SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: July 30, 1999
(Date of earliest event reported: May 28, 1999)
Tadeo Holdings, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 1-11568 95-4228470
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
5 Hanover Square, 24th Floor New York, NY 10004
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 271-8511
N/A
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(Former name or former address, if changed since last report)
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Item 5. OTHER INFORMATION.
On May 28, 1999, as amended by agreements dated as of June 1,
1999, Tadeo Holdings, Inc., a Delaware corporation ("Tadeo"), through its
recently-incorporated wholly-owed subsidiary active in the electronic
commerce industry, Tadeo-E Commerce Corp., a Delaware corporation
("Tadeo-E"), entered into a Web Design and Consulting Agreement with
Azurel, Ltd.("Azurel"), a public company engaged in the business of
manufacturing and distributing cosmetics and other related products
("Azurel Web Agreement"). Under the terms of the Azurel Web Agreement,
based upon the fee schedule provided in that agreement, Tadeo-E-Commerce is
providing all necessary consulting and development services to design,
maintain and enhance Azurel's electronic commerce internet sites and other
related electronic commerce marketing vehicles. In connection with
assistance provided to Tadeo-E's electronic commerce development
activities, for Azurel and other clients, Tadeo-E paid Azurel $500,000 for
Azurel's provision of content and marketing consulting services. At the
same time, to enhance the strategic relationship between Azurel, Tadeo and
Tadeo-E, Tadeo-E loaned to Azurel an aggregate of $1,528,166.67 under the
terms of a Credit Agreement, as amended, dated as of June 1, 1999 (with
part of the aggregate principal reflecting the restructuring of a March 31,
1999 short-term $500,000 promissory note), with interest payable at the
rate of 8% per annum, payable monthly, and with all principal and accrued
interest due on May 28, 2001 (the "Credit Agreement"). Repayment of amounts
outstanding under the Credit Agreement are secured by a pledge of
approximately 66.66% of the outstanding shares of certain Azurel operating
subsidiaries, under the terms of a Pledge Security Agreement, by and
between Azurel and Tadeo. In further consideration for its advances to
Azurel under the Credit Agreement, Tadeo E received from Azurel warrants to
acquire 500,000 shares of Azurel Common Stock, exercisable at $1.50 per
share, with the shares acquired upon exercise of such Warrants being
subject to registration rights provided under the terms of Registration
Rights Agreement, as amended, dated as of June 1, 1999.
Under agreements dated as of June 30, 1999, Tadeo-E entered into
both a Web Design and Consulting Agreement and an Online Hosting Agreement
with Diplomat Direct Marketing Corporation("Diplomat"), a public company
engaged in the business of distributing women's and children's fashion
apparel and related accessories through catalogue sales and over the
internet ("Diplomat Web Agreements"). Under the terms of the Diplomat Web
Agreements, based upon the fee schedules provided in those agreements,
Tadeo-E is providing all necessary consulting and development services to
design, maintain and enhance Diplomat's electronic commerce internet sites
and other related electronic commerce marketing vehicles, as well as to
host those sites on behalf of Diplomat. In connection with assistance
provided to Tadeo-E's electronic commerce development activities, for
Diplomat and other clients, Tadeo-E paid Diplomat $500,000 for Diplomat's
provision of content and marketing consulting services. In addition to
payments by Diplomat for the services provided under the Diplomat Web
Agreements, in further consideration for its services to Diplomat under the
Web Agreements Tadeo-E will receive royalties from Diplomat based upon
Diplomat's ongoing electronic commerce businesses (the "Royalties"). The
Royalties are equal to 5% of Diplomat's electronic commerce revenues, until
$500,000 has been paid to Tadeo-E, and thereafter 20% of certain Diplomat
electronic commerce net income in perpetuity.
At the same time, to enhance the strategic relationship between
Diplomat, Tadeo and Tadeo-E, Tadeo-E (i) purchased, for $1,000,000, 10,000
shares of Diplomat's Series G Convertible Redeemable Preferred Stock (which
is redeemable for the $1,000,000 purchase price plus accrued and unpaid
dividends out of the proceeds of a secondary offering of Diplomat
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common stock which has been filed with the Securities and Exchange
Commission) (the "Preferred Stock") and (ii) exchanged $1,000,000
approximate market value of its common stock (285,715 shares) for
$1,000,000 approximate market value of Diplomat common stock (1,066,098
shares), under the terms of the Securities Purchase Agreement, dated as of
June 30, 1999, by and between Tadeo, Tadeo-E and Diplomat. The shares of
Diplomat common stock acquired upon conversion of the Preferred Stock and
the Diplomat shares received in exchange for Tadeo common stock are subject
to the terms of a Registration Rights Agreement between Diplomat and
Tadeo-E dated as of June 30, 1999, and Diplomat's obligations to Tadeo-E as
a holder of the Preferred Stock (e.g., redemption payments) are secured
under the terms of a Pledge Security Agreement, dated as of June 30, 1999,
by and between Tadeo-E, Diplomat and the Rubin Family Irrevocable Stock
Trust (the "Trust") , with the pledge by the Trust of 300,000 shares of
Tadeo common stock held by the Trust.
Item 7. EXHIBITS.
