with respect to the Registrable Securities and Penalty Shares ("Underwriters"),
their officers and directors, and each person who controls each such
Underwriter, on substantially the same basis as that of the indemnification of
and contribution to the Holders provided in this Section 4.
(b) By its participation in a Registration Statement, each
Holder shall be deemed to have agreed to indemnify and hold harmless (i) the
Company, (ii) each of its directors, (iii) each of its officers who signs such
Registration Statement and (iv) each person who controls the Company within the
meaning of either the Act or the Exchange Act to the same extent as the
foregoing indemnity from the Company to each such Holder, but only with respect
to written information relating to such Holder furnished to the Company by or on
behalf of such Holder specifically for inclusion in the documents referred to in
the foregoing indemnity. This indemnity agreement will be in addition to any
liability which any such Holder may otherwise have. Each Holder shall also be
deemed to have agreed to indemnify and contribute to each Underwriter, their
officers and directors, and each person who controls each such Underwriter, on
substantially the same basis as that of the indemnification of and contribution
to the Company provided in this Section 4. Anything in this Agreement contained
to the contrary notwithstanding, the liability of each Holder for
indemnification or contribution hereunder shall be limited to the amount of
proceeds received by such Holder in the offering giving rise to such liability.
(c) Promptly after receipt by an indemnified party under this
Section 4 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 4, notify the indemnifying party in writing of the
commencement thereof, but the failure so to promptly notify the indemnifying
party will not relieve the indemnifying party from liability under Section 4(a)
or 4(b) hereof unless and to the extent that it is materially prejudiced
thereby. The indemnifying party shall be entitled to appoint counsel of the
indemnifying party's choice at the indemnifying party's expense to represent the
indemnified party in any action for which
6
<PAGE>
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate Counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses Of
Such separate Counsel (and local Counsel) if (i) the Use of counsel chosen by
the indemnified party to represent the indemnified party would present such
Counsel with a conflict of interest, (ii) the actual or potential defendants in,
or targets of, any such action include both the indemnified party and the
indemnifying party and the indemnified party shall have reasonably concluded
that there may be legal defenses available to it and/or other indemnified
parties which are different from or additional to those available to the
indemnifying party, (iii) the indemnifying party shall not have employed counsel
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnified party shall not
settle or compromise any action for which it seeks indemnification or
contribution hereunder without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld. An indemnifying party
will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment with respect to any
pending or threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or action)
unless such settlement, compromise or consent includes an unconditional release
of each indemnified party from all liability arising out of such claim, action,
suit or proceeding.
(d) In the event that the indemnity provided in Section 4(a)
or 4(b) is unavailable to or insufficient to hold harmless an indemnified party
for any reason, then each applicable indemnifying party, in lieu of indemnifying
such indemnified party, shall contribute to the aggregate losses, claims,
damages and liabilities (including legal or other expenses reasonably incurred
in connection with investigating or defending same) (collectively "losses") to
which such indemnified party may be subject in such proportion as is appropriate
to reflect the relative benefits received by such indemnifying party, on the one
hand, and such indemnified party, on the other hand, from the Registration
Statement which resulted in such losses.
(e) The provisions of this Section 4 shall remain in full
force and effect regardless of any investigation made by or on behalf of any
Holder or the Company or any other persons who are entitled to indemnification
pursuant to the provisions of this Section 4, and shall survive the sale by a
Holder of Registrable Securities pursuant to the Registration Statement.
5. AMENDMENTS. This Agreement may not be amended, modified or
supplemented, and waivers of or consents to departures from the provisions of
this Agreement may not be given, unless it would not have an adverse effect upon
the rights of any of the Holders and the
7
<PAGE>
Company has obtained the consent of Holders then holding a majority of the
Registrable Securities.
6. SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of, and be binding upon, the Company, the Holders and the other persons
and entities described in Section 4 hereof and their respective successors,
assigns and transferees, including, without limitation and without the need for
an express assignment, subsequent Holders.
7. THIRD PARTY BENEFICIARIES. The Holders from time to time
shall each be a third party beneficiary of the agreements of the Company
contained herein.
8. HEADING. The headings which are contained in this Agreement
are for the sole purpose of convenience of reference, and shall not limit or
otherwise affect the interpretation of any of the provisions hereof.
9. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York applicable to contracts made and to be wholly performed
therein.
10. NOTICES. All notices and other communications hereunder
shall be in writing and shall be made by hand delivery, registered or certified
mail (postage paid, return receipt requested), telecopier or any courier
providing overnight delivery, (i) if to the Company or an Initial Purchaser, at
the address set forth in the Subscription Agreement and (ii) if to a Holder to
the address set forth on the books and records of the Company. All Such notices
and other communications shall be deemed to have been duly given upon receipt.
11. ENTIRE AGREEMENT. This Agreement sets forth the entire
agreement of the Company with respect to the subject matter hereof.
12. SEVERABILITY. In the event that any one or more of the
provisions of this Agreement, or the application thereof in any circumstances,
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions of this Agreement shall not be in any
way impaired or affected thereby.
13. FURTHER ASSURANCES. The Company will from time to time
after the date hereof take any and all actions, and execute, acknowledge and
deliver any and all documents and instruments, at its cost and expense, as any
Holder may from time to time reasonably request in order to more fully perfect
or protect the rights intended to be granted to it hereunder.
14. INTERPRETATION. As used in this Agreement, unless the
context otherwise requires: words describing the singular number shall include
the plural and vice versa; words denoting any gender shall include all genders;
words denoting natural persons shall include corporations, partnerships and
other entities, and vice versa; and the words "hereof', "herein" and
"hereunder", and words of similar import, shall refer to this Agreement as a
whole, and not to any particular provision of this Agreement.
8
<PAGE>
15. WAIVER. The failure of the Company or any Holder to at any
time enforce any of the provisions of this Agreement shall not be deemed or
construed to be a waiver of any such provision, nor to in any way affect the
validity of this Agreement or any provision hereof or the right of the Company
or any Holder to thereafter enforce each and every provision of this Agreement.
IN WITNESS WHEREOF, the undersigned has duly executed and delivered
this Agreement as of the date above written:
EDIETS.COM, INC.
By: _______________________________________
Name: David R. Humble
Title: Chairman and Chief Executive Officer
9
EXHIBIT 4.5
WARRANT AGREEMENT dated as of November 17, 1999 between eDiets.com Inc.
(formerly Olas Inc.), a Delaware corporation (the "Company"), and Whale
Securities Co., L.P. (hereinafter referred to as the "Placement Agent").
W I T N E S E T H:
WHEREAS, the Company proposes to issue to the Placement Agent warrants
(the "Warrants") to purchase up to 697,500 (as such number may be adjusted from
time to time pursuant to Article 8 of this Agreement) shares (the "Shares") of
the shares, par value $.001 per share (the "Common Shares"), of the Company; and
WHEREAS, the Placement Agent has agreed, pursuant to the placement
agent agreement (the "Placement Agent Agreement") dated November 17, 1999
between the Placement Agent and the Company, to act as the placement agent in
connection with the Company's proposed private offering of up to 168 Units (the
"Units"), each Unit consist of 25,000 Common Shares and warrants to purchase
12,500 Common Shares at an exercise price of $2.50 per Common Share, at an
offering price of $50,000 per Unit, on a "best efforts - One Hundred (100) Unit
Minimum/One Hundred Sixty Eight (168) Unit Maximum" basis (the "Private
Placement"); and
WHEREAS, the Warrants issued pursuant to this Agreement are being
issued by the Company to the Placement Agent and/or to its designees, in
consideration for, and as part of the Placement Agent's compensation in
connection with, the Placement Agent acting as the placement agent pursuant to
the Placement Agent Agreement;
NOW, THEREFORE, in consideration of the premises, the agreements herein
set forth and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
1. GRANT.
The Placement Agent, and/or its designees are hereby granted the right
to purchase, at any time from November 17, 1999 until 5:00 P.M., New York time,
on November 17, 2004 (the "Warrant Exercise Term"), up to 697,500 fully-paid and
nonassessable Shares (487,500 Shares for the first 100 Units sold; 140,000
Shares for the next 40 Units sold, or a pro rata amount thereof (i.e., 3,500
shares for each of the additional 60 units sold) ; and 70, 000 Shares for the
next 28 Units sold, or a pro rata amount thereof (i.e., 2,500 Shares for each of
the additional 28 Units sold)) at an initial exercise price (subject to
adjustment as provided in Article 8 hereof) of $2.50 per Share.
<PAGE>
2. WARRANT CERTIFICATES.
The warrant certificates delivered and to be delivered pursuant to this
Agreement (the "Warrant Certificates") shall be in the form set forth in Exhibit
A attached hereto and made a part hereof, with such appropriate insertions,
omissions, substitutions and other variations as required or permitted by this
Agreement.
3. EXERCISE OF WARRANT.
3.1. CASH EXERCISE. The Warrants initially are exercisable at
a price of $2.50 per Share, payable in cash or by check to the order of the
Company, or any combination thereof, subject to adjustment as provided in
Article 7 hereof. Upon surrender of the Warrant Certificate with the annexed
Form of Election to Purchase duly executed, together with payment of the
Exercise Price (as hereinafter defined) for the Shares purchased, at the
Company's principal offices in Florida (currently located at 3467 Hillsboro
Boulevard, Deerfield Beach, Florida 33442) the registered holder of a Warrant
Certificate ("Holder" or "Holders") shall be entitled to receive a certificate
or certificates for the Shares so purchased. The purchase rights represented by
each Warrant Certificate are exercisable at the option of the Holder thereof, in
whole or in part (but not as to fractional Shares) In the case of the purchase
of less than all the Shares purchasable under any Warrant Certificate, the
Company shall cancel said Warrant Certificate upon the surrender thereof and
shall execute and deliver a new Warrant Certificate of like tenor for the
balance of the Shares purchasable thereunder.
3.2. CASHLESS EXERCISE. At any time during the Warrant
Exercise Term, the Holder may, at the Holder's option, exchange, in whole or in
part, the Warrants represented by such Holder's Warrant Certificate (a "Warrant
Exchange"), into the number of Shares determined in accordance with this Section
3.2, by surrendering such Warrant Certificate at the principal office of the
Company or at the office of its transfer agent, accompanied by a notice stating
such Holder's intent to effect such exchange, the number of Warrants to be so
exchanged and the date on which the Holder requests that such Warrant Exchange
occur (the "Notice of Exchange"). The Warrant Exchange shall take place on the
date specified in the Notice of Exchange or, if later, the date the Notice of
Exchange is received by the Company (the "Exchange Date"). Certificates for the
Shares issuable upon such Warrant Exchange and, if applicable, a new Warrant
Certificate of like tenor representing the Warrants which were subject to the
surrendered Warrant Certificate and not included in the Warrant Exchange, shall
be issued as of the Exchange Date and delivered to the Holder within three (3)
days following the Exchange Date. In connection with any Warrant Exchange, the
Holder shall be entitled to subscribe for and acquire (i) the number of Shares
(rounded to the next highest integer) equal to (a) the number of Warrant Shares
specified by the Holder in its Notice of Exchange (the "Total Number") less (b)
the number of Shares equal to the quotient obtained by dividing (x) the product
of the Total Number and the existing Exercise Price (as hereinafter defined) by
(y) the Market Price (as hereinafter defined) of a Common Share on the day
preceding the Warrant Exchange and (ii) a Remainder Warrant Certificate, if
applicable. "Market Price', at any date shall be deemed to be (i) the last
reported sale price on the day prior to such date, or, (ii) in case no such
reported sales takes place on such day, the average of the last reported sale
prices
<PAGE>
for the last three (3) trading days, in either case as (a) officially reported
by the principal securities exchange on which the Common Shares are listed or
admitted to trading or as reported in the Nasdaq National Market System, or, (b)
if the Common Shares are not listed or admitted to trading on any national
securities exchange or quoted on the Nasdaq National Market System, the closing
sale price as furnished by W the National Association of Securities Dealers,
Inc. through Nasdaq or (ii) a similar organization if Nasdaq is no longer
reporting such information, or (c) if such information is no longer reported by
Nasdaq or a similar organization, the fair market value of the Common Shares as
determined in good faith by resolution of the independent directors of the
Company based on the best information available to it for the day immediately
preceding the Exchange Date and the day of Exchange Date, but in the case of any
such determination made under this clause (c), in no event less than the greater
of (x) per Common Share price of the last sale or issuance of Common Shares or
Common Shares equivalents by the Company or (y) the last closing sale price as
available under clauses (a) or (b) above prior to such date.
4. ISSUANCE OF CERTIFICATES.
Upon the exercise of the Warrants, the issuance of certificates for the
Shares purchased shall be made forthwith (and in any event within three (3)
business days thereafter) without charge to the Holder thereof including,
without limitation, any tax which may be payable in respect of the issuance
thereof, and such certificates shall be issued in the name of, or in such names
as may be directed by, the Holder thereof; provided, however, that the Company
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any such certificates in a
name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
The Warrant Certificates and the certificates representing the Shares
shall be executed on behalf of the Company by the manual or facsimile signature
of the present or any future Chairman or Vice Chairman of the Board of
Directors, Chief Executive Officeror President or Vice President of the Company
under its corporate seal reproduced thereon, attested to by the manual or
facsimile signature of the present or any future Secretary or Assistant
Secretary of the Company. Warrant Certificates shall be dated the date of
execution by the Company upon initial issuance, division, exchange, substitution
or transfer.
Upon exercise, in part or in whole, of the Warrants, certificates
representing the Shares shall bear a legend substantially similar to the
following:
"The securities represented by this certificate have not been
registered for purposes of public distribution under the Securities Act of 1933,
as amended (the "Act"), and may not be offered or sold except (i) pursuant to an
effective registration statement under the Act, (ii) to the extent applicable,
pursuant to Rule 144 under the Act (or any similar rule under such Act relating
to the disposition of securities), or (iii) upon the delivery by the holder to
the
<PAGE>
Company of an opinion of counsel, reasonably satisfactory to counsel to the
Company, stating that an exemption from registration under such Act is
available."
5. PRICE.
5.1. INITIAL AND ADJUSTED EXERCISE PRICE. The initial exercise
price of each Warrant shall be $2.50 per Share. The adjusted exercise price per
Share shall be the price which shall result from time to time from any and all
adjustments of the initial exercise price per Share in accordance with the
provisions of Article 7 hereof.
5.2. EXERCISE PRICE. The term "Exercise Price" herein shall
mean the initial exercise price or the adjusted exercise price, depending upon
the context.
6. REGISTRATION RIGHTS.
6.1. REGISTRATION UNDER THE SECURITIES ACT OF 1933. None of
the Warrants or Shares have been registered for purposes of public distribution
under the Securities Act of 1933, as amended (the "Act").
6.2. REGISTRATION RIGHTS AGREEMENT. The holders of Shares will
be entitled to the registration rights relating to such Shares as are set forth
in the Registration Rights Agreement dated as of November 17, 1999, executed and
delivered by the Company in their favor, a form of which is attached hereto as
Exhibit B.
7. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES.
7.1. COMPUTATION OF ADJUSTED PRICE. Except as hereinafter
provided, in case the Company shall at any time after the date hereof issue or
sell any Common Shares, including shares held in the Company's treasury and
Common Shares issued upon the exercise of any options, rights or warrants to
subscribe for Common Shares and Common Shares issued upon the direct or indirect
conversion or exchange of securities for Common Shares, for a consideration per
share less than either the Exercise Price in effect immediately prior to the
issuance or sale of such shares or the Market Price per Common Share or without
consideration, then forthwith upon such issuance or sale, the Exercise Price
shall (until another such issuance or sale) be reduced to the price (calculated
to the nearest full cent) equal to the quotient derived by dividing (A) an
amount equal to the sum of (X) the product of (a) the total number of Common
Shares outstanding immediately prior to such issuance or sale, multiplied by (b)
the lower of (i) the Exercise Price in effect immediately prior to such issuance
or sale or (ii) the Market Price per Common Share on the date immediately prior
to the issuance or sale of such shares, plus, (Y) the aggregate of the amount of
all consideration, if any, received by the Company upon such issuance or sale,
by (3) the total number of Common Shares outstanding immediately after such
issuance or sale; provided, however, that in no event shall the Exercise Price
be adjusted pursuant to this computation to an amount in excess of the Exercise
Price in effect immediately prior to such computation, except in the case of a
combination of outstanding Common Shares, as provided by Section 7.3 hereof.
<PAGE>
For the purposes of any computation to be made in accordance with this
Section 7.1, the following provisions shall be applicable:
(i) case of the issuance or sale of Common Shares for a
consideration part or all of which shall be cash, the amount of the cash
consideration therefor shall be deemed to be the amount of cash received by the
Company for such shares (or, if Common Shares are offered by the Company for
subscription, the subscription price, or, if such securities shall be sold to
underwriters or dealers for public offering without a subscription offering, the
initial public offering price) before deducting therefrom any compensation paid
or discount allowed in the sale, underwriting or purchase thereof by
underwriters or dealers or others performing similar services, or any expenses
incurred in connection therewith.
(ii) In case of the issuance or sale (otherwise than as a
dividend or other distribution on any stock of the Company) of Common Shares for
a consideration part or all of which shall be other than cash, the amount of the
consideration therefor other than cash shall be deemed to be the value of such
consideration as determined in good faith by resolution of the independent
directors of the Company.
(iii) Common Shares issuable by way of dividend or other
distribution on any stock of the Company shall be deemed to have been issued
immediately after the opening of business on the day following the record date
for the determination of stockholders entitled to receive such dividend or other
distribution and shall be deemed to have been issued without consideration.
(iv) The reclassification of securities of the Company other
than Common Shares into securities including Common Shares shall be deemed to
involve the issuance of such Common Shares for a consideration other than cash
immediately prior to the close of business on the date fixed for the
determination of security holders entitled to receive such shares, and the value
of the consideration allocable to such Common Shares shall be determined as
provided in subsection (ii) of this Section 7.1.
(v) The number of common Shares at any one time outstanding
shall include the aggregate number of shares issued or issuable upon the
exercise of options, rights, warrants and upon the conversion or exchange of
convertible or exchangeable securities.
7.2. OPTIONS, RIGHTS, WARRANTS AND CONVERTIBLE AND
EXCHANGEABLE SECURITIES. Except in the case of the Company issuing rights to
subscribe for Common Shares distributed to all the stockholders of the Company
and Holders of Warrants pursuant to Section 7.7 hereof, if the Company shall at
any time after the date hereof issue options, rights or warrants to subscribe
for Common Shares, or issue any securities convertible into or exchangeable for
Common Shares, (i) for a consideration per share less than (a) the Exercise
Price in effect immediately prior to the issuance of such options, rights or
warrants, or such convertible or exchangeable securities, or (b) the Market
Price, or (ii) without consideration, the Exercise Price in effect immediately
prior to the issuance of such options, rights or warrants, or such
<PAGE>
convertible or exchangeable securities, as the case may be, shall be reduced to
a price determined by making a computation in accordance with the provisions of
Section 7.1 hereof, provided that:
(a) The aggregate maximum number of Common shares, as the case
may be, issuable under all the outstanding options, rights or warrants shall be
deemed to be issued and outstanding at the time all the outstanding options,
rights or warrants were issued, and for a consideration equal to the minimum
purchase price per share provided for in the options, rights or warrants at the
time of issuance, plus the consideration (determined in the same manner as
consideration received on the issue or sale of shares in accordance with the
terms of the Warrants), if any, received by the Company for the options, rights
or warrants, and if no minimum price is provided in the options, rights or
warrants, then the consideration shall be equal to zero; provided, however, that
upon the expiration or other termination of the options, rights or warrants, if
any thereof shall not have been exercised, the number of Common Shares deemed to
be issued and outstanding pursuant to this subsection (a) (and for the purposes
of subsection (v) of Section 7.1 hereof) shall be reduced by such number of
shares as to which options, warrants and/or rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding, and the Exercise Price then in effect shall forthwith
be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of shares actually issued
or issuable upon the exercise of those options, rights or warrants as to which
the exercise rights shall not have expired or terminated unexercised.
(b) The aggregate maximum number of Common Shares issuable upon
conversion or exchange of any convertible or exchangeable securities shall be
deemed to be issued and outstanding at the time of issuance of such securities,
and for a consideration equal to the consideration (determined in the same
manner as consideration received on the issue or sale of Common Shares in
accordance with the terms of the Warrants) received by the Company for such
securities, plus the minimum consideration, if any, receivable by the Company
upon the conversion or exchange thereof; provided, however, that upon the
termination of the right to convert or exchange such convertible or exchangeable
securities (whether by reason of redemption or otherwise), the number of shares
deemed to be issued and outstanding pursuant to this subsection (b) (and for the
purpose of subsection (v) of Section 7.1 hereof) shall be reduced by such number
of shares as to which the conversion or exchange rights shall have expired or
terminated unexercised, and such number of shares shall no longer be deemed to
be issued and outstanding and the Exercise Price then in effect shall forthwith
be readjusted and thereafter be the price which it would have been had
adjustment been made on the basis of the issuance only of the shares actually
issued or issuable upon the conversion or exchange of those convertible or
exchangeable securities as to which the conversion or exchange rights shall not
have expired or terminated unexercised.
(c) If any change shall occur in the price per share provided
for in any of the options, rights or warrants referred to in subsection (a) of
this Section 7.2, or in the price per share at which the securities referred to
in subsection (b)of this Section 7.2 are convertible or exchangeable, the
options, rights or warrants or conversion or exchange rights,
<PAGE>
as the case may be, shall be deemed to have expired or terminated on the date
when such price change became effective in respect to share not theretofore
issued pursuant to the exercise or conversion or exchange thereof, and the
Company shall be deemed to have issued upon such date new options, rights or
warrants or convertible or exchangeable securities at the new price in respect
of the number of shares issuable upon the exercise of such options, rights or
warrants or the conversion or exchange of such convertible or exchange
securities.
7.3. SUBDIVISION AND COMBINATION. In case the Company shall at
any time subdivide or combine the outstanding Common Shares, the Exercise Price
shall forthwith be proportionately decreased in the case of subdivision or
increased in the case of combination.
7.4. ADJUSTMENT IN NUMBER OF SHARES. Upon each adjustment of
the Exercise Price pursuant to the provisions of this Article 7, the number of
Shares issuable upon the exercise of each Warrant shall be adjusted to the next
highest full number by multiplying a number equal to the Exercise Price in
effect immediately prior to such adjustment by the number of Shares issuable
upon exercise of the Warrants immediately prior to such adjustment and dividing
the product so obtained by the adjusted Exercise Price.
7.5. RECLASSIFICATION, CONSOLIDATION, MERGER, ETC. In case of
any reclassification or change of the outstanding Common Shares (other than a
change in par value to no par value, or from no par value to par value, or as a
result of a subdivision or combination), or in the case of any consolidation of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger in which the Company is the surviving corporation and
which does not result in any reclassification or change of the outstanding
Common Shares, except a change as a result of a subdivision or combination of
such shares or a change in par value, as aforesaid), or in the case of a sale or
conveyance to another corporation of the property of the Company as an entirety,
the Holders shall thereafter have the right to purchase the kind and number of
shares of stock and other securities and property receivable upon such
reclassification, change, consolidation, merger, sale or conveyance as if the
Holders were the owners of the Common Shares underlying the Warrants immediately
prior to any such events at a price equal to the product of (x) the number of
Common Shares issuable upon exercise of the Holder's Warrants and (y) the
Exercise Price in effect immediately prior to the record date for such
reclassification, change, consolidation, merger, sale or conveyance as if such
Holders had exercised the Warrants.
7.6. DIVIDENDS AND OTHER DISTRIBUTIONS WITH RESPECT TO
OUTSTANDING SECURITIES. In the event that the Company shall at any time prior to
the exercise of all Warrants make any distribution of its assets to holders of
its Common Shares as a liquidating or a partial liquidating dividend, then the
holder of Warrants who exercises its Warrants after the record date for the
determination of those holders of Common Shares entitled to such distribution of
assets as a liquidating or partial liquidating dividend shall be entitled to
receive for the Warrant Price per Warrant, in addition to each Common Share, the
amount of such distribution (or, at the option of the Company, a sum equal to
the value of any such assets at the time of such distribution as determined by
the Board of Directors of the Company in good faith) which would have been
payable to such holder had he been the holder of record of the Common
<PAGE>
Share receivable upon exercise of his Warrant on the record date for the
determination of those entitled to such distribution. At the time of any such
dividend or distribution, the Company shall make appropriate reserves to ensure
the timely performance of the provisions of this Subsection 7.6.
7.7. SUBSCRIPTION RIGHTS FOR COMMON SHARES OR OTHER
SECURITIES. In the case that the Company or an affiliate of the Company shall at
any time after the date hereof and prior to the exercise of all the Warrants
issue any rights, warrants or options to subscribe for Common Shares or any
other securities of the Company or of such affiliate to all the stockholders of
the Company, the Holders of unexercised Warrants on the record date set by the
Company or such affiliate in connection with such issuance of rights, warrants
or options shall be entitled, in addition to the Common Shares or other
securities receivable upon the exercise of the Warrants, to receive such rights,
warrants or options shall be entitled, in addition to the Common Shares or other
securities receivable upon the exercise of the Warrants, to receive such rights
at the time such rights, warrants or options that such Holders would have been
entitled to receive had they been, on such record date, the holders of record of
the number of whole Common Shares then issuable upon exercise of their
outstanding Warrants (assuming for purposes of this Section 7.7), that the
exercise of the Warrants is permissible immediately upon issuance).
8. EXCHANGE AND REPLACEMENT OF WARRANT CERTIFICATES.
Each Warrant Certificate is exchangeable without expense, upon the
surrender thereof by the registered Holder at the principal executive office of
the Company, for a new Warrant Certificate of like tenor and date representing
in the aggregate the right to purchase the same number of securities in such
denominations as shall be designated by the Holder thereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of any Warrant Certificate, and,
in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to it, and reimbursement to the Company of all reasonable expenses
incidental thereto, and upon surrender and cancellation of the Warrant
Certificate, if mutilated, the Company will make and deliver a new Warrant
Certificate of like tenor, in lieu thereof.
9. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares, nor shall it be required to issue scrip or pay cash in lieu
of fractional interests, it being the intent of the parties that all fractional
interests shall be eliminated by rounding any fraction up to the nearest whole
number of Shares.
<PAGE>
10. RESERVATION AND LISTING OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Shares, solely for the purpose of issuance upon the exercise
of the Warrants, such number of Common Shares as shall be issuable upon the
exercise thereof. The Company covenants and agrees that, upon exercise of the
Warrants and payment of the Exercise Price therefor, all Shares issuable upon
such exercise shall be duly and validly issued, fully paid, non-assessable and
not subject to the preemptive rights of any stockholder. Commencing upon the
initial listing of the Company's Common Shares on NASDAQ or a national
securities exchange and for as long as the Warrants shall be outstanding, the
Company shall use its best efforts to cause all Common Shares issuable upon the
exercise of the Warrants to be listed on or quoted by NASDAQ or listed on such
national securities exchange, in the event the Common Shares are listed on a
national securities exchange.
11. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Agreement shall be construed as conferring
upon the Holder or Holders the right to vote or to consent or to receive notice
as a stockholder in respect of any meetings of stockholders for the election of
directors or any other matter, or as having any rights whatsoever as a
stockholder of the Company. If, however, at any time prior to the expiration of
the Warrants and their exercise, any of the following events shall occur:
(a) the Company shall take a record of the holders of its
Common Shares for the purpose of entitling them to receive a dividend or
distribution payable otherwise than in cash, or a cash dividend or distribution
payable otherwise than out of current or retained earnings, as indicated by the
accounting treatment of such dividend or distribution on the books of the
Company; or
(b) the Company shall offer to all the holders of its Common
Shares any additional shares of capital stock of the Company or securities
convertible into or exchangeable for shares of capital stock of the Company, or
any option, right or warrant to subscribe therefor; or
(c) a dissolution, liquidation or winding up of the Company
(other than in connection with a consolidation or merger) or a sale of all or
substantially all of its property, assets and business as an entirety shall be
proposed; or
(d) reclassification or change of the outstanding Common
Shares (other than a change in par value to no par value, or f rom no par value
to par value, or as a result of a subdivision or combination), consolidation of
the Company with, or merger of the Company into, another corporation (other than
a consolidation or merger in which the Company is the surviving corporation and
which does not result in any reclassification or change of the outstanding
Common Shares, except a change as a result of a subdivision or combination of
such shares or a change in par value, as aforesaid) , or a sale or conveyance to
another corporation of the property of the Company as an entirety is proposed;
or
<PAGE>
(e) The Company or an affiliate of the Company shall propose
to issue any rights to subscribe for Common Shares or any other securities of
the Company or of such affiliate to all the stockholders of the Company;
then, in any one or more of said events, the Company shall give written
notice to the Holder or Holders of such event at least twenty (20) days prior to
the date fixed as a record date or the date of closing the transfer books for
the determination of the stockholders entitled to such dividend, distribution,
convertible or exchangeable securities or subscription rights, options or
warrants, or entitled to vote on such proposed dissolution, liquidation, winding
up or sale. Such notice shall specify such record date or the date of closing
the transfer books, as the case may be. Failure to give such notice or any
defect therein shall not affect the validity of any action taken in connection
with the declaration or payment of any such dividend or distribution, or the
issuance of any convertible or exchangeable securities or subscription rights,
options or warrants, or any proposed dissolution, liquidation, winding up or
sale.
12. NOTICES.
All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to be given and effective when delivered
if by hand, by courier or mailed by registered or certified mail, postage paid,
return receipt requested (regardless of whether or not delivery is refused) or
when sent by confirmed facsimile transmission with a copy delivered by any of
the other foregoing means):
(a) If to a registered Holder of the Warrants, to the address (or
facsimile number) of such Holder as shown on the books of the Company; or
(b) If to the Company, to the address set forth in Section 3 of this
Agreement (or if by facsimile, to (954) 360-9095) or to such other address (or
facsimile number) as the Company may designate by notice to the Holders.
13. SUPPLEMENTS AND AMENDMENTS.
The Company and the Placement Agent may from time to time supplement or
amend this Agreement without the approval of any Holders of Warrant Certificates
in order to cure any ambiguity, to correct or supplement any provision contained
herein which may be defective or inconsistent with any provisions herein, or to
make any other provisions in regard to matters or questions arising hereunder
which the Company and the Placement Agent may deem necessary or desirable and
which the Company and the Placement Agent deem not to adversely affect the
interests of the Holders of Warrant Certificates.
<PAGE>
14. SUCCESSORS.
All the covenants and provisions of this Agreement by or for the
benefit of the Company and the Holders inure to the benefit of their respective
successors and assigns hereunder.
15. TERMINATION.
This Agreement shall terminate at the close of business on November 17,
2006. Notwithstanding the foregoing, this Agreement will terminate on any
earlier date when all Warrants have been exercised and all the Shares issuable
upon exercise of the Warrants have been resold to the public; provided, however,
that the provisions of Section 6 shall survive any termination pursuant to this
Section 15 until the close of business on November 17, 2009.
16. GOVERNING LAW.
This Agreement and each Warrant Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of New York and for all
purposes shall be construed in accordance with the laws of said State, except to
the extent that the Delaware General Corporation Law mandatorily applies.
17. BENEFITS OF THIS AGREEMENT.
Nothing in this Agreement shall be construed to give to any person or
corporation other than the Company and the Placement Agent and any other
registered holder or holders of the Warrant Certificates, Warrants or the Shares
any legal or equitable right, remedy or claim under this Agreement; and this
Agreement shall be for the sole and exclusive benefit of the Company and the
Placement Agent and any other holder or holders of the Warrant Certificates,
Warrants or the Shares.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
18. COUNTERPARTS.
This Agreement may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and
such counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
EDIETS.COM, INC.
By:________________________
Name: David R. Humble
Title: Chairman and Chief
Executive Officer
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By:________________________
Name: William G. Walters
Title: Chairman
<PAGE>
EXHIBIT A
THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE OTHER SECURITIES ISSUABLE
UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED FOR PURPOSES OF PUBLIC
DISTRIBUTION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND MAY
NOT BE OFFERED OR SOLD EXCEPT (i) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE 144
UNDER SUCH ACT (OR ANY SIMILAR RULE UNDER SUCH ACT RELATING TO THE DISPOSITION
OF SECURITIES) , OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN
OPINION OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, STATING
THAT AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT IS AVAILABLE.
THE TRANSFER OR EXCHANGE OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IS
RESTRICTED IN ACCORDANCE WITH THE WARRANT AGREEMENT REFERRED TO HEREIN.
EXERCISABLE ON OR BEFORE
5:00 P.M., NEW YORK TIME, November 17, 2004
No. W- _____ Warrants
WARRANT CERTIFICATE
This Warrant Certificate certifies that or registered assigns, is the
registered holder of _______________ Warrants to purchase, at any time from ,
1999, until 5:00 P.M. New York City time on , 2004 ("Expiration Date"), up to
fully-paid and non-assessable shares ("Shares")of the common shares, par value
per share (the "Common Shares"), of eDiets.com, Inc., a Delaware corporation
(the "Company"), at the initial exercise price, subject to adjustment in certain
events (the "Exercise Price"), of $2.50 per Share upon surrender of this Warrant
Certificate and payment of the Exercise Price at an office or agency of the
Company, but subject to the conditions set forth herein and in the warrant
agreement dated as of November 17, 1999 between the Company and Whale Securities
Co., L.P. (the "Warrant Agreement"). Payment of the Exercise Price may be made
in cash, or by certified or official bank check in New York Clearing House Funds
payable to the order of the Company, or any combination thereof.
No Warrant may be exercised after 5:00 P.M., New York City time, on the
Expiration Date, at which time all Warrants evidenced hereby, unless exercised
prior thereto, shall thereafter be void.
The Warrants evidenced by this warrant Certificate are part of a duly
authorized issue of Warrants issued pursuant to the Warrant Agreement, which
Warrant Agreement is hereby
<PAGE>
incorporated by reference in and made a part of this instrument and is hereby
referred to in a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Company and the holders (the words
"holders" or "holder" meaning the registered holders or registered holder) of
the Warrants.
The Warrant Agreement provides that upon the occurrence of certain
events, the Exercise Price and the type and/or number of the Company's
securities issuable thereupon may, subject to certain conditions, be adjusted.
In such event, the Company will, at the request of the holder, issue a new
Warrant Certificate evidencing the adjustment in the Exercise Price and the
number and/or type of securities issuable upon the exercise of the Warrants;
provided, however, that the failure of the Company to issue such new Warrant
Certificates shall not in any way change, alter, or otherwise impair, the rights
of the holder as set forth in the Warrant Agreement.
Upon due presentment for registration of transfer of this Warrant
Certificate at an office or agency of the Company, a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided herein and in the Warrant
Agreement, without any charge except for any tax, or other governmental charge
imposed in connection therewith.
Upon the exercise of less than all of the Warrants evidenced by this
Certificate, the Company shall forthwith issue to the holder hereof a new
Warrant Certificate representing such number of unexercised Warrants.
The Company may deem and treat the registered holder(s) hereof as the
absolute owner(s) of this warrant Certificate (notwithstanding any notation of
ownership or other writing hereon made by anyone), for the purpose of any
exercise hereof, and of any distribution to the holder(s) hereof, and for all
other purposes, and the Company shall not be affected by any notice to the
contrary.
All terms used in this Warrant Certificate which are defined in the
Warrant Agreement shall have the meanings assigned to them in the Warrant
Agreement.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed under its corporate seal.
Dated: November , 1999 EDIETS.COM, INC.
By:________________________
Name: David R. Humble
Title: Chairman and Chief
Executive Officer
<PAGE>
[FORM OF ELECTION TO PURCHASE]
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to purchase _______________ Common
Shares and herewith tenders in payment for such securities cash or a certified
or official bank check payable in New York Clearing House Funds to the order of
eDiets.com, Inc. in the amount of $___________ all in accordance with the terms
hereof. The undersigned requests that a certificate for such securities be
registered in the name of _______________________________ whose address is
____________________________________ and that such Certificate be delivered to
________________________________ whose address is _____________________________.
Dated: Signature: ______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate.)
_______________________________________
_______________________________________
(Insert Social Security or Other
Identifying Number of Holder)
<PAGE>
[FORM OF ASSIGNMENT]
(To be executed by the registered holder if such holder desires to
transfer the Warrant Certificate.)
FOR VALUE RECEIVED ____________________________________________ hereby sells,
assigns and transfers unto
____________________________________________
(Please print name and address of transferee)
this Warrant Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ____________________________,
Attorney, to transfer the within Warrant Certificate on the books of the
within-named Company, with full power of substitution.
Dated: Signature: ______________________________
(Signature must conform in all respects
to name of holder as specified on the
face of the Warrant Certificate)
_______________________________________
_______________________________________
(Insert Social Security or Other
Identifying Number of Assignee)
EXHIBIT 5.1
December 30, 1999
eDiets.com, Inc.
3467 West Hillsboro Boulevard, Suite 2
Deerfield Beach, Florida 33442
Ladies and Gentlemen:
We have acted as counsel to eDiets.com, Inc., a Delaware corporation (the
"Company") in connection with its filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, (the "Securities Act")
of a Registration Statement on Form SB-2, including exhibits therein (the
"Registration Statement") covering up to 8,570,941 shares of the Company's
Common Stock, $.001 per share (the "Shares") and up to 2,457,503 Warrants to
purchase Common Stock (the "Warrants").
We have examined the originals, or photostatic or certified copies, of such
records of the Company, certificates of officers of the Company and of public
officials, and such other documents as we have deemed relevant and necessary as
the basis of the opinion set forth below. In such examination, we have assumed
the genuiness of all signatures, the authenticity of all documents submitted to
us as photostatic or certified copies and the authenticy of the originals of
such copies.
Based on the foregoing, we are of the opinion that:
(1) The Shares and the Warrants have been validly authorized and are
legally issued, fully paid and non-assessable; and
(2) Assuming the state of the applicable law as it presently exists, the
Shares issuable upon exercise of the Warrants, will be, upon issuance
in accordance with the terms of the Warrants, legally issued, fully
paid and non-assessable.
<PAGE>
eDiets.com, Inc.
December 30, 1999
Page 2
We hereby consent to the use of our opinion as herein set forth as an exhibit to
the Registration Statement and to the use of our name under the caption "Legal
Matters" in the prospectus forming a part of the Registration Statement.
Very truly yours,
NASON, YEAGER, GERSON, WHITE
& LIOCE, P.A.
EXHIBIT 10.1
EDIETS.COM, INC.
STOCK OPTION PLAN
1. PURPOSE AND DEFINITIONS
A. PURPOSE OF THE PLAN
The Plan is intended to encourage ownership of Shares by Key
Employees and Key Non-Employees in order to attract and retain
such Key Employees in the employ of the Company or an
Affiliate, or to attract such Key Non-Employees to provide
services to the Company or an Affiliate, and to provide
additional incentive for such persons to promote the success
of the Company or an Affiliate.
B. DEFINITIONS
Unless otherwise specified or unless the context otherwise
requires, the following terms, as used in this Plan, have the
following meanings:
1. AFFILIATE means a corporation which, for purposes of
Section 422 of the Code, is a parent or subsidiary of
the Company, direct or indirect.
2. BOARD means the Board of Directors of the Company.
3. CODE means the Internal Revenue Code of 1986, as
amended.
4. COMMITTEE means the committee to which the Board
delegates the power to act under or pursuant to the
provisions of the Plan, or the Board if no committee
is selected. If the Board delegates powers to a
committee, and if the Company is or becomes subject
to Section 16 of the Exchange Act, then, if necessary
for compliance therewith, such committee shall
consist initially of not less than two (2) members of
the Board, each member of which must be a
"non-employee director," within the meaning of the
applicable rules promulgated pursuant to the Exchange
Act. The failure of any Committee members to qualify
as a "non-employee director" shall not otherwise
affect the validity of the grant of an option, or the
issuance of shares of Common Stock otherwise validly
issued upon exercise of any such option. If the
Company is or becomes subject to Section 16 of the
Exchange Act, no member of the Committee shall
receive any Option pursuant to the Plan or any
similar plan of the Company or any Affiliate while
serving on the Committee unless the Board determines
that the grant of such an Option satisfies the then
current Rule 16b-3 requirements under the Exchange
Act.
<PAGE>
Notwithstanding anything herein to the contrary, and
insofar as the Board determines that it is necessary
in order for compensation recognized by Participants
pursuant to the Plan to be fully deductible to the
Company for federal income tax purposes, each member
of the Committee also shall be an "outside director"
(as defined in regulations or other guidance issued
by the Internal Revenue Service under Code Section
162(m)).
5. COMPANY means eDiets.com, Inc., a Delaware
corporation, and includes any successor or assignee
corporation or corporations into which the Company
may be merged, changed, or consolidated; any
corporation for whose securities the securities of
the Company shall be exchanged; and any assignee of
or successor to substantially all of the assets of
the Company.
6. DISABILITY or DISABLED means permanent and total
disability as defined in Section 22(e)(3) of the
Code.
7. EXCHANGE ACT means the Securities Exchange Act of
1934, as amended from time to time, or any successor
statute thereto.
8. FORMULA OPTION means a Nonstatutory Option granted
automatically to a Non-Employee Board Member in
accordance with Article VI of the Plan.
9. INCENTIVE OPTION means an Option which, when granted,
is intended to be an "incentive stock option," as
defined in Section 422 of the Code.
10. KEY EMPLOYEE means an employee of the Company or of
an Affiliate (including, without limitation, an
employee who also is serving as an officer or
director of the Company or of an Affiliate),
designated by the Board or the Committee as being
eligible to be granted one or more Options under the
Plan.
11. KEY NON-EMPLOYEE means a Non-Employee Board Member,
consultant, or independent contractor of the Company
or of an Affiliate who is designated by the Board or
the Committee as being eligible to be granted one or
more Options under the Plan.
12. NON-EMPLOYEE BOARD MEMBER means a director of the
Company who is not an employee of the Company or any
of its Affiliates. For purposes of this Plan, a
Non-Employee Board Member shall be deemed to include
the employer of such Non-Employee Board Member, if
the Non-Employee Board Member is so required, as a
condition of his
2
<PAGE>
employment, to provide that any Option granted
hereunder be made to the employer.
13. NONSTATUTORY OPTION means an Option which, when
granted, is not intended to be an "incentive stock
option," as defined in Section 422 of the Code.
14. OPTION means a right or option granted under the
Plan.
15. OPTION AGREEMENT means an agreement between the
Company and a participant executed and delivered
pursuant to the Plan.
16. PARTICIPANT means a Key Employee to whom one or more
Incentive Options or Nonstatutory Options are granted
under the Plan, and a Key Non-Employee to whom one or
more Nonstatutory Options are granted under the Plan.
17. PLAN means this Stock Option Plan, as amended from
time to time.
18. SHARES means the following shares of the capital
stock of the Company as to which Options have been or
may be granted under the Plan: treasury shares or
authorized but unissued Common Stock, $.001 par
value, or any shares of capital stock into which the
Shares are changed or for which they are exchanged
within the provisions of Article VII of the Plan.
II. SHARES SUBJECT TO THE PLAN
The aggregate number of Shares as to which Options may be granted from
time to time shall be One Million Eight Hundred Thirty Thousand
(1,830,000) Shares (subject to adjustment for stock splits, stock
dividends, and other adjustments described in Article VII hereof).
Subject to the provisions of the immediately preceding paragraph, the
maximum number of shares as to which Options may be granted in any
calendar year to any one Key Employee shall not exceed 500,000 (subject
to adjustment for stock splits, stock dividends and other adjustments
described in Article VII hereof).
If an Option ceases to be "outstanding," in whole or in part, the
Shares which were subject to such Option, if the Option was not
exercised, shall be available for the granting of other Options. Any
Option shall be treated as "outstanding" until such Option is exercised
in full, terminates or expires under the provisions of the Plan or
Option Agreement, or is canceled by agreement of the Company and the
Participant.
Subject to the provisions of Article VII, the aggregate number of
Shares as to which Incentive Options may be granted shall be subject to
change only by means of an amendment of the Plan duly adopted by the
Company and approved by the stockholders
3
<PAGE>
of the Company within one year before or after the date of the adoption
of any such amendment.
III. ADMINISTRATION OF THE PLAN
The Plan shall be administered by the Committee. A majority of the
Committee shall constitute a quorum at any meeting thereof (including
by telephone conference) and the acts of a majority of the members
present, or acts approved in writing by a majority of the entire
Committee without a meeting, shall be the acts of the Committee for
purposes of this Plan. The Committee may authorize one or more of its
members or an officer of the Company to execute and deliver documents
on behalf of the Committee. A member of the Committee shall not
exercise any discretion respecting himself or herself under the Plan.
The Board shall have the authority to remove, replace or fill any
vacancy of any member of the Committee upon notice to the Committee and
the affected member. Any member of the Committee may resign upon notice
to the Board. The Committee may allocate among one or more of its
members, or may delegate to one or more of its agents, such duties and
responsibilities as it determines.
Subject to the provisions of the Plan, the Committee is authorized to:
A. interpret the provisions of the Plan or of any Option or
Option Agreement and to make all rules and determinations
which it deems necessary or advisable for the administration
of the Plan;
B. determine which employees of the Company or of an Affiliate
shall be designated as Key Employees and which of the Key
Employees shall be granted Options;
C. determine the Key Non-Employees to whom Nonstatutory Options
shall be granted;
D. determine whether the Option to be granted shall be an
Incentive Option or Nonstatutory Option;
E. determine the number of Shares for which an Option or Options
shall be granted;
F. provide for the acceleration of the right to exercise an
Option (or portion thereof); and
G. specify the terms and conditions upon which Options may be
granted;
provided, however, that with respect to Incentive Options, all such
interpretations, rules, determinations, terms, and conditions shall be
made and prescribed in the context
4
<PAGE>
of preserving the tax status of the Incentive Options as incentive
stock options within the meaning of Section 422 of the Code.
All determinations of the Committee shall be reduced to writing and
signed by or on behalf of the Committee. No member of the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option.
IV. ELIGIBILITY FOR PARTICIPATION
The Committee may at any time and from time to time grant one or more
Options to one or more Key Employees or Key Non-Employees and may
designate the number of Shares to be subject to each Option so granted,
provided, however, that (i) each Participant receiving an Incentive
Option must be a Key Employee of the Company or of an Affiliate at the
time an Incentive Option is granted; (ii) no Incentive Options shall be
granted after the expiration of ten (10) years from the earlier of the,
date of the adoption of the Plan by the Company or the approval of the
Plan by the stockholders of the Company; and (iii) the fair market
value of the Shares (determined at the time the Option is granted) as
to which Incentive Options are exercisable for the first time by any
Key Employee during any single calendar year (under the Plan and under
any other incentive option plan of the Company or an Affiliate) shall
not exceed $100,000.
Notwithstanding any of the foregoing provisions, the Committee may
authorize the grant of an Option to a person not then in the employ of
or serving as a Non-Employee Board Member, consultant, or independent
contractor of the Company or of an Affiliate, conditioned upon such
person becoming eligible to become a Participant at or prior to the
execution of the Option Agreement evidencing the actual grant of such
Option.
V. TERMS AND CONDITIONS OF OPTIONS
Each Option shall be set forth in an Option Agreement, duly executed on
behalf of the Company and by the Participant to whom such Option is
granted. Except for the setting of the Option price under Paragraph A,
no Option shall be granted and no purported grant of any Option shall
be effective until such Option Agreement shall have been duly executed
on behalf of the Company and by the Participant. Each such Option
Agreement shall be subject to at least the following terms and
conditions:
A. OPTION PRICE
Except with respect to Formula Options as set forth in Article
VI, the exercise price of the Shares covered by each Option
granted under the Plan shall be determined by the Committee.
The Option price per share shall be such amount as may be
determined by the Committee in its sole discretion on the date
of the grant of the Option. In the case of an Incentive
Option, if the optionee owns directly or by reason of the
applicable attribution rules ten percent (10%) or less
5
<PAGE>
of the total combined voting power of all classes of share
capital of the Company, the Option price (per share) of the
Shares covered by each Incentive Option shall be not less than
the "fair market value" of the Shares on the date of the grant
of the Incentive Option. In all other cases of Incentive
Options, the Option price shall be not less than one hundred
ten percent (110%) of the said fair market value on the date
of grant. If the Shares are listed on any national securities
exchange, the fair market value shall be the closing sales
price, if any, on the largest such exchange on the date of the
grant of the Option, or, if none, on the most recent trade
date thirty (30) days or less prior to the date of the grant
of the Option. If the Shares are not then listed on any such
exchange, the fair market value of such Shares shall be the
closing sales price if such is reported or otherwise the mean
average of the closing "Bid" and the closing "Ask" prices, if
any, as reported on the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") for the date of
the grant of the Option, or if none, on the most recent trade
date thirty (30) days or less prior to the date of the grant
of the Option for which such quotations are reported. If the
Shares are not then either listed on any such exchange or
quoted on NASDAQ, the fair market value shall be the mean
between the average of the "Bid" and the average of the "Ask"
prices, if any, as reported in the National Daily Quotation
Service for the date of the grant of the Option, or, if none,
for the most recent trade date thirty (30) days or less prior
to the date of the grant of the Option for which such
quotations are reported. If the fair market value cannot be
determined under the preceding three sentences, it shall be
determined in good faith by the Committee.
B. NUMBER OF SHARES
Each Option shall state the number of Shares to which it
pertains.
C. TERM OF OPTION
Each Incentive Option shall terminate not more than ten (10)
years from the date of the grant thereof, or at such earlier
time as the Option Agreement may provide, and shall be subject
to earlier termination as herein provided, except that if the
Option price is required under Paragraph A of this Article V
to be at least one hundred ten percent (110%) of fair market
value, each such Incentive Option shall terminate not more
than five (5) years from the date of the grant thereof, and
shall be subject to earlier termination as herein provided.
D. DATE OF EXERCISE
Upon the authorization of the grant of an Option, or at any
time thereafter, the Committee may, subject to the provisions
of Paragraph C of this Article V, prescribe the date or dates
on which the Option becomes exercisable, and may
6
<PAGE>
provide that the Option rights become exercisable in
installments over a period of years, or upon the attainment of
stated goals.
E. MEDIUM OF PAYMENT
The Option price shall be paid on the date of purchase
specified in the notice of exercise, as set forth in Paragraph
I. It shall be paid in such form (permitted by Section 422 of
the Code in the case of Incentive Options) as the Committee
shall, either by rules promulgated pursuant to the provisions
of Article III of the Plan, or in the particular Option
Agreement, provide.
F. TERMINATION OF EMPLOYMENT
1. A Participant who ceases to be an employee or Key
Non-Employee of the Company or of an Affiliate for
any reason other than death, Disability, or
termination for cause, may exercise any Option
granted to such Participant, to the extent that the
right to purchase Shares thereunder has become
exercisable on the date of such termination, but only
within three (3) months after such date, or, if
earlier, within the originally prescribed term of the
Option, and subject to the condition that no Option
shall be exercisable after the expiration of the term
of the Option. A Participant's employment shall not
be deemed terminated by reason of a transfer to
another employer which is the Company or an
Affiliate.
2. A Participant who ceases to be an employee or Key
Non-Employee for cause shall, upon such termination,
cease to have any right to exercise any Option. For
purposes of this Plan, cause shall be deemed to
include (but shall not be limited to) wrongful
appropriation of funds of the Company or an
Affiliate, divulging confidential information about
the Company or an Affiliate to the public, the
commission of a gross misdemeanor or felony, or the
performance of any similar action that the Board or
the Committee, in their sole discretion, may deem to
be sufficiently injurious to the interests of the
Company or an Affiliate to constitute substantial
cause for termination. The determination of the Board
or the Committee as to the existence of cause shall
be conclusive and binding upon the Participant and
the Company.
3. A Participant who is absent from work with the
Company or an Affiliate because of temporary
disability (any disability other than a permanent and
total Disability as defined at Paragraph B(6) of
Article I hereof), or who is on leave of absence for
any purpose permitted by any authoritative
interpretation (i.e., regulation, ruling, case law,
etc.) of Section 422 of the Code, shall not, during
the period of any such absence, be deemed, by virtue
of such absence alone, to have terminated
7
<PAGE>
his employment or relationship with the Company or
with an Affiliate, except as the Committee may
otherwise expressly provide or determine.
4. Paragraph F(1) shall control and fix the rights of a
Participant who ceases to be an employee or Key
Non-Employee of the Company or of an Affiliate for
any reason other than death, Disability, or
termination for cause, and who subsequently becomes
Disabled or dies. Nothing in Paragraphs G and H of
this Article V shall be applicable in any such case
except that, in the event of such a subsequent
Disability or death within the three (3) month period
after the termination of employment or, if earlier,
within the originally prescribed term of the Option,
the Participant or the Participant's estate or
personal representative may exercise the Option
permitted by this Paragraph F, in the event of
Disability, within twelve (12) months after the date
that the Participant ceased to be an employee or Key
Non-Employee of the Company or of an Affiliate or, in
the event of death, within twelve (12) months after
the date of death of such Participant.
G. TOTAL AND PERMANENT DISABILITY
A Participant who ceases to be an employee or Key Non-Employee
of the Company or of an Affiliate by reason of Disability may
exercise any Option granted to such Participant (i) to the
extent that the right to purchase Shares thereunder has become
exercisable on or before the date such Participant becomes
Disabled as determined by the Committee, and (ii) if the
Option becomes exercisable periodically under Paragraph D, to
the extent of any additional rights that would have become
exercisable had the Participant not become so disabled until
after the close of business on the next periodic exercise
date.
A Disabled Participant shall exercise such rights, if at all,
only within a period of not more than twelve (12) months after
the date that the Participant became Disabled as determined by
the Committee (notwithstanding that the Participant might have
been able to exercise the Option as to some or all of the
Shares on a later date if the Participant had not become
Disabled) or, if earlier, within the originally prescribed
term of the Option.
H. DEATH
In the event that a Participant to whom an Option has been
granted ceases to be an employee or Key Non-Employee of the
Company or of an Affiliate by reason of such Participant's
death, such Option, to the extent that the right is
exercisable but not exercised on the date of death, may be
exercised by the Participant's estate or personal
representative within twelve (12) months after the date of
death of such Participant or, if earlier, within the
originally
8
<PAGE>
prescribed term of the Option, notwithstanding that the
decedent might have been able to exercise the Option as to
some or all of the Shares on a later date if the Participant
were alive and had continued to be an employee or Key
Non-Employee of the Company or of an Affiliate.
I. EXERCISE OF OPTION AND ISSUANCE OF STOCK
Options shall be exercised by giving written notice to the
Company. Such written notice shall: (1) be signed by the person
exercising the Option, (2) state the number of Shares with
respect to which the Option is being exercised, (3) contain the
warranty required by Paragraph M of this Article V, and (4)
specify a date (other than a Saturday, Sunday or legal holiday)
not less than five (5) nor more than ten (10) days after the
date of such written notice, as the date on which the Shares
will be purchased. Such tender and conveyance shall take place
at the principal office of the Company during ordinary business
hours, or at such other hour and place agreed upon by the
Company and the person or persons exercising the Option. On the
date specified in such written notice (which date may be
extended by the Company in order to comply with any law or
regulation which requires the Company to take any action with
respect to the Option Shares prior to the issuance thereof,
whether pursuant to the provisions of Article VII or
otherwise), the Company shall accept payment for the Option
Shares and shall deliver to the person or persons exercising
the Option in exchange therefor an appropriate certificate or
certificates for fully paid non-assessable Shares. In the event
of any failure to take up and pay for the number of Shares
specified in such written notice on the date set forth therein
(or on the extended date as above provided), the right to
exercise the Option shall terminate with respect to such number
of Shares, but shall continue with respect to the remaining
Shares covered by the Option and not yet acquired pursuant
thereto.
J. RIGHTS AS A STOCKHOLDER
No Participant to whom an Option has been granted shall have
rights as a stockholder with respect to any Shares covered by
such Option except as to such Shares as have been issued to or
registered in the Company's share register in the name of such
Participant upon the due exercise of the Option and tender of
the full Option price.
K. ASSIGNABILITY AND TRANSFERABILITY OF OPTION
Unless otherwise permitted by the Code and by Rule 16b-3 of
the Exchange Act, if applicable, and approved in advance by
the Committee, an Option granted to a Participant shall not be
transferable by the Participant and shall be exercisable,
during the Participant's lifetime, only by such Participant
or, in the event of the Participant's incapacity, his guardian
or legal representative. Except
9
<PAGE>
as otherwise permitted herein, such Option shall not be
assigned, pledged or hypothecated in any way (whether by
operation of law or otherwise) and shall not be subject to
execution, attachment, or similar process. Any attempted
transfer, assignment, pledge, hypothecation or other
disposition of any Option or of any rights granted thereunder
contrary to the provisions of this Paragraph K, or the levy of
any attachment or similar process upon an Option or such
rights, shall be null and void.
L. OTHER PROVISIONS
The Option Agreement for an Incentive Option shall contain
such limitations and restrictions upon the exercise of the
Option as shall be necessary in order that such Option can be
an "incentive stock option" within the meaning of Section 422
of the Code. Further, the Option Agreements authorized under
the Plan shall be subject to such other terms and conditions
including, without limitation, restrictions upon the exercise
of the Option, as the Committee shall deem advisable and
which, in the case of Incentive Options, are not inconsistent
with the requirements of Section 422 of the Code.
M. PURCHASE FOR INVESTMENT
Unless the Shares to be issued upon the particular exercise of
an Option shall have been effectively registered under the
Securities Act of 1933, as now in force or hereafter amended,
the Company shall be under no obligation to issue the Shares
covered by such exercise unless and until the following
conditions have been fulfilled. In accordance with the
direction of the Committee, the persons who exercise such
Option shall warrant to the Company that, at the time of such
exercise, such persons are acquiring their Option Shares for
investment and not with a view to, or for sale in connection
with, the distribution of any such Shares, and shall make such
other representations, warranties, acknowledgments and
affirmations, if any, as the Committee may require. In such
event, the persons acquiring such Shares shall be bound by the
provisions of the following legend (or similar legend) which
shall be endorsed upon the certificate(s) evidencing their
Option Shares issued pursuant to such exercise:
"The shares represented by this certificate have been
acquired for investment and they may not be sold or
otherwise transferred by any person, including a
pledgee, in the absence of an effective registration
statement for the shares under the Securities Act of
1933 or an opinion of counsel satisfactory to the
Company that an exemption from registration is then
available."
Without limiting the generality of the foregoing, the Company
may delay issuance of the Shares until completion of any
action or obtaining any consent
10
<PAGE>
that the Company deems necessary under any applicable law
(including without limitation state securities or "blue sky"
laws).
VI. FORMULA OPTIONS
A. BOARD OPTIONS
Each Non-Employee Board Member serving as of the Effective
Date of the Plan shall upon the Effective Date be granted
automatically a Formula Option to purchase 25,000 Shares at an
exercise price set forth in Section B herein. In addition,
each Non-Employee Board Member elected subsequent to the
Effective Date of the Plan shall be granted automatically a
Formula Option to purchase 25,000 Shares, as of the date of
his or her election, at an exercise price set forth in Section
B herein. On each year anniversary of the initial grant of a
Formula Option to a Non-Employee Board Member, the
Non-Employee Board Member shall be entitled to an automatic
renewal grant of 25,000 Formula Options, at an exercise price
set forth in Section B herein, provided such individual
remains an incumbent Non-Employee Board Member as of such
anniversary date. Each Formula Option granted pursuant to this
Paragraph VI.A. shall be fully exercisable on the date of
grant for a period of ten (10) years from the date of grant.
B. EXERCISE PRICE
The purchase price of the Shares subject to the Formula
Options granted as of the Effective Date of the Plan shall be
$2.00 per share. The purchase price of the Shares subject to
the Formula Options granted subsequent to the Effective Date
hereunder shall be equal to one hundred percent (100%) of the
fair market value as of the date of grant, with such fair
market value to be determined as set forth in Article V.
C. TERMS AND CONDITIONS
Formula Options shall be evidenced by an Option Agreement
which shall conform to the requirements of the Plan, and may
contain such other provisions not inconsistent therewith, as
the Committee shall deem advisable. The provisions of Article
V governing Nonstatutory Options, and the exercise and
issuance thereof, shall apply to Formula Options to the extent
such provisions are not inconsistent with this Article VI.
VII. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; SALE OF COMPANY SHARES
In the event that the outstanding Shares of the Company are changed
into or exchanged for a different number or kind of shares or other
securities of the Company or of
11
<PAGE>
another corporation by reason of any reorganization, merger,
consolidation, recapitalization, reclassification, change in par value,
stock split-up, combination of shares or dividend payable in capital
stock, or the like, appropriate adjustments to prevent dilution or
enlargement of the rights granted to, or available for, Participants
shall be made in the manner and kind of shares for the purchase of
which Options may be granted under the Plan, and, in addition,
appropriate adjustment shall be made in the number and kind of Shares
and in the Option price per share subject to outstanding Options. No
such adjustment shall be made which shall, within the meaning of
Section 424 of the Code, constitute such a modification, extension, or
renewal of an Option as to cause the adjustment to be considered as the
grant of a new Option.
Notwithstanding anything herein to the contrary, the Company may, in
its sole discretion, accelerate the timing of the exercise provisions
of any Option in the event of a tender offer for the Company's Shares,
the adoption of a plan of merger or consolidation under which all the
Shares of the Company would be eliminated, or a sale of all or
substantially all of the Company's assets. Alternatively, the Company
may, in its sole discretion, cancel any or all Options upon any of the
foregoing events and provide for the payment to Participants in cash of
an amount equal to the difference between the Option price and the
price of a Share, as determined in good faith by the Committee, at the
close of business on the date of such event, multiplied by the number
of Shares subject to Option so canceled.
Upon a business combination by the Company or any of its Affiliates
with any corporation or other entity through the adoption of a plan of
merger or consolidation or a share exchange or through the purchase of
all or substantially all of the capital stock or assets of such other
corporation or entity, the Board or the Committee may, in its sole
discretion, grant Options pursuant hereto to all or any persons who, on
the effective date of such transaction, hold outstanding options to
purchase securities of such other corporation or entity and who, on and
after the effective date of such transaction, will become employees or
directors of, or consultants to, the Company or its Affiliates. The
number of Shares subject to such substitute Options shall be determined
in accordance with the terms of the transaction by which the business
combination is effected. Notwithstanding the other provisions of this
Plan, the other terms of such substitute Options shall be substantially
the same as or economically equivalent to the terms of the options for
which such Options are substituted, all as determined by the Board or
by the Committee, as the case may be. Upon the grant of substitute
Options pursuant hereto, the options to purchase securities of such
other corporation or entity for which such Options are substituted
shall be canceled immediately.
VIII. DISSOLUTION OR LIQUIDATION OF THE COMPANY
Upon the dissolution or liquidation of the Company other than in
connection with a transaction to which the preceding Article VII is
applicable, all Options granted hereunder shall terminate and become
null and void; provided, however, that if the
12
<PAGE>
rights of a Participant under the applicable Options have not otherwise
terminated and expired, the Participant shall have the right
immediately prior to such dissolution or liquidation to exercise any
Option granted hereunder to the extent that the right to purchase
shares thereunder has become exercisable as of the date immediately
prior to such dissolution or liquidation.
IX. TERMINATION OF THE PLAN
The Plan shall terminate ten (10) years from the earlier of the date of
its adoption or the date of its approval by the stockholders. The Plan
may be terminated at an earlier date by vote of the stockholders or the
Board; provided, however, that any such earlier termination shall not
affect any Options granted or Option Agreements executed prior to the
effective date of such termination. Except as may otherwise be provided
for under Articles VII and VIII, and notwithstanding the termination of
the Plan, any Options granted prior to the effective date of the Plan's
termination may be exercised until the earlier of (i) the date set
forth in the Option Agreement, or (ii) ten (10) years from the date the
Option is granted, and the provisions of the Plan with respect to the
full and final authority of the Committee under the Plan shall continue
to control.
X. AMENDMENT OF THE PLAN
The Plan may be amended by the Board and such amendment shall become
effective upon adoption by the Board; provided, however, that any
amendment shall be subject to the approval of the stockholders of the
Company at or before the next annual meeting of the stockholders of the
Company if such stockholder approval is required by the Code, any
federal or state law or regulation, the rules of any stock exchange or
automated quotation system on which the Shares may be listed or quoted,
or if the Board, in its discretion, determines to submit such changes
to the Plan to its stockholders for approval.
XI. EMPLOYMENT RELATIONSHIP
Nothing herein contained shall be deemed to prevent the Company or an
Affiliate from terminating the employment of a Participant, nor to
prevent a Participant from terminating the Participant's employment
with the Company or an Affiliate.
XII. INDEMNIFICATION OF COMMITTEE
In addition to such other rights of indemnification as they may have as
directors or as members of the Committee, the members of the Committee
shall be indemnified by the Company against all reasonable expenses,
including attorneys' fees, actually and reasonably incurred in
connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be
a party by reason of any action taken by them as members of the
Committee and against all amounts paid by them in settlement thereof
(provided such settlement is approved by
13
<PAGE>
independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding,
except in relation to matters as to which it shall be adjudged in such
action, suit or proceeding that the Committee member is liable for
gross negligence or willful misconduct in the performance of his or her
duties. To receive such indemnification, a Committee member must first
offer in writing to the Company the opportunity, at its own expense, to
defend any such action, suit or proceeding.
XIII. SAVINGS CLAUSE
This Plan is intended to comply in all respects with applicable law and
regulations, including, (i) with respect to those Participants who are
officers or directors for purposes of Section 16 of the Exchange Act,
Rule 16b-3 of the Securities and Exchange Commission, if applicable,
and (ii) with respect to executive officers, Code Section 162(m). In
case any one or more provisions of this Plan shall be held invalid,
illegal, or unenforceable in any respect under applicable law and
regulation (including Rule 16b-3 and Code Section 162(m)), the
validity, legality, and enforceability of the remaining provisions
shall not in any way be affected or impaired thereby and the invalid,
illegal, or unenforceable provision shall be deemed null and void;
however, to the extent permitted by law, any provision that could be
deemed null and void shall first be construed, interpreted, or revised
retroactively to permit this Plan to be construed in compliance with
all applicable law (including Rule 16b-3 and Code Section 162(m)) so as
to foster the intent of this Plan. Notwithstanding anything herein to
the contrary, with respect to Participants who are officers and
directors for purposes of Section 16 of the Exchange Act, no grant of
an Option to purchase Shares shall permit unrestricted ownership of
Shares by the Participant for at least six (6) months from the date of
the grant of such Option, unless the Board determines that the grant of
such Option to purchase Shares otherwise satisfies the then current
Rule 16b-3 requirements,
XIV. WITHHOLDING
Except as otherwise provided by the Committee,
A. The Company shall have the power and right to deduct or
withhold, or require a Participant to remit to the Company,
an amount sufficient to satisfy federal, state, and local
taxes required by law to be withhold with respect to any
grant, exercise, or payment made under or as a result of this
Plan; and
B. In the case of any taxable event hereunder, a Participant may
elect, subject to the approval In advance by the Committee,
to satisfy the withholding requirement, if any, in whole or
in part, by having the Company withhold Shares of Common
Stock that would otherwise be transferred to the Participant
having a Fair Market Value, on the date the tax is to be
determined, equal to the minimum marginal tax that could be
imposed on the transaction. All elections shall be made in
writing and signed by the Participant.
14
<PAGE>
XV. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board on the
effective date determined by the Board (the "Effective Date"), provided
that within one (1) year before or after such adoption by the Board the
Plan is approved by the stockholders of the Company.
XVI. GOVERNING LAW
This Plan shall be governed by the laws of the State of Delaware and
construed in accordance therewith.
EXHIBIT 10.2
EMPLOYMENT AGREEMENT
Agreement, dated as of 17th day of November ,1999, by and between
EDIETS.COM, INC., a Delaware corporation having its principal place of business
at 3467 W. Hillsboro Boulevard, Deerfield Beach, Florida 33442 (the
"Corporation") and DAVID R. HUMBLE, residing at 2896 Emerald Way North,
Deerfield Beach, Florida 33441 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ Executive as an executive
officer, and Executive is willing to accept such employment, all subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions
hereof, the Corporation hereby employs Executive, and Executive hereby accepts
employment by the Corporation, for a period of three (3) years commencing on
November 17,1999, (the "Commencement Date") and ending on the third anniversary
of the Commencement Date, unless terminated sooner pursuant to the provisions
hereof. Thereafter, the Agreement shall be automatically renewed for successive
one (1) year terms (a "Renewal Term") unless terminated by the Corporation or
the Executive upon ninety (90) days' written notice prior to the beginning of a
Renewal Term.
