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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MAY 27, 1999
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DREAMLIFE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 0-15586 52-1373960
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(STATE OR OTHER JURISDICTION (COMMISSION FILE (IRS EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NO.)
425 WEST 15TH STREET, FLOOR 3R, NEW YORK, NEW YORK 10011
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 313-9400
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(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
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ITEM 7.FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
Historical financial statements of Change Your Life.com, LLC,
a Delaware limited liability company ("CYL"), are not
included as a part of this Form 8-K/A as CYL was formed on
April 21, 1999 and had no significant operations prior to the
date of acquisition. Accordingly, such financial statements
are not material to an understanding of the financial
condition of dreamlife, inc. (the "Company"). Concept
Development Inc. ("CDI") had no significant activities and
there are therefore no financial statements provided for CDI.
(b) PRO FORMA FINANCIAL INFORMATION.
Filed on August 24, 1999 by amendment to the Form 8-K dated
May 27, 1999, originally filed on June 11, 1999.
(c) EXHIBITS
This amendment to the Form 8-K dated May 27, 1999,
originally filed on June 11, 1999, is filed to include
revised exhibits that were the subject of a request for
confidential treatment by the Company originally filed with
the Securities and Exchange Commission on June 11, 1999.
Exhibits including provisions for which confidential
treatment has been granted are noted with a footnote in the
list below.
EXHIBITS DESCRIPTION
2(a) Contribution and Exchange Agreement dated as
of May 20, 1999 among the Company, Change
Your Life.com, LLC, Anthony J. Robbins,
Robbins Research International Inc. and CYL
Development Holdings, LLC (1)
2(b) Agreement and Plan of Reorganization dated as
of May 27, 1999 among the Company, Concept
Acquisition Corporation, Concept Development,
Inc., William Zanker and Debbie Dworkin (2)
2(c) Agreement of Merger dated as of May 27, 1999
between Concept Acquisition Corporation and
Concept Development, Inc. (2)
3(a) Certificate of Designations for Series A
Preferred Stock (1)
3(b) Certifate of Designations for Series B
Preferred Stock (1)
3(c) Certificate of Designations for Series C
Preferred Stock (1)
3(d) Amended and Restated By-Laws (1)
10(a) Content Provider Agreement and License
effective as of April 23, 1999 between Change
Your Life.com, LLC, Anthony J. Robbins and
Research International Inc. (2) (3)
10(b) Escrow Agreement dated as of May 27, 1999
among the Company, Debbie Dworkin and State
Street Bank and Trust Company (2) (3)
10(c) Repurchase Agreement dated as of May 27, 1999
between the Company and Debbie Dworkin (2)
10(d) Employment Agreement dated as of May 27, 1999
between the Company and Wiliam Zanker (1)
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(CONTINUED) EXHIBITS DESCRIPTION
10(e) Exclusive License and Marketing Agreement
dated as of May 27, 1999 among the Company,
Seligman Greer Communication Resources, Inc.
("Seligman"), SGS Communications Resources,
Inc., Seligman Greer Sandberg Enterprises,
Inc., SGC Communication Resources LLC and
Learning Annex Interactive LLC (2) (3)
10(f) Option Agreement dated as of May 27, 1999
among the Company, Seligman Greer
Communication Resources, Inc., SGS
Communication Resources, Inc., Seligman Greer
Sandberg Enterprises, Inc., SGC Communication
Resources LLC and Learning Annex Interactive
LLC and certain shareholders and members, as
applicable, of such entities other than the
Company listed therein (2) (3)
10(g) Registration Rights Agreement dated as of May
27, 1999 among the Company, Anthony J.
Robbins, Robbins Research International Inc.
and CYL Development Holdings, LLC (1)
10(h) Stockholders Agreement dated as of May 27,
1999 among the Company, Anthony J. Robbins,
Robbins Research International Inc. and CYL
Development Holdings, LLC (1)
99(a) Press Release issued May 28, 1999 (1)
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(1) Previously filed as identically numbered exhibit to
the Company's Form 8-K/A dated May 27, 1999 and filed
with the Securities and Exchange Commission as of June
11, 1999, which amended dreamlife's current report on
Form 8-K dated May 27, 1999 and filed with the
Securities and Exchange Commission on June 11,
1999.
(2) Filed herewith as a replacement to the identically
number exhibit to the Company's previously filed Form
8-K/A dated May 27, 1999 and filed with the Securities
and Exchange Commission as of June 11, 1999, which
amended dreamlife's current report on Form 8-K dated
May 27, 1999 and filed with the Securities and
Exchange Commission on June 11, 1999.
(3) Confidential treatment has been granted for certain
portions of this exhibit. Omitted portions have been
filed separately with the Securities and Exchange
Commission.
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SIGNATURE
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 thereunto duly authorized.
DREAMLIFE, INC.
Dated: February 16, 2000 /s/ Philicia G. Levinson
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Philicia G. Levinson
Chief Financial Officer
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
2(a) Contribution and Exchange Agreement dated as of May 20, 1999 among
the Company, Change Your Life.com, LLC, Anthony J. Robbins, Robbins
Research International Inc. and CYL Development Holdings, LLC (1)
2(b) Agreement and Plan of Reorganization dated as of May 27, 1999 among
the Company, Concept Acquisition Corporation, Concept Development,
Inc., William Zanker and Debbie Dworkin (2)
2(c) Agreement of Merger dated as of May 27, 1999 between Concept
Acquisition Corporation and Concept Development, Inc. (2)
3(a) Certificate of Designations for Series A Preferred Stock (1)
3(b) Certificate of Designations for Series B Preferred Stock (1)
3(c) Certificate of Designations for Series C Preferred Stock (1)
3(d) Amended and Restated By-Laws (1)
10(a) Content Provider Agreement and License effective as of April 23,
1999 between Change Your Life.com, LLC, Anthony J. Robbins and
Research International Inc. (2) (3)
10(b) Escrow Agreement dated as of May 27, 1999 among the Company, Debbie
Dworkin and State Street Bank and Trust Company (2) (3)
10(c) Repurchase Agreement dated as of May 27, 1999 between the Company
and Debbie Dworkin (2)
10(d) Employment Agreement dated as of May 27, 1999 between the Company
and Wiliam Zanker (1)
10(e) Exclusive License and Marketing Agreement dated as of May 27, 1999
among the Company, Seligman Greer Communication Resources, Inc.
("Seligman"), SGS Communications Resources, Inc., Seligman Greer
Sandberg Enterprises, Inc., SGC Communication Resources LLC and
Learning Annex Interactive LLC (2) (3)
10(f) Option Agreement dated as of May 27, 1999 among the Company,
Seligman Greer Communication Resources, Inc., SGS Communication
Resources, Inc., Seligman Greer Sandberg Enterprises, Inc., SGC
Communication Resources LLC and Learning Annex Interactive LLC and
certain shareholders and members, as applicable, of such entities
other than the Company listed therein (2) (3)
10(g) Registration Rights Agreement dated as of May 27, 1999 among the
Company, Anthony J. Robbins, Robbins Research International Inc.
and CYL Development Holdings, LLC (1)
10(h) Stockholders Agreement dated as of May 27, 1999 among the Company,
Anthony J. Robbins, Robbins Research International Inc. and CYL
Development Holdings, LLC (1)
99(a) Press Release issued May 28, 1999 (1)
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(1) Previously filed as identically numbered exhibit to the
Company's Form 8-K/A dated May 27, 1999 and filed with
the Securities and Exchange Commission as of June 11,
1999, which amended dreamlife's current report on Form
8-K dated May 27, 1999 and filed with the Securities
and Exchange Commission on June 11, 1999.
(2) Filed herewith as a replacement to the identically
number exhibit to the Company's previously filed Form
8-K/A dated May 27, 1999 and filed with the Securities
and Exchange Commission as of June 11, 1999, which
amended dreamlife's current report on Form 8-K dated
May 27, 1999 and filed with the Securities and Exchange
Commission on June 11, 1999.
(3) Confidential treatment has been granted for certain
portions of this exhibit. Omitted portions have been
filed separately with the Securities and Exchange
Commission.
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Exhibit 2(b)
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AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
MAY 27, 1999
AMONG
GHS, INC.
CONCEPT ACQUISITION CORPORATION
CONCEPT DEVELOPMENT, INC.
AND
THE SOLE STOCKHOLDER OF CONCEPT DEVELOPMENT, INC.
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SCHEDULES
Schedule 2.2(b) Escrow Shares
Schedule 3.1(ee) Officers and Directors
Schedule 9.5 Stockholder Address
EXHIBITS
Exhibit A Form of Agreement of Merger
Exhibit B Form of Escrow Agreement
Exhibit C Form of Employment Agreement
Exhibit D Form of Repurchase Agreement
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AGREEMENT AND PLAN OF REORGANIZATION dated as
of May 27, 1999 among GHS, INC., a Delaware
corporation ("Parent"), CONCEPT ACQUISITION
CORPORATION, a Delaware corporation and a direct,
wholly-owned subsidiary of Parent ("Acquisition
Sub") and CONCEPT DEVELOPMENT, INC., a Delaware
corporation (the "Company"), WILLIAM ZANKER and
DEBBIE DWORKIN (the "Founders") and DEBBIE DWORKIN
(the "Stockholder").
The Boards of Directors of Parent, Acquisition Sub and the
Company have each duly approved and adopted this Agreement, the Agreement of
Merger in substantially the form of EXHIBIT A attached hereto (the "Agreement
of Merger") and the proposed merger of Acquisition Sub with and into the
Company in accordance with this Agreement, the Agreement of Merger and the
Delaware General Corporation Law (the "Delaware Statute"), whereby, among
other things, the issued and outstanding shares of common stock, no par
value, of the Company (the "Company Common Stock"), will be exchanged and
converted into the right to receive cash and shares of Series C preferred
tock, $.01 par value, of Parent (the "Parent Preferred Stock") in the manner
set forth in Article II hereof and in the Agreement of Merger, upon the terms
and subject to the conditions set forth in this Agreement and the Agreement
of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Agreement of Merger and the
representations, warranties, covenants, agreements, conditions and promises
contained herein and therein, the parties hereby agree as follows:
ARTICLE 1
GENERAL{TC}
1.1 THE MERGER{TC}. In accordance with the provisions of this
Agreement, the Agreement of Merger and the Delaware Statute, Acquisition Sub
shall be merged with and into the Company (the "Merger"), which at and after
the Effective Time shall be, and is sometimes herein referred to as, the
"Surviving Corporation". Acquisition Sub and the Company are sometimes
referred to as the "Constituent Corporations".
1.2 THE EFFECTIVE TIME OF THE MERGER{TC}. Subject to the provisions
of this Agreement, the Agreement of Merger shall be executed and delivered to
and filed with the Secretary of State of the State of Delaware by each of the
Constituent Corporations on the Closing Date in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective (the
"Effective Time") upon the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware and the issuance of a certificate
of merger by the Secretary of State of the State of Delaware.
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1.3 EFFECT OF MERGER{TC}. At the Effective Time the separate
existence of Acquisition Sub shall cease and Acquisition Sub shall be merged
with and into the Surviving Corporation, and the Surviving Corporation shall
possess all of the rights, privileges, powers and franchises of a public as
well as of a private nature, and be subject to all the restrictions,
disabilities and duties of each of the Constituent Corporations as provided
in Section 251 of the Delaware Statute.
1.4 CHARTER AND BY-LAWS OF SURVIVING CORPORATION{TC}. From and after
the Effective Time and pursuant to the Agreement of Merger: (i) the Charter
of Acquisition Sub shall be the Charter of the Surviving Corporation, unless
and until altered, amended or repealed as provided in the Delaware Statute or
the Charter, (ii) the by-laws of Acquisition Sub shall be the by-laws of the
Surviving Corporation, unless and until altered, amended or repealed as
provided in the Delaware Statute, the Charter or such by-laws, (iii) the
directors of Acquisition Sub shall be the directors of the Surviving
Corporation, unless and until removed, or until their respective terms of
office shall have expired, in accordance with the Delaware Statute, the
Charter and the by-laws of the Surviving Corporation, as applicable and (iv)
the officers of Acquisition Sub shall be the officers of the Surviving
Corporation, unless and until removed, or until their terms of office shall
have expired, in accordance with the Delaware Statute, the Charter and the
by-laws of the Surviving Corporation, as applicable.
1.5 TAKING OF NECESSARY ACTION{TC}. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may
be necessary or appropriate in order to effectuate the Merger as
expeditiously as reasonably practicable, in accordance with this Agreement,
the Agreement of Merger and the Delaware Statute.
1.6 TAX-FREE REORGANIZATIONS{TC}. For Federal income tax purposes,
the parties intend that the merger be treated as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of
1986, as amended (the "Code"), by reason of Section 368(a)(2)(E) of the Code.
1.7 CLOSING{TC}. Unless this Agreement shall have been terminated
and the transactions contemplated by this Agreement abandoned pursuant to the
provisions of Article VIII, and subject to the provisions of Article V, the
closing of the Merger (the "Closing") will take place at 10:00 a.m. (Eastern
Standard Time) on a date (the "Closing Date") to be mutually agreed upon by
the parties, which date shall be not later than the third Business Day after
all the conditions set forth in Article V shall have been satisfied (or
waived in accordance with Section 10.10, to the extent the same may be
waived), unless another date is agreed to in writing by the parties. The
Closing shall take place at the offices of Orrick, Herrington & Sutcliffe
LLP, 666 Fifth Avenue, New York, New York 10103, unless another place is
agreed to in writing by the parties. As used herein, the term "Business Day"
shall mean any day other than a Saturday, Sunday or day on which banks are
permitted to close in the State of New York.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES{TC}
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2.1 TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK{TC}. The entire
consideration payable by Parent with respect to all outstanding shares of
capital stock of the Company and for all options, warrants, rights, calls,
commitments, agreements or arrangements of any character to which the Company
is a party or by which it is bound calling for the issuance of shares of
capital stock of the Company or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, directly or indirectly, any such capital stock, or other
arrangement to acquire, at any time or under any circumstance, capital stock
of the Company or any such other securities (hereinafter collectively
referred to as the "Fully Diluted Company Shares,") other than any capital
stock of the Company owned or held by Parent or any Affiliate of Parent,
shall be an aggregate of (A) 50,000 shares of Parent Preferred Stock (the
"Total Parent Share Amount") and (B) $2,000,000 MINUS the $200,000 to be paid
to Swidler, Berlin, Shereff, Friedman, LLP on the date hereof, which
liability of the Company is set forth on Schedule 3.1(f) of the Company
Disclosure Schedule (the "Aggregate Cash Consideration") in cash (the
Aggregate Cash Consideration, together with the Total Parent Share Amount,
being sometimes hereinafter collectively referred to as the "Aggregate
Purchase Price"). For purposes of the calculation of the exchange ratio for
Parent Preferred Stock under Section 2.1(c)(i) hereof, it is assumed that the
number of Fully Diluted Company Shares is one (1) (the "Fully Diluted Company
Share Amount"). At the Effective Time, subject and pursuant to the terms and
conditions of this Agreement and the Agreement of Merger, by virtue of the
Merger and without any action on the part of the Constituent Corporations or
the holders of the capital stock or options to purchase capital stock of the
Constituent Corporations:
(a) CAPITAL STOCK OF ACQUISITION SUB{TC}. Each issued
and outstanding share of common stock, par value $.01 per share, of
Acquisition Sub shall be converted into one share of common stock, par value
$.01 per share, of the Surviving Corporation.
(b) CANCELLATION OF CERTAIN SHARES OF COMPANY COMMON
STOCK{TC}. Each share of capital stock of the Company that is authorized but
unissued shall cease to exist and no Parent Preferred Stock or other
consideration shall be delivered in exchange therefor.
(c) EXCHANGE OF COMPANY COMMON STOCK{TC}. Subject to
Section 2.2, each share of Company Common Stock issued and outstanding at the
Effective Time, including all accrued and unpaid dividends thereon, shall be
exchanged and converted into the right to receive:
(i) 50,000 shares of Parent Preferred Stock
which are deliverable at the Closing and are subject to the repurchase rights
set forth in the Repurchase Agreement; and
(ii) $2,000,000 MINUS the $200,000 to be paid
to Swidler, Berlin, Shereff, Friedman, LLP which shall be payable at the
Closing.
For convenience of reference, the shares of Parent Preferred Stock to be
issued upon the exchange and conversion of Company Common Stock in accordance
with this Section 2.1(c) are
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sometimes hereinafter collectively referred to as the "Merger Shares". All
calculations under Section 2.1 shall be rounded to the nearest one billionth
(.000000001).
(d) SHARES FOR DISSENTING STOCKHOLDERS{TC}. Each issued
and outstanding share of Company Common Stock held by a Dissenting
Stockholder, if any, shall not be exchanged and converted as described in
Section 2.1(c) but shall become the right to receive such consideration as
may be determined to be due to such Dissenting Stockholder pursuant to the
Delaware Statute; PROVIDED, HOWEVER, that each share of Company Common Stock
issued and outstanding at the Effective Time and held by a Dissenting
Stockholder who or which shall, after the Effective Time, withdraw his or its
demand for appraisal or lose or fail to perfect his or its right of appraisal
as provided in the Delaware Statute shall be deemed, as of the Effective
Time, to be exchanged and converted into Parent Preferred Stock as provided
in Section 2.1(c), without interest. After the Effective Time, as provided
in Section 262 of the Delaware Statute, no Dissenting Stockholder will be
entitled to vote the shares of Company Common Stock subject to such
Dissenting Stockholder's demand for appraisal for any purpose or be entitled
to the payment of dividends or other distributions on such shares. The
Company shall give Parent prompt notice of any demands received by the
Company for fair value of such Company Common Stock, and Parent shall have
the right to participate in all the negotiations and proceedings with respect
to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment (except to the extent that any such
payment is pursuant to a court order) with respect to, or settle or offer to
settle, any such demands
2.2 ESCROW DEPOSIT; EXCHANGE OF CERTIFICATES{TC}.
(a) ESCROW AGREEMENT{TC}. Reference is made to the
Escrow Agreement to be dated as of the Effective Time among the Stockholder,
Parent and a mutually agreeable escrow agent (the "Escrow Agent") in the form
of EXHIBIT B hereto (the "Escrow Agreement"). The Escrow Agreement is to be
entered into for the purpose of securing the indemnification obligations of
the Stockholders under Article VII.
(b) ESCROW DEPOSIT{TC}. At the Effective Time, Parent
shall cause to be deposited with the Escrow Agent (i) 5,000 shares of Parent
Preferred Stock ("Escrow Shares"), and (ii) three stock power duly endorsed
in blank for transfer on behalf of the Stockholder, and the Stockholder by
her execution and delivery of this Agreement, hereby authorizes and directs
Parent to make such deposit on her behalf.
(c) PROCEDURE FOR EXCHANGE{TC}. Immediately following
the Effective Time, Parent shall deliver to the Stockholder, other than
Parent or any subsidiary of Parent, of a certificate or certificates which
immediately prior to the Effective Time represented issued and outstanding
shares of Company Common Stock (each, an "Old Certificate") a certificate (a
"New Certificate") representing that number of Merger Shares (other than the
Escrow Shares) which such holder has the right to receive pursuant to Section
2.1(c)(i) with respect to such Old Certificate against receipt by Parent of
(i) such Old Certificate for cancellation and (ii) an executed letter of
transmittal, and the Old Certificate so surrendered shall forthwith be
canceled (the certificates representing the Escrow Shares having therefore
been deposited on behalf of the Stockholder into escrow as contemplated by
Section 2.2(b) hereof). In the event of a transfer of ownership of shares of
Company Common Stock which is not
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registered on the transfer records of the Company, a New Certificate
representing the proper number of shares of Parent Preferred Stock may be
issued to a transferee if the Old Certificate representing such Company
Common Stock is presented to Parent, accompanied by all documents required to
evidence and effect such transfer and by evidence that any applicable stock
or other transfer taxes have been paid. Until surrendered as contemplated by
this Section 2.2, each Old Certificate shall be deemed, on and after the
Effective Time, to represent only the right to receive upon such surrender,
New Certificates representing Merger Shares (other than the Escrow Shares) as
contemplated by Section 2.1(c)(i), without interest. All Escrow Shares shall
be held by, and distributed in accordance with, the terms and provisions of
the Escrow Agreement.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON
STOCK{TC}. All shares of Parent Preferred Stock issued upon the surrender or
exchange of shares of Company Common Stock in accordance with the terms of
this Article II shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock. If, after the
Effective Time, any Old Certificate is presented to the Surviving Corporation
for any reason, such Old Certificate shall be canceled and exchanged as
provided in this Article II.
(e) NO LIABILITY{TC}. None of Parent, Acquisition Sub or
the Company shall be liable to any holder of shares of Company Common Stock
or Parent Preferred Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Preferred Stock to be issued in
exchange for Company Common Stock pursuant to this Section 2.2, if, on or
after the expiration of six months following the Effective Time, such shares
are delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
(f) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES{TC}.
In the event any Old Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit to that effect by the person claiming such
Old Certificate to be lost, stolen or destroyed and, if required by Parent,
the posting by such person of a bond in such amount as Parent may reasonably
direct as indemnity against any claim that may be made against it with
respect to such Old Certificate, Parent will issue in exchange for such lost,
stolen or destroyed Old Certificate the Merger Shares and cash in lieu of
fractional shares deliverable in respect thereof pursuant to this Agreement.
(g) AUTHORIZATION OF THE MERGER, THIS AGREEMENT, THE
AGREEMENT OF MERGER, THE ESCROW AGREEMENT AND THE ESCROW AGENT{TC}. In the event
the Merger shall be approved by the stockholders of the Company, as required
by the Delaware Statute and as contemplated by this Agreement, such approval
shall constitute approval and ratification by the stockholders of the Company
of the (i) Merger, as required by the Delaware Statute, (ii) provisions of
this Agreement and the Agreement of Merger and (iii) designation of the
Escrow Agent and the approval and ratification by the stockholders of the
Company of the terms and provisions of the Escrow Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES{TC}
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY.{TC}The Company and
the Stockholder jointly and severally represent and warrant to Parent and
Acquisition Sub that, except as disclosed in the disclosure schedule dated
the date hereof, certified by the Chief Executive Officer of the Company and
delivered by the Company to Parent and Acquisition Sub simultaneously
herewith (which disclosure schedule shall contain specific references to the
representations and warranties to which the disclosures contained therein
relate) (the "Company Disclosure Schedule"{XE "\"Company Disclosure
Schedule\""}):
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND
POWER.{TC}The Company (i) is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware, (ii) has all
requisite corporate power and authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted,
and as proposed to be conducted, to enter into this Agreement, the Agreement
of Merger and the Related Agreements (as defined below) to which the Company
is a party, to perform its obligations hereunder and thereunder, and to
consummate the transactions contemplated hereby and thereby and (iii) is duly
qualified and in good standing to do business in those jurisdictions listed
in Section 3.1(a) of the Company Disclosure Schedule and in all other
jurisdictions in which the failure to be so qualified and in good standing
could reasonably be expected to have a material adverse effect on the Company
or its business, properties, condition (financial or otherwise), assets,
Liabilities, operations, results of operations, prospects or affairs of the
Company (a "Company Material Adverse Effect"{XE "\"Company Material Adverse
Effect\""}). The Company has delivered to Parent true and complete copies of
the Charter and by-laws of the Company, in each case as amended to the date
hereof. As used herein, "Charter" shall mean, with respect to any
corporation, those instruments that at the time constitute its corporate
charter as filed or recorded under the general corporation law of the
jurisdiction of its incorporation, including the articles or certificate of
incorporation or organization, and any amendments thereto, as the same may
have been restated, and any amendments thereto (including any articles or
certificates of merger or consolidation, certificate of correction or
certificates of designation or similar instruments which effect any such
amendment) which became effective after the most recent such restatement.
(b) EQUITY INVESTMENTS.{TC}The Company has never had,
nor does it currently have, any subsidiaries, nor has it ever owned, nor does
it currently own, any capital stock or other proprietary interest, directly
or indirectly, in any corporation, association, trust, partnership, joint
venture or other entity. There are no options, warrants, rights, calls,
commitments or agreements of any character to which the Company is a party or
by which it is bound calling for the issuance of shares of capital stock of
the Company or any securities convertible into or exercisable or exchangeable
for, or representing the right to purchase or otherwise receive, any such
capital stock, or other arrangement to acquire, at any time or under any
circumstance, capital stock of the Company or any such other securities. As
used herein, a "subsidiary" of any corporation means another corporation an
amount of whose voting securities sufficient to elect at least a majority of
its Board of Directors is owned directly or indirectly by such corporation.
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(c) CAPITAL STOCK; SECURITIES{ TC }. The authorized
capital stock of the Company consists of (i) 1,500 shares of Company Common
Stock, of which one (1) share is outstanding. The outstanding share of Company
Common Stock is validly issued and outstanding, fully paid and non-assessable
and not subject to preemptive rights. There are no voting trusts, voting
agreements, proxies, first refusal rights, first offer rights, co-sale rights,
options, transfer restrictions or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect to the
voting, transfer or disposition of Company Common Stock to which the Company is
a party or by which it is bound, or, to the best knowledge of the Company and
the Stockholders, among or between any persons other than the Company.
(d) AUTHORITY; NO CONSENTS{ TC }. The execution,
delivery and performance by the Company of this Agreement, the Agreement of
Merger and the Related Agreements to which it is a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of the Company; and
this Agreement and the Related Agreements to which it is a party have been, and
the Agreement of Merger when executed and delivered by the Company will be, duly
and validly executed and delivered by the Company; and this Agreement and the
Related Agreements to which it is a party are the valid and binding obligations
of the Company, enforceable against the Company in accordance with their
respective terms and the Agreement of Merger when executed and delivered by the
Company will be, enforceable against the Company in accordance with its terms.
Neither the execution, delivery and performance of this Agreement, the Related
Agreements to which it is a party or the Agreement of Merger nor the
consummation by the Company of the transactions contemplated hereby or thereby
nor compliance by the Company with any provision hereof or thereof will in any
material respect (A) conflict with, (B) result in any violations of, (C) cause a
default under (with or without due notice, lapse of time or both), (D) give rise
to any right of termination, amendment, cancellation or acceleration of any
obligation contained in or the loss of any material benefit under or (E) result
in the creation of any Encumbrance on or against any assets, rights or property
of the Company under any term, condition or provision of (x) any instrument,
contract or agreement to which the Company is a party, or by which the Company
or any of its properties, assets or rights may be bound, (y) any law, statute,
rule, regulation, order, writ, injunction, decree, permit, concession, license
or franchise of any Governmental Authority applicable to the Company or any of
its properties, assets or rights or (z) the Company's Charter or by-laws.
Except as set forth on Section 3.1(d) of the Company Disclosure Schedule, no
permit, authorization, consent or approval of or by, or any notification of or
filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by the Company of this
Agreement, the Agreement of Merger or the Related Agreements or the consummation
by the Company of the transactions contemplated hereby or thereby, except for
(i) the distribution of the Stockholders' Materials with respect to the adoption
by the Stockholders of this Agreement, the Merger and the transactions
contemplated hereby, (ii) the filing of the Agreement of Merger with the
Secretary of State of the State of Delaware and appropriate documents with the
relevant authorities of other states in which the Company is qualified to do
business and (iii) such other consents, waivers, authorizations, filings,
approvals and registrations which if not obtained or made would not have a
Company Material Adverse Effect or materially impair the ability of the Company
and the Stockholders to consummate the transactions contemplated by this
Agreement or the Agreement of Merger, including, without
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limitation, the Merger (each of which actions reflected in clauses (i) and (ii)
above is to be taken by the Company on a timely basis).
(e) FINANCIAL INFORMATION{ TC }.
(i) The Company has previously delivered to
Parent the Company Returns (as defined below); and
(ii) The Company Returns (A) are in accordance
with the books and records of the Company, (B) fairly present the financial
condition of the Company as at the respective dates indicated and the results of
operations of the Company for the respective periods indicated.
(f) ABSENCE OF UNDISCLOSED LIABILITIES{ TC }. Except as
set forth on Schedule 3.1(f) of the Company Disclosure Schedule, on the date
hereof the Company has no liability or obligation of any nature (whether known
or unknown, matured or unmatured, fixed or contingent, secured or unsecured,
accrued, absolute or otherwise ("Liability")). There were no material loss
contingencies (as such term is used in Statement of Financial Accounting
Standards No. 5 issued by the Financial Accounting Standards Board in March,
1975 ("FAS No. 5")).
(g) ABSENCE OF CHANGES{ TC }. Since the Company's
inception the Company has been operated in the ordinary course, consistent with
past practice, and there has not been any material adverse change in the
business, assets, properties, Liabilities, operations, results of operations,
condition (financial or otherwise), prospects or affairs (a "Material Adverse
Change") of the Company;
(h) TAX MATTERS{ TC }. The Company and each other
corporation (if any) included in any consolidated or combined tax return in
which the Company has been included (i) have filed and will file, in a timely
and proper manner, consistent with applicable laws, all Federal, state and local
Tax returns and Tax reports required to be filed by them through the Closing
Date (the "Company Returns") with the appropriate governmental agencies in all
jurisdictions in which Company Returns are required to be filed and have timely
paid or will timely pay all amounts shown thereon to be due; (ii) have paid and
shall timely pay all Taxes of the Company (or such other corporation) required
to have been paid by the Company (or such other corporation) on or before the
Closing Date; and (iii) currently are not the beneficiary of an extension of
time within which to file any Tax return or Tax report. All such Company
Returns were and will be correct and complete at the time of filing. All Taxes
of the Company attributable to periods up to and including the Closing Date, to
the extent not required to have been previously paid, have been adequately
provided for on and disclosed on Schedule 3.1(h). The Company has not been
notified by the Internal Revenue Service or any state, local or foreign taxing
authority that any issues have been raised (and are currently pending) in
connection with any Company Return, and no waivers of statutes of limitations
have been given with respect to the Company that are still in effect. Except as
contested in good faith and disclosed in Section 3.1(h) of the Company
Disclosure Schedule, any deficiencies asserted or assessments (including
interest and penalties) made as a result of any examination by the Internal
Revenue Service or by any other taxing authorities of any Company Return have
been
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fully paid and the Company has received no notification that any proposed
additional Taxes have been asserted. The Company (i) has not made an election
to be treated as a "consenting corporation" under Section 341(f) of the Code and
(ii) is not a "personal holding company" within the meaning of Section 542 of
the Code. The Company has not agreed to, nor is it required to, make any
adjustment under Section 481(a) of the Code by reason of a change in accounting
method or otherwise. The Company will not incur a Tax Liability resulting from
the Company ceasing to be a member of a consolidated or combined group that had
previously filed consolidated, combined or unitary Tax returns. The Company is
not a party to any agreement or contract with any "disqualified individual" (as
defined in Section 280G(c) of the Code) that, by reason of the transactions
contemplated hereby and occurring on or prior to the Closing Date or taking into
account any other agreements or contracts currently in effect between the
Company and such disqualified individual, will result in the disallowance of any
deduction for any payment under such agreement or contract as an "excess
parachute payment" (as defined in Section 280G(b)(1) of the Code).
As used in this Agreement, "Tax" means any of the Taxes and "Taxes"
means, with respect to any entity, (A) all income taxes (including any tax on or
based upon net income, gross income, income as specially defined, earnings,
profits or selected items of income, earnings or profits) and all gross
receipts, sales, use, ad valorem, transfer, franchise, license, withholding,
payroll, employment, excise, severance, stamp, occupation, premium, property or
windfall profits taxes, alternative or add-on minimum taxes, customs duties and
other taxes, fees, assessments or charges of any kind whatsoever, together with
all interest and penalties, additions to tax and other additional amounts
imposed by any taxing authority (domestic or foreign) on such entity and (B) any
liability for the payment of any amount of the type described in the immediately
preceding clause (A) as a result of being a "transferee" (within the meaning of
Section 6901 of the Code or any other applicable law) of another entity or a
member of an affiliated or combined group.
(i) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED
MATTERS{ TC }. Except as set forth on Schedule 3.1(i) of the Company Disclosure
Schedule, the Company has good and valid title to all of its assets, properties
and interests in properties, real, personal or mixed, all of which is described
on Schedule 3.1(i) of the Company Disclosure Schedule (except (A) inventory or
other property sold or otherwise disposed of since the Company Reviewed Balance
Sheet Date in the ordinary course of business and (B) accounts receivable and
notes receivable paid in full subsequent to the Company Reviewed Balance Sheet
Date), or not so reflected therein but used or useful in the conduct or
operation of the Company's business, free and clear of all Encumbrances, of any
kind or character, except for (i) those Encumbrances set forth in Section 3.1(i)
of the Company Disclosure Schedule, (ii) liens for current taxes not yet due and
payable and (iii) statutory mechanics and materialmen's liens. The assets,
properties and interests in properties of the Company are in good operating
condition and repair in all material respects (ordinary wear and tear excepted).
The assets, properties and interests in properties of the Company to be owned,
leased or licensed by the Surviving Corporation at the Effective Time shall
include all assets, properties and interests in properties (real, personal and
mixed, tangible and intangible) and all rights, leases, licenses and other
agreements necessary to enable the Surviving Corporation to carry on the
business of the Company as presently conducted by the Company or as proposed to
be conducted. The Company does not own or lease any personal and/or mixed
property. As used herein, the term "Encumbrances" shall mean and
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include security interests, mortgages, liens, pledges, guarantees, charges,
easements, reservations, restrictions, clouds, equities, rights of way, options,
rights of first refusal and all other encumbrances, whether or not relating to
the extension of credit or the borrowing of money.
(j) REAL PROPERTY-OWNED OR LEASED{ TC }. The Company
does not currently own or lease, nor has it or any of its predecessors ever
owned or leased, any real property.
(k) INTELLECTUAL PROPERTY{ TC }.
(i) The Company has good and valid title to, and
owns free and clear of all Encumbrances, has the right to use, sell, transfer,
license (or sublicense), transmit, broadcast, deliver (electronically or
otherwise) and dispose of, and has the right to bring actions for the
infringement of, all Intellectual Property Rights necessary or required for the
conduct of its business as currently conducted and as proposed to be conducted
(collectively, the "Company Rights"). The Company has not granted any rights to
third parties with respect to its Intellectual Property Rights and no third
party holds any rights in or to the current business plan of the Company.
(ii) The execution, delivery and performance of
this Agreement and the Related Agreements and the consummation of the Merger and
the consummation of the other transactions contemplated hereby, will not breach,
violate or conflict with any instrument or agreement governing any Company
Rights, will not cause the forfeiture or termination or give rise to a right of
forfeiture or termination of any Company Right or in any way impair the right of
the Company or the Surviving Corporation to use, sell, license (or sublicense),
transmit, broadcast, deliver (electronically or otherwise) or dispose of, or to
bring any action for the infringement of, any Company Right or portion thereof.
(iii) There are no royalties, honoraria, fees or
other payments payable by the Company to any person by reason of the ownership,
use, license (or sublicense), transmission, broadcast, delivery (electronically
or otherwise), sale, or disposition of the Company Rights, other than sales
commissions paid in the ordinary course of business.
(iv) The Company does not manufacture, market,
license (or sublicense), sell, transmit, deliver (electronically or otherwise),
or use any product or service nor does it have any product or service under
development.
(v) All current and past officers, employees and
consultants of or to the Company have, or will have at Closing, executed and
delivered to and in favor of the Company an agreement regarding the protection
of confidential and proprietary information and the assignment to the Company of
all Intellectual Property Rights arising from the services performed for the
Company by such persons (collectively, the "Confidentiality Agreements", the
form of which is attached to Section 3.1(k)(iv) of the Company Disclosure
Schedule). The Company has taken and will continue through the Effective Time
to take all steps necessary, appropriate or desirable to safeguard and maintain
the secrecy and confidentiality of, and its proprietary rights in, all Company
Rights.
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(vi) All works that were created, prepared or
delivered by consultants, independent contractors or other third parties for or
on behalf of Company (including any materials and elements created, prepared or
delivered by such parties in connection therewith) (A) are and shall constitute
"works made for hire" specially ordered or commissioned by the Company within
the meaning of United States' copyright law, or (B) all right, title and
interest therein (including any materials and elements created, prepared or
delivered by such parties in connection therewith) have been assigned to the
Company.
(vii) No licenses or rights have been granted by
the Company, or by any employee, consultant, officer, director, agent or
affiliate of the Company or by anyone other than the foregoing, to distribute
the source code of, or to use source code to create Derivative Works, of, any
product currently marketed by, commercially available from or under development
by the Company for which the Company possesses the source code. As used herein,
"Derivative Work" shall mean a work that is based upon one or more preexisting
works, such as a revision, enhancement, modification, abridgment, condensation,
expansion or any other form in which such preexisting works may be recast,
transformed or adapted, and which, if prepared without authorization of the
owner of the copyright in such preexisting work, would constitute a copyright
infringement. For purposes herein, a "Derivative Work" shall also include any
compilation that incorporates such a preexisting work as well as translations
from one type of code to another.
(viii) No person has any marketing rights to any of
the Intellectual Property Rights of the Company (excluding Intellectual Property
Rights licensed to the Company by third parties).
(ix) Section 3.1(k)(ix) of the Company Disclosure
Schedule contains a true and complete list of all (A) of the Company's patents,
patent applications, trademarks, trademark applications, trade names, service
marks, service mark applications, copyrights, copyright registrations and
copyright applications and Internet domain names and applications therefor and
(B) other filings and formal actions made or taken pursuant to Federal, state,
local and foreign laws by the Company to perfect or protect its interest
therein.
(x) Section 3.1(k)(x) of the Company Disclosure
Schedule contains a true and complete list of all options, licenses or other
agreements of any kind by which Intellectual Property Rights have been granted
to the Company from, or granted by the Company to, any other person (except for
those licenses identified in Section 3.1(l)(i) of the Company Disclosure
Schedule).
(xi) As used herein, the term "Intellectual
Property Rights" shall mean all industrial and intellectual property rights,
including, without limitation, patents, patent applications, patent rights,
trademarks, trademark applications, trade names, service marks, service mark
applications, copyrights, copyright registrations, copyright applications,
franchises, licenses, databases, "URL's" and Internet domain names and
applications therefor (and all interest therein), computer programs and other
computer software (including, but not limited to, the Software), user
interfaces, know-how, trade secrets, customer lists, proprietary technology,
processes and formulae, source code, object code, algorithms, architecture,
structure, display screens, layouts, development tools, instructions, templates,
marketing materials,
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inventions, trade dress, logos and designs and all documentation and media
constituting, describing or relating to the foregoing.
(l) COMPANY SOFTWARE{ TC }. The Company has not
designed or developed, nor does the Company have under development by employees
of the Company or by consultants on the Company's behalf, any software programs,
systems or applications, nor has the Company licensed any such software from any
third party.
(m) AGREEMENTS, ETC{ TC }. Schedule 3.1(m) to the
Company Disclosure Schedule sets forth a true and complete list of all written
and oral contracts, agreements, instruments, understandings or arrangements to
which the Corporation is a party or by which it is bound.
(n) NO DEFAULTS{ TC }. The Company has in all material
respects performed all the obligations required to be performed by it to date
and is not in default or alleged to be in default under (i) its Charter or
by-laws or (ii) any material agreement, lease, license, contract, commitment,
instrument or obligation to which the Company is a party or by which any of its
properties, assets or rights are or may be bound or affected, and there exists
no event, condition or occurrence which, with or without due notice or lapse of
time, or both, would constitute such a default by it of any of the foregoing.
(o) LITIGATION, ETC{ TC }. Except as set forth on
Schedule 3.1(n) of the Company Disclosure Schedule, there are no (i) actions,
suits, claims, investigations or legal or administrative or arbitration
proceedings (collectively, "Actions") pending, or to the best knowledge of the
Company and the Stockholders, threatened against the Company nor, to the best
knowledge of the Company and the Stockholders , any basis therefor, whether at
law or in equity, or before or by any Federal, state, local, municipal, foreign
or other governmental court, department, commission, board, bureau, agency or
instrumentality ("Governmental Authority"), (ii) judgments, decrees, injunctions
or orders of any Governmental Authority or arbitrator against the Company or
(iii) disputes with customers or vendors. There are no Actions pending or, to
the best knowledge of the Company and the Stockholders, threatened, nor, to the
best knowledge of the Company and the Stockholders, any basis therefor, with
respect to (A) the current employment by, or association with, the Company, or
future employment by, or association with, Parent or the Surviving Corporation,
of any of the present officers or employees of or consultants to the Company
(collectively, the "Designated Persons") or (B) the use, in connection with any
business presently conducted or proposed to be conducted by the Company or the
Surviving Corporation, of any information, techniques or processes presently
utilized or proposed to be utilized by the Company, Parent, the Surviving
Corporation or any of the Designated Persons, that the Company, Parent, the
Surviving Corporation or any of the Designated Persons are or would be
prohibited from using as the result of a violation or breach of, or conflict
with any agreements or arrangements between any Designated Person and any other
person, or any legal considerations applicable to unfair competition, trade
secrets or confidential or proprietary information. The Company has delivered
to Parent all material documents and correspondence relating to such matters
referred to in Section 3.1(o) of the Company Disclosure Schedule (including, in
the case of clause (iii) of the first sentence of this
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Section 3.1(o), any correspondence evidencing material customer dissatisfaction
with the Company or its products or services).
(p) ACCOUNTS AND NOTES RECEIVABLE{ TC }. There are no
accounts receivable or notes receivable owing to the Company as of the date
hereof.
(q) ACCOUNTS AND NOTES PAYABLE{ TC }. There are no
accounts payable or notes payable by the Company to third parties as of the date
hereof. As of the Closing, all accounts payable and notes payable by the Company
to third parties will have arisen in the ordinary course of business, and,
except as set forth in Section 3.1(q) of the Company Disclosure Schedule, there
is no such account payable or note payable delinquent in its payment, except
those contested in good faith and already disclosed in Section 3.1(q) of the
Company Disclosure Schedule.
(r) COMPLIANCE; GOVERNMENTAL AUTHORIZATIONS{ TC }. The
Company has complied and is presently in compliance in all material respects
with all Federal, state, local or foreign laws, ordinances, regulations and
orders applicable to it or its business (including, without limitation, laws,
ordinances, regulations and orders applicable to labor, employment and
employment practices, terms and conditions of employment and wages and hours).
The Company has all Federal, state, local and foreign governmental
authorizations, consents, approvals, licenses and permits necessary in the
conduct of its business as presently conducted or as proposed to be conducted,
such authorizations, consents, approvals, licenses and permits are in full force
and effect, no violations are or have been recorded in respect of any thereof
and no proceeding is pending or, to the best knowledge of the Company and the
Stockholders, threatened to revoke or limit any thereof. Section 3.1(r) of the
Company Disclosure Schedule contains a true and complete list of all such
governmental licenses, authorizations, consents, approvals, permits, orders,
decrees and other compliance agreements under which the Company is operating or
bound, the Company is not in default or alleged to be in default under any
thereof and the Company has furnished to Parent true and complete copies
thereof. None of such authorizations, consents, approvals, licenses and permits
shall be affected in any material respect by the Merger or the transactions
contemplated hereby.
(s) ENVIRONMENTAL MATTERS{ TC }. The Company currently
is and at all times has been in material compliance with all Federal, state and
local laws, ordinances, regulations and orders relating to the protection of the
environment applicable to its properties, facilities or operations.
(t) LABOR RELATIONS; EMPLOYEES{ TC }.
(i) Except for the Founders, there are currently
no, and since the Company's inception there have not been any, employees of the
Company.
(u) EMPLOYEE BENEFIT PLANS AND CONTRACTS{ TC }.
(i) There are no "employee benefit plans", as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), or any other written or formal plans or agreements
involving direct or indirect compensation (including any employment agreements
entered into between the
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Company and any Employee, but excluding workers' compensation, unemployment
compensation, other government-mandated programs and the Company's salary and
wage arrangements) currently or previously maintained, contributed to or
entered into by the Company or any ERISA Affiliate thereof for the benefit of
any Employee or former Employee under which the Company or any ERISA Affiliate
thereof has any present or future material obligation or liability (the
"Employee Plans"). For purposes of the preceding sentence, "ERISA Affiliate"
shall mean any entity which is a member of (A) a "controlled group of
corporations", as defined in Section 414(b) of the Code, (B) a group of entities
under "common control", as defined in Section 414(c) of the Code or (C) an
"affiliated service group", as defined in Section 414(m) of the Code or treasury
regulations promulgated under Section 414(o) of the Code, any of which includes
the Company. For purposes of Section 3.1(u), "Employee" means any common law
employee, consultant or director of the Company.