The following Exhibits are filed as part of this Report:
Exhibit 10.1 Form of Web Site Design and Consulting Agreement, dated as of
June 1, 1999, by and between Azurel, Ltd. ("Azurel") and Tadeo E
Commerce Corp. ("Tadeo-E").
Exhibit 10.2 Credit Note, dated May 28, 1999, made by Azurel in favor of
Tadeo Holdings, Inc. ("Tadeo") (the "Credit Note").
Exhibit 10.3 First Allonge to Credit Note, made by Azurel in favor of
Tadeo-E, dated June 1, 1999.
Exhibit 10.4 Credit Agreement, dated as of May 28, 1999, by and between
Tadeo and Azurel.
Exhibit 10.5 Pledge Security Agreement, dated as of May 28, 1999, by and
between Azurel and Tadeo.
Exhibit 10.6 Warrant, to acquire 300,000 shares of Azurel common stock,
dated May 28, 1999.
Exhibit 10.7 First Amendment to Credit Agreement, dated as of June 1,
1999, by and between Tadeo, Tadeo-E and Azurel.
Exhibit 10.8 Registration Rights Agreement, dated as of May 28, 1999, by
and between Tadeo and Azurel.
Exhibit 10.9 Warrant, to acquire 200,000 shares of Azurel common stock,
dated June 1, 1999.
Exhibit 10.10 Form of On-Line Hosting Agreement, dated as of June 30,
1999, by and between Tadeo-E and Diplomat Direct Marketing
Corporation ("Diplomat").
Exhibit 10.11 Web Site and Consulting Agreement, dated as of June 30,
1999, by and between Tadeo-E and Diplomat.
Exhibit 10.12 Securities Purchase Agreement, dated as June 30, 1999, by
and between Tadeo, Tadeo-E and Diplomat.
Exhibit 10.13 Registration Rights Agreement, dated as of June 30, 1999,
by and between Tadeo-E and Diplomat.
Exhibit 10.14 Pledge Security Agreement, dated as of June 30, 1999, by and
between Tadeo-E, The Rubin Family Irrevocable Stock Trust and
Diplomat.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: July 30, 1999 TADEO HOLDINGS, INC.
By: /s/ Brian D. Bookmeier
Brian D. Bookmeier
President
[FORM]
WEB SITE DESIGN AND CONSULTING AGREEMENT
Agreement, dated as of this 1st day of June, 1999, by and between TADEO
E-COMMERCE CORP, a Delaware corporation having an address at 5 Hanover Square,
New York, NY 10004 ("Developer") and AZUREL, LTD., a Delaware corporation having
an address at 509 Madison Avenue, New York, NY 10022 ("Client"), regarding
Client's interest in securing the services of Developer to design, develop,
test, implement, launch and service a World Wide Web Site which will be owned by
Client and to provide various additional consulting and other services after the
site is successfully launched (the "Project").
The parties hereby agree as follows:
1. THE SITE. Client is planning to launch a new World Wide Web Site tentatively
entitled "_______________________________" in conjunction and with the
cooperation of [the hosting company] (the "Collaborator") and which will be
devoted, at least initially, to issues related to the cosmetics industry and the
Client's products and services, including but not limited to cosmetics and other
materials and services manufactured and/or distributed, or otherwise provided,
by the Client (the "Site"). The Site, as presently contemplated, will consist of
the initial components set forth in EXHIBIT A (the "Site Components"). The Site
Components, as well as the contents therein and all aspects whatsoever of the
Site, may change as the Site is designed and developed, and, thereafter from
time to time as specified by Client (subject to Developer's right to terminate
this Agreement under Paragraph 9.1). All aspects of the Site shall be subject to
Client's approval, in its reasonable discretion. As between Developer and
Client, Client shall be solely responsible for the editorial content of the
Site.
