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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
February 21, 2000
Date of Report (Date of earliest event reported)
U.S. Technologies Inc.
(Exact name of Registrant as Specified in Charter)
Delaware 0-15960 73-1284747
(State or Other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
2001 Pennsylvania Avenue, NW, Suite 675, Washington, DC 20006
(Address of principal executive offices including zip code)
(202) 466-3100
(Registrant's telephone number, including area code)
Not applicable
(Former name or address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 5. OTHER EVENTS.
On February 22, 2000, U.S. Technologies Inc., a Delaware corporation,
issued the following press release:
U.S. Technologies, Inc. (OTC Bulletin Board: USXX) announced today
that it has reached a definitive agreement to acquire E2Enet, Inc., an internet
company incubator, for convertible preferred stock. Privately held E2Enet has
made early stage investments in several development stage business-to-business
(B2B) and business-to-consumer (B2C) e-commerce businesses. The E2Enet
acquisition is expected to close in mid-April once all closing conditions have
been satisfied.
U.S. Technologies will acquire E2Enet's stock and assume its liabilities in
exchange for U.S. Technologies securities. Initially, shares of a new voting
Series B mandatorily convertible preferred stock will be issued with a stated
liquidation preference aggregating $11.2 million. Those shares will eventually
be converted into 56 million shares of common stock.
"We are excited about the potential transition of U.S. Technologies to include
an Internet incubator company modeled after other public companies that
successfully invest in and build strategic alliances involving new Internet
technologies and businesses," said Gregory Earls, Co-Chairman and Co-Chief
Executive Officer of U.S. Technologies. "The acquisition of E2Enet's internet
company portfolio will be U.S. Technologies first step towards further
developing several promising e-commerce companies and internet infrastructure
technologies. The E2Enet acquisition will provide a platform to invest in
e-commerce, particularly the burgeoning B2B commerce arena," said Mr. Earls.
E2Enet has various interests in several development stage internet e-commerce
companies. These interests include:
- -- Buyline.net, Inc., a developer of B2B e-commerce applications. Buyline is
developing a proprietary Internet software program designed to be a universal
platform for entry-level B2B e-commerce, linking buyers and sellers. Buyline's
application of RFP/RFQ technology (Request for Proposal/Request for Quotation)
will be used in a full range of on-line advertising, on Internet based
directories, and commercial web sites.
- -- VIPRO Corporation (www.vipro.com), an Internet surety company. Vipro
provides repair guarantees against viruses that harm computers. The Company has
e-commerce relationships with a leading internet utility company, a credit card
association, one of the
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largest warranty claims administrators in the world and over 170 internet
service providers (ISP's).
- -- Urban Box Office Network, Inc. (www.ubo.net), a developer of networked
multi-media web sites that will provide e-commerce services to participants
interested in urban culture, information, entertainment and products.
- -- OneMade, Inc.(www.onemade.com), a developer of an e-commerce community that
will serve participants in the arts, crafts, and hobby industries. OneMade will
connect wholesalers, retailers, consumers and artists in this $36 billion
category.
- -- bluemercury, Inc. (www.bluemercury.com), a fully enabled e-commerce site
for upscale female cosmetic products and accessories. The company intends to
pursue a "clicks and bricks" strategy by acquiring high-end cosmetic specialty
retailers.
- -- MEI Software Systems, Inc., a provider of customized software systems to
manage the databases of trade associations, professional associations,
fund-raising organizations and chambers of commerce.
U.S. Technologies also announced that it will expand its Board of Directors
in connection with closing the E2E acquisition. The new directors will also
stand for election at the Company's next annual meeting. These directors are:
- -- General Alexander M. Haig, Jr., former Secretary of State and White House
Chief of Staff. General Haig is a member of the Board of Directors of America
Online, Inc., MGM Grand, Inc., Metro-Goldwyn-Mayer, Inc., Intereneuron
Pharmaceuticals and Preferred Employers Holdings, Inc.
- -- Sen. George J. Mitchell, former Senator from Maine and Senate Majority
Leader. Sen. Mitchell is a member of the Board of Directors of Federal Express
Corporation, Walt Disney Company, Xerox Corporation, UNUM Corporation, KTI,
Inc, and Staples.
- -- Hon. William H. Webster, former Director of both the FBI and CIA. Judge
Webster is a senior partner at the law firm of Milbank, Tweed, Hadley & McCloy
and an Advisory Director at publicly-traded Anheuser Busch.
- -- Rick Rickertsen, partner at Thayer Capital, a leading investment management
firm headquartered in Washington, D.C. Mr. Rickertsen leads Thayer's
information technology practice and serves as Chairman of the Board of
publicly-traded Software AG Systems. Mr. Rickertsen is also a director of
publicly-traded EPLUS and Global Vacation Group.
- -- Hal Wilson and Peter Schiff, Managing Directors of Northwood Ventures LLC
and Northwood Capital Partners LLC ("Northwood"), a
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venture capital investment firm headquartered in New York. Northwood is the
largest investor in E2Enet, Inc.
"We are pleased that this outstanding slate of director nominees have agreed to
join our Board. The broad experience of these new directors in the internet,
investment management, corporate and public arenas will help U.S. Technologies
manage and develop its existing portfolio of companies and to capitalize on new
investment opportunities in the B2B and B2C sectors," said Mr. Earls.
U.S. Technologies also announced that it will commence raising at least $6.25
million of additional capital through private placements. The new funding will
include at least $5.0 million of a new Series C preferred stock that would
eventually be converted into common stock at $0.90 per common share. $1.25
million of additional shares of Series A preferred stock will also be acquired
by USV Partners, which is presently the Company's largest shareholder. USV
Partners is an affiliate of Mr. Earls. The new funds will be used primarily to
finance additional investments in new and existing internet businesses that
focus on B2B commerce, and payment of costs incurred and liabilities assumed in
connection with the E2E acquisition and related business transactions.
Completion of these private placement offerings is a condition to closing the
E2Enet acquisition.
U.S. Technologies currently has approximately 28.7 million shares of common
stock outstanding. It would have approximately 73 million common shares
outstanding on a fully diluted basis assuming conversion of existing preferred
stock but prior to the proposed E2E acquisition and the private placement
offerings. U.S. Technologies, Inc. stock trades on the Nasdaq OTC Bulletin
Board under the symbol "USXX."
Following a closing of the E2E acquisition, U.S. Technologies intends to call a
meeting of its stockholders for the purpose of amending the Company's charter.
The amendment will authorize additional shares of common stock, which is
necessary to permit conversion to common stock of all of its preferred stock
including those shares issued in connection with the E2E acquisition and
related financings. Once that amendment is effective, all of the Series B
preferred shares issued to acquire E2Enet and the Series C preferred shares in
the new financing would be converted automatically into common stock. The
Company intends to have the meeting by this summer once necessary disclosure
materials and required financial information can be prepared and released.
U.S. Technologies is currently an outsourcing company providing services to
other businesses. The Company performs its services utilizing prison labor
under the Prison Industry Enhancement (PIE) Program, which was designed to
place inmates in a realistic working environment, pay them the prevailing local
wage for similar work and enable them to acquire marketable skills to increase
their
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potential for successful rehabilitation and meaningful employment upon release.
The Company currently operates an electronic assembly and manufacturing
facility in Texas, a furniture manufacturing plant in California and a
motorcycle assembly plant in Florida.
This release contains "forward-looking statements" concerning prospective
future events. U.S. Technologies cautions that actual developments may differ
materially from prospective future events. There can be no assurance that the
conditions necessary to completing the E2Enet acquisition or simultaneous
financing efforts will be satisfied, or that any of these or other described
events will occur. The Company's assets and operations, including results of
operations, would be affected materially by either occurrence of such events or
their failure to occur.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
Exhibits
2.1 Stock Exchange Agreement, dated February 21, 2000, among
U.S. Technologies Inc., E2Enet, Inc. and Certain Stockholders
of E2Enet, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
U.S. TECHNOLOGIES INC.
By: /s/ Gregory Earls
---------------------------------------
Gregory Earls
Co-Chairman and Co-Chief Executive
Officer
Dated: February 25, 2000
Washington, DC
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
2.1 Stock Exchange Agreement, dated February 21, 2000, among
U.S. Technologies Inc., E2Enet, Inc. and Certain
Stockholders of E2Enet, Inc.
</TABLE>
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EXHIBIT 2.1
STOCK EXCHANGE AGREEMENT
among
U.S. TECHNOLOGIES INC.,
E2ENET, INC.,
and
CERTAIN STOCKHOLDERS OF E2ENET, INC.