(ii) There are no employment, severance or other
similar contracts, arrangements or policies or plans or arrangements (written or
oral) providing for insurance coverage (including any self-insured
arrangements), workers' benefits, vacation benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits entered into, maintained or contributed to,
as the case may be, by the Company on behalf of any Employee or covering any
Employee or former Employee or under which the Company or any ERISA Affiliate
has any present or future obligation or liability.
(v) INSURANCE{ TC }. The Company does not and has not
since its inception maintained or held any policies of liability, theft,
fidelity, fire, product liability, errors and omissions, workmen's compensation,
indemnification of directors and officers or other similar forms of insurance.
(w) BANK ACCOUNTS; POWERS OF ATTORNEY{ TC }. Section
3.1(w) of the Company Disclosure Schedule sets forth a true and complete list of
(i) all bank accounts and safe deposit boxes of the Company and all persons who
are signatories thereunder or who have access thereto and (ii) the names of all
persons, firms, associations, corporations or business organizations holding
general or special powers of attorney from the Company and a summary of the
terms thereof.
(x) BROKERS{ TC }. The Company has not, nor have any of
its officers, directors, securityholders or employees, employed any broker or
finder or incurred any liability for any brokerage fees, commissions or finders'
fees in connection with the transactions contemplated hereby.
(y) RELATED TRANSACTIONS{ TC }. Except as set forth on
Schedule 3.1(x) of the Company Disclosure Schedule, no current or former
director, officer or securityholder of the Company that is an affiliate of the
Company or any associate (as defined in the rules promulgated under the Exchange
Act) thereof, is now, or has been since the inception of the Company, a party to
any transaction with the Company (including, but not limited to, any contract,
agreement or other arrangement providing for the furnishing of services by, or
rental of real or personal property from, or borrowing money from, or otherwise
requiring payments to, any such director, officer or affiliated stockholder of
the Company or associate thereof), or the
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direct or indirect owner of an interest in any corporation, firm, association or
business organization which is a present or potential competitor, supplier or
customer of the Company (other than non-affiliated holdings in publicly-held
companies), nor does any such person receive income from any source other than
the Company which relates to the business of, or should properly accrue to, the
Company.
(z) CUSTOMERS{ TC }. Since its inception, the Company
has not had any customers.
(aa) MINUTE BOOKS{ TC }. The minute books of the Company
provided to Parent for review contain a complete summary of all meetings of and
actions by directors and stockholders of the Company from the time of its
incorporation to the date of such review and reflect all actions referred to in
such minutes accurately in all material respects.
(bb) BUSINESS GENERALLY{ TC }. There have been no events
or transactions, or information which has come to the attention of the Company
or any officer, director, incorporator or key employee thereof that could
reasonably be expected to have a Company Material Adverse Effect, and the
Company is not obligated under any contractor agreement or subject to any
Charter or other corporate restriction which could have a Company Material
Adverse Effect.
(cc) BOARD APPROVAL{ TC }. The Board of Directors of the
Company has unanimously (i) approved this Agreement, the Merger and each of the
Related Agreements to which the Company is a party and the transactions
contemplated hereby and thereby, (ii) determined that the Merger is in the best
interests of the stockholders of the Company and is on terms that are fair to
such stockholders of the Company and (iii) recommended that the stockholders of
the Company approve the Merger in accordance with the Agreement of Merger and
the Delaware Statute.
(dd) BUSINESS PLAN{ TC }. Attached hereto as Schedule
3.1(dd) is a copy of the current business plan of the Company (the "Business
Plan").
(ee) VOTE REQUIRED{ TC }. The affirmative vote of at
least a majority of the outstanding shares of Company Common Stock approving
this Agreement, the Merger and the Agreement of Merger is the only vote of the
holders of any class or series of the Company's capital stock necessary to
approve this Agreement, the Merger and the Agreement of Merger and the
transactions contemplated hereby and thereby.
(ff) INFORMATION SUPPLIED{ TC }. None of the information
supplied or to be supplied by the Company or the Stockholder for inclusion or
incorporation by reference in the Stockholders' Materials will, at the dates
mailed to the Stockholder and at the effective date of the Stockholder Action,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they are made, not misleading. The
Stockholders' Materials will comply as to form in all material respects with the
provisions of all applicable laws, rules and regulations of all Governmental
Authorities.
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(gg) DISCLOSURE{TC}. Neither Section 3.1 of this
Agreement (including the Company Disclosure Schedule) nor any document,
written information, statement, financial statement, certificate or exhibit
furnished or to be furnished to Parent or Acquisition Sub by or on behalf of
the Company or any securityholder pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements or facts contained herein and
therein not misleading in light of the circumstances under which they were
made.
(hh) KNOWLEDGE DEFINITION{TC}. As used in this
Article III, the term "best knowledge" and like phrases shall mean and
include (i) actual knowledge and (ii) that knowledge which a prudent business
person (including the officers, directors, and key employee) could have
obtained in the management of his or her business affairs after making due
inquiry and exercising due diligence with respect thereto. In connection
therewith, the knowledge (both actual and constructive) of any officer,
director, or key employee of the Company shall be imputed to be the knowledge
of the Company.
3.2 SEVERAL REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS{TC}.
The Stockholder represents and warrants to Parent, Acquisition Sub and the
Company with respect to herself as follows:
(a) TITLE; ABSENCE OF CERTAIN AGREEMENTS{TC}. The
Stockholder is the lawful and record and beneficial owner of, and has good
and marketable title to all of the shares of Company Common Stock, with the
full power and authority to vote such Company Common Stock and transfer and
otherwise dispose of such Company Common Stock, and any and all rights and
benefits incident to the ownership thereof free and clear of all
Encumbrances, and there are no agreements or understandings between the
Stockholder and the Company and/or any other person with respect to the
voting, sale or other disposition of Company Common Stock or any other matter
relating to Company Common Stock.
(b) AUTHORITY - GENERAL{TC}. The Stockholder has
full and absolute power and authority to enter into this Agreement and, if
applicable, each Related Agreement being executed and delivered by the
Stockholder simultaneously herewith and this Agreement and each Related
Agreement to which the Stockholder is a party; and this Agreement and each
Related Agreement to which the Stockholder is a party has been duly executed
and delivered by the Stockholder, and is the valid and binding obligation of
the Stockholder, enforceable against the Stockholder in accordance with its
terms. Neither the execution, delivery and performance of this Agreement and
each Related Agreement to which the Stockholder is a party, nor the
consummation of the transactions contemplated hereby or thereby nor
compliance by the Stockholder with any of the provisions hereof or thereof
will (i) (A) conflict with, (B) result in any violations of, (C) cause a
default under (with or without due notice, lapse of time or both), (D) give
rise to any right of termination, amendment, cancellation or acceleration of
any obligation contained in or the loss of any material benefit under or (E)
result in the creation of any Encumbrance upon or against any assets, rights
or property of the Company (or against any Company Common Stock, Parent
capital stock or common stock of the Surviving Corporation), under any term,
condition or provision of (x) any agreement or instrument to which the
Stockholder is a party, or by which the Stockholder or any of his or its
properties, assets or rights
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may be bound or (y) any law, statute, rule, regulation, order, writ,
injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to the Stockholder or any of his or its
properties, assets or rights, which conflict, breach, default or violation or
other event would prevent the consummation of the transactions contemplated
by this Agreement, the Agreement of Merger or any Related Agreement to which
the Stockholder is a party. Except as set forth in Section 3.2(c) ofthe
Company Disclosure Schedule (which, if so disclosed shall have been
effectively made or obtained (as the case may be) on or prior to the Closing,
unless otherwise waived by Parent) no permit, authorization, consent or
approval of or by, or any notification of or filing with, any Governmental
Authority or other person is required in connection with the execution,
delivery and performance by the Stockholder of this Agreement, each Related
Agreement to which the Stockholder is a party or the consummation by the
Stockholder of the transactions contemplated hereby or thereby.
(c) INVESTMENT REPRESENTATIONS{TC}. The Stockholder:
(i) is acquiring the Merger Shares being
issued to the Stockholder for investment and for the Stockholder's own
account and not as a nominee or agent for any other person and with no
present intention of distributing or reselling such shares or any part
thereof in any transactions that would be in violation of the Securities Act
or any state securities or "blue-sky" laws;
(ii) understands (A) that the Merger Shares to
be issued to her have not been registered for sale under the Securities Act
or any state securities or "blue-sky" laws in reliance upon exemptions
therefrom, which exemptions depend upon, among other things, the bona fide
nature of the investment intent of such Stockholder as expressed herein, (B)
that such Merger Shares must be held indefinitely and not sold until such
shares are registered under the Securities Act and any applicable state
securities or "blue-sky" laws, unless an exemption from such registration is
available, (C) that Parent is under no obligation to so register such Merger
Shares and (D) that the certificates evidencing such Merger Shares will be
imprinted with a legend in the form set forth in Section 7.2(b) that
prohibits the transfer of such shares, except as provided in Section 7.2;
(iii) has been furnished with, and has read and
reviewed, the Parent SEC Documents;
(iv) has had an opportunity to ask questions of
and has received satisfactory answers from the officers of Parent or persons
acting on Parent's behalf concerning Parent and the terms and conditions of
an investment in Parent Preferred Stock or Parent Common Stock issuable upon
conversion thereof;
(v) is aware of Parent's business affairs and
financial condition and has acquired sufficient information about Parent to
reach an informed and knowledgeable decision to acquire the Merger Shares to
be issued to her;
(vi) can afford to suffer a complete loss of
her investment in such Merger Shares;
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(vii) is familiar with the provisions of Rule
144 promulgated under the Securities Act which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly,
from the issuer thereof, in a non-public offering subject to the satisfaction
of certain circumstances which require among other things: (A) the
availability of certain public information about the issuer, (B) the resale
occurring not less than one year after the party has purchased, and made full
payment for, within the meaning of Rule 144, the securities to be sold; and,
in the case of an affiliate, or of a non-affiliate who has held the
securities less than two years, the amount of securities being sold during
any three month period not exceeding the specified limitations stated
therein, if applicable and (C) the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Exchange Act);
(viii) understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rule 144
is not exclusive, the staff of the SEC has expressed its opinion that persons
proposing to sell private placement securities other than in a registered
offering and otherwise than pursuant to Rule 144 will have a substantial
burden of proof in establishing that an exemption from registration is
available for such offers or sales, and that such persons and their
respective brokers who participate in such transactions do so at their own
risk;
(ix) has either alone or together with the
Stockholder's "Purchaser Representative" (as such term is defined in Rule
501(h), as promulgated under the Securities Act) as to each such Purchaser, a
"Purchaser Representative"), such knowledge and experience in financial and
business matters that she is capable of evaluating the merits and risks of
acquiring and holding shares of Parent Preferred Stock or Parent Common Stock
issuable upon conversion thereof; and
(x) the Stockholder is an "accredited
investor" within the meaning of Rule 501(a) under the Securities Act or if
the Stockholder has identified that such Stockholder is being advised by a
Purchaser Representative in connection with the transactions contemplated
hereby.
(d) BROKERS{TC}. No Stockholder has, nor have any of
their officers, directors, securityholders or employees (if any) employed any
broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
(e) ABSENCE OF CLAIMS{TC}. The Stockholder hereby
represents and warrants that in her capacity as a stockholder she has no
knowledge of any claims that she may have against the Released Parties (as
defined in Section 5.2 hereof).
(f) ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE
COMPANY{TC}. To the best knowledge of the Stockholder, the representations
and warranties of the Company set forth in Section 3.1 are true, correct and
complete in all material respects and the Company is not in breach or
violation thereof.
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(g) REPRESENTATION BY LEGAL COUNSEL{TC}. The
Stockholder has been advised by legal counsel in connection with the
negotiation, execution and delivery of this Agreement and the Related
Agreements and the performance of the transactions contemplated hereby an
thereby.
3.3 SEVERAL REPRESENTATIONS AND WARRANTIES OF THE FOUNDERS{TC}.
Each of the Founders severally (and not jointly) represents and warrants to
Parent, Acquisition Sub and the Company, with respect to himself or herself,
as follows:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE
COMPANY{TC}. Such Founder has carefully read and reviewed this Agreement and
the Schedules and Exhibits hereto and to the best knowledge of such Founder,
all representations and warranties of the Company set forth in Section 3.1
hereof are true, correct and complete in all material respects and the
Company is not in breach or violation thereof.
(b) EMPLOYMENT OF FOUNDERS{TC}. Neither the (i)
current employment by, or association with, the Company, or future employment
by, or association with, Parent or the Surviving Corporation of such Founder,
or (ii) use, in connection with any business presently conducted or proposed
to be conducted by the Company, Parent or the Surviving Corporation, of any
information or techniques presently utilized or proposed to be utilized by
the Company, Parent, the Surviving Corporation or such Founders, violates,
conflicts with, breaches or is prohibited under, or would violate, conflict
with, breach or be prohibited under, any agreements or arrangements between
such Founder and any other person obtained on a confidential basis from third
parties, trade secrets or confidential or proprietary information.
3.4 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION
SUB{TC}. Parent and Acquisition Sub represent and warrant to the Company as
follows:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND
POWER{TC}. Each of Parent and Acquisition Sub (i) is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and (ii) has all requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as
now being conducted, to enter into this Agreement and each of the Related
Agreements to which it is a party, to perform its obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and
thereby. Parent has delivered to the Company true and complete copies of the
Charter and by-laws of each of Parent and Acquisition Sub.
(b) CAPITAL STOCK{TC}. Parent's Quarterly Report on
Form 10-Q filed with the SEC with respect to the fiscal quarter ended March
31, 1999 (the "Form 10-Q"{XE"\"Form 10-Q\""}), sets forth a true and complete
description of the authorized and outstanding shares of capital stock of Parent
as of such date. Parent has duly authorized and reserved for issuance the Merger
Shares, and, when issued in accordance with the terms of Article II, the Merger
Shares will be validly issued, fully paid and nonassessable and free of
preemptive rights (other than any Parent Rights which may be issued). Parent
owns all the outstanding shares of capital stock of Acquisition Sub, and all of
such shares are validly issued, fully paid and nonassessable and not subject to
preemptive rights.
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(c) AUTHORITY{TC}. The execution, delivery and
performance by Parent of this Agreement and each of the Related Agreements to
which it is a party and the execution, delivery and performance of this
Agreement and the Agreement of Merger by Acquisition Sub and the consummation
of the transactions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of Parent and Acquisition Sub,
respectively. This Agreement and each of the Related Agreements to which
Parent is a party are valid and binding obligations of Parent, enforceable
against Parent in accordance with their respective terms; and this Agreement
and the Agreement of Merger are the valid and binding obligations of
Acquisition Sub, enforceable against Acquisition Sub in accordance with their
respective terms. Neither the execution, delivery and performance by Parent
of this Agreement and the Related Agreements to which Parent is a party, the
execution, delivery and performance of this Agreement and the Agreement of
Merger by Acquisition Sub, nor the consummation of the transactions
contemplated hereby or thereby, will in any material respect (A) conflict
with, (B) result in any material violations of, (C) cause a material default
under (with or without due notice, lapse of time or both), (D) give rise to
any material right of termination, amendment, cancellation or acceleration of
any obligation contained in or the loss of any material benefit under, (E)
result in the creation of any material Encumbrance on or against any assets,
rights or property of Parent or Acquisition Sub, as the case may be, under
any term, condition or provision of (x) any material instrument or agreement
to which Parent or Acquisition Sub is a party, or by which Parent or
Acquisition Sub or any of their respective properties, assets or rights may
be bound, (y) any material law, statute, rule, regulation, order, writ,
injunction, decree, permit, concession, license or franchise of any
Governmental Authority applicable to Parent or Acquisition Sub or any o their
respective properties, assets or rights or (z) Parent's or Acquisition Sub's
Charter or by-laws, as amended through the date hereof, respectively, in each
case, which conflict, breach, default or violation or other event would
prevent the consummation of the transactions contemplated by this Agreement,
the Agreement of Merger or any Related Agreement to which Parent or
Acquisition Sub is a party. Except as contemplated by this Agreement, no
permit, authorization, consent or approval of or by, or any notification of
or filing with, any Governmental Authority or other person is required in
connection with the execution, delivery and performance by Parent or
Acquisition Sub of this Agreement, the Agreement of Merger (in the case of
Acquisition Sub) or the Related Agreements to which they are a party or the
consummation of the transactions contemplated hereby or thereby, other than
(i) the filing with the SEC of such reports and information under the
Securities and Exchange Act of 1934, as amended (the "Exchange
Act"{XE"\"Exchange Act\""}), and the rules and regulations promulgated by the
SEC thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby, (iii) the filing of the Agreement of Merger with the Secretary of State
of the State of Delaware and (iv) such other consents, waivers, authorizations,
filings, approvals and registrations which if not obtained or made would
materially impair the ability of Parent or Acquisition Sub to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Merger (each of the actions reflected in clauses (i), (ii) and (iii) to be taken
by Parent).
(d) SEC DOCUMENTS{TC}.
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(i) Parent has furnished or made available to
the Company a correct and complete copy of the Form 10-Q, Parent's Annual
Report on Form 8-K for the year ended December 31, 1998 and each report,
schedule, registration statement and definitive proxy statement filed by
Parent with the SEC on or after the date of filing of the Form 10-Q which are
all the documents (other than preliminary material) that Parent was required
to file (or otherwise did file) with the SEC in accordance with Sections 13,
14 and 15(d) of the Exchange Act on or after the date of filing with the SEC
of the Form 10-Q (collectively, the "Parent SEC Documents"{XE"\"Parent SEC
Documents\""}). As of their respective filing dates, or in the case of
registration statements, their respective effective dates, none of the Parent
SEC Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, and the Parent SEC Documents
complied when filed, or in the case of registration statements, as of their
respective effective dates, in all material respects with the then applicable
requirements of the Securities Act or the Exchange Act, as the case may be, and
the rules and regulations promulgated by the SEC thereunder.
(ii) The financial statements (including the
notes thereto) of Parent included in the Form 10-Q for the fiscal quarter
then ended, complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with GAAP during
the periods involved (except as may have been indicated in the notes thereto)
and fairly present the financial position of Parent as at the dates thereof
and the results of their operations, stockholders' equity and cash flows for
the period then ended.
(e) BROKERS{TC}. Neither Parent, Acquisition Sub,
nor any of their respective officers, directors or employees have employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
hereby.
ARTICLE 4
RELATED AGREEMENTS{TC}
4.1 RELATED AGREEMENTS{TC}. Simultaneously with the execution and
delivery of this Agreement, the following agreements (such agreements, being
herein collectively referred to as the "Related Agreements"{XE"\"Related
Agreements\""}) are being executed and delivered by the respective parties
thereto:
(a) ESCROW AGREEMENT{TC}. Each of Parent, the
Stockholder and the Escrow Agent are entering into the Escrow Agreement.
(b) EMPLOYMENT AGREEMENT{TC}. The Company is
entering into an Employment Agreement with William Zanker in the form of
EXHIBIT C attached hereto,, pursuant to which, among other things, William
Zanker will become an employee of Parent or the Surviving Corporation.
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(c) REPURCHASE AGREEMENT{TC}. The Company is
entering into a Repurchase Agreement with the Stockholder in the form of
EXHIBIT D attached hereto,, pursuant to which, among other things, the
Company will have the option to repurchase the Merger Shares under
circumstances set forth therein.
ARTICLE 5
STOCKHOLDER AND FOUNDER AGREEMENTS{TC}
5.1 AFFILIATE AGREEMENT{TC}.
(a) The Stockholder may be deemed to be an
"affiliate" of the Company within the meaning of Rule 145 promulgated under
the Securities Act of 1933, as amended (the "Securities Act"), and Accounting
Series Release No. 130, as amended, Accounting Series Release No. 135 and
Staff Accounting Bulletin No. 76 of the Securities and Exchange Commission
(the "SEC"), although nothing contained herein should be construed as an
admission thereof. If the Stockholder were to be deemed an "affiliate" of
the Company, the Stockholder's ability to sell, exchange, transfer, pledge or
otherwise dispose of Merger Shares may be restricted unless such transaction
is registered under the Securities Act or an exemption from such registration
is available. The Stockholder understands that such exemptions are limited
and has obtained advice of counsel as to the nature and conditions of such
exemptions, including information with respect to the applicability to the
transfer of such securities of Rules 144 and 145(d) promulgated under the
Securities Act.
(b) The Stockholder hereby covenants and agrees that
the Stockholder shall not offer, sell, exchange, transfer, pledge or
otherwise dispose of any Merger Shares, or any securities that may be paid as
a dividend or otherwise distributed thereon or with respect thereto or issued
or delivered in exchange or substitution therefor (all such shares and other
securities of Parent being herein sometimes collectively referred to as
"RESTRICTED SECURITIES"), or any option, right or other interest with respect
to any Restricted Securities unless at such time either:
(i) such transaction shall be permitted pursuant
to the provisions of Rule 144 or Rule 145, as applicable, promulgated
under the Securities Act;
(ii) counsel representing the Stockholder,
reasonably satisfactory to Parent, shall have advised Parent in a written
opinion letter reasonably satisfactory to Parent, that no registration
under the Securities Act is required in connection with the proposed
transaction;
(iii) a registration statement under the Securities
Act covering the Merger Shares proposed to be sold, exchanged,
transferred or otherwise disposed of, describing the manner and terms of
the proposed sale, transfer, exchange or other disposition, and
containing a current prospectus, shall have been filed with the SEC and
become effective under the Securities Act; or
(iv) an authorized representative of the SEC shall
have rendered written advice to the Stockholder (sought in writing by the
Stockholder or counsel to the Stockholder, with copies thereof and of
all other related communications delivered to
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Parent) to the effect that the SEC would take no action, or that the
staff of the SEC would not recommend that the SEC take action, with
respect to the proposed sale, transfer or other disposition of such
Merger Shares if consummated.
(c) The Stockholder also understands and agrees that
Parent, at its discretion, may cause stop transfer orders to be placed with its
transfer agent with respect to certificates for Merger Shares owned by the
Stockholder but not as to certificates for such Merger Shares as to which the
legend set forth in Section 7 is no longer required.
(d) The Stockholder shall observe and comply with the
Securities Act and the rules and regulations promulgated by the SEC
thereunder as now in effect or hereafter enacted or promulgated, and as from
time to time amended, in connection with any offer, sale, exchange, transfer,
pledge or other disposition of Merger Shares beneficially owned by the
Stockholder.
(e) From and after the Effective Time and for so long
as necessary in order to permit the Stockholder to sell Merger Shares
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the
Securities Act, Parent shall use reasonable efforts to file on a timely basis
all reports required to be filed by it pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, referred to in paragraph (c)(1)
of Rule 144 promulgated by the SEC under the Securities Act (or, if
applicable, Parent shall use reasonable efforts to make publicly available
the information regarding itself referred to in paragraph (c)(2) of Rule
144), in order to permit the Stockholder to sell, pursuant to the terms and
conditions of Rule 145 and the applicable provisions of Rule 144, Merger
Shares beneficially owned by the Stockholder.
5.2 STOCKHOLDER RELEASE{TC}. Effective as of the Effective Time
and for good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Stockholder (the "Releasor") on her behalf and on
behalf of her (i) heirs, executors, administrators, agents, successors and
assigns, attorneys, employees, (the "Releasor Persons"), as applicable,
hereby releases, waives and discharges the Company, Parent and Acquisition
Sub and their respective officers, directors, stockholders, agents,
successors and assigns (collectively, the "Released Parties"), from any and
all actions, causes of action, suits, debts, dues, sums of money, accounts,
bonds, bills, covenants, contracts, controversies, agreements, promises,
variances, trespasses, damages, judgments, executions, claims and demands
whatsoever, known or unknown, in law or equity (each a "Claim" and
collectively, the "Claims") arising from the Releasor's relationship with the
Company prior to and including the date hereof or the Releasor's status as a
stockholder, director, officer or employee of the Company prior to and
including the date hereof; PROVIDED, HOWEVER, that the Releasor does not
release the Released Parties from any claims in connection with any breach by
the Released Parties of this Agreement or the Related Agreements.
ARTICLE 6
CLOSING ACTIONS; DELIVERABLES{TC}
6.1 ACTIONS BEING TAKEN AT OR PRIOR TO CLOSING{TC}. The following
actions are being taken at or prior to the Closing:
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(a) STOCKHOLDER APPROVAL; AGREEMENT OF MERGER{TC}.
This Agreement and the Merger shall have been duly and validly approved and
adopted by the stockholders of the Company in accordance with the Delaware
Statute and the Company's Charter and By-laws, and the Agreement of Merger
shall have been executed and delivered by Acquisition Sub and the Company and
filed with and accepted by the Secretary of State of the State of Delaware.
(b) APPROVALS{TC}. All authorizations, consents,
orders or approvals of, or declarations or filings with or expiration of
waiting periods imposed by any Governmental Authority necessary for the
consummation of the transactions contemplated hereby shall have been obtained
or made or shall have occurred.
(c) LEGAL ACTION{TC}. No temporary restraining
order, preliminary injunction or permanent injunction or other order
preventing the consummation of the Merger shall have been issued by any
Federal or state court or other Governmental Authority and remain in effect.
(d) LEGISLATION{TC}. No Federal, state, local or
foreign statute, rule or regulation shall have been enacted which prohibits,
restricts or delays the consummation of the transactions contemplated by this
Agreement.
6.2 DELIVERABLES TO PARENT AND ACQUISITION SUB{TC}. The following
documents and other items are being delivered to Parent and Acquisition Sub
at the Closing:
(a) DELIVERY OF CERTIFICATES{TC}. The Old
Certificates, in the manner and otherwise in accordance with Section 2.2
hereof, are being delivered to Parent.
(b) OPINION OF THE COMPANY'S COUNSEL{TC}. A
favorable opinion dated the Closing Date is being delivered by Swidler,
Berlin, Shereff Freidman LLP, counsel to the Company, in favor of Parent and
Acquisition Sub, in form and substance reasonably satisfactory to Parent and
Acquisition Sub.
(c) CONSENTS AND APPROVALS{TC}. Duly executed copies
of all consents and approvals contemplated by this Agreement or the Company
Disclosure Schedule, in form and substance satisfactory to Parent and
Acquisition Sub, are being delivered by the Company.
(d) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC.{TC}.
Copies of all consents, authorizations, orders or approvals of, and filings
or registrations with, any Governmental Authority which are required for or
in connection with the execution and delivery by the Company and the
Stockholders of this Agreement, the Agreement of Merger and the Related
Agreements and the consummation by the Company and the Stockholder of the
transactions contemplated hereby, are being delivered by the Company.
(e) COMPANY EXPENSES{TC}. A true, correct and
complete schedule (the "Schedule of Expenses") of all Company Expenses paid
or incurred by or on behalf of the Company through the Closing Date,
accompanied by a certificate signed by the Chief Financial Officer of the
Company certifying the accuracy and completeness thereof, is being delivered
by
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the Company; and the Company is furnishing evidence satisfactory to Parent
and Acquisition Sub that the Company has paid the amount of Company Expenses.
(f) COMPANY EXPENSES RELEASE{TC}. A written
instrument in form and substance reasonably satisfactory to Parent and
Acquisition Sub is being delivered by each third party identified on the
Schedule of Expenses (i) acknowledging that upon receipt by each such party
in the ordinary course following the Effective Time after presentation of
detailed statements thereof of the respective amounts set forth therein
(each, a "Stated Amount"), such payment will constitute full payment of all
fees and expenses of such party constituting Company Expenses and (ii)
releasing Parent, Acquisition Sub, the Surviving Corporation and their
Affiliates from any liabilities or obligations in respect of the payment of
any fees and expenses that are or may be characterized as Company Expenses
other than the Stated Amounts (and concurrently with the payment of the
Stated Amounts all liability with respect thereto shall be deemed so
released).
(g) RESIGNATION OF DIRECTORS{TC}. Resignations are
being delivered by each of the directors and officers of the Company
immediately prior to the Effective Time, effective as of the Effective Time.
(h) OFFICER'S CERTIFICATES{TC}. Certain officers'
certificates are being delivered by the Company.
6.3 DELIVERABLES TO COMPANY{TC}. The following documents and other
items are being delivered to the Company at the Closing:
(a) GOVERNMENT CONSENTS, AUTHORIZATIONS, ETC.{TC}.
Copies of all consents, authorizations, orders or approvals of, and filings
or registrations with, any Governmental Authority which are required for or
in connection with the execution and delivery by Parent and Acquisition Sub
of this Agreement, the Agreement of Merger and the Related Agreements and the
consummation by Parent and Acquisition Sub of the transactions contemplated
hereby or thereby, are being delivered by Parent.
(b) PURCHASE PRICE{TC}. The delivery of the New
Certificates (representing the Merger Shares (other than the Escrow Shares))
and the cash consideration deliverable at the Effective Time in the manner
and otherwise in accordance with Article II hereof (and concurrent delivery
of Escrow Shares to the Escrow Agent in accordance with Section 2.2 hereof),
are being made by Parent.
(c) RELATED AGREEMENTS{TC}. Each of the Related
Agreements is being delivered by Parent to the extent that it is required or
contemplated by the parties hereto to be a party to any Related Agreement.
ARTICLE 7
ADDITIONAL AGREEMENTS{TC}
7.1 RESTRICTION ON TRANSFER{TC}.
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(a) The shares of Parent Preferred Stock to be issued to
each Stockholder at the Effective Time pursuant to the Merger and any shares of
capital stock or other securities received with respect thereto (collectively,
the "Restricted Securities") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "Transfer") except upon the
conditions specified in this Section 7.1, which conditions are intended to
insure compliance with the provisions of the Securities Act. Each Stockholder
shall observe and comply with the Securities Act and the rules and regulations
promulgated by the SEC thereunder as now in effect or hereafter enacted or
promulgated, and as from time to time amended, in connection with any Transfer
of Restricted Securities beneficially owned by the Stockholder.
(b) Each certificate representing Restricted Securities
issued to a Stockholder and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.1(c) and 7.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES OR
"BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE
CONDITIONS SPECIFIED IN SECTIONS 5.1 AND 7.2 OF THE AGREEMENT AND
PLAN OF REORGANIZATION AMONG GHS, INC., CONCEPT ACQUISITION
CORPORATION AND CONCEPT DEVELOPMENT, INC. AND THE OTHER
SIGNATORIES THERETO AND NO TRANSFER OF THESE SECURITIES SHALL BE
VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED.
UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, GHS HAS AGREED
TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING
THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN
THE NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF GHS, INC."
(c) Each Stockholder agrees, prior to any Transfer
of Restricted Securities, to give written notice to Parent of such Stockholder's
intention to effect such Transfer and to comply in all other respects with the
provisions of this Section 7.2. Each such notice shall describe the manner and
circumstances of the proposed Transfer and shall be accompanied by the written
opinion, addressed to Parent, of counsel for the holder of such Restricted
Securities, stating that in the opinion of such counsel (which opinion and
counsel (if other than Swidler, Berlin, Shereff Friedman LLP) shall be
reasonably satisfactory to Parent) such proposed transfer does not involve a
transaction requiring registration or qualification of such Restricted
Securities under the Securities Act. The holder thereof shall thereupon, with
the written consent of Parent,
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be entitled to Transfer such Restricted Securities in accordance with the terms
of the notice delivered by it to Parent. Each certificate or other instrument
evidencing the securities issued upon the Transfer of any such Restricted
Securities (and each certificate or other instrument evidencing any
untransferred balance of such Restricted Securities) shall bear the legend set
forth in Section 7.1(b) unless (x) in such opinion of counsel of Parent
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (y) Parent shall have waived the requirement of such
legends. No Stockholder shall Transfer any Restricted Securities until such
opinion of counsel has been given (unless waived by Parent or unless such
opinion is not required in accordance with the provisions of this Section
7.1(c)).
(d) Notwithstanding the foregoing provisions of this
Section 7.1, the restrictions imposed by this Section 7.1 upon the
transferability of Restricted Securities shall cease and terminate when (i) any
such shares are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as otherwise contemplated by
Section 7.1(c) and, pursuant to Section 7.1(c), the securities so transferred
are not required to bear the legend set forth in Section 7.1(c) or (ii) the
holder of such Restricted Securities has met the requirements for Transfer of
such Restricted Securities pursuant to Rule 144 or Rule 145, as applicable.
Whenever the restrictions imposed by this Section 7.1 shall terminate, as herein
provided, the holder of Restricted Securities as to which such restrictions have
terminated shall be entitled to receive from Parent, without expense, a new
certificate not bearing the restrictive legend set forth in Section 7.1(b) and
not containing any other reference to the restrictions imposed by this Section
7.1.
(e) Each Stockholder understands and agrees that Parent,
at its discretion, may cause stop transfer orders to be placed with its transfer
agent with respect to certificates for Restricted Securities owned by such
Stockholder but not as to certificates for such shares of Parent Preferred Stock
as to which the legend set forth in paragraph (b) of this Section 7.1 is no
longer required because one or more of the conditions set forth in Section
7.1(d) shall have been satisfied.
7.2 DISCLOSURE OF INFORMATION; NON-COMPETITION{ TC }. Each of the
Founders and the Stockholder acknowledges and recognizes that the Subject
Business has been conducted or is currently planned to be conducted by the
Company throughout the world, and further acknowledges and recognizes the highly
competitive nature of the industry in which the Subject Business is involved and
that, accordingly, in consideration of the premises contained herein, the
consideration to be received hereunder and the direct and indirect benefits to
each of the Founders and the Stockholder of the transactions contemplated
hereby, and in consideration of and as an inducement to Parent and Acquisition
Sub to enter into to this Agreement and to consummate the transactions
contemplated hereby:
(a) From and after the date hereof, no Founder or
Stockholder shall use or disclose to any Person, except as required by law or
judicial process, any Confidential Information (as defined below), for any
reason or purpose whatsoever, nor shall he or she make use of any of the
Confidential Information for his or her own purposes or for the benefit of any
Person except Parent and the Surviving Corporation. For purposes of this
Agreement, "Confidential Information" shall mean Intellectual Property Rights of
the Company, the Surviving Corporation or Parent or its Affiliates or the
Subject Business and the terms and
28
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provisions of this Agreement (other than information that is in the public
domain at the time of receipt thereof by such Stockholder, or otherwise becomes
public other than as a result of the breach by such Stockholder of his or her
agreement hereunder or is rightfully received from a third party without any
obligation of confidentiality to Parent or the Company or is independently
developed by such Stockholder). As used herein, the term "Subject Business"
shall mean any business conducted anywhere in the world of the type and
character of business engaged in by Parent or the Surviving Corporation.
(b) Each of the Founders and the Stockholder shall not
during the three-year period commencing at the Effective Time within the United
States or any other country in which Parent or a licensee of Parent is then
operating or preparing to operate, directly or indirectly, own, manage, operate,
join, control, be employed by, perform consulting services for, or participate
in the ownership, management, operation or control of, or be connected in any
manner with, any business or operation (other than by way of working for an
affiliate of any such business or operation which is not itself involved in any
such business or operation) of the type, character and content engaged in by the
Company.
ARTICLE 8
INDEMNIFICATION{ TC }
8.1 DEFINITIONS{ TC }. As used in this Agreement, the following terms
shall have the following meanings:
(a) "AFFILIATE{ TC }" as to any person means any entity,
directly or indirectly, through one or more intermediaries, controlling,
controlled by or under common control with such person.
(b) "EVENT OF INDEMNIFICATION{ TC }" shall mean the
following:
(i) the untruth, inaccuracy or breach of any
representation or warranty of the Company, the Stockholder or the Founders
(including the fact and circumstances underlying such untruth, inaccuracy or
breach) contained in Sections 3.1, 3.2 and 3.3 of this Agreement, or in the
Company Disclosure Schedule, any Exhibit or Schedule hereto or any document
delivered in connection herewith;
(ii) the breach of any agreement or covenant of
the Company or the Stockholders contained in this Agreement, the Related
Agreements or in the Company Disclosure Schedule, any Exhibit hereto or any
document delivered in connection herewith;
(iii) any claim, demand, liability or obligation of
any nature whatsoever, which arose or was incurred on or before the Closing
Date, or which was based on events occurring on or before the Closing Date, or
which was based on products sold or services performed by the Company or the
Stockholders on or before the Closing Date (in each case, other than claims,
demands, liabilities or obligations approved by Parent in writing prior to the
date hereof), notwithstanding that the date on which the claim, demand,
liability or obligation may arise or become manifest is after the Closing Date,
other than liabilities or obligations of the
29
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Company arising after the Closing Date under contracts and agreements entered
into prior to the Closing Date that are disclosed on the Company Disclosure
Schedule; or
(iv) any claim, demand, liability or obligation
sustained or suffered by the Company, Parent or the Surviving Corporation, or
any of them, arising from or in connection with (A) the action of the
Stockholders required to approve the transactions contemplated by this
Agreement, the Agreement and the Related Agreements, or (B) any assertion of
impropriety by any Stockholder against the Company, Parent or the Surviving
Corporation, or any of them, with respect to any actions or transactions of or
involving the Company prior to or at the Effective Time (including, without
limitation, the actions and transactions contemplated by this Agreement, the
Agreement of Merger and the Related Agreements).
(c) "INDEMNIFIED PERSONS{ TC }" shall mean and include
Parent, Acquisition Sub and the Surviving Corporation and their respective
Affiliates, successors and assigns, and the respective officers and directors of
each of the foregoing.
(d) "INDEMNIFYING PERSONS{ TC }" shall mean and include
(A) prior to Closing, the Company and each of the Stockholders and its or his
respective successors, assigns, heirs and legal representatives and estates, as
the case may be and (B) on and after the Closing, each of the Stockholders and
its or his respective successors, assigns, heirs and legal representatives and
estates, as the case may be.
(e) "LOSSES{ TC }" shall mean any and all losses,
claims, shortages, damages, liabilities, expenses (including reasonable
attorneys' and accountants' fees), assessments, Taxes (including interest or
penalties thereon) sustained, suffered or incurred by any Indemnified Person
arising from or in connection with any such matter that is the subject of
indemnification under Section 8.2 hereof.
8.2 INDEMNIFICATION GENERALLY{ TC }. The Indemnifying Persons shall
severally indemnify the Indemnified Persons from and against any and all Losses
arising from or in connection with any Event of Indemnification.
8.3 ASSERTION OF CLAIMS{ TC }. No claim shall be brought under
Section 8.2 hereof unless the Indemnified Persons, or any of them, at any time
prior to the applicable Survival Date, give the Stockholder (a) written notice
of the existence of any such claim, specifying the nature and basis of such
claim and the amount thereof, to the extent known or (b) written notice pursuant
to Section 8.4 of any third party claim, the existence of which might give rise
to such a claim but the failure so to provide such notice to the Stockholder
will not relieve the Indemnifying Persons from any liability which they may have
to the Indemnified Persons under this Agreement or otherwise (unless and only to
the extent that such failure results in the loss or compromise of any rights or
defenses of the Indemnifying Persons and they were not otherwise aware of such
action or claim). Upon the giving of such written notice as aforesaid, the
Indemnified Persons, or any of them, shall have the right to commence legal
proceedings prior or subsequent to the Survival Date for the enforcement of
their rights under Section 8.2 hereof.
30
<PAGE>
8.4 NOTICE AND DEFENSE OF THIRD PARTY CLAIMS{ TC }. Losses resulting
from the assertion of liability by third parties (each, a "Third Party
Claim"{ XE"\"Third Party Claim\""}) shall be subject to the following terms and
conditions:
(a) The Indemnified Persons shall promptly give written
notice to the Stockholders' Committee of any Third Party Claim that might give
rise to any Loss by the Indemnified Persons, stating the nature and basis of
such Third Party Claim, and the amount thereof to the extent known. Such notice
shall be accompanied by copies of all relevant documentation with respect to
such Third Party Claim, including, without limitation, any summons, complaint or
other pleading that may have been served, any written demand or any other
document or instrument. Notwithstanding the foregoing, the failure to provide
notice as aforesaid to the Stockholders' Committee will not relieve the
Indemnifying Persons from any liability which they may have to the Indemnified
Persons under this Agreement or otherwise (unless and only to the extent that
such failure results in the loss or compromise of any rights or defenses of the
Indemnifying Person and they were not otherwise aware of such action or claim).
(b) The Indemnified Persons shall defend any Third Party
Claims with counsel of their own choosing, and shall act reasonably and in
accordance with their good faith business judgment in handling such Third Party
Claims. The Stockholders' Committee and the Indemnifying Persons, on the one
hand, and the Indemnified Persons, on the other hand, shall make available to
each other and their counsel and accountants all books and records and
information relating to any Third Party Claims, keep each other fully apprised
as to the details and progress of all proceedings relating thereto and render to
each other such assistance as may be reasonably required to ensure the proper
and adequate defense of any and all Third Party Claims.
8.5 SURVIVAL OF REPRESENTATIONS AND WARRANTIES{ TC }. Subject to the
further provisions of this Section 8.5, the representations and warranties of
the Parent and Acquisition Sub shall be deemed to be a condition to the Merger
and shall survive the Effective Time for one year and the representations and
warranties made by the Company in Section 3.1, the Stockholders in Section 3.2
and the Founders in Section 3.3 hereof shall survive the Effective Time for one
year; PROVIDED, HOWEVER, that the representations and warranties set forth in
Section 3.1(h) (Tax Matters) shall survive for period of the applicable statute
of limitations. For convenience of reference, the date upon which any
representation and warranty contained herein shall terminate is referred to
herein as the "Survival Date." Anything contained herein to the contrary
notwithstanding, the representations and warranties of the Company contained in
this Agreement (including, without limitation, the Company Disclosure Schedule)
(i) are being given by the Company on behalf of the Stockholders and for the
purpose of binding the Stockholders to the terms and provisions of this Article
VIII and the Escrow Agreement, and as an inducement to Parent and Acquisition
Sub to enter into this Agreement and to approve the Merger (and the Company
acknowledges that Parent and Acquisition Sub have expressly relied thereon) and
(ii) are solely for the benefit of the Indemnified Persons and each of them.
Accordingly, no third party (including, without limitation, the Stockholders or
anyone acting on behalf of any thereof) other than the Indemnified Persons, and
each of them, shall be a third party or other beneficiary of such
representations and warranties and no such third party shall have any rights of
contribution against the Company or the Surviving Corporation with respect to
such
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<PAGE>
representations or warranties or any matter subject to or resulting in
indemnification under this Article VIII or otherwise.
ARTICLE 9
MISCELLANEOUS{ TC }
9.1 EXPENSES{ TC }. As used in this Agreement, "Transaction Costs"
shall mean, with respect to any party, all actual, out-of-pocket expenses
incurred by such party to third parties, in connection with this Agreement, the
Merger and all other transactions provided for herein and therein; but shall not
in any event include general overhead; the time spent by employees of such party
internally; postage, telephone, telecopy, photocopy and delivery expenses of
such party; permit and filing fees; and other non-material expenses that are
incidental to the ordinary course of business. Each party hereto shall bear its
own fees and expenses in connection with the transactions contemplated hereby;
PROVIDED, HOWEVER, that in the event the Merger shall be consummated, Parent and
Acquisition Sub shall bear all Transaction Costs of Parent and Acquisition Sub
and the Stockholders shall bear all Transaction Costs of the Company, whether or
not such fees and expenses have been paid by the Company on or before the
Closing Date and whether or not such fees and expenses are reflected in the
Company Disclosure Schedule or the Schedule of Expenses (such Transaction Costs
of the Company being herein collectively referred to as the "Company Expenses").
9.2 ENTIRE AGREEMENT{ TC }. This Agreement (including the Company
Disclosure Schedule and the Exhibits attached hereto) and the other writings
referred to herein contain the entire agreement among the parties hereto with
respect to the transactions contemplated hereby and supersede all prior
agreements or understandings, written or oral, among the parties with respect
thereto including, but not limited to, the Original Reorganization Agreement.