2. DEVELOPER'S SERVICES. Developer confirms that it is experienced in the custom
design, development, launch and delivery of web sites and agrees to provide the
following services for the Site, all subject to Client's approval:
a) THE SITE AND LAUNCH MODULE. During Phase I of the Project, the Developer
shall design, develop, test, implement and launch the overall Site structure and
programming and shall develop the Site Components, both for the initial version
of the Site to be launched (the "Launch Module") and so as to accommodate
Additional Modules (see Paragraph 2(b) below). During Phase I of the Project
Developer shall deliver to Client's reasonable satisfaction all materials,
information, software, source code, documentation, guides, manuals and similar
material as are necessary for Client to maintain, update, edit, modify,
terminate, redesign and otherwise operate and service the Site. Developer shall
be responsible for the design, structure and implementation of all aspects of
the Site
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to Client's reasonable satisfaction (other than the gathering and delivery to
Developer of editorial content therefor, which shall be the responsibility of
Client). As part of Developer's services required hereunder, but not in
limitation thereof, Developer shall:
(i) work and confer with Client throughout the design process to
ascertain both Client and Collaborator's design needs and requirements for the
Site;
(ii) design the look, operation, and programming of the Site,
including, without limitation, the functional specifications, user interface and
user interface specifications, technical design specifications, search and
retrieval software and graphic elements of the Site design (such as layout,
typeface, illustrations and photographs), both to accommodate Client's current
needs and so as to accommodate modifications and additions thereto as the Site
expands and changes;
(iii) develop and deliver necessary HTML programming;
(iv) develop and deliver necessary CGI programming;
(v) incorporate Client Content (as hereinafter defined in Paragraph
3.1) for the launch;
(vi) transfer Site files to Client's server;
(vii) fully test (and correct where needed) the Site and all Site
Components and aspects (conduct a soft launch - a Beta test in the staging area)
to Client's reasonable satisfaction;
(viii) launch the Site;
(ix) provide Client with all technical and design documents as well as
a troubleshooting guide needed to ensure that Client can with ease maintain,
update, modify, edit, cancel and otherwise operate the Site;
b) ADDITIONAL MODULES. At Client's request from time to time during the
Development Term (as defined in Paragraph 5), as Phase II of the Project
Developer agrees, if requested, to design, develop, implement, test and launch
Additional Modules subject to the fee schedule contained on Exhibit B], but only
to the extent that the requests are made in accordance with the Schedule annexed
hereto as EXHIBIT B (the "Schedule"). Additional Modules may update and expand
the entire Site, but also may include new material for the original Launch
Module. It is anticipated by Developer and Client that _______(_) Additional
Modules will be requested during the first contract year during the Development
Term, and
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________(_) in the second contract year during the Development Term, each one
every _______(__) months. For each Additional Module, Developer shall:
(i) after discussions with Client, submit proposed designs to Client;
(ii) develop and deliver necessary HTML programming;
(iii) develop and deliver necessary CGI programming;
(iv) develop and deliver necessary functional specifications, user
interface and user interface specifications, technical and design documentation
and specifications, and search and retrieval software;
(v) conduct a soft launch (a Beta test) to Client's reasonable
satisfaction; (vi) transfer Additional Module files to Client's server;
(vii) amend the Site's maintenance manual and troubleshooting guide to
include the Additional Module; and
(viii) launch the new Additional Module.
c) DELIVERY. Developer agrees to submit to Client for its approval, and in
accordance with the Schedule, all of the Phase I Deliverables set forth in
EXHIBIT C and all of the Phase II Deliverables for each Additional Module
requested in accordance with the conditions of Paragraph 2(b) above
(collectively, the "Deliverables," and each separate item a "Deliverable"). Upon
receipt, Client shall promptly review and determine whether each such
Deliverable materially satisfies the acceptance criteria set forth in EXHIBIT C
(as supplemented for the acceptance criteria with respect to any Additional
Modules). Client shall give Developer prompt written notice if Client determines
that a Deliverable does not materially satisfy the acceptance criteria, and such
notice shall in detail set forth the deficiencies found in the Deliverables by
Client. Developer shall, at no cost to Client, promptly correct any such
deficiencies. Upon completion of the corrective action by Developer, Client will
reconsider acceptance of the Deliverable. If the Deliverable still does not
materially satisfy the acceptance criteria within thirty (30) days of Client 's
notice of disapproval, and the end of such period is beyond the specific dates
for Deliverable delivery in the Schedule (as it may be supplemented), Client
may: (i) terminate this Agreement in accordance with Paragraph 9; or (ii)
require Developer to continue to attempt to correct the deficiencies, reserving
the right to terminate in accordance with Paragraph 9. It is understood that
Client may be obligated to obtain the approval also of Collaborator.
d) ONGOING CONSULTATION. Developer agrees to consult, strategize and
coordinate with Client and, if requested by Client, with Collaborator,
throughout
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the provision of Developer's services hereunder to ensure Client's
reasonable satisfaction with and reasonable approval of each aspect of the Site.
e) MAINTENANCE, UPDATES AND ONGOING SERVICE.
(i) If requested by Client, and for consideration to Developer as
specified on EXHIBIT D, Developer agrees to provide, at its sole cost and
expense, all maintenance required to correct defects, bugs, viruses, design
flaws and similar inherent problems in the Site, during the Development Term and
for a period of one year thereafter (the "Maintenance Term"); PROVIDED, that the
Developer is not obligated to provide additional maintenance services requested
by Client during periods beyond the Maintenance Term, without its specific
written approval, which approval may be withheld in Developer's full discretion;
and FURTHER PROVIDED, that the Developer shall at no time be obligated to
provide such maintenance services in the event that such services are required
due to Client's modification or editing of the Site without Developer's written
approval thereof, Client's destruction of the Site, or Client's license of the
Site for use and/or operation by any other person without Developer's prior
written consent.
(ii) In addition, but only during the Development Term, Developer
agrees to provide other specified design, maintenance and other services
requested by Client, at the fees set forth on EXHIBIT D; PROVIDED, that
Developer shall have the ability to reject such requests(s) based upon
Developer's reasonable determination of Client's inability to pay timely for
such services.
3. CLIENT PROVIDED CONTENT.
3.1. Client shall be responsible for obtaining all licenses, sublicenses,
assignments, permissions, waivers or other rights or clearances necessary for
Developer 's incorporation of any content provided by Client ("Client Content")
into the Deliverables. Client shall deliver one (1) copy of each item of Client
Content to be provided by Client to be incorporate into a Deliverable. Client
shall provide to Developer as part of that copy all credits and/or attributions
which must be included in the Deliverable. Developer shall use each item of
Client Content provided by Client only in conjunction with the Deliverable for
which it was provided.
