UNITED STATES 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
Report for Event: May 24, 1996
INDENET, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-18034 68-0158367
(State or other (Commission (IRS Employer
jurisdiction of File No.) Identification No.)
incorporation)
1640 N. Gower Street, Los Angeles, CA 90028
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(213) 466-6388
Not applicable
(Former name and address)
Item 1. Changes in Control of Registrant
Not applicable.
Item 2. Acquisition or Disposition of Assets
On May 24, 1996, IndeNet, Inc. (the "Company") completed the
acquisition of Enterprise Systems Group Limited, a private
company incorporated in England and Wales ("Enterprise") for a
purchase price equal to the U.S. dollar equivalent of eight times
EBITDA (earnings before interest, taxes, depreciation and
amortization) of Enterprise for the twelve months ended March 31,
1996. The purchase price was paid (i) at the closing by the
Company paying $10,000,000 in cash and $5,000,000 in promissory
notes (the "Notes") and (ii) by the Company agreeing to pay
$12,379,210 in unregistered shares of the Company's common stock
to the Enterprise shareholders. The number of shares to be
issued is based on the average closing price of the stock (as
reported by The Nasdaq Stock Market) for a 60-day trading period
consisting of a defined 30 trading days prior to closing and 30
trading days following the closing (the "Share Price"). The
shares are expected to be issued in mid-July 1996. The Notes
earn interest at a rate of 8% per annum and are payable in equal
quarterly installments of principal and interest commencing
November 30, 1996 with the final payment due May 31, 2000.
Commencing November 24, 1996, the Notes are convertible into the
Company's common stock at the holders' option at a conversion
price of 150% of the Share Price as defined above. The holders
of the common stock issued in this transaction have certain
demand and piggy-back registration rights. The cash portion of
the purchase price was paid from proceeds of a private placement.
In connection with the acquisition of Enterprise, the Company
agreed to elect two designees of the former Enterprise
shareholders to the Company's Board of Directors.
Enterprise is a London, U.K. based company with offices in the
U.S., Africa and Australia which designs, develops and integrates
traffic and billing, revenue management, and program management
software products for use by broadcast television stations. The
principal assets acquired by the Company consisted of
Enterprise's software, cash and accounts receivable. Enterprise
currently provides its software products to over 140 domestic
television and radio stations, and to a total of over 70
television stations located in the United Kingdom, Western
Europe, New Zealand, Australia, Southeast Asia and South Africa.
Enterprise's customers include such major television networks as
NBC Television Stations and Fox Television Stations in the United
States, Laser Sales and VTM in Europe, Network 10 in Australia
and TVNZ in New Zealand. Although the Company intends to
continue Enterprise's operations, the Company may integrate
Enterprise with the Company's other complimentary businesses in
the future.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not applicable.
Item 5. Other Events
Not applicable.
Item 6. Resignations of Registrant's Directors
Not applicable.
Item 7. Financial Statements and Exhibits.
The audited historical financial statements and pro forma
financial information of Enterprise will be filed not later than
60 days after the filing date.
Exhibit No. Description
99 Share Purchase Agreement dated May 24, 1996.
Item 8. Change in Fiscal Year
Not applicable.
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.
INDENET, INC.
Date: June 7, 1996 By: /s/ Richard J. Parent
Richard J. Parent
Its: Chief Financial
Officer and Secretary
SHARE PURCHASE AGREEMENT
THIS SHARE PURCHASE AGREEMENT (the "Agreement") is made and
entered into as of the 24th day of May, 1996, between Enterprise
System Group Limited, a private company limited by shares and
incorporated in England and Wales (the "Company"), IndeNet, Inc.,
a Delaware corporation ("Buyer"), and the shareholders of the
Company listed on the signature page hereof and on Exhibit A
hereto (each a "Shareholder" and collectively, the
"Shareholders").
W I T N E S S E T H:
WHEREAS, Buyer desires to purchase all of the issued share
capital of the Company, all of which shares (the "Shares") are
owned by the Shareholders as listed on Exhibit A hereto, and the
Shareholders desire to sell all of the Shares to Buyer, in each
case upon the terms and subject to the conditions set forth in
this Agreement; and
WHEREAS, Graeme R. Jenner, David W. Martin and Richard L.
Schleufer (collectively, the "Managing Shareholders") are Share-
holders and executive officers of the Company;
NOW, THEREFORE, in consideration of the mutual terms,
conditions and other agreements set forth herein, the
Shareholders, the Company and Buyer hereby agree as follows:
ARTICLE I
SALE AND PURCHASE
SECTION 1.1 Agreement to Sell and to Purchase. In
consideration for the purchase price established in accordance
with Section 1.2 below (the "Purchase Price") and payable in the
manner set forth in Section 1.3 below, the Shareholders hereby
sell, assign, transfer, convey and deliver all of the Shares to
Buyer, and Buyer hereby purchases and accepts all of the Shares
from the Shareholders.
SECTION 1.2 Purchase Price - Amount. The Purchase Price is
an amount equal to the U.S. dollar equivalent of eight (8) times
the Company's EBITDA for the fiscal year ended March 31, 1996
(the "1996 Fiscal Year"). "EBITDA" means earnings before
interest, taxes, depreciation and amortization, and was
calculated in a manner consistent with Financial Reporting
Standards in the United Kingdom. The EBITDA for the 1996 Fiscal
Year was derived from the consolidated financial statements of
the Company prepared for the 1996 Fiscal Year (the "Financial
Statements"), which Financial Statements were audited by KMPG
Peat Marwick (the "Company's Auditors"). In determining the
Purchase Price, the amount of EBITDA determined pursuant to this
Section 1.2 was converted from British pounds to U.S. dollars
using the currency conversion rate of 1.5624 U.S. dollars per
U.K. pound.
SECTION 1.3 Purchase Price-Payment. The Purchase Price is
being paid in two installments, as follows:
(a) Concurrently with the acquisition of the Shares,
the Buyer is delivering to (i) the Client Dollar Account of
Brobeck Hale and Dorr International (account number 64223199,
sort code 20-77-67, Barclays Bank plc, Broadgate Business Centre,
155 Bishopsgate, London EC2), attorneys for the Shareholders, the
sum of Ten Million U.S. Dollars (U.S. $10,000,000) by bank wire
transfer in immediately available funds, and (ii) certain of the
Shareholders, in the amounts set forth on Exhibit A, the Buyer's
duly executed secured promissory note (collectively, the "Buyer
Notes"), each in the form of Exhibit B attached hereto, in the
aggregate principal amount of Five Million U.S. Dollars (U.S.
$5,000,000). (The payments referred to in subsections (i) and
(ii) above are hereinafter referred to as the "Closing Payment,"
and the Shareholder receiving the Buyer Notes are hereinafter
referred to as the "Note Shareholder"). The amounts held in the
Client Dollar Account will be distributed by Brobeck Hale and
Dorr International to the Shareholders in the manner set forth on
Exhibit A.
(b) The balance of the Purchase Price (determined by
subtracting the Closing Payment from the Purchase Price, which
the balance of the Purchase Price is hereinafter referred to as
the "Stock Payment") shall be paid to the Note Shareholders, in
the manner set forth on Exhibit A, in unregistered shares of the
Buyer's $0.001 par value common stock (the "Common Stock") on the
35th trading day after the date of this Agreement. The aggregate
number of shares of Common Stock to be issued for the Stock
Payment shall be determined by dividing the amount of the Stock
Payment by the Market Price. For the purposes of this Section
1.3(b), the "Market Price" shall be the 60-day average of the
Quoted Price, which 60-day period shall consist of the 30 trading
days ending on March 21, 1996 (a list of the Quoted Price for
such 30 trading days is set forth on Exhibit C) and the 30
trading days immediately following the date of this Agreement.
The "Quoted Price" of the Common Stock for any trading day is the
last reported sales price of the Common Stock as reported by The
Nasdaq Stock Market, or if the Common Stock is listed on a
national securities exchange, the last reported sales price of
the Common Stock on such exchange, or if such shares are not so
reported or listed, then the Quoted Price shall be equal to the
average of the last reported bid prices over such period, as
reported by the National Quotation Bureau, Inc., or any similar
reputable quotation and reporting service, if such quotation is
not reported during such period by the National Quotation Bureau,
Inc. The Quoted Price shall be adjusted to reflect any stock
split, stock dividend, recapitalization or other similar event
affecting the Common Stock during the periods used to determine
the number of shares of Common Stock to be issued as the Stock
Payment. Although the Note Shareholders will not become owners
of the Common Stock constituting the Stock Payment until the
issuance of such shares, the Company agrees that the Note
Shareholders shall also be entitled to receive any cash dividends
in respect of the Common Stock during the period following the
date hereof until the issuance of the Stock Payment.
