SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report: December 12, 1997
(Date of earliest event reported: December 12, 1997)
EXPERTELLIGENCE, INC.
(Exact Name of Registrant as specified in its charter)
California
(State or other jurisdiction of incorporation)
2-849630-LA 95-3506403
(Commissioner File Number) (IRS Employer Identification No.)
203 Chapala Street, Santa Barbara, California 93101
(Address of principal executive offices)
(805) 962-2558
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
ITEM 5. Acquisition or Disposition of Assets
On December 12, 1997, Registrant entered into an Stock
Reorganization Agreement (the "Reorganization Agreement") with
Electronic Offsite Services, Inc., a California corporation with
its principal offices in Santa Barbara, California ("EOS"),
pursuant to which Registrant would acquire all of the issued and
outstanding capital stock of EOS in exchange for Registrant's
issuance to the shareholders of EOS a total of up to 326,000
shares of its Common Stock. The consummation of the acquisition
is subject to the satisfaction of various customary conditions.
The acquisition is scheduled to close on or before January
20, 1998. If the condition, financial or otherwise, of EOS is
not satisfactory to Registrant, Registrant may terminate the
Reorganization Agreement. Either party may terminate the
Reorganization Agreement if the merger has not occurred by
January 31, 1998, or such other date as the parties may agree.
The discussion of the Reorganization Agreement and the
proposed acquisition set forth above are qualified by the terms
of the Stock Reorganization Agreement, a copy of which is
attached as an Exhibit to this Report.
ITEM 7. Exhibits
2.1 Stock Reorganization Agreement dated as of December
12,
1997, by and between Expertelligence, Inc., a California
corporation, and Electronic Offsite Services, Inc., a California
corporation, without Exhibits. Registrant will furnish
supplementally a copy of any omitted Exhibit that the Commission
may request.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned hereunto duly authorized.
EXPERTELLIGENCE, INC.,
a California corporation
Date: _________________ By ________________________________
Denison W. Bollay,
President
Exhibit 2.1
STOCK REORGANIZATION AGREEMENT
THIS STOCK REORGANIZATION AGREEMENT (this "Agreement") is made
and entered into as of December 12, 1997, by and among the signatory
stockholders of ELECTRONIC OFFSITE SERVICES, INC., a California
corporation ("EOS"), MICHAEL C. DITMORE, THOMAS J. HARRIMAN, and NORMAN
SPRAGUE (individually as a "Shareholder" and collectively as the
"Shareholders"), and EXPERTELLIGENCE, INC., a California corporation
("ET"), with reference to the following facts.
A. The Shareholders beneficially own more than 50% of the
issued and outstanding shares of capital stock of EOS. In addition,
the Shareholders are Directors of EOS and collectively constitute a
majority of the authorized number of Directors of EOS.
B. ET desires to acquire from the Shareholders, and the
Shareholders desire to transfer to ET, all of the shares of the issued
and outstanding capital stock of EOS owned by them on the terms and
subject to the conditions hereinafter set forth.
C. Each remaining non-signatory shareholder of EOS is entering
into a Short-Form Stock Reorganization Agreement with ET, which
Agreements provide for ET's acquisition from each such shareholder of
all of its shares of capital stock of EOS owned by such shareholders.
D. Upon consummation of the transactions contemplated by this
Agreement and the Short-Form Agreements, ET will own all of the issued
and outstanding capital stock of EOS.
E. The parties intend that the transactions contemplated in
this Agreement and the Short-Form Agreements will be treated for income
tax purposes as a tax-free B-reorganization under Section 368(a)(1)(B)
of the Code.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the parties hereto hereby agree as
follows:
1. Definitions. For purposes of this Agreement, the terms set forth
below shall be used as they are defined in this Section.
1.1 Affiliate. "Affiliate" shall mean any entity controlling,
controlled by or under common control with a Person. For the purposes
of this definition, "control" shall have the meaning presently
specified for that word in Rule 405 promulgated by the SEC under the
Securities Act.
1.2 Applicable Law. "Applicable Law" means any statute, law,
rule, or regulation or any judgment, order, writ, injunction or decree
of any Governmental Entity to which a specified person or property is
subject.
1.3 Balance Sheet. "Balance Sheet" shall mean the unaudited
balance sheet of EOS for the fiscal year ended September 30, 1997.
1.4 Code. "Code" means the Internal Revenue Code of 1986, as
amended.
1.5 Commission. "Commission" shall mean the Securities and
Exchange Commission.
1.6 Company Documents. "Company Documents" shall mean and
include the Registration Rights Agreement and the Non-Competition
Agreement.
1.7 Encumbrance. "Encumbrance" means any claim, lien, pledge,
option, charge, easement, security interest, right-of-way, encumbrance
or other rights of third parties, and, with respect to any securities,
any agreements, understandings or restrictions affecting the voting
rights or other incidents of record or beneficial ownership pertaining
to such securities.
1.8 EOS Shares. "EOS Shares" means the shares of Common Stock
of EOS owned, beneficially and of record, by the Shareholders and to be
transferred to ET under this Agreement.
1.9 ET Shares. "ET Shares" means the shares of Common Stock of
ET to be issued to the Shareholders under this Agreement.
1.10 Exchange Act. "Exchange Act" means the U.S. Securities
Exchange Act of 1934, as amended.
1.11 Financial Statements. "Financial Statements" shall mean
and include the unaudited balance sheet of EOS as of September 30,
1996, and September 30, 1997, the related statements of income and
retained earnings and the related statements of cash flows for the
periods then ended, certified by EOS's Chief Financial Officer. A
true, correct and complete copy of the Financial Statements is set
forth in Exhibit B hereto.
1.12 Intellectual Property. "Intellectual Property" means and
includes all inventions, computer software programs, applications and
related documentation (including all source code and object code
versions and documentation), patents, patent applications, copyrights
and copyright rights, mask works and mask work rights, trademarks,
service marks, trade secrets, and other proprietary rights, and all
foreign, domestic, federal and state registrations and applications
applicable to or covering any or all of the foregoing.
1.13 Material Contracts. "Material Contracts" means, with
respect to EOS:
1.13.1 Any contract which involves performance of
services or delivery of goods and/or materials, by or to EOS of an
amount or value in excess of $20,000;
1.13.2 Any note, debenture, other evidence of
indebtedness, guarantee, loan, letter of credit, surety-bond or
financing agreement or instrument or other contract for money borrowed,
including any agreement or commitment for future loans, credit or
financing;
1.13.3 Any lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other contract
affecting the ownership of, leasing of, title to, use of, or any
leasehold or other interest in, any real property;
1.13.4 Any material licensing agreement or other
contract with respect to patents, trademarks, copyrights, or other
intellectual property, including agreements with current or former
employees, consultants or contractors regarding the exploitation,
appropriation or the nondisclosure of Intellectual Property;
1.13.5 Any employment agreement, collective bargaining
agreement or other contract to or with any employee or any labor union
or other employee representative of a group of employees relating to
wages, hours, and other conditions of employment;
1.13.6 Any bonus, pension, profit sharing, retirement,
stock purchase, stock option, deferred compensation, medical,
hospitalization or life insurance plan, contract, understanding with
respect to any or all of the employees of EOS;
1.13.7 Any joint venture contract, partnership
agreement, limited liability company or other contract (however named);
1.13.8 Any agreement granting any preemptive right,
right of first refusal or similar right to any Person;
1.13.9 Any covenant not to compete or other
restriction on the ability of EOS to conduct its business or engage in
any other activity;
1.13.10 Any agreement not made in the ordinary course
of business that is material to EOS; and
1.13.11 Any amendment, supplement, and modification
(whether written or oral) in respect of any of the foregoing.
1.14 Non-Competition Agreement. "Non-Competition Agreement"
means the Non-Competition Agreement by Michael C. Ditmore for the
benefit of ET substantially in the form attached hereto as Exhibit C.
1.15 Permits. "Permits" shall mean all licenses, permits,
orders, consents, approvals, registrations, authorizations,
qualifications and filings required by any federal, state, local or
foreign laws or governmental or regulatory bodies and all industry or
other non-governmental self-regulatory organizations.
1.16 Permitted Encumbrances. "Permitted Encumbrances" means (i)
any mechanic's or materialmen's lien or similar Encumbrances with
respect to amounts not yet due and payable or which are being contested
in good faith by appropriate proceedings and for which appropriate
reserves have been established, (ii) Encumbrances for Taxes not yet due
and payable or which are being contested in good faith by appropriate
proceeding, for which appropriate reserves have been established, or
(iii) easements, licenses, covenants, rights of way and similar
Encumbrances which, individually or in the aggregate, would not
materially and adversely affect the marketability or value of the
property encumbered thereby or materially interfere with the operations
of EOS.
1.17 Person. "Person" means any individual, copartner,
association, partnership, joint venture, limited liability company,
trust, estate or other entity or organization.
1.18 Registration Rights Agreement. "Registration Rights
Agreement" means the Registration Rights Agreement by and among EOS and
the Shareholders substantially in the form attached hereto as Exhibit
D.
1.19 Return or Returns. "Return" or "Returns" means all
returns, declarations, reports, statements, and other documents
required to be filed in respect of Taxes.
1.20 Schedule of Exceptions. "Schedule of Exceptions" shall
mean that Schedule set forth in Exhibit E hereto.
1.21 Securities Act. "Securities Act" shall mean the U.S.
Securities Act of 1933, as amended.
1.22 Short-Form Agreements. "Short-Form Agreements" mean the
Short-Form Stock Reorganization Agreements to be executed and delivered
at the Closing by the shareholders of EOS other than the Shareholders,
which shall be substantially in the form set forth in Exhibit F hereto.
1.23 Taxes. "Taxes" shall mean and include all federal, state,
local and foreign income, franchise, gross receipts, business license,
sales, use, withholding, employment, property and other taxes imposed
on EOS for any taxable period or portion thereof that ends on or before
the Closing Date, and all interest, penalties and additions to tax
attributable thereto.