3.2. In the event that Client does not obtain the licenses, sublicenses,
assignments, permissions, waivers or other rights or clearances necessary to use
particular materials as Client Content in a Deliverable, Developer shall not be
obligated to incorporate such materials into the Deliverable.
4. RIGHTS IN DELIVERABLE.
4.1. Developer acknowledges that Client shall retain all title to and all
rights in any intellectual property provided by Client to Developer under this
Agreement.
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4.2. The original content component of the Deliverables produced by
Developer shall be considered to be works made for hire for all purposes,
including for purposes of interpretation under the U.S. Copyright Law, 17 U.S.C.
ss.101 et seq. To the extent that such Deliverables are not construed to be
works made for hire, Developer shall, and hereby does, perpetually, and without
further consideration, assign all right, title and interest to such Deliverables
to Client. All right, title and interest in the original content component of
the Deliverables produced by Developer , including any copyright or other
proprietary right in the Deliverables, shall be the sole property of Client.
Notwithstanding the foregoing, nothing herein should be construed to vest
ownership of any right, title or interest to any computer software component
("Software") of a Deliverable under this Agreement.
4.3. Developer, or its licensors, shall retain all right, title and
interest to Software. Developer hereby grants to Client a perpetual, worldwide,
royalty-free license, or sublicense, to duplicate, exhibit, perform, transmit,
broadcast, distribute, maintain and modify Software, provided that such Software
is only used by Client in accordance with this Paragraph 4.3 in connection with
substantially all of the content component of the Deliverables provided by
Developer to Client for use in connection with the Site.
4.4. Developer agrees to execute and deliver any documents and take all
such other actions as may be necessary or desirable in order to carry into
effect the provisions of this Paragraph 4, including, without limitation, the
execution of assignments, copyright registrations and patent applications.
5. TERM. The term of this Agreement during which period Developer shall be
obligated to provide to Client the services described in Paragraph 2
(collectively, the "Developer Services") shall extend for a period of __ months
from the date of this Agreement (the "Development Term"). The parties may extend
the Development Term of this Agreement by mutual written agreement.
6. RESERVED.
7. CLIENT'S SERVICES AND DELIVERABLES. Client shall be responsible for
a) obtaining and securing a domain name and address for the Site;
b) preparing, gathering and/or writing all Client Content (including
illustrations, photographs, charts, graphs and similar information and material
to accompany the editorial content) to be included in the Site, including all
licenses, etc., as referenced in Paragraph 3 of this Agreement;
c) delivering to Developer fully edited editorial content in a mutually
agreed upon digital format;
d) housing the Site on Client's server; and
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e) coordinating with Collaborator on all aspects of the Site development,
design and operation.
8. THE SCHEDULE. In order to meet the Client's requirements for the Project,
Client and Developer have together developed the Schedule. Developer shall
provide all of its services under this Agreement in accordance with the
Schedule, unless Client and Developer agree otherwise. No changes may be made in
the Schedule without the written consent of Client and Developer.
9. TERMINATION.
9.1. Client may terminate upon ten (10) days' prior written notice this
Agreement in the event Client has rejected any Deliverable in accordance with
the provisions of Paragraph 2(c) and Developer has failed to correct the
deficiencies during the specified time period. Developer may terminate this
Agreement upon ten (10) days' prior written notice in the event that (i) Client
fails to pay to Developer when due the compensation amounts required to be paid
pursuant to Paragraph 12 and Schedule D, (ii) Client materially changes the
parameters for development of the Site or the Site Components, (iii)
Collaborator unreasonably withholds its approval of Developer's work product
under this Agreement to the extent its approval is necessary to launch the Site
or augment or maintain the Site, or (iv) Client otherwise materially breaches
its obligations under this Agreement.
9.2. Either party may terminate this Agreement, effective immediately upon
written notice if: (i) all or a substantial portion of the assets of the other
party are transferred to an assignee for the benefit of creditors or to a
receiver or to a trustee in bankruptcy; (ii) a proceeding is commenced by or
against the other party for relief under bankruptcy or similar laws and such
proceeding is not dismissed within sixty (60) days; or (iii) the other party is
adjudged bankrupt or insolvent. Termination of this Agreement shall not relieve
either party of any obligation accrued prior to the termination date.
9.3. In the event of termination of this Agreement: (i) Developer shall be
entitled to retain all sums paid to the date of termination, (ii) Client shall
own all the results and proceeds of Developer's services rendered to the date of
such termination as work for hire, and (iii) Developer shall promptly deliver
all materials, information, documents, draft and any other property secured,
produced and/or developed by Developer pursuant to this Agreement, including,
without limitation, all Deliverables as prepared to the date of termination;
PROVIDED, that notwithstanding termination of this Agreement by either party,
and for any reason, except as otherwise specifically provided in Paragraph 12
below, (i) Client shall continue to be obligated to pay to Developer the
Royalties (as hereinafter defined in Paragraph 12) and (ii) in the event that
such termination occurs prior to Developer's receipt from Client of aggregate
Royalties equal to $500,000, Client
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shall continue to be obligated to pay to Developer in cash (U.S. Dollars),
within thirty (30) days of the date of termination of this Agreement, the
difference between $500,000 and the aggregate amount of Royalties delivered to
Developer prior to the date of termination of this Agreement (which amount shall
be credited as the payment of Royalties for purposes of Paragraph 12).