Dated as of February 21, 2000
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TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I DEFINITIONS
1.1 Definitions................................................................... 2
1.2 Interpretation................................................................ 6
1.3 Accounting Terms.............................................................. 7
ARTICLE II EXCHANGE OF SHARES
2.1 Exchange of Shares............................................................ 7
2.2 The Closing................................................................... 7
ARTICLE III TERMS OF PREFERRED SHARES
3.1 The Preferred Shares.......................................................... 7
ARTICLE IV CONDITIONS PRECEDENT TO E2E
AND E2E STOCKHOLDERS' OBLIGATION TO CLOSE
4.1 Representations, Warranties, Covenants and Agreements......................... 8
4.2 Documentation at Closing...................................................... 8
4.3 Amended Organizational Documents.............................................. 9
4.4 Due Diligence................................................................. 9
4.5 Capital Infusion.............................................................. 9
4.6 Tax Matters................................................................... 9
4.7 Voting Agreement.............................................................. 9
4.8 Proxy......................................................................... 9
4.9 Amended and Restated Registration Rights Agreement............................ 9
ARTICLE V CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
5.1 Representations, Warranties, Covenants and Agreements........................ 10
5.2 Documentation at Closing..................................................... 10
5.3 Joinder...................................................................... 11
5.4 Due Diligence................................................................ 11
5.5 Capital Infusion............................................................. 11
5.6 Tax Matters.................................................................. 11
5.7 Voting Agreement............................................................. 11
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF E2E AND THE E2E
STOCKHOLDERS
6.1 Organization................................................................. 12
6.2 Authority.................................................................... 12
6.3 Capitalization of E2E and Status of Capital Stock............................ 12
6.4 Consents and Approvals....................................................... 13
6.5 No Conflict or Violation..................................................... 13
6.6 Taxes........................................................................ 14
6.7 Financial Statements......................................................... 14
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<TABLE>
<S> <C> <C> <C>
6.8 Litigation.................................................................... 15
6.9 Legal Compliance.............................................................. 15
6.10 Intellectual Property......................................................... 15
6.11 Labor Matters................................................................. 15
6.12 Contracts..................................................................... 16
6.13 Absence of Undisclosed Liabilities............................................ 16
6.14 Absence of Certain Changes or Events.......................................... 16
6.15 Certain Fees.................................................................. 17
6.16 Books and Records............................................................. 17
6.17 Investments in Other Persons.................................................. 18
6.18 Disclosure.................................................................... 18
6.19 Proxy Statement............................................................... 18
6.20 Investment Representation..................................................... 18
6.21 E2E Representatives........................................................... 19
ARTICLE VII REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY GROUP
7.1 Organization.................................................................. 19
7.2 Corporate Action.............................................................. 20
7.3 Capitalization of the Company and Status of Capital Stock..................... 20
7.4 Capital Stock of Subsidiaries................................................. 20
7.5 Subsidiaries.................................................................. 21
7.6 Governmental Approvals........................................................ 21
7.7 No Conflict or Violation...................................................... 21
7.8 Taxes......................................................................... 21
7.9 Financial Statements.......................................................... 22
7.10 Absence of Certain Changes or Events.......................................... 22
7.11 Litigation.................................................................... 23
7.12 Legal Compliance.............................................................. 23
7.13 Intellectual Property......................................................... 24
7.14 Absence of Undisclosed Liabilities............................................ 24
7.15 Certain Fees.................................................................. 24
7.16 Proxy Statement............................................................... 24
7.17 Vote Required................................................................. 24
ARTICLE VIII COVENANTS
8.1 Covenants of E2E and the E2E Stockholders..................................... 25
8.2 Covenants of the Company...................................................... 26
ARTICLE IX POST-CLOSING COVENANTS
9.1 Proxy Statement............................................................... 28
9.2 Assumption of Liabilities..................................................... 29
ARTICLE X TERMINATION
10.1 Termination by Either the Company or the E2E Representatives.................. 29
</TABLE>
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<TABLE>
<S> <C> <C> <C>
10.2 Effect of Termination and Abandonment........................................ 29
ARTICLE XI MISCELLANEOUS
11.1 Severability................................................................. 30
11.2 Survival of Representations and Warranties................................... 30
11.3 Entire Agreement; Amendments................................................. 30
11.4 Notices...................................................................... 30
11.5 Waivers...................................................................... 32
11.6 Headings..................................................................... 32
11.7 Successors and Assignees..................................................... 32
11.8 No Third Party Beneficiaries................................................. 32
11.9 Counterparts................................................................. 32
11.10 Governing Law................................................................ 32
11.11 Dispute Resolution........................................................... 32
11.12 Drafting..................................................................... 34
11.13 Waiver of Jury Trial......................................................... 34
11.14 Expenses..................................................................... 34
11.15 Further Assurances........................................................... 34
11.16 Disclosure to Other Persons.................................................. 34
</TABLE>
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SCHEDULES
<TABLE>
<S> <C>
Schedule 4.5 Company New Investments
Schedule 6.12(a) E2E Contracts
Schedule 7.3(b) Additional Company Options
Schedule 7.11 Litigation
</TABLE>
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STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement (the "Agreement") is made as of this
21st day of February, 2000, by and among U.S. Technologies Inc., a Delaware
corporation (the "Company"), E2ENET, Inc., a Delaware corporation ("E2E"), and
the E2E Stockholders as hereinafter defined (each, individually, a "Party" and,
collectively, the "Parties").
WITNESSETH:
WHEREAS, the E2E Stockholders desire to sell to the Company, and the
Company desires to purchase from the E2E Stockholders, all of the shares of
capital stock of E2E (the "E2E Shares") to be issued and outstanding as of the
Closing, upon the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants and agreements set forth herein, and other good and
valuable consideration, the receipt and sufficiency of which is hereby mutually
acknowledged, the Parties hereto agree as follows:
ARTICLE I DEFINITIONS
1.1 Definitions. As used herein, the following terms shall have
the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"AAA" shall have the meaning given to it in Section 11.11(a).
"Action or Proceeding" means any action, suit, arbitration, proceeding
or Government Entity investigation or audit.
"Affiliate" shall mean, with respect to any Person, any other Person
directly or indirectly controlling, controlled by or under direct or indirect
common control with such Person. For the purposes of this definition, a Person
shall be deemed to control another Person if it possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
"Agreement" means this Stock Exchange Agreement as from time to time
amended and in effect between the Parties, including all schedules hereto.
"Amended and Restated Registration Rights Agreement" means the
Registration Rights Agreement of USV Partners, LLC, which will be amended and
restated at Closing to provide the
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E2E Stockholders with essentially the same rights as provided to USV Partners,
LLC in said Registration Rights Agreement of USV Partners, LLC.
"Audited Financial Statements" has the meaning given to it in Section
7.9.
"Board" means the Board of Directors of the Company.
"Books and Records" means all titles, documents, instruments, papers,
books and records relating to the business and operations of any Party,
including financial statements, tax returns and related workpapers and letters
from accountants, budgets, pricing guidelines, ledgers, journals, deeds, title
policies, minute books, stock certificates, corporate books, stock transfer
ledgers, contracts, Licenses, customer lists, computer files and programs,
retrieval programs, operating data and plans and environmental studies and
plans.
"Business Day" means any day other than a Saturday, Sunday or public
holiday or the equivalent for banks under the laws of Washington, D.C.
"Capital Lease" means any lease of property (real, personal or mixed)
which, in accordance with GAAP, is required to be capitalized on the lessee's
balance sheet.
"Certificate of Designations" means the Certificate of Designations,
Preferences and Rights of the Series B Convertible Preferred Stock of U.S.
Technologies Inc. to be adopted by the Company, as described in Section 3.1.
"Charter Amendment" has the meaning given to it in Section 7.17.
"Closing" has the meaning given to it in Section 2.2.
"Common Stock" means (a) the Company's common stock, with a par value
of $0.02 per share, as authorized on the date of this Agreement, (b) any other
capital stock of any class or classes (however designated) of the Company
authorized on or after the date hereof, the holders of which shall have the
right, without limitation as to amount per share, either to all or to a share
of the balance of current dividends and liquidating distributions after the
payment of dividends and distributions on any shares entitled to preference in
the payment thereof, and the holders of which shall ordinarily, in the absence
of contingencies, be entitled to vote for the election of directors of the
Company, and (c) any other securities into which or for which any of the
securities described in (a) or (b) above may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
"Company" means U.S. Technologies Inc., a Delaware corporation, and
its successors and permitted assigns.
"Company Group" means the Company and each of its Subsidiaries,
including, without
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limitation, Labor-to-Industry Inc., a Texas corporation, and
Service-to-Industry Inc., a Delaware corporation.
"Company Group Business" means and includes, with respect to any date,
all businesses engaged in by any Member.
"Contracts" has the meaning given to it in Section 6.12(a).
"E2E Stockholders" means the persons other than the Company and E2E
that are Parties hereto (including those that are expected to be added as
parties to this Agreement by joinder as contemplated by Section 6.21) and who
presently, or prior to the Closing, will own, collectively, all of the issued
and outstanding shares of capital stock of E2E as of the Closing.
"E2E Representatives" means Jonathan J. Ledecky, Northwood Ventures
LLC, and Northwood Capital Partners LLC.
"GAAP" shall mean the generally accepted accounting principles of the
United States consistently applied.
"Government Entity" means any court or tribunal or administrative,
governmental or regulatory body, agency, commission, division, department,
public body or other authority.
"Indebtedness" means all obligations, contingent and otherwise which
should, in accordance with GAAP, be classified upon the obligor's balance sheet
as liabilities, but in any event including, without limitation, liabilities
secured by any mortgage on property owned or acquired subject to such mortgage,
whether or not the liability secured thereby shall have been assumed, and also
including, without limitation, (a) all guaranties, endorsements and other
contingent obligations in respect of Indebtedness of others, whether or not the
same are or should be so reflected in said balance sheet except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business, and (b) the present value of
any Capital Leases.
"Investment Documents" shall mean this Agreement, the Preferred
Shares, the Certificate of Designations, and the Amended and Restated
Registration Rights Agreement.
"Knowledge" means, with respect to any Person, the knowledge that such
Person (including the directors and Principal Officers of such Person) has or
should have after reasonable inquiry.
"Laws" means all laws, statutes, rules, regulations, ordinances and
other pronouncements having the effect of law in the United States, or any
state, province, county, municipality or other political subdivision thereof.
"Liabilities" means all Indebtedness, obligations, and other
liabilities of a Person, including
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any impairment of any asset (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates, approvals,
registrations, franchises and similar consents granted or issued by a
Government Entity or any other Person.
"Lien" means any mortgage, security interest, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge, preference, priority or other security agreement, option, warrant,
attachment, right of first refusal, preemptive, conversion, put, call or other
claim or right, restriction on transfer (other than restrictions imposed by
applicable securities Laws), or preferential arrangement of any kind or nature
whatsoever (including any restriction on the transfer of any assets), any
conditional sale or other title retention agreement, any financing lease
involving substantially the same economic effect as any of the foregoing and
the filing of any financing statement or similar document with any pertinent
public or private registry.
"Member" means any member of the Company Group.
"Order" means any writ, judgment, decree, injunction or similar order
of any Government Entity (in each case whether preliminary or final).
"Organizational Documents" means with respect to any Person, articles
of incorporation, certificates of incorporation, by-laws, partnership
agreement, articles of association, joint venture or other agreement,
instrument or document, individually or collectively, pursuant to which such
Person is established or organized, and that governs the internal affairs of
such Person, as such documents may be amended from time to time.
"Party" means any party to this Agreement.
"Person" means and includes any individual, partnership, joint
venture, corporation, trust, limited liability company, joint stock company,
unincorporated organization, Government Entity or any political subdivision or
agency thereof, or any other entity.
"Preferred Shares" has the meaning given to it in Section 2.1.
"Preferred Stock" means all series of preferred stock of the Company.
"Principal Officer" means any management level employee.
"Proxy Statement" means the proxy statement, together with any
amendments thereof or supplements thereto, with respect to the Company's annual
meeting of stockholders, which, among other things, will include a proposal
with respect to the Charter Amendment contemplated by this Agreement.
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"Registration Rights Agreement of USV Partners, LLC" means the
Registration Rights Agreement by and between the Company and USV Partners, LLC,
dated as of July 16, 1998.
"Securities Act" means the Securities Act of 1933, as amended, or any
similar successor federal statute, and the rules and regulations of the United
States Securities and Exchange Commission (or any other federal agency at that
time administering the Securities Act) thereunder, all as the same shall be in
effect at the time.
"Subsidiary" or "Subsidiaries" means (a) any entity with more than
fifty percent (50%) of whose capital stock of any class or classes having by
the terms thereof ordinary voting power to elect directors of such corporation
(irrespective of whether or not at the time stock of any class or classes of
such entity shall have or might have voting power by reason of the happening of
any contingency) is at the time owned directly or indirectly by any one or more
members and (b) any partnership, association, joint venture or other entity in
which any one or more of its members has more than a fifty percent (50%) equity
interest at the time.
"Tax Return" means any report, return, statement or other written
information required to be supplied to a taxing authority in connection with
Taxes.
"Taxes" means (a) any and all taxes, levies or other like assessments,
charges or fees (including estimated taxes, charges and fees), including,
without limitation, income, corporation, add-on minimum, ad valorem, advances,
gross receipts, transfer, excise, property, sales, use, value-added, License,
payroll, employment, severance, pay as you earn, withholding on amounts paid by
or to the relevant party, social security and franchise or other governmental
taxes or charges, imposed by the United States or by any other nation, state,
province, county, local or foreign government or by any subdivision or agency
of the foregoing; and such term shall include any interest (punitive or
otherwise), penalties or additions to tax related or attributable to such
taxes; and (b) Liability for the payment of any amounts of the type described
in (a) as a result of any obligation to indemnify any other Person.