1.24 Tax Returns. "Tax Returns" shall mean and include all tax
and information returns, reports and other filings required to be made
by EOS with any federal, state, local or foreign governmental agency
with respect to any Taxes applicable to or imposed upon EOS with
respect to any period ending on or before the Closing Date.
2. Plan of Reorganization. The parties hereby adopt this Agreement
as a "Plan of Reorganization" within the meaning of Sections 354 and
368(a)(l)(B) of the Code.
3. Exchange of Shares.
3.1 Exchange of EOS Shares. At the Closing, each of the
Shareholders will transfer and assign to ET the number of EOS Shares
set forth opposite the Shareholder's name on Exhibit A hereto and in
exchange therefor ET will issue to the Shareholder of the number of ET
Shares and the amount of cash in lieu of fractional shares set forth
opposite the Shareholder's name on Exhibit A hereto. There shall be no
adjustment in the number of ET Shares to be issued under this Agreement
by reason of any increase or decrease in the market price of the Common
Stock of ET at any time during the period starting on the date of this
Agreement and ending on the Closing Date. In no event shall ET be
obligated to issue any fraction of a share. The parties acknowledge
that the aggregate number of shares of Common Stock that ET shall be
obligated to issue under this Agreement and all of the Short-Form
Agreements is 326,000 shares and the number of ET Shares issuable to
each Shareholder under this Agreement shall be determined on the basis
of the total number of shares of Common Stock of EOS outstanding as of
the Closing Date.
3.2 EOS Options. At the Closing, each person who, as of the
date of this Agreement, holds any option issued under EOS's 1996
Employee Stock Option Plan shall have surrendered such option in
exchange for ET's grant to such person of a corresponding option under
ET's 1996 Equity Participation Plan. Set forth on Exhibit G hereto is
a true correct and complete list of all persons who, as of the date of
this Agreement hold any options issued under EOS's 1996 Employee Stock
Option Plan and the terms of the option to be granted to such person at
the Closing under ET's 1996 Equity Participation Plan.
3.3 EOS Warrants. At the Closing, all warrants, convertible
securities and other rights to acquire securities of EOS (except only
the options described in Section 3.2 above) previously issued by EOS
and which have not previously been exercised in full shall be cancelled
without liability or obligation to ET.
4. Closing.
4.1 Closing Date. Subject to the terms and conditions of this
Agreement, the closing of the transactions contemplated by this
Agreement (the "Closing") shall be held at the offices of Reicker,
Clough, Pfau & Pyle LLP, 1421 State Street, Suite B, Santa Barbara,
California, at 10:00EA.M., California Time, on January 20, 1998 or on
such other date as the parties hereto may agree upon in writing (the
"Closing Date").
4.2 Deliveries by Shareholders. In addition to and without
limiting any other provisions of this Agreement, the Shareholders shall
deliver, or cause to be delivered, to ET at the Closing the following:
4.2.1 Certificates representing all of the EOS Shares owned
by such Shareholders, which certificates shall be either duly endorsed
or accompanied by stock powers duly executed with signatures
guaranteed;
4.2.2 Such written resignations, effective on the Closing
Date, of officers and directors of EOS as ET shall have requested;
4.2.3 One or more certificates of the Shareholders
confirming that (a) all of the representations and warranties of the
Shareholders set forth in this Agreement and the Company Documents are
true, correct and complete to the same extent as if given as of the
Closing Date, (b) each of the Shareholders and EOS has performed all
actions and obligations to be performed by such person on or before the
Closing Date, and (c) all of the conditions precedent to the
Shareholders' obligations to consummate the transactions contemplated
in this Agreement have been satisfied or waived on or before the
Closing Date;
4.2.4 All corporate and other records of EOS held by any
Shareholder, including but not limited to, minute books, stock books
and registers, books of account, leases and contracts;
4.2.5 In each case where any of EOS's licenses, leases,
contracts, agreements or commitments require the consent of another
party as a result of the consummation of the transactions contemplated
hereunder, the consent of each such other party to the consummation of
the transactions contemplated hereunder;
4.2.6 A copy of the Articles of Incorporation of EOS,
certified as of a date not earlier than ten (10) days prior to the
Closing Date by the Secretary of State of California;
4.2.7 Certificates, dated as of a date not earlier than ten
(10) days prior to the Closing Date, of the Secretary of the State and
Franchise Tax Board of California and the corresponding agencies of
each of the states in which EOS is qualified to transact business as a
foreign corporation as to the payment of franchise taxes and the good
standing of EOS in such jurisdictions;
4.2.8 By-Laws of EOS certified, as of the Closing Date, by
the Secretary of EOS;
4.2.9 An "estoppel letter", in a form reasonably
satisfactory to ET's counsel, from each lessor of real property being
leased to EOS, stating that, as of a date not earlier than five (5)
days prior to the Closing Date: (i)Esuch lease is in full force and
effect and (ii)Eno event has occurred which does or would result in a
breach of such lease by EOS; and
4.2.10 Such other documents, instruments or
certificates as shall be reasonably requested by ET or its counsel.
4.3 Deliveries By ET. In addition to, and without limiting any
other provisions of this Agreement, ET shall deliver to the
Shareholders at the Closing the following:
4.3.1 Certificates representing the ET Shares
deliverable to the Shareholders and cash for any fractional shares as
set forth on Exhibit A hereto;
4.2.3 A certificate of the President of ET confirming that
(a) all of the representations and warranties of ET set forth in this
Agreement and the Company Documents are true, correct and complete to
the same extent as if given as of the Closing Date, (b) ET has
performed all actions and obligations to be performed by it on or
before the Closing Date, and (c) all of the conditions precedent to
ET's obligations to consummate the transactions contemplated in this
Agreement have been satisfied or waived on or before the Closing Date;
4.3.3 A certified copy of resolutions adopted by the Board
of Directors of ET authorizing the transactions contemplated by this
Agreement;
4.3.4 Certificates, dated as of a date not earlier than ten
(10) days prior to the Closing Date, of the Secretary of State and
Franchise Tax Board of the State of California, and the corresponding
agencies of each of the states in which ET is qualified to do transact
business as a foreign corporation as to the payment of franchise taxes
and the good standing of ET in such jurisdictions; and
4.3.5 Such other documents or certificates as shall be
reasonably requested by the Shareholders or their counsel.
4.4 Further Deliveries. The Shareholders and ET shall, on
request, on or after the Closing Date, cooperate with each other by
furnishing any additional information, executing and delivering any
additional documents and/or instruments and doing any and all such
other things as may be reasonably required by the parties or their
counsel to consummate or otherwise implement the transactions
contemplated by this Agreement.
5. Representations and Warranties about EOS. As a material
inducement for ET to enter into and perform its obligations under this
Agreement, each of the Shareholders hereby jointly and severally
represents and warrants to ET that, except as set forth on the Schedule
of Exceptions specifically identifying the relevant Section hereof, all
of the following are true and correct. Each of the Shareholders
acknowledges that ET is entering into this Agreement in reliance on the
accuracy of the representations and warranties set forth in this
Section 5 and ET would not consummate the transactions contemplated
herein without the Shareholders providing these representations and
warranties.
5.1 Organization and Good Standing. EOS is a corporation duly
organized, validly existing and in good standing under the laws of
State of California; has all requisite power to own, lease, license and
operate its assets, properties and business and to carry on its
business as conducted during the 12-month period prior to the date
hereof, as now conducted and as proposed to be conducted; and is duly
qualified or licensed to do business as a foreign corporation and is in
good standing in every jurisdiction in which the nature of its business
or the location of its properties requires such qualification or
licensing, except for such jurisdictions where the failure to so
qualify or be so licensed would not have any adverse effect on the
enforceability of any of the Material Contracts or EOS's ability to
bring lawsuits, or a material adverse effect upon the condition
(financial or otherwise), assets, liabilities, business, operations or
prospects of EOS, or EOS's ability to perform fully its obligations
under this Agreement and the Company Documents.
5.2 Authority to Execute and Perform Agreements. EOS has all
requisite corporate power, authority and approvals required to enter
into, execute and deliver this Agreement and all of the Company
Documents and to perform fully EOS's obligations hereunder and
thereunder.
5.3 Due Authorization: Enforceability. EOS has taken all
actions necessary to authorize it to enter into and perform fully its
obligations under this Agreement and all of the Company Documents and
to consummate the transactions contemplated herein and therein. This
Agreement and the Company Documents are, or upon execution and delivery
will be, the legal, valid and binding obligations of EOS, enforceable
in accordance with their respective terms, subject, as to enforcement
of remedies, to applicable bankruptcy, insolvency, moratorium,
reorganization and similar laws affecting creditors' rights generally
and to general equitable principles.
5.4 Capital Structure. The authorized capital stock of EOS
consists of One Million (1,000,000) shares of Common Stock, without par
value. As of the date of this Agreement, there are issued and
outstanding Nine Hundred Thousand (900,000) shares of Common Stock.
EOS will file prior to the Closing Date an amendment to its Articles of
Incorporation which will increase its authorized capital stock to Four
Million s(4,000,000), which will consist of Three Million (3,000,000)
shares of Common Stock and One Million (1,000,000) shares of Preferred
Stock. Set forth in Exhibit G hereto is a true, correct and complete
schedule as of the date of this Agreement, of the holders of the issued
and outstanding shares of capital stock of EOS and of the holders of
all outstanding subscriptions, options, rights, warrants, convertible
securities, notes and senior notes and other agreements and obligations
under which EOS has any obligation to issue or transfer from treasury
any shares of capital stock. Except as set forth in Exhibit G hereto,
there are no outstanding subscriptions, options, rights, warrants,
convertible securities, or other agreements or commitments obligating
EOS to issue or to transfer from treasury any shares of its capital
stock of any class or kind whatsoever. At the Closing, the
Shareholders shall deliver to ET an updated Exhibit G which shall
contain a true, correct and complete schedule of the information as of
the Closing Date required to be set forth in Exhibit G. The
outstanding shares of Common Stock of EOS are duly and validly issued,
fully paid and nonassessable, and, except as set forth on Exhibit G
hereto, were issued in compliance with all applicable federal and state
securities laws, including but not limited to, the anti-fraud
provisions thereof.