9.3 DESCRIPTIVE HEADINGS{ TC }. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
9.4 PUBLIC ANNOUNCEMENTS{ TC }. The parties hereto agree that, to the
maximum extent feasible, but subject, in the case of Parent, to its public
disclosure and, as to all parties, other legal and regulatory obligations, they
shall advise and confer with each other prior to the issuance (and provide
copies to the other party prior to issuance) of any public announcements,
reports, statements or releases pertaining to the Merger; PROVIDED that the
parties shall not disclose the purchase price of the Merger in any such public
announcements.
9.5 NOTICES{ TC }.
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally or sent by
nationally-recognized overnight courier or by registered or certified mail,
postage prepaid, return receipt requested or by telecopier, with confirmation as
provided above addressed as follows:
(a) if to Parent or Acquisition Sub, to:
GHS, Inc.
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<PAGE>
2400 Research Blvd.
Rockville, Maryland 20850
Attention:
Telecopier: (301) 308-3254
with copies to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151;
(b) if to the Company, to:
Concept Development, Inc.
20 Taconic Road
Millwood, New York 10546
Attention: William Zanker
Telecopier: (212) 967-6256;
with a copy to:
Swidler, Berlin, Shereff Friedman LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Morris Orens, Esq.
Telecopier: (212) 891-9507
(c) if to the Founders, to:
20 Taconic Road
Millwood, New York 10546
Attention: William Zanker and Debbie Dworkin
Telecopier: (212) 967-6256;
(d) if to the Stockholder, at her address set forth on
SCHEDULE 10.5 attached hereto;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such
notices or communications shall be deemed to be received (a) in the case of
personal delivery or telecopy, on the date of such delivery, (b) in the case of
nationally-recognized overnight courier, on the next business day after the date
when sent and (c) in the case of mailing, on the third business day following
the date on which the piece of mail containing such communication was posted.
33
<PAGE>
9.6 COUNTERPARTS{ TC }. This Agreement may be executed in any number
of counterparts by original or facsimile signature, each such counterpart shall
be an original instrument, and all such counterparts together shall constitute
one and the same agreement.
9.7 GOVERNING LAW{ TC }. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without regard to principles
of conflicts of laws) except for those terms and conditions that specifically
relate to Merger as described in Article I hereof, which shall be governed by
and construed in accordance with the General Corporation Law of the State of
Delaware (without regard to principles of conflicts of laws).
9.8 BENEFITS OF AGREEMENT{ TC }. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
9.9 PRONOUNS{ TC }. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction.
9.10 AMENDMENT, MODIFICATION AND WAIVER{ TC }. This Agreement shall
not be altered or otherwise amended except pursuant to (a) an instrument in
writing signed by Parent and the Company prior to the Effective Date, if Article
VII is not affected by such alteration or amendment and (b) an instrument in
writing signed by (i) Parent, (ii) the Company and (iii) the Stockholders, if
Article VII is affected thereby or the alteration or amendment occurs subsequent
to the Effective Date; PROVIDED, HOWEVER, that after the approval and adoption
of this Agreement and the Merger by the Stockholders, no amendment of this
Agreement shall be made which pursuant to the Delaware Statute or other law
requires the further approval of the Stockholders; PROVIDED FURTHER, HOWEVER,
that any party to this Agreement may waive any obligation owed to it by any
other party under this Agreement. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach.
[Remainder of this page intentionally left blank]
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<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
and Plan of Reorganization to be executed on its behalf as of the day and year
first above written.
GHS, INC.
By: /s/ Alan Gold
---------------------------------
Name: Alan Gold
Title: President
CONCEPT ACQUISITION CORPORATION
By: /s/ Beth Polish
---------------------------------
Name: Beth Polish
Title: President
CONCEPT DEVELOPMENT, INC.
By: /s/ William Zanker
---------------------------------
Name: William Zanker
Title: President
FOUNDERS:
/s/ William Zanker
------------------------------------
William Zanker
/s/ Debbie Dworkin
------------------------------------
Debbie Dworkin
STOCKHOLDER:
/s/ Debbie Dworkin
------------------------------------
Debbie Dworkin
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<PAGE>
SCHEDULE 2.2(b)
ESCROW SHARES
10,000 SHARES OF PARENT PREFERRED STOCK
SCHEDULE 3.2
STOCKHOLDER SHARES
1 SHARE OF COMPANY COMMON STOCK OWNED BY D. DWORKIN
SCHEDULE 4.1(a)
COMPANY AFFILIATES
D. DWORKIN
W. ZANKER
SCHEDULE 6.2(e)
CONTINUING EMPLOYEES
W. ZANKER
<PAGE>
SCHEDULE 10.5
STOCKHOLDERS' ADDRESSES
20 TACONIC ROAD
MILLWOOD, NEW YORK 10546
37
<PAGE>
EXHIBIT A
FORM OF AGREEMENT OF MERGER
EXHIBIT B
FORM OF ESCROW AGREEMENT
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT
EXHIBIT D
FORM OF REPURCHASE AGREEMENT
<PAGE>
Exhibit 2(c)
AGREEMENT OF MERGER dated
as of May 27, 1999, between CONCEPT
ACQUISITION CORPORATION, a Delaware
corporation ("Acquisition Sub"), and
CONCEPT DEVELOPMENT, INC., a Delaware
corporation (the "Company").
The Boards of Directors of Acquisition Sub and the Company
have each duly approved and adopted this Agreement, the Agreement and Plan of
Reorganization dated as of May 27, 1999, (the "Reorganization Agreement"),
among, GHS, Inc. a Delaware corporation ("Parent"), Acquisition Sub, a
wholly-owned subsidiary of Parent, the Company and the other parties thereto and
the proposed merger of Acquisition Sub with and into the Company in accordance
with this Agreement, the Reorganization Agreement and the Delaware General
Corporation Law (the "Delaware Statute"), whereby, among other things, the
issued and outstanding shares of common stock, no par value, of the Company (the
"Company Common Stock"), will be exchanged and converted into the right to
receive cash and shares of Series C preferred stock, $.01 par value, of Parent
(the "Parent Preferred Stock") in the manner set forth in this Agreement and the
Reorganization Agreement, upon the terms and subject to the conditions set forth
in this Agreement and the Reorganization Agreement.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Reorganization Agreement and the
representations, warranties, covenants, agreements, conditions and promises
contained herein and therein, the parties hereby agree as follows:
ARTICLE I
THE MERGER
Section 1. THE MERGER. In accordance with the provisions of this
Agreement, the Reorganization Agreement and the Delaware Statute, Acquisition
Sub shall be merged with and into the Company (the "Merger"), which at and after
the Effective Time (as defined in Article I, Section 2 hereof) shall be, and is
sometimes herein referred to as, the "Surviving Corporation". Acquisition Sub
and the Company are sometimes referred to as the "Constituent Corporations".
Section 2. THE EFFECTIVE TIME OF THE MERGER. Subject to the provisions
of the Reorganization Agreement, this Agreement shall be executed and delivered
to and filed with the Secretary of State of the State of Delaware by each of the
Constituent Corporations on the Closing Date in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective (the
"Effective Time") upon the filing of this Agreement with the Secretary of State
of the State of Delaware and the issuance of a certificate of merger by the
Secretary of State of the State of Delaware.
Section 3. EFFECT OF MERGER. At the Effective Time the separate
existence of Acquisition Sub shall cease and Acquisition Sub shall be merged
with and into the Surviving
<PAGE>
Corporation, and the Surviving Corporation shall possess all of the rights,
privileges, powers and franchises of a public as well as of a private nature,
and be subject to all the restrictions, disabilities and duties of each of the
Constituent Corporations as provided in Section 251 of the Delaware Statute.
Section 4. CHARTER AND BY-LAWS OF SURVIVING CORPORATION. From and
after the Effective Time, (i) the Charter of Acquisition Sub shall be the
Charter of the Surviving Corporation, unless and until altered, amended or
repealed as provided in the Delaware Statute or the Charter, (ii) the by-laws of
Acquisition Sub shall be the by-laws of the Surviving Corporation, unless and
until altered, amended or repealed as provided in the Delaware Statute, the
Charter or such by-laws, (iii) the directors of Acquisition Sub shall be the
directors of the Surviving Corporation, unless and until removed, or until their
respective terms of office shall have expired, in accordance with the Delaware
Statute, the Charter and the by-laws of the Surviving Corporation, as applicable
and (iv) the officers of the Acquisition Sub shall be the officers of the
Surviving Corporation, unless and until removed, or until their terms of office
shall have expired, in accordance with the Delaware Statute, the Charter and the
by-laws of the Surviving Corporation, as applicable.
Section 5. TAKING OF NECESSARY ACTION. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may be
necessary or appropriate in order to effectuate the Merger as expeditiously as
reasonably practicable, in accordance with this Agreement, the Reorganization
Agreement and the Delaware Statute.
Section 6. TAX FREE REORGANIZATIONS. For Federal income tax purposes,
the parties intend that the Merger be treated as a tax-free reorganization
within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), by reason of Section 368(a)(2)(E) of the Code.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
Section 1. TOTAL CONSIDERATION; EFFECT ON CAPITAL STOCK. The entire
consideration payable by Parent with respect to all outstanding shares of
capital stock of the Company and for all options, warrants, rights, calls,
commitments, agreements or arrangements of any character to which the Company is
a party or by which it is bound calling for the issuance of shares of capital
stock of the Company or any securities convertible into or exercisable or
exchangeable for, or representing the right to purchase or otherwise receive,
directly or indirectly, any such capital stock, or other arrangement to acquire,
at any time or under any circumstance, capital stock of the Company or any such
other securities (hereinafter collectively referred to as the "Fully Diluted
Company Shares,") other than any capital stock of the Company owned or held by
Parent or any Affiliate of Parent, shall be an aggregate of (A) 50,000 shares of
Parent Preferred Stock (the "Total Parent Share Amount") and (B) $2,000,000
MINUS the $200,000 to be paid to Swidler, Berlin, Shereff, Friedman, LLP on the
date hereof, (the "Aggregate Cash Consideration") in cash (the Aggregate Cash
Consideration, together with the Total Parent Share Amount, being sometimes
hereinafter collectively referred to as the "Aggregate Purchase Price"). For
purposes of the calculation of the exchange ratio for Parent Preferred Stock
under
2
<PAGE>
Article II, Section 1(c)(i), it is assumed that the number of Fully Diluted
Company Shares is one (1) (the "Fully Diluted Company Share Amount"). At the
Effective Time, subject and pursuant to the terms and conditions of this
Agreement and the Reorganization Agreement, by virtue of the Merger and without
any action on the part of the Constituent Corporations or the holders of the
capital stock or options to purchase capital stock of the Constituent
Corporations:
(a) CAPITAL STOCK OF ACQUISITION SUB. Each issued and
outstanding share of common stock, $.01 par value per share, of Acquisition Sub
shall be converted into one share of common stock, $.01 par value per share, of
the Surviving Corporation;
(b) CANCELLATION OF CERTAIN SHARES OF COMPANY STOCK. Each
share of capital stock of the Company that is authorized but unissued shall
cease to exist and no Parent Preferred Stock or other consideration shall be
delivered in exchange therefor.
(c) EXCHANGE OF COMPANY STOCK. Subject to Article II, Section
2 hereof, each share of Company Common Stock issued and outstanding at the
Effective Time, including all accrued and unpaid dividends thereon, shall be
exchanged and converted into the right to receive:
(i) 50,000 shares of Parent Preferred Stock which are
deliverable at the Closing and are subject to the repurchase rights set forth in
the Repurchase Agreement; and
(ii) $2,000,000 MINUS the $200,000 to be paid to
Swidler, Berlin, Shereff, Friedman, LLP which shall be payable at the Closing.
For convenience of reference, the shares of Parent Preferred Stock to be issued
upon the exchange and conversion of Company Common Stock in accordance with this
Section 2.1(c) are sometimes hereinafter collectively referred to as the "Merger
Shares".
(d) SHARES OF DISSENTING SHAREHOLDERS. Each issued and
outstanding share of Company Stock held by a Dissenting Stockholder, if any,
shall not be exchanged and converted as described in Article II, Section 1(c)
hereof but shall become the right to receive such consideration as may be
determined to be due to such Dissenting Stockholder pursuant to the Delaware
Statute; provided, however, that each share of Company Stock issued and
outstanding at the Effective Time and held by a Dissenting Stockholder who or
which shall, after the Effective Time, withdraw his or its demand for appraisal
or lose or fail to perfect his or its right of appraisal as provided in the
Delaware Statute shall be deemed, as of the Effective Time, to be exchanged and
converted into Parent Preferred Stock as provided in Article II, Section 2(d),
without interest. After the Effective Time, as provided in Section 262 of the
Delaware Statute, no Dissenting Stockholder will be entitled to vote the shares
of Company Common Stock subject to such Dissenting Stockholder's demand for
appraisal for any purpose or be entitled to the payment of dividends or other
distributions on such shares. The Company shall give Parent prompt notice of any
demands received by the Company for fair value of such Company Stock, and Parent
shall have the right to participate in all the negotiations and proceedings with
respect to such demands. The Company shall not, except with the prior written
consent of Parent, make any payment (except to the extent that any such payment
is pursuant to a court order) with respect to, or settle or offer to settle, any
such demands.
Section 2. ESCROW DEPOSIT; EXCHANGE OF CERTIFICATES.
3
<PAGE>
(a) ESCROW AGREEMENTS. At the Effective Time, the
Stockholder, Parent and State Street Bank and Trust Company (the "Escrow Agent")
shall enter into an escrow agreement in the form of Exhibit B to the
Reorganization Agreement (the "Escrow Agreement"). The Escrow Agreement is being
entered into for the purpose of securing the indemnification obligations of the
Stockholders under Article VII of the Reorganization Agreement.
(b) ESCROW DEPOSIT. At the Effective Time, Parent
shall cause to be deposited with the Escrow Agent (i) 5,000 shares of Parent
Preferred Stock ("Escrow Shares") and (ii) three stock powers duly endorsed in
blank for transfer on behalf of the stockholder, and the stockholder by her
execution and delivery of the Reorganization Agreement authorizes and directs
Parent to make such deposit on her behalf.
(c) PROCEDURE FOR EXCHANGE. Immediately following the
Effective Time, Parent shall deliver to the Stockholder, other than Parent or
any subsidiary of Parent, of a certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Company
Common Stock (each, an "Old Certificate") a certificate (a "New Certificate")
representing that number of Merger Shares (other than the Escrow Shares) which
such holder has the right to receive pursuant to Article II, Section 1(c)(i)
with respect to such Old Certificate against receipt by Parent of (i) such Old
Certificate for cancellation and (ii) an executed letter of transmittal, and the
Old Certificate so surrendered shall forthwith be canceled (the certificates
representing the Escrow Shares having therefore been deposited on behalf of the
Stockholder into escrow as contemplated by Article II, Section 2(b). In the
event of a transfer of ownership of shares of Company Common Stock which is not
registered on the transfer records of the Company, a New Certificate
representing the proper number of shares of Parent Preferred Stock may be issued
to a transferee if the Old Certificate representing such Company Common Stock is
presented to Parent, accompanied by all documents required to evidence and
effect such transfer and by evidence that any applicable stock or other transfer
taxes have been paid. Until surrendered as contemplated by Article II, Section
2, each Old Certificate shall be deemed, on and after the Effective Time, to
represent only the right to receive upon such surrender, New Certificates
representing Merger Shares (other than the Escrow Shares) as contemplated by
Article II, Section 1(c)(i), without interest. All Escrow Shares shall be held
by, and distributed in accordance with, the terms and provisions of the Escrow
Agreement.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All
Shares of Parent Preferred Stock issued upon the surrender for exchange of
shares of Company Common Stock in accordance with the terms of this Article II
shall be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock. If, after the Effective Time,
any Old Certificate is presented to the Surviving Corporation for any reason,
such Old Certificate shall be canceled and exchanged as provided in this Article
II.
(e) NO LIABILITY. None of Parent, Acquisition Sub or
the Company shall be liable to any holder of shares of Company Common Stock or
Parent Preferred Stock, as the case may be, for shares (or dividends or
distributions with respect thereto) of Parent Preferred Stock to be issued in
exchange for Company Common Stock pursuant to this Article II, Section 2, if, on
or after the expiration of six months following the Effective Time, such shares
are delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
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(f) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES.
In the event any Old Certificate shall have been lost, stolen or destroyed, upon
the making of an affidavit to that effect by the person claiming such Old
Certificate to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in such amount as Parent may reasonably direct
as indemnity against any claim that may be made against it with respect to such
Old Certificate, Parent will issue in exchange for such lost, stolen or
destroyed Old Certificate the Merger Shares and cash in lieu of fractional
shares deliverable in respect thereof pursuant to this Agreement.
ARTICLE III
MISCELLANEOUS
Section 1. ENTIRE AGREEMENT. This Agreement and the Reorganization
Agreement (including the Company Disclosure Schedule and the Exhibits attached
thereto) and the other writings referred to therein contain the entire agreement
among the parties hereto with respect to the transactions contemplated hereby
and supersede all prior agreements or understandings, written or oral, among the
parties with respect thereto including, but not limited to, the Original
Reorganization Agreement.
Section 2. NOTICES. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested or by telecopier,
with confirmation as provided above addressed as follows:
(i) if to Parent or Acquisition Sub, to:
GHS, Inc.
2400 Research Blvd.
Rockville, Maryland 20850
Attention:
Telecopier: (301) 308-3254
with copies to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151;
(b) if to the Company, to:
Concept Development, Inc.
20 Taconic Road
Millwood, New York 10546
Attention: William Zanker
Telecopier: (212) 967-6256;
5
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with a copy to:
Swidler, Berlin, Shereff Friedman LLP
919 Third Avenue
New York, New York 10022-9998
Attention: Morris Orens, Esq.
Telecopier: (212) 891-9507
Section 3. COUNTERPARTS. This Agreement may be executed in any number
of counterparts by original or facsimile signature, each such counterpart shall
be an original instrument, and all such counterparts together shall constitute
one and the same agreement.
Section 4. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein (without regard to principles
of conflicts of laws) except for those terms and conditions that specifically
relate to Merger as described in Article I of the Reorganization Agreement,
which shall be governed by and construed in accordance with the General
Corporation Law of the State of Delaware (without regard to principles of
conflicts of laws).
Section 5. AMENDMENT, MODIFICATION AND WAIVER. The Reorganization
Agreement shall not be altered or otherwise amended except pursuant to (a) an
instrument in writing signed by Parent and the Company prior to the Effective
Date, if Article VII of the Reorganization Agreement is not affected by such
alteration or amendment and (b) an instrument in writing signed by (i) Parent,
(ii) the Company and (iii) the Stockholders, if Article VII of the
Reorganization Agreement is affected thereby or the alteration or amendment
occurs subsequent to the Effective Date; provided, however, that after the
approval and adoption of this Agreement and the Merger by the Stockholders, no
amendment of this Agreement shall be made which pursuant to the Delaware Statute
or other law requires the further approval of the Stockholders; provided
further, however, that any party to the Reorganization Agreement may waive any
obligation owed to it by any other party under the Reorganization Agreement. The
waiver by any party hereto of a breach of any provision of the reorganization
Agreement shall not operate or be construed as a waiver of any subsequent
breach.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement of Merger to be executed and delivered on its behalf as of the date
first above written.
CONCEPT ACQUISITION CORPORATION
By: /s/ Beth Polish
--------------------------
Name: Beth Polish
Title: President
CONCEPT DEVELOPMENT, INC.
By: /s/ William Zanker
--------------------------
Name: William Zanker
Title: President
<PAGE>
OFFICERS CERTIFICATE
OF
CONCEPT ACQUISITION CORPORATION
(A Delaware corporation)
--------------------------------------
Beth Polish hereby certifies that:
1. Beth Polish is the President and Secretary of CONCEPT
ACQUISITION CORPORATION, a Delaware corporation (the "Corporation").
2. The Corporation has only one class of shares and the total
number of outstanding shares is 100.
3. The principal terms of the Agreement of Merger to which
this certificate is attached, having been duly approved by the Board of
Directors of the Corporation, was then submitted to the sole shareholder of the
Corporation for approval and adoption by written consent in lieu of a
Shareholder meeting, and the sole shareholder of the Corporation adopted and
approved the Agreement of Merger by executing a written consent dated May 26,
1999, all in accordance with the Delaware General Corporations Law.
4. The percentage vote required of the outstanding shares of
common stock of the Corporation was more than 50%.
5. Equity securities of the Corporation's parent corporation,
GHS, Inc., a Delaware corporation, are to be issued in the Merger (as defined in
the Agreement of Merger) and no vote of the stockholders of the parent
corporation was required.
I further declare under penalty of perjury under the laws of
the State of Delaware that the matters set forth in this certificate are true
and correct and of our own knowledge.
May 27, 1999
/s/ Beth Polish
----------------------------------
Beth Polish
President, Secretary and Treasurer
<PAGE>
OFFICER'S CERTIFICATE
OF
CONCEPT DEVELOPMENT, INC.
(A Delaware corporation)
William Zanker and Debbie Dworkin certify that:
1. William Zanker is the President of CONCEPT DEVELOPMENT, INC., a
Delaware corporation (the "Corporation") and Debbie Dworkin is the Secretary of
the Corporation.
2. The number of outstanding shares of the Corporation at May 27, 1999,
the date of the approval and adoption of the Agreement of Merger to which this
certificate is attached by written consent in lieu of a shareholder meeting, was
100 shares of Common Stock.
3. The principal terms of the Agreement of Merger to which this
certificate is attached, having been duly approved by the Board of Directors of
the Corporation, was then submitted to the shareholders of the Corporation for
approval and adoption by written consent in lieu of a shareholder meeting, and
shareholders of the Corporation holding a number of outstanding shares of each
class equaling or exceeding the vote required in accordance with the Delaware
Corporations Code adopted and approved the Agreement of Merger by executing and
delivering a written consent dated May __, 1999.
4. The percentage vote required of the outstanding shares was more than
50% of the outstanding shares of Common Stock, voting as a single class.
We further declare under penalty of perjury under the laws of the State
of Delaware that the matters set forth in this certificate are true and correct
and of our own knowledge.
Dated: May 27, 1999
/s/ William Zanker
------------------------------------
William Zanker
President
/s/ Debbie Dworkin
------------------------------------
Debbie Dworkin
Secretary
<PAGE>
* Confidential treatment has been granted for certain portions of this
exhibit. Omitted portions have been filed separately with the Commission.
CONTENT PROVIDER AGREEMENT AND LICENSE
This AGREEMENT effective as of the 23rd day of April, 1999, by
and between Change Your Life.com, LLC ("Change Your Life"), a Delaware limited
liability company, with its principal offices at 704 Broadway, New York, NY
10003, Anthony J. Robbins, an individual resident in San Diego, California
("Robbins"), Robbins Research International Inc., a Nevada corporation, with its
principal offices at 9191 Town Center Drive, Suite 600, San Diego, California
92122 (Robbins and Robbins Research International Inc., collectively, the
"Robbins Group"). Change Your Life and the Robbins Group may hereinafter each be
referred to as a "Party" and collectively as the "Parties".
1. DEFINITIONS
1.1 "Content" means text, graphics, photographs, animation,
characters, illustrations, features, recordings, video, audio,
CD-ROMS, proprietary software packages, tools and systems, and/or
other data or information relating to any subject.
1.2 "CYL" means Change Your Life and any divisions, subsidiaries, and
successors thereto and any parent or affiliate thereof.
1.3 "Change Your Life Content" means (i) any Content developed, owned
or controlled by Change Your Life and (ii) any interactive
Content supplied to Change Your Life by the Robbins Group, other
than Robbins Group Property.
1.4 "Change Your Life Site Channel" means a generic area within the
Change Your Life Site that is targeted to a specific subject
matter (such as career, relationships, etc.) but excludes those
features or areas that do not relate to one particular subject
matter (i.e. shopping, chat and community).
1.5 "CYL Network" means all channels, programming, products, services
and ventures featured on the Change Your Life Site as well as
other channels, programming, products and ventures whether or not
appearing on the Change Your Life Site, such as co-branded,
syndicated, private label and joint venture and partnership
offerings and endeavors, in which CYL has input or an economic
interest.
1.6 "Change Your Life Site" means the Internet sites or areas
developed, supported, sponsored, owned or controlled by Change
Your Life whether for business or consumer applications.
1.7 "Enhancement Development Cost" means direct, out-of-pocket cash
development costs (excluding any general and administrative costs
and other overhead items) expended by the Robbins Group to
develop an Enhancement.
<PAGE>
1.8 "Fixed Icon" means a branded button that is placed in a fixed
position on the home page of a Change Your Life Site Channel and
links directly to the Robbins Group/Change Your Life Site.
1.9 "Impression" means user exposure to a page on the Change Your
Life Site.
1.10 "Intellectual Property Rights" means all inventions, discoveries,
trademarks, patents, domain names, URLs, trade names, copyrights,
moral rights, jingles, know-how, intellectual property, software,
shop rights, licenses, developments, research data, designs,
technology, trade secrets, test procedures, processes, route
lists, customer lists (subject to the limitations set forth in
Exhibit B hereto), computer programs, computer discs, computer
tapes, literature, reports and other confidential information,
intellectual and similar intangible property rights, whether or
not patentable or copyrightable (or otherwise subject to legally
enforceable restrictions or protections against unauthorized
third party usage), and any and all applications for,
registrations of and extensions, divisions, renewals and
reissuance of, any of the foregoing, and rights therein,
including without limitation (a) rights under any royalty or
licensing agreements, and (b) programming and programming rights,
on any distribution medium (i.e. audio, video, film, digital).
1.11 "Internet" means any network of interconnected computer networks,
using the Transmission Control Protocol/Internet Protocol and/or
such other standard network interconnection protocols as may be
adopted from time to time, which is used to transmit Content that
is directly or indirectly delivered to a computer or other
digital electronic device for display to an end-user, whether
such Content is delivered through on-line browsers, off-line
browsers, or through "push" technology, electronic mail,
broadband distribution, satellite, wireless or otherwise, and any
subset of such network, such as "intranets."
1.12 "Internet Site" means any site or service delivering Content on
or through the Internet, world-wide web, corporate intranets,
private data networks or proprietary on-line service, including,
without limitation, America Online, Compuserve, Prodigy and the
Microsoft Network.
1.13 "Person" means any natural person, legal entity, or other
organized group of persons or entities. (All pronouns whether
personal or impersonal, which refer to a Person include natural
persons and other Persons.)
1.14 "Robbins Group Core Business" means in-person seminars,
television infomercials, one-on-one human coaching, printed books
and audio and video tapes, marketed, distributed or supplied by
the Robbins Group, other than on or through the Internet.
1.15 "Robbins Group/Change Your Life Content" means new Content (i)
created jointly by Change Your Life and the Robbins Group or
their representatives, (ii) created by Change Your Life based on
or derived from Robbins Group Content or (iii) any
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Enhancement for which the Enhancement Development Cost has been
recouped as set forth in Section 2.4.
1.16 "Robbins Group Content" means any existing or future non-Internet
Content (i.e. Content that is not distributed on or through or
utilizes the Internet) that is owned by the Robbins Group and
relates to, among other things, the Robbins Group Core Business.
1.17 "Robbins Group/Change Your Life Site" is defined in Section 2.1
hereof.
1.18 "Robbins Group Products" means all existing and future Robbins
Group-branded, affiliated and sourced products, including books,
audio and video tapes and other merchandise, but shall exclude
off-line coaching services that are not marketed, serviced or
supported through the Internet.
1.19 "Robbins Group Marks" means the existing trademarks and service
marks of the Robbins Group set forth on Exhibit E hereto, as from
time to time amended so as to include all future trademarks and
service marks, to the extent that the Robbins Group has an
interest therein.
1.20 "Robbins Group Property" is defined in Section 9.1(a) hereof.
1.21 "Robbins Group Content Deliverables" is defined in Exhibit A
hereof.
2. DISTRIBUTION; PROGRAMMING
2.1 ROBBINS GROUP/CHANGE YOUR LIFE SITE. The Robbins Group shall have a
co-branded area on the Change Your Life Site (the "Robbins Group/Change Your
Life Site"). In addition, the Robbins Group will receive a Fixed Icon within
one-half of up to six Change Your Life Site Channels, i.e. no more than three
Fixed Icons. In the event of an odd number of channels (up to and including five
channels), the number of channels for the purpose of calculating the number of
Fixed Icons for the Robbins Group shall be rounded up to the next even number,
i.e. one shall become two, three shall become four and five shall become six. If
there are more than six Change Your Life Site Channels, the Robbins Group and
Change Your Life shall mutually agree on the number of additional Fixed Icons to
be provided to the Robbins Group within the additional Change Your Life Site
Channels, which shall in any event result in Fixed Icons in at least one-third
of such additional Change Your Life Site Channels. The Robbins Group will be
listed as a resource on those Change Your Life Site Channels in which the
Robbins Group does not have a Fixed Icon.
2.2 CONTENT. Subject to the terms of this Agreement, CYL shall have the
right to integrate, use and develop existing or future Robbins Group Content and
Robbins Group/Change Your Life Content anywhere on the CYL Network as further
described in Section 3 hereof. The Robbins Group/Change Your Life Site shall
consist of (i) Robbins Group Content and any other Content licensed, sublicensed
and/or published by the Robbins Group in connection with its products, services
or publications including, without limitation, elements described on EXHIBIT A
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hereto, (ii) Robbins Group/Change Your Life Content, (iii) Change Your Life
Content and any other Content licensed, sublicensed and/or published by CYL in
connection with its products, services or publications and (iv) other elements
as mutually agreed by CYL and the Robbins Group. The Robbins Group shall not
authorize or permit any third party (including but not limited to affiliates,
unaffiliated parties, strategic partners, joint venture partners and others) to
distribute any Content on the CYL Network without CYL's prior written approval.
2.3 DEDICATED EMPLOYEES. Change Your Life will dedicate a team of at
least six individuals whose primary responsibility will be the development and
maintenance of the (i) Robbins Group Content on the CYL Network and (ii) Robbins
Group/Change Your Life Content (the "Robbins Team"). Such individuals will be
employed by and subject to the management control of Change Your Life; PROVIDED,
HOWEVER, that Robbins will have the right to approve the selection of the
General Manager of the Robbins Team. All other personnel and resources to be
dedicated to any Robbins Group project will be determined in accordance with and
subject to Change Your Life's periodic personnel and budgeting process.
2.4 ROBBINS GROUP ENHANCEMENTS. (a) If the Robbins Group proposes that
Change Your Life develop an Internet-based product offering that was not
previously agreed to by the Parties (an "Enhancement Product") and Change Your
Life determines not to commit development dollars to such Enhancement Product
(an "Enhancement"), then the Robbins Group may develop such Enhancement
utilizing its own funding and resources; PROVIDED, HOWEVER, such Enhancement (i)
shall conform to all uniformity and technical requirements of Change Your Life,
including, without limitation, look, feel and functionality, (ii) shall not be
available outside the CYL Network, (iii) shall not cause or result in a material
adverse effect on CYL and (iv) shall not be developed within six months of the
launch of the CYL Network. CYL will not be permitted to distribute such
Enhancement outside of the Robbins Group/Change Your Life Site without the
consent of the Robbins Group until the Robbins Group recoups its Enhancement
Development Cost plus fifty percent (50%) of such costs from the compensation to
which it is entitled pursuant to Section 7, at which time the Enhancement shall
be deemed to be Robbins Group/Change Your Life Content. Change Your Life may
incur and shall charge the Robbins Group for certain costs associated with an
Enhancement (if applicable), including, without limitation, cost of (a)
integrating of such Enhancement in the Robbins Group/Change Your Life Site, (b)
servicing, sales commissions and tracking of advertising or sponsorship
associated with such Enhancement, (c) transaction processing associated with
such Enhancement and (d) any revenue sharing arrangements with marketing and
distribution partners of CYL ("Change Your Life Enhancement Costs"). CYL will
charge the Robbins Group for Change Your Life Enhancements Costs based on its
then current actual costs.
(b) Until the Robbins Group has received an amount equal to
its Enhancement Development Cost plus fifty percent (50%), the Robbins Group
shall (i) be entitled to receive in cash upon receipt by Change Your Life a
share of those advertising revenues that are directly attributable to such
Enhancement, which revenue share shall be 25% greater than the Standard
Advertising Revenue Amount set forth on Exhibit B and (ii) if such Enhancement
is a fee-based product (i.e., user of Enhancement must pay for use of such
Enhancement), then the Robbins
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Group shall be entitled to receive any revenues net of Change Your Life
Enhancement Costs, received by Change Your Life and directly attributable to
such Enhancement.
If the Robbins Group collects revenues associated with such Enhancement, then
the Robbins Group will remit to Change Your Life all Change Your Life
Enhancements Costs. After the Robbins Group has recouped its Enhancement
Development Cost plus fifty percent (50%) for such Enhancement, the terms of
Section 7 hereof shall apply.
(c) Each Enhancement shall comply with the following terms:
(i) no Enhancement may reside outside the domain
of the Change Your Life Site or on any
server outside the CYL Network;
(ii) before an Enhancement may be implemented,
Change Your Life must be provided with
adequate time in its reasonable discretion
to review fully and approve in its
reasonable discretion all technology, Look,
Feel and Functionality (subject to Robbins'
rights set forth in Section 3.4 hereof) and
production plans and designs;
(iii) Change Your Life shall have the right in its
reasonable discretion to approve
arrangements for the development,
production, merchandising and sponsorship
for the Enhancement; and
(iv) users of the Enhancement shall not be
required to go through a registration
process (or any similar process) to access
and use the Enhancement.
2.5 CHANGE YOUR LIFE SITE. Subject to the terms of this Agreement,
Change Your Life shall have the following rights. Change Your Life shall have
the sole and exclusive right to determine all Change Your Life Content and other
elements that will be displayed on the Change Your Life Site. Change Your Life
shall have the sole and exclusive right to redesign or modify the organization,
structure, look, feel and functionality, navigation and other elements of the
Change Your Life Site. If Change Your Life implements such redesign or
modifications to the Change Your Life Site in a manner that substantially
modifies the placement of the Fixed Icons, then Change Your Life will work with
the Robbins Group in good faith to assure that any new placement of the Fixed
Icons is reasonably satisfactory to the Robbins Group.
2.6 RIGHT TO CONFORM TO INTERNATIONAL LOCAL MARKETS. Change Your Life
shall have the right to conform, and the Robbins Group shall assist Change Your
Life in conforming, the Robbins Group Content for markets outside the United
States, including translating the Robbins Group Content into languages other
than English and making any other stylistic changes to the Robbins Group Content
to conform it to a local market.
2.7 CHANGE YOUR LIFE LOOK, FEEL AND FUNCTIONALITY. The Robbins Group
acknowledges and agrees that Change Your Life shall own all right, title and
interest in and to
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the distinctive and particular elements of graphics, design, organization,
presentation, layout, user interface, navigation, links, trade dress and
stylistic convention (including the digital implementations thereof) within the
Change Your Life Site, and the total appearance and impression substantially
formed by the combination, coordination and interaction of these elements and
any copyrights or other Intellectual Property Rights therein (the "Look, Feel
and Functionality"). Change Your Life shall have editorial control over: (1) the
Change Your Life Site (other than the Robbins Group/Change Your Life Site), (2)
the portions of the Change Your Life Sites that frame the Robbins Group/Change
Your Life Site (the "Change Your Life Site Frames") and (3) the main screen for
the Change Your Life Site. Change Your Life may, in its sole discretion,
incorporate navigational icons, links and pointers or other Content into such
Change Your Life Site Frames.
2.8 OTHER SITES. The Robbins Group agrees and acknowledges that certain
third-party Content providers now or in the future associated with the Change
Your Life Site will have expended or may expend varying efforts and amounts of
money to independently develop their Content, and therefore the Robbins
Group/Change Your Life Site may look and feel substantially different from the
sites developed by other Content providers on the Change Your Life Site.
2.9 FULFILLMENT. The Robbins Group will sell or arrange for the sale of
Robbins Group Products (other than seminars and off-line one-on-one human
coaching services) to Change Your Life at the Robbins Group's cost for such
Robbins Group Products. The Robbins Group will also make available to Change
Your Life those discounts or other concessions on Robbins Group Products that it
makes available to other third parties or to which the Robbins Group may be
entitled. The Robbins Group will permit Change Your Life to offer any
promotional pricing, discount or price reduction that may be offered by any
other distribution channel for Robbins Group Products. The Robbins Group will
also permit CYL to sell its live seminars, live events attendance and off-line
one-on-one person-to-person, real-time coaching services. The Parties
acknowledge that in connection with providing such off-line, one-on-one,
person-to-person, real-time, coaching services, the coaching participants may
use the Internet to share non-interactive documents relating to the coaching in
which case Change Your Life will receive a fee, subject to the last clause of
this sentence, equal to 1% of the fee received by the Robbins Group from such
coaching call but in no event shall the fee to Change Your Life be less than 50
cents per call, unless the costs of such document sharing to Change Your Life
are in excess of such amounts, in which case a higher fee to be agreed by the
Parties will be established to adequately compensate Change Your Life for its
additional costs for its services. To the extent any such coaching has been sold
on-line, then Change Your Life shall be entitled to the revenues from such sale
as specified in Exhibit B hereto.
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2.10 INTERNET EVENTS. Robbins will conduct on-line chats of at least
one hour duration on the Change Your Life Site at the following levels:
<TABLE>
<CAPTION>
------------------------------------------ -----------------------------------------------
YEARS NUMBER OF CHATS
------------------------------------------ -----------------------------------------------
<S> <C>
in years 1-5 at least ten per year
------------------------------------------ -----------------------------------------------
in years 6-10 at least five per year
------------------------------------------ -----------------------------------------------
thereafter such numbers as are mutually agreed by Change
Your Life and Robbins
------------------------------------------ -----------------------------------------------
</TABLE>
Change Your Life and Robbins will co-ordinate with each other to establish a
mutually agreeable schedule for the above on-line chats in advance of each
quarter during the term of this commitment, provided that changes for marketing
and other purposes may be necessary and the parties will use their best efforts
to accommodate such changes as they arise. To the extent Robbins is unavailable
at any time due to death, disability or legal restriction to provide the on-line
chats outlined above, the Robbins Group will assist, if requested by Change Your
Life, with the process of obtaining a replacement spokesperson acceptable to
Change Your Life, but in no event will the failure of Robbins to complete the
on-line chats for the reasons specified above be deemed to be a breach of this
Agreement by Robbins or the Robbins Group.
2.11 OTHER EXPERTS. The Robbins Group will use its best efforts to
attract other key Content providers as Content providers for the CYL Network.
2.12 ADVERTISING. The Robbins Group will collaborate with, make
introductions and provide other reasonable assistance to facilitate sponsorship
and advertising sales for the CYL Network from the Robbins Group's existing and
future corporate relationships and clients.
2.13 INFORMATION/INVESTOR RELATIONS. The Robbins Group will cooperate
with and supply to CYL all materials and information reasonably requested by CYL
for regulatory compliance and required disclosures, in each case as required
under applicable law or by CYL's other contractual arrangements. In addition,
Robbins will dedicate reasonable time and energy to promote CYL to the
investment community, including, without limitation, attendance at meetings and
participation on teleconferences with brokerage firms, analysts and significant
investors.
2.14 GUTHY-RENKER. The Robbins Group will facilitate the negotiation
and execution of an agreement between CYL and Guthy-Renker (or any successor
thereto) for, among other things, the right to broadcast over the CYL Network
excerpts from infomercials that promote Robbins Group Products. This assistance
from the Robbins Group shall not require it to undertake any actions that would
be detrimental, in the reasonable judgment of the Robbins Group, to its share of
revenues from Guthy-Renker.
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2.15 COACHING. If Change Your Life offers for sale person-to-person,
coaching services on the Change Your Life Site, the Robbins Group will be the
exclusive provider of such coaching services. Robbins will have approval over
the coaching services sold by the Change Your Life Site and will work with
Change Your Life to develop the appropriate types of coaching services.
Notwithstanding the foregoing, the Robbins Group exclusivity with regard to
coaching services is subject to the following provisions: (1) there will be
various pricing options, each option offering a relative value; (2) more than
one type of approach to coaching may be offered including coaching services
either offered by or branded under a name different that one related to the
Robbins Group; and (3) there may be private label versions of the coaching
services. Subject to Section 7 and Exhibit B attached hereto, Change Your Life
and the Robbins Group will share revenue associated with such coaching services.
Nothing contained in this Section 2.15 shall be deemed to restrict the Robbins
Group from providing offline one-on-one human coaching. However, if the Robbins
Group is no longer actively engaged in providing coaching services or Robbins,
individually, is no longer directing the Robbins Group coaching services, then
the Robbins Group shall no longer be the exclusive provider of coaching services
for Change Your Life.
3. LICENSE
3.1 EXCLUSIVE GRANT. The Robbins Group grants to CYL, during the term
of this Agreement and subject to the terms and conditions contained herein and
the rights of third parties (if any), the exclusive, worldwide right and license
on the Internet:
(a) to use, copy, publicly display, edit, revise, amend,
modify, extend, perform, distribute or otherwise make available Robbins Group
Content on the CYL Network;
(b) to permit users of the CYL Network to view, access,
retrieve, copy and print any Robbins Group Content distributed thereon;
(c) to use the Robbins Marks, the likeness of Robbins and the
Robbins Group Content and in connection with advertising, promotion and
operation of the CYL Network; and
(d) to advertise, promote, utilize as Content and sell Robbins
Group Products on the Internet (provided that the exclusivity with respect to
this Section 3.1(d) is subject to Section 9.3).
3.2 SOLE INTERNET DISTRIBUTION. Subject to Section 9.3, the Robbins
Group/Change Your Life Site will be the Robbins Group's sole authorized Internet
Site or presence, and the Robbins Group will not maintain any other Internet
Site or presence. The Robbins Group will incorporate the contents of its
existing website(s) into the Robbins Group/Change Your Life Site and shall not,
during the term of this Agreement, sponsor, support or maintain any other
website.
3.3 ROBBINS GROUP CONTENT. (a) CYL shall have access to and the Robbins
Group shall deliver, at times reasonably requested by CYL, all Robbins Group
Content. Notwithstanding the foregoing, Robbins shall have approval and control
over Robbins Group Content and shall have the right to refuse to deliver to CYL
specific Robbins Group Content if,
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in Robbins' judgment, the Robbins Group Content or the use contemplated by CYL,
conflicts with, interferes with or is detrimental to Robbins's interests,
reputation or business or might subject Robbins to unfavorable regulatory
action, violate any law, infringe the rights of any person, or subject Robbins
to liability for any reason; provided that a refusal by the Robbins Group to
deliver certain Robbins Group Content shall not diminish its obligation to
provide Content generally hereunder.
(b) The Robbins Group will assist Change Your Life in developing and
producing new Content, services and utilities that will be updated on an ongoing
basis. The Robbins Group will collaborate with Change Your Life in the
development and production of the Change Your Life member experience. For those
Change Your Life Site Channels in which the Robbins Group has a Fixed Icon, the
Robbins Group will:
(i) collaborate in the process of developing core tools
and resources;
(ii) provide text and proprietary artwork and images;
(iii) provide a complete list of appropriate products and
services to be offered by Change Your Life in such
Change Your Life Site Channels;
(iv) provide answers to questions from members of Change
Your Life;
(v) actively participate in the development of
educational programs to be offered in such Change
Your Life Site Channels; and
(vi) train and provide qualified personnel (to be
compensated by Change Your Life) for message boards
and chat services.
3.4 OPERATION OF ROBBINS GROUP/CHANGE YOUR LIFE SITE. (a) During the
term of this Agreement and subject to the then applicable uniformity
requirements of Change Your Life including, without limitation, Look, Feel and
Functionality, Robbins, individually and not through intermediaries, shall have
the right to approve and create the Content and the look and feel on the Robbins
Group/Change Your Life Site and to have it displayed on the Robbins Group/Change
Your Life Site, provided however, that CYL shall not be obligated to place any
Content on the Robbins Group/Change Your Life Site that (i) does not meet Change
Your Life's technical requirements, (ii) is outside of the personal and
professional improvement category, (iii) would result in a violation of any
applicable governmental law, rule or regulation or any other terms of this
Agreement, or conflict with any third party rights, (iv) is morally offensive,
(v) violates or conflicts with any applicable restrictions or limitations placed
on CYL by its third party promotional and marketing partners or (vi) would
result in a material adverse effect on CYL. In the event that Robbins is no
longer actively involved in the Robbins Group's businesses, the Robbins Group
shall have the right to designate one person who shall succeed Robbins with
respect to the rights set forth in the prior sentence, provided such person has
final decision-making authority on all such decisions.