Notwithstanding anything in this Agreement to the contrary,
the number of shares of Common Stock issuable as part of the
Stock Payment and issuable upon the conversion of some or all of
the Buyer Notes shall not in the aggregate exceed 2,530,000. In
the event that the number of shares of Common Stock the Buyer
would be obligated to issue to the Shareholders as the Stock
Payment exceeds 2,530,000, then the Buyer shall issue only
2,530,000 shares of Common Stock to the Note Shareholders and
shall pay the Note Shareholders an amount of cash (in U.S.
dollars) equal to the product of (i) the Market Price times (ii)
the number of shares in excess of 2,530,000 that, but for the
limits contained in this paragraph, the Note Shareholders would
have been entitled to receive as the Stock Payment. In the event
that the number of shares of Common Stock issuable upon any
future conversion of any Buyer Notes, when added to all other
shares of Common Stock issued prior thereto as the Stock Payment
or upon prior conversions of any Buyer Notes, would, in the
aggregate, exceed 2,530,000, then the conversion privilege
contained in any such Buyer Note shall be restricted in the
manner provided in the Buyer Notes.
SECTION 1.4 Documents Delivered. Concurrently with the
execution of this Agreement, the parties hereto are delivering
fully executed copies of the following:
(a) Each Shareholder is delivering to the Buyer or its
designees one or more share certificates representing all of the
Shares owned by such Shareholder, which certificates are
accompanied by appropriate stock transfer forms, duly executed in
blank.
(b) Employment agreements in the form attached hereto
as Exhibit D for Mr. Graeme R. Jenner, Mr. David W. Martin and
Mr. Richard L. Schleufer.
(c) The Registration Rights Agreement, the form of
which is attached hereto as Exhibit G.
(d) An opinion of counsel delivered to the Buyer from
Bates, Wells & Braithwaite.
(e) An opinion of counsel delivered to the
Shareholders from Cohen, Brame & Smith.
(f) The Pledge Agreements in the form attached hereto
as Exhibit H, pursuant to which a total 1,192,779 shares of the
Company's ordinary shares will be pledged to the Note
Shareholders.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
CONCERNING THE SHAREHOLDERS
Except as set forth in that certain Disclosure Letter
previously delivered to the Buyer, a copy of which is attached
hereto as Schedule A (the "Disclosure Letter") and is hereby
expressly incorporated into this Agreement, each of the
Shareholders, or Note Shareholders as the case may be, hereby
severally represents and warrants to, and covenants and agrees
with, the Buyer that:
SECTION 2.1 Ownership of Shares. Such Shareholder is the
registered proprietor of the number of shares of the Company set
forth opposite such Shareholder's name on Exhibit A hereto. Such
Shareholder has good and marketable title to such Shares free and
clear of all liens, security interests, claims, encumbrances or
other restrictions ("Liens").
SECTION 2.2 Delivery of Good Title. All consents,
approvals, authorizations and orders necessary for the sale and
delivery of the Shares hereby sold by such Shareholder have been
obtained, and such Shareholder has full right, power, authority
and capacity to sell, assign, transfer and deliver such Shares
pursuant to this Agreement. Buyer is acquiring from such
Shareholder good and marketable title to such Shares, free and
clear of all Liens.
SECTION 2.3 Execution and Delivery. All consents,
approvals, authorizations and orders necessary for the execution,
delivery and performance by such Shareholder of this Agreement
(including, without limitation, the transfer and sale of the
Shares to be sold by such Shareholder to Buyer) have been duly
and lawfully obtained, and such Shareholder has full right,
power, authority and capacity to execute, deliver and perform
this Agreement. No consents or approvals are required for such
Shareholder to execute and deliver this Agreement or preform his,
her or its obligations hereunder. This Agreement has been duly
executed and delivered by such Shareholder, or by such
Shareholder's attorneys-in-fact and agents, and constitutes a
legal, valid and binding agreement of such Shareholder
enforceable against such Shareholder in accordance with its
terms, except as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of
creditors' rights generally, and by general equitable principles.
SECTION 2.4 No Conflicts. The execution, delivery and
performance of this Agreement by such Shareholder, or by such
Shareholder's attorneys-in-fact and agents, and the consummation
by such Shareholder of the transactions contemplated hereby will
not conflict with or result in a breach or violation of any term
or provision of, or (with or without notice or passage of time,
or both) constitute a default under, any indenture, mortgage,
deed of trust, trust (constructive or other), loan agreement or
other agreement or instrument to which such Shareholder is a
party or by which such Shareholder or such Shareholder's Shares
are bound, or violate any statute, law, ordinance, rule, permit,
writ, judgment or award applicable to or binding upon such
Shareholder.
SECTION 2.5 Qualification as a Stockholder of Buyer.
(a) Each Note Shareholder hereby represents and
warrants that he, she or it, individually or with such Note
Shareholder's advisors, has the requisite knowledge and
experience in financial and business matters to assess the
relative merits and risks of an investment in the shares of
Common Stock to be received as part of the Stock Payment
hereunder. Such Note Shareholder has had the full opportunity to
seek the advice of independent counsel respecting this investment
and the tax risks and implications of the transactions
consummated in connection with this Agreement.
(b) Each Note Shareholder has received information
concerning Buyer referred to in Section 4.5 below and has had the
opportunity to obtain such additional information as desired in
order to evaluate the merits and risks of holding the Common
Stock, and is able to bear the economic risks and lack of
liquidity inherent in holding unregistered shares of Common
Stock.
SECTION 2.6 Investment Intent. The shares of Common
Stock being acquired by the Note Shareholder hereunder are being
acquired for such Shareholder's own account and not with a view
to, or for resale in connection with, any distribution other than
resales made in compliance with the registration and prospectus
delivery requirements of the U.S. Securities Act of 1933, as
amended (the "Act"). The Note Shareholder understands that
the shares of Common Stock received in connection with the
transactions contemplated hereby have not been registered under
the Act by reason of available exemptions from the registration
and prospectus delivery requirements of the Act, and that such
Common Stock must be held indefinitely unless the Shares of
Common Stock are registered under the Act or until any transfer
is exempt from registration, and the reliance of Buyer upon these
exemptions is predicated in part by these representations and
warranties by the Note Shareholder. Notwithstanding the
foregoing, the Buyer agrees and acknowledges that the
Shareholders may sell the shares of Common Stock received
hereunder pursuant to an effective registration statement filed
under the Registration Rights Agreement executed and delivered by
Buyer on the date hereof in the manner permitted by the
Registration Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
CONCERNING THE COMPANY
Except as set forth in the Disclosure Letter, the Managing
Shareholders severally represent and warrant to the Buyer as
follows:
SECTION 3.1 Corporate Organization. The Company is a
private company limited by shares and is validly existing under
the laws of England and Wales, and has all requisite corporate
power and authority to own its properties and assets and to
conduct its business as now conducted. The Company is duly
qualified to do business as a foreign corporation and is in good
standing in every jurisdiction where the character of the
properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary. Copies of
the Memorandum and Articles of Association of the Company, with
all amendments thereto to the date hereof, have been furnished to
Buyer or its representatives, and such copies are accurate and
complete as of the date hereof.
SECTION 3.2 Capitalization of the Company. The authorized
share capital consists of 6,930,500 ordinary shares, of which
6,531,470 shares are issued, and 1,500,000 Preference Shares, of
which none have been issued. All Shares have been duly
authorized and validly issued, and all such Shares are fully
paid, not subject to any call, and have no personal liability
attached to the ownership thereof. The Shares are the sole
outstanding share capital of the Company, and except as
specifically provided in this Agreement there are no outstanding
options, warrants, agreements, conversion rights, preemptive
rights, or other rights to subscribe for, purchase or otherwise
acquire any of the Shares or any unissued share capital of the
Company.
SECTION 3.3 Subsidiaries and Equity Investments.
(a) The Disclosure Letter sets forth (i) the name of
each branch office operated, directly and indirectly, by the
Company and each corporation of which the Company owns, directly
or indirectly, shares of capital stock having in the aggregate
50% or more of the total combined voting power of the issued and
outstanding shares of capital stock entitled to vote generally in
the election of directors of such corporation (such branches and
corporations are hereinafter referred to collectively as
"Subsidiaries" and individually as a "Subsidiary"); (ii) the name
of each corporation, partnership, joint venture or other entity
(other than the Subsidiaries) in which the Company or any
of its Subsidiaries has, or pursuant to any agreement has the
right to acquire at any time by any means, directly or
indirectly, an equity interest or investment; (iii) in the case
of each of such corporations described in the foregoing
clauses (i) and (ii), (A) the jurisdiction of incorporation, (B)
the capitalization thereof and the percentage of each class of
capital voting stock owned by the Company, and (C) a description
of any outstanding options or other rights to acquire securities
of such corporation; and (iv) in the case of each of such
unincorporated entities, information substantially equivalent to
that provided pursuant to the preceding clause (iii) with regard
to corporate entities. (The Company and the Subsidiaries are
herein sometimes collectively referred to as the "Companies.")