"Unaudited Financial Statements" has the meaning given to it in
Section 7.9.
1.2 Interpretation. Unless otherwise expressly provided herein
(a) defined terms in the singular include the plural and vice versa, and the
masculine, feminine and neuter gender include all genders; (b) the words
"hereof," "herein" and "hereunder" and words of similar import refer to this
Agreement as a whole and not to any particular provision of this Agreement; (c)
the words "include," "includes," and "including" mean include, includes and
including "without limitation" and "without limitation by specification"; and
(d) references to any Person shall be construed as a reference to such Person
and any permitted successors or assigns of such Person; (e) references to
"consent" shall mean prior consent evidenced in writing; (f) terms such as
"satisfactory to ______" "acceptable to _________," "in such manner as ______
may determine," "to ______'s satisfaction," and phrases of similar import
authorize and permit such Party to approve, disapprove, act or decline to act,
unless otherwise specified herein, in its reasonable discretion
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without unreasonable delay or condition; and (g) references to Sections refer
to Sections of this Agreement.
1.3 Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with GAAP, and all financial
data submitted pursuant to this Agreement and all financial tests to be
calculated in accordance with this Agreement shall be prepared and calculated
in accordance with GAAP. All financial tests described herein relating to the
Company shall be calculated with respect to the Company Group on a consolidated
basis.
ARTICLE II EXCHANGE OF SHARES
2.1 Exchange of Shares. Subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement, each of
the E2E Stockholders agrees to sell all of its respective E2E Shares (which
number of shares after any reorganization or recapitalization of E2E
contemplated by this Agreement is listed below their names on the signature
pages hereto), free and clear of any and all Liens, to the Company. In exchange
for the E2E Shares, the Company agrees to issue and deliver to the E2E
Stockholders duly authorized, validly issued, fully paid, and non-assessable
shares of the Company's Series B Convertible Preferred Stock ("Preferred
Shares") with an aggregate stated value equal to $11,200,000, mandatorily
convertible into an aggregate of 56,000,000 shares of Common Stock as described
in Section 3.1.
2.2 The Closing. Subject to the terms and conditions of this
Agreement, such exchange described in Section 2.1 (the "Exchange") shall take
place at a closing ("Closing") to be held at the offices of Fleischman and
Walsh, L.L.P. at 10:00 a.m., local time, on a date mutually satisfactory to the
Company and E2E which is no later than the fifth Business Day after
satisfaction (or waiver) of the conditions to Closing set forth in Articles IV
and V hereof (other than those conditions which require the delivery of any
documents or the taking of other action, at the Closing) (the "Closing Date").
At the Closing, (i) the Company will issue to each E2E Stockholder a
certificate evidencing such E2E Stockholder's pro rata amount of Preferred
Shares, registered in the name of such E2E Stockholder; and (ii) the E2E
Stockholders will deliver to the Company certificates representing their
respective E2E Shares, duly endorsed (or accompanied by stock powers duly
executed) in favor of the Company.
ARTICLE III TERMS OF PREFERRED SHARES
3.1 The Preferred Shares. (a) As of the Closing Date, the Company
will have adopted the Certificate of Designations, authorizing the issuance to
the E2E Stockholders of the Preferred Shares, which shares of Preferred Stock
shall have terms essentially equivalent to those of the Company's outstanding
Series A Preferred Stock except for the following provisions: (i) pro rata
liquidation value per share based on an aggregate stated value of all shares of
Preferred Stock to be issued to the E2E Stockholders at Closing equal to
$11,200,000; (ii) pari passu in liquidation on a pro rata basis per liquidation
values with pre-existing Series A Preferred Stock and the additional shares of
Preferred Stock to be issued at Closing for cash as contemplated by Schedule
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4.5; (iii) mandatorily convertible into Common Stock immediately following the
approval of the Charter Amendment as described herein; (iv) voting rights as if
converted into Common Stock (voting together with all other shares of Common
Stock and Preferred Stock); and (v) no right to elect members of the Company's
Board of Directors.
ARTICLE IV CONDITIONS PRECEDENT TO E2E
AND E2E STOCKHOLDERS' OBLIGATION TO CLOSE
The obligations of E2E and the E2E Stockholders to exchange the E2E
Shares hereunder for the Preferred Shares at the Closing is subject to
satisfaction of each the following conditions, all or any of which may be
waived in writing by E2E and the E2E Stockholders:
4.1 Representations, Warranties, Covenants and Agreements. Each
of the representations and warranties of the Company set forth in Article VII
hereof shall be true and correct in all material respects as of the Closing
Date as though made on and as of that date and all covenants and agreements
required by this Agreement to be performed or complied with by the Company at
or prior to the Closing shall have been performed or complied with in all
material respects by the Company.
4.2 Documentation at Closing. E2E and the E2E Stockholders shall
have received prior to or at the Closing all of the following, each in form and
substance reasonably satisfactory to them and their respective counsel:
(a) The Certificate of Designations, as adopted by the
Board, attested to by the Secretary or Assistant Secretary of the Company and
filed with the Secretary of State of the State of Delaware.
(b) Stock certificates, duly executed by the Company,
representing the Preferred Shares.
(c) Certified copies of the resolutions of the Board of
Directors evidencing (to the extent legally required prior to the Closing)
approval of: (i) the Investment Documents, and (ii) all other matters
contemplated thereby.
(d) A certificate from a duly authorized officer of the
Company stating that each of the representations and warranties contained in
Article VII hereof are true and correct in all material respects as of the
Closing Date as though made on and as of that date and that all covenants and
agreements required by this Agreement to be performed or complied with by the
Company at or prior to the Closing have been performed or complied with in all
material respects by the Company other than those, if any, waived by E2E in
writing.
(e) All third-party and governmental and regulatory
consents and approvals necessary for the consummation by the Company of the
transactions contemplated hereby.
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(f) The opinion of Fleischman and Walsh, LLP, special
counsel for the Company, in form and scope reasonably acceptable to E2E's and
E2E Stockholders' respective counsel.
(g) Such other documents (other than the Charter
Amendment) referenced or relating to the transactions contemplated by the
Investment Documents as E2E or its special counsel may reasonably request.
4.3 Amended Organizational Documents. The Board of Directors of
the Company shall have duly authorized the issuance of the Preferred Shares
pursuant to the Certificate of Designations as described in Section 3.1.
4.4 Due Diligence. Completion by the E2E Representatives of due
diligence with respect to the Company to their reasonable satisfaction.
4.5 Capital Infusion. Successful infusion of at least $6,250,000
and up to $10,000,000 of additional capital into the Company consistent with
Schedule 4.5 hereto.
4.6 Tax Matters. Reasonable satisfaction that the Company's share
exchange for E2E Shares will not result in any material federal or state income
tax to E2E Stockholders.
4.7 Voting Agreement. Execution and delivery of a voting
agreement for a period of three (3) years among USV Partners, LLC, James V.
Warren and each of the E2E Representatives with respect to the composition of
the board of directors of the Company, pursuant to which the parties thereto
will agree to vote for the following directors: (i) four directors designated
by USV Partners, LLC, including Gregory C. Earls as Chairman and CEO; (ii) two
directors designated by Jonathan J. Ledecky; and (iii) two directors designated
by Northwood Ventures LLC and Northwood Capital Partners LLC; provided,
however, that such rights will be subject to forfeiture by any party that sells
at least half of the shares owned by it as of the Closing.
4.8 Proxy. Execution and delivery of a voting agreement and proxy
by USV Partners, LLC, and James V. Warren in favor of the E2E Stockholders with
respect to the Charter Amendment.
4.9 Amended and Restated Registration Rights Agreement. The
Amended and Restated Registration Rights Agreement, duly executed and delivered
by the Company.
4.10 Joinder. The E2E Representatives shall have obtained the
joinder of the other E2E Stockholders to this Agreement and the transactions
contemplated hereby as contemplated by Section 6.21 and delivered evidence
thereof to the Company.
4.11 Assumption of Put Agreement. Execution and delivery by the
Company as contemplated by Section 8.2(g), which agreement shall be reasonably
satisfactory to the E2E Representatives.
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ARTICLE V CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATION TO CLOSE
The obligation of the Company to issue to the E2E Stockholders the
Preferred Shares at the Closing is subject to satisfaction of each the
following conditions, all or any of which may be waived in writing by the
Company:
5.1 Representations, Warranties, Covenants and Agreements. Each
of the representations and warranties of E2E and the E2E Stockholders set forth
in Article VI hereof shall be true and correct in all material respects as of
the Closing Date as though made on and as of that date and all covenants and
agreements required by this Agreement to be performed or complied with by them
at or prior to the Closing shall have been performed or complied with by them
in all material respects.
5.2 Documentation at Closing. The Company shall have received
prior to or at the Closing all of the following, each in form and substance
satisfactory to the Company and its special counsel:
(a) Certificates representing all of the E2E Shares,
which shall be either duly endorsed or accompanied by stock powers duly
executed in favor of the Company.
(b) Certified copies of the resolutions of E2E, and to
the extent required, the E2E Stockholders, evidencing approval of the
Investment Documents and all other matters contemplated thereby; certified
copies of the organizational documents of E2E and certified copies of all
documents evidencing other necessary corporate or other action and governmental
approvals, if any, with respect to the Investment Documents and all other
matters contemplated thereby.
(c) A certificate of the Secretary or an Assistant
Secretary of E2E dated the date of Closing, which shall certify the names of
the officers of E2E authorized to sign the Investment Documents and any other
documents or certificates to be delivered pursuant thereto, together with the
true signatures of such officers.
(d) The opinion of Hogan & Hartson, L.L.P., special
counsel for E2E, in form and scope reasonably acceptable to the Company's
counsel.
(e) A certificate from a duly authorized officer of E2E
and each of the E2E Stockholders stating that each of the representations and
warranties contained in Article VI hereof are true and correct in all material
respects as of the Closing as though made on and as of that date and that all
covenants and agreements required by this Agreement to be performed or complied
with by them at or prior to the Closing have been performed or complied with by
them in all material respects other than those, if any, waived by the Company
in writing.
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(f) All third-party and governmental and regulatory
consents and approvals necessary for the consummation by E2E and the E2E
Stockholders of the transactions contemplated hereby.
(g) Written resignations, effective on the Closing Date,
of officers and directors of E2E that the Company shall have requested prior to
the Closing.
(h) All corporate records (including minute books and
stock books and registers) and financial and tax records of E2E.
(i) Such other documents referenced or relating to the
transactions contemplated by the Investment Documents as the Company or its
special counsel may reasonably request.
5.3 Joinder. The E2E Representatives shall have obtained the
joinder of the other E2E Stockholders to this Agreement and the transactions
contemplated hereby as contemplated by Section 6.21 and delivered evidence
thereof to the Company.
5.4 Due Diligence. Completion of due diligence with respect to
E2E and its investments to the Company's reasonable satisfaction consistent
with the terms of this Agreement.