2. DUTIES. Executive shall serve the Corporation as its
Chairman of the Board and Chief Executive Officer. Executive shall perform such
executive, administrative, management, marketing and other services and duties
as are incidental to the offices he holds and as may, from time to time, be
assigned to him by the Board of Directors of the Corporation or a committee
thereof. Executive shall devote substantially all of his time to the performance
of his duties hereunder. Executive further agrees to serve as an officer or
director of any parent, subsidiary or affiliate of the Corporation upon the
Corporation's request, with no additional compensation beyond that set forth in
Paragraph 3 below.
3. COMPENSATION.
(a) As base compensation for the services to be rendered by
Executive hereunder, the Corporation agrees to pay to Executive an annual base
salary in the amount of One Hundred Fifty Thousand Dollars ($150,000), such
salary to be paid in equal biweekly installments for so long as Executive is
employed by the Corporation.
(b) The Executive shall receive an annual bonus for each
calendar year (i) in a minimum amount equal to a percentage of the Corporation's
net income before taxes for that year, with the percentage to be determined by
the Corporation's Compensation Committee;
<PAGE>
plus (ii) any additional amount, if any, to be determined by Corporation's
Compensation Committee in recognition of the Executive's contribution to the
Corporation.
(c) During the term of this Employment Agreement, the
Corporation shall not pay any of its other employees or officers a greater
annual compensation than the compensation to be paid Executive pursuant to the
preceding subparagraphs 3(a) and (b).
(d) Executive shall be entitled, on a basis consistent with
the Corporation's policy, to reimbursement for all normal and reasonable travel,
entertainment and other expenses necessarily incurred by him in the performance
of his obligations hereunder. The Corporation shall reimburse Executive for such
expenses upon presentation to the Corporation, within a reasonable time after
such expenses are incurred, of an itemized account of such expenses, together
with such vouchers or receipts for individual expense items as the Corporation
may from time to time require under its established policies and procedures.
(e) Executive shall be entitled to participate in, or benefit
from, in accordance with the eligibility and other provisions thereof, such
medical insurance, pension, retirement, or other fringe benefit plans or
policies as the Corporation may make available to, or have in effect for, its
executive personnel from time to time. Plans and benefits currently in effect
and in which Executive shall be participate during the term of this Agreement
are set forth in Schedule A attached hereto. Plans and benefits may be modified
or eliminated by the Corporation from time to time as it determines in its sole
discretion. Executive shall also be entitled to four (4) weeks of vacation and
other similar benefits in accordance with the policies of the Corporation from
time to time in effect for executive personnel.
(f) Except as hereinafter provided, the Corporation shall pay
Executive, for any period during the term of this Agreement during which he is
unable fully to perform his duties because of physical or mental disability or
incapacity, an amount equal to the compensation due him for such period in
accordance with this Agreement, less the aggregate amount of all income
disability benefits which for such period he may receive under or by reason of
(i) any applicable compulsory state disability law, (ii) the Federal Social
Security Act, (iii) any applicable workmen's compensation law or similar law,
and (iv) any plan towards which the Corporation or any parent, subsidiary or
affiliate of the Corporation has contributed or for which it has made payroll
deductions, such as group accident, disability or health policies.
4. TERMINATION ON DISABILITY OR DEATH.
(a) In the event that Executive, due to physical or mental
disability or incapacity, is unable to substantially perform his duties
hereunder for a period of three (3) successive months, the Corporation or
Executive shall then have the right to terminate this Agreement and Executive's
employment hereunder upon thirty (30)days' prior written notice, provided,
however, that in the event that Executive shall recommence rendering services
and performing all of his duties hereunder within such thirty (30) day notice
period, such notice shall be vitiated, and the Corporation and the Executive
shall no longer have the right to
2
<PAGE>
terminate based on the disability event described in the notice. Executive's
employment shall terminate immediately upon his death.
(b) Upon termination of Executive's employment by reason of
his death or disability as aforesaid, Executive, or in the case of Executive's
death, Executive's personal representatives, shall be entitled to receive all
base compensation earned or accrued to the date of such termination and not
already paid, less any benefits paid to Executive by reason of such disability.
(c) In the event of the termination of this Agreement for any
reason other than death, Executive shall have the right to purchase, and the
Corporation shall assign to Executive, any insurance policy maintained by the
Company on the life of Executive then in effect, for a price equal to the net
cash surrender value thereof at the time of such termination.
5. TERMINATION FOR CERTAIN CAUSES AND OTHER REASONS. In the
event of the (a) willful material misconduct of Executive in the performance of
his duties hereunder, (b) material breach of any provisions of Paragraphs 7, 8
or 9, or (c) conviction of the Executive for any felony under federal or state
law, this Agreement and Executive's employment hereunder may be terminated by
the Corporation without prior notice.
6. CHANGE OF CONTROL. In order to protect the Executive
against the possible consequences and uncertainties of a Change of Control of
the Corporation (as hereinafter defined) and thereby induce the Executive to
enter into the employ of the Corporation, the Corporation agrees that:
(a) If, during the initial three (3) year term of this
Agreement, the Executive's employment is terminated by the Corporation at any
time subsequent to a Change of Control other than for the causes set forth in
Paragraph 5, then in such event, the Corporation shall pay the Executive within
thirty (30) days after such termination, a lump sum payment in cash in an amount
equal to the balance of his base salary for the remaining term of the Agreement.
(b) For purposes of this Paragraph 6, in the event, following
a Change of Control, the Executive shall resign from his employment with the
Corporation within thirty (30) calendar days after he has obtained actual
knowledge of any significant change or proposed change in his title, nature of
duties, employee benefits or working conditions, in each instance without his
prior consent, such resignation shall be deemed to be a termination of
employment by the Corporation other than for the causes set forth in Paragraph
5.
(c) As used in this Paragraph 6, a "Change of Control" shall
be deemed to have occurred if (i) any "person" or "group of persons" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act")), becomes the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of
securities of the Corporation representing more than thirty-five percent (35%)
of the Corporation's then outstanding securities having the right to vote on the
election of directors or (ii) if directors constituting a majority of the Board
of Directors are
3
<PAGE>
elected to the Board of Directors without the recommendation or approval of the
incumbent Board of Directors.
7. DISCLOSURE AND ASSIGNMENT OF DISCOVERIES.
(a) Executive hereby covenants and agrees to disclose promptly
and fully, in writing, whenever possible, to the Corporation and its attorneys
and designated representatives, without additional compensation, all ideas,
formulae, programs, systems, devices, inventions, processes, business concepts,
discoveries, improvements, developments, works of authorship, product marks and
designations, technical information and know-how, whether or not patentable,
copyrightable or otherwise protectable relating to personalized diet and
nutrition programs (together, the "Developments"), which he may conceive,
develop, reduce to practice, acquire or make, alone or jointly with others:
(i) during the term of his employment with the
Corporation, whether during or outside of the usual hours of work;
(ii) within a period of two (2) years after
termination of his employment with the Corporation; and
(iii) within a period of three (3) years after
termination of his employment with the Corporation, if such Developments arise
out of any work done or concepts developed by Executive, alone or with others,
during his employment by the Corporation.
Executive hereby agrees that all of his right, title and interest in and to such
Developments shall be deemed as held by him in a fiduciary capacity solely for
the benefit of the Corporation, shall be the sole and exclusive property of the
Corporation and shall be subject to the confidentiality provisions of Section 8
as confidential information of the Corporation.
(b) Executive, when required to do so, either during or after
the term of his employment with the Corporation, shall:
(i) assign and convey to the Corporation his entire
right, title and interest in and to the Developments to the extent not owned by
the Corporation as a matter of law from the time of their creation and execute,
acknowledge and deliver all such further instruments and documents, in form and
substance satisfactory to the Corporation, as it shall deem reasonably necessary
or advisable to evidence the vesting in the Corporation of all right, title and
interest of Executive in and to the Developments;
(ii) assist the Corporation and its agents in
preparing patent applications, domestic and foreign, covering the Developments;
(iii) sign and deliver all such applications and
assignments of the same to the Corporation; and
4
<PAGE>
(iv) generally give all information and testimony,
sign all papers and do all things which may be needed or requested by the
Corporation to the end that the Corporation may obtain, extend, reissue,
maintain and enforce United States and foreign patents covering the
Developments.
(c) Executive hereby irrevocably nominates and appoints the
Corporation his attorney-in-fact to sign and deliver all such papers, and
perform all such acts mentioned in subparagraph 7(b), in the event of
Executive's absence, unavailability, or death, such nomination and appointment
hereby being granted with full authority in the premises, and such authority to
be deemed coupled with an interest vested in the Corporation.
(d) The Corporation agrees to bear all expenses which it
causes to be incurred in obtaining, extending, issuing, maintaining and
enforcing such patents and in investing and perfecting title thereto in the
Corporation, and agrees further to pay Executive for any time which it may
require of him therefor, and for any services that may be required of him
pursuant to subparagraph 7(b), subsequent to the termination of his employment
with the Corporation, such payment to be at an hourly rate equivalent to that at
which Executive is paid at the time of the termination of his employment by the
Corporation.
(e) In the event of the unenforceability of all or part of the
foregoing provisions of this Paragraph 7, as determined by a court of competent
jurisdiction, Executive hereby transfers and assigns to the Corporation such
lesser interests in the Developments, including, without limitations, any and
all United States and foreign patent rights therein and renewals thereof, as may
be determined by such a court to be a reasonable grant of interests under the
circumstances, but, in any event, and without limitation, Executive shall be
deemed to have granted to the Corporation not less than an irrevocable,
non-exclusive license, with the right to sublicense others, to manufacture, use,
lease and sell the Developments which have not been assigned to the Corporation
under the provisions of subparagraph 7(b), without payment of any royalty.
8. CONFIDENTIALITY.
(a) Executive understands and hereby acknowledges that as a
result of his employment with the Corporation, he will necessarily become
informed of, and have access to, certain valuable and confidential information
of the Corporation and any of its subsidiaries, joint ventures and affiliates,
including, without limitation, inventions, trade secrets, technical information,
know-how, plans, specifications, identity of customers and suppliers, and that
such information, even though it may be developed or otherwise acquired by
Executive, is the exclusive property of the Corporation to be held by Executive
in trust and solely for the Corporation's benefit. Accordingly, Executive hereby
agrees that he shall not, at any time, either during or subsequent to his
employment hereunder, use, reveal, report, publish, transfer or otherwise
disclose to any person, corporation or other entity, any of the Corporation's
confidential information without the prior written consent of the Corporation,
except to responsible officers and employees of the Corporation and other
responsible persons who are in a contractual or fiduciary relationship with the
Corporation or who have a need for such information for purposes in the interest
of the Corporation, and except for such information
5
<PAGE>
which legally and legitimately is or becomes of general public knowledge from
authorized sources other than Executive.
(b) Upon the termination of his employment with the
Corporation for any reason whatsoever, Executive shall promptly deliver to the
Corporation all drawings, manuals, letters, notes, notebooks, reports and copies
thereof, and all other materials, including, without limitation, those of a
secret and confidential nature, relating to the Corporation's business which are
in Executive's possession or control.
9. NON-COMPETITION. Executive agrees that, during the term of
this Agreement and for a period of two (2) years after the termination for any
cause of his employment with the Corporation, he shall not, anywhere in the
United States of America or elsewhere in the world (or in such smaller area or
for such lesser period as may be determined by a court of competent jurisdiction
to be a reasonable limitation on the competitive activity of Executive),
directly or indirectly:
(i) engage in a directly competitive line of business
to the business carried on by the Corporation, either for his own account or
with or for anyone else;
(ii) solicit or attempt to solicit business of any
customers of the Corporation for products or services the same or similar to
those offered, sold, produced or under development by the Corporation;
(iii) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(iv) solicit or attempt to solicit for any business
endeavor any employee of the Corporation;
(v) interfere with any business relationship between
the Corporation and any other person; or
(vi) render any services as an officer, director,
employee, partner, consultant or otherwise to, or have any interest as a
stockholder, partner, lender or otherwise in, any person which is so engaged.
Notwithstanding anything to the contrary contained in this Paragraph 9, the
provisions hereof shall not prevent the Executive from purchasing or owning up
to five percent (5%) of the voting securities of any corporation, the stock of
which is publicly traded.
10. REMEDIES. Because the Corporation does not have an
adequate remedy at law to protect its business from Executive's competition or
to protect its interests in its trade secrets, privileged, proprietary or
confidential information and similar commercial assets, the Corporation shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach of the provisions of Paragraphs 7, 8 and 9,
be available to the Corporation. In the event of such a breach, in addition to
any other remedies, the
6
<PAGE>
Corporation shall be entitled to receive from Executive payment of, or
reimbursement for, its reasonable attorneys fees and disbursements incurred in
successfully enforcing any such provision.
11. SURVIVAL. The provisions of Paragraphs 7, 8 and 9 shall
survive termination of this Agreement for any reason.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject matter
hereof. This Agreement may not be changed or terminated orally, and no change,
termination or attempted waiver of any of the provisions hereof shall be binding
unless in writing and signed by the party against whom the same is sought to be
enforced; PROVIDED, HOWEVER, that Executive's compensation may be increased at
any time by the Corporation without in any way affecting any of the other terms
and conditions of this Agreement, which in all other respects shall remain in
full force and effect. Failure of a party to enforce one or more of the
provisions of this Agreement or to require at any time performance of any of the
obligations hereof shall not be construed to be a waiver of such provisions by
such party nor to in any way affect the validity of this Agreement of such
party's right thereafter to enforce any provision of this Agreement, nor to
preclude such party from taking any other action at any time which it would
legally be entitled to take.
13. SUCCESSORS AND ASSIGNS. Neither party shall have the right
to assign this personal Agreement, or any rights or obligations hereunder,
without the consent of the other party; PROVIDED, HOWEVER, that upon the sale of
all or substantially all of the assets, business and goodwill of the Corporation
to another corporation, or upon the merger or consolidation of the Corporation
with another corporation, this Agreement shall inure to the benefit of, and be
binding upon, both Executive and the corporation purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other
corporation were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
14. ADDITIONAL ACTS. Executive and the Corporation each agrees
that he or it shall, as often as requested to do so, execute, acknowledge and
deliver and file, or cause to be executed, acknowledged and delivered and filed,
any and all further instruments, agreements or documents as may be necessary or
expedient in order to consummate the transactions provided for in this Agreement
and do any and all further acts and things as may be necessary or expedient in
order to carry out the purpose and intent of this Agreement.
15. COMMUNICATIONS. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time when mailed in any United States post office
enclosed in a registered or certified postage prepaid envelope and addressed to
the addresses set forth at the beginning of this Agreement, or to such other
address as any party may specify by notice to the other party; PROVIDED,
HOWEVER, that any notice of change of address shall be effective only upon
receipt.
7
<PAGE>
16. CONSTRUCTION. The headings of the Paragraphs of this
Agreement have been inserted for convenience of reference only and shall in no
way restrict or otherwise affect the construction of the terms or provisions
hereof. References in this Agreement to Sections are to the sections of this
Agreement.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
18. SEVERABILITY. If any provision of this Agreement is held
to be invalid or unenforceable by a court or tribunal of competent jurisdiction,
such invalidity or unenforceability shall not affect the validity and
enforceability of the other provisions of this Agreement and the provision held
to be invalid or unenforceable shall be carried out as nearly as possible
according to its original terms and intent to eliminate such invalidity or
unenforceability.
19. GOVERNING LAW. This Agreement is made and executed and
shall be governed by the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
CORPORATION:
EDIETS.COM, INC.
By: /S/ CHRISTINE M. BROWN
---------------------------------------
Christine M. Brown, Secretary
EXECUTIVE:
/S/ DAVID R. HUMBLE
------------------------------------------
David R. Humble
8
<PAGE>
SCHEDULE "A"
(1) Medical Insurance
(2) Long Term Care - $2,500 Annually
EXHIBIT 10.4
AGREEMENT
AND
PLAN OF MERGER
AND
REORGANIZATION
DATED AS OF AUGUST 30, 1999
AMONG
OLAS, INC.,
EDIETS ACQUISITION CORP.
EDIETS.COM, INC.
AND
DAVID R. HUMBLE
<PAGE>
TABLE OF CONTENTS
Page
1. The Merger ......................................................... 1
1.1. The Merger .................................................. 1
1.2. Effective Date .............................................. 1
1.3. Effect of the Merger ........................................ 2
1.4. Certificate of Incorporation; By-Laws ....................... 2
1.5. Directors and Officers of Surviving
Corporation ................................................. 2
1.6. Conversion of Securities .................................... 3
2. Representations and Warranties as to eDiets ........................ 3
2.1. Organization, Standing and Power ............................ 4
2.2. Capitalization .............................................. 4
2.3. Ownership of eDiets Common Stock ............................ 5
2.4. Interests in Other Entities ................................. 5
2.5. Authority ................................................... 5
2.6. Noncontravention ............................................ 6
2.7. Financial Statements ........................................ 6
2.8. Absence of Undisclosed Liabilities .......................... 7
2.9. Guaranties .................................................. 7
2.10. Accounts and Notes Receivable .............................. 7
2.11. Absence of Changes ......................................... 8
2.12. Litigation ................................................. 8
2.13. No Violation of Law ........................................ 8
2.14. Title to Assets and Properties ............................. 9
2.15. Intangibles/Inventions ..................................... 9
2.16. Systems and Software ....................................... 10
2.17. Tax Matters ................................................ 10
2.18. Insurance .................................................. 11
2.19. Banks; Powers of Attorney .................................. 11
2.20. Employee Arrangements ...................................... 12
2.21. ERISA ...................................................... 12
2.22. Environmental Matters ...................................... 12
2.23. Certain Business Matters ................................... 13
2.24. Certain Contracts .......................................... 13
2.25. Suppliers .................................................. 14
2.26. Approvals/Consents ......................................... 14
2.27. Information as to eDiets ................................... 14
2.28. Securities Act Representation .............................. 15
3. Representations and Warranties as to Olas and
Subsidiary ....................................................... 15
3.1. Organization, Standing and Power ............................ 15
3.2. Capitalization .............................................. 15
3.3. Interests in Other Entities ................................. 16
3.4. Authority ................................................... 16
3.5. Noncontravention ............................................ 17
3.6. Financial Statements ........................................ 17
3.7. Absence of Undisclosed Liabilities .......................... 18
3.8. Guaranties .................................................. 18
-i-
<PAGE>
3.9. Accounts and Notes Receivable ............................... 18
3.10. Absence of Changes ......................................... 19
3.11. Litigation ................................................. 19
3.12. No Violation of Law ........................................ 19
3.13. Title to Assets and Properties ............................. 19
3.14. Intangibles/Inventions ..................................... 20
3.15. Systems and Software ....................................... 21
3.16. Tax Matters ................................................ 21
3.17. Insurance .................................................. 22
3.18. Banks; Powers of Attorney .................................. 22
3.19. Employee Arrangements ...................................... 22
3.20. ERISA ...................................................... 23
3.21. Environmental Matters ...................................... 23
3.22. Certain Business Matters ................................... 23
3.23. Certain Contracts .......................................... 24
3.24. Suppliers .................................................. 25
3.25. Approvals/Consents ......................................... 25
3.26. Information as to Olas and Subsidiary ...................... 25
3.27. Stock Issuable in Merger ................................... 25
4. Indemnification .................................................... 26
4.1. Indemnification by the Shareholder .......................... 26
4.2. Indemnification by Olas and Subsidiary ...................... 26
4.3. Third Party Claims .......................................... 26
4.4. Assistance .................................................. 27
5. Covenants .......................................................... 27
5.1. Investigation ............................................... 27
5.2. Noncompete Covenant ......................................... 28
5.3. Consummation of Transaction ................................. 29
5.4. Cooperation/Further Assurances .............................. 30
5.5. Accuracy of Representations ................................. 30
5.6. Notification of Certain Matters ............................. 30
5.7. Broker ...................................................... 30
5.8. No Solicitation of Transactions ............................. 31
5.9. Prohibited Conduct of eDiets and Shareholder ................ 31
5.10. Prohibited Conduct of Olas ................................. 34
5.11. Tax Covenant ............................................... 36
5.12. Payment of Taxes Upon Merger ............................... 36
5.13. Olas Reverse Stock Split ................................... 36
5.14. Conversion of Class B Stock ................................ 36
5.15. Directors of Olas .......................................... 37
5.16. Commission Filings ......................................... 37
5.17. Directors and Officers Insurance Policy .................... 37
5.18. Compensation Committee of Olas Board of
Directors ................................................... 37
5.19. Name Change ................................................ 37
6. Conditions of Merger ............................................... 37
6.1. Conditions to Obligations of Olas and
Subsidiary to Effect the Merger ............................. 37
(a) Accuracy of Representations and
Warranties ............................................. 38
(b) Performance of Agreements ............................... 38
-ii-
<PAGE>
(c) Results of Investigation ................................ 38
(d) Board Authorizations .................................... 38
(e) Private Placement ....................................... 38
(f) Opinion of Counsel for eDiets ........................... 38
(g) Litigation .............................................. 38
(h) Consents and Approvals .................................. 39
(i) Date of Consummation .................................... 39
(j) Validity of Transactions ................................ 39
(k) No Material Adverse Change .............................. 39
(l) Tax Free Nature ......................................... 39
(m) Humble Employment Agreement ............................. 39
(n) Closing Certificate ..................................... 39
6.2. Conditions to Obligations of eDiets and the
Shareholder to Effect the Merger ............................ 39
(a) Accuracy of Representations and
Warranties ............................................. 40
(b) Opinion of Counsel for Olas and
Subsidiary ............................................. 40
(c) Litigation .............................................. 40
(d) Performance of Agreements ............................... 40
(e) Board Authorizations .................................... 40
(f) Results of Investigation ................................ 40
(g) Consents and Approvals .................................. 40
(h) Date of Consummation .................................... 41
(i) Validity of Transactions ................................ 41
(j) Conversion of Class B Stock ............................. 41
(k) Amendment to Certificate of Incorporation
and By-Laws ............................................ 41
(l) Stock Issuance to Whale ................................. 41
(m) Stock Options ........................................... 41
(n) Private Placement ....................................... 42
(o) Tax Free Nature ......................................... 42
(p) Humble Employment Agreement ............................. 42
(q) Kier Employment Agreement ............................... 42
(r) Closing Certificate ..................................... 42
7. The Closing ........................................................ 42
7.1. Deliveries by Olas and Subsidiary at the
Closing ..................................................... 42
7.2. Deliveries by eDiets and/or the Shareholder
at the Closing .............................................. 43
7.3. Other Deliveries ............................................ 43
8. Termination, Amendment and Waiver .................................. 43
8.1. Termination ................................................. 44
8.2. Effect of Termination ....................................... 44
8.3. Fees and Expenses ........................................... 45
8.4. Waiver ...................................................... 45
9. Survival of Representations and Warranties ......................... 45
10. General Provisions ................................................ 45
10.1. Notices .................................................... 45
10.2. Severability ............................................... 46
-iii-
<PAGE>
10.3. Entire Agreement ........................................... 46
10.4. Amendment .................................................. 46
10.5. Schedules .................................................. 46
10.6. No Assignment .............................................. 47
10.7. Governing Law .............................................. 47
10.8. Headings ................................................... 47
10.9. Counterparts ............................................... 47
-iv-
<PAGE>
EXHIBITS
Exhibit A - Delaware Certificate of Merger
Exhibit B - Certificate of Incorporation of eDiets.com
Exhibit C - Subsidiary By-Laws
Exhibit D - Olas Amended and Restated Certificate of
Incorporation and By-Laws
Exhibit E - Whale Letter of Intent
Exhibit F - Opinion of Counsel for eDiets
Exhibit G - Humble Employment Agreement
Exhibit H - Opinion for counsel to Olas
<PAGE>
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION dated as of August 30,
1999 (the "Agreement"), among OLAS, INC., a Delaware corporation ("Olas"),
EDIETS ACQUISITION CORP., a Delaware corporation and a wholly-owned subsidiary
of Olas ("Subsidiary"), EDIETS.COM, INC., a Delaware corporation ("eDiets") and
DAVID R. HUMBLE ("David" or "Shareholder").
W I T N E S S E T H :
WHEREAS, eDiets is in the business of (i) providing personalized diet
programs, (ii) selling health and fitness related equipment, accessories and
dietary supplements and (iii) publishing an electronic health and fitness
newsletter via the internet (the "eDiets Business"); and
WHEREAS, Olas desires to combine eDiets' Business with its existing
business (the "Olas Business"); and
WHEREAS, the Board of Directors of Olas, the Board of Directors of
Subsidiary, Olas as the sole shareholder of Subsidiary, the Board of Directors
of eDiets and David as the sole shareholder of eDiets have: (a) determined that
it is in the best interests of their respective companies for the Subsidiary to
be merged with and into eDiets upon the terms and subject to the conditions set
forth herein; and (b) approved the merger of the Subsidiary with and into eDiets
(the "Merger") in accordance with the Delaware General Corporation Law
("Delaware Law") and upon the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties hereto do hereby agree as follows:
1. THE MERGER.
1.1. THE MERGER. At the Effective Date (as defined in section 1.2), and subject
to and upon the terms and conditions of this Agreement and Delaware Law, the
Subsidiary shall be merged with and into eDiets, the separate corporate
existence of the Subsidiary shall cease, and eDiets shall continue as the
surviving corporation, operating as a wholly-owned subsidiary of Olas. eDiets,
as the surviving corporation after the Merger, is hereinafter sometimes referred
to as the "Surviving Corporation."
1.2. EFFECTIVE DATE. As promptly as practicable after the satisfaction or waiver
of the conditions set forth in
<PAGE>
Paragraph 6, unless this Agreement shall have been terminated and the
transactions contemplated herein shall have been abandoned pursuant to section
8.1, Subsidiary and eDiets shall cause the Merger to be consummated by executing
and filing a Certificate of Merger (the "Certificate of Merger") with the
Secretary of State of the State of Delaware in the form of EXHIBIT A and making
such other filings as may be required by Delaware Law, in such form as required
by and executed in accordance with such laws (the time of the last of such
filings to be made being the "Effective Date").
1.3. EFFECT OF THE MERGER. At the Effective Date, the effect of
the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Date, all the rights, privileges, powers, franchises and all property
(real, personal and mixed) of the Subsidiary and all debts due the Subsidiary
shall vest in eDiets, and all debts, liabilities, obligations and duties of the
Subsidiary shall become the debts, liabilities, obligations and duties of
eDiets.
1.4. CERTIFICATE OF INCORPORATION; BY-LAWS.
(a) The Certificate of Incorporation of eDiets, as in
effect immediately prior to the Effective Date (annexed hereto as EXHIBIT B),
shall be the Certificate of Incorporation of the Surviving Corporation until
thereafter amended as provided by law or such Certificate of Incorporation.
(b) The By-Laws of Subsidiary, as in effect immediately
prior to the Effective Date (annexed hereto as EXHIBIT C), shall be the By-Laws
of the Surviving Corporation until thereafter amended as provided by law or by
the Certificate of Incorporation of the Surviving Corporation or the By-Laws of
the Surviving Corporation.
1.5. DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) Each of David R. Humble, the sole director of eDiets,
and Isaac Kier and Matthew Gohd, the directors of the Subsidiary, shall, at the
Effective Date, be the duly appointed directors of the Surviving Corporation, to
hold office in accordance with applicable law, the Certificate of Incorporation
and By-Laws of the Surviving Corporation until resignation, removal or
replacement. After execution of this Agreement, two other directors of Olas
shall be appointed by David (subject to the approval of either Matthew Gohd or
Isaac Kier). Until such additional directors have been appointed, David shall
have the right to veto any action taken by a majority of the members of the
Board.
-2-
<PAGE>
(b) Each of David R. Humble and Christine M. Brown, shall,
at the Effective Date, be duly nominated and appointed as Chief Executive
Officer, Chairman of the Board and Secretary and Treasurer, respectively, of the
Surviving Corporation, and shall constitute the initial officers of the
Surviving Corporation, in each case to serve at the pleasure of the Board of
Directors of eDiets until their respective resignation, removal or replacement.
1.6. CONVERSION OF SECURITIES. At the Effective Date, by virtue of the Merger
and without any action on the part of Olas, Subsidiary, eDiets or the
Shareholder:
(a) The outstanding shares and the shares underlying
outstanding options of eDiets Common Stock (as defined in section 2.2 hereof)
shall be converted into the right to receive an aggregate of 8,800,000 shares of
common stock, $.01 par value per share, of Olas ("Olas Common Stock") (hereafter
referred to as the "Share Consideration" or the "Merger Consideration"), to be
distributed to the Shareholder and the holders of current eDiets options,
respectively, as set forth on Schedule 1.6(a). All such shares of eDiets Common
Stock, when so converted, shall no longer be outstanding and shall automatically
be cancelled and become Treasury Stock subject to issuances pursuant to section
1.6(e).
(b) Any option convertible or exchangeable into eDiets
capital stock shall be converted into an option convertible or exchangeable, as
the case may be, into Olas Common Stock upon substantially the same terms and
conditions as is currently in effect for eDiets options and shall be exercisable
at the same exercise price.
(c) From and after the Effective Date, the holders of
certificates evidencing ownership of shares, options or warrants of eDiets
Common Stock shall cease to have any rights with respect to the shares of eDiets
Common Stock, options and warrants.
(d) No fractional shares of Olas Common Stock shall be
issued in connection with the Merger and the Shareholder will be issued a whole
share of Olas Common Stock in lieu of any fractional shares.
(e) Each share of the common stock, $.01 par value per
share, of the Subsidiary issued and outstanding at the Effective Date shall be
converted into the right to receive one fully paid and nonassessable share of
common stock of the Surviving Corporation.
2. REPRESENTATIONS AND WARRANTIES AS TO EDIETS. Each of the Shareholder and
eDiets, jointly and severally, represents and warrants to Olas and Subsidiary as
follows:
-3-
<PAGE>
2.1. ORGANIZATION, STANDING AND POWER. eDiets is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with full corporate power and corporate authority to (i) own, lease and operate
its properties, (ii) carry on the eDiets Business as currently conducted by it
and (iii) execute and deliver, and perform under this Agreement and each other
agreement and instrument to be executed and delivered by it pursuant hereto.
Except as set forth on SCHEDULE 2.1, there are no states or jurisdictions in
which the character and location of any of the properties owned or leased by
eDiets, or the conduct of the eDiets Business makes it necessary for eDiets to
qualify to do business as a foreign corporation. True and complete copies of the
Certificate of Incorporation of eDiets and all amendments thereof, and of the
By-Laws of eDiets, as amended to date, have heretofore been furnished to Olas.
eDiets' minute books contain complete and accurate records of all meetings and
other corporate actions of eDiets' stockholders and Board of Directors
(including committees of its Board of Directors).
2.2. CAPITALIZATION. (a) As of the date of this Agreement, the authorized
capital stock of eDiets consists of: 10,000,000 shares of common stock, par
value $.001 per share (the "eDiets Common Stock"), of which 6,215,733 shares of
eDiets Common Stock are issued and outstanding and options to purchase 784,267
shares of eDiets Common Stocks are issued and outstanding. All of the eDiets
Common Stock is duly authorized, validly issued, fully paid and nonassessable.
SCHEDULE 2.2 sets forth a true and complete list of the current holders of all
outstanding shares of eDiets Common Stock, and the current holders of all
outstanding options and warrants issued by eDiets, which shares, options and
warrants are held by them in the amounts set forth on SCHEDULE 2.2 and the
amounts which will be held by them as immediately prior to the Effective Date.
Except as contemplated by the Merger and except as set forth on SCHEDULE 2.2,
there are no other options, warrants or other rights, agreements, arrangements
or commitments of any character relating to the issued or unissued capital stock
of eDiets or obligating eDiets to issue or sell any shares of capital stock of
or other equity interests in eDiets. There is no personal liability, and there
are no preemptive rights with regard to the capital stock of eDiets, and no
right-of-first refusal or similar catch-up rights with regard to such capital
stock. Except as set forth on SCHEDULE 2.2 and except for the transactions
contemplated by this Agreement, there are no outstanding contractual obligations
or other commitments or arrangements of eDiets to (A) repurchase, redeem or
otherwise acquire any shares of eDiets Common Stock (or any interest therein) or
(B) to provide funds to or make any investment (in the form of a loan, capital
contribution or otherwise) in any other entity, or (C) issue or distribute to
any person any eDiets Common Stock, or (D) issue or distribute to holders of any
of the eDiets Common Stock any evidences of indebtedness or assets of eDiets.
All of the outstanding
-4-
<PAGE>
securities of eDiets have been issued and sold by eDiets in full compliance with
applicable federal and state securities laws.
2.3. OWNERSHIP OF EDIETS COMMON STOCK. The Shareholder has good and marketable
title to all of the issued and outstanding shares of eDiets Common Stock, free
and clear of any and all liens, adverse claims, security interests, pledges,
mortgages, charges and encumbrances of any nature whatsoever ("eDiets Liens"),
and on the Closing Date (as defined in Paragraph 7 hereof) will own all of the
eDiets Common Stock, free and clear of any and all eDiets Liens, including, but
not limited to, any claims by any present or former shareholders of eDiets.
2.4. INTERESTS IN OTHER ENTITIES.
(a) eDiets does not have any direct or indirect
subsidiaries or own, directly or indirectly, of record or beneficially, shares
of voting or other equity securities in any other corporation.
(b) The Shareholder does not: (i) own, directly or
indirectly, of record or beneficially, any shares of voting stock or other
equity securities of any other corporation engaged in the same or similar
business to that business engaged in by eDiets at the Effective Date (other than
not more than one percent (1%) of the publicly-traded capital stock of
corporations engaged in such business held solely for investment purposes); (ii)
have any ownership interest, direct or indirect, of record or beneficially, in
any unincorporated entity engaged in the same or similar business to that
business engaged in by eDiets at the Effective Date; or (iii) have any
obligation, direct or indirect, present or contingent, (A) to purchase or
subscribe for any interest in, advance or loan monies to, or in any way make
investments in, any other person or entity engaged in the same or similar
business to that business engaged in by eDiets at the Effective Date, or (B) to
share any profits or capital investments or both from a entity engaged in the
same or similar business to that business engaged in by eDiets at the Effective
Date.
2.5. AUTHORITY. The execution and delivery by eDiets of this Agreement and of
all of the agreements to be executed and delivered by eDiets pursuant hereto
(collectively, the "eDiets Documents"), the performance by eDiets of its
obligations hereunder and thereunder, and the consummation of the transactions
contemplated hereby and thereby, have been duly and validly authorized by all
necessary corporate action on the part of eDiets (including, but not limited to,
the unanimous consents of the Board of Directors of eDiets and of the
Shareholder) and eDiets has all necessary corporate power and corporate
authority with respect thereto. The Shareholder is an individual having all
necessary capacity, power and authority to execute and deliver this Agreement
and such other agreements to be executed
-5-
<PAGE>
and delivered by him pursuant hereto (collectively, the "Shareholder Documents")
and to consummate the transactions contemplated hereby and thereby. This
Agreement is, and when executed and delivered by eDiets and the Shareholder,
each of the other agreements to be delivered by either or both of them pursuant
hereto will be, the valid and binding obligations of eDiets and the Shareholder,
to the extent that it or he is a party thereto, in accordance with their
respective terms, except as the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other laws affecting the rights of creditors
generally and subject to the rules of law governing (and all limitations on)
specific performance, injunctive relief, and other equitable remedies.
2.6. NONCONTRAVENTION. Except as set forth on SCHEDULE 2.6, neither the
execution and delivery by eDiets or the Shareholder of this Agreement or of any
other eDiets Documents or Shareholder Documents to be executed and delivered by
either or both of them, nor the consummation of any of the transactions
contemplated hereby or thereby, nor the performance by either or both of them of
any of their respective obligations hereunder or thereunder, will (nor with the
giving of notice or the lapse of time or both would) (a) conflict with or result
in a breach of any provision of the Certificate of Incorporation, By-Laws or
other constituent documents of eDiets, each as amended to date, or (b) give rise
to a default, or any right of termination, cancellation or acceleration, or
otherwise be in conflict with or result in a loss of contractual benefits to any
of them, under any of the terms, conditions or provisions of any note, bond,
mortgage, indenture, license, agreement or other instrument or obligation to
which either or both of them is a party or by which either or both of them or
any of their respective assets may be bound, or require any consent, approval or
notice under the terms of any such document or instrument, or (c) violate any
order, writ, injunction, decree, law, statute, rule or regulation of any court
or governmental authority which is applicable to either or both of them, or (d)
result in the creation or imposition of any lien, adverse claim, restriction,
charge or encumbrance upon any of the assets of eDiets (the "eDiets Assets") or
the eDiets Common Stock, or (e) interfere with or otherwise adversely affect the
ability of eDiets to carry on the eDiets Business after the Effective Date on
substantially the same basis as is now conducted by eDiets.
2.7. FINANCIAL STATEMENTS. eDiets has heretofore delivered to each of Olas and
Subsidiary (a) its financial statements consisting of the audited balance sheets
at December 31, 1998 and 1997, and the related statements of income,
stockholders' equity and cash flows for the two years then ended, which have
been audited by Ernst & Young, LLP, independent certified public accountants,
and (b) its unaudited balance sheet at June 30, 1999 (the "eDiets Balance
Sheet") statements of income, stockholders' equity and cash flows for the six
(6)
-6-
<PAGE>
months ended June 30, 1999 (collectively, the "eDiets Financial Statements").
The eDiets Financial Statements were prepared in accordance with generally
accepted accounting principles ("GAAP") and Regulation S-X, consistently
applied, and present fairly the financial position of eDiets as at the dates
thereof and the results of operations for the periods indicated. The books and
records of eDiets are complete and correct in all material respects, have been
maintained in all material respects in accordance with good business practices,
and accurately reflect the basis for the financial condition, results of
operations and cash flow of eDiets as set forth in the eDiets Financial
Statements.
2.8. ABSENCE OF UNDISCLOSED LIABILITIES. eDiets has no liabilities or
obligations of any nature whatsoever, whether accrued, matured, unmatured,
absolute, contingent, direct or indirect or otherwise, which have not been (a)
in the case of liabilities and obligations of a type customarily reflected on a
corporate balance sheet, prepared in accordance with GAAP and set forth on the
eDiets Balance Sheet, or (b) incurred in the ordinary course of business since
June 30, 1999, or (c) in the case of other types of liabilities and obligations,
described in SCHEDULE 2.8, or (d) incurred, consistent with past practice, in
the ordinary course of business of eDiets (in the case of liabilities and
obligations of the type referred to in clause (a) above).
2.9. GUARANTIES. SCHEDULE 2.9 hereto is a complete and accurate list and summary
description of all written guaranties currently in effect heretofore issued by
the Shareholder to any bank or other lender in connection with any credit
facilities extended by such creditors to eDiets or issued by the Shareholder in
connection with any other contracts or agreements for the benefit of eDiets,
including the name of such creditor and the amount of the indebtedness, together
with any interest and fees currently owing and expected to be outstanding as of
the Effective Date.
2.10. ACCOUNTS AND NOTES RECEIVABLE/INVENTORIES.
(a) The accounts receivable which are reflected on the
eDiets Balance Sheet are good and collectible in the ordinary course of business
at the aggregate recorded amounts thereof, less the respective amount of the
allowances for doubtful accounts and notes receivable, if any, reflected
thereon, and are not subject to any offsets. The accounts and notes receivable
of eDiets which were added after June 30, 1999, are good and collectible in the
ordinary course of business, less the amount of the allowance(s) for doubtful
accounts and notes receivable, if any, reflected on the books and records of
eDiets (which allowances were established on a basis consistent with prior
practice), and are not subject to any offsets.
-7-
<PAGE>
(b) The inventories reflected on the eDiets Balance Sheet
consist of items of a quality and quantity usable or saleable in the ordinary
course of business, except for obsolete materials, slow-moving items, materials
of below standard quality and not readily marketable items, all of which have
been (i) written down to net realizable value or (ii) adequately reserved
against on the books and records of eDiets. All inventories are stated at the
lower of cost or market.
2.11. ABSENCE OF CHANGES. Except as set forth in SCHEDULE 2.11, since June 30,
1999, there have not been (a) any material adverse change (other than as is
normal in the ordinary course of business) in the condition (financial or
otherwise), assets, liabilities, business, prospects, results of operations or
cash flows of eDiets (including, without limitation, any such adverse change
resulting from damage, destruction or other casualty loss, whether or not
covered by insurance), (b) any waivers by eDiets of any right, or cancellation
of any debt or claim, of substantial value, (c) any declarations, set asides or
payments of any dividend or other distributions or payments in respect of the
eDiets Common Stock, or (d) any changes in the accounting principles or methods
which are utilized by eDiets.
2.12. LITIGATION. Except as set forth in SCHEDULE 2.12, there are no claims,
suits or actions, or administrative, arbitration or other proceedings or
governmental investigations, pending or to the actual knowledge of eDiets or the
Shareholder threatened, against or relating to eDiets or the Shareholder, the
transactions contemplated hereby or any of the eDiets Assets. There are no
judgments, orders, stipulations, injunctions, decrees or awards in effect which
relate to eDiets, this Agreement, the transactions contemplated, the eDiets
Business or any of the eDiets Assets, the effect of which is (a) to limit,
restrict, regulate, enjoin or prohibit any business practice of eDiets in any
area, or the acquisition by eDiets of any properties, assets or businesses, or
(b) otherwise have a material adverse effect to the eDiets Business, any of the
eDiets Assets or eDiets Common Stock.
2.13. NO VIOLATION OF LAW. Neither eDiets nor the Shareholder have actual
knowledge that eDiets is engaging in any activity or omitting to take any action
as a result of which it is in violation of any law, rule, regulation, zoning or
other ordinance, statute, order, injunction or decree, or any other requirement
of any court or governmental or administrative body or agency, applicable to
eDiets, the eDiets Business or any of the eDiets Assets, including, but not
limited to, those relating to: occupational safety and health matters; issues of
environmental and ecological protection (E.G., the use, storage, handling,
transport or disposal of pollutants, contaminants or hazardous or toxic
materials or wastes, and the exposure of persons thereto); business practices
and operations; labor
-8-
<PAGE>
practices; employee benefits; and zoning and other land use laws and
regulations.
2.14. TITLE TO ASSETS AND PROPERTIES. eDiets has good and marketable title to
all of the eDiets Assets free and clear of all liens. All properties, structures
and equipment which are utilized in the eDiets Business, or are material to the
condition (financial or otherwise) of eDiets are owned or leased by eDiets, are
free and clear of all eDiets Liens, and are in good operating condition and
repair (ordinary wear and tear excepted), and are adequate and suitable for the
purposes for which they are used. SCHEDULE 2.14 sets forth all (a) real property
which is owned, leased (whether as lessor or lessee) or subject to contract or
commitment of purchase or sale or lease (whether as lessor or lessee) by eDiets,
or which is subject to a title retention or conditional sales agreement or other
security device, and (b) tangible personal property which is owned, leased
(whether as lessor or lessee) or subject to contract or commitment of purchase
or sale or lease (whether as lessor or lessee) by eDiets.
2.15. INTANGIBLES/INVENTIONS. SCHEDULE 2.15 identifies (by a summary
description) the eDiets Intangibles (as defined below) the ownership thereof
and, if applicable, eDiets' authority for use of the same, which Schedule is
complete and correct and encompasses: (A) all United States and foreign patents,
trademark and trade name registrations, trademarks and trade names, brandmarks
and brand name registrations, servicemarks and servicemark registrations,
assumed names and copyrights and copyright registrations (collectively, the
"eDiets Marks"), owned in whole or in part or used by eDiets, and all
applications therefor, (B) all domain names, fictitious and d.b.a names,
proprietary "800" and "888" prefix phone numbers, internet URLS and other
similar identifier and proprietary rights owned or used by eDiets (collectively
the "eDiets Internet Intangibles"), (C) all inventions, discoveries,
improvements, processes, formulae, technology, know-how, processes and other
intellectual property, proprietary rights and trade secrets relating to the
eDiets Business (collectively, the "eDiets Inventions") and (D) all licenses and
other agreements to which eDiets is a party or otherwise bound which relate to
any of the eDiets Intangibles or the eDiets Inventions or eDiets' use thereof in
connection with the eDiets Business (collectively, the "eDiets Licenses", and
together with the eDiets Marks, the eDiets Internet Intangibles and the eDiets
Inventions, the "eDiets Intangibles"). No violations in any material respect of
the terms of any of the aforesaid licenses and/or agreements have occurred.
Except as disclosed on SCHEDULE 2.15, (A) eDiets owns or is authorized to use in
connection with the eDiets Business all of the Intangibles; (B) no proceedings
have been instituted, are pending or to the actual knowledge of eDiets and the
Shareholder are threatened which challenge the rights of eDiets with respect to
the eDiets Intangibles or its use thereof in connection with the
-9-
<PAGE>
eDiets Business and/or the eDiets Assets or the validity thereof and, there is
no valid basis for any such proceedings; (C) based on the actual knowledge of
eDiets and the Shareholder, neither eDiets' ownership of the eDiets Intangibles
nor their use thereof in connection with the eDiets Business and/or the eDiets
Assets violates any laws, statutes, ordinances or regulations, or has at any
time infringed upon or violated any rights of others, or is being infringed by
others; (D) none of the Intangibles, or eDiets' use thereof in connection with
the eDiets Business and/or the eDiets Assets is subject to any outstanding
order, decree, judgment, stipulation or any lien, security interest or other
encumbrance; and (E) eDiets has not granted any license to third parties with
regard to the eDiets Intangibles.
2.16. SYSTEMS AND SOFTWARE. eDiets owns or has the right to use pursuant to
lease, license, sublicense, agreement, or permission all computer hardware,
software and information systems necessary for the operation of the businesses
of eDiets as presently conducted (collectively, "eDiets Systems"). Each eDiets
System owned or used by eDiets immediately prior to the Effective Date will be
owned or available for use by eDiets on identical terms and conditions
immediately subsequent to the Effective Date. With respect to each eDiets System
owned by a third party and used by eDiets pursuant to lease, license,
sublicense, agreement or permission: (a) the lease, license, sublicense,
agreement or permission covering the eDiets System is legal, valid, binding,
enforceable, and in full force and effect; (b) the lease, license, sublicense,
agreement or permission will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the Effective Date;
(c) no party to any such lease, license, sublicense, agreement or permission is
in breach or default, and no event has occurred which with notice or lapse of
time would constitute a breach or default, and permit termination, modification
or acceleration thereunder; (d) no party to any such lease, license, sublicense,
agreement or permission has repudiated any provision thereof; (e) eDiets has not
granted any sublicense, sublease or similar right with respect to any such
lease, license, sublicense, agreement or permission; (f) eDiets' use and
continued use of such eDiets Systems does not and will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
intellectual property rights of third parties as a result of the continued
operation of the eDiets Business.
2.17. TAX MATTERS.
(a) eDiets has filed with the appropriate governmental
agencies all tax returns and reports required to be filed by it, and has paid in
full or contested in good faith or made adequate provision for the payment of,
Taxes (as defined herein) shown to be due or claimed to be due on such tax
returns and reports. The provisions for Taxes which are set forth on the
-10-
<PAGE>
eDiets Balance Sheet are adequate for all accrued and unpaid taxes of eDiets as
of June 30, 1999, whether (i) incurred in respect of or measured by income of
eDiets for any periods prior to the close of business on that date, or (ii)
arising out of transactions entered into, or any state of facts existing, on or
prior to such date. eDiets has duly withheld all payroll taxes, FICA and other
federal, state and local taxes and other items requiring to be withheld by it
from employer wages, and has duly deposited the same in trust for or paid over
to the proper taxing authorities. eDiets has not executed or filed with any
taxing authority any agreement extending the periods for the assessment or
collection of any Taxes, and is not a party to any pending or threatened action
or proceeding by any governmental authority for the assessment or collection of
Taxes. Within the past three years, the United States federal income tax returns
of eDiets have not been examined by the Internal Revenue Service (the "IRS"),
nor has any states' taxing authority examined any merchandize, personal
property, sales or use tax returns of eDiets.
(b) eDiets (i) has not agreed to or been required to make
any adjustment pursuant to Section 481(a) of the Internal Revenue Code of 1986,
as amended (the "Code"), (ii) has no knowledge that the IRS or any other taxing
authority has proposed any such adjustment or change in accounting method, and
(iii) has no application pending with any governmental authority requesting
permission for any change in accounting method.
(c) As used herein, the term "Taxes" means all federal,
state, county, local and other taxes and governmental assessments, including but
not limited to income taxes, estimated taxes, withholding taxes, excise taxes,
ad valorem taxes, payroll related taxes (including but not limited to premiums
for worker's compensation insurance and statutory disability insurance),
employment taxes, franchise taxes and import duties, together with any related
liabilities, penalties, fines, additions to tax or interest.
2.18. INSURANCE. SCHEDULE 2.18 is a complete and correct list and summary
description of all contracts and policies of insurance relating to any of the
eDiets Assets, the eDiets Business or the Shareholder in which eDiets is an
insured party, beneficiary or loss payable payee. Such policies are in full
force and effect, all premiums due and payable with respect thereto have been
paid, and no notice of cancellation or termination has been received by eDiets
with respect to any such policy.
2.19. BANKS; POWERS OF ATTORNEY. SCHEDULE 2.19 is a complete and correct list
showing (a) the names of each bank in which eDiets has an account or safe
deposit box and the names of all persons authorized to draw thereon or who have
access
-11-
<PAGE>
thereto, and (b) the names of all persons, if any, holding powers of attorney
from eDiets.
2.20. EMPLOYEE ARRANGEMENTS. SCHEDULE 2.20 is a complete and correct list and
summary description of all (a) union, collective bargaining, employment,
management, termination and consulting agreements to which eDiets is a party or
otherwise bound, and (b) compensation plans and arrangements; bonus and
incentive plans and arrangements; deferred compensation plans and arrangements;
pension and retirement plans and arrangements; profit- sharing and thrift plans
and arrangements; stock purchase and stock option plans and arrangements;
hospitalization and other life, health or disability insurance or reimbursement
programs; holiday, sick leave, severance, vacation, tuition reimbursement,
personal loan and product purchase discount policies and arrangements; and other
plans or arrangements providing for benefits for employees of eDiets. Said
Schedule also lists the names and compensation of all employees of eDiets whose
earnings during the last fiscal year were $[50,000] or more (including bonuses
and other incentive compensation), and all employees who are expected to receive
at least said amount in respect of the current fiscal year.
2.21. ERISA. Except as listed on SCHEDULE 2.21 eDiets neither maintains nor is
obligated to contribute to an "employee pension benefit plan" as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or "welfare benefit plan", as such term is defined in
Section 3(1) of ERISA.
2.22. ENVIRONMENTAL MATTERS. eDiets has obtained and is in compliance with the
terms and conditions of all required permits, licenses, registrations and other
authorizations required under Environmental Laws (as hereinafter defined). No
asbestos in a friable condition, equipment containing polychlorinated biphenyls,
leaking underground or above-ground storage tanks are contained in or located at
any facility currently, or was contained or located at any facility previously
owned, leased or controlled by eDiets or any of its subsidiaries. eDiets has not
released, discharged or disposed of on, under or about any facility currently or
previously owned, leased or controlled by eDiets or any subsidiary of eDiets
heretofore in existence, any Hazardous Substance (as hereinafter defined), and
no third party has released, discharged or disposed of on, under or about any
facility currently or previously owned, leased or controlled by eDiets, any
Hazardous Substances (as hereinafter defined). eDiets is in compliance with all
applicable Environmental Laws. eDiets has fully disclosed to Olas all past and
present noncompliance with, or liability under, Environmental Laws, and all past
discharges, emissions, leaks, releases or disposals by it of any substance or
waste regulated under or defined by Environmental Laws that have formed or could
reasonably be expected to form the basis of any claim, action,
-12-
<PAGE>
suit, proceeding, hearing or investigation under any applicable Environmental
Laws. eDiets has not received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans of eDiets that
have resulted in or threaten to result in any common law or legal liability, or
otherwise form the basis of any claim, action, suit, proceeding, hearing or
investigation under, any applicable Environmental Laws. For purposes of this
section 2.22, (a) "Environmental Laws": mean applicable federal, state, local
and foreign laws, regulations and codes relating in any respect to pollution or
protection of the environment and (b) "Hazardous Substances" means any toxic,
caustic or otherwise dangerous substance (whether or not regulated under
federal, state or local environmental statutes, rules, ordinances, or orders),
including (i) "hazardous substance" as defined in 42 U.S.C. Section 9601, and
(ii) petroleum products, derivatives, byproducts and other hydrocarbons.
2.23. CERTAIN BUSINESS MATTERS. Except as is set forth in SCHEDULE 2.23, (a)
eDiets is not a party to or bound by any publishing, distributorship,
dealership, sales agency, franchise or similar agreement which relates to the
sale or distribution of any of the products and services of the eDiets Business,
(b) except to the extent that iVillage, Inc. and America Online, Inc. may be
considered unique suppliers, eDiets has no sole-source supplier of significant
goods or services (other than utilities) with respect to which practical
alternative sources are not available on comparable terms and conditions, (c)
there are no pending or threatened labor negotiations, work stoppages or work
slowdowns involving or affecting the eDiets Business, and no union
representation questions exist, and there are no organizing activities, in
respect of any of the employees of eDiets, (d) the product and service
warranties given by eDiets or by which it is bound (complete and correct copies
or descriptions of which have heretofore been delivered by eDiets to Olas)
entail no greater obligations than are customary in the eDiets Business, (e)
neither eDiets nor the Shareholder is a party to or bound by any agreement which
limits its or his, as the case may be, freedom to compete in any line of
business or with any person, or which is otherwise materially burdensome to
eDiets or the Shareholder, and (f) except for the license agreement with the
Shareholder set forth in SCHEDULE 2.23, eDiets is not a party to or bound by any
agreement in which any officer, director or shareholder of eDiets (or any
affiliate of any such person) has, or had when made, a direct or indirect
material interest.
2.24. CERTAIN CONTRACTS. SCHEDULE 2.24 is a complete and correct list of all
material contracts, commitments, obligations and understandings which are not
set forth in any other Schedule delivered hereunder and to which eDiets is a
party or otherwise bound, except for (a) purchase orders from vendors or
customers and (b) each of those which (i) were made in the
-13-
<PAGE>
ordinary course of business and (ii) either (A) are terminable by eDiets (and
will be terminable by eDiets) without liability, expense or other obligation on
30 days' notice or less, or (B) may be anticipated to involve aggregate payments
to or by eDiets of $5,000 (or the equivalent) or less calculated over the full
term thereof, and (C) are not otherwise material to the eDiets Business.
Complete and correct copies of all contracts, commitments, obligations and
undertakings set forth on any of the Schedules delivered pursuant to this
Agreement have been furnished by eDiets to Olas. Except as expressly stated on
any of such Schedules, (1) each of the agreements listed on SCHEDULE 2.24 is in
full force and effect, no person or entity which is a party thereto or otherwise
bound thereby is in material default thereunder, and no event, occurrence,
condition or act exists which does (or which with the giving of notice or the
lapse of time or both would) give rise to a material default or right of
cancellation, acceleration or loss of contractual benefits thereunder; (2) there
has been no threatened cancellations thereof, and there are no outstanding
disputes thereunder; and (3) none of them is materially burdensome to eDiets.
2.25. SUPPLIERS. SCHEDULE 2.25 sets forth a complete and correct list, as of the
date hereof, of the 10 largest suppliers of the eDiets Business and the amount
of goods and services purchased from each such supplier. Except as set forth in
SCHEDULE 2.25, there are no (i) threatened cancellations by the aforesaid
suppliers with respect to the eDiets Business, (ii) outstanding disputes by such
suppliers with eDiets and the eDiets Business, or (iii) any adverse changes in
the business relationship between the eDiets Business and any such supplier. The
aforesaid suppliers will continue their respective relationships with the eDiets
Business after the Closing Date on substantially the same basis as now exists.
2.26. APPROVALS/CONSENTS. Except as set forth on SCHEDULE 2.26, eDiets currently
holds all governmental and administrative consents, permits, appointments,
approvals, licenses, certificates and franchises which are necessary for the
operation of the eDiets Business, all of which are in full force and effect.
SCHEDULE 2.26 is a complete and correct list of all such governmental and
administrative consents, permits, appointments, approvals, licenses,
certificates and franchises. No material violations of the terms thereof have
heretofore occurred or are known by the Shareholder to exist as of the date of
this Agreement.
2.27. INFORMATION AS TO EDIETS. None of the representations or warranties made
by eDiets or the Shareholder in this Agreement is, or contained in any of the
eDiets Documents or the Shareholder Documents to be executed and delivered
hereto will be, false or misleading with respect to any material fact, or omits
to state any material fact necessary in order to make the statements therein
contained not misleading.
-14-
<PAGE>
2.28. SECURITIES ACT REPRESENTATION. The Shareholder is acquiring the Olas
Common Stock solely for investment purposes, with no intention of distributing
or reselling any such stock or any interest therein. The Shareholder is aware
that, except as set forth in section 5.15 hereof, the Olas Common Stock will not
be registered under the Securities Act of 1933, as amended (the "Securities
Act"), and that neither the Olas Common Stock nor any interest therein may be
sold, pledged, or otherwise transferred unless the Olas Common Stock is
registered under the Securities Act or qualifies for an exemption under the
Securities Act.
3. REPRESENTATIONS AND WARRANTIES AS TO OLAS AND SUBSIDIARY. Olas and
Subsidiary, jointly and severally, represent and warrant to eDiets and the
Shareholder as follows:
3.1. ORGANIZATION, STANDING AND POWER. Each of Olas and Subsidiary is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, with full corporate power and corporate authority to
(i) own, lease and operate its properties, (ii) carry on its business as
currently conducted by it and (iii) execute and deliver, and perform under this
Agreement and each other agreement and instrument to be executed and delivered
by it pursuant hereto. Except as set forth on SCHEDULE 3.1, there are no states
or jurisdictions in which the character and location of any of the respective
properties owned or leased by either of Olas or Subsidiary or the conduct of the
Olas Business make it necessary for either Olas or Subsidiary to qualify to do
business as a foreign corporation. True and complete copies of the respective
Certificates of Incorporation and By-Laws, each as amended to date, of Olas and
Subsidiary have heretofore been furnished to eDiets. Each of Olas' and
Subsidiary's respective minute books contain complete and accurate records of
all meetings and other corporate actions of their respective stockholders and
Board of Directors (including committees of their respective Board of
Directors).
3.2. CAPITALIZATION.
(a) As of the date of this Agreement, the authorized
capital stock of Olas consists of 10,000,000 shares of Class A Stock 10,000,000
shares of Olas Class B common stock, $.01 par value ("Class B Stock") and
5,000,000 shares of Preferred Stock, $.01 par value (the "Preferred Stock"). As
of the date hereof, (i) 7,131,095 shares of Class A Stock are issued and
outstanding and 808,796 shares of Class B Stock are issued and outstanding, all
of which are duly authorized, validly issued, fully paid and nonassessable and
no shares of Preferred Stock are issued and outstanding. As of the Effective
Date, the authorized capital stock of Olas will consist of 20,000,000 shares of
Olas Common Stock, $.001 par value, of which 1,050,000 shares will be issued and
outstanding and all of which shall be
-15-
<PAGE>
duly authorized, validly issued, fully paid and nonassessable and 1,000,000
shares of Preferred Stock, none of which shall be outstanding.
(b) The outstanding shares of capital stock of each of the
subsidiaries of Olas, including the Subsidiary, are duly authorized, validly
issued, fully paid and nonassessable, and, except as set forth on SCHEDULE 3.2,
such shares are owned by Olas, directly or indirectly, free and clear of all
security interests, liens, adverse claims, pledges, agreements, limitations on
Olas's voting rights, charges and other encumbrances of any nature whatsoever.
Except as noted on SCHEDULE 3.2, there are no options, warrants or similar right
outstanding with respect to shares of capital stock of any subsidiary.
3.3. INTERESTS IN OTHER ENTITIES.
SCHEDULE 3.3 sets forth a true and complete list of all
direct or indirect subsidiaries of Olas (other than Subsidiary) that are
material to the financial condition of Olas and its subsidiaries, together with
the jurisdiction of incorporation of each of such subsidiary and the percentage
of each such subsidiary's outstanding capital stock owned by Olas or another of
Olas' subsidiaries. Each of such subsidiaries are duly organized corporations,
validly existing and in good standing under the laws of the jurisdiction of its
respective incorporation (as well as all applicable foreign jurisdictions
necessary to its business operations) and have the requisite authority to own,
operate or lease the properties that each purports to own, operate or lease and
to carry on its business as it is now being conducted.
3.4. AUTHORITY. The execution and delivery by each of Olas and Subsidiary of
this Agreement and of each agreement to be executed and delivered by either of
them pursuant hereto (collectively, the "Olas Documents"), the performance by
each of them of its obligations hereunder and thereunder, and the consummation
of the transactions contemplated hereby and thereby, have been duly and validly
authorized by all necessary corporate action on the part of each of Olas and
Subsidiary (including, but not limited to, the unanimous consents of the
respective Board of Directors of Olas and of Subsidiary) and each of Olas and
Subsidiary has all necessary corporate power and corporate authority with
respect thereto. This Agreement is, and when executed and delivered by each of
Olas and the Subsidiary and each of the other agreements to be delivered by
either or both of them pursuant hereto will be, the valid and binding
obligations of Olas or the Subsidiary, to the extent it is a party thereto, in
accordance with the respective terms thereof, except as the same may be limited
by bankruptcy, insolvency, reorganization, moratorium or other laws affecting
the rights of creditors generally and subject to the rules of law governing (and
all
-16-
<PAGE>
limitations on) specific performance, injunctive relief, and other equitable
remedies.
3.5. NONCONTRAVENTION. Except as set forth on SCHEDULE 3.5, neither the
execution and delivery by Olas or Subsidiary of this Agreement or of any other
Olas Documents to be executed and delivered by either or both of them, nor the
consummation of any of the transactions contemplated hereby or thereby, nor the
performance by either or both of them of any of their respective obligations
hereunder or thereunder, will (nor with the giving of notice or the lapse of
time or both would) (a) conflict with or result in a breach of any provision of
the respective Certificate of Incorporation, By-Laws or other constituent
documents of Olas or of Subsidiary, each as amended to date, or (b) give rise to
a default, or any right of termination, cancellation or acceleration, or
otherwise be in conflict with or result in a loss of contractual benefits to
either of them, under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, agreement or other instrument or obligation
to which either or both of them is a party or by which either or both of them or
any of their respective assets may be bound, or require any consent, approval or
notice under the terms of any such document or instrument, or (c) violate any
order, writ, injunction, decree, law, statute, rule or regulation of any court
or governmental authority which is applicable to either or both of them, or (d)
result in the creation or imposition of any lien, adverse claim, restriction,
charge or encumbrance upon any of the assets of Olas or Subsidiary
(collectively, the "Olas Assets") or the Class A Stock or the Class B Stock, or
the Olas Common Stock or (e) interfere with or otherwise adversely affect the
ability of Olas and Subsidiary to carry on their respective business after the
Effective Date on substantially the same basis as is now conducted by them.
3.6. FINANCIAL STATEMENTS. Olas has heretofore delivered to eDiets (a) its
consolidated financial statements consisting of the compiled consolidated
balance sheets at December 31, 1998 and 1997, and the related statements of
income, stockholders' equity and cash flows for the two years then ended and (b)
its unaudited consolidated balance sheet at June 30, 1999 (the "Olas Balance
Sheet") statements of income, stockholders' equity and cash flows for the six
months ended June 30, 1999 (collectively, the "Olas Financial Statements"). The
Olas Financial Statements were prepared in accordance with GAAP and Regulation
S-X, consistently applied, and present fairly the financial position of Olas and
its subsidiaries as at the dates thereof and the consolidated results of its
operations for the periods indicated. The books and records of Olas and its
subsidiaries are complete and correct in all material respects, have been
maintained in accordance with good business practices, and in all material
respects accurately reflect the basis for the financial condition, results of
operations and cash flow of Olas
-17-
<PAGE>
and its subsidiaries, on a consolidated basis, as set forth in the Olas
Financial Statements.
3.7. ABSENCE OF UNDISCLOSED LIABILITIES. Neither Olas nor Subsidiary has
liabilities or obligations of any nature whatsoever, whether accrued, matured,
unmatured, absolute, contingent, direct or indirect or otherwise, which have not
been (a) in the case of liabilities and obligations of a type customarily
reflected on a corporate balance sheet, prepared in accordance with GAAP and set
forth on the Olas Balance Sheet, or (b) incurred in the ordinary course of
business since June 30, 1999, or (c) in the case of other types of liabilities
and obligations, described in SCHEDULE 3.7, or (d) incurred, consistent with
past practice, in the ordinary course of business of Olas or its subsidiaries
(in the case of liabilities and obligations of the type referred to in clause
(a) above).
3.8. GUARANTIES. SCHEDULE 3.8 hereto is a complete and accurate list and summary
description of all written guaranties currently in effect heretofore issued by
any bank or other lender in connection with any credit facilities extended by
such creditors to Olas or Subsidiary or in connection with any other contracts
or agreements for the benefit of Olas or Subsidiary, including the name of such
creditor and the amount of the indebtedness, together with any interest and fees
currently owing and expected to be outstanding as of the Effective Date.
3.9. ACCOUNTS AND NOTES RECEIVABLE/INVENTORIES.
(a) The accounts receivable which are reflected on the Olas
Balance Sheet are good and collectible in the ordinary course of business at the
aggregate recorded amounts thereof, less the respective amount of the allowances
for doubtful accounts and notes receivable, if any, reflected thereon, and are
not subject to any offsets. The accounts and notes receivable of Olas and
Subsidiary which were added after June 30, 1999, are good and collectible in the
ordinary course of business, less the amount of the allowance(s) for doubtful
accounts and notes receivable, if any, reflected on the books and records of
Olas and/or Subsidiary (which allowances were established on a basis consistent
with prior practice), as the case may be, and are not subject to any offsets.
(b) The inventories reflected on the Olas Balance Sheet
consist of items of a quality and quantity usable or saleable in the ordinary
course of business, except for obsolete materials, slow-moving items, materials
of below standard quality and not readily marketable items, all of which have
been (i) written down to net realizable value or (ii) adequately reserved
against on the books and records of Olas and/or Subsidiary, as the case may be.
All inventories are stated at the lower of cost or market.
-18-
<PAGE>
3.10. ABSENCE OF CHANGES. Except as set forth in SCHEDULE 3.10, since June 30,
1999, there have not been (a) any material adverse change (other than as is
normal in the ordinary course of business) in the condition (financial or
otherwise), assets, liabilities, business, prospects, results of operations or
cash flows of Olas or Subsidiary (including, without limitation, any such
adverse change resulting from damage, destruction or other casualty loss,
whether or not covered by insurance), (b) any waivers by Olas or Subsidiary of
any right, or cancellation of any debt or claim, of substantial value, (c) any
declarations, set asides or payments of any dividend or other distributions or
payments in respect of the Class A Stock or Class B Stock, or the Olas Common
Stock or (d) any changes in the accounting principles or methods which are
utilized by Olas or Subsidiary.
3.11. LITIGATION. Except as set forth in SCHEDULE 3.11, there are no claims,
suits or actions, or administrative, arbitration or other proceedings or
governmental investigations, pending or to the actual knowledge of Olas or the
Subsidiary threatened, against or relating to Olas or Subsidiary, the
transactions contemplated hereby or any of the Olas Assets. There are no
judgments, orders, stipulations, injunctions, decrees or awards in effect which
relate to Olas, Subsidiary, this Agreement, the transactions contemplated, the
business of or any of the Olas Assets, the effect of which is (a) to limit,
restrict, regulate, enjoin or prohibit any business practice of Olas or
Subsidiary in any area, or the acquisition by Olas or Subsidiary of any of its
respective properties, the Olas Assets or the Olas Business, or (b) otherwise
have a material adverse effect to the Olas Business, any of the Olas Assets or
Class A Stock or Class B Stock.
3.12. NO VIOLATION OF LAW. Neither Olas, nor Subsidiary have actual knowledge
that either Olas or Subsidiary is engaging in any activity or omitting to take
any action as a result of which it is in violation of any law, rule, regulation,
zoning or other ordinance, statute, order, injunction or decree, or any other
requirement of any court or governmental or administrative body or agency,
applicable to Olas or Subsidiary, the Olas Business or any of the Olas Assets,
including, but not limited to, those relating to: occupational safety and health
matters; issues of environmental and ecological protection (E.G., the use,
storage, handling, transport or disposal of pollutants, contaminants or
hazardous or toxic materials or wastes, and the exposure of persons thereto);
business practices and operations; labor practices; employee benefits; and
zoning and other land use laws and regulations.
3.13. TITLE TO ASSETS AND PROPERTIES. Each of Olas and Subsidiary has good and
marketable title to all of their respective assets free and clear of all liens.