(b) Change Your Life shall provide the Robbins Group with those
data and systems
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services that may be reasonably required for the maintenance
of the Robbins Group/Change Your Life Content and the Robbins Group/Change
Your Life Site.
(c) Subject to the terms and provisions of this Agreement, Change
Your Life shall have sole authority over budgeting and operational issues
affecting the Change Your Life Site and the Robbins Group/Change Your Life
Site.
4. PROMOTION
4.1 COOPERATION. Each Party shall cooperate with and reasonably assist
the other Party in supplying all necessary materials for marketing and
promotional activities of Change Your Life. The Robbins Group will assist Change
Your Life in (i) securing appropriate advertisers and sponsors for the Change
Your Life Site and (ii) developing sponsor-funded programs for the Change Your
Life Site and the Robbins Group/Change Your Life Site.
4.2 PROMOTION OF CYL BY THE ROBBINS GROUP. The Robbins Group agrees to
use its reasonable efforts to promote Change Your Life, including but not
limited to promotion of the affiliation between the Robbins Group and Change
Your Life. Further, the Robbins Group will and will use its reasonable efforts
to cause third-party distribution partners of the Robbins Group to:
(a) feature the URL for the Change Your Life Site and any
keywords or locators for any Change Your Life interactive
marketing and distribution partners in all existing and
future books, tapes, off-line class and seminar materials
and any and all other printed materials (including the
promotional materials used by the Robbins Group to promote
the Robbins Group Core Business);
(b) mention and/or display the Robbins Group/Change Your Life
Site and its relationship with Change Your Life in all
applicable television, print, and radio appearances or
interviews; and
(c) include Change Your Life-branded Internet access software
(or that of a CYL distribution/media partner), with
Robbins Group books, recorded audio content and off-line
seminar and appearance materials.
The undertaking in this Section 4.2 with respect to third-party distribution
partners shall not require the Robbins Group to undertake any actions that would
be detrimental, in its reasonable judgment, to its share of revenues from such
distribution partners or breach any of its contractual obligations. In such
promotions, Change Your Life shall have the right to control the manner in which
the Change Your Life logo is displayed and the Change Your Life Site described.
4.3 QUALITY CONTROL AND APPROVALS. (a) The Robbins Group will provide
camera-ready specimens of the Robbins Marks and the likeness of Robbins for use
by CYL as specified in Section 3.1. In the event that
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CYL utilizes the Robbins Marks or the likeness of Robbins to advertise or
promote the CYL Network (the "CYL Promotional Materials") without including any
other third party Content provider on such advertisement or promotion, then CYL
will provide the Robbins Group with an example of such CYL Promotional Materials
for prior approval by the Robbins Group. If the Robbins Group does not respond
within 5 days of delivery of such CYL Promotional Materials then the Robbins
Group will be deemed to have approved such CYL Promotional Materials. If such
CYL Promotional Materials also feature other Content providers of the CYL
Network, no approval shall be necessary, however, the Robbins Group may request
the removal of any Robbins Marks or likeness of Robbins as soon as commercially
practicable if in the Robbins Group's reasonable judgment, the use thereof does
not comply with the terms and provisions of this Section 4.3.
(b) CYL recognizes and understands the importance of the exercise of
control by the Robbins Group over the quality of the services provided by CYL
using the Robbins Marks. CYL agrees that the services provided by CYL under the
Robbins Marks will be of a quality standard reasonably acceptable to the Robbins
Group and further agrees to respond to any reasonable objections by the Robbins
Group in this regard; PROVIDED, HOWEVER, that use of the Robbins Marks in
connection with services of a quality at least equal to that of CYL's services
generally shall be deemed to be compliance by CYL of all quality control
obligations hereunder.
4.4 PROMOTION OF THE ROBBINS GROUP BY CHANGE YOUR LIFE. Change Your
Life agrees to use its reasonable efforts to promote the Robbins Group,
including promoting the Robbins Group's affiliation with Change Your Life.
Change Your Life shall also commit in the first ten years of the operation of
the Change Your Life Site to reserve a pool equal to approximately 10% of the
total Impressions received by the Change Your Life Site each quarter during the
following quarter (the "Impressions Pool") to be directed exclusively to the
Change Your Life Site experts. The Robbins Group will be prominently featured
and receive that share of the Impressions Pool that is granted to the expert
tier level in which the Robbins Group is placed by Change Your Life which,
during the term of this Agreement, shall be in the highest tier available for
any expert of Change Your Life.
4.5 JOINT PRESS RELEASE. On a date to be determined by Change Your
Life, Change Your Life and the Robbins Group shall jointly issue one or more
press releases regarding the Robbins Group affiliation with Change Your Life and
the availability of the Robbins Group Content through the CYL Network. Any
additional press releases by either Change Your Life or the Robbins Group that
contain information that is in addition to (a) a description or reference to the
arrangements between Change Your Life and the Robbins Group, such as a list of
Change Your Life experts and a description of their website features and tools
on the CYL Network, (b) previously approved standard disclosures and tag lines
of the other party or (c) previously released and mutually approved CYL
Promotional Materials, shall require the prior approval of the other Party
hereto. The Parties agree that any release that includes Robbins shall identify
him as Chairman and a founder of CYL.
4.6 USE OF LOGO AND/OR TAG LINE. The Robbins Group shall provide CYL
with its logo and/or tag line, if any, in an electronic form and hereby grants
CYL the right to use such logo
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and/or tagline in accordance with the terms of this Agreement. In the event that
the Robbins Group's logo and/or tag line is modified, the Robbins Group shall
provide CYL with 30 business days advance written notice, including such
modified logo and/or tag line and CYL shall have 30 business days to incorporate
such modified logo and/or tag line into their programming.
4.7 RESPONSE TO QUESTIONS/COMMENTS, CUSTOMER SERVICE. The Robbins Group
shall use its best efforts to respond promptly and professionally to questions,
comments, complaints and other reasonable requests regarding the Robbins
Group/Change Your Life Site by CYL users and shall cooperate with and provide
answers to commonly asked questions regarding the Robbins Group to Change Your
Life in order to assist Change Your Life in promptly answering the same. Change
Your Life shall co-operate with and provide answers to commonly asked questions
regarding Change Your Life to the Robbins Group in order to assist the Robbins
Group in promptly answering the same.
4.8 STATEMENTS TO THIRD PARTIES. Neither Party shall make, publish, or
otherwise communicate or cause to be made, published or otherwise communicated,
any deleterious remarks whatsoever to any third parties concerning the other
Party or its affiliates, directors, officers, employees or agents, including,
without limitation, the other Party's business projects, business capabilities,
performance of duties and services or financial position.
4.9 LIMITATION OF PROMOTION. Subject to the terms of Section 9.3(b),
the Robbins Group will not promote any other Internet Site or Internet product
or service without the prior written consent of Change Your Life.
5. TERM
5.1 DURATION. Subject to this Section 5, this Agreement and the
licenses granted hereunder shall be perpetual. The Agreement may, however, be
terminated or its term abbreviated in accordance with the terms and conditions
of Section 5.2 hereof.
5.2 FINANCIAL TESTS. Within 90 days of the tenth anniversary of the
date of the launch of the Change Your Life Site (the "Tenth Anniversary Date"),
Change Your Life and the Robbins Group will determine if the following two tests
have been met:
(a) Change Your Life has been able to secure in the aggregate
equity, debt or commercial credit financing coupled with cumulative (measured
from the fiscal year in which Change Your Life achieves at least break even cash
flow) positive, free cash flow in an amount of at least $40 million in the ten
year period beginning on the date of this Agreement; and
(b) Change Your Life has at least $10 million in working
capital, measured on the basis of the average of the working capital amounts at
the end of the last four fiscal quarters ending prior to the Tenth Anniversary
Date.
If the conditions in (a) and (b) above have been determined
not to have been met, then either Party may notify the other within 30 days
thereof that it will not thereafter continue with the Agreement. If no such
notice is given, then the Agreement will continue.
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5.3 POSSIBLE REDUCTION IN TERM. Beginning with the eleventh year
following the launch of the Change Your Life Site, Change Your Life will commit
to certain amounts of annual promotions for Robbins, the Robbins Group/Change
Your Life Site and Robbins Group Products (taken together). These promotions
will be reviewed beginning at the end of the eleventh year following the launch
of the Change Your Life Site and on each anniversary thereafter (each an "Option
Year") to determine if the following conditions have been met:
(a) Change Your Life has devoted in the equivalent period
specified below off-line marketing dollars to Robbins, the Robbins Group/Change
Your Life Site and Robbins Group Products (taken together) in an amount at least
equal to the highest amount spent on any other single expert, calculated on the
basis of the higher amount spent in the following two periods: (i) the last
fiscal year and (ii) an average of the prior ten fiscal years (based on the
highest amount spent on any other single expert in each of the prior years);
(b) On-line promotion in the equivalent period specified below
of Robbins, the Robbins Group/Change Your Life Site and Robbins Group Products
(taken together) has been in an amount and of a value at least equal to the
amount and value provided to the expert adviser featured on the Change Your Life
Site to whom CYL has provided the highest on-line promotion in the equivalent
period, taking into account, in determining value, positioning, size, time of
day and other features, calculated on the basis of the higher amount and value
provided in the following two periods: (i) the last fiscal year or (ii) an
average of the prior ten fiscal years (based on the average of the amounts and
value of on-line promotions for the expert with the highest amounts spent in
each of the prior years);
If the conditions in either (a) or (b) above have not been met in each
respective Option Year, then Change Your Life shall have a period of three
months, unless CYL and the Robbins Group agree in writing to a longer period, to
cure any deficiency. If Change Your Life does not do so within said period,
either Party may notify the other within 30 days of the end of such three month
period that it will not thereafter continue with the Agreement. If no such
notice is given, then the Agreement shall continue.
5.4 TERMINATION EVENTS. (a) In the event of a breach of a material term
of (x) this Agreement by Change Your Life or the Robbins Group (y) of Sections
3.3 and 8.5 of the Contribution and Exchange Agreement by and among Change Your
Life, GHS, Inc. and certain of the stockholders of GHS, Inc. or (z) of the
obligations of GHS, Inc. to Robbins under that certain letter agreement dated
April 23, 1999 regarding reimbursement of expenses, the non-breaching party may
terminate this Agreement provided that it has given the breaching party written
notice of such breach and the breaching party has not within the 45 business
days of the receipt of such notice, corrected such breach if it is capable of
correction, provided however, that if the breaching party believes the breach is
incapable of being cured, said question shall be referred to arbitration under
the terms of Section 13.5. In the event the arbitration concludes that the
breach was curable but was not cured, then the Agreement shall terminate upon
such finding and the breaching party may be found liable for damages in the
arbitration. If, however, the arbitration finds that the breach was not capable
of being cured, then damages may be assessed
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against the breaching party, but the Agreement will not terminate unless the
same breach occurs again, in which case, notwithstanding the fact that the
subsequent breach is incapable of being cured, the Agreement will terminate.
(b) The Robbins Group shall have the right to terminate this
Agreement upon providing written notice to Change Your Life if Change Your Life:
(i) becomes insolvent or unable to pay its debts as they mature or makes an
assignment for the benefit of its creditors; (ii) is the subject of a voluntary
petition in bankruptcy or any voluntary proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, if such
petition or proceeding is not dismissed within sixty (60) days of filing; (iii)
becomes the subject of any involuntary petition in bankruptcy or any involuntary
proceeding relating to insolvency, receivership, liquidation, or composition for
the benefit of creditors, if such petition or proceeding is not dismissed within
sixty (60) days of filing; or (iv) is liquidated or dissolved.
5.5 RIGHTS UPON TERMINATION OF AGREEMENT. In the event that this
Agreement is terminated in accordance with the terms hereof and no other
agreement is reached by the parties hereto, CYL shall cease all use of the
Robbins Group Marks as provided in Section 6.3 below. Notwithstanding the
foregoing, CYL shall be permitted to continue to use and modify the Content
derived from the Robbins Group Content in connection with the operation of the
CYL Network provided that they are in the form used on or before the termination
date and do not include the Robbins Group Marks and any non-interactive Robbins
Group Content shall be returned to the Robbins Group upon its request. In the
event that the Robbins Group Content from which the Content described above is
derived was copyrighted by the Robbins Group, then CYL shall pay the royalty set
forth on Exhibit B for its continued use following termination of this
Agreement.
6. TRADEMARKS
6.1 DELIVERY. (a) Each Party acknowledges that the Robbins Group Marks
are trademarks exclusively owned or controlled by the Robbins Group and that all
uses by CYL of such Robbins Group Marks shall inure to the Robbins Group
benefit.
(b) In the event that during the term of this Agreement CYL shall
create any proprietary right in any Robbins Group Marks, as a result of the
exercise by CYL of any right granted to it hereunder, such proprietary right
shall immediately vest in the Robbins Group and CYL shall be authorized to use
for no additional consideration such new proprietary right as though the same
had specifically been included in this Agreement.
6.2 APPLICATIONS. Change Your Life shall not file any application in
any country to register a trademark that contains "Robbins " or any other
trademark that is the same as, similar to, or misleading with respect to the
Robbins Group Marks. If any application for registration is filed in any country
by Change Your Life in contravention of this Section 6.2, the Robbins Group
shall have the right to take appropriate action against Change Your Life,
including seeking injunctive relief, to prohibit or otherwise restrain Change
Your Life from using such trademark. The Robbins Group shall not file any
application in any country to register a
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trademark that contains "Change Your Life" or any other trademark which is the
same as, similar to, or misleading with respect to CYL or its marks. If any
application for registration is filed in any country by the Robbins Group in
contravention of this Section 6.2, Change Your Life shall have the right to take
appropriate action against the Robbins Group, including seeking injunctive
relief, to prohibit or otherwise restrain the Robbins Group's use of such
trademark.
6.3 TERMINATION. Upon termination of this Agreement, CYL shall cease
all use of the Robbins Group Marks, as soon as commercially and technically
practicable but in no event longer than 90 business days from the date of
termination.
7. COMPENSATION
7.1 REVENUE SHARING. Change Your Life and the Robbins Group shall share
in revenues attributable to the Robbins Group Content, Robbins Group/Change Your
Life Content and/or Robbins Group Products as described in EXHIBIT B attached
hereto.
7.2 PAYMENT. Except as otherwise specified herein, each Party agrees to
pay the other Party all amounts received and payable to the other Party under
this Agreement, less a reserve for returns of 15% and bad debts, on a quarterly
basis within 45 days of the end of the calendar quarter in which such amounts
were collected by such Party and recognized as revenues in accordance with
generally accepted accounting principles.
7.3 CURRENCY, INTEREST AND TAXES. Each Party shall be responsible for
all applicable national, state and local taxes, value added or sales taxes,
exchange, interest, banking, collection and other charges and levies and
assessments pertaining to payments received by such Party other than U.S. taxes
based on the other Party's net income. If either Party is required by law to
make any deduction or to withhold from any sum payable to the other Party
hereunder, such Party shall effect such deduction or withholding, remit such
amounts to the appropriate taxing authorities and promptly furnish the other
Party with tax receipts evidencing the payments of such amounts.
8. ACCOUNTINGS
8.1 PERIODIC REPORTS. (a) Change Your Life will compute and report
revenues and usage data for the Robbins Group/Change Your Life Site and the
Robbins Group/Change Your Life Content ("Quarterly Reports") on a calendar
quarter basis for the prior quarterly period. Change Your Life shall provide the
Robbins Group with each Quarterly Report and payment (as described in Section
7.2) within forty-five days after the calendar quarterly period to which such
Quarterly Report pertains. Acceptance by the Robbins Group of any Quarterly
Report or payment shall not preclude the Robbins Group from challenging the
accuracy thereof.
(b) The Robbins Group will compute and report revenues and usage data
for each Enhancement ("Enhancement Reports") on a calendar quarter basis for the
prior quarterly period. The Robbins Group shall provide Change Your Life with
each Enhancement Report and payment (as described in Sections 2.4 and 7.2)
within forty-five days after the calendar quarterly period to which such
Enhancement Report pertains. Acceptance by Change Your Life of any
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Enhancement Report or payment shall not preclude Change Your Life from
challenging the accuracy thereof.
8.2 MAINTENANCE OF RECORDS; EXAMINATION. Change Your Life will maintain
accurate books and records with respect to its business. The Robbins Group may,
at its own expense, examine and copy those books and records that pertain to the
Quarterly Report, as provided in this Section 8.2. The Robbins Group may must
examine a particular statement within 3 years after the date when Change Your
Life sends the respective Quarterly Report. Change Your Life will be deemed
conclusively to have sent the Robbins Group the statement concerned on the date
prescribed in Section 8.1. The Robbins Group may make such examinations only
during Change Your Life's usual business hours and at the place where Change
Your Life keeps its books and records. Such books and records shall be kept at
the Change Your Life office in New York, New York, unless otherwise notified.
The Robbins Group will be required to notify Change Your Life at least ten
business days before the date of planned examination. If the Robbins Group's
examination has not been completed within two months from the time the Robbins
Group begins such examination, Change Your Life may require the Robbins Group to
terminate such examination on seven days notice to the Robbins Group at any
time, provided that Change Your Life has reasonably cooperated with the Robbins
Group in the examination of such books and records. In the event that an
examination conducted pursuant to the terms of this Section 8.2 results in a
change in the amounts owing to the Robbins Group by Change Your Life of more
than ten percent (10%) of the total amount reported, then Change Your Life shall
pay both its and the Robbins Group's expenses of such examination.
9. RIGHTS
9.1 OWNERSHIP. (a) As between the Robbins Group and CYL, the Robbins
Group shall be the exclusive owner of and shall have all right, title and
interest in and to the Robbins Group Content and the Robbins Group Marks,
including all Intellectual Property Rights therein, but excluding the Change
Your Life Content and the Robbins Group/Change Your Life Content (the "Robbins
Group Property").
(b) Change Your Life shall be the exclusive owner of and shall have all
right, title and interest in and to the Change Your Life Content or any Content
derived therefrom, the Robbins Group/Change Your Life Content or any Content
derived therefrom, the Change Your Life Site, all trademarks of Change Your
Life, and all Intellectual Property Rights contained in each of the above,
excluding the Robbins Group Property.
9.2 NECESSARY ACTION. Each Party agrees to take all action and
cooperate as is reasonably necessary, at the other Party's request and expense,
to protect the other's respective rights, titles, and interests specified in
this Article 9, and further agrees to execute any documents that might be
necessary to perfect each Party's ownership of such rights, titles, and
interests.
9.3 RESTRICTIONS. Anything contained in this Agreement to the contrary
notwithstanding, the Robbins Group shall be permitted:
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(i) to conduct any activity in connection with the Robbins
Group Core Business conducted during the term of this Agreement,
PROVIDED that (x) such activity is not a product offering designed as
an Internet product offering, (y) any Internet promotion of a Robbins
Group Core Business offering (a) is only a portion of the main
distribution channels for the Robbins Group Core Business product
offering, (b) is on a non-interactive commerce website (except
interactivity employed solely to order Robbins Group Products) or to
download a Robbins Group Product (such as an audio or video tape) via
the Internet as an alternative delivery route of a third party
distributor, provided that said website does not predominately feature
Robbins, the Robbins Group or Robbins Group Products, (c) is other than
an interactive offering (except interactivity employed solely to order
or download (as an alternative delivery route) Robbins Group Products)
and (d) does not mimic or incorporate any Robbins Group/Change Your
Life Content. For example, an Internet appearance on a Simon & Schuster
website to promote a new book would be permitted;
(ii) to conduct Internet sales and marketing training for
employees of companies in which the Robbins Group owns at least 20% of
the equity or equity with a fair market value of at least $250,000
whichever is lower, provided that such equity was not purchased with a
view towards circumventing the terms of this Agreement, and provided
further that any such training on the Internet shall require the
royalty payments to Change Your Life specified on Schedule B hereto;
and
(iii) to continue to provide in-house, corporate consulting
services and products that include client seminars, presentations and
training that may be broadcast via satellite, teleconference or
inter-company networks such as intranets; provided however, that such
intranet broadcasts will be one-directional, for client company use
only and non-interactive except for questions and answers, audience
group responses and Robbins' Outcome Purpose Action (OPA) offerings.
The Robbins Group will include restrictions consistent with the terms of this
Agreement, particularly Section 9.3 hereof, in all new distribution agreements
and in all renewals of existing distribution agreements.
10. WARRANTIES; REPRESENTATIONS; INDEMNITIES
10.1 AUTHORITY AND OBLIGATION OF EACH PARTY. Each Party represents and
warrants to the other, as of the date hereof, that (a) such party has the full
right, power and authority to enter into this Agreement, to grant the licenses
hereunder and to perform the acts required of it hereunder, (b) the execution,
delivery and performance by such party of this Agreement are within its powers
and have been duly authorized by all necessary action on its part; (c) the
execution of this Agreement by such party and the performance by such party of
its obligations and duties hereunder do not and will not violate any agreement,
applicable law, judgment, injunction, order or decree to which such party is a
party or by which it is otherwise bound; (d) when executed and delivered by it,
this Agreement will constitute the legal, valid and binding obligation of such
party, enforceable against such party in accordance with its terms; (e) such
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party acknowledges that the other party makes no representations, warranties or
agreements related to the subject matter hereof which are not expressly provided
for in this Agreement.
10.2 REPRESENTATIONS. (a) The Robbins Group represents, warrants and
covenants that: (i) it has sufficient right and authority to grant to CYL all
licenses and rights granted by the Robbins Group hereunder; (ii) the Robbins
Group Marks and the use thereof as permitted pursuant to this Agreement shall
not violate any law or infringe upon or violate any rights of any Person; (iii)
the Robbins Group Content and the use thereof as permitted pursuant to this
Agreement shall not violate any law or infringe upon or violate any rights of
any Person under any law; (iv) no Person other than those Persons specifically
identified on Exhibit D hereto and who may be Parties to this Agreement has any
ownership right or interest in or with respect to the Robbins Group Marks or
Robbins Group Content and the Robbins Group shall not transfer or assign any
ownership right or interest, in or with respect to the Robbins Group Marks or
the Robbins Group Content, unless the transferee becomes a party to this
Agreement and bound by the terms and provisions hereof; (v) Exhibit E contains a
true and complete list of all Robbins Group Marks used in connection with the
(x) Robbins Group Content or (y) any Intellectual Property used by the Robbins
Group and (vi) no Person in the Robbins Group or any affiliate of the Robbins
Group has, during the term of this Agreement, or will, enter into any business
or contractual or other relationship that is directly or indirectly competitive
with CYL's business or would have any ownership, control or interest over the
subject matter of this Agreement.
(b) Change Your Life represents and warrants that: (i) it owns
or controls all right, title, and interest in and to the Change Your Life Site,
and all Intellectual Property Rights therein, necessary to carry out its
obligations hereunder; (ii) it is has the full power and authority to enter into
and fully perform this Agreement; (iii) the Change Your Life Site, any Change
Your Life Content and any Content developed or furnished by Change Your Life
hereunder and the use thereof shall not violate any law or infringe upon or
violate any rights of any Person; and (iv) the Change Your Life Site will be
produced, advertised, distributed, transmitted and licensed in accordance with
all applicable federal, state, local and foreign laws and in a manner that will
not reflect adversely on Robbins.
10.3 INDEMNITIES. (a) The Robbins Group shall indemnify and hold
harmless CYL and its officers, agents and employees from and against any and all
losses, liabilities, costs, expenses (including reasonable attorneys' fees),
claims, penalties, judgments and damages, resulting from or arising out of:
(i) any breach by the Robbins Group of any representation or
warranty made in this Agreement, including, but not limited to, any infringement
or alleged infringement or violation of rights of third parties, including
copyright, trademark, trade dress, trade secrets, design right, patent, moral
right, right of publicity, defamation, libel, know-how and/or any other present
or future intellectual property right of any type; (ii) any injury to person or
property caused by any material, product, or service sold or distributed in
connection with Robbins' participation in the CYL Network or any activity
conducted or action taken by the Robbins Group, directly or indirectly, in
connection with the Robbins Group's CYL Site; and (iii) the Robbins Group
Content and any material to which users can directly link through the Robbins
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Group Content or other information supplied by the Robbins Group.
(b) Change Your Life shall indemnify and hold harmless the
Robbins Group and its officers, agents and employees from and against any and
all losses, liabilities, costs, expenses (including reasonable attorneys' fees),
claims, penalties, judgments and damages, resulting from or arising out of: (a)
any breach by Change Your Life of this Agreement, including, but not limited to,
any infringement or alleged infringement or violation of rights of third
parties, including copyright, trademark, trade dress, trade secrets, design
right, patent, moral right, right of publicity, defamation, libel, know-how
and/or any other present or future intellectual property right of any type; (b)
any injury to person or property caused by any material, product, or service
sold or distributed in connection with the CYL Network not in connection with
the Robbins Group/Change Your Life Site and (c) the Change Your Life Content and
any material which users can directly link through the Change Your Life Content,
other than Robbins Group Content incorporated in the CYL Network.
(c) PROMPT NOTIFICATION. Each party to this Agreement agrees
to (a) promptly inform the other in writing of any information related to the
CYL Network which could reasonably lead to a claim, demand or liability against
Change Your Life or the Robbins Group by any third party; PROVIDED, HOWEVER,
that failure to give prompt notice will not relieve either party of any
liability hereunder (except to the extent such failure causes or leads to actual
material prejudice to the other party); and (b) cooperate fully with the other
Party, at that other Party's expense, in defending or settling such claim.
11. CONFIDENTIALITY
11.1 CONFIDENTIAL INFORMATION. For the purposes of this Agreement,
"Confidential Information" means any information relating to or disclosed during
the term of the Agreement, which is, or should be reasonably understood to be,
confidential or proprietary to the disclosing Party, including, but not limited
to, information about Change Your Life subscribers, technical processes and
formulas, source codes, product designs, sales, cost and other unpublished
financial information, product and business plans, projections, usage and
marketing data. "Confidential Information" shall not include information (a)
already lawfully known to or independently developed by the receiving Party, (b)
disclosed in published materials, (c) generally known to the public, (d)
lawfully obtained from any third party or (e) required or reasonably advised to
be disclosed by law.
11.2 CONFIDENTIALITY. Each Party acknowledges that Confidential
Information may be disclosed to the other Party during the course of this
Agreement. Each Party agrees that it (a) will not disclose to any third party or
use any Confidential Information disclosed to it except as expressly permitted
in this Agreement and (b) shall take reasonable steps, at least substantially
equivalent to the steps it takes to protect its own proprietary information, to
prevent the duplication or disclosure of Confidential Information of the other
Party, other than by or to its employees or agents who must have access to such
Confidential Information to perform such Party's obligations hereunder, which
employees shall each agree to comply with this Article 11 of this Agreement.
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11.3 DISCLOSURE. Notwithstanding the foregoing, each party may disclose
Confidential Information (a) to the extent required by a court of competent
jurisdiction or other governmental authority or (b) on a "need-to-know" basis
under an obligation of confidentiality to its legal counsel, accountants, banks
and other financing sources and their advisors.
11.4 TERMS AND CONDITIONS OF AGREEMENT CONFIDENTIAL. The terms and
conditions of this Agreement will be deemed to be the Confidential Information
of each Party an will not be disclosed without the written consent of the other
party or as otherwise provided in this Agreement or as required by law or
regulation.
12. PRIVACY
12.1 PROTECTION OF PRIVACY. Change Your Life shall establish, and the
Robbins Group and Change Your Life shall adhere to and enforce the terms of, a
privacy policy (which policy may be modified from time to time) for the
protection of the privacy of all subscribers to or users of Change Your Life.
12.2 SUBSCRIBER INFORMATION. The Robbins Group shall not sell or
otherwise make available to any third party, any information about Change Your
Life subscribers collected via the Change Your Life Site ("Subscriber
Information") except to the extent that such Subscriber Information is required
by a third party to fulfill the purchase of any products or services purchased
via the Change Your Life Site. Furthermore, except for promotional activities
expressly permitted under this Agreement, the Robbins Group will not use any
Subscriber Information except to the extent that such Subscriber Information is
required by the Robbins Group to fulfill the purchase of any products or
services purchased via the Change Your Life Site unless (a) such use conforms
with Change Your Life's then-current privacy policy and the Robbins Group has
obtained Change Your Life's prior written consent for such use; or (b) the
Subscriber Information to be used consists only of information input directly by
a Change Your Life subscriber after such subscriber has either viewed (or been
given a clear and conspicuous opportunity to view) a clear disclosure of how
such information may be used by the Robbins Group and/or had the opportunity to
"opt out" of any use of such information. This paragraph will survive the
termination of this Agreement for a period of two years.
12.3 SOLICITATION OF SUBSCRIBERS. During the Term of this Agreement
neither the Robbins Group nor its agents will (a) solicit or participate in the
solicitation of CYL subscribers when that solicitation is for the benefit of any
entity (including the Robbins Group) which could reasonably be construed to be
or become in competition with CYL or (b) promote any services which could
reasonably be construed to be in competition with services available through
CYL, including, but not limited to, services available through the Internet and
the on-line services of any aggregators of personal and professional development
Content.
13. TREATMENT OF CLAIMS
13.1 DAMAGES. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE LIABLE TO
THE OTHER PARTY FOR INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL OR EXEMPLARY
DAMAGES (EVEN IF THAT PARTY HAS BEEN ADVISED
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OF THE POSSIBILITY OF SUCH DAMAGES) ARISING FROM BREACH OF THIS AGREEMENT, THE
USE OF OR INABILITY TO USE CYL NETWORK OR ANY OTHER PROVISION OF THIS AGREEMENT,
SUCH AS, BUT NOT LIMITED TO, LOSS OF REVENUE OR ANTICIPATED PROFITS OR LOST
BUSINESS (COLLECTIVELY, "DISCLAIMED DAMAGES"); PROVIDED THAT EACH PARTY SHALL
REMAIN LIABLE TO THE OTHER PARTY TO THE EXTENT ANY DISCLAIMED DAMAGES ARE
CLAIMED BY A THIRD PARTY AND ARE SUBJECT TO INDEMNIFICATION ABOVE. EXCEPT AS
PROVIDED ABOVE IN THE "INDEMNITY" SECTION, NEITHER PARTY SHALL BE LIABLE TO THE
OTHER PARTY FOR MORE THAN THE AGGREGATE AMOUNTS PAYABLE HEREUNDER; PROVIDED THAT
EACH PARTY SHALL REMAIN LIABLE FOR THE AGGREGATE AMOUNT OF ANY PAYMENT
OBLIGATIONS OWED TO THE OTHER PARTY UNDER THE PROVISIONS OF THIS AGREEMENT.
13.2 NO ADDITIONAL WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT, NEITHER PARTY MAKES, AND EACH PARTY HEREBY SPECIFICALLY DISCLAIMS,
ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, REGARDING THE CYL
NETWORK, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE AND IMPLIED WARRANTIES ARISING FROM COURSE OF DEALING OR
COURSE OF PERFORMANCE. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, CYL
SPECIFICALLY DISCLAIMS ANY WARRANTY REGARDING THE PROFITABILITY OF THE CYL
NETWORK OR THE ROBBINS GROUP/CHANGE YOUR LIFE SITE.
13.3 ACKNOWLEDGMENT. CHANGE YOUR LIFE AND THE ROBBINS GROUP EACH
ACKNOWLEDGE THAT THE PROVISIONS OF THIS AGREEMENT WERE NEGOTIATED TO REFLECT AN
INFORMED, VOLUNTARY ALLOCATION BETWEEN THEM OF ALL RISKS (BOTH KNOWN AND
UNKNOWN) ASSOCIATED WITH THE TRANSACTIONS CONTEMPLATED HEREUNDER. THE
LIMITATIONS AND DISCLAIMERS RELATED TO WARRANTIES AND LIABILITY CONTAINED IN
THIS AGREEMENT ARE INTENDED TO LIMIT THE CIRCUMSTANCES AND EXTENT OF LIABILITY.
THE PROVISIONS OF THIS SECTION 14 SHALL BE ENFORCEABLE INDEPENDENT OF AND
SEVERABLE FROM ANY OTHER ENFORCEABLE OR UNENFORCEABLE PROVISION OF THIS
AGREEMENT.
13.4 DISPUTE RESOLUTION. (a) Sections 2.4, 2.15., 3.4, 5.3(b) and
9.3(i) and 9.3 (iii) are sections that relate to issues that could not be
adequately described as of the date of this Agreement. Although the parties
intend to co-operate in good faith on such matters, in the event that a dispute
on such matters arises, the following dispute resolution mechanism shall be
employed. Each of the Robbins Group and Change Your Life shall appoint one
member of the Board of Directors of Change Your Life (other than Robbins and the
Chief Executive Officer of Change Your Life) or if Robbins has no nominees then
serving on the Board of Directors of Change Your Life, he may appoint a third
party (other than himself or an affiliate of the Robbins Group) and these two
designees shall appoint a third person who may, but shall not be required, to be
a member of the Board of Directors of Change Your Life. This group of three
persons shall be empowered as mediators to consider any dispute(s) presented to
them. If this mediation
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process does not resolve the dispute in a mutually satisfactory manner for
disputes arising under Sections 2.15, 5.3(b) or 9.3 (i) and 9.3 (iii), then the
matter may be submitted by any party to arbitration as provided for in Section
13.5. The referral to arbitration may occur at any time within sixty (60) days
of the decision of the mediators, but in the event the dispute arises under
Sections 2.15, 5.3(b) or 9.3 (i) or 9.3 (iii), the mediators will be instructed
to determine the matter within thirty (30) days of the appointment of the
mediators. If the mediators have not done so, then any party may submit the
matter to arbitration under Section 13.5, provided the dispute has arisen under
Sections 2.15, 5.3(b) or 9.3 (i) or 9.3 (iii), within the subsequent sixty (60)
day period. For disputes arising under Sections 2.4 or 3.4, the determination of
the mediators shall be final and binding on all Parties without the ability to
resort to the provisions of Section 13.4(b), arbitration or any court process.
(b) In the event of any dispute, controversy or claim arising out of or
relating to this Agreement (other than those governed by the terms of Section
13.4(a) hereof), representatives of the parties shall meet in New York, NY, San
Diego, CA or such other city as may be agreeable to the parties as soon as
reasonably possible (but not later than ten (10) days after written notice from
one party to the other of such dispute) and shall enter into good faith
negotiations aimed at resolving the dispute. If they are unable to resolve the
dispute in a mutually satisfactory manner within thirty (30) days from the date
of such notice, the matter may be submitted by any party to arbitration as
provided for in Section 13.5.
13.5 ARBITRATION. (a) Any dispute, controversy or claim between or
among any of the parties hereto arising out of or relating to this Agreement or
the breach, termination or invalidity thereof, including any dispute as to
whether any dispute is subject to arbitration, which has not been resolved after
good faith negotiations pursuant to Section 13.4(b) hereof shall be settled by
binding arbitration administered by the American Arbitration Association in
accordance with its then current Commercial Arbitration Rules except as provided
herein.
(b) Any arbitration shall be conducted by a three person
arbitration panel. The three person arbitration panel shall consist of one party
arbitrator selected by Change Your Life, one party arbitrator selected by the
Robbins Group, each of whom shall be named within ten (10) days of the demand
for arbitration, and one neutral arbitrator selected by the first two
arbitrators. If the two party appointed arbitrators cannot agree on the neutral
arbitrator within ten (10) days of the selection of the last party appointed
arbitrator, the American Arbitration Association shall appoint the neutral
arbitrator, who shall act as chairperson. In the event of a vacancy with respect
to an arbitrator, the vacancy shall be filled within ten (10) days of notice of
the vacancy in the same manner and subject to the same requirements as are
provided for in the original appointment to that position. If the vacancy is not
filled within ten (10) days, the American Arbitration Association shall make the
appointment. Unless otherwise mutually agreed, the place of arbitration shall be
New York, NY or San Diego, CA, as selected by the party receiving the request
for arbitration.
(c) The law applicable to the validity of the arbitration
clause, the conduct of the arbitration, including the resort to a court for
interim relief, enforcement of the award or any other question of arbitration
law or procedure shall be the United States' Federal Arbitration Act,
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9 U.S.C. ss. 1 ET SEQ. The parties shall be entitled to engage in reasonable
discovery including requests for the production of all relevant documents and a
reasonable number of depositions. The arbitration panel shall have the sole
discretion to determine the reasonableness of any requested document production
or deposition. It is the intent of the parties that a substantive hearing be
held within sixty (60) days of the appointment of the neutral arbitrator or the
rejection of a challenge thereto, whichever shall occur later. In the event that
the dispute referred to arbitration hereunder arises under Section 2.15, 5.3(b)
or 9.3(i) or 9.3 (iii), then the arbitrators shall be instructed to resolve the
entire matter and render their findings within a period of forty-five (45) days
of the appointment of the neutral arbitrator or the rejection of a challenge
thereto, whichever shall occur later. A stenographic record of every hearing
shall be made. The presentation of evidence shall be governed by the federal
Rules of Evidence.
(d) Any award, including any interim award, made shall be made
by a majority of the arbitrators applying the substantive law of New York and
shall (i) be in writing and state the arbitration panel's findings of fact and
conclusions of law; (ii) be made promptly, and in any event within sixty (60)
days after the conclusion of the arbitration hearing; and (iii) be binding
against the parties involved and may be entered for enforcement in any court of
competent jurisdiction.
(e) The costs of any arbitration proceeding (e.g.,
arbitrators, court reporter and room rental fees) shall be equally divided
between Change Your Life and the Robbins Group. However, each party shall pay
its own expense, including attorneys' and other professionals' fees and
disbursements.
(f) The arbitration provision set forth in this Section 13.5
shall be a complete defense to any suit, action or proceeding instituted in any
court with respect to any matter arbitrable under this Agreement, except that
judicial intervention may be sought in accordance with Section 13.6 hereof.
13.6 NO WAIVERS; INTERIM RELIEF.
The Parties mutually acknowledge that an award of damages may be
inadequate to remedy any breach hereof and that injunctive relief may be
required. Therefore, (a) a party may request a court of competent jurisdiction
to provide interim injunctive relief in aid of arbitration or to prevent a
violation of this Agreement pending arbitration, and any such request shall not
be deemed a waiver or breach of the obligations to arbitrate set forth herein
and (b) the arbitrators may order equitable relief where they deem it
appropriate and the parties agree that any interim relief ordered by the
arbitrators may be immediately and specifically enforced by a court otherwise
having jurisdiction over the parties.
14. GENERAL
14.1 ASSIGNMENT. Neither party may assign this Agreement, nor any
rights, interests or obligations thereunder, in whole or in part without the
other party's prior written consent. Any attempt to assign this Agreement
without such consent shall be void and of no effect AB INITIO. Notwithstanding
the foregoing, the Robbins Group may assign its rights and duties under the
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Agreement to an entity, wholly-owned directly or indirectly by Robbins and
Change Your Life may assign the Agreement to an affiliate provided that such
assignee agrees in writing to succeed to all of the rights and be subject to all
of the obligations of under this Agreement. No assignment shall relieve the
assignor of its obligations under the Agreement. The Agreement shall apply to,
and shall be binding upon each of the Parties thereto, their respective
successors and permitted assigns, and all persons claiming by, through, or under
any of the aforesaid persons.
14.2 COMPLIANCE. Each party shall comply in all material respects with
all laws and regulations applicable to its activities under this Agreement.
14.3 SEVERABILITY. If any provision of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any Person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any other Persons or
circumstances.
14.4 NOTICES. All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered by hand or
sent, postage prepaid, by registered, certified or express mail or reputable
overnight courier service and shall be deemed given when so delivered by hand,
or if mailed, three days after mailing (one business day in the case of express
mail or overnight courier service), as follows: (i) if to Change Your Life.com,
Inc, 704 Broadway, New York, NY 10003 Attention of Beth Polish, Chief Operating
Officer with copies to: Dewey Ballantine LLP, 1301 Avenue of the Americas, New
York, NY 10019 Attention of Frank E. Morgan II, Esq., (ii) if to the Robbins
Group, 9191 Town Center Drive, Suite 600, San Diego, CA 92122; Attention of Sam
Georges with copies to: Loeb & Loeb, Suite 1800, 1000 Wilshire Boulevard, Los
Angeles, CA 90017-245 Attention of David L. Ficksman, Esq.
14.5 INDEPENDENT CONTRACTORS. The parties to this Agreement are
independent contractors. There is no relationship of partnership, joint venture,
employment, franchise, or agency between the parties. Neither party shall have
the power to bind the other or incur obligations on the other's behalf without
the other's prior written consent.
14.6 FAILURE TO ENFORCE RIGHTS. No failure of either party to exercise
or enforce any of its rights under this Agreement shall act as a waiver of such
right.
14.7 COMPLETE AGREEMENT. This Agreement, along with the Exhibits hereto
and the agreements entered into by the parties on a contemporaneous basis
herewith contain the entire agreement and understanding between the parties
hereto with respect to the subject matter hereof and supersedes all prior
agreements and understandings relating to such subject matter. Neither party
shall be liable or bound to any other party in any manner by any
representations, warranties or covenants relating to such subject matter except
as specifically set forth herein.
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14.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to each of the other parties.
14.9 AMENDMENTS. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
14.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State.
14.11 SOLE BENEFIT. This Agreement is for the sole benefit of the
parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be construed to give to any person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
14.12 HEADINGS. The headings contained in this Agreement or in any
Exhibit or Schedule hereto are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement. All Exhibits and
Schedules annexed hereto or referred to herein are hereby incorporated in and
made a part of this Agreement as if set forth in full herein. Any capitalized
terms used in any Schedule or Exhibit but not otherwise defined therein, shall
have the meaning as defined in this Agreement. When a reference is made in this
Agreement to a Section, Exhibit or Schedule, such reference shall be to a
Section of, or an Exhibit or Schedule to, this Agreement unless otherwise
indicated.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the Effective Date.
CHANGE YOUR LIFE.COM, LLC
/s/ David Roy
- --------------------------------
Print Name: David Roy
----------------------
Title: Vice President
----------------------------
Date: April 23, 1999
----------------------------
/s/ Anthony J. Robbins
- --------------------------------
ANTHONY J. ROBBINS
Date: April 23, 1999
----------------------------
ROBBINS RESEARCH INTERNATIONAL INC.
By: /s/ Anthony J. Robbins
-------------------------
Print Name: Anthony J. Robbins
------------------
Title: Chairman
------------------------
Date: April 23, 1999
------------------------
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EXHIBIT A
[Description of Robbins Group Content]
[Robbins Group Content Deliverables to be initially supplied and listed within
thirty days of signing and then updated on a regular basis.]
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EXHIBIT B
REVENUE SHARING
ADVERTISING REVENUES. Aggregate amounts collected by CYL, the Robbins Group or
either Party's agents, as the case may be, arising from the license or sale of
advertisements, promotions, links or sponsorships ("Advertisements") that appear
within any pages of the Change Your Life Site, less applicable Advertising Sales
Commissions and Distribution Fees.
ADVERTISING SALES COMMISSIONS. (i) Actual amounts paid as commission to third
party agencies or media networks by either buyer or seller in connection with
sale of an Advertisement and/or (ii) any amount payable to employees of CYL in
connection with the sale of an Advertisement.
DISTRIBUTION FEES. Any portion of Revenues earned by the Company that are paid
to a third party with whom the Company partners to distribute, market or
otherwise promote the CYL Network on any digital and/or interactive platform,
which third party shall not include a provider of content unless such provider
of content is separately a party to a distribution, marketing or promotion
agreement with the CYL.
ADJUSTED TRANSACTION REVENUES. Aggregate amounts that are paid by users of the
CYL Network or in connection with the sale, licensing, distribution or provision
any CYL Product, Robbins Group Product or CYL/Robbins Group Product (as the case
may be) and excluding in each case (a) amounts collected for sales or use taxes
or duties, (b) handling, shipping and service charges and credit or debit card
charges, (c) credits and chargebacks for returned or canceled goods or services,
(d) cost of goods sold or services and (e) fixed per person per item or session
charges (in the case of digital products only). The fixed per person per item or
session charges will be calculated and mutually agreed prior to each digital
product or service being launched within the CYL Network. [*]
CYL PRODUCT. Any product, good or service (other than a Robbins Group Product)
which CYL develops, purchases wholesale or manufactures and which CYL (or others
acting on its behalf or as distributors) offers, sells, provides, distributes or
licenses to users of the CYL Network directly or indirectly through (i) the
Change Your Life Site, (ii) any other electronic means directors at users of the
CYL Network (e.g., email offers), or (iii) an `off line' means (e.g. toll-free
number) for receiving orders related to specific offers within the CYL Network
requiring purchasers to reference a specific promotional identifier or tracking
code.