5.5 Repurchase Offers and Redemptions. On or before the date
of this Agreement, EOS has neither offered to repurchase or redeem nor
repurchased or redeemed any of its securities. All repurchase and
redemption offers, repurchases and redemptions by EOS of any of its
securities have been duly and validly made in accordance with
applicable law.
5.6 Subsidiaries and Investments. EOS does not own, directly
or indirectly, any outstanding capital stock or equity interest in any
corporation, partnership, joint venture or other entity.
5.7 Validity of This Agreement. The execution, delivery, and
performance by EOS of this Agreement and each of the Company Documents
and the consummation by EOS of the transactions contemplated by this
Agreement and each of the Company Documents, (a) have been duly
authorized and approved by all necessary corporate action on the part
of EOS, its officers, directors and shareholders, and (b) will not
violate any provision of law and will not conflict with, or result in a
breach of, any of the terms of, or constitute a default under, EOS's
Articles of Incorporation, Bylaws, or any Material Contract, judgment,
decree, order, or other restriction to which EOS is a party or by which
it or any of its properties is bound, and (c) will not result in the
creation of any mortgage, lien, charge or encumbrance upon any of the
properties or assets of EOS pursuant to the terms of its Articles of
Incorporation, Bylaws or any Material Contract, instrument, judgment,
decree or order applicable to it.
5.8 Consents. No consent, approval, or authorization of or
registration, qualification, designation, declaration, or filing with
any governmental authority on the part of EOS is required in connection
with the valid execution, delivery, or performance of this Agreement
and each of the Company Documents, or the consummation of any other
transaction contemplated in this Agreement and each of the Company
Documents.
5.9 Material Contracts. As of the date hereof:
5.9.1 Each Material Contract is the valid and binding
obligation of EOS and each of the other contracting parties enforceable
in all material respects in accordance with its terms against the other
contracting parties (subject, as to enforcement of remedies, to
applicable bankruptcy, insolvency, moratorium, reorganization and
similar laws affecting creditors' rights generally and to general
equitable principles) and is in full force and effect; and all rights
of EOS thereunder are owned free and clear of any lien, claim or other
encumbrance;
5.9.2 EOS has fulfilled all material obligations
required pursuant to each Material Contract to have been performed by
it prior to the date hereof, and EOS has no reason to believe that EOS
will not be able to fulfill, when due, all of its obligations under
each Material Contract which remain to be performed after the date
hereof;
5.9.3 Neither EOS nor any other contracting party to
any Material Contract is now in material breach thereof or has breached
the same in any material respect within the 12-month period prior to
the date hereof; none of EOS and the Shareholders has any knowledge of
any anticipated material breach thereof by any such other contracting
party; and there is not now, nor has there been in the 12-month period
prior to the date hereof, any disagreements or disputes between EOS and
any other party to any Material Contract relating to the validity or
interpretation of such Material Contract or to the performance by any
party thereunder;
5.9.4 EOS is not a party to, nor bound by, any
contract or other agreement, or any provision of its Articles of
Incorporation or Bylaws which (i) restricts the conduct of EOS'
business anywhere in the world or (ii) contains any unusual or
burdensome provisions which could reasonably be expected to have a
material adverse effect upon its condition (financial or otherwise),
assets, liabilities, business, operations or prospects; and
5.9.5 EOS is not under any material liability or
obligation with respect to the return of inventory or products sold by
EOS which are in the possession of distributors, wholesalers, retailers
or customers.
5.10 Litigation. There are no actions, suits, arbitrations,
proceedings, or investigations pending, or to the best of the
Shareholders' knowledge, threatened in any court or before any
governmental agency or instrumentality against or affecting EOS or the
business, operations, financial condition, properties or assets of EOS.
There are no actions, suits, arbitrations, proceedings or
investigations pending, or, to the best of the Shareholders' knowledge,
threatened in any court or before any governmental agency or
instrumentality which would prevent the execution and delivery of this
Agreement or any of the Company Documents or the carrying out of any of
the transactions contemplated in this Agreement or any of the Company
Documents, or declare the same unlawful or cause the rescission
thereof. Neither EOS nor any of its assets is subject to or in default
with respect to the provisions of any order, writ, injunction, judgment
or decree of any court or governmental agency or instrumentality.
5.11 Compliance with Other Instruments. EOS is not, and no
facts exist on the basis of which, with the passage of time, the giving
of notice or both, would cause EOS to be, in violation of or in default
of any term of its Articles of Incorporation, Bylaws, or any Material
Contract, instrument, judgment, decree or order applicable to it.
5.12 Compliance with Laws; Governmental Matters. EOS has in all
material respects complied with, and is now in all material respects in
compliance with, all laws and orders applicable to EOS, and no material
capital expenditures will be required in order to insure continued
compliance therewith. Section 5.12 of the Schedule of Exceptions sets
forth each business license and permit now held by EOS, together with
its date of expiration and a brief description of its material terms.
Except for the business licenses and permits already held by EOS as
disclosed in Section 5.12 of the Schedule of Exceptions, to the best of
the Shareholders' knowledge other franchise, license, permit, order or
approval of any governmental authority is material to or necessary for
the conduct of the business of EOS as previously conducted during the
12-month period prior to the date hereof, as presently conducted or as
proposed to be conducted. Each license and permit is in full force and
effect; EOS is now and has at all times in the past been in all
material respects in full compliance with each thereof, no violations
are or have, since the date of the organization of EOS, been recorded
by any governmental authority in respect of any thereof, and no
proceeding is pending or, to the best of the Shareholders' knowledge,
threatened, to revoke, amend or limit any thereof. There are no
pending or, to the best of the Shareholders' knowledge, threatened
proceedings by or before any governmental authority which involve new
special assessments, assessment districts, bonds, Taxes, condemnation
actions, laws or orders or similar matters which, if instituted, could
reasonably be expected to have a material adverse effect upon the
condition (financial or otherwise), assets, liabilities, business or
prospects of EOS.
5.13 Articles and Bylaws. Set forth in Exhibits H and I hereto,
respectively, are true, correct, and complete copies of EOS's Articles
of Incorporation, as amended to the date hereof, and Bylaws, as
presently in effect.
5.14 Intellectual Property. EOS has valid title to, ownership
of, or valid and outstanding licenses for all Intellectual Property
necessary for its business as now conducted and as proposed to be
conducted, and without any conflict with or infringement of the rights
of others. Set forth in Exhibit J hereto is a true, correct and
complete list of all Intellectual Property now owned by EOS or used by
EOS in the conduct of its business. None of the employees or officers
of EOS has any interest in any of the Intellectual Property used by EOS
in its business as now conducted and as proposed to be conducted which
are adverse to the interests of EOS therein. There are no outstanding
options, licenses, or agreements of any kind relating to any of the
Intellectual Property, nor is EOS bound by or a party to any options,
licenses or agreements of any kind with respect to any of the
Intellectual Property of any other person or entity. EOS has not
received any communication alleging, and, to the best of the
Shareholders' knowledge, there is no basis for any allegation, that EOS
has violated or, by conducting its business as proposed, would violate
any of the Intellectual Property rights of any other person or entity.
There is not now due and payable, nor is EOS a party to any license,
contract or other agreement pursuant to which EOS would be obligated to
pay, by reason of the ordinary course and conduct of its business as
presently conducted and as proposed to be conducted, any royalties,
honoraria, fees or other payments by reason of EOS's ownership, use,
license, sale or disposition of any of EOS's Intellectual Property.
5.15 Financial Condition.
5.15.1 Financial Statements. Except as disclosed
therein, the Financial Statements (a) were prepared in accordance with
the books and records of EOS; (b) were prepared in accordance with
generally accepted accounting principles consistently applied; (c)
fairly present EOS's financial condition and the results of its
operations as of the relevant dates thereof and for the periods covered
thereby; (d) contain and reflect all necessary adjustments and accruals
for a fair presentation of EOS's financial condition and the results of
its operations for the periods covered by said Financial Statements;
(e) contain and reflect adequate provisions for all reasonably
anticipated liabilities for all Taxes with respect to the period then
ended and all prior periods; and (f) with respect to contracts and
commitments for the sale of goods or the provision of services by EOS,
contain and reflect adequate reserves for all reasonably anticipated
material losses and all reasonably anticipated costs and expenses in
excess of expected receipts.
5.15.2 No Undisclosed Liabilities. Except for (a)
those liabilities specifically reflected or reserved against on the
Balance Sheet, (b) those current liabilities for trade or business
obligations incurred since September 30, 1997 in connection with the
purchase, lease or license of equipment, goods or services, including,
but not limited to, payments of salary, compensation and other benefits
to or on behalf of the employees of, and consultants to, EOS, in the
ordinary course of EOS's business and consistent with past practices
(none of which is, individually or in the aggregate, material and none
of which is for breach of contract, breach of warranty, tort or
infringement), (c) those liabilities arising under any Material
Contract (none of which liabilities is for breach of contract, breach
of warranty, tort or infringement) or (d) those liabilities otherwise
disclosed in Section 5.15 of the Schedule of Exceptions (none of which
liabilities is for breach of contract, breach of warranty, tort or
infringement), EOS does not have, any direct or indirect indebtedness,
liabilities, claims, losses, damages, deficiencies, obligations or
responsibilities, known or unknown, liquidated or unliquidated,
accrued, absolute, contingent or otherwise, and whether or not of a
kind required by generally accepted accounting principles to be set
forth on a financial statement, which individually or in the aggregate
are material to the condition (financial or otherwise), assets,
liabilities, business, operations or prospects of EOS.