5.5 Capital Infusion. Successful infusion of at least $6,250,000
of additional capital into the Company consistent with Schedule 4.5 hereto.
5.6 Tax Matters. Reasonable satisfaction that the Company's share
exchange with the E2E Stockholders and the related reorganizations and
restructurings of E2E and its investments will not result in any adverse
federal or state income tax consequences to the Company or E2E.
5.7 Voting Agreement. Execution and delivery of a voting
agreement for a period of three (3) years among USV Partners, LLC, James V.
Warren and each of the E2E Representatives with respect to the composition of
the board of directors of the Company, pursuant to which the parties thereto
will agree to vote for the following directors: (i) four directors designated
by USV Partners, LLC, including Gregory C. Earls as Chairman and CEO; (ii) two
directors designated by Jonathan J. Ledecky; and (iii) two directors designated
by Northwood Ventures LLC and Northwood Capital Partners LLC; provided,
however, that such rights will be subject to forfeiture by any party that sells
at least half of the shares owned by it as of the Closing.
ARTICLE VI REPRESENTATIONS AND WARRANTIES OF E2E AND THE E2E
STOCKHOLDERS
E2E and each of the E2E Stockholders, as to itself, hereby represent
and warrant as of the date of this Agreement and as of the Closing that:
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6.1 Organization. E2E and each E2E Stockholder that is not an
individual is duly organized, validly existing and in good standing under the
laws of its state of organization. E2E (a) has all requisite corporate power
and authority to own, lease and operate its property and to conduct its
business as it is now being conducted and presently proposed to be conducted,
(b) is in compliance in all material respects with all Laws applicable to it or
its business, including but not limited to any tax Laws, and (c) has obtained
and maintained all Licenses required to conduct its business as it is currently
being conducted and presently proposed to be conducted. E2E is duly qualified,
licensed or admitted to do business and is in good standing in all
jurisdictions in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary. True, complete and correct copies of the
Organizational Documents of E2E presently in effect have been delivered to the
Company. E2E is not in violation of its Organizational Documents.
6.2 Authority. It has the power and authority, and in the case of
any E2E Stockholder who is an individual the legal capacity, to enter into the
Investment Documents to which it is a party, and to carry out its respective
obligations thereunder. The execution, delivery and performance of the
Investment Documents to which it is a party and the consummation of the
transactions contemplated thereby have been duly authorized by all necessary
internal proceedings, and no other internal proceedings on its part are
necessary to authorize the Investment Documents to which it is a party or the
transactions contemplated thereby. Each Investment Document to which it is a
party has been duly and validly executed and delivered (or will be duly and
validly executed and delivered with respect to those deliveries to be executed
and delivered by it at Closing) by it and (assuming this Agreement constitutes
a valid and binding obligation of the Company) constitutes (or will constitute
with respect to those deliveries made at Closing) a valid and binding agreement
of it, enforceable against it in accordance with its respective terms, except
as enforcement thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and by general principles of equity.
6.3 Capitalization of E2E and Status of Capital Stock. (a) The
E2E Shares are, or upon the consummation of the recapitalization of E2E
pursuant to the exercise of all outstanding rights, options and warrants and
the conversion of all notes payable to the E2E Representatives contemplated by
this Agreement will be, duly authorized, validly issued, fully paid,
nonassessable and free and clear of all Liens. As of the date hereof, E2E has a
total authorized capitalization consisting of 100,000,000 shares of common
stock, par value $0.01 per share, of which 4,358,669 shares are issued and
outstanding.
(b) As of the Closing, there will be no options,
warrants or rights (including conversion rights) to purchase shares of capital
stock or other securities of E2E issued or outstanding, nor will E2E be
obligated in any other manner to issue shares of its capital stock or other
securities. All such options, warrants or rights (including conversion rights)
will be
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canceled, or fully exercised and E2E Shares issued therefor, prior to the
Closing. There are no restrictions on the transfer of shares of capital stock
of E2E other than those imposed by relevant state and federal securities laws.
Except as set forth in this Agreement, no holder of any security of E2E is
entitled to preemptive or similar statutory or contractual rights, either
arising pursuant to any agreement or instrument to which E2E is a party, or
which are otherwise binding upon E2E.
(c) Except as acquired pursuant to the Contracts
described on Schedule 6.12(a), E2E does not have any Subsidiaries nor does it
presently own, of record or beneficially, or control, directly or indirectly,
any capital stock, securities convertible into capital stock, or any other
equity or similar interest, in any Person, nor, directly or indirectly, is a
participant in any joint venture, partnership or other noncorporate entity.
6.4 Consents and Approvals. No filing with, and no License of,
any Government Entity is necessary for the execution, delivery and performance
of this Agreement or the other documents contemplated hereby by it and the
consummation by it of the transactions contemplated by the Investment
Documents.
6.5 No Conflict or Violation. The execution, delivery and
performance by E2E and the E2E Stockholders of this Agreement and the other
Investment Documents to which they are a party, the consummation of the
transactions contemplated hereby and thereby, the fulfillment of the terms
hereof and thereof, and the compliance with any of the provisions hereof and
thereof:
(a) will not conflict with or result in a breach or
violation of the Organizational Documents of E2E or any E2E Stockholder;
(b) will not conflict with, result in a violation or
breach of, or constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, vesting,
payment, exercise, acceleration, suspension, revocation or modification) under,
any of the terms, conditions or provisions of any note, credit agreement, bond,
mortgage, deed of trust, security instrument, indenture, lease, License,
Contract, plan or other instrument or obligation to which it is a party or by
which it or any of its respective properties or assets may be bound or
affected, or result in the creation or imposition of any material Lien on any
of the assets or properties of it pursuant to (i) any Law to which it or any of
its property is subject, or (ii) any Order to which it is bound or any of its
respective property is subject;
(c) do not require the consent, approval or
authorization of, or registration or filing with, any Person; and
(d) will not violate any Order or Law applicable to it
or any of its properties or assets.
6.6 Taxes.
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(a) E2E has (i) duly filed (or has had filed on its
behalf) with the appropriate Government Entities all Tax Returns required to be
filed by it, all of which Tax Returns are true, correct and complete in all
material respects and (ii) duly paid in full all Taxes owed by it whether or
not shown on any Tax Return;
(b) E2E has withheld and paid to the proper Government
Entity all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder or other third party;
(c) No Actions or Proceedings, or other administrative
or court claims are pending, or to E2E's Knowledge, threatened, with regard to
any Taxes or Tax Returns of E2E;
(d) The income Tax Returns of E2E required to be filed
as of the date hereof have been filed with the appropriate Government Entities,
and no deficiencies have been asserted as a result of any such filings that
have not been resolved and fully paid; E2E has not granted any requests,
agreements, consents or waivers to extend the statutory period of limitations
applicable to the assessment, collection or payment of any Taxes for which E2E
may be liable;
(e) There are no Liens outstanding against any assets,
properties or businesses of E2E which arise from or are otherwise related to
Taxes or Tax Returns, other than Liens securing Taxes which are not yet due and
payable or which are being contested in good faith;
(f) True, correct and complete copies of all Tax
Returns, examination reports and statements of deficiencies assessed against or
agreed to by E2E since December 31, 1999 have been made available to the
Company or its Affiliates for review; and
(g) E2E is not a party to any Tax sharing, Tax indemnity
or other agreement or arrangement relating to Taxes with any Person.
6.7 Financial Statements. E2E has made available to the Company
true, correct and complete copies of its audited financial statements for the
six-month period ending June 30, 1999, including therein consolidated balance
sheets of E2E as of June 30, 1999 and consolidated statements of income and of
shareholders' equity and of cash flows of E2E for the six-month period ending
June 30, 1999, together with all schedules and notes thereto (collectively, the
"E2E Financial Statements"). The E2E Financial Statements fairly present, or
will fairly present, in conformity with GAAP, applied on a consistent basis in
accordance with past practice (except as may be indicated in the notes
thereto), the consolidated financial position of E2E as of the respective dates
thereof and the results of its operations and its cash flows for the periods
then ended.
6.8 Litigation. There is no claim, Action or Proceeding (whether
at law or equity, before or by any Government Entity or before any arbitrator)
pending, or to the Knowledge of E2E, threatened, against or affecting E2E or
any of its assets or properties that would have a material
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adverse effect upon E2E. There are no Orders, stipulations or awards (whether
rendered by a Government Entity or by arbitration) against E2E or any of its
properties, assets or businesses.
6.9 Legal Compliance. E2E has conducted its operations in
compliance in all material respects with all applicable Laws. E2E has not
received any written complaint or notice from any Government Entity alleging
that it has violated any Order or Law and, to E2E's Knowledge, no such
complaint or notice is threatened.
6.10 Intellectual Property. E2E owns or possesses, and has taken
all actions necessary to record, preserve and protect, adequate and enforceable
long-term licenses or other rights to use all copyrights, patents, trade names,
trade secrets, trademarks, franchises, source codes and similar rights now
owned, used or employed by E2E in connection with its business, including,
without limitation, all trade names, trademarks and logos of E2E that
previously have been used in the conduct or operation of E2E.
6.11 Labor Matters.
(a) E2E is not engaged in any unfair labor practices as
defined in any applicable Law, and E2E is in compliance in all material
respects with all applicable Laws respecting employment and employment
practices, including, without limitation, terms and conditions of employment,
wages, employment discrimination, workers' compensation, family and medical
leave, the Immigration Reform and Control Act, hours of work and occupational
safety and health requirements.
(b) There is no unfair labor practice, charge or
complaint brought by any employee pending, or to the Knowledge of E2E,
threatened, against E2E and, to E2E's Knowledge, there is no basis for any such
charge, complaint or grievance.
(c) There is no labor strike, lock-out, slow-down,
employment-related arbitration or work stoppage pending, or to E2E's Knowledge,
threatened, against E2E, nor have there been any such actions or threats since
E2E's formation.
(d) E2E has not experienced any significant work
stoppage or been a party to any Action or Proceeding for the past three (3)
years.
(e) All Persons classified by E2E as independent
contractors do satisfy and have satisfied the requirements of Law to be so
classified, and E2E has fully and accurately reported their compensation on IRS
Forms 1099 or other comparable reports when required to do so.
(f) There is no charge or compliance proceeding actually
pending, or to E2E's Knowledge, threatened, against it before the Equal
Employment Opportunity Commission or any state, local or foreign agency
responsible for the prevention of unlawful employment practices.
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6.12 Contracts.
(a) Schedule 6.12(a) lists or describes: (i) all
unexpired written or oral contracts, leases, agreements, arrangements,
commitments, instruments or understandings (collectively, "Contracts") that
restrict E2E from engaging in any business activity; (ii) all investment
Contracts (whether equity or debt) with any Person, including its portfolio
companies; and (iii) all Contracts of every nature to which E2E is a party or
to which it or any of its assets or properties are bound if such Contract
obligates E2E to pay more than $50,000 in remaining payment obligations. Each
Contract listed on Schedule 6.12(a) represents a valid, binding and enforceable
agreement of E2E, and, to the Knowledge of E2E and each of the E2E
Stockholders, the other party or parties thereto, except as enforcement thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws relating to or affecting creditors' rights generally and by
general principles of equity.