9.4. Termination of this Agreement shall not limit either party from
pursuing any remedies available to it for any breach of this Agreement. All
obligations of either party set forth in Paragraphs 4,9,12,16 and 17 of this
Agreement shall survive termination of this Agreement.
10. CREDIT. Provided Developer fully performs its obligations hereunder,
Developer shall be entitled to receive the following credit in the Site, the
size and placement of which shall be mutually determined by Client and
Developer:
"----------------------"
11. OWNERSHIP. Client shall own the Site and all aspects thereof, except as set
forth in Paragraphs 3 and 4. Client shall have the right to modify, edit,
destroy, license, exploit or use the Site in any way, without compensation or
consultation with Developer.
12. CONSIDERATION. In recognition and acknowledgment of the market consulting
and e-commerce content services previously provided by Client to Developer, for
which services Developer has previously advanced $500,000 to Client, in full
consideration for all of Developer's services and Deliverables provided
hereunder for Phase I and Phase II through and including launch of Site and
completion and launch of the scheduled Additional Modules pursuant to Paragraph
2(b) and the Schedule, Client shall compensate Developer as follows:
a) Developer shall receive royalties (the "Royalties") based upon all
quarterly gross revenues generated by Client and its consolidated subsidiaries,
as determined under generally accepted accounting principles ("GAAP"),
consistently applied for purposes of Client's financial reporting obligations
with the Securities and Exchange Commission (the "SEC"), from sales (whether
direct or indirect), fees, licenses, royalties, consulting, or any other forms
of revenue or compensation which are derived, directly or indirectly, from
electronic commerce [(which includes but is not limited to commercial
transactions which are in any way solicited, or initiated, or conducted, or
concluded, or otherwise consummated (subject to subsequent delivery or transfer
of the subject matter of the transactions) through use of Worldwide Web Sites or
otherwise through use of the Internet (the "Gross Revenues")], which Royalties
(i) shall equal 5% of Gross Revenues until Developer has received Royalties in
cash the aggregate amount of which equals $500,000; and (ii) thereafter shall
equal 3% of Gross Revenues in perpetuity; PROVIDED, that this obligation to pay
Royalties to Developer, except by operation of law, shall not be assignable by
Client to any person without the
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written consent of Developer, which consent may be withheld in Developer's full
discretion; FURTHER PROVIDED, that notwithstanding any termination of this
Agreement, the payment of Royalties in accordance with the terms hereof shall
continue; and PROVIDED, FURTHER, that at the option of Developer, in the event
of the sale, conveyance or disposition of all or substantially all of the assets
of Client, the effectuation by the Client of a transaction or series of related
transactions in which more than 50% of the voting power of the Client is
disposed of, for the consolidation, merger or other business combination of the
Client with or into any other Person (as defined below) or Persons when the
Client is not the survivor, the Developer may terminate this Agreement on ten
(10) days' written notice and Client shall be required to distribute, upon
consummation of and as a condition to any such transaction(s) an amount equal to
the difference between $750,000 and the aggregate amount of Royalties previously
distributed to Developer (which amount shall be credited as the payment of
Royalties for purposes of this Paragraph 12). "Person" shall mean any
individual, corporation, limited liability company, partnership, association,
trust or other entity or organization. The amount of Royalties for which Client
is obligated to pay Developer under the terms hereof shall be paid to Developer
within forty-five days following the last day of each fiscal quarter of Client,
commencing with the quarter ended June 30, 1999.
13. NO OBLIGATION TO PUBLISH. Nothing in this Agreement shall obligate Client to
launch, publish or continue to publish the Site; PROVIDED, that in the event
that Client (i) fails to launch the Site on or before September 1, 1999, or (ii)
fails to continue to publish the site for a period of at least five (5) years
from the date hereof (the "Publication Period"), and at all times during the
Publication Period Client does not use its best efforts to generate significant
revenue from use of the Site, or otherwise from electronic commerce generally,
then within thirty (30) days following its receipt of written notice from
Developer of a breach by Client of either subprovision (i) or (ii), Client shall
be obligated to pay to Developer the difference between $500,000 and the
aggregate amount of Royalties previously distributed to Developer(which amount
shall be credited as the payment of Royalties for purposes of this Paragraph 12)
within thirty (30) days of written notification therefor given to Client by
Developer.
14. REPRESENTATIONS AND WARRANTIES.
14.1.Developer represents and warrants to Client that: (i) Developer has
the full right, power and authority to enter into and to fully perform this
Agreement; (ii) the design of the Site and all design and programming aspects of
the Site as delivered by Developer shall be original and shall be owned by
Client as work for hire or by transfer of all rights, including the copyright
thereto; (iii) neither the design nor programming of the Site, nor any other
material or facet added to the Site by Developer (other than Client Content
supplied by Client) contains any libelous material or any material which
constitutes an invasion of privacy or publicity, or infringes any trademark,
copyright, patent, trade secret, or other
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intellectual property right; and (iv) the Site as delivered by Developer shall
be free of "bugs," viruses, defects or design flaws.