All properties, structures and equipment which are utilized in the Olas
Business,
-19-
<PAGE>
or are material to the condition (financial or otherwise) of Olas or Subsidiary
are owned or leased by Olas and/or Subsidiary, as the case may be, are free and
clear of all Olas Liens, and are in good operating condition and repair
(ordinary wear and tear excepted), and are adequate and suitable for the
purposes for which they are used. SCHEDULE 3.13 sets forth all (a) real property
which is owned, leased (whether as lessor or lessee) or subject to contract or
commitment of purchase or sale or lease (whether as lessor or lessee) by Olas or
Subsidiary, or which is subject to a title retention or conditional sales
agreement or other security device, and (b) tangible personal property which is
owned, leased (whether as lessor or lessee) or subject to contract or commitment
of purchase or sale or lease (whether as lessor or lessee) by Olas or
Subsidiary.
3.14. INTANGIBLES/INVENTIONS. SCHEDULE 3.14 identifies (by a summary
description) the Olas Intangibles (as defined below) the ownership thereof and,
if applicable, Olas and/or Subsidiary's authority for use of the same, which
Schedule is complete and correct and encompasses: (A) all United States and
foreign patents, trademark and trade name registrations, trademarks and trade
names, brandmarks and brand name registrations, servicemarks and servicemark
registrations, assumed names and copyrights and copyright registrations
(collectively, the "Olas Marks"), owned in whole or in part or used by Olas or
Subsidiary, and all applications therefor, (B) all domain names, fictitious and
d.b.a names, proprietary "800" and "888" prefix phone numbers, internet URLS and
other similar identifier and proprietary rights owned or used by Olas or
Subsidiary (collectively the "Olas Internet Intangibles"), (C) all inventions,
discoveries, improvements, processes, formulae, technology, know-how, processes
and other intellectual property, proprietary rights and trade secrets relating
to the Olas Business (collectively, the "Olas Inventions") and (D) all licenses
and other agreements to which Olas or Subsidiary is a party or otherwise bound
which relate to any of the Olas Intangibles or the Olas Inventions or Olas'
and/or Subsidiary's use thereof in connection with the Olas Business
(collectively, the "Olas Licenses, and together with the Olas Marks, the Olas
Internet Intangibles and the Olas Inventions, the "Olas Intangibles"). No
violations in any material respect of the terms of any of the aforesaid licenses
and/or agreements have occurred. Except as disclosed on SCHEDULE 3.14, (A) Olas
and/or Subsidiary, as the case may be, owns or is authorized to use in
connection with the Olas Business all of the Olas Intangibles; (B) no
proceedings have been instituted, are pending or to the actual knowledge of Olas
or Subsidiary are threatened which challenge the rights of Olas or Subsidiary
with respect to the Olas Intangibles or their use thereof in connection with the
Olas Business and/or the Olas Assets or the validity thereof and, there is no
valid basis for any such proceedings; (C) neither Olas nor Subsidiary's
ownership of the Olas Intangibles nor their use thereof in connection with the
Olas Business and/or the Olas
-20-
<PAGE>
Assets violates any laws, statutes, ordinances or regulations, or, based upon
the actual knowledge of Olas and Subsidiary, has at any time infringed upon or
violated any rights of others, or is being infringed by others; (D) none of the
Olas Intangibles, or Olas' or Subsidiary's use thereof in connection with the
Olas Business and/or the Olas Assets is subject to any outstanding order,
decree, judgment, stipulation or any lien, security interest or other
encumbrance; and (E) neither Olas nor Subsidiary has granted any license to
third parties with regard to the Olas Intangibles.
3.15. SYSTEMS AND SOFTWARE. Each of Olas and Subsidiary own or has the right to
use pursuant to lease, license, sublicense, agreement, or permission all
computer hardware, software and information systems necessary for the operation
of the Olas Business as presently conducted (collectively, "Olas Systems"). Each
Olas System owned or used by Olas and/or Subsidiary immediately prior to the
Effective Date will be owned or available for use by Olas and/or Subsidiary on
identical terms and conditions immediately subsequent to the Effective Date.
With respect to each Olas System owned by a third party and used by Olas or
Subsidiary pursuant to lease, license, sublicense, agreement or permission: (a)
the lease, license, sublicense, agreement or permission covering the Olas System
is legal, valid, binding, enforceable, and in full force and effect; (b) the
lease, license, sublicense, agreement or permission will continue to be legal,
valid, binding, enforceable, and in full force and effect on identical terms
following the Effective Date; (c) no party to any such lease, license,
sublicense, agreement or permission is in breach or default, and no event has
occurred which with notice or lapse of time would constitute a breach or
default, and permit termination, modification or acceleration thereunder; (d) no
party to any such lease, license, sublicense, agreement or permission has
repudiated any provision thereof; (e) neither Olas nor Subsidiary has granted
any sublicense, sublease or similar right with respect to any such lease,
license, sublicense, agreement or permission; (f) Olas and/or Subsidiaries use
and continued use of such Olas Systems does not and will not interfere with,
infringe upon, misappropriate, or otherwise come into conflict with, any
intellectual property rights of third parties as a result of the continued
operation of the Olas Business.
3.16. TAX MATTERS.
(a) Each of Olas and Subsidiary has filed with the
appropriate governmental agencies all tax returns and reports required to be
filed by them, and has paid in full or contested in good faith or made adequate
provision for the payment of, Taxes shown to be due or claimed to be due on such
tax returns and reports. The provisions for Taxes which are set forth on the
Olas Balance Sheet are adequate for all accrued and
-21-
<PAGE>
unpaid taxes of Olas and its subsidiaries as of June 30, 1999, whether (i)
incurred in respect of or measured by income of Olas and its subsidiaries for
any periods prior to the close of business on that date, or (ii) arising out of
transactions entered into, or any state of facts existing, on or prior to such
date. Each of Olas and Subsidiary has duly withheld all payroll taxes, FICA and
other federal, state and local taxes and other items requiring to be withheld by
them from employer wages, and has duly deposited the same in trust for or paid
over to the proper taxing authorities. Neither Olas nor Subsidiary has executed
or filed with any taxing authority any agreement extending the periods for the
assessment or collection of any Taxes, and is not a party to any pending or
threatened, action or proceeding by any governmental authority for the
assessment or collection of Taxes. Within the past three years, the United
States federal income tax returns of Olas have not been examined by IRS, nor has
any states' taxing authority examined any merchandize, personal property, sales
or use tax returns of Olas.
(b) Neither Olas nor Subsidiary (i) has agreed to or been
required to make any adjustment pursuant to Section 481(a) of the Code, (ii) has
knowledge that the IRS or any other taxing authority has proposed any such
adjustment or change in accounting method, and (iii) has an application pending
with any governmental authority requesting permission for any change in
accounting method.
3.17. INSURANCE. SCHEDULE 3.17 is a complete and correct list and summary
description of all contracts and policies of insurance relating to Olas,
Subsidiary, any of the Olas Assets or the Olas Business in which Olas or
Subsidiary is an insured party, beneficiary or loss payable payee. Such policies
are in full force and effect, all premiums due and payable with respect thereto
have been paid, and no notice of cancellation or termination has been received
by Olas or Subsidiary with respect to any such policy.
3.18. BANKS; POWERS OF ATTORNEY. SCHEDULE 3.18 is a complete and correct list
showing (a) the names of each bank in which Olas or Subsidiary has an account or
safe deposit box and the names of all persons authorized to draw thereon or who
have access thereto, and (b) the names of all persons, if any, holding powers of
attorney from Olas and Subsidiary.
3.19. EMPLOYEE ARRANGEMENTS. SCHEDULE 3.19 is a complete and correct list and
summary description of all (a) union, collective bargaining, employment,
management, termination and consulting agreements to which Olas and/or
Subsidiary is a party or otherwise bound, and (b) compensation plans and
arrangements; bonus and incentive plans and arrangements; deferred compensation
plans and arrangements; pension and retirement plans and arrangements;
profit-sharing and thrift plans and arrangements; stock purchase and stock
option plans and
-22-
<PAGE>
arrangements; hospitalization and other life, health or disability insurance or
reimbursement programs; holiday, sick leave, severance, vacation, tuition
reimbursement, personal loan and product purchase discount policies and
arrangements; and other plans or arrangements providing for benefits for
employees of Olas and/or Subsidiary. Said Schedule also lists the names and
compensation of all employees of Olas and/or Subsidiary whose earnings during
the last fiscal year were $[50,000] or more (including bonuses and other
incentive compensation), and all employees who are expected to receive at least
said amount in respect of the current fiscal year.
3.20. ERISA. Except as listed on SCHEDULE 3.20, Neither Olas nor Subsidiary
maintains nor is obligated to contribute to an "employee pension benefit plan"
as such term is defined in Section 3(2) of ERISA, or "welfare benefit plan", as
such term is defined in Section 3(1) of ERISA.
3.21. ENVIRONMENTAL MATTERS. Each of Olas and Subsidiary has obtained and is in
compliance with the terms and conditions of all required permits, licenses,
registrations and other authorizations required under Environmental Laws. No
asbestos in a friable condition, equipment containing polychlorinated biphenyls,
leaking underground or above-ground storage tanks are contained in or located at
any facility currently, or was contained or located at any facility previously
owned, leased or controlled by Olas or any of its subsidiaries. Neither Olas nor
Subsidiary has released, discharged or disposed of on, under or about any
facility currently or previously owned, leased or controlled by Olas or any
subsidiary of Olas heretofore in existence, any Hazardous Substance, and no
third party has released, discharged or disposed of on, under or about any
facility currently or previously owned, leased or controlled by Olas or
Subsidiary, any Hazardous Substances. Each of Olas and Subsidiary is in
compliance with all applicable Environmental Laws. Each of Olas and Subsidiary
has fully disclosed to eDiets all past and present noncompliance with, or
liability under, Environmental Laws, and all past discharges, emissions, leaks,
releases or disposals by them of any substance or waste regulated under or
defined by Environmental Laws that have formed or could reasonably be expected
to form the basis of any claim, action, suit, proceeding, hearing or
investigation under any applicable Environmental Laws. Neither Olas nor
Subsidiary has received notice of any past or present events, conditions,
circumstances, activities, practices, incidents, actions or plans of Olas or
Subsidiary that have resulted in or threaten to result in any common law or
legal liability, or otherwise form the basis of any claim, action, suit,
proceeding, hearing or investigation under, any applicable Environmental Laws.
3.22. CERTAIN BUSINESS MATTERS. Except as is set forth in SCHEDULE 3.22, (a)
neither Olas nor Subsidiary is a party to or bound by any publishing,
distributorship, dealership,
-23-
<PAGE>
sales agency, franchise or similar agreement which relates to the sale or
distribution of any of the products and services of the Olas Business, (b)
neither Olas nor Subsidiary has a sole-source supplier of significant goods or
services (other than utilities) with respect to which practical alternative
sources are not available on comparable terms and conditions, (c) there are no
pending or threatened labor negotiations, work stoppages or work slowdowns
involving or affecting the Olas Business, and no union representation questions
exist, and there are no organizing activities, in respect of any of the
employees of Olas or Subsidiary, (d) the product and service warranties given by
Olas or Subsidiary or by which either of them is bound (complete and correct
copies or descriptions of which have heretofore been delivered by Olas to
eDiets) entail no greater obligations than are customary in the Olas Business,
(e) neither Olas nor Subsidiary is a party to or bound by any agreement which
limits its or his, as the case may be, freedom to compete in any line of
business or with any person, or which is otherwise materially burdensome to Olas
or Subsidiary, and (f) neither Olas nor Subsidiary is a party to or bound by any
agreement in which any officer, director or shareholder of Olas or Subsidiary
(or any affiliate of any such person) has, or had when made, a direct or
indirect material interest.
3.23. CERTAIN CONTRACTS. SCHEDULE 3.23 is a complete and correct list of all
material contracts, commitments, obligations and understandings which are not
set forth in any other Schedule delivered hereunder and to which Olas and/or
Subsidiary is a party or otherwise bound, except for (a) purchase orders from
vendors or customers and (b) each of those which (i) were made in the ordinary
course of business and (ii) either (A) are terminable by Olas and/or Subsidiary,
as the case may be (and will be terminable by Olas and/or Subsidiary, as the
case may be) without liability, expense or other obligation on thirty (30) days'
notice or less, or (B) may be anticipated to involve aggregate payments to or by
Olas and/or Subsidiary of $5,000 (or the equivalent) or less calculated over the
full term thereof, and (C) are not otherwise material to the Olas Business.
Complete and correct copies of all contracts, commitments, obligations and
undertakings set forth on any of the Schedules delivered pursuant to this
Agreement have been furnished by Olas to eDiets. Except as expressly stated on
any of such Schedules, (1) each of the agreements listed on SCHEDULE 3.23 is in
full force and effect, no person or entity which is a party thereto or otherwise
bound thereby is in material default thereunder, and no event, occurrence,
condition or act exists which does (or which with the giving of notice or the
lapse of time or both would) give rise to a material default or right of
cancellation, acceleration or loss of contractual benefits thereunder; (2) there
has been no threatened cancellations thereof, and there are no outstanding
disputes thereunder; and (3) none of them is materially burdensome to Olas or
Subsidiary.
-24-
<PAGE>
3.24. SUPPLIERS. SCHEDULE 3.24 sets forth a complete and correct list, as of the
date hereof, of the 10 largest suppliers of the Olas Business and the amount of
goods and services purchased from each such supplier. There are no (i)
threatened cancellations by the aforesaid suppliers with respect to the Olas
Business, (ii) outstanding disputes by such suppliers with Olas, Subsidiary and
the Olas Business, or (iii) any adverse changes in the business relationship
between the Olas Business and any such supplier. The aforesaid suppliers will
continue their respective relationships with the Olas Business after the Closing
Date on substantially the same basis as now exists.
3.25. APPROVALS/CONSENTS. Except as set forth on SCHEDULE 3.25, each of Olas and
Subsidiary currently holds all governmental and administrative consents,
permits, appointments, approvals, licenses, certificates and franchises which
are necessary for the operation of the Olas Business, all of which are in full
force and effect. SCHEDULE 3.25 is a complete and correct list of all such
governmental and administrative consents, permits, appointments, approvals,
licenses, certificates and franchises. No material violations of the terms
thereof have heretofore occurred or are known by Olas or the Subsidiary to exist
as of the date of this Agreement.
3.26. INFORMATION AS TO OLAS AND SUBSIDIARY. None of the representations or
warranties made by Olas or the Subsidiary in this Agreement is, or contained in
any of the documents to be executed and delivered hereto will be, false or
misleading with respect to any material fact, or omits to state any material
fact necessary in order to make the statements therein contained not misleading.
3.27. STOCK ISSUABLE IN MERGER. The Share Consideration, when issued, will be
duly authorized and validly issued, fully paid and non- assessable, will be
delivered hereunder free and clear of any liens, adverse claims, security
interests, pledges, mortgages, charges and encumbrances of any nature
whatsoever, except that the Share Consideration shall not be registered under
the Securities Act and therefore will be "restricted securities", as such term
is defined in the rules and regulations of the Securities and Exchange
Commission (the "SEC") promulgated under the Securities Act, and will be subject
to restrictions on transfers pursuant to such rules and regulations. Olas has
reserved an adequate number of shares of Olas Common Stock to enable it to issue
(i) the Share Consideration which includes the Olas Common Stock issuable under
the options convertible pursuant to section 1.6(b) hereof and (ii) any other
shares of Olas Common Stock underlying any options or warrants of Olas granted
pursuant to this Agreement.
-25-
<PAGE>
4. INDEMNIFICATION.
4.1. INDEMNIFICATION BY THE SHAREHOLDER. The Shareholder, hereby indemnifies and
agrees to defend and hold harmless each of Olas and Subsidiary from and against
any and all losses, obligations, deficiencies, liabilities, claims, damages,
costs and expenses (including, without limitation, the amount of any settlement
entered into pursuant hereto, and all reasonable legal and other expenses
incurred in connection with the investigation, prosecution or defense of any
matter indemnified pursuant hereto) which either of them may sustain, suffer or
incur and which arise out of, are caused by, relate to, or result or occur from
or in connection any misrepresentation of a material fact contained in any
representation of eDiets and/or the Shareholder contained in, or the breach by
eDiets, or the Shareholder of any warranty or covenant made by any one or all of
them herein or in any eDiets Document and/or any Shareholder Document. The
foregoing indemnification shall also apply to direct claims by Olas and/or
Subsidiary against the Shareholder.
4.2. INDEMNIFICATION BY OLAS AND SUBSIDIARY. Each of Olas and Subsidiary,
jointly and severally, indemnifies and agrees to defend and hold harmless each
of eDiets (before the Effective Date) and the Shareholder from and against any
and all losses, obligations, deficiencies, liabilities, claims, damages, costs
and expenses (including, without limitation, the amount of any settlement
entered into pursuant hereto, and all reasonable legal and other expenses
incurred in connection with the investigation, prosecution or defense of any
matter indemnified pursuant hereto), which it or he may sustain, suffer or incur
and which arise out of, are caused by, relate to, or result or occur from or in
connection with any misrepresentation of a material fact contained in any
representation of Olas and/or Subsidiary contained herein or in or the breach by
Olas or Subsidiary of any warranty or covenant made by either or both of them
herein or in any Olas Document. The foregoing indemnification shall also apply
to direct claims by eDiets or the Shareholder against Olas and/or Subsidiary.
4.3. THIRD PARTY CLAIMS. If a claim by a third party is made against any party
or parties hereto and the party or parties against whom said claim is made
intends to seek indemnification with respect thereto under sections 4.1 or 4.2,
the party or parties seeking such indemnification shall promptly notify the
indemnifying party or parties, in writing, of such claim; provided, however,
that the failure to give such notice shall not affect the rights of the
indemnified party or parties hereunder except to the extent that such failure
materially and adversely affects the indemnifying party or parties due to the
inability to timely defend such action. The indemnifying party or parties shall
have ten (10) business days after said notice is given to elect, by written
notice given to the indemnified party or parties, to undertake, conduct and
control, through counsel of
-26-
<PAGE>
their own choosing (subject to the consent of the indemnified party or parties,
such consent not to be unreasonably withheld) and at their sole risk and
expense, the good faith settlement or defense of such claim, and the indemnified
party or parties shall cooperate with the indemnifying parties in connection
therewith; provided: (a) all settlements require the prior reasonable
consultation with the indemnified party and the prior written consent of the
indemnified party, which consent shall not be unreasonably withheld, and (b) the
indemnified party or parties shall be entitled to participate in such settlement
or defense through counsel chosen by the indemnified party or parties, provided
that the fees and expenses of such counsel shall be borne by the indemnified
party or parties. So long as the indemnifying party or parties are contesting
any such claim in good faith, the indemnified party or parties shall not pay or
settle any such claim; provided, however, that notwithstanding the foregoing,
the indemnified party or parties shall have the right to pay or settle any such
claim at any time, provided that in such event they shall waive any right of
indemnification therefor by the indemnifying party or parties. If the
indemnifying party or parties do not make a timely election to undertake the
good faith defense or settlement of the claim as aforesaid, or if the
indemnifying parties fail to proceed with the good faith defense or settlement
of the matter after making such election, then, in either such event, the
indemnified party or parties shall have the right to contest, settle or
compromise (provided that all settlements or compromises require the prior
reasonable consultation with the indemnifying party and the prior written
consent of the indemnifying party, which consent shall not be unreasonably
withheld) the claim at their exclusive discretion, at the risk and expense of
the indemnifying parties.
4.4. ASSISTANCE. Regardless of which party is controlling the defense of any
claim, each party shall act in good faith and shall provide reasonable documents
and cooperation to the party handling the defense.
5. COVENANTS
5.1. INVESTIGATION.
(a) Between the date hereof and the Closing Date, Olas
and/or Subsidiary, on the one hand, and eDiets and the Shareholder, on the other
hand, may, directly and through their representatives, make such investigation
of each other corporate party and their respective businesses and assets of the
other corporate party or parties as each deems necessary or advisable (the
entity and/or its representatives making such investigation being the
"Investigating Party"), but such investigation shall not affect any of the
representations and warranties contained herein or in any instrument or document
delivered pursuant hereto. In furtherance of the foregoing, the Investigating
Party shall have reasonable access, during normal business hours after
-27-
<PAGE>
the date hereof, to all properties, books, contracts, commitments and records of
each other, and shall furnish to the other and their representatives such
financial and operating data and other information as may from time to time be
reasonably requested relating to the transactions contemplated by this
Agreement. Each of Olas and Subsidiary, on the one hand, and eDiets and the
Shareholder, on the other, and the respective management, employees, accountants
and attorneys of the corporate parties shall cooperate fully with the
Investigating Party in connection with such investigation.
(b) All confidential information of a party to which an
Investigating Party obtains access shall be deemed "Confidential Information."
As used in this section 5.1, the term "Confidential Information" shall mean any
and all information (verbal and written) relating to the eDiets Business or the
Olas Business, including, but not limited to, information relating to: identity
and description of goods and services used; purchasing; costs; pricing; sources;
machinery and equipment; technology; research, test procedures and results;
customers and prospects; marketing; and selling and servicing;
(c) From and after the date hereof, the parties agree not
to, at any time, directly or indirectly, use, communicate, disclose or
disseminate any Confidential Information in any manner whatsoever except as
required by applicable law.
5.2. NONCOMPETE COVENANT.
(a) The Shareholder shall not, for a two (2) year period
commencing on the Effective Date, directly or indirectly (A) engage or become
interested in any business (whether as owner, manager, operator, licensor,
licensee, lender, partner, stockholder, joint venturer, employee, consultant or
otherwise) engaged in any business then engaged in by Olas, or the Surviving
Corporation in any of the areas in which Olas or the Surviving Corporation then
conducts business or (B) take any other action which constitutes an interference
with or a disruption of the Surviving Corporation's operation of the eDiets
Business or the Surviving Corporation's use, ownership and enjoyment of the
eDiets Assets.
(b) For purposes of clarification, but not of limitation,
the Shareholder acknowledges and agrees that the provisions of section 5.2(a)
above shall serve as a prohibition against him, during the period described
therein, directly or indirectly, hiring, offering to hire, enticing away or in
any other manner persuading or attempting to persuade any officer, employee,
agent, lessor, lessee, licensor, licensee, customer, prospective customer or
supplier of the eDiets Business to discontinue or alter his or its relationship
with the eDiets Business.
-28-
<PAGE>
(c) The parties hereto hereby acknowledge and agree that
(i) Olas and/or the Surviving Corporation would be irreparably injured in the
event of a breach by the Shareholder of any of his obligations under this
section 5.2, (ii) monetary damages would not be an adequate remedy for any such
breach, and (iii) eDiets, Olas and/or the Surviving Corporation shall be
entitled to injunctive relief, in addition to any other remedy which it may
have, in the event of any such breach. It is hereby also agreed that the
existence of any claims which the Shareholder may have against Olas or the
Subsidiary, whether under this Agreement or otherwise, shall not be a defense to
the enforcement by Olas and/or the Surviving Corporation of any of the rights
under this section 5.2.
(d) It is the intent of the parties hereto that the
covenants contained in this Agreement shall be enforced to the fullest extent
permissible under the laws of and public policies of each jurisdiction in which
enforcement is sought (the Shareholder hereby acknowledges that said
restrictions are reasonably necessary for the protection of Olas and
Subsidiary). Accordingly, if any one or more of the provisions of section 5.2
shall be adjudicated to be invalid or unenforceable for any reason whatsoever,
said provision shall be (only with respect to the operation thereof in the
particular jurisdiction in which such adjudication is made) construed by
limiting and reducing it so as to be enforceable to the extent permissible.
(e) The provisions of this section 5.2 shall be
in addition to, and not in lieu of, any other obligations with respect to the
subject matter hereof, whether arising as a matter of contract, by law or
otherwise, including, but not limited to, any obligations which may be contained
in any employment or consulting agreements between the Surviving Corporation and
the Shareholder.
5.3. CONSUMMATION OF TRANSACTION. Each of the parties shall use its best efforts
to cause all conditions precedent to his or its obligations (and to the
obligations of the other parties hereto to consummate the transactions
contemplated hereby) to be satisfied, including, but not limited to, using all
reasonable efforts to obtain all required (if so required by this Agreement)
consents, waivers, amendments, modifications, approvals, authorizations,
novations and licenses; provided, however, that nothing herein contained shall
be deemed to modify any of the absolute obligations imposed upon any of the
parties hereto under this Agreement or any agreement executed and delivered
pursuant hereto.
-29-
<PAGE>
5.4. COOPERATION/FURTHER ASSURANCES.
(a) Each of the parties hereto shall cooperate with the
other parties hereto in preparing and filing any notices, applications, reports
and other instruments and documents which are required by, or which are
desirable in the reasonable opinion of any of the parties hereto, or their
respective legal counsel, in respect of, any statute, rule, regulation or order
of any governmental or administrative body in connection with the transactions
contemplated by this Agreement.
(b) Each of the parties hereto hereby further agrees to
execute, acknowledge, deliver, file and/or record, or cause such other parties
to the extent permitted by law to execute, acknowledge, deliver, file and/or
record such other documents as may be required by this Agreement and as Olas
and/or Subsidiary, on the one hand, and/or eDiets and/or the Shareholder, on the
other, or their respective legal counsel may reasonably require in order to
document and carry out the transactions contemplated by this Agreement.
5.5. ACCURACY OF REPRESENTATIONS. Each party hereto agrees that prior to the
Effective Date he or it will enter into no transaction and take no action, and
will use his or its best efforts to prevent the occurrence of any event (but
excluding events which occur in the ordinary course of business and events over
which such party has no control), which would result in any of his or its
representations, warranties or covenants contained in this Agreement or in any
agreement, document or instrument executed and delivered by him or it pursuant
hereto not to be true and correct, or not to be performed as contemplated, at
and as of the time immediately after the occurrence of such transaction or
event.
5.6. NOTIFICATION OF CERTAIN MATTERS. eDiets and the Shareholder shall give
prompt notice to Olas and Subsidiary, and Olas or Subsidiary shall give prompt
notice to eDiets and the Shareholder, as the case may be, of (a) the occurrence,
or nonoccurrence, or any event the occurrence, or nonoccurrence, of which would
be likely to cause any representation contained in this Agreement to be untrue
or inaccurate in any material respect at or prior to the Effective Date and (b)
any material failure of eDiets and/or the Shareholder, on the one hand, and of
Olas and/or Subsidiary, on the other, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by him or it hereunder;
provided, however, that the delivery of any notice pursuant to this section 5.6
shall not limit or otherwise affect the remedies available hereunder to the
party receiving such notice.
5.7. BROKER. Each of Olas, Subsidiary, eDiets,
and the Shareholder represents and warrants to the other parties that, except
for Whale Securities Co., L.P. ("Whale"), no broker
-30-
<PAGE>
or finder was engaged or dealt with in connection with any of the transactions
contemplated by this Agreement, and each of the parties shall indemnify and hold
the other harmless from and against any and all claims or liabilities asserted
by or on behalf of any alleged broker or finder for broker's fees, finder's
fees, commissions or like payments.
5.8. NO SOLICITATION OF TRANSACTIONS. Prior to the earlier of the Effective Date
or the termination of this Agreement, neither eDiets nor the Shareholder will,
directly or indirectly, through any director, officer, employee, investment
banker, financial advisor, attorney, accountant or other agent or representative
of eDiets otherwise, solicit, initiate or encourage the submission of proposals
or offers from any person relating to any acquisition or purchase of all or
(other than in the ordinary course of business) any portion of the eDiets Common
Stock, the eDiets Assets or the eDiets Business of, or any equity interest in,
eDiets, or any business combination with eDiets (other than the Merger
contemplated hereby) and other than with Olas and/or Subsidiary, participate in
any negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing. eDiets and the Shareholder shall immediately cease and
cause to be terminated any existing discussions or negotiations with any parties
conducted heretofore with respect to any of the foregoing (other than in respect
of the transaction contemplated hereby). eDiets and the Shareholder shall
promptly notify Olas if any such proposal or offer, or any inquiry or contact
with any person with respect thereto, is made and shall, in any such notice to
Olas, indicate in reasonable detail the identity of the offeror and the terms
and conditions of any proposal or offer.
5.9. PROHIBITED CONDUCT OF EDIETS AND SHAREHOLDER. Each of eDiets and the
Shareholder, jointly and severally, covenants and agrees that, during the period
from the date hereof to the Effective Date, except pursuant to the terms hereof
or unless Olas shall otherwise agree in writing, the eDiets Business shall be
conducted only, and eDiets shall not take any action except, in the ordinary
course of business and in a manner consistent with past practice and in
compliance with applicable laws; and eDiets shall use its best efforts to
preserve intact the eDiets Assets, the eDiets Business and the business
organization of eDiets, to keep available the services of the present officers,
employees and consultants of eDiets, and to preserve the present relationships
of eDiets with customers, suppliers and other persons with whom eDiets has
business relations. By way of illustration, and not limitation, neither eDiets
nor the Shareholder shall, between the date of this Agreement and the Effective
Date, unless specifically contemplated by this Agreement, directly or
indirectly, do or
-31-
<PAGE>
propose or commit to do, any of the following without the prior written consent
of Olas:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of the eDiets Common Stock, or
(ii) split, combine or reclassify any of the eDiets Common Stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the eDiets Common Stock, or otherwise;
(b) authorize for issuance, issue, deliver, sell or agree
to commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
pledge or otherwise encumber, any shares of eDiets Common Stock, any other
voting securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities convertible securities or
any other securities or equity equivalents;
(c) (i) increase the compensation payable or to become
payable to any officer, director, employees or consultant of eDiets, except
pursuant to the terms of contracts, policies or benefit arrangements in effect
on the date hereof, or (ii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director, officer, other
employee or consultant of eDiets or any of its subsidiaries, except pursuant to
the terms of contracts, policies and benefit arrangements in effect on the date
hereof, or (iii) establish, adopt, enter into or amend any collective bargaining
(other than in accordance with past practice), bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers,
employees or consultants of eDiets;
(d) amend the Certificate of Incorporation, By-Laws or
other comparable charter or organizational documents of eDiets or alter through
merger, liquidation, reorganization, restructuring, or in any other fashion, the
corporate structure or ownership of eDiets;
(e) acquire, or agree to acquire, (i) by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or corporation, partnership,
joint venture, association or other business organization or division thereof,
or (ii) any assets that are material, individually or in the aggregate, to
eDiets, except purchases consistent with past practice;
(f) sell, lease, license, mortgage or otherwise encumber
or subject to any lien, security interest,
-32-
<PAGE>
pledge or encumbrance or otherwise dispose of any of the eDiets Assets, except
sales in the ordinary course of business consistent with past practice;
(g) permit eDiets to incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
eDiets, guarantee any debt securities of another person, or enter into any
arrangement having the economic effect of any of the foregoing, except for
short- term borrowings incurred in the ordinary course of business consistent
with past practice, or (ii) permit the Shareholder to issue any guaranties of
any indebtedness of eDiets;
(h) except in the ordinary course of business, enter into
any agreement, contract, commitment, involving a commitment on the part of
eDiets to purchase, sell, lease or otherwise dispose of assets or require
payment by eDiets in excess of $25,000;
(i) make any capital expenditures in excess of $25,000;
(j) adopt a plan of complete or partial liquidation of
eDiets or resolutions providing for or authorizing such a liquidation or the
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization of eDiets;
(k) cause eDiets to recognize any labor union (unless
legally required to do so) or enter into or amend any collective bargaining
agreement;
(l) change any accounting principles used by eDiets,
unless required by the Financial Accounting Standards Board;
(m) make any tax election of, or settle, compromise any
income tax liability of, or file any federal income tax return prior to the last
day (including extensions) prescribed by law, in the case of any of the
foregoing, material to the business, financial condition or results of the
operations of eDiets and its subsidiaries, if any, taken as a whole;
(n) settle or compromise any litigation in which eDiets
is a defendant (whether or not commenced prior to the date of this Agreement) or
settle, pay or compromise any claims not required to be paid, which payments are
individually in an amount in excess of $5,000 and in the aggregate in an amount
in excess of $25,000; and
(o) authorize any of, or commit or agree to take any of,
the foregoing actions.
-33-
<PAGE>
5.10. PROHIBITED CONDUCT OF OLAS. Olas covenants and agrees that, during the
period from the date hereof to the Effective Date, except pursuant to the terms
hereof or unless eDiets shall otherwise agree in writing, the Olas Business
shall be conducted only, and Olas shall not take any action except, in the
ordinary course of business and in a manner consistent with past practice and in
compliance with applicable laws; and Olas shall use its best efforts to preserve
intact the Olas Assets, the Olas Business and the business organization of Olas,
to keep available the services of the present officers, employees and
consultants of Olas, and to preserve the present relationships of Olas with
customers, suppliers and other persons with whom Olas has business relations. By
way of illustration, and not limitation, Olas shall not, between the date of
this Agreement and the Effective Date, unless specifically contemplated by this
Agreement, directly or indirectly, do or propose or commit to do, any of the
following without the prior written consent of eDiets:
(a) (i) declare, set aside or pay any dividends on, or
make any other distributions in respect of, any of the Olas Common Stock, or
(ii) split, combine or reclassify any of the Olas Common Stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for shares of the Olas Common Stock, or otherwise;
(b) authorize for issuance, issue, deliver, sell or agree
to commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
pledge or otherwise encumber, any shares of Olas Common Stock, any other voting
securities or any securities convertible into, or any rights, warrants or
options to acquire, any such shares, voting securities convertible securities or
any other securities or equity equivalents;
(c) (i) increase the compensation payable or to become
payable to any officer, director, employees or consultant of Olas, except
pursuant to the terms of contracts, policies or benefit arrangements in effect
on the date hereof, or (ii) grant any severance or termination pay to, or enter
into any employment or severance agreement with, any director, officer, other
employee or consultant of Olas or any of its subsidiaries, except pursuant to
the terms of contracts, policies and benefit arrangements in effect on the date
hereof, or (iii) establish, adopt, enter into or amend any collective bargaining
(other than in accordance with past practice), bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers,
employees or consultants of Olas;
-34-
<PAGE>
(d) amend the Certificate of Incorporation, By-Laws or
other comparable charter or organizational documents of Olas or alter through
merger, liquidation, reorganization, restructuring, or in any other fashion, the
corporate structure or ownership of Olas;
(e) acquire, or agree to acquire, (i) by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or corporation, partnership,
joint venture, association or other business organization or division thereof,
or (ii) any assets that are material, individually or in the aggregate, to
eDiets, except purchases consistent with past practice;
(f) sell, lease, license, mortgage or otherwise encumber
or subject to any lien, security interest, pledge or encumbrance or otherwise
dispose of any of the Olas Assets, except sales in the ordinary course of
business consistent with past practice;
(g) permit Olas to incur any indebtedness for borrowed
money or guarantee any such indebtedness of another person, issue or sell any
debt securities or warrants or other rights to acquire any debt securities of
Olas, guarantee any debt securities of another person, or enter into any
arrangement having the economic effect of any of the foregoing, except for
short- term borrowings incurred in the ordinary course of business consistent
with past practice;
(h) except as set forth on Schedule 5.10(h) (i) enter
into any agreement, contract, commitment, involving a commitment on the part of
Olas to purchase, sell, lease or otherwise dispose of assets or require payment
by Olas in excess of $15,000 or (ii) deplete its cash such that there is less
than $400,000 in its bank account
(i) make any capital expenditures in excess of $15,000;
(j) adopt a plan of complete or partial liquidation of
Olas or resolutions providing for or authorizing such a liquidation or the
dissolution, merger, consolidation, restructuring, recapitalization or
reorganization of Olas;
(k) cause Olas to recognize any labor union (unless
legally required to do so) or enter into or amend any collective bargaining
agreement;
(l) change any accounting principles used by Olas, unless
required by the Financial Accounting Standards Board;
-35-
<PAGE>
(m) make any tax election of, or settle, compromise any
income tax liability of, or file any federal income tax return prior to the last
day (including extensions) prescribed by law, in the case of any of the
foregoing, material to the business, financial condition or results of the
operations of eDiets and its subsidiaries, if any, taken as a whole;
(n) settle or compromise any litigation in which Olas is
a defendant (whether or not commenced prior to the date of this Agreement) or
settle, pay or compromise any claims not required to be paid, which payments are
individually in an amount in excess of $5,000 and in the aggregate in an amount
in excess of $25,000; and
(o) authorize any of, or commit or agree to take any of,
the foregoing actions.
5.11. TAX COVENANT. Each of the parties hereto agree to use all reasonable
efforts to cause the merger to be treated as a tax-free reorganization within
the meaning of section 368(a)(ii)(E) of the Code and corresponding provisions of
state income tax law, and the parties agree to file all reports and statements
with the IRS and state tax authorities necessary to reflect such status and not
to take any position thereon or otherwise that is or would be inconsistent with
such treatment.
5.12. PAYMENT OF TAXES UPON MERGER. The Shareholder shall be responsible for,
and shall pay, any and all sales, use, purchase, transfer and similar taxes
(real estate or otherwise), if any, in respect of the Shareholders' securities
arising out of the transfer of eDiets Common Stock pursuant to the Merger.
5.13. OLAS REVERSE STOCK SPLIT. Olas shall amend its certificate of
incorporation and by-laws in substantially the form of Exhibit D to effect an
approximately 7.5 for 1 reverse stock split, such that there will be 1,200,000
shares of Olas Common Stock issued and outstanding (including 150,000 Olas
Common Stock shares to be issued to Whale pursuant to section 6.2(l) hereof, but
excluding (a) any shares of Olas Common Stock underlying options to be issued to
Isaac Kier pursuant to section 6.2(m) hereof, (b) any shares of Olas Common
Stock issued in connection with the consummation of a private placement pursuant
to section 6.2(n) hereof), and (c) the 300,000 shares of Olas Common Stock
underlying the options to be granted to each of David, Isaac Kier and Matthew
Gohd in consideration for their services on the executive committee of the Board
of Directors of Olas.
5.14. CONVERSION OF CLASS B STOCK. Olas shall convert all of its outstanding
Class B Stock into Class A Stock prior to the Effective Date; and simultaneously
with the reverse
-36-
<PAGE>
stock split shall convert all Class A Stock into Olas Common Stock.
5.15. DIRECTORS OF OLAS. Olas shall cause after the execution hereof, (i) its
Board of Directors to amend the By-Laws of Olas to increase the number of
directors of Olas to five (5) and (ii) the appointment as directors of Olas, the
two additional directors selected by David. In addition, each of the parties
hereto shall use its best efforts to cause the re-election of Mr. Kier for the
ensuing year until the earlier to occur of (i) an initial public offering of
Olas or (ii) the second anniversary of the Effective Date.
5.16. COMMISSION FILINGS. As soon as is practicable after the Effective Date,
Olas shall, with the cooperation of eDiets, prepare and file with the SEC a
registration statement under the Securities Act, relating to 1,000,000 shares of
the Share Consideration (as amended or supplemented, the "Registration
Statement"). The Registration Statement shall comply as to form in all material
respects with the Securities Act and the rules and regulations thereunder. The
Registration Statement shall be kept effective at least for so long as any of
such 1,000,000 shares of Share Consideration remain outstanding.
5.17. DIRECTORS AND OFFICERS INSURANCE POLICY. The Board of Directors shall
cause Olas after the Effective Date to obtain and maintain claims made Directors
and Officer's Insurance Policy with coverage limits not less than $5,000,000
which shall cover all actions of the Isaac Kier in his capacity as a director
and officer prior to the Effective Date. The Shareholder shall vote and cause
his nominees to vote FOR any vote taken to obtain such insurance.
5.18. COMPENSATION COMMITTEE OF OLAS BOARD OF DIRECTORS. Promptly after the
Effective Date, the Board of Directors of Olas shall create a compensation
committee of two independent directors of Olas.
5.19. NAME CHANGE. Promptly after the Effective Date, the Board of Directors of
Olas shall cause Olas to further amend its certificate of incorporation to
change its name to eDiets.com, Inc. and to change the name of the surviving
company to EDiets, Inc.
6. CONDITIONS OF MERGER.
6.1. CONDITIONS TO OBLIGATIONS OF OLAS AND SUBSIDIARY TO EFFECT THE MERGER. The
respective obligations of Olas and Subsidiary to effect the Merger shall be
subject to the fulfillment at or prior to the Effective Date of the following
conditions any or all of which may be waived by such party at its sole
discretion:
-37-
<PAGE>
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of each of eDiets and the Shareholder contained in any Shareholder
Document or eDiets Document delivered by either or both of them shall have been
true when made, and, in addition, shall be true in all material respects on and
as of the Closing Date with the same force and effect as though made on and as
of the Closing Date.
(b) PERFORMANCE OF AGREEMENTS. Each of eDiets and the Shareholder, as
the case may be, shall have performed, observed and complied in all material
respects with all of their obligations, covenants and agreements, and shall have
satisfied or fulfilled in all material respects conditions contained in any
Shareholder Document or eDiets Document and required to be performed, observed
or complied with, or to be satisfied or fulfilled, by eDiets or the Shareholder
at or prior to the Effective Date.
(c) RESULTS OF INVESTIGATION. Olas and Subsidiary shall be satisfied
with the results of any investigation of the business and affairs of eDiets
undertaken by them pursuant to section 5.1 hereof.
(d) BOARD AUTHORIZATIONS. Approval by the Board of Directors and the
Shareholder of eDiets and the Board of Directors and shareholders of Olas, if
necessary, with respect to the execution and delivery of, and the performance by
each of eDiets and Olas of its respective obligations under, this Agreement and
the transactions contemplated hereunder.
(e) PRIVATE PLACEMENT. Olas shall have consummated a private placement
financing yielding gross proceeds in the minimum amount of $5,000,000, pursuant
to the letter of intent with Whale attached hereto as EXHIBIT E.
(f) OPINION OF COUNSEL FOR EDIETS. Olas and Subsidiary shall have
received an opinion of Nason, Yeager, Gerson, White & Lioce, P.A., counsel for
eDiets and the Shareholder, dated the Closing Date, in substantially the form of
EXHIBIT F hereto.
(g) LITIGATION. No order of any court or administrative agency shall be
in effect which restrains or prohibits the transactions contemplated hereby, and
no claim, suit, action, inquiry, investigation or proceeding in which it will
be, or it is, sought to restrain, prohibit or change the terms of or obtain
damages or other relief in connection with this Agreement or any of the
transactions contemplated hereby, shall have been instituted or threatened by
any person or entity, and which, in the reasonable judgment of Olas (based on
the likelihood of success and material consequences of such claim, suit, action,
inquiry or proceeding), makes it inadvisable to proceed with the consummation of
such transactions.
-38-
<PAGE>
(h) CONSENTS AND APPROVALS. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments or modifications to existing agreements with
third parties) (the "Consents") required as a precondition to the performance by
eDiets and the Shareholder of their respective obligations hereunder and under
any agreement delivered pursuant hereto, or which in Olas's reasonable judgment
are necessary to continue unimpaired, subsequent to the Effective Date, any
rights in and to the eDiets Assets and/or the eDiets Business which could be
impaired by the Merger, shall have been duly obtained and shall be in full force
and effect.
(i) DATE OF CONSUMMATION. The Merger shall have been consummated on or
prior to September 30, 1999, or such later date as the parties shall agree by a
written instrument signed by all of them.
(j) VALIDITY OF TRANSACTIONS. The validity of all transactions
contemplated hereby, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by eDiets and
the Shareholder pursuant hereto, shall be satisfactory in all material respects
to Olas and its counsel.
(k) NO MATERIAL ADVERSE CHANGE. Except as otherwise provided by this
Agreement, there shall not have occurred after the date hereof, in the
reasonable judgment of Olas, a material adverse change in the financial or
business condition of eDiets, taken as a whole.
(l) Tax Free Nature. The Merger shall be treated as a tax free
re-organization under the Code.
(m) Humble Employment Agreement. Olas shall have entered into an
employment agreement with David in substantially the form attached hereto as
Exhibit G.
(n) CLOSING CERTIFICATE. Each of eDiets and the Shareholder shall have
furnished Olas and Subsidiary with certificates, all dated the Closing Date, to
the effect that all the representations and warranties of eDiets and the
Shareholder are true and complete and all covenants to be performed by eDiets or
the Shareholder at or as of the Closing have been performed and conditions to be
satisfied at or as of the Closing have been waived or satisfied.
6.2. CONDITIONS TO OBLIGATIONS OF EDIETS AND THE SHAREHOLDER TO EFFECT THE
MERGER. The obligations of eDiets and the Shareholder to effect the Merger shall
be subject to the fulfillment at or prior to the Effective Date of the following
conditions, any or all of which may be waived by such party, in its sole
discretion:
-39-
<PAGE>
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Olas and Subsidiary contained in any Olas Documents delivered by
either Olas or Subsidiary or both of them shall have been true when made, and,
in addition, shall be true in all material respects, on and as of the Closing
Date with the same force and effect as though made on and as of the Closing
Date.
(b) OPINION OF COUNSEL FOR OLAS AND SUBSIDIARY. eDiets shall have
received an opinion of Tenzer Greenblatt LLP, counsel for Olas and Subsidiary,
dated the Closing Date, in substantially the form of EXHIBIT H hereto.
(c) LITIGATION. No order of any court or administrative agency shall be
in effect which restrains or prohibits the transactions contemplated hereby, and
no claim, suit, action, inquiry, investigation or proceeding in which it will
be, or it is, sought to restrain, prohibit or change the terms of or obtain
damages or other relief in connection with this Agreement or any of the
transactions contemplated hereby, shall have been instituted or threatened by
any person or entity, and which, in the reasonable judgment of eDiets (based on
the likelihood of success and material consequences of such claim, suit, action,
inquiry or proceeding), makes it inadvisable to proceed with the consummation of
such transactions.
(d) PERFORMANCE OF AGREEMENTS. Each of Olas and Subsidiary shall have
performed, observed and complied, in all material respects, with all
obligations, covenants and agreements, and shall have satisfied or fulfilled in
all material respects all conditions contained in any Olas Document and required
to be performed, observed or complied with, or satisfied or fulfilled, by either
or both of them at or prior to the Closing Date.
(e) BOARD AUTHORIZATIONS. Approval by the Board of Directors and the
Shareholder of eDiets and the Board of Directors and shareholders of Olas, if
necessary, with respect to the execution and delivery of, and the performance by
each of eDiets and Olas of its respective obligations under, this Agreement and
the transactions contemplated hereunder.
(f) RESULTS OF INVESTIGATION. eDiets shall be satisfied with the
results of any investigation of the business and affairs of Olas undertaken by
them pursuant to section 5.1 hereof.
(g) CONSENTS AND APPROVALS. All consents, waivers, approvals, licenses
and authorizations by third parties and governmental and administrative
authorities (and all amendments and modifications to existing agreements with
third parties) required as a precondition to the performance by Olas and
Subsidiary of their respective obligations hereunder and
-40-
<PAGE>
under any agreement delivered pursuant hereto, shall have been duly obtained and
shall be in full force and effect.
(h) DATE OF CONSUMMATION. The Merger shall have been consummated on or
prior to September 30, 1999, or such later date as the parties shall agree by a
written instrument signed by all of them.
(i) VALIDITY OF TRANSACTIONS. The validity of all transactions
contemplated hereby, as well as the form and substance of all agreements,
instruments, opinions, certificates and other documents delivered by Olas and
Subsidiary pursuant hereto, shall be satisfactory in all material respects to
the Shareholder and its counsel.
(j) CONVERSION OF CLASS B STOCK. Olas shall have converted all of its
outstanding Class B Stock into Class A Stock.
(k) AMENDMENT TO CERTIFICATE OF INCORPORATION AND BY-LAWS. Each of the
Board of Directors and stockholders of Olas shall have approved amendments to
the Certificate of Incorporation and By-Laws of Olas, in substantially the form
of Exhibit D, respectively, which amendments shall provide, among other things,
for (i) the elimination of the Class A Stock and the Class B Stock and the
designation of the Olas Common Stock as the only authorized class of common
stock of Olas and (ii) an approximately 7.5 for 1 reverse stock split, such that
there will be 1,200,000 shares of Olas Common Stock issued and outstanding
(including 150,000 Olas Common Stock shares to be issued to Whale pursuant to
section 6.2(1) above, but excluding (a) any shares of Olas Common Stock
underlying options issued to Mr. Kier pursuant to section 6.2(m) above, (b) any
shares of Olas Common Stock issued in connection with the consummation of a
private placement pursuant to section 6.2(n) above, or (c) the 300,000 shares of
Olas Common Stock underlying the options to be granted to each of David, Isaac
Kier and Matthew Gohd in consideration for their services on the executive
committee of the Board of Directors of Olas.
(l) STOCK ISSUANCE TO WHALE. Olas shall have issued to Whale, Olas'
financial advisor, such number of shares of Olas Common Stock that will be equal
to 150,000 shares of Olas Common Stock after giving effect to the reverse stock
split described in section 6.2(l) below.
(m) STOCK OPTIONS. Olas shall have issued to Isaac Kier or his
designee(s) options to purchase such number of shares of Olas Common Stock that
will be equal to 32,500 shares of Olas Common Stock after giving effect to the
reverse stock split described in section 6.2(k) above, at an exercise price of
$1.425 per share.
-41-
<PAGE>
(n) PRIVATE PLACEMENT. Olas shall have consummated a private placement
financing yielding gross proceeds in the minimum amount of $5,000,000, pursuant
to the letter of intent with Whale attached hereto as EXHIBIT D.
(o) TAX FREE NATURE. The Merger shall be treated as a tax free
reorganization under the Code.
(p) HUMBLE EMPLOYMENT AGREEMENT. Olas shall have entered into an
employment agreement with David Humble in substantially the form attached hereto
as Exhibit G.
(q) KIER EMPLOYMENT AGREEMENT. Olas shall have caused Mr. Isaac Kier,
Olas' principal shareholder to execute a letter agreeing not to assert any claim
against Olas including any claim for indemnification and/or reimbursement of
attorney's fees, for any matters arising prior to the Effective Date which were
performed by him or resulted from his actions, which would not be covered by
Olas Director and Officer Insurance policy described in Section 5.17 hereof;
(r) CLOSING CERTIFICATE. Each of Olas and Subsidiary shall have
furnished eDiets with certificates, each executed by their respective
presidents, dated the Closing Date, to the effect that all the representations
and warranties of Olas or Subsidiary, as the case may be, are true and complete
in all material respects and all covenants to be performed by each of Olas or
Subsidiary, as the case may be, at or as of the Closing have been performed in
all material respects and conditions to be satisfied at or as of the Closing
have been waived or satisfied in all material respects.
7. THE CLOSING. Unless this Agreement shall have been terminated and the
transactions herein contemplated shall have been abandoned pursuant to Paragraph
8, the closing of the Merger (the "Closing") will take place at the offices of
Tenzer Greenblatt LLP as promptly as practicable (and in any event within five
business days) after satisfaction or waiver of the conditions set forth in
Paragraph 6 but in no event later than September, 30, 1999 (the "Closing Date");
or such later date as shall have been fixed by a written instrument signed by
the parties.
7.1. DELIVERIES BY OLAS AND SUBSIDIARY AT THE CLOSING. At the Closing, Olas and
Subsidiary shall deliver the following:
(a) stock certificate(s), representing the Share
Consideration registered in the name of the Shareholder;
(b) copies of (i) resolutions adopted by the Olas Board
authorizing Olas to execute and deliver the Olas Documents to which it is a
party, to perform its obligations
-42-
<PAGE>
thereunder and to effect the Merger upon the terms and subject to the conditions
set forth therein, and (ii) resolutions adopted by the board of directors of the
Subsidiary, and the written consent of the sole shareholder, authorizing
Subsidiary to execute and deliver the Subsidiary Documents to which it is a
party, to perform its obligations thereunder and to effect the Merger upon the
terms and subject to the conditions set forth therein, duly certified by the
Secretaries or Assistant Secretaries of Olas and the Subsidiary, respectively;
(c) certificates of the Secretary or Assistant Secretary of
each of Olas and Subsidiary certifying as to the incumbency and specimen
signatures of the officers of Olas and Subsidiary executing the Olas Documents
on behalf of such corporation; and
(d) confirmation, in the form of satisfactory to the
parties hereto, from the Secretary of State of the State of Delaware that the
Certificate of Merger of the Subsidiary with and into eDiets has been filed with
such Secretary of State; together with a copy of the executed form of such
agreement.
7.2. DELIVERIES BY EDIETS AND/OR THE SHAREHOLDER AT THE CLOSING. At the Closing,
eDiets and/or the Shareholder, as applicable, shall deliver to Olas and/or
Subsidiary, as the case may be, the following:
(a) stock certificate(s) representing the eDiets Common
Stock, duly executed by the proper officers of eDiets;
(b) a copy of the resolutions of the Board of Directors of
eDiets, and the written consent of the Shareholder, authorizing eDiets to
execute and deliver the eDiets Documents, to perform its obligations thereunder
and to effect the Merger upon the terms and conditions thereunder, duly
certified by the Secretary or assistant Secretary of eDiets; and
(c) certificates of the Secretary or Assistant Secretary of
eDiets certifying as to the incumbency and specimen signatures of the officers
of eDiets executing the eDiets Documents on behalf of such corporation.
7.3. OTHER DELIVERIES. In addition, the parties shall execute and deliver such
other documents as may be required by this Agreement and as either of them or
their respective counsel may reasonably require in order to document and carry
out the transactions contemplated by this Agreement.
8. TERMINATION, AMENDMENT AND WAIVER.
-43-
<PAGE>
8.1. TERMINATION. This Agreement may be terminated at any time prior to the
Effective Date:
(a) By mutual consent of the Boards of Directors of Olas,
Subsidiary and eDiets; or
(b) By Olas and Subsidiary, on the one hand, or eDiets and
the Shareholder, on the other hand, if any of the conditions precedent with
respect to the other party, as set forth in sections 6.1 and 6.2, respectively,
have not been satisfied or waived on or before the Effective Date.
(c) By Olas and Subsidiary, on the one hand, or eDiets and
the Shareholder, on the other hand, if (i) the Merger shall not have been
consummated by [September 30], 1999, or such later date as the parties shall
have fixed by written instrument signed by the parties hereto; provided,
however, that the right to terminate this Agreement under this subsection (c)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Date to occur on or before such date or (ii) a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree, ruling or other action the parties hereto shall use their
reasonable efforts to vacate), in each case permanently restraining, enjoining
or otherwise prohibiting the transactions contemplated by this Agreement.
(d) By Olas and Subsidiary, on the one hand, or by eDiets
and the Shareholder, on the other hand, if, in the reasonable judgment of Olas
and Subsidiary or eDiets and the Shareholder, as the case may be, (and provided
such parties are not then in material breach of their respective obligations
hereunder), it shall have been determined that the transaction contemplated by
this Agreement has become inadvisable or impracticable by reason of the
institution or threat by state, local or federal governmental authorities or by
any other person of material litigation or proceedings against Olas or eDiets.
(e) By Olas and Subsidiary, on the one hand, or eDiets
and the Shareholder, on the other hand, if, in the reasonable judgment of Olas
and Subsidiary or eDiets or the Shareholder, as the case may be (and provided
such parties are not then in material breach of their respective obligations
hereunder), it shall be determined that the business or assets or financial
condition of the other unrelated corporate party hereto has been materially and
adversely affected since June 30, 1999, whether by reason of changes,
developments or operations in the normal course of business or otherwise.
8.2. EFFECT OF TERMINATION. In the event of the termination of this Agreement as
provided in this Paragraph 8,
-44-
<PAGE>
this Agreement shall, forthwith become null and void and there shall be no
liability on the part of any party hereto and nothing herein shall relieve any
party from liability for any wilful breach hereof. Such termination shall not,
however, affect the obligations of the parties with respect to any Confidential
Information exchanged by the parties pursuant to section 5.1 hereof.
8.3. FEES AND EXPENSES. Olas and the Subsidiary for themselves, and eDiets for
itself and for the Shareholder, shall bear its or his own expenses in connection
with this Agreement and the transactions contemplated hereby.
8.4. WAIVER. At any time prior to the Effective Date, any party hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid if set forth in an instrument in writing
signed by the party or parties to be bound thereby.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
Each of the parties hereto hereby agrees that: (i) the representations
and warranties made by or on behalf of him or it in this Agreement or in any
document or instrument delivered pursuant hereto shall survive the Closing for a
period of one (1) year; and (ii) with respect to representations or warranties
regarding any tax matters made herein shall survive for a period of its statute
of limitations.
10. GENERAL PROVISIONS.
10.1. NOTICES. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the earlier of the date delivered or mailed if delivered personally, by
overnight courier or mailed by express, registered or certified mail (postage
prepaid, return receipt requested) or by facsimile transmittal, confirmed by
express, certified or registered mail, to the parties at the following addresses
(or at such other address for a party as shall be specified by like notice,
except that notices of changes of address shall be effective upon receipt):
If to Olas or Subsidiary: Olas, Inc.
660 Madison Avenue
New York, New York 10021
Attn: Mr. Isaac Kier
-45-
<PAGE>
with a copy to: Tenzer Greenblatt LLP
405 Lexington Avenue
New York, New York 10174
Attn: Peter Schnur, Esq.
If to eDiets or
the Shareholder: eDiets.com, Inc.
3467 Hillsboro Boulevard
Deerfield Beach, FL 33442 Attn: Mr. David Humble
with a copy to: Nason, Yeager, Gerson, White & Lioce, P.A.
1645 Palm Beach Lakes, Blvd.
West Palm Beach, FL 33401
Attn: Mark A. Pachman, Esq.
10.2. SEVERABILITY. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any rule of law, or public policy, all
other conditions and provisions of this Agreement shall nevertheless remain in
full force and effect so long as the economic or legal substance of the
transactions contemplated hereby is not affected in any manner adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the greatest extent possible.
10.3. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement, and
supersede all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof.
10.4. AMENDMENT. This Agreement may not be amended except by an instrument in
writing signed by each of the parties hereto.
10.5. SCHEDULES. All references in this Agreement to Schedules shall mean the
schedules identified in this Agreement, which are incorporated into this
Agreement and shall be deemed a part of the representations and warranties to
which they relate. To the extent a disclosure has been made by Olas, Subsidiary,
eDiets or the Shareholder on any Schedule, it shall be in writing, shall
indicate the section pursuant to which it is being delivered, and shall be
initialed by the delivering party. For purposes of this Agreement, information
which is necessary to make a given Schedule complete and accurate, but is
omitted therefrom, shall nevertheless be deemed to be contained therein if it is
contained on any other Schedule; but only if
-46-
<PAGE>
such information appears on such other Schedule in such form and detail that it
is responsive to the requirements of such given Schedule.
10.6. NO ASSIGNMENT. This Agreement shall not be assigned by operation of law or
otherwise, and any assignment shall be null and void.
10.7. GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the general corporate law of the State of Delaware without
regard to its choice of law principles. Each of Olas, Subsidiary, eDiets and the
Shareholder hereby irrevocably and unconditionally consents to submit to the
jurisdiction of the courts of the State of New York and of the United States
located in the County of New York, State of New York for any litigation arising
out of or relating to this Agreement and the transactions contemplated hereby
(and agrees not to commence any litigation relating thereto except in such
courts), waives any objection to the laying of venue of any such litigation in
such courts and agrees not to plead or claim that such litigation brought in any
such courts has been brought in an inconvenient forum.
10.8. HEADINGS. Headings in this Agreement are included herein for convenience
of reference only and shall not constitute part of this Agreement for any other
purpose.
10.9. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by the different parties hereto in separate counterparts, each of which when
so executed shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement.
-47-
<PAGE>
IN WITNESS WHEREOF, each of Olas, Subsidiary and eDiets, by their
respective officers thereunto duly authorized, and the Shareholder,
individually, have caused this Agreement to be executed as of the date first
written above.
OLAS, INC.
By: /s/ ISAAC KIER
Name: Issac Kier
Title: President
EDIETS ACQUISITION CORP.
By: /s/ ISAAC KIER
Name: Issac Kier
Title: President
EDIETS.COM, INC.
By: /s/ DAVID R. HUMBLE
Name: David R. Humble
Title: President
/s/ DAVID R. HUMBLE
DAVID R. HUMBLE
-48-
<PAGE>
EXHIBIT A
CERTIFICATE OF MERGER
OF
EDIETS ACQUISITION CORP.
INTO
EDIETS.COM, INC.
Pursuant to Section 251(c) of the General Corporation Law
EDIETS ACQUISITION CORP., an Delaware corporation, desiring to
merge into EDIETS.COM. INC., Delaware corporation, pursuant to the provisions of
Section 251(c) of the General Corporation Law of the State of Delaware, does
hereby certify as follows:
FIRST: The names and states of incorporation of each constituent
corporation are:
NAME STATE OF INCORPORATION
EDIETS.COM, INC. Delaware
EDIETS ACQUISITION CORP. Delaware
SECOND: An Agreement and Plan of Merger has been approved, adopted,
certified, executed and acknowledged by each constituent corporation in
accordance with Section 251(c) of the General Corporation Law.
<PAGE>
THIRD: The name of the surviving corporation is EDIETS.COM, INC.
FOURTH: The Certificate of Incorporation of EDIETS.COM, INC. shall be
the Certificate of Incorporation of the surviving corporation.
FIFTH: An executed copy of the Agreement and Plan of Merger is on file
at the principal place of business of the surviving corporation, 3467 Hillsboro
Blvd., Deerfield Beach, FL 33442, and a copy of the Agreement and Plan of Merger
will be furnished by the surviving corporation, on request and without cost, to
any stockholder of any constituent corporation.
IN WITNESS WHEREOF, the undersigned have caused this
Certificate to be executed this 17th day of November, 1999.
EDIETS.COM, INC.
By: /S/ DAVID R. HUMBLE
Name: David R. Humble
Title: President
EDIETS ACQUISITION CORP.
By: /S/ ISAAC KIER
Name: Isaac Kier
Title: President
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
SELF/HELP TECHNOLOGIES INC.
The undersigned does hereby form and establish a corporation under the
provisions of the General Corporation Law of the State of Delaware, and for that
purpose does certify as follows-
ARTICLE I: The name of the corporation shall be:
SELF/HELP TECHNOLOGIES INC.
(hereinafter the "corporation").
ARTICLE II: The registered office of this corporation in the State of
Delaware is Two Greenville Crossing, Suite 300A, 4001 Kennett Pike, P.O. Box
4477, Wilmington, New Castle County, Delaware 19807-0477 and its registered
agent at that address is Corporations & Companies, Inc., Two Greenville
Crossing, Suite 300A. 4001 Kennett Pike, P. 0. Box 4477, Wilmington, New Castle
County, Delaware 19607-0477.
ARTICLE III: The purpose of the corporation is to engage in any lawful
act or activity for which corporations may be organized under the General
Corporation Law of Delaware; and shall have perpetual existence.
ARTICLE IV: The amount of the authorized capital stock of this
corporation is 1,500 shares of "no par value" stock. or stock without any fixed
par value. All of the said stock is common stock of one class.
ARTICLE V: The name and address of the incorporator are: Corporation &
Companies, Inc. a Delaware corporation. Two Greenville Crossing, Suite 300A.
4001 Kennett Pike, P.O. Box 4477. Wilmington, New Castle County. Delaware
19807-0477.
ARTICLE VI: A director of the corporation shall not be liable to the
corporation or its stockholder for monetary damages for breach of fiduciary duty
as a director, except to the extent such exemption from liability or limitation
thereof is to: permitted under the General Corporation Law of the State of
Delaware as the same exists or may hereafter be amended. Any amendment,
modification or repeat of the foregoing sentence by the stockholders of the
corporation shall not adversely affect any right or protection of a director of
the corporation in respect of any act or omission occurring prior to the time of
such amendment, modification or repeal.
ARTICLE VII: The stockholders and directors shall have the power to
hold their meetings, to have an office or offices, to keep the books, documents
and papers of the corporation outside of the State of Delaware at such places as
might from time to time be designated by the by-laws or resolutions of the
directors or stockholders, except as otherwise required by the laws of Delaware.
ARTICLE VII: The undersigned, being the incorporator hereinabove named,
for the purpose of forming a corporation pursuant to the General Corporation Law
of the State of Delaware, do make this certificate, acknowledging under the
penalty of perjury, hereby declaring and certifying that this instrument is the
act and deed of Corporations & Companies, Inc. and the facts herein are true,
pursuant to 8 DEL.C. ss.103(b)(2) and accordingly have hereunto caused this
Certificate to be executed by the President of Corporations & Companies, Inc.
this 18th day of March, 1996.
CORPORATIONS & COMPANIES, INC.
BY: /s/ STEPHEN D.M. ROBINSON
IN THE PRESENCE OF: STEPHEN D.M. ROBINSON, President
Two Greenville Crossing, Suite 300A
4001 Kennett Pike
<ILLEGIBLE SIGNATURE> P.O. Box 4477
New Castle County
Wilmington, Delaware 19807-0477
<PAGE>
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT TO
CERTIFICATE OF INCORPORATION
FIRST, that by a consent of the sole stockholder and the sole member of
the Board of Directors (one and the same person) of SELF/HELP TECHNOLOGIES INC.,
a Delaware corporation (the "Corporation"), the following resolution proposing
an amendment of the Certificate of Incorporation was adopted:
RESOLVED, that the Certificate of Incorporation of the
Corporation be amended by changing Article I so that, as
amended, said Article shall be and read as follows:
ARTICLE I: The name of the corporation shall be:
ediets.com, inc."
SECOND, that said amendment was duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware.
THIRD, that the capital of the Corporation shall not be reduced under
or by reason of said amendment.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by David R. Humble, an authorized officer, this 23rd day of February,
A.D. 1999.
SELF/HELP TECHNOLOGIES, INC.,
a Delaware corporation
By: /s/ DAVID R. HUMBLE
David R. Humble, its President
<PAGE>
State of Florida
Department of State
I certify from the records of this office that SELF/HELP TECHNOLOGIES INC., is a
corporation organized under the laws of Delaware, authorized to transact
business in the State of Florida, qualified on July 11, 1996.
The document number of this corporation is F96000003507.
I further certify that said corporation has paid all fees and penalties due this
office through December 31, 1996, and its status is active.
I further certify that said corporation has not filed a Certificate of
Withdrawal.
Given under my hand and the Great Seal of
the State of Florida, at Tallahassee, the
Capital this Eleventh day of July, 1996
/s/ SANDRA B. MORTHAM
[STATE SEAL] Sandra B. Mortham
Secretary of State
<PAGE>
FLORIDA DEPARTMENT OF STATE
Sandra B. Mortham
Secretary of State
July 11, 1996
DAVID R. HUMBLE
c/o SELF/HELP TECHNOLOGIES, INC.
3467 W. HILLSBORO BLVD.
DEERFIELD BEACH, FL 33442
Qualification documents for SELF/HELP TECHNOLOGIES INC. were filed on July 11,
1996 and assigned document number F96000003507. Please refer to this number
whenever corresponding with this office.
Your corporation is now qualified and authorized to transact business in Florida
as of the file date.
The certification you requested is enclosed.
A corporation annual report will be due this office between January 1 and May 1
of the year following the calendar year of the file date. A Federal Employer
Identification (FEI) number will be required before this report can be filed. If
you do not already have an FEI number, please apply NOW with the Internal
Revenue by calling 1-800-829-3676 and requesting form SS-4.
Please be aware if the corporate address changes, it is the responsibility of
the corporation to notify this office.
Should you have any questions regarding this matter, please telephone (904)
487-6091, the Foreign Qualification/Tax Lien Section.
Michael Mays
Document Specialist
Division of Corporations Letter Number 396A00033728
Division of Corporations - P.O. BOX 6327 - Tallahassee, Florida 32314
<PAGE>
APPLICATION BY FOREIGN CORPORATION FOR AUTHORIZATION
TO TRANSACT BUSINESS IN FLORIDA
IN COMPLIANCE WITH SECTION 607.1503. FLORIDA STATUTES, THE FOLLOWING IS
SUBMITTED TO REGISTER A FOREIGN CORPORATION TO TRANSACT BUSINESS IN THE STATE OF
FLORIDA:
1. Self-help Technologies, Inc.
(Name of corporation: must include the word "INCORPORATED", "COMPANY",
"CORPORATION" or words or abbreviations of like import in language as
will clearly indicate that it is a corporation instead of a natural
person or partnership if not so contained in the name at present.)
2. Delaware 3.
(State or country under the (FEI number, if applicable)
law of which it is incorporated
4. 3/18/96 5. Perpetual
(Date of Incorporation) (Duration: Year corp. will
cease to exist or "perpetual")
6. 1996
(Date first transacted business in Florida. (SEE SECTIONS 607.1501,
607.1502, AND 817.155. F.S.)