(b) True, complete and correct copies of all written
Contracts listed in Schedule 6.12(a) have been made available to the Company
and true, complete and correct descriptions of all oral Contracts have been
provided therein. Each such Contract is enforceable in accordance with its
terms (except as may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws relating to or affecting creditors'
rights generally and by general principles of equity) and is in full force and
effect. E2E is not, nor to its Knowledge, is any other party to any of such
Contracts (with or without the lapse of time or the giving of notice, or both),
in material violation thereof or in material default thereunder.
6.13 Absence of Undisclosed Liabilities. Except for the
Liabilities to be assumed by the Company as of the Closing as described in
Section 9.2, E2E does not have any Liabilities of any kind whatsoever, either
accrued, absolute, contingent, determined or determinable or otherwise, or any
existing condition, situation or set of circumstances that could reasonably be
expected to result in such a Liability (including documentary or standby
letters of credit, bid or performance bonds or customer or third party
guarantees), except Liabilities reflected or reserved against in the E2E
Financial Statements and not heretofore paid or discharged. To E2E's Knowledge,
there are no asserted claims for indemnification by any Person against E2E
under any Law or agreement or pursuant to the Organizational Documents of E2E,
and E2E has no Knowledge of any facts or circumstances that could reasonably be
expected to give rise to the assertion of such a claim against E2E thereunder.
6.14 Absence of Certain Changes or Events. Since June 30, 1999,
E2E has conducted its business in the ordinary and regular course consistent
with past practices, and there has not been:
(a) any material adverse effect;
(b) any material damage, destruction or casualty loss to
any material asset or property of E2E that is not covered by insurance that
will promptly be paid to E2E;
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(c) any entry into of any employment agreement, deferred
compensation or other similar agreement or any arrangement with any of its
officers or employees; any increase in the rate or terms of the compensation
payable or to become payable to employees of E2E, except increases occurring in
accordance with customary practices or in accordance with employment
agreements, or any modification in employee benefits, or any borrowing of money
from E2E by any employee of E2E (other than routine travel and similar
advances);
(d) any sale, assignment, lease, transfer or other
disposition, or the execution of any agreement for the sale, assignment, lease,
transfer or other disposition, of any material assets of E2E;
(e) any change by E2E in accounting or bookkeeping
methods, principles or practices, except as required by GAAP;
(f) any borrowing of money, including any increase or
extension of purchase money credit of E2E or any increase in the Liabilities of
E2E from those reflected in the E2E Financial Statements;
(g) any transaction with any officer, director or
shareholder (including any of their respective family members) of E2E or any of
their respective Affiliates, other than payments of salary and employee
benefits in the ordinary course;
(h) any declaration or payment of any dividend or other
distribution on or with respect to, or any redemption or purchase or other
acquisition of, the capital stock of E2E; or
(i) any change in any material Tax election or any other
action with respect to Taxes that is inconsistent with past practices.
6.15 Certain Fees. None of E2E or any of the E2E Stockholders has
entered into, nor will it enter into, during the term of this Agreement, any
agreement, arrangement or understanding with any Person that will result in the
obligation of the Company to pay any finder's fee, brokerage commission or
similar payment in connection with the transactions contemplated hereby.
6.16 Books and Records. The minute books and other similar records
of E2E contain a true, complete and correct record, in all material respects,
of all material actions taken at all meetings and by all written consents in
lieu of meetings of the stockholders and the boards of directors of E2E. The
stock book and the share certificate ledgers and other similar records of E2E
as made available to the Company and its Affiliates (or any of their respective
representatives) accurately reflect all record transfers and any rights or
Contracts related to or involving any shares of capital stock of E2E. E2E does
not have any of its Books and Records recorded, stored, maintained, operated or
otherwise wholly or partly dependent upon or held by any means (including any
electronic, mechanical or photographic process, whether computerized
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or not) which (including all means of access thereto and therefrom) are not
under the exclusive ownership and direct control of E2E.
6.17 Investments in Other Persons. Except as disclosed in the
Contracts listed on Schedule 6.12(a), E2E has not made any investment in, or
loan or advance (other than trade credit advanced in the ordinary course of
business and consistent with past practices) to, any Person which is
outstanding on the date of this Agreement, nor is E2E obligated or committed to
make any such loan or advance. Each such investment constitutes a duly
authorized and valid investment by E2E pursuant to any written or oral
Contract.
6.18 Disclosure. No representation or warranty by it in this
Agreement or any Schedule hereto, or any certificate furnished or to be
furnished by it in connection with this Agreement, contains or will contain an
untrue statement of material fact, or omits or will omit to state a material
fact necessary to make the statements contained herein or therein, in light of
the circumstances in which they were made, not misleading.
6.19 Proxy Statement. None of the information supplied or to be
supplied by or on behalf of any of the E2E Stockholders in the Proxy Statement,
in definitive form, relating to the Company Vote to be sought with respect to
the Charter Amendment will, at the date the Proxy Statement is first mailed to
the Company's shareholders or at any time the Proxy Statement is amended or
supplemented, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they are
made, not misleading.
6.20 Investment Representation.
(a) Each of the E2E Stockholders acknowledges that the
Preferred Shares are not registered under the securities laws of any
jurisdiction and that it is acquiring the Preferred Shares for its own account,
and not as nominee or agent.
(b) The Preferred Shares are being and will be acquired
for the purpose of investment and not with a view to distribution or resale
thereof, subject, nevertheless, to the condition that, except as otherwise
provided herein and subject to compliance with applicable securities laws, the
disposition of the property of the E2E Stockholders shall at all times be
within its control.
(c) It hereby acknowledges that the Preferred Shares and
any other securities issued in respect of such securities upon any stock split,
stock dividend, recapitalization, merger or similar event (unless no longer
required in the opinion of counsel) shall bear a legend substantially in the
following form (in addition to any other legend required by the Investment
Documents):
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
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OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF WITHOUT AN OPINION OF
LEGAL COUNSEL (REASONABLY SATISFACTORY TO U.S. TECHNOLOGIES INC. AND ITS LEGAL
COUNSEL) THAT SUCH SALE, TRANSFER, PLEDGE OR OTHER DISPOSITION IS IN COMPLIANCE
WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
(d) Each of the E2E Stockholders represents and warrants to the
Company that (i) at the time it was offered the Preferred Shares, it was, (ii)
at the date hereof, it is, and (iii) at the Closing Date, it will be, an
"accredited investor" as defined in Regulation D under the Securities Act.
The acquisition at Closing by the E2E Stockholders of the Preferred
Shares shall constitute a confirmation by it of each of the foregoing
representations and warranties.
6.21 E2E Representatives. The E2E Representatives have the power
and authority to bind the E2E Representatives themselves and the other E2E
Stockholders to this Agreement. Notwithstanding the foregoing, prior to
Closing, the E2E Representatives will secure the joinder of the other E2E
Stockholders to this Agreement and the transactions contemplated hereby.
ARTICLE VII REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY GROUP
The Company represents and warrants as of the date hereof and as of
the Closing that:
7.1 Organization. The Company is a corporation, duly organized,
validly existing and in good standing under the Laws of the State of Delaware.
Labor-to-Industry Inc. is a corporation, duly organized, validly existing and
in good standing under the Laws of the State of Texas. Service-to-Industry Inc.
is a corporation duly organized, validly existing and in good standing under
the Laws of the State of Delaware. Each Member (a) has all requisite corporate
power and authority to own, lease and operate its property and to conduct its
business as it is now being conducted and presently proposed to be conducted;
(b) is in compliance in all material respects with all Laws applicable to it or
its business, including but not limited to any tax Laws, and (c) has obtained
and maintained all Licenses required to conduct its business as it is currently
being conducted and presently proposed to be conducted. Each Member is duly
qualified, licensed or admitted to do business and is in good standing in all
jurisdictions in which the ownership, use or leasing of its assets and
properties, or the conduct or nature of its business, makes such qualification,
licensing or admission necessary. No Member is in violation of its
Organizational Documents.
7.2 Corporate Action. The Company has all necessary corporate
power and authority to enter into the Investment Documents and to carry out its
obligations thereunder (subject to the approval of the Charter Amendment). The
Company has duly executed and delivered (or will have, with respect to
deliveries to be executed and delivered by it at Closing) each of the
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Investment Documents, and each is (or will be, with respect to deliveries to be
executed and delivered by it at Closing) a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms,
except as enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws relating to or affecting
creditors' rights generally and by general principles of equity. The issuance
of the Preferred Shares is not subject to preemptive or other similar statutory
or contractual rights.
7.3 Capitalization of the Company and Status of Capital Stock.
(a) The Preferred Shares, when issued and exchanged for E2E Shares at the
Closing, will be duly authorized, validly issued, fully paid, nonassessable and
free and clear of all Liens other than Liens created by the E2E Stockholders.
The Company has a total authorized capitalization consisting of 40,000,000
shares of Common Stock, of which 28,795,278 shares were issued and outstanding
on November 8, 1999, and 10,000,000 shares of Preferred Stock, of which 500,000
shares are issued and outstanding as of the date hereof.
(b) Except as disclosed in the Company's reports filed
with the SEC, an additional aggregate number of options that do not exceed
1,500,000 granted by the Company prior to the end of 1999 that the Company
previously disclosed to the E2E Representatives, and the options described on
Schedule 7.3(b), as of the Closing there will be no options, warrants or rights
to purchase shares of capital stock or other securities of the Company issued
or outstanding, nor will the Company be obligated in any other manner to issue
shares of its capital stock or other securities. There are no restrictions on
the transfer of shares of capital stock of the Company other than those imposed
by relevant state and federal securities laws. Except as set forth in this
Agreement, no holder of any security of the Company is entitled to preemptive
or similar statutory or contractual rights, either arising pursuant to any
agreement or instrument to which the Company is a party, or which are otherwise
binding upon the Company.
7.4 Capital Stock of Subsidiaries. The Company owns, directly or
indirectly, all of the outstanding capital stock of each of the Subsidiaries,
beneficially and of record, free and clear of all Liens. All of the outstanding
shares of capital stock of each of the Subsidiaries have been duly authorized
and validly issued, and are fully paid, nonassessable and free and clear of all
Liens. There are no options, warrants or rights to purchase shares of capital
stock or other securities of any of the Subsidiaries issued or outstanding, nor
is any Subsidiary obligated in any other manner to issue shares of its capital
stock or other securities.
7.5 Subsidiaries. No Member of the Company Group (other than the
Company) has any Subsidiaries or presently owns, of record or beneficially, or
controls, directly or indirectly, any capital stock, securities convertible
into capital stock, or any other equity or similar interest, in any Person, nor
is any Member, directly or indirectly, a participant in any joint venture,
partnership or other noncorporate entity.
7.6 Governmental Approvals. No authorization, consent, approval,
License, exemption of or filing or registration with any court or Government
Entity is or will be necessary for, or in connection with, the offer, issuance,
sale, execution or delivery by the Company of, or for the
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performance by the Company of its obligations under any of the Investment
Documents other than (i) under applicable securities laws with respect to the
Charter Amendment and (ii) under applicable securities laws with respect to the
transactions contemplated by the registration rights set forth in the Amended
and Restated Registration Rights Agreement.