(b) Each Subsidiary is a corporation or branch duly
organized or established, validly existing and in good standing
(in such jurisdictions where such concept is applicable) under
the laws of its jurisdiction of incorporation and has all
requisite corporate power and authority to own its properties and
assets and to conduct its business as now conducted. Each
Subsidiary is duly qualified to do business as a foreign
corporation in every jurisdiction where the character of the
properties owned or leased by it or the nature of the business
conducted by it makes such qualification necessary. All the
outstanding shares of capital stock of each corporate Subsidiary
have been duly authorized and validly issued, are fully paid and
non-assessable, are not subject to any call, and are owned of
record and beneficially, directly or indirectly, by the Company,
free and clear of any liens, claims, charges, security interests
or other legal or equitable encumbrances, limitations or
restrictions. There are no outstanding options, warrants,
agreements, conversion rights, preemptive rights or other rights
to subscribe for, purchase or otherwise acquire any issued or
unissued shares of capital stock of any corporate Subsidiary.
SECTION 3.4 Authorization and Validity of Agreements. The
Company has the corporate power to enter into this Agreement and
to carry out its obligations hereunder. The execution and
delivery of this Agreement and the performance of the Company's
obligations hereunder have been duly authorized by the Board of
Directors of the Company, and no other corporate proceedings on
the part of the Company are necessary to authorize such
execution, delivery and performance. This Agreement has been
duly executed by the Company and is the valid and legally binding
obligation of the Company, enforceable in accordance with its
terms, except as the enforcement thereof may be limited by
bankruptcy, reorganization, moratorium, insolvency and other laws
of general applicability relating to or affecting creditors'
rights or general principles of equity.
SECTION 3.5 No Conflict or Violation. The execution,
delivery and performance by the Company and the Shareholders of
this Agreement does not and will not violate or conflict with any
provision of the Memorandum or Articles of Association of the
Company or any Subsidiary and does not and will not violate any
provision of law, or any order, judgment or decree of any court
or other governmental or regulatory authority, nor violate nor
will result in a breach of or constitute (with due notice or
lapse of time or both) a default under any contract, lease, loan
agreement, mortgage, security agreement, trust indenture or other
agreement or instrument to which the Company or any Subsidiary is
a party or by which any of its properties or assets is subject,
nor will result in the creation or imposition of any lien, charge
or encumbrance of any kind whatsoever upon any of the properties
or assets of the Companies, nor will result in the cancellation,
modification, revocation or suspension of any of the licenses,
franchises, permits, authorizations or approvals referred to in
Section 3.14 hereof.
SECTION 3.6 Consents and Approvals. The Disclosure Letter
sets forth a true and complete list of each consent, waiver,
authorization, or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or
corporation, and each declaration to or filing or registration
with any such governmental or regulatory authority, that is
required in connection with the execution and delivery of this
Agreement by the Company or the Shareholders or the performance
by the Company or the Shareholders of their respective
obligations hereunder.
SECTION 3.7 Financial Statements. The Financial
Statements, including the notes thereto, (a) have been properly
prepared in accordance with the Financial Reporting Standards,
(b) present a true and fair view of the state of affairs of the
Companies and of the Companies' profit for the fiscal year
referred to therein, (c) are complete, correct and in accordance
with the books of account and records of the Companies, and (d)
can be reconcilable with the financial statements and the
financial records maintained and the accounting methods applied
by the Company for all of its income tax purposes.
SECTION 3.8 Absence of Certain Changes or Events.
(a) Since March 31, 1996 to and including the
date hereof, each of the Companies has operated in the ordinary
course of business consistent with past practice and there has
not been any material adverse change in the assets, properties,
business, operations, net income or financial condition of any of
the Companies. The Managing Shareholders know of no event,
condition, circumstance or development which threatens or may
threaten to have a material adverse effect on the assets,
properties, operations, net income or financial condition of any
of the Companies.
(b) Since March 31, 1996 through the date hereof, none
of the Companies has taken any of the following actions:
(i) Amended its charter documents or bylaws;
(ii) Declared, set aside or paid any dividend or
made any distribution on or with respect to its share capital;
(iii) Issued, granted, sold or pledged any shares
of, or rights of any kind to acquire any shares of any of the
Companies, or purchased, redeemed or otherwise acquired any such
shares except for options outstanding on March 31, 1996 that were
exercised or shares outstanding on March 31, 1996 that were
converted;
(iv) Acquired any assets or properties, except in
the ordinary course of business consistent with past practices;
(v) Sold, leased, transferred, disposed of,
encumbered or mortgaged any assets or properties, except in the
ordinary course of business consistent with past practices;
(vi) Entered into any merger, consolidation,
recapitalization or other business combination or reorganization;
(vii) Created, incurred or assumed any
indebtedness for borrowed money, except in the ordinary course of
business consistent with past practices, or prepaid any part of
the principal or interest of any existing indebtedness before the
due date thereof;
(viii) Assumed, guaranteed, endorsed or otherwise
became liable or responsible (whether directly, contingently or
otherwise) for the obligations of any other person or entity;
(ix) Made any loans, advances or capital
contributions to or investments in any person or entity;
(x) Caused or permitted any of their current
insurance policies to be cancelled or terminated or any of the
coverage thereunder to lapse;
(xi) Sold, transferred, licensed, or otherwise
disposed of any of the Intangible Assets other than in the
ordinary course of business consistent with past practices;
(xii) Waived, released, granted or transferred
any rights of value or modified or changed in any material
respect any existing license, lease, contract or other document,
other than in the ordinary course of business consistent with
past practices;
(xiii) Other than expenditures for software
development made in the ordinary course of business consistent
with past practices, made aggregate capital expenditures and
commitments therefore which when taken together with all other
capital expenditures and commitments of the Companies existing or
made during such period, would exceed U.S. $25,000;
(xiv) Increased the compensation payable or to
become payable to any of their employees, except for normal
periodic increases in the ordinary course of business that are
made in accordance with established compensation policies of the
Companies;
(xv) Except in the ordinary course of business
consistent with past practices, entered into any employment
agreement or other contract or arrangement with respect to the
performance of personal services which is not terminable without
liability by such Company on not more than 90 days' notice;
(xvi) Entered into any agreement or transaction
with any Affiliate upon terms and conditions less favorable to
any of the Companies than would be obtained on an arm's-length
basis; or
(xvii) Entered into any oral or written
agreement, contract, commitment, arrangement or understanding
with respect to any of the foregoing.
SECTION 3.9 Tax Matters. The Company and each of its
Subsidiaries has filed, or caused to be filed, within the manner
prescribed by law, all tax and corporate tax returns required to
have been filed (either separately or as part of a consolidated
group) with all taxing authorities of England, the United States
(including federal, state and local taxing authorities in the
United States) and every other jurisdiction in which such tax or
information returns are required to be filed. Such returns and
reports reflect accurately taxable income and all liability for
all taxes of the Company or any of its Subsidiaries for the
periods covered thereby. Except as reflected on the Financial
Statements, all income, profits, franchise, sales, use,
occupancy, exercise, payroll, accumulated earnings tax and other
taxes and assessments (the "Taxes") payable by, or due from the
fully paid or adequately disclosed and fully reserved for in the
Financial Statements, and no other tax of any nature whatsoever,
interest or penalty, will be payable by the Company or any of the
Subsidiaries with respect to any period ended on or before March
31, 1996. No examination of any return of the Company or any of
its Subsidiaries by any taxing authority is currently in progress
and, to the best knowledge of the Managing Shareholders, neither
the Company nor any of its Subsidiaries has received notice of
any proposed audit or examination. No consent extending any
statute of limitations has been filed by the Company or any of
its Subsidiaries with respect to any tax liability for any year.
Except for the provisions of group relief, none of the Company or
its Subsidiaries is a party to any agreement with respect to
sharing or allocation of taxes or tax costs.