5.16 Absence of Certain Changes. Since the September 30, 1997
EOS has conducted its business only in the ordinary course consistent
with past practices and has not:
5.16.1 suffered any change, event or condition which,
in any case or in the aggregate, has had or could reasonably be
expected to have a material adverse effect upon EOS's condition
(financial or otherwise), assets, liabilities, business, operations or
prospects, or EOS's ability to consummate the transactions contemplated
herein;
5.16.2 suffered any destruction, damage to or loss of
any asset (whether or not covered by insurance) which could reasonably
be expected to have a material adverse effect upon the condition
(financial or otherwise), assets, liabilities, business, operations or
prospects of EOS, the value or utility of its assets or EOS's ability
to consummate the transactions contemplated herein;
5.16.3 incurred any obligation or liability or taken
property subject to any liability, whether absolute, accrued,
contingent or otherwise and whether due or to become due, except
current liabilities for trade or business obligations incurred since
September 30, 1997 in connection with the purchase of goods or services
in the ordinary course business and consistent with prior practices,
none of which liabilities, in any event, involved a potential liability
of EOS in excess of $20,000, individually, or $50,000, in the
aggregate;
5.16.4 mortgaged, pledged or subjected to any lien or
other encumbrance any of its property or assets, tangible or
intangible;
5.16.5 sold, transferred, leased or licensed to others
or otherwise disposed of any of its assets, tangible or intangible,
except for inventory and services sold, transferred, leased, licensed
or otherwise disposed of, in the ordinary course of business consistent
with past practices or immaterial amounts of other tangible personal
property not required by the business;
5.16.6 amended or terminated any Material Contract or
any license or permit or received any notice of termination of any of
the same;
5.16.7 declared or made any payment of dividends or
other distribution to its shareholders or upon or in respect of any
shares of its capital stock, or purchased, retired or redeemed, or
obligated itself to purchase, retire or redeem, any of its shares of
capital stock or other securities;
5.16.8 encountered any labor union organizing
activity, suffered any actual or threatened employee strikes, work
stoppages, slow-downs or lock-outs, or any material change in its
relations with its employees, agents, customers or suppliers or
suffered any actual or threatened wrongful discharge or other unlawful
labor practice action or proceeding;
5.16.9 made any change in the rate of compensation,
commission, bonus or other direct or indirect remuneration payable, or
paid or agreed or orally promised to pay, conditionally or otherwise,
any bonus, extra compensation, pension or severance or vacation pay, to
any shareholder, director, officer, employee, salesman, distributor or
agent of EOS;
5.16.10 changed its accounting methods or practices
(including, without limitation, any change in depreciation or
amortization policies or rates) or revalued any of its assets;
5.16.11 entered into any transaction, contract or
commitment other than in the ordinary course of business and consistent
with prior practices; or
5.16.12 entered into any agreement or made any
commitment to take any of the types of action described in paragraphs
5.16.1 through 5.16.2 above.
5.17 Title to Properties. EOS has good and valid title to all
its property and assets, and the same are not subject to any liens,
security interests, restrictions or encumbrances except such liens,
security interests, restrictions or encumbrances which arise in the
ordinary course of EOS's business and do not materially impair, either
individually or collectively, ownership or use of such property or
assets. With respect to the property and assets which it leases or
licenses, EOS is in compliance in all material respects with such
leases and licenses and EOS holds a valid leasehold or license
interest, as appropriate, free and clear of any liens, security
interests, restrictions or encumbrances. Each of the fixed assets of
EOS which is used in the current conduct of EOS's business is in good
operating and usable condition and repair.
5.18 Indebtedness. Set forth in Exhibit K hereto is a true,
correct and complete list of all agreements, documents and other
arrangements under or pursuant to which EOS has any outstanding
indebtedness for borrowed money. EOS is not in default in any material
respect under any of such agreements, documents or other arrangements,
and, to the best of the Shareholders' knowledge, no facts exist on the
basis of which, with the giving of notice, the passage of time or both,
EOS would be in default in any material respect under any such
agreements, documents or arrangements.
5.19 Pension Reform Act of 1974. EOS does not have any employee
benefit plans subject to the provisions of the Employee Retirement
Income Security Act of 1974, as amended.
5.20 Tax Matters.
5.20.1 Within the times and in the manner prescribed
by law, EOS has filed all tax returns which EOS is required to file,
has paid or provided for all Taxes shown thereon to be due and owing by
it and has paid or provided for all deficiencies or other assessments
of Taxes, interest or penalties owed by it; no taxing authority has
asserted, or will successfully assert, any claim for the assessment of
any additional Taxes of any nature with respect to any periods covered
by any such tax returns; all Taxes which are required to be withheld or
collected by EOS have been duly withheld or collected and, to the
extent required, have been paid to the proper taxing authority or
properly segregated or deposited as required by law.
5.20.2 Each Tax Return filed by EOS fully and
accurately reflects its liability for Taxes for such year or period and
accurately sets forth all items (to the extent required to be included
or reflected in such returns) relevant to its future liabilities for
Taxes, including the tax bases of its properties and assets. The
provisions for Taxes payable reflected in the Financial Statements are
fully adequate and correct.
5.20.3 No audit of any Tax Return of EOS is in
progress or, to the best of EOS's and the Shareholders' knowledge,
threatened.
5.20.4 No extensions of time with respect to any date
on which any Tax Return was or is to be filed by EOS is in force.
5.20.5 EOS has not waived or extended any applicable
statute of limitations relating to the assessment of any Taxes.
5.20.6 No issues have been raised with EOS by any
taxing authority which are currently pending in connection with any Tax
Returns. No material issues have been raised in any examination by any
taxing authority with respect to EOS which, by application of similar
principles, reasonably could be expected to result in a proposed
deficiency for any other period not so examined. There are no
unresolved issues or unpaid deficiencies relating to any such
examination.
5.20.7 EOS has not filed a consent pursuant to Section
341(f) of the Code nor has EOS agreed to have Section 341(f)(2) of the
Code applied to any disposition of a Subsection (f) asset (as such term
is defined in Section 341(f)(4) of the Code).
5.21 Environmental Matters. EOS has not received any notice
from any governmental or administrative agency informing it of any
violation of any environmental laws by EOS, nor has EOS received any
notification of any pending investigation or administrative proceeding
questioning EOS's compliance with any environmental laws. None of the
Shareholders or EOS is aware of any past or present violation by EOS of
any environmental laws or of the pendency or threat of commencement of
any investigation or administrative proceeding questioning EOS's
compliance with any environmental laws. As used in this Section, the
term "environmental laws" means any and all federal, state or local
laws, ordinances, rules, decrees, orders, regulations relating to any
or all of the protection of the environment, hazardous substances,
hazardous materials, hazardous wastes, toxic substances and
environmental conditions, soil and ground water conditions or other
similar substances or conditions on, under or about any property owned,
leased or operated by EOS, soil and ground water conditions or other
similar substances or conditions.
5.22 Brokers. No person or entity is entitled to any brokerage
commission, finder's fee, or like payment from EOS or any Shareholder
in connection with the transactions contemplated by this Agreement or
any of the Company Documents.
5.23 Powers of Attorney and Suretyships. EOS has no general or
special powers of attorney outstanding (whether as grantor or grantee
thereof) or any obligation or liability (whether actual, accrued,
accruing, contingent or otherwise) as guarantor, surety, co-signer,
endorser, comaker, indemnitor or otherwise in respect of the obligation
of any person.
5.24 Certain Transactions. All purchases and sales or other
transactions, if any, between EOS, on the one hand, and any officer,
director, shareholder or key employee or affiliate thereof, on the
other hand, since the date of the organization of EOS and through the
date hereof have been made on the basis of prevailing market rates and
terms such that from the perspective of EOS, all such transactions have
been made on terms no less favorable than those which would have been
available from unrelated third parties.
5.25 Suppliers and Customers. Set forth in Section 5.25 of the
Schedule of Exceptions is a correct and current list of all customers
of EOS who purchased more than $10,000 of products or services from EOS
during EOS's last full fiscal year, together with summaries of the
sales made to each such customer during EOS's last full fiscal year.
No single supplier or customer of EOS is of material importance to EOS.
5.26 Compliance With Labor Laws and Agreements. Section 5.26 of
the Schedule of Exceptions sets forth a true and current list of all of
the labor and employment agreements to which EOS is a party and which
are now in effect. EOS has complied in all material respects with all
such labor and employment agreements and all Applicable Laws and orders
relating to the employment of labor. No present or former employee,
officer or director of EOS has, or will have at the Closing Date, any
claim against EOS for any matter.
5.27 Prior Registration Rights. Except as provided in the
Registration Rights Agreement, EOS is not under any contractual
obligation to register under the Securities Act any of its presently
outstanding securities or any securities which may hereafter be issued.
5.28 Transactions with Shareholders, Directors, Officers, and
Partners. Section 5.28 of the Schedule of Exceptions fully and
accurately discloses all existing contracts, commitments, payables,
promissory notes, receivables, and other transactions and commitments
by and between EOS and any of the shareholders, directors, officers, or
employees of EOS.
5.29 Interest in Competitors. None of the officers, directors
or shareholders of EOS has a significant financial, equity or
managerial interest in any person or entity which presently is a
competitor or customer of EOS. For purposes of this SectionE, an
equity interest of less than three percent (3%) and a financial
interest requiring payments of less than $20,000 per year shall not be
considered a significant interest.
5.30 Accounts Receivable. All accounts receivable of EOS as of
the date of the Unaudited Balance Sheet and all accounts receivable of
EOS created after such date arose from valid sales in the ordinary
course of EOS's business. Except to the extent reserved against on the
Unaudited Balance Sheet, all such accounts receivable are collectible
by EOS in ordinary course and conduct of its business, assuming the
exercise of due diligence in their collection and reasonable service
and support to their respective customers.
5.31 Insurance. Section 5.31 of the Schedule of Exceptions
contains a list of every policy of fire, liability or other form of
insurance held by or applicable to EOS, and such policies are in full
force and effect and will not terminate as to EOS upon the sale of EOS
Shares and EOS Common Stock. Such insurance policies are adequate and
customary for the conduct of the business of EOS.
5.32 Full Disclosure. All documents and other papers delivered
to ET by or on behalf of EOS in connection with this Agreement and the
Company Documents and the transactions contemplated herein and therein
are accurate, complete and authentic. Furthermore, the information
furnished to ET by or on behalf of the Shareholders with respect to EOS
in connection with this Agreement and the Company Documents and the
transactions contemplated herein and therein does not contain any
untrue statement of a material fact and does not omit to state any
material fact necessary to make the statements made, in the context in
which they are made, not false or misleading. There is no fact which
EOS has not disclosed to ET in writing which could reasonably be
expected to have a material adverse effect upon the condition
(financial or otherwise), assets, liabilities, business, operations,
properties or prospects of EOS.