7.7 No Conflict or Violation. Subject to the approval of the
Charter Amendment, the execution, delivery and performance of the Investment
Documents, the consummation of the transactions contemplated thereby, the
fulfillment of the terms hereof, and the compliance with any of the provisions
hereof will not:
(a) conflict with or result in a breach or violation of
the Organizational Documents of any Member;
(b) conflict with, result in a violation or breach of,
constitute (with or without due notice or the lapse of time or both) a default
(or give rise to any right of termination, cancellation, vesting, payment,
exercise, acceleration, suspension, revocation or modification) under, any of
the terms, conditions or provisions of any note, credit agreement, bond,
mortgage, deed of trust, security instrument, indenture, lease, License,
Contract, plan or other instrument or obligation to which any Member is a party
or by which any Member or any of their respective properties or assets may be
bound or affected, or result in the creation or imposition of any material Lien
on any of the assets or properties of any Member pursuant to (i) any Law to
which any Member or any of its respective property is subject, or (ii) any
Order to which any Member is bound or any of its respective property is
subject; or
(c) violate any Order or Law applicable to any Member or
any of its respective properties or assets.
7.8 Taxes.
(a) Each Member has (i) duly filed (or has had filed on
its behalf) with the appropriate Government Entities all Tax Returns required
to be filed by it, all of which Tax Returns are true, correct and complete in
all material respects and (ii) duly paid in full all Taxes owed by it whether
or not shown on any Tax Return;
(b) Each Member has withheld and paid to the proper
Government Entity all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent contractor,
creditor, stockholder or other third party;
(c) No Actions or Proceedings, or other administrative
or court claims are pending, or to the Knowledge of the Company, threatened,
with regard to any Taxes or Tax Returns of any Member;
(d) The income Tax Returns of each Member required to be
filed as of the date hereof have been filed with the appropriate Government
Entities, and no deficiencies have been
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asserted as a result of any such filings that have not been resolved and fully
paid; no Member has granted any requests, agreements, consents or waivers to
extend the statutory period of limitations applicable to the assessment,
collection or payment of any Taxes for which any Member may be liable;
(e) There are no Liens outstanding against any assets,
properties or business of any Member which arise from or are otherwise related
to Taxes or Tax Returns, other than Liens securing Taxes which are not yet due
and payable or which are being contested in good faith; and
(f) No Member is a party to any Tax sharing, Tax
indemnity or other agreement or arrangement relating to Taxes with any Person.
7.9 Financial Statements. The Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, as filed with the SEC (the
"Audited Financial Statements"), and Quarterly Report on Form 10-Q for the
period ending September 30, 1999, as filed with the SEC (the "Unaudited
Financial Statements"), fairly present in conformity with GAAP, applied on a
consistent basis in accordance with past practice (except as may be indicated
in the notes thereto), the consolidated financial position of the Company Group
as of the respective dates thereof and the results of its operations and its
cash flows for the periods then ended.
7.10 Absence of Certain Changes or Events. Since the date of the
Unaudited Financial Statements, except as disclosed in the Company's reports
filed with the SEC, each Member has conducted its business in the ordinary and
regular course consistent with past practices, and there has not been:
(a) any material adverse effect;
(b) any material damage, destruction or casualty loss to
any material asset or property of any Member that is not covered by insurance
that will promptly be paid to the Member;
(c) any entry into of any employment agreement, deferred
compensation or other similar agreement or any arrangement with any of their
officers or employees; any increase in the rate or terms of the compensation
payable or to become payable to employees of any Member, except increases
occurring in accordance with customary practices or in accordance with existing
collective bargaining or employment agreements, or any modification in employee
benefits, or any borrowing of money from any Member by any employee of any
Member (other than routine travel and similar advances);
(d) any sale, assignment, lease, transfer or other
disposition, or the execution of any agreement for the sale, assignment, lease,
transfer or other disposition, of any material assets of any Member, except in
the ordinary course of business and consistent with past practice;
(e) any change by any Member in accounting or
bookkeeping methods, principles or practices, except as required by GAAP;
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(f) any borrowing of money, including any increase or
extension of purchase money credit of any Member or any increase in the
Liabilities of any Member from those reflected in the Unaudited Financial
Statements other than current Liabilities incurred in the ordinary course of
business and consistent with past practice;
(g) any transaction with any officer, director or
shareholder (including any of their respective family members) of any Member or
any of their respective Affiliates, other than payments of salary and employee
benefits in the ordinary course;
(h) any declaration or payment of any dividend or other
distribution on or with respect to, or any redemption or purchase or other
acquisition of, the capital stock of any Member; or
(i) any change in any material Tax election or any other
action with respect to Taxes that is inconsistent with past practices.
7.11 Litigation. Except as set forth in the Company's public
filings with the SEC or as set forth on Schedule 7.11: (i) there is no claim,
Action or Proceeding (whether at law or equity, before or by any Government
Entity or before any arbitrator) pending, or to the Knowledge of the Company,
threatened, against or affecting any Member or any of its assets or properties
that would result in a material adverse effect upon the Company Group taken as
a whole and (ii) there are no Orders, stipulations or awards (whether rendered
by a Government Entity or by arbitration) against any Member or against any of
its respective properties, assets or business that would result in a material
adverse effect on the Company Group taken as a whole.
7.12 Legal Compliance. To the Knowledge of the Company, each
Member has conducted its operations in compliance in all material respects with
all applicable Laws. The Company has not received any written complaint or
notice from any Government Entity alleging that it has violated any Order or
Law and, to the Knowledge of the Company, no such complaint or notice is
threatened.
7.13 Intellectual Property. Each Member owns or possesses, and has
taken all actions necessary to record, preserve and protect, adequate and
enforceable long-term licenses or other rights to use all copyrights, patents,
trade names, trade secrets, trademarks, franchises, source codes and similar
rights now owned, used or employed by such Member in connection with its
business, including, without limitation, all trade names, trademarks and logos
of each Member that previously have been used in the conduct or operation of
the Company Group Business.
7.14 Absence of Undisclosed Liabilities. No Member has any
Liabilities of any kind whatsoever, either accrued, absolute, contingent,
determined or determinable or otherwise, or any existing condition, situation
or set of circumstances that could reasonably be expected to result in such a
Liability (including documentary or standby letters of credit, bid or
performance bonds or
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customer or third party guarantees), except Liabilities reflected or reserved
against in the Audited Financial Statements or the Unaudited Financial
Statements and not heretofore paid or discharged, and Liabilities arising in
the ordinary course of business or in connection with the transactions
contemplated by this Agreement, none of which, individually or in the
aggregate, are expected to have a material adverse effect. To the Knowledge of
the Company, there are no asserted claims for indemnification by any Person
against any Member under any Law or agreement or pursuant to the Organizational
Documents of any Member, and the Company has no Knowledge of any facts or
circumstances that could reasonably be expected to give rise to the assertion
of such a claim against any Member thereunder.
7.15 Certain Fees. No Member, nor any of their respective
officers, directors or employees, has entered into, or will enter into, during
the term of this Agreement, any agreement, arrangement or understanding with
any Person to pay any finder's fee, brokerage commission or similar payment in
connection with the transactions contemplated hereby.
7.16 Proxy Statement. None of the information supplied or to be
supplied by or on behalf of the Company in the Proxy Statement, in definitive
form, relating to the Company Vote to be sought as a result of the Exchange
will, at the date the Proxy Statement is first mailed to the Company's
shareholders or at any time the Proxy Statement is amended or supplemented,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement will comply as to form and in substance in all
material respects with the applicable provisions of the Exchange Act and the
rules and regulations thereunder.
7.17 Vote Required. The Company requires the approval of the
Company's shareholders (the "Company Vote") for the amendment of the Company's
Restated Certificate of Incorporation to increase the number of shares of
Common Stock authorized (the "Charter Amendment"), which will enable the
automatic conversion of the Preferred Shares into Common Stock (pursuant to the
terms of the Certificate of Designations as described herein). The Charter
Amendment requires the approval by the holders of a majority of the outstanding
shares of Common Stock and Series A Preferred Stock of the Company, voting
together as a class. Other than the Company Vote and, with respect to the
issuance of the Preferred Shares, the affirmative vote of the holders of a
majority of the then outstanding shares of Series A Preferred Stock, voting as
a class, no other vote of the holders of any class or series of capital stock
of the Company is required to approve the Charter Amendment.
ARTICLE VIII COVENANTS
8.1 Covenants of E2E and the E2E Stockholders. E2E and the E2E
Stockholders agree to observe and perform the following covenants and
agreements:
(a) Conduct of the Business Prior to the Closing Date.
Except (i) as required by law or regulation or (ii) as otherwise expressly
consented to in writing by the Company,
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which consent will not be unreasonably withheld or delayed, prior to the
Closing, E2E will: (1) not make or permit any material change in the general
nature of its business; (2) preserve E2E as an ongoing business and use
reasonable efforts to maintain the goodwill associated with E2E; (3) preserve
all of its licenses, authorizations and other governmental rights and permits;
(4) not enter into any material transaction or Contract; (5) not purchase,
sell, lease, dispose of or otherwise transfer or make any contract for the
purchase, sale, lease, disposition or transfer of, or subject to lien, any of
the assets of E2E; (6) not hire any employees or enter into any employment,
severance or similar contract with any Person; (7) except as disclosed or
specifically contemplated in this Agreement, not make any capital expenditure
or capital expenditure commitment; (8) not make any changes in financial
policies or practices, or strategic or operating policies or practices, except
as required by law, rule or regulation; (9) comply in all material respects
with all applicable Laws; (10) not make (i) any loan or advance to any officer,
director, stockholder or employee or (ii) make any other loan or advance to any
Person or any investment in any Person; and (11) not amend any of its
Organizational Documents.
(b) Access to Offices, Properties and Records; Updating
Information.
(1) From and after the date hereof and until
the Closing Date, E2E shall permit the Company and its representatives
to have, on reasonable notice and at reasonable times, reasonable
access to such of the offices, properties and employees of E2E, and
shall disclose, and make available to the Company and its
representatives all books, papers and records to the extent that they
relate to the ownership, operation, obligations and liabilities of or
pertaining to E2E and its businesses, assets and investments.
(2) E2E will notify the Company as promptly as
practicable of any significant change in the ordinary course of
business or operation of E2E or any of its investments and shall use
reasonable efforts to keep the Company fully informed of such events
and permit the Company's representatives access to all materials
prepared in connection therewith, consistent with any applicable
Contract.
(3) As promptly as practicable after the
Company's request, E2E will furnish such financial and operating data
and other information pertaining to the E2E investments and their
businesses and assets as the Company may reasonably request; provided,
however, that nothing herein will obligate E2E to take actions that
would violate the terms of any Contract to which it is a party.
(c) Third Party Consents. E2E will use its reasonable
best efforts to obtain all necessary consents, approvals and waivers from any
Person required under any license, lease, permit or Contract applicable to E2E.