SECTION 3.10 Absence of Undisclosed Liabilities. At the
close of business on March 31, 1996, neither the Company nor any
of its Subsidiaries had any indebtedness or liability, absolute
or contingent, which is not shown or provided for on the balance
sheet of the Company as of that date included in the Financial
Statements. Except as shown in such balance sheet or contained
in the notes to the Financial Statements, none of the Companies
is directly or indirectly liable upon or with respect to (by
discount, repurchase agreements or otherwise), or obligated in
any other way to provide funds in respect of, or to guarantee or
assume, any debt, obligation or dividend of any person, except
endorsements in the ordinary course of business in connection
with the deposit of items for collection.
SECTION 3.11 Interests in Real Property. None of the
Companies own any real property. The Disclosure Letter sets
forth a true and complete list, by deed reference or otherwise,
of all real properties leased or used by any of the Companies.
True, correct and complete copies of all leases (the "Leases")
entered into by any of the Companies, and all amendments,
modifications and supplemental agreements thereto, have
previously been delivered by the Company to the Buyer or its
representatives. The Leases are in full force and effect, are,
to the best knowledge of the Managing Shareholders, binding and
enforceable against the parties thereto in accordance with their
respective terms and, except as set forth in the Disclosure
Letter, have not been modified or amended since the date of
delivery to the Buyer. Except as set forth in the Disclosure
Letter, neither the Company nor any Subsidiary has received
notice that it is in breach of or default in the performance of
any covenant, agreement or condition contained in any Lease.
There are no rent reviews under the Leases in progress. Except
as set forth in the Disclosure Letter, no material construction,
alteration or other leasehold improvement work with respect to
any of the Leases remains to be paid for or to be performed by
the Company or any of the Subsidiaries.
SECTION 3.12 Personal Property. The Disclosure Letter sets
forth a true and complete list of each item of machinery,
equipment, furniture, fixtures and other tangible personal
property owned, leased or used by each of the Companies having an
original purchase cost or aggregate lease cost to such Company
exceeding U.S. $25,000 (the "Machinery and Equipment"). Except
as set forth in the Disclosure Letter, the Companies own outright
and have good title, free and clear of all title defects and
objections, security interests, liens, charges and encumbrances
of any nature whatsoever (other than the lien of current property
taxes and assessments not in default, if any) to the Machinery
and Equipment listed on the Disclosure Letter as owned by them
and to all the machinery, equipment, furniture, fixtures,
inventory, receivables and other tangible or intangible personal
property reflected on the balance sheet included in the Financial
Statements and all such property acquired since the date thereof,
except for sales and dispositions in the ordinary course of
business since such date. None of the title defects, objections,
security interests, liens, charges or encumbrances (if any)
listed on the Disclosure Letter adversely affects the value of
any of the items of personal property to which it relates or
interferes with its use in the conduct of business of any of the
Companies. Except as set forth in the Disclosure Letter, the
Companies hold good and transferable leaseholds in all of the
Machinery and Equipment shown on the Disclosure Letter as leased
by them, in each case under valid and enforceable leases. None
of the Companies is in default with respect to any item of
Machinery and Equipment purported to be leased by them, and no
event has occurred which constitutes or with due notice or lapse
of time or both may constitute a default under any lease thereof.
The Machinery and Equipment and other personal property now
owned, leased or used by the Companies are sufficient and
adequate to carry respective businesses as presently conducted
and all items thereof are in good operating condition and repair.
The Companies do not hold any personal property of any other
person, firm or corporation pursuant to any consignment or
similar arrangement.
SECTION 3.13 Copyrights, Trademarks, Trade Names and
Know-How. The Disclosure Letter sets forth a true and complete
list of (i) all patents, patent rights, copyrights, trademarks,
service marks, and trade names (either registered, applied for,
or common law) owned by, registered in the name of, licensed to,
or used in the business of each of the Companies (the "Intangible
Assets"), (ii) all jurisdictions in which the rights of the
Companies in and to the Intangible Assets have been registered,
authorized or otherwise officially recognized or protected. Such
list specifies, where applicable, the date on which any permit,
patent, license, or other authorization was granted or applied
for, the expiration date and the current status thereof. There
are no liens, security interests, charges or encumbrances on any
of the Intangible Assets, there is no restriction affecting the
Companies' use of any of the Intangible Assets, and no license
has been granted by any of the Companies with respect thereto
other than as set forth in the Disclosure Letter. To the best
knowledge of the Managing Shareholders, each of the Intangible
Assets is valid and in good standing, is not currently being
challenged, is not involved in any pending or threatened
administrative or judicial proceeding, and does not conflict with
any rights of any other person, firm or corporation. To the best
knowledge of the Managing Shareholders, none of the products or
operations of any of the Companies involves any infringement of
any proprietary right of any other person, firm or corporation.
SECTION 3.14 Licenses, Permits and Governmental Approvals.
The Disclosure Letter sets forth a true and complete list of all
material licenses, permits, franchises, authorizations and
approvals issued or granted to any of the Companies by any
national or local government, or any department, agency, board,
commission, bureau or instrumentality of any of the foregoing
(the "Licenses"), and all pending applications therefor. Such
list, where applicable, specifies the date issued, granted or
applied for, the expiration date and the current status thereof.
Each License has been duly obtained, is valid and in full force
and effect, and to the best knowledge of the Managing
Shareholders, is not subject to any pending or threatened
administrative or judicial proceeding to revoke, cancel or
declare such License invalid in any respect. To the best
knowledge of the Managing Shareholders, the Licenses are
sufficient in all respects to permit the continued lawful conduct
of each of the Companies' respective businesses in the manner now
conducted, and none of the Companies' operations are being
conducted in a manner which violates any of the terms or
conditions under which any License was granted.
SECTION 3.15 Compliance with Law; Licenses. To the best
knowledge of the Managing Shareholders, the operations of the
Companies have been and are being conducted in accordance with
all applicable laws, regulations, orders and other requirements
of all courts and other governmental or regulatory authorities
having jurisdiction over the Companies and their respective
assets, properties and operations, except where the failure to so
comply would not individually or in the aggregate have a material
adverse effect on the assets or the businesses of the Companies,
taken as a whole. To the best knowledge of the Managing
Shareholders, neither the Company nor any of the Subsidiaries has
received notice of any violation of any such law, regulation,
order or other legal requirement, or is in default with respect
to any order, writ, judgment, award, injunction or decree of any
federal, state or local court or governmental or regulatory
authority or arbitrator, domestic or foreign, applicable to the
Companies or any of their respective assets, properties or
operations. To the best knowledge of the Managing Shareholders,
the Companies have all material licenses, franchises, permits,
authorizations or approvals from all governmental or regulatory
authorities required for the conduct of their businesses and are
not in violation of any such material license, franchise,
authorization, permit, order or approval. To the best knowledge
of the Managing Shareholders, no such material licenses,
franchises, permits, authorizations and approvals will in any way
be affected by, or terminate or lapse by reason of, the
consummation of the transactions contemplated by this Agreement.
SECTION 3.16 Litigation. The Disclosure Letter sets forth
a list and a summary description of all pending actions, suits,
proceedings, disputes or investigations. Except as set forth in
the Disclosure Letter, there are no claims, actions, suits,
proceedings, labor disputes or investigations pending or, to the
best of the Managing Shareholders' knowledge, threatened before
any federal, state or local court or governmental or regulatory
authority of any country, or before any arbitrator of any nature,
brought by or against any of the Companies involving, affecting
or relating to any assets, properties or operations of any of the
Companies or the transactions contemplated by this Agreement.
None of the Companies nor any of their respective assets or
properties is subject to any order, writ, judgment, award,
injunction or decree of any federal, state or local court or
governmental or regulatory authority or arbitrator, which affects
or might affect their respective assets, properties, operations,
net income or financial condition or which would or might
interfere with the transactions contemplated by this Agreement.