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ROBBINS GROUP PRODUCT. Any Robbins Group Product which CYL (or others acting on
its behalf or as distributors) purchases wholesale or manufactures and offers,
sells, provides, distributes or licenses to users of the CYL Network directly or
indirectly through (i) the Change Your Life Site, (ii) any other electronic
means directed at users of the CYL Network (e.g., email offers), or (iii) an
`off line' means (e.g. toll-free number) for receiving orders related to
specific offers within the CYL Network requiring purchasers to reference a
specific promotional identifier or tracking code.
ROBBINS GROUP OFFLINE/LIVE PRODUCT. Any offline coaching, offline seminar or
offline live event offered by the Robbins Group which CYL (or others acting on
its behalf or as distributors) offers, sells, provides, distributes or licenses
to users of the CYL Network directed or indirectly through (i) the Change Your
Life Site, (ii) any other electronic means directors at users of the CYL Network
(e.g., email offers), or (iii) an `off line' means (e.g. toll-free number) for
receiving orders related to specific offers within the CYL Network requiring
purchasers to reference a specific promotional identifier or tracking code.
CYL/ROBBINS GROUP PRODUCT. Any product, good or service which CYL and Robbins
Group develop together and co-brand as defined in Section 1.15, and which CYL
(or others acting on its behalf or as distributors) offers, sells, provides,
distributes or licenses to users of the CYL Network directly or indirectly
through (i) the Change Your Life Site, (ii) any other electronic means directed
at users of the CYL Network (e.g., email offers), or (iii) an `off line' means
(e.g. toll-free number) for receiving orders related to specific offers within
the CYL Network requiring purchasers to reference a specific promotional
identifier or tracking code.
UNBRANDED CYL/ROBBINS GROUP PRODUCT. Any product, good or service which is based
upon copyrighted Robbins Group Content and which after Termination of this
Agreement under Section 5.5, CYL (or others acting on its behalf or as
distributors) continues to offer, sell, provide, distribute or license to users
of the CYL Network directly or indirectly through (i) the Change Your Life Site,
(ii) any other electronic means directed at users of the CYL Network (e.g. email
offers), or (iii) an `off line' means (e.g. toll-free number) for receiving
orders related to specific offers within the CYL Network requiring purchasers to
reference a specific promotional identifier or tracking code.
ROBBINS GROUP EXISTING CUSTOMERS. Robbins Group customers that exist as of the
date of this Agreement and Robbins Group customers that are obtained solely as a
result of direct non-Internet marketing efforts that are identified in the
customer lists that are to be provided by the Robbins Group in accordance with
Section 1.10 of this Agreement. Such Robbins Group Existing Customers will be
separately identified and their purchases will be separately tracked.
REVENUE SHARE FOR ADVERTISEMENT SALES. CYL will share Advertising Revenues with
the Robbins Group as follows: (a) if Content of the Robbins Group and/or Robbins
Group/Change Your Life Content is the only Content on a page within the Change
Your Life Site that an Advertisement(s) appears, then the Robbins Group shall be
entitled to 25% of the Advertising Revenues for Advertisements on such page or
(b) if there is Content from more than one content
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provider of CYL on a page within the Change Your Life Site and such other
content providers are entitled to a share of Advertising Revenues, then each
such content provider shall be entitled to an amount equal to 25% of the
Advertising Revenue for Advertisements on such page multiplied by the quotient
of: (x) the number of rotating clickable icons (excluding fixed icons,
advertising and sponsorship, icons and product sales icons) that are branded by
such Content Provider on such page divided by (y) the total number of rotating
clickable icons (excluding fixed icons, advertising and sponsorship icons, and
product sales icons) on such page.
REVENUE SHARE FOR ROBBINS GROUP PRODUCTS. CYL will share with the Robbins Group
thirty-five percent (35%) of Adjusted Transaction Revenues from Robbins Group
Products.
REVENUE SHARE FOR CYL PRODUCTS. CYL will share with the Robbins Group forty
percent (40%) of Adjusted Transaction Revenues from CYL Products that are sold
by the Robbins Group offline.
REVENUE SHARE FOR CYL/ROBBINS GROUP PRODUCTS. CYL will share with the Robbins
Group thirty percent (30%) of Adjusted Transaction Revenues from CYL/Robbins
Group Products.
REVENUE SHARE FOR ROBBINS GROUP OFFLINE/LIVEPRODUCTS. CYL will retain the
following amounts in connection with the sale of Robbins Group Offline/Live
Products:
(a) four percent (4%) of the first $2,000,000 of gross revenue earned
in connection with the sale of such Robbins Group Offline/Live
Products;
(b) five percent (5%) of the next $1,000,000 of gross revenue earned
in connection with the sale of such Robbins Group Offline/Live
Products; and
(c) six percent (6%) of all additional amounts of gross revenue earned
in connection with the sale of such Robbins Group Offline/Live
Products.
In the event that the Robbins Group pays or agrees to pay any member of the
Robbins Group personal account representatives (PARs) a revenue share that is
greater than the amounts set forth above in connection with the sale of Robbins
Group Offline/Live Events, the above percentages shall be modified to reflect
and CYL shall be entitled to retain such higher percentages.
REVENUE SHARE FOR UNBRANDED CYL/ROBBINS GROUP PRODUCTS. CYL will share with the
Robbins Group eighteen percent (18%) of the Adjusted Transaction Revenues from
Unbranded CYL/Robbins Group Products as described above.
REVENUE SHARE FOR ROBBINS GROUP EXISTING CUSTOMERS. CYL will not retain any
Adjusted Transaction Revenues from the first two purchases of Robbins Group
Products (other than purchases of book products) made by Robbins Group Existing
Customers. Thereafter, CYL will share revenue associated with Robbins Group
Existing Customers with the Robbins Group in accordance with the revenue sharing
provisions contained in this Exhibit B. Notwithstanding the foregoing, CYL will
not retain any Adjusted Transaction Revenues associated with a specific Robbins
Group Existing Customer until such Robbins Group Existing Customer has purchased
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an aggregate of $400 of Robbins Group Product.
REVENUE FROM SALES AND MARKETING TRAINING BY THE ROBBINS GROUP. In the event
that the Robbins Group provides sales and marketing training in accordance with
Section 9.3(ii) of this Agreement, then CYL shall be entitled to one percent
(1%) of all cash receipts received by the Robbins Group in connection therewith;
PROVIDED, HOWEVER, that if CYL in any manner assists the Robbins Group with such
sales and marketing training (including, without limitation, marketing of the
same on the Internet) the parties shall at such time agree in good faith on an
appropriate revenue share with respect thereto.
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EXHIBIT C
(SECTION 3.1 THIRD PARTY RIGHTS)
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EXHIBIT D
(SECTION 10.2 - LIST OF ROBBINS ENTITIES WITH RIGHTS
LICENSED UNDER THE TERMS OF THIS AGREEMENT)
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EXHIBIT E
(List of Robbins Group Marks)
NAME OF PERSON Nature of right, title or interest in, and
identification of, Robbins Group Mark and/or
Robbins Group Content
--------------------------------------------
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Exhibit 10(b)
* Confidential treatment has been granted for certain portions of this
exhibit. Omitted portions have been filed separately with the Commission.
ESCROW AGREEMENT, dated as
of May 27, 1999, among GHS, INC., a
Delaware corporation ("PARENT"),
Debbie Dworkin (the "STOCKHOLDER"
and together with Parent referred to
herein as "INTERESTED PARTIES") and
State Street Bank and Trust Company,
in its capacity as Escrow Agent
hereunder (the "ESCROW AGENT", which
term shall also include any
successor escrow agent appointed in
accordance with Section 9(d)
hereof).
Reference is made to the Agreement and Plan of Reorganization
dated as of the date hereof (the "REORGANIZATION AGREEMENT"), among Parent,
Concept Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of Parent ("ACQUISITION SUB"), Concept Development, Inc., a Delaware
corporation (the "COMPANY"), the Stockholder and William Zanker (together with
the Stockholder, the "FOUNDERS") providing for, among other things, the merger
(the "MERGER") of Acquisition Sub with and into the Company, with the Company
surviving the Merger as a wholly-owned subsidiary of Parent and the Stockholder
is receiving shares of preferred stock of Parent ("PARENT PREFERRED STOCK") in
exchange for shares of capital stock of the Company, in the manner provided in
the Reorganization Agreement and the Agreement of Merger. As used herein, the
term "Reorganization Agreement" shall be deemed to mean and include the
Reorganization Agreement and the Agreement of Merger executed and delivered in
connection therewith.
Reference is also made to the Repurchase Agreement dated as of
the date hereof (the "REPURCHASE AGREEMENT") between Parent and the Stockholder
providing for the repurchase by Parent of the Parent Preferred Stock in order to
provide an incentive to William Zanker, the Stockholder's husband, to exercise
his best efforts on behalf of Parent or any subsidiaries or affiliates of
Parent.
This Agreement is designed to implement the provisions of the
Reorganization Agreement and the Repurchase Agreement pursuant to which Parent,
on behalf of the Stockholder, is depositing with the Escrow Agent that number of
shares of Parent Preferred Stock listed on SCHEDULE I hereto issued in the
Merger to the Stockholder as security for the satisfaction of (i) the
indemnification obligations of the Stockholder pursuant to Article VIII of the
Reorganization Agreement and (ii) the repurchase obligations of the Stockholder
pursuant to the Repurchase Agreement.
NOW, THEREFORE, in consideration of the premises and the
representations and warranties and agreements contained herein, the parties
hereto agree as follows:
1. DEFINITIONS. As used herein the following capitalized terms shall have
the following meanings:
(a) "ESCROW SHARES" shall mean the Parent Common Stock and the Parent
Preferred Stock held by the Escrow Agent hereunder.
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(b) "INDEMNIFIED PERSONs" shall mean and include Parent, Acquisition
Sub and the Company and their respective affiliates, successors and assigns, and
the respective officers and directors of each of the foregoing.
(c) "INDEMNITY ESCROW SHARES" shall mean 5,000 (of the total of 50,000)
shares of Parent Preferred Stock issued to the Stockholder pursuant to the
Reorganization Agreement (including, without limitation, any shares issued
pursuant to any stock dividend, stock split, reverse stock split, combination or
reclassification thereof), and any shares of common stock of Parent ("PARENT
COMMON STOCK") issued upon conversion thereof (including, without limitation,
any shares issued pursuant to any stock dividend, stock split, reverse stock
split, combination or reclassification thereof).
(d) "REPURCHASE ESCROW SHARES" shall mean 50,000 shares of Parent
Preferred Stock issued to the Stockholder pursuant to the Reorganization
Agreement (including, without limitation, any shares issued pursuant to any
conversion, stock dividend, stock split, reverse stock split, combination or
reclassification thereof), and any shares of Parent Common Stock issued upon
conversion thereof (including, without limitation, any shares issued pursuant to
any conversion, stock dividend, stock split, reverse stock split, combination or
reclassification thereof).
(e) "SALE TRANSACTION" shall mean the merger or consolidation of the
Company into or with another corporation or other entity, or the sale of all or
substantially all the assets or the sale of all of the outstanding capital stock
of the Company, in each case under circumstances in which the holders of the
outstanding capital stock of the Company immediately prior to the Transaction,
own less than a majority in voting power of the outstanding capital stock of the
Company or the surviving or resulting company or acquiror, as the case may be,
immediately following such transaction.
(f) "STIPULATED PRICE" shall mean (i) in the event that the Parent
Preferred Stock has not been converted into Parent Common Stock, the product of
(x) (A) the closing price of the Parent Common Stock on any securities exchange,
the Nasdaq National Market or (B) if actively traded over-the-counter, the
average of the closing bid or sale prices (whichever is applicable), on the date
hereof TIMES (y) ten (10) or (ii) in the event that the Parent Preferred Stock
has been converted into Parent Common Stock, the closing price per share of the
Parent Common Stock on any securities exchange, the Nasdaq National Market or
OTC Bulletin Board on the date hereof, all as calculated and/or ascertained by
the Parent and communicated to the Escrow Agent in writing.
2. APPOINTMENT OF ESCROW AGENT; ESCROW ACCOUNT. The Escrow Agent is hereby
appointed to act as escrow agent hereunder and the Escrow Agent agrees to act as
such.
3. ESCROW FUND AND ESCROW ACCOUNT. (a) Parent shall deliver to the Escrow Agent,
within a reasonable time from the date hereof, certificates registered in the
name of the Stockholder representing the Indemnity Escrow Shares and the
Repurchase Escrow Shares (in each case, with stock powers executed in blank by
the Stockholder attached thereto) and the Escrow Agent shall accept such
certificates in escrow for the benefit of (i) Parent, and the
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<PAGE>
Indemnified Persons and (ii) the Stockholder, pursuant and subject to the
provisions of this Agreement. The shares of Parent Preferred Stock to be
delivered to the Escrow Agent pursuant to this Section 3(a), together with any
stock dividends or stock distributions or any securities of Parent issued in
respect thereof (including, without limitation, any shares issued pursuant to
any conversion, stock dividend, stock split, reverse stock split, combination or
reclassification thereof) shall become part of, and are hereinafter referred to
collectively as, the "ESCROW FUND". The Escrow Agent shall have no
responsibility for the genuineness, validity, market value, title or sufficiency
for any intended purpose of the Parent Preferred Stock to be delivered to it
under this Agreement.
(b) The Escrow Agent shall establish a segregated account (the "ESCROW
ACCOUNT") at its office located at its address set forth on SCHEDULE II in which
to hold the Escrow Fund.
4. RIGHTS TO THE ESCROW FUND. The Escrow Fund shall be for the exclusive benefit
of the Parent and the Indemnified Persons and their respective successors and
assigns, as provided herein, in the Repurchase Agreement and in the
Reorganization Agreement, and no other person or entity shall have any right,
title or interest therein other than the Stockholder's underlying ownership
interests in the property constituting the Escrow Fund.
5. DISTRIBUTION OF THE INDEMNITY ESCROW SHARES IN CONNECTION WITH INDEMNITY
CLAIMS. The Escrow Agent shall continue to hold the Indemnity Escrow Shares in
its possession until authorized hereunder to distribute the Indemnity Escrow
Shares or any part thereof. The Escrow Agent shall distribute the Indemnity
Escrow Shares as follows:
(a) INDEMNIFICATION. In the event any Indemnified Person (the "CLAIMING
PERSON") asserts a right of indemnity against the Stockholder under Section 8 of
the Reorganization Agreement, Parent shall execute and deliver to the Escrow
Agent a written notice to such effect (a "NOTICE OF CLAIM"; and the right of
indemnity asserted in a Notice of Claim being hereinafter referred to as a
"CLAIM"), which Notice of Claim shall instruct the Escrow Agent to deliver that
portion of the Indemnity Escrow Shares the Fair Market Value (as defined in
Section 8 hereof) of which shall equal the amount of the Claim (or, if the
amount of the Claim shall be greater than the Fair Market Value of the Indemnity
Escrow Shares, the balance of the Indemnity Escrow Shares) to such Claiming
Person, and the following shall apply:
(i) a Notice of Claim delivered to the Escrow Agent pursuant
to this Section 5(a) shall set forth the name of the Claiming Person,
the nature and details of such Claim (to the extent known), and a
calculation setting forth the amount thereof (or if not ascertainable,
a reasonable good faith estimate of the maximum amount thereof); and
(ii) if within 10 business days after the Escrow Agent's
receipt of any Notice of Claim pursuant to this Section 5(a), the
Escrow Agent has not received a notification (a "NOTICE OF DISPUTE")
from the Stockholder that the Claim, or the amount thereof, is
disputed, the Escrow Agent shall, within 5 business days after the
expiration of such 10-day period, deliver to the Claiming Person that
portion of the Indemnity Escrow Shares the Fair Market Value of which
shall equal the amount of the Claim as set forth in such Notice of
Claim (or, if the amount of the Claim shall be greater than the Fair
Market Value of the
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<PAGE>
aggregate Indemnity Escrow Shares as of such date, the balance of the
Indemnity Escrow Shares) (the date of any such delivery being referred
to herein as a "RELEASE DATE"). If the Escrow Agent does receive a
Notice of Dispute within such 10-day period (a copy of the Notice of
Dispute being simultaneously sent to Parent by the Stockholder), the
Escrow Agent shall not deliver such amount to such Claiming Person
until 5 business days after such dispute has been settled as provided
in Section 17 hereof and written notice of such settlement and of the
amount, if any, to be paid in respect of the disputed Claim has been
received by the Escrow Agent from the Parent.
(b) Anything contained herein to the contrary notwithstanding, if the
Escrow Agent is authorized, at any time pursuant to Section 5(a) hereof, to
deliver all or any portion of the Indemnity Escrow Shares to a Claiming Person
with respect to a Claim or Claims, then (i) such delivery shall be made
regardless of the Escrow Agent's prior or subsequent receipt of any Notice of
Claim or Notice of Dispute with respect to any other Claim or Claims and (ii)
the Escrow Agent shall (A) deliver to the transfer agent for the Parent
Preferred Stock (who shall be identified to the Escrow Agent in writing by
Parent) on behalf of the Stockholder the certificate registered in such
Stockholder's name representing the Escrow Shares, together with a completed
stock power transferring to such Claiming Person that number of shares of Parent
Preferred Stock being delivered to such Claiming Person and (B) instruct such
transfer agent to issue and deliver to the Escrow Agent for retention hereunder
as part of the Escrow Fund a certificate of like tenor, registered in the name
of the Stockholder representing the balance of the shares of Parent Preferred
Stock represented thereby, if any. Parent and the Stockholder shall take all
such actions and execute and deliver all such documents as are necessary to
effectuate the intent and purpose of this Section 5(b).
6. DISTRIBUTION OF THE REPURCHASE ESCROW SHARES IN CONNECTION WITH EXERCISE OF
THE REPURCHASE OPTION.
(a) In the event Parent and/or any assignee of Parent shall elect to
exercise the Purchase Option set forth in the Repurchase Agreement, Parent shall
execute and deliver to the Escrow Agent and the Stockholder a written notice (a
"REPURCHASE NOTICE") specifying (i) the number of shares of (A) Parent Preferred
Stock or (B) upon conversion of the Parent Preferred Stock, Parent Common Stock,
which Parent is entitled to repurchase, (ii) the number of Repurchase Escrow
Shares as to which it is exercising the Repurchase Option, (iii) the purchase
price and the calculation thereof and (iv) the time for a closing thereunder at
the principal office of Parent (the "REPURCHASE CLOSING"). Said Repurchase
Notice shall be given no sooner than five (5) business days before the
Repurchase Closing.
(b) Stockholder and Parent hereby irrevocably authorize and direct the
Escrow Agent to deliver to the Parent the number of shares of Parent Preferred
Stock or Parent Common Stock, as applicable, to close the transaction
contemplated by such Repurchase Notice in accordance with the terms of said
Repurchase Notice. Subject to the provisions of the Repurchase Agreement and
Section 6(b) hereof, the Escrow Agent shall deliver to the Stockholder the
number of shares equal to the difference between (x) the total number of
Repurchase Escrow Shares held by the Escrow Agent on the date of delivery of the
Repurchase Notice MINUS (y) the number of Repurchase Escrow Shares for which the
Purchase Option has been exercised.
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<PAGE>
(c) If the Escrow Agent has not received from Parent a Repurchase
Notice to the Escrow Agent, or has exercised the Purchase Option with respect to
less than all of the then remaining Repurchase Escrow Shares, prior to the
applicable date set forth on the table below, the Escrow Agent shall deliver to
the Stockholder, subject to payment of escrow fees and expenses by the Company
as required herein, within five (5) business days after the dates set forth
below the number of Repurchase Escrow Shares equal to the Vested Shares (as set
forth below):
<TABLE>
<CAPTION>
- --------------------------- --------------------------------------------- ------------------------------------------
VESTED SHARES (IF THE PARENT VESTED SHARES (IF THE PARENT
PREFERRED STOCK HAS NOT PREFERRED STOCK HAS
BEEN CONVERTED TO PARENT BEEN CONVERTED TO PARENT
DATE COMMON STOCK) COMMON STOCK)
---- ------------- -------------
<S> <C> <C>
- --------------------------- --------------------------------------------- ------------------------------------------
September 1, 1999 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
December 1, 1999 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
March 1, 2000 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
June 1, 2000 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
September 1, 2000 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
December 1, 2000 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
March 1, 2001 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
June 1, 2001 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
September 1, 2001 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
December 1, 2001 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
March 1, 2002 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
June 1, 2002 [*] [*]
- --------------------------- --------------------------------------------- ------------------------------------------
</TABLE>
(d) SALE TRANSACTION. Subject to Section 7 hereof and anything
contained herein to the contrary notwithstanding, upon the consummation of a
Sale Transaction, Parent shall deliver a notice to the Escrow Agent (the "SALE
TRANSACTION NOTICE") and Escrow Agent shall thereafter deliver the Repurchase
Escrow Shares (including, without limitation, any shares issued pursuant to any
stock split, reverse stock split, combination or reclassification thereof) to
the Stockholder within five (5) business days after receipt of the Sale
Transaction Notice, subject to the following:
(i) if the Sale Transaction Notice is received by the Escrow
Agent before the first anniversary of the date hereof (the "FIRST
ANNIVERSARY"), the Escrow Agent shall not distribute to the
Stockholder, and the Escrow Agent shall hold and retain in Escrow, the
balance of the Indemnity Escrow Shares (including, without limitation,
any shares issued pursuant to any stock split, reverse stock split,
combination or reclassification thereof) and on and after the First
Anniversary the Escrow Agent shall distribute to the Stockholder within
five (5) business days after the First Anniversary the balance of the
Indemnity Escrow Shares; PROVIDED, HOWEVER, that, regardless of whether
the Sale Transaction Notice is received before, on or after the First
Anniversary, the Escrow Agent
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<PAGE>
shall NOT distribute to the Stockholder, and the Escrow Agent shall
hold and retain in Escrow, the number of Indemnity Escrow shares
specified in all Notices of Claim which, prior to the First
Anniversary, have been received by the Escrow Agent but which have not
been paid to Parent or otherwise discharged pursuant to this Section
6. Any portion of the Indemnity Escrow Shares which shall continue to
be held by the Escrow Agent pursuant to the preceding sentence shall
be so held until such time as all disputed Claims hereunder have been
settled as provided in Section 17 and written notice of such
settlement or settlements setting forth the amounts to be paid to
Parent, on the one hand, and the Stockholder, on the other hand, have
been received by the Escrow Agent.
7. ESCROW FEES. Notwithstanding anything herein to the contrary, at any time
that the Escrow Agent is authorized or directed or otherwise required to make a
disbursement or distribution from the Escrow Fund, the Escrow Agent may refrain
from making such disbursement or distribution from the Escrow Fund, without
liability, if and to the extent that there are any fees or expenses then due to
the Escrow Agent pursuant to Sections 11, 12, 13 and/or Schedule II.
8. VALUATION. For all purposes of this Agreement, the "FAIR MARKET VALUE" of any
property (other than cash and shares of Parent Preferred Stock or Parent Common
Stock) contained in the Escrow Fund as of any date shall be the fair market
value of such property as of such date as determined by the Board of Directors
of Parent in the good faith exercise of its reasonable business judgment, which
determination shall be evidenced by a certificate executed by the Secretary of
Parent and delivered to the Escrow Agent and the Stockholder, and the "FAIR
MARKET VALUE" per share of Parent Preferred Stock and/or Parent Common Stock, as
applicable, shall be the lesser of (i) the Stipulated Price and (ii) (A) if such
shares are traded on a securities exchange or through the Nasdaq National
Market, the value shall be deemed to be the closing price of the securities on
such exchange on the date of delivery of the Notice of Claim or Repurchase
Notice or (B) if actively traded over-the-counter, the value shall be deemed to
be the closing bid or sale prices (whichever is applicable) on the date of
delivery of the Notice of Claim or Repurchase Notice, as calculated and/or
ascertained by the Parent and provided to the Escrow Agent in writing.
9. STOCKHOLDER RIGHTS. (a) Except as expressly provided otherwise herein, the
Stockholder shall at all times retain and have the full and absolute right to
exercise all rights and indicia of ownership with respect to the Escrow Shares
owned by such Stockholder, including, without limitation, voting and consensual
rights; PROVIDED, HOWEVER, that the Stockholder shall have no right to transfer,
pledge or encumber or otherwise dispose in any manner whatsoever any Escrow
Shares that are held in Escrow Account. In accordance with Section 3(a), all
dividends or distributions or proceeds in stock or other property issued (other
than cash) in respect of the Escrow Shares shall be deposited into the Escrow
Account and become part of the Escrow Fund so long as the Escrow Agent is
authorized to retain such shares hereunder. If any such shares of Parent
Preferred Stock are transferred to a Claiming Person pursuant to Section 5
hereof in satisfaction of a Claim or Claims, all rights and indicia of ownership
with respect to such shares shall thereupon reside with such Claiming Person or
any subsequent holder thereof.
(b) The Escrow Agent shall be under no duty to preserve, protect or
exercise rights in
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<PAGE>
the Escrow Shares, and shall be responsible only for reasonable measures to
maintain the physical safekeeping thereof, and otherwise to perform such
duties on its part as are expressly set forth in this Agreement. The Escrow
Agent will not be responsible for authenticating the right of the Stockholder
to exercise voting or consent-giving authority in respect of shares of Parent
Preferred Stock held by it hereunder. The Escrow Agent shall not be
responsible for forwarding to, or notifying any party, or taking any other
action with respect to any notice, solicitation or other document or
information, written or oral, received by the Escrow Agent from an issuer or
other person with respect to Escrow Shares held by the Escrow Agent
hereunder, including, without limitation, any proxy material, tenders,
options, the pendency of calls and maturities and the expiration of rights.
10. TERMINATION. This Agreement may be terminated at any time by and upon the
receipt by the Escrow Agent of 10 days' prior written notice of termination
executed by Parent and the Stockholder directing the distribution of all
property then held by the Escrow Agent under and pursuant to the distribution
provisions of Section 5(c) of this Agreement and such termination notice. This
Agreement shall automatically terminate if and when all amounts in the Escrow
Account (including all the securities in which any funds, if any, contained in
the Escrow Account shall have been invested) shall have been distributed by the
Escrow Agent in accordance with the terms of this Agreement and all amounts
payable to the Escrow Agent pursuant to Sections 11, 12 or 13 have been paid.
11. CONCERNING THE ESCROW AGENT.
(a) Each party acknowledges and agrees that the Escrow Agent (i) shall
not be responsible for any of the agreements referred to or described herein
(including without limitation the Reorganization Agreement), or for determining
or compelling compliance therewith, and shall not otherwise be bound thereby,
(ii) shall be obligated only for the performance of such duties as are expressly
and specifically set forth in this Agreement on its part to be performed, each
of which is ministerial (and shall not be construed to be fiduciary) in nature,
and no implied duties or obligations of any kind shall be read into this
Agreement against or on the part of the Escrow Agent, (iii) shall not be
obligated to take any legal or other action hereunder that might in its judgment
involve or cause it to incur any expense or liability unless it shall have been
furnished with acceptable indemnification, (iv) may rely on and shall be
protected in acting (or, if so requested, refraining from acting) upon and in
accordance with any written notice, instruction (including, without limitation,
wire transfer instructions, whether incorporated herein or provided in a
separate written instruction), instrument, statement, certificate, request or
other document furnished to it hereunder and believed by it to be genuine and to
have been signed or presented by the proper person, and shall have no
responsibility for determining the accuracy thereof, and (v) may consult counsel
satisfactory to it, including in-house counsel, and the opinion or advice of
such counsel in any instance shall be full and complete authorization and
protection in respect of any action taken, suffered or omitted by it hereunder
in good faith and in accordance with the opinion or advice of such counsel.
(b) The Escrow Agent shall not be liable to anyone for any action taken
or omitted to be taken by it hereunder except in the case of the Escrow Agent's
gross negligence or willful misconduct in breach of the terms of this Agreement.
In no event shall the Escrow Agent be
7
<PAGE>
liable for indirect, punitive, special or consequential damage or loss
(including but not limited to lost profits) whatsoever, even if the Escrow Agent
has been informed of the likelihood of such loss or damage and regardless of the
form of action.
(c) The Escrow Agent shall have no more or less responsibility or
liability on account of any action or omission of any book-entry depository or
securities intermediary employed by the Escrow Agent than any such book-entry
depository or securities intermediary has to the Escrow Agent, except to the
extent that such action or omission of any book-entry depository or securities
intermediary was caused by the Escrow Agent's own gross negligence or willful
misconduct in breach of this Agreement.
(d) The Escrow Agent may resign and be discharged from its duties
hereunder at any time by giving at least 30 days' prior written notice of such
resignation to Parent and the Stockholder specifying a date upon which such
resignation shall take effect; PROVIDED, HOWEVER, that the Escrow Agent shall
continue to serve until its successor accepts the Escrow Fund. Upon receipt of
such notice, a successor escrow agent shall be appointed by Parent and the
Stockholder, such successor escrow agent to become the Escrow Agent hereunder on
the resignation date specified in such notice. If a written instrument of
acceptance by a successor escrow agent shall not have been received by the
Escrow Agent within 40 days after the giving of such notice of resignation, the
resigning Escrow Agent may at the expense of Parent petition any court of
competent jurisdiction for the appointment of a successor escrow agent. Parent
and the Stockholder acting jointly, may at any time substitute a new escrow
agent by giving 10 days' prior written notice thereof to the Escrow Agent then
acting and by Parent paying all fees and expenses of such Escrow Agent.
12. INDEMNIFICATION. Each of the Interested Parties covenant and agree, jointly
and severally, to indemnify the Escrow Agent (and its directors, officers and
employees) and hold it (and such directors, officers and employees) harmless
from and against any loss, liability, damage, cost and expense of any nature
incurred by the Escrow Agent arising out of or in connection with this Agreement
or with the administration of its duties hereunder, including but not limited to
reasonable attorney's fees and other costs and expenses of defending or
preparing to defend against any claim of liability unless and except to the
extent such loss, liability, damage, cost and expense shall be caused by the
Escrow Agent's gross negligence or willful misconduct. The foregoing
indemnification and agreement to hold harmless shall survive the termination of
this Agreement and the resignation of the Escrow Agent.
13. FEES OF ESCROW AGENT. For its services hereunder, the Escrow Agent shall be
entitled to the fees set forth on SCHEDULE II attached hereto. The annual
Administrative Fee shall be subject to adjustment annually, upon notice. Such
fees shall be paid by Parent. In addition, the Parent and the Stockholder
jointly and severally agree to pay equally the cost of reimbursing the Escrow
Agent, and shall reimburse the Escrow Agent on demand, for all costs and
expenses incurred in connection with the administration of this Agreement or the
escrow created hereby or the performance or observance of its duties hereunder
which are in excess of its compensation for normal services hereunder, including
without limitation, payment of any reasonable legal fees and expenses incurred
by the Escrow Agent in connection with resolution of any claim by any party
hereunder ("EXTRAORDINARY ADMINISTRATIVE EXPENSES"). The Escrow Agent shall
8
<PAGE>
periodically bill Parent and the Stockholder for such out of pocket fees and
expenses. The Escrow Fund shall not be available to, and shall not be used by,
the Escrow Agent to set off any obligations of any party hereto owing the Escrow
Agent in any capacity. Without altering or limiting the joint and several
liability of any of the Interested Parties to the Escrow Agent hereunder, each
of the Interested Parties agrees as between themselves that they shall share,
one half each, all amounts payable to the Escrow Agent for Extraordinary
Administrative Expenses pursuant to this Section 13.
14. CERTIFICATION OF TAX IDENTIFICATION NUMBER. The Interested Parties hereto
agree to provide the Escrow Agent with a certified tax identification number by
signing and returning a Form W-9 (or Form W-8, in case of non-U.S. persons) to
the Escrow Agent prior to the date on which any income earned on the Escrow Fund
is credited to the Escrow Fund. The Interested Parties understand that, in the
event their tax identification numbers are not certified to the Escrow Agent,
the Internal Revenue Code, as amended from time to time, may require withholding
of a portion of any income earned on the Escrow Fund.
15. TAX REPORTING. The interested Parties agree that, for tax reporting
purposes, all income earned on the Escrow Fund in any tax year shall (i) to the
extent such income is distributed by the Escrow Agent to any person or entity
pursuant to the terms of this Agreement during such tax year, to be allocated to
such person or entity, and (ii) otherwise shall be allocated to the Stockholder.
16. TAX INDEMNIFICATION. Each of the Interested Parties agree, jointly and
severally, (i) to assume any and all obligations now or hereafter arising under
any applicable tax law with respect to any payment or distribution of the Escrow
Fund to, or performance of other activities under this Agreement by, such
Interested Party, (ii) to instruct the Escrow Agent in writing with respect to
the Escrow Agent's responsibility for withholding and other taxes, assessments
or other governmental charges, and to instruct the Escrow Agent with respect to
any certifications and governmental reporting that may be required under any
laws or regulations that may be applicable in connection with its action as
Escrow Agent under this Agreement, and (iii) to indemnify and hold the Escrow
Agent harmless from any liability or obligation on account of taxes,
assessments, additions for late payment, interest, penalties expenses and other
governmental charges that may be assessed or asserted against the Escrow Agent
in connection with or relating to any payment made or other activities performed
under the terms of this Agreement, including without limitation any liability
for the withholding or deduction of (or the failure to withhold or deduct) the
same, and any liability for failure to obtain proper certifications or to report
properly to governmental authorities in connection with this Agreement,
including costs and expenses (including reasonable legal fees and expenses),
interest and penalties, to the extent that it relates to such individual
Interested Party. The foregoing indemnification and agreement to hold harmless
shall survive the termination of this Agreement and the resignation of the
Escrow Agent.
17. DISPUTES. If any dispute should arise with respect to the payment or
ownership or right of possession of the Escrow Fund, or the duties of the Escrow
Agent hereunder or should any claim be made upon the Escrow Agent or the Escrow
Fund by any third party, the Escrow Agent is authorized and directed to retain
in its possession, without liability to anyone, any part of the
9
<PAGE>
Escrow Fund in dispute until such dispute shall have been settled either by
mutual agreement of Parent and the Stockholder (evidenced by appropriate
instructions in writing to the Escrow Agent signed by Parent and the
Stockholder) or by the final order, decree or judgment, received by the Escrow
Agent, of a court of competent jurisdiction in the United States of America (the
time for appeal having expired with no appeal having been taken) in a proceeding
to which Parent and the Stockholder are parties, but the Escrow Agent shall be
under no duty whatsoever to institute or defend any such proceedings.
18. MISCELLANEOUS.
(a) All notices or other communications which are required or permitted
hereunder shall be in writing and shall be deemed given (i) when received by the
addressee if delivered personally or sent by nationally-recognized overnight
courier (ii) when received by the addressee if sent by registered or certified
mail, return receipt requested and postage prepaid, or (iii) when sent by
telecopier, provided that a confirmation copy thereof is sent the same day by
postage prepaid U.S. mail. Notwithstanding the foregoing, no notice nor other
communication shall be deemed given to the Escrow Agent until the Escrow Agent's
actual receipt thereof. Notices shall be sent to the addresses given below for
the parties, or to such other address for any party notice of which, complying
with these requirements, is given by that party to all others.
(i) if to the Stockholder then to:
Debbie Dworkin
20 Taconic Road
Millwood, New York 10546
Fax: (212) 967-6256
(ii) if to Parent, to:
GHS, Inc.
2400 Research Blvd.
Rockville, Maryland 20850
Attention: Alan Gold
Telecopier: (301) 308-3254
with copies to:
Orrick, Herrington & Sutcliffe LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151; and
if to the Escrow Agent, to the address set forth on
SCHEDULE II hereto;
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or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith.
(b) COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
(c) GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the domestic laws of the Commonwealth of Massachusetts without
giving effect to any choice of law or conflicting provision or rule.
(d) PARTIES IN INTEREST. This Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the parties hereto and their respective
successors and assigns. Anything contained herein to the contrary
notwithstanding, this Agreement shall not be assigned by any party hereto
without the consent of the other parties hereto.
(e) AMENDMENTS. This Agreement may be amended only by a written
instrument duly executed by the parties hereto. No course of conduct shall
constitute a waiver of any of the terms and conditions of this Escrow Agreement,
unless such waiver is specified in writing, and then only to the extent so
specified. A waiver of any of the terms and conditions of this Escrow Agreement
on one occasion shall not constitute a waiver of the terms of this Escrow
Agreement, or of such terms and conditions on any other occasion.
(f) HEADINGS. The section and paragraph headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) ENTIRE AGREEMENT. This Agreement and, with respect to the
Interested Parties only, the Reorganization Agreement, contain the entire
agreement among the parties hereto with respect to the transactions contemplated
hereby and supersedes all prior agreements or understandings, written or oral,
among the parties identified above with respect thereto; PROVIDED, that anything
contained herein to the contrary notwithstanding, the parties hereto agree that
the Escrow Agent shall perform its obligations under this Agreement solely by
reference to this Agreement.
(h) FORCE MAJEURE. The Escrow Agent will not be responsible for delays
or failures in performing its duties resulting from acts beyond its control such
as, but not limited to, acts of God, strikes, lockouts, riots, acts of war,
epidemics, governmental regulations superimposed after the fact, fire,
communication line failures, computer viruses, power failures, earthquakes or
other disasters.
(i) REPRODUCTION OF AGREEMENT. This Agreement and all documents
relating hereto, including, without limitation, (1) consents, waivers and
modifications that may hereafter be executed, and (2) certificates and other
information previously or hereafter furnished, may be reproduced by any
photographic, photostatic, microfilm, optical disk, micro-card, miniature
photographic or other similar process. It is agreed that any such reproduction
shall be admissible in evidence as the original itself in any judicial or
administrative proceeding, whether or not the
11
<PAGE>
original is in existence and whether or not the reproduction was made by a party
in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.
(j) INVESTMENT OF CASH. Should the Escrow Agent hold any cash in the
Escrow fund, the Escrow Agent shall be under no obligation to invest (or
otherwise pay interest on) such cash.
(k) CONSENT TO JURISDICTION AND SERVICE. Each of the Interested Parties
hereby absolutely and irrevocably consents and submits to the jurisdiction of
the courts in the Commonwealth of Massachusetts and of any Federal court located
in said Commonwealth in connection with any actions or proceedings brought
against any of the Interested Parties (or each of them) by the Escrow Agent
arising out of or relating to this Escrow Agreement. In any such action or
proceeding, the Interested Parties each hereby absolutely and irrevocably (i)
waives any objection to jurisdiction or venue, (ii) waives personal service of
any summons, complaint, declaration or other process, and (iii) agrees that the
service thereof may be made by certified or registered first-class mail directed
to such party, as the case may be, at their respective addresses in accordance
Section 16(a) hereof.
(l) CERTAIN DISTRIBUTIONS OF ESCROW SHARES. Notwithstanding anything
herein to the contrary, if the Escrow Agent is required to distribute Escrow
Shares pursuant hereto to a particular recipient or recipients (an "Intended
Recipient"), and the Escrow Agent has sufficient Parent Common Stock or Parent
Preferred Stock, as the case may be, to satisfy such distribution, but the stock
certificates in the Escrow Agent's possession are in such denominations that the
Escrow Agent is not able to distribute the exact number of Escrow Shares so
required to be distributed (the "Required Amount"), the Escrow Agent shall
deliver to the Parent such number of Parent Common Stock and/or Parent Preferred
Stock, as the case may be, as may exceed the Required Amount, and the Parent
shall promptly deliver to the Escrow Agent a certificate representing the number
of such shares in excess of the Required Amount (the "Excess Shares") for the
Escrow Agent to retain in escrow pursuant to the terms hereof. The Parent shall,
to the extent necessary, deliver a certificate representing the Required Amount
of the Parent Common Stock or Parent Preferred Stock, as the case may be, to the
Intended Recipient. The Escrow Agent shall not be responsible for safekeeping
the Excess Shares until received by the Escrow Agent from the Parent, and the
Escrow Agent shall not be responsible for its failure to perform hereunder
resulting from the failure of the Escrow Agent to receive such Excess Shares
from the Parent.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Escrow
Agreement to be executed and delivered on the date first above written.
GHS, INC.
By: /s/ Alan Gold
---------------------------
Name: Alan Gold
Title: President
STOCKHOLDER:
/s/ Debbie Dworkin
------------------------------
Debbie Dworkin
Accepted and Agreed to
as of the Date First Above Written:
STATE STREET BANK AND TRUST COMPANY,
AS ESCROW AGENT:
By: /s/
---------------------------
Name:
Title:
13
<PAGE>
SCHEDULE I
ESCROW SHARES
<TABLE>
<CAPTION>
- ------------------------------------- ------------------------------------------
STOCKHOLDER ESCROW SHARES
- ------------------------------------- ------------------------------------------
<S> <C>
Debbie Dworkin 50,000
Parent Preferred
Stock and all
shares of Parent
Common Stock
issued upon
conversion
thereof.
- ------------------------------------- ------------------------------------------
</TABLE>
14
<PAGE>
SCHEDULE II
FEES OF ESCROW AGENT
ESCROW AGENT:
State Street Bank and Trust Company
Financial Markets Group
Corporate Trust
Two International Place, 5th Floor
Boston, MA 02110-2804
Attention: GHS/Dworkin Escrow
Wire Transfer Information:
State Street Bank and Trust Company
ABA#: 011 000 028
DDA: 99039901
FFC: 122299-010
Attn: Corporate Trust Dept
Ref: GHS/Dworkin Escrow
<TABLE>
<CAPTION>
FEES AND EXPENSES:
<S> <C>
ACCEPTANCE FEE: $1,000.00
ADMINISTRATIVE FEE: 3,500.00 per year or any part
thereof
INVESTMENT FEE: $65.00 per buy/sell
SWEEP FEE: 40 basis points per annum of the
average daily net assets
WIRE FEE: $20 per wire
OUT OF POCKET EXPENSES: At Cost
LEGAL FEES: At Cost, including attorney's fees
incurred in the preparation of this
Escrow Agreement
EXTRAORDINARY ADMINISTRATIVE EXPENSES As billed as per Section 13
</TABLE>
15
<PAGE>
Exhibit 10(c)
REPURCHASE AGREEMENT dated as of May
27, 1999, between GHS, INC., a
Delaware corporation (the
"Company"), and DEBBIE DWORKIN (the
"Stockholder").
The Stockholder owns 50,000 shares of preferred stock, $0.01
par value (the "Preferred Stock") of the Company or common stock, $0.01 par
value (the "Common Stock" and together with the Preferred Stock, the "Shares")
of the Company issued upon conversion thereof, which Shares shall pursuant to
the terms of this Agreement, become subject to repurchase by the Company in
order provide an incentive to William Zanker ("Zanker"), the Stockholder's
husband, to exercise his best efforts on behalf of the Company or any
subsidiaries or affiliates of the Company, subject to the terms and provisions
of this Agreement.
NOW, THEREFORE, for good and valuable consideration, the
receipt of which is hereby acknowledged, the parties hereto hereby agree as
follows:
1. PURCHASE OPTION.
(a) The Shares shall be subject to the option (the
"Purchase Option") in the amounts set forth in Section 2(c) herein. In the event
Zanker shall cease to be employed by the Company (including an affiliate or a
subsidiary of the Company) pursuant to any Voluntary Termination, Involuntary
Termination or a Termination for Cause (in each case as defined in the
Employment Agreement dated as of the date hereof (the "Employment Agreement")
between the Company and Zanker) ("Cessation of Employment"), the Company shall
have the right, at any time within 60 days after the date the Zanker ceases to
be so employed, to purchase from the Stockholder or her personal representative,
as the case may be, at the purchase price specified in subsection (b) below (the
"Option Price"), up to but not exceeding the number of Shares specified in
subparagraph (c) below upon the terms hereinafter set forth; PROVIDED, HOWEVER,
that the Shares shall immediately cease to be subject to the Purchase Option (A)
upon the merger or consolidation of the Company into or with another corporation
or other entity, or the sale of all or substantially all the assets or the sale
of all of the outstanding capital stock of the Company (each, a "Sale
Transaction"), in each case under circumstances in which the holders of the
outstanding capital stock of the Company, immediately prior to the Transaction,
own less than a majority in voting power of the outstanding capital stock of the
Company or the surviving or resulting company or acquiror, as the case may be,
immediately following such Sale Transaction or (B) if Zanker is Terminated
Without Cause (as such term is defined in the Employment Agreement).