7. 3467 W Hillsborough Blvd, Suite 2
Deerfield Beach, FL 33442
(Current mailing address)
8. FOR PROFIT SOFTWARE DEVELOPMENT
(Purpose(s) of corporation authorized in home state or country to be
carried out in the state of Florida)
9. Name and street address of Florida registered agent: (P.O. Box or Mail
Drop Box NOT acceptable)
Name: David R. Humble
Office Address: 3467 W Hillsborough Blvd, Suite 2
Deerfield Beach, Florida 33442
(zip code)
10. Registered agent's acceptance:
HAVING BEEN NAMED AS REGISTERED AGENT AND TO ACCEPT SERVICE OF PROCESS FOR THE
ABOVE STATED CORPORATION AT THE PLACE DESIGNATED IN THIS APPLICATION, I HEREBY
ACCEPT THE APPOINTMENT AS REGISTERED AGENT AND AGREE TO ACT IN THIS CAPACITY. I
FURTHER AGREE TO COMPLY WITH THE PROVISIONS OF ALL STATUTES RELATIVE TO THE
PROPER AND COMPLETE PERFORMANCE OF MY DUTIES, AND I AM FAMILIAR WITH AND ACCEPT
THE OBLIGATIONS OF MY POSITION AS REGISTERED AGENT.
/s/ DAVID R. HUMBLE
(Registered agent's signature)
11. Attached is a certificate of existence duly authenticated, not more than 90
days prior to delivery of this application to the Department of State, by the
Secretary of State or other official having custody of corporate records in the
jurisdiction under the law of which it is incorporated.
<PAGE>
12. Names and addresses of officers and/or directors: (Street address ONLY
- P.O. Box NOT acceptable)
A. DIRECTORS (Street address only - P.O. Box NOT acceptable)
Chairman: David R. Humble
Address: 2696 Emerald Way N
Deerfield Beach, FL 33446
Vice Chairman: None
Address:_____________________________________________________________________
Director:____________________________________________________________________
Address:_____________________________________________________________________
Director:____________________________________________________________________
Address:_____________________________________________________________________
B. OFFICERS (Street address only - P.O. Box NOT acceptable)
President: None
Address:_____________________________________________________________________
Vice President:______________________________________________________________
Address:_____________________________________________________________________
Secretary:___________________________________________________________________
Address:_____________________________________________________________________
Treasurer:___________________________________________________________________
Address:_____________________________________________________________________
NOTE: If necessary, you may attach an addendum to the application listing
additional officers and/or directors.
13. /s/ DAVID R. HUMBLE
(Signature of Chairman, Vice Chairman, or any other officer listed in
number 12 of the applicant)
14. DAVID R. HUMBLE, CHAIRMAN
(Typed or printed name and capacity of person signing application)
<PAGE>
EXHIBIT C
EDIETS ACQUISITION CORP.
BY-LAWS
ARTICLE I
OFFICES
1. The location of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle, and the name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
2. The Corporation shall in addition to its registered office
in the State of Delaware establish and maintain an office or offices at such
place or places as the Board of Directors may from time to time find necessary
or desirable.
ARTICLE II
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation and may be in such form as the Board of
Directors may determine. Such seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
ARTICLE III
MEETINGS OF STOCKHOLDERS
1. All meetings of the stockholders shall be held at the
principal office of the Corporation or at such other place as shall be
determined from time to time by the Board of Directors.
<PAGE>
2. The annual meeting of stockholders shall be held on such
day and at such time as may be determined from time to time by resolution of the
Board of Directors, when they shall elect by plurality vote, a Board of
Directors to hold office until the annual meeting of stockholders held next
after their election and their successors are respectively elected and qualified
or until their earlier resignation or removal. Any other proper business may be
transacted at the annual meeting.
3. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise expressly provided by statute, by
the Certificate of Incorporation or by these By-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting (except as otherwise provided by statute). At such
adjourned meeting at which the requisite amount of voting stock shall be
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
4. At all meetings of the stockholders each stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such
<PAGE>
stockholder and bearing a date not more than three years prior to said meeting,
unless such instrument provides for a longer period.
5. At each meeting of the stockholders each stockholder shall
have one vote for each share of capital stock having voting power, registered in
his name on the books of the Corporation at the record date fixed in accordance
with these By-law, or otherwise determined, with respect to such meeting. Except
as otherwise expressly provided by statute, by the Certificate of Incorporation
or by these By-laws, all matters coming before any meeting of the stockholders
shall be decided by the vote of a majority of the number of shares of stock
present in person or represented by proxy at such meeting and entitled to vote
thereat, a quorum being present.
6. Notice of each meeting of the stockholders shall be mailed
to each stockholder entitled to vote thereat not less than 10 nor more than 60
days before the date of the meeting. Such notice shall state the place, date and
hour of the meeting and, in the case of a special meeting, the purposes for
which the meeting is called.
7. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the Chief
Executive Officer, by the President or by the Board of Directors, and shall be
called by the Secretary at the request in writing of stockholders owning a
majority of the amount of the entire capital stock of the Corporation issued and
outstanding
-3-
<PAGE>
and entitled to vote. Such request by stockholders shall state the purpose or
purposes of the proposed meeting.
8. Business transacted at each special meeting shall be
confined to the purpose or purposes stated in the notice of such meeting.
9. The order of business at each meeting of stockholders shall
be determined by the presiding officer.
ARTICLE IV
DIRECTORS
1. The business and affairs of the Corporation shall be
managed under the direction of a Board of Directors, which may exercise all such
powers and authority for and on behalf of the Corporation as shall be permitted
by law, the Certificate of Incorporation or these By-laws. Each of the directors
shall hold office until the next annual meeting of stockholders and until his
successor has been elected and qualified or until his earlier resignation or
removal.
2. The Board of Directors may hold their meetings within or
outside of the State of Delaware, at such place or places as it may from time to
time determine.
3. The number of directors comprising the Board of Directors
shall be such number as may be from time to time fixed by resolution of the
Board of Directors. In case of any increase, the Board shall have power to elect
each additional director to hold office until the next annual meeting of
stockholders and until his
-4-
<PAGE>
successor is elected and qualified or his earlier resignation or removal. Any
decrease in the number of directors shall take effect at the time of such action
by the Board only to the extent that vacancies then exist; to the extent that
such decrease exceeds the number of such vacancies, the decrease shall not
become effective, except as further vacancies may thereafter occur, until the
time of and in connection with the election of directors at the next succeeding
annual meeting of the stockholders.
4. If the office of any director becomes vacant, by reason of
death, resignation, disqualification or otherwise, a majority of the directors
then in office, although less than a quorum, may fill the vacancy by electing a
successor who shall hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal.
5. The directors shall elect from among their members a
Chairman of the Board of Directors who shall serve until the next annual meeting
of directors and until his successor has been duly elected and qualify. The
Chairman shall preside at the meetings of the Board of Directors and at the
meetings of stockholders and shall perform such other duties as from time may be
assigned to him by the Board of Directors or the Executive Committee.
6. Any director may resign at any time by giving written
notice of his resignation to the Board of Directors. Any such resignation shall
take effect upon receipt thereof by the
-5-
<PAGE>
Board, or at such later date as may be specified therein. Any such notice to the
Board shall be addressed to it in care of the Secretary.
ARTICLE V
COMMITTEES OF DIRECTORS
1. By resolutions adopted by a majority of the whole Board of
Directors, the Board may designate an Executive Committee and one or more other
committees, each such committee to consist of one or more directors of the
Corporation. The Executive Committee shall have and may exercise all the powers
and authority of the Board in the management of the business and affairs of the
Corporation (except as otherwise expressly limited by statute), including the
power and authority to declare dividends and to authorize the issuance of stock,
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall have such of the powers and authority
of the Board as may be provided from time to time in resolutions adopted by a
majority of the whole Board.
2. The requirements with respect to the manner in which the
Executive Committee and each such other committee shall hold meetings and take
actions shall be set forth in the resolutions of the Board of Directors
designating the Executive Committee or such other committee.
-6-
<PAGE>
ARTICLE VI
COMPENSATION OF DIRECTORS
The directors shall receive such compensation for their
services as may be authorized by resolution of the Board of Directors, which
compensation may include an annual fee and a fixed sum for expense of attendance
at regular or special meetings of the Board or any committee thereof. Nothing
herein contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor.
ARTICLE VII
MEETINGS OF DIRECTORS; ACTION WITHOUT A MEETING
1. Regular meetings of the Board of Directors may be held
without notice at such time and place, either within or without the State of
Delaware, as may be determined from time to time by resolution of the Board.
2. Special meetings of the Board of Directors shall be held
whenever called by the President of the Corporation or the Board of Directors on
at least 24 hours' notice to each director. Except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-laws, the purpose or purposes of any such special meeting need not be
stated in such notice, although the time and place of the meeting shall be
stated.
3. At all meetings of the Board of Directors, the presence in
person of a majority of the members of the Board of Directors shall be necessary
and sufficient to constitute a quorum
-7-
<PAGE>
for the transaction of business, and, except as otherwise provided by statute,
by the Certificate of Incorporation or by these By-laws, if a quorum shall be
present the act of a majority of the directors present shall be the act of the
Board.
4. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting if all the members of the Board or such 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 of committee. Any director may participate
in a meeting of the Board, or any committee designated by the Board, by means of
a conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting pursuant to this sentence shall constitute presence in person at such
meeting.
ARTICLE VIII
OFFICERS
1. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President, a Vice
President, a Treasurer and a Secretary. The Board may also choose one or more
Assistant Secretaries and Assistant Treasurers, and such other officers as it
shall deem necessary.
Any number of offices may be held by the same person.
-8-
<PAGE>
2. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors, or in such manner as the Board may prescribe.
3. The officers of the Corporation shall hold office until
their successors are elected and qualified, or until their earlier resignation
or removal. Any officer may be at any time removed from office by the Board of
Directors, with or without cause. If the office of any officer becomes vacant
for any reason, the vacancy may be filled by the Board of Directors.
4. Any officer may resign at any time by giving written notice
of his resignation to the Board of Directors. Any such resignation shall take
effect upon receipt thereof by the Board or at such later date as may be
specified therein. Any such notice to the Board shall be addressed to it in care
of the Secretary.
ARTICLE IX
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be the chief executive
officer of the Corporation. Subject to the supervision and direction of the
Board of Directors, he shall be responsible for managing the affairs of the
Corporation. He shall have supervision and direction of all of the other
officers of the Corporation and shall have the powers and duties usually and
customarily associated with the office of chief executive officer. In the
absence of the Chairman, the Chief Executive Officer shall preside at the
meetings of the Board of Directors and at the meetings of stockholders and
-9-
<PAGE>
shall perform such other duties as from time may be assigned to him by the Board
of Directors or the Executive Committee.
ARTICLE X
PRESIDENT
The President shall be the chief operating officer of the
Corporation. Subject to the supervision and direction of the Board of Directors,
he shall be responsible for the day to day operations of the Corporation and
shall have the powers and duties usually and customarily associated with the
office of chief operating officer.
ARTICLE XI
VICE PRESIDENT
The Vice President shall have such powers and perform such
duties as may be delegated to him by the Board of Directors, the Chief Executive
Officer or the President.
ARTICLE XII
TREASURER AND ASSISTANT TREASURER
1. The Treasurer shall have the custody of the corporate funds
and securities, and shall deposit or cause to be deposited under his direction
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Chief Executive
Officer, the President or the Board of Directors, or pursuant to authority
granted by it. He shall render to the Chief Executive Officer, the President and
the Board whenever they may require it an account of all his transactions as
Treasurer and of the financial condition of
-10-
<PAGE>
the Corporation. He shall have such other powers and duties as may be delegated
to him by the Chief Executive Officer, the President or the Board.
2. The Assistant Treasurer shall, in case of the absence of
the Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall have such other powers and duties as may be delegated to him by the Chief
Executive Officer or the President.
ARTICLE XIII
SECRETARY AND ASSISTANT SECRETARY
1. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders, and shall record the minutes of all
proceedings in a book to be kept for that purpose. He shall perform like duties
for the committees of the Board when required.
2. The Secretary shall give, or cause to be given, notice of
meetings of the stockholders, of the Board of Directors and of the committees of
the Board. He shall keep in safe custody the seal of the Corporation, and when
authorized by the President, an Executive Vice President or a Vice President,
shall affix the same to any instrument requiring it, and when so affixed it
shall be attested by his signature or by the signature of an Assistant
Secretary. He shall have such other powers and duties as may be delegated to him
by the Chief Executive Officer or the President.
3. The Assistant Secretary shall, in case of the absence of
the Secretary, perform the duties and exercise the
-11-
<PAGE>
powers of the Secretary, and shall have such other powers and duties as may be
delegated to them by the Chief Executive Officer or the President.
ARTICLE XIV
CERTIFICATES OF STOCK
The certificates of stock of the Corporation shall be numbered
and shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, the
Executive Vice President or the Senior Vice President, and by the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary.
ARTICLE XV
CHECKS
All checks, drafts and other orders for the payment of money
and all promissory notes and other evidences of indebtedness of the Corporation
shall be signed by such officer or officers or such other person as may be
designated by the Board of Directors or pursuant to authority granted by it.
ARTICLE XVI
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from
time to time by resolution duly adopted by the Board of Directors.
-12-
<PAGE>
ARTICLE XVII
NOTICES AND WAIVERS
1. Whenever by statute, by the Certificate of Incorporation or
by these By-laws it is provided that notice shall be given to any director or
stockholder, such provision shall not be construed to require personal notice,
but such notice may be given in writing, by mail, by depositing the same in the
United States mail, postage prepaid, directed to such stockholder or director at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to be given at the time when the same shall be thus deposited.
Notice of regular or special meetings of the Board of Directors may also be
given to any director by telephone or by telex, telegraph or cable, and in the
latter event the notice shall be deemed to be given at the time such notice,
addressed to such director at the address hereinabove provided, is transmitted
by telex (with confirmed answerback), or delivered to and accepted by an
authorized telegraph or cable office.
2. Whenever by statute, by the Certificate of Incorporation or
by these By-laws a notice is required to be given, a written waiver thereof,
signed by the person entitled to notice, whether before or after the time stated
therein, shall be deemed equivalent to notice. Attendance of any stockholder or
director at any meeting thereof shall constitute a waiver of notice of such
meeting by such stockholder or director, as the case may be, except as otherwise
provided by statute.
-13-
<PAGE>
ARTICLE XVIII
INDEMNIFICATION
All persons who the Corporation is empowered to indemnify
pursuant to the provisions of Section 145 of the General Corporation Law of the
State of Delaware (or any similar provision or provisions of applicable law at
the time in effect) shall be indemnified by the Corporation to the full extent
permitted thereby. The foregoing right of indemnification shall not be deemed to
be exclusive of any other such rights to which those seeking indemnification
from the Corporation may be entitled, including, but not limited to, any rights
of indemnification to which they may be entitled pursuant to any agreement,
insurance policy, other by-law or charter provision, vote of stockholders or
directors, or otherwise. No repeal or amendment of this Article XVII shall
adversely affect any rights of any person pursuant to this Article XVII which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
ARTICLE XIX
ALTERATION OF BY-LAWS
The By-laws of the Corporation may be altered, amended or
repealed, and new By-laws may be adopted, by the stockholders or by the Board of
Directors.
-14-
<PAGE>
EXHIBIT D
RESTATED CERTIFICATE OF INCORPORATION
OF
OLAS, INC.
The original Certificate of Incorporation of OLAS, INC. (the
"Corporation") was filed by the Secretary of State on March 24, 1992 under the
name Lida, Inc. This Restated Certificate of Incorporation, which further amends
the Certificate of Incorporation of the Corporation, was duly adopted in
accordance with the provisions of Sections 242 and 245 of the Delaware General
Corporation Law by the affirmative vote of the holders of a majority of the
stock entitled to vote at a meeting of stockholders.
FIRST: The name of the Corporation is:
eDiets.com, Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is 1209 Orange Street, in the City of Wilmington, County
of New Castle, 19801. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any
lawful act or activity for which a corporation may be organized under the laws
of the General Corporation Law of the State of Delaware.
<PAGE>
FOURTH: The aggregate number of shares which the Corporation
has authority to issue is 21,000,000 million shares, consisting of 20,000,000
shares of Common Stock, $.001 par value per share (the "Common Stock"), and
1,000,000 shares of Preferred Stock, $.01 par value per share (the "Preferred
Stock").
The presently issued and outstanding shares of Class A Common
Stock shall be combined in the ratio of one (1) new share of Common Stock for
each 7.5618095 shares of Class A Common Stock presently issued and outstanding.
The Board of Directors is authorized at any time, and from
time to time, to provide for the issuance of shares of Preferred Stock in one or
more series, with such designation, powers, preferences and relative,
participating, optional or other special rights (including voting rights), and
qualifications, limitations or restrictions, as shall be established by
resolution of the Board of Directors in accordance with Section 151 of the
General Corporation Law.
FIFTH: Unless required by law or determined by the chairman of
the meeting to be advisable, the vote by stockholders on any matter, including
the election of directors, need not be by written ballot.
SIXTH: The Corporation reserves the right to in-crease or
decrease its authorized capital stock, or any class or series thereof, and to
reclassify the same, and to amend, alter, change or repeal any provision
contained in the Certificate of
-2-
<PAGE>
Incorporation under which the Corporation is organized or in any amendment
thereto, in the manner now or hereafter prescribed by law, and all rights
conferred upon stockholders in said Certificate of Incorporation or any
amendment thereto are granted subject to the aforementioned reservation.
SEVENTH: The Board of Directors shall have the power at any
time, and from time to time, to adopt, amend and repeal any and all By-laws of
the Corporation.
EIGHTH: 1. Indemnification
The Corporation shall, and does hereby, indemnify to the
fullest extent permitted or authorized by the Delaware General Corporation Law
or judicial or administrative decisions, as the same exists or may hereafter be
amended or interpreted differently in the future (but, in the case of any such
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Corporation to provide broader indemnification rights
than permitted prior thereto), each person (including the current and future
heirs, beneficiaries, personal representatives and estate of such person) who
was or is a party, or is threatened to be made a party, or was or is a witness,
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "Proceeding") and whether
the basis of such Proceeding is an allegation of an action in an official
capacity of such person related to the Corporation or any other capacity while
such
-3-
<PAGE>
person is serving as an officer, director, employee or agent of the Corporation,
against any liability (which for purposes of this Article shall include any
judgment, settlement, penalty or fine) or cost, charge or expense (including
attorneys' fees) asserted against him or incurred by him by reason of the fact
that such indemnified person (1) is or was a director, officer or employee of
the Corporation or (2) is or was an agent of the Corporation as to whom the
Corporation, by action of its Board of Directors, has agreed to grant such
indemnity or (3) is or was serving, at the request of the Corporation, as a
director, officer or employee of another corporation, partnership, joint
venture, trust or other enterprise (including serving as a fiduciary of any
employee benefit plan) or (4) is or was serving as an agent of such other
corporation, partnership, joint venture, trust or other enterprise described in
clause (3) hereof as to whom the Corporation, by action of its Board of
Directors, has agreed to grant such indemnity. Each director, officer, employee
or agent of the Corporation to whom indemnification rights under this Section 1
of this Article have been granted shall be referred to as an "Indemnified
Person."
Notwithstanding the foregoing, except as specified in Section
3 of this Article, the Corporation shall not be required to indemnify an
Indemnified Person in connection with a Proceeding (or any part
-4-
<PAGE>
thereof) initiated by such Indemnified Person unless such authorization for such
Proceeding (or any part thereof) was not denied by the Board of Directors of the
Corporation prior to sixty (60) days after receipt of notice thereof from such
Indemnified Person stating his intent to initiate such Proceeding and only upon
such terms and conditions as the Board of Directors may deem appropriate.
2. Advance of Costs, Charges and Expenses
Costs, charges and expenses (including attorneys' fees)
incurred by an officer, director, employee or agent who is an Indemnified Person
in defending a Proceeding shall be paid by the Corporation to the fullest extent
permitted or authorized by the Delaware General Corporation Law or judicial or
administrative decisions, as the same exists or may hereafter be amended or
interpreted differently in the future (but, in the case of any such future
amendment or interpretation, only to the extent that such amendment or
interpretation permits the Corporation to provide broader rights to advance
costs, charges and expenses than permitted prior thereto), in advance of the
final disposition of such Proceeding, upon receipt of an undertaking by or on
behalf of the Indemnified Person to repay all amounts so advanced in the event
that it shall ultimately be determined by final judicial decision that such
person is not entitled to be indemnified by the Corporation as authorized in
this Article and upon such other terms and conditions, in the case of an agent
as to whom the Corporation has agreed to grant such indemnity, as the Board of
Directors may deem appropriate. The Corporation
-5-
<PAGE>
may, upon approval of the Indemnified Person, authorize the Corporation's
counsel to represent such person in any Proceeding, whether or not the
Corporation is a party to such Proceeding. Such authorization may be made by the
Board of Directors by majority vote, including directors who are parties to such
Proceeding.
3. Procedure for Indemnification
Any indemnification or advance under this Article shall be
made promptly and in any event within sixty (60) days upon the written request
of the Indemnified Person (except in the case of a claim for an advancement of
costs, charges or expenses, in which case the applicable period shall be twenty
(20) days). The right to indemnification or advances as granted by this Article
shall be enforceable by the Indemnified Person in any court of competent
jurisdiction if the Corporation denies such request under this Article, in whole
or in part, or if no disposition thereof is made within sixty (60) days or
twenty (20) days, as may be applicable. Such Indemnified Person's costs and
expenses incurred in connection with successfully establishing his right to
indemnification or advancement of costs, charges or expenses, in whole or in
part, in any such action shall also be indemnified by the Corporation. It shall
be a defense to any such action that the claimant has not met the standard of
conduct, if any, required by the Delaware General Corporation Law or judicial or
administrative decisions, as the same exists or may hereafter be
-6-
<PAGE>
amended or interpreted differently in the future (but, in the case of any such
future amendment or interpretation, only to the extent that such amendment or
interpretation does not impose a more stringent standard of conduct than
permitted prior thereto), but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors or any committee thereof, its independent legal counsel, and its
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant or advancement for the claimant is
proper in the circumstances because he has met the applicable standard of
conduct, if any, nor the fact that there has been an actual determination by the
Corporation (including its Board of Directors or any committee thereof, its
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the claimant has not met the applicable standard of conduct.
4. Non-Exclusivity; Survival of Indemnification
The indemnification and advancement provided by this Article
shall not be deemed exclusive of any other rights to which those Indemnified
Persons may be entitled under any agreement, vote of stockholders or
disinterested directors or recommendation of counsel or otherwise, both as to
actions in such person's official capacity and as to actions in any other
-7-
<PAGE>
capacity while holding such office or position, and shall continue as to an
Indemnified Person who has ceased to be a director, officer, employee or agent
and shall inure to the benefit of the heirs, beneficiaries, personal
representatives and the estate of such person. All rights to indemnification and
advancement under this Article shall be deemed to be a contract between the
Corporation and each Indemnified Person who serves or served in such capacity at
any time while this Article is in effect. Any repeal or modification of this
Article or any repeal or modification of relevant provisions of the Delaware
General Corporation Law or any other applicable laws shall not in any way
diminish any rights to indemnification of such Indemnified Person, or the
obligations of the Corporation arising hereunder, for claims relating to matters
occurring prior to such repeal or modification.
5. Insurance
The Corporation may 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 (including serving as a fiduciary of an
employee benefit plan) against any liability asserted against him and incurred
by him in any such capacity or arising out of his status as such, whether or not
the Corporation would have the power to
-8-
<PAGE>
indemnify him against such liability under the provisions of this Article or the
applicable provisions of the Delaware General Corporation Law.
6. Savings Clause
If this Article or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Corporation shall
nevertheless indemnify and advance costs to each Indemnified Person as to costs,
charges and expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement with respect to any Proceeding, including an action by or in
the right of the Corporation, to the full extent permitted by any applicable
portion of this Article that shall not have been invalidated and as permitted by
the Delaware General Corporation Law.
NINTH: No director of the Corporation shall be personally
liable to the Corporation or its stockholders for any monetary damages for
breaches of fiduciary duty as a director, provided that this provision shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders; (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law; (iii) under Section 174 of the General Corporation Law
of the State of Delaware; or (iv) for any transaction from which the director
derived an improper personal benefit. No repeal or amendment of this Article
shall
-9-
<PAGE>
adversely affect any rights of any person pursuant to this Article which existed
at the time of such repeal or amendment with respect to acts or omissions
occurring prior to such repeal or amendment.
Dated: November 17, 1999.
OLAS, INC.
By: /S/ ISAAC KIER
Name: Isaac Kier
Title: President
-10-
<PAGE>
OLAS, INC.
BY-LAWS
ARTICLE I
OFFICES
1. The location of the registered office of the Corporation in
the State of Delaware is 1013 Centre Road, in the City of Wilmington, County of
New Castle, and the name of its registered agent at such address is The
Prentice-Hall Corporation System, Inc.
2. The Corporation shall in addition to its registered office
in the State of Delaware establish and maintain an office or offices at such
place or places as the Board of Directors may from time to time find necessary
or desirable.
ARTICLE II
CORPORATE SEAL
The corporate seal of the Corporation shall have inscribed
thereon the name of the Corporation and may be in such form as the Board of
Directors may determine. Such seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
ARTICLE III
MEETINGS OF STOCKHOLDERS
1. All meetings of the stockholders shall be held at the
principal office of the Corporation or at such other place as shall be
determined from time to time by the Board of Directors.
<PAGE>
2. The annual meeting of stockholders shall be held on such
day and at such time as may be determined from time to time by resolution of the
Board of Directors, when they shall elect by plurality vote, a Board of
Directors to hold office until the annual meeting of stockholders held next
after their election and their successors are respectively elected and qualified
or until their earlier resignation or removal. Any other proper business may be
transacted at the annual meeting.
3. The holders of a majority of the stock issued and
outstanding and entitled to vote thereat, present in person or represented by
proxy, shall constitute a quorum at all meetings of the stockholders for the
transaction of business, except as otherwise expressly provided by statute, by
the Certificate of Incorporation or by these By-laws. If, however, such majority
shall not be present or represented at any meeting of the stockholders, the
stockholders entitled to vote thereat, present in person or by proxy, shall have
power to adjourn the meeting from time to time, without notice other than
announcement at the meeting (except as otherwise provided by statute). At such
adjourned meeting at which the requisite amount of voting stock shall be
represented any business may be transacted which might have been transacted at
the meeting as originally notified.
4. At all meetings of the stockholders each stockholder having
the right to vote shall be entitled to vote in person, or by proxy appointed by
an instrument in writing subscribed by such stockholder and bearing a date not
more than three years prior to said meeting, unless such instrument provides for
a longer period.
-2-
<PAGE>
5. At each meeting of the stockholders each stockholder shall
have one vote for each share of capital stock having voting power, registered in
his name on the books of the Corporation at the record date fixed in accordance
with these By-law, or otherwise determined, with respect to such meeting. Except
as otherwise expressly provided by statute, by the Certificate of Incorporation
or by these By-laws, all matters coming before any meeting of the stockholders
shall be decided by the vote of a majority of the number of shares of stock
present in person or represented by proxy at such meeting and entitled to vote
thereat, a quorum being present.
6. Notice of each meeting of the stockholders shall be mailed
to each stockholder entitled to vote thereat not less than 10 nor more than 60
days before the date of the meeting. Such notice shall state the place, date and
hour of the meeting and, in the case of a special meeting, the purposes for
which the meeting is called.
7. Special meetings of the stockholders, for any purpose or
purposes, unless otherwise prescribed by statute, may be called by the Chief
Executive Officer, by the President or by the Board of Directors, and shall be
called by the Secretary at the request in writing of stockholders owning a
majority of the amount of the entire capital stock of the Corporation issued and
outstanding and entitled to vote. Such request by stockholders shall state the
purpose or purposes of the proposed meeting.
-3-
<PAGE>
8. Business transacted at each special meeting shall be
confined to the purpose or purposes stated in the notice of such meeting.
9. The order of business at each meeting of stockholders shall
be determined by the presiding officer.
ARTICLE IV
DIRECTORS
1. The business and affairs of the Corporation shall be
managed under the direction of a Board of Directors, which may exercise all such
powers and authority for and on behalf of the Corporation as shall be permitted
by law, the Certificate of Incorporation or these By-laws. Each of the directors
shall hold office until the next annual meeting of stockholders and until his
successor has been elected and qualified or until his earlier resignation or
removal.
2. The Board of Directors may hold their meetings within or
outside of the State of Delaware, at such place or places as it may from time to
time determine.
3. The number of directors comprising the Board of Directors
shall be such number as may be from time to time fixed by resolution of the
Board of Directors. In case of any increase, the Board shall have power to elect
each additional director to hold office until the next annual meeting of
stockholders and until his successor is elected and qualified or his earlier
resignation or removal. Any decrease in the number of directors shall take
effect at the time of such action by the Board only to the extent that vacancies
then exist; to the extent that such decrease exceeds the
-4-
<PAGE>
number of such vacancies, the decrease shall not become effective, except as
further vacancies may thereafter occur, until the time of and in connection with
the election of directors at the next succeeding annual meeting of the
stockholders.
4. If the office of any director becomes vacant, by reason of
death, resignation, disqualification or otherwise, a majority of the directors
then in office, although less than a quorum, may fill the vacancy by electing a
successor who shall hold office until the next annual meeting of stockholders
and until his successor is elected and qualified or his earlier resignation or
removal.
5. The directors shall elect from among their members a
Chairman of the Board of Directors who shall serve until the next annual meeting
of directors and until his successor has been duly elected and qualify. The
Chairman shall preside at the meetings of the Board of Directors and at the
meetings of stockholders and shall perform such other duties as from time may be
assigned to him by the Board of Directors or the Executive Committee.
6. Any director may resign at any time by giving written
notice of his resignation to the Board of Directors. Any such resignation shall
take effect upon receipt thereof by the Board, or at such later date as may be
specified therein. Any such notice to the Board shall be addressed to it in care
of the Secretary.
-5-
<PAGE>
ARTICLE V
COMMITTEES OF DIRECTORS
1. By resolutions adopted by a majority of the whole Board of
Directors, the Board may designate an Executive Committee and one or more other
committees, each such committee to consist of one or more directors of the
Corporation. The Executive Committee shall have and may exercise all the powers
and authority of the Board in the management of the business and affairs of the
Corporation (except as otherwise expressly limited by statute), including the
power and authority to declare dividends and to authorize the issuance of stock,
and may authorize the seal of the corporation to be affixed to all papers which
may require it. Each such committee shall have such of the powers and authority
of the Board as may be provided from time to time in resolutions adopted by a
majority of the whole Board.
2. The requirements with respect to the manner in which the
Executive Committee and each such other committee shall hold meetings and take
actions shall be set forth in the resolutions of the Board of Directors
designating the Executive Committee or such other committee.
ARTICLE VI
COMPENSATION OF DIRECTORS
The directors shall receive such compensation for their
services as may be authorized by resolution of the Board of Directors, which
compensation may include an annual fee and a fixed sum for expense of attendance
at regular or special meetings of the
-6-
<PAGE>
Board or any committee thereof. Nothing herein contained shall be construed to
preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor.
ARTICLE VII
MEETINGS OF DIRECTORS; ACTION WITHOUT A MEETING
1. Regular meetings of the Board of Directors may be held
without notice at such time and place, either within or without the State of
Delaware, as may be determined from time to time by resolution of the Board.
2. Special meetings of the Board of Directors shall be held
whenever called by the President of the Corporation or the Board of Directors on
at least 24 hours' notice to each director. Except as may be otherwise
specifically provided by statute, by the Certificate of Incorporation or by
these By-laws, the purpose or purposes of any such special meeting need not be
stated in such notice, although the time and place of the meeting shall be
stated.
3. At all meetings of the Board of Directors, the presence in
person of a majority of the members of the Board of Directors shall be necessary
and sufficient to constitute a quorum for the transaction of business, and,
except as otherwise provided by statute, by the Certificate of Incorporation or
by these By-laws, if a quorum shall be present the act of a majority of the
directors present shall be the act of the Board.
4. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting if all the members of the Board or such committee, as the case may be,
consent thereto in writing and the
-7-
<PAGE>
writing or writings are filed with the minutes of proceedings of the Board of
committee. Any director may participate in a meeting of the Board, or any
committee designated by the Board, by means of a conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
sentence shall constitute presence in person at such meeting.
ARTICLE VIII
OFFICERS
1. The officers of the Corporation shall be chosen by the
Board of Directors and shall be a Chief Executive Officer, a President, a Vice
President, a Treasurer and a Secretary. The Board may also choose one or more
Assistant Secretaries and Assistant Treasurers, and such other officers as it
shall deem necessary.
Any number of offices may be held by the same person.
2. The salaries of all officers of the Corporation shall be
fixed by the Board of Directors, or in such manner as the Board may prescribe.
3. The officers of the Corporation shall hold office until
their successors are elected and qualified, or until their earlier resignation
or removal. Any officer may be at any time removed from office by the Board of
Directors, with or without cause. If the office of any officer becomes vacant
for any reason, the vacancy may be filled by the Board of Directors.
4. Any officer may resign at any time by giving written notice
of his resignation to the Board of Directors. Any such resignation shall take
effect upon receipt thereof by the Board or
-8-
<PAGE>
at such later date as may be specified therein. Any such notice to the Board
shall be addressed to it in care of the Secretary.
ARTICLE IX
CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall be the chief executive
officer of the Corporation. Subject to the supervision and direction of the
Board of Directors, he shall be responsible for managing the affairs of the
Corporation. He shall have supervision and direction of all of the other
officers of the Corporation and shall have the powers and duties usually and
customarily associated with the office of chief executive officer. In the
absence of the Chairman, the Chief Executive Officer shall preside at the
meetings of the Board of Directors and at the meetings of stockholders and shall
perform such other duties as from time may be assigned to him by the Board of
Directors or the Executive Committee.
ARTICLE X
PRESIDENT
The President shall be the chief operating officer of the
Corporation. Subject to the supervision and direction of the Board of Directors,
he shall be responsible for the day to day operations of the Corporation and
shall have the powers and duties usually and customarily associated with the
office of chief operating officer.
ARTICLE XI
VICE PRESIDENT
The Vice President shall have such powers and perform such
duties as may be delegated to him by the Board of Directors, the Chief Executive
Officer or the President.
-9-
<PAGE>
ARTICLE XII
TREASURER AND ASSISTANT TREASURER
1. The Treasurer shall have the custody of the corporate funds
and securities, and shall deposit or cause to be deposited under his direction
all moneys and other valuable effects in the name and to the credit of the
Corporation in such depositories as may be designated by the Chief Executive
Officer, the President or the Board of Directors, or pursuant to authority
granted by it. He shall render to the Chief Executive Officer, the President and
the Board whenever they may require it an account of all his transactions as
Treasurer and of the financial condition of the Corporation. He shall have such
other powers and duties as may be delegated to him by the Chief Executive
Officer, the President or the Board.
2. The Assistant Treasurer shall, in case of the absence of
the Treasurer, perform the duties and exercise the powers of the Treasurer, and
shall have such other powers and duties as may be delegated to him by the Chief
Executive Officer or the President.
ARTICLE XIII
SECRETARY AND ASSISTANT SECRETARY
1. The Secretary shall attend all meetings of the Board of
Directors and of the stockholders, and shall record the minutes of all
proceedings in a book to be kept for that purpose. He shall perform like duties
for the committees of the Board when required.
2. The Secretary shall give, or cause to be given, notice of
meetings of the stockholders, of the Board of Directors
-10-
<PAGE>
and of the committees of the Board. He shall keep in safe custody the seal of
the Corporation, and when authorized by the President, an Executive Vice
President or a Vice President, shall affix the same to any instrument requiring
it, and when so affixed it shall be attested by his signature or by the
signature of an Assistant Secretary. He shall have such other powers and duties
as may be delegated to him by the Chief Executive Officer or the President.
3. The Assistant Secretary shall, in case of the absence of
the Secretary, perform the duties and exercise the powers of the Secretary, and
shall have such other powers and duties as may be delegated to them by the Chief
Executive Officer or the President.
ARTICLE XIV
CERTIFICATES OF STOCK
The certificates of stock of the Corporation shall be numbered
and shall be entered in the books of the Corporation as they are issued. They
shall exhibit the holder's name and number of shares and shall be signed by the
Chairman of the Board, the Vice Chairman of the Board, the President, the
Executive Vice President or the Senior Vice President, and by the Treasurer or
an Assistant Treasurer, or the Secretary or an Assistant Secretary.
ARTICLE XV
CHECKS
All checks, drafts and other orders for the payment of money
and all promissory notes and other evidences of indebtedness of the Corporation
shall be signed by such officer or officers or
-11-
<PAGE>
such other person as may be designated by the Board of Directors or pursuant to
authority granted by it.
ARTICLE XVI
FISCAL YEAR
The fiscal year of the Corporation shall be as determined from
time to time by resolution duly adopted by the Board of Directors.
ARTICLE XVII
NOTICES AND WAIVERS
1. Whenever by statute, by the Certificate of Incorporation or
by these By-laws it is provided that notice shall be given to any director or
stockholder, such provision shall not be construed to require personal notice,
but such notice may be given in writing, by mail, by depositing the same in the
United States mail, postage prepaid, directed to such stockholder or director at
his address as it appears on the records of the Corporation, and such notice
shall be deemed to be given at the time when the same shall be thus deposited.
Notice of regular or special meetings of the Board of Directors may also be
given to any director by telephone or by telex, telegraph or cable, and in the
latter event the notice shall be deemed to be given at the time such notice,
addressed to such director at the address hereinabove provided, is transmitted
by telex (with confirmed answerback), or delivered to and accepted by an
authorized telegraph or cable office.
2. Whenever by statute, by the Certificate of Incorporation or
by these By-laws a notice is required to be given, a written waiver thereof,
signed by the person entitled to notice,
-12-
<PAGE>
whether before or after the time stated therein, shall be deemed equivalent to
notice. Attendance of any stockholder or director at any meeting thereof shall
constitute a waiver of notice of such meeting by such stockholder or director,
as the case may be, except as otherwise provided by statute.
ARTICLE XVIII
INDEMNIFICATION
All persons who the Corporation is empowered to indemnify
pursuant to the provisions of Section 145 of the General Corporation Law of the
State of Delaware (or any similar provision or provisions of applicable law at
the time in effect) shall be indemnified by the Corporation to the full extent
permitted thereby. The foregoing right of indemnification shall not be deemed to
be exclusive of any other such rights to which those seeking indemnification
from the Corporation may be entitled, including, but not limited to, any rights
of indemnification to which they may be entitled pursuant to any agreement,
insurance policy, other by-law or charter provision, vote of stockholders or
directors, or otherwise. No repeal or amendment of this Article XVII shall
adversely affect any rights of any person pursuant to this Article XVII which
existed at the time of such repeal or amendment with respect to acts or
omissions occurring prior to such repeal or amendment.
-13-
<PAGE>
ARTICLE XIX
ALTERATION OF BY-LAWS
The By-laws of the Corporation may be altered, amended or
repealed, and new By-laws may be adopted, by the stockholders or by the Board of
Directors.
-14-
<PAGE>
EXHIBIT E
Olas, Inc.
660 Madison Avenue
New York, NY 10021
June 23, 1999
eDiets.com, Inc.
3467 Hillsboro Boulevard
Deerfield Beach, Florida 33442
Attn: Mr. David Humble
Chairman and Chief Executive Officer
Dear Mr. Humble:
The purpose of this letter is to confirm the intentions of the
parties hereto with respect to the acquisition by Olas, Inc. ("Olas") of all of
the outstanding shares of capital stock (the "Shares") of eDiets.com, Inc.
("eDiets"), from the stockholders of eDiets (the "Stockholders") pursuant to a
merger (the "Merger") of eDiets into Olas or of a subsidiary of Olas into
eDiets. The principal terms of the purchase and sale would be as follows:
I. Olas would acquire good and marketable title to all of the
Shares, free and clear of all liens, encumbrances or claims.
II. At the Closing, all of the assets (real, personal and
intangible) which are owned by eDiets, or used in its business, would
be free and clear of any liens, claims or encumbrances of any nature
whatsoever (except for obligations under any contracts or indebtedness
which are expressly disclosed to Olas.
III. Immediately prior to the Closing, Olas would effect an
approximately 1 for 15 reverse stock split, such that there will be
600,000 shares of Class A Common Stock of Olas issued and outstanding,
including the 75,000 shares issued pursuant to Paragraph VII E. below,
but excluding any shares underlying options issued pursuant to
Paragraph VIIF. below or shares issued pursuant to Paragraph VIIG.
below .
IV. At the closing (the "Closing") of the Merger, Olas would
issue 4,400,000 shares of its Class A common
<PAGE>
eDiets.com, Inc.
June 23, 1999
Page 2
stock (the "Olas Stock") to the Stockholders (the "Purchase Price"), in
full consideration for all of the outstanding shares of capital stock
(including, without limitation, all classes of preferred stock) of
eDiets, free and clear of all liens.
V. The transaction contemplated herein is intended to be tax
free under the federal income tax laws to the extent that the
Stockholders receive Olas Stock in the Merger.
VI. The transaction contemplated herein is subject to the
execution and delivery by the parties hereto of a mutually satisfactory
definitive Merger Agreement containing representations and warranties
(which would survive the Closing), covenants and closing conditions of
a type which are customarily included in such agreements, including,
but not limited to, reciprocal indemnification provisions by Olas (on
one hand) and by eDiets and the Stockholders (on the other hand).
VII. The transaction contemplated herein would also be subject
to:
A. The approval thereof by the Board of Directors and
Stockholders, if necessary, of Olas and the Board of Directors and
Stockholders of eDiets;
B. Each of eDiets and Olas being satisfied with the
results of its "due diligence" investigation of the other's business,
liabilities, properties and assets;
C. The conversion of all outstanding Class B Common
Stock, if any, into Class A common stock of Olas prior to the Merger;
D. The receipt of all required third party,
governmental and administrative consents and approvals;
E. The issuance by Olas to Whale Securities Co., L.P.
("Whale"), Olas' financial advisor, of such number of shares of Olas
Stock, that will be equal to 75,000 shares, after giving effect to the
reverse stock split described in Paragraph III above, in consideration
<PAGE>
eDiets.com, Inc.
June 23, 1999
Page 3
of Whale's services to Olas in connection with the Merger;
F. The issuance by Olas to Isaac Kier or his
designee(s) of options to purchase such number of shares of Class A
common stock of Olas that will be equal to 16,250 shares after giving
effect to the reverse stock split described in Paragraph III, above, at
an exercise price of $2.85 per share in consideration of services
rendered by Mr. Kier to Olas in connection with finding, structuring
and negotiating merger alternatives for Olas, including the Merger.
G. The consummation of a private placement financing
yielding gross proceeds in the minimum amount of $4,000,000, pursuant
to the letter of intent with Whale attached hereto.
VIII. Each of the parties hereto hereby represents and
warrants to the other parties hereto that it or he has done nothing to
incur any obligation or liability for a finder's fee, commission,
brokerage fee or like payment in connection with the transactions
contemplated hereby.
IX. As long as Olas is proceeding in good faith with respect
to the transactions contemplated hereby, neither eDiets nor Olas shall,
nor shall the Stockholders, authorize or permit eDiets' or Olas', as
the case may be, officers, directors or employees or any investment
banker, financial advisor, attorney, accountant or other representative
of eDiets or Olas to sell, agree to sell or enter into any arrangements
or negotiations or authorize any third party to enter into negotiations
or solicit offers of any type relating to the sale, transfer or other
disposition of eDiets' or Olas' assets or capital stock (including any
merger or consolidation involving eDiets or Olas); provided, however,
that the foregoing prohibition shall terminate if a definitive
agreement has not been executed and delivered by the parties thereto
within ninety (90) days from the date of execution hereof by eDiets,
unless otherwise extended by mutual agreement of eDiets and Olas.
<PAGE>
eDiets.com, Inc.
June 23, 1999
Page 4
X. Each of eDiets and Olas and their respective
representatives shall be given access, during normal business hours and
upon prior notification, to each other's facilities, employees, books
and records for the purpose of conducting a "due diligence"
investigation. Each of the parties agrees that all confidential
information which is obtained by it in connection with the foregoing
shall be maintained by it on a confidential basis, until the
transactions contemplated hereby are consummated or said information
becomes otherwise ascertainable from public sources; and each of the
parties further agrees that if the transactions contemplated hereby are
not consummated for any reason whatsoever, it shall promptly return all
written manifestations of said confidential information (and all copies
thereof). Each party shall cooperate fully in connection with any due
diligence investigation hereunder.
XI. eDiets and Olas shall consult with each other prior to
issuing any press release or otherwise making any public statement with
respect to the contents of this document or the transactions
contemplated hereby, and none of the parties hereto shall issue any
such press release or make any such public statement prior to such
consultation, except as may be required by law or applicable stock
exchange or NASDAQ regulations.
Except for the provisions of paragraphs VIII, IX, X and XI
(which are intended to be binding agreements), this statement of intent does
not, and is not intended to, constitute a legally binding obligation on the part
of any of the parties hereto. It does, however, constitute a statement of the
intention of said parties to promptly proceed in good faith with respect to the
transactions contemplated hereby. If the foregoing is in
<PAGE>
eDiets.com, Inc.
June 23, 1999
Page 5
accordance with your understanding, please so acknowledge by signing the
enclosed copy of this letter and returning it to the undersigned.
Very truly yours,
OLAS, INC.
By: /s/ ISAAC KIER
Isaac Kier
President and Chief
Executive Officer
AGREED TO AND ACCEPTED AS OF
THIS ___ DAY OF JUNE, 1999 BY:
EDIETS.COM, INC.
By:/s/ DAVID HUMBLE
David Humble
Chairman and Chief Executive Officer
STOCKHOLDER:
/s/ DAVID HUMBLE
DAVID HUMBLE
<PAGE>
_______________, 1999
Page 1
EXHIBIT F
[Letterhead of Nason, Yeager, Gerson, White & Lioce, P.A.]
_______________,1999
Olas, Inc.
660 Madison Avenue
New York, New York 10021
EDiets Acquisition Corp.
Gentlemen:
We have acted as counsel for eDiets.com, Inc., a Delaware corporation
(the "Company"), and David R. Humble ("Stockholder") in connection with the
entering into of the Agreement and Plan of Merger and Reorganization dated as of
August 30, 1999 (the "Merger Agreement"), among Olas, Inc., a Delaware
corporation ("Olas"), EDiets Acquisition Corp., a Delaware corporation
("Subsidiary"), the Company and Stockholder, and each of the agreements,
documents and instruments to be executed by the parties pursuant to the Merger
Agreement (collectively, the "Ancillary Documents").
This opinion is being delivered to you pursuant to the provisions of
Section 6. 1 (f) of the Merger Agreement. Our opinions are limited to the date
hereof, and we do not in any event undertake to advise you of any facts or
circumstances occurring or coming to our attention subsequent to the date
hereof. All capitalized terms used herein, unless expressly defined herein,
shall have the meanings ascribed to such terms in the Merger Agreement.
We have examined originals, or copies certified or otherwise identified
to our satisfaction, of each of the Merger Agreement and the Ancillary Documents
as well as such other documents and corporate and public records (including the
Company's Certificate of
<PAGE>
_______________, 1999
Page 2
Incorporation, By-Laws, minutes of certain meetings of
the Board of Directors of the Company and Financial Statements) as we deemed to
be necessary as a basis for the opinion hereinafter expressed. With respect to
such examination, we have assumed the genuineness of all signatures appearing on
all documents presented to us as originals, and the conformity to the originals
of all documents presented to us as conformed or reproduced copies, Except as
expressly set forth in this Opinion Letter, we have not undertaken any
independent investigation, examination or inquiry to confirm or determine the
existence or absence of any facts, searched any of the books, records or files
of the Company or any of its affiliates (except where such books, records or
files were provided to us by the Company), searched any internal file, court
file, public record or other information collection, or examined or reviewed any
communication, instrument, agreement, document, file, record or other item.
As to factual matters material to such opinion which were not otherwise
independently established, we have relied exclusively and without investigation
upon the certificates of appropriate state and local officials, upon
representations set forth in the Merger Agreement and Ancillary Documents, upon
the representatives of executive officers and responsible employees and agents
of the Company and upon such other data as we deemed to be appropriate under the
circumstances.
Where reference is made in this Opinion Letter to matters within our
knowledge, or to facts and circumstances known to us, such reference means the
actual knowledge of those attorneys within our firm who have given substantive
attention to the Merger Agreement and the transactions contemplated thereby. By
actual knowledge, we mean the conscious awareness of information about either
fact or law (depending upon usage) of any such lawyer without undertaking any
investigation to determine the existence or absence of any facts, either within
our firm or otherwise.
We express no opinion respect the Merger Agreement or any other
document or any right, power, privilege, remedy or interest intended or
purported to be created thereunder, insofar as: (a) any of the rights, powers,
privileges, remedies and interests of a party thereunder may be limited (i) by
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization or other laws affecting any rights, powers, privileges, remedies
and interests of creditors generally, (ii) by rules or principles of equity or
public policy affecting the enforcement of obligations generally, whether
considered in a proceeding at law, in equity or otherwise including (without
limitation) those pertaining to good faith, fair dealing, diligence,
reasonableness, unconscionability, impossibility of performance or other cure,
surety rights or defenses, waiver, laches, estoppel or judicial deference, or
(iii) by the exercise of the discretionary powers of any court or other
authority before which may be brought any proceeding seeking equitable or other
remedies, including (without limitation) specific performance, injunctive relief
and indemnification; (b) the rights, powers, privileges, remedies and interests
of any party under the Merger Agreement or any other document or applicable law
may be exercised or otherwise enforced in bad faith, in a commercially
unreasonable manner or for immaterial breaches, consequences or damages; and (c)
any term or provision of the Merger Agreement or any other document purportedly
grants to a party, or permits a party to exercise or
<PAGE>
_______________, 1999
Page 3
otherwise enforce or pursue, specific rights, powers, privileges, remedies or
interests in a manner impermissible: under or otherwise inconsistent with
applicable laws or public policy from time, to time in effect including (without
limitation) agreements to agree, reformation, severability, exculpations and
indemnifications, penalties, waivers, releases, powers of attorney and
collateral disposition, election of remedies and non-judicial remedies
(including, without limitation, the indemnification, non-compete and waiver
provisions contained in the Merger Agreement).
Based upon the foregoing and such consideration of matters of law as we
deemed to be relevant, and subject to the qualifications and assumptions set
forth herein, we are of the following opinion:
1 The Company is a corporation duly incorporated, organized, validly
existing and in good standing under the laws of the State of Delaware. The
Company has, and did have on the date of execution of the Merger Agreement and
as of the Closing Date, the requisite corporate power and corporate authority to
own, lease and operate its assets, to carry on its business, and to execute,
deliver and perform its obligations under the Merger Agreement and the Ancillary
Documents to which it is a party.
2. The Company has no subsidiaries.
3. The execution, delivery and performance by the Company of the Merger
Agreement and the Ancillary Documents, and the consummation of the transactions
contemplated thereby, have been duly authorized and approved by all necessary
corporate actions on the part of the Company and the Company has all necessary
corporate power with respect thereto.
4. To our knowledge, the Stockholder has the requisite capacity to
execute, deliver and perform his respective obligations under the Merger
Agreement and the Ancillary Documents to which he is a party.
5. The Merger Agreement and each of the Ancillary Documents are the
valid and binding legal obligations of the Company and the Stockholder, to the
extent they are parties, and are enforceable against each of them (to the extent
they are parties thereto) in accordance with their respective term, subject to
the effect of (a) applicable bankruptcy, reorganization, insolvency, moratorium
and other laws of general application (including, without limitation, statutory
or other similar laws regarding fraudulent or preferential transfers) relating
to, limiting or affecting the enforcement of creditors' rights generally and (b)
general principles of equity that may limit the enforceability of the remedies,
covenants or other provisions of the Merger Agreement or the Ancillary Documents
and the availability of injunctive relief or other equitable remedies.
6. The execution, delivery and performance by the Company and the
Stockholder of the Merger Agreement and the Ancillary Documents to which either
of them is a party will not (i) violate or conflict with any term of either the
Certificate of Incorporation or the
<PAGE>
_______________, 1999
Page 4
By-Laws of the Company; or (ii) violate or, alone or with the passage of time,
result in the breach or termination of, or otherwise (with or without the giving
of notice or the passage of time or both) entitle any party to terminate or
declare a default under any agreement to which the Company or the Stockholder is
or was a party or by which it or he is bound, or to which any of the Company's
properties, assets or businesses are subject and that we are aware of; or (iii)
violate any judgment, order, injunction, decree or award binding upon the
Company or the Stockholder or the business or assets of the Company that we are
aware of.
7. To our knowledge:, all outstanding shares of the capital stock of
the Company are owned of record by the Stockholder and have been duly and
validly issued, and are fully paid and nonassessable. Except as otherwise
disclosed on Schedule 3.2 to the Merger Agreement, to our knowledge, there are
no outstanding rights (i) to acquire any capital stock of the Company from
either the Company or the Stockholder, or shares of capital stock issuable upon
exercise of options and outstanding stock purchase warrants of either the
Company or the Stockholder or (ii) to acquire any additional capital stock of
the Company, including without limitation any outstanding subscriptions,
warrants, calls, options, rights, commitments or agreements, actual or
contingent, by which the Stockholder is bound calling for the issuance of shares
of any class of its capital stock, or for the issuance of any securities
convertible or exchangeable, into shares of its capital stock.
8. To our knowledge, the shares of the Company's common stock have been
delivered to the Subsidiary free and clear of any and all liens, security
interests, pledges, claims, charges, voting trusts and encumbrances of any kind
whatsoever.
9. We have performed a federal and state Uniform Commercial Code lien
search, and a national judgment search, and we have discovered no liens or
judgments against the Company. To our knowledge, there is no (i) claim, suit,
action, arbitration or legal, administrative or other proceeding or governmental
investigation or tax audit, pending or threatened against or related to the
Company or the Stockholder or (ii) judgment, order, injunction or decree of any
court, governmental authority or regulatory agency, to which either the Company
or the Stockholder are subject, which might materially and adversely affect or
restrict the ability of the Company or the Stockholder to consummate the
transactions in the manner contemplated by the Merger Agreement and the
Ancillary Documents or have a material adverse effect on the Company.
10. No governmental license, permit or authorization, and no
registration, declaration or filing with any governmental authority or
regulatory agency, is required under any law, rule or regulation in connection
with the execution, delivery and performance of the Merger Agreement and the
Ancillary Documents.
11. Upon the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware in accordance with the terms of the Merger
Agreement, and upon acceptance of such filing and certification by the State of
Delaware, the Merger shall have been duty consummated in accordance with the
laws of the State of Delaware.
<PAGE>
_______________, 1999
Page 5
We are attorneys admitted to practice in the State of Florida and we
are not, and do not purport to be, experts as to the laws of any other
jurisdiction other than Federal law and the General Corporation Law of the State
of Delaware. The opinions set forth herein are limited to Florida Law, the
General Corporation Law of the State of Delaware and Federal law.
In giving the opinion set forth above we have assumed (i) the due
authorization, execution and delivery of the Merger Agreement and the Ancillary
Documents by each of the parties thereto other than the Company and the
stockholders of the Company; (ii) that all such other parties thereto have all
requisite power and authority under applicable laws, regulations and governing
documents to execute and deliver the Merger Agreement and the Ancillary
Documents; (iii) each certificate, report or other document issued by any
governmental official, office or agency concerning any person, asset, property
or status is, and all public records (including their proper indexing and
filing) are, accurate, complete, authentic and current and remain so as of the
date hereof; (iv) there has not been any mutual mistake of fact,
misunderstanding, fraud, duress or undue influence, and the conduct of the
parties to the Merger Agreement has complied with any requirement of good faith,
fair dealing and conscionability; (v) there are no written or oral agreements or
understandings among the parties not known to us that would define, supplement
or qualify any term or provision of the Merger Agreement; and (vi) no party will
in the future take any action (including a decision not to act) that (1) is
prohibited under the Merger Agreement, any Ancillary Document or applicable law,
or (2) may be permitted, but not required, under the Merger Agreement if such
action would result in any violation of applicable law or constitute any
violation or default under the Merger Agreement or any Corporate Documents.
This opinion is solely for the benefit of Olas and Subsidiary and may
not be relied upon by any other person. Copies of this opinion may not be
furnished to any other person without our prior written consent. The opinions
expressed herein are as of the date hereof, and we make no undertaking to
update, supplement or amend such opinions as facts and circumstances come to our
attention or changes in law occur which could affect our opinions.
Very truly yours,
NASON, YEAGER, GERSON, WHITE & LIOCE, P.A.
<PAGE>
EXHIBIT G
EMPLOYMENT AGREEMENT
Agreement, dated as of the ___ day of November, 1999, by and between
EDIETS.COM, INC., a Delaware corporation having its principal place of business
at 3467 W. Hillsboro Boulevard, Deerfield Beach, Florida 33442 (the
"Corporation") and DAVID R. HUMBLE, residing at 2896 Emerald Way North,
Deerfield Beach, Florida 33441 (the "Executive").
W I T N E S S E T H:
WHEREAS, the Corporation desires to employ Executive as an executive
officer, and Executive is willing to accept such employment, all subject to the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements set forth herein, the parties hereto agree as follows:
1. EMPLOYMENT AND TERM. Subject to the terms and conditions hereof, the
Corporation hereby employs Executive, and Executive hereby accepts employment by
the Corporation, for a period of three(3) years commencing on November , 1999,
(the "Commencement Date") and ending on the third anniversary of the
Commencement Date, unless terminated sooner pursuant to the provisions hereof.
Thereafter, the Agreement shall be automatically renewed for successive one (1)
year terms (a "Renewal Term") unless terminated by the Corporation or the
Executive upon ninety (90) days' written notice prior to the beginning of a
Renewal Term.
2. DUTIES. Executive shall serve the Corporation as its Chairman of the
Board and Chief Executive Officer. Executive shall perform such executive,
administrative, management, marketing and other services and duties as are
incidental to the offices he holds and as may, from time to time, be assigned to
him by the Board of Directors of the Corporation or a committee thereof.
Executive shall devote substantially all of his time to the performance of his
duties hereunder. Executive further agrees to serve as an officer or director of
any parent, subsidiary or affiliate of the Corporation upon the Corporation's
request, with no additional compensation beyond that set forth in Paragraph 3
below.
3. COMPENSATION.
(a) As base compensation for the services to be rendered by
Executive hereunder, the Corporation agrees to pay to Executive an annual base
salary in the amount of One Hundred Fifty Thousand Dollars ($150,000), such
salary to be paid in equal biweekly installments for so long as Executive is
employed by the Corporation.
<PAGE>
(b) The Executive shall receive an annual bonus for each
calendar year (i) in a minimum amount equal to a percentage of the Corporation's
net income before taxes for that year, with the percentage to be determined by
the Corporation's Compensation Committee; plus (ii) any additional amount, if
any, to be determined by Corporation's Compensation Committee in recognition of
the Executive's contribution to the Corporation.
(c) During the term of this Employment Agreement, the
Corporation shall not pay any of its other employees or officers a greater
annual compensation than the compensation to be paid Executive pursuant to the
preceding subparagraphs 3(a) and (b).
(d) Executive shall be entitled, on a basis consistent with
the Corporation's policy, to reimbursement for all normal and reasonable travel,
entertainment and other expenses necessarily incurred by him in the performance
of his obligations hereunder. The Corporation shall reimburse Executive for such
expenses upon presentation to the Corporation, within a reasonable time after
such expenses are incurred, of an itemized account of such expenses, together
with such vouchers or receipts for individual expense items as the Corporation
may from time to time require under its established policies and procedures.
(e) Executive shall be entitled to participate in, or benefit
from, in accordance with the eligibility and other provisions thereof, such
medical insurance, pension, retirement, or other fringe benefit plans or
policies as the Corporation may make available to, or have in effect for, its
executive personnel from time to time. Plans and benefits currently in effect
and in which Executive shall be participate during the term of this Agreement
are set forth in Schedule A attached hereto. Plans and benefits may be modified
or eliminated by the Corporation from time to time as it determines in its sole
discretion. Executive shall also be entitled to four (4) weeks of vacation and
other similar benefits in accordance with the policies of the Corporation from
time to time in effect for executive personnel.
(f) Except as hereinafter provided, the Corporation shall pay
Executive, for any period during the term of this Agreement during which he is
unable fully to perform his duties because of physical or mental disability or
incapacity, an amount equal to the compensation due him for such period in
accordance with this Agreement, less the aggregate amount of all income
disability benefits which for such period he may receive under or by reason of
(i) any applicable compulsory state disability law, (ii) the Federal Social
Security Act, (iii) any applicable workmen's compensation law or similar law,
and (iv) any plan towards which the Corporation or any parent, subsidiary or
affiliate of the Corporation has contributed or for which it has made payroll
deductions, such as group accident, disability or health policies.
-2-
<PAGE>
4. TERMINATION ON DISABILITY OR DEATH.
(a) In the event that Executive, due to physical or mental disability
or incapacity, is unable to substantially perform his duties hereunder for a
period of three (3) successive months, the Corporation or Executive shall then
have the right to terminate this Agreement and Executive's employment hereunder
upon thirty (30)days' prior written notice, provided, however, that in the event
that Executive shall recommence rendering services and performing all of his
duties hereunder within such thirty (30) day notice period, such notice shall be
vitiated, and the Corporation and the Executive shall no longer have the right
to terminate based on the disability event described in the notice. Executive's
employment shall terminate immediately upon his death.
(b) Upon termination of Executive's employment by reason of his death
or disability as aforesaid, Executive, or in the case of Executive's death,
Executive's personal representatives, shall be entitled to receive all base
compensation earned or accrued to the date of such termination and not already
paid, less any benefits paid to Executive by reason of such disability.
(c) In the event of the termination of this Agreement for any reason
other than death, Executive shall have the right to purchase, and the
Corporation shall assign to Executive, any insurance policy maintained by the
Company on the life of Executive then in effect, for a price equal to the net
cash surrender value thereof at the time of such termination.
5. TERMINATION FOR CERTAIN CAUSES AND OTHER REASONS. In the event of
the (a) willful material misconduct of Executive in the performance of his
duties hereunder, (b) material breach of any provisions of Paragraphs 7, 8 or 9,
or (c) conviction of the Executive for any felony under federal or state law,
this Agreement and Executive's employment hereunder may be terminated by the
Corporation without prior notice.
6. CHANGE OF CONTROL. In order to protect the Executive against the
possible consequences and uncertainties of a Change of Control of the
Corporation (as hereinafter defined) and thereby induce the Executive to enter
into the employ of the Corporation, the Corporation agrees that:
(a) If, during the initial three (3) year term of this
Agreement, the Executive's employment is terminated by the Corporation at any
time subsequent to a Change of Control other than for the causes set forth in
Paragraph 5, then in such event, the Corporation shall pay the Executive within
thirty (30) days after such termination, a lump sum payment in cash in an amount
equal to the balance of his base salary for the remaining term of the Agreement.
-3-
<PAGE>
(b) For purposes of this Paragraph 6, in the event, following
a Change of Control, the Executive shall resign from his employment with the
Corporation within thirty (30) calendar days after he has obtained actual
knowledge of any significant change or proposed change in his title, nature of
duties, employee benefits or working conditions, in each instance without his
prior consent, such resignation shall be deemed to be a termination of
employment by the Corporation other than for the causes set forth in Paragraph
5.
(c) As used in this Paragraph 6, a "Change of Control" shall
be deemed to have occurred if (i) any "person" or "group of persons" (as such
terms are used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act")), becomes the "beneficial owner" (as defined
in Rule 13d-3 promulgated under the 1934 Act), directly or indirectly, of
securities of the Corporation representing more than thirty-five percent (35%)
of the Corporation's then outstanding securities having the right to vote on the
election of directors or (ii) if directors constituting a majority of the Board
of Directors are elected to the Board of Directors without the recommendation or
approval of the incumbent Board of Directors.
7. DISCLOSURE AND ASSIGNMENT OF DISCOVERIES.
(a) Executive hereby covenants and agrees to disclose promptly and
fully, in writing, whenever possible, to the Corporation and its attorneys and
designated representatives, without additional compensation, all ideas,
formulae, programs, systems, devices, inventions, processes, business concepts,
discoveries, improvements, developments, works of authorship, product marks and
designations, technical information and know-how, whether or not patentable,
copyrightable or otherwise protectable relating to personalized diet and
nutrition programs (together, the "Developments"), which he may conceive,
develop, reduce to practice, acquire or make, alone or jointly with others:
(i) during the term of his employment with the Corporation,
whether during or outside of the usual hours of work;
(ii) within a period of two (2) years after termination of his
employment with the Corporation; and
(iii) within a period of three (3) years after termination of
his employment with the Corporation, if such Developments arise out of any work
done or concepts developed by Executive, alone or with others, during his
employment by the Corporation.
Executive hereby agrees that all of his right, title and interest in
and to such Developments shall be deemed as held by
-4-
<PAGE>
him in a fiduciary capacity solely for the benefit of the Corporation, shall be
the sole and exclusive property of the Corporation and shall be subject to the
confidentiality provisions of Section 8 as confidential information of the
Corporation.
(b) Executive, when required to do so, either during or after the term
of his employment with the Corporation, shall:
(i) assign and convey to the Corporation his entire right,
title and interest in and to the Developments to the extent not owned by the
Corporation as a matter of law from the time of their creation and execute,
acknowledge and deliver all such further instruments and documents, in form and
substance satisfactory to the Corporation, as it shall deem reasonably necessary
or advisable to evidence the vesting in the Corporation of all right, title and
interest of Executive in and to the Developments;
(ii) assist the Corporation and its agents in preparing patent
applications, domestic and foreign, covering the Developments;
(iii) sign and deliver all such applications and assignments
of the same to the Corporation; and
(iv) generally give all information and testimony, sign all
papers and do all things which may be needed or requested by the Corporation to
the end that the Corporation may obtain, extend, reissue, maintain and enforce
United States and foreign patents covering the Developments.
(c) Executive hereby irrevocably nominates and appoints the Corporation
his attorney-in-fact to sign and deliver all such papers, and perform all such
acts mentioned in subparagraph 7(b), in the event of Executive's absence,
unavailability, or death, such nomination and appointment hereby being granted
with full authority in the premises, and such authority to be deemed coupled
with an interest vested in the Corporation.
(d) The Corporation agrees to bear all expenses which it causes to be
incurred in obtaining, extending, issuing, maintaining and enforcing such
patents and in investing and perfecting title thereto in the Corporation, and
agrees further to pay Executive for any time which it may require of him
therefor, and for any services that may be required of him pursuant to
subparagraph 7(b), subsequent to the termination of his employment with the
Corporation, such payment to be at an hourly rate equivalent to that at which
Executive is paid at the time of the termination of his employment by the
Corporation.
(e) In the event of the unenforceability of all or part of the
foregoing provisions of this Paragraph 7, as determined by a
-5-
<PAGE>
court of competent jurisdiction, Executive hereby transfers and assigns to the
Corporation such lesser interests in the Developments, including, without
limitations, any and all United States and foreign patent rights therein and
renewals thereof, as may be determined by such a court to be a reasonable grant
of interests under the circumstances, but, in any event, and without limitation,
Executive shall be deemed to have granted to the Corporation not less than an
irrevocable, non-exclusive license, with the right to sublicense others, to
manufacture, use, lease and sell the Developments which have not been assigned
to the Corporation under the provisions of subparagraph 7(b), without payment of
any royalty.
8. CONFIDENTIALITY.
(a) Executive understands and hereby acknowledges that as a result of
his employment with the Corporation, he will necessarily become informed of, and
have access to, certain valuable and confidential information of the Corporation
and any of its subsidiaries, joint ventures and affiliates, including, without
limitation, inventions, trade secrets, technical information, know-how, plans,
specifications, identity of customers and suppliers, and that such information,
even though it may be developed or otherwise acquired by Executive, is the
exclusive property of the Corporation to be held by Executive in trust and
solely for the Corporation's benefit. Accordingly, Executive hereby agrees that
he shall not, at any time, either during or subsequent to his employment
hereunder, use, reveal, report, publish, transfer or otherwise disclose to any
person, corporation or other entity, any of the Corporation's confidential
information without the prior written consent of the Corporation, except to
responsible officers and employees of the Corporation and other responsible
persons who are in a contractual or fiduciary relationship with the Corporation
or who have a need for such information for purposes in the interest of the
Corporation, and except for such information which legally and legitimately is
or becomes of general public knowledge from authorized sources other than
Executive.
(b) Upon the termination of his employment with the Corporation for any
reason whatsoever, Executive shall promptly deliver to the Corporation all
drawings, manuals, letters, notes, notebooks, reports and copies thereof, and
all other materials, including, without limitation, those of a secret and
confidential nature, relating to the Corporation's business which are in
Executive's possession or control.