SECTION 3.17 Contracts. The Disclosure Letter sets forth a
true and complete list of all material contracts, agreements and
other instruments to which any of the Companies is a party
relating to or affecting any of their respective assets,
properties or operations (except items listed elsewhere in the
Disclosure Letter and, with respect to clauses (ii), (iii) and
(iv) below, any of the foregoing calling for payments of less
than $25,000 or terminable by such Company upon not more than
three months' written notice), including, without limitation, all
written or oral, express or implied, (i) contracts, agreements
and commitments; (ii) purchase and supply contracts; (iii)
contracts, loan agreements, repurchase agreements, mortgages,
security agreements, trust indentures, promissory notes and other
documents or arrangements relating to the borrowing of money or
for lines of credit; (iv) leases and subleases of real or
personal property; (v) agreements and other arrangements for the
sale of any assets other than in the ordinary course of business
or for the grant of any options or preferential rights to
purchase any assets, property or rights; (vi) documents granting
any power of attorney with respect to the affairs of any of the
Companies; (vii) suretyship contracts, working capital
maintenance or other form of guaranty agreements; (viii)
contracts or commitments limiting or restraining any of the
Companies from engaging or competing in any lines of business or
with any person, firm, or corporation; (ix) partnership and joint
venture agreements; and (x) all amendments, modifications,
extensions or renewals of any of the foregoing (the foregoing
contracts, agreements and documents are hereinafter referred to
collectively as the "Commitments" and individually as a
"Commitment"). To the best knowledge of the Managing
Shareholders, each Commitment is valid, binding and enforceable
against the parties thereto in accordance with its terms, and in
full force and effect on the date hereof. Each of the Companies
has performed all obligations required to be performed by it to
date under, and is not in default in respect of, any Commitment,
and no event has occurred which, with due notice or lapse of time
or both, would constitute such a default. To the best of the
Managing Shareholders's knowledge, no other party to any
Commitment is in default in respect thereof, and no event has
occurred which, with due notice or lapse of time or both, would
constitute such a default. The Company has delivered to the
Buyer or its representatives true and complete copies of all the
Commitments. To the best knowledge of the Managing Shareholders,
none of the Commitments will, under the terms of such
Commitments, terminate or become terminable due to the sale and
transfer of the Shares to Buyer hereunder.
SECTION 3.18 Accounts Receivable. All notes and accounts
receivable payable to or for the benefit of any of the Companies
reflected on the balance sheet of the Company included in the
Financial Statements, or acquired by any of the Companies after
the date thereof and before the date hereof, have been collected
or are current and collectible (or will be in the ordinary course
of business) in amounts not less than the aggregate amount
thereof (net of reserves established in accordance with prior
practice) carried (or to be carried) on the books of the Company,
and are not subject to any counterclaims or set-offs.
SECTION 3.19 Inventories. The inventories of each of the
Companies reflected on the balance sheet of the Company included
in the Financial Statements, or acquired by any of the Companies
after the date thereof and before the date hereof, are carried at
not in excess of the lower of cost or net realizable value, and
do not include any inventory which is obsolete, surplus or not
usable or saleable in the lawful and ordinary course of business
of the Companies as heretofore conducted, in each case net of
reserves provided therefor on such balance sheets. As used
herein, "obsolete inventory" is inventory which, at the balance
sheet date, was not usable or saleable, because of legal
restrictions, failure to meet specifications, loss of market,
damage, physical deterioration or for any other cause; and
"surplus inventory" is inventory which, at the balance sheet
date, exceeded known or anticipated requirements in the
reasonable business judgment of the Company.
SECTION 3.20 Employee Plans.
(a) The Disclosure Letter sets forth a true and a
complete list of all bonus, pension, stock option, stock
purchase, benefit, welfare, profit sharing, retirement,
disability, vacation, severance, hospitalization, insurance,
incentive, deferred compensation and other similar fringe or
employee benefit plans, funds, programs or arrangements, all
employment contracts or executive compensation agreements,
written or oral, and all collective bargaining agreements in each
of the foregoing cases which cover, are maintained for the
benefit of, or relate to any or all employees of each of the
Companies (the "Employee Plans").
(b) Each of the Employee Plans is in compliance with
the requirements provided by any and all applicable statutes,
orders or governmental rules or regulations currently in effect.
(c) With respect to the Employee Plans, all applicable
contributions and payments required to be made by the Companies
to, or in connection with such Employee Plans, for all periods
ending before the date hereof have been made in full. Subject
only to normal retrospective adjustments in the ordinary course,
all insurance premiums required to be paid or accrued by the
Companies have been paid in full with regard to such Employee
Plan for policy years or other applicable policy periods ending
on or before the date hereof.
(d) The Disclosure Schedule sets forth a true and
complete list of all agreements now in effect between any of the
Companies and any labor organization. None of the Companies has
breached or otherwise failed to comply in any material respect
with any provisions of any such agreement and there are no
grievances outstanding against any of them under any such
agreement. No unfair labor practice complaints are pending or
threatened against any of the Companies before any labor
relations board or similar agency, and no current union
representation questions involving employees of any of the
Companies are outstanding. No activity or proceeding of any
labor organization (or representative thereof) to organize any
unorganized employees of any of the Companies, and no strike,
slowdown, work stoppage, lockout or other collective labor action
by or with respect to any employees of the Companies has occurred
within the past three years or is now in progress or, to the best
of the Managing Shareholders's knowledge, has been threatened.
SECTION 3.21 Customers. The Disclosure Schedule hereto
sets forth a true and complete list of all customers from whom
the Companies, taken as a whole, derived 1% or more of their
consolidated gross revenues during the Company's last full fiscal
year. To the best of the Managing Shareholders' knowledge, none
of such customers has, or intends to terminate or change
significantly its relationship with any of the Companies whether
because of the sale and transfer of the Shares to Buyer
hereunder, or otherwise.
SECTION 3.22 Insurance. The Disclosure Schedule sets forth
a true and complete list of all insurance policies in force at
March 31, 1996, with respect to the assets, properties or
operations of each of the Companies. True and complete copies of
all such insurance policies have been furnished to Buyer by the
Company.
SECTION 3.23 Transactions with Directors, Officers and
Affiliates. Since November 1, 1995, there have been no
transactions between any of the Companies and the Shareholders,
or any director, officer, stockholder or affiliate, as defined in
Rule 405 under the Act (an "Affiliate"), of the Shareholders, or
of any of the Companies. To the best of the Managing
Shareholders' knowledge, during the past three years none of the
officers, or directors of any of the Companies, or any spouse or
relative of any of such persons, has been a director or officer
of, or has had any direct or indirect interest in, any firm,
corporation, association or business enterprise which during such
period has been a supplier, customer or sales agent of any of
the Companies or has competed with or been engaged in any
business of the kind being conducted by the Company.
SECTION 3.24 Propriety of Past Payments. No funds or
assets of any of the Companies have been used for illegal
purposes; no unrecorded funds or assets of any of the Companies
have been established for any purpose; no accumulation or use of
the Companies' corporate funds or assets has been made without
being properly accounted for in the respective books and records
of such Company; all payments by or on behalf of each of the
Companies have been duly and properly recorded and accounted for
in their respective books and records; no false or artificial
entry has been made in the books and records of any of the
Companies for any reason; no payment has been made by or on
behalf of any of the Companies with the understanding that any
part of such payment is to be used for any purpose other than
that described in the documents supporting such payment; and none
of the Companies has made, directly or indirectly, any illegal
contributions to any political party or candidate, either
domestic or foreign.
SECTION 3.25 Environmental Matters. The Companies have
obtained all permits, licenses and other authorizations which are
required with respect to their respective assets, properties and
operations under all applicable laws, regulations and other
requirements of governmental or regulatory authorities relating
to pollution or protection of the environment (collectively, the
"Environmental Laws"). The Companies are in compliance with: (i)
all terms and conditions of such required permits, licenses and
authorizations, (ii) all terms and conditions of the
Environmental Laws and (iii) all other limitations, restrictions,
conditions, standards, prohibitions, requirements, obligations,
schedules and timetables contained in the Environmental Laws or
in any regulation, code, plan, order, decree, judgment, notice or
demand letter issued, entered, promulgated or approved
thereunder, except where the failure to so comply would not
affect the functioning of the Companies or require the
expenditure of any money to cure such noncompliance. The
Companies have not received notice of any past, present or
future events, conditions, circumstances, activities, practices,
incidents, actions or plans with respect to the assets,
properties or operations of the Companies which may interfere
with or prevent continued compliance, or which may give rise to
any common law or legal liability, or otherwise form the basis of
any claim, action, suit, proceeding, hearing or investigation
under any Environmental Law, based on or related to the
manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling, or the emission, discharge,
release or threatened release into the environment, of any
pollutant, contaminant, or hazardous or toxic material or waste.
There are no hazardous wastes or toxic substances located on any
real property leased or used by any of the Companies and no such
real property has been used for the storage of any oils,
petroleum by-products or other hazardous materials (other than,
in each case referred to in this sentence, those generally used
or generated in the normal operations of the Companies in
conformity with applicable law which has not had and will not
have an adverse effect on such real property or the operations
of any of the Companies). No pollutants, in excess of those
deemed acceptable under Environmental Laws, are discharged from
any such real property by any of the Companies, directly or
indirectly into any body of water.