6. Representations and Warranties of Shareholders. As a material
inducement for ET to enter into and perform its obligations under this
Agreement, each of the Shareholders severally represents and warrants
to ET that all of the following are true and correct.
6.1 Authorization. This Agreement and each of the Company
Documents to which the Shareholder is a party constitute, or upon
execution and delivery will constitute, valid and legally binding
obligations of such Shareholder and are, or will be, enforceable
against such Shareholder in accordance with their terms, except as
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application relating to creditors'
rights or by the application of equitable principles when equitable
remedies are sought.
6.2 No Violation. Neither the execution and delivery of this
Agreement and the Company Documents to which the Shareholder is a party
nor the consummation of the transactions contemplated hereby and
thereby, nor compliance by such Shareholder with any of the provisions
hereof or thereof, does or will violate, or conflict with, or result in
a breach of any provisions of, or constitute a default (or an event
which, with notice or lapse of time or both, would constitute a
default) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the EOS Shares owned by
such Shareholder, under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, deed of trust, license, agreement,
lease or other instrument or obligation to which such Shareholder is a
party, or by which such Shareholder may be bound or affected.
6.3 Consents. No consent, approval, or authorization of or
registration, qualification, designation, declaration, or filing with
any governmental authority on the part of the Shareholder is required
in connection with his valid execution, delivery, or performance of
this Agreement and each of the Company Documents, or the consummation
of any other transaction contemplated herein or therein.
6.4 Litigation. There are no actions, suits, arbitrations,
proceedings or investigations pending, or, to the best of the
Shareholder's knowledge, threatened in any court or before any
governmental agency or instrumentality which would prevent the
Shareholder's execution and delivery of this Agreement or any of the
Company Documents or his carrying out of any of the transactions
contemplated herein or therein, or declare the same unlawful or cause
the rescission thereof.
6.5 Stock Ownership. Such Shareholder (a)Eowns beneficially
and of record and has good and marketable title to such Shareholder's
shares of EOS Shares free and clear of all liens, charges, claims,
pledges and encumbrances whatsoever; (b)Ehas full right, power and
authority to enter into this Agreement and the Company Documents to
which the Shareholder is a party and to sell, assign, transfer and
deliver such Shareholder's shares of EOS Shares hereunder, free and
clear of all liens, charges, claims, pledges and encumbrances
whatsoever; and (c)Eupon delivery by ET to such Shareholder of its or
his proportionate share of the ET Shares in respect of the EOS Shares
owned by such Shareholder, ET will acquire good and marketable title to
such EOS shares, thereto, free and clear of all liens, charges, claims,
pledges and encumbrances whatsoever.
6.6 Investment Intent. Such Shareholder is acquiring the ET
Shares for investment, for his own account, and not as a nominee or
agent, and not with a view to the resale or distribution of any part
thereof, and he has no present intention of selling, granting any
participation in or otherwise distributing the ET Shares. He does not
have any contract, undertaking, agreement or arrangement with any
person to sell, transfer or grant any participation to such person, or
to any third person, in or with respect to any of the ET Shares.
6.7 No Distribution of ET Shares. Such Shareholder understands
that the ET Shares will not be registered under the Securities Act in
reliance on the so-called "private offering" exemption provided by
Section 4(2) thereof; that the ET Shares will, therefore, constitute
"restricted securities" within the meaning of the Securities Act and
the rules and regulations thereunder, including Rule 144; and that the
certificates representing the ET Shares will bear the following
restrictive legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR
IN CONNECTION WITH, THE SALE, DISTRIBUTION OR RESALE THEREOF, AND MAY
NOT BE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH
SHARES UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR PURSUANT TO RULE
144 UNDER THE ACT OR AN OPINION OF COUNSEL, SKILLED IN SECURITIES
MATTERS AND SATISFACTORY TO THE ISSUER, THAT REGISTRATION IS NOT
REQUIRED UNDER SUCH ACT."
6.8 Disclosure of Information.
6.8.1 Documents Received. Such Shareholder has
received from ET a copy of the following documents:
A. ET's Annual Report on Form 10-KSB for the
fiscal year ended September 30, 1996;
B. ET's Quarterly Reports on Form 10-QSB for the
fiscal quarters ended December 31, 1996, March 31, 1997 and June 30,
1997; and
C. Each Current Report on Form 8-K filed by ET
since September 30, 1996.
6.8.2 Review. Such Shareholder has reviewed each of the
foregoing documents and reports, has had an opportunity to ask
questions and receive answers from ET and its officers and directors
regarding such reports and the information therein and has received all
additional information which he considers necessary or appropriate for
deciding whether or not to enter into this Agreement and to consummate
the transactions contemplated hereby.
6.9 Tax Advice. Such Shareholder has sought and received
independent professional advice concerning the treatment of the
transactions contemplated by this Agreement under the Code, the rules
and regulations thereunder, and the income tax laws of any other
applicable taxing jurisdictions, and that he is not relying upon any
representation, warranty or other statement made by ET, its counsel or
anyone acting on behalf of ET with respect to such treatment or the
structuring of the transfer of the EOS Shares under this Agreement as
assuring any particular result or treatment under the Code, such rules
and regulations, or the income tax laws of any other taxing
jurisdiction.
7. ET'S Representations and Warranties. ET hereby represents and
warrants to each Shareholder as follows.
7.1 Organization and Good Standing. ET is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and is duly qualified or licensed to do
business as a foreign corporation and is in good standing in every
jurisdiction in which the nature of its business or the location of its
properties requires such qualification or licensing, except for such
jurisdictions where the failure to so qualify or be so licensed would
not have a material adverse effect upon the condition (financial or
otherwise), assets, liabilities, business, operations or prospects of
ET, or ET's ability to perform fully its obligations under this
Agreement and the Company Documents.
7.2 Authority to Execute and Perform Agreements. ET has all
requisite corporate power, authority and approvals required to enter
into, execute and deliver this Agreement and all of the Company
Documents and to perform fully ET's obligations hereunder and
thereunder.
7.3 Due Authorization: Enforceability. ET has taken all
actions necessary to authorize it to enter into and perform fully its
obligations under this Agreement and all of the Company Documents and
to consummate the transactions contemplated herein and therein. This
Agreement and the Company Documents, or upon execution and delivery
will be, are the legal, valid and binding obligations of ET,
enforceable in accordance with their respective terms, subject, as to
enforcement of remedies, to applicable bankruptcy, insolvency,
moratorium, reorganization and similar laws affecting creditors' rights
generally and to general equitable principles.
7.4 Issuance of Shares. The offer, issuance, and sale of the
ET Shares pursuant to this Agreement are, and at the time of issuance
thereof, will be, exempt from the registration and prospectus delivery
requirements of the Securities Act and the qualification requirements
of applicable state securities laws.
7.5 Articles and Bylaws. The copies of the Articles of
Incorporation and By-Laws of ET delivered to the Shareholders on or
before the Closing Date are, and on the Closing Date will be, true and
complete and are, and on the Closing Date will be, as in effect on the
date hereof.
7.6 No Conflict. Neither the execution and delivery of this
Agreement and the Company Documents nor the consummation of the
transactions contemplated hereby or thereby, nor compliance by ET with
any of the provisions hereof or thereof, will:
7.6.1 violate, or conflict with, or result in a breach of
any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, any
of the terms, conditions or provisions of the Articles of Incorporation
or By-Laws of ET, or any note, bond, mortgage, indenture, deed of
trust, license, agreement or other instrument or obligation to which it
is a party, or by which it or any of its properties or assets may be
bound or affected; or
7.6.2 violate any order, writ, injunction or decree, or any
statute, rule or regulation applicable to ET or any of its properties
or assets.
7.7 Necessary Permits. Prior to the Closing Date, ET will have
obtained any and all permits, approvals and consents (or appropriate
waivers thereof) of agencies of any jurisdiction and of any other
governmental body or agency which counsel for the Shareholders and ET
may reasonably deem necessary or appropriate in order to ensure that
consummation of the transactions contemplated by this Agreement will be
in compliance with all applicable laws, rules, regulations, orders and
directives of such jurisdictions, bodies and agencies.
7.8 Investment Intent. ET is acquiring the EOS Shares
hereunder and under the Short-Form Agreements for investment for its
own account and not with a view to the sale or distribution of any part
thereof and that it has no present intention of selling, granting
participation in, or otherwise distributing the same.
7.9 Financial Statements and Reports.
7.9.1 ET has filed with the Commission and has
heretofore made available to the Shareholders true and complete copies
of all forms, reports, Securities, statements and other documents
required to be filed by it since January 1, 1996 under the Exchange Act
or the Securities Act (as such documents have been amended since the
time of their filing to the date hereof, collectively the "ET SEC
Filings"). The ET SEC Filings, including without limitation any
financial statements included therein, at the time filed, complied in
all material respects with the applicable requirements of the Exchange
Act and the Securities Act, and the applicable rules and regulations of
the Commission thereunder. The financial statements, contained in the
ET SEC Filings are in accordance with the respective books and records
of ET and its consolidated subsidiaries, have been prepared in
accordance with generally accepted accounting principles ("U.S. GAAP")
consistently applied throughout the periods involved, except as
otherwise indicated therein, and present fairly (subject, in the case
of unaudited statements, to normal recurring audit adjustments) the
consolidated financial position of ET and its consolidated subsidiaries
as of the respective dates, and the consolidated results of operations
and retained earnings and cash flows of ET and its consolidated
subsidiaries for the respective periods indicated thereby.
7.9.2 Except as and to the extent set forth in ET's
Annual Report on Form 10-K for the period ended September 30, 1996,
(the "1996 10-K"), as of September 30, 1996, neither ET nor any of its
consolidated subsidiaries had any known liabilities of any nature,
whether accrued, absolute, contingent or otherwise, and whether due or
to become due, which would be required by U.S. GAAP to be reflected in
a consolidated balance sheet of ET and its consolidated subsidiaries
(including the notes thereto).
