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
May 8, 1998
------------
Date of Report (Date of earliest event reported)
INNOVUS CORPORATION
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(Exact name of Registrant as specified in its charter)
Delaware 0-26790 87-0461856
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(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
Incorporation) No.)
4600 Campus Drive
Newport Beach, CA 92660
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(Address of principal executive offices)
(Zip Code)
(949) 833-1220
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(Registrant's telephone number, including area code)
392 E. 12300 South, Suite J
Draper, UT 84020
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(Former name or address, if changed since last report.)
<PAGE>
Item 1. Changes in Control of the Registrant
On May 8, 1998, after the close of business, Innovus Corporation entered
into an Agreement and Plan of Share Exchange dated as of May 8, 1998 (the
"Agreement") by and among the Registrant and Intermark Corporation, a California
corporation, and the securityholders of Intermark Corporation ("Exchanging
Securityholders"). Upon the closing of the transaction contemplated by the
Agreement ("Closing"), there would be a change in control of the Registrant. The
transaction is expected to be consummated in late May 1998, subject to
satisfaction or waiver of closing conditions.
The Agreement provides for the Exchanging Securityholders to deliver and
exchange all of the outstanding capital stock of Intermark Corporation and
options or other rights to purchase such capital stock for capital stock of the
Registrant having voting power equal to 75% of the capital stock of the
Registrant outstanding as of immediately after the Closing, assuming that all of
the holders of Intermark Corporation securities execute the Agreement.
Management of Intermark Corporation will own approximately 60% of the
Registrant's capital stock as of immediately after the Closing.
The Agreement also provides that immediately after the Closing, Thomas
Hemingway, the Chief Executive Officer of Intermark Corporation, will become the
Chief Executive Officer of the Registrant, and two additional designates of
Intermark Corporation will be elected to the Board of Directors of the
Registrant, who together would comprise a majority of the Board of Directors of
the Registrant as then constituted.
The capital stock issuable by the Registrant to the Exchanging
Securityholders upon the Closing will be comprised of a limited number of
authorized and unissued shares of the Registrant's Common Stock, par value $.001
("Common Stock"), and the remainder will be comprised of authorized and unissued
shares of a new series of Preferred Stock, to be designated by the Board of
Directors of the Registrant as the Series H Convertible Preferred Stock, par
value $.001 per share, which will be convertible into Common Stock and have
voting rights equivalent to the number of shares of Common Stock which would be
issuable upon conversion (without regard to whether there is an inadequate
amount of authorized and unissued Common Stock available for issuance upon
conversion).
Accordingly, the Registrant's Board of Directors also authorized and agreed
to recommend to the Registrant's stockholders for approval a 1-for-10 reverse
stock split of the Common Stock, which would result in 90% fewer shares of
Common Stock being outstanding and reserved for issuance immediately after the
reverse split. As a result, a substantial number of the Registrant's 15,000,000
shares of Common Stock that are presently authorized would become available for
issuance. These available shares would be used for conversion of Series H
Preferred Stock into Common Stock and for other purposes. Upon such shares
becoming available, as a result of the reverse split, or otherwise, the Series H
Preferred Shock would be automatically convertible into Common Stock at the
election of the Registrant and the holders may also elect such conversion.
If fewer than all of the holders of securities of Intermark Corporation
execute and deliver the Agreement prior to the Closing, the Registrant may cause
Intermark Corporation to be merged with and into the Registrant in order to
acquire al of the remaining securities of Intermark Corporation. It is
anticipated that all of such securityholders will execute and deliver the
Agreement.
<PAGE>
The Agreement and Plan of Share Exchange filed with this Form 8-K as
Exhibit 2.1 and the text of the news release dated May 11, 1998 as set forth in
Item 5 hereof, are incorporated by this reference into this Item 1.
Item 5. Other Events
On May 11, 1998, the Registrant and Intermark Corporation jointly issued
the following news release:
Contact: James Budd
Intermark Corporation
Voice: (714) 833-1220
Email: [email protected]
For Release
May 11, 1998
7:30 am EST
INTERMARK AND INNOVUS CORPORATION
ANNOUNCE SIGNING OF ACQUISITION AGREEMENT
NEWPORT BEACH, CA AND SALT LAKE CITY, UT (OTC BB: INUS), - May 11, 1998 -
Intermark Corporation, Newport Beach, California and Innovus Corporation, Salt
Lake City, Utah, jointly announced today that they have signed a definitive
agreement whereby Intermark will be acquired by Innovus in exchange for Innovus
common and convertible preferred voting shares.
As a result of the share exchange, Intermark will be a wholly owned
subsidiary of Innovus and the previous holders of Intermark securities will
receive shares of Innovus that represent 75% of the voting power and outstanding
stock of Innovus, fully-diluted.
Innovus shares to be issued include a new Series H Preferred Stock
automatically convertible into common stock when additional common stock is
authorized for issuance. The share exchange is expected to be completed in late
May 1998, subject to satisfaction of closing conditions. Conversion of all of
the previously outstanding preferred stock is a condition to the Closing of the
share exchange.
As part of the authorization of the share exchange, the Innovus Board
of Directors has approved an amendment of the Innovus Certificate of
Incorporation that would effect a 10-for-1 reverse stock split of the common
stock, and after the Closing of the share exchange will recommend the same to
Innovus common stockholders for approval at the next annual meeting. The reverse
stock split and the related increase in authorized capital will result in the
conversion of all shares of Series H Preferred Stock into common stock.
Proxies are not being solicited hereby. Proxies will be solicited
concurrently with delivery of a proxy statement containing the information
specified by Schedule 14A under the Securities Exchange Act of 1934, as amended.
In conjunction with the Closing of the share exchange, Innovus will
appoint Thomas Hemingway, and two additional persons to be designated by the
management of Intermark, to Innovus' Board of Directors. Management of
Intermark will hold approximately 60% of the voting power of Innovus and its
outstanding stock on a fully-diluted, as converted, basis.
<PAGE>
With the completion of the Acquisition Agreement, Innovus moved its corporate
offices to Intermark's Newport Beach, California headquarters. This move will
allow the employees of Intermark to efficiently integrate Innovus products into
Intermark sales channels
In a statement, Tom Hemingway, Chairman and Chief Executive Officer of Intermark
said, "The transaction with Innovus is an important step in the continued growth
of Intermark's business and should enhance the company's ability to serve its
expanding customer base." Mr. David Mock, Chairman of the Board and Chief
Financial Officer of Innovus said, "The combination of Intermark with Innovus
will greatly strengthen Innovus' overall product technology and sales and
marketing abilities." Mr. Mock added, "The fact that the remaining Innovus
employees have relocated to Intermark's facilities in Newport Beach, California,
should also mean a considerable cost savings."
Intermark is a provider of sales and marketing services, Internet products, and
is developing online diagnostic-based Electronic Software Distribution (ESD)
solutions. Intermark believes its new ESD solution will greatly enhances the
ability to sell and deliver software electronically, by dramatically reducing
download times and by automatically installing software for immediate use. This
proprietary technology enables consumers to bypass the traffic jams caused by
lengthy downloads commonly associated with other methods of electronic
distribution.
Statements expressing the beliefs and expectations of management regarding
future performance are forward-looking and involve risks and uncertainties,
including, but not limited to, consummation of the transaction, Innovus's
ability to manage and integrate acquired businesses, quarterly fluctuations in
results and other risks. These risks are and will be detailed from time to time
in Innovus's Securities and Exchange filings, including its Form 10-K for the
year ended December 31, 1997 and subsequent Form 10-Q's and 8-K's. Actual
results may differ materially from Management's expectations.
For more information, contact Intermark Corporation, 4600 Campus Drive, Newport
Beach, CA 92660, at (714) 833-1220 or visit its website at
http://www.imarkmall.com.
####
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits. The following exhibit is incorporated herein by this
reference:
Exhibit No. Description of Exhibit
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2.1 Agreement and Plan of Share Exchange dated as of
May 8, 1998 among the Registrant; Intermark
Corporation, a California corporation; and the
Exchanging Securityholders of Intermark
Corporation
<PAGE>
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.
INNOVUS CORPORATION
Date: May 11, 1998. By /s/ Terry Haas
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Terry Haas, President
<PAGE>
EXHIBIT INDEX
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Exhibit No. Description of Exhibit
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2.1 Agreement and Plan of Share Exchange dated as of
May 8, 1998 among the Registrant; Intermark
Corporation, a California corporation; and the
Exchanging Securityholders of Intermark
Corporation. Omitted from this Form 8-K filing
are the following schedules or attachments to
the agreement identified immediately above:
(A) Form of Certificate of Designation of
Series H Convertible Preferred Stock;
(B) Intermark Corporation Financial Statements
(Unaudited) for its 1997 Fiscal Year;
(C) Confidentiality Agreement dated March 1998
between the Registrant and Intermark
Corporation;
(D) Disclosure Schedule of Intermark
Corporation;
(E) Disclosure Schedule of the Registrant.
AGREEMENT AND PLAN OF SHARE EXCHANGE
among
INNOVUS CORPORATION,
INTERMARK CORPORATION,
and
EXCHANGING SECURITYHOLDERS
Dated as of May 8, 1998
<PAGE>
AGREEMENT AND PLAN
OF SHARE EXCHANGE
THIS AGREEMENT AND PLAN OF SHARE EXCHANGE (the "Agreement"), is made as
of this 8th day of May, 1998, by and among INNOVUS CORPORATION, a Delaware
corporation ("Innovus"), INTERMARK CORPORATION, a California corporation
("Intermark"), and the securityholders of Intermark identified on the signature
pages hereto who execute this Agreement ("Exchanging Securityholders").
WHEREAS, Innovus has been actively engaged in the business of software
development, manufacture and sales;
WHEREAS, Intermark has been actively engaged in the business of
software marketing and distribution;
WHEREAS, the parties desire to adopt a plan of reorganization intended
to effect a tax-free Share Exchange under ss.ss. 361(a) and 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code"), pursuant to which
Innovus will acquire control of Intermark in exchange for voting stock of
Innovus (the "Share Exchange");
WHEREAS, the Boards of Directors of Innovus and Intermark, the
shareholders of Intermark, and each of the Exchanging Securityholders each (i)
has determined that this Agreement and the transactions contemplated hereby,
including the Share Exchange (as defined hereinafter) are fair to it and in its
best interests, and (ii) approved this Agreement and the transactions
contemplated hereby, including the Share Exchange, all on the terms and subject
to the conditions set forth in this Agreement.
NOW, THEREFORE, for good and valuable considerations, receipt and
sufficiency of which is hereby acknowledged, Innovus and Intermark hereby agree
as follows:
Section 1. Certain Definitions.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, amounts paid
in settlement, Liabilities, obligations, Taxes, liens, losses, expenses, and
fees, including court costs and attorneys' fees and expenses, in each case (a)
net of any insurance recoveries (except to the extent such recoveries increase
the cost of insurance, through retrospective adjustments or otherwise), and (b)
net of any tax benefit, after taking into account any tax detriment, of any
indemnity.
"Available Innovus Common Shares" means a number that is found by executing the
following calculations in the order as set forth: (i) 15,000,000 minus the
number of Fully Diluted Innovus Shares; (ii) minus the number of Innovus Common
Shares described in item (z) of the definition of Fully-Diluted Innovus Shares;
(iii) plus the number of Innovus Common Shares that shall have become available
as of the Closing Date under agreements described in item (b) of Section 9(e);
(iv) minus any Innovus Common Shares, if any, reserved for issuance upon
exercise or conversion of Innovus securities described in Section 9(d).