SECTION 3.26 Labor Matters. Except as set forth in the
Disclosure Letter: (i) none of the Companies is a party to any
outstanding employment agreements or contracts with officers or
employees that are not terminable upon less than three (3) months
notice, or that provide for the payment of any bonus or
commission; (ii) none of the Companies is a party to any
agreement, policy or practice that requires it to pay termination
or severance pay to salaried, non-exempt or hourly employees
(other than is required by applicable notice periods or by law);
(iii) none of the Companies is a party to any collective
bargaining agreement or other labor union contract applicable to
persons employed by the Companies nor do the Companies know of
any activities or proceedings of any labor union to organize any
such employees.
SECTION 3.27 Accuracy of Information. None of the repre-
sentations, warranties or statements contained in this Agreement,
in the exhibits hereto, or in the Disclosure Schedule, contains
any untrue statement of a material fact or omits to state any
material fact necessary in order to make any of such
representations, warranties or statements in light of the
circumstances under which they were made not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants as follows:
SECTION 4.1 Corporate Organization. Buyer is a corporation
duly organized, validly existing and in good standing under the
laws of the State of Delaware, and has all requisite power and
authority (corporate and other) to own its properties and assets
and to conduct its business as now conducted. Complete and
correct copies of Buyer's Certificate of Incorporation and
By-Laws have been delivered to the Company for distribution to
the Shareholders.
SECTION 4.2 Authorization and Validity of Agreements.
Buyer has the corporate power to enter into this Agreement and
the other agreements contemplated hereby and to carry out its
obligations hereunder and thereunder. The execution and delivery
of this Agreement and the performance of Buyer's obligations
hereunder have been duly authorized by the Board of Directors of
Buyer, and no other corporate proceedings on the part of Buyer
are necessary to authorize such execution, delivery and
performance. This Agreement has been duly executed by Buyer and
is the valid and legally binding obligation of Buyer, enforceable
against Buyer in accordance with its terms except as the
enforcement thereof may be limited by bankruptcy, reorganization,
moratorium, insolvency and other laws of general applicability
relating to or affecting creditors' rights or general principles
of equity.
SECTION 4.3 No Conflict or Violation. The execution,
delivery and performance by Buyer of this Agreement do not and
will not violate or conflict with any provision of the charter
documents or by-laws of Buyer, and do not and will not violate
any provision of any agreement or instrument to which the Buyer
is a party or by which it is bound, or of any order, judgment or
decree of any court or other governmental or regulatory authority
to which Buyer is subject.
SECTION 4.4 Capitalization. The authorized capital of the
Buyer consists solely of (i) 100,000,000 shares of Common Stock,
of which approximately 12,668,303 shares are issued and
outstanding as of the date of this Agreement and (ii) 10,000,000
shares of $.0001 par value preferred stock, of which 1,200 shares
have been designated as Series A Preferred Stock, and 250,000
have been designated as Series B Preferred Stock. As of the date
hereof, all 1,200 shares of Series A Preferred Stock are issued
and outstanding, and 216,667 shares of Series B Preferred Stock
are issued or outstanding. All of the outstanding shares of
Common Stock have been duly authorized and validly issued and are
fully paid and non-assessable, and have not been issued in
violation of any preemptive rights of stockholders. Except as
set forth in Schedule 4.4, there are no outstanding options,
warrants, rights, calls, commitments, conversion rights, rights
of exchange, plans or other agreements of any character providing
for the purchase, issuance or sale of any shares of the capital
stock of the Buyer.
SECTION 4.5 SEC Filings; Disclosure. Since January 1,
1995, Buyer has timely filed and, as required by Section 13 of
the Securities Exchange Act of 1934, will continue to timely
file, all the required forms, reports and other documents with
the Securities and Exchange Commission (the "SEC"). As of the
date hereof, all reports, forms and other documents so filed:
(i) complied in all material respects with all of the statutes,
rules and regulations enforced or promulgated by the SEC, and
(ii) do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. No
representation or warranty by the Buyer in this Agreement or in
any Exhibit or Schedule hereto, contains any untrue statement of
a material fact or omits to state any material fact necessary to
make the statements contained therein, in the light of the
circumstances under which they were made, not misleading. Buyer
has delivered to the Company, for distribution to all
Shareholders, a copy of all reports filed by Buyer with the
SEC since January 1, 1995 and a copy of all press releases issued
by the Buyer since January 1, 1995.
SECTION 4.6 Financial Statements. Buyer has delivered to
the Company for distribution to the Shareholders copies of the
unaudited balance sheet of Buyer as of December 31, 1995 and
the related statements of income, changes in shareholders' equity
and cash flows for the year then ended (the "Buyer Financials").
The Buyer Financials were prepared in accordance with generally
accepted accounting principles applied on a consistent basis
during the periods involved (except as may otherwise be indicated
in the notes thereto) and fairly present the financial position
of Buyer as of the dates thereof and the results of operations
and changes in financial position of Buyer as of the dates
thereof and the results of operations and changes in financial
position for the periods then ended. Except as may be disclosed
in the SEC filings and other materials referred to in Section 4.5
above, since December 31, 1995, there has not been any material
adverse change in the assets or liabilities, or in the business
or financial condition, or the results of operations of Buyer.
SECTION 4.7 No Encumbrances. The shares of Common Stock to
be issued pursuant to the Stock Payment will, upon issuance to
the Shareholders, be fully-paid and non-assessable shares free
from all claims, equities, liens, charges and encumbrances
whatsoever, and will be issued with all rights attaching and
accruing to the Common Stock.
SECTION 4.8 No Further Issuances. Except as set forth in
Schedule 4.8 and as contemplated herein, the Buyer has not
granted and has not committed to grant any options, warrants,
convertible securities, preemptive rights, rights of first
refusal, or other rights presently outstanding to purchase or
otherwise acquire any shares of capital stock of Buyer, or any
options, warrants, agreements, or similar rights calling for the
issuance by Buyer of any of its securities, or obligations of
Buyer to purchase any issued and outstanding shares of its
capital stock. Except as described in Schedule 4.8 there are no
agreements between Buyer and any of its stockholders or, to the
best knowledge of Buyer, concerning the purchase, sale or other
disposition, voting or registration of any securities of the
Buyer.
SECTION 4.9 Consents and Approvals. No consent, waiver,
authorization, or approval of any governmental or regulatory
authority, domestic or foreign, or of any other person, firm or
corporation, is required in connection with the execution and
delivery of this Agreement by Buyer or in connection with the
performance by Buyer or its obligations hereunder.
SECTION 4.10 Absence of Certain Changes or Events. Other
than as disclosed in the SEC filings and other materials referred
to in Section 4.5 above, since January 1, 1996 Buyer has operated
in the ordinary course of business consistent with past practice
and there has not been any material adverse change in the assets,
properties, business, operations or financial condition of Buyer.
Buyer knows of no event, condition, circumstance or development
which threatens or may threaten to have a material adverse effect
on the assets, properties, operations, or financial condition of
Buyer.
SECTION 4.11 Litigation. Except as contained in the SEC
filings and other materials referred to Section 4.5 above, there
are no claims, actions, suits, proceedings, labor disputes or
investigations pending or, to the best knowledge of Buyer,
threatened before any federal, state or local court or
governmental or regulatory authority of any country, or before
any arbitrator of any nature, brought by or against Buyer
involving, affecting or relating to any assets, properties or
operations of Buyer or the transactions contemplated by this
Agreement. Buyer is not subject to any order, writ, judgment,
award, injunction or decree of any federal, state or local court
or governmental or regulatory authority or arbitrator, which
effects or might effect its assets, properties, operations or
financial condition or which would or might interfere with the
transactions contemplated by this Agreement.
SECTION 4.12 Compliance with Law. The operations of the
Buyer have been conducted in accordance with all applicable laws,
regulations, orders and other requirements of all courts and
other governmental or regulatory authorities having jurisdiction
over the Buyer and its assets, properties and operations, except
where the failure to so comply would not individually or in the
aggregate have a material adverse effect on the assets or the
business of the Buyer. The Buyer has not received notice of any
violation of any such law, regulation, order or other legal
requirement, and is not in default with respect to any order,
writ, judgment, award, injunction or decree of any federal, state
or local court or governmental or regulatory authority or
arbitrator, domestic or foreign, applicable to the Buyer or any
of its assets, properties or operations.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1 Survival of Provisions. The respective
representations, warranties, covenants and agreements of each of
the parties to this Agreement shall survive the consummation of
the transactions contemplated by this Agreement. Notwithstanding
anything to the contrary contained by way of warranty, indemnity,
covenant, representation or undertaking in this Agreement, the
parties acknowledge and agree that neither the Shareholders nor
the Managing Shareholders are indemnifying the Buyer from and
against any claims, damages, losses, liabilities, costs and
expenses (collectively, "Losses") arising out of or in connection
with any breach of any representation or warranty made by either
the Shareholders or the Managing Shareholders in this Agreement,
other than with respect to any Losses of the Buyer resulting from
fraud on the part of the Shareholders or the Managing
Shareholders, as the case may be. The parties acknowledge and
agree that the indemnification obligation of the Shareholders and
the Managing Shareholders are several and not joint obligations.