9. NON-COMPETITION. Executive agrees that, during the term of this
Agreement and for a period of two (2) years after the termination for any cause
of his employment with the Corporation, he shall not, anywhere in the United
States of America or elsewhere in the world (or in such smaller area or for such
lesser period as may be determined by a court of competent
-6-
<PAGE>
jurisdiction to be a reasonable limitation on the competitive activity of
Executive), directly or indirectly:
(i) engage in a directly competitive line of business to the business
carried on by the Corporation, either for his own account or with or for anyone
else;
(ii) solicit or attempt to solicit business of any customers of the
Corporation for products or services the same or similar to those offered, sold,
produced or under development by the Corporation;
(iii) otherwise divert or attempt to divert from the
Corporation any business whatsoever;
(iv) solicit or attempt to solicit for any business endeavor
any employee of the Corporation;
(v) interfere with any business relationship between the
Corporation and any other person; or
(vi) render any services as an officer, director, employee,
partner, consultant or otherwise to, or have any interest as a stockholder,
partner, lender or otherwise in, any person which is so engaged.
Notwithstanding anything to the contrary contained in this Paragraph 9, the
provisions hereof shall not prevent the Executive from purchasing or owning up
to five percent (5%) of the voting securities of any corporation, the stock of
which is publicly traded.
10. Remedies. Because the Corporation does not have an adequate remedy
at law to protect its business from Executive's competition or to protect its
interests in its trade secrets, privileged, proprietary or confidential
information and similar commercial assets, the Corporation shall be entitled to
injunctive relief, in addition to such other remedies and relief that would, in
the event of a breach of the provisions of Paragraphs 7, 8 and 9, be available
to the Corporation. In the event of such a breach, in addition to any other
remedies, the Corporation shall be entitled to receive from Executive payment
of, or reimbursement for, its reasonable attorneys fees and disbursements
incurred in successfully enforcing any such provision.
11. SURVIVAL. The provisions of Paragraphs 7, 8 and 9 shall survive
termination of this Agreement for any reason.
12. ENTIRE AGREEMENT. This Agreement sets forth the entire
understanding of the parties and merges and supersedes any prior or
contemporaneous agreements between the parties pertaining to the subject matter
hereof. This Agreement may not be changed or
-7-
<PAGE>
terminated orally, and no change, termination or attempted waiver of any of the
provisions hereof shall be binding unless in writing and signed by the party
against whom the same is sought to be enforced; PROVIDED, HOWEVER, that
Executive's compensation may be increased at any time by the Corporation without
in any way affecting any of the other terms and conditions of this Agreement,
which in all other respects shall remain in full force and effect. Failure of a
party to enforce one or more of the provisions of this Agreement or to require
at any time performance of any of the obligations hereof shall not be construed
to be a waiver of such provisions by such party nor to in any way affect the
validity of this Agreement of such party's right thereafter to enforce any
provision of this Agreement, nor to preclude such party from taking any other
action at any time which it would legally be entitled to take.
13. SUCCESSORS AND ASSIGNS. Neither party shall have the right to
assign this personal Agreement, or any rights or obligations hereunder, without
the consent of the other party; PROVIDED, HOWEVER, that upon the sale of all or
substantially all of the assets, business and goodwill of the Corporation to
another corporation, or upon the merger or consolidation of the Corporation with
another corporation, this Agreement shall inure to the benefit of, and be
binding upon, both Executive and the corporation purchasing such assets,
business and goodwill, or surviving such merger or consolidation, as the case
may be, in the same manner and to the same extent as though such other
corporation were the Corporation. Subject to the foregoing, this Agreement shall
inure to the benefit of, and bind, the parties hereto and their legal
representatives, heirs, successors and assigns.
14. ADDITIONAL ACTS. Executive and the Corporation each agrees that he
or it shall, as often as requested to do so, execute, acknowledge and deliver
and file, or cause to be executed, acknowledged and delivered and filed, any and
all further instruments, agreements or documents as may be necessary or
expedient in order to consummate the transactions provided for in this Agreement
and do any and all further acts and things as may be necessary or expedient in
order to carry out the purpose and intent of this Agreement.
15. COMMUNICATIONS. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been given at the time when mailed in any United States post office
enclosed in a registered or certified postage prepaid envelope and addressed to
the addresses set forth at the beginning of this Agreement, or to such other
address as any party may specify by notice to the other party; PROVIDED,
HOWEVER, that any notice of change of address shall be effective only upon
receipt.
-8-
<PAGE>
16. CONSTRUCTION. The headings of the Paragraphs of this Agreement have
been inserted for convenience of reference only and shall in no way restrict or
otherwise affect the construction of the terms or provisions hereof. References
in this Agreement to Sections are to the sections of this Agreement.
17. COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
18. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable by a court or tribunal of competent jurisdiction, such
invalidity or unenforceability shall not affect the validity and enforceability
of the other provisions of this Agreement and the provision held to be invalid
or unenforceable shall be carried out as nearly as possible according to its
original terms and intent to eliminate such invalidity or unenforceability.
19. GOVERNING LAW. This Agreement is made and executed and shall be
governed by the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first set forth above.
CORPORATION:
EDIETS.COM, INC.
By: Christine M. Brown, Secretary
EXECUTIVE:
David R. Humble
-9-
<PAGE>
SCHEDULE "A"
(1) Medical Insurance
(2) Long Term Care - $2,500 Annually
-10-
<PAGE>
EXHIBIT H
[LETTERHEAD OF TENZER GREENBLAT LLP]
November 17, 1999
eDiets.com, Inc.
3467 Hillsboro Boulevard
Deerfield Beach, FL 33442
David R. Humble
c/o eDiets.com, Inc.
3467 Hillsboro Boulevard
Deerfield Beach, FL 33442
Gentlemen:
We have acted as counsel for Olas, Inc., a Delaware
corporation (the "Company"), and EDiets Acquisition Corp., a Delaware
corporation (the "Subsidiary") in connection with the execution and delivery of
the Agreement and Plan of Merger and Reorganization dated as of August 30, 1999
(the "Merger Agreement"), among the Company, the Subsidiary, eDiets.com, Inc., a
Delaware corporation ("eDiets"), and David R. Humble ("Stockholder"), and each
of the agreements, documents and instruments to be executed by the parties
pursuant to the Merger Agreement (collectively, the "Ancillary Documents").
This opinion is being delivered to you pursuant to the
provisions of Section 6.2(b) of the Merger Agreement. All capitalized terms used
herein, unless expressly defined herein, shall have the meanings ascribed to
such terms in the Merger Agreement.
We have examined originals, or copies certified or otherwise
identified to our satisfaction, of each of the Merger Agreement and the
Ancillary Documents as well as such other documents and corporate and public
records (including the Company's and the Subsidiary's respective Certificate of
Incorporation and By-Laws and minutes of certain meetings of the Board of
Directors of the Company and the Subsidiary) as we
<PAGE>
November 17, 1999
Page 2
deemed to be necessary as a basis for the opinion hereinafter expressed. With
respect to such examination, we have assumed the genuineness of all signatures
appearing on all documents presented to us as originals, and the conformity to
the originals of all documents presented to us as conformed or reproduced
copies. Except as expressly set forth in this Opinion Letter, we have not
undertaken any independent investigation, examination or inquiry to confirm or
determine the existence or absence of any facts, searched any of the books,
records or files of the Company or any of its affiliates (except where such
books, records or files were provided to us by the Company), searched any
internal file, court file, public record or other information collection, or
examined or reviewed any communication, instrument, agreement, document, file,
record or other item.
As to factual matters material to such opinion which were not
otherwise independently established, we have relied exclusively and without
investigation upon the certificates of appropriate state and local officials,
upon representations set forth in the Merger Agreement and Ancillary Documents,
upon the representatives of executive officers and responsible employees and
agents of the Company and upon such other data as we deemed to be appropriate
under the circumstances.
Where reference is made in this Opinion Letter to matters
within our knowledge, or to facts and circumstances known to us, such reference
means the actual knowledge of those attorneys within our firm who have given
substantive attention to the Merger Agreement and the transactions contemplated
thereby.
We express no opinion with respect the Merger Agreement or any
other document or any right, power, privilege, remedy or interest intended or
purported to be created thereunder, insofar as: (a) any of the rights, powers,
privileges, remedies and interests of a party thereunder, may be limited (i) by
applicable bankruptcy, insolvency, fraudulent conveyance or transfer,
reorganization or other laws affecting any rights, powers, privileges, remedies
and interests of creditors generally, (ii) by rules or principles of equity or
public policy affecting the enforcement including (without limitation) those
pertaining to good faith, fair dealing, diligence, reasonableness,
unconscionability, impossibility of performance or other cure, surety rights or
defenses, waiver, laches, estoppel or judicial deference, or (iii) by the
exercise of the discretionary powers of any court or other authority before
which may be brought any proceeding seeking equitable or other remedies,
including (without limitation) specific performance, injunctive relief and
indemnification; (b) the rights, powers, privileges, remedies and
<PAGE>
November 17, 1999
Page 3
interests of any party under the Merger Agreement or any other document or
applicable law may be exercised or otherwise enforced in bad faith, in a
commercially unreasonable manner or for immaterial breaches, consequences or
damages; and (c) any term or provision of the Merger Agreement or any other
document purportedly grants to a party, or permits a party to exercise or
otherwise enforce or pursue, specific rights, powers, privileges, remedies or
interests in a manner impermissible under or otherwise inconsistent with
applicable laws or public policy from time to time in effect including (without
limitation) agreements to agree, reformation, severability, exculpations and
indemnifications, penalties, waivers, releases, powers of attorney and
collateral disposition, election of remedies and non-judicial remedies
(including, without limitation, the indemnification, non-compete and waiver
provisions contained in the Merger Agreement).
Based upon the foregoing and such consideration of matters of
law as we deemed to be relevant, and subject to the qualifications and
assumptions set forth herein, we are of the following opinion:
1. Each of the Company and the Subsidiary are corporations
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware. Each of the Company and the Subsidiary has, and did have on
the date of execution of the Merger Agreement and as of the Closing Date, the
requisite corporate power and corporate authority to own, lease and operate its
assets, to carry on its business as now conducted, and to execute, deliver and
perform its obligations under the Merger Agreement and the Ancillary Documents
to which it is a party.
2. The execution, delivery and performance by each of the
Company and the Subsidiary of the Merger Agreement and the Ancillary Documents
to which it is a party, and the consummation of the transactions contemplated
thereby, have been duly authorized and approved by all necessary corporate
actions on the part of the Company and the Subsidiary, respectively.
3. The Merger Agreement and each of the Ancillary Documents
are the valid and binding legal obligations of the Company and the Subsidiary,
to the extent they are parties, and are enforceable against each of them (to the
extent they are parties thereto) in accordance with their respective terms,
subject to the effect of (a) applicable bankruptcy, reorganization, insolvency,
moratorium and other laws of general
<PAGE>
November 17, 1999
Page 4
application (including, without limitation, statutory or other similar laws
regarding fraudulent or preferential transfers) relating to, limiting or
affecting the enforcement of creditors' rights generally, (b) general principles
of equity that may limit the enforceability of the remedies, covenants or other
provisions of the Merger Agreement or the Ancillary Documents and the
availability of injunctive relief or other equitable remedies and (c) judicial
imposition of an implied covenant of good faith and fair dealing.
4. The execution, delivery and performance by the Company and
the Subsidiary of the Merger Agreement and the Ancillary Documents to which
either of them is a party will not (i) violate or conflict with any term of
either the respective Certificate of Incorporation or the By-Laws of the Company
and the Subsidiary; or (ii) violate or, alone or with the passage of time,
result in the breach or termination of, or otherwise (with or without the giving
of notice or the passage of time or both) entitle any party to terminate or
declare a default under any material agreement to which the Company or the
Subsidiary is a party or by which it is bound, or to which any of the Company's
or the Subsidiary's respective properties, assets or businesses are subject and,
in each case, of which we have knowledge, or (iii) violate any judgment, order,
injunction, decree or award (of which we have knowledge) binding upon the
Company or the Subsidiary or the respective business or assets of the Company or
the Subsidiary which would have a material adverse effect on the Company or the
Subsidiary.
5. The 7,814,065 shares of the Company's common stock to be
delivered to Stockholder pursuant to the Merger Agreement will be delivered to
Stockholder free and clear of any and all liens, security interests, pledges,
claims, charges, voting trusts and encumbrances of any kind whatsoever except
for any liens, security interests, pledges, claims, charges, voting trusts and
encumbrances which may have been placed on such shares by Stockholder.
6. Upon the filing of the Certificate of Merger with the
Secretary of State of the State of Delaware in accordance with the terms of the
Merger Agreement, and upon acceptance of such filing and certification by the
State of Delaware, the Merger shall have been duly consummated in accordance
with the laws of the State of Delaware.
We are attorneys admitted to practice in the State of New York
and we are not, and do not purport to be, experts as to the laws of any other
jurisdiction other than Federal law and the General Corporation Law of the State
of Delaware. The opinions set forth herein are limited to New York Law, the
General Corporation Law of the State of Delaware.
<PAGE>
November 17, 1999
Page 5
In giving the opinion set forth above we have assumed (x) the
due authorization, execution and delivery of the Merger Agreement and the
Ancillary Documents by each of the parties thereto other than the Company and
the Subsidiary, and (y) that all such other parties thereto have all requisite
power and authority under applicable laws, regulations and governing documents
to execute and deliver the Merger Agreement and the Ancillary Documents.
Our opinion is limited to the matters expressly stated herein, and no
opinion is implied or may be inferred beyond the matters expressly stated
herein. This opinion is based upon the state of the law and factual situations
known to us as of the date of this opinion, and we assume no obligation to
update or supplement such opinion to reflect any facts or circumstances which
may hereafter come to our attention or any change in law which may hereafter
occur. We bring to your attention the fact that the opinions set forth in this
letter are expressions of professional judgment and not a guaranty of a result.
This opinion is solely for the benefit of eDiets and the
Stockholder and may not be relied upon by any other person or for any other
purpose. Copies of this opinion may not be furnished to any other person without
our prior written consent. The opinions expressed herein are as of the date
hereof, and we make no undertaking to update, supplement or amend such opinions
as facts and circumstances come to our attention or changes in law occur which
could affect our opinions.
Very truly yours,
TENZER GREENBLATT LLP
<PAGE>
EDIET SCHEDULES
SCHEDULE 1.6(A)
Post Merger Capitalization
o The following is a list of shares and options outstanding of eDiets prior
to the merger and a schedule of shares and options of Olas to be exchanged
in the merger using a conversion ratio of 1.257143.
SHARES OUTSTANDING EDIETS OLAS
--------- ---------
David R. Humble .......................... 6,215,733 7,814,065
STOCK OPTIONS GRANTED
Diane Driscoll ........................... 20,000 25,143
Scott Goodwin ............................ 40,000 50,286
James C. Kennedy ......................... 42,000 52,800
David Gentzler ........................... 75,000 94,286
Richard Becker ........................... 25,000 31,428
Steve Johnson ............................ 40,000 50,286
60,000 75,429
127,267 159,993
Howard A. Goldman ........................ 25,000 31,428
Donna De Cunzo ........................... 35,000 44,000
80,000 100,572
Ronald Caporale .......................... 60,000 75,429
50,000 62,857
Stacy Brassington ........................ 35,000 44,000
Christine Brown .......................... 40,000 50,286
Hans Barth ............................... 10,000 12,571
Scott Yardley ............................ 10,000 12,571
Gena McGuiness ........................... 5,000 6,285
Rochelle Jones ........................... 5,000 6,285
SUBTOTAL - OPTIONS ....................... 784,267 985,935
--------- ---------
GRAND TOTAL .............................. 7,000,000 8,800,000
========= =========
<PAGE>
SCHEDULE 2.1
States or Jurisdictions of Property Owned or Leased
eDiets.com, Inc. is a corporation organized under the laws of the State of
Delaware on March 18, 1996. The corporation was qualified to transact business
in the State of Florida on July 11, 1996. All property owned or leased is within
the State of Florida.
<PAGE>
SCHEDULE 2.2
Schedule of Common Stock Shareholders and Holders of Options and Warrants
o The sole shareholder of eDiets.com, Inc. is David R. Humble owning
6,215,733 shares of Common Stock, $.001 par value.
o STOCK OPTION GRANTS
Except as noted below, all options are exercisable at $.01 per share
and vest in equal monthly installments over a period of 12 months from the date
of grant.
<TABLE>
<CAPTION>
Date of # of Options # of Options Date
Name of Optionee Grant Granted Lapsed of Lapse
- ---------------- -------- ------ -------- ---------
<S> <C> <C> <C> <C> <C>
Diane Driscoll 06/11/96 25,000 5,000 03/31/97
Scott Goodwin 07/15/96 40,000
James C. Kennedy 07/08/97 60,000 18,000 03/12/98
David Gentzler 05/01/96 75,000
Richard Becker 07/01/96 50,000 25,000 01/31/97
Steve Johnson 06/01/96 40,000
11/18/98 60,000
07/28/99(1) 127,267
Howard A. Goldman 06/10/96 50,000 25,000 12/31/97
Donna De Cunzo 05/01/96 35,000
04/24/99(2) 80,000
Ronald Caporale 10/25/96 60,000
11/03/98 50,000
Stacy Brassington 10/01/98 35,000
Christine Brown 02/01/99 40,000
Hans Barth 06/01/96 10,000
Scott Yardley 01/18/99 10,000
Gena McGuiness 09/08/98 5,000
Rochelle Jones 08/17/98 5,000
------ ------
Total Granted 857,267 73,000
Total Outstanding 784,267
</TABLE>
(1) Exercisable at $1.425 per share. Vests on a monthly basis over 24
months from date of grant.
(2) Vesting retroactive to I/l/99.
<PAGE>
SCHEDULE 2.6
Noncontravention
Paragraph 19 of the Lease Agreement between eDiets and The 3467 Partnership (as
listed on Schedule 2.4) requires the consent of the landlord to transfer the
stock.
<PAGE>
SCHEDULE 2.8
Absence of Undisclosed Liabilities
There is a dispute over an Agreement between eDiets and iVillage. Please refer
to the letters dated May 20, 1999 and August 3, 1999 previously given to counsel
for Olas.
<PAGE>
SCHEDULE 2.9
List and Summary Description of Written Guaranties
Extended to eDiets and Shareholder
o David R. Humble has guaranteed a $150,000 line of credit with SunTrust
Bank, South Florida, N.A.
<PAGE>
SCHEDULE 2.11
Absence of Changes
None other than as set forth in Schedule 2.8.
<PAGE>
SCHEDULE 2.12
Pending and Threatening Litigation
NONE
<PAGE>
SCHEDULE 2.14
Schedule of Real Property Owned, Leased or Subject to Contract
of Commitment of Purchase or Sale of Lease
o eDiets.com, Inc. currently leases approximately 1,288 square feet of
office space in Deerfield Beach, Florida, pursuant to a Lease Agreement
dated May 1, 1999 between The 3467 Partnership (Lessor) and Self/Help
Technologies (Lessee), and Addendum #1 thereto dated April 1, 1999,
executed April 29, 1999, to lease premises known as Suite #2 in the
building located at 3467 West Hillsboro Boulevard, Deerfield Beach,
Florida. expiring on April 30, 2000.
o eDiets.com, Inc. currently leases a laptop computer from DFS (Dell
Financial Services) Acceptance, a division of Dell Computer, pursuant
to an 24-month agreement at $268.02 per month.
<PAGE>
SCHEDULE 2.15
Summary of Intangibles, the Ownership thereof and Authority for Use
o eDiets.com, Inc. has filed Service Mark Applications with the U.S.
Department of Commerce, Patent and Trademark Office to register the
following names: 1. eDiets.com 2. eDiets 3. I.Q. Diet
o eDiets.com, Inc. has the following internet domain names registered
with Network Solutions, Inc.:
1. SELFHELPTECH.COM
2. SHAPECITY.COM
3. DIETSONLINE.COM
4. MYEDIETS.COM
5. EDIETCITY.COM
6. EDIETSCENTER.COM
7. EDIETSNEWS.COM
8. EDIETSNEWS.COM
9. RELOGIC.COM
10. EDIETSFORWOMEN.COM
It. EDIETWOMEN.COM
12. EDIETS.COM
13. EDIETSFORMEN.COM
14. EDIETMEN.COM
15. ENUTRI.COM
16. IQDIET.COM
o Patent License Agreement between David R. Humble and eDiets.
<PAGE>
SCHEDULE 2.18
Insurance Policies
1. Certificate of Insurance dated 02/23/99 Re Policy Number NWA 0151016-00
of Reliance National Indemnity Workers' Compensation and Employers'
Liability Insurance.
2. Certificate Number 1145156 of Chicago Insurance Company Medical
Professional Liability Occurrence Insurance Policy. Note that this
policy insures Donna M. DeCunzo, the dietitian for eDiets and does not
insure the Company.
3. Spectrum under the Agreement for Services referred to in Schedule 2.20,
2.21 and 2.23 maintains a medical health insurance policy for eDiets
employees for which eDiets reimburses Spectrum for the premium costs
made under the policy. David R. Humble, who is not an employee of
eDiets, is not covered under the policy.
<PAGE>
SCHEDULE 2.19
Bank Accounts, Safe Deposit Boxes and Authorized Persons
BANKING INFORMATION
<TABLE>
<CAPTION>
Account Name and Address Banking Contact Authorized Signatory
- ------------- ----------------------------- -------------------- --------------------
<S> <C> <C> <C>
Operating SunTrust Bank, South Florida, Becky Buchanan David R. Humble
Account N.A. V.P., Branch Manager
0613000201139 1761 West Hillsboro Blvd. (954) 480-8296
Deerfield Beach, FL 33442
AMEX SunTrust Bank, South Florida, Becky Buchanan David R. Humble
Clearing N.A. V.P., Branch Manager
0613000202558 1761 West Hillsboro Blvd. (954) 480-8296
Deerfield Beach, FL 33442
VISA/MC RNB Republic Bank (Union Laura Trascaclair David R. Humble
Clearing Planters) Chief Retail Banking
0391000377 Republic National Bank of Manager
Miami (561) 361-5619
Palm Aire Banking Center or
1321 Powerline Road Maria Aquila
Pompano Beach, FL 33096 (954) 979-5900
</TABLE>
<PAGE>
SCHEDULE 2.20
Employee Plans, Benefits and Arrangements and Schedule of Employees
and Compensation of Employees
The following is a list of Key Employees and annual compensation for each
employee. Please note that all employees, except David R. Humble, are leased
through from Spectrum through the Agreement referred to on Schedule 2.23. Please
refer to Schedule 2.2 for stock options granted.
o KEY EMPLOYEES - ANNUAL COMPENSATION
Pre-merger Post-merger Other Annual
Employee Name and Position Salary ($) Salary ($) Bonus Compensation
- -------------------------- ---------- -------- ----- ------------
Humble, David R., Chairman $ 0.00 $150,000 $ 0.00 $ 0.00
of the Board, President and
Chief Executive Officer
DeCunza, Donna, Director of Under $90,000 $ 0.00 $ 0.00
Nutrition Services $50,000
Johnson, Steve, Chief $85,000 $92,000 $ 0.00 $ 0.00
Technical Officer
Brown, Christine, Director Under $60,000 $ 0.00 $ 0.00
Operations, Secretary and $50,000
Treasurer
o CONFIDENTIALITY AGREEMENTS
1. Confidentiality Agreement dated July 13, 1999, between eDiets and
Christine Marie Brown.
2. Confidentiality Agreement dated July 13, 1999, between eDiets and M.
Roshelle Jones.
3. Confidentiality Agreement dated July 13, 1999, between eDiets and
Stacey Brassington.
4. Confidentiality Agreement dated August 2, 1999, between eDiets and
Steven E. Johnson.
5. Confidentiality Agreement dated July 26, 1999, between eDiets and Karen
Humble.
6. Confidentiality Agreement dated July 16, 1999, between eDiets and Gina
McGinnis.
7. Confidentiality Agreement dated August 2, 1999, between eDiets and
Robin Hyman.
<PAGE>
SCHEDULE 2.21
Employee Pension Benefit Plans
o Spectrum under the Agreement for Services referred to in Schedule 2.20
and 2.23 maintains a 401K Pension Plan for eDiets employees for which
eDiets reimburses Spectrum for the costs of contributions made under
the Plan. David R. Humble, who is not an employee of eDiets, is not
covered under the Plan.
<PAGE>
SCHEDULE 2.23
Product Service Agreements and License Agreements
1. Section 11. Spectrum Agreement for Services dated January 20, 1999,
between eDiets and The Spectrum Division of Staffing Concepts, Inc. to
provide professional employee services to eDiets.
*2. AOL Advertising Insertion Order, Contract #10592, 13916 and 15318.
3. Thrive/Netfind Contract #13916.
*4. Letter Agreement dated July 30, 1998 with K2 Design.
*5 Sponsorship Agreement dated January 4, 1999 between eDiets and
iVillage, Inc. and its affiliates.
6. Agreement between eDiets and Yahoo! Advertising.
7. Linkshare Network(TM) Membership Agreement For Merchants dated December
2, 1998, between LinkShare Corporation and eDiets.
8. Agreement between eDiets and Healthshop.com.
9. Affiliate Contract dated January 5, 1999 between eDiets and Health
Scout, Inc.
10. Content Service Agreement dated June 16, 1999 between eDiets and
ScreamingMedia.Net, Inc.
11. Fit @ Home Affiliates Program Operating Agreement.
12. Operating Agreement between eDiets and Fogdog Sports(TM), Inc.
13. Operating Agreement between eDiets and Amazon.com.
14. Letter Agreement dated May 15, 1999 between eDiets and Dr.Koop.com.
15. E-Commerce Hyperlink between eDiets and Green Tree
16. Letter Agreement with BeHealtyNow.com
17. Insertion Order with Online Network Company
18. Letter Agreement with Best Solutions
19. Agreement with Cybergold, Inc.
* Please note that the performance and payment obligations of the parties
to these contracts are in controversy.
<PAGE>
SCHEDULE 2.24
Business Contracts
None, except as set forth in Schedules 2.2, 2.9, 2.14, 2.15, 2.18, 2.20, 2.23.
<PAGE>
SCHEDULE 2.25
Schedule of Suppliers and Amounts of Goods and Services from each Supplier
None other than as set forth in other schedules.
<PAGE>
SCHEDULE 2.26
Governmental and Administrative Consents, Permits, Appointments,
Approvals, Licenses, Certificates and Franchises
1. Broward County Occupational License For Period October 1, 1998 thru
September 30, 1999, Account No. 377-0004939.
2. City of Deerfield Beach Occupational License No. 99-16547 For Period
October 1, 1998 thru September 30, 1999.
3. State of Florida Department of Health, Division of Medical Quality
Assurance License No. ND-0002352 Re: Licensed Dietitian/Nutritionist
Donna M. De Cunzo, Expiration Date: February 28, 2001.
<PAGE>
EXHIBIT F
Opinion of Counsel
<PAGE>
OLAS SCHEDULES
SCHEDULE 3.1
I. STATES OR JURISDICTIONS OF PROPERTY OWNED OR LEASED
A. None.
<PAGE>
SCHEDULE 3.2
I. SCHEDULES OF COMMON STOCK SHAREHOLDERS OF OLAS SUBSIDIARIES
A. None.
II. HOLDERS OF OPTIONS AND WARRANTS OF OLAS SUBSIDIARIES
A. None.
<PAGE>
SCHEDULE 3.3
I. SCHEDULE OF DIRECT OR INDIRECT SUBSIDIARIES OF OLAS
A. None.
<PAGE>
SCHEDULE 3.5
I. NONCONTRAVENTION - OLAS
A. List of Summary Description of Written Guaranties Extended to Olas or
Subsidiary.
1. None.
<PAGE>
SCHEDULE 3.7
I. ABSENCE OF UNDISCLOSED LIABILITIES
A. None
<PAGE>
SCHEDULE 3.8
I. LIST AND SUMMARY DESCRIPTION OF WRITTEN GUARANTIES EXTENDED TO OLAS OR
SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.10
I. MATERIAL ADVERSE EFFECT - OLAS OR SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.11
I. PENDING OR THREATENING LITIGATION
A. Olas
1. Derivative Demand Letter of Kenneth Zimmerman dated
August 1, 1996:,
On August 5, 1996 Olas, Inc. (the "Company") received
a Draft Complaint and Demand Letter dated August 1, 1996 from Kenneth Zimmerman
which demanded that the Company institute a suit against the directors and
controlling shareholders of the Company for various alleged acts constituting
self-dealing, breach of fiduciary duty, mismanagement and corporate waste.
Following an extensive investigation and analysis by counsel to the Company it
was concluded that if the Company were to institute the litigation embodied in
the Draft Compliant, the Company would probably have little or no chance of
prevailing. Based on the recommendation of counsel the Company did not institute
any such action. No further action has been taken by the Company with regard to
this Draft Complaint and Demand Letter.
B. Subsidiary
1. None.
<PAGE>
SCHEDULE 3.13
I. SCHEDULE OF REAL PROPERTY LEASE OR SUBJECT TO CONTRACT OF COMMITMENT OF
PURSE OR SALE OR LEASE - OLAS AND SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.14
I. SUMMARY OF INTANGIBLES, THE OWNERSHIP THEREOF AND AUTHORITY FOR USE -
OLAS AND SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.17
I. INSURANCE POLICIES - OLAS, SUBSIDIARY, OLAS ASSETS, OLAS BUSINESS
A. None.
<PAGE>
SCHEDULE 3.18
I. BANK ACCOUNTS, SAFE DEPOSIT BOXES AND AUTHORIZED PERSONS - OLAS AND
SUBSIDIARY
Dreyfus BASIC Money Market Fund Fund Account Number # 123-0790780597
Bank of America (NationsBank) Account Number # 0000 0 134 5420
P.O. BOX MailBoxEtc
Olas Inc.
Suite 262
1173A Second Avenue
New York, NY 10021
<PAGE>
SCHEDULE 3.19
I. EMPLOYEE PLANS, BENEFITS AND ARRANGEMENTS AND SCHEDULE OF EMPLOYEES AND
COMPENSATION OF EMPLOYEES - OLAS AND SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.20
I. EMPLOYEE PENSION BENEFIT PLAN - OLAS AND SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.22
I. PRODUCT SERVICE AGREEMENTS AND LICENSE AGREEMENTS - OLAS AND SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.23
I. BUSINESS CONTRACTS - OLAS AND SUBSIDIARY
A. None.
<PAGE>
SCHEDULE 3.24
I. SCHEDULE OF SUPPLIERS AND AMOUNTS OF GOODS AND SERVICES FROM EACH
SUPPLIER - OLAS BUSINESS
A. None.
<PAGE>
SCHEDULE 3.25
I. GOVERNMENTAL AND ADMINISTRATIVE CONSENTS, PERMITS, APPOINTMENTS,
APPROVALS, LICENSES, CERTIFICATES AND FRANCHISES - OLAS BUSINESS
A. None.
<PAGE>
Exhibit 5.10(h)
OLAS MONTHLY EXPENSES
CONTINENTAL STOCK MAILBOX ETC PIERCE LEAHY
TRANSFER & TRUST CO.
$396.00 $113,66 (every 3 mths) $199.01
LEGAL FEES
I. PARKER, POE, ADAMS & BERNSTEIN
2. GLEIBERMAN SPEARS SHEPHERD & MENAKER
$1000.00 (Approx. every 1 mnths)
EXHIBIT 10.5
LICENSE AGREEMENT
Agreement dated as of August 3, 1999, by and between DAVID R. HUMBLE,
residing at 2896 Emerald Way North, Deerfield Beach, Florida 33441 (the
"Licensor") and EDIETS.COM, INC., a Delaware corporation, having its principal
place of business at 3467 W. Hillsboro Boulevard, Deerfield Beach, Florida 33442
(the "Licensee").
W I T N E S S E T H:
WHEREAS, the Licensor is the owner of an invention relating to a means
of using the Internet to provide an interactive link in the store between
consumers and the manufacturers and retailers that market to the consumers for
the purpose of providing sales and marketing information and measuring the
response of the consumers to the sales and marketing information (the
"Invention"); and
WHEREAS, the Licensor has filed a patent application (the
"Application") for the purpose of obtaining a patent relating to the Invention;
and
WHEREAS, the Licensor desires to license to the Licensee the Invention
and all rights with respect to the Application and any patent or patents that
may be issued for the purpose only of utilizing the Invention in connection with
Licensee's marketing on the Internet of personalized diet and nutrition
programs, and Licensee desires to obtain the License upon the terms and
conditions set forth herein.
NOW, THEREFORE, it is agreed as follows:
1. LICENSE. The Licensor grants to the Licensee the exclusive,
nontransferable right and license to use such aspects of the Invention and the
Application and any patent or patents that may be issued upon the Application in
connection with Licensee's sales and marketing on the Internet of personalized
diet and nutrition programs.
2. REPRESENTATIONS OF LICENSOR. The Licensor represents that he has the
right to grant this License and has not granted any other person, firm or
corporation any right, license or privilege which is contrary to the terms of
this License.
3. TERM OF LICENSE. This License shall be for a perpetual term.
4. ROYALTIES. This License shall be royalty-free.
5. INFRINGEMENT. The Licensor shall defend, at his own expense, all
infringement suits that may be brought against him or the Licensee based upon
the use of the Invention.
<PAGE>
6. ASSIGNMENT. The Licensee shall not have the right to assign this
Agreement or any rights or licenses granted to Licensee hereunder without the
prior written consent of the Licensor.
7. GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have executed this License
Agreement effective the date and year first above written.
LICENSOR:
/S/ DAVID R. HUMBLE
-----------------------------------
DAVID. R. HUMBLE
LICENSEE:
EDIETS.COM, INC.
By: /S/ CHRISTINE BROWN
--------------------------------
Christine Brown, Secretary
EXHIBIT 10.6
3467 PARTNERSHIP
LEASE AGREEMENT
1. PARTIES. This Lease Agreement is between THE 3467 PARTNERSHIP,
hereinafter referred to as the "LESSOR" and EDIETS.COM, INC., a
Delaware Corporation hereinafter referred to as "LESSEE".
2. PREMISES. LESSOR hereby leases to LESSEE and LESSEE leases from LESSOR,
for the term and upon the terms and conditions hereinafter set forth,
the Premises known as Suites 1 and 2 in the Building located at 3467
West Hillsboro Boulevard, Deerfield Beach, Florida, consisting of
approximately 2,600 square feet, together with non-exclusive use of the
building, common areas and other improvements constructed in said
business center as hereinafter provided, and together with the
non-exclusive right to use all adjoining parking areas, driveways,
sidewalks, road alleys and means of ingress and egress in the business
center of which leased Premises are a part. THIS DOES NOT INCLUDE OR
ALLOW ANY PARKING SOUTH OF OUR BUILDING ON PROPERTY THAT DOES NOT
BELONG TO THE PARTNERSHIP (WORLD GYM LOADING DOCK).
3. TERM. The term of this Lease shall be for 5 years, commencing on the
18th day of November 1999 and the Lease shall continue until the 30th
day of September 2004, unless sooner terminated or extended as herein
provided. Should such event occur on other than the first day of
calendar month, LESSEE agrees to pay a proportionate part of the
monthly rental herein provided for that month only (rent divided by
days in month).
4. RENT. LESSEE agrees to pay to LESSOR or his designee, without deduction
or offset, prior notice/demand, a minimum monthly base rent for first
year of $2,270.67 plus $920.83 pass-thru expenses plus $191.49 sales
tax (or as per State of Florida Sales Tax requirement) for a total of
$3,382.99 (Three thousand, three hundred and eighty-two dollars and
ninety-nine cents). The base rent for the second year is $2,384.20 plus
$920.83 pass-thru expenses plus $198.30 sales tax for a total of
$3,448.08 (Three thousand, four hundred and forty-eight dollars and
eight cents). The base rent for the third year is $2,503.41 plus
$920.83 pass-thru expenses plus $205.45 sales tax for a total of
$3,529.69 (Three thousand, five hundred and twenty-nine dollars and
sixty-nine cents). The base rent for the fourth year is $2,628.58 plus
$920.83 pass-thru expenses plus $212.96 sales tax for a total of
$3,762.37 (Three thousand, seven hundred and sixty-two dollars and
thirty-seven cents). The base rent for the fifth year is $2,760.01 plus
$920.83 pass-thru expenses plus $220.85 sales tax for a total of
$3,901.69 (Three thousand, nine hundred and one dollars and sixty-nine
cents). Sales tax shall be waived if LESSEE has a valid Tax Exemption
Certificate. Such monthly rental shall be paid in advance on or before
the first day of each month. The pass-thru expenses will be
<PAGE>
adjusted annually up or down relative to this LESSEE's prorated share
of taxes (including real estate taxes and special assessments),
cleaning, utilities, maintenance, insurance, etc. See Paragraphs 8, 9,
10 and 11.
5. SECURITY PROVISIONS. Upon signing this lease, please submit to the
LESSOR $2,225.81 to bring your Security Deposit up to date. This will
be added to your current deposit of $1,675.88. The LESSOR shall retain
as security for the faithful performance of all covenants, conditions,
and agreements of this Lease, but in no event shall LESSOR be obliged
to apply the same to rent or other charges in arrears or upon damages
for LESSEE's failure to perform the said covenants, conditions and
agreement, LESSOR may also apply the security, at its option, and
LESSOR's right to the possession of the Leased Premises for nonpayment
of rent or for any other reason shall not in any event be effected by
reason of the fact that LESSOR holds this security. The said sum, if
not applied toward the payment of rent in arrears or toward payment of
damages suffered by LESSOR by reason of LESSEE's breach of the
covenants, conditions and agreements of this Lease, is to be returned
to the LESSEE without interest when this Lease is terminated, the space
returned to the LESSOR in a clean, undamaged and leasable condition
(usual wear and tear excepted), according to the terms of this Lease,
and in no event is the said security to be returned until LESSEE has
vacated the Leased Premises and delivered possession to LESSOR. In the
event that LESSOR repossess the Leased Premises because of the LESSEE's
defaulter because of LESSEE's failure to carry out the covenants,
conditions and agreements of this Lease LESSOR may apply the said
security towards all damages suffered to the date of said repossession
and may retain the Security Deposit to apply upon all damages as may be
suffered or shall accrue thereafter by reason of LESSEE's default or
breach (except only if the eviction is due solely to the use of the
premises in breach of Paragraph 7 and payments are up to date).
6. The LESSEE is responsible for installation and maintenance of all floor
and wall treatments and any other interior decorating or other interior
modifications, the directory insert and door signs for the subject
Premises (provided by LESSOR at LESSEE's expense) in accordance with
the terms and conditions contained herein for such lettering.
7. USE. The premises may be used for the following purpose. OFFICE (and
any related use upon LESSOR's approval) USE ONLY, and for no other
purpose whatsoever without the written consent of LESSOR, which may be
arbitrarily withheld at the LESSOR's discretion.
The space shall not be utilized for an abortion clinic, a drug
rehab., or any other use that may cause the LESSEES of the Building to
be inconvenienced by the LESSEE's Clients or anyone demonstrating
against the LESSEE or the LESSEE's Clients. In addition, the LESSEE
shall not allow its Employees or Clients to loiter in any of the
building's common areas or in any adjoining area.
<PAGE>
8. UTILITIES. (A) LESSEE agrees to pay all charges for electricity used by
it. (B) LESSEE agrees to pay 42% percentage of LESSOR's water and sewer
charges by the City.
9. TAXES/INSURANCE. LESSEE agrees to pay all taxes/insurance levied upon
LESSEE's personal property, including trade fixtures and inventory, not
owned by LESSOR and kept on the leased premises. LESSOR agrees to pay
all taxes/insurance and assessments levied against the land and the
building and improvements, other than trade fixtures of LESSEE situated
thereon. LESSEE shall pay LESSOR each month, in addition to the rent,
42% of said taxes/insurance as LESSEE's proportionate share of the
taxes and insurance. Adjustments will be made at the end of each year
when the LESSOR receives the tax and insurance bills. All of the above
are included in the pass-thru expenses of Paragraph 11.
10. TRASH. LESSEE agrees to pay 42% of all trash charges. Any trash
requirements over and above normal office use will be separately
charged to the individual LESSEE at the LESSOR's option. This 42% is
included in the pass-thru expenses of Paragraph 11.
11. COMMON AREAS. (A) LESSOR shall be responsible for exterior cleaning,
landscape maintenance, irrigation, exterior maintenance and exterior
lighting of the common areas of the business center, but LESSEE shall
bear a 42% of the cost. (B) With regard to the LESSEE's proportionate
share of utilities, taxes/insurance, trash and common area maintenance
as per Paragraphs 8,9,10 and 11 for this year, there will be a $4.25
per sq. ft. charge to the LESSEE. This figure will be adjusted annually
relative to the Tenant's pro rata share of real estate taxes, building
maintenance and insurance.
12. REPAIRS AND MAINTENANCE OF LEASED PREMISES RESPONSIBILITIES OF LESSEE.
Without limiting the generality of Paragraph 11, LESSEE agrees to
repair and maintain in good order and condition the non-structural
interior portions of the Leased Premises, including the store fronts,
doors, windows, plate and window glass, and floor coverings, (3) air
conditioning units, plumbing and electrical facilities and appliances.
For any major repairs on AC, electrical or plumbing, the LESSEE will
only be responsible for the first $150.00 per repair (unless repairs
are due to poor maintenance practices by LESSEE), and the LESSOR will
pay the balance. LESSEE shall, at its own expense, perform all
janitorial and cleaning services within the demised premises in order
to keep same in a neat, clean and orderly condition.
Neither LESSOR nor LESSOR's Agents shall be liable for any
damages caused by or growing out of any breakage, leakage, getting out
of order or defective condition of the electric wiring, air
conditioning, and equipment, closets, plumbing, roof, appliances, other
equipment, or other facilities serving the Leased Premises.
All property belonging to LESSEE or any occupant of the Leased
Premises shall be there at the risk of LESSEE or such other person
only, and LESSOR shall not be liable for damage thereto or theft or
misappropriation thereof. At the expiration of the tenancy hereby
created, LESSEE shall surrender the Leased Premises in the same
condition as the Leased Premises were in upon delivery of possession
thereto under this Lease, reasonable wear and tear excepted, and damage
by unavoidable casualty
<PAGE>
excepted, and shall surrender all keys for the Leased Premises to
LESSOR. LESSEE shall remove all and any alterations or improvements
which LESSOR requests to be removed before surrendering the premises as
aforesaid and shall repair any damage to the Leased Premises caused
thereby. LESSEE's obligation to observe or perform this covenant shall
survive the expiration or other termination of the term of the Lease.
13. REPAIRS AND MAINTENANCE OF LEASED PREMISES RESPONSIBILITY OF LESSOR.
LESSOR agrees to repair and maintain in good order and condition the
roof, roof drains, outside walls (and their finish), foundations and
structural portions (both interior and exterior) of the Leased
Premises. There is excepted from the preceding covenant, however: (1)
repair or replacement of broken plate or window glass (except in case
of damage by fire or other casualty covered by LESSOR's fire and
extended coverage policy); (2) repair of damage caused by the LESSEE,
its employees, agents, contractors, customers, invitees, and (3)
interior repainting and redecoration. The LESSOR will replace the A/C
compressor.
Except as provided herein, LESSOR shall not be obligated or
required to make any other repairs, and all other portions of the
Leased Premises shall be kept in good repair and condition by LESSEE,
and at the end of the term of this lease, LESSEE shall deliver the
Leased Premises to LESSOR in good repair and condition, reasonable wear
and tear and damage from fire and other insured casualty excepted.
Nothing in this Lease shall negate the LESSEE's responsibility
to pay 42% of the LESSOR's utility, taxes, insurance and common areas
maintenance expenses (See Paragraphs #8,9,10, 11). The LESSOR must have
access to each suite in case of emergency and the LESSEE is
unavailable.
14. ALTERATIONS. LESSEE shall not make any interior alterations or
alterations involving structural changes without securing LESSOR's
written consent, which consent shall not be unreasonably withheld;
without cost to LESSOR. All alterations and improvements shall become
the property of LESSOR and remain upon the premises as a part thereof,
and be surrendered with the Premises upon the termination of the Lease.
No exterior alterations shall be made by LESSEE.
15. TRADE AND OTHER FIXTURES. LESSEE may install or cause to be installed
such equipment and trade and other fixtures as are reasonably necessary
for the operation of its business. Such equipment and trade and other
fixtures may be installed prior to acceptance of the improvements and
shall remain personal property and title thereto shall continue in the
owner thereof, unless attached or affixed to the demised Premises in
such manner as to render them incapable to removal without causing
damage to the Premises. In the event such equipment and trade and other
fixtures are subject to a lien or title retention instrument, LESSOR
shall have the right and be able to enforce the same as stated therein.
16. RIGHT TO PLACE SIGNS, AWNINGS AND CANOPIES. LESSOR shall install all
signage visible from exterior. All door and directory sign inserts
shall be ordered and installed by LESSOR and paid for by LESSEE. No
other signs (building, window, door, etc.) are
<PAGE>
allowed. LESSEE will not place or permit to be placed on any exterior
door or wall of the Premises any signs, awnings, canopy, or advertising
matter or any other thing of any kind, and will not place or maintain
any decoration, letters or advertising matter on the glass of any door
or wall, will not place any illuminated sign in any window area of the
Premises WITHOUT FIRST OBTAINING LESSOR'S WRITTEN APPROVAL which may be
arbitrarily withheld at the LESSOR's sole discretion.
17. CASUALTY DAMAGE. In the event the Premises shall be destroyed or so
damaged or injured by fire or other casualty during the life of this
Lease, whereby the same shall be rendered untenantable, then the LESSOR
shall have the right to render said Premises tenantable by repairs
within ninety (90) days therefrom. There shall be abatement or
reduction of rent during said ninety (90) day period. If said Premises
are not rendered tenantable within said time, it shall be optional with
either party hereto to cancel this Lease, and in the event of such
cancellation the rent shall be paid only to the date at which time the
Premises were rendered untenantable. The cancellation herein mentioned
shall be evidenced in writing.
18. INDEMNIFICATION OF LESSOR. LESSEE, during the term hereof, shall
indemnify LESSOR against all claims and demands, whether for injuries
to persons, loss of life, or damage to property occurring within the
demised Premises and arising out of the use and occupancy of the
demised Premises by LESSEE, excepting, however, such claims and
demands, whether for injuries to persons, loss of life, or damage to
property caused by acts or omissions of LESSOR. Nothing contained in
this Paragraph shall, however, detract for LESSOR's rights to
protection under the public liability insurance policy to be paid by
LESSEE as specified in Paragraph 33 hereof.
19. ASSIGNMENT AND SUBLETTING. LESSEE shall not assign this Lease, nor
sublet the Premises, or any part thereof nor use the same or any part
thereof, nor permit the same, or any part thereof, to be used for any
other purpose than as above stipulated, without the written consent of
LESSOR, which consent shall not be unreasonably withheld. Under no
circumstances will the LESSEE be permitted to assign this Lease or
sublet the Premises before taking possession of the space and operating
the Premises for the purpose as represented in Paragraph No. 7 herein
for a period of no less than six (6) months. Any sale of the Tenant's
corporation (eDiet.com, Inc.) or any sale or transfer of more than 49%
of the stock of said corporation shall be considered an assignment to
this Lease. (Other than a Public offering which shall evoke no change
in this Lease as to LESSEE's Corporation ownership).
20. BANKRUPTCY. Should LESSEE make an assignment for benefit of creditors
or be adjudicated bankrupt, such action shall constitute a default of
this Lease for which LESSOR shall have all of the remedies available to
it under Paragraph 25 herein below.
21. COMPLIANCE WITH LAWS. LESSEE will promptly comply with all applicable
and valid laws, ordinances and regulations of Federal, State, County,
Municipal or other lawful authority pertaining to the use, occupancy
and alteration of the leased Premises.
<PAGE>
22. EMINENT DOMAIN. If all of the Leased Premises and common areas are
taken under the power of eminent domain or conveyed under threat of
condemnation proceedings, or if any part of the building or 30% or more
of the common areas is taken or conveyed, then, in either event, this
Lease shall terminate effective as of the date LESSEE is required to
give up the right to occupy or use said building or common areas. If
this Lease is not terminated as above provided, LESSOR and LESSEE shall
agree upon equitable reduction of the rental, based on the reduction in
the building or common areas. If the parties fail to agree upon such
reduction within sixty (60) days from the date of the final award or
payment for the part of the leased Premises so taken or conveyed,
LESSOR and LESSEE shall choose one arbitrator each, and the two
arbitrators so chosen shall choose a third arbitrator. The decision of
any two of the arbitrators as to the rental reduction, if any, shall be
binding on LESSEE and LESSOR, and any expense of the arbitration shall
be divided equally between the LESSEE and the LESSOR. The LESSEE shall
pay the full rent pending final determination of the reduction, and
upon said determination, the rent shall be adjusted retroactively to
the date of actual reduction in the Premises or common areas.
23. ATTORNEY FEES. If it becomes necessary to enforce any covenant of this
Lease or for the breach of any covenant or condition herein contained,
the parties hereto agree that the party who has breached that condition
shall pay to the other party seeking to enforce the provisions of this
Lease a reasonable attorney's fee and costs.
24. LATE CHARGES. LESSEE agrees to pay a late charge to the LESSOR of
$35.00 plus $5.00 per day for each monthly rent payment which may be
more than five (5) days past due; plus an additional check charge of
$35.00 for any check from the LESSEE which is returned to the LESSOR
uncollected for any reason. These charges shall be considered as
additional rent.
25. DEFAULT. In the event LESSEE shall default in the payment of the
monthly rent or any additional payments as provided herein and said
default shall continue for a period of ten (10) days after the due date
thereof, said default shall, at the election of LESSOR, work as a
forfeiture of this Lease, or LESSOR may enforce performance in any
manner by law, and LESSOR's agent or attorney shall have the right
without further notice or demand to re-enter and remove all persons for
LESSOR's property without being deemed guilty of any manner of trespass
and without prejudice to any remedies for arrears of rent or breach of
covenant, or LESSOR's attorney or Agent may resume possession of the
property and re-let the same for the remainder of the term at the best
rental such agent or attorney can obtain for the account of LESSEE, who
shall pay any deficiency, and LESSOR shall have a lien as security for
such rental upon the fixtures and equipment belonging to LESSEE which
are on the demised Premises. Notwithstanding any other remedy available
to LESSOR, in the event of default by LESSEE, all rent due for the
balance of the term of this Lease shall, at the election of LESSOR,
become immediately due and payable.
<PAGE>
In the event LESSEE shall default in the performance of any of
the terms or provisions of this Lease other than the payment of monthly
rent, LESSOR shall promptly so notify LESSEE in writing. If LESSEE
shall fail to cure such default within twenty (20) days after receipt
of such notice, or if the default is of such character as to require
more than twenty (20) days to cure and LESSEE shall fail to commence to
do so within twenty (20) days after receipt of such notice and
thereafter diligently proceed to cure such default, then in either
event LESSOR may, at its election, cure such default and such expense
shall be added to the rent otherwise due, or LESSOR may, at its
election, declare the Lease forfeited, and shall have available to it
the same remedies as are available in the case of default in the
payment of rent.
26. LESSOR'S COVENANTS. LESSOR covenants that they have good and marketable
title to the Premises in fee simple absolute and that the same is
subject to no Leases, tenancies, agreements, encumbrances, liens,
restriction, or defects in title affecting the rights granted LESSEE in
this Lease; that there are not restrictive covenants, zoning or other
ordinances or regulations applicable to the demised Premises which will
prevent LESSEE from conducting its usual business (See paragraph #7).
27. QUIET ENJOYMENT. LESSEE upon paying the rent and performing the
covenants and agreements of this Lease shall quietly have, hold and
enjoy the demised premises and all rights granted LESSEE in this Lease
during the term thereof and extensions thereto, if any.
28. PARKING. No vehicles or equipment of LESSEE are to be parked overnight
on premises.
29. SUBORDINATION. LESSEE hereby agrees that its Leasehold interest
hereunder is subordinate to any mortgages or trust deeds now on, or
hereafter to be placed on, the premises Leased hereunder and to all
advances made or that may be made on account of the encumbrances to the
full extent of the principal sums secured thereby and interests
thereon.
30. NOTICE. Any notices required or permitted hereunder shall be in writing
and delivered whether in person to the other party or the other party's
authorized agent, or by United States Certified Mail, Return Receipt
Requested, postage full prepaid, to the addresses set forth
hereinafter, or to such other address as either party may designate in
writing and deliver as herein provided.
LESSOR: 3467 Partnership LESSEE: eDiets.com, Inc.
3467 W. Hillsboro Blvd. #3 3467 W. Hillsboro Blvd. #1,2
Deerfield Beach, FL 33442 Deerfield Beach, FL 33442
31. WINDOW COVERINGS. There is no requirement for the LESSEE to cover the
windows of the Premises. If, in fact, the LESSEE desires to cover a
window on the Premises and
<PAGE>
the covering is visible to the street, such window covering shall be in
accordance with following:
Micro-Blinds (1/2" horizontal blinds) as manufactured by Bali
(or other manufacturer acceptable to the LESSOR) with
hold-down brackets. Color or finish may be as desired by the
LESSEE, subject to the LESSOR's approval which will not be
unreasonably withheld.
32. RECORDING. This Lease Agreement shall not be filed for Public Record by
any party hereto.
33. LIABILITY INSURANCE. LESSEE agrees at LESSEE's expense to maintain in
force continuously throughout the term of this Lease and any extension
hereof public liability insurance covering the leased Premises, and
naming LESSOR its designees and its mortgagee as additional insurers,
with single limits of $1,000,000.00 for death or personal injury and
$250,000.00 for property damage, and shall upon written request of
LESSOR furnish LESSOR a certificate by the insurer that such insurance
is in force and is not cancelable on less than thirty (30) days notice.
It is agreed that all policies of insurance to be maintained
in force by the respective parties hereto shall be obtained from good
and solvent insurance companies.
LESSEE is to obtain Workman's Compensation insurance. LESSEE
shall maintain and keep in force all employees' compensation insurance
required under the laws of the State of Florida, and such other
insurance as may be necessary to protect LESSOR against any other
liability to person or property arising hereunder by operation of law,
whether such law be now in force or adopted subsequent to the execution
hereof.
LESSEE's failure to keep in effect and pay for such insurance
as outlined herein above and pay for such insurance as it is in this
Section required to maintain, shall entitle the LESSOR to do so for
LESSEE, in which event the insurance premiums paid by LESSOR shall
become due and payable forthwith and shall be deemed as additional
rent. Failure of LESSEE to pay same on demand shall constitute a breach
of this Lease, and LESSEE will be held personally liable for same.
34. PLATE GLASS. The replacement of any plate glass damaged or broken from
any cause whatsoever in and about the Leased Premises shall be LESSEE's
responsibility. LESSEE agrees to replace any damaged or broken glass as
soon as possible. Said glass to exactly match the original adjoining
material without exception.
35. INCREASE IN FIRE INSURANCE PREMIUM. LESSEE agrees that it will not
keep, use, sell or offer for sale in or upon the Leased Premises any
article which may be prohibited by the standard form of fire and
extended risk insurance that may be charged during the term of this
Lease on the amount of such insurance which may be carried by LESSOR on
said premises or the building of which they are a part, resulting from
the type of merchandise maintained or sold by LESSEE in the Leased
Premises, whether or not
<PAGE>
LESSOR has consented to the same. In determining whether increased
premiums are the result of LESSEE's use of the Leased Premises, a
schedule issued by the organization making the insurance rate on the
Leased Premises, showing the various components of such rate, shall be
conclusive evidence of the several items and charges which make up the
fire insurance rate on the Leased Premises. LESSEE agrees to promptly
make, at LESSEE's cost, any repairs, alterations, changes and/or
improvements to equipment in the Leased Premises required by the
company insuring LESSOR's fire insurance so as to avoid the
cancellation of, or the increase in premiums on said insurance.
In the event LESSEE's occupancy and use of Leased Premises
causes any increase of premium for the fire and/or casualty rates on
the Leased Premises or any part thereof above the rate for the least
hazardous type of occupancy legally permitted on the premises, the
LESSEE shall pay the additional premium on the fire, boiler and/or
casualty insurance policies by reason thereof. The LESSEE also shall
pay in such event, any additional premium on the rent insurance policy
that may be carried by the LESSOR for its protection against rent loss
through fire or other casualty. Bills for such additional premiums
shall be rendered by LESSOR to LESSEE at such times as LESSOR may elect
and shall be due from payable by LESSEE when rendered, and the amount
thereof shall be deemed to be additional rent.
36. INDEMNIFICATION OF LESSOR. LESSEE shall indemnify LESSOR and save it
harmless from and against any and all claims, actions, damages,
liability and expense in connection with loss of life, personal injury
and/or damage to property arising from or out of any occurrence in,
upon or at the Leased Premises, or the occupancy or use by LESSEE of
the Leased Premises of any part thereof occasioned wholly or in part by
any act or omission of LESSEE, its agents, contractors, employees,
servants, lessees, or concessionaires, whether occurring in or about
the Lease Premises or outside the Leased Premises but within the
Shopping Center. In the case LESSOR shall be made a party to any
litigation commenced against LESSEE, then LESSEE shall protect and hold
LESSOR harmless and shall pay all costs, expenses and reasonable
attorney's fees incurred or paid by LESSOR in connection with such
litigation.
37. WAIVER OF SUBROGATION. LESSOR and LESSEE waive, unless said waiver
should invalidate any such insurance, their right to recover damages
against each other for any reason whatsoever to the extend the damaged
party recovers indemnity from its insurance carrier. Any insurance
policy procured by either LESSEE or LESSOR which does not name the
other as a named insured shall, if obtainable, contain an express
waiver of any right of subrogation by the insurance company against the
LESSOR or LESSEE, whichever the case may be. All public liability and
property damage policies shall contain an endorsement that LESSOR,
although named as an insured, shall nevertheless be entitled to recover
for damages caused by the negligence of LESSEE.
38. TIME OF THE ESSENCE. Time is of the essence of each and every
provision, covenant, and condition herein contained and on the part of
LESSEE and LESSOR to be done and performed.
<PAGE>
39. SAVING CLAUSE. It is understood and agreed that should any part, term,
sentence, clause or provision of this Lease be declared by the courts
to be invalid, the validity of the remaining portions or provisions
shall not be affected thereby.
40. HOMESTEAD WAIVER. LESSEE hereby waives and renounces for himself and
family any and all homestead and exemption rights he may have now, or
hereafter, under or by virtue of the constitution and laws of the State
of Florida or of any other State, or of the United States, as against
the payment of said rental or any portion hereof, or any other
obligation or damage that may accrue under the terms of this agreement.
41. ANNUAL RENT ADJUSTMENT. During the full term of this Lease and any
extensions thereof, the base rent shall be increased annually by 5%.
The adjusted base rent shall be computed annually on the anniversary
date of the Lease by multiplying 1.05 times the most current base rent
at the end of the prior year (1.05 x Prior year base rent = Adjusted
base rent).
42. LESSOR'S OPTION. In the event the subject property is sold the Lessor
at his option may terminate this lease by giving ninety (90) days
written notice (certified mail return receipt) to the Lessee. Any
transfer or change of more than 49% of the Ownership of the 3467
Partnership shall be considered as a sale of subject property.
43. COMPLETE AGREEMENT. This Lease contains a complete expression of the
Agreement between the Parties and there are no promises,
representations or inducements except such as are herein provided. This
Lease Agreement shall inure to the benefit of and be binding upon the
parties hereto and their respective heirs, legal representative,
successors and assigns.
44. The LESSOR, the LESSEE's behalf, shall re-construct Suite #1 & 2 in
accordance with the plans approved by the LESSEE (dated 9-30-99,
revised and signed 10-4-99). Costs of reconstruction of soon to be
occupied Suite #1 shall be as noted in Addendum #1 to the lease for
Suite #2 dated 4-29-99.
EXECUTED BY LESSOR this ______ day of ____________________, 1999.
LESSOR
3467 Partnership
By _____________________ Title: Partner
_____________________ Title: Partner
_____________________ Witness
LESSEE
eDiets.com,Inc.
By _____________________ Title: Director of Operations and
Corporate Officer
Witness
<PAGE>
October 18, 1999
RE: SUITES 1 AND 2 CONSTRUCTION ADDENDUM TO SUITE #1 LEASE DATED 4-29-99
1. The new Air Handling Unit (supplied and installed by LESSOR) has been
installed in a location specified by the LESSEE. Please note that the
LESSOR shall bear no responsibility for any damages (or down time to
any equipment) caused by the AHU pan overflowing or other defects of
the AHU. This AHU shall be maintained exclusively by the LESSEE.
2. The additional cost of painting above the ceiling grid, if performed is
$2,800 plus an additional $750.00 for prep and cleanup. This is no
guarantee that the paint will adhere to all existing surfaces,
mechanical and electrical equipment, etc. due to the fact that this
attic and the equipment therein were not designed for or constructed to
accommodate exposed painted surfaces. These costs are in addition to
the normal costs in paragraph #5. If this work is performed in the
LESSEE's behalf the LESSEE shall pay at termination of lease to the
LESSOR the sum of $1,000.00 for future replacement of acoustic ceiling
panels and R19 insulation.
3. Be advised that the new AC system recently installed by the LESSOR is
not sized properly to air condition the attic as well as the rooms
(with no roof or ceiling insulation). It is the LESSOR's guestimate
that the AC capacity needed to air condition these attics and rooms may
need an additional 1 or 2 tons. (This is guestimated on an approximate
2,000 cubic feet of area to be cooled). The LESSEE will take full
responsibility for any lack of sufficient cooling capacity. Any
additional tonnage shall be supplied and installed at the sole expense
of the LESSEE.
4. The LESSEE is advised that, in the event the LESSEE needs additional
electrical power for additional AC capacity or any other reason, the
LESSEE at its sole expense shall install upgraded electrical service
(to be provided by LESSOR).
5. CONSTRUCTION COSTS PER TENANT'S INSTRUCTIONS:
<TABLE>
<S> <C>
Base Contract (credit $750.00 for ceiling panel & insulation installation) $8,235.00
Painting of ceiling above grid 2,800.00
Prep and cleanup of painting of ceiling 750.00
Aluminum Power Poles 2,500.00
Additional AC Work (including 3 drops) 450.00
Additional Electrical Work Including Phasing and Telephone Board 300.00
Architectural Services 900.00
Carpet by Tenant N/C
Permits:
Demolition 70.25
DNRP Review 30.00
Building (Plan Review @ $125.00/hr.) Assume 300.00
New Air Handler Unit N/C
Relocate AHU 100.00
----------
TOTAL $16,435.25
</TABLE>
<PAGE>
6. The LESSEE is responsible for all constructions costs incurred at the
direction and instructions of the LESSEE (see Plans approved 10-4-99).
See Addendum paragraphs #2 and #5. The LESSEE may request the LESSOR to
finance this construction cost of up to $10,000.00. The LESSOR shall do
so by adding a service charge of 10% per year (on unpaid balances) on
all of the LESSOR's advanced monies. The LESSOR shall be repaid in 60
equal payments (plus interest). Said sum shall be considered loan
repayment and shall be due and payable on the first day of each month
simultaneous with monthly rent payments due under this lease.
7. In the event that the LESSEE (or the LESSOR on the LESSEE's behalf)
removes any of the existing interior walls in Suite #1 or 2, then the
LESSEE shall pay to the LESSOR the sum of $3,780.00 (plus sales tax) as
compensation for replacement of the walls. Said sum shall be paid to
the LESSOR over the five year lease term in 60 monthly installments of
$63.00 (plus sales tax). Said sum shall be considered additional rent
and shall be due and payable on the first day of each month
simultaneous with the monthly rent payments due under this lease.
The LESSOR will refund the $3,780.00 to the LESSEE provided the LESSEE
faithfully completes the five year term of this lease and provided one
of the following conditions occur:
a. If the LESSEE renews this lease for a three year term or
longer with rent and terms agreeable to the LESSOR and LESSEE.
Said monies to be prorated as a monthly deduction to the
lease. The sales tax shall not be refunded.
b. If Suites #1 and 2 are leased to a third party for a three
year term or longer with occupancy within thirty days or less
of termination of this lease and provided that it is not
necessary to build any partition walls in the suites where
walls were removed. Said monies to be paid to LESSEE as a lump
sum within 90 days of occupancy of the third party LESSEE. The
sales tax will not be refunded.
_______________________________ _______________________________
LESSOR LESSEE
_______________________________ _______________________________
WITNESS WITNESS
EXHIBIT 10.7
eDiets.com, Inc.
3467 Hillsboro Boulevard
Deerfield Beach, Florida 33442
As of November 17, 1999
Whale Securities Co., L.P.
650 Fifth Avenue
New York, New York 10019
Ladies and Gentlemen:
eDiets.com, Inc., (formerly Olas, Inc.) a Delaware corporation (the
"Company"), hereby confirms its agreement with you (the "Placement Agent") as
follows:
1. DESCRIPTION OF TRANSACTION. The Company will offer for sale
to a limited number of persons meeting certain criteria for "accredited
investor" status (as more fully described in the Confidential Private Offering
Memorandum dated September 1, 1999 and the exhibits annexed thereto
(collectively, the "Memorandum"), up to one hundred sixty eight (168) units of
the Company's securities (the "Units"), each Unit consisting of (i) twenty five
thousand (25,000) shares (the "Shares") of the common stock, par value $.001 per
share (the "Common Stock") and (ii) twelve thousand five hundred (12,500)
redeemable warrants (the "Warrants"), each to purchase one share of Common Stock
(collectively, the "Warrant Shares") at a price of $2.50 per Warrant Share,
subject to adjustment under certain circumstances (the "Offering"). The purchase
price for the Units shall be Fifty Thousand Dollars ($50,000) per Unit. The
Units, the Shares and the Warrant Shares are more fully described in the
Memorandum; capitalized words not defined herein shall have the meanings set
forth in the Memorandum.
2. APPOINTMENT OF THE PLACEMENT AGENT. The Company hereby
appoints the Placement Agent as its exclusive agent to offer and sell the Units
on a "best efforts, 100 Unit Minimum/168 Unit Maximum" basis to accredited
investors, as set forth in Section 3 below. The Placement Agent, on the basis of
the representations, warranties, covenants and agreements of the Company, and
subject to the conditions contained herein, accepts such appointment and agrees
to use its best efforts to sell the Units. It is understood that the Placement
Agent has no commitment to sell the Units other than to use its best efforts.
3. PURCHASE, SALE AND DELIVERY OF UNITS. On the basis of the
representations and warranties contained herein, and subject to the terms and
conditions set forth herein, the parties agree that:
(a) REGULATION D OFFERING. Neither the offer nor the sale of
the Units has been or will be registered with the Securities and
Exchange Commission. The Units will be offered and sold in reliance
upon the exemption from registration provided
1
<PAGE>
by Regulation D ("Reg D") adopted under the Securities Act of 1933, as
amended (the "Act") , will only be sold to "accredited investors" as
such term is defined under Reg D ("Accredited Investors" ) and will be
made within the limitations of Rules 502 (c) and (d) ; the Units will
be offered for sale only in states in which the Units have been
qualified or registered for sale or are exempt from such qualification
or registration; and the Company will provide the Placement Agent for
delivery to all offerees and purchasers and their representatives, if
any, any information, documents and instruments which the Placement
Agent and Company deem necessary to comply with the rules, regulations
and judicial and administrative interpretations respecting compliance
with applicable state and federal statutes and regulations.
(b) SUBSCRIPTION FOR UNITS. Subscription for Units shall occur
by execution and delivery by the subscriber (the "Subscriber") of a
Subscription Agreement (the "Subscription Agreement") in the form
annexed as part of the Memorandum, together with such other documents
and instruments as are set forth in the Memorandum.
(c) SEGREGATION OF FUNDS. Each Subscriber for the Units shall
tender a check payable to "Whale Securities Co., L.P., as Placement
Agent for eDiets.com, Inc.," or wire transfer funds, in respect of the
purchase price of the Units subscribed for, which funds shall be held
in a non-interest-bearing special bank account (the "Special Account")
in a commercial bank in the City of New York designated by the
Placement Agent (the "Bank") as set forth in the Memorandum.