(d) Dividends and Extraordinary Events. Except as
expressly contemplated
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by this Agreement, E2E shall not: (i) declare or pay any dividends on or make
other distributions in respect of any of its capital stock; or (ii) split,
combine or reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, or in substitution for, any
shares of its capital stock.
(e) Issuance of Securities. Except as expressly
contemplated by this Agreement, E2E shall not, nor shall it permit any of its
Subsidiaries to, issue, agree to issue, deliver, sell, award, pledge, dispose
of or otherwise encumber or authorize or propose the issuance, delivery, sale,
award, pledge, disposal or other encumbrance of, any shares of its or their
capital stock of any class or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any such shares or
convertible or exchangeable securities.
(f) No Inconsistent Action. Neither the E2E Stockholders
nor E2E shall take any action that is inconsistent with their respective
obligations under the Investment Documents in any material respect or that
could reasonably be expected to hinder or delay the consummation of the
transactions contemplated by the Investment Documents. Neither the E2E
Stockholders, E2E, nor any of their respective representatives or agents shall,
directly or indirectly, solicit, initiate, or participate in any way in
discussions or negotiations with, or provide any confidential information to,
any Person (other than the Company or any Affiliate of the Company and their
respective representatives and agents) concerning any possible sale of E2E
(including, without limitation, shares of capital stock of E2E), the sale of
any material assets of E2E, or any similar transaction.
8.2 Covenants of the Company. The Company agrees to observe and
perform the following covenants and agreements:
(a) Conduct of the Business Prior to the Closing Date.
Except (i) as required by law or regulation or (ii) as otherwise expressly
consented to in writing by E2E, which consent will not be unreasonably withheld
or delayed, prior to the Closing, the Company will: (1) not make or permit any
material change in the general nature of its business; (2) maintain its
ordinary course of business in accordance with prudent business judgment and
consistent with past practice and policy; (3) preserve the Company as an
ongoing business and use reasonable efforts to maintain the goodwill associated
with the Company; (4) preserve all of its licenses, authorizations and other
governmental rights and permits; (5) not enter into any material transaction or
Contract other than in the ordinary course of business; (6) not purchase, sell,
lease, dispose of or otherwise transfer or make any contract for the purchase,
sale, lease, disposition or transfer of, or subject to lien, any of the
material assets of the Company or any of its Subsidiaries other than in the
ordinary course of business; (7) not make any changes in financial policies or
practices, or strategic or operating policies or practices, except as required
by law, rule or regulation; (8) comply in all material respects with all
applicable Laws; (9) not make (i) any loan or advance to any officer, director,
stockholder or employee other than in the ordinary course of business or (ii)
make any other loan or advance to any Person other than
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in the ordinary course of business; and (10) not amend any of its
Organizational Documents (except for taking any actions in connection with the
Charter Amendment).
(b) Access to Offices, Properties and Records; Updating
Information.
(1) From and after the date hereof and until
the Closing Date, the Company shall permit E2E and its representatives
to have, on reasonable notice and at reasonable times, reasonable
access to such of the offices, properties and employees of the
Company, and shall disclose, and make available to E2E and its
representatives all books, papers and records to the extent that they
relate to the ownership, operation, obligations and liabilities of or
pertaining to the Company and its businesses, assets and investments.
(2) The Company will notify E2E as promptly as
practicable of any significant change in the ordinary course of
business or operation of the Company and shall use reasonable efforts
to keep E2E fully informed of such events and permit E2E's
representatives access to all materials prepared in connection
therewith, consistent with any applicable Contract.
(3) As promptly as practicable after E2E's
request, the Company will furnish such financial and operating data
and other information pertaining to the Company's businesses and
assets as E2E may reasonably request; provided, however, that nothing
herein will obligate the Company to take actions that would violate
the terms of any Contract to which it is a party.
(c) Third Party Consents. The Company will use its
reasonable best efforts to obtain all necessary consents, approvals and waivers
from any Person required under any license, lease, permit or Contract
applicable to the Company.
(d) Dividends. The Company shall not: (i) declare or pay
any dividends on or make other distributions in respect of any of its capital
stock; or (ii) split, combine or reclassify any of its capital stock or issue
or authorize or propose the issuance of any other securities in respect of, or
in substitution for any shares of its capital stock.
(e) Issuance of Securities. Except as a result of any of
the transactions contemplated or permitted by this Agreement, the Company shall
not, nor shall it permit any of its Subsidiaries to, issue, agree to issue,
deliver, sell, award, pledge, dispose of or otherwise encumber or authorize or
propose the issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of its or their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable securities.
(f) No Inconsistent Action. The Company shall not take
any action that is
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inconsistent with its obligations under the Investment Documents in any
material respect or that could reasonably be expected to hinder or delay the
consummation of the transactions contemplated by the Investment Documents.
(g) Assumption of Put Agreement. The Company shall
assume the obligation of Jonathan J. Ledecky pursuant to the Put Agreement by
and among Jonathan J. Ledecky, William K. Dodd and Katharine W. Kelley dated as
of May 14, 1999, as amended to date.
ARTICLE IX POST-CLOSING COVENANTS
9.1 Proxy Statement. The Company will, as promptly as practicable
after the Closing, prepare and file with the SEC the Proxy Statement with
respect to the Charter Amendment contemplated by this Agreement. The Company
will use all reasonable efforts to cause the Proxy Statement to be mailed to
stockholders of the Company at the earliest practicable date thereafter. The
Proxy Statement shall meet the requirements of the Exchange Act and the
relevant rules and regulations of the SEC. Each party hereto agrees to
cooperate reasonably with each other party in connection with the preparation
and filing of the Proxy Statement, including providing information to the other
party with respect to itself as may be reasonably required in connection
therewith. No representation, warranty, covenant or agreement is made by or on
behalf of the Company with respect to information supplied by any other party
for inclusion in the Proxy Statement. No representation, warranty, covenant or
agreement is made by or on behalf of the E2E Stockholders with respect to
information supplied by any other party for inclusion in the Proxy Statement.
No filing of, or amendment or supplement to, the Proxy Statement shall be made
by the Company without providing the E2E Representatives with the opportunity
to review and comment thereon. If at any time prior to the approval of the
Charter Amendment any information relating to any party hereto or any of their
respective officers, directors, shareholders or Subsidiaries, should be
discovered by any party hereto which should be set forth in an amendment or
supplement to the Proxy Statement so that the Proxy Statement would not include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, the party which discovers such
information shall promptly notify the other parties hereto and an appropriate
amendment or supplement describing such information shall be promptly prepared,
filed with the SEC and, to the extent required by law, disseminated to the
shareholders of the Company, as may be necessary.
9.2 Assumption of Liabilities. As of Closing, the Company will
assume all of the legitimate, verified liabilities of E2E outstanding as of the
Closing Date, including without limitation, E2E's legal, accounting and
printing expenses and other trade payables, in an amount not to exceed
$1,500,000 in the aggregate.
ARTICLE X TERMINATION
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10.1 Termination by Either the Company or the E2E Representatives.
(a) This Agreement may be terminated and the Exchange may be abandoned by (i)
the mutual, written agreement of the E2E Representatives and the Company, (ii)
by either the E2E Representatives or the Company if (x) the Exchange shall not
have been consummated by 5:00 p.m. Eastern Time on the date 45 days after the
date hereof, provided that the party seeking to terminate this Agreement
pursuant to this clause (ii) is not in breach of this Agreement (or in the case
of the E2E Representatives, neither they nor any of the other E2E Stockholders
are in breach of this Agreement), or (y) a Government Entity shall have issued
an Order or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by this Agreement and such
Order or other action shall have become final and nonappealable; provided, that
the party or parties seeking to terminate this Agreement pursuant to this
clause (ii)(y) shall have used all reasonable efforts to remove such Order.
(b) This Agreement may be terminated at any time prior
to the Closing by the Company, if there has been one or more breaches by E2E or
the E2E Stockholders of any representations, warranties, covenants, or
agreements contained in this Agreement which would entitle the Company not to
close pursuant to Article V; provided however, that the Company may not
terminate this Agreement pursuant to this Section 10.1(b) unless, within ten
(10) days of becoming aware of such breach, the Company has given written
notice of such breach to the E2E Representatives and has provided such E2E
Representatives with thirty (30) days to cure such breach.
(c) This Agreement may be terminated at any time prior
to the Closing by the E2E Representatives, if there has been one or more
breaches by the Company of any representations, warranties, covenants, or
agreements contained in this Agreement which would entitle the E2E or the E2E
Stockholders not to close pursuant to Article IV; provided however, that the
E2E Representatives may not terminate this Agreement pursuant to this Section
10.1(c) unless, within ten (10) days of becoming aware of such breach, the E2E
Representatives have given written notice of such breach to the Company and has
provided the Company with thirty (30) days to cure such breach.
10.2 Effect of Termination and Abandonment. In the event of
termination of the Agreement pursuant to this Article X, the terminating party
shall give written notice thereof as promptly as practicable to the other
Parties to this Agreement and this Agreement shall terminate and the
transactions contemplated herein shall be abandoned, without further action by
any of the Parties hereto. If this Agreement is terminated as provided herein:
(a) there shall be no liability or obligation on the part of any of the Parties
hereto or any of their respective officers and directors, and all obligations
of the Parties shall terminate, except for the obligations of the Parties
pursuant to Articles X and XI; provided, however, that a Party who is in
material breach of its representations, warranties, covenants or agreements set
forth in this Agreement shall be liable for damages occasioned by such breach,
including, without limitation, any expenses incurred by the other Parties in
connection with this Agreement and the transactions contemplated hereby and (b)
all filings, applications, and other submissions made pursuant to the
transactions contemplated by this Agreement shall, to the extent practicable,
be withdrawn from the agency or Person to which made.
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ARTICLE XI MISCELLANEOUS
11.1 Severability. If any term, provision, covenant or restriction
of this Agreement is held to be invalid, void or unenforceable, such provision
shall be amended by the Parties only to the extent necessary to be enforceable
consistent with the Parties' intent, and the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect, unless such action would substantially impair the benefits to
any Party of the remaining provisions of this Agreement.
11.2 Survival of Representations and Warranties. The
representations and warranties contained herein shall be terminated effective
as of, and shall not survive, the Closing.
11.3 Entire Agreement; Amendments. This Agreement (including the
Schedules hereto) and the other documents and instruments referred to herein
contain the entire understanding of the Parties with respect to the matters
covered hereby and supersede all other prior agreements and understandings,
both written and oral, among the Parties or any of them, with respect to the
subject matter hereof. This Agreement may be amended only by an instrument in
writing executed by the Parties.
11.4 Notices. Any notices or communications required or permitted
hereunder shall be in writing and addressed as follows:
If to E2E or any E2E Stockholder, to each of the E2E
Representatives at their respective addresses as set forth on the signature
page hereto.
With a copy to:
Hogan & Hartson L.L.P.