"CGCL" means the California General Corporation Law.
"Common Exchange Ratio" means the quotient found by dividing the number of
Available Innovus Common Shares by the number of Intermark Common Shares.
"DGCL" means the Delaware General Corporation Law.
<PAGE>
"Escrow Agreement" means the Escrow Agreement in a form as mutually acceptable
to the parties.
"Fully-Diluted Innovus Shares" means the sum of (a) the number of Innovus Common
Shares issued and outstanding, plus (b) the number of Innovus Common Shares that
are subject to issuance upon exercise or conversion of outstanding preferred
stock, stock warrants, stock options, conversion rights and other similar
rights, whether or not such warrants, options and rights are currently
exercisable or convertible or are subject to any contingency, in each case
determined as of the Closing Date, specifically excluding (y) any Innovus Common
Shares issuable in the Share Exchange pursuant to this Agreement, or upon
conversion of Innovus Series H Preferred Shares issuable pursuant to this
Agreement or upon exercise of Innovus Options issuable pursuant to this
Agreement and (z) up to 324,688 Innovus Common Shares issuable pursuant to stock
options held by employees, officers or directors of Innovus expiring within
three (3) years after the date hereof and exercisable at a price of at least
$3.00 per Innovus Common Share or within five (5) years after the date hereof
and exercisable at a price of at least $5.00 per Innovus Common Share.
"Fully-Diluted Intermark Shares" means the sum of (a) the number of Intermark
Common Shares issued and outstanding, plus (b) the number of Intermark Common
Shares that are subject to issuance upon exercise or conversion of outstanding
preferred stock, stock warrants, stock options, conversion rights and other
similar rights, whether or not such warrants, options and rights are currently
exercisable or convertible or are subject to any contingency, in each case
determined as of the Closing Date, specifically including the Intermark Options.
"Innovus Common Shares" means shares of Common Stock, par value $.001 per share,
of Innovus as presently authorized.
"Innovus Options" means the options to purchase Innovus Series H Preferred
Shares to be issued in exchange for the Intermark Options. Innovus Options shall
be on the terms of the existing options plans of Innovus except that the
exercise price of each Innovus Option shall provide as nearly as practicable the
same financial benefit as of the Closing Date as the exercise price of Intermark
Options, taking into account the Option Conversion Ratio. In the event that the
Innovus option plans do not have available sufficient Innovus Options, Innovus'
Board of Directors shall have approved prior to the Closing Date sufficient
additional Innovus Options and recommend approval of such increase to its
stockholders after the Closing Date concurrently with the Reclassification
defined below.
"Innovus Series H Preferred Shares" means shares of Series H Convertible
Preferred Stock, par value $.001 per share, of Innovus, on substantially the
terms and conditions of the Certificate of Designation of Series H Preferred
Stock attached hereto as Exhibit A, and with any additions, deletions or changes
thereto as may be approved by an officer or officers of Innovus who deems the
same to be necessary or appropriate in order to comply with filing requirements
of the DGCL.
"Innovus Shares" means Innovus Series H Preferred Shares and Innovus Common
Shares.
"Intellectual Property" means (a) all inventions (whether patentable or
unpatentable and whether or not reduced to practice), all improvements thereto,
and all patents, patent applications, and patent disclosures, together with all
reissuances, continuations, continuations-in-part, revisions, extensions, and
reexaminations thereof, (b) all trademarks, service marks, trade dress, logos,
trade names, and corporate names, together with all translations, adaptations,
derivations, and combinations thereof and including all goodwill associated
therewith, and all applications, registrations, and renewals in connection
therewith, (c) all copyrightable works, all copyrights, and all applications,
registrations, and renewals in connection therewith, (d) all trade secrets and
confidential business information (including ideas, research and development,
<PAGE>
know-how, compilations, compositions, processes and techniques, technical data,
designs, drawings, specifications, customer and supplier lists, pricing and cost
information, and business and marketing plans and proposals), (e) all computer
software (including data and related documentation), (f) all other proprietary
rights, and (g) all copies and tangible embodiments thereof (in whatever form or
medium).
"Intermark Common Shares" means the issued and outstanding shares of Common
Stock, without par value, of Intermark determined as of the Closing Date.
"Intermark Options" means the stock options identified as such in the signature
pages to this Agreement to purchase Intermark Common Shares that are outstanding
determined as of the Closing Date.
"Intermark Shares" means (a) the Intermark Common Shares that are issued and
outstanding, plus (b) the Intermark Common Shares that are subject to issuance
upon exercise or conversion of outstanding convertible notes, preferred stock,
stock warrants, stock options, conversion rights and other similar rights,
whether or not such warrants, options and rights are currently exercisable or
convertible or are subject to any contingency, specifically excluding the
Intermark Options, in each case determined as of the Closing Date.
"Liability" means any liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or unaccrued,
whether liquidated or unliquidated, and whether due or to become due), including
any liability for Taxes.
"Option Exchange Ratio" means the number that is found by executing the
following calculations in the order as set forth: (i) multiplying the number of
Fully-Diluted Innovus Shares by the number three (3); (ii) dividing that
multiplication product by the number of Fully-Diluted Intermark Shares; and
(iii) dividing that division result by five hundred sixty-two and one-half (562
1/2).
"Preferred Exchange Ratio" means the number that is found by executing the
following calculations in the order as set forth: (i) multiplying the number of
Fully-Diluted Innovus Shares by the number three (3); (ii) dividing that
multiplication product by the number of Fully-Diluted Intermark Shares; (iii)
subtracting from that division quotient the number of Innovus Available Common
Shares; and (iv) dividing that subtraction result by five hundred sixty-two and
one-half (562 1/2).
"Tax" means any federal, state, local, or foreign income, gross receipts,
license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec. 59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
Section 2. The Share Exchange; Other Agreements.
(a) On and subject to the terms and conditions of this Agreement, Innovus agrees
to accept from each of the Exchanging Securityholders, and each of the
Exchanging Securityholders agrees to transfer and deliver to Innovus, its
Intermark Shares and Intermark Options in the amounts indicated on the signature
pages to this Agreement in exchange for the considerations specified below. At
the Closing, each of the Exchanging Securityholders will exchange Intermark
Shares for Innovus Shares and/or Intermark Options for Innovus Options. In
consideration for each Intermark Share delivered by an Exchanging Securityholder
pursuant to the immediately preceding sentence, Innovus shall deliver a number
of Innovus Common Shares equal to the number of Intermark Common Shares
multiplied by the Common Exchange Ratio plus a number of Innovus Series H
<PAGE>
Preferred Shares equal to the number of Intermark Common Shares multiplied by
the Preferred Exchange Ratio. In consideration of each Intermark Option
delivered by an Exchanging Securityholder, Innovus shall deliver an Innovus
Option entitling the Exchanging Securityholder to purchase the number of Innovus
Series H Preferred Shares equal to the number of Intermark Common Shares
purchasable upon exercise of the Intermark Option multiplied by the Option
Exchange Ratio, with an exercise price adjusted in accordance with the Code to
provide the same economic benefit as the Intermark Options. Deliveries of
Innovus Shares to each Exchanging Securityholder shall be aggregated and rounded
to the nearest whole share, and deliveries of Innovus Options to each Exchanging
Securityholder shall be aggregated and rounded to the nearest whole share.
Outstanding convertible notes of Intermark shall be converted as of prior to the
Closing Date into Intermark Common Shares.
(b) At the Closing, (i) the Exchanging Securityholders will deliver to Innovus
the Intermark stock certificates representing Intermark Shares and its Intermark
option agreements representing Intermark Options, endorsed in blank or
accompanied by duly executed assignment documents; (ii) Innovus will deliver to
each of the Exchanging Securityholders the considerations specified above; and;
(iii) Innovus and each of the Exchanging Securityholders shall deliver to the
Escrow Agent the respective numbers of Innovus Series H Preferred Shares as
provided in the Escrow Agreement, which shall approximately be equal to 20% of
the Fully-Diluted Innovus Shares in the case of Innovus and 10% of the
Fully-Diluted Innovus Shares in the case of the Exchanging Securityholders, in
the aggregate.
(c) Subject to approval as required by the DGCL of stockholders of Innovus,
Innovus' certificate of incorporation shall be amended and restated as promptly
as practicable after the Closing Date to effect a change of name of Innovus to a
mutually agreed upon name, and the Innovus Common Shares will be reclassified
and combined (the "Reclassification") in a ratio of one (1) for ten (10) in a
reverse stock split (herein, as reclassified, called the "New Common Shares").
Innovus shall promptly call and notice an annual meeting of its stockholders and
recommend approval of proposals to the foregoing effects, all in compliance with
applicable securities laws and corporate laws.
(d) As promptly as reasonably practicable after the Closing Date, Innovus shall
use its best efforts to exchange Innovus Shares for Intermark Shares held by all
holders ("Minority Shareholders") of Intermark Shares that remain outstanding,
on terms and conditions as favorable to such shareholders as the terms and
conditions of this Agreement are to the Exchanging Securityholders. In the event
that any Intermark Shares thereafter remain outstanding, other than outstanding
Intermark Shares acquired by Innovus in the Share Exchange or held in the Escrow
(as defined in the Escrow Agreement), Innovus and Intermark shall merge (the
"Merger"), subject to approval of the Merger by stockholders of Innovus as
required by the DGCL and, if applicable, the CGCL, and all outstanding Intermark
Shares, other than shares held by Innovus or a wholly-owned subsidiary of
Innovus, shall be cancelled and exchanged for Innovus Shares on terms as
favorable to such shareholders as the terms and conditions of this Agreement are
to Exchanging Securityholders. The Merger shall also result in a certificate of
incorporation for the surviving corporation after the Merger with the changes
described in Section 2(c) in the event that the Reclassification shall not have
yet been effected.
(e) Promptly following the execution and delivery of this Agreement, the parties
shall issue a joint press release in a form mutually to be agreed upon. The
parties shall not, and shall instruct their representatives not to, issue or
cause the publication of any press release or other public announcement with
respect to, or otherwise make any public statement concerning, this Agreement or
the Share Exchange without the consent of the other party, which consent shall
not be unreasonably withheld. Notwithstanding the foregoing, in the event that
any party determines, based upon the advice of counsel, that a press release,
disclosure in a public filing, or other public disclosure of or reference to
this Agreement, the Share Exchange or the other party is required by law, the
former party shall first use reasonable efforts to notify the latter party of
the potential disclosure, and use reasonable efforts to afford the latter party
a reasonable opportunity to review and comment on the proposed disclosure,
provided that the consent of the latter party for such publication shall not be
<PAGE>
required in any such instance. In addition, Innovus shall file on a timely basis
a Current Report on Form 8-K reporting this transaction as a change in control,
and make any additional filings and reports as may be required or advisable
under applicable law.
(f) Prior to the Closing Date, Innovus shall use its best efforts to solicit or
require conversions of all outstanding shares of Preferred Stock, par value
$.001 per share, of Innovus into Innovus Common Shares; and Innovus shall have
filed certificates of elimination with the Secretary of State of the State of
Delaware as to all series of its Preferred Stock other than the Innovus Series H
Preferred Shares and taken all other actions necessary or appropriate to effect,
and to carry out its obligations upon, such conversions.