(d) CLOSING; TERMINATION OF OFFERING. If at least one hundred
(100) Units are subscribed for on or prior to November 17, 1999, an
initial closing of the offering (the "Initial Closing") shall occur as
soon as practicable after Subscription Agreements for, and funds in
respect of the purchase price of, such Units are received and accepted
by the Placement Agent and such Subscription Agreements are approved by
the Company. Thereafter, the Offering may continue, up to a maximum
(including the Units sold in connection with the Initial Closing) of
one hundred sixty eight (168) Units. All such sales must be completed
not later than December 1, 1999 (or such later date as is mutually
agreed to by the Company and the Placement Agent). The date on which
the Initial Closing occurs is hereinafter referred to as the "Initial
Closing Date;" the date or dates on which the subsequent closing or
closings occur are hereinafter referred to as the "Additional Closing
Date;" and the Initial Closing Date and Additional Closing Date(s) are
sometimes hereinafter referred to collectively as the "Closing Date,"
the last of which shall be referred to herein as the "Final Closing
Date." The Company shall deliver to the Placement Agent on the Closing
Date, on behalf of the Subscribers, certificates representing the
Shares and Warrants included in the Units being purchased by the
Subscribers on such Closing Date pursuant to Section 1 of this
Agreement against payment therefor, after deducting the amounts set
forth in Section 4 below. In the event of termination of the offering
contemplated herein, this Agreement, other than Sections 10 and 11
hereof, shall be automatically terminated and neither party shall have
any further obligation to the other party under this Agreement other
than the Company's
2
<PAGE>
obligation to pay expenses as set forth in Section 10 of this Agreement
and to indemnify and provide contribution as set forth in Section 11 of
this Agreement.
4. COMPENSATION OF PLACEMENT AGENT. As compensation for its
services rendered as Placement Agent under this Agreement, the Placement Agent
shall receive the following compensation:
(a) A sales commission equal to ten percent (10%) of the
aggregate Gross Proceeds (as hereinafter defined) of the Units, payable
by deducting the sales commission from the Gross Proceeds received for
the Units on the Initial Closing Date and each Additional Closing Date
(of which Fifteen Thousand Dollars ($15,000) has been paid and will be
credited against amounts payable at the Initial Closing); and
(b) Up to 697,500 Warrants (the "Placement Agent Warrants")
each to purchase one share of Common Stock at an exercise price of
$2.50 per Warrant Share, exercisable for a period of five years
commencing on the Initial Closing Date, pursuant to the terms of a
warrant agreement (the "Placement Agent Warrant Agreement") as follows:
(a) 487,500 Placement Warrants for the sale of the first one hundred
(100) Units, (b) 140,000 additional Placement Warrants for the next
forty (40) Units sold, or a pro rata amount thereof (i.e., 1,400
Placement Warrants for each of the forty (40) Units sold); and (c)
70,000 additional Placement Warrants for the next twenty eight (28)
Units sold, or a pro rata amount thereof (i.e., 2,500 Placement
Warrants for each of the additional twenty eight (28) Units sold), in
each case, to be issued on each Closing Date in relation to the number
of Units sold on each date and in the names provided by the Placement
Agent. Immediately prior to the listing of the Warrants on the Nasdaq
SmallCap Market, a securities exchange or the OTC Bulletin Board, the
Company shall offer in writing to the holders of Placement Warrants the
option to exchange the Placement Warrants for an equal number of
Warrants, which will be listed with the Warrants.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND EDIETS.
The Company and eDiets (as defined in Section 8(a) hereof) represents and
warrants to, and agrees with, the Placement Agent that:
(a) Memorandum. The Company and eDiets have prepared the
Memorandum, which may be supplemented from time to time, which contains
information, accurate as of the date specified therein, of the kind
specified by applicable statutes and regulations, including without
limitation:
(i) Terms of the Offering;
(ii) A description of the Units, the Shares and the
Additional Shares (as defined in Section 5(i) hereof);
(iii) the Acquisition (as defined in Section 8(a)
hereof);
3
<PAGE>
(iv) A description of the business conducted by the
Company and eDiets;
(v) The financial condition of the Company and
eDiets;
(vi) Past material activities of the Company and
eDiets;
(vii) Commissions and compensation to be paid to the
Placement Agent in connection with the Offering;
(viii) Disclosure of material contracts, agreements
or other business arrangements, which affect or are related to
the business conducted by the Company and eDiets and to be
conducted by the Company;
(ix) Information regarding the Company, its
management, material obligations, liabilities, any pending or
threatened lawsuits or proceedings, and recent material
adverse changes in its financial condition; and
(x) Any appropriate legends and such other
information or material as the Placement Agent may deem
necessary or desirable to be included therein.
(xi) The Memorandum, including all exhibits thereto,
as of its date and at all times subsequent thereto up to and
including the Final Closing Date does not (as of the date
hereof) and will not as of any such subsequent date include
any untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances in
which they were made, not misleading.
(b) ADDITIONAL INFORMATION. The Company has provided, and
shall provide to the Placement Agent, such information, documents and
instruments as may be required under Section 4(2) of the Act and Reg D
for an offer made to Accredited Investors.
(c) ORGANIZATION; GOOD STANDING. The Company is a corporation
duly organized and validly existing and in good standing under the laws
of the State of Delaware, with full power and authority, corporate and
other, to own or lease, as the case may be, and operate its properties
and to conduct its business as described in the Memorandum. The Company
has no subsidiaries or other equity interests in any entity other than
eDiets. Each of the Company and eDiets is duly qualified to do business
as a foreign corporation and is in good standing in all jurisdictions
wherein such qualification is necessary and where failure so to qualify
would have a material adverse effect on the financial condition,
results of operations, business or properties of the
4
<PAGE>
Company and eDiets taken as a whole. Unless the context otherwise
requires, all references to the "Company" in this Agreement shall
include eDiets. The term "Olas" is sometimes used herein to refer to
Olas, Inc. prior to the Acquisition. EDiets has full power and
authority, corporate and other, and all Permits (defined hereafter)
necessary to own or lease, as the case may be, and operate its
properties and to conduct its business as described in the Memorandum.
The Company owns all of the issued and outstanding shares of capital
stock of eDiets, free and clear of any security interests, liens,
encumbrances, claims and charges, and all of such shares have been duly
authorized and validly issued and are fully paid and non-assessable.
Except as described in the Memorandum or the letter agreement dated
November 5, 1999 amending the Merger Agreement (the "November 5, 1999
Letter"), there are no options or warrants for the purchase of, or
other rights to purchase, or outstanding securities convertible into or
exchangeable for, any capital stock or other securities of eDiets.
(d) GOVERNMENTAL AUTHORITY. Except for the filing of Form D
under the Act and other than as may be required under applicable state
securities or Blue Sky laws, no authorization, approval, consent,
order, registration, certification, license or permit (collectively,
"Permits") of any court or governmental agency or body, is required for
the valid authorization, issuance, sale and delivery of the Units, the
Shares, the Warrants or the Placement AgentWarrants to the Placement
Agent and/or the Subscribers and the consummation by the Company of the
transactions contemplated by this Agreement, the Warrants, the
Subscription Agreements, the Registration Rights Agreements between the
Company and the Subscribers and the Placement Agent, a form of which is
attached as Exhibit D to the Memorandum (the "Registration Rights
Agreements") and the Placement Agent Warrant Agreement.
(e) CORPORATE AUTHORIZATION. Each of the Company and eDiets
has full power and authority, corporate and other, to execute, deliver
and perform this Agreement and to consummate the transactions
contemplated hereby. The Company has full power and authority,
corporate and other, to execute, deliver and perform the Subscription
Agreements, the Warrants, the Registration Rights Agreements, the
Placement Agent Warrant Agreement and the Placement Agent Warrants, and
to consummate the transactions contemplated thereby. The execution,
delivery and performance of this Agreement, the Warrants, the
Registration Rights Agreements, the Subscription Agreements, the
Placement Agent Warrant Agreement and the Placement Agent Warrants, the
consummation by the Company of the transactions herein and therein
contemplated and the compliance by the Company with the terms of this
Agreement, the Warrants, the Registration Rights Agreements, the
Subscription Agreements, the Placement Agent Warrant Agreement and the
Placement Agent Warrants and the issuance and sale of the Units, have
been duly authorized by all necessary corporate action, and each of
this agreement, the Warrants, the Registration Rights Agreements, the
Subscription Agreements, the Placement Agent Warrant Agreement and the
Placement Agent Warrants has been duly executed and delivered by the
Company. Each of this Agreement, the Warrants, the Registration Rights
Agreement, the Subscription Agreement and the Placement Agent Warrant
Agreement
5
<PAGE>
is a valid and binding obligation of the Company, enforceable in
accordance with its terms, enforceable in accordance with its terms, in
each case, subject, as to enforcement of remedies, to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws
affecting the rights of creditors generally and the discretion of
courts in granting equitable remedies and except that enforceability of
the indemnification and contribution provisions set forth hereunder and
hereunder may be limited by the federal securities laws of the United
States or state securities laws or public policy relating thereto. The
execution, delivery and performance of this Agreement, the Warrants,
the Registration Rights Agreement, the Subscription Agreements, the
Placement Agent Warrant Agreement and the Placement Agent Warrants by
the Company, the consummation by the Company of the transactions herein
and therein contemplated and the compliance by the Company with the
terms of this Agreement, the Warrants, Registration Rights Agreement,
the Subscription Agreements, the Placement Agent Warrant Agreement and
the Placement Agent Warrants (i) result in any violation of the
Certificate of Incorporation or By-Laws, each as amended, of the
Company or eDiets; (ii) result in a breach of or conflict with any of
the terms or provisions of, or constitute a default under, or result in
the modification or termination of, or result in the creation or
imposition of any lien, security interest, charge or encumbrance upon
any of the properties or assets of the Company or eDiets pursuant to,
any indenture, mortgage, note, contract, commitment or other agreement
or instrument to which the Company or eDiets is a party or by which the
Company or eDiets or any of their respective properties or assets are
or may be bound or affected; (iii) violate any existing applicable law,
rule, regulation, judgment, order or decree of any governmental agency
or court, domestic or foreign, having jurisdiction over the Company or
eDiets or any of their respective properties or businesses; or (iv)
have any adverse effect on any Permits necessary for the Company or
eDiets, to own or lease, as the case may be, and operate any of its
properties or conduct its business or on the ability of the Company or
eDiets to make use thereof.
(f) CAPITALIZATION. The Company had, at the date or
dates indicated in the Memorandum, a duly authorized and outstanding
capitalization as set forth in the Memorandum under the caption
"Capitalization". Immediately prior to the Initial Closing, the Company
will have a duly authorized and outstanding capitalization as set forth
in the Memorandum under the caption "Capitalization" on a pro forma
basis after giving effect to the Acquisition. The outstanding shares of
Common Stock and outstanding options and warrants to purchase shares of
Common Stock have been duly authorized and validly issued. All such
outstanding shares of Common Stock are fully paid and nonassessable.
The outstanding options and warrants to purchase shares of Common Stock
constitute the valid and binding obligations of the Company,
enforceable in accordance with their terms. None of such outstanding
shares of Common Stock, options or warrants to purchase shares of
Common Stock have been issued in violation of the preemptive rights of
any security holder of the Company. None of the holders of such
outstanding shares of Common Stock is subject to personal liability
solely by reason of being such a holder. The offers and sales of such
outstanding shares of Common Stock and outstanding options and warrants
to purchase
6
<PAGE>
shares of Common Stock were at all relevant times either registered
under the Act and the applicable state securities or Blue Sky laws, or
exempt from such registration requirements. The authorized shares of
Common Stock and outstanding options and warrants to purchase shares of
Common Stock conform in all material respects to the descriptions
thereof contained in the Memorandum. Except as described in the
Memorandum, no holder of any of the Company's securities has any
rights, "demand", "piggyback" or otherwise, to have such securities
registered under the Act or applicable state securities laws. Except as
set forth in the Memorandum or the November 5, 1999 Letter, on the
Closing Date there will be no outstanding options or warrants for the
purchase of, or other outstanding rights to purchase, shares of Common
Stock or securities convertible into shares of Common Stock. The
issuance of the Shares, the Additional Shares, the Placement Agent
Shares, the Placement Agent Warrants, the Placement Agent Warrant
Shares and the Penalty Shares (as defined in the Registration Rights
Agreements) will not give any holder of any of the Company's
outstanding options, warrants, or other convertible securities or
rights to purchase shares of Common Stock, the right to acquire any
additional shares of Common Stock and/or the right to acquire shares of
Common Stock at a reduced price.
(g) AUTHORIZATION OF UNITS. The issuance and sale of the
Shares and Warrants as Units have been duly authorized. When the Shares
are issued and delivered in accordance with this Agreement, the Shares
will be validly issued, fully paid and nonassessable, and the holders
thereof will not be subject to personal liability solely by reason of
being such holders. The Shares will not be subject to the preemptive
rights of any security holder of the Company.
(h) AUTHORIZATION OF WARRANT SHARES, ADDITIONAL SHARES,
PLACEMENT AGENT WARRANTS, PLACEMENT AGENT WARRANT SHARES AND PENALTY
SHARES. The issuances of Warrant Shares, Additional Shares, Placement
Agent Warrants, the Placement Agent Warrant Shares and Penalty Shares
under the circumstances described in, and pursuant to the terms of,
this Agreement, the Warrants, the Subscription Agreement, Placement
Agent Warrant Agreement and Registration Rights Agreements, as the case
may be, have been duly authorized and, when issued and delivered in
accordance with the provisions of this Agreement, the Warrants, the
Subscription Agreement, the Placement Agent Warrant Agreement and
Registration Rights Agreements, as the case may be, Warrant Shares, the
Additional Shares, the Placement Agent Warrant Shares and Penalty
Shares will be validly issued, fully paid and nonassessable, and the
holders thereof will not be subject to personal liability solely by
reason of being such holders, and the Placement Agent Warrants will
constitute the valid and binding obligations of the Company,
enforceable in accordance with their terms. None of the Warrant Shares,
the Additional Shares, the Placement Agent Warrant Shares and Penalty
Shares will be subject to the preemptive rights of any security holder
of the Company.
(i) NONCONTRAVENTION. Neither the Company nor eDiets is in
violation of, or in default under, (i) any term or provision of its
Certificate of Incorporation or By-Laws, each as amended; (ii) any term
or provision, or any financial
7
<PAGE>
covenants, of any indenture, mortgage, contract, commitment or other
agreement or instrument to which it is a party or by which it or any of
its properties or business is or may be bound or affected; or (iii) any
existing applicable law, rule, regulation, judgment, order or decree of
any governmental agency or court, domestic or foreign, having
jurisdiction over the Company or eDiets or any of their respective
properties or businesses. Each of the Company and eDiets owns,
possesses or has obtained all governmental and other Permits necessary
to own or lease, as the case may be, and to operate its properties and
to conduct its business or operations as currently conducted and all
such Permits are outstanding and in good standing, and there are no
proceedings pending or, to the Company's or eDiets' knowledge,
threatened, nor is there any basis therefore, seeking to cancel,
terminate or limit such Permits.
(j) LITIGATION. Except as set forth in the Memorandum or the
November 5, 1999 Letter there are no claims, actions, suits,
proceedings, arbitrations, investigations or inquiries before any
governmental agency, court or tribunal, domestic or foreign, or before
any private arbitration tribunal, pending, or, to the Company's or
eDiets, knowledge, threatened, against the Company or eDiets involving
the properties or business of the Company or eDiets, which, if
determined adversely to the Company or eDiets would, individually or in
the aggregate, have an adverse effect on the financial position,
results of operations, properties or business of the Company and eDiets
taken as a whole, or which question the validity of the outstanding
capital stock of the Company or eDiets or this Agreement, or of any
action taken or to be taken by the Company or eDiets pursuant to, or in
connection with, this Agreement, nor is there any basis for any such
claim, action, suit proceeding, arbitration, investigation or inquiry.
There are no outstanding orders, judgments or decrees of any court,
governmental agency or other tribunal specifically naming the Company
or eDiets and enjoining the Company or eDiets from taking, or requiring
the Company or eDiets to take, any action, or to which the Company or
eDiets or their respective properties or businesses is bound or subject
which would be material to the Company and eDiets taken as a whole.
(k) FINANCIAL STATEMENTS. The financial statements and
schedules and notes thereto included in the Memorandum present fairly
the financial position of the Company and eDiets , as the case may be,
as of the dates thereof, and the results of operations and changes in
financial position of the Company and eDiets, as the case may be, for
the periods indicated therein, are in conformity with generally
accepted accounting principles applied on a consistent basis throughout
the periods involved, except as otherwise stated in the Memorandum.
(l) LIABILITIES. Except as and to the extent reflected or
reserved against in the financial statements of the Company included in
the Memorandum or as otherwise described in the Memorandum, neither the
Company nor eDiets as at June 30, 1999, had any material liabilities,
debts, obligations or claims asserted against it, whether accrued,
absolute, contingent or otherwise, and whether due or to become due,
including, but not limited to, liabilities on account of taxes, other
governmental charges
8
<PAGE>
or lawsuits brought subsequent to such date. Other than as described in
the Memorandum, subsequent to June 30, 1999, neither the Company nor
eDiets has incurred liabilities or debts or obligations of any nature
whatsoever, other than those incurred in the ordinary course of its
business which are not material to its business, financial condition or
operating results.
(m) TAXES. Each of the Company and eDiets has filed all
federal, state, municipal and local tax returns (whether relating to
income, sales, franchise, withholding, real or personal property or
other types of taxes) required to be filed under the laws of the United
States and applicable states or has duly obtained extensions of time
for the filing thereof, and has paid in full all taxes which have
become due pursuant to such returns or claimed to be due by any taxing
authority other than those being contested in good faith; and the
provisions for income taxes payable, if any, shown on the financial
statements contained in the Memorandum are sufficient for all accrued
and unpaid foreign and domestic taxes, whether or not disputed, and for
all periods to and including the dates of such financial statements.
Each of the Company and eDiets believes that each of the tax returns
heretofore filed by it correctly and accurately reflects the amount of
its tax liability thereunder. Each of the Company and eDiets has
withheld, collected and paid all other levies, assessments, license
fees and taxes to the extent required and, with respect to payments, to
the extent that the same have become due and payable. Except as
disclosed in writing to the Placement Agent, neither the Company nor
eDiets has executed or filed with any taxing authority, foreign or
domestic, any agreement extending the period for assessment or
collection of any income taxes nor is a party to any pending action or
proceeding by any foreign or domestic governmental agency for
assessment or collection of taxes; and no claims for assessment or
collection of taxes have been asserted against the Company or eDiets.
(n) CONDUCT OF BUSINESS. Since the respective dates as of
which information is given in the Memorandum, neither the Company nor
eDiets has (i) incurred any obligation or liability (absolute or
contingent), except obligations and liabilities incurred in the
ordinary course of the operation of business of the Company or eDiets,
as the case may be, as carried on at and prior to such date; (ii)
canceled, without payment in full, any notes, loans or other
obligations receivable or other debts or claims held by it other than
in the ordinary course of business; (iii) sold, assigned, transferred,
abandoned, mortgaged, pledged or subjected to lien any of its
properties, tangible or intangible, or rights under any contract,
permit, license, franchise or other agreement other than sales or other
dispositions of goods or services in the ordinary course of business at
customary terms and prices; (iv) increased compensation payable to any
of its officers, directors or other employees (including in the term
"compensation," salaries, fringe benefits, pensions, profit
participations and payments or benefits of any kind whatsoever) other
than in the ordinary course of business; (v) entered into any line of
business other than that conducted by it on such date or entered into
any transaction not in the ordinary course of its business; (vi)
conducted any line of business in any manner except by transactions
customary in the operation of its business
9
<PAGE>
as conducted on such date; or (vii) declared, made or paid or set aside
for payment any cash or non-cash distribution on any shares of its
capital stock.
(o) PROPERTIES. Neither the Company nor eDiets owns any real
property. Each of the Company and eDiets has good title to all material
personal property (tangible and intangible) owned by it, free and clear
of all security interests, charges, mortgages, liens, encumbrances and
defects, except such as are described in the Memorandum or such as do
not materially affect the value or transferability of such property and
do not interfere with the use of such property made, or proposed to be
made, by the Company or eDiets. The leases, licenses or other contracts
or instruments under which the Company or eDiets leases, holds or is
entitled to use any property, real or personal, are valid, subsisting
and enforceable, only with such exceptions as are not material and do
not interfere with the use of such property made, or proposed to be
made, by the Company or eDiets and all rentals, royalties or other
payments accruing thereunder which became due prior to the date of this
Agreement have been duly paid, and neither the Company nor eDiets is,
nor to the Company's or eDiets knowledge, is any other party in default
thereunder and, to the Company's and eDiets knowledge, no event has
occurred which, with the passage of time or the giving of notice, or
both, would constitute a default thereunder. Neither the Company nor
eDiets has received notice of any violation of any applicable law,
ordinance, regulation, order or requirement relating to its owned or
leased properties.
(p) CONTRACTS. Each contract or other instrument (however
characterized or described) to which the Company or eDiets is a party
or by which their properties or business is or may be bound or affected
and to which reference is made in the Memorandum has been duly and
validly executed by the Company or eDiets, as the case may be, and,
assuming that such contracts or other instruments have been properly
executed by parties other than the Company and eDiets is in full force
and effect in all material respects and is enforceable against the
parties thereto in accordance with its terms, and none of such
contracts or instruments has been assigned by the Company or eDiets, as
the case may be, and except as described in the memorandum, neither the
Company nor eDiets is, nor to the best of the Company's and eDiets'
knowledge, is any other party in default thereunder and, to the best of
the Company's nor eDiets, knowledge, no event has occurred which, with
the lapse of time or the giving of notice, or both, would constitute a
default thereunder.
To the best of the Company's knowledge, none of the material
provisions of such contracts or instruments violates any existing
applicable law, rule, regulation, judgment/order or decree of any
governmental agency or court having jurisdiction over the Company or
eDiets or any of their respective assets or businesses.
(q) BENEFIT PLANS. Except as set forth in or contemplated by
the Memorandum or as set forth in Schedule 5(q) attached hereto,
neither the Company nor eDiets has employee benefit plans (including,
without limitation, profit sharing and
10
<PAGE>
welfare benefit plans) or deferred compensation arrangements that are
subject to the provisions of the Employee Retirement Income Security
act of 1974.
(r) CONTRIBUTIONS. Neither the Company nor eDiets has directly
or indirectly, at any time W made any contributions to any candidate
for political office, or failed to disclose fully any such contribution
in violation of law or (ii) made any payment to any state, federal or
foreign governmental officer or official, or other person charged with
similar public or quasi-public duties, other than payments or
contributions required or allowed by applicable law.
(s) REG D QUALIFICATION; OFFERING DOCUMENTS. Assuming the
representations and warranties of the Placement Agent contained herein
and of the purchasers contained in the Subscription Documents are true
and correct, the offer and sale of the Units by the Company has
satisfied and on. the Closing Date will have satisfied, all of the
requirements of Reg D and the Company is not disqualified from the
exemption under Rule 505 contained in Reg D by virtue of the
disqualifications contained in Rule 505(b)(2)(iii), or the exemption
under Reg D by virtue of the disqualification contained in Rule 507.
The Memorandum and related documents (the "Offering Documents") conform
in all material respects with the requirements of Section 4(2) of the
Securities Act and Reg D promulgated thereunder and with the
requirements of all other published rules and regulations of the
Securities and Exchange Commission currently in effect relating to
"private offerings."
(t) FINDER'S FEE. Other than any payments to the Placement
Agent hereunder, neither the Company, Olas nor eDiets has incurred any
liability for any finder's fees or similar payments in connection with
the transactions herein contemplated.
(u) INTANGIBLES. Each of the Company and eDiets owns or
possesses or can acquire on reasonable terms adequate and enforceable
rights to use all trademarks, service marks, copyrights, rights, trade
secrets or other confidential information currently used in the conduct
of its respective business as described in the Memorandum (collectively
the "Intangibles"); except as disclosed in the Memorandum, to the
Company's and eDiets' knowledge, neither the Company nor eDiets has
infringed nor is infringing upon the rights of others with respect to
the Intangibles; and neither the Company nor eDiets has received any
notice that it has or may have infringed or is infringing upon the
rights of others with respect to the Intangibles; and neither the
Company nor eDiets has not received any notice of conflict with the
asserted rights of others with respect to the Intangibles which could,
singly or in the aggregate, materially adversely affect its business,
financial condition or results of operations and neither the Company
nor eDiets knows of any basis therefore; and, to the Company's and
eDiets, knowledge, no others have infringed upon the Intangibles.
11
<PAGE>
(v) LABOR RELATIONS. To the best of the Company's and eDiets,
knowledge, no labor problem exists with the Company's or eDiets'
employees or is imminent which could adversely affect the Company and
eDiets.
(w) INSURANCE. Each of the Company and eDiets has adequately
insured its properties against loss or damage by fire or other casualty
and maintains, in amounts which it deems, in good faith, to be
adequate, such other insurance, including but not limited to, liability
insurance, as is usually maintained by companies engaged in the same or
similar businesses.
(x) ENCUMBRANCES. Concurrently with or prior to the execution
hereof, each of the Company and eDiets has provided the Placement Agent
with the results of UCC, lieu and title searches in all appropriate
jurisdictions.
(y) NO ADVERSE CHANGE. Since the respective dates as of which
information is given in the Memorandum and the Company's and eDiets
latest financial statements, neither the Company nor eDiets has
incurred any material liability or obligation, direct or contingent, or
entered into any material transaction, whether or not in the ordinary
course of business, and has not sustained any material loss or
interference with its business from fire, storm, explosion, flood or
other casualty, whether or not covered by insurance, or from any labor
dispute or court or governmental action, order or decree; and since the
respective dates as of which information is given in the Memorandum,
there have not been, and prior to the Closing Date, except as disclosed
in the Memorandum there will not be, any changes in the capital stock
or any material increases in the long-term debt of the Company or any
material increases in the long-term debt of eDiets or any material
adverse change in or affecting the general affairs, management,
financial condition, shareholders' equity, or results of operations of
the Company or eDiets, otherwise than as set forth or contemplated in
the Memorandum.
(z) REGULATORY MATTERS. Each of the Company and eDiets is in
all material respects in compliance with the provision of all
applicable laws, rules and regulations.
(aa) DUE DILIGENCE. Each of the Company's and eDiets response
to the Corporate Review Memorandums of Tenzer Greenblatt LLP, dated
June 29, 1999, is true, complete and correct in all material respects
as of the date hereof and each Closing Date.
(bb) ACQUISITION AGREEMENT. The representations and warranties
of each of the Company, eDiets and the stockholder of eDiets contained
in the Acquisition Agreement are true, accurate and complete as of the
date hereof and all conditions to the consummation of the Acquisition
(other than the Initial Closing) have been satisfied.
12
<PAGE>
(cc) Any certificate signed by an officer of the Company or
eDiets and delivered to the Placement Agent or its counsel, or to
counsel for the Placement Agent, shall be deemed to be a representation
and warranty by the Company or eDiets, as the case may be, to the
Placement Agent as to the matters covered thereby.
6. Covenants.
(a) MEMORANDUM. The Company will furnish the Placement Agent,
without charge, during the offering, as many copies of the Memorandum
(and any amended or supplemental Memorandum) as the Placement Agent may
reasonably request. If during the offering period any event occurs as
the result of which the Memorandum, as then amended or supplemented,
would include an untrue statement of a material fact, or omit to state
a material fact necessary in order to make the statements made in light
of the circumstances in which they were made not misleading, or if it
shall be necessary to amend or supplement the Memorandum to comply with
applicable law, the Company will forthwith notify the Placement Agent
thereof, and furnish to the Placement Agent in such quantities as may
be reasonably requested, an amendment or amended or supplemented
Memorandum which corrects such statements or omissions or causes the
Memorandum to comply with applicable law. No copies of the Memorandum,
or any exhibit thereto, or any material prepared by the Company in
connection with the Offering will be given without the prior written
permission of the Placement Agent, by the Company or its counsel or by
any principal or agent of the Company to any person not a party to this
Agreement, unless such person is a director or principal shareholder
of, or directly employed by, the Company.
(b) STATE SECURITIES REGISTRATION. The Company will provide
Placement Agent's counsel with all information which such counsel
determines to be necessary and will otherwise cooperate with such
counsel, to permit such counsel to take all necessary action and file
all necessary forms and documents in order to qualify or register the
Units for sale under the securities laws of the states in which offers
or sales will be made or to take any necessary action and file any
necessary forms which are required to obtain an exemption from such
qualification or registration in such jurisdictions. The Company will
promptly advise the Placement Agent:
(i) If any securities regulator of any state shall
make a request or suggestion of or to the Company of any
amendment to the Memorandum or any registration materials or
for any additional information, including the nature and
substance thereof; and
(ii) Of the issuance of a stop order suspending the
qualification of the Units for sale in any state, including
the initiation or threatening of any proceeding for such
purpose, and the Company will use its best efforts to prevent
the issuance of such a stop order, or if such an order shall
be issued, to obtain the withdrawal thereof at the earliest
practicable date.
13
<PAGE>
The Company will provide the Placement Agent for
delivery to all offerees and purchasers and their
representatives any additional information, documents and
instruments which the Placement Agent shall deem necessary to
comply with the rules, regulations and judicial and
administrative interpretations in those states and
jurisdictions where the Units are to be offered for sale or
sold. The Company will file all post-offering forms, documents
or materials and take all other actions required by states in
which the Units have been offered or sold. The Placement Agent
will not make offers or sales of the Units in any jurisdiction
in which the Units have not been qualified or registered, or
are not exempt from such qualification or registration.
(c) USE OF PROCEEDS. The Company will use the net proceeds of
the Offering in the manner set forth in the Memorandum and, except as
set forth in the Memorandum, the Company will not use any portion of
the proceeds derived from the proposed offering to repay any
indebtedness for borrowed monies.
(d) REG D COMPLIANCE. The Company will comply in all respects
with the terms and conditions of Reg D and applicable state securities
laws with respect to the offering and the sale of the Units only to
"accredited investors" as set forth in the Memorandum.
(e) RESTRICTION ON ISSUANCE OF SECURITIES. During the six (6)
month period commencing on the Initial Closing Date, without the prior
written consent of the Placement Agent, (i) neither the Company nor any
of its officers, directors or security holders (other than security
holders of Olas prior to the acquisition who were not officers,
directors or beneficial owners of 52~5 or more of the outstanding
common stock of Olas prior to the Acquisition) will sell or otherwise
dispose of any securities of the Company and (ii) no holders of
registration rights relating to securities of the Company will exercise
any registration rights. The Company will not file a registration
statement on Form S-8 (or any similar form) during the six (6) month
period commencing on the Initial Closing Date. The Company will deliver
to the Placement Agent, the agreements of its officers, directors and
security holders (other than security holders of Olas prior to the
acquisition who were not officers, directors or beneficial owners of 5%
or more of the outstanding common stock of Olas prior to the
Acquisition) to this effect.
(f) BOARD OF DIRECTORS COMPOSITION AND MEETINGS. As of the
Initial Closing Date and until the earlier of the completion of an
initial public offering of the Company's securities or one (1) year
from the Initial Closing Date, the Company's Board of Directors shall
be comprised five (5) members consisting of David Humble, Isaac Kier,
Matthew Gohd and two (2) designees of eDiets (who must be unaffiliated
with the Company or with the management or founders of eDiets or the
Company (e.g., not an employee or officer of the Company or eDiets or a
relative of an employee or officer of the Company or eDiets) who were
reasonably satisfactory to the Placement
14
<PAGE>
Agent. The Company will cause its Board of Directors to meet, either in
person or telephonically, a minimum of four (4) times per year.
(g) EXECUTIVE COMMITTEE. As of the Initial Closing Date, the
Board of Directors shall have (i) established an executive committee,
(ii) appointed Messrs. David Humble, Isaac Kier and Matthew Gohd to
serve as the committee's only members for a period of six (6) months,
and (iii) granted to each committee member options to purchase 100,000
shares of Common Stock at an exercise price of $2.00 per share.
(h) EMPLOYEE STOCK OPTION PLAN. The Company will not grant any
options under its employee stock options plan with an exercise price
less than the greater of $2.00 per share and the market price per share
on the date of grant.
(i) REGISTRATION UNDER SECTION 12(G) OF THE EXCHANGE ACT AND
LISTING ON NASDAQ . If the Common Stock has not been registered under
the provisions of Section 12(g) of the Securities Exchange Act of 1934
and listed for trading on Nasdaq SmallCap Market within six (6) months
following the Initial Closing Date, the Company shall issue to each
holder of Warrants a number of shares of Common Stock equal to one-half
of the Warrants held by such holder (collectively, the "Additional
Shares") ; provided that if the Final Closing Date takes place more
than 45 days after the Initial Closing Date, the six (6) months shall
be increased by the number of days which elapse between the 45th day
after the Initial Closing Date and the Final Closing Date. The Company
will apply to list the Warrants on the Nasdaq SmallCap Market or any
securities exchange or the OTC Bulletin Board on which the Company
applies to list the Common Stock and will use customary reasonable
efforts to cause the Warrants to be so listed.
(j) TRANSFER AGENT FOR THE COMMON STOCK. The Company will
provide a transfer agent and registrar for the Common Stock, which may
be a single entity, not later than the earliest of (i) the registration
of the Common Stock under Section 12 (g) of the Exchange Act, (ii)
listing of the Common Stock for trade on Nasdaq or (iii) the effective
date of the Mandatory Registration Statement (as defined in the
Registration Rights Agreements).
7. REPRESENTATIONS AND WARRANTIES OF THE PLACEMENT AGENT. The
Placement Agent represents and warrants to, and agrees with, the Company that:
(a) NO DISQUALIFICATION. The Placement Agent is not
disqualified from the exemption under Rule 506 contained in Reg D by
virtue of the disqualifications contained in Rule 507.
(b) NO GENERAL SOLICITATION. No form of general solicitation
or general advertising has been or will be used by the Placement Agent
or any of its affiliates or representatives in connection with the
offer and sale of any of the Units,
15
<PAGE>
including, but not limited to, articles, notices or other communication
published in any newspaper, magazine, or similar medium or broadcast
over television or radio, or any seminar or meeting whose attendees
have been invited by any general solicitation or general advertising.
(c) ACCREDITED INVESTORS ONLY. In connection with the sale of
the Units, the Placement Agent will solicit offers to buy the Units
only from, and will offer to sell the Units only to Accredited
Investors who make the representations contained in, and execute and
return to the Company, a Subscription Agreement and a Confidential
Purchaser Questionnaire in the forms attached as exhibits to the
Memorandum.
(d) DELIVERY OF MEMORANDUM. Prior to or simultaneously with
the sale by the Company to any purchaser of any of the Units pursuant
hereto, the Placement Agent will furnish to such purchaser a copy of
the Memorandum (and any amendment thereof or supplement thereto that
the Company shall have furnished to the Placement Agent prior to the
date of such sale).
(e) RELIANCE ON REPRESENTATIONS. The Company and, for purposes
of the opinions to be delivered to the Placement Agent pursuant to
Section 8(g) hereof, counsel to the Company will rely upon the accuracy
and truth of the foregoing representations and the Placement Agent
hereby consents to such reliance.
(f) COMPLIANCE WITH THE ACT AND THE EXCHANGE ACT. In
connection with the offer and sale of the Units, the Placement Agent
agrees to comply with the applicable requirements under the Act and the
Exchange Act, and the published rules and regulations of the Securities
and Exchange Commission thereunder, including Regulation D.
8. CONDITIONS TO PLACEMENT AGENT'S OBLIGATIONS. The
obligations of the Placement Agent hereunder will be subject to the accuracy of
the representations and warranties of the Company herein contained as of the
date hereof and as of each Closing Date, to the performance by the Company of
its obligations hereunder and to the following additional conditions:
(a) ACQUISITION OF EDIETS. The Company shall have completed
the acquisition of all of the outstanding capital stock of eDiets.com,
Inc. ("eDiets") , a Delaware corporation, through the merger of eDiets
Acquisition Corp. with and into eDiets on the terms and conditions set
forth in the Agreement and Plan of Merger and Reorganization (the
"Acquisition Agreement") , dated August 30, 1999, by and among the
Company, eDiets and the stockholder of eDiets (the "Acquisition"). The
Company shall have changed its name from "Olas, Inc." to "eDiets.com,
Inc." and eDiets shall have changed its name from "eDiets.com, Inc." to
"eDiets, Inc."
16
<PAGE>
(b) DUE QUALIFICATION OR EXEMPTION. (i) The Offering will
become qualified or be exempt from qualification under the securities
laws of the several states pursuant to Section 6(b) above not later
than the Closing Date, and (ii) at the Closing Date no stop order
suspending the sale of the Units shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened;
(c) NO MATERIAL MISSTATEMENTS. The Placement Agent will not
have notified the Company that the Blue Sky qualification materials or
the Memorandum, or any supplement thereto, contains an untrue statement
of a fact which in its opinion is material, or omits to state a fact,
which in its opinion is material and is required to be stated therein,
or is necessary to make the statements therein not misleading;
(d) COMPLIANCE WITH AGREEMENTS. The Company will have complied
in all material respects with all agreements and satisfied all
conditions on its part to be performed or satisfied hereunder at or
prior to the Closing Date;
(e) CORPORATE ACTION. The Company will have taken all
necessary corporate action, including, without limitation, obtaining
the approval of the Company's board of directors, for the execution and
delivery of this Agreement, the performance by the Company of its
obligations hereunder and the commencement of the Offering;
(f) OFFICER'S CERTIFICATE. At each Closing Date, the Company
will have delivered a certificate of its Chairman of the Board or
President to the effect set forth in the preamble and subparagraphs (c)
and (d) of this Section 8;
(g) OPINION OF COUNSEL. On each Closing Date, the Placement
Agent will have received from (i) counsel to the Company ("Company
Counsel"), a signed opinion, dated as of such Closing Date, covering
the matters and language set forth in the form attached as Exhibit A
hereto and (ii) Nason, Yeager, Gerson, White & Lioce, P.A. ("eDiets
Counsel"), a signed opinion, dated as of such Closing Date, covering
the matters and language set forth in the form attached as Exhibit B
hereto.
In rendering its opinion, Company Counsel and eDiets Counsel
may rely upon (i) the certificates of government officials and officers
of the Company as to matters of fact; provided that Company Counsel and
eDiets counsel shall state that they have no reason to believe, and do
not believe, that they are not justified in relying upon such opinions
or such certificates of government officials and officers of the
Company as to matters of fact, as the case may be.
The opinion letter delivered pursuant to this Section 8(g) of
the Placement Agent Agreement shall state that any opinion given
therein qualified by the phrase "to the best of our knowledge" is being
given by Company Counsel after due investigation of the matters therein
discussed.
17
<PAGE>
(h) DELIVERY OF AGREEMENTS BY THE COMPANY. The Company will
have duly executed and delivered the Registration Rights Agreements,
the Subscription Agreements, the Shares and Warrants comprising the
Units sold on each Closing Date, the Placement Agreement Warrant
Agreement (on the Initial Closing Date) and the Placement Agreement
Warrants.
(i) DELIVERY OF AGREEMENTS OF OFFICERS, DIRECTORS AND
STOCKHOLDERS. The Company will have delivered to the Placement Agent on
or prior to the Initial Closing Date, the agreements of its officers,
directors and stockholders to the effect of the matters set forth in
Section 6(e) hereof.
9. CONDITIONS OF THE COMPANY'S OBLIGATIONS. The obligations of
the Company hereunder will be subject to the accuracy of the representations and
warranties of the Placement Agent contained herein as of the date hereof and as
of the Closing Date, to the performance by the Placement Agent of its
obligations hereunder and to the following additional conditions:
(a) APPROVAL OF INVESTORS. The Company shall have approved,
which approval shall not be unreasonably withheld, each purchaser of
Units;
(b) ABSENCE OF CERTAIN EVENTS. No stop order suspending the
sale of the Units will have been issued, and no proceeding for that
purpose will have been initiated or threatened; and
10. EXPENSES OF SALE. In addition to those items referred to
in Sections 4 hereof, the Company will pay or cause to be paid all costs and
expenses incident to the proposed sale of Units, whether or not the Offering is
consummated, including, without limitation, the fees, disbursements and expenses
of (a) its counsel and accountants, (b) preparing, printing, or otherwise
reproducing, and mailing, the Memorandum and other appropriate documents, and
any amendments or supplements thereto (all in such quantities as the Placement
Agent may require) , (c) registering or qualifying the Units for offer and sale
in the applicable states, as specified by the Placement Agent, or obtaining
exemptions therefrom, and the fees, expenses and disbursements of the Placement
Agent, including fees (up to a maximum of $7,500), expenses and disbursements of
Placement Agent's counsel, incurred in connection therewith, (d) all taxes, if
any, on the issuance of the Units, and (e) all other expenses relating to the
Offering.
18
<PAGE>
11. Indemnification and Contribution.
(a) INDEMNIFICATION BY THE COMPANY AND EDIET. Each of the
Company and eDiets agrees, jointly and severally, to indemnify and hold
harmless the Placement Agent and each person, if any, who controls the
Placement Agent within the meaning of the Act or the Exchange Act
against any losses, claims, damages or liabilities, joint or several,
to which the Placement Agent or such controlling person may become
subject, under the Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of a
material fact contained in the Memorandum, or in any Blue Sky
application or other document executed by the Company or eDiets
specifically for that purpose or based upon written information
furnished by the Company or eDiets filed in any state or other
jurisdiction in order to qualify any or all of the Units under the
securities laws thereof (any such application, document or information
being hereinafter called a "Blue Sky Application") or the omission or
alleged omission to state in the Memorandum or in any Blue Sky
Application a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading; and will reimburse the Placement
Agent and each other indemnified person for any legal or other expenses
reasonably incurred by the Placement Agent or such controlling person
in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company and
eDiets will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon an
untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with written
information furnished to the Company by the Placement Agent, with
respect to the Placement Agent, specifically for inclusion in the
Memorandum.
(b) INDEMNIFICATION BY THE PLACEMENT AGENT. The Placement
Agent agrees to indemnify and hold harmless the Company and each
person, if any, who controls the Company within the meaning of the Act
and the Exchange Act against any losses, claims, damages or
liabilities, joint or several, to which the Company or such controlling
person may become subject, under the Act or otherwise insofar as such
losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Memorandum or the
omission or alleged omission to state in the Memorandum or in any Blue
Sky Application a material fact required to be stated therein or
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in each case
to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to
the Company by the Placement Agent, with respect to the Placement
Agent, specifically for inclusion in the Memorandum.
(c) PROCEDURE. Promptly after receipt by an indemnified party
under this Section 11 of notice of the commencement of any action, such
indemnified party
19
<PAGE>
will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 11, notify in writing the
indemnifying party of the commencement thereof; provided, however, that
the failure so to notify the indemnifying party will not relieve the
indemnifying party from any liability under this Section 11, except to
the extent it is materially prejudiced thereby. In case any such action
is brought against any indemnified party, and it notifies an
indemnifying party of the commencement thereof, the indemnifying party
will be entitled to participate therein, and to the extent that it may
wish, jointly with any other indemnifying party, similarly notified, to
assume the defense thereof, with counsel who shall be to the reasonable
satisfaction of such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party will not be liable
to such indemnified party under this Section 11 for any legal or other
expenses subsequently incurred by such indemnified party in connection
with the defense thereof other than reasonable costs of investigation;
provided, however, that if, in the reasonable judgment of the
indemnified party or parties it is reasonable for the indemnified party
or parties to be represented by separate counsel, the indemnified party
shall have the right to employ a single counsel to represent the
indemnified parties who may be subject to liability arising out of any
claim in respect of which indemnity may be sought by the indemnified
parties thereof against the indemnifying party, in which event the fees
and expenses of such separate counsel shall be borne by the
indemnifying party. Any such indemnifying party shall not be liable to
any such indemnified party on account of any settlement of any claim or
action effected without the consent of such indemnifying party, which
consent shall not be unreasonably withheld.
(d) CONTRIBUTION. If the indemnification provided for in this
Section 11 is unavailable to any indemnified party in respect to any
losses, claims, damages, liabilities or expenses referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified
party, will contribute to the amount paid or payable by such
indemnified party, as a result of such losses, claims, damages,
liabilities or expenses (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and eDiets on the
one hand, and the Placement Agent on the other hand, from the Offering,
or (ii) if the allocation provided by clause (i) above is not permitted
by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and eDiets on the one hand, and of the
Placement Agent on the other hand, in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities
or expenses as well as any other relevant equitable considerations. The
relative benefits received by the Company and eDiets on the one hand,
and the Placement Agent on the other hand, shall be deemed to be in the
same proportion as the total proceeds from the Offering (net of sales
commissions, but before deducting expenses) received by the Company and
eDiets, bear to the commissions received by the Placement Agent. The
relative fault of the Company and eDiets on the one hand, and the
Placement Agent on the other hand, will be determined with reference
to, among other things, whether the untrue or alleged untrue statement
of a material fact or
20
<PAGE>
the omission to state a material fact relates to information supplied
by the Company or eDiets, and its relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or
omission. The amount payable by a party as a result of the losses,
claims, damages, liabilities or expenses referred to above will be
deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending
any action or claim.
(e) EQUITABLE CONSIDERATIONS. The Company, eDiets and the
Placement Agent agree that it would not be just and equitable if
contribution pursuant to this Section 11 were determined by pro rata
allocation or by any other method of allocation which does not take
into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this
Section 11, no person guilty of fraudulent misrepresentation (within
the meaning of Section 11 (f) of the Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
(f) PLACEMENT AGENT'S LIABILITY. Notwithstanding anything
contained in this Section 11 to the contrary, in no event shall the
amount for which the Placement Agent may be liable under this Section
11 exceed the amount which is paid to and received by the Placement
Agent pursuant to Section 4 (a) of this Agreement as compensation for
its services hereunder.
(g) INFORMATION WITH RESPECT TO THE PLACEMENT AGENT. The
Company and eDiets hereby acknowledge and agree that for all purposes
of this Section 11, the only information furnished to the Company or
eDiets by or on behalf of the Placement Agent specifically for
inclusion in this Memorandum is the information set forth in the
Memorandum under the caption "Plan of Distribution."
12. REPRESENTATIONS AND AGREEMENTS TO SURVIVE DELIVER. All
representations, warranties and agreements of the Company, eDiets and of the
Placement Agent herein will survive the delivery and execution hereof and the
closings hereunder, and shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of the Placement Agent or
any person who controls the Placement Agent within the meaning of the Act, or by
the Company, eDiets or any person who controls the Company or eDiets within the
meaning of the Act, and will survive delivery of the securities constituting the
Units hereunder and any termination of this Agreement.
13. NOTICES. Any notice hereunder shall be in writing and
shall be effective when delivered in person, or the day delivered if sent by
courier or mailed by certified or registered mail, postage prepaid, return
receipt requested (regardless of whether or not delivery is refused) , to the
appropriate party or parties, at the following addresses: if to the Placement
Agent, to Whale Securities Co., L.P., 650 Fifth Avenue, New York, New York
10019, Attention: Mr. William G. Walters, Chairman, with a copy to Tenzer
Greenblatt LLP, 405 Lexington Avenue, New York, New York 10174, Attention:
Robert J. Mittman, Esq.; if to the Company, to Olas Inc., 660 Madison Avenue,
New York, New York 10021, Attention:
21
<PAGE>
Mr. Isaac Kier, Chief Executive Officer, with a copy to Tenzer Greenblatt LLP,
405 Lexington Avenue, New York, New York 10174, Attention: Robert J. Mittman,
Esq.; if to the Company or eDiets, to eDiets.com, Inc., 3467 Hillsboro
Boulevard, Deerfield Beach, Florida 33442, Attention: Mr. David Humble, Chairman
and Chief Executive Officer, with a copy to Nason, Yeager, Gerson, White &
Lioce, P.A., Mellon United National Bank Tower, 1645 Palm Beach Lakes Boulevard,
Suite 1200, West Palm Beach, Florida 33401, Attention: Mark Pachman, Esq.; or,
in any case, to such other address as the parties may hereinafter designate by
like notice.
14. PARTIES. This Agreement will inure to the benefit of and
be binding upon the Placement Agent, the Company, eDiets and their respective
successors and assigns. This Agreement is intended to be, and is for the sole
and exclusive benefit of the parties hereto and the persons described in
subsections 11(a) and 11(b) hereof, and their respective successors and assigns,
and for the benefit of no other person, and no other person will have any legal
or equitable right, remedy or claim under, or in respect of this Agreement. No
purchaser of any of the Units will be construed as successor or assign merely by
reason of such purchase.
15. AMENDMENT AND/OR MODIFICATION. Neither this Agreement, nor
any term or provision hereof, may be changed, waived, discharged, amended,
modified or terminated orally, or in any manner other than by an instrument in
writing signed by each of the parties hereto.
16. FURTHER ASSURANCES. Each party to this Agreement will
perform any and all acts and execute any and all documents as may be necessary
and proper under the circumstances in order to accomplish the intents and
purposes of this Agreement and to carry out its provisions.
17. VALIDITY. In case any term of this Agreement will be held
invalid, illegal or unenforceable, in whole or in part, the validity of any of
the other terms of this Agreement will not in any way be affected thereby.
18. WAIVER OF BREACH. The failure of any party hereto to
insist upon strict performance of any of the covenants and agreements herein
contained, or to exercise any option or right herein conferred in any one or
more instances, will not be construed to be a waiver or relinquishment of any
such option or right, or of any other covenants or agreements, and the same will
be and remain in full force and effect.
19. ENTIRE AGREEMENT. This Agreement contains the entire
agreement and understanding of the parties with respect to the entire subject
matter hereof, and there are no representations, inducements, promises or
agreements, oral or otherwise, not embodied herein. Any and all prior
discussions, negotiations, commitments and understanding relating thereto are
superseded hereby. There are no conditions precedent to the effectiveness of
this Agreement other than as stated herein, and there are no related collateral
agreements existing between the parties that are not referred to herein.
22
<PAGE>
20. COUNTERPARTS. This Agreement may be executed in
counterparts and each of such counterparts will for all purposes be deemed to be
an original, and such counterparts will together constitute one and the same
instrument.
21. LAW. This Agreement will be deemed to have been made and
delivered in New York City and will be governed as to validity, interpretation,
construction, effect and in all other respects by the internal laws of the State
of New York. Each of the Company and eDiets (a) agrees that any legal suit,
action or proceeding arising out of or relating to this Agreement will be
instituted exclusively in New York State Supreme Court, County of New York, or
in the United States District Court for the Southern District of New York, (b)
waives any objection which it may have now or hereafter to the venue of any such
suit, action or proceeding, and (c) irrevocably consents to the jurisdiction of
the New York State Supreme Court, County of New York and the United States
District Court for the Southern District of New York in any such suit, action or
proceeding. Each of the Company and eDiets further agrees to accept and
acknowledge service of any and all process which may be served in any such suit,
action or proceeding in the New York State Supreme Court, County of New York or
in the United States District Court for the Southern District of New York and
agrees that service of process upon it, mailed by certified mail to its address
will be deemed in every respect effective service of process upon it, in any
suit, action or proceeding.
23
<PAGE>
If the foregoing correctly sets forth our understanding,
please so indicate in the space provided below for that purpose. Upon such
execution by you and delivery thereof to us (which may be by facsimile), this
letter will constitute a binding agreement between us in accordance with its
terms.
EDIETS.COM, INC.
By: /S/ DAVID R. HUMBLE
-----------------------------
Name: David R. Humble
Title: Chairman and Chief
Executive Officer
CONFIRMED AND ACCEPTED:
WHALE SECURITIES CO., L.P.
By: Whale Securities Corp.,
General Partner
By: /S/ WILLIAM G. WALTERS
--------------------------------
William G. Walters,
Chairman
24
<PAGE>
EXHIBIT A
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware. To the
best of Company Counsel's knowledge, the Company has no subsidiaries or other
equity interest in any entity other than eDiets. To the best of Company
Counsel's knowledge, prior to the Acquisition, the Company was not actively
engaged in any material business activities. All references to the "Company" in
this opinion specifically excludes eDiets.
(b) The Company has full power and authority, corporate and
other, to execute, deliver and perform the Placement Agent Agreement and to
consummate the transactions contemplated thereby. The Company has full corporate
power and authority, corporate to execute, deliver and perform the Subscription
Agreements, the Warrants, the Registration Rights Agreements, the Placement
Agent Warrant Agreement and the Placement Agent Warrants, and to consummate the
transactions contemplated thereby. The execution, delivery and performance of
the Placement Agent Agreement, the Subscription Agreements, the Warrants, the
Registration Rights Agreements, the Placement Agent Warrant Agreement and the
Placement Agent Warrants by the Company, the consummation by the Company of the
transactions therein contemplated, the compliance by the Company with the terms
of the Placement Agent Agreement, the Subscription Agreements, the Warrants, the
Registration Rights Agreements, the Placement Agent Warrant Agreement and the
Placement Agent Warrants and the issuance and sale of the Units have been duly
authorized by all necessary corporate action, and each of the Placement Agent
Agreement, the Subscription Agreements, the Warrants, the Registration Rights
Agreements, the Placement Agent Warrant Agreement and the Placement Agent
Warrants have been duly executed and delivered by the Company. Each of the
Placement Agent Agreement, the Subscription Agreements, the Warrants, the
Registration Rights Agreements, and the Placement Agent Warrant Agreement
(assuming for the purposes of this opinion that each is valid and binding upon
the other party thereto) is the valid and binding obligation of the Company,
enforceable in accordance with their respective terms, enforceable in accordance
with its terms, in each case, subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the rights of creditors generally and the discretion of courts in
granting equitable remedies and except that enforceability of the
indemnification provisions and the contribution provisions set forth herein may
be limited by the federal securities laws of the United States or public policy
underlying such laws.
(c) The execution, delivery and performance of the Placement
Agent Agreement, the Subscription Agreements, the Warrants, the Registration
Rights Agreements, the Placement Agent Warrant Agreement and the Placement Agent
Warrants by the Company, the consummation by the Company of the transactions
therein contemplated and the compliance by the Company with the terms of the
Placement Agent Agreement, the Subscription Agreements, the Warrants, the
Registration Rights Agreements, the Placement Agent Warrant Agreement and the
Placement Agent Warrants do not, and will not, with or without the giving of
notice or the lapse of time, or both, result in a violation of the Certificate
of Incorporation or By-Laws, each as amended, of the Company.
25
<PAGE>
(d) When the Shares and Warrants have been issued and duly
delivered in accordance with the provisions of this Agreement, the Shares will
be validly issued, fully paid and nonassessable, and, to the best of Company
Counsel's knowledge, the holders thereof will not be subject to personal
liability solely by reason of being such holders and the Warrants will
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms. The issuances of the Warrant Shares, Additional
Shares, Penalty Shares, Placement Agent Warrants and Placement Agent Warrant
Shares under the circumstances described in, and pursuant to the terms of, the
Placement Agent Agreement, the Warrants, the Subscription Agreements, the
Registration Rights Agreements or the Placement Agent Warrant Agreement, as the
case may be, have been duly authorized and, when issued and delivered in
accordance with the provisions of the Placement Agent Agreement, the Warrants,
the Subscription Agreements, the Registration Rights Agreements or the Placement
Agent Warrant Agreement, as the case may be, the Warrant Shares, Additional
Shares, Penalty Shares and Placement Agent Warrant Shares will be validly
issued, fully paid and nonassessable, and, to the best of Company Counsel's
knowledge, the holders thereof will not be subject to personal liability solely
by reason of being such holders, and the Placement Agent Warrants will
constitute the valid and binding obligations of the Company, enforceable in
accordance with their terms, in each case, subject, as to enforcement of
remedies, to applicable bankruptcy, insolvency, reorganization, moratorium and
other similar laws affecting the rights of creditors generally and the
discretion of courts in granting equitable remedies and except that
enforceability of the indemnification provisions and the contribution provisions
set forth herein may be limited by the federal securities laws of the United
States or public policy underlying such laws. None of the Shares, Warrant
Shares, Penalty Shares or Placement Agent Warrant Shares are subject to the
preemptive rights of any security holder of the Company under Delaware General
Corporate Law or the Company's Certificate of Incorporation or By-Laws. The
certificates representing the Shares, Warrant Shares, Penalty Shares, Placement
Agent Warrants and Placement Agent Warrant Shares when issued and delivered will
be in proper legal form.
26
<PAGE>
EXHIBIT B
(b) EDiets has full power and authority, corporate
and other, necessary to own or lease, as the case may be, and operate
its properties and to conduct its business as described in the
Memorandum. In connection with the Acquisition, to the best of eDiets
Counsel's knowledge the Company acquired all of the issued and
outstanding shares of capital stock of eDiets, free and clear of any
security interests, liens, encumbrances, claims and charges, and all of
such shares have been duly authorized and validly issued and are fully
paid and non-assessable. Except as set forth in the Memorandum, to the
best of eDiets Counsel's knowledge, there are no options or warrants
for the purchase of, or other rights to purchase, or outstanding
securities convertible into or exchangeable for, any capital stock or
other securities of eDiets.
(c) The execution, delivery and performance of the
Placement Agent Agreement, the Subscription Agreements, the Warrants,
the Registration Rights Agreements, the Placement Agent Warrant
Agreement and the Placement Agent Warrants by the Company, the
consummation by the Company of the transactions therein contemplated
and the compliance by the Company with the terms of the Placement Agent
Agreement, the Subscription Agreements, the Warrants, the Registration
Rights Agreements, the Placement Agent Warrant Agreement and the
Placement Agent Warrants do not, and will not, with or without the
giving of notice or the lapse of time, or both, (1) result in a
violation of the Certificate of Incorporation or By-Laws, each as
amended, of the eDiets; (2) to the best of counsel's knowledge result
in a breach of or conflict with any terms or provisions of, or
constitute a default under, or result in the modification or
termination of, or result in the creation or imposition of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of eDiets pursuant to, any indenture, mortgage, note, contract,
commitment or other agreement or instrument to which eDiets is a party
or by which eDiets or any of its properties or assets are or may be
bound or affected; (3) to the best of counsel's knowledge, violate any
existing applicable material law, rule, regulation, judgment, order or
decree of any governmental agency or court, domestic or foreign, that
would reasonably be expected to have jurisdiction over eDiets or any of
its properties or its business or (4) to the best of counsel's
knowledge have any effect on any Permit necessary for eDiets to own or
lease and operate any of its properties and to conduct business or the
ability of eDiets to make use thereof.
(d) The Units, the Shares, the Warrants, the
Placement Agent Warrants conform to the descriptions thereof contained
in the Memorandum.
(e) To the best of eDiets Counsel's knowledge, no
stop order relating to the offering contemplated by the Memorandum and
no proceedings for that purpose have been instituted or are pending,
threatened or contemplated under applicable securities laws.
27
<PAGE>
(f) The descriptions in the Memorandum of statutes
regulations, government classifications, contracts, instruments and
other documents have been reviewed by eDiets Counsel, and, based upon
such review, are accurate in all material respects and present fairly
the information with respect to eDiets required to be disclosed, and
there are no material statutes, regulations or government
classifications or material contracts or documents, of a character such
that they should be described in the Memorandum, which are not so
described. None of the material provisions of the contracts or
instruments described above violates any existing applicable law, rule,
regulation that we, exercising customary professional diligence would
reasonably recognize being directly applicable to the Company, or any,
judgment, order or decree known to us of any governmental agency or
court that would reasonably be expected to have jurisdiction over
eDiets or any of its assets or its business. To the best of eDiets
Counsel's knowledge, except so disclosed in the Memorandum eDiets is
not in default under any contract or agreement material to its business
or under any promissory note or other evidence of indebtedness for
borrowed funds.
(g) To the best of eDiets Counsel's knowledge, there
are no claims, actions, suits, proceedings, arbitrations,
investigations or inquiries before any governmental agency, court or
tribunal, foreign or domestic, or before any private arbitration
tribunal, pending or threatened against eDiets or involving their
respective properties or businesses, other than as described in the
Memorandum and other than litigation incident to the kind of business
conducted by eDiets which, individually and in the aggregate, is not
material.
(h) To the best of eDiets Counsel's knowledge, eDiets
has not infringed and is infringing upon, and eDiets Counsel has
received no notice to the effect that eDiets has infringed or is
infringing upon, the Intangibles of others, and, to the best of eDiets
Counsel's knowledge, after due inquiry of eDiets, eDiets has not
received any notice of conflict with the asserted rights of others with
respect to the Intangibles which might, singly or in the aggregate,
materially adversely affect its business, results of operations or
financial condition and such counsel is not aware of any licenses with
respect to the Intangibles which are required to be obtained by eDiets.
(i) No consent, approval, authorization or order of
any court or governmental agency or body of the United States or any
state of the United States or any political subdivision of any of the
foregoing is required for the consummation of the offering, except
such as may be required under the Blue Sky or other securities laws of
any state of the United States in connection with the purchase of
Units by the Subscribers and the distribution of the Units by the
Placement Agent.
eDiets Counsel has participated in reviews and discussions in
connection with the preparation of the Memorandum, and, in the course of such
reviews and discussions and such other investigation as eDiets Counsel deemed
necessary, no facts came to its attention which lead it to believe that the
Memorandum (except as to the financial statements as to which eDiets Counsel
need not express an opinion) , on the Closing Date, contained any untrue
28
<PAGE>
statement of a material fact, or omitted to state any material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
29
<PAGE>
SCHEDULE 5(G)
Employee Pension Benefit Plans
* Spectrum, a professional employer service used by eDiets, maintains a 401K
Pension Plan for eDiets employees for which eDiets reimburses Spectrum for the
costs of administering contributions made under the Plan. David R. Humble, who
is not an employee of eDiets, is not covered under the Plan.
30
EXHIBIT 10.8
December 22 1999
Mr. David Humble
eDiets, Inc..
3467 Hillsboro Blvd.
Deerfield Beach, FL 33442
RE: LETTER OF AGREEMENT
Dear Mr. Humble:
This Letter of Agreement shall serve as an agreement (the "Agreement")
between iVillage Inc. ("iVillage") and eDiets, Inc. ("eDiets") and shall be
effective as of the first date set forth above (the "Effective Date").
1. IVILLAGE'S AND MUTUAL OBLIGATIONS. During the term of this Agreement, and in
connection with iVillage's existing U.S. English language version Web sites (the
"iVillage Network"), iVillage shall perform the following:
A. Deliver to eDiets a minimum of twenty-nine million five-hundred
thousand and eight (29,500,008) Impressions in the form of advertising banners.
eDiets retains the right to adjust delivery of said impressions to include some
combination of banners, buttons, "Don't Miss" boxes and newsletter impressions
as mutually agreed by the parties and subject to available inventory. Targeting
of said impressions to be as follows:
(i) a minimum of eight million four hundred thousand (8,400,000)
Impressions, to be delivered over the Term of this Agreement
at a rate of seven hundred thousand (700,000) Impressions per
month, to be delivered within the iVillage Diet Channel, which
shall all link directly to the eDiets Web Site located at
www.ediets.com (the "eDiets Web Site") or another location to
be mutually agreed upon by both parties;
(ii) a minimum of four million two hundred thousand (4,200,000)
Impressions, to be delivered over the Term of this Agreement
at a rate of three hundred and fifty thousand (350,000)
Impressions per month, to be delivered within the iVillage
allHealth Channel which shall all link directly to the eDiets
Web Site or another location to be mutually agreed upon by
both parties;
(iii) a minimum of sixteen million nine hundred thousand four
hundred and eight (16,400,008) Impressions, to be delivered
over the Term of this Agreement at a rate of one million four
hundred and eight thousand three hundred and thirty-four
(1,408,334) Impressions per month, to be delivered throughout
the iVillage Network which shall all link directly to the
eDiets Web Site or another location to be mutually agreed upon
by both parties.
(iv) In the event that iVillage is unable to deliver ninety percent
(90%) of the guaranteed monthly amount, iVillage will have
sixty (60) days to deliver the shortfall or iVillage will be
considered in material breach of the Agreement. If iVillage is
considered in material breach of the Agreement, eDiets may
either elect to terminate the Agreement or extend the
Agreement over a mutually agreed to period of time ("Make
Good" Period) in order to receive the originally guaranteed
delivered Impressions. Should eDiets elect to terminate the
<PAGE>
Agreement, iVillage shall reimburse eDiets, within thirty (30)
days of the date of termination, for all Impressions paid for
and not delivered as of the date of termination. iVillage
agrees that, if eDiets elects to extend the Agreement for a
Make Good Period, then the monthly fee due for the months
subsequent to when eDiets has elected to extend the Agreement
will be recalculated and reduced to reflect the changes in
delivery schedule.
B. MEMBER OFFER PROGRAM. Over and above the Impressions delivered
pursuant to Section 1(A), iVillage shall deliver to eDiets during the Term of
this Agreement no less than twenty-five million (25,000,000) additional
impressions as a part of the following Member Offer Program:
(i) With regard to timing, said additional Impressions will be
delivered as mutually agreed by the parties. Said Impressions
will be delivered in the form of a rotating iVillage Network
Button (a 120x60 pixel graphic button located in the top right
corner of standard iVillage pages) which will also be a
hyperlink to an exact location to be agreed by the parties.
Design, style, format, content and all other aspects of said
rotating network button must be approved by iVillage, which
approval shall not be unreasonably withheld. The exact
schedule for delivery of said Impressions shall be subject to
the availability of iVillage Network Button inventory and
within the discretion of iVillage.
(ii) eDiets, in cooperation with iVillage, will use said additional
Impressions delivered via the iVillage Network Button to
promote a discount offer to iVillage members off of any diet
program offered by eDiets. This member offer will be presented
and membership authentication accomplished as determined by
iVillage and in a manner similar to that used in the iVillage
home page retail program. Although it is understood that the
price of an eDiets program may vary during the term of this
Agreement, in no case, unless otherwise agreed to by the
parties, can the value of this discount to the iVillage member
be less than fifteen dollars ($15). In addition, eDiets also
agrees to pay iVillage a cost per acquisition for each eDiets
program purchased pursuant to the use of said Network Button
and discount offer, to be paid within thirty (30) days from
the end of each month in which said new eDiets membership or
eDiets program is purchased from eDiets. Although it is
understood that the price of an eDiets program may vary during
the term of this Agreement, in no case, unless otherwise
agreed to by the parties, can the value of this cost per
acquisition component be less than ten dollars ($10).
(iii) eDiets may opt not to move ahead with this member offer
program if the parties are unable to agree on a structure that
is economically viable for eDiets.
C. BONUS INVENTORY ON AOL. iVillage shall offer to eDiets all iVillage
advertising inventory available on the iVillage Never Say Diet section that
appears on America Online ("AOL") during the Term of this Agreement, so long as
such section appears on AOL, at no charge. Said rights granted to eDiets under
this Section 1(C) of this Agreement shall be subject to the existence of the
Never Say Diet section on AOL, which may not appear on AOL throughout the Term
of this Agreement. This Section 1(C) shall also be subject to any decision by
iVillage, without notice and within its sole discretion, to retain or terminate
said Never Say Diet section on AOL.
<PAGE>
D. SPONSORSHIP. eDiets shall be one of no more than five (5) sponsors
of the Interactive Diet Planner which shall be located within the iVillage Diet
& Fitness Channel. Said sponsorship will consist of an eDiets logo or graphic,
no larger than 120x90 pixels, to be rotated equally among said sponsors on the
Diet Planner Web page. Such logo or graphic will also be a hyperlink to the
eDiets Web site or other such location to be determined by the parties. eDiets
will compensate iVillage with 50% of all revenue generated by sales resulting
from this link.
E. SHOPPING CHANNEL INTEGRATION. iVillage shall include an eDiets logo,
which shall also be a hyperlink to the eDiets Web site, to be rotated equally
amongst other third party logos, and a permanent text link which shall also be
hyperlink to the eDiets Web site, within the Health and Sports section currently
located at www.ivillage.com/shopping/department/health_sports/.
2. EDIETS'S OBLIGATIONS:
A. GENERAL OBLIGATIONS. In conjunction with the parties' mutually
agreed upon deliverable schedule, eDiets shall provide iVillage with those
elements needed to support eDiets presence on the iVillage Network. eDiets shall
promptly notify iVillage of any deficiencies in such submissions, if any, within
a mutually agreed upon deadline. eDiets acknowledges that any delay in providing
its approvals or deliverables to iVillage affects the timely implementation of
its presence within the iVillage Network.
B. NEWSLETTER INCENTIVE PROGRAM. eDiets, at its discretion, shall
integrate a tool to allow eDiets members and visitors to sign up, on an "opt in"
basis, into receiving the iVillage Diet & Fitness Newsletter. All aspects of the
design, functionality and placement of this tool, including all aspects of the
presentation of said offer to receive said Newsletter, is subject to the
approval and solely within the discretion of iVillage. For every eDiets visitor
that opts to receive said iVillage Newsletter through said tool with a valid
e-mail address, eDiets shall be credited with fifteen (15) additional Run of
Network impressions at no additional charge. (By way of example, should eDiets
provide iVillage with ten thousand (10,000) valid e-mail addresses via said
opt-in tool eDiets will receive one hundred fifty thousand (150,000) additional
Run of Network impressions at no cost.)