(b) The Option Price per Share (as constituted on the
date hereof) shall be:
(i) from the date hereof until May 31, 2000, the
lesser of (A) $6.00 and (B) the Fair Value Per Share (as hereinafter
defined);
(ii) from June 1, 2000 until the May 31, 2001,
the lesser of (A) $9.00 and (B) the Fair Value Per Share; and
(iii) from June 1, 2001 until May 31, 2002, the
lesser of (A) $12.00 and (B) the Fair Value Per Share (as hereinafter
defined).
<PAGE>
"Fair Value Per Share" shall mean, as of the date the Purchase Option is
exercised, (i) if the Shares are not publicly traded, a price determined in good
faith by the Board of Directors of the Company or (ii) if the Shares are
publicly traded, the average closing price per share of Common Stock as reported
in the over-the-counter market as reported on the Nasdaq National Market System
or on the principal national securities exchange on which it is so traded, as
the case may be, during the ten trading days ending on the trading date
immediately prior to the date the Purchase Option is exercised.
(c) Subject to Section 1(d) hereof and the proviso
contained in Section 1(a) hereof, upon the Cessation of Employment of Zanker
during any period of time specified in the table below, the Company may exercise
the Purchase Option for up to the maximum number of the Shares specified in the
following table for such period:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Number of Shares Number of Shares
Subject to Purchase Option (if Subject to Purchase Option (if
If Cessation of Preferred Shares have been converted Preferred Shares have NOT been
Employment Occurs into Common Shares) converted into Common Shares)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
During the period beginning on the 500,000 50,000
date hereof and ending on
August 31, 1999
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 458,333 45,833
September 1, 1999 and ending on
November 30, 1999
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 416,667 41,667
December 1, 1999 and ending on
February 28, 2000
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 375,000 37,499
March 1, 2000 and ending on May 31,
2000
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on June 333,333 33,333
1, 2000 and ending on August 31,
2000
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 291,667 29,167
September 1, 2000 and ending on
November 30, 2000
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 250,000 24,999
December 1, 2000 and ending on
February 28, 2001
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 208,333 20,833
March 1, 2001 and ending on May
31, 2001
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on June 166,667 16,666
1, 2001 and ending on August 31,
2001
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 125,000 12,499
September 1, 2001 and ending on
November 30, 2001
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 83,333 8,333
December 1, 2001 and ending on
February 28, 2002
- ----------------------------------------------------------------------------------------------------------------------
During the period beginning on 41,667 4,166
March 1, 2002 and ending on May
31, 2002
- ----------------------------------------------------------------------------------------------------------------------
June 1, 2002 0 0
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
(d) Nothing in this Agreement shall affect in any manner
whatsoever the right or power of the Company, or a parent or affiliate or
subsidiary of the Company, to terminate Zanker's employment for any reason, with
or without cause, and without notice.
(e) For purposes of this Agreement, the following terms
shall have the following respective meanings:
2. EXERCISE OF PURCHASE OPTION. The Purchase Option shall be exercised by
written notice signed by an officer of the Company (the "Purchase Notice") and
delivered or mailed as provided in Section 9 indicating (i) that the Company is
exercising the Purchase Option, (ii) specifying a place and date not earlier
than five (5) days from the date of delivery of the Purchase Notice for the
closing of such purchase (the "Option Closing Date"), (iii) Option Price to be
paid hereunder and (iv) instructing that the Escrow Agent deliver out of the
Escrow Fund to
<PAGE>
the Company the number of shares held by the Escrow Agent being purchased by the
Company on the Option Closing Date. The Option Price shall be payable, at the
option of the Company in cash (by check) or by wire transfer of funds.
3. ADJUSTMENTS, ETC. If, from time to time during the term of the Purchase
Option, there is:
(a) any stock dividend or liquidating dividend of cash
and/or property, stock split or other change in the character or amount of any
of the outstanding securities of the Company; or
(b) any consolidation, merger or sale of all, or
substantially all, of the assets of the Company, other than a Sale Transaction;
then, in such event, any and all new, substituted or additional securities or
other property to which Stockholder is entitled by reason of his ownership of
the Shares (the "Substituted Property") to the Purchase Option and shall be
included in the term "Shares" for all purposes of the Purchase Option with the
same force and effect as the Shares subject to the Purchase Option under the
terms of Section 1. While the total Option Price shall remain the same after
each such event, the Option Price per Company Share upon exercise of the
Purchase Option shall be appropriately adjusted.
4. RESTRICTIONS ON TRANSFER. Stockholder shall not sell or in any other
way directly or indirectly transfer, assign, pledge, distribute, bequeath,
devise, encumber or otherwise dispose of, either voluntarily or involuntarily,
with or without consideration (each, a "Sale") any of the Shares subject to the
Purchase Option.
5. LEGENDS. All certificates representing any of the Shares subject to the
provisions of this Agreement shall have endorsed thereon the following legend
"THESE SECURITIES ARE SUBJECT TO THE TERMS, CONDITIONS AND PROVISIONS, INCLUDING
A PURCHASE OPTION AND A RIGHT OF FIRST REFUSAL, CONTAINED IN A CERTAIN AGREEMENT
BETWEEN THE RECORD HOLDER HEREOF AND THE COMPANY. A COPY OF SUCH AGREEMENT IS
AVAILABLE FOR INSPECTION AT THE COMPANY'S OFFICES."
6. ESCROW ARRANGEMENTS. As security for her faithful performance of the
terms of this Agreement and to insure that the Shares will be available for
delivery upon exercise of the Purchase Option as herein provided, Stockholder
agrees to deliver to and deposit with State Street Bank and Trust Company, or
any successor thereto, or any other escrow agent mutually agreeable to the
Company and the Stockholder (the "Escrow Agent"), as Escrow Agent in this
transaction, two Stock Assignments, duly endorsed (with date and number of
shares blank) in the forms attached hereto as Exhibit 1, together with the
certificate or certificates evidencing the Shares. Said documents are to be held
by the Escrow Agent and delivered by the Escrow Agent pursuant to the Escrow
Agreement dated as of the date hereof among the Escrow Agent, the Company and
the Stockholder and incorporated by this reference. The escrow arrangements set
forth in this Section 6 with respect to the Shares shall not survive a Sale
Transaction, and upon the consummation of any Sale Transaction the certificates
evidencing the Shares and the Stock Assignments related thereto shall be
delivered by the Escrow Agent to the registered holders thereof; PROVIDED, that
the escrow arrangements set forth in this Section 6 with respect to the
<PAGE>
Shares shall survive any consolidation, merger or sale of the assets or capital
stock of the Company which is not a Sale Transaction and shall remain in full
force and effect with respect to the Substituted Property.
7. RIGHTS AS A STOCKHOLDER. The Company shall not be
required (i) to transfer on its books any of the Shares which shall have been
sold or transferred in violation of any of the provisions set forth in this
Agreement or (ii) to treat as the owner of such shares or to accord the right to
vote as such owner or to pay dividends to any transferee to whom such shares
shall have been so transferred. Subject to the provisions of Section 6 above,
Stockholder shall, during the term of this Agreement, exercise all rights and
privileges of a stockholder of the Company with respect to the Shares deposited
in said escrow.
8. GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable to
contracts made and to be wholly performed in such State (without regard to
principles of conflicts of laws).
9. NOTICES. All notices and other communications
pursuant to this Agreement shall be in writing and deemed to be sufficient if
contained in a written instrument and shall be deemed given if delivered
personally, by telecopier sent by nationally-recognized overnight courier or
mailed by registered or certified mail (return receipt requested), postage
prepaid, to the parties at the following address:
(i) If to Stockholder, to:
William Zanker
20 Taconic Road
Millwood, New York 10546
Telecopier: (914) ________
(ii) If to the Company, to:
GHS, Inc.
2400 Research Blvd.
Rockville, Maryland 20850
Attention: Alan Gold
Telecopier: (301) 208-3254
<PAGE>
with copies to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick
Telecopier: (212) 506-5151
or to such other address as the party to whom notice is to be given may have
furnished to the other parties hereto in writing in accordance herewith. Any
such notice or communication shall be deemed to be delivered and received (A) in
the case of personal delivery or delivery by telecopier, when delivered,(B) in
the case of nationally-recognized overnight courier, on next business day after
the date when sent and(C) in the case of mailing, on the third business day
following that on which the piece of mail containing such communication is
posted. As used in this Section 9, "business day" shall mean any day other than
a date in which banking institutions in the State of New York are legally closed
for business.
10. ASSIGNMENT. This Agreement and all of the provisions hereof shall be
binding upon and inure to the benefit of the Company's successors and permitted
assigns.
11. MISCELLANEOUS.
(a) Each of the parties hereto shall hereafter, at the
request of any party hereto, execute and deliver such further documents and
agreements, and do such further acts and things as may be necessary or expedient
to carry out the provisions of this Agreement.
(b) The failure of a party to insist upon strict
adherence to any term of this Agreement on any occasion shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement. Any waiver must be
in writing.
(c) This Agreement constitutes a complete statement of
all of the arrangements between the parties as of the date hereof with respect
to the transactions contemplated hereby and supersedes all prior agreements and
understandings between such parties. No amendment, alteration or modification of
this Agreement shall be valid unless in each instance such amendment, alteration
or modification is in a writing signed by both parties.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
GHS, INC.
By: /s/ Alan Gold
--------------------------------------------
Name: Alan Gold
Title: President
STOCKHOLDER
/s/ Debbie Dworkin
--------------------------------------------
DEBBIE DWORKIN
<PAGE>
EXHIBIT 1 to Repurchase Agreement
STOCK ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED, _____________________ hereby sells,
assigns and transfers unto GHS, INC. __________________ shares of preferred
stock, $0.01 par value, of GHS, INC., a Delaware corporation, or common stock
issued upon conversion thereof, standing in the undersigned's name on the books
of said Company represented by Certificate No. ___________, and does hereby
irrevocably constitute and appoint ______________________ attorney to transfer
the said shares on the books of the said Company with full power of substitution
in the premises.
Dated: ____________________
Signature: __________________________________
<PAGE>
Exhibit 10(e)
* Confidential treatment has been granted for certain portions of this
exhibit. Omitted portions have been filed separately with the Commission.
EXCLUSIVE LICENSE AND MARKETING AGREEMENT
-----------------------------------------
Exclusive License and Marketing Agreement (the "Agreement")
dated as of May 27, 1999 (the "Effective Date"), among GHS, INC., a Delaware
corporation ("GHS"), having a principal place of business at 704 Broadway, 2nd
Floor, New York, New York 10003, and SELIGMAN GREER COMMUNICATION RESOURCES,
INC., a California corporation (d/b/a The Learning Annex of San Francisco), SGS
COMMUNICATION RESOURCES, INC., a California corporation (d/b/a The Learning
Annex of Los Angeles), SELIGMAN GREER SANDBERG ENTERPRISES, INC., a California
corporation (d/b/a The Learning Annex of San Diego), SGC COMMUNICATION RESOURCES
LLC, a Delaware limited liability company (d/b/a The Learning Annex of New York)
and LEARNING ANNEX INTERACTIVE LLC, a Delaware limited liability company
(collectively, "THE LEARNING ANNEX") with offices at c/o Stephen Seligman, 291
Geary Street, Suite 510, San Francisco, California 94102. GHS and Learning Annex
are each referred to herein as "Party" or collectively as "Parties".
INTRODUCTION
------------
GHS owns, operates and/or distributes information on the Internet and
through other offline media. Learning Annex creates and manages self improvement
and education seminars and events and creates and distributes various products
relating to the same.
Each of Learning Annex and GHS desire to provide certain content,
products and services relating to the promotion of each of Learning Annex and
GHS on the terms and subject to the conditions set forth herein.
NOW THEREFORE, the parties hereby agree as follows:
TERMS
-----
1. DEFINITIONS. The following terms shall have the following meanings for the
purpose of this Agreement:
1.1 "GHS MARKS" means the brands, URL's, logos and trademarks of GHS to
be utilized by Learning Annex in accordance with the terms and conditions of
Agreement, each of which shall be identified by GHS as soon as practicable after
the date hereof.
1.2 "GHS MATERIALS" means the GHS Marks and the GHS Seminars.
1
<PAGE>
1.3 "GHS SEMINARS" shall mean any courses, seminars, training sessions
or events that are delivered to Students via the Internet, including those
courses that are booked by the Learning Annex pursuant to the terms of this
Agreement.
1.4 "GHS WEB SITE" means the web site or URL as may be designated by
GHS from time to time.
1.5 "INTERNET" means any network of interconnected computer networks,
using the Transmission Control Protocol/Internet Protocol and/or such other
standard network interconnection protocols as may be adopted from time to time,
which is used to transmit content that is directly or indirectly delivered to a
computer or other digital electronic device for display to an end-user, whether
such Content is delivered through on-line browsers, off-line browsers, or
through "push" technology, electronic mail, broadband distribution, satellite,
wireless or otherwise, and any subset of such network, such as "intranets".
1.6 "LEARNING ANNEX CONTENT" means all seminars, locations and events
(each, a "Learning Annex Seminar") hosted by Learning Annex (including text,
pictures, graphics, sound, video and other data utilized in such Learning Annex
Seminar). If the Learning Annex has not obtained, after using its best efforts,
permission from an instructor to distribute on the Internet the content
contained in Learning Annex Seminars that were presented prior to the date
hereof by such instructor, then such content shall not be included in the
definition of Learning Annex Content.
1.7 "LEARNING ANNEX MARKS" means the name, brands, URL's, logos and
trademarks of the Learning Annex to be utilized by GHS in accordance with and in
order to effectuate the terms and conditions of Agreement. The Learning Annex
Marks presently owned or licensed by the Learning Annex are identified on
Schedule 1.7 attached hereto, which Schedule 1.7 shall be automatically amended
to include any additional Learning Annex Marks acquired during the Term.
1.8 "LEARNING ANNEX MATERIALS" means Learning Annex Content, Learning
Annex Marks and Learning Annex Products.
1.9 "LEARNING ANNEX PRODUCTS" means all products manufactured, sold or
distributed by Learning Annex now or in the future including, without
limitation, all books, videos and tapes and provided hereunder in accordance
with the terms and conditions of this Agreement.
1.10 "LEARNING ANNEX SEMINAR" shall have the meaning set forth in
Section 1.6.
1.11 "MARKS" means The Learning Annex Marks or the GHS Marks, as the
case may be.
2
<PAGE>
1.12 "STUDENT" means any registrant or attendee of a Learning Annex
Seminar or a GHS Seminar, as the case may be.
2. LICENSE.
2.1 LEARNING ANNEX MARKS. Subject to the terms of this Agreement,
Learning Annex hereby grants GHS a worldwide, royalty-free, exclusive right and
license to use on the Internet the Learning Annex Marks for all purposes (with
the exception of the "learningannex.com" URL, the sole use of which shall be
limited to information and registration for Learning Annex Seminars); PROVIDED
that GHS: (a) does not create a unitary composite mark involving a Learning
Annex Mark without the prior written approval of Learning Annex, which approval
may be withheld in its reasonable discretion; and (b) uses the Learning Annex
Marks only in the formats in which they have heretofore been used by the
Learning Annex, unless the Learning Annex expressly approves in advance of any
change in writing.
2.2 LEARNING ANNEX CONTENT. Subject to the terms of this Agreement,
Learning Annex hereby grants GHS a worldwide, royalty-free, exclusive right and
license (i) to reproduce Learning Annex Content by audio and visual reproduction
(the "Reproductions"), (ii) to distribute, transmit, store, communicate,
perform, market, enhance, establish navigational icons, links and pointers
within, display, promote, create derivative works from and sublicense the
Reproductions solely on the Internet, and (iii) to "webcast" the Learning Annex
Content via an online or Internet transmission, PROVIDED that the license to
"webcast" the Learning Annex Content pursuant to this Section 2.2 shall not be
royalty-free and the Parties shall determine in good faith a mutually agreeable
royalty for such license; PROVIDED FURTHER, HOWEVER, that the right and license
granted under this Section 2.3 shall be non-exclusive as to Disclosed Existing
Rights (as hereinafter defined).
2.3 LEARNING ANNEX PRODUCTS. Subject to the terms of this Agreement,
Learning Annex hereby grants GHS a worldwide, royalty-free, exclusive right and
license to distribute, market and sell on the Internet all Learning Annex
Products; PROVIDED, HOWEVER, that the right and license granted under this
Section 2.3 shall be non-exclusive as to Disclosed Existing Rights.
2.4 LEARNING ANNEX MAILING LIST. Subject to the terms of this
Agreement, Learning Annex hereby grants GHS a worldwide, royalty-free, exclusive
right and license to use the Learning Annex mailing list for purposes related to
the promotion of the GHS Seminars; PROVIDED, HOWEVER, that GHS shall also be
permitted to use the Learning Annex mailing list for promotions of other aspects
of the GHS business if the promotion of GHS Seminars also includes such
promotions of other aspects of the GHS business.
2.5 GHS MARKS. Subject to the terms of this Agreement, GHS hereby
grants to the Learning Annex a worldwide, royalty-free right and license to use
the GHS Marks for the purposes identified in this Agreement; PROVIDED that
Learning Annex: (a) does not create a unitary composite mark involving a GHS
Mark without the prior written
3
<PAGE>
approval of GHS, which approval may be withheld in its reasonable discretion and
(b) uses the GHS Marks only in the formats in which they have heretofore been
used by the GHS, unless the GHS expressly approves in advance of any change in
writing.
2.6 EXCLUSIVITY. During the term of this Agreement and subject to the
terms hereof, Learning Annex agrees that GHS will be the sole licensee of any
Learning Annex Content, Learning Annex Marks and Learning Annex Products owned,
licensed or sublicensed by Learning Annex for any use or distribution on the
Internet; PROVIDED, HOWEVER, that the right and license granted under Section
2.3 shall be non-exclusive as to Disclosed Existing Rights.
3. TERM; TERMINATION.
3.1 INITIAL TERM. The initial term shall commence on the Effective Date
and shall continue until September 1, 2002 (the "Initial Term").
(a) RENEWAL TERMS. Upon conclusion of the Initial Term, GHS
will have the right to renew the Agreement for two successive one-year renewal
terms (each a "Renewal Term" and together with the Initial Term, the "Term");
PROVIDED that GHS may only renew if it has paid the option price for Year Four
and/or Year Five (each as defined in the Option Agreement dated as of May 27,
1999 (the "Option Agreement"), among GHS, Inc. and The Learning Annex entities
identified therein and the securityholders of The Learning Annex entities
identified therein), respectively. A Renewal Term shall automatically commence
following the expiration of the Initial Term (or prior Renewal Term, as the case
may be), unless GHS indicates its intention not to renew any such Renewal Term
with thirty (30) days prior written notice to Learning Annex.
3.2 TERMINATION FOR BREACH. Except as expressly provided elsewhere in
this Agreement, either Party may terminate this Agreement at any time in the
event of a material breach of this Agreement by the other Party which remains
uncured after thirty (30) days written notice thereof to the other Party (or
such shorter period as may be specified elsewhere in this Agreement). A failure
to pay any licensing fees due under this Agreement within ten (10) days of its
due date shall be deemed to be a material breach of this Agreement.
3.3 EFFECT OF TERMINATION. Upon the expiration or termination of this
Agreement, (i) neither Party shall have any further right to exercise any or all
of the license rights contained in Section 2 hereof and such license rights
shall forthwith revert to the other Party, (ii) all items identified in Section
1.9 and furnished by Learning Annex to GHS shall immediately be returned to the
Learning Annex at GHS's expense, (iii) all items identified in Section 1.2 and
furnished by GHS to Learning Annex shall immediately be returned to GHS at the
Learning Annex's expense and (iv) all portions of those items identified in
subclauses (ii) and (iii) above that are not returned as described above shall
be destroyed and a certificate evidencing such destruction shall be delivered to
the Party that owns such items.
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4. LICENSE CONSIDERATION.
4.1 EQUITY.
(a) Upon the execution hereof, GHS shall issue to SELIGMAN
GREER COMMUNICATION RESOURCES, INC. (i) 5,000 shares (the "Fixed Shares") of
Series C Preferred Stock, $0.01 par value, (the "Preferred Stock") of GHS (the
terms of such Preferred Stock are attached hereto as ANNEX 1 in the Certificate
of Designations oF Series C Preferred Stock (the "Certificate of Designation"))
and (ii) an amount of shares of Preferred Stock (the "Additional Shares") as
shall equal the quotient of (A) the quotient of (x) $125,000 DIVIDED BY (y) the
average of the high and low price of the Common Stock, $.01 par value, of GHS
(the "Common Stock") of, as quoted on the OTC Bulletin Board, for the five
trading days immediately prior to and after the date hereof DIVIDED BY (B) ten
(10). The Fixed Shares and the Additional Shares (collectively, the "Shares")
shall be subject to the transfer restrictions and have the benefits of the
registration rights attached hereto as EXHIBIT A, the terms of which are
incorporated herein by reference.
(b) Learning Annex shall have executed and delivered to GHS
the Investor Suitability Questionnaire, which includes certain investment
representations, attached hereto as EXHIBIT B, the provisions of which are
incorporated herein by reference.
4.2 [*]
(a) [*]
(b) [*]
5. OWNERSHIP OF MARKS AND CONTENT; QUALITY CONTROL.
5.1 OWNERSHIP OF LEARNING ANNEX CONTENT AND LEARNING ANNEX MARKS. All
right, title and interest in and to the Learning Annex Content and Learning
Annex Marks as well as intellectual property rights (including without
limitation all rights therein under copyright, trademark, trade secret and
similar laws) shall remain with Learning Annex or its licensors and/or
suppliers.
5.2 OWNERSHIP OF GHS MATERIALS. All right, title and interest in and to
the GHS Materials and any intellectual property rights of GHS (including without
limitation all rights therein under copyright, trademark, trade secret and
similar laws) shall remain with GHS or its licensors and/or suppliers.
5.3 TRADEMARK RIGHTS. Each Party acknowledges that its utilization of
the other Party's Marks will not create in it, nor will it represent it has, any
right, title or interest in or to such Marks other than the licenses expressly
granted herein. Each Party agrees not to do anything contesting or impairing the
trademark rights of the other Party.
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5.4 QUALITY STANDARDS. Each Party: (a) agrees that the nature and
quality of its products and services supplied in connection with the other
Party's Marks shall conform to quality standards communicated in writing by the
other Party for use of its trademarks; (b) agrees to supply the other Party,
upon request, with a reasonable number of samples of any materials publicly
disseminated by such Party which utilize the other Party's Marks; (c) shall
accurately reproduce any graphic portions of the other Party's Marks and
displays symbols and notices clearly and sufficiently indicating the trademark
status and ownership of the other Party's Marks in accordance with applicable
trademark law and practice; (d) understands and acknowledges that the other
Party has the right to establish and to change standards of quality for the
services rendered under its Marks, and agrees to conform to such standards as
the other Party may establish from time to time, (e) shall use the other Party's
marks only in the formats in which they have heretofore been used by the other
Party, unless the other Party expressly approves any change in writing, and (f)
shall comply with all applicable laws, regulations and customs and obtain any
required government approvals pertaining to use of the other Party's Marks.
5.5 DUTY TO INFORM. Each party shall promptly inform the other Party of
any information related to the other Party's Marks which could reasonably lead
to a claim, demand or liability of or against the other Party by any third
party.
6. CO-MARKETING OBLIGATIONS.
6.1 THE LEARNING ANNEX MAGAZINE.
(a) Learning Annex shall include the following, in each
edition of the LEARNING ANNEX MAGAZINE that is distributed in each Learning
Annex location and city:
(i) an advertisement for each of the courses offered
by GHS adjacent to its counterpart course, if any, offered by Learning Annex via
a visual burst or icon;
(ii) (A) multiple advertisements for GHS or GHS
Seminars, the number and size of which shall be determined by GHS in its sole
discretion and the placement of which shall be mutually agreed upon by the
Parties or (B) the first opportunity to include an exclusive insert, the size
and design of which shall be determined by GHS in its sole discretion and the
placement of which shall be mutually agreed upon by the Parties, PROVIDED that
if the Learning Annex has an opportunity to include inserts from other third
parties in the LEARNING ANNEX MAGAZINE, then the Learning Annex shall notify GHS
in writing of such opportunity (which notice shall identify the third party and
type of insert) and GHS shall within ten (10) days of receipt of such
notification GHS inform the Learning Annex whether the inclusion of such insert
with the GHS insert is acceptable; and
(iii) taglines (such as "Can't make it to class -
take it online at ConceptDevelopment.com" or such other words or phrases to
similar effect ) related to GHS programming to be placed throughout such edition
of the LEARNING ANNEX
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MAGAZINE, which taglines shall be developed solely by GHS and approved by the
Learning Annex, which approval shall not be unreasonably withheld or delayed.
(b) All advertisements and inserts that are included in the
LEARNING ANNEX MAGAZINE shall be subject to and conform to the Learning Annex's
standard operating protocol for acceptance in the LEARNING ANNEX MAGAZINE
attached hereto as EXHIBIT C.
(c) In connection this Section 6.1, the Learning Annex shall
(i) inform GHS of the editorial schedule (the "Editorial Schedule") of the
LEARNING ANNEX MAGAZINE (including requisite delivery dates for each of the
items identified in Section 6.1(a) above) and (ii) provide GHS with sixty (60)
days written notice of any changes to such schedule. GHS shall deliver each of
the items identified in Section 6.1(a) to the Learning Annex in accordance with
the Editorial Schedule for inclusion in each LEARNING ANNEX MAGAZINE. The
Editorial Schedule is attached hereto as EXHIBIT D.
(d) GHS shall pay for the direct costs related to the
additional printing, insertion, production and/or postage charges incurred in
connection with the items identified in Section 6.1(a).
(e) In the event that GHS places additional full-page
advertisements on one or more pages of the LEARNING ANNEX MAGAZINE, the Learning
Annex shall make such pages available to GHS at a price that is no greater than
cost to Learning Annex to produce such advertisements.
6.2 PROMOTION.
(a) STREET STANDS. Learning Annex shall affix advertising
stickers promoting GHS on existing and newly placed Learning Annex streets
stands which are located on street and store locations throughout the United
States and contain copies of the LEARNING ANNEX MAGAZINE. The advertising
stickers shall be developed solely by GHS and approved by the Learning Annex,
which approval shall not be unreasonably withheld or delayed. GHS shall pay for
the cost of producing such advertising stickers.
(b) ADVERTISEMENTS. In Learning Annex's television, radio,
print and "out of home" (e.g., buses and billboards) advertisements or
co-sponsorships and in any publications, programs, features or other forms of
media over which Learning Annex exercises at least partial editorial control,
Learning Annex will include specific references or mentions (verbally where
possible) of the availability of GHS, which references shall be reasonably
determined by GHS.
(c) MATERIALS. At all locations where Learning Annex sells or
distributes any of its materials, including any location where Learning Annex
Products are sold or distributed or any location where registration for any
Learning Annex Seminar is offered, Learning Annex shall make available at such
location all materials of GHS requested by GHS to be included with such
distributions of Learning Annex materials.
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GHS shall incur all costs directly related to the inclusion of its materials
pursuant to this Section 7.2(c).
(d) LEARNING ANNEX LOCATIONS. At all locations at which
Learning Annex hosts Learning Annex Seminars, Learning Annex shall:
(i) prominently display GHS "take-one" cards, such cards
to be provided by and paid for by GHS;
(ii) distribute GHS promotional materials to all
Learning Annex registrants and/or to attendees of the Learning Annex
Seminars, such materials to be provided by and paid for by GHS; and
(iii) allow GHS to set up and maintain an information
booth at any such location for the duration of the Learning Annex Seminar.
(e) LEARNING ANNEX PROMOTIONAL LINK. Learning Annex shall
provide prominent banner advertisements for and promotional links to the URL
"ConceptDevelopment.com" above-the-fold on the LearningAnnex.com website.
(f) GHS PROMOTIONAL LINK. GHS shall provide banner
advertisements for and promotional links to the URL "LearningAnnex.com" on the
ConceptDevelopment.com website to promote the Learning Annex offline courses.
(g) LEARNING ANNEX REGISTRATION. Learning Annex shall make
available to GHS on a monthly basis the e-mail addresses of each Student and
hereby grants permission to GHS to market to each Student through e-mail
communication or otherwise the GHS Seminars. GHS hereby agrees to post a privacy
policy on the GHS Web Site, which privacy policy shall comply with all material
Federal laws regarding e-mail communications, and to utilize the e-mail
addresses of the Students only in accordance with such privacy policy.
(h) PROMOTIONAL MATERIALS. Learning Annex shall include GHS
promotional materials as stuffers in all Learning Annex registration materials.
All such GHS promotional materials shall be provided by GHS and GHS shall incur
the costs of producing such promotional materials and the additional postage
costs for including such stuffers with the Learning Annex registration
materials. The quantity and content of such materials shall be mutually approved
by the parties.
7. FURTHER OBLIGATIONS OF LEARNING ANNEX.
7.1 LISTINGS. Learning Annex shall make all of its Learning Annex
Seminar listings available to GHS (for use by GHS as provided hereunder) at the
same time that the Learning Annex submits each issue of the LEARNING ANNEX
MAGAZINE containing such listings to its printer for printing. This information
will include, at a minimum, the time, location, instructor and title of such
Learning Annex Seminar. Learning Annex will
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respond to requests for Learning Annex Seminar information that are initiated by
Internet users of the GHS Web Site or a web site of a partner or affiliate of
GHS.
7.2 INSTRUCTORS. During each printing period, Learning Annex shall
present to GHS a list of courses anticipated to be offered by Learning Annex and
instructors therefor. GHS shall review the list and choose those courses and
instructors it wishes to include on the GHS service, whereupon Learning Annex
shall use its commercially reasonable efforts to book such courses and
instructors via a standard employment contract provided to Learning Annex by
GHS. In the event that the booking process with respect to any instructor or
course becomes unduly complicated or protracted, then the Learning Annex may
transfer the obligation to continue to negotiate with and book such instructor
or course to GHS; PROVIDED, HOWEVER, that the Learning Annex shall not, directly
or indirectly, prevent or hinder the negotiation process or the consummation of
an agreement between GHS and such instructor or course.
7.3 INTRODUCTIONS. Learning Annex shall use its best efforts to
introduce GHS to its various business partners including, but not limited to,
instructors, teachers and Career Track, for the purpose of entering into a
strategic relationships.
8. HAY HOUSE AGREEMENT.
(a) As of the Effective Date, the Learning Annex shall have
either (i) entered into an agreement with Hay House, Inc. ("HH") or (ii) amended
the agreement dated August 31, 1994 (the "Original Hay House Agreement") between
The Learning Annex and HH, in either case, to provide, among other things, the
following:
(i) to clarify and confirm that ownership of Learning
Annex Products (whether past, present or future), including any products that
may previously have been assigned to HH under the Original Hay House Agreement,
resides with The Learning Annex;
(ii) HH shall grant to The Learning Annex exclusive
online distribution rights in all Learning Annex Products that the Learning
Annex owns or owned, publishes or published, produces or produced or otherwise
has or had an interest in or are otherwise provided by Learning Annex for
distribution by HH (including any such products to which rights may have
previously been assigned to HH under the Original Hay House Agreement), other
than those rights relating to Learning Annex Products granted under distribution
agreements currently existing between HH and other parties heretofore
specifically disclosed to The Learning Annex (the "Disclosed Existing Rights")
and attached hereto as EXHIBIT E;
(iii) the sale by HH to Learning Annex of The
Learning Annex Products at the lowest cost on terms no less favorable than it
sells such products to any other distributor or wholesaler;
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(iv) the representation and warranty that Learning
Annex is, and the covenant that Learning Annex shall be, the exclusive online
distributor of Learning Annex Products other than the Disclosed Existing Rights;
and
(v) that The Learning Annex shall have the right to
designate a third party to be the exclusive online distributor of all Learning
Annex Products.
(b) Learning Annex shall not renew the Original Hay House
Agreement or enter into any future agreement with HH providing for distribution
rights ("Future Distribution Agreement") to any Learning Annex Products without
the consent of GHS unless The Learning Annex shall have first offered to GHS the
opportunity to enter into a similar Future Distribution Agreement and GHS had
refused; PROVIDED, that any Future Distribution Agreement shall include a
provision that Learning Annex owns all new products created by Learning Annex
and that GHS shall have distribution rights to such products at least as
favorable as HH.
(c) Any Learning Annex Products sold by HH to Learning Annex
pursuant to Section 8(a)(iii) above shall be made available to GHS at Learning
Annex's cost.
9. REPRESENTATIONS AND WARRANTIES.
9.1 Each of Learning Annex and GHS hereby represent and warrant to the
other, as of the date hereof, that: (a) the execution, delivery and performance
by it of this Agreement are within its corporate powers and have been duly
authorized by all necessary corporate action on its part and (b) this Agreement
constitutes a valid and binding agreement of it enforceable against it in
accordance with its terms.
9.2 GHS hereby represents that as of the date hereof the Certificate of
Designation shall have been filed with the Secretary of State of the State of
Delaware.
9.3 Learning Annex hereby represents and warrants, as of the date
hereof, that:
(a) With respect to the Learning Annex Materials and other
subject matter, including ideas, processes and methods which Learning Annex
discloses to GHS or uses in the performance of this Agreement, Learning Annex
has the right to make disclosure and use thereof without liability to others.
Any Learning Annex Materials and all related ideas, creations and information
furnished or developed by Learning Annex and licensed to GHS under this
Agreement (i) are or will be Learning Annex's own and original creation (except
for matters in the public domain) and (ii) shall not rely, or in any way be
based upon, proprietary information obtained or derived by Learning Annex from
any source other than Learning Annex unless Learning Annex has received specific
authorization or license in writing from any such source as to the use thereof;
and
(b) The Learning Annex Materials do not and will not
(including the use thereof under this Agreement) infringe upon or misappropriate
the intellectual
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property rights or any other legal rights of any third party. Should any aspect
of the Learning Annex Materials become, or in GHS's opinion is likely to become,
the object of any infringement or misappropriation claim or suit, Learning Annex
will procure for GHS the right to use such Learning Annex Materials in all
respects.
10. LIMITED WARRANTY.
10.1 LIMITED DAMAGES. EXCEPT WITH RESPECT TO ANY LIABILITY OF EITHER
PARTY TO THE OTHER PARTY ARISING UNDER SECTIONS 9 OR 11 HEREUNDER, IN NO EVENT
SHALL EITHER PARTY BE LIABLE FOR LOSS OF PROFITS, REVENUES OR DATA, OR ANY
SPECIAL, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR EXEMPLARY DAMAGES WITH RESPECT
TO ANY PROVISION OF THIS AGREEMENT, INCLUDING LOST PROFITS, INTERRUPTED
COMMUNICATIONS OR LOST DATA EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
10.2 NO OTHER WARRANTIES. EXCEPT AS EXPRESSLY PROVIDED IN THIS
AGREEMENT, EACH PARTY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION THE IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE.
11. INDEMNITY.
11.1 INDEMNITY BY GHS. GHS shall indemnify and hold Learning Annex and
its officers, directors, employees and agents harmless from and against all
claims, losses, damages, liabilities, costs and expenses, including reasonable
attorneys' fees, resulting from or arising out of (a) any breach of
representation or warranty made in this Agreement, including but not limited to
any infringement or violation of rights of third parties including copyright,
music performance or other music related right, trademark, trade dress, trade
secret, design right, patent, moral right, right of publicity, defamation,
libel, know-how and/or any other present or future intellectual property right
of any type or (b) any injury to any person or property caused by any GHS
Materials or any content on the GHS Web Site, in each case excluding any
Learning Annex Materials contained therein or thereon, if any.
11.2 INDEMNITY BY LEARNING ANNEX. Learning Annex shall indemnify and
hold GHS and its Partners affiliates and suppliers and their respective
officers, directors, employees and agents harmless from and against all claims,
losses, damages, liabilities, costs and expenses, including reasonable
attorneys' fees, resulting from or arising out of (a) any breach of
representation or warranty made in this Agreement, including but not limited to
any infringement or violation of rights of third parties including copyright,
music performance or other music related right, trademark, trade dress, trade
secret, design right, patent, moral right, right of publicity, defamation,
libel, know-how and/or any other present or future intellectual property right
of any type or (b) any injury to any person or property caused by any Learning
Annex Materials.
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11.3 MECHANICS OF INDEMNITY. The party seeking indemnification (the
"Indemnified Party") shall: (a) give the proposed indemnifier (the "Indemnifying
Party") notice of the relevant claim, (b) cooperate with the Indemnifying Party,
at the Indemnifying Party's expense, in the defense of such claim, and (c) give
the Indemnifying Party the right to defend such claim, except that the
Indemnifying Party shall not enter into any settlement without the Indemnified
Party's prior written approval and (ii) select counsel PROVIDED that such
counsel shall be reasonably acceptable to the Indemnified Party. The Indemnified
Party shall have the right to participate in or assume the defense at its
expense.
12. SURVIVAL. All rights granted to and obligations undertaken by the Parties
hereunder will terminate immediately upon the expiration or termination of this
Agreement, except that (a) Sections , 9, 10, 11, 12, 13 and 14 hereof shall
survive any termination or expiration of this Agreement and (b) the termination
of this Agreement for any reason shall not relieve GHS of its obligations to
make full payment to Learning Annex for any and all amounts that are owed
through the date of termination of this Agreement.
13. CONFIDENTIALITY.
13.1 CONFIDENTIAL INFORMATION. Each party acknowledges that
Confidential Information (as hereinafter defined) may be used or disclosed to
the other party during the course of this Agreement. For the purposes of this
Agreement, "Confidential Information" means any information which the party
disclosing the information (the "Discloser") designates as confidential or which
the party receiving the information (the "Receiver") knows or has reason to know
or should know is confidential to the Discloser and the terms of this Agreement.
Confidential Information does not include information which is: (a) already
known by the Receiver at time of disclosure through lawful means; (b) is or
becomes, through no act or fault of Receiver, publicly known; (c) received by
Receiver from a third party free to make such disclosure without breach of any
legal obligations; (d) independently developed by Receiver without reference to
Discloser's Confidential Information; or (e) required to be disclosed by a court
or governmental agency pursuant to a statute, regulation or valid order.
13.2 NON-DISCLOSURE OBLIGATIONS. The Receiver shall hold the
Confidential Information in confidence and shall not disclose the Confidential
Information to third parties nor use the Confidential Information for any
purpose other than as permitted in this Agreement.
13.3 RETURN OF CONFIDENTIAL INFORMATION. Upon termination or expiration
of this Agreement for any reason, Receiver shall return or destroy all copies of
Confidential Information in its possession at Discloser's direction.
14. GENERAL PROVISIONS.
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14.1 GOVERNING LAW. This Agreement will be governed and construed in
accordance with the applicable laws of the State of California without giving
effect its conflict of laws principles.
14.2 COMPLIANCE WITH LAWS. Each of Learning Annex and GHS at its own
expense shall comply with all applicable laws, regulations, rules, ordinances
and orders regarding its activities related to this Agreement.
14.3 PUBLICITY. Parties shall work together to issue a mutually
acceptable and mutually approved press release announcing this Agreement. The
Parties may issue additional press releases regarding the relationship of the
Parties subject to the prior approval of the other Party. The Parties shall not
disclose the terms of this Agreement to any third party, except as required by
law.
14.4 SEVERABILITY; HEADINGS. If any provision of this Agreement is held
to be invalid or unenforceable for any reason, the remaining provisions will
continue in full force without being impaired or invalidated in any way.
Headings are for reference purposes only and in no way define, limit, construe
or describe the scope or extent of such section, or in any way affect this
Agreement.
14.5 INDEPENDENT CONTRACTORS. The Parties to this Agreement are
independent contractors, and no agency, partnership, joint venture or
employee-employer relationship is intended or created by this Agreement. Neither
Party may take any actions which are binding on the other party. Without
limiting the foregoing, neither Learning Annex nor GHS shall not make any
representations or warranties to third parties on behalf of the other party.
14.6 NOTICE. Any notices required or permitted hereunder shall be given
to the appropriate Party at the address specified in the preamble to this
Agreement or at such other address as the Party shall specify in writing. Unless
otherwise specified, such notice shall be deemed given: upon personal delivery;
if sent by fax, upon confirmation of receipt; if sent by overnight mail carrier,
the next business day or if sent by certified or registered mail, postage
prepaid, three (3) days after the date of mailing.
14.7 ENTIRE AGREEMENT; AMENDMENT; WAIVER. This Agreement and the
Exhibits attached hereto set forth the entire understanding and agreement of the
Parties, and supersede any and all prior or contemporaneous oral or written
agreements or understandings between the parties, as to the subject matter of
this Agreement. Except as provided herein, this Agreement may be changed only by
a writing signed by both Parties. Waiver by either Party of a breach of any
provision contained herein must be in writing, and no such waiver shall be
construed as a waiver of any succeeding breach of such provision or a waiver of
the provision itself.
14.8 ASSIGNMENT. This Agreement and the rights and obligations
hereunder may, in GHS's sole discretion, be assigned, in whole or in part, to a
designated affiliate (as defined below) of GHS. Neither this Agreement nor any
of the rights and obligations
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hereunder may be assigned, in whole or in part, by Learning Annex.
Notwithstanding the foregoing, the terms and conditions of this Agreement shall
be binding upon and inure to the benefit of each of the Parties and their
respective successors (by merger, acquisition or operation of law) and assigns.
For purposes of this Section 14.8, "affiliate" shall mean (a) a corporation or
other entity in which GHS owns, directly or indirectly, more than 50% of the
capital stock or other equity interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other entity and (b) any other person that directly
or indirectly, through one or more intermediaries, controls, is controlled by or
is under common control with, GHS.
14.9 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which shall
be deemed to be one instrument.
14.10 ATTORNEY'S FEES. Should any litigation be commenced between the
Parties in relation to this Agreement, the Party prevailing in such litigation
shall be entitled, in addition to such other relief as may be granted, to a
reasonable sum for attorneys' fees in connection with such litigation.
14.11 AGENCY. Stephen Seligman as Chief Executive Officer of SELIGMAN
GREER COMMUNICATIONS RESOURCES, INC. (the "Agent") is hereby designated and
shall act on behalf of all the Learning Annex entities identified in the caption
to this Agreement on any matter in connection with this Agreement and any matter
s contemplated hereby and is hereby authorized to bind all such entities in
respect thereof. Accordingly, GHS shall only be required to interact with or in
any respect deal with the Agent in any matter involving the Agent or any of such
Learning Annex entities (including without limitation, the giving of notice,
consents or approvals hereunder or any amendment, modification waiver of any
term, condition or provision of this Agreement or to the other agreements and
exhibits contemplated hereby).
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IN WITNESS WHEREOF, the parties have executed and delivered this
Exclusive License and Marketing Agreement on the date first above written.
<TABLE>
<CAPTION>
<S> <C>
GHS, INC. SELIGMAN GREER COMMUNICATION
RESOURCES, INC.
By: /s/ Alan Gold
------------------------------
Name: Alan Gold By: /s/ Stephen Seligman
Title President ----------------------
Name: Stephen Seligman
Title: C.E.O.
By: /s/ Beth Greer
----------------------
Name: Beth Greer
Title: President
SGS COMMUNICATION RESOURCES,
INC.,
By: /s/ Stephen Seligman
----------------------
Name: Stephen Seligman
Title: C.E.O.
By: /s/ Beth Greer
----------------------
Name: Beth Greer
Title: President
SELIGMAN GREER SANDBERG
ENTERPRISES, Inc.
By: /s/ Stephen Seligman
----------------------
Name: Stephen Seligman
Title: C.E.O.
By: /s/ Beth Greer
----------------------
Name: Beth Greer
Title: President
SGC COMMUNICATION RESOURCES
LLC
By: /s/ Stephen Seligman
----------------------
Name: Stephen Seligman
Title: C.E.O.