SECTION 5.2 Post-Closing Obligations. The Buyer hereby
agrees to the following matters to be performed by it after the
date hereof:
(a) The Buyer shall take all action required to (i)
increase the size of the Buyer's Board of Directors to nine
members, (ii) appoint two designees of the Shareholders (the
"Shareholder Designees") as directors of the Buyer's Board of
Directors; and (iii) at each of the next two annual meetings of
the Buyer's stockholders, nominate for the election to the
Buyer's Board of Directors the Shareholders' Designees. The
Shareholders hereby agree that the Shareholder Designees shall be
designated on behalf of the Shareholders by the Board of
Directors of the Company. All Shareholder Designees must be
qualified and acceptable to the Buyer's Board of Directors, which
acceptance will not be unreasonably withheld. The Buyer hereby
agrees that each of the Managing Shareholders is qualified and
acceptable as a Shareholder Designee.
(b) The Board of Directors will, at its first meeting
of the Board of Directors to be held after the date hereof,
review obtaining director and officer liability insurance and the
Buyer will obtain such insurance to cover the Board of Directors
if the Board of Directors determines that such insurance is
economical.
(c) During the six-month period ending November 24,
1996 (the "Financing Period"), the Buyer shall use its reasonable
best efforts to consummate an additional debt or equity financing
through an underwritten public or private offering (an "Under-
written Offering") for the purpose of raising proceeds to fund
the Buyer's working capital and future acquisition needs. The
Buyer agrees to use its reasonable best efforts to cause the
amount of gross proceeds proposed to be raised for the Buyer in
such Underwritten Offering to be increased by $5,000,000, which
additional proceeds will be allocated to the repayment of the
then outstanding principal balances of the Buyer Notes. The
Buyer shall not be required to increase the amount proposed to be
raised for the Buyer in an Underwritten Offering by $5,000,000 if
the underwriter or placement agent informs the Buyer in writing
that the (i) increase in the size of the offering, or (ii) the
disclosed use of any of the offering proceeds for the repayment
of the Buyer Notes would have an adverse effect on the success
of the Underwritten Offering. In the event that an Underwritten
Offering that has raised an additional $5,000,000 is consummated
during the Financing Period, the Buyer will use such additional
proceeds to repay in full the Buyer Notes within 10 business days
after the consummation of such Underwritten Offering.
SECTION 5.3 Successors and Assigns; No Third-Party
Beneficiaries. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective
successors and assigns; provided, however, that neither party
shall assign or delegate any of the obligations created under
this Agreement without the prior written consent of the other
party. Nothing in this Agreement shall confer upon any person or
entity not a party to this Agreement, or the legal representa-
tives of such person or entity, any rights or remedies of any
nature or kind whatsoever under or by reason of this Agreement.
SECTION 5.4 Brokers and Finders.
(a) Each of the Shareholders and the Company severally
represent and warrant to Buyer that they have not employed the
services of a broker or finder in connection with this Agreement
or any of the transactions contemplated hereby. Each of the
Shareholders severally indemnifies and agrees to defend and hold
Buyer harmless against and in respect of all claims, losses,
liabilities and expenses which may be asserted against Buyer (or
any Affiliate of Buyer) by any broker or other person who claims
to be entitled to a broker's, finder's or similar fee or
commission in respect of the execution of this Agreement, or the
consummation of the transactions contemplated hereby, by reason
of his acting at the request of the Shareholders or of the
Company.
(b) Buyer represents and warrants to the Shareholders
that it has not employed the services of a broker or finder in
connection with this Agreement or any of the transactions
contemplated hereby. Buyer indemnifies and agrees to save and
hold the Shareholders harmless against and in respect of all
claims, losses, liabilities and expenses which may be asserted
against it by any broker or other person who claims to be
entitled to a broker's, finder's or similar fee or commission
in respect of the execution of this Agreement or the consummation
of the transactions contemplated hereby, by reason of his acting
at the request of Buyer.
SECTION 5.5 Fees and Expenses. Except as otherwise
expressly provided in this Agreement, all legal and other fees,
costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the
party incurring such fees, costs or expenses. No fees, costs or
expenses incurred in connection with this transaction by the
Shareholders shall be borne by any of the Companies.
SECTION 5.6 Notices. All notices and other communications
given or made pursuant hereto shall be in writing and shall be
deemed to have been given or made if in writing and delivered
personally, sent by international courier or by facsimile
transmission to the parties at the following addresses:
(a) If to Buyer, to:
IndeNet, Inc.
1640 North Gower Street
Los Angeles, California 90028
U.S.A.
Attention: Robert Lautz
with a copy to:
Troy & Gould
1801 Century Park East,
Suite 1600
Los Angeles, California 90067
U.S.A.
Attention: Istvan Benko
(b) If to the Shareholders, to the addresses listed on
Exhibit A.
with a copy to:
Brobeck Hale and Dorr International
Veritas House
125 Finsbury Pavement
London, EC2A 1NQ, England
Attention: Christopher A. Grew
(c) If to the Company, to:
Enterprise Systems Group Limited
Ferry Works
Summer Road
Thames Ditton
Surrey KT7 0QJ
Attention: Graeme R. Jenner
or to such other persons or at such other addresses as shall be
furnished by either party by like notice to the other, and such
notice or communication shall be deemed to have been given or
made as of the earlier of the date so delivered or received via
facsimile or three calendar days after mailed by international
courier. No change in any of such addresses shall be effective
insofar as notices under this Section 5.6 are concerned unless
such change shall have been given to such other party hereto as
provided in this Section 5.6.
SECTION 5.7 Entire Agreement. This Agreement, together
with the exhibits hereto, represents the entire agreement and
understanding of the parties with reference to the transactions
set forth herein and no representations or warranties have been
made in connection with this Agreement other than those expressly
set forth herein or in the exhibits, certificates and other
documents delivered in accordance herewith. This Agreement
supersedes all prior negotiations, discussions, correspondence,
communications, understandings and agreements between the parties
relating to the subject matter of this Agreement and all prior
drafts of this Agreement, all of which are merged into this
Agreement. No prior drafts of this Agreement and no words or
phrases from any such prior drafts shall be admissible into
evidence in any action or suit involving this Agreement.
SECTION 5.8 Waivers and Amendments. Each of the
Shareholders and Buyer may by written notice to the other (a)
extend the time for the performance of any of the obligations or
other actions of the other; (b) waive any inaccuracies in the
representations or warranties of the other contained in this
Agreement; (c) waive compliance with any of the covenants of the
other contained in this Agreement; (d) waive performance of any
of the obligations of the other created under this Agreement; or
(e) waive fulfillment of any of the conditions to its own
obligations under this Agreement. The waiver by any party hereto
of a breach of any provision of this Agreement shall not operate
or be construed as a waiver of any subsequent breach, whether or
not similar. This Agreement may be amended, modified or
supplemented only by a written instrument executed by the parties
hereto.
SECTION 5.9 Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or
provision hereof shall not affect the validity or enforceability
of this Agreement or of any other term or provision hereof.
Furthermore, in lieu of any such invalid or unenforceable term or
provision, the parties hereto intend that there shall be added as
a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be
valid and enforceable.
SECTION 5.10 Titles and Headings. The Article and Section
headings contained in this Agreement are solely for convenience
of reference and shall not affect the meaning or interpretation
of this Agreement or of any term or provision hereof.
SECTION 5.11 Counterparts. This Agreement may be executed
in two or more counterparts, each of which shall be deemed an
original and all of which together shall be considered one and
the same agreement.
SECTION 5.12 Dispute Resolution; Arbitration.
(a) General. In the event that any dispute should
arise between Buyer and some or all of the Shareholders with
respect to any matter covered by this Agreement, Buyer and such
Shareholders shall resolve such dispute in accordance with the
procedures set forth in this Section 5.12.
(b) Agreement of the Parties. In the event of any
dispute between the parties with respect to any matter covered by
this Agreement, the parties shall first use all reasonable
efforts to resolve such dispute between themselves. If the
parties are unable to resolve the dispute within thirty (30) days
after the commencement of efforts to resolve the dispute, the
dispute will be submitted to arbitration in accordance with
Section 5.12(c), which shall be the exclusive remedy for
disputes.