7.9.3 Since September 30, 1996, except as disclosed
in the ET SEC Filings, there has not occurred any material adverse
change in the financial condition or operations of the business of ET
and its consolidated subsidiaries considered as a whole.
7.9.4 No statement contained in any of the ET SEC
Filings, as of the date of such ET SEC Filing, contained any untrue
statement of a material fact, or omitted or will omit to state a
material fact necessary to make the statements contained therein not
misleading in light of the circumstances in which such statements were
or will be made.
7.10 Compliance with Laws; Legal Proceedings.
7.10.1 To the best of ET's knowledge and except as
disclosed in the ET SEC Filings, neither ET nor any of its subsidiaries
is in violation of any applicable foreign, federal, state or local law,
statute, rule, regulation, ordinance, order, injunction, decree, or
other requirement or judgment entered by any foreign, federal, state or
local court or governmental authority relating to or affecting the
operation, conduct or ownership of the property or business of ET or
any of its subsidiaries, which violation would have a materially
adverse effect on the financial condition, assets, business or
properties of ET and its subsidiaries considered as a whole.
7.10.2 Except as disclosed in the ET SEC Filings or
provided for in the financial statements (including the notes thereto)
contained in the ET SEC Filings, there is no order, injunction or
decree outstanding, and no legal, administrative, arbitration or other
proceeding or governmental investigation pending, or, to the best
knowledge of ET, any claims against or relating to ET or to any of its
subsidiaries or their respective assets or businesses, which would,
individually or in the aggregate, have a material adverse effect on the
financial condition or business of ET and its subsidiaries considered
as a whole.
8. Indemnification.
8.1 Indemnification by Shareholders. Each of the Shareholders
jointly and severally, on the basis hereinafter set forth, shall
indemnify, defend and hold harmless ET and each of its shareholders,
directors, officers, employees, agents, attorneys and representatives,
from and against any and all losses which may be incurred or suffered
by any such party and which may arise out of or result from the breach
or inaccuracy of any representation, warranty, covenant or agreement of
any of the Shareholders contained in this Agreement or in any of the
Company Documents; provided that each Shareholder's indemnification
obligation with respect to breach or inaccuracy of any representation
in Section 6 of this Agreement shall be a separate obligation and not a
joint and several obligation. To the extent such breach or inaccuracy
of any representation, warranty, covenant or agreement results in
losses to which EOS would not have been subjected had the state of
facts been as represented or warranted or had the covenant or agreement
been performed, ET as the direct or indirect owner of EOS shall also be
deemed to have been damaged to the extent of ET's proportionate
interest in such losses, determined on the basis of ET's percentage
stock interest in EOS, despite the fact that EOS may have been
subjected to such losses absent the consummation of the transactions
contemplated by this Agreement.
8.2 Indemnification by ET. ET shall indemnify, defend and
hold harmless each of the Shareholders and each of their respective
affiliates, assigns and successors in interest, agents, attorneys and
representatives, from and against any and all losses which may be
incurred or suffered by any such party and which may arise out of or
result from the breach or inaccuracy of any representation, warranty,
covenant or agreement of ET contained in this Agreement or in any of
the Company Documents.
8.3 Notice to Indemnifying Party. If any party (the
"Indemnified Party") receives notice of any claim or other commencement
of any action or proceeding with respect to which any other party (or
parties) (the "Indemnifying Party") is obligated to provide
indemnification pursuant to Section or Section hereof or pursuant to
any other specific indemnification covenant contained in this
Agreement, the Indemnified Party shall promptly give the Indemnifying
Party written notice thereof which notice shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom.
The timely delivery of any such notice shall not be a condition
precedent to any liability of the Indemnifying Party for
indemnification hereunder, unless the delay or untimely delivery of any
such notice is materially prejudicial to the right or ability of the
Indemnifying Party to defend against the claim, action or proceeding
which is the subject of the notice. The Indemnified Party shall not
settle or compromise any claim by a third party for which it is
entitled to indemnification hereunder without the prior written consent
of the Indemnifying Party (which consent shall not be unreasonably
withheld or delayed) unless suit shall have been instituted against it
and the Indemnifying Party shall not have taken control of such suit
after notification thereof as provided in Section .
8.4 Defense by Indemnifying Party. In connection with any claim
giving rise to indemnity hereunder resulting from or arising out of any
claim or legal proceeding by a person who is not a party to this
Agreement, the Indemnifying Party at its sole cost and expense may,
upon written notice to the Indemnified Party delivered within 15 days
after receipt by the Indemnifying Party of a notice for a claim for
indemnification, assume the defense of any such claim or legal
proceeding using counsel of its choice (subject to the approval of the
Indemnified Party, which approval shall not be unreasonably withheld or
delayed) if it acknowledges to the Indemnified Party in writing its
obligations to indemnify the Indemnified Party with respect to all
elements of such claim. The Indemnified Party shall be entitled to
participate in (but not control) the defense of any such action, with
its counsel and at its own expense; provided, however, that if the
Indemnified Party reasonably determines that there exists a conflict of
interest between the Indemnifying Party (or any constituent party
thereof) and the Indemnified Party, the Indemnified Party (or any
constituent party thereof) shall have the right to engage separate
counsel, the reasonable costs and expenses of which shall be paid by
the Indemnifying Party, but in no event shall the Indemnifying Party be
liable for (a) the costs and expenses of more than one such separate
counsel or (b) the costs and expenses of any such separate counsel
which are incurred prior to the date on which the Indemnified Party
delivers to the Indemnifying Party written notice of the engagement of
such separate counsel. If the Indemnifying Party does not assume the
defense of any such claim or litigation resulting therefrom, the
Indemnified Party may defend against such claim or litigation, after
giving notice of the same to the Indemnifying Party, on such terms as
the Indemnified Party may deem appropriate, and the Indemnifying Party
shall be entitled to participate in (but not control) the defense of
such action, with its counsel and at its own expense. If the
Indemnifying Party thereafter seeks to question the manner in which the
Indemnified Party defended such third-party claim or the amount or
nature of any such settlement, the Indemnifying Party shall have the
burden to prove by a preponderance of the evidence that the Indemnified
Party did not defend or settle such third-party claim in a reasonably
prudent manner.
8.5 Survival of Representations and Covenants of the
Shareholders.
8.5.1 Section 5 Representations. Notwithstanding any
right of ET to investigate the affairs of EOS and notwithstanding ET's
knowledge of facts determined or determinable by ET pursuant to such
investigation or right of investigation, ET shall have the right to
rely fully upon the representations, warranties, covenants and
agreements of each of the Shareholders contained in this Agreement or
in any Company Documents. With the sole exception of those
representations set forth in Section hereof and those covenants which
are to be performed after the Closing (which shall survive until three
(3) years after the date for the performance of such covenant), each
representation, warranty, covenant and agreement of each of the
Shareholders contained herein shall survive the execution and delivery
of this Agreement and the Closing and shall thereafter terminate and
expire on the third (3rd) anniversary of the Closing Date. No claim or
action for indemnity pursuant to Section hereof for breach or
inaccuracy of any such representation, warranty, covenant and agreement
of any of the Shareholders shall be asserted or maintained by ET after
the expiration of such representation, warranty, covenant and agreement
pursuant to the preceding sentence except for claims made in writing
prior to such expiration and actions (whether instituted before or
after such expiration) based on any claim made in writing prior to such
expiration.
8.5.2 Section 6 Representations. Notwithstanding any
right of ET to investigate the affairs of EOS and notwithstanding ET's
knowledge of facts determined or determinable by ET pursuant to such
investigation or right of investigation, ET shall have the right to
rely fully upon the representations, warranties, covenants and
agreements of each of the Shareholders contained in this Agreement or
in any Company Documents. Each representation of each of the
Shareholders contained in Section hereof shall survive the execution
and delivery of this Agreement and the Closing and shall survive until
a claim thereon is barred by the applicable statute of limitations. No
claim or action for indemnity pursuant to Section hereof for breach or
inaccuracy of any such representation shall be asserted or maintained
by ET after the expiration of such representation pursuant to the
preceding sentence except for claims made in writing prior to such
expiration and actions (whether instituted before or after such
expiration) based on any claim made in writing prior to such
expiration.
8.6 Survival of Representations and Covenants of ET. Each
representation, warranty, covenant and agreement of ET contained herein
shall survive the execution and delivery of this Agreement and the
Closing and thereafter shall terminate and expire on the third (3rd)
anniversary of the Closing Date. No claim or action for indemnity
pursuant to Section hereof for breach of any representation, warranty,
covenant and agreement of ET shall be asserted or maintained by any
Shareholder after the expiration of such representation, warranty,
covenant and agreement pursuant to the preceding sentence except for
claims made in writing prior to such expiration and actions (whether
instituted before or after such expiration) based on any claim made in
writing prior to such expiration.
8.7 Satisfaction. Notwithstanding anything in this Agreement
to the contrary, each Shareholder may satisfy his indemnification
obligation under Section by surrendering to ET a number of shares of
ET Common Stock having a fair market value at the time of surrender
equal to the amount of the claim for which ET is entitled to
indemnification. For purposes of this Section, the fair market value
of the ET Common Stock at any time shall be the average of the closing
price, if any, or bid price, if there is no closing price, as reported
on the principal exchange or quotation service on which the ET Common
Stock is reported, over the twenty (20) trading days immediately
preceding the date on which the Shareholder delivers to ET notice that
he intends to satisfy his indemnification obligation through the
surrender of shares of ET Common Stock. If the ET Common Stock is not
then listed on an exchange or quotation service, the fair market value
of the ET Common Stock shall be determined by appraisal by three
appraisers, one of whom is selected by the Shareholder(s), one of whom
is selected by ET and one of whom is selected by the other two
appraisers, and the fair market value shall be the average of the
values determined by the three appraisers.
8.8 Limitation. Notwithstanding anything in this Agreement to
the contrary, each Shareholder's indemnification obligation with
respect to any claim under this Agreement, other than the breach or
inaccuracy of any representation or warranty contained in Section
hereof, shall be subject to the following limitations.