(g) Promptly following the date of execution of this Agreement, Innovus shall
file Form D with the SEC regarding the Share Exchange, and make all other
necessary or advisable filings under Utah, California and other applicable state
securities laws, as necessary or advisable to obtain appropriate exemptions from
registration or qualification under federal and applicable state securities
laws.
(h) On the Closing Date, Innovus shall cause to be delivered to Innovus and
Intermark such resignations of directors and officers of Innovus and cause to
take effect such amendments of its bylaws as may be necessary or appropriate to
elect Thomas Hemingway and other designates of Intermark to constitute a
majority of the authorized number of members on the Innovus Board of Directors.
Section 3. Representations and Warranties of the Exchanging Securityholders.
As of the date hereof, and as of the Closing Date, each of the Exchanging
Securityholders hereby represents and warrants to Innovus, except as set forth
on Intermark's Disclosure Schedule, as follows with respect to itself.
(a) Organization of Certain Exchanging Securityholders. If the Exchanging
Securityholder is a corporation or partnership, the Exchanging Securityholder is
duly organized, validly existing, and in good standing under the laws of the
jurisdiction of its organization.
(b) Authorization of Transaction. The Exchanging Securityholder has full power
and authority (including, if the Exchanging Securityholder is a corporation or
partnership, full corporate or partnership power and authority, respectively) to
execute and deliver this Agreement and to perform his or its obligations
hereunder. This Agreement constitutes the valid and legally binding obligation
of the Exchanging Securityholder, enforceable in accordance with its terms and
conditions. The Exchanging Securityholder need not give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any government
or governmental agency in order to consummate the transactions contemplated by
this Agreement.
(c) Noncontravention. Neither the execution and the delivery of this Agreement,
nor the consummation of the transactions contemplated hereby, will (A) violate
any constitution, statute, regulation, rule, injunction, judgment, order,
decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which the Exchanging Securityholder is subject or, if the
Exchanging Securityholder is a corporation or partnership, any provision of its
charter, bylaws or partnership agreement or (B) conflict with, result in a
breach of, constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument or other
arrangement to which the Exchanging Securityholder is a party or by which it is
bound or to which any of its assets is subject, except where the violation,
conflict, breach, default, acceleration, termination, modification,
cancellation, or failure to give notice would not have a material adverse effect
on the financial condition of Innovus, or on the ability of the parties to
consummate the transactions contemplated by this Agreement.
<PAGE>
(d) Brokers' Fees. Neither Intermark nor the Exchanging Securityholder has any
liability or obligation to pay any fees or commissions to any broker, finder, or
agent with respect to the transactions contemplated by this Agreement for which
Intermark, Innovus or any of the other Exchanging Securityholders could become
liable or obligated.
(e) Investment Intent. The Innovus Shares and Innovus Options being acquired by
the Exchanging Securityholder are being acquired for the Exchanging
Securityholder's personal account, for investment purposes only, and not with a
view to the distribution, resale or other disposition thereof. The Exchanging
Securityholder acknowledges that Innovus is issuing the Innovus Shares and
Innovus Options, and may issue Innovus Shares upon the exercise of the Innovus
Options, without registering such shares under the Securities Act of 1933 (the
"Act") on the basis of certain exemptions from such registration requirement.
Accordingly, the Exchanging Securityholder agrees that the certificates
evidencing the Innovus Shares and Innovus Options shall bear a legend indicating
such non-registration under the Act and the resulting restrictions on transfer,
and the Exchanging Securityholder may be required to hold the Shares
indefinitely unless they are subsequently registered for resale under the Act or
an exemption from such registration is available.
(f) Investment Information. The Exchanging Securityholder acknowledges receipt
of a copy of the Filings (as defined below) and understands that all rights and
obligations connected with this Agreement are set forth in this Agreement. The
Exchanging Securityholder acknowledges having had an opportunity to request and
receive additional information from Innovus, and being experienced and
sophisticated in financial and business matters sufficient to protect its
interests in this transaction and to evaluate the merits and risks of the Share
Exchange.
(g) Title to Shares. The Exchanging Securityholder holds good title to the
Intermark Common Shares, Intermark Options or convertible notes, as the case may
be, surrendered in the Share Exchange, and on the Closing Date Innovus will
receive good title to the same, in each case free and clear of any lien, claim,
encumbrance or restriction, other than restrictions arising under the federal or
applicable state securities laws or any liens, claims, encumbrances, or
restrictions arising by or under Innovus.
Section 4. Representations and Warranties of Intermark. As of the date
hereof, and as of the Closing Date, Intermark hereby represents and warrants to
Innovus, except as set forth on Intermark's Disclosure Schedule, as follows:
(a) Intermark is a corporation duly organized and existing and in good standing
under the laws of the State of California and Intermark has all necessary
corporate power and authority to own and conduct its business as currently
conducted. Intermark is not required by the nature of its business or properties
to be qualified to do business as a foreign corporation in any jurisdiction
outside California. Intermark has no subsidiaries, and owns no similar interest
in any other entity.
(b) Intermark has obtained all necessary corporate authorizations and approvals
required for the execution, delivery and consummation of the transactions
provided for in this Agreement. This Agreement constitutes the valid and binding
obligations of Intermark, enforceable against Intermark in accordance with its
terms.
(c) Intermark has authorized capital of 10,000,000 shares of Common Stock,
without par value, of which a total of 3,375,000 shares of Common Stock are
issued and outstanding, 540,000 shares are reserved for issuance under
outstanding options, and 272,873 shares are reserved for issuance under
outstanding convertible notes or other securities or arrangements. The amount
<PAGE>
and material terms of all outstanding capital stock, options, rights or
securities are set forth in the Intermark Disclosure Schedule and the signature
pages hereto.
(d) The execution and delivery of this Agreement by Intermark, and the
consummation of the transactions and obligations contemplated hereby, do not
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default (or an event that would upon notice or lapse of time or
both would become a default) under, or result in the creation of a lien or
encumbrance of any kind on any of its assets pursuant to (i) its Articles of
Incorporation, as amended, or bylaws, as amended, (ii) any agreement, document
or instrument to which Intermark is a party or by which Intermark is bound, or
(iii) any judgment, decree, order, statute, rule or regulation applicable to
Intermark.
(e) The unaudited financial statements of Intermark attached hereto as Exhibit B
fairly present the financial condition of Intermark for the periods and at the
dates stated therein, subject to normal audit adjustments and the absence of
footnotes. When delivered, the audited financial statements of Intermark shall
fairly present the financial condition of Intermark for the periods and at the
dates stated therein. No fact or condition is known to Intermark that materially
adversely affects, or that may materially adversely affect Intermark's business
or financial condition.
(f) Intermark (i) is not involved in any pending or, to its knowledge,
threatened investigation, litigation or legal proceeding that may have a
material adverse effect upon its financial condition, business or prospects of
Intermark, and (ii) is not subject to any order, judgment or decree that would
reasonably be likely to have such effect.
(g) At the Closing Date, all of the assets of Intermark shall be free and clear
of any and all liens, liabilities, claims or encumbrances of any kind or nature
whatsoever, except as otherwise expressly provided herein or as arises under
Innovus.
(h) The Intermark Disclosure Schedule contains a true and correct list of all
material Intellectual Property used by Intermark in its business, owned by
Intermark or in which Intermark has rights or licenses, and which are material
to the business of Intermark. Except as set forth in the Intermark Disclosure
Schedule, to the best knowledge of Intermark, Intermark has not infringed, and
is not now infringing, any patent, trade name, trademark, service mark,
copyright, trade secret, technology, know-how or process belonging to any other
person, firm or corporation, which infringement would have an material adverse
effect on Intermark. Neither Intermark nor any Exchanging Securityholder has
received any written notice or other indication of any such claim of
infringement. Except as set forth in the Intermark Disclosure Schedule,
Intermark is not a party to any material license, agreement, or arrangement,
whether as licensor, licensee or otherwise, with respect to Intellectual
Property. Intermark owns, or holds adequate licenses or other rights to use, all
Intellectual Property used in or necessary for the operation of Intermark's
business as now conducted.
(i) Intermark has not utilized the services of, and that it does not and will
not have any liability to, any broker or finder in connection with this
Agreement or the transactions contemplated hereby.
(j) The Intermark Disclosure Schedule lists all employee pension plans (as
defined in Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), all material employee welfare plans (as defined in
Section 3(1) of ERISA), and all other bonus, stock option, stock purchase,
incentive, deferred compensation, supplemental retirement, severance and other
similar fringe or employee benefit plans, programs or arrangements, and any
material current or former employment, executive compensation, consulting or
severance agreements, written or otherwise, for the benefit of, or relating to,
any employee of or consultant (or former employee of or consultant) to
Intermark, any trade or business (whether or not incorporated) which is a member
of a controlled group including Intermark or which is under common control with
Intermark (an "ERISA Affiliate") within the meaning of Section 414 of the Code,
<PAGE>
(all such plans, practices and programs are referred to as the "Intermark
Benefit Plans"), excluding agreements with former employees under which
Intermark has no remaining monetary obligations. Neither Intermark nor any ERISA
Affiliate maintains, or has ever maintained, an Intermark Benefit Plan intended
to qualify under Section 401(a) of the Code or subject to Title IV of ERISA.
There have been made available to Parent copies of (i) each written Intermark
Benefit Plan and (ii) the most recent annual report on Form 5500 series, with
accompanying schedules and attachments, filed with respect to each Intermark
Benefit Plan required to make such a filing. No Intermark Benefit Plans promises
or provides retiree medical or other retiree welfare benefits to any person, and
no Intermark Benefit Plans is a "multiemployer plan" as such term is defined in
Section 3(37) of ERISA. There has been no "prohibited transaction," as such term
is defined in Section 406 of ERISA and Section 4975 of the Internal Revenue Code
of 1986, as amended (the "Code") with respect to any Intermark Benefit Plan,
which could result in any material liability to Intermark. All Intermark Benefit
Plans are in material compliance with the requirements prescribed by any and all
statutes (including ERISA and the Code), orders, or governmental rules and
regulations currently in effect with respect thereto (including all applicable
requirements for notification to participants or the Department of Labor, IRS or
Secretary of the Treasury), and, Intermark has performed all obligations
required to be performed by it under, are not in any respect in default under or
violation of, and Intermark has no knowledge of any default or violation by any
other party to, any Intermark Benefit Plans; and (iv) all contributions required
to be made to any Intermark Benefit Plan pursuant to the terms of such Intermark
Benefit Plan have been made on or before their due dates. The Intermark
Disclosure Schedule also sets forth a true and complete list of (i) all
employment agreements with officers or key management personnel of Intermark;
(ii) all agreements with consultants obligating Intermark to make annual cash
payments in an amount exceeding $10,000; (iii) all employees of, or consultants
to, Intermark who have executed a confidentiality or non-competition agreement
with Intermark; (iv) all severance agreements, programs and policies of
Intermark with or relating to its employees, excluding programs and policies
required to be maintained by law; and (v) all plans, programs, agreements and
other arrangements of Intermark with or relating to its employees which contain
change in control provisions. Except as set forth in the Intermark Disclosure
Schedule, (i) there are no controversies, including any unfair labor practice
complaint, pending or, to the knowledge of Intermark, threatened, between
Intermark and any of its employees, nor to the knowledge of Intermark, is there
any factual basis for any such controversy; and (ii) Intermark is in compliance
with all applicable laws, regulations and orders respecting employment and
employment practices, terms and conditions of employment and wages and hours and
Intermark is not engaged in any unfair labor practice.