14.2. Client represents and warrants to Developer that: (i) Client has the
full right, power and authority to enter into and to fully perform this
Agreement; (ii) to the extent that Client is required to obtain rights,
permissions and credit and/or attribution information with respect to the Client
Content, Client will do so accurately and completely; and (iii) the Client
Content provided by Client will not contain any libelous material or any
material which constitutes an invasion of any right of privacy or publicity, or
infringes upon any trademark, copyright, patent, trade secret or other
intellectual property right.
14.3. No party shall in any circumstances be liable to the other party or
any other party for any loss of business or profits, or any other indirect,
consequential, incidental, punitive or similar damages arising from the breach
of this Agreement, even if it has been advised of the possibility of such
damages.
14.4. THE WARRANTIES STATED HEREIN ARE LIMITED WARRANTIES AND THE ONLY
WARRANTIES MADE BY THE PARTIES. THE PARTIES WAIVE ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
15. INDEMNIFICATION.
15.1.During the Term of this Agreement and for one (1) year thereafter,
Developer shall indemnify and hold Client harmless from and against any and all
claims, demands, actions, losses, liabilities, damages, costs and expenses
(including, but not limited to, reasonable attorneys' fees) arising out of or
resulting from Developer 's material breach of Paragraph 14.1 of this Agreement,
provided that Client (i) notifies Developer promptly of any written claims or
demands against Client, (ii) gives Developer the opportunity to defend or settle
any such claim at Developer 's expense, and (iii) cooperates with Developer , at
Developer 's expense, in defending or settling such claim.
15.2. During the Development Term of this Agreement and for one (1) year
thereafter, Client shall indemnify and hold Developer harmless from and against
any and all claims, demands, actions, losses, liabilities, damages, costs and
expenses (including, but not limited to, reasonable attorneys' fees) arising out
of or resulting from Client's material breach of Paragraph 14.2 of this
Agreement, provided that Developer (i) notifies Client promptly of any written
claims or demands against Developer , (ii) gives Client the opportunity to
defend or settle any such claim at Client's expense, and (iii) cooperates with
Client, at Client's expense, in defending or settling such claim.
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16. CONFIDENTIALITY.
16.1.Each party shall retain in confidence and shall not, without the prior
written consent of the other party (the "Disclosing Party"), disclose in any
manner or use, except under the terms and prior to the termination of this
Agreement, any materials disclosed to a party (the "Receiving Party") by the
Disclosing Party and either marked at the time of disclosure as being
confidential or identified in writing by the Disclosing Party within thirty (30)
days of disclosure to the Receiving Party as being confidential ("Confidential
Information"); PROVIDED, that if the receiving Party is compelled by law
(whether through court order or subpoena) to disclose such Confidential
Information, the Receiving Party shall provide the Disclosing Party with prompt
notice of such compelled disclosure.
16.2. This Paragraph 16 shall impose no obligation upon the Receiving Party
with respect to any Confidential Information: (i) in the public domain at the
time received by Receiving Party; (ii) which enters the public domain other than
by breach of the Receiving Party's obligations hereunder; (iii) known to the
Receiving Party prior to receipt from the Disclosing Party; (iv) received by
Receiving Party from a third party if such third party has the right to make
such disclosure; or (v) independently developed by the Receiving Party without
access to Confidential Information.
16.3. Upon the Disclosing Party's request or termination of this Agreement,
the Receiving Party will, at its election, either promptly deliver to the
Disclosing Party or destroy all Confidential Information in every form in the
Receiving Party's possession.
17. GENERAL.
17.1.The relationship between the parties shall be that of independent
contractors. Nothing in this Agreement shall create, or be deemed to imply the
creation of, any partnership, joint venture or other relationship. Neither party
shall have the authority to incur any obligation, contractual or otherwise, in
the name or on behalf of the other party. Each party shall bear its own costs
and expenses in connection with performance of this Agreement.
17.2. This Agreement and any exhibits or appendices hereto constitute the
entire agreement between the parties with respect to the subject matter hereof
and supersede all prior and contemporaneous communications. Neither this
Agreement nor any exhibits or appendices hereto shall be modified except by a
written agreement dated subsequent to the date of this Agreement and signed on
behalf of the parties by their respective duly authorized representatives.
17.3. If this Agreement shall be terminated or held by a court of competent
jurisdiction to be invalid, illegal or unenforceable as to particular
provisions, this Agreement shall remain in full force and effect as to the
remaining provisions.
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<PAGE>
17.4. No waiver of any breach of any provisions of this Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach of the same or
any other provisions hereof or thereof, and no waiver shall be effective unless
made in writing and signed by the duly authorized representative of the party to
be charged.
17.5. All notices that Developer or Client may give to the other pursuant
to this Agreement shall be in writing and shall be hand delivered or sent by
registered or certified mail postage prepaid, return receipt requested, by
facsimile (with confirmation back), or by overnight courier service, postage
prepaid, to the parties at the addresses provided above or to such other address
or as either party shall designate by written notice given in accordance with
this Section, with notice being deemed given five days' after being deposited
with the United States mail, upon hand delivery, upon receipt of confirmation
back that a facsimile was received and one day after deliver to a nationally
recognized overnight courier service (if so deposited or delivered as described
above).