(c) Arbitration.
(i) Either Buyer or the Shareholders involved in
the dispute may submit any matter referred to in Section 5.12(a)
to arbitration by notifying the other party hereto, in writing,
of such dispute. Within ten (10) days after receipt of such
notice, Buyer and the Shareholders shall designate in writing
one arbitrator to resolve the dispute; provided, that if the
parties hereto cannot agree on an arbitrator within such 10-day
period, the arbitrator shall be selected by the American
Arbitration Association. The arbitrator so designated shall not
be an employee, consultant, officer, director or stockholder of
any party hereto, any Affiliate of any party to this Agreement,
nor any Affiliate of Buyer's auditors or the Company's Auditor.
(ii) Within 15 days after the designation of the
arbitrator, the arbitrator, Buyer and the Shareholders shall
meet, at which time Buyer and the Shareholders shall be required
to set forth in writing all disputed issues and a proposed ruling
on each such issue.
(iii) The arbitrator shall set a date for a
hearing, which shall be no later than thirty (30) days after the
submission of written proposals pursuant to paragraph (ii) above,
to discuss each of the issues identified by Buyer and the
Shareholders. Each such party shall have the right to be
represented by counsel. The arbitration shall be governed by the
rules of the American Arbitration Association; provided, that the
arbitrator shall have sole discretion with regard to the
admissibility of evidence.
(iv) The arbitrator shall use his or her best
efforts to rule on each disputed issue within thirty (30) days
after the completion of the hearings described in paragraph (iii)
above. The determination of the arbitrator as to the resolution
of any dispute shall be binding and conclusive upon all parties
hereto. All rulings of the arbitrator shall be in writing and
shall be delivered to the parties hereto.
(v) The prevailing party in any arbitration shall
be entitled to any award of reasonable attorneys' fees incurred
in connection with the arbitration. The non-prevailing party
shall pay such fees, including investigation costs incurred by
the prevailing party in such proceedings, together with the fees
of the arbitrator and the costs and expenses of the arbitration.
(vi) Any arbitration initiated by the Buyer
pursuant to this Section 5.12 shall be conducted in London,
England, and any arbitration initiated by the Shareholders
pursuant to this Section 5.12 shall be conducted in Los Angeles,
California. Any arbitration award may be entered in and enforced
by any court having jurisdiction thereover and shall be final and
binding upon the parties.
SECTION 5.13 Proprietary Information.
(a) The Shareholders agree that from and after the
date hereof, each Shareholder shall hold in confidence and shall
use all reasonable endeavors to have all of its officers,
directors and personnel to hold in confidence all knowledge and
information of a secret or confidential nature with respect to
the business of the Companies and not to disclose, publish or
make us of the same without the consent of the Buyer, except to
the extent that such information shall have become public
knowledge other than by breach of this Agreement by the
Shareholders.
(b) The Shareholders agree that the remedy at law for
any breach of this Section 5.13 would be inadequate and that
Buyer shall be entitled to injunctive relief in addition to any
other remedy it may have upon breach of any provision of this
Section 5.13.
SECTION 5.14 Enforcement of the Agreement. The parties
hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and
provisions hereto, this being in addition to any other remedy to
which they are entitled at law or in equity.
SECTION 5.15. Knowledge Defined. In phrases referring "to
the best knowledge" (or other similar phrases) of a person, a
person will be deemed to have "knowledge" of a particular
material fact or other matter if: (a) such individual is actually
aware of such material fact or other matter; or (b) a prudent
individual could be expected to discover or otherwise become
aware of such material fact or other matter in the course of
conducting a reasonably comprehensive investigation concerning
the existence of such material fact or other matter.
SECTION 5.16 Further Assurances. Upon the request of Buyer
at any time after this Agreement, the Shareholders will forthwith
execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and
other documents as Buyer or its counsel may request in order to
perfect title of Buyer and its successors and assigns to the
Shares or otherwise to effectuate the purposes of this Agreement.
SECTION 5.17 Governing Law. This Agreement shall be
governed by and construed and enforced in accordance with the
laws of the State of California without giving effect to the
choice-of-law provisions thereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
"BUYER" INDENET, INC., a Delaware
corporation
By:___________________________
"COMPANY" ENTERPRISE SYSTEMS GROUP LIMITED
By:___________________________
___________________________
Director
___________________________
Director/Secretary
"SHAREHOLDERS"
_______________________________
Abacus (Nominees) Ltd.
_______________________________
Advent Nominees Ltd.
_______________________________
Coal Pension Venture Nominees
Limited
_____________________________
Commercial Union Life Assurance
_______________________________
Commercial Union Nominees Ltd.
_______________________________
Legal & General Assurance
Society Ltd.
______________________________
Thompson Clive Investments plc
_______________________________
Midland Bank Trustees
(Jersey) Limited a/c
Thompson Clive Ventures
_______________________________
Midland Bank Trustees
(Jersey) Limited a/c
Thompson Clive Ventures LP
_______________________________
Peter Rhodes Dimmer
_______________________________
Michael John Boxford
_______________________________
Magna Standard Trust c/o
Sefta Trustees Limited Ref 119
_______________________________
Graeme Ronald Jenner
_______________________________
Richard Lee Schleufer
_______________________________
Susan Mary Pacey
_______________________________
Michael John Pacey
_______________________________
David William Martin
_______________________________
Sheila Lillian Martin
_______________________________
Robert F. McConnell
_______________________________
Barnaby John Gibbens
_______________________________
Clinton Leroy Bulkley
_______________________________
George Theodore Beattie
________________________________
Philip Sansome
_______________________________
Joseph James Frazer
_______________________________
Edith Peakman Frazer
_______________________________
Lynda D. Johnson
_______________________________
Raymond Vidler
_______________________________
Joseph Robert Lennon
_______________________________
John Noel Hapgood
_______________________________
Rose Eileen Hapgood
_______________________________
Nicholas William Graham
_______________________________
Roger James Carmody
_______________________________
Janet M. Giese
_______________________________
Helen Julie J. Carless
_______________________________
Adrian Andrew Paul Crockett
_______________________________
Nigel Mark Stone
_______________________________
Arthur L. Fagan
_______________________________
Peter J. Vitarelli
_______________________________
Robert O. Royse
_______________________________
Ian Davidson Whitfield
_______________________________
Christopher H. Stinton
_______________________________
Joanna Elizabeth Earle
_______________________________
John Charles James Holland
_______________________________
Teresa Jean Grinewich
_______________________________
Steve W. Galusha
_______________________________
Desiree C. Padula
_______________________________
David S. Weatherley
_______________________________
Margaret Mary Mattingley
_______________________________
Andrew Eric Read
_______________________________
Valerie Lesley Diane Hill
_______________________________
Jules Elliott-Sysum
_______________________________
Lee Anne Fredrick
_______________________________
Richard Evelyn Cooke
_______________________________
Anita L. Buford
_______________________________
John Laurence Stuart Munday
_______________________________
Phillip James Welch
_______________________________
Celeste Perkins
_______________________________
Alan Brown B. Wilson
_______________________________
Keith Malcolm Parkin
_______________________________
Joseph Minuti
_______________________________
Lilla Ajgaonkar Wylie
_______________________________
Deborah Anne Plumridge
_______________________________
Betty M. Amon
_______________________________
Amy D. Simmons
_______________________________
Michael Wayne Lynch
_______________________________
Drake W. Rinesmith
_______________________________
Peter Simon Kelly
_______________________________
Ila J. McLaughlin
_______________________________
Kathleen J. Micci
_______________________________
Anthony Windsor Hill
_______________________________
Minoo Yasseri
_______________________________
Joyce Margaret McPhee
_______________________________
Patti A. Kuettner
_______________________________
Julian Paul Watkin
_______________________________
Ryan Rodney Rockwell
_______________________________
Christopher J. Lennon
_______________________________
Lori Angela Houser
_______________________________
Terri E. Bache-Wiig
_______________________________
Kathleen E. Lennon (nee Kilgore)
_______________________________
Betty L. Matkin
<PAGE>
INDEX
TO
SCHEDULES/EXHIBITS
Exhibits
A Names, addresses of, and Shares owned by Shareholders
B Form of Secured Promissory Note
C Quoted Prices from February 8, 1996 through March
21, 1996
D Employment Agreements
E Opinion of Counsel (Shareholders)
F Opinion of Counsel (Buyer)
G Registration Rights Agreement
H Pledge Agreement
Schedules
A Disclosure Letter
4.4 Capitalization
4.8 Options, Warrants, etc.