(k) The Intermark Disclosure Schedule includes a list of all agreements to which
Intermark is a party or by which Intermark is bound (i) under which the
consequences of a default, nonrenewal or termination could have a material
adverse effect on Intermark; or (ii) pursuant to which payments might be
required or acceleration of benefits may be required upon a "change of
ownership" of Intermark, which shall include any agreements or notes or other
instruments under which Intermark borrows money or finances the purchase of any
goods or services, that grants any security interest or other lien or
encumbrance on any assets of Intermark, restricts the scope or nature of or
places geographic restrictions on the business of Intermark that governs the
provision of services by Intermark to its clients, provides for the sale or
issuance of any shares of Intermark stock or any convertible securities or for
the sale of any assets of Intermark, other than in the ordinary course of
business consistent with past practice (collectively, the "Material Contracts").
Except as set forth in the Intermark Disclosure Schedule, all of the Material
Agreements are valid and binding obligations of Intermark and, to the knowledge
of Intermark, of the other parties thereto, all such Material Contracts are in
full force and effect and there has not occurred any default under or breach of
any of the Material Contracts, whether by Intermark or, to the knowledge of
Intermark, by the other parties thereto and, to the knowledge of Intermark, no
events or circumstances have occurred that, with the passage of time or the
giving of notice, or both, would constitute a breach or default of any such
Material Contract (whether by Intermark or any of the other parties thereto)
under any of the Material Contracts, or would impair Intermark's rights or alter
<PAGE>
the rights or obligations of any third party under, or give to any of the other
parties any rights of termination, amendment, acceleration or cancellation of
any Material Contract, or result in the creation of a lien or encumbrance on any
of the assets of Intermark.
Section 5. Representations and Warranties of Innovus. As of the date hereof
and as of the Closing Date, Innovus represents and warrants, except as set forth
on the Innovus Disclosure Schedule, to Intermark as follows:
(a) Innovus is a corporation duly organized and existing in good standing under
the laws of the State of Delaware and has all necessary corporate power and
authority to own and conduct its business as now conducted. Innovus Multimedia,
Inc., a Utah corporation ("Subsidiary") is a corporation duly organized and
existing in good standing under the laws of its state of incorporation and has
all necessary corporate power and authority to own and conduct its business as
now conducted. Innovus and each Subsidiary is qualified to do business as a
foreign corporation in each jurisdiction where the nature of its business or
properties requires. Innovus has no subsidiaries, joint ventures, partnerships
or similar investments or ownership interests in any entity other than the
Subsidiary.
(b) Innovus has authorized capital of 15,000,000 shares of Common Stock, of
which a total of 7,633,135 shares of Common Stock are issued and outstanding,
and 7,331,945 shares are reserved for issuance under options, warrants,
convertible preferred stock or other securities or arrangements without regard
to the agreements described in Section 9(e). The amount and material terms of
all outstanding capital stock, options, rights of securities are set forth in
the Innovus Disclosure Schedule. As of the Closing Date, no shares of its
Preferred Stock, par value $.001 per share shall remain outstanding, and no
shares of its Preferred Stock, par value $.001 per share, will be issued except
Innovus Series H Preferred Shares issuable pursuant to this Agreement. At the
Closing Date, Innovus shall have full power and authority to issue the Innovus
Shares and Innovus Options, in the manner provided herein, free and clear of any
liens, claims, charges, options and encumbrances.
(c) Innovus has obtained all necessary corporate authorizations and approvals
required for the execution, delivery and consummation of the transactions
provided for in this Agreement, exclusive of the post-closing covenants to
obtain approval by its stockholders as to amendments of its certificate of
incorporation or option plan increases as expressly provided in this Agreement.
This Agreement constitutes a valid and binding obligation of Innovus,
enforceable against Innovus in accordance with its terms.
(d) The execution and delivery of this Agreement by Innovus, and the
consummation of the transactions and obligations contemplated hereby does not
conflict with or result in a breach of the terms, covenants or provisions of, or
constitute a default (or an event that would upon notice or lapse of time or
both would become a default) under, or result in the creation of a lien or
encumbrance of any kind on any of the assets of Innovus or any Subsidiary
pursuant to (i) its Certificate of Incorporation, as amended, or bylaws, as
amended, (ii) any agreement, document or instrument to which Innovus is a party
or by which Innovus or any Subsidiary is bound, or (iii) any judgment, decree,
order, statute, rule or regulation applicable to Innovus or any Subsidiary.
(e) No fact or condition is known to Innovus that materially adversely affects,
or that may materially adversely affect any of the assets, business, financial
condition or prospects of Innovus which is not reflected in the filings (the
"Filings") by Innovus with the Securities and Exchange Commission ("SEC"), all
of which have been delivered by Innovus to Intermark or are available through
the Electronic Data Gathering and Retrieval System at the SEC's public website.
Innovus has not taken any action, or omitted to take any action, or executed any
agreement, instrument or other document, that would create any liability for
Innovus, which is not reflected in the Filings. Innovus has made all Filings
<PAGE>
required of it by the SEC or applicable federal or state securities laws in a
timely manner and in compliance with such requirements.
(f) Neither Innovus nor any Subsidiary (i) is involved in any pending or, to its
knowledge, threatened investigation, litigation or legal proceeding that may
have a material adverse effect upon the business or prospects of Innovus, or
(ii) is subject to any order, judgment, or decree that may have such effect.
(g) The Innovus Disclosure Schedule contains a true and correct list of all
material Intellectual Property used by Innovus in its business, owned by Innovus
or in which Innovus has rights or licenses, and which are material to the
business of Innovus. Except as set forth in the Innovus Disclosure Schedule, to
the best knowledge of Innovus, Innovus has not infringed, and is not now
infringing, any patent, trade name, trademark, service mark, copyright, trade
secret, technology, know-how or process belonging to any other person, firm or
corporation, which infringement would have an material adverse effect on
Innovus. Innovus has not received any written notice or other indication of any
such claim of infringement. Except as set forth in the Innovus Disclosure
Schedule, Innovus is not a party to any material license, agreement, or
arrangement, whether as licensor, licensee or otherwise, with respect to
Intellectual Property. Innovus owns, or holds adequate licenses or other rights
to use, all Intellectual Property used in or necessary for the operation of
Innovus's business as now conducted.
(h) Innovus has not utilized the services of, and that it does not and will not
have any liability to, any broker or finder in connection with this Agreement or
the transactions contemplated hereby.
(i) The Innovus Disclosure Schedule lists all employee pension plans (as defined
in Section 3(2) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")), all material employee welfare plans (as defined in Section
3(1) of ERISA), and all other bonus, stock option, stock purchase, incentive,
deferred compensation, supplemental retirement, severance and other similar
fringe or employee benefit plans, programs or arrangements, and any material
current or former employment, executive compensation, consulting or severance
agreements, written or otherwise, for the benefit of, or relating to, any
employee of or consultant (or former employee of or consultant) to Innovus, any
trade or business (whether or not incorporated) which is a member of a
controlled group including Innovus or which is under common control with Innovus
(an "ERISA Affiliate") within the meaning of Section 414 of the Code, (all such
plans, practices and programs are referred to as the "Innovus Benefit Plans"),
excluding agreements with former employees under which Innovus has no remaining
monetary obligations. Neither Innovus nor any ERISA Affiliate maintains, or has
ever maintained, an Innovus Benefit Plan intended to qualify under Section
401(a) of the Code or subject to Title IV of ERISA. There have been made
available to Parent copies of (i) each written Innovus Benefit Plan and (ii) the
most recent annual report on Form 5500 series, with accompanying schedules and
attachments, filed with respect to each Innovus Benefit Plan required to make
such a filing. No Innovus Benefit Plans promises or provides retiree medical or
other retiree welfare benefits to any person, and no Innovus Benefit Plans is a
"multiemployer plan" as such term is defined in Section 3(37) of ERISA. There
has been no "prohibited transaction," as such term is defined in Section 406 of
ERISA and Section 4975 of the Internal Revenue Code of 1986, as amended (the
"Code") with respect to any Innovus Benefit Plan, which could result in any
material liability to Innovus. All Innovus Benefit Plans are in material
compliance with the requirements prescribed by any and all statutes (including
ERISA and the Code), orders, or governmental rules and regulations currently in
effect with respect thereto (including all applicable requirements for
notification to participants or the Department of Labor, IRS or Secretary of the
Treasury), and, Innovus has performed all obligations required to be performed
by it under, are not in any respect in default under or violation of, and
Innovus has no knowledge of any default or violation by any other party to, any
Innovus Benefit Plans; and (iv) all contributions required to be made to any
Innovus Benefit Plan pursuant to the terms of such Innovus Benefit Plan have
been made on or before their due dates. The Innovus Disclosure Schedule also
sets forth a true and complete list of (i) all employment agreements with
officers or key management personnel of Innovus; (ii) all agreements with
<PAGE>
consultants obligating Innovus to make annual cash payments in an amount
exceeding $10,000; (iii) all current employees of, or consultants to, Innovus
who have executed a confidentiality or non-competition agreement with Innovus;
(iv) all severance agreements, programs and policies of Innovus with or relating
to its employees, excluding programs and policies required to be maintained by
law; and (v) all plans, programs, agreements and other arrangements of Innovus
with or relating to its employees which contain change in control provisions.
Except as set forth in the Innovus Disclosure Schedule, (i) there are no
controversies, including any unfair labor practice complaint, pending or, to the
knowledge of Innovus, threatened, between Innovus and any of its employees, nor
to the knowledge of Innovus, is there any factual basis for any such
controversy; and (ii) Innovus is in compliance with all applicable laws,
regulations and orders respecting employment and employment practices, terms and
conditions of employment and wages and hours and Innovus is not engaged in any
unfair labor practice.
(j) The Innovus Disclosure Schedule includes a list of all agreements to which
Innovus is a party or by which Innovus is bound (i) under which the consequences
of a default, nonrenewal or termination could have a material adverse effect on
Innovus; or (ii) pursuant to which payments might be required or acceleration of
benefits may be required upon a "change of ownership" of Innovus, which shall
include any agreements or notes or other instruments under which Innovus borrows
money or finances the purchase of any goods or services, that grants any
security interest or other lien or encumbrance on any assets of Innovus,
restricts the scope or nature of or places geographic restrictions on the
business of Innovus that governs the provision of services by Innovus to its
clients, provides for the sale or issuance of any shares of Innovus stock or any
convertible securities or for the sale of any assets of Innovus, other than in
the ordinary course of business consistent with past practice (collectively, the
"Material Contracts"). Except as set forth in the Innovus Disclosure Schedule,
all of the Material Agreements are valid and binding obligations of Innovus and,
to the knowledge of Innovus, of the other parties thereto, all such Material
Contracts are in full force and effect and there has not occurred any default
under or breach of any of the Material Contracts, whether by Innovus or, to the
knowledge of Innovus, by the other parties thereto and, to the knowledge of
Innovus, no events or circumstances have occurred that, with the passage of time
or the giving of notice, or both, would constitute a breach or default of any
such Material Contract (whether by Innovus or any of the other parties thereto)
under any of the Material Contracts, or would impair Innovus's rights or alter
the rights or obligations of any third party under, or give to any of the other
parties any rights of termination, amendment, acceleration or cancellation of
any Material Contract, or result in the creation of a lien or encumbrance on any
of the assets of Innovus.
(k) Innovus is acquiring the Intermark Common Shares and convertible notes in
the Share Exchange for investment, and not with a view toward resale or
distribution thereof, and Innovus acknowledges that such securities are neither
registered under the Securities Act of 1933, nor qualified under any state
securities laws, and will bear restrictive legends required under such laws.