17.6. This Agreement shall be binding on Developer and Client and the
respective successors and permitted assigns of each party. Except as permitted
in this Agreement, no party may assign any of its rights or delegate any of its
obligations under this Agreement to any third party without the express written
consent of the other party, which consent may be withheld in either party's sole
discretion.
17.7. This Agreement between Developer and Client is not exclusive and the
parties are free to engage in other relationships of a similar nature with other
parties.
17.8. Client hereby grants Developer its permission to (i) disclose to
potential customers of Developer that Client is a customer of Developer , and
(ii) duplicate, exhibit, perform, transmit, broadcast and distribute
Deliverables to potential customers of Developer for purposes of publicizing
Developer's services.
17.9. This Agreement shall be governed and construed in accordance with the
internal substantive laws of the State of New York without regard to its
conflicts of laws principles.
17.10. The section headings contained in this Agreement are for purposes of
convenience and reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
17.11. Neither party shall be in material breach if failure to perform any
obligation hereunder is caused solely by supervening conditions beyond that
party's control, including acts of God, civil commotions, strikes, labor
disputes and governmental demands or requirements.
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<PAGE>
17.12. This Agreement may be executed in counterparts which, when taken
together, shall constitute one and the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto, each acting with proper
authority, have executed this Agreement under seal as of the ___ day of June,
1999.
TADEO E-COMMERCE CORP. AZUREL, LTD.
By: By:
Damon Testaverde, President Frank DeSimone, President
<PAGE>
EXHIBIT A
SITE COMPONENTS
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<PAGE>
EXHIBIT B
PROJECT SCHEDULE
PHASE I MILESTONES DUE DATE
PHASE II MILESTONES DUE DATE
- 15 -
<PAGE>
EXHIBIT C
DEVELOPER'S DELIVERABLES
PHASE I DELIVERABLES:
PHASE II DELIVERABLES:
- 16 -
<PAGE>
EXHIBIT D
FEE SCHEDULE
- 17 -
CREDIT NOTE
$1,000,000 May 28, 1999
- ----------
FOR VALUE RECEIVED, AZUREL LTD. ("Maker") promises to pay to the order
of TADEO HOLDINGS, INC., or its successors or assigns, together with any other
holder hereof ("Holder" or "Bank"), at _______________, New York _____, or such
other place as Holder may from time to time designate in writing, in lawful
money of the United States of America, the aggregate unpaid principal amount of
One Million Dollars ($1,000,000), plus accrued interest and any applicable costs
or charges, as follows:
1) Payments.
(a) Monthly payments of accrued interest shall be due and
payable on the first day of the first month after the
date hereof and on the first day of every month
thereafter until this Note is paid in full.
(b) Maker shall have no obligation to repay any
outstanding principal balance hereof prior to the
Maturity Date, as hereinafter defined, unless
acceleration is made by Holder pursuant to the
provisions of this Note or the Credit Agreement or
the Pledge Security Agreement, each dated the date
hereof, between Maker and Bank (collectively the
"Credit and Security Agreements") whereupon the
entire outstanding principal balance shall be paid
(c) All principal and accrued interest hereunder shall be
paid in full on that date which is two calendar years
after the date of this instrument, or if not a
business day, on the next succeeding business day
(the "Maturity Date").
2) Interest. This Note shall bear interest computed daily on the
outstanding principal balance on the basis of a 360 day year, at a rate equal to
eight percent (8%) per annum, but in no event shall the interest rate be greater
than the maximum rate of interest allowed to be contracted by applicable law.
3) This Note may be prepaid in whole or in part any time without
premium or penalty. Any payment or prepayment hereunder shall be applied first
to unpaid costs of collection and late charges, if any, then to accrued and
unpaid interest and the balance, if any, to principal.
4) After maturity or acceleration, this Note shall bear interest at the
Default Interest Rate herein until paid in full. The "Default Interest Rate"
shall be the lesser of (i) five percent (5%) over the interest rate in effect
immediately prior to default and (ii) the Maximum Rate. Any judgment hereon
awarded to Holder shall bear interest at the highest allowable rate until paid.
5) Maker shall pay a late charge of two percent (2%) of any required
payment of principal or interest on this Note which is not received by Holder
within ten (10) days of when
<PAGE>
such payment is due. The parties agree that this charge is a fair and reasonable
charge for the late payment and shall not be deemed a penalty.
This Note is executed pursuant to the Credit Agreement of even date and
is subject to all of the terms and conditions thereof, including the Events of
Default therein, provided that the terms of this Note shall apply in the event
of an inconsistency between the terms of the Credit Agreement and this Note.
This Note is secured pursuant to the terms of the Pledge Security Agreement of
even date.
In no event shall Maker be obligated to pay interest or payments in the
nature of interest in excess of the maximum rate of interest permitted by law
("Maximum Rate"). Any interest in excess of the Maximum Rate paid by Maker
("excess sum") shall be credited as a payment of principal, or if Maker so
request in writing, returned to Maker, or, if the indebtedness and other
obligations evidenced by this Note have been paid in full, returned to Maker
together with interest at the same rate as was paid by Maker during such period.
Any excess sum credited to principal shall be credited as of the date paid to
Holder, it being the intent of Holder to conform strictly to the limitations of
applicable laws governing the charging of interest.