3. COMPENSATION.
A. eDiets shall pay to iVillage upon execution of this Agreement an
up-front, non-refundable, non-recoupable production and set up fee in the amount
of One Hundred Thousand Dollars ($100,000.0). In addition, eDiets shall pay
iVillage an additional Nine Hundred and Ninety One Thousand Five Hundred Dollars
($991,500), for a total of $1,091,500, to be paid in twelve equal monthly
payments of Eighty Two Thousand Six hundred and Twenty Five Dollars ($82,625.00)
each, due on or before the first day of each month, beginning January 1, 2000.
B. To the extent any of the above mentioned fees are accrued but not
yet paid to iVillage as of the termination or expiration of this Agreement, this
Section 3 shall survive any such termination or expiration of this Agreement
until such time as the payment for fees accrued has been fully satisfied.
C. All payments made via wire transfer should be directed as follows:
Chase Manhattan Bank, 1411 Broadway, New York, New York 10018; Account name:
iVillage Inc.; ABA#: 021000021; Account #: 020-923406; Reference: eDiets. All
payments made via check,
<PAGE>
should be sent to: iVillage Inc., 170 Fifth Avenue, New York, New York 10010;
Attention: Accounts Receivable.
4. TERM AND TERMINATION.
A. The term of this Agreement will extend for a period of one (1) year
and commencing on the January 1, 2000 and to run until December 31, 2000 (the
"Term") unless terminated earlier as set forth herein.
B. In the event of a material breach by either party of any term of
this Agreement, the non-breaching party may terminate this Agreement by written
notice to the breaching party if the breaching party fails to cure such material
breach within thirty (30) days of receipt of written notice thereof. In
addition, either party may terminate this Agreement effective upon written
notice stating its intention to terminate in the event the other party (i)
ceases to function as a going concern or to conduct operations in the normal
course of business, or (ii) has a petition filed by or against it under any
state or federal bankruptcy or insolvency law which petition has not been
dismissed or set aside within ninety (90) days of its filing.
C. Each right, duty, obligation and cause of action which by its nature
should survive the termination or expiration of this Agreement, will survive the
termination of this agreement, including but not limited to, Section 3 as to
fees accrued but unpaid, Section 11, 12, 13 and 14.
5. OWNERSHIP. All intellectual or proprietary property and/or information, of
any nature whatsoever, which has been supplied or developed by either Party (the
"Intellectual Property") is and will remain the sole and exclusive property of
the party who supplied or developed same, regardless of where the Intellectual
Property resides. Upon termination of this Agreement and upon written request,
the party in receipt of the requesting party's Intellectual Property as a result
of this Agreement will immediately return such information to the requesting
party.
6. LICENSES. eDiets grants to iVillage, during the term of this Agreement, a
royalty-free, non-exclusive, worldwide license to use, reproduce, display,
distribute, perform and produce (i) eDiets's tradenames, trademarks, service
marks and logos (collectively, the "eDiets Marks") to support the development,
promotion and marketing of eDiets within the iVillage Network and the eDiets
Products and Services as contemplated by this Agreement. Except as set forth
herein, no right, title, license, or interest in any eDiets Marks owned by
eDiets or any of its affiliates is intended to be given to or acquired by
iVillage by the execution of or the performance of this Agreement. iVillage
shall not use the eDiets Marks for any purpose or activity except as expressly
authorized or contemplated herein. iVillage acknowledges that eDiets is the sole
and exclusive owner of all trademarks, service marks, copyrights and other
intellectual property of any kind in the eDiets Marks. iVillage agrees that (i)
it shall do nothing inconsistent with such ownership either during the term of
the Agreement or afterwards; (ii) it shall use the eDiets Marks in a manner that
does not deviate from eDiets'rights in the eDiets Marks; and (iii) it shall take
no action that shall interfere with or diminish eDiets' right in the eDiets
Marks.
7. INABILITY TO MUTUALLY AGREE/DETERMINE. In connection with any element of the
implementation of the sponsorship which, in accordance with the terms of this
Agreement, is to be determined by the mutual agreement of the parties, if such
an agreement cannot be reached within a reasonable period of time, iVillage
shall make a commercially reasonable decision to implement the terms hereof.
<PAGE>
8. SUBMISSIONS. As appropriate, iVillage must receive all eDiets submissions at
least 5 business days prior to the scheduled date of publication for each
relevant graphic (GIF) file, or file of such other format as iVillage may
designate from time to time, supplied by eDiets to be published by iVillage on
the iVillage Network and which may contain a link to eDiets's Web site or to a
Web site specified by eDiets or any and all information and items necessary for
iVillage's publication of any material supplied by eDiets, including changes and
updates thereto (collectively, "eDiets Submissions" and each, a "eDiets
Submission"). In the event iVillage does not receive an eDiets Submission prior
to the applicable deadline, iVillage may publish in substitution any prior
eDiets Submission until such time as iVillage can reasonably begin publication
of the promotion. If no such prior eDiets Submission is available, iVillage may
publish in substitution, any material it deems appropriate, in its sole
discretion, until such time as iVillage can reasonably begin publication of the
promotion. All changes to and/or cancellations of eDiets Submissions must be
made in writing, with an e-mail copy sent to [email protected], and received
by iVillage prior to the applicable deadline. iVillage may, in its sole
discretion, refuse at any time and for any reason, any eDiets Submission and/or
publish any advertisement provided by eDiets.
9. REPORTS AND TRACKING.
A. iVillage shall provide eDiets with a user name and password to
access online reporting through DART (Doubleclick) or other similar service. Any
customization of reports requested by eDiets or its agent or representative
shall be subject to a reasonable charge as determined by iVillage. In addition,
during the term of this Agreement, iVillage shall provide eDiets with mutually
agreed upon statistics regarding the Co-Branded Area, including traffic thereon,
in accordance with iVillage's standard reporting formats.
B. In the event a third party advertisement serving and measurement
company ("Ad Server") is used and the iVillage report indicates a number of
impressions delivered that is greater than the Ad Server report, then the number
of impressions indicated by iVillage's report will be deemed the determinative
number of impressions delivered during the reporting period for purposes of the
duties and obligations of this Agreement.
10. PUBLICITY. If so desired, iVillage and eDiets may mutually agree to work
together to draft a press release. The press release and any quotes from each
party's sources must be approved by the public relations department of the other
party (unless otherwise required to be disclosed to a government or
administrative agency), which also must be made aware of any pre-briefings with
outside parties at least 5 days in advance of any pre-briefing. Notwithstanding
the foregoing, this Section shall not restrict with either party from complying
with any governmental or administrative order or requirement.
11. REPRESENTATIONS, WARRANTIES AND INDEMNIFICATION.
A. iVillage represents and warrants that: (i) it is authorized to do
business under the rules of the state in which it is incorporated; (ii) it is
authorized to enter into this Agreement and to perform its obligations; (iii) it
has all required permits, licenses, and other governmental authorizations and
approvals; (iv) the services to be provided will be performed in a professional
manner; and (v) to the best of iVillage's knowledge the services to be performed
and the materials provided by it (a) do not infringe or violate any patent,
copyright, trade secret, trademark, or other proprietary right of any third
party, (b) do not violate any applicable law, statute, ordinance or regulation;
(c) are not knowingly defamatory or libelous; (d) are not lewd,
<PAGE>
pornographic or obscene; (e) do not knowingly violate any laws regarding unfair
competition, antidiscrimination or false advertising; (f) are year 2000
compliant and do not promote violence or contain hate speech; and (g) do not
knowingly contain viruses, trojan horses, worms, time bombs, cancelbots or other
similar harmful or deleterious programming routines.
B. eDiets represents and warrants that: (i) it is authorized to do
business under the rules of the state in which it is incorporated; (ii) it is
authorized to enter into this Agreement and to perform its obligations; (iii) it
has all required permits, licenses, and other governmental authorizations and
approvals; (iv) the services to be provided will be performed in a professional
manner; (v) any premium rates published on the Co-Branded Area are accurate;
(vi) the eDiets presence on the iVillage Network shall, during the term of this
Agreement, satisfies all applicable regulatory requirement; (vii) eDiets is
authorized to provide the eDiets Products and Services in the jurisdictions
applicable to this Agreement; (viii) it has the technical and operational
capacity to count and track, and will count and track the number of leads
generated pursuant to this Agreement; and (ix) the services to be performed and
the materials provided by it (a) do not infringe or violate any patent,
copyright, trade secret, trademark, or other proprietary right of any third
party, (b) do not violate any applicable law, statute, ordinance or regulation;
(c) are not knowingly defamatory or libelous; (d) are not lewd, pornographic or
obscene; (e) do not knowingly violate any laws regarding unfair competition,
antidiscrimination or false advertising; (f) do not promote violence or contain
hate speech; and (g) is year 2000 compliant, does not knowingly contain viruses,
trojan horses, worms, time bombs, cancelbots or other similar harmful or
deleterious programming routines.
C. INDEMNIFICATION/THIRD PARTY CLAIMS: Each party ("Indemnitor") will
defend, at its expense, and will pay the cost and damages of a settlement or
award resulting from any claim brought against the other ("Respondent") by any
third party that (a) related to a breach of representation or a warranty, (b) in
any way relates to the independent business relationship that Indemnitor may
have with the claimant, or (c) alleges infringement of any Untied States patent,
trademark, copyright or trade secret that relates solely to the Indemnitor's Web
sites or the content thereon conveyed under this Agreement, except where, in
each case, (i) through (iii), the claim arises out of or results from
modifications made by, or combinations with content, products or services
provided by Respondent or others, or, use of content, or Intellectual Property
to violation of this Agreement, but only if Respondent in each case (a) through
(c), (i) promptly notifies the Indemnitor in writing of the claim, (ii) gives
the Indemnitor all requested information that the Respondent has concerning the
claim, (iii) reasonably cooperates with and assists the Indemnitor in defending
the claim at the Indemnitor's expense; and (iv) gives the Indemnitor sole
authority to defend or settle the claim (however, Indemnitor will not have the
authority to obligate the Respondent in any way or to compromise any of
Respondent's right in connection with the defense or settlement). Respondent may
participate in the defense of the claim at its expense, or choose to handle the
defense of the claim directly, but only through council of its choosing.
12. CONFIDENTIALITY. Other than as required or appropriate for securities laws
disclosure, iVillage and eDiets agree to keep in confidence, all Confidential
Information. Confidential Information means (a) any material non-public
information, communication or data, in any form, of the other party and (b)
eDiets-branded advertisements and promotional elements prior to publication. All
Confidential Information shall remain the sole property of the disclosing party
and its confidentiality shall be maintained and protected by the receiving party
with at least the same degree of care as the receiving party uses for the
protection of its own confidential and
<PAGE>
proprietary information. The receiving party shall not disclose such
Confidential Information to any third party. These restrictions shall not apply
to any Confidential Information: (v) after it has become generally available to
the public without breach of this Agreement by the receiving party; (w) is
rightfully in the receiving party's possession before disclosure to it by the
disclosing party; (x) is independently developed by the receiving party; (y) is
rightfully received by the receiving party from a third party without a duty of
confidentiality; or (z) is required to be disclosed under operation of law or
administrative process. Upon expiration or termination of this Agreement for any
reason, eDiets will promptly and at the direction of iVillage, either destroy or
return to iVillage, and will not take or use, all items of any nature which
belong to iVillage and all records (in any form, format or medium) containing or
relating to Confidential Information.
13. LIMITATION OF LIABILITY. NEITHER PARTY SHALL HAVE ANY LIABILITY FOR ANY
INDIRECT, SPECIAL, PUNITIVE OR CONSEQUENTIAL DAMAGES INCLUDING, WITHOUT
LIMITATION, LOSS OF PROFIT OR BUSINESS OPPORTUNITIES, WHETHER OR NOT THE PARTY
WAS ADVISED OF THE POSSIBILITY OF SUCH. EXCEPT AS EXPRESSLY SET FORTH HEREIN,
NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE SERVICES
CONTEMPLATED BY THIS AGREEMENT, INCLUDING ANY IMPLIED WARRANTY OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE AND IMPLIED WARRANTIES
ARISING FROM COURSE OF DEALING OR COURSE OF PERFORMANCE. FURTHERMORE, EXCEPT AS
SPECIFICALLY PROVIDED FOR HEREIN, NEITHER PARTY IS LIABLE TO THE OTHER PARTY FOR
ANY REASON OR UPON ANY AND ALL CLAIMS AND CAUSES OF ACTION IN THE AGGREGATE, IN
CONTRACT, TORT OR OTHERWISE, ARISING IN A CALENDAR YEAR, EXCEPT FOR THOSE
RESULTING FROM SECTIONS 11(A)(v) AND 11 (B)(ix), IN AN AMOUNT NOT TO EXCEED THE
FEES RECEIVED BY IVILLAGE IN A CALANDER YEAR, OR LESS, AS A RESULT OF THE TERMS
OF THIS AGREEMENT.
14. MISCELLANEOUS PROVISIONS. Nothing in this Agreement shall imply any
partnership, joint venture or agency relationship between the parties and
neither party shall have the power to obligate or bind the other except as
expressly set forth in this Agreement. Commencing on the tenth day after the
date that each of the aforementioned payments are due, eDiets.com shall be
liable for a monthly rate of interest of not more than 1 1/2%, which interest
shall be in addition to such fees due and owing to iVillage. Except as otherwise
expressly provided in this Agreement, neither party will be deemed to be in
default of or to have breached any provision of this Agreement or for any delay
or failure of performance or interruption of service resulting from any acts of
God, acts of civil or military authorities, civil disturbances, wars, strikes or
other labor disputes, fires, transportation contingencies, interruptions in
telecommunications or Internet services or network provider services, failure of
equipment and/or software, other catastrophes or any other occurrences which are
beyond such party's reasonable control. This Agreement, including the Schedules
hereto, sets forth the entire agreement between the Parties on this subject and
supersedes all prior negotiations, understandings and agreements between the
Parties concerning the subject matter. No amendment or modification of this
Agreement shall be made except by a writing signed by the Party to be bound
thereby or the successor or assign of such Party. The rights granted under this
Agreement to eDiets shall be applicable to iVillage existing Web sites and shall
not apply to any future acquisition by iVillage of Web sites or content, joint
ventures or similar business combinations. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York without
reference to its
<PAGE>
conflicts of laws provisions. Jurisdiction for litigation of any dispute,
controversy or claim arising out of or in connection with this Agreement, shall
be only in a federal or state court having subject matter jurisdiction located
in New York County, New York. This Agreement may not be modified or altered
except by a written instrument signed by the party to be charged. No waiver of
any term or condition of this Agreement, or of any breach of this Agreement or
any portion thereof, shall be deemed a waiver of any other term, condition or
breach of this Agreement or any portion thereof. In connection with any element
of the implementation of the sponsorship which, in accordance with the terms of
this Agreement, is to be determined by the mutual agreement of the parties, if
such an agreement cannot be reached within a reasonable period of time, iVillage
shall make a commercially reasonable decision to implement the terms hereof.
This Agreement shall be binding on the successors or assigns of eDiets,
and the successors, assigns and authors of iVillage, but no assignment by either
party shall be made without prior written consent of the other party, which
shall not be unreasonably withheld or delayed. The section headings contained in
this Agreement are for reference purposes only and shall not in any way affect
the meaning or interpretations of this Agreement. In the event that any
provision of this Agreement conflicts with the law under which this Agreement is
to be construed, or if any such provision is held invalid by a court with
jurisdiction over the parties to this Agreement, such provision shall be deemed
to be restated to reflect as nearly as possible the original intentions of the
parties in accordance with the applicable law, and the remainder of this
Agreement shall remain in full force and effect. There shall be no presumption
for or against either party as a result of such party being the principle
drafter of this Agreement. All notices and requests in connection with this
Agreement shall be deemed given as of the day they are received either by
messenger, delivery service, or in the United States mails, postage prepaid,
certified or registered, return receipt requested, or sent by overnight courier
with charges prepaid and a confirming fax, and shall be delivered to the address
set forth below or to such address as provided for by such party.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first above written.
eDiets.com, Inc. iVillage Inc.
3467 W. Hillsboro Boulevard 170 Fifth Avenue
Deerfield Beach, FL 33442 New York, NY 10010
Tel: (954) 360-9022 Tel: (212) 206-3100
Fax: (954) 360-9095 Fax: (212) 604-9144
- ------------------------ -----------------------------
(NAME) (NAME)
- ------------------------ -----------------------------
(TITLE) (TITLE)
- ------------------------ -----------------------------
(DATE) (DATE)
- ------------------------ -----------------------------
(SIGNATURE)
EXHIBIT 10.9
YAHOO ! Advertising Insertion Order
http://www.yahoo.com
Order # 61580 Sales Contact: Beth Maisano-Wilder
Phone 404-870-9140
Customer Order Email [email protected]
Fax 404-870-9146
Revision Date 29-SEP-1999
Advertiser EDIETS Agency
Campaign Address
Url
Address 3467 Hillsboro Boulevard West
Suite 2
Deerfield Beach, Florida 33442
Contact Dave Humble Contact
Phone 954/360-9022 Phone Fax
Email [email protected] Email
<TABLE>
<CAPTION>
StartDate 01-January-2000 End Date 31-December-2000 Contract Length 366 days Bill To Advertiser
- -----------------------------------------------------------------------------------------------------
Total Impressions Total Amount
<S> <C> <C>
Order Totals: 222,225,000 $2,000,000.00
Net Cost: $2,000,000.00
</TABLE>
Terms Pending Credit Approval
Billing Monthly
MATERIALS: Banners: Banner requirements are posted at
http:\\www.yahoo.com/docs/advertising
DELIVERY: All Materials and any changes must be delivered at least 4 business
days in advance to the email address specified for your region at
http:\\www.yahoo.com/docs/advertising.
A Yahoo! Insertion order number and flight dates must be referenced in all
correspondence. Yahoo! Will not issue any credit or makegood due to late or
incorrectly submitted banners and/or late or incomplete information.
TERMS AND CONDITIONS: The insertion order is subject to the terms and conditions
("Standard Terms") attached hereto as Exhibit A of this insertion Order, and
such Standard Terms are made a part of this insertion order by reference. The
signatory of this insertion Order represents that he has read and agrees to such
Standard Terms.
THIS INSERTION ORDER IS VALID FOR THREE (3) BUSINESS DAYS FROM THE DATE OF THIS
ORDER. THIS AGREEMENT IS NON-CANCELABLE.
Authorized By: Phone: 954-360-9122 Date: 9-30-99
Production Contact DAVE HUMBLE Phone: 954/360-9022 Email: [email protected]
PLEASE RETURN TO YAHOO SALES OPERATIONS DEPT YAHOO! INC. SANTA CLARA (PC)
FAX # 408-530-5130 2700 San Thomas
SANTA CLARA, CA 95051
<PAGE>
Page 2 of Order 61580
YAHOO ! ADVERTISING INSERTION ORDER
http://www.yahoo.com
1 CPIRun of / (N) 01-JAN-2000 31-JAN-2000
2 CPIRun of / (N) 01-FEB-2000 29-FEB-2000
3 CPIRun of / (N) 01-MAR-2000 31-MAR-2000
4 CPIRun of / (N) 01-APR-2000 30-APR-2000
5 CPIRun of / (N) 01-MAY-2000 31-MAY-2000
6 CPIRun of / (N) 01-JUN-2000 30-JUN-2000
7 CPIRun of / (N) 01JUL-2000 31-JUL-2000
8 CPIRun of / (N) 01-AUG-2000 31-AUG-2000
9 CPIRun of / (N) 01-SEP-2000 30-SEP-2000
10 CPIRun of / (N) 01-OCT-2000 31-OCT-2000
11 CPIRun of / (N) 01-NOV-2000 30-NOV-2000
12 CPIRun of / (N) 01-DEC-2000 31-DEC-2000
<PAGE>
Page 3 of Order 61580
YAHOO ! Advertising Insertion Order
http://www.yahoo.com
Total Impressions Total Amount
222,225,000 $2,000,000.00
-------------
Net Cost $2,000,000.00
=============
- ----------------------------------------------------------------------
Comments:
29-SEP-1999 Annual commitment includes customized Direct program targeting
Women; program links to microsite with Ediets nutrition and
diet info, newsletters, etc. and multiple chances for users to
win prize TBD; promotion runs in (4) eight week cycles; in
between promotion, banners point back to Ediets site.
<PAGE>
Page 4 of Order 61580
YAHOO ! Advertising Insertion Order
http://www.yahoo.com
STANDARD TERMS AND CONDITIONS FOR YAHOO! ADVERTISING
The following terms and conditions (the "Standard Terms") shall be deemed to be
incorporated into the attached insertion order (the "Insertion Order"):
1. Terms of Payment. Advertiser must submit complete credit application to
determine terms of payment. If no credit application is submitted or the request
for credit is deemed by Yahoo! Inc. ("Yahoo") in its sole discretion, the
Insertion Order must be paid in advance of the advertisement start date. Major
credit cards (VISA, M/C and American Express) are accepted. If Yahoo approves
credit, Advertiser will be invoiced on the first day of the contract period set
forth on the Insertion Order and payment shall be made to Yahoo within thirty
(30) days from the date of invoice ("Due Date"). Amounts paid after the Due Date
shall bear interest at the rate of one percent (1%) per month (or the highest
rate permitted by law, if less). In the event Advertiser fails to make timely
payment, Advertiser will be responsible for all reasonable expenses (including
attorneys' fees) incurred by Yahoo in collecting such amounts. Yahoo reserves
the right to suspend performance of its obligations hereunder (or under any
other agreement with Advertiser) in the event Advertiser fails to make timely
payment hereunder or under any other agreement with Yahoo.
2. Positioning. Except as otherwise expressly provided in the Insertion Order,
positioning of advertisements within the Yahoo properties or on any page is at
the sole discretion of Yahoo. Yahoo may, at its sole discretion, remove from the
Insertion Order (and substitute with similar inventory) any keyword or category
page that it believes to be a trademark, trade name, company name, product name
or brand name belonging to or claimed by a third party.
3. Usage Statistics. Unless specified in the Insertion Order, Yahoo makes no
guarantees with respect to usage statistics or levels of impressions for any
advertisement. Advertiser acknowledges that delivery statistics provided by
Yahoo are the official, definitive measurements of Yahoo's performance on any
delivery obligations provided in the Insertion Order. The processes and
technology used to generate such statistics have been certified and audited by
an independent agency. No other measurements or usage statistics (including
those of Advertiser or a third party ad server) shall be accepted by Yahoo or
have bearing on the Insertion Order.
4. No Assignment or Resale of Ad Space. Advertiser may not resell, assign or
transfer any of its rights hereunder, and any attempt to resell, assign or
transfer such rights shall result in immediate termination of this contract,
without liability to Yahoo.
5. Limitation of Liability. In the event (i) Yahoo fails to publish an
advertisement in accordance with the schedule provided in the Insertion Order,
(ii) Yahoo fails to deliver the number of total page views specified in the
Insertion Order (if any) by the end of the specified period, or (iii) of any
other failure, technical or otherwise, of such advertisement to appear as
provided in the Insertion Order, the sole liability of Yahoo to Advertiser shall
be limited to, at Yahoo's sole discretion, a pro rata refund of the advertising
fee representing undelivered page views, placement of the advertisement at a
later time in a comparable position, or extension of the term of the Insertion
Order until total page views are delivered. In no event shall Yahoo be
responsible for any consequential, special, punitive or other damages,
including, without limitation, lost revenue or profits, in any way arising out
of or related to the Insertion Order/Standard Terms or publication of the
advertisement, even if Yahoo has been advised of the possibility of such
damages. Without limiting the foregoing, Yahoo shall have no liability for any
failure or delay resulting from any governmental action, fire, flood,
insurrection, earthquake, power failure, riot, explosion, embargo, strikes
whether legal or illegal, labor or material shortage, transportation
interruption of any kind, work slowdown or any other condition beyond the
control of Yahoo affecting production or delivery in any manner.
6. Advertisers Representations; Indemnification. Advertisements are accepted
upon the representation that Advertiser has the right to publish the contents of
the advertisement without infringing the rights of any third party and without
violating any law. In consideration of such publication, Advertiser agrees, at
its own expense, to indemnify, defend and hold harmless Yahoo, and its
employees, representatives, agents and affiliates, against any and all expenses
and losses of any kind (including reasonable attorneys' fees and costs) incurred
by Yahoo in connection with any claims, administrative proceedings or criminal
investigations of any kind arising out of publication of the advertisement
and/or any material of Advertiser to which users can link through the
advertisement (including without limitations, any claim of trademark or
copyright infringement, defamation, breach of confidentiality, privacy
violation, false or deceptive advertising or sales practices).
7. Provision of Advertising Materials. Advertiser will provide all materials for
the advertisement in accordance with Yahoo's policies in effect from time to
time, including (without limitation) the manner of transmission to Yahoo and the
lead-time prior to publication of the advertisement. Yahoo shall not be required
to publish any advertisement that is not received in accordance with
such policies and reserves the right to charge Advertiser, at the rate specified
in the Insertion Order, for inventory held by Yahoo pending receipt of
acceptable materials from Advertiser which are past due. Advertiser hereby
grants to Yahoo a non-exclusive, worldwide, fully paid license to use, reproduce
and display the advertisement (and the contents, trademarks and brand features
contained therein) in accordance herewith.
8. Right to Reject Advertisement. All contents of advertisements are subject to
Yahoo's approval. Yahoo reserves the right to reject or cancel any
advertisement, insertion order, URL link, space reservation or position
commitment, at any time for any reason whatsoever (including belief by Yahoo
that placement of advertisement, URL link, etc. may subject Yahoo to criminal or
civil liability).
9. Cancellations. Except as otherwise provided in the Insertion Order, the
Insertion Order is non-cancelable by Advertiser.
10. Construction. No conditions other than those set forth in the Insertion
Order or these Standard Terms shall be binding on Yahoo unless expressly agreed
to in writing by Yahoo. In the event of any inconsistency between the Insertion
Order and the Standard Terms shall control.
11. Miscellaneous. These Standard Terms, together with the Insertion Order, (i)
shall be governed and construed in accordance with, the laws of the State of
California, without giving effect to principles of conflicts of law; (ii) may be
amended only by written agreement executed by an authorized representative of
each party; and (iii) constitute the complete and entire expression of the
agreement between the parties, and shall supersede any and all other agreements,
whether written or oral, between the parties. Advertiser shall make no public
announcement regarding the existence of the Insertion Order without Yahoo's
written approval, which may be withheld at Yahoo's sole discretion. Both parties
consent to the jurisdiction of the courts of the State of California with
respect to any legal proceeding arising in connection with the Insertion
Order/Standard Terms.
EXHIBIT 10.10
DATABASE MANAGEMENT AND DIRECT MARKETING AGREEMENT
This agreement between ConsumerNet with it's principal place of business at 2-40
Bridge Avenue, Red Bank, New Jersey 07701, together with its affiliates,
subsidiaries and successors, ("ConsumerNet"), and eDiets.com with its principal
place of business at 3467 Hillsboro Boulevard, Deerfield Beach, Florida 33443
together with its affiliates, subsidiaries and successors ("The Company"), is
made and entered into this _____ day of August, 1999 (the "Effective Date").
WHEREAS, "The Company" is an owner of publications and sites on the World Wide
Web located at WWW.EDIETS.COM (the "Company Site"); and
WHEREAS, ConsumerNet maintains a site on the World Wide Web located at
"www.consumernet.com", ("ConsumerNet Site"); and
WHEREAS, ConsumerNet desires to collect, manage and market end-user information
for The Company; and
WHEREAS, The Company is willing to provide all reasonable assistance to enable
ConsumerNet to collect end-user information from the Company site ("Company Site
Users") and to provide access to the ConsumerNet Site from the Company Site.
NOW THEREFORE, in consideration of the foregoing, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
1. ENGAGEMENT.
The Company hereby engages ConsumerNet as its consumer database manager
to manage information collected from Company Site Users and other
end-users who elect to receive information from The Company,
ConsumerNet or other third party providers and to market such
information to direct marketers and other clients ConsumerNet may
obtain through brokerage channels.
2. "THE COMPANY'S" OBLIGATIONS.
1. The Confidential Alliance Member Cancellation Agreement
will be contingent upon the representation and warrant of the
quality of the database and upon the confirmation of 3rd party
opt-in status. All opt-in data ConsumerNet receives will
contain the following demographic information: firm name, last
name, e-mail address, zip code, gender, age, height and
weight. Additionally, this Cancellation Agreement will be
based upon the continued and regular transfer of demographic
data, collected on the eDiets Web site, to ConsumerNet.
2. The Company grants to ConsumerNet the right to publicly
display The Company site in all promotion, advertising and
other materials relating to distribution of direct marketing
materials through the ConsumerNet site.
3. The Company shall provide ConsumerNet with a list of Opt-In
Company Site Users including the names, e-mail addresses, and
demographic information of Company Site Users in electronic
ASCII format on a continuous basis ("User List(s)"). The User
Lists shall remain the exclusive property of The Company and
ConsumerNet at all times, and will have rights, title and
interest in such User Lists for the purposes contemplated by
this Agreement. Please refer to the Confidential Alliance
Member Cancellation Agreement for revisions pertaining to this
subsection.
3. CONSUMERNET'S OBLIGATIONS.
ConsumerNet shall provide the technology to implement registration
forms for Company Site Users to register for the ConsumerNet Service in
accordance with this Agreement.
3.1 ConsumerNet grants to The Company a non-exclusive,
non-transferable, royalty-free license to incorporate, use and
distribute the ConsumerNet Site on The Company Site during the
Term (as defined in Section 6 below) of this Agreement,
subject to the terms and conditions herein.
Page 1
<PAGE>
3.2 At ConsumerNet's option, ConsumerNet may promote the
availability of the ConsumerNet Site on The Company Site by
maintaining a link to The Company Site.
3.3 ConsumerNet shall use its best efforts to manage and
market The User Links to direct marketers who use ConsumerNet
Service and to other customers ConsumerNet may obtain through
other list brokerage channels.
3.4 ConsumerNet shall be responsible for and handle all
merge/purge, subscribe/unsubscribe requests, servicing and
mailing of The User Lists, and processing customer orders. The
Company shall maintain the lists as Opt-In lists that the
Company Site Users can join voluntarily.
3.5 ConsumerNet shall continue to prominently post a notice on
the ConsumerNet Site that Company Site Users may "unsubscribe"
to the ConsumerNet Service at any time. ConsumerNet shall
promptly "unsubscribe" any Company Site User upon receipt of a
request to do so from a Company Site User.
4. SCHEDULE.
Within thirty (30) days of the Effective Date, the parties shall use
their best efforts to link the ConsumerNet Site to The Company Site,
and to create and establish any and all co-branded pages.
5. FEES.
1. For the service, rights and licenses provided hereunder,
ConsumerNet shall pay The Company a fee of fifty percent (50%)
of the Net Revenues (defined below) collected by ConsumerNet
for the rental of The User Lists. ConsumerNet shall have the
rights to employ another broker to market The User Lists,
subject to the terms of this Agreement. ConsumerNet may pay
such other broker a portion of its share of the Net Revenues,
in its sole discretion. The current price for use of each name
on the User List is $.15-$.25 per name, which price is subject
to change at the sole discretion of ConsumerNet. For purposes
of this agreement, "Net Revenues" shall mean the revenues
billed and annually collected by ConsumerNet for each rental
of The User Lists under this Section 5.1. net of all
applicable discounts, returns, and credits in the ordinary
course of business.
2. On the fifteenth business day following the end of each
month, ConsumerNet shall pay The Company the above fee based
on Net Revenues Collected for use of The User Lists during
such prior month. ConsumerNet shall provide The Company with a
monthly statement that shall contain a reasonably detailed
calculation of such fee, and information regarding The User
Lists rental, funds owed and funds collected (the
"Statement"). Any such Statement shall be final and binding on
the parties, unless The Company objects in writing within
sixty (60) days of receipt of the Statement.
3. ConsumerNet shall keep complete and accurate books and records
with respect to the Net Revenues received from the ConsumerNet
Site in accordance with generally accepting accounting
principles. The Company shall have the right to examine
ConsumerNet's books and records concerning the services
rendered hereunder at ConsumerNet's offices and at a mutually
agreeable time.
Any such examination shall be at The Company's sole expense,
unless errors in accounting to The Company's disadvantage
amount to five percent (5%) or more of the total sum paid to
The Company in their accounting period shall be found. In such
event, ConsumerNet shall pay the amount of the error and pay
the reasonable costs of the examination.
6. TERM.
The term of this Agreement shall commence upon execution of this
Agreement and shall end two years after the Effective Date (the
"Initial Term"). This Agreement shall be automatically renewed
thereafter for successive terms of two (2) (each a "Renewal Term"),
unless either party provides written notice of termination to the other
party prior to the expiration of the Initial Term of the then current
Renewal Term. The Initial Term and any current Renewal Term shall be
referred to collectively as the "Term". Notwithstanding the foregoing,
either party may terminate this Agreement for any reason whatsoever
upon ninety (90) days prior written notice to the other party.
7. [ILLEGIBLE]
Page 2
<PAGE>
1. ConsumerNet represents and warrants that it has the right
to grant the rights granted to The Company hereunder and to
distribute The User Lists through the ConsumerNet Site and
that neither the rights granted to The Company hereunder, nor
the exercise of such rights will infringe upon or conflict
with the rights held by any third party under any trademark,
copyright, trade secret or other proprietary right.
ConsumerNet shall indemnify, defend and hold harmless The
Company, its directors, officers, employees, agents and
assigns from and against any and all losses, claims, damages,
liabilities, judgments, costs and expenses (including
reasonable attorney's fees) resulting from or arising out of
(i) any of the foregoing representations and warranties being
false or inaccurate in any way, or (ii) ConsumerNet material
breach of this Agreement. The Company shall notify ConsumerNet
promptly of any such claim or litigation and shall cooperate
with ConsumerNet in every reasonable way, at ConsumerNet
expense, to facilitate the defense of such claim or
litigation.
2. The Company represents and warrants that it has the right
to grant the rights granted to ConsumerNet hereunder and that
neither the rights granted to ConsumerNet hereunder, nor the
exercise of such rights will infringe upon or conflict with
the rights held by any third party under any trademark,
copyright, trade secret or other proprietary right. The
Company shall indemnify, defend and hold harmless ConsumerNet,
its directors, officers, employees, agents and assigns from
and against any and all claims, losses, damages, liabilities,
judgments, costs and expenses (including reasonable attorneys'
fees) resulting from or arising out of (i) any of the
foregoing representations and warranties being false or
inaccurate in any way, or (ii) The Company's material breach
of this Agreement. ConsumerNet shall notify The Company
promptly of any such claim or litigation and shall cooperate
with The Company in every reasonable way, at The Company's
expense, to facilitate the defense of such claim or
litigation.
8. CONFIDENTIALITY.
In the course of performing this Agreement, each of ConsumerNet and The
Company may be given access to certain confidential and/or proprietary
information and trade secrets relating to the other party's list of end
user names and email addresses, computer systems, World Wide Web Sites,
business operations, strategic plans and other confidential matters
(the "Confidential Information"). Confidential information shall be
deemed not to include any information which (i) at the time of
disclosure or thereafter is generally available to and known by the
pubic (other than as a result of disclosure directly or indirectly by
the parties), (ii) was available to the parties on a non-confidential
basis from a source other than one of their employees, representatives
and advisors, provided that such source in not in breach of any
obligations of confidentiality to the parties, or (iii) has been
independently acquired or developed by the parties without violating
any of the parties' obligations pursuant to this Agreement. Such
Confidential Information is of a highly sensitive nature, is a special,
valuable and unique asset of the business of The Company and
ConsumerNet, respectively, and its improper use would be materially
damaging to The Company and ConsumerNet, respectively. Each party shall
hold in strict confidence all data, records, and materials relating to
the Confidential Information of the other party. Unless otherwise
required by law, each party shall not, directly or indirectly, disclose
any of the confidential Information or make it available to any third
party or use it for its benefit or the benefit of any third party
except as expressly authorized in this Agreement. Each party agrees not
to make copies of any such Confidential Information, except as required
in the due course of performing services hereunder. Each party shall
not disclose the Confidential Information to any of its employees,
representatives and advisors, except those with a need to know such
Confidential Information for the purpose of performing their
obligations under this Agreement.
9. LIMITATION OF LIABILITY.
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR ANY
INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, CONSEQUENTIAL OR LOST PROFIT
DAMAGES, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10. GENERAL.
1. The relationship created by this Agreement is that of
independent contractor. Nothing in this Agreement shall be
constructed to make either party the partner, agent, employee
or representative of the other. Neither party has authority to
make any warranties or incur any liabilities on behalf of or
binding on the other party.
Page 3
<PAGE>
2. This Agreement shall be construed and governed by the laws
of the State of New York. Any dispute arising out of this
Agreement or the breach thereof, except for a claim for
injunctive relief, shall be submitted to arbitration pursuant
to the rules of the American Arbitration Association. Any such
arbitration shall be held in the County of New York, State of
New York. Judgment upon the award rendered by the arbitration
may be entered into any court having jurisdiction thereof.
3. Neither party shall assign this Agreement or delegate any
rights, duties or obligations hereunder to any other entity
without the prior written consent of the other party, which
consent shall not be unreasonably withheld or delayed.
4. Any notices required to be given pursuant to this Agreement
shall be in writing and shall be deemed to have been property
given when personally delivered on the day after if given by
nationally recognized overnight courier, or on the third
business day after mailing if given by registered or certified
mail, return receipt requested to the other party at the
following addresses:
If to ConsumerNet: ConsumerNet
2-40 Bridge Avenue
2nd Floor
Red Bank, New Jersey 07701
Attention: Paul Chachion
With a copy to: Kelly, Dry & Warren
Two Stanford Plaza
281 Tressor Boulevard
Stanford, CT 06901-3229
Attention: John Capetta
Either party may change the address or addresses to which such notices should be
directed by giving written notice to the other party of such change.
11. This Agreement constitutes the entire understanding and agreement of
the parties with respect to its subject matter and supersedes and
replaces all prior agreements, understandings or representations,
written or oral. The provisions in Sections 7 and 8 shall survive the
termination of this Agreement. This Agreement may be amended or
modified only by a written agreement signed by both parties. If any
provision of this Agreement is held to be unenforceable, invalid or
illegal by any court of competent jurisdiction, such unenforceable,
invalid or illegal provision shall not affect the remainder of this
Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be an original, and all of which shall constitute
but one Agreement. The terms and provisions of this Agreement are
binding on and shall inure to the benefit of the parties hereto and
their respective successors and their assigns. Recourse by Company
against ConsumerNet shall extend only to ConsumerNet and not to any of
ConsumerNet's employees, agents, officers, director, partners,
affiliates, and/or licensees.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
ConsumerNet eDiets.com
By: [ILLEGIBLE] By: /s/ DAVID R. HUMBLE
Name: [ILLEGIBLE] Name: David R. Humble
Title: [ILLEGIBLE] Title: CEO
Page 4
EXHIBIT 10.11
December 27, 1999
CONFIDENTIAL ALLIANCE MEMBER CANCELLATION AGREEMENT
This agreement between 24/7 MAIL, with it's principal place of business at 1250
BROADWAY, NEW YORK, NEW YORK 10001 together with its affiliates, assignors and
successors (collectively, "24/7 Media") and EDIETS.COM with it's principal place
of business at 3467 HILLSBORO BOULEVARD, DEERFIELD BEACH, FL 33442 together with
its affiliates, subsidiaries and successors (collectively, the "Company") is
made and entered into this [2nd] of August, 1999 (the "Effective Date").
1. UNDERSTANDING: The Company and 24/7 Mail have entered into a
Database management and Database Marketing Agreement dated
[2nd] day of August, 1999 ("Alliance Agreement"). 24/7 Mail
and the Company will use best efforts in employing high
quality standards to ensure consumer satisfaction with respect
to all consumer marketing initiatives ("Best Efforts
Practices")
2. CANCELLATION: In the event that the 24/7 Mail and the Company
use Best Efforts Practices and the Company provide material
evidence of negative consumer sentiment with respect to email
marketing initiatives to 24/7 Mail, 24/7 Mail will immediately
terminate data acquisition, database management, and direct
marketing programs associated with the Company. 24/7 Mail
agrees to return the Company database within 14 days of such
termination.
3. CANCELLATION WITHOUT CAUSE: In the even that the 24/7 Mail and
the Company use Best Efforts Practices and the Company does
not provide material evidence of negative consumer sentiment
with respect to its email marketing initiatives to 24/7 Mail
or any material cause which would facilitate termination, 24/7
Mail would allow the Cancellation of the Alliance Agreement
two years after the effective date (the "Initial Term") under
the following terms and condition: (i) 24/7 Mail will
discontinue to market Company data according to the terms and
conditions of the "Alliance Agreement", (ii) 24/7 Mail will
return all Company data to the Company and, delete all Company
files from the 24/7 Mail database within 14 days following the
termination of this agreement.
4. EXCLUSIVITY: The Company shall grant to 24/7 Mail an exclusive
agreement (inclusive of list management, brokers of data, and
compiled databases) to collect, manage, and market end-user
information for the Company. The term of this agreement shall
commence upon execution of this agreement and shall end two
years after the Effective Date (the "Initial Term") unless
renewed.
5. CONFIDENTIALITY: The Company agrees to maintain strict
confidentiality regarding the terms and conditions of this
agreement. The Company further agrees that it will not
disclose or communicate any information relating to this
agreement to other Alliance Members, suppliers, customers,
affiliates, or any other party accept as required by law.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the Effective
Date.
24/7 Mail eDiets
By: By:
Title: Title:
Date: Date:
EXHIBIT 10.12
24/7 MEDIA, INC.
E-MAIL NEWSLETTER MANAGEMENT AGREEMENT
WHEREAS, the undersigned (hereinafter the "List Owner") is the operator
and owner of opt-in email databases and opt-in newsletter(s) (the "Lists")
specified on the signature pages hereto;
WHEREAS, 24/7 Media, Inc. , a Delaware corporation with an address at
1250 Broadway, 26th floor, New York, NY 10001, and 24/7 Mail, a division of 24/7
Media, Inc., ("24/7 Mail"), (collectively, "24/7 Media") operate a network of
email lists and newsletters (the "24/7 Mail Network") for which it solicits
advertisers, advertising agencies, buying services or others ("Advertisers"),
regarding the placement of advertising banners, text links, buttons, jump pages
and similar devices, as well as all elements of sponsorship or promotion
("Advertising") for display in opt-in email messages and newsletters distributed
to the Lists reasonably suitable for advertising;
WHEREAS, List Owner and 24/7 Media wish to include the Lists in the
24/7 Mail Network;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
and agreements contained herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. TERM. The initial term ("Initial Term") of the Agreement shall be one
year, beginning on the Effective Date (as defined on the signature page
hereto).
2. RENEWAL/TERMINATION. Following the Initial Term, the Agreement may be
renewed for subsequent terms of one year each. As used herein, "Term"
shall mean the Initial Term and any renewal term. Renewal shall be
evaluated thirty (30), days prior to the end of the then current Term.
Notwithstanding the foregoing, either party may terminate this
Agreement, for any reason, 180 days after the Effective Date.
3. OBLIGATIONS OF 24/7 MAIL. In furtherance of the foregoing, 24/7 Media
covenants and agrees:
A. to utilize best efforts to sell Advertising on the Lists,
(including sales of the Lists as a single list, through
multi-list packages and through the 24/7 Mail Network, at such
prices as 24/7 Mail shall deem appropriate);
B. to provide the List Owner with notice, via fax, phone or
e-mail, of new Advertising that has been solicited by 24/7
Mail to be offered to the Lists, and to honor any decision by
List Owner to decline any Advertising, providing however that
Advertising will not be unreasonably withheld;
C. to deliver to the List Owner a monthly statement showing
revenues earned by List Owner during the calendar month and
any sum(s) due the List Owner on account thereof pursuant to
Section 4 hereof; and
D. to maintain suitable and qualified personnel in
administrative, sales and technical positions necessary for
24/7 Media to perform effectively the terms of this Agreement;
E. to advertise the Lists in industry trades, publications and
through email and direct mail.
<PAGE>
F. to manage the opt-out and unsubscribe processes with respect
to the Lists by providing the appropriate opt-out language to
subscribers and a URL address in email messages where
subscribers can opt-out of the Lists;
G. to use its best efforts to: (i) manage the placement of
Advertising sold by 24/7 Media in the Lists; (ii) distribute
email messages to end-users within 24 hours from the sale of
Advertising to the Lists; (iii) track and report to 24/7 Media
the delivery and click-through rates, for each URL or link, of
each campaign within 72 hours from the distribution of such
campaign.
4. OBLIGATIONS OF LIST OWNER. The List Owner covenants and agrees:
A. to use its best efforts to maintain the collection and
management of the Lists in a manner consistent with the
initial intent of the Lists;
B. staff an account representative to maintain the relationship
with 24/7 Media. This person will be responsible for all
communication between 24/7 Media and the Company for all
campaigns under consideration.
C. to provide at the point of user registration the option of
accepting HTML or plain text e-mail;
D. to maintain and post at the point of user registration a
Direct Marketing Association (DMA) or other widely accepted
industry compliant privacy policy (i.e., TRUSTe or Better
Business Bureau) and to adhere to a widely-accepted industry
practice to manage the consumers right to opt-out of the
Lists;
E. to notify 24/7 Media within one business day from the time of
notice when any new Advertising given by 24/7 Media to the
List Owner, of the List Owner's rejection of any new
Advertising will be considered acceptance of the campaign and
will be applied to the guarantee regardless of the Company's
decision to prevent the Advertising after the 24 hour approval
period.
F. to furnish 24/7 Media with all subscribership, viewership,
inventory, and usage reports, reviews and audience studies,
deliveries, census requirements, and any other information, on
a monthly basis, regarding the Lists as is reasonably
available to the List Owner and appropriate for use by 24/7
Media for the sale of Advertising; and
G. not to engage, contract with, license or permit any person,
firm or entity to represent, market or sell Advertising on the
Lists. Notwithstanding the foregoing, employees of the List
Owner may sell Advertising to the Lists to the Advertisers
identified in Appendix A. Employees of the List Owner shall
direct all other List inquires to 24/7 Media. ,
5. PAYMENTS.
A. Advertisers shall be directed to pay to 24/7 Media all cash
and other consideration generated from the sale of Advertising
by 24/7 Media during the term of this Agreement and for a
period of six months following the termination of this
Agreement.
B. 24/7 Media shall pay List Owner 80%of Net Revenue. Net Revenue
shall be defined as gross revenue collected minus broker
commissions paid by 24.7 Media. 24/7 Media will, at its sole
discretion, determine the price of Advertising to the Lists.
<PAGE>
C. In the event any Advertiser remits any payment for Advertising
sold by 24/7 Media directly to the List Owner rather than to
24/7 Media, the List Owner agrees to make prompt full payment
to 24/7 Media of any and all such payments.
D. List Owner will be obligated to compensate 24/7 Media after
the expiration of this Agreement for any business contracted
by 24/7 Media prior to the termination or expiration of the
Term of this Agreement.
6. INTELLECTUAL PROPERTY. All hardware, software, programs, codes, trade
names, technology, intellectual property, licenses, patents,
trademarks, copyrights, trade secrets, know-how, and processes
(collectively, the "24/7 Media Technology") used by 24/7 Media Mail
under this Agreement shall remain the sole property of 24/7 Media Mail.
List Owner shall have no rights, title or interest in the 24/7 Media
Technology. All hardware, software, programs, codes, trade names,
technology, intellectual property, licenses, patents, trademarks,
copyrights, trade secrets, know-how, and processes (collectively, the
"List Owner Technology") used by List Owner under this Agreement shall
remain the sole property of List Owner. 24/7 Media shall have no
rights, title or interest in the List Owner Technology. Upon the
expiration or termination of this Agreement, each party shall promptly
return all information, documents, manuals and other materials
belonging to the other party except as otherwise provided in this
Agreement.
7. CONFIDENTIALITY. 24/7 Media and List Owner covenant to each other that
neither party shall disclose to any third party (other than its
employees and directors, in their capacity as such, and the employees
and directors of any affiliate on a need to know basis so long as they
are bound by the terms of this Agreement) any information regarding the
terms and provisions of this Agreement or any non-public confidential
information which has been identified as such by the other Party hereto
except (i) to the extent necessary to comply with any law or valid
order of a court of competent jurisdiction (or any regulatory or
administrative tribunal), in which event the party so complying shall
so notify the others as promptly as practicable (and, if possible,
prior to making any disclosure) and shall seek confidential treatment
of such information, if available; (ii) as part of its normal reporting
or review procedure to its auditors or its attorneys, as the case may
be, so long as they are notified of the provisions of this Agreement;
(iii) in order to enforce its rights pursuant to this Agreement; (iv)
in connection with any filing with any governmental body or as
otherwise required by law, including the federal securities laws and
any applicable rules and regulations of any stock exchange or quotation
system; and (v) in a confidential disclosure made in connection with a
contemplated financing, merger, consolidation or sale of capital stock
of 24/7 Media or the List Owner . Information which is or should be
reasonably understood to be confidential or proprietary includes, but
is not limited to, information about the 24/7 Mail Network, sales, cost
and other unpublished financial information, product and business
plans, projections, marketing data, and sponsors but shall not include
information (a) already lawfully known to or independently developed by
a party, (b) disclosed in published materials, (c) generally known to
the public, (d) lawfully obtained from any third party or (e) required
to be disclosed by law.
8. CONTENT OF NEWSLETTER. List Owner covenants and agrees not to include
or provide via the Newsletter or the Newsletter's Pages any material
that is or may be considered: (i) libelous, pornographic, obscene, or
defamatory under any federal or state law; (ii) an infringement of any
third party's intellectual property rights (including copyright,
patent, trademark, trade secret or other proprietary rights); or (iii)
an infringement on any third party's rights of publicity or privacy.
List Owner further covenants and agrees, with respect to the operation
of its Newsletter and its Pages, to comply with all laws, statutes,
ordinances, and regulations.
9. INDEMNICATION. List Owner shall indemnify and hold harmless 24/7 Media,
its advertisers and other suppliers and any related third parties,
against and in respect of any and all third party
<PAGE>
claims, suits, actions, proceedings (formal and informal),
investigations, judgments, deficiencies, damages, settlements,
liabilities, and legal and other expenses (including reasonable legal
fees and expenses of attorneys chosen by 24/7 Media) as and when
incurred, arising out of or based upon any act or omission or alleged
act or alleged omission by List Owner in connection with the acceptance
of, or the performance or non-performance by List Owner of, any of its
duties under this Agreement or arising from the breach by List Owner of
its warranties, representations or covenants contained in this
Agreement. 24/7 Media shall indemnify and hold harmless the List Owner,
against and in respect of any and all third party claims, suits,
actions, proceedings (formal and informal), investigations, judgments,
deficiencies, damages, settlements, liabilities, and legal and other
expenses (including reasonable legal fees and expenses of attorneys
chosen by List Owner) as and when incurred, arising out of or based
upon any act or omission or alleged act or alleged omission by 24/7
Media in connection with the acceptance of, or the performance or
non-performance by 24/7 Media of, any of its duties under this
Agreement or arising from the breach by 24/7 Media of its warranties,
representations or covenants contained in this Agreement.
10. NO POACHING; List Owner agrees that, during the Term and for a period
of one year from the end of the Term, neither it nor its affiliates
will solicit or recruit the services of any 24/7 Media employees, or
hire any such employees. List Owner agrees that during the term of this
agreement and for 90 days thereafter neither it nor is affiliates or
agents will solicit advertising from their clients who have placed
advertising through 24/7 Media.
11. NO WAIVER; This Agreement shall not be waived, modified, assigned or
transferred except by a written consent to that effect signed by List
Owner and 24/7 Media, provided however, that 24/7 Media may transfer or
assign this Agreement without the consent of List Owner in the event of
a merger of 24/7 Media with, or a sale of all or substantially all of
its assets, to a third party. List Owner agrees that if it assigns or
transfers this Agreement, it shall cause such successor, assignee, or
transferee to assume all of the List Owner 's obligations hereunder.
Any assignment, transfer, or assumption shall not relieve the List
Owner of liability hereunder.
12. GOVERNING LAW; This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to
contracts made and performed therein, without regard to principles of
conflicts of laws.
13. NOTICES; All notices required or permitted to be given hereunder shall
be in writing and either hand-delivered, telecopied, mailed by
certified first class mail, postage prepaid, or sent via electronic
mail to the other party or parties hereto at the address(es) set forth
below. A notice shall be deemed given when delivered personally, when
the telecopied notice is transmitted by the sender, three business days
after mailing by certified first class mail, or on the delivery date if
delivered by electronic mail.
14. ENTIRE AGREEMENT; This Agreement constitutes the entire agreement and
supersedes all prior agreements of the Parties with respect to the
transactions set forth herein and, except as otherwise expressly
provided herein, is not intended to confer upon any other person any
rights or remedies hereunder.
15. COUNTERPARTS; This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which together shall
constitute one and the same document.
16. FORCE MAJEURE; Neither party shall be held liable or responsible to the
other party nor be deemed to have defaulted under or breached this
Agreement for failure or delay in fulfilling or performing any term of
this Agreement when such failure or delay is caused by or results from
causes beyond the reasonable control of the affected party, including
but not limited to fire, floods, failure of communications systems or
networks, embargoes, war, acts of war (whether war is declared or not),
insurrections, riots, civil commotion, strikes, lockouts or other labor
<PAGE>
disturbances, acts of God or acts, omissions or delays in acting by any
governmental authority or the other party; provided, however, that the
party so affected shall use reasonable commercial efforts to avoid or
remove such causes of nonperformance, and shall continue performance
hereunder with reasonable dispatch whenever such causes are removed.
Either party shall provide the other party with prompt written notice
of any delay or failure to perform that occurs by reason of force
majeure. The parties shall mutually seek a resolution of the delay or
the failure to perform as noted above.
17. SEVERABILITY; Should one or more provisions of this Agreement be or
become invalid, the parties hereto - shall substitute, by mutual
consent, valid provisions for such invalid provisions which valid
provisions in their economic effect are sufficiently similar to the
invalid provisions that it can be reasonably assumed that the parties
would have entered into this Agreement with such valid provisions. In
case such valid provisions cannot be agreed upon, the invalidity of one
or several provisions of this Agreement shall not affect the validity
of this Agreement as a whole, unless the invalid provisions are of such
essential importance to this Agreement that it is to be reasonably
assumed that the parties would not have entered into this Agreement
without the invalid provisions.
18. DISPUTE RESOLUTION; Any controversy or claim arising out of or relating
to the Agreement, or the breach thereof, shall be settled exclusively
by arbitration. Such arbitration shall be conducted before a single
arbitrator in accordance with the Commercial Arbitration Rules of the
American Arbitration Association then in effect. If arbitration is
commenced by 24/7 Media, it shall take place in the city in the
continental United States in which the principal U.S.A. corporate
offices of List Owner are located. If List Owner has no corporate
offices in the U.S.A. or if arbitration is commenced by List Owner,
then arbitration shall take place in New York, New York. Judgment may
be entered on the arbitrator's award in any court having jurisdiction,
and the parties irrevocably consent to the jurisdiction of such courts
for that purpose. The parties waive personal service in connection with
any such arbitration; any process or other papers under this provision
may be served outside the home state of List Owner or New York by
registered mail, return receipt requested, or by personal service,
provided a reasonable time for appearance or response is allowed. All
decisions of the arbitrator shall be final and binding on the parties.
The parties shall equally divide all costs of the American
Arbitration Association and the arbitrator. Each party shall bear its
own legal fees in any dispute. The arbitrator may grant injunctive or
other relief.
19. INDEPENDENT CONTRACTORS; 24/7 Media and List Owner shall each act as
independent contractors. Neither party shall exercise control over the
activities and operations of the other party. 24/7 Media and List Owner
shall each conduct all of its business in its own name and as it deems
fit, provided it is not in derogation of the other's interests. Neither
party shall engage in any conduct inconsistent with its status as an
independent contractor, have authority to bind the other with respect
to any agreement or other commitment with any third party, nor enter
into any commitment on behalf of the other, except as expressly
provided for by this Agreement.
[END OF TEXT]
<PAGE>
[SIGNATURE PAGE TO E-MAIL NEWSLETTER AFFILIATION AGREEMENT]
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement this
___ day of ____________________, 1999 (the "Effective Date").
24/7 MEDIA, INC.
By: [ILLEGIBLE]
----------------------------------------
Name: [ILLEGIBLE]
----------------------------------------
Title: [ILLEGIBLE]
----------------------------------------
E-mail address: [ILLEGIBLE]
----------------------------------------
CLIENT:
Name of List Owner: eDiets
Name of Newsletter:
----------------------------------------
Address: 3467 Hillsboro Boulevard
Address: Deerfield Beach, FL 33442
By: /s/ DAVID R. HUMBLE
----------------------------------------
Name: David Humble
Title: CEO
E-mail address: [email protected]
EXHIBIT 10.13
PSIWEB INC.
CO-LOCATE SERVICE
SERVICE ORDER FORM
DATE: __________________________________
PURCHASE ORDER NUMBER: _________________
(if required by customer's accounting department)
1. CUSTOMER ADMINISTRATIVE/LEGAL/CONTRACT REPRESENTATIVE: (REQUIRED)
Organization/Division: ________________________________________________
Name/Title: ___________________________________________________________
Street/P.O. Box/Mail Stop: ____________________________________________
City: ________________________________________ State: ____ Zip: ______
Telephone Number: (____) _____________ Fax Number: (____) _____________
E-mail Address: _______________________________________________________
2. CUSTOMER TECHNICAL REPRESENTATIVE: (REQUIRED)
Organization/Division: ________________________________________________
Name/Title: ___________________________________________________________
Street/P.O. Box/Mail Stop: ____________________________________________
City: ________________________________________ State: ____ Zip: ______
Telephone Number: (____) _____________ Fax Number: (____) _____________
E-mail Address: _______________________________________________________
3. CO-LOCATE SERVICE LOCATION SITES: (PLEASE INITIAL ONLY ONE)
______ Herndon, Virginia (Metro Washington, D.C.)
______ Santa Clara, California (Metro San Francisco)
4. CO-LOCATE SERVICE LEVELS: (PLEASE INITIAL ONLY ONE)
Setup Fee Monthly Fee
---------- -----------
______ Co-Locate 256 Kbps & Quarter-Rack.....$ 1,000.00.... $ 1,900.00
______ Co-Locate 512 Kbps & Quarter-Rack.....$ 1,000.00.... $ 2,100.00
______ Co-Locate 1.5 Mbps & Quarter-Rack.....$ 1,000.00.... $ 2,300.00
______ Co-Locate 512 Kbps & Half-Rack........$ 2,000.00.... $ 2,300.00
______ Co-Locate 1.5 Mbps & Half-Rack........$ 2,000.00.... $ 2,700.00
______ Co-Locate 512 Kbps & Full-Rack........$ 3,000.00.... $ 3,200.00
______ Co-Locate 1.5 Mbps & Full-Rack........$ 3,000.00.... $ 3,500.00
______ Co-Locate 3.0 Mbps & Full-Rack........$ 3,000.00.... $ 3,900.00
______ Co-Locate 5.0 Mbps & Full-Rack........$ 3,000.00.... $ 4,600.00
______ Co-Locate 10.0 Mbps & Full-Rack.......$ 3,000.00.... $ 6,100.00
Rack Specifications:
QUARTER RACK -
10 U (17.5" in a standard19" rack)
5 AC outlets & 2 Ports -10 Mbps Ethernet
HALF RACK -
20 U (35" in a standard 19" rack)
10 AC outlets & 4 Ports -10 Mbps Ethernet
FULL RACK -
40 U (70" in a standard 19" rack)
20 AC outlets & 8 Ports -10 Mbps Ethernet
** CUSTOMERS WILL BE CHARGED FOR THE ACTUAL PHYSICAL SPACE THEIR
EQUIPMENT CONSUMES **
PSIWeb Inc. Co-Locate Service Agreement April 21, 1999 Page 1 of 5
<PAGE>
5. CUSTOMER-AUTHORIZED PERSONNEL TO ACCESS CO-LOCATE FACILITY: (REQUIRED)
Name: ___________________________ Title: ______________________________
Name: ___________________________ Title: ______________________________
Name: ___________________________ Title: ______________________________
6. STANDARD FEATURE: DOMAIN NAME REGISTRATION AND DNS SERVICE.
Customers who require a specialized domain other than a subdomain of
the inter.net domain may choose one below. PSIWeb will manage the
registration and will provide DNS resolution service for that domain.
CHECK NO MORE THAN ONE OF THE BOXES BELOW.
______ MANAGEMENT AND RESOLUTION SERVICE IS REQUIRED FOR A DOMAIN
NAME PREVIOUSLY REGISTERED WITH THE INTERNIC (E.G. PSI.COM,
PBS.ORG, ETC.).
Currently Registered Domain Name: _____________________________________
o THE INTERNIC WILL BILL YOU DIRECTLY FOR YOUR INTERNIC
MAINTENANCE TAXES.
IS PSINET CURRENTLY PROVIDING DNS FOR THIS DOMAIN NAME? OYES. ONO.
______ MANAGEMENT AND RESOLUTION SERVICE IS REQUIRED FOR A NEW DOMAIN
NAME NOT PREVIOUSLY REGISTERED WITH THE INTERNIC.
Preferred Domain Name: __________________ (e.g. acme.com)
Alternate #1: ___________________________ (e.g. acme1.com)
Alternate #2: ___________________________ (e.g. acmeinc.com)
o FOR DOMAIN NAMES NEWLY REGISTERED WITH THE INTERNIC, A
REGISTRATION TAX OF $100 IS CHARGED BY THE INTERNIC FOR THE
INITIAL REGISTRATION AND FIRST TWO YEARS OF MAINTENANCE
FOLLOWED BY A $50.00 PER YEAR MAINTENANCE TAX AFTER THE SECOND
YEAR. THE INTERNIC WILL BILL YOU DIRECTLY FOR YOUR INTERNIC
REGISTRATION AND MAINTENANCE TAXES. FEES SUBJECT TO CHANGE.
SEE http://www.internic.net/fees/facts.html FOR LATEST FEE
INFORMATION.
7. OPTIONAL FEATURE: INTER.NET DOMAIN NAME SERVICE.
All Customers have the option to be setup with a subdomain name using
PSIWeb's 'inter.net' domain. PSIWeb will provide DNS service for this
'[Customer]. inter.net' subdomain. In the space provided below the
Customer may request the subdomain name. This feature incurs no
additional costs to the Customer.
Preferred Name: ______________________.inter.net (e.g. acme.inter.net)
o CUSTOMERS MUST SPECIFY ANY DESIRED CAPITALIZATION IN THEIR
SUBDOMAIN NAME. PSIWEB WILL NOT ASSIGN TO ANY OTHER CUSTOMER A
NAME THAT DIFFERS ONLY IN CAPITALIZATION.
o CUSTOMER SUBDOMAIN NAMES ASSIGNED ARE EXCLUSIVELY FOR USE IN
CONNECTION WITH THE CO-LOCATE SERVICE.
o THE SUBDOMAIN NAME SELECTED MAY NOT BE ASSIGNED OR RETAINED BY
THE CUSTOMER UPON TERMINATION OF THE CO-LOCATE SERVICE.
o PSIWEB DOES NOT GUARANTEE THAT ANY DESIRED SUBDOMAIN NAME WILL
BE ACCEPTED.
o BECAUSE SUBDOMAINS OF THE ".INTER.NET" DOMAIN ARE OWNED BY
PSIWEB , NO SETUP OR ONGOING FEES ARE REQUIRED; HOWEVER, THE
SUBDOMAIN WILL REMAIN THE PROPERTY OF PSIWEB BOTH DURING AND
AFTER THE CO-LOCATE SERVICE.
PSIWeb Inc. Co-Locate Service Agreement April 21, 1999 Page 2 of 5
<PAGE>
THIS AGREEMENT is made between PSIWeb Inc.("PSIWeb"), incorporated under the
laws of the State of Delaware and having its main offices at 510 Huntmar Park
Drive, Herndon, VA 20170, and the party specified above ("Customer").
WHEREAS, Customer desires to obtain from PSIWeb certain connectivity services
directly from PSIWeb facilities integrated into the wide-area network
architecture of PSINet Inc. ("PSINet"), the global PSINet network being a
portion of the Internet; and
WHEREAS, PSIWeb is willing and able to provide such services to Customer;
THEREFORE, in consideration of the mutual promises and covenants contained
herein, the parties agree, intending to be legally bound, as follows:
1. DEFINITIONS. The following terms shall have the following meanings for
purposes of this Agreement.
1.1 "CO-LOCATE SITE" shall mean the location of the POP in which Space
for Customer's Equipment is made available by PSIWeb.
1.2 "END USER" shall mean any person enabled, through a data connection
over the Internet, to access, use, purchase, download, or otherwise
interact with the Content which is located on or distributed by means
of the Equipment.
1.3 "CONTENT" shall mean electronic data, software, programs, or
information provided by Customer and made available to End Users by
means of the Equipment, which may include, but is not limited to,
advertisements, product information, announcements, news, software,
services, or electronic exhibitions or games of various types.
1.4 "EQUIPMENT" shall mean computer, networking, and data
communications hardware and software (typically including one or more
World-Wide Web servers) owned, located and maintained by Customer in
the available Space.
1.5 "NETWORK" shall mean the TCP/IP-based data communications
network (including all hardware, software, telecommunications
facilities and equipment) owned and operated by PSINet and
PSIWeb through which End Users may access Customer' s Content
via the Internet.
1.6 "OPERATIONS DESK" OR DCOPS shall mean the location within the
hosting facility that serves as a gateway to the Customer
co-location Space.
1.6 "POP" shall mean a Network point-of-presence where the Space for
the Equipment will be located.
1.7 "SPACE" shall mean the area within a PSIWeb-controlled cabinet (or
"rack") set aside for Customer' s Equipment which is located in the
Co-Locate Site.
2. SPACE SPECIFICS.
2.1 ENVIRONMENT. PSIWeb shall provide environmentally controlled Space
within the Co-Locate Site in which to house the Equipment. Normal air
conditioning and/or heating service to the Equipment will meet this
requirement.
2.2 POWER REQUIREMENTS. PSIWeb shall provide 20 Ampere singly
fused power service 24 hours a day, 7 days a week. PSIWeb will
be responsible for the ongoing power usage fees. PSIWeb will
inform Customer in advance of any scheduled power outage and
the expected duration of the outage. Each rack shall be backed
up by PSIWeb with UPS (uninterrupted power supply) and
generator as part of the monthly service fee.
2.3 FULL RACKS, HALF RACKS, & QUARTER RACKS. PSIWeb shall provide
Space to house Equipment. A "Full Rack" shall comprise the
entire space available in one (1) PSIWeb-owned free-standing
cabinet of the total dimensions 24" W x 36" D x 70" H. A "Half
Rack" shall comprise one-half the entire space of a Full Rack
(24" W x 36 " D x 35" H). A "Quarter Rack" shall comprise of
one-quarter the entire space of a Full Rack (24" W x 36" D x
17" H). Customer will specify above, the Co-Locate Site
Location and the Rack Space requirement.
2.4 NETWORK ACCESS SPEEDS. Equipment will be connected to the
Network via a 10 / 100 Mbps ethernet connection. Connectivity
levels are specified by the Customer on the order form.
Available options include: 256 Kbps, 512 Kbps, 1.5 Mbps, 3.0
Mbps, 5.0 Mbps, and 10 Mbps. 10 Mbps ethernet is provisioned
as the default ethernet configuration.
2.5 CUSTOMER ACCESS TO SPACE. PSIWeb shall provide reasonable
commercial access to the Space with required PSIWeb escort for
individuals designated and authorized by Customer. The names
or those individuals whom Customer initially authorizes are
set forth above. PSIWeb shall provide access to the Equipment
from both the front and rear of the Space on a 24 hour per
day, 7 day per week basis, subject to the conditions set forth
in this Section. Customer shall give a minimum of one (1) hour
advance notice to PSINet' s Network Operations Center in Troy,
New York, for access to any Co-Locate Site, whereupon PSIWeb
will respond as escort personnel are available but in no event
later than 4 hours after notice is given. In emergencies,
designated as such by Customer, advance notice may be less
than t one (1) hour and PSIWeb will exercise its best efforts
to make escort personnel available as soon as possible under
the circumstances. The monthly service fee shall include
access without payment of a security escort fee for the first
seven (7) calendar days after the Actual Startup Date.
Thereafter, the monthly service fee shall include access
without payment of a security escort fee for up to ten (10)
hours per month (such free hours excluding federal or state
holidays, Saturdays and Sundays), with a minimum charge of one
(1) hour per visit. All visits to the Space by Customer beyond
the ten (10) free hours per month shall require and be subject
to hourly fees for the necessary PSIWeb personnel to escort
Customer. Unused free hours shall not carry over from month to
month but must be used in the month in which they accrue. Fees
for dispatch of PSIWeb personnel after regular business hours
(8 AM to 6 PM in the relevant time zone) will accrue from the
time of dispatch, and fees for visits on federal or state
holidays, Saturdays and Sundays will accrue from the time of
dispatch and be charged at a premium of one-and-one-half times
the standard hourly rates of $150.00.