Innovus further acknowledges having had an opportunity to request and receive
additional information from Intermark regarding the merits and risks to Innovus
of the Share Exchange, and being experienced and sophisticated in financial and
business matters sufficient to protect its interests in this transaction and to
evaluate the merits and risks of the Share Exchange.
Section 6. Closing; Conditions.
(a) Closing. Unless the parties shall mutually fix another date, time or place,
the closing of the Share Exchange ("Closing") shall take place at 5:00 P.M.
Pacific Time on or before the fifth business day following the satisfaction or
waiver of the conditions precedent contained in this Section 6, at the offices
of Stradling Yocca Carlson & Rauth in Newport Beach, California. The date on
which Closing occurs is referred to herein as the "Closing Date." Except as
otherwise provided herein, all proceedings to be taken and all documents to be
executed at the Closing shall be deemed to have been taken, delivered and
<PAGE>
executed simultaneously as of the Closing Date, and no proceeding shall be
deemed taken nor documents deemed executed or delivered until all have been
taken, delivered and executed.
(b) Conditions to Obligations of Innovus. The obligations of Innovus to
consummate the Share Exchange are subject to the satisfaction of, or Innovus'
written waiver of, each of the following conditions by or before the Termination
Date:
(i) Accuracy of Representations and Warranties. Intermark's
and the Exchanging Securityholders' representations and warranties contained in
this Agreement shall have been true and correct as of the dates when made and
again as of the Closing Date, except to the extent that the event or development
rendering such representation or warranty untrue, individually or in the
aggregate with all other events or developments rendering that or any other
representation or warranty of Intermark untrue, shall not have resulted in or
constitute, and could not reasonably be expected to result in or constitute, a
material adverse effect on Intermark or Innovus or on the ability of Intermark
or Innovus to consummate the Share Exchange.
(ii) Compliance with Covenants. Intermark and the Exchanging
Securityholders shall have performed, satisfied and complied with, in all
material respects, each of its agreements and covenants contained in this
Agreement, unless the failure to perform, satisfy or comply relates to an
immaterial obligation that, taken together with all other such failures, does
not constitute a material failure by Intermark to perform its obligations
hereunder.
(iii) Receipt of Legal Opinion. Innovus shall have received a
legal opinion from Stradling Yocca Carlson & Rauth, a Professional Corporation,
counsel for Intermark, addressed to Innovus and dated the Closing Date, in form
and substance reasonably satisfactory to Innovus, opining to customary matters
reasonably requested by Innovus, subject to such firm's customary limitations,
assumptions and qualifications.
(iv) Receipt of Officers' Certificate. Innovus shall have
received from Intermark a certificate, executed by respectively, the President
and Chief Financial Officer of Intermark and dated as of the Closing Date,
certifying to the fulfillment of the conditions specified in Section 6(d) (with
regard to Intermark only) and Section 6(c), including a certification that each
representation or warranty contained in Section 2 and 3 is true and correct as
of the Closing Date (or, if such certification cannot be made, specifying the
exceptions thereto), excepting only representations and warranties which speak
expressly as of an earlier specified date.
(v) Documents and Instruments in Satisfactory Form. All
corporate and other proceedings in connection with this Agreement and with the
Share Exchange and all documents and instruments incidental to the Share
Exchange shall be reasonably satisfactory in substance and form to Innovus and
its counsel and the Exchanging Securityholders and their respective counsel, if
any, and Innovus and its counsel and the Exchanging Securityholders and their
respective counsel, if any, shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
(vi) Audit Report. Independent certified public accountants of
Intermark shall have consented and agreed in writing to the inclusion of their
audit report for fiscal 1997 and any subsequent audited balance sheet in the
filings intended to be made by Innovus before or within 6 months after the
Closing Date with the Securities and Exchange Commission or the Nasdaq Stock
Market that in the judgment of Innovus require such consents to be included,
such as any Form 8-K's, Proxy Statements, and Form S-8's.
(c) Conditions to Obligations of Intermark. The obligations of Intermark to
consummate the Share Exchange are subject to the satisfaction of, or Intermark'
<PAGE>
written waiver of, each of the following conditions by or before the Termination
Date:
(i) Accuracy of Representations and Warranties. Innovus'
representations and warranties contained in this Agreement shall have been true
and correct as of the dates when made and again as of the Closing Date, except
to the extent that the event or development rendering such representation or
warranty untrue, individually or in the aggregate with all other events or
developments rendering that or any other representation or warranty of Innovus
untrue, shall not have resulted in or constitute, and could not reasonably be
expected to result in or constitute, a material adverse effect on Innovus or on
the ability of Innovus or Intermark to consummate the Share Exchange.
(ii) Compliance with Covenants. Innovus shall have performed,
satisfied and complied with, in all material respects, each of its agreements
and covenants contained in this Agreement, unless the failure to perform,
satisfy or comply relates to an immaterial obligation that, taken together with
all other such failures, does not constitute a material failure by Innovus to
perform its obligations hereunder.
(iii) Receipt of Legal Opinion. Intermark and the Exchanging
Securityholders shall have received a legal opinion from Callister, Nebeker &
McCullough, counsel for Innovus, addressed to Intermark and the Exchanging
Securityholders and dated the Closing Date, in form and substance reasonably
satisfactory to Intermark, opining to customary matters reasonably requested by
Intermark, subject to such firm's customary limitations, assumptions and
qualifications.
(iv) Receipt of Officers' Certificate. Intermark shall have
received from Innovus a certificate, executed by respectively, the President and
Chief Financial Officer of Innovus and dated as of the Closing Date, certifying
to the fulfillment of the conditions specified in Section 6(d) (with regard to
Innovus only) and Section 6(b), including a certification that each
representation or warranty contained in Section 4 is true and correct as of the
Closing Date (or, if such certification cannot be made, specifying the
exceptions thereto), excepting only representations and warranties which speak
expressly as of an earlier specified date.
(v) Documents and Instruments in Satisfactory Form. All
corporate and other proceedings in connection with this Agreement and with the
Share Exchange and all documents and instruments incidental to the Share
Exchange shall be reasonably satisfactory in substance and form to Intermark and
its counsel, and Intermark and its counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
(vi) Voting Proxies. All members of Innovus' management shall
have executed and delivered to Intermark stockholders agreements, providing for
the proxyholder or proxyholders designated by Intermark to hold their proxy to
approve the transactions referred to in this Agreement that are subject to
stockholder approval, namely the Reclassification and the subsequent Merger, and
none of such persons shall have breached or failed to perform, in any material
respects, any of their respective obligations or covenants under those
respective agreements; and the terms of, and the number of shares covered by,
such proxies shall be reasonably satisfactory to Intermark.
(vii) Registration Rights. Innovus shall have executed and
delivered to Exchanging Securityholders a registration rights agreement in form
and substance acceptable to Intermark and Innovus in a mutually satisfactory
form providing for rights to register Innovus Common Shares.
(viii) Board Approval. The Board of Directors of Innovus shall
have unanimously approved this Agreement, the Share Exchange, the
Reclassification, the subsequent Merger, and determined that the Share Exchange
and the transactions contemplated in this Agreement is entirely fair to Innovus
and the stockholders of Innovus and provides the best available financial value
to the stockholders of Innovus and is in Innovus' and such stockholders' best
interests, and shall not have rescinded or qualified such approval.
<PAGE>
(ix) Board Recommendation. The Board of Directors of Innovus
shall have unanimously recommended to its shareholders the amendments of its
certificate of incorporation referred to hereinabove.
(d) Conditions to Obligations of Each Party.
(i) There shall be no claim, action, suit, investigation or
other proceeding pending or overtly threatened before any court or other
governmental or regulatory entity that presents a substantial risk of restraint
or prohibition of the Share Exchange; and no such restraint or prohibition shall
be effective as of the Closing or the Closing Date, whether or not the action in
which the same was entered shall remain pending.
(ii) The Exchanging Securityholders shall have delivered for
exchange Intermark Shares representing at least 80% control of Intermark for
purposes of Section 368(a)(1)(B) of the Code.
(iii) Innovus, Intermark, the Exchanging Securityholders and a
mutually acceptable escrow agent shall have entered into the Escrow Agreement.
Section 7. Termination. This Agreement may be terminated, and the Share
Exchange abandoned, prior to the Closing solely by the following means and with
the following effects:
(a) By Mutual Agreement. Innovus and Intermark may terminate this Agreement by
mutual written consent at any time.
(b) By Intermark. Intermark may unilaterally terminate this Agreement: (i) If
Innovus has breached any of its representations or warranties or covenants
contained in this Agreement and such breach is of a nature that would, in the
reasonable determination of Intermark, cause the failure of the condition to
Intermark's obligations set forth in Section 6(c), and Innovus has failed to
cure such breach within ten (10) Business Days following written notice to
Innovus from the Intermark identifying and describing such breach in reasonable
detail; or (ii) Upon notice to Innovus at any time after June 30, 1998 (the
"Termination Date"), if the Closing and the Closing Date shall not have occurred
on or prior to such date, unless such failure results from Intermark breaching
any of its representations, warranties, covenants or agreements contained in
this Agreement in any material respect.
(c) By Innovus. Innovus may unilaterally terminate this Agreement: (i) If
Intermark has breached any of its representations or warranties or covenants
contained in this Agreement and such breach is of a nature that would, in the
reasonable determination of Innovus, cause the failure of the condition to
Innovus' obligations set forth in Section 6(b), and Intermark has failed to cure
such breach within ten (10) Business Days following written notice to Intermark
from Innovus identifying and describing such breach in reasonable detail; or
(ii) Upon notice to Intermark after the Termination Date, if the Closing shall
not have occurred on or prior to such date, unless the failure results from
Innovus breaching any of its representations, warranties, covenants or
agreements contained in this Agreement in any material respect.
(d) Effect of Termination; Remedies. In the event of the termination of this
Agreement pursuant to this Section 7, this Agreement shall forthwith become void
and there shall be no liability on the part of any Party hereto or any of its
affiliates, directors, officers or stockholders, and all documents, instruments
and consideration delivered hereunder shall be returned to the delivering party
within two days of such termination. Specifically, and without limiting the
generality of the foregoing, Intermark and Innovus agree that termination of
this Agreement shall be their sole and exclusive remedy for any nonwillful
breach by the other party of its representations, warranties and covenants under
<PAGE>
this Agreement. All costs and expenses incurred in connection with this
Agreement shall be paid by the party incurring such cost or expense.
Section 8. Remedies for Breaches of this Agreement.
a. Survival of Representations and Warranties. All of the representations
and warranties of Innovus, Intermark and the Exchanging Securityholders
contained in Sections 3 (other than Section 3(g)), 4 or 5 shall survive the
Closing hereunder (even if the damaged party knew or had reason to know of any
misrepresentation or breach of warranty at the time of Closing) and continue in
full force and effect until the expiration of ninety (90) calendar days after
the date on which Intermark delivers to Innovus the audit report of its
independent certified public accountants related to Intermark's September 30,
1997 balance sheet and financial statements for the period then ended. The
representations and warranties of the Exchanging Securityholders in Section 3(g)
shall survive the Closing Date for twenty (20) years. The date upon which the
representations and warranties expire is hereinafter called the "Expiration
Date." The remedies contained in this Section 8 shall constitute the sole
remedies of the Parties for claims under this Agreement.
b. Indemnification Provisions for Benefit of Innovus.