555 Thirteenth Street, N.W.
Washington, D.C. 20004-1109
Attn: J. Hovey Kemp
Facsimile: (202) 637-5910
Telephone: (202) 637-5600
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If to the Company:
U.S. Technologies Inc.
c/o U.S. Viewing Corporation
2001 Pennsylvania Avenue, NW
Suite 675
Washington, DC 20006
Attn: Gregory C. Earls
Telephone: 202-466-3100
Facsimile: 202-466-4557
with a copy to:
Fleischman and Walsh L.L.P.
1400 Sixteenth Street, N.W.
Washington, DC 20036
Attn: Stephen A. Bouchard
Telephone: 202-939-7945
Facsimile: 202-265-5706
Any Party may, on fifteen (15) days' notice given in accordance with
this Section 11.4 to the other Parties, designate another address or Person for
receipt of notices hereunder. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (a) in
the case of a facsimile transmission, when received by recipient in legible
form and sender has received an electronic confirmation of receipt of the
transmission; (b) in the case of delivery by a standard overnight courier, upon
the date of delivery indicated in the records of such courier; (c) in the case
of delivery by hand, when delivered by hand; or (d) in the case of delivery by
first class (registered or certified) mail, upon the expiration of seven (7)
Business Days after the day when mailed (postage prepaid, return receipt
requested), addressed to the respective Parties at the above address (or such
other address for a party as shall be specified by like notice).
11.5 Waivers. No waiver by either Party of any default with
respect to any provision, condition or requirement hereof shall be deemed to be
a continuing waiver in the future thereof or a waiver of any other provision,
condition or requirement hereof; nor shall any delay or omission of either
Party to exercise any right hereunder in any manner impair the exercise of any
such right accruing to it thereafter.
11.6 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
11.7 Successors and Assignees. This Agreement shall be binding
upon and inure to the benefit of the Parties and their successors and permitted
assigns. Neither this Agreement nor any of the rights or obligations hereunder
may be assigned by any Party without the prior written consent of the other
Parties hereto.
11.8 No Third Party Beneficiaries. This Agreement is intended for
the benefit of the
30
<PAGE> 36
Parties hereto, and their respective permitted successors and assigns, and is
not for the benefit of, nor may any provision hereof be enforced by, any other
Person.
11.9 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when counterparts have been signed by each Party and
delivered to the other Parties, it being understood that all Parties need not
sign the same counterpart.
11.10 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of Delaware,
United States of America, without regard to the conflicts of laws principles
thereof.
11.11 Dispute Resolution.
(a) All disputes, controversies, and claims directly or
indirectly arising out of or in relation to this Agreement or the validity,
interpretation, construction, performance, breach or enforceability of this
Agreement shall be finally, exclusively and conclusively settled by binding
arbitration, as provided in this Section, under the International Rules of
Conciliation and Arbitration of the American Arbitration Association (the
"AAA") which are in effect as of the Closing.
(b) The arbitral tribunal shall be composed of three (3)
arbitrators, one arbitrator being selected by the Company, one arbitrator being
selected jointly by the E2E Representatives, and the third arbitrator being
selected by the other two arbitrators. The arbitration proceedings shall be
conducted in the English language, and all documents not in English submitted
by any party must be accompanied by an English translation. The arbitration
proceedings shall be conducted and any arbitral award shall be made in
Washington, DC. No discovery shall be conducted except by written agreement of
all Parties.
(c) The Parties agree: (i) that the arbitrator shall
have no authority to award punitive damages or any damages other than those
recoverable in accordance with this Agreement (which may include reasonable
attorneys' fees and other costs of arbitration); (ii) to be bound by any
arbitral award or Order resulting from any arbitration conducted thereunder and
that any such award or Order shall be a reasoned award, shall be in writing,
and shall specify the factual and legal basis for the award, shall be final and
binding; (iii) not to commence, procure, participate in, or otherwise be
involved as a party in any claim, Action or Proceeding that might result in any
Order concerning a dispute (except for initiating Actions or Proceedings to
obtain a judgment recognizing or enforcing an arbitral award or Order and
except for applications, claims, Actions or Proceedings by the Parties, seeking
interim interlocutory or other provisional relief in any court having
jurisdiction, but only on the ground that the award to which the applicant may
be entitled may be rendered ineffectual without such provisional relief); (iv)
any monetary award shall be made and payable in U.S. Dollars, in each case
through a bank selected by the recipient of the award, together with interest
therein at the lesser of the one year London Interbank Offered Rate (LIBOR), as
appearing in the Reuters screen, plus five (5) percent or the maximum interest
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<PAGE> 37
rate permissible under applicable Law, from the fifth (5) Business Day after
the award is granted to but excluding the date it is paid in full; and (v) that
judgment or any arbitral award or Order resulting from an arbitration conducted
under this Section may be entered in any court of competent jurisdiction having
jurisdiction thereof or having jurisdiction over either Party or any of their
assets.
(d) The Company, E2E and the E2E Stockholders hereby
irrevocably waive and exclude all rights of appeal, challenge, or recourse to
any court from any arbitral award or Order resulting from any arbitration
conducted under this Section (except for initiating Actions or Proceedings to
obtain a judgment recognizing or enforcing an arbitral award or Order and
except for Actions or Proceedings seeking interim, interlocutory or other
provisional relief in any court having jurisdiction, but only on the ground
that the award to which the applicant may be entitled may be rendered
ineffectual without such provisional relief). Each of the Parties to this
Agreement hereby consents to the non-exclusive jurisdiction of any court of
competent jurisdiction in Washington, DC for all Actions or Proceedings to
obtain a judgment recognizing or enforcing an arbitral award or Order and
waives any defense or opposition to such jurisdiction.
(e) The arbitrators, in their discretion, may
consolidate two or more arbitrations or claims between any of the Parties
arising pursuant to this Agreement or any other agreement among the parties or
to which the shareholders of the Company, E2E and the E2E Stockholders are a
party into one arbitration, or terminate any such consolidation and/or
establish other arbitration proceedings for different claims that may rise in
any one arbitration. Notwithstanding the foregoing, the arbitrators shall
consolidate arbitrations and/or claims, if they determine that it would be more
efficient to consolidate such arbitrations and/or claims than to continue them
separately and (i) there are matters of fact or law that are common to the
arbitrations and/or claims to be consolidated, (ii) there are related payment
and performance obligations considered in the arbitrations and/or claims to be
consolidated or (iii) there is a danger of inconsistent awards.
(f) Each Party shall bear its own expenses in connection
with the arbitration provided in this Section, provided that the fees of the
arbitrators shall be divided equally between the Parties.
11.12 Drafting. Each Party acknowledges that its legal counsel
participated in the preparation of this Agreement. The Parties therefore
stipulate that the rule of construction that ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement to favor any Party against the other.
11.13 Waiver of Jury Trial. EACH PARTY HERETO WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OF OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
11.14 Expenses. Except as otherwise expressly provided herein, each
of the parties hereto shall bear and pay all costs and expenses incurred by it
or on its behalf in connection with
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<PAGE> 38
the transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
11.15 Further Assurances. From and after the date of this
Agreement, each party shall execute and deliver such instruments, documents and
other writings as may be reasonably necessary or desirable to confirm and carry
out and to effectuate fully the intent and purposes of this Agreement.
11.16 Disclosure to Other Persons. No party hereto shall issue,
make or cause the publication of any press release or other announcement with
respect to this Agreement or the transactions contemplated hereby, or otherwise
make any disclosures relating thereto, without the consent of the other
parties, such consent not to be unreasonably withheld or delayed; provided,
however, that such consent shall not be required where such release or
announcement is required by applicable law or the rules or regulations of a
securities exchange, in which event the party so required to issue such release
or announcement shall endeavor, wherever possible, to furnish an advance copy
of the proposed release to the other parties.
[THE REMAINDER OF THIS PAGE INTENTIONALLY IS LEFT BLANK.]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
U.S. TECHNOLOGIES INC.
By: /s/ C. Gregory Earls
--------------------------------------
Name: C. Gregory Earls
Title: Co-Chairman and Co-CEO
E2ENET, INC.
By: /s/ Steven J. Quamme
--------------------------------------
Name: Steven J. Quamme
Title:
--------------------------------
<PAGE> 40
[signature page to Stock Exchange Agreement, dated as of February __, 2000]
NORTHWOOD CAPITAL PARTNERS LLC
By: /s/ Harry T. Wilson
--------------------------------------------
Name: Harry T. Wilson
------------------------------------------
Title: Managing Director
-----------------------------------------
Address: 485 Underhill Boulevard, Suite 205
-------------------------------------
Syosset, NY 11791
-------------------------------------
Phone: 516 364-5544
-------------------------------------
Fax: 516 364-0879
-------------------------------------
Shares:
----------------------------------------
NORTHWOOD VENTURES LLC
By: /s/ Harry T. Wilson
--------------------------------------------
Name: Harry T. Wilson
-------------------------------------
Title: Managing Director
-------------------------------------
Address: 485 Underhill Boulevard, Suite 205
-------------------------------------
Syosset, NY 11791
-------------------------------------
Phone: 516 364-5544
-------------------------------------
Fax: 516 364-0879
-------------------------------------
Shares:
----------------------------------------
JONATHAN J. LEDECKY
By: /s/ Jonathan J. Ledecky
--------------------------------------------
Name: Jonathan J. Ledecky
<PAGE> 41
SCHEDULE 4.5
COMPANY NEW INVESTMENTS
Company New Investments (cash for working capital, any PIE acquisitions, any
E2E expenses assumed that are to be paid at E2E/Company closing, and any new
investments in E2E portfolio companies)
<TABLE>
<S> <C>
-- Additional Series A shares to Earls affiliates for $1,250,000
recent and anticipated advances consistent with
his previous commitments/rights; use 12.2(cent)
valuation/conversion to common;
-- New Series to others (to close by $5,000,000
E2E closing); use $.90 for conversion to to $8,750,000
common (essentially USXX closing market
price before USXX/E2E announcement);
mandatorily convertible when adequate
common authorized
</TABLE>
<PAGE> 42
SCHEDULE 7.3(b)
ADDITIONAL COMPANY OPTIONS
<TABLE>
<CAPTION>
BOARD OF DIRECTORS
number of options*
------------------
<S> <C>
The Honorable
Alexander M. Haig, Jr. 250,000
The Honorable
William H. Webster 250,000
The Honorable
George J. Mitchell 250,000
Rick Rickertsen 250,000
Peter Schiff 250,000
Henry T. Wilson 250,000
Greg Earls 250,000
ADVISORS
H. Lee Rust 150,000
Edward Hauk 100,000
PERSONNEL
Michael Deale 200,000
Lucille A. Payne 75,000
Dana R. Williams 75,000
Jacqueline D. Scott 75,000
Amy Blodgett Paladini 75,000
Sharon D. Anderson 25,000
</TABLE>
*Exercise Price = $.90 per share, to vest pro rata on the first, second and
third anniversaries of their grants.
<PAGE> 43
<TABLE>
<CAPTION>
OTHERS **
<S> <C>
Liaven Mallin 125,000
William Phelan 125,000
Marla Malcolm-Nagler 100,000
Barry Beck 66,667
Adam Kidron 100,000
Frank Cooper, III 100,000
</TABLE>
** Exercise Price = $.90 per share