8.8.1 The amount that a Shareholder shall be
obligated to pay with respect to a claim made on or before the first
anniversary of the Closing Date shall not exceed the sum of (a) the
surrender of all ET Shares then held by the Shareholder, and (b) the
cash amount equal to the sum of (i) the gross proceeds realized by the
Shareholder from the sale or other transfer for value of any of the ET
Shares prior to the date of the Shareholder's satisfaction of the
indemnification obligation, and (ii) the fair market value of any ET
Shares, as determined under Section hereof as of the date of the
Shareholder's satisfaction of the indemnification obligation, which the
Shareholder transferred other than for value prior to the date of
satisfaction of the indemnification obligation other than for value.
8.8.2 The amount that a Shareholder shall be
obligated to pay with respect to a claim made after the first
anniversary of the Closing Date and on or before the second anniversary
of the Closing Date shall not exceed the sum of (a) the surrender of
one-half (1/2) of the ET Shares then held by the Shareholder, and (b)
the cash amount equal to one-half of the sum of (i) the gross proceeds
realized by the Shareholder from the sale or other transfer for value
of any of the ET Shares prior to the date of the Shareholder's
satisfaction of the indemnification obligation, and (ii) the fair
market value of any ET Shares, as determined under Section hereof as
of the date of the Shareholder's satisfaction of the indemnification
obligation, which the Shareholder transferred other than for value
prior to the date of satisfaction of the indemnification obligation
other than for value.
8.8.3 The amount that a Shareholder shall be
obligated to pay with respect to a claim made after the second
anniversary of the Closing Date and on or before the third anniversary
of the Closing Date shall not exceed the sum of (a) the surrender of
one-third (1/3) of the ET Shares then held by the Shareholder, and (b)
the cash amount equal to one-third (1/3) of the sum of (i) the gross
proceeds realized by the Shareholder from the sale or other transfer
for value of any of the ET Shares prior to the date of the
Shareholder's satisfaction of the indemnification obligation, and (ii)
the fair market value of any ET Shares, as determined under Section
hereof as of the date of the Shareholder's satisfaction of the
indemnification obligation, which the Shareholder transferred other
than for value prior to the date of satisfaction of the indemnification
obligation other than for value.
8.9 No Limitation. Nothing in this Agreement shall be deemed
to limit each Shareholder's indemnification obligation with respect to
any claim under this Agreement relating to the breach or inaccuracy of
any representation or warranty contained in Section hereof.
8.9 Contribution; Subrogation. Notwithstanding anything in
this Agreement to the contrary, none of the Shareholders shall have any
right to seek or obtain contribution or indemnification from EOS with
respect to any amount that they pay or are obligated to pay under
Section hereof or otherwise in satisfaction of any claim for
indemnification made against them under this Agreement.
9. Shareholder Pre-Closing Covenants.
9.1 General Conduct of Business. From and after the date
hereof, and until the Closing Date, the Shareholders shall, unless ET
shall otherwise agree in writing, cause EOS:
9.1.1 to permit ET, through its
representatives, accountants and attorneys, to make such investigations
of the business and properties and of the financial and legal condition
of EOS as ET may reasonably deem necessary or advisable, and to make
available to such persons on the premises of EOS all such books,
records and other data as they may reasonably request;
9.1.2 to carry on its business in the ordinary
course;
9.1.3 to refrain from doing, or causing to be
done, anything which is represented and warranted not to have been done
since the Balance Sheet Date in Section hereof;
9.1.4 to refrain from incurring any obligation
or liability (absolute or contingent) except current liabilities
incurred, and obligations under contracts entered into, in the ordinary
course of business and individually not involving an aggregate
expenditure by EOS in excess of $5,000;
9.1.5 to refrain from amending EOS's Articles
of Incorporation or By-laws and from making any change in its
authorized capital stock;
9.1.6 to refrain from issuing any shares of
capital stock or any options, warrants or other rights to acquire any
shares of capital stock;
9.1.7 to continue to insure EOS and all
property, real and personal, owned or leased by EOS substantially in
accordance with its current practice, and to use, operate, maintain and
repair all property in accordance with EOS's current practice;
9.1.8 to use its best efforts (without making
any commitments on behalf of ET) to preserve EOS's business
organization intact, to keep available to ET EOS's present key
employees, and to preserve for ET EOS's present relationships with its
suppliers and customers and others having business relationships with
it;
9.1.9 to refrain from doing any act or omitting
to do any act, or permitting any act or omission to act, which will
cause a breach of any material contract, commitment or obligation of
EOS; and
9.1.10 to furnish to ET within fifteen (15) days after
the end of a fiscal month an unaudited balance sheet and income
statement of EOS for such period.
9.2 Other Events. EOS currently is in negotiations with
respect to the following transactions: (a) the acquisition from General
Research Corporation International, Inc. ("GRCI") of certain assets
previously used in connection with GRCI's "Flow Gemini" product line
(the "Flow Gemini Transaction"); and (b) the establishment with one or
more entities in New Mexico of high-speed telecommunications facilities
(the "New Mexico Transaction"). From and after the date hereof, and
until the Closing Date, the Shareholders shall, unless ET shall
otherwise agree in writing, cause EOS:
9.2.1 to promptly advise ET of any material
developments with respect to either the Flow Gemini Transaction or the
New Mexico Transaction;
9.2.2 to provide ET a copy of any proposed
agreement with respect to the Flow Gemini Transaction or the New Mexico
Transaction at least five (5) business days prior to EOS's entry into
such agreement;
9.2.3 to refrain from taking any action or
making any representation that would obligate ET with respect to any
matter relating to the Flow Gemini Transaction or the New Mexico
Transaction prior to the Closing Date; and
9.2.4 to deliver to ET a copy of any agreement
that EOS enters into with respect to the Flow Gemini Transaction or the
New Mexico Transaction promptly after such agreement is executed.
9.3 Completion of Exhibits. On or before December 31, 1997,
the Shareholders shall deliver to ET true, correct and complete copies
of all Exhibits to this Agreement reflecting all applicable information
as of December 31, 1997.
10. Conditions Precedent.
10.1 Conditions Precedent to ET's Obligations. The obligation
of ET to consummate the transactions contemplated under this Agreement
shall be subject to the fulfillment, on or prior to the Closing Date,
of the following conditions. ET may waive any of the following
conditions precedent.
10.1.1 The representations and warranties of the
Shareholders contained in this Agreement shall be true and correct in
all material respects on and as of the Closing Date with the same force
and effect as if made on and as of the Closing Date.
10.1.2 The Shareholders shall have performed and
complied with all covenants, agreements and conditions required by this
Agreement to be performed or complied with by them prior to or at the
Closing Date.
10.1.3 On the Closing Date, no action or proceeding
shall be pending by any public authority, private individual or entity
before any court or administrative body to restrain, enjoin or
otherwise prevent the consummation of this Agreement, any of the Short-
Form Agreement or any of the transactions contemplated hereby or
thereby or to recover any damages or obtain other relief as a result of
the transactions proposed hereby or thereby.
10.1.4 All proceedings to be taken in connection with
the consummation of the transactions contemplated by this Agreement,
and all documents incident thereto, shall be reasonably satisfactory in
form and substance to ET and its counsel, and ET and its counsel shall
have received copies of such documents as ET and its counsel may
reasonably request in connection therewith.
10.1.5 The business, assets and properties of EOS
shall not have been materially and adversely affected in any way as a
result of fire, explosion, earthquake, disaster, accident, flood,
drought, riot, civil disturbance, uprising, activity of armed forces,
or act of God or public enemy, whether or not covered by applicable
insurance.
10.1.6 Between September 30, 1997 and the Closing Date
there shall have been no materially adverse change in the position,
financial or otherwise, or the assets, liabilities or results of
operations of EOS and no changes other than in the ordinary course of
business or as permitted or contemplated by this Agreement.
10.1.7 There shall have been obtained any and all
permits, approvals and consents of agencies of any jurisdiction and of
any other governmental body or agency which counsel for ET may
reasonably deem necessary or appropriate in order to ensure that
consummation of the transactions contemplated by this Agreement will be
in compliance with the applicable laws, rules and regulations.
10.1.8 On the Closing Date, the Shareholders shall
have delivered to ET a certificate executed by the Shareholders to the
effect that the conditions set forth in Sections 10.1.1, 10.1.2, 10.1.5
and 10.1.6 have been satisfied and, to the best of the Shareholder's
knowledge, no action or proceeding of the type described in Section
10.1.3 above is pending as of the Closing Date.
10.1.9 ET shall not have terminated this Agreement
pursuant to Section hereof.
10.1.10 The Shareholders shall have (a) delivered to ET
a written description of the status, as of the Closing Date, of the
Flow Gemini Transaction and the New Mexico Transaction and (b)
represented and warranted that such description is true, correct and
complete.
10.1.11 ET shall have accepted, in its sole discretion,
the status of the Flow Gemini Transaction and the New Mexico
Transaction and all related agreements existing as of the Closing Date.
10.1.12 Each of the Shareholders shall participate in
the Closing and shall transfer all of his EOS Shares to ET at the
Closing.
10.1.13 Each of the shareholders of EOS other than the
Shareholders shall have executed and delivered to ET a Short-Form
Agreement and the transactions contemplated under each Short-Form
Agreement shall have been consummated at or prior to the Closing.
10.1.14 Each of Michael C. Ditmore and Mel Beckman
shall have entered into a written Employment Agreement with ET
providing for their employment with ET after the Closing and the terms
and conditions of such Employment Agreements shall be acceptable to ET
in its sole discretion.
10.1.15 Each employee and consultant who holds,
immediately prior to the Closing, an option or other right to acquire
any shares of capital stock of EOS shall have exchanged, as of the
Closing Date, such option or right for a stock option granted under
ET's 1996 Equity Incentive Plan.
10.1.16 All of the indebtedness of EOS for borrowed
money shall have been paid or shall have been converted into shares of
Common Stock of EOS and all warrants to purchase shares of Common Stock
of EOS shall have been exercised, cancelled or exercised in part and
the unexercised portion cancelled.