(1) In the event Intermark breaches (or in the event any third party alleges
facts that, if true, would mean Intermark has breached) any of its
representations or warranties contained in Section 4, or any other covenant or
obligation under this Agreement, and provided that Innovus makes a written claim
for indemnification against any of the Exchanging Securityholders pursuant to
Section 10(k) below before the Expiration Date, then each of the Exchanging
Securityholders agrees to indemnify Innovus from and against the entirety of any
Adverse Consequences Innovus may suffer through and after the date of the claim
for indemnification resulting from, arising out of, relating to, in the nature
of, or caused by the breach (or the alleged breach); provided, however, that the
Exchanging Securityholders shall not have any obligation to indemnify Innovus
from and against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach (or alleged breach) of
any representation or warranty of Intermark contained in Section 4 above except
to the extent that Innovus has suffered Adverse Consequences by reason of all
such breaches (or alleged breaches) in excess of a $250,000 aggregate threshold;
and provided, further, that the sole source of indemnity for Innovus under this
Section 8(b)(1) shall be the Exchanging Securityholders' deposits in the Escrow,
each in the same proportion, and the Exchanging Securityholders' aggregate
liability under this Section 8(b)(1) shall not exceed their deposits remaining
in the Escrow, and upon the release of the Escrow, shall have no liability under
this Section 8(b)(1).
(2) In the event any of the Exchanging Securityholders breaches (or in the event
any third party alleges fact that, if true, would mean any of the Exchanging
Securityholders has breached) any of his or its representations and warranties
in Section 3 above, and provided that Innovus makes a written claim for
indemnification against the Exchanging Securityholder pursuant to Section 10(k)
below before the Expiration Date, then the Exchanging Securityholder agrees to
indemnify Innovus from and against the entirety of any Adverse Consequences
Innovus may suffer through and after the date of the claim for indemnification
resulting from, arising out of, relating to, in the nature of, or caused by the
breach (or the alleged breach); provided, however, that the Exchanging
Securityholder's aggregate liability under this Section 8(b)(2) shall not exceed
the consideration received by the Exchanging Securityholder in the Share
Exchange. The representations and warranties of each of the Exchanging
Securityholders in Section 3 above and all other obligations of the Exchanging
Securityholders are several, and not joint, obligations.
c. Indemnification Provisions for Benefit of the Exchanging Securityholders. In
the event Innovus breaches (or in the event any third party alleges facts that,
if true, would mean Innovus has breached) any of its representations and
warranties in Section 5, or any other covenant or obligation under this
<PAGE>
Agreement, and provided that an Exchanging Securityholder makes a written claim
for indemnification against Innovus pursuant to Section 10(k) below prior to the
Expiration Date, then Innovus agrees to indemnify each such Exchanging
Securityholder from and against the entirety of any Adverse Consequences the
Exchanging Securityholder may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the breach (or the alleged breach) to the
extent that the Exchanging Securityholders have suffered in the aggregate
Adverse Consequences by reason of all such breaches (or alleged breaches) in
excess of a $250,000 aggregate threshold; and provided, further, that the sole
source of indemnity for the Exchanging Securityholders under this Section 8
shall be Innovus' deposit in the Escrow, and Innovus' aggregate liability under
this Section 8 shall not exceed its deposit in the Escrow.
d. Matters Involving Third Parties.
(1) If any third party shall notify any Party (the
"Indemnified Party") with respect to any matter (a "Third Party Claim") which
may give rise to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Section 8, then the Indemnified Party shall
promptly notify each Indemnifying Party thereof in writing; provided, however,
that no delay on the part of the Indemnified Party in notifying any Indemnifying
Party shall relieve the indemnifying Party from any obligation hereunder unless
(and then solely to the extent) the Indemnifying Party thereby is prejudiced or
the notice is given after the Expiration Date.
(2) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
satisfactory to the Indemnified Party so long as (A) the Indemnifying Party
notifies the Indemnified Party in writing within 15 days after the Indemnified
Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse
Consequences the Indemnified Party may suffer resulting from, arising out of,
relating to, in the nature of, or caused by the Third Party Claim, (B) the
Indemnifying Party provides the Indemnified Party with evidence reasonably
acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its
indemnification obligations hereunder, whether through the Escrow Fund or
otherwise, (C) the Third Party Claim involves only money damages and does not
seek an injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential custom or
practice materially adverse to the continuing business interests of the
Indemnified Party, and (E) the Indemnifying Party conducts the defense of the
Third Party Claim actively and diligently.
(3) So long as the Indemnifying Party is conducting the
defense of the Third Party Claim in accordance with Section 8(d)(2) above, (A)
the Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnifying Party (not to be withheld unreasonably), and (C) the
Indemnifying Party will not consent to the entry of any judgment or enter into
any settlement with respect to the Third Party Claim without the prior written
consent of the Indemnified Party (not to be withheld unreasonably).
(4) In the event any of the conditions in Section 8(d)(2)
above is or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, the Third Party Claim with the prior written consent of the
Indemnifying Party, which shall not be unreasonably withheld or delayed, to the
fullest extent provided in this Section 8, (B) the Indemnifying Parties will
reimburse the Indemnified Party promptly and periodically for the costs of
defending against the Third Party Claim (including reasonable attorneys' fees
<PAGE>
and expenses) to the fullest extent provided in this Section 8, and (C) the
Indemnifying Parties will remain responsible for any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the
nature of, or caused by the Third Party Claim to the fullest extent provided in
this Section 8.
(e) Determination of Adverse Consequences. The Parties shall take into account
the time cost of money (using the prime rate of Bank of America as the discount
rate) in determining Adverse Consequences for purposes of this Section 8.
(f) No Claims Against Intermark. Each of the Exchanging Securityholders hereby
agrees that he or it will not make any claim for indemnification against either
Intermark or Innovus by reason of the fact that he or it or any Affiliate was a
director, officer, employee, or agent of any such entity or was serving at the
request of any such entity as a partner, trustee, director, officer, employee,
or agent of another entity (whether such claim is for judgments, damages,
penalties, fines, costs, amounts paid in settlement, losses, expenses, or
otherwise and whether such claim is pursuant to any statute, charter document,
bylaw, agreement, or otherwise) with respect to any action, suit, proceeding,
complaint, claim, or demand brought by Innovus against Exchanging
Securityholders pursuant to this Agreement.
Section 9. Certain Covenants Prior to Closing.
(a) Access. Each party shall make available to the other all information
regarding the party that the other party reasonably may request and shall
authorize all reasonable visits to the party's premises with such staff,
consultants and experts as the other party may reasonably request. Innovus
agrees to coordinate closely all relocation activities and renegotiations with
Intermark's CEO. Each party shall conduct any such inquiries with appropriate
discretion and sensitivity to the other party's relationships with its
employees, clients and suppliers. The parties acknowledge that certain of the
information made available to one another pursuant to this Section 9 and
otherwise in connection with the Share Exchange may be confidential, proprietary
or otherwise nonpublic, and each party agrees, for itself and for each of
representatives, that it shall continue to comply with its obligations under the
agreement entitled Mutual Confidentiality & Nondisclosure between Innovus and
Intermark, a copy of which is attached hereto as Exhibit C (the "Confidentiality
Agreement"). The respective agreements of the parties contained in the
Confidentiality Agreement, which by this reference are incorporated herein and
made an integral part of this Agreement, shall survive any termination of this
Agreement and the consummation of the Share Exchange, except that if the Share
Exchange is consummated, the obligations of and restrictions on Innovus and
Intermark thereunder shall thereupon terminate. Each party shall remain
responsible for any disclosure of Confidential Information by any of its
representatives.
(b) Conduct in Ordinary Course. Each party shall (a) conduct its business in the
usual, regular and ordinary course of business consistent with past practice
(except as required by applicable Law or by this Agreement), (b) use all
reasonable efforts to maintain and preserve intact its business organization,
employees and advantageous contractual and business relationships and retain the
services of its officers and key employees (including by causing its current
insurance policies not to be cancelled or terminated or any of the coverage
thereunder to lapse prior to or upon the Closing, unless simultaneously with
such event replacement policies providing substantially similar coverage for
substantially similar (or lesser) premiums are in full force and effect), (c)
conduct relations with its employees, excluding hiring and terminating
practices, only in the ordinary course of business and consistent with past
practice, and (d) take no action which could reasonably be expected to adversely
affect or delay the ability of either party or any of their respective direct or
indirect subsidiaries to obtain any necessary approvals of any governmental or
regulatory entity or other third persons required for the Share Exchange or for
the transactions contemplated in connection therewith, or to perform its
covenants and agreements under this Agreement.
(c) Operating Restrictions. Without the other party's prior written consent
(which consent shall not be unreasonably withheld or delayed), and without
<PAGE>
limiting the generality of the provisions of this Agreement, each party shall
not, and each Subsidiary shall not:
(i) Amend or otherwise change its Articles or Certificate of
Incorporation, Certificate of Designation, or bylaws;
(ii) Issue, sell, pledge, dispose of or encumber, or authorize
the issuance, sale, pledge, disposition or encumbrance of, any shares of capital
stock of any class (other than upon the exercise of vested options under option
plans or conversions of convertible securities in accordance with their terms),
any convertible securities or any other rights of any kind to acquire 20 any
shares of capital stock or convertible securities, or any other ownership
interest (including, without limitation, any phantom interest) in the party;
(iii) Sell, pledge, dispose of, grant any security interest in
or encumber any assets of the party (except for (i) sales of assets or inventory
in the ordinary course of business and in a manner consistent with past
practice, (ii) dispositions of obsolete or worthless assets, (iii) sales of
immaterial assets not in excess of $10,000 individually or $25,000 in the
aggregate), (iv) private placements of securities by Intermark or Innovus on
terms mutually acceptable to Intermark and Innovus, and (v) as otherwise
expressly permitted in this Agreement;
(iv) Declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, or split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or amend the terms or change the period of exercisability of,
purchase, repurchase, redeem or otherwise acquire, any of its shares of stock or
propose to do any of the foregoing;
(v) Acquire (by Share Exchange, consolidation, or acquisition
of stock or assets) any corporation, partnership or other business organization
or division thereof; incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse or otherwise as an accommodation
become responsible for, the obligations of any person or, except in the ordinary
course of business consistent with past practice or in connection with purchases
of equipment or capital improvements made in the ordinary course of business and
consistent with past practices, make any loans or advances, (iii) enter into any
new or amend or terminate any existing material contract; (iv) authorize any
capital expenditures or purchase of fixed assets which are, in the aggregate, in
excess of $25,000; or (v) enter into or amend any contract, agreement,
commitment or arrangement to effect any of the matters prohibited by this
Section 9(c)(v);
(vi) Increase the compensation payable or to become payable to
its officers (such current compensation rates are set forth in the Intermark
Disclosure Schedule) or employees, or grant any severance or termination pay to,
or enter into any employment or severance agreement with any director, officer
or other employee of the party (except as expressly contemplated in this
Agreement), or establish, adopt, enter into or amend any collective bargaining,
any employee benefit plan or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any current or former directors, officers or
employees, except, in each case, as may be required by law, and except for
payment of deferred compensation to officers of Intermark;
(vii) Take any action to change accounting policies or
procedures (including, without limitation, procedures with respect to revenue
recognition, payments of accounts payable and collection of accounts
receivable);
(viii) Make any material tax election inconsistent with past
practice or settle or compromise any material federal, state, local or foreign
tax liability or agree to an extension of a statute of limitations, except to
the extent the amount of any such settlement has been reserved for in its
financial statements;
<PAGE>
(ix) Pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business and consistent with past practices of current liabilities
that have become mandatorily due and payable and are reflected or reserved
against in its financial statements; or
(x) Take, or agree in writing or otherwise to take, any of the
actions described in this Section 9(c), or any action which would make any of
the representations or warranties of the party contained in this Agreement
untrue or incorrect or prevent either party from performing or cause the party
not to perform its covenants hereunder.