In the event that this Note should be found not to be a negotiable
instrument, the parties hereto acknowledge and agree that Article 3 of the
Uniform Commercial Code, as now or hereafter in effect in the State of New York,
nevertheless sets forth the respective contracts, warranties, rights and
obligations of Holder and of Maker and any other person liable for payment
hereof, except to the extent that there can be no holder in due course hereof.
Maker hereby (a) expressly waives any valuation and appraisal,
presentment, demand for payment, notice of dishonor, protest, notice of
nonpayment or protest, all other forms of notice whatsoever, and diligence in
collection; (b) consents that Holder may, from time to time and without notice
or demand, (i) extend, rearrange, renew or postpone any or all payments and/or
(ii) release, exchange, add to or substitute all or any part of any collateral
for this Note; and (c) agrees that Holder, in order to enforce payment of this
Note, shall not be required first to institute any suit or to exhaust any of its
remedies against Maker or to attempt to realize on any collateral for this Note.
In the event that this Note is collected by legal action, or otherwise
with the advice of attorneys at law, Maker hereby agrees to pay all costs of
collection including reasonable attorneys' fees and expenses, whether or not
suit is brought, and whether incurred in connection with legal advice,
collection, trial, appeal, bankruptcy or other creditors' proceedings.
Holder may accept partial payments or payments marked "payment in full"
or "in satisfaction" or words to similar effect at any time. Acceptance of such
payments shall not affect or vary the duty of Maker to pay all obligations when
due hereunder, and shall not affect or impair the right of Holder to pursue all
remedies available to it hereunder, or under any of the other agreements
securing or guaranteeing payment hereof.
The remedies of Holder shall be cumulative and concurrent, and may be
pursued singularly, successively or together, at the sole discretion of Holder,
and may be exercised as often as occasion therefor shall arise. No act of
omission or commission of Holder, including
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<PAGE>
specifically any failure to exercise or forbearance in the exercise of any
right, remedy or recourse, shall be deemed to be a waiver or release of the
same, such waiver or release to be effected only through a written document
executed by Holder and then only to the extent specifically recited therein. A
waiver or release with reference to any one event shall not be construed as
continuing or as constituting a course of dealing, nor shall it be construed as
a bar to, or as a waiver or release of, any subsequent right, remedy or recourse
as to a subsequent event.
MAKER BY EXECUTING THIS NOTE OR ANY OTHER DOCUMENT CREATING SUCH
LIABILITY, WAIVES ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION, WHETHER ARISING IN
CONTRACT OR TORT, BY STATUTE OR OTHERWISE, IN ANY WAY RELATED TO THIS NOTE OR TO
THE CREDIT AND SECURITY AGREEMENTS, OR OTHER LOAN DOCUMENT. MAKER HEREBY
IRREVOCABLY CONSENTS TO THE NONEXCLUSIVE JURISDICTION AND VENUE OF THE COURTS OF
THE STATE OF NEW YORK AND OF ANY FEDERAL COURT, IN EITHER CASE LOCATED IN NEW
YORK COUNTY IN CONNECTION WITH ANY ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS NOTE. THIS PROVISION IS A MATERIAL INDUCEMENT FOR HOLDER'S
EXTENDING CREDIT TO MAKER AND NO WAIVER OF LIMITATION OF HOLDER'S RIGHTS UNDER
THIS PARAGRAPH SHALL BE EFFECTIVE UNLESS IN WRITING AND MANUALLY SIGNED ON
HOLDER'S BEHALF.
Maker acknowledges that the above paragraph has been expressly
bargained for by Holder as part of the loan evidenced hereby and that, but for
Maker's agreement, Holder would not have extended the loan for the term and with
the interest rate provided herein.
IN WITNESS WHEREOF, Maker has executed this Note on the day and year
first above written.
By: /S/GERARD SEMHON
Its: CHAIRMAN
FIRST ALLONGE TO CREDIT NOTE
ALLONGE, dated June 1, 1999, attached to and forming a part of
the Credit Note, dated May 28, 1999 (the "Note"), made by AZUREL LTD., a
Delaware corporation ("Maker"), payable to the order of TADEO HOLDINGS, INC., a
Delaware corporation ("Payee") in the original principal amount of $1,000,000.
WHEREAS, Payee has previously advanced an aggregate of
$1,500,000 to Maker as follows: (i) $500,000 pursuant to a promissory note,
dated March 31, 1999, which matured on May 31, 1999 bearing interest at 20.8%
and remains unpaid ("Note 1"); and (ii) $1,000,000 pursuant to the Note;
WHEREAS, repayment of the Note is secured by specified
collateral identified in that certain Pledge Security Agreement by and between
Maker and Payee, dated as of May 28, 1999 (the "Pledge Agreement");
WHEREAS, Payee and Maker desires to: (i) amend Note 1 and
amend the Note for the purpose of making the payee for all of such indebtedness
the Payee's wholly-owned subsidiary, Tadeo E-Commerce Corp.; (ii) amend the Note
to include the $500,000 unpaid principal plus $28,166.67 of accrued interest
with respect to funds advanced pursuant to Note 1, an aggregate of $1,528,166.67
(the "Secondary Advances"), as amounts to be repaid under the terms of and on
the same schedule as all funds advanced under the original terms of the Note,
and to include the Secondary Advances as obligations to