By: /s/ Beth Greer
----------------------
Name: Beth Greer
Title: President
</TABLE>
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<TABLE>
<S> <C>
LEARNING ANNEX INTERACTIVE LLC
By: /s/ Stephen Seligman
----------------------
Name: Stephen Seligman
Title: C.E.O.
By: /s/ Beth Greer
----------------------
Name: Beth Greer
Title: President
</TABLE>
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Exhibit A.
ADDITIONAL AGREEMENTS
1. DEFINITIONS. As used in this Exhibit A, the following terms shall have the
following meanings:
1.1 "COMMISSION" means the Securities and Exchange Commission or any
other Federal agency at the time administering the Securities Act
1.2 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder,
all as the same shall be in effect from time to time.
1.3 "OTHER SHARES" means at any time those shares of Common Stock which
do not constitute Primary Shares or Registrable Shares.
1.4 "PRIMARY SHARES" means at any time the authorized but unissued
shares of Common Stock or shares of Common Stock held by GHS in its treasury.
1.5 "REGISTRABLE SHARES" means at any time the shares of Common Stock
held by Learning Annex or its successors, assigns or transferees that constitute
Restricted Shares.
1.6 "REGISTRATION DATE" means the date upon which the registration
statement pursuant to which GHS shall have initially registered shares of Common
Stock under the Securities Act for sale to the public shall have been declared
effective.
1.7 "RESTRICTED SHARES" means at any time the Shares and any shares of
Common Stock issued or issuable upon conversion thereof which are held by
Learning Annex and which have not previously been sold to the public pursuant to
a registration statement under the Securities Act or pursuant to Rule 144.
1.8 "RULE 144" means Rule 144 promulgated under the Securities Act or
any successor rule thereto or any complementary rule thereto.
1.9 "SECURITIES ACT" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder, all as the same shall be
in effect from time to time.
1.10 "TRANSFER" means any disposition of any Restricted Shares or of
any interest therein which constitutes a sale within the meaning of the
Securities Act, other than any disposition pursuant to an effective registration
statement under the Securities Act and complying with all applicable state
securities and "blue sky" laws.
<PAGE>
2. PIGGYBACK REGISTRATION. If GHS at any time proposes for any reason (other
than at the request or demand of any third party) to register Primary Shares or
Other Shares under the Securities Act (other than on Form S-4 or Form S-8
promulgated under the Securities Act or any successor forms thereto or other
than in connection with an exchange offer or offering solely to, GHS's
stockholders), it shall promptly give written notice to Learning Annex of its
intention so to register the Primary Shares or Other Shares and, upon the
written request, given within 30 days after delivery of any such notice by GHS,
of Learning Annex to include in such registration Registrable Shares (which
request shall specify the number of Registrable Shares proposed to be included
in such registration), GHS shall use its best efforts to cause all such
Registrable Shares to be included in such registration on the same terms and
conditions as the securities otherwise being sold in such registration;
PROVIDED, HOWEVER, that if the managing underwriter advises GHS that the
inclusion of all Registrable Shares and/or Other Shares proposed to be included
in such registration would interfere with the successful marketing (including
pricing) of the Primary Shares proposed to be registered by GHS, then the number
of Primary Shares, Registrable Shares and Other Shares, proposed to be included
in such registration shall be included in the following order:
(i) FIRST, the Primary Shares;
(ii) SECOND,; the Other Shares and
(iii) THIRD, the Registrable Shares.
3. LOCK-UP AGREEMENT. In connection with the registration of shares of Common
Stock under the Securities Act for sale to the public, Learning Annex shall not
sell, make any short sale of, grant any option for the purchase of, or otherwise
dispose of any Restricted Shares (other than those shares of Common Stock
included in such registration pursuant to Sections 2) without the prior written
consent of GHS for a period designated by GHS in writing to the Learning Annex,
which period shall not last more than 180 days after the effective date of such
registration statement. Notwithstanding the foregoing, to the extent that
Learning Annex shall enter into an underwriting agreement that contains
provisions covering one or more issues addressed in this Section 3, the
provisions contained in such underwriting agreement shall control as to the
party or parties so entering into such underwriting agreement.
4. INFORMATION TO BE PROVIDED BY LEARNING ANNEX. Whenever under this Agreement
Registrable Shares are being registered, Learning Annex shall, as a condition to
the inclusion of Registrable Shares held it in such registration, provide GHS on
a timely basis with such information and materials as GHS may reasonably request
in order to effect the registration of the Registrable Shares.
5. RULE 144. With a view to making available Learning Annex the benefits of Rule
144 under the Securities Act, GHS agrees to use its best efforts to make
available adequate current public information with respect to it within the
meaning of, and as required pursuant to, Rule 144(c).
<PAGE>
6. TERMS AND CONDITIONS OF REGISTRATION. In connection with any registration
pursuant to this Agreement, and subject to the other terms and conditions of
this Agreement, GHS shall in its sole discretion determine the terms and
conditions of such registration, including, without limitation, the timing
thereof; the scope of the offering contemplated thereby (i.e., whether the
offering shall be a combined primary offering and a secondary offering or
limited only to a secondary offering); the manner of distribution of Registrable
Shares; the period of effectiveness of registration for permissible sales of
Registrable Securities thereunder consistent with the plan of distribution
agreed upon by GHS and Learning Annex; and all other material aspects of the
registration and the registration process. In connection therewith, GHS may
require that any such registration be underwritten, in which event (i) the
managing underwriter shall be selected by GHS and (ii) the inclusion of
Registrable Shares in such registration shall be conditioned upon each holder
thereof entering into an underwriting agreement in customary form with such
underwriters participating in such registration.
7. EXPENSES. All expenses incurred by GHS in effecting a registration under this
Agreement, including, without limitation, all registration and filing fees
(including all expenses incident to filing with the NASD), fees and expenses of
complying with securities and "blue-sky" laws, printing expenses, and the fees
and expenses of counsel and accountants, shall be borne by GHS; PROVIDED,
HOWEVER, that under all circumstances all underwriting discounts, income and
transfer taxes, if any, selling commissions and legal fees and expenses of
counsel to Learning Annex participating in any registration under this Agreement
shall not be borne by GHS but shall be borne solely by Learning Annex.
8. TRANSFER OF SECURITIES.
8.1 RESTRICTIONS ON TRANSFER. Learning Annex and each subsequent
transferee of the Shares (each, a "Holder") acknowledges that the Shares have
not been and will not be registered under the Securities Act, that the Shares
are being or will be issued pursuant to an exemption from registration under the
Securities Act and that such shares constitute "restricted securities" under
Rule 144. Accordingly, Shares held by a Holder shall not be sold, transferred,
assigned, pledged, encumbered or otherwise disposed of (each, a "Transfer")
except upon the conditions specified in this Section 8.1 (which provides for
certain additional restrictions on transfer), which conditions are intended to
ensure compliance with the provisions of the Securities Act and this Agreement.
8.2 RESTRICTIVE LEGEND. Each certificate for the Shares and each
certificate for any such Shares issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions of Sections 8.3
and 8.4) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS
CERTIFICATE HAVE BEEN ACQUIRED FOR
<PAGE>
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED OR ANY APPLICABLE STATE
SECURITIES OR "BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT OR LAWS. ADDITIONALLY, THE
TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN SECTION 8 OF EXHIBIT A TO THE EXCLUSIVE LICENSE
AND MARKETING AGREEMENT DATED AS OF MAY __, 1999, AMONG GHS,
INC. AND THE LEARNING ANNEX, AND NO TRANSFER OF THESE
SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF ALL APPLICABLE
CONDITIONS, GHS, INC. HAS AGREED TO DELIVER TO THE HOLDER
HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE
HOLDER HEREOF."
8.3 NOTICE OF TRANSFER. Holder agrees, prior to any Transfer of Shares
to give written notice to GHS of Holder's intention to effect such Transfer and
to comply in all other respects with the provisions of this Section 8. Each such
notice shall describe the manner and circumstances of the proposed Transfer and
shall be accompanied by the written opinion, addressed to GHS, of counsel for
the Holder, stating that in the opinion of such counsel (which opinion and
counsel shall be reasonably satisfactory to GHS), such proposed Transfer does
not involve any transaction requiring registration or qualification of such
shares under the Securities Act or the securities or "blue-sky" laws of any
relevant state of the United States. Such Holder shall thereupon be entitled to
Transfer such shares in accordance with the terms of the notice delivered by it
to GHS. Each certificate or other instrument evidencing the securities issued
upon the Transfer of any such shares (and each certificate or other instrument
evidencing any untransferred balance of such shares) shall bear the legend set
forth in Section 8 unless (a) in such opinion of counsel registration of any
future Transfer is not required by the applicable provisions of the Securities
Act and applicable state securities or "blue-sky" laws or (b) GHS shall have
waived the requirement of such legends. No Holder shall Transfer any Shares
until such opinion of counsel has been given (unless waived by GHS or unless
such opinion is not required in accordance with the provisions of this Section
8).
<PAGE>
8.4 REMOVAL OF LEGENDS, ETC. Notwithstanding the foregoing provisions
of this Section 8, the restrictions imposed by this Section 8 upon the
transferability of any Shares held by a Holder shall cease and terminate when
(a) any such shares are sold or otherwise disposed of pursuant to an effective
registration statement under the Securities Act or as otherwise contemplated by
Section 8(c) and, pursuant to Section 8(c), the Shares so transferred are not
required to bear the legend set forth in Section 8(b) or (b) the holder of such
shares has met the requirements for Transfer of such Shares pursuant to
subparagraph (k) of Rule 144. Whenever the restrictions imposed by this Section
8 shall terminate, as herein provided, each Holder holding Shares as to which
such restrictions have terminated shall be entitled to receive from GHS, without
expense, a new certificate not bearing the restrictive legend set forth in
Section 8(b) and not containing any other reference to the restrictions imposed
by this Section 8.
9. INDEMNIFICATION.
9.1 In connection with any registration of any Registrable Shares under
the Securities Act pursuant to this Agreement, GHS shall indemnify and hold
harmless Learning Annex against any losses, claims, damages or liabilities,
joint or several (or actions in respect thereof), to which Learning Annex may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon an untrue statement or alleged untrue statement of a material
fact contained in the registration statement under which such Registrable Shares
were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading or,
with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made not misleading, or any
violation by GHS of the Securities Act or state securities or "blue-sky" laws
applicable to GHS and relating to action or inaction required of GHS in
connection with such registration or qualification under state securities or
"blue-sky" laws; PROVIDED, HOWEVER, that GHS shall not be liable in any such
case to the extent that any such loss, claim, damage, liability or action arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in said registration statement, preliminary
prospectus, final prospectus, amendment, supplement or document incident to
registration or qualification of any Registrable Shares in reliance upon and in
strict conformity with written information furnished to GHS by Learning Annex
with respect to information regarding such the Learning Annex expressly for
inclusion therein.
9.2 In connection with any registration of Registrable Shares under the
Securities Act pursuant to this Agreement, Learning Annex shall indemnify and
hold harmless (in the same manner and to the same extent as set forth in Section
8.1) GHS, each director of GHS, each officer of GHS who shall sign such
registration statement,
<PAGE>
each underwriter, broker or other Person acting on behalf of GHS and each Person
who controls any of the foregoing Persons within the meaning of the Securities
Act with respect to any statement or omission from such registration statement,
any preliminary prospectus or final prospectus contained therein or otherwise
filed with the Commission, any amendment or supplement thereto or any document
incident to registration or qualification of any Registrable Share, if such
statement or omission was made in reliance upon and in strict conformity with
written information furnished to GHS or such underwriter by Learning Annex
expressly for inclusion in such registration statement, preliminary prospectus,
final prospectus, amendment, supplement or document, PROVIDED that the liability
of the Learning Annex under this Section 8.2 shall not exceed the aggregate
proceeds received by the Learning Annex upon the sale of Registrable Shares by
the Learning Annex pursuant to such registration.
9.3 Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 9, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the indemnified party in connection with the
defense thereof; PROVIDED, HOWEVER, that an indemnified party shall have the
right to retain its own counsel, with the reasonable fees and expenses to be
paid by the indemnifying party, if such indemnified party shall have reasonably
concluded that representation of such indemnified party or parties by the
counsel retained by the indemnifying party or parties would be inappropriate due
to actual or potential differing interests between such indemnified party or
parties and any other party represented by such counsel in such proceeding.
9.4 If the indemnification provided for in this Section 9 is held by a
court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage,
liability or action as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent,
<PAGE>
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
10. TERMINATION. The terms of Section 2 this Exhibit A shall terminate and be of
no further force or effect on the earlier to occur of (i) the third anniversary
of the date hereof (ii) when there shall not be any Restricted Shares and (iii)
at such time as the provisions of Rule 144(k) are applicable to the Restricted
Shares then held by Learning Annex.
11. REPRESENTATIONS AND WARRANTIES. REPRESENTATIONS AND WARRANTIES OF THE THE
LEARNING ANNEX. The Learning Annex represents and warrants to the Corporation as
follows:
11.1 ACCREDITED INVESTOR. If the Learning Annex has checked the box
located on Exhibit B to the Agreement, it is an "accredited investor" (as such
term is defined in Rule 501 of Regulation D promulgated under the Securities
Act).
11.2 INVESTMENT INTENT. The Learning Annex is acquiring the Shares for
his own account, for investment and not with a view to, or for resale in
connection with, any distribution thereof, nor with any present intention of
distributing or reselling the same or any part thereof in any transactions that
would be in violation of the Securities Act of or any state securities or
"blue-sky" laws.
11.3 RESTRICTED SECURITIES. The Learning Annex understands (i) that the
Shares will not be registered under the Securities Act or any state securities
or "blue-sky" laws by reason of their issuance in a transaction exempt from the
registration requirements of the Securities Act or any state securities or
"blue-sky" laws, (ii) that the Shares must be held indefinitely unless a
subsequent disposition thereof is registered under the Securities Act or any
state securities or "blue-sky" laws or is exempt from such registration, (iii)
that, except as set forth in this Exhibit A, GHS is under no obligation to so
register any Shares and (iv) that the certificate(s) evidencing the Shares will
be imprinted with a legend that prohibits the transfer substantially as set
forth in Section 8.2 hereof unless they are registered or such registration is
not required.
11.4 RULE 144. The Learning Annex understands that the exemption from
registration afforded by Rule 144 (the provisions of which are known to such
person) promulgated under the Securities Act ("Rule 144") depends on the
satisfaction of various conditions and that, if applicable, Rule 144 may only
afford the basis for sales under certain circumstances only in limited amounts.
The Learning Annex understands that at the time it wishes to sell the Shares,
GHS may not be satisfying the current public information requirements of Rule
144, and that, in such event, the Learning Annex would be precluded from selling
the securities under Rule 144 even if the applicable minimum holding period
provided thereunder had been satisfied.
11.5 ACCESS TO INFORMATION; EXPERIENCE. The Learning Annex has had
access during the course of this transaction and prior to the sale of the Shares
to all information necessary to enable the Learning Annex to evaluate the merits
and risks of accepting the
<PAGE>
Shares pursuant to the Agreement and the Learning Annex has had an opportunity
to discuss with representatives of GHS the business and financial affairs of GHS
and to obtain such additional information, to the extent that GHS possesses such
information or could acquire it without unreasonable effort or expense,
necessary to verify the accuracy of the information to which GHS has had access
and all questions raised by the Learning Annex have been answered to its full
satisfaction. The Learning Annex can afford to suffer a complete loss of its or
his investment in the Shares.
11.6 SPECULATIVE INVESTMENT. The Learning Annex understands that the
Corporation has a limited financial and operating history, that the Common
Shares are a speculative investment which involve a high degree of financial
risk, and that there is no assurance of any economic, income or tax benefit from
such investment.
<PAGE>
EXHIBIT B
FORM OF INVESTOR SUITABILITY QUESTIONNAIRE
The following is an investor questionnaire to be completed by
the Learning Annex to qualify the Learning Annex as an "accredited investor" in
GHS under the Federal and state securities and blue-sky law.
12. ACCREDITED INVESTOR CERTIFICATION. The Purchaser represents and warrants
that he comes within one category marked below, and that for any category
marked, it has truthfully set forth, where applicable, the factual basis or
reason the Learning Annex comes within that category. ALL INFORMATION IN
RESPONSE TO THIS SECTION WILL BE KEPT STRICTLY CONFIDENTIAL. The undersigned
agrees to furnish any additional information which GHS deems necessary in order
to verify the answers set forth below.
<TABLE>
<S> <C>
Category A _____ The undersigned is an individual (not a partnership,
corporation, etc.) whose individual net worth, or
joint net worth with his or her spouse, presently
exceeds $1,000,000.
Explanation: In calculating net
worth you may include equity in
personal property and real estate,
including your principal residence,
cash, short-term investments, stock
and securities. Equity in personal
property and real estate should be
based on the fair market value of
such property less debt secured by
such property.
Category B _____ The undersigned is an individual (not a partnership,
corporation, etc.) who had an income in excess of
$200,000 in each of the two most recent years, or
joint income with his or her spouse in excess of
$300,000 in each of those years (in each case
including foreign income, tax exempt income and full
amount of capital gains and losses but excluding any
income of other family members and any unrealized
capital appreciation) and has a reasonable
expectation of reaching the same income level in the
current year.
Category C _____ The undersigned is a director or executive officer of
GHS.
Category D _____ The undersigned is a bank, a savings and loan
association, insurance company, registered investment
company, registered business development company,
licensed small business investment company ("SBIC"),
or employee benefit plan within the meaning of Title
1 of ERISA and (a) the investment decision is made by
a plan fiduciary which is either a bank. savings and
loan association. insurance company or registered
investment advisor, or (b) the plan has total assets
in excess of $5,000,000 or is a self directed plan
with investment decisions made solely by persons that
are accredited investors.
------------------
------------------
(describe entity)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
Category E_____ The undersigned is a private business development
company as defined in Section 202(a)(22) of the
Investment Advisors Act of 1940.
------------------
------------------
(describe entity)
Category F_____ The undersigned is a corporation, partnership,
business trust, or non-profit organization within the
meaning of Section 501(c)(3) of the Internal Revenue
Code, in each case not formed for the specific
purpose of acquiring the Securities and with total
assets in excess of $5,000,000.
------------------
------------------
(describe entity)
Category G_____ The undersigned is a trust with total assets in
excess of $5,000,000, not formed for the specific
purpose of acquiring the Securities, where the
purchase is directed by a "sophisticated person" as
defined in Regulation 506 (b)(2)(ii).
Category H_____ The undersigned is an entity all the equity owners of
which are "accredited investors" (as such term is
defined in Rule 501(a) as promulgated under the
Securities Act of 1933, as amended (the "Securities
Act")) within one or more of the above categories. If
relying upon this Category alone, each equity owner
must complete a separate copy of this Agreement.
------------------
------------------
(describe entity)
Category I_____ The undersigned is not within any of the categories
above and is therefore not an "accredited investor".
</TABLE>
<PAGE>
<TABLE>
<S> <C>
- ---------------------------------------------------- ---------------------------------------------------------
__________________________________ __________________________________
Signature Signature (if purchasing jointly)
- ---------------------------------------------------- ---------------------------------------------------------
__________________________________ __________________________________
Name (Typed or Printed) Name (Typed or Printed)
- ---------------------------------------------------- ---------------------------------------------------------
__________________________________ __________________________________
Residence (Typed or Printed) Residence (Typed or Printed)
- ---------------------------------------------------- ---------------------------------------------------------
__________________________________ __________________________________
City, State and Zip Code City, State and Zip Code
- ---------------------------------------------------- ---------------------------------------------------------
__________________________________ __________________________________
Tax Identification or Social Security Number Tax Identification or Social Security Number
- ---------------------------------------------------- ---------------------------------------------------------
Telephone No.: Business______________________ Telephone No.: Business______________________
Home__________________________ Home__________________________
- ---------------------------------------------------- ---------------------------------------------------------
Name in which securities should
beissued:_______________________________
- ---------------------------------------------------- ---------------------------------------------------------
Dated: _________, 1999 Dated: _________, 1999
- ---------------------------------------------------- ---------------------------------------------------------
</TABLE>
<PAGE>
EXHIBIT C
LEARNING ANNEX ADVERTISING POLICIES
<PAGE>
EXHIBIT D
EDITORIAL SCHEDULE
<PAGE>
EXHIBIT E
EXISTING RIGHTS
<PAGE>
SCHEDULE 1.7
LEARNING ANNEX MARKS
<PAGE>
Exhibit 10(f)
* Confidential treatment has been granted for certain portions of this
exhibit. Omitted portions have been filed separately with the Commission.
OPTION AGREEMENT dated as of May 27,
1999 among GHS, INC., a Delaware
corporation ("GHS"), SELIGMAN GREER
COMMUNICATION RESOURCES, INC., a
California corporation (d/b/a The
Learning Annex of San Francisco)
(the "SAN FRANCISCO LEARNING
ANNEX"), SGS COMMUNICATION
RESOURCES, INC., a California
corporation (d/b/a The Learning
Annex of Los Angeles) (the "LOS
ANGELES LEARNING ANNEX"), SELIGMAN
GREER SANDBERG ENTERPRISES, INC., a
California corporation (d/b/a The
Learning Annex of San Diego) (the
"SAN DIEGO LEARNING ANNEX"), SGC
COMMUNICATION RESOURCES LLC, a
Delaware limited liability company
(d/b/a The Learning Annex of New
York) (the "NEW YORK LEARNING
ANNEX") and LEARNING ANNEX
INTERACTIVE LLC, a Delaware limited
liability company (the "DELAWARE
LEARNING ANNEX" and collectively
"THE LEARNING ANNEX") and the
shareholders and members, as
applicable, of The Learning Annex
listed on Schedule I attached hereto
(the "SHAREHOLDERS").
Pursuant to this Agreement, GHS shall have, among other things, the
right and option to acquire The Learning Annex on the terms and subject to the
conditions set forth in this Agreement (the "ACQUISITION"). In connection with
the proposed Acquisition, GHS, The Learning Annex and the Shareholders desire to
enter into certain other arrangements, on the terms and subject to the
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual benefits to be derived
from this Agreement and the representations, warranties, covenants, agreements
and promises contained herein, the parties hereby agree as follows:
1. OPTIONS.
(a) ALTERNATIVE A OPTION. Each Shareholder hereby grants
to GHS, and GHS shall have the irrevocable right and option (the "ALTERNATIVE A
OPTION") exercisable during the period beginning on the date hereof and ending
on September 1, 2004 (the "OPTION PERIOD"), upon compliance with the procedures
set forth in Section 6 hereof, to acquire 100% of the outstanding capital stock
and other interests of The Learning Annex and all options, warrants, rights,
calls, commitments, agreements or arrangements of any character to which the any
of the
<PAGE>
Shareholders or The Learning Annex is a party or by which he, she, it or they is
or are bound calling for the issuance of shares of capital stock or other
interests of The Learning Annex or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, directly or indirectly, any such capital stock or other
interests, or other arrangement to acquire, at any time or under any
circumstance, capital stock or other interests of The Learning Annex or any such
other securities (the "FULLY-DILUTED LEARNING ANNEX SECURITIES").
(b) ALTERNATIVE B OPTION. GHS may in its sole discretion,
during the Option Period, in lieu of exercising the Alternative A Option, elect
in compliance with the procedures set forth in Section 6 hereof, to consummate
an acquisition of The Learning Annex by way of (i) a statutory merger, (ii)
consolidation, (iii) purchase of all or substantially all of the assets of The
Learning Annex or (iv) purchase of the Fully-Diluted Learning Annex Securities
(each, an "ALTERNATIVE B OPTION" and together with the Alternative A Option, the
"OPTIONS"). It is hereby understood that GHS is under no obligation to elect to
consummate such an Alternative B Option and any election to do so shall be in
its sole discretion; PROVIDED, that the consummation of the Alternative B Option
shall, taken as a whole, be mutually beneficial to both parties from a tax
perspective and; PROVIDED FURTHER that notwithstanding the exercise of an
Alternative B Option, GHS may elect to exercise the Alternative A Option at any
time, in which case such exercise of the Alternative A Option shall effect the
termination of negotiations pursuant to the Alternative B Option and the
Alternative A Option shall immediately supersede in all respects the Alternative
B Option election.
(c) ELECTION NOT TO PROCEED WITH OPTION EXERCISE.
(i) NOTICE NOT TO PROCEED. At any time after the
exercise of either of the Options and prior to the consummation of the
closing under the applicable Option, GHS shall have the right and
option, without liability to any of the Shareholders, The Learning
Annex or any other third party, to elect not to proceed with a closing
by delivery to The Learning Annex of GHS's election not to proceed (the
"NOTICE NOT TO PROCEED").
(ii) If (A) GHS has no reasonable basis to elect
NOT to proceed with the consummation of the Acquisition, (B) The
Learning Annex and the Shareholders are ready, willing and able to
proceed with the consummation of the Acquisition and (C) GHS delivers
the Notice Not to Proceed for a reason outside of GHS' control, then
GHS shall be deemed for all purposes to have exercised the Options
hereunder and shall not thereafter have the right to exercise either of
the Options; PROVIDED, HOWEVER, that GHS shall have the one time right,
upon the payment of the Option Reset Expenses (as defined below), to be
deemed not to have exercised the Options hereunder and shall thereafter
have the right to exercise either of the Options for the term of this
Agreement on the terms and subject to the conditions set forth herein
(the "OPTION RESET").
(iii) In connection with the Option Reset, GHS
shall reimburse The Learning Annex for any reasonable fees of The
Learning Annex incurred directly and
2
<PAGE>
solely in connection with the transactions related to the exercise of
the Option prior to delivery of the Notice Not to Proceed, upon receipt
of reasonable documentation therefor (the "OPTION RESET EXPENSES").
2. OPTION PRICE; OPTION PERIOD.
(a) The price payable hereunder in consideration of the
Options (the "OPTIONS PRICE") shall be the dollar amount set forth below payable
on the date(s) set forth opposite such amounts (each an "OPTION PAYMENT DATE");
PROVIDED, that if GHS does not pay the applicable Options Price on any Option
Payment Date, The Learning Annex shall deliver notice of its intention to
terminate the Option (the "TERMINATION NOTICE") and GHS shall have 30 days after
delivery of the Termination Notice to deliver the Options Price:
<TABLE>
<CAPTION>
OPTION PERIOD DOLLAR AMOUNT TIMING OF PAYMENT
- ------------- ------------- -----------------
<S> <C> <C>
From the date hereof until the first $75,000.00 Simultaneous with the execution and
anniversary of the date hereof ("YEAR delivery of the License Agreement
ONE"). (as defined below in Section 11(a))
From the first anniversary of the date $125,000.00 September 1, 2000
hereof until the second anniversary of
the date hereof ("YEAR TWO").
From the second anniversary of the $200,000.00 September 1, 2001
date hereof until the third
anniversary of the date hereof ("YEAR
THREE").
From the third anniversary of the date $500,000.00 September 1, 2002
hereof until the fourth anniversary of
the date hereof ("YEAR FOUR").
From the fourth anniversary of the $750,000.00 September 1, 2003
date hereof until the fifth
anniversary of the date hereof ("YEAR
FIVE").
</TABLE>
3. PLEDGE OF SHARES. The Shareholders hereby pledge the Fully-Diluted
Learning Annex Securities to be held in trust by Carol Goodman or another
mutually agreeable third party (the
3
<PAGE>
"AGENT") pursuant to an agreement in form and substance acceptable to GHS for
the purpose of securing the obligations of The Learning Annex and the
Shareholders hereunder (the "PLEDGE AGREEMENT"). As soon as practicable after
the date hereof, and in no event later than fifteen (15) days after the date
hereof, each Shareholder shall cause to be deposited with the Agent all stock
certificates or certificate of ownership of membership interests, as the case
may be, held by such Shareholder, together with a stock power or certificate of
assignment duly endorsed in blank for transfer on behalf of such Shareholder,
representing all of the shares of capital stock or membership interests of The
Learning Annex (the "OPTION SECURITIES") owned by such Shareholder (and
representing, in the aggregate, the Fully-Diluted Learning Company Securities).
4. EXERCISE PRICE.
(a) GENERAL. The exercise price to be paid upon exercise
by GHS of the Alternative A Option or the Alternative B Option (in each case,
the "EXERCISE PRICE") shall be as set forth below:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
<S> <C>
Year Exercise Price
- --------------------------------------------------------------------------------
Year One [*].
- --------------------------------------------------------------------------------
Year Two [*]; PROVIDED, that if [*] (as
defined below) for fiscal year 1999
is less than [*], then the Purchase
Price in [*]shall be the product of
(A) [*] MULTIPLIED BY (B) [*]for
fiscal year 1999.
- --------------------------------------------------------------------------------
Year Three [*] MULTIPLIED BY the prior calendar
year's [*].
- --------------------------------------------------------------------------------
Year Four [*] MULTIPLIED BY the prior calendar
year's [*].
- --------------------------------------------------------------------------------
Year Five [*] MULTIPLIED BY the prior calendar
year's [*].
- --------------------------------------------------------------------------------
</TABLE>
(b) EXERCISE PRICE ADJUSTMENT.
(i) The Exercise Price paid hereunder shall be
decreased, on a dollar-for-dollar basis, by (i) any and all payments
made by GHS, cumulatively, of the Options Price pursuant to Section 2
hereof and (ii) the Additional Shares Fair Market Value (as defined
below), in an amount no greater than [*], of the Additional Shares (as
defined in the License Agreement) issued by GHS to The Learning Annex
pursuant to the License Agreement.
(ii) "ADDITIONAL SHARES FAIR MARKET VALUE" means the fair
market value, as determined on the date two (2) days prior to the date
of the consummation of the
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Alternative A Option or the Alternative B Option, as the case may be,
in accordance with the terms of the License Agreement, of any
Additional Shares.
(c) PAYMENT IN CASH. Unless otherwise mutually agreed by
the parties, the Exercise Price shall be paid in cash or other immediately
available funds by wire transfer or certified check.
(d) [*]
5. AUDITOR'S REPORT; CALCULATION OF EBIDA.
(a) DELIVERY TO GHS OF AUDITOR'S REPORT. Within sixty
(60) days following the end of each Option Period, The Learning Annex shall
deliver to GHS reviewed financial statements for the prior Option Period
prepared in accordance with GAAP consistently applied (the "FINANCIAL
STATEMENTS") and the [*] (the "CALCULATION"), which Calculation and Financial
Statements shall be certified by Chaio and Smith (the "ACCOUNTANTS") (the
"AUDITOR'S REPORT").
(b) REVIEW BY BUYER OF THE AUDITOR'S REPORT. Following
receipt of the Auditor's Report, GHS will be afforded a period of sixty (60)
calendar days (the "REVIEW PERIOD") to review the Auditor's Report. During such
Review Period, GHS and GHS's accountants will be afforded reasonable access to
any of The Learning Annex's employees and the records, work papers, trial
balances and similar materials prepared by The Learning Annex's Accountants and
The Learning Annex shall, and shall cause the Accountants to, cooperate and
provide assistance to such GHS Accountants in connection therewith. At or before
the end of the Review Period, GHS will either (i) accept the Auditor's Report in
its entirety, in which case the Calculation shall be deemed to be as set forth
in the Auditor's Report, or (ii) deliver to The Learning Annex and The Learning
Annex's Accountants a written notice in accordance with Section 6(c) disputing
the Calculation.
(c) DISPUTES. GHS shall notify the Learning Annex in
writing of each disputed item in the Accountant's Report that bears a
relationship to or is relevant to the determination of EBIDA prior to the
expiration of the Review Period, specifying the amount thereof in dispute, or a
reasonable estimation thereof, and setting forth the basis for such dispute. In
the event of such a dispute, GHS and The Learning Annex shall attempt to
reconcile in good faith their differences as to such items within twenty (20)
calendar days (the "RESOLUTION PERIOD") of The Learning Annex's receipt of such
notice, and any resolution by them as to any disputed amounts shall be final,
binding and conclusive on GHS and The Learning Annex. If GHS and The Learning
Annex are unable to reach a resolution with such effect within the Resolution
Period, GHS and The Learning Annex shall submit the items in the Accountant's
Report remaining in dispute for resolution to an independent accounting firm of
national reputation mutually appointed by GHS and The Learning Annex (the
"INDEPENDENT ACCOUNTING FIRM"), which shall, within thirty (30) calendar days of
such submission, determine and report to GHS and The Learning Annex its
resolution of such remaining disputed items, which shall be deemed to be
resolved as set forth in such report, and such report shall be final, binding
and conclusive on GHS and The Learning Annex. GHS and The Learning Annex shall
each pay fifty percent (50%) of the fees and disbursements of such Independent
Accounting Firm.
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(d) FAILURE TO DELIVER AUDITOR'S REPORT. If The Learning
Annex fails to deliver the certified Calculation and Financial Statements on or
before ninety (90) days following the end of any Option Period, then GHS shall
have the right to select an independent certified public accountant (the "GHS
ACCOUNTANT") (the fees and charges of which shall be borne by The Learning
Annex) to prepare a determination of such prior year's EBIDA (the "GHS
CALCULATION") (and the GHS Accountant will be afforded reasonable access to any
of The Learning Annex's employees and the records, work papers, trial balances
and similar materials prepared by The Learning Annex's Accountants and The
Learning Annex shall, and shall cause the Accountants to, cooperate and provide
assistance to such GHS Accountants in connection therewith) and the GHS
Calculation shall be the EBIDA for all calculations hereunder.
6. MECHANICS FOR EXERCISE.
(a) ALTERNATIVE A EXERCISE NOTICE. In the event that GHS
desires to exercise the Alternative A Option, it shall send to The Learning
Annex and to the Agent a written notice (such notice being herein referred to as
an "ALTERNATIVE A EXERCISE NOTICE" and the date of issuance of an Alternative A
Exercise Notice being herein referred to as the "ALTERNATIVE A NOTICE DATE")
indicating (i) that GHS is exercising the Alternative A Option, (ii) specifying
a place and date not earlier than five (5) Business Days and not later than
thirty (30) Business Days from the Alternative A Notice Date for the closing of
such purchase (the "ALTERNATIVE A OPTION CLOSING DATE"), (iii) the Exercise
Price to be paid hereunder and (iv) that, and instructing that, the Agent
deliver out of the pledge fund to GHS all shares of The Learning Annex held by
the Agent on the Alternative A Option Closing Date. GHS may require that, in
connection with the exercise of the Alternative A Option, in which case the
parties shall, in good faith negotiate and enter into definitive agreements
(which shall provide for, among other things, customary representations and
warranties (in addition to those representations and warranties the truth and
accuracy of which are being confirmed in accordance with Section 6(c) hereof),
covenants and indemnities and provide a closing date for consummation of the
transactions described therein) customary for transactions of this type.
(b) ALTERNATIVE B EXERCISE NOTICE. In the event that GHS
desires to exercise the Alternative B Option, it shall send to The Learning
Annex a written notice (such notice being herein referred to as an "ALTERNATIVE
B EXERCISE NOTICE" and the date of issuance of an Alternative B Exercise Notice
being herein referred to as the "ALTERNATIVE B NOTICE DATE") indicating that GHS
is exercising the Alternative B Option, and The Learning Annex and the
Shareholders shall as soon as practicable thereafter, and in any event within
thirty (30) days from the Alternative B Notice Date, in good faith negotiate and
enter into definitive agreements (which shall provide for, among other things,
customary representations and warranties (in addition to those representations
and warranties the truth and accuracy of which are being confirmed in accordance
with Section 6(c) hereof), covenants and indemnities and provide a closing date
for consummation of the transactions described therein) customary for
transactions of this type. GHS can elect to exercise the Alternative A Option at
any time during the Option Period, whether before or after the delivery of the
Alternative B Exercise Notice.
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(c) CLOSING. The Closing of the Acquisition shall occur
on the Alternative A Option Closing Date or on the date of the closing of the
Acquisition pursuant to exercise of the Alternative B Option (the "ALTERNATIVE B
OPTION CLOSING DATE"), against delivery of (i) certificates or other instruments
representing the Fully-Diluted Company Securities duly endorsed in blank and
otherwise in proper form for transfer free and clear of any liens or
Encumbrances, (ii) documents listed on ANNEX A and (iii) such other definitive
documents customary for transactions of the applicable type (including
representations, warranties and covenants customary for transactions of the
applicable type) and such other documents (including the documents listed on
ANNEX A) as the parties mutually agree (each of (i) through (iii) hereof being
collectively referred to as the "CLOSING Documents").
(d) EXECUTION AND DELIVERY OF FURTHER DOCUMENTS. Upon
receipt of the Alternative A Exercise Notice or the Alternative B Exercise
Notice, as the case may be, each party hereto will promptly and duly execute and
deliver such further documents, certificates and agreements and make such
further assurances for and take such further action reasonably requested by any
other party to this Agreement, in addition to the execution and delivery of the
Closing Documents, all as may be reasonably necessary to carry out more
effectively the intent and purpose of this Agreement and consummate the exercise
of the Options.
(e) If the form of transaction chosen for the Acquisition
permits an Internal Revenue Code (the "CODE") Section 338 election or a Code
Section 338(h)(10) election (or any successor or similar elections relating to
the establishment of the tax basis of the assets underlying the businesses
transferred to GHS) then, if and to the extent requested by GHS, the parties to
the Acquisition shall take all steps reasonably necessary to effect such
election(s); PROVIDED, that such election shall, taken as a whole, be mutually
beneficial from a tax perspective to the parties hereto.
(f) EXTENSION OF OPTION PERIOD. If the closing of the
Acquisition pursuant to the Alternative A Option or the Alternative B Option
cannot be consummated, by reason of any applicable Order (as defined below), the
period of time that otherwise would run pursuant to Section 6(a)(ii) or Section
6(b), as applicable, shall run instead from the date on which such restriction
on consummation has expired or been terminated (the "TOLLING PERIOD"); and
PROVIDED FURTHER, without limiting the foregoing, that if, in the reasonable
opinion of GHS, prior notification to or approval of any regulatory agency is
required in connection with the Acquisition, The Learning Annex, GHS or one or
more of the Shareholders, as the case may be, shall promptly file the required
notice or application for approval and shall expeditiously process the same and
the period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Anything contained herein to the contrary
notwithstanding, if (A) the Tolling Period continues for more than ninety (90)
days and (B) the next Option Period has begun, then the Exercise Price shall be
recalculated on the terms set forth in Section 4 hereof; PROVIDED that GHS shall
not be required to make any additional Options Payment for the next Option
Period.
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(g) DEFINITION OF ORDER. As used herein, "ORDER" shall
mean any orders, judgments, injunctions, decrees and other legislative,
administrative or judicial restrictions (including the Federal securities laws
and regulations thereunder and the rules of all such regulatory organizations
including those which The Learning Annex is subject to).
7. REPRESENTATIONS AND WARRANTIES OF THE LEARNING ANNEX. The Learning Annex
hereby represents and warrants to GHS as follows:
(a) ORGANIZATION. The (i) San Francisco Learning Annex is
a corporation duly organized, validly existing and in good standing under the
laws of the State of California, (ii) Los Angeles Learning Annex is a
corporation duly organized, validly existing and in good standing under the laws
of the State of California, (iii) San Diego Learning Annex is a corporation duly
organized, validly existing and in good standing under the laws of the State of
California, (iv) New York Learning Annex is a limited liability company duly
organized, validly existing and in good standing under the laws of the state of
Delaware and (v) Delaware Learning Annex is a limited liability company duly
organized, validly existing and in good standing under the laws of the state of
Delaware, and, in each case, has all requisite corporate power and authority to
own, lease and operate the assets used in its business, to carry on its business
as presently conducted and as proposed to be conducted, to enter into this
Agreement, to perform its obligations hereunder, and to consummate the
transactions contemplated hereby.
(b) QUALIFICATION; GOOD STANDING. The Delaware Learning
Annex is qualified to do business as a foreign corporation in the State of New
York. The Learning Annex is qualified to do business as a foreign corporation in
any other jurisdiction in which it is required to be so qualified.
(c) CORPORATE AUTHORIZATION; ENFORCEABILITY. The Learning
Annex has taken all corporate action (including all action required of its Board
of Directors, managers and Shareholders or members, as applicable) necessary to
authorize its execution and delivery of this Agreement, its performance of its
obligations hereunder, and its consummation of the Acquisition contemplated
hereby. This Agreement has been executed and delivered by officers of The
Learning Annex in accordance with such authorization. This Agreement constitutes
a valid and binding obligation of The Learning Annex, enforceable in accordance
with its terms, subject to applicable bankruptcy, reorganization, insolvency,
moratorium, and similar laws affecting creditors' rights generally and to
general principles of equity.
(d) AUTHORIZATION OF SHARES OF CAPITAL STOCK. The Option
Securities, when issued, were duly authorized by all requisite corporate action
of The Learning Annex and when issued, sold and delivered by The Learning Annex
the Option Securities were validly issued and outstanding, fully paid and
nonassessable with no personal liability attaching to the ownership thereof, and
not subject to preemptive or any similar rights of the shareholders of The
Learning Annex or others.
(e) NO CONFLICT. The execution and delivery by The
Learning Annex of this Agreement, its consummation of the Acquisition
contemplated hereby, and its compliance with the provisions hereof, will not (a)
violate or conflict with its certificate of incorporation,
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certificate of formation, by-laws or operating agreement, as applicable, (b)
violate, conflict with, or give rise to any right of termination, cancellation,
rescission or acceleration under any material agreement, lease, security,
license, permit, or instrument to which The Learning Annex is a party, or to
which it or any of its assets is subject, (c) result in the imposition of any
security interests, mortgages, liens, pledges, guarantees, charges, easements,
reservations, restrictions, rights of way, options, rights of first refusal and
all other encumbrances, whether or not relating to the extension of credit or
the borrowing of money (an "ENCUMBRANCE") on any asset of The Learning Annex,
(d) violate or conflict with any Laws, or (e) require any consent, approval or
other action of, notice to, or filing with any entity or person (governmental or
private), except for those that have been obtained or made. "Laws" means all
laws, rules, regulations, ordinances, orders, judgments, injunctions, decrees
and other legislative, administrative or judicial restrictions.
(f) NO CONSENT OR APPROVAL REQUIRED. No authorization,
consent, approval or other order of, or declaration to or filing with, any
governmental agency or body or other person or entity is required for the valid
authorization, execution and delivery by The Learning Annex of this Agreement,
or for the consummation of the Acquisition contemplated hereby or, if required,
the same has been obtained or effected.
(g) CAPITALIZATION. The capitalization of The Learning
Annex upon the signing hereof shall consist of (A) 10,000 shares of common
stock, no par value, of the San Diego Learning Annex, of which 200 shares are
validly issued and outstanding, fully paid and nonassessable, (B) 10,000 shares
of common stock, no par value, of the Los Angeles Learning Annex, of which 200
shares are validly issued and outstanding, fully paid and nonassessable, (C)
10,000 shares of common stock, no par value, of the San Francisco Learning
Annex, of which 1,000 shares are validly issued and outstanding, fully paid and
nonassessable, (D) membership interests in respect of 100% of the outstanding
equity of the Delaware Learning Annex, all of which are validly issued and
outstanding, fully paid and nonassessable and (E) membership interests in
respect of 100% of the outstanding equity of the New York Learning Annex, all of
which are validly issued and outstanding, fully paid and nonassessable. The
Option Securities listed on SCHEDULE I hereto constitute all of the capital
stock of The Learning Annex. As of the date hereof there are no (i) outstanding
warrants, options, agreements, convertible securities or other commitments or
instruments pursuant to which The Learning Annex is or may become obligated to
issue or sell any shares of capital stock or other securities of The Learning
Annex, (ii) preemptive or similar rights to purchase or otherwise acquire shares
of capital stock of The Learning Annex pursuant to any provision of law, the
Certificate of Incorporation, By-laws, Certificate of Formation or Operating
Agreement, as the case may be, of The Learning Annex or any agreement to which
The Learning Annex is party or otherwise or (iii) obligation (contingent or
otherwise) of The Learning Annex to purchase, redeem or otherwise acquire any
shares of its capital stock or any interest therein or to pay any dividend or
make any other distribution in respect thereof. There are no voting trusts,
voting agreements, proxies, first refusal rights, first offer rights, co-sale
rights, options, transfer restrictions or other agreements, instruments or
understandings (whether written or oral, formal or informal) with respect to the
voting, transfer or disposition of capital stock of The Learning Annex to which
The Learning Annex is a party or by which it is bound, or, to the best knowledge
of The Learning Annex, among or between any persons other than The Learning
Annex..