(d) Prior to the Closing Date, Intermark shall act as placement agent for
Innovus to privately place, on a reasonable efforts basis, securities of
Innovus, the proceeds of which, after payment of out-of-pocket costs of
Intermark directly related to such activity, shall be used to pay outstanding
debts owed by Innovus to its creditors, to such creditors and on such terms as
are mutually satisfactory to Innovus and Intermark, and Innovus will use its
reasonable efforts to negotiate settlement agreements with all of its creditors
evidenced by agreements and documents satisfactory to Intermark.
(e) On or prior to the Closing Date, Innovus shall present to Intermark written
evidence that Innovus has taken all necessary action in order to effect the
following, under agreements with third parties on terms acceptable to Innovus
and Intermark: (a) termination of the leases as of May 1, 1998 for the leased
space Innovus occupies at 392 East 12300 South, Suite J, Draper, Utah, 84020,
which functions as a corporate facility under a three- year lease expiring in
2000; and (b) amendments of the stock options to purchase Innovus Common Shares
owned Terry Haas, David Mock, and all other members of Innovus management or
employees, including without limitation the holders of the options referred to
in item (z) of the definition of Fully-Diluted Innovus Shares, shall be amended,
on terms acceptable to Intermark, to suspend their exercisability until after
the Reclassification and provide that Innovus shall not be required to reserve
Innovus Common Shares for exercise of such options prior to the
Reclassification. In the event Innovus is unable to obtain such consents or
agreements, such party shall indemnify, defend and hold harmless Intermark from
the failure to obtain such consents or agreements, in form and substance
reasonably satisfactory to Intermark.
(f) Effective immediately after the Closing, Thomas Hemingway will be elected by
the Board of Director of Innovus to serve as Chief Executive Officer of Innovus
after the Transaction, and shall enter into an employment agreement for a term
of three (3) years or more on terms acceptable to Innovus and Thomas Hemingway.
(g) Innovus will use its best efforts to seek continued listing on the NASDAQ
OTC electronic bulletin board, and to cause Innovus's Common Stock to qualify
for such continued listing, and Intermark shall cooperate in such efforts.
(h) Each respective parties' Board of Directors will, subject to their fiduciary
duties, recommend that this Agreement and the transactions contemplated hereby
to its stockholders, and, subject to the requirements of applicable law, Innovus
will seek consent from holders of Common Stock in writing or at a special
meeting, pursuant to a proxy statement to be filed by Innovus with the
<PAGE>
Securities and Exchange Commission. Intermark will provide, and be responsible
for, all required information about Intermark and its affiliates for inclusion
in the proxy statement. Innovus will be responsible for all other information
therein. The parties and their respective representatives or counsel will
consult each other concerning the form and content thereof.
(i) Until this Agreement is terminated, neither Innovus nor its agents or
representatives shall, without the prior consent of Intermark, sell, agree to
sell, enter into negotiations to sell, or discuss the sale of the assets of
Innovus or the stock of Innovus, to or with any party except as disclosed to
Intermark in advance and agreed upon by both parties. Negotiations disclosed by
Innovus to Intermark and accepted by Intermark, as follows: (i) Innovus'
liquidation of old inventory; and (ii) Innovus' sale of securities as
contemplated in Section 9(d). Unless and until this Agreement is terminated in
accordance with its terms, neither Innovus nor any of its officers, directors,
employees, agents or other representatives shall (i) solicit, initiate, or
encourage, or enter into discussions or any letter of intent or agreement with
respect to, any inquiries, proposals or offers that contemplate, propose or
relate to any Acquisition Proposal (as hereinbelow defined), (ii) undertake or
consummate, any sale or other disposition of, or grant of any rights or options
with respect to, or any pledge, hypothecation or encumbrance of, any of the
outstanding shares of capital stock of Innovus or any authorized but unissued
shares of capital stock or convertible securities of Innovus; or (iii) provide
information regarding Innovus or its businesses or assets, capitalization,
financial condition or operating results to any person (other than as provided
in this Agreement or to a government agency having jurisdiction over Innovus).
Innovus shall immediately notify Intermark after receipt of any Acquisition
Proposal, or any modification of or amendment to any Acquisition Proposal, or
any request for nonpublic information relating to Innovus in connection with a
possible Acquisition Proposal or for access to the properties, books or records
of Innovus by any person or entity that informs the Board of Directors of
Innovus that it is considering making, or has made, an Acquisition Proposal.
"Acquisition Proposal" shall mean any inquiry, proposal, term sheet, discussion
draft, letter of intent or other communication or agreement that contemplates,
proposes or relates to (i) any possible sale or disposition by Innovus of, or
any mortgage, lien or encumbrance on, any of its assets (other than sales of
assets that are made in the ordinary course of business consistent with past
practices); (ii) any sales by Innovus or its Management or principal
shareholders or issuance of shares of capital stock or convertible securities of
Innovus (other than upon the exercise of vested Innovus options under its option
plans); (iii) any redemption or repurchase, or any recapitalization, of any of
the outstanding shares of Innovus' Common Stock by Innovus, (iv) any offer to
purchase more than five percent (5%) of the outstanding shares of capital stock
of Innovus, (v) any financing or refinancing, including any sale-leaseback of
the assets of Innovus that involves the granting of any security interest or
lien on, or the transfer of ownership of any of the assets of Innovus (other
than in the ordinary course of business), or (vi) any Share Exchange or
reorganization of Innovus with or any other business combination between Innovus
and any other entity.
(j) Innovus shall cause a meeting of its shareholders (the "Innovus Stockholder
Meeting") to be duly called and held as soon as reasonably practicable for the
purpose of voting on the approval and adoption of this Agreement and the Share
Exchange. The Directors of Innovus shall, subject to their fiduciary duties
under the DGCL as determined by the Board of Directors in their reasonable good
faith judgment, recommend approval and adoption of this Agreement and the Share
Exchange by Innovus' shareholders. In connection with such meeting, Innovus (i)
will promptly prepare and file with the SEC, will use its best efforts to have
cleared by the SEC and will thereafter mail to its shareholders as promptly as
<PAGE>
practicable the Innovus Proxy Statement and all other proxy materials for such
meeting, (ii) subject to the fiduciary duties of the Board of Directors of
Innovus under the DGCL as determined by the Board of Directors will use its best
efforts to obtain the necessary approvals by its shareholders of this Agreement
and the transactions contemplated hereby and (iii) will otherwise comply with
all legal requirements applicable to such meeting. Innovus has been advised that
all of its directors and executives currently intend to vote all shares owned by
them in favor of the Share Exchange. Innovus will provide Intermark with a copy
of the preliminary proxy statement and all modifications thereto prior to filing
or delivery to the SEC and will consult with Intermark in connection therewith.
Innovus will notify Intermark promptly of the receipt of any comments from the
SEC or its staff and of any request by the SEC or its staff for amendments or
supplements to the Innovus Proxy Statement or for additional information and
will supply Intermark with copies of all correspondence between Innovus or any
of its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Innovus Proxy Statement or the Share Exchange. If at
any time prior to Innovus' Shareholder Meeting there shall occur any event that
should be set forth in an amendment or supplement to the Innovus Proxy
Statement, Innovus will promptly prepare and mail to its shareholders such an
amendment or supplement.
(k) If any "fair price," "control share acquisition" or "moratorium" statute or
other anti-takeover or similar statute or regulation or any state "blue sky"
statute shall become applicable to the transactions contemplated hereby, each
constituent corporation and the members of the Board of Directors of the
constituent corporation shall grant such approvals and take such actions as are
necessary so that the transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise act to minimize the effects of such statute or regulation
on the transactions contemplated hereby or thereby.
(l) At or prior to the Closing Date, Innovus will relocate to Orange County,
California. Neither Innovus nor Intermark will offer any employee of Innovus any
salary increase as an inducement for such employee to relocate. No compensation,
termination or severance payment shall be paid by a party hereto in the event
that any employee declines continued employment with Innovus, other than payment
of accrued vacation pay.
(m) Each of the parties shall give prompt notice to the other party, of: (i) any
notice or other communication from any person alleging that the consent of such
person is or may be required in connection with the transactions contemplated by
this Agreement; (ii) any notice or other communication from any governmental or
regulatory entity in connection with the transactions contemplated by this
Agreement; and (iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving or
otherwise affecting it or any of its subsidiaries which, if pending on the date
of this Agreement would have been required to have been disclosed in a
Disclosure Schedule or which relate to the consummation of the transactions
contemplated by this Agreement.
Section 10. Miscellaneous Provisions.
(a) Expenses. If the Closing fails to occur, each of the parties shall be solely
responsible for all of their respective costs and expenses incurred in
connection with the transactions contemplated herein, including, without
limitation, legal fees, costs and expenses. If the Closing occurs, Intermark
shall bear the costs and expenses (including reasonable legal fees and expenses)
<PAGE>
incurred in connection with this Agreement and the transactions contemplated
hereby by itself, by the Exchanging Securityholders and by one counsel for the
Exchanging Securityholders; provided, however, that the reimbursement for legal
fees and disbursements of the counsel to Exchanging Securityholders shall not
exceed $10,000.
(b) Binding Effect. This Agreement shall be binding upon the successors and
assigns of the respective parties hereto.
(c) Specific Performance. Each of the parties executing this Agreement
("Parties") acknowledges and agrees that the other Parties would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to enforce specifically this Agreement and the terms and
provisions hereof in any action instituted in any court of the United States or
any state thereof having jurisdiction over the Parties and the matter, in
addition to any other remedy to which they may be entitled, at law or in equity.
(d) Counterparts. This Agreement may be executed in facsimile and in any number
of counterparts, each of which shall be deemed to be an original and all of
which together shall be deemed to be one and the same instrument. The execution
of this Agreement by fewer than all of the persons identified on the signature
pages hereto as securityholders of Intermark shall not detract from the
enforceability or binding effect of this Agreement as to all signatories, and
each Existing Securityholder is individually intending to be bound hereby.
(e) Headings. The subject headings of the sections and subsections of this
Agreement are included for purposes of convenience only and shall not affect the
construction or interpretation of any of its provisions.
(f) Waivers. Any party to this Agreement may waive any right, breach or default
which it has the right to waive; provided, that such waiver will not be
effective against the waiving party unless it is in writing and specifically
refers to this Agreement. No waiver will be deemed to be a waiver of any other
matter, whenever occurring and whether identical, similar or dissimilar to the
matter waived.
(g) Entire Agreement. This Agreement, including the Exhibits, disclosure
schedules and other documents referred to herein which form a part hereof, and
the Confidentiality Agreement, embodies the entire agreement and understanding
of the parties hereto, and supersedes all prior or contemporaneous agreements or
understandings (whether written or oral) among the parties, in respect to the
subject matter contained herein. Without limiting the generality of the
foregoing, this Agreement shall supersede the letter dated March 12, 1998 from
Intermark addressed to Innovus which comprised the letter of intent between the
parties.