10.1.17 Neither ET nor its counsel shall be aware of
any facts which would prevent the transactions contemplated in this
Agreement and the Short-Form Agreements from being treated for income
tax purposes as a tax-free B-reorganization under Section 328(a)(1)(B)
of the Code.
10.1.18 ET shall have confirmed that none of this
Agreement, the Company Documents, the Short-Form Agreements or any of
the transactions contemplated herein or therein shall be required to be
approved by the shareholders of ET.
10.1.19 ET shall have received true, correct and
complete copies of all Exhibits to this Agreement on or before December
31, 1997.
10.1.20 All of the Exhibits to this Agreement,
including any updated Exhibits delivered pursuant to Section 10.1.19
above shall, as of the Closing Date, be acceptable to ET, in its sole
discretion.
10.2. Conditions Precedent to Shareholders' Obligations. The
obligation of the Shareholders to consummate the transactions
contemplated hereby shall be subject to the fulfillment, on or prior to
the Closing Date, of the following conditions. The Shareholders may
waive any of the following conditions precedent.
10.2.1 The Shareholders shall not have terminated this
Agreement pursuant to Section hereof.
10.2.2 The representations and warranties of ET
contained in this Agreement shall be true and correct in all material
respects on and as of the Closing Date with the same force and effect
as if made on and as of the Closing Date.
10.2.3 ET shall have performed and complied with all
covenants, agreements and conditions required by this Agreement to be
performed or complied with by them prior to or at the Closing Date.
10.2.4 On the Closing Date, no action or proceeding
shall be pending by any public authority, private individual or entity
before any court or administrative body to restrain, enjoin or
otherwise prevent the consummation of this Agreement or any of the
Short-Form Agreements or the transactions contemplated hereby or
thereby or to recover any damages or obtain other relief as a result of
the transactions proposed hereby or thereby.
10.2.5 At the Closing on the Closing Date, ET shall
have delivered to the Shareholders a certificate executed by an officer
of ET to the effect that the conditions set forth in Sections 10.2.2
and 10.2.3 have been satisfied.
10.2.6 Between September 30, 1997 and the Closing Date
there shall have been no materially adverse change in the position,
financial or otherwise, or the assets, liabilities or results of
operations of ET and no changes other than in the ordinary course of
business or as permitted or contemplated by this Agreement.
10.2.7 All proceedings to be taken in connection with
the consummation of the transactions contemplated by this Agreement,
and all documents incident thereto, shall be reasonably satisfactory in
form and substance to the Shareholders and their counsel, and the
Shareholders and their counsel shall have received copies of such
documents as they may reasonably request in connection with said
transactions.
11. Termination. This Agreement may be terminated at any time prior
to the Closing as follows, and in no other manner:
11.1 by mutual consent of ET and the Shareholders;
11.2 by ET or the Shareholders, if, at or before the Closing,
any conditions set forth herein for the benefit of the ET or the
Shareholders, respectively, shall not have been timely met;
11.3 by ET or the Shareholders, if the Closing of the
transactions contemplated by this Agreement shall not have occurred on
or before January 31, 1998, or such later date as may have been agreed
upon in writing by the parties hereto; and
11.4 by ET or the Shareholders, if any representation or
warranty made herein for the benefit of ET or the Shareholders,
respectively, or in any certificate or document furnished to ET or the
Shareholders, respectively, pursuant to this Agreement is untrue in any
material respect, or ET or the Shareholders, respectively, shall have
defaulted in any material respect in the performance of any material
obligation herein contained.
If this Agreement is terminated with respect to any Shareholder, it
shall be deemed terminated with respect to all of the Shareholders.
12. Miscellaneous Provisions.
12.1 Further Assurances. Each party to this agreement shall
take such additional actions and shall execute such documents and
instruments as may be necessary or proper to cause the occurrence of
any conditions precedent or conditions subsequent to his or her
obligation to perform or as may otherwise be appropriate to effectuate
the purposes and intention of this Agreement or to consummate the
transactions contemplated hereunder.
12.2 Force Majeure. None of the parties hereto shall be liable
for any delay or default in performing its obligations hereunder if
such delay or default is caused by force majeure, such as wars of
insurrection, strikes, fires, vandalism, floods, work stoppages,
embargoes and/or lack of materials. In the event any such delay or
default caused by force majeure shall continue for ninety (90) days or
more, then non-delaying party shall be entitled to terminate this
agreement upon thirty (30) days' written notice to the other party of
intention to terminate.
12.3 Counterparts and Execution. This agreement may be executed
in one or more counterparts, each of which shall be deemed an original
and all of which taken together shall constitute one and the same
instrument binding on all the parties hereto, notwithstanding that all
of the parties are not signatories to the original or the same
counterpart.
12.4 Interpretation. As used in this agreement, and whenever
the context indicates or requires, the masculine, feminine and neuter
gender and the singular or plural numbers shall each be deemed to
include the other, and the words "person" and "party" shall include any
corporation, partnership, firm, trust, or association. The captions to
the various Sections and paragraphs of this agreement are for
convenience and reference purposes only and are not intended and shall
not be construed to limit the provisions to which they relate.
12.5 Construction. The parties agree that each party and its
counsel have reviewed and revised this agreement and that any rule of
construction to the effect that ambiguities are to be resolved against
the drafting party shall not apply in the interpretation of this
agreement or any amendments of Exhibits thereto.
12.6 Representation by Counsel. Each of the parties have had
the advice of their respective independent counsel in connection with
the execution of this agreement, have had the entire agreement fully
explained by such counsel, and are fully aware of and understand the
contents of this agreement.
12.7 Governing Law. This agreement, the construction and
enforcement of its terms, and the interpretation of the rights and
duties of the parties hereunder shall be governed by the laws of the
State of California.
12.8 Partial Invalidity. Each term and provision of this
agreement shall be valid and enforceable to the fullest extent
permitted by law. If any term or provision of this agreement or the
application thereof to any person or circumstance shall, to any extent,
be invalid or unenforceable, then the remainder of this agreement or
the application of such term or provision to persons or circumstances
other than those to which it is held invalid or unenforceable, shall
not be affected thereby.
12.9 Arbitration. Unless the relief sought requires the
exercise of the equity powers of a court of competent jurisdiction, any
dispute arising in connection with the interpretation or enforcement of
the provisions of this Agreement, or the application or validity
thereof, shall be submitted to arbitration. Such arbitration
proceedings shall be held in Santa Barbara, California, in accordance
with the rules then obtaining of the American Arbitration Association.
This agreement to arbitrate shall be specifically enforceable. Any
award rendered in any such arbitration proceedings shall be final and
binding on each of the parties hereto, and judgment may be entered
thereon in any court of competent jurisdiction.
12.10 Attorneys' Fees. Should any action or proceeding be
necessary to construe or enforce the terms or conditions of this
agreement, or the application or validity thereof, then the party
prevailing in such action shall be entitled to recover its reasonable
attorneys' fees and other court costs, together with any costs and
attorneys' fees incurred in enforcing any judgment entered therein.
12.11 Exhibits. All Exhibits or appendices attached or
referred to in this agreement are incorporated in this agreement by
such reference and are made a part hereof as though they were fully set
forth herein.
12.12 Complete Agreement. This written instrument,
together with any Exhibits or appendices referred to herein,
constitutes the entire understanding of the parties with respect to the
matters that are the subject of this agreement, and no representations,
warranties or covenants not included in this Agreement may be relied
upon by any party hereto.
12.13 Confidentiality. All information relating to EOS obtained
by ET and any of its authorized representatives pursuant to this
Agreement or otherwise in connection with the transactions contemplated
hereby, shall be kept confidential by ET and each of its
representatives and shall not be used by any of them for any purpose
other than in connection with the transactions contemplated hereby;
provided that the foregoing shall not apply to (a) any information
generally available to the public on the date hereof or which becomes
generally available to the public through no fault of ET or its
representative, but only from and after the date such information
becomes so available, and (b) any information obtained by ET from a
third party having the right to disclose such information.
12.14 Notices. All notices and other written communications
required or permitted to be transmitted to any party to this Agreement
pursuant to the provisions hereof shall be personally delivered to such
party or mailed postage prepaid by registered or certified mail, or
sent by facsimile or other form of electronic transmissions, addressed
to such party at the address set forth on Exhibit L hereto or such
other address as hereafter may be given for purposes of such notice.
Any notice or other written communication sent in accordance with the
foregoing shall conclusively be deemed to have been received at the
time of delivery, if personally delivered, or five (5) days after the
date of mailing, if mailed, or two (2) days after transmission, in sent
by facsimile or other form of electronic transmission.
12.15 Successors. This Agreement shall be binding upon and
inure to the benefit of the transferees by operation of law, successors
and assigns of any party hereto or otherwise bound hereby, whether or
not any such person shall have executed this Agreement or otherwise
agreed to become bound hereby. Except as otherwise expressly provided
for herein, this Agreement shall not inure to the benefit of, be
enforceable by or create any right or cause of action in any person,
other than the parties hereto.
12.16 Expenses. Each of the parties shall pay all costs and
expenses incurred by it in negotiating and preparing this Agreement and
the Company Documents and in carrying out the transactions contemplated
hereby and thereby.
12.17 Third Party Benefit. The parties do not intend to confer
any benefit on any person, firm, corporation, entity or individual
other than the parties to this Agreement by reason, directly or
indirectly, of the parties' execution and delivery of this Agreement,
including all Exhibits to this Agreement, and any related documents,
Schedules, certificates and opinions.
12.18 Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF
THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL,
UNLESS THE SALE OF SECURITIES IS EXEMPT FROM THE QUALIFICATION BY
SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE
RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON
SUCH QUALIFICATION BEING OBTAINED UNLESS THE SALE IS SO EXEMPT.
IN WITNESS WHEREOF, the parties hereto have executed this Stock
Purchase Agreement the day and year first above written.
"ET" "SHAREHOLDERS"
ExperTelligence, Inc.
By:_________________________ ___________________________
Denison W. Bollay Michael C. Ditmore
president
By:_________________________ ____________________________
Robert W. Reali Thomas J. Harriman
Secretary
____________________________
Norman Sprague