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(h) LITIGATION, ETC. Other than the current proceeding
against the Seminar Center which is described no Schedule 7(h) and which shall
not result in a Liability in excess of $100,000, there are no (i) actions,
suits, claims, investigations or legal or administrative or arbitration
proceedings (collectively, "ACTIONS") pending, or to the best knowledge of The
Learning Annex, threatened against The Learning Annex nor, to the best knowledge
of The Learning Annex, any basis therefor, whether at law or in equity, or
before or by any Federal, state, local, municipal, foreign or other governmental
court, department, commission, board, bureau, agency or instrumentality
("GOVERNMENTAL AUTHORITY"), (ii) judgments, decrees, injunctions or orders of
any Governmental Authority or arbitrator against The Learning Annex or (iii)
disputes with students, teachers, customers or vendors with an amount in
dispute, individually or in the aggregate, greater than $25,000. There are no
Actions pending or, to the best knowledge of The Learning Annex, threatened,
nor, to the best knowledge of The Learning Annex, any basis therefor, with
respect to (A) the current or future employment by, or association with, The
Learning Annex, of any of the present officers or employees of or consultants to
The Learning Annex (collectively, the "DESIGNATED PERSONS") or (B) the use, in
connection with any business presently conducted or proposed to be conducted by
The Learning Annex, of any information, techniques or processes presently
utilized or proposed to be utilized by The Learning Annex or any of the
Designated Persons, that The Learning Annex or any of the Designated Persons are
or would be prohibited from using as the result of a violation or breach of, or
conflict with any agreements or arrangements between any Designated Person and
any other person, or any legal considerations applicable to unfair competition,
trade secrets or confidential or proprietary information. The Learning Annex has
delivered to GHS all material documents and correspondence relating to such
matters referred to in this Section 7(h) (including, in the case of clause (iii)
of the first sentence of this Section 7(h), any correspondence evidencing
material customer dissatisfaction with The Learning Annex or its products or
services).
(i) INTELLECTUAL PROPERTY
(i) The Learning Annex has good and valid title
to, and owns free and clear of all Encumbrances, has the exclusive
right to use, sell, transfer, license (or sublicense), transmit,
broadcast, deliver (electronically or otherwise) and dispose of, and
has the right to bring actions for the infringement of, all
Intellectual Property Rights necessary or required for the conduct of
its business as currently conducted and as proposed to be conducted
(collectively, the "COMPANY RIGHTS").
(ii) The execution, delivery and performance of
this Agreement, the License Agreement and the Pledge Agreement and the
consummation of the transactions contemplated hereby, will not breach,
violate or conflict with any instrument or agreement governing any
Company Rights, will not cause the forfeiture or termination or give
rise to a right of forfeiture or termination of any Company Right or in
any way impair the right of The Learning Annex to use, sell, license
(or sublicense), transmit, broadcast, deliver (electronically or
otherwise) or dispose of, or to bring any action for the infringement
of, any Company Right or portion thereof.
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(iii) There are no royalties, honoraria, fees or
other payments payable by The Learning Annex to any person by reason of
the ownership, use, license (or sublicense), transmission, broadcast,
delivery (electronically or otherwise), sale, or disposition of The
Learning Annex Rights, other than sales commissions and other
instructor fees paid in the ordinary course of business.
(iv) All works that were created, prepared or
delivered by consultants, independent contractors or other third
parties for or on behalf of The Learning Annex (including any materials
and elements created, prepared or delivered by such parties in
connection therewith) (A) are and shall constitute "works made for
hire" specially ordered or commissioned by The Learning Annex within
the meaning of United States' copyright law, or (B) all right, title
and interest therein (including any materials and elements created,
prepared or delivered by such parties in connection therewith) have
been assigned to The Learning Annex.
(v) Except for the agreement between Hay House
and Seligman/Greer Communication Resources, Inc., dba The Learning
Annex dated August 31, 1994, as amended (the "HAY HOUSE AGREEMENT"), no
licenses or rights have been granted by The Learning Annex, or by any
employee, consultant, officer, director, agent or affiliate of The
Learning Annex or by anyone other than the foregoing, to distribute the
source code of, or to use source code to create Derivative Works, of,
any product currently marketed by, commercially available from or under
development by The Learning Annex for which The Learning Annex
possesses the source code. As used herein, "DERIVATIVE WORK" shall mean
a work that is based upon one or more preexisting works, such as a
revision, enhancement, modification, abridgment, condensation,
expansion or any other form in which such preexisting works may be
recast, transformed or adapted, and which, if prepared without
authorization of the owner of the copyright in such preexisting work,
would constitute a copyright infringement. For purposes herein, a
"DERIVATIVE WORK" shall also include any compilation that incorporates
such a preexisting work as well as translations from one type of code
to another.
(vi) Except for the Hay House Agreement, no
person has any marketing rights to any of the Intellectual Property
Rights of The Learning Annex (excluding Intellectual Property Rights
licensed to The Learning Annex by third parties).
(vii) Section 7(i)(viii) of The Learning Annex
Disclosure Schedule contains a true and complete list of all (A) of The
Learning Annex's patents, patent applications, trademarks, trademark
applications, trade names, service marks, service mark applications,
copyrights, copyright registrations and copyright applications and
Internet domain names and applications therefor and (B) other filings
and formal actions made or taken pursuant to Federal, state, local and
foreign laws by The Learning Annex to perfect or protect its interest
therein.
(viii) Section 7(i)(ix) of The Learning Annex
Disclosure Schedule contains a true and complete list of all options,
licenses or other agreements of any kind by which Intellectual Property
Rights have been granted to The Learning Annex from, or granted by The
Learning Annex to, any other person.
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(ix) As used herein, the term "Intellectual
Property Rights" shall mean all industrial and intellectual property
rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service
marks, service mark applications, copyrights, copyright registrations,
copyright applications, franchises, licenses, databases, "URL's" and
Internet domain names and applications therefor (and all interest
therein), computer programs and other computer software (including, but
not limited to, the Software), user interfaces, know-how, trade
secrets, customer lists, proprietary technology, processes and
formulae, source code, object code, algorithms, architecture,
structure, display screens, layouts, development tools, instructions,
templates, marketing materials, inventions, trade dress, logos and
designs and all documentation and media constituting, describing or
relating to the foregoing.
(j) TITLE TO ASSETS, PROPERTIES AND RIGHTS AND RELATED
MATTERS. Except as set forth on Schedule 7(j) of The Learning Annex Disclosure
Schedule, The Learning Annex has good and valid title to, or good and valid
licenses or leasehold interests in, all assets, properties and interests in
properties, real, personal or mixed, necessary for the conduct of the business
as conducted or as proposed to be conducted, free and clear of all Encumbrances,
of any kind or character, except for (i) those Encumbrances set forth in Section
7(j) of The Learning Annex Disclosure Schedule, (ii) liens for current taxes not
yet due and payable and (iii) statutory mechanics and materialmen's liens. The
assets, properties and interests in properties of The Learning Annex are in good
operating condition and repair in all material respects. The Learning Annex does
not own or lease any personal and/or mixed property.
(k) ABSENCE OF UNDISCLOSED LIABILITIES.
(i) At the Balance Sheet Date, with respect to
the Balance Sheet, The Learning Annex had no material Liability (as
defined below) required to be set forth on the Balance Sheet or the
Interim Financial Information, respectively, in order for the Balance
Sheet or the Interim Financial Information, respectively, to fairly
present the financial condition of The Learning Annex at the dates
thereof in accordance with GAAP, which was not provided for or
disclosed thereon.
(ii) All liability reserves established by The
Learning Annex and set forth on the Balance Sheet or the Interim
Financial Information, respectively, were adequate, in all material
respects, for all such Liabilities at the respective dates thereof.
(iii) As used herein the term "LIABILITY" shall
mean any liability or obligation of any nature (whether known or
unknown, matured or unmatured, fixed or contingent, secured or
unsecured, accrued, absolute or otherwise).
(l) FINANCIAL STATEMENTS.
(i) The Learning Annex has previously delivered
to GHS the following financial statements (collectively, "THE LEARNING
ANNEX FINANCIAL STATEMENTS"):
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(1) the financial information and
calculations concerning The Learning Annex set forth in
Section 7(l) of The Learning Annex Disclosure Schedule as at
March 31, 1999 or April 30, 1999, as applicable (the "INTERIM
FINANCIAL INFORMATION"; and the date thereof being the
"INTERIM FINANCIAL INFORMATION DATE"); and
(2) the balance sheets of The Learning Annex
as at December 31, 1998 (the "BALANCE SHEET"; and the date
thereof being the "BALANCE SHEET DATE"), 1997 and 1996,
respectively, and the related statements of income, cash flow
and shareholders' equity for the respective years then ended
(including complete footnotes thereto), certified by The
Learning Annex Accountants, and accompanied by a copy of such
auditor's report.
(ii) The Learning Annex Financial Statements (A)
are in accordance with the books and records of The Learning Annex, (B)
fairly present the financial condition of The Learning Annex as at the
respective dates indicated and the results of operations of The
Learning Annex for the respective periods indicated and (C) have been
prepared in accordance with generally accepted accounting principles
consistently applied, except as indicated therein and, in the case of
Interim Financial Statements, for the absence of complete footnote
disclosure as required by GAAP and subject, in the case of the Interim
Financial Statements, to changes resulting from normal year-end audit
adjustments, which adjustments shall not in any event be material
individually or in the aggregate.
(m) ABSENCE OF CHANGES. Except as set forth in Section
7(m) of The Learning Annex Disclosure Schedule, since the Balance Sheet Date,
The Learning Annex has been operated in the ordinary course, consistent with
past practice, and there has not been any material adverse change in the
business, assets, properties, Liabilities, operations, results of operations,
condition (financial or otherwise), prospects or affairs (a "MATERIAL ADVERSE
CHANGE") of The Learning Annex, in each case in an amount, individually or in
the aggregate, greater than $25,000.
(n) AGREEMENTS. Schedule 7(n) hereto sets forth a true
and complete list of all contracts, agreements, instruments, understandings or
arrangements to The Learning Annex is a party or by which it is bound (i) that
involve liabilities or obligations of, or payments by or to The Learning Annex
or otherwise have a value in excess of $50,000, (ii) that involve the license to
or from The Learning Annex of any intellectual property rights (other than
licenses of, or licenses arising from purchases of, "off-the-shelf" or other
standard products), (iii) between it and any of its officers, directors,
employees, consultants (or any of their respective family members) or (iv) that
restricts The Learning Annex from engaging in any aspect of its business or
competing in any line of business in any geographic area. To the best knowledge
of The Learning Annex, it is not in default under any agreements with any third
parties.
(o) DISCLOSURE. Neither Section 7 of this Agreement
(including The Learning Annex Disclosure Schedule) nor any document, written
information, statement, financial statement, certificate or exhibit furnished or
to be furnished to GHS by or on behalf of The Learning Annex or any
securityholder pursuant hereto or in connection with the transactions
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contemplated hereby, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary in order to make
the statements or facts contained herein and therein not misleading in light of
the circumstances under which they were made. There is no fact which materially
adversely affects, or in the future may, insofar as can be reasonably foreseen
by The Learning Annex, materially adversely affect, the business, operations,
affairs, prospects, condition, properties or assets of The Learning Annex which
has not been set forth in this Agreement or in the Closing Documents.
8. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each of the
Shareholders, severally (and not jointly) represents and warrants to GHS with
respect to himself, herself or itself as follows:
(a) TITLE; ABSENCE OF CERTAIN AGREEMENTS. Such
Shareholder is the lawful and record and beneficial owner of (i) the Option
Securities and (ii) all options, warrants, rights, calls, commitments,
agreements or arrangements of any character to which such Shareholder is a party
or by which he, she, or it is bound calling for the issuance of shares of
capital stock of The Learning Annex or any securities convertible into or
exercisable or exchangeable for, or representing the right to purchase or
otherwise receive, directly or indirectly, any such capital stock, or other
arrangement to acquire, at any time or under any circumstance, capital stock of
The Learning Annex (the "COMMON EQUIVALENTS") or any such other securities in
each case set forth opposite the name of such Shareholder on SCHEDULE I attached
hereto, with the full power and authority to vote such Option Securities and
transfer and otherwise dispose of such Option Securities and Common Equivalents
and any and all rights and benefits incident to the ownership thereof, free and
clear of all Encumbrances, and there are no voting trusts, voting agreements,
proxies, first refusal rights, first offer rights, co-sale rights, options,
transfer restrictions or other agreements, instruments or understandings
(whether written or oral, formal or informal) between such Shareholder and The
Learning Annex and/or any other Shareholder or any other person with respect to
the voting, transfer or disposition of Option Securities or any other matter
relating to Option Securities. The Option Securities set forth opposite the name
of such Shareholder are the only shares of capital stock of The Learning Annex
held by such Shareholder.
(b) ORGANIZATION, GOOD STANDING AND POWER. In the case of
any Shareholder that is not a natural person, such Shareholder is duly organized
or formed and validly existing under the laws of the jurisdiction of its
incorporation or formation and has the corporate or other organizational power
and authority under such laws to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
(c) AUTHORITY - GENERAL. Such Shareholder has full and
absolute power and authority to enter into this Agreement and the Pledge
Agreement and, and has, in the case of a Shareholder that is not a natural
person, been duly authorized by all requisite action on the part of such
Shareholder; and this Agreement and the Pledge Agreement have been duly executed
and delivered by such Shareholder, and each is the valid and binding obligation
of such Shareholder, enforceable against such Shareholder in accordance with its
terms. Neither the execution, delivery and performance of this Agreement or the
Pledge Agreement, nor the consummation of the transactions contemplated hereby
or thereby nor compliance by such Shareholder with any of
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the provisions hereof or thereof will (i) (A) conflict with, (B) result in any
violations of, (C) cause a default under (with or without due notice, lapse of
time or both), (D) give rise to any right of termination, amendment,
cancellation or acceleration of any obligation contained in or the loss of any
material benefit under or (E) result in the creation of any Encumbrance upon or
against any assets, rights or property of GHS, under any term, condition or
provision of (x) any agreement or instrument to which such Shareholder is a
party, or by which such Shareholder or, to the best knowledge of such
Shareholder, any of his or its properties, assets or rights may be bound, (y)
any law, statute, rule, regulation, order, writ, injunction, decree, permit,
concession, license or franchise of any Governmental Authority applicable to
such Shareholder or, to the best knowledge of such Shareholder, any of his or
its properties, assets or rights or (z) in the case of any Shareholder that is
not a natural person, such Shareholder's Charter or by-laws, as amended through
the date hereof, which conflict, breach, default or violation or other event
would prevent the consummation of the transactions contemplated by this
Agreement or the Pledge Agreement. No permit, authorization, consent or approval
of or by, or any notification of or filing with, any Governmental Authority or
other person is required in connection with the execution, delivery and
performance by such Shareholder of this Agreement, or the Pledge Agreement or
the consummation by such Shareholder of the transactions contemplated hereby or
thereby.
9. REPRESENTATIONS AND WARRANTIES OF GHS. GHS represents and warrants to
The Learning Annex and Shareholders as follows:
(a) ORGANIZATION. GHS is a corporation, duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite power and authority to enter into this Agreement, to
perform its obligations hereunder, and to consummate the Acquisition
contemplated thereby.
(b) AUTHORIZATION. GHS has taken all corporate action
necessary to authorize its execution and delivery of this Agreement, its
performance of its obligations hereunder, and its consummation of the
Acquisition contemplated hereby. This Agreement has been executed and delivered
by an officer of GHS in accordance with such authorization. This Agreement
constitutes a valid and binding obligation of GHS, enforceable in accordance
with its terms, subject to bankruptcy, reorganization, insolvency, moratorium,
and similar laws affecting creditors' rights generally and to general principles
of equity.
(c) NO CONFLICT. The execution and delivery by GHS of
this Agreement, its consummation of the Acquisition contemplated hereby, and its
compliance with the provisions hereof, will not (a) violate or conflict with its
Certificate of Incorporation or By-laws, (b) violate, conflict with, or give
rise to any right of termination, cancellation, rescission or acceleration under
any agreement, lease, security, license, permit, or instrument to which GHS is a
party, or to which it or any of its assets is subject, (c) violate or conflict
with any Laws, or (d) require any consent, approval or other action of, notice
to, or filing with any entity or person (governmental or private), except for
those that have been obtained or made.
10. OPERATION OF THE BUSINESS; FINANCIAL INFORMATION.
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(a) OPERATION OF BUSINESS. During the Option Period, The
Learning Annex will operate its business as now operated and only in the normal
and ordinary course and, consistent with such operation, will use its best
efforts to preserve intact its present business organization, to keep available
the services of its officers and employees and to maintain satisfactory
relationships with licensors, franchisees, licensees, suppliers, contractors,
distributors, customers and other persons having business dealings with it.
Without limiting the generality of the foregoing, during the Option Period The
Learning Annex shall not without the prior written consent of GHS, in each case
other than in the ordinary course of business, take or cause to occur any of the
following actions or transactions;
(i) The sale, lease, license, transfer,
Encumbrance, pledge or other disposition of The Learning Annex's
material assets, involving more than $50,000 in any one transaction (or
series of related transactions);
(ii) any declaration, setting aside or payment of
any dividend or other distribution of any assets of any kind whatsoever
with respect to any shares of the capital stock of The Learning Annex,
or any direct or indirect redemption, purchase or other acquisition of
any such shares of the capital stock of The Learning Annex (other than
(1) any cash dividends and (2) the payment or disposition, by dividend
or otherwise, of (A) the payments of the Options Price pursuant to this
Agreement, (B) the Shares and (C) so long as Steven Seligman or Beth
Greer are full time employees of The Learning Annex, the license fees
paid by GHS to the Learning Annex pursuant to the License Agreement);
(iii) any stock split, reverse stock split,
combination, reclassification or recapitalization of any capital stock
of The Learning Annex, or any issuance of any other security in respect
of or in exchange for, any shares of capital stock of The Learning
Annex;
(iv) any increase in or modification to or
acceleration of any benefits payable or to become payable under any
bonus, pension, severance, insurance or other benefit plan, payment or
arrangement (including, but not limited to, the granting of stock
options, restricted stock awards or stock appreciation rights) made to,
for or with any officer, key employee, consultant or agent of The
Learning Annex;
(v) any loan, advance or capital contribution to
or investment in (or series of related loans, advances or capital
contributions to or investments in) any person in each case in excess
of $50,000 or the engagement in any transaction with any employee,
officer, director or securityholder, other than advances to employees
in the ordinary course of business for travel and similar business
expenses;
(vi) any change in the accounting methods or
practices followed The Learning Annex or any change in depreciation or
amortization policies or rates theretofore adopted;
(vii) any acceleration or decceleration of payment
of accounts payable or collection of accounts receivable other than in
a manner consistent with past practice;
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(viii) any incurrence, refinancing or alteration of
material terms by The Learning Annex of indebtedness for borrowed money
in excess of $150,000 in the aggregate (or the guaranty by The Learning
Annex of any such indebtedness);
(ix) conducting operations or entering into
transactions materially inconsistent with the annual business plan in
effect at the time or material changes in the strategic direction of
the business or scope of the business or entering into any material
joint venture outside the ordinary course of business;
(x) any amendments or changes in The Learning
Annex's Charter or by-laws.
(b) INFORMATION RIGHTS. During the Option Period The
Learning Annex shall provide GHS with the following information:
(i) GENERAL. The Learning Annex will permit GHS
on reasonable notice to visit and inspect during normal business hours
any of the properties of The Learning Annex and to examine its books
and records, and to discuss with its officers the business and affairs
of The Learning Annex, at such reasonable times as such persons may
desire without disruption of The Learning Annex's normal business and
affairs for any reasonable purpose relating to its investment in The
Learning Annex.
(ii) QUARTERLY STATEMENTS. As soon as available,
but not later than sixty (60) days after the end of each quarterly
accounting period commencing with the quarterly period ending on June
30, 1999, an unaudited consolidated financial report of The Learning
Annex, prepared in accordance with generally accepted accounting
principles consistently applied, except that such financial statements
shall not include footnotes and shall be subject to normal year-end
audit adjustments, including, with respect to such quarterly accounting
period, the following:
(1) A profit and loss statement for such
quarterly accounting period and on a cumulative basis for the
fiscal year to date;
(2) A balance sheet as at the last day of
such quarterly accounting period;
(3) A statement of cash flow for such
quarterly accounting period on a cumulative basis for the
fiscal year to date; and
(4) A comparison between the actual figures
for such quarterly accounting period and on a cumulative basis
for the fiscal year to date, the comparable figures (with
respect to clauses (1) and (2) only) for the prior period of
year (if any),
certified by the chief executive officer and chief financial officer of
the Corporation as being prepared in accordance with generally accepted
accounting principles (except with
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respect to footnote disclosure and subject to normal year-end audit
adjustments) consistently applied and accompanied by a statement
showing the number of shares of each class and series of capital stock,
and securities convertible into or exercisable for shares of capital
stock.
(iii) ANNUAL REPORTS. As soon as available, but not later
than 90 days after the end of each fiscal year of The Learning Annex,
reviewed financial statements of The Learning Annex, which shall
include a statement of cash flows and statement of operations for such
fiscal year and a balance sheet as at the last day thereof, each
prepared in accordance with generally accepted accounting principles,
consistently applied, and accompanied by the report of Chaio and Smith
or another accounting firm reasonably acceptable to GHS. The
Corporation shall maintain a system of accounting sufficient to enable
its independent certified public accountants to render the report
referred to in this Section 7(k).
(c) MATERIAL EVENTS. The Learning Annex shall promptly
notify GHS in writing (i) if there has been or is likely to be a Material
Adverse Change, (ii) if there has been any event which adversely impacts or
could reasonably be expected to adversely impact the integrity and value of the
Options or (iii) if The Learning Annex has entered into any business
relationship that could infringe upon the nature and scope of the contemplated
Options.
11. COVENANTS.
(a) LICENSE AGREEMENT. On or before the date hereof, GHS
and The Learning Annex shall have executed and delivered an exclusive online
marketing and licensing agreement in the form attached hereto as EXHIBIT B (the
"LICENSE AGREEMENT").
(b) NO-SHOP.
(i) Subject to the ability of The Learning Annex
to consummate a Corporate Transaction on the terms and subject to the
conditions set forth in Section 11(c) hereof, from the date of this
Agreement until the earlier of (i) the termination of this Agreement in
accordance with its terms or (ii) the closing of the Acquisition
pursuant to the exercise of either of the Options, The Learning Annex
shall not, nor shall it authorize or permit any of its respective
officers, directors, employees, members, representatives, Shareholders,
agents or affiliates, directly or indirectly, to (A) solicit, initiate
or encourage or take any action to facilitate or encourage any
inquiries or the making of any proposal that constitutes, an
Acquisition Proposal or (B) participate or engage in discussions or
negotiations with, or provide any information to, any person or entity
concerning an Acquisition Proposal or which might reasonably be
expected to result in an Acquisition Proposal. The Learning Annex shall
immediately cease and cause to be terminated and shall cause its
affiliates and its or their respective officers, directors, employees,
members, Shareholders, representatives or agents, to terminate all
existing discussions or negotiations with any persons or entities
conducted heretofore with respect to, or that could reasonably be
expected to lead to, an Acquisition Proposal and hereby agree to
immediately disclose to GHS the existence and terms of any written or
oral offer
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to The Learning Annex or any Shareholder of an Acquisition Proposal, or
any representative acting on its, his, her or their behalf, including
copies of any relevant written materials.
(ii) For purposes of this Agreement, the term
"ACQUISITION PROPOSAL" shall mean any inquiry, proposal or offer from
any person (other than GHS) relating to any (i) merger or consolidation
of The Learning Annex into or with another corporation or other entity,
(ii) the sale, transfer, license or other disposition of all or
substantially all of the properties or of The Learning Annex, (iii) the
sale, transfer or other disposition of capital stock of The Learning
Annex, in each case under circumstances in which the holders of the
outstanding capital stock of The Learning Annex immediately prior to
such merger, consolidation or sale, own less than a majority (by voting
power) of outstanding capital stock of The Learning Annex or the
surviving or resulting corporation or acquirer, as the case may be,
immediately following such merger, consolidation or sale, (iv) any
investment in, or any debt or equity financing of either The Learning
Annex, (v) the Internet (as such term is defined in the License
Agreement) distribution of content or services of The Learning Annex or
(vi) any other transaction the consummation of which could reasonably
be expected to impede, interfere with, prevent or materially delay the
consummation of the transactions contemplated hereby or which would
reasonably be expected to dilute materially the benefits to GHS of the
transactions contemplated hereby (each a "CORPORATE TRANSACTION").
(c) RIGHT OF FIRST REFUSAL.
(i) On and after the third anniversary of the
date hereof, if The Learning Annex proposes to seek or seeks parties to
enter into a Corporate Transaction or takes any action incident
thereto, The Learning Annex shall so notify GHS in writing (the
"SHOPPING NOTICE") prior to contacting or negotiating with any other
party and shall provide GHS and its affiliates the first and exclusive
option, for a period of 30 days after such notice is delivered, to
negotiate the terms and conditions upon which GHS may propose at its
option and in its discretion to consummate a Corporate Transaction
(other than pursuant to the exercise of the Option). The Shopping
Notice shall include (A) all relevant terms of the proposed Corporate
Transaction and (B) a list of parties proposed to be involved in such
proposed Corporate Transaction.
(ii) If GHS elects not to make a proposal to The
Learning Annex to enter into a Corporate Transaction and if GHS has not
exercised the Option within one hundred and twenty (120) days of
delivery of the Shopping Notice, then The Learning Annex shall have the
right to actively solicit Acquisition Proposals (but not consummate any
Corporate Transaction (other than pursuant to the exercise of the
Option)) for sixty (60) days (the "SHOPPING PERIOD") at a price and on
terms and conditions no more favorable to the purchaser(s) than the
price, terms and conditions set forth in the Shopping Notice.
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(iii) The Learning Annex shall keep GHS regularly
informed and updated as to the status of its search for Acquisition
Proposals, discussions and/or negotiations, if any, with third parties
for any Corporate Transaction. If during the Shopping Period The
Learning Annex negotiates all of the material terms of a BONA FIDE
Corporate Transaction with a third party (the "CORPORATE TRANSACTION
PROPOSAL"), then GHS shall immediately thereupon notify GHS in writing
thereof and GHS shall have the right and option (the "RIGHT OF FIRST
REFUSAL") for thirty (30) days after receipt of the such written notice
to elect to (A) consummate an Acquisition pursuant to the exercise of
the Option on the terms set forth in Section 4 hereof or (B) consummate
the Corporate Transaction on terms and conditions no less favorable to
GHS than the terms and conditions set forth in the Corporate
Transaction Proposal; PROVIDED, that if the Corporate Transaction
Proposal provides for the third party to provide capital stock or other
securities or other non-cash consideration as consideration in the
Corporate Transaction, GHS shall be entitled to provide capital stock
or other securities or other non-cash consideration of GHS or (C)
deliver a notice to The Learning Annex that GHS elects not to exercise
its Right of First Refusal.
(iv) If (A) GHS elects not to exercise its Right
of First Refusal and (B) The Learning Annex consummates the Corporate
Transaction, then The Learning Annex shall reimburse GHS in cash
simultaneous with the closing of the Corporate Transaction an amount
equal to the last payment made by GHS in respect of the Options Price.
(d) FUTURE SHAREHOLDERS.
(i) ISSUANCE BY THE LEARNING ANNEX. The Learning
Annex hereby covenants that it shall not issue or sell any capital
stock of The Learning Annex or any options, warrants, rights, calls,
commitments, agreements or arrangements of any character calling for
the issuance of shares of capital stock of The Learning Annex or any
securities convertible into or exercisable or exchangeable for, or
representing the right to purchase or otherwise receive, directly or
indirectly, any such capital stock, or other arrangement to acquire, at
any time or under any circumstance, capital stock of The Learning Annex
or any such other securities which The Learning Annex is or may become
obligated to issue or sell any shares of capital stock or other
securities of The Learning Annex to any person (a "FUTURE ISSUANCE")
unless such person shall have, as a condition to such Future Issuance,
executed a counterpart to this Agreement and the Pledge Agreement,
agreeing to be bound by and obligated in accordance with this Agreement
and the Pledge Agreement as if he, she or it were a Shareholder.
(ii) TRANSFER BY EXISTING SHAREHOLDER. Each of
the Shareholders hereby covenants and agrees that he, she or it shall
not sell, transfer or otherwise dispose (a "TRANSFER") of any Option
Securities or any other capital stock ("OTHER SHARES" and, together
with the Option Securities, the "SECURITIES") of The Learning Annex now
owned or ever owned by such Shareholder to any person (a "TRANSFEREE")
unless such Transferee shall have, as a condition to such Transfer,
executed a counterpart to this Agreement and
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the Pledge Agreement, agreeing to be bound by and obligated in
accordance with this Agreement and the Pledge Agreement as if he, she
or it were a Shareholder.
(iii) RESTRICTIVE LEGEND. Each certificate for the
Securities and each certificate for any such Securities issued to
subsequent transferees or pursuant to a Future Issuance shall be
stamped or otherwise imprinted with a legend in substantially the
following form:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE CONDITIONS SPECIFIED IN THE
OPTION AGREEMENT AMONG GHS, INC., THE LEARNING ANNEX AND THE
SHAREHOLDERS (AS DEFINED THEREIN), AND NO TRANSFER OF THESE
SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF ALL APPLICABLE
CONDITIONS, GHS, INC. HAS AGREED TO DELIVER TO THE HOLDER
HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF THE
HOLDER HEREOF."
(e) SHAREHOLDERS' BEST EFFORTS. Each of the Shareholders
hereby covenants and agrees that he, she or it shall use his, her or its best
efforts to ensure that the Learning Annex abides by, observes and performs his,
her or its obligations hereunder, and the Shareholders and The Learning Annex
hereby agree that they shall not sell their Shares except in accordance with
Section 11 hereto.
(f) CONFIDENTIALITY. The parties hereto hereby covenant
and agree that without the express written consent of GHS on the one hand and
The Learning Annex on the other hand, neither The Learning Annex nor any
Shareholder, nor GHS, shall disclose the existence of this Agreement or any
agreements referenced herein or attached hereto, nor any of the terms hereof or
thereof, to any third party except: (i) as required by law; (ii) to such party's
attorneys, accountants, other advisors, officers, employees, directors and
equityholders, as applicable, in order to facilitate the consummation of the
Acquisition and the fulfillment of such party's obligations hereunder or
thereunder, provided that any such third party agrees to be bound by the
confidentiality provisions hereof.
(g) NO JOINT VENTURE. Neither party shall make any
warranties or representations, or assume or create any obligations, on the other
party's behalf except as may be expressly permitted hereunder or in writing by
such other party. Each party shall be solely responsible for the actions of all
its respective employees, agents and representatives.
(h) ACCESS TO INFORMATION. Upon the exercise of either of
the Options, The Learning Annex shall afford to the officers, employees,
accountants, counsel and other representatives of GHS, reasonable access, during
the period prior to the date of the closing of the Acquisition, to all its
properties, books, contracts, commitments and records and, during such period,
and The Learning Annex shall furnish promptly to GHS all information concerning
its
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business, properties and personnel as GHS may reasonably request, and The
Learning Annex shall make available to GHS the appropriate individuals for
discussion of The Learning Annex's business, properties and personnel as GHS may
reasonably request. No investigation pursuant to this Section 11(g) shall affect
any representations or warranties of The Learning Annex herein or the conditions
to the obligations of the parties hereto.
(i) RETENTION OF KEY EMPLOYEES. The Learning Annex hereby
covenants and agrees that it shall use best efforts from the date hereof until
the Closing Date to retain all key employees of The Learning Annex, including,
without limitation, Steve Seligman and Beth Greer. The Learning Annex shall
promptly, and in any event within 48 hours, notify GHS in writing if any The
Learning Annex key employee on the date hereof ceases to be an employee of The
Learning Annex, or if any The Learning Annex key employee on the date hereof
informs any officer of The Learning Annex that he or she will terminate his or
her employment or engagement with The Learning Annex.
12. SURVIVAL; INDEMNIFICATION.
(a) SURVIVAL. The covenants, representations and
warranties and agreements of the parties hereto contained in this Agreement and
in the Closing Documents shall survive (i) for the term of this Agreement or
(ii) if the Options are exercised and the closing of the Acquisition pursuant
thereto is consummated, then for three (3) years after the closing date of such
Acquisition.
(b) THE LEARNING ANNEX AND SHAREHOLDERS INDEMNITY. The
Learning Annex and the Shareholders hereby jointly and severally indemnify GHS
against and agree to hold GHS harmless from any and all damage, loss, liability
and expense (including, without limitation, reasonable expenses of investigation
and reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding, including any action, suit or proceeding to enforce this
indemnity) ("DAMAGES") incurred or suffered by GHS arising out of any
misrepresentation or breach of representation, warranty (or any facts or
circumstances constituting such breach), covenant or agreement made or to be
performed by The Learning Annex or the Shareholders pursuant to this Agreement,
the Closing Documents or other closing documents executed and delivered in
connection therewith. The Shareholders shall not have any right of contribution
against The Learning Annex in connection with this Section 12.
(c) GHS INDEMNITY. GHS hereby indemnifies The Learning
Annex and each of the Shareholders against and agrees to hold each of them
harmless from any and all Damages incurred or suffered by The Learning Annex or
each of the Shareholders arising out of any misrepresentation or breach of
representation, warranty (or any facts or circumstances constituting such
breach), covenant or agreement made or to be performed by GHS pursuant to this
Agreement, Closing Documents or other documents delivered in connection
therewith.
(d) PROCEDURES. If any third party shall assert any claim
against a GHS, The Learning Annex or a Shareholder, as the case may be, which,
if successful, would entitle the such person to indemnification under Section
12(a) or (b), as the case may be, such person (the "INDEMNIFIED PARTY") shall
give a notice of such claim to the party from whom it intends to seek
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indemnification (the "INDEMNIFYING PARTY") and the Indemnified Party shall have
the right to assume the defense. If the Indemnified Party does assume such
defense, the Indemnifying Person shall indemnify and hold the Indemnified Party
harmless from and against any and all losses, damages and liabilities caused by
or arising out of any settlement or judgment of such claim and the Indemnifying
Person may not claim that it does not have an indemnification obligation with
respect thereto. In addition, the Indemnifying Party shall have the right to
participate in the defense of such claim at its expense, in which case (i) the
Indemnified Party shall cooperate in providing information to and consulting
with the Indemnifying Party about the claim; and (ii) the Indemnified Party
shall not consent to the entry of judgment or enter into any settlement without
the prior written consent of the Indemnifying Party, which consent shall not be
unreasonably withheld or delayed. If the Indemnified Party does not assume the
defense of any such claim, the Indemnifying Party may defend against or settle
such claim in such manner and on such terms as it in good faith deems
appropriate and shall be entitled to indemnification in respect thereof in
accordance with Section 12(a) or (b), as the case may be.
13. EXPIRATION OR TERMINATION. In the event that the Option shall not have
been exercised on or prior to the end of the Option Period, the Option shall
automatically expire and terminate and no party hereunder shall have any rights
or obligations with respect thereto.
14. MISCELLANEOUS PROVISIONS.
(a) ENTIRE AGREEMENT. This Agreement (including the
Exhibits attached hereto) and the Pledge Agreement and License Agreement contain
the entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements or understandings,
written or oral, among the parties with respect thereto.
(b) DESCRIPTIVE HEADINGS. Descriptive headings are for
convenience only and shall not control or affect the meaning or construction of
any provision of this Agreement.
(c) NOTICES. All notices or other communications which
are required or permitted hereunder shall be in writing and sufficient if
delivered personally, sent by nationally-recognized overnight courier or by
registered or certified mail, postage prepaid, return receipt requested or by
telecopier, addressed as follows:
(i) if to GHS, to:
GHS, Inc.
2400 Research Boulevard
Rockville, MD 20850
Attention:
Telecopier (301) 308-3254;
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with copies to:
Orrick, Herrington & Sutcliffe LLP
666 Fifth Avenue
New York, New York 10103
Attention: Martin H. Levenglick, Esq.
Telecopier: (212) 506-5151; and
(ii) if to The Learning Annex, to:
Seligman/Greer Communication Resources, Inc.
291 Greary Street, Suite 510
San Francisco, CA 94102
Attn: Stephen Seligman
Telecopier: (415) 788-5574
with copies to:
Carol Goodman
Delta Tower
100 First Street, Suite 2530
San Francisco, California 94105
Telecopier: (415) 357-3851
(iii) if to the Shareholders, to their respective
addresses set forth on SCHEDULE I, attached hereto, or to such other
address as the party to whom notice is to be given may have furnished
to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be delivered and received (a) in
the case of personal delivery or telecopy, on the date of such
delivery, (b) in the case of nationally-recognized overnight courier,
on the next business day after the date when sent and (c) in the case
of mailing, on the third business day following the date on which the
piece of mail containing such communication was posted.
(d) COUNTERPARTS. This Agreement may be executed in any
number of counterparts by original or facsimile signature, each such counterpart
shall be an original instrument, and all such counterparts together shall
constitute one and the same agreement.
(e) GOVERNING LAW. This Agreement shall be governed by
and construed in accordance with the laws of the State of California applicable
to contracts made and to be performed wholly therein, without reference to the
principals of conflicts of law.
(f) BENEFITS OF AGREEMENT. All the terms and provisions
of this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors
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and permitted assigns; PROVIDED, HOWEVER, that this Agreement shall not be
assignable by The Learning Annex or the Shareholders, whether by operation of
law or otherwise, without the express written consent of GHS. Any attempted
assignment, pledge, hypothecation or other disposition of such Option contrary
to the provisions hereof shall be null and void and without effect.
(g) PRONOUNS. As used herein, all pronouns shall include
the masculine, feminine, neuter, singular and plural thereof whenever the
context and facts require such construction.
(h) ATTORNEYS' FEES. In the event of a claim by a party
to this Agreement against another party to this Agreement, arising under this
Agreement, the prevailing party in a disposition of such claim by a court of
competent jurisdiction or by arbitration shall be paid by the other party the
reasonable and actual out-of-pocket attorneys' fees and expenses incurred by the
prevailing party with respect thereto.
(i) SPECIFIC PERFORMANCE. The transactions contemplated
hereby are unique and the parties acknowledge that the breach or threatened
breach of the provisions hereof may cause irreparable harm to GHS for which an
award of monetary damages would be inadequate. Accordingly, in addition to and
not in limitation of any other remedies available for a breach or threatened
breach by a party hereto, GHS shall be entitled to an injunction restraining the
breaching party from continuing such breach or threatened breach or specific
performance.
(j) AGENCY. Stephen Seligman as Chief Executive Officer
of SELIGMAN GREER COMMUNICATIONS RESOURCES, INC. (the "THE LEARNING ANNEX
AGENT") is hereby designated and shall act on behalf of all The Learning Annex
entities identified in the caption to this Agreement on any matter in connection
with this Agreement and any matters contemplated hereby and is hereby authorized
to bind all such entities in respect thereof. Accordingly, GHS shall only be
required to interact with or in any respect deal with The Learning Annex Agent
in any matter involving The Learning Annex Agent or any of such Learning Annex
entities (including without limitation, the giving of notice, consents or
approvals hereunder or any amendment, modification waiver of any term, condition
or provision of this Agreement or to the other agreements and exhibits
contemplated hereby).
(k) AMENDMENT, MODIFICATION AND WAIVER. This Agreement
shall not be altered or otherwise amended except pursuant to an instrument in
writing signed by each of the parties hereto; PROVIDED, HOWEVER, that any party
to this Agreement may waive in writing any obligation owed to it by any other
party under this Agreement. The waiver by any party hereto of a breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
25
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Option Agreement to be executed on its behalf as of the date first above
written.
GHS, INC.
By: /s/ Alan Gold
------------------------------------------
Name: Alan Gold
Title: President
THE LEARNING ANNEX:
SELIGMAN/GREER COMMUNICATION SGS COMMUNICATION RESOURCES,
RESOURCES, INC., INC.,
a California corporation a California corporation
By: /s/ Stephen Seligman By: /s/ Stephen Seligman
- ------------------------------- ------------------------------------------
Name: Stephen Seligman Name: Stephen Seligman
Title: C.E.O. Title: C.E.O.
By: /s/ Beth Greer By: /s/ Beth Greer
- ------------------------------- ------------------------------------------
Name: Beth Greer Name: Beth Greer
Title: President Title: President
SELIGMAN GREER SANDBERG SGC COMMUNICATION RESOURCES,
ENTERPRISES, INC., a California LLC,
corporation a Delaware limited liability company
By: /s/ Stephen Seligman By: /s/ Stephen Seligman
- ------------------------------- ------------------------------------------
Name: Stephen Seligman Name: Stephen Seligman
Title: C.E.O. Title: C.E.O.
By: /s/ Beth Greer By: /s/ Beth Greer
- ------------------------------- ------------------------------------------
Name: Beth Greer Name: Beth Greer
Title: President Title: President
LEARNING ANNEX INTERACTIVE
LLC,
A Delaware limited liability company
By: /s/ Stephen Seligman
- -------------------------------
Name: Stephen Seligman
Title: C.E.O.
By: /s/ Beth Greer
- -------------------------------
Name: Beth Greer
Title: President
<PAGE>
SIGNATURE PAGE TO OPTION AGREEMENT
DATED AS OF MAY 26, 1999 (THE "AGREEMENT"), AMONG
THE LEARNING ANNEX
AND THE OTHER PARTIES TO THE AGREEMENT
The undersigned hereby executes and delivers the Agreement,
authorizes this signature page to be attached to a counterpart of the Agreement,
and agrees to be bound by the Agreement; and this Signature Page together with
the Signature Pages of GHS, Inc., The Learning Annex (as defined therein) and
the other parties to the Agreement shall constitute counterpart copies of the
Agreement in accordance with the terms of the Agreement.
SHAREHOLDERS:
---------------------------------------------
STEPHEN SELIGMAN
---------------------------------------------
BETH GREER
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
COMPANY NAME/
Shareholder or Member Name Option Securities
- --------------------------------------------------------------------------------
<S> <C>
SELIGMAN/GREER/SANDBERG
ENTERPRISES, INC., a California
Corporation
- --------------------------------------------------------------------------------
Stephen Seligman 100 shares common stock
- --------------------------------------------------------------------------------
Beth Greer 100 shares common stock
- --------------------------------------------------------------------------------
SGS COMMUNICATION RESOURCES,
INC., a California corporation
- --------------------------------------------------------------------------------
Stephen Seligman 100 shares common stock
- --------------------------------------------------------------------------------
Beth Greer 100 shares common stock
- --------------------------------------------------------------------------------
SELIGMAN/GREER COMMUNICATION
RESOURCES, INC., a California corporation
- --------------------------------------------------------------------------------
Stephen Seligman 500 shares common stock
- --------------------------------------------------------------------------------
Beth Greer 500 shares common stock
- --------------------------------------------------------------------------------
LEARNING ANNEX INTERACTIVE,
LLC, a Delaware limited liability company
- --------------------------------------------------------------------------------
Stephen Seligman 50% of membership interests
- --------------------------------------------------------------------------------
Beth Greer 50% of membership interests
- --------------------------------------------------------------------------------
SGS COMMUNICATION RESOURCES,
LLC, a Delaware limited liability company
- --------------------------------------------------------------------------------
Stephen Seligman 50% of membership interests
- --------------------------------------------------------------------------------
Beth Greer 50% of membership interests
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
ANNEX A
CLOSING DOCUMENTS
1. Certificate of The Learning Annex confirming the representations and
warranties of The Learning Annex and the disclosure schedule, and
including updated financial statement for purposes of Section 7.
2. Certificate of each Shareholder confirming the representations and
warranties of such Shareholder.
3. Recent Good standing certificate of The Learning Annex and all
subsidiaries and affiliates thereof together with any bring-down
certificates.
4. Certificate of the Secretary of The Learning Annex as to incumbency.
5. Such certificates, instruments and documents customary in transactions
of this type as are mutually agreed upon by the parties.