(h) Arbitration. All disputes between the parties hereto shall be determined
solely and exclusively by binding arbitration under, and in accordance with the
rules then in effect of, the Judicial Arbitration and Mediation Service, or any
successors hereto ("JAMS"), in Orange County, California, unless the parties
otherwise agree in writing. The parties shall jointly select a single
arbitrator. In the event the parties fail to agree upon an arbitrator within ten
(10) days, then each party shall select an arbitrator and such arbitrators shall
then select a third arbitrator to serve as the sole arbitrator, provided that if
<PAGE>
either party, in such event, fails to select an arbitrator within seven (7)
days, such arbitrator shall be selected by the JAMS upon application of either
party. Judgment upon the award of the agreed upon arbitrator or the so chosen
third arbitrator, as the case may be, shall be binding and shall be entered into
by a court of competent jurisdiction.
(i) Attorneys' Fees. In the event a dispute arises with respect to this
Agreement, the party prevailing in such dispute shall be entitled to recover all
expenses, including, without limitation, reasonable attorneys' fees and costs,
incurred in determining such party's rights, in preparing to enforce, or in
enforcing such party's rights under this Agreement, whether or not it was
necessary for such party to institute suit and, if instituted, whether with
regard to trial or appeals and shall separately entitle the prevailing party to
the costs for collection of judgments.
(j) Severability. Any provision of this Agreement which is illegal, invalid or
unenforceable shall be ineffective to the extent of such illegality, invalidity
or unenforceability, without affecting in any way the remaining provisions
hereof.
(k) Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger, addressed
to the following address, or any address designated in writing by such party by
way of notice to the other parties:
Innovus Corporation
2060 E. 2100 South
Salt Lake City, Utah 84109
Attention: David Mock
And a copy to:
Paul Shaphren
Callister, Nebeker & McCullough
Gateway Tower E., Suite 900
10 East South Temple
Salt Lake City, UT 94133
Intermark Corporation
4600 Campus Drive
Newport Beach, CA 92660
Attention: Thomas Hemingway
And a copy to:
Nicholas J. Yocca
Stradling, Yocca, Carlson & Rauth P.C.
660 Newport Center Drive, Suite 1600
Newport Beach, CA 92660
Exchanging Securityholders
c/o Tom Hemingway at Intermark's address above
and with a copy as addressed above
(l) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the DGCL and/or CGCL, as applicable, and otherwise the laws of
the State of California without regard to any conflict of law principles
thereof.
<PAGE>
(m) Further Assurances. Each party agrees to cooperate with the other party to
effect the transactions contemplated hereunder. Without limiting the generality
of the foregoing, each of the parties shall execute, deliver and perform such
agreements, documents and instruments as the other party may request in order to
fully perform and carry out the terms and provisions of this Agreement. Each of
the parties agrees to use all reasonable efforts to take, or cause to be taken,
all actions, and to do, or cause to be done, and to assist and cooperate with
the other party in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable the
Share Exchange and the other transactions contemplated by this Agreement,
including (i) the obtaining of all other necessary actions or nonactions,
waivers, consents and approvals from governmental or regulatory entities and the
making of all other necessary registrations and filings, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
preparation of the Innovus Proxy Statement, and (iv) the execution and delivery
of any additional instruments necessary to consummate the transactions
contemplated by, and to fully carry out the purposes of, this Agreement.
(n) No Third Party Beneficiaries. Nothing expressed or implied in this Agreement
is intended, or shall be construed, to confer upon or give any person other than
the parties executing this Agreement and their respective successors and
permitted assigns any rights or remedies under or by reason of this Agreement.
(o) Power of Attorney. Each of the Exchanging Securityholders hereby appoints
Tom Hemingway, James Budd and T. Richard Hutt, and each of them, as its attorney
in fact, to act in the Exchanging Securityholder's name, place and stead, to do
any and all acts and things as if such Exchanging Securityholder were personally
present in order to deliver this Agreement, to accept notices under this
Agreement, deliver stock certificates, option agreements, or convertible notes,
accompanied by instruments of transfer on behalf of the Exchanging
Securityholder, evidencing the Intermark Shares or Intermark Options as
contemplated in this Agreement for cancellation or exchange, and to execute and
deliver this Agreement (in substantially the form as executed by the Exchanging
Securityholder and including any changes, deletions or additions to the form of
this Agreement executed by the Exchanging Securityholder as may be approved in
the discretion of the attorney-in-fact, such as the completion of any blanks
found herein, the correction of typographical or clerical errors, the change of
dates herein, and any other changes that do not materially detract from the
benefits or add to the burdens hereof to the Exchanging Securityholder in the
sole judgment of the attorney-in-fact or as may be requested by Innovus), the
Intermark Disclosure Schedule, the Exhibits hereto, the Registration Rights
Agreement and the Escrow Agreement, with the same effect as if such Exchanging
Shareholder had personally executed and delivered the same. The Exchanging
Securityholders are aware of the personal interests of their attorneys -in-fact
in this Agreement, as Exchanging Securityholders, and as directors, officers and
employees of Intermark, and as future directors, officers and employees of
Innovus, and expressly desire that such interests shall not limit the authority
granted by this power of attorney. Innovus' counsel, Intermark's counsel, and
counsel to the Exchanging Securityholders shall be entitled to rely on this
power of attorney until written notice of revocation given in accordance with
this Agreement is actually received. The Exchanging Securityholders further
agree and acknowledge that Intermark is entitled to waive conditions to
Intermark's obligations and to accept waivers of conditions to Innovus'
obligations without notice to or consent from the Exchanging Securityholder.
(p) Stradling Yocca Carlson & Rauth. The Exchanging Securityholders hereby
acknowledge that the law firm of Stradling Yocca Carlson & Rauth represents only
<PAGE>
Intermark in connection with this Agreement, the Share Exchange and related
other corporate matters, and does not represent or advise any Exchanging
Securityholder, directly or indirectly, or provide any other assurances or
advice concerning this Agreement or otherwise. The Exchanging Securityholders
are hereby informed of their right to obtain separate counsel to advise them on
tax, financial and all other matters related to this Agreement, and that
separate counsel may be helpful to them in regard to understanding, evaluating
or negotiating this Agreement, understanding the merits and risks of the Share
Exchange, considering any effects on their individual tax and financial
position, or refusing to execute and deliver this Agreement. By execution and
delivery of this Agreement, each Exchanging Securityholder is confirming its
having consulted with separate counsel or its knowing and voluntary waiver of
such right.
WHEREAS, the parties hereto have entered into the foregoing Agreement
and Plan of Share Exchange as of the date first above written.
INNOVUS CORPORATION, INTERMARK CORPORATION,
a Delaware corporation a California corporation
By: /s/ TERRY R. HAAS By: /s/ THOMAS HEMINGWAY
-------------------------------- ----------------------------
Terry R. Haas, Chief Executive Thomas Hemingway, Chief
Officer and President Executive Officer
By: /s/ DAVID MOCK By: /s/ T. RICHARD HUTT
------------------------------- ---------------------------
David Mock, Chief Financial Officer T. Richard Hutt, Secretary
and Chairman of the Board
By: /s/ JAMES H. BUDD
----------------------------
James H. Budd, Vice President
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
EXCHANGING SECURITYHOLDERS
/s/ TOM HEMINGWAY
------------------------------------
Tom Hemingway, an individual
Number of Intermark
Common Shares: 960,000
Number of Intermark Options: 250,000
/s/ JAMES H. BUDD
------------------------------------
James H. Budd, an individual
Number of Intermark
Common Shares: 960,000
Number of Intermark Options: 100,000
/s/ T. RICHARD HUTT
------------------------------------
T. Richard Hutt, an individual
Number of Intermark
Common Shares: 960,000
Number of Intermark Options: 100,000
/s/ DETRA MAURO
------------------------------------
Detra Mauro, an individual
Number of Intermark
Common Shares: 120,000
/s/ TOM KIRK
------------------------------------
Tom Kirk, an individual
Number of Intermark
Common Shares: 35,000
/s/ CJ D'ANGELO
------------------------------------
CJ D'Angelo, an individual
Number of Intermark
Common Shares: 90,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
/s/ ROBIN CRUSE
------------------------------------
Robin Cruse, an individual
Number of Intermark
Common Shares: 35,000
/s/ BRIAN BAE
------------------------------------
Brian Bae, an individual
Number of Intermark
Common Shares: 10,000
/s/ JENNIFER NAGEL
------------------------------------
Jennifer Nagel, an individual
Number of Intermark
Common Shares: 10,000
/s/ TERRY MURPHY
------------------------------------
Terry Murphy, an individual
Number of Intermark
Common Shares: 12,500
Number of Intermark Options: 10,000
------------------------------------
Greg Clark, an individual
Number of Intermark
Common Shares: 12,500
Number of Intermark Options: 10,000
/s/ NICK YOCCA
------------------------------------
Nick Yocca, an individual
Number of Intermark
Common Shares: 20,000
Number of Intermark Options: 60,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Lawrence L. Tyson, an individual
Number of Intermark
Common Shares: 60,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Kirit Goradia, an individual
Number of Intermark
Common Shares: 45,000
/s/ MATTHEW MINARDI
------------------------------------
Matthew Minardi, an individual
Number of Intermark
Common Shares issuable under
convertible note: 4,000
------------------------------------
John Schmitz, an individual
Number of Intermark
Common Shares issuable under
convertible note: 6,666
------------------------------------
John Saunders, an individual
Number of Intermark
Common Shares issuable under
convertible notes: 105,540
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
/s/ TERRY DORSEY
------------------------------------
Terry Dorsey, an individual
Number of Intermark
Common Shares issuable under
convertible notes: 73,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Sam D'Angelo, an individual
Number of Intermark
Common Shares issuable under
convertible note: 13,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Charles F. Marks, an individual
Number of Intermark
Common Shares issuable under
convertible note: 3,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
James Cruse, an individual
Number of Intermark
Common Shares issuable under
convertible note: 3,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
/s/ DALE MAX BOYKO
------------------------------------
Dale Max Boyko, an individual
Number of Intermark
Common Shares issuable under
convertible notes: 13,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Karen Emmett, an individual
Number of Intermark
Common Shares issuable under
convertible note: 6,666
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Delores E. Vierila, Trustee of the
Delores E. Vierila Trust
Number of Intermark
Common Shares issuable under
convertible note: 13,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Allan Budd, an individual
Number of Intermark
Common Shares issuable under
convertible note: 13,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Gary Noe, an individual
Number of Intermark
Common Shares issuable under
convertible note: 3,333
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
GLOBAL MARKETING PARTNERS, INC.
By:
------------------------------------
Stan Hirshman, President
Number of Intermark
Common Shares: 6,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
NUTRIDATA
By:
------------------------------------
Riza Rahman, President
Number of Intermark
Common Shares: 6,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
/s/ BILL KESSELRING
------------------------------------
Bill Kesselring, an individual
Number of Intermark
Common Shares: 25,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Dave Lyons, an individual
Number of Intermark Options: 10,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
------------------------------------
Bobby Orbach, an individual
Number of Intermark
Common Shares: 10,000
[SIGNATURES CONTINUE ON NEXT PAGE]
<PAGE>
[AGREEMENT AND PLAN OF SHARE EXCHANGE: SIGNATURES CONTINUED FROM PRIOR PAGE]
/s/ JOHN GUNNISON
------------------------------------
John Gunnison, an individual
Number of Intermark
Common Shares issuable under
convertible note: 13,333
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