2.6 LANDLORD REQUESTS. All arrangements requiring coordination
with the Co-Locate Site's landlord will be made only through
PSIWeb personnel directly.
3. EQUIPMENT SPECIFICS.
3.1 PROVISION. Customer, or its subcontractors as Customer shall
designate in writing, shall at its own expense supply, order, install,
configure, troubleshoot, and maintain all Equipment, including cabling
and termination devices necessary to support Network access and console
access to the Equipment. At Customer' s option and at its own expense,
Customer may order an analog phone line from a local telephone company
for direct dial remote access to the Equipment, and PSIWeb will provide
the necessary cross-connect from its phone closet nearest the Co-Locate
Site to the Space.
3.2 SECURITY. PSIWeb shall not allow its personnel or others on its
premises to open the Equipment cabinets. However, PSIWeb provides no
user access security or Network access security with respect to any of
the Equipment or Content. Customer shall be solely responsible for user
access security and Network access security. PSIWeb will reasonably
assist in Network security breach detection or identification, but
shall not be liable for any inability, failure or mistake in doing so.
3.3 DOMAIN NAME AND NETWORK NUMBER. Customer shall arrange for the
provision of Domain Name Service for any Equipment it desires to be
accessible by hostname to End Users over the Internet, or, at its
option, Customer may request that PSIWeb provide Domain Name Service
("DNS") only to the extent necessary to provide such access to the
Equipment. Customer may use a domain name or subdomain already
registered under its business name, or PSIWeb shall apply for and
maintain DNS for one (1) new domain name per Co-Locate Site for this
purpose, at Customer' s option. Customer shall be solely responsible
for the InterNIC registration and maintenance taxes incurred in
connection with each new domain name. PSIWeb shall supply to the
Customer and route a sufficient number of Classless Inter-Domain
Routing (CIDR) host IP addresses from its block of Class A (network 38)
addresses to support Network access to the Equipment. CIDR IP addresses
are and shall remain the sole and exclusive property of PSIWeb and
shall immediately be relinquished by Customer at the termination of
this Agreement to allow for reassignment and reuse by PSIWeb. PSIWeb
shall not supply or route non-CIDR IP addresses under this Agreement.
PSIWeb Inc. Co-Locate Service Agreement April 21, 1999 Page 3 of 5
<PAGE>
3.4 CUSTOMER'S SUPPORT PERSONNEL. PSIWeb is not responsible to Customer
for providing, or for any costs or expenses associated with providing,
any administrative, technical, emergency or support personnel or
services necessary for dealing with PSIWeb or for providing and
maintaining Customer's Equipment, Content, and access to the Network.
PSIWeb shall provide one or more email lists to which Customer' s
authorized personnel may direct questions, issues or concerns regarding
the services provided by PSIWeb under the Agreement.
3.5 EQUIPMENT ACCESS TO NETWORK. Each Full Rack or Half Rack shall have
10 Base-T jacks to connect the Equipment to the Network at the access
speed purchased by Customer. Except for such Network access and remote
console access provided exclusively for operational purposes under
Section 3.1, any form of connectivity between the Equipment and any
network or transmission medium other than PSINet is prohibited.
3.6 RISK OF LOSS. Customer shall at all times before, during and after
the term of this Agreement bear the entire risk of loss, damage, theft,
or destruction of the Equipment or any part thereof, from any and every
cause whatsoever.
3.7 DISCONNECTION. PSIWeb shall retain the right to disconnect the
Equipment from its LAN and/or from the Network at any time, provided
that PSIWeb provides at least two (2) hours' advance notice to
Customer. Advance notice shall not be required, however, for
disconnection for Customer' s breach of Sections 4.2, 4.3, or 9.2, or
when any delay in disconnection presents a substantial risk of a
service outage, or damages to equipment or data belonging to PSINet or
PSIWeb or to a third party, or damages to the POP or Co-Locate Site or
to any persons or property present therein; provided, however, that
PSIWeb will give Customer notice via telephone immediately upon
disconnection without advance notice. Customer reserves the right to
shut down the Equipment at the Co-Locate Sites in accordance with its
emergency operating procedures, with prompt notification to PSIWeb.
3.8 RELOCATION OF EQUIPMENT. Relocation of the Equipment, if requested
by Customer, shall be performed by Customer or its subcontractors at
its expense. PSIWeb is not responsible for Network access disruptions
caused by Customer' s Equipment relocation requirements.
4. CUSTOMER USE OF SPACE, EQUIPMENT, CONTENT AND NETWORK.
4.1 OWNERSHIP OF EQUIPMENT AND CONTENT. Customer intends to support the
dissemination and use of its Content by End Users through Network
access to the Equipment. All interest in and ownership of the Equipment
and the Content including, but not limited to, those portions of the
Content that are Customer's trade names, trademarks or service marks,
are and shall remain the property of Customer.
4.2 NETWORK USAGE RESTRICTIONS. Customer warrants that Network
access, the Equipment, and the Content will not constitute
violations of, or be used to violate, any community or
Internet policies, practices, or standards, laws or
regulations of local, state or federal governments or agencies
thereof, or international treaties. Actions such as, but not
limited to, misuse of copyrighted materials, misappropriation
of trade and other distinguishing marks, and use of the
Network, the Equipment, the Content, or any PSIWeb facilities
for defamatory, threatening or obscene purposes are
prohibited. Any such violations may be grounds for termination
of this Agreement upon receipt of written notice to Customer
by PSIWeb specifying such violation.
4.3 NO BACKUP BY PSIWEB. PSIWeb shall not provide or guarantee any
data back-up or data storage of Customer's Equipment or
Content. Customer is solely responsible for providing any data
storage, data back-up and archival history with respect to its
Equipment and its Content. At Customer' s request and for an
additional fee, PSIWeb personnel will exchange back-up tapes
within a Customer-owned tape drive located in the Space.
4.4 RESPONSIBILITY FOR ITS END USERS. Customer shall be solely
responsible for providing customer services, technical
support, pricing and service plans, billing and collections,
and any and all other services to its End Users, and PSIWeb
shall have no obligations whatsoever to End Users under this
Agreement.
5. PAYMENTS.
5.1 PAYMENTS. Customer shall pay monthly service fees to PSIWeb
according to the Co-Locate Service Level specified above by Customer,
following the Actual Startup Date. Customer agrees to pay such invoice
amounts in advance by the first day of each month of service. Customer
shall be invoiced for the initial Setup fee as sent forth in the Order
Form following the Service Order Date. Customer agrees to pay this
Setup fee as due in the invoice.
5.1.1 SERVICE ORDER DATE. The "Service Order Date" refers to the
date PSIWeb receives and processes Customer's complete order,
including this executed Agreement and Customer' s DNS and IP address
requirements, which results in activity by PSIWeb such as
consultation, configuration and physical preparation of the Space.
5.1.2 ACTUAL STARTUP DATE. The "Actual Startup Date" for each Space
shall be three calendar days after the date on which PSIWeb makes
available the Space and the "live" 10-Base-T connection to each
Space, and notifies the Customer in writing of the availability of
that Space for its Equipment and Content.
5.1.3 ANNIVERSARY DATE. The "Anniversary Date" for each Space shall
be the first day of the month following the Actual Startup Date.
5.1.4 INTERIM BILLING PERIOD. Billing for the interim period between
each Actual Startup Date and the Anniversary Date shall be the daily
prorata amount times the number of days between these two events
plus the Actual Startup Date. This Interim Billing Period amount
will be calculated and included on a service fee invoice to the
Customer.
5.2 CUSTOMER CHARGES. Customer is solely responsible for establishing
and collecting the charges, if any, for Content and related services it
offers to its End Users through the Network and Equipment, and for
preparing and mailing invoices to its End Users. Customer remains
responsible for payment of the total amounts invoiced it by PSIWeb
regardless of whether Customer is paid for Content and related services
offered to its End Users.
5.3 TAXES. Customer shall be liable for and shall reimburse PSIWeb for
all taxes and related charges however designated resulting from the
transactions contemplated hereby, including federal, state, provincial
or local sales or use taxes and excise taxes, imposed in connection
with or arising from the provision of services under this Agreement,
except for taxes incurred by PSIWeb on its income.
5.4 LATE PAYMENTS. Invoices not paid by their due date shall be subject
to a 1.5% per month interest fee, or the maximum interest allowed by
applicable laws, whichever is less, on all past-due balances. In the
event PSIWeb incurs additional fees as a result of any collection
activity, such as collection agencies or legal fees, Customer shall
reimburse PSIWeb for all such fees. In the event Customer shall fail to
pay PSIWeb any amount due under this Agreement for a period of thirty
(30) days after the due date, PSIWeb in addition to charging applicable
delinquency fees, may discontinue providing Network access to any or
all Equipment by Customer and its End Users upon forty-eight (48) hours
prior written notice by overnight courier or certified mail to
Customer. PSIWeb shall resume providing Network access to such
Equipment immediately upon receipt of such payment, and in such event
Customer shall pay PSIWeb a reconnection fee of $750.
6. TERM/EXTENSION/TERMINATION.
6.1 INITIAL NON-CANCELABLE TERM. This Agreement shall extend from the
date first written below until the end of the initial non-cancelable
term which shall be one (1) year from the last Anniversary Date.
6.2 EXTENSION. Unless terminated by either party as provided herein,
this Agreement shall automatically renew for successive one-year terms
and Customer shall be invoiced for any subsequent monthly service fees
as set forth above. Service rendered beyond each term will also be
subject to the regular monthly service fees.
6.3 TERMINATION.
6.3.1 BY EITHER PARTY.
6.3.1.1 FOR DEFAULT. Section 6.1 notwithstanding, either party
may terminate this Agreement for default by the other party for
material breach of the Agreement should such breach not be cured
within thirty (30) days of written notice clearly specifying the
material breach to the other party, provided however that the
opportunity to cure shall not apply to Customer' s material
breach of Section 4.2 of this Agreement.
PSIWeb Inc. Co-Locate Service Agreement April 21, 1999 Page 4 of 6
<PAGE>
6.3.1.2 END OF TERM. Either party may terminate this Agreement
for any reason upon thirty (30) days written notice before the
end of either the initial or any subsequent terms.
6.3.2 BY PSIWEB
6.3.2.1 FOR NON-PAYMENT. After thirty (30) days of non-payment
from the PSIWeb invoice due date, Network access may be disabled
and use of the Space revoked by PSIWeb and/or this Agreement
terminated, at the sole discretion of PSIWeb. Disablement or
termination of this Agreement for non-payment does not relieve
Customer of its responsibilities hereunder, including but not
limited to the payment of all fees up to the date of disablement
or termination and all monthly service fees remaining to the end
of the then-current term, should PSIWeb elect not to terminate
the Agreement.
6.3.2.2 FOR TERMINATION OF PSIWEB'S LEASE. Should PSIWeb or the
landlord of the Co-Locate Site decide in their sole discretion to
terminate the lease of the real property in which the POP and/or
Co-Locate Site is situated, PSIWeb may terminate this Agreement
upon thirty (30) days written notice.
6.3.3 REMOVAL OF EQUIPMENT. Customer shall remove all items of
Equipment located in the Space within ten (10) days of the date of
termination of this Agreement for any reason. In the event the
Equipment is not removed, PSIWeb may remove it and retain possession
thereof as security for the payment of any sums owed by the Customer
under the Agreement. Customer shall not acquire any interest in, nor
file any liens upon, the Space or any portion of the Co-Location
Site as a result of this Agreement or its termination for any
reason.
7. INSURANCE. Customer shall provide proof of insurance prior to installation of
Equipment in the Space and maintain such insurance at all times during the
initial and any renewal term of this Agreement and during any ten-day removal
period pursuant to Subsection 6.3.3 of this Agreement. Proof of insurance shall
be provided by delivery of certificates of insurance to PSIWeb showing the
following types of insurance, in the following minimum amounts, which insurance
shall be issued by companies which have a Best' s Key Rating of at least A-:
WORKER'S COMPENSATION INSURANCE complying with the law of the state in
which each Co-Locate Site to be used by Customer is situated,
regardless of whether Customer is required by such law to maintain
worker' s compensation insurance, and EMPLOYER'S LIABILITY INSURANCE
with the limit of $100,000 per occurrence; and
OCCURRENCE FORM COMMERCIAL GENERAL LIABILITY INSURANCE including
coverage for personal injury, bodily injury, death, contractual
liability and broad form property damage, including loss of use of
property, occurring in the course of or in any way related to Customer'
s operations, in the amount not less than $1,000,000 combined single
limit per occurrence; and
EXCESS OR UMBRELLA LIABILITY COVERAGE with a combined single limit of
$1,000,000 per occurrence to be excess of (a) and (b).
ELECTRONIC ERRORS AND OMISSIONS COVERAGE including coverage for losses
attributable to damage, destruction, and/or fraudulent modification of
electronic data.
PSIWeb and its landlord for each Co-Locate Site shall not insure or be
responsible for any loss or damage to property of any kind owned or leased by
the Customer or its employees, servants and agents, including but not limited to
the Equipment. Any policy of insurance covering the Equipment against loss or
physical damage shall provide that underwriters have given their permission to
waive their rights of subrogation against PSIWeb its landlord, and their
directors, officers, employees, agents, parents, subsidiaries and affiliates.
PSIWeb except in the case of worker' s compensation insurance, shall be named as
an additional insured on the policies required above, and the certificate of
insurance for each policy shall be delivered to PSIWeb upon execution of this
Agreement. The certificates of insurance shall show that the insurance is
prepaid, and in full force and effect and that such insurance shall not be
canceled, non-renewed or decreased, during the initial or any renewal term of
this Agreement or during any ten-day removal period pursuant to Subsection 6.3.3
of this Agreement, without at least thirty (30) days written notice to PSIWeb.
The maintenance of insurance by Customer shall not affect or limit the extent of
Customer' s liability under this Agreement.
If PSIWeb' s landlord in any of the Co-Locate Sites in which Customer maintains
Equipment has other insurance requirements under its lease, Customer hereby
agrees to comply with the landlord' s requirements in addition to the
requirements under this Agreement.
8. SERVICE ADJUSTMENTS. If Network access to the Customer' s Equipment is
disrupted due to a failure of PSIWeb' s equipment or circuits at the POP within
which the Co-Locate Site is situated, except for occurrences due to force
majeure as set forth in Section 13.2 hereof, then the following adjustments will
be made: AFTER FOUR HOURS, PSIWEB WILL PROVIDE ADDITIONAL SERVICE DAYS TO
CUSTOMER BEYOND THE SERVICE TERM FOR ANY CALENDAR DAY OR PORTION THEREOF OF THE
NETWORK ACCESS DISRUPTION. ONLY ONE ADDITIONAL SERVICE DAY CAN BE GRANTED PER
CALENDAR DAY OR PORTION THEREOF. The foregoing represents the sole remedy
available to Customer for Network access disruptions.
9. CONFIDENTIAL INFORMATION.
9.1 ACKNOWLEDGMENT OF CONFIDENTIALITY. Each Party hereby acknowledges
that it may be exposed to confidential and proprietary information
belonging to the other party or relating to its affairs. Such materials
shall be expressly designated or marked as confidential. Confidential
Information does not include (i) information already known or
independently developed by the recipient; (ii) information in the
public domain through no wrongful act of the recipient, or (iii)
information received by recipient from a third party who was free to
disclose it.
9.2 COVENANT NOT TO DISCLOSE. Each party hereby agrees that it shall
not use, commercialize or disclose the other party's Confidential
Information to any person or entity, except to its own employees or
agents having a "need to know" such information in connection with the
performance of this Agreement, and to such other recipients as the
other party may approve in a signed, written document. Neither party
shall alter or remove from any software, documentation or other
Confidential Information of the other party (or any third party) any
proprietary, copyright, trademark or trade secret legend. The parties'
obligations of confidentiality under this Agreement shall survive
termination of this Agreement for any reason.
10. INDEMNIFICATION OF PSIWEB. CUSTOMER AGREES TO DEFEND, INDEMNIFY AND HOLD
HARMLESS PSIWEB AND ITS PARENTS, SUBSIDIARIES, DIRECTORS, EMPLOYEES, AGENTS AND
SUBCONTRACTORS, AGAINST ANY AND ALL ALLEGATIONS, CLAIMS, EXPENSES (INCLUDING
REASONABLE ATTORNEY' S FEES AND DISBURSEMENTS), LIABILITY OR SUITS THREATENED,
MADE OR BROUGHT IN RELATION TO OR ARISING FROM (i) CUSTOMER' S DESIGN, CREATION,
PROVISION, DISTRIBUTION OR USE OF INFORMATION AND TECHNOLOGIES IN THEIR CONTENT,
INCLUDING, BUT NOT LIMITED TO, ANY RELATED COPYRIGHTS, TRADE SECRETS, TRADE
NAMES, PATENTS, OR OTHER INTELLECTUAL PROPERTY RIGHTS, OR (ii) CUSTOMER' s OR
ITS END USERs' VIOLATION OR ALLEGED VIOLATION OF LAWS PROHIBITING OBSCENITY,
DEFAMATION, HARASSMENT, OR ANY OTHER LAWS, RULES, REGULATIONS, INTERNET OR OTHER
COMMUNITY POLICIES, PRACTICES, OR STANDARDS, OR INTERNATIONAL TREATIES IN EFFECT
IN ANY COUNTRY OR JURISDICTION IN WHICH THE CONTENT CAN BE VIEWED OR RETRIEVED;
OR (iii) ANY OTHER ACTS OR OMISSIONS OF CUSTOMER AND/OR ITS END USERS THAT
RESULT, DIRECTLY OR INDIRECTLY, IN CLAIMS OR LOSSES ATTRIBUTABLE TO SERVICE
OUTAGES INCURRED BY PSINET' S OR PSIWEBS CUSTOMERS, OR DAMAGES TO EQUIPMENT OR
DATA BELONGING TO PSINET OR PSIWEB OR TO OTHER CUSTOMERS OF PSINET OR PSIWEB OR
DAMAGES TO THE POP OR CO-LOCATE SITE OR TO ANY PERSONS OR PROPERTY PRESENT
THEREIN.
11. WARRANTIES EXCLUDED. PSIWEB MAKES NO WARRANTIES IN CONNECTION WITH ITS
NETWORK OR THE PROVISION OF ACCESS OR SPACE AS CONTEMPLATED HEREIN, WHETHER
WRITTEN OR ORAL, STATUTORY, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION THE
WARRANTY OF MERCHANTABILITY AND THE WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE
OR USE. CUSTOMER HEREBY WAIVES ANY CLAIM (INCLUDING ANY CLAIM BASED ON STRICT OR
ABSOLUTE LIABILITY IN TORT) THAT IT MAY HAVE AGAINST PSIWEB FOR ANY LOSS, DAMAGE
(INCLUDING LOSS OF PROFITS, LOSS OF DATA OR SPECIAL, INCIDENTAL, PUNITIVE,
RELIANCE OR CONSEQUENTIAL DAMAGE) OR EXPENSE CAUSED BY CUSTOMER'S USE OF THE
NETWORK, THE SPACE OR THE EQUIPMENT (EVEN IF PSIWEB HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES). CUSTOMER ACKNOWLEDGES THAT PSIWEB DID NOT SELECT,
MANUFACTURE OR DISTRIBUTE THE EQUIPMENT OR ITS CONTENT AND THAT CUSTOMER HAS
MADE THE SELECTION OF THE EQUIPMENT AND ITS CONTENT BASED SOLELY
PSIWeb Inc. Co-Locate Service Agreement April 21, 1999 Page 5 of 6
<PAGE>
UPON ITS OWN JUDGMENT AND EXPRESSLY DISCLAIMS ANY RELIANCE ON STATEMENTS MADE BY
PSIWEB OR ITS AGENTS.
12. LIMITATION OF LIABILITY. NOTWITHSTANDING ANYTHING CONTAINED IN THIS
AGREEMENT TO THE CONTRARY, THE PARTIES AGREE THAT PSIWEB ITS PARENTS,
SUBSIDIARIES, DIRECTORS, EMPLOYEES, AGENTS AND SUBCONTRACTORS, SHALL IN NO EVENT
BE LIABLE TO CUSTOMER OR ANY OTHER PERSON FOR ANY ACTUAL, DIRECT, INDIRECT,
CONSEQUENTIAL, SPECIAL, INCIDENTAL, RELIANCE, PUNITIVE OR ANY OTHER DAMAGES, OR
FOR ANY LOST PROFITS OF ANY KIND OR NATURE WHATSOEVER, REGARDLESS OF THE
FORESEEABILITY THEREOF, ARISING OUT OF THE PROVISION OF ACCESS OR IN ANY WAY
ARISING OUT OF THIS AGREEMENT, WHETHER IN AN ACTION ARISING OUT OF BREACH OF
CONTRACT, BREACH OF WARRANTY, DELAY, NEGLIGENCE, STRICT TORT LIABILITY, PATENT
OR INTELLECTUAL PROPERTY MATTERS OR ANY OTHER LEGAL OR EQUITABLE THEORY. NO
ACTION OR PROCEEDING AGAINST PSIWEB MAY BE COMMENCED MORE THAN TWO YEARS AFTER
THE EVENT GIVING RISE TO SUCH CLAIM. THIS CLAUSE SHALL SURVIVE FAILURE OF AN
EXCLUSIVE REMEDY.
13. GENERAL TERMS.
13.1 NOTICES. Any notice required or permitted hereunder shall be in
writing and shall be deemed to have been given upon personal delivery,
confirmation of receipt of fax transmission, or three (3) business days
after being sent to the other party by US mail at the addresses listed
above or to such other persons and addresses as one party may from time
to time notify the other in writing.
13.2 FORCE MAJEURE. Except for obligations requiring the payment of
money, neither party shall be liable for delay in performance hereunder
due to causes beyond its reasonable control; provided, that such party
shall give notice to the other party of any actual or anticipated
delay, shall take steps to minimize any such delay and overcome its
effects, and shall promptly resume performance when the cause of such
delay is removed.
13.3 INDEPENDENT CONTRACTORS. This Agreement shall not be construed as
constituting either party as a partner or agent of the other party or
to create a joint venture or any other form of legal association that
would impose liability on one party for the act or failure to act of
the other party or as providing either party with the right, power or
authority to create any duty or obligation on behalf of the other
party.
13.4 ASSIGNMENT. Neither party may sell, transfer, or assign this
Agreement, except to entities completely controlling or controlled by
that party, or to entities acquiring all or substantially all of its
assets, without the prior written consent of the other which consent
shall not be unreasonably withheld or delayed. Any act in derogation of
the foregoing shall be null and void; provided, however, that any such
assignment shall not relieve the assigning party of its obligations
hereunder.
13.5 WAIVERS. The waiver or failure of either party to exercise in any
respect any right provided for in this Agreement shall not be deemed a
waiver of any further right under this Agreement.
13.6 SEVERABILITY. If any provision of this Agreement is held by a
court of competent jurisdiction to be contrary to law, the remaining
provisions of this Agreement will remain in full force and effect.
13.7 GOVERNING LAW. This Agreement shall be governed by the substantive
law of the State of New York without regard to its principles of
conflicts of law.
13.8 ENTIRE AGREEMENT AND CHANGES. This Agreement represents the
complete agreement and understanding of the parties with respect to the
subject matter herein, and supersedes any other agreement or
understanding, written or oral. In the event of any conflict arising
between Customer' s purchase order terms and this Agreement, this
Agreement shall take precedence. This Agreement may be modified only in
writing signed by both parties.
THE PARTIES REPRESENT AND WARRANT THAT THEY HAVE FULL CORPORATE POWER AND
AUTHORITY TO EXECUTE AND DELIVER THIS AGREEMENT AND TO PERFORM THEIR OBLIGATIONS
HEREUNDER, AND THAT THE PERSON WHOSE SIGNATURE APPEARS BELOW IS DULY AUTHORIZED
TO ENTER INTO THIS AGREEMENT ON BEHALF OF THE PARTY WHOM THEY REPRESENT.
IN WITNESS WHEREOF, THE PARTIES HAVE ENTERED INTO THIS AGREEMENT AS OF THE
DATE SET FORTH:
- -----------------------------------------------------------------
AUTHORIZED CUSTOMER REPRESENTATIVE/TITLE
(PLEASE TYPE OR PRINT)
- -----------------------------------------------------------------
CUSTOMER SIGNATURE DATE
- -----------------------------------------------------------------
AUTHORIZED PSIWEB REPRESENTATIVE /TITLE(PLEASE TYPE OR PRINT)
- -----------------------------------------------------------------
PSIWEB REPRESENTATIVE SIGNATURE DATE
PSIWeb Inc. Co-Locate Service Agreement April 21, 1999 Page 6 of 6
First Sierra Financial, Inc. - Anaheim ("Lessor")
201 E. Center St.Anaheim, CA 92805
PHONE (800) 774-5855
FAX (714) 687-5855
Agreement Number 176079 / 204130
Supplier:
See attached invoice(s) or equipment list for Supplier information
A. Lessee:
Ediets.com, Inc.
3467 Hillsboro Blvd. Suite 2
Deerfield Beach, FL 33442
David R. Humble (954) 360-9022
B. Equipment (Quantity, Description & Serial No.):
See attached invoice(s) or equipment list ("Equipment")
Location: 510 Hunt Mar Park Dr. Herndon, VA 20170
C. Schedule of Payments:
<TABLE>
<CAPTION>
Initial Total Number Amount of Each Total Initial Payment $ 2,716.52
Term Of Payment First $ 1,180.15 Doc. Fee $ 250.00
(In Months) Payments (plus applicable taxes) Last $ 1,180.15 Deposit $ 0.00
<S> <C> <C>
36 36 1,180.15
Purchase Alternative: Fair Market Value (FMV) Purchase Amount (if applicable) $ FMV
</TABLE>
(see reverse or following page, section 6, for
description of Purchase Alternatives)
D. DISCLAIMER OF WARRANTIES AND CLAIMS: LIMITATION OF REMEDIES. THERE ARE NO
WARRANTIES BY OR ON BEHALF OF LESSOR AND NEITHER THE SUPPLIER NOR ANY OTHER
PARTY IS LESSOR'S AGENT. LESSEE ACKNOWLEDGES AND AGREES BY ITS SIGNATURE BELOW
AS FOLLOWS: (A) LESSOR MAKES NO WARRANTIES EITHER EXPRESS OR IMPLIED AS TO THE
CONDITION OF THE EQUIPMENT, ITS MERCHANTABILITY, ITS FITNESS OR SUITABILITY FOR
ANY PARTICULAR PURPOSE, ITS DESIGN, ITS CONDITION, ITS CAPACITY, ITS QUALITY, OR
WITH RESPECT TO ANY CHARACTERISTICS OF THE EQUIPMENT; (B) LESSEE LEASES THE
EQUIPMENT "AS IS" AND WITH ALL FAULTS; (C) LESSEE ACKNOWLEDGES THAT THE
EQUIPMENT IS LEASED TO LESSEE SOLELY FOR COMMERCIAL OR BUSINESS PURPOSES; (D) IF
THE EQUIPMENT IS NOT PROPERLY INSTALLED, DOES NOT OPERATE AS REPRESENTED OR
WARRANTED BY THE SUPPLIER OR MANUFACTURER, OR IS UNSATISFACTORY FOR ANY REASON,
REGARDLESS OF CAUSE OR CONSEQUENCE, LESSEE'S ONLY REMEDY, IF ANY, SHALL BE
AGAINST THE SUPPLIER OR MANUFACTURER OF THE EQUIPMENT AND NOT AGAINST LESSOR;
(E) LESSEE SHALL HAVE NO REMEDY FOR CONSEQUENTIAL OR INCIDENTAL DAMAGES AGAINST
LESSOR; AND (F) NO DEFECT, DAMAGE OR UNFITNESS OF THE EQUIPMENT FOR ANY PURPOSE
SHALL RELIEVE LESSEE OF THE OBLIGATION TO MAKE PAYMENTS OR RELIEVE LESSEE OF ANY
OTHER OBLIGATION UNDER THIS AGREEMENT.
E. Statutory finance lease ("Agreement"): Lessee agrees and acknowledges that it
is the intent of both parties to this Agreement that it qualify as a statutory
finance lease under Article 2A of the Uniform Commercial Code. Lessee
acknowledges and agrees that Lessee has selected both: (1) the Equipment; and
(2) the Supplier from whom Lessor is to purchase the Equipment. Lessee
acknowledges that Lessor has not participated in any way in Lessee's selection
of the Equipment or of the Supplier, and Lessor has not selected, manufactured
or supplied the Equipment. Lessee acknowledges that Lessor has informed or
advised Lessee, in writing, either previously or by this agreement that Lessee
may have rights under the supply contract evidencing Lessor's purchase of the
Equipment from the Supplier chosen by Lessee and that Lessee should contact the
Supplier of the Equipment for a description of any such rights and any
limitation of such rights.
F. Amendments: No term or provision of this Agreement may be amended, altered,
waived or discharged except by a written instrument signed by all parties to
this Agreement.
THIS AGREEMENT, THE TERMS OF WHICH HAVE BEEN FREELY NEGOTIATED BY EACH PARTY, IS
SUBJECT TO THE TERMS AND CONDITIONS ON THE REVERSE SIDE OR FOLLOWING PAGE WHICH
ARE MADE A PART HEREOF AND WHICH LESSEE AND LESSOR ACKNOWLEDGE THEY HAVE READ
AND ACCEPTED.
THIS IS A NON-CANCELABLE AGREEMENT
Lessor: First Sierra Financial, Inc. - Anaheim Lessee : Ediets.com, Inc.
By: Signature: X
Title: Title: David R Humble,
President
Guaranty: In consideration of First Sierra Financial, Inc. - Anaheim, its
successors and assigns ("Lessor") entering into this Agreement, the partie(s) or
individual(s) executing this Guaranty ("Guarantor," whether one or more)
unconditionally and irrevocably guaranty to Lessor, the prompt payment and
performance of all obligations of the Lessee. Guarantor agrees that this is a
guaranty of payment and not of collection, and that Lessor can proceed directly
against Guarantor without first proceeding against Lessee or against the
Equipment covered by the Agreement. Guarantor waives all defenses and notices,
including those of protest, presentment and demand. Guarantor agrees that Lessor
can renew, extend or otherwise modify the terms of the Agreement and Guarantor
will be bound by such changes. If Lessee defaults under the Agreement, Guarantor
will immediately perform all obligations of Lessee under the Agreement,
including, but not limited to, paying all amounts due under the Agreement.
Guarantor will pay to Lessor all expenses (including attorneys' fees) incurred
by Lessor in enforcing Lessor's rights against Guarantor. This Guaranty will not
be discharged or affected by the death, dissolution, termination, bankruptcy or
insolvency of Lessee or Guarantor and will bind Guarantor's heirs, personal
representatives, successors and assigns. If more than one Guarantor has signed
this Guaranty, each Guarantor agrees that his/her liability is joint and
several. Guarantor authorizes Lessor or any of Lessor's designees to obtain and
share with others credit bureau reports regarding Guarantor's personal credit,
and make other credit inquiries that Lessor determines are necessary. THIS
GUARANTY IS GOVERNED BY THE LAWS OF THE STATE OF CALIFORNIA. GUARANTOR CONSENTS
TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT LOCATED IN CALIFORNIA OR IN
ANY OTHER STATE WHERE LESSOR HAS AN OFFICE. GUARANTOR EXPRESSLY WAIVES ANY RIGHT
TO A TRIAL BY JURY.
X
Guarantor Signature
David R Humble
X
Guarantor Signature
Certificate of acceptance: The undersigned Lessee certifies to Lessor that all
items of Equipment referred to above or on the attachment(s) hereto have been
received and irrevocably accepted by the Lessee and were at the time of receipt
in good order and condition and acceptable to use. Lessee approves payment by
Lessor to the Supplier. Lessee hereby certifies that Lessor has fully and
satisfactorily performed all covenants and conditions to be performed by it
under the Agreement. Lessee agrees to enforce, in its own name, all warranties,
agreements or representations, if any, which may be made by the Supplier in
respect to the Equipment.
David R Humble, President
X
Signature
REQUEST FOR ELECTRONIC PAYMENT
Please attach a voided check from the account to be debited
The undersigned hereby authorizes and requests Lessor to initiate electronic
debit entries (and credit entries and adjustments for any debit entries in
error) or affect a charge by any other commercially accepted practice to the
account indicated below in the financial institution named below ("Depository").
The undersigned hereby authorizes and requests the Depository to honor the debit
and/or credit entries initiated by Lessor. This authorization is for payments
due under the referenced Agreement. This authority is to remain in force until
such time as all amounts due are paid in full or until Lessor and Depository
have received written notification from the undersigned terminating this
authorization in such time and manner as to afford Lessor and Depository a
reasonable opportunity to act on it.
Customer Name Printed: Ediets.com, Inc. Agreement Number : 176079/204130
Depository Name and Branch:__________________________________________________
Depository Address (city & state): __________________________________________
Depository Telephone Number: ________________________________________________
Account Number: _____________________________________________________________
Customer Signature: _________________________________________________________
Page 1 of 2
<PAGE>
TERMS AND CONDITIONS
Agreement Number: 176079 / 204130
1. DEFINITIONS; REPORTS: The words "you" and "your" refer to the LESSEE, its
successors and assigns, as shown on the reverse side or preceding page, as
applicable (the "first page"). The words "we", "us" and "our" refer to the
LESSOR, its successors and assigns as shown on the first page. You authorize us
and our designees to obtain investigative credit reports regarding you and each
guarantor from a credit bureau or a credit agency and to investigate the
references given on any statement or data obtained, and to share such reports
with others.
2. ACCEPTANCE: We agree to lease to you, and you agree to lease from us, the:
equipment, items, products, software, services, and other personal property
described or referenced on the first page ("Equipment") for the term shown on
the first page ("Initial Term"). We shall have no obligations hereunder until we
accept and sign this Agreement at our offices. If this Agreement is executed by
you and thereafter sent to us by facsimile transmission, then until such time as
we have received the Agreement with your manual signature thereon, such
facsimile transmission shall constitute, upon acceptance and execution by us in
our offices, the original Agreement and chattel paper and shall be admissible
for all purposes as the original Agreement. You agree to promptly forward to us
the Agreement with your manual signature thereon and upon receipt by us the
Agreement with your manual signature thereon shall constitute the chattel paper
in lieu of such facsimile transmission.
3. PAYMENTS: You promise to pay us the payments shown on the first page, in
advance, commencing as of the first day of the Initial Term and continuing on
the first day of each month in which a payment is due, without need of an
invoice; provided, as indicated in the Schedule of Payments, the payments
included in Total Initial Payment shall be paid upon your execution of this
Agreement. We reserve the right to adjust the payment shown in the Schedule of
Payments, by up to 10% to reflect changes in the final amounts paid to the
Supplier or amount borrowed. Any such adjustment shall be reflected on a
subsequent invoice to be sent to you within 30 days. If the contemplated lease
transaction is not consummated, the Total Initial Payment may be retained by us
as partial compensation for costs and expenses incurred in preparation for the
transaction. On the first day of the Initial Term you agree to pay us an interim
rent amount equal to 1/30th of the monthly rental multiplied by the number of
days elapsing between the date on which the first payment is made to the
Supplier and the first day of the Initial Term. Your obligation to make payments
and pay other amounts hereunder is absolute and unconditional and not subject to
abatement, reduction or set-off for any reason whatsoever. If the date on which
all payments have been made to the Supplier for the Equipment is the first day
of a calendar month, then the Initial Term shall commence on such date;
otherwise, the Initial Term shall commence on the first day of the following
calendar month; and in each case the Initial Term shall continue for the number
of months indicated on the first page. The Deposit shown on the first page shall
not bear interest and we may apply the Deposit to cure any default, in which
event you will promptly restore the Deposit to its full amount. After all of the
obligations under this Agreement are fully paid and performed, any remaining
balance of the Deposit shall be refunded to you after the return of the
Equipment to us at the termination of the Initial Term or of any Renewal Term.
4. LIABILITY; LOCATION: We are not responsible for any losses or injuries caused
by the installation or use of the Equipment. You agree to reimburse us for and
to defend us against all claims for losses or injuries caused by the Equipment.
You agree to maintain records showing the location of each item of Equipment.
You shall report such location to us upon our request. Your failure, to maintain
records showing the location of each item of Equipment and/or to report the
location of each item of Equipment shall constitute a default.
5. MAINTENANCE; INSTALLATION; RETURN: You are responsible for installing and
keeping the Equipment in good working order. You shall not make any alterations,
additions or improvements to the Equipment which detract from its economic value
or functional utility. All additions and improvements made to the Equipment
shall be deemed accessions thereto, and shall not be removed if removal would
impair the Equipment's economic value or functional utility. If the Equipment is
damaged or lost, you agree to continue making scheduled payments unless you pay
the Casualty Value pursuant to Section 13. At the end of the Initial Term, or
any Renewal Term, you will immediately return the Equipment to us in a condition
as good as received less normal wear and tear to any place in the United States
we designate. You will prepay all expenses of crating and shipping by means we
designate and you will properly insure the shipment. You also agree to pay us an
administration fee of $100.00 for processing the return of the Equipment. You
will also continue to make payments until the Equipment is received and accepted
by us.
6. PURCHASE ALTERNATIVES: So long as no default exists, at the end of the
Initial Term and/or any Renewal Term, you may purchase the Equipment under the
terms and conditions of the Purchase Alternative indicated on the first page and
described in detail below. In all cases, if you elect to purchase the Equipment
or (as in the case of a Put) are required to purchase the Equipment, upon
payment of the amount indicated on the first page ("Purchase Amount") plus any
and all fees, sales taxes and other applicable taxes, we will transfer the
Equipment to you AS IS-WHERE IS, WITHOUT ANY REPRESENTATION OR WARRANTY and we
will release any security interest we may have in the Equipment.
A. FAIR MARKET VALUE (FMV): If this Alternative is selected, at the end of the
Initial Term, this Agreement will automatically renew for successive 90 day
terms ("Renewal Term") unless you send us written notice that you do not want to
renew at least 60 days before the end of any term. We may cancel the automatic
renewal by sending you written notice at least 15 days before the end of any
term. Providing the aforementioned written notice is given by you to us, you
shall have the option to (a) return the Equipment in accordance with Section 5
or (b), purchase all (but not less than all) of the Equipment for a Purchase
Amount that is equal to the Equipment's Fair Market Value. B. STATED PURCHASE
OPTION: If this Alternative is selected, at the end of the Initial Term, this
Agreement will automatically renew for successive 90 day terms ("Renewal Term")
unless you send us written notice that you do not want to renew at least 60 days
before the end of any term. We may cancel the automatic renewal by sending you
written notice at least 15 days before the end of any term. Providing the
aforementioned written notice is given by you to us, you shall have the option
to (a) return the Equipment in accordance with Section 5 or (b) purchase all
(but not less than all) of the Equipment for the stated Purchase Amount. C.
DOLLAR PURCHASE OPTION: At the end of the Initial Term, you may purchase the
Equipment for such amount. D. PUT: At the end of the Initial Term, you must
purchase all (but not less than all) of the Equipment for the stated Purchase
Amount. E. OTHER: If this Purchase Alternative is indicated an addendum
explaining the terms and conditions of said alternative must be included with
this Agreement.
7. INSURANCE: You agree to keep the Equipment fully insured against loss until
this Agreement is paid in full and to have us named as loss payee. You also
agree to obtain a general public liability insurance policy, with minimum limits
of $100,000/$300,000 for bodily injury and $50,000 for property damage, from
anyone who is acceptable to us and to include us as an additional insured on the
policy. You agree to provide us with certificates or other evidence of insurance
acceptable to us, before this Agreement term begins, and during the term. If at
any time you have failed to deliver to us a valid certificate of insurance
reflecting such insurance as being in effect, then we will have the right, but
no obligation, to have such insurance protecting us placed for the term of this
Agreement at your expense; and if so placed, we will add to your payment and you
will pay us our costs of obtaining such insurance and any customary charges or
fees of ours or our designee associated with such insurance together with
interest thereon at the maximum rate permitted by applicable law.
8. TAXES AND FEES: You agree to pay when due or reimburse us for all taxes,
fees, fines and penalties relating to use or ownership of the Equipment or to
this Agreement, including documentary stamp taxes, now or hereafter imposed,
levied or assessed by any federal, state or local government or agency. If any
federal, state, county or local government or agency requires any taxes, charges
or fees to be paid in advance, and we pay such taxes, charges or fees, we
reserve the right to adjust the payment shown in the Schedule of Payments, to
reflect the payment of such taxes, charges or fees. Any such adjustment shall be
reflected on a subsequent invoice to be sent to you within 30 days. In
connection with and addition to each of the payments shown on the first page,
you will pay to us our estimate of the annual amount of property taxes (if
applicable) divided by the number of payments per annum. If the actual annual
amount of such taxes differ from the estimated payments made by you, then you
will pay us or we will reimburse to you (as applicable) the difference. You also
agree to pay us upon demand a per annum administration fee for the handling or
collecting of any such tax or related return in an amount as we determine but
not to exceed $50 per annum. Upon termination/expiration of this Agreement, you
agree to promptly remit 90% of the previous year's personal property tax due
with respect to the Equipment (plus any applicable taxes and fees) as specified
in a written notice from us for application against that year's personal
property tax; provided, you will remain liable for any deficiency.
9. PERSONAL PROPERTY: This Agreement is a lease. Your rights to the Equipment
are those solely of a lessee. If, however, this Agreement is construed to be a
financing, you grant us a security interest in the Equipment and all proceeds
thereof. The Equipment will be and shall remain personal property and, if
requested by us, you will obtain real property waivers satisfactory to us. You
shall keep the Equipment free from any and all liens and encumbrances. You shall
give us immediate notice of any attachment or other judicial process, liens or
encumbrances affecting the Equipment. You hereby authorize us and appoint us as
your attorney-in-fact with the power of attorney to file this Agreement, any
financing statement(s) or security agreement(s) with respect to the Equipment or
any other collateral you provide to us in any state in the United States. You
further authorize us to file this Agreement and such financing statements or
security agreements without your signature thereon. If your signature on any
financing statement is required by law, you shall execute such supplemental
instruments and financing statements we deem to be necessary and advisable and
shall otherwise cooperate to defend our title by filing or otherwise. You also
agree to pay us on demand filing, registration and releasing fees prescribed by
the Uniform Commercial Code ("UCC") or other law. Any Equipment that is subject
to title registration laws shall be titled and registered as directed by us.
10. DEFAULT; REMEDIES: If you do not pay when due or if you breach or fail to
perform any of your other covenants and promises under this Agreement or any
other agreement entered into by you and held or serviced by us or if you declare
bankruptcy or insolvency or if you dissolve or terminate your entity existence
or take any actions regarding the cessation or winding up of your business
affairs, you will be in default. If you are in default, at our election, we can
accelerate and require that you pay, as reasonable liquidated damages for loss
of bargain, the "Accelerated Balance". The Accelerated Balance will be equal to
the total of (i) accrued and unpaid amounts, (ii) the remaining payments and
(iii) the actual cost to us of the Equipment multiplied by 20%. We can also
pursue any of the remedies available to us under the UCC or any other law. In
addition, you agree to pay our reasonable attorneys' fees and actual costs
including repossession and collection costs, and all non-sufficient funds
charges and similar charges. To the extent permitted by law, you waive all
rights and remedies conferred upon a lessee under Article 2A of the UCC.
11. LATE CHARGE: If any part of a payment is late, you agree to pay a late
charge equal to the lesser of (a) the greater of 10% of the payment or $25.00 or
(b) the maximum amount permitted by applicable law.
12. ASSIGNMENT; INSPECTION: YOU HAVE NO RIGHT TO SELL, TRANSFER, ASSIGN,
SUBLEASE OR ENCUMBER THE EQUIPMENT OR THIS AGREEMENT. We may sell, transfer,
assign, or encumber this Agreement. You agree that if we sell, transfer, assign,
or encumber this Agreement, the assignee will have the rights and benefits that
we assign to the assignee and will not have to perform any of our obligations.
You agree that the rights of the assignee will not be subject to any claims,
defenses or set-offs that you may have against us. We and our agents and
representatives shall have the right at any time during regular business hours
to inspect the Equipment and for that purpose to have access to the location of
the Equipment.
13. RISK OF LOSS: You hereby assume and shall bear the entire risk of loss,
theft, damage and destruction of the Equipment from any cause whatsoever and no
loss, theft, damage or destruction of the Equipment shall relieve you of the
obligation to make scheduled payments or any other obligation under this
Agreement, and this Agreement shall remain in full force and effect, except as
provided below. You shall promptly notify us in writing of such loss, theft,
damage or destruction. If damage of any kind occurs to any item of Equipment,
you, at our option, shall at your expense (a) place the item in good repair,
condition or working order, or (b) if the Equipment cannot be repaired or is
lost, stolen or suffers a constructive loss under an insurance policy covering
the Equipment, pay to us the "Casualty Value." The Casualty Value will be equal
to the total of (i) accrued and unpaid amounts, (ii) the remaining payments
discounted to present value using the Federal Funds rate as of the date of
payment, and (iii) the actual cost to us of the Equipment multiplied by 20%
(similarly discounted to present value from the date of expiration of the
Initial Term).
14. CHOICE OF LAW; CONSENT TO JURISDICTION; VENUE: This Agreement shall be
interpreted, and all rights and liabilities of the parties hereto and thereunder
shall be determined and governed as to validity, interpretation, enforcement and
effect, by the laws of the State of California. Without limiting the right of
Lessor to bring any action or proceeding against Lessee in the courts of other
jurisdictions, Lessee hereby irrevocably submits to the jurisdiction of any
State or Federal court located in California or in any other state where Lessor
has an office. Lessor and Lessee expressly waive any right to a trial by Jury.
15. SOFTWARE: The Equipment refereed to in this Agreement may include certain
software (the "Software"). Notwithstanding any language to the contrary, we will
not purchase the Software but will only advance your cost to purchase or license
the Software (and you grant us a security interest in your rights in and to the
Software to secure performance of your obligations under this Agreement). We
will not be a party to any license agreement for the Software. In all other
respects the Software will be treated as Equipment.
16. MISCELLANEOUS: During the term of this Agreement and any renewal hereof, you
agree to provide us with all financial statements and copies of federal or state
tax returns as we may reasonably request. If we supply you with labels, you
shall label any and all items of Equipment and shall keep the same affixed in a
prominent place. If any provision hereof or any remedy herein provided is found
to be invalid under any applicable law, such provisions shall be inapplicable
and deemed omitted, but the remaining provisions hereof, including remaining
default remedies, shall be given effect in accordance with the manifest intent
hereof. You agree that any delay or failure to enforce our rights under this
Agreement does not prevent us from enforcing any rights at a later time. You
agree that the terms and conditions indicated above and on the first page are a
complete and exclusive statement of our agreement and they may be modified only
by written agreement signed by all of the parties hereto and not by course of
performance. You agree that the original of this Agreement may be microfilmed or
electronically duplicated and a photostatic copy of such microfilm or electronic
duplication may be introduced in lieu of the original thereof and without
further foundation. The parties hereto expressly waive the secondary evidence
rule. You acknowledge receipt of a copy of this Agreement. You agree that this
Agreement will be binding upon your successors, assigns, heirs and legal
representatives. You agree that our waiver of any provision hereunder shall not
constitute a waiver of any other matter. It is the express intent of the parties
not to violate any applicable usury laws or to exceed the maximum amount of time
price differential or interest, as applicable, permitted to be charged or
collected by applicable law, and any such excess payment will be applied to
payments in inverse order of maturity, and any remaining excess will be refunded
to you.
_________________
(Lessee's Initials)
Page 2 of 2
<PART 2 TO COME>
EXHIBIT 10.15
As of November 15, 1999
eDiets.com, Inc.
3467 Hillsboro Blvd.
Deerfield Beach, FL 33442
Attention: Mr. David R. Humble
Ladies and Gentlemen:
This will set forth the terms and conditions on which you agree to
employ us and we agree to serve as your exclusive advertising agency in the
United States.
<PAGE>
I. BASIC SERVICES
We shall provide those services customarily performed by a general
advertising agency in connection with your advertising campaigns for all
marketing communications programs/initiatives, and all brand identity and
positioning programs/initiatives. Specifically, we shall do the following:
A. Formulate and submit for your approval advertising campaigns and
recommendations.
A. After approval by you, create and prepare advertising for all
consumer and trade print, broadcast, and outdoor media.
A. After approval by you, create and prepare on-line banner
advertising.
A. After approval by you, create and prepare advertising for direct
mail, inserts, catalogs and brochures.
A. Plan media commitments consistent with budgeted and approved funds
for all media other than on-line media; support these media commitments with
advertising strategy and rationales; and submit detailed cost estimates for such
media commitments.
A. Purchase all materials and services necessary for the production of
finished advertisements and commercials.
B. Execute in finished form the advertising materials set forth in
Sections I(b), (c) and (d) above.
A. Order advertising space and time or other means for transmitting
your advertising (other than on-line advertising) and forwarding advertising
material to media (other than on-line media) with proper instructions.
A. Look after necessary checking of advertisements and publications for
appearance, date, position, size, and mechanical reproduction for all
advertising other than on-line advertising.
A. Pay all charges incurred and assumed by us on your behalf.
A. Endeavor to do all of the above on the most advantageous rates,
terms, and conditions available.
I. MINIMUM GUARANTEED COMPENSATION
<PAGE>
You agree to pay us a guaranteed minimum monthly fee as follows: (a)
$31,250 for the period between November 15 and November 30, 1999; (b) $62,500
for each of the months of December 1999, January 2000 and February 2000; (c)
$58,750 for the month of March 2000; and (d) $55,000 for the month of April 2000
and each month thereafter. If our services terminate on a date other than the
first day of a month, a prorated share of the guaranteed minimum monthly fee
will be due for the final month. The guaranteed minimum monthly fees shall be
payable on the first day of each month, except that the fee set forth in
subparagraph (a) of the previous sentence, shall be payable on November 15,
1999.
I. ADDITIONAL COMPENSATION
You agree to pay us the "Additional Compensation" set forth in Exhibit
A to this agreement.
I. BONUS COMPENSATION
A. You agree to pay us the following bonus compensation:
1. If your "Gross Revenues" (as defined below) during the "Bonus
Period" (as defined below) exceed $12,000,000, you agree to pay to us an
additional amount equal to $50,000; and
1. If your "Gross Revenues" (as defined below) during the "Bonus
Period" (as defined below) exceed $15,000,000, you agree to pay to us an
additional amount equal to $120,000.
1. As used herein, (A) "Gross Revenues" shall mean the gross
revenues received by you from all sources, and (B) "Bonus Period" shall mean the
period commencing on February 1, 2000 and ending January 30, 2001.
1. In addition, in the event that during the Bonus Period you
acquire a third party and/or acquire the assets of a third party (collectively,
the "New Businesses"), and provided that any materials we produce or supply to
you hereunder (or anything derived therefrom) are not used in connection with
such New Businesses, then any gross revenues received by you during the Bonus
Period in connection with such New Businesses shall be excluded from the
definition of "Gross Revenues." Notwithstanding the foregoing, in the event that
you and we mutually agree that we shall provide our services in connection with
a particular New Business, or in the event that you use any materials we produce
or supply to you hereunder (or anything derived therefrom) in connection with
such New Business, then the "New Business Gross Revenue" (as defined below)
derived from such New Business shall be included in the definition of "Gross
Revenues."
<PAGE>
1. As used herein,"New Business Gross Revenue" shall be defined as
the difference (if any) between:
(A) the gross revenues derived from the New Business during the
period commencing on the earlier of (1) the date we commence providing our
services in connection with such New Business and (2) the first date on which
you use any materials we produce or supply to you hereunder (or anything derived
therefrom) in connection with such New Business, and ending on the last day of
the Bonus Period; and
(B) the gross revenues derived from such New Business during the
corresponding period of time during the immediately prior calendar year(s).
1. Thus, by way of example, if: (A) on March 1, 2000 you acquire a
particular New Business, (B) on May 1, 2000 you use materials produced by us
hereunder to advertise such New Business, (C) the gross revenues derived from
such New Business between May 1, 2000 and January 30, 2001 equal $1,000,000, and
(C) the gross revenues derived from such New Business between May 1, 1999 and
January 30, 2000 equal $800,000, then the "New Business Gross Revenue" with
respect to such particular New Business would be equal to $200,000.
A. Any amounts payable pursuant to this Section IV shall be paid no
later than February 15, 2001.
B. You and we will agree upon sales "goals" for the one-year period
commencing on February 1, 2001, and for each one-year period thereafter, and
appropriate bonus compensation to us if such goals are achieved.
A. It is acknowledged and agreed that in the event that this agreement
is terminated in accordance with Section IX below prior to January 30, 2001,
then we shall be entitled to bonus compensation in accordance with this Section
IV, except that the "Bonus Period" shall be defined as the period commencing on
February 1, 2000 and ending on the termination date, rather than as set forth in
Section IV(b)(1)(B) above.
I. MEDIA, PRODUCTION, AND OTHER CHARGES
A. In addition, you agree to pay us for the following charges:
1. You agree to pay us for the net cost of all media purchased by us
on your behalf, and, in addition, you agree to pay us a commission of five
percent (5%) of the Gross Media Cost, which shall be defined as the standard
gross media charges (I.E., the published, negotiated, or standard rates, without
deduction of any discounts, and specifically including a standard agency
commission) for all media in which any of your advertising is placed. If, in a
medium having a schedule of graduated rates, you use a different amount of space
or time than contracted for, the amount payable by you will be adjusted to
reflect the charges for the space or time actually used.
<PAGE>
1. You agree to pay us for all third party charges for the
production and purchase of advertising materials and programs, including,
without limitation, typography, engraving, printing, photographs, artwork,
comprehensive layouts, paste-ups, mechanicals, scanning/retouching,
illustration, stock photography, television and photography shoots (including,
without limitation, stylists, props, assistants, location scouting, etc.),
mailing house, printing/engraving (including, without limitation,
film/matchprints), chromes/c-prints, digital mediums, premium items for
promotions (E.G., coffee mugs, pens, etc.), on-line banner production,
photoboards, film, videotapes, musical compositions and arrangements, radio and
television programs and facilities, talent, props, scenery, sound and lighting
effects, rights, royalties, and producers' or packagers' fees, at cost, plus an
amount equal to 17.65% of such third party charges as an agency commission.
A. You agree to pay us, in accordance with estimates which we will
supply to you, for our charges for any studio functions performed by us,
including, without limitation, for any paste-ups, mechanicals, comprehensive
production storyboards and photoboards, printing, typography, retouching,
illustration, graphics, animation, designs (including computer aided design),
digital image research, portable media, and color output and prints prepared or
produced by our personnel, plus an amount equal to 17.65% of such studio charges
as an agency commission.
B. You agree to reimburse us for the following expenses (collectively,
"Administrative Expenses"): reasonable travel expenses, including
transportation, hotels, meals, etc., of our personnel in connection with the
servicing of your advertising account and any special services; charges
originating with us for costs of forwarding, storing, shipping, mailing,
telephoning, telegraphing, telecopier, facsimile transmissions, duplicating, and
courier and messenger services incurred in the servicing of your account;
charges for talent payment services; charges for legal services authorized by
you including, without limitation, legal review of advertising and other
materials, trademark and copyright advice and registrations, negotiation of
talent and other extraordinary contracts, and representation before industry and
governmental regulatory agencies. In addition, you agree to pay us a commission
equal to 17.65% of the Administrative Expenses as an agency commission.
<PAGE>
I. PAYMENTS
We will bill you for charges to be incurred pursuant to Section V above
in connection with our services upon your approval of estimates for such
charges, and you agree to pay these charges within ten (10) days, except that
any payments we must make on your behalf must be collected from you no later
than the earliest dates on which we must make payment on your behalf. In the
event that we do not receive payment in accordance with the terms hereof, we
shall have no obligation to purchase or contract on your behalf, and we shall
have the right to cancel any contracts previously entered into on your behalf,
and in the event that we cancel any such contracts, you shall be responsible for
any charges, commissions and fees incurred prior to, or as a result of, such
cancellation. Billing adjustments will be made for differences between estimated
charges previously billed and charges actually incurred upon completion of each
job or project. We shall have the right to require reasonable assurance of the
availability of your funds in advance of undertaking commitments on your behalf.
If any payment is not received on a timely basis we will have the right to
assess a finance charge of up to one and one-half percent (1 1/2%) per month on
the unpaid balance.
I. SPECIAL SERVICES
In addition to the basic services, we are prepared to render special
services to you in support of traditional media advertising. Any special
services agreed upon will be rendered in accordance with any special terms
agreed upon in writing and will be charged to you in accordance with estimates
which we will supply you or, if no estimate has been supplied, at our net cost,
including time charges for all our employees as determined in accordance with
our normal accounting practice, plus an amount which will yield us fifteen
percent (15%) of the gross amount charged. Special services will not be credited
against any minimum fees. Special services include, without limitation, the
following:
A. Sales promotion material such as point-of-sale, leaflets, sales
films, training films, sales manuals, and other materials prepared for use other
than in traditional advertising media.
A. Research services, other than copy development, such as studies of
your products or services, and studies of consumer or trade attitudes and
behavior, including the analysis of studies done by others.
A. Design services including packaging, trademarks, and corporate
identity programs.
A. Special marketing services such as investigations of market
potential and distribution problems.
A. Services relating to the development of new product concepts from
pre-testing activities through active test marketing of new products.
<PAGE>
A. Staging or conducting sales or other company meetings and designing
and preparing exhibits for trade or industry shows.
A. Designing, creating, and producing interactive and on-line materials
(other than on-line banner advertising as set forth in Section I above) and Web
sites and serving and maintaining Web sites.
A. With respect to on-line media, (1) planning on-line media
commitments consistent with budgeted and approved funds and supporting these
media commitments with advertising strategy and rationales and submitting
detailed media cost estimates; (2) ordering advertising space and time for your
on-line advertising materials and forwarding such materials to on-line media
with proper instructions; and (3) looking after necessary checking of on-line
materials for appearance, date, position, size, and mechanical reproduction.
A. Any services in connection with any New Business.
I. GENERAL
A. We will obtain your authorization before making any substantial
commitments for media placement or any substantial expenditures on your behalf,
and we are authorized to act on your behalf as an agent for a disclosed
principal. As used in this Article VIII(a), "substantial" shall mean any
commitment or expenditure in excess of $1500.
A. If you should desire any advertising material or special material
created by us (or anything derived from such material) to be placed outside the
United States (whether during or after the term of our services hereunder)
through another advertising agency or other party, you and we will agree upon
the terms in advance.
A. As between you and us, any plan or advertising material which we
produce on your behalf will become your property when you have paid our
invoices. Any material or ideas prepared or submitted to you, which you have
chosen not to produce or for which you have not paid our corresponding
production invoices, will remain our property (regardless of whether the
physical embodiment of creative work is in your possession in the form of copy,
artwork, plates, recordings, films, tapes, etc.) and may be submitted to other
clients for their use, provided that such submission or use does not involve the
release of any confidential information regarding your business or methods of
operation.
A. We hereby agree to indemnify and hold you harmless from and against
any and all third party claims, demands, regulatory proceedings, damages, costs
(including, without limitation, settlement costs), and expenses (including,
without limitation, reasonable attorneys' fees) arising from any claim
pertaining to libel, slander,
<PAGE>
defamation, copyright infringement, invasion of privacy, piracy, and/or
plagiarism arising from your use consistent with releases and agreements with
third parties of any materials we create or supply to you, except to the extent
that such claim arises from materials created or supplied by you. We agree to
obtain and maintain in place during the period that we are providing our
services hereunder an advertiser's liability policy.
A. Other than that for which we agree to indemnify and hold you
harmless pursuant to Section VIII(d) above, you hereby agree to indemnify and
hold us harmless from and against any and all third party claims, demands,
regulatory proceedings, damages, costs (including, without limitation,
settlement costs), and expenses (including, without limitation, reasonable
attorneys' fees) arising from or relating to any activities undertaken by us on
your behalf, the use by you, your retailers or dealers, or anyone else of any
materials we create or supply to you, or your products or services.
A. We will use our reasonable best efforts to guard against any loss to
you caused by the failure of media, suppliers, or others to perform in
accordance with their commitments, but we will not be responsible for any such
loss or failure on their part, or any destruction or unauthorized use by others
of your property.
A. You have the right at any time to direct us to cancel any plans,
schedules, or work in progress, but you agree to indemnify us against any loss,
cost, or liability we may sustain as a result of such action. We will be
entitled to our commissions, fees, and payments for services performed prior to
your instructions to cancel, and for advertising and materials placed or
delivered thereafter if we are unable to halt such placement or delivery. Under
no circumstances will we be obliged to breach any lawful contractual commitment
to others.
A. In the evenDO NOT EDIT THIS DOCUMENTt that we are required to resort
to collection procedures or litigation for the collection of any compensation
due us, we shall be entitled to collect from you reasonable attorneys' fees and
costs in addition to such compensation.
A. At reasonable times and on reasonable notice to us, you may examine
our files and records which pertain specifically to your advertising.
A. We agree that during the period that we are providing services
hereunder, we shall not serve as the advertising agency for any other weight
loss management program.
A. You and we will meet on a quarterly basis to evaluate your account,
to discuss our services and progress to date, and to discuss strategies and
goals for the future. The first such meeting will occur on a mutually agreeable
date on or about March 1, 2000.
<PAGE>
I. TERMINATION
A. We shall continue to serve as your advertising agency until you or
we shall terminate, with or without cause, our services in full, or only with
respect to specified products or services assigned to us, by giving not less
than ninety (90) days' prior written notice by registered mail to the principal
place of business of the other. However, you agree not to give notice of
termination prior to March 15, 2000. Notice of termination shall become
effective upon receipt of such notice by the party to whom it is addressed.
A. Our rights and duties hereunder shall continue in full force during
the notice period, but our responsibilities shall be limited to supervising and
administering then existing advertising campaigns and the ordering of
advertising media which is normally ordered during the period, and we shall
continue to receive commissions on any advertising normally ordered, or actually
ordered, during the ninety (90) day period.
<PAGE>
A. Any reservation, contract, or arrangement made by us for you prior
to the termination date which continues beyond the termination date will be
carried to completion by us and paid for by you in accordance with this
agreement unless you direct us to transfer such reservation, contract, or
arrangement to another entity and you release and indemnify us, in which event
we will attempt to make such transfer, subject to obtaining any necessary
consents of third parties. We will be entitled to our commissions, fees, and
payments for services performed prior to accomplishing the transfer. Upon
termination, provided that you have no outstanding indebtedness to us and you
assume any third party obligations (including, without limitation, any
applicable union or guild obligations relating to the production and use of
commercials), we shall transfer in accordance with your instructions all
property and materials owned by you which are under our control. Notwithstanding
anything to the contrary contained herein, termination of this agreement will
not affect our rights in any warrants that have vested pursuant to Section III
above and Exhibit "A" attached hereto.
A. All indemnification obligations shall survive the termination of our
services or the termination or expiration of this agreement.
I. MISCELLANEOUS
A. This agreement contains the entire understanding between the parties
and may not be altered or waived except by a writing signed by both parties. No
waiver by either party of the breach of any term or condition of this agreement
will constitute a waiver of, or consent to, any subsequent breach of the same or
any other term or condition of this agreement.
<PAGE>
A. This agreement will be governed by the laws of the State of New York
applicable to contracts executed and to be performed entirely in the State of
New York.
Please indicate your acceptance of the terms and conditions by signing
the enclosed copy of this letter and returning it to us.
Very truly yours,
DIMASSIMO BRAND ADVERTISING, INC.
By:_________________________________
Mark DiMassimo
President & Creative Director
AGREED TO:
EDIETS.COM INC
By:___________________________
Authorized Officer
<PAGE>
EXHIBIT "A"
ADDITIONAL COMPENSATION
1. You agree that we shall be entitled to the following additional
consideration (the "Additional Consideration"):
(a) You hereby issue to us 82,500 warrants, each to purchase
one share of your common stock at an exercise price of $2.00 per share, and such
warrants will vest as follows: on the fifteenth (15th) day of each month during
the first contract year (commencing on November 15, 1999), 6,875 warrants will
vest. If our services terminate on a date other than the fifteenth (15th) of a
month, a prorated number of warrants shall vest in us for the final month.
(b) The warrants issued hereunder shall be exercisable once
they have vested until the third (3rd) anniversary date of the date of grant and
shall have standard anti-dilution protection provisions regarding exercise price
and shares of common stock issuable upon the exercise of such warrants in the
event of any recapitalization, stock split, dividend or similar event.
(c) You shall provide us with a form of warrant agreement
incorporating the terms set forth herein which we shall negotiate in good faith.
Until such time, if ever, that the warrant agreement is executed, the terms of
this paragraph shall remain binding on the parties.
(d) We may elect, at any time, to exercise any warrants by
means of a "cashless exercise" in lieu of paying cash. "Cashless exercise" shall
mean the surrendering of shares of common stock which would otherwise be
issuable upon the exercise of the warrants which have the aggregate fair market
value equal to the product of the exercise price and the number of warrants
exercised.
(e) You hereby covenant and agree that you will notify us and
include, at your sole expense, all of the shares of common stock issued and/or
issuable upon the exercise of the warrants issued hereunder, including any
shares of common stock issued or issuable pursuant to any anti-dilution
adjustment, in a registration statement on an appropriate form prepared and
filed by you with the Securities and Exchange Commission in connection with that
certain private financing conducted by you and your agents under Regulation D
promulgated under the Securities Act of 1933, as amended, and which was
consummated in November 1999. You hereby undertake to maintain the effectiveness
of such registration statement until the earlier of: (a) such time that we have
sold all of the shares of common stock issued or issuable upon the exercise of
our warrants included in such registration statement or (b) such time as you no
longer have an obligation to the investors in the private offering to keep the
registration statement in effect. You also hereby undertake to prepare and file,
at your sole expense, all appropriate forms and registrations with any and all
blue sky securities commissions in
<PAGE>
all states in which we have asked you file and to assist us in the sale of the
registered shares of common stock.
2. Unless this agreement has been terminated, commencing on October 1,
2000, you and we agree to negotiate in good faith additional compensation that
will be payable to us for the period after the first contract year.
EXHIBIT 21
eDiets.com, Inc.
LIST OF SUBSIDIARIES
NAME JURISDICTION
eDiets, Inc. Delaware
EXHIBIT 23.2
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated July 30, 1999 (except for third paragraph of Note 8, as
which the date is November 17, 1999) with respect to the financial statements of
eDiets.com, Inc. (f/k/a Self/Help Technologies, Inc.), in the Registration
Statement (Form SB-2 No.33-______) and related Prospectus of eDiets.com, Inc.
dated December 30, 1999.
/s/ Ernst & Young LLP
West Palm Beach, Florida
December 27, 1999
EXHIBIT 23.3
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 9, 1999 with respect to the financial
statements of Olas, Inc. included in the Registration Statement (Form SB-2
No.33-______) and related Prospectus of eDiets.com, Inc. dated December 30,
1999.
/s/ Ernst & Young LLP
West Palm Beach, Florida
December 27, 1999
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from eDiets.com,
Inc.'s financial statements and is qualified in its entirety by reference to
such statements
</LEGEND>
<CIK> 1094058
<NAME> eDiets.com
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 157,728
<SECURITIES> 0
<RECEIVABLES> 55,688
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 243,681
<PP&E> 321,542
<DEPRECIATION> (167,099)
<TOTAL-ASSETS> 671,352
<CURRENT-LIABILITIES> 699,785
<BONDS> 0
0
0
<COMMON> 6,216
<OTHER-SE> (90,731)
<TOTAL-LIABILITY-AND-EQUITY> 671,352
<SALES> 1,922,347
<TOTAL-REVENUES> 1,922,347
<CGS> 160,915
<TOTAL-COSTS> 160,915
<OTHER-EXPENSES> 1,370,874
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 390,558
<INCOME-TAX> 0
<INCOME-CONTINUING> 390,558
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 390,558
<EPS-BASIC> 0.06
<EPS-DILUTED> 0.06
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Olas, Inc.'s
financial statements and is qualified in its entirety by reference to such
statements
</LEGEND>
<CIK> 1094058
<NAME> Olas, Inc.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 418,893
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 420,669
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 420,669
<CURRENT-LIABILITIES> 35,762
<BONDS> 0
0
0
<COMMON> 10,500
<OTHER-SE> 374,407
<TOTAL-LIABILITY-AND-EQUITY> 420,669
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 38,082
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (23,436)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,436)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,436)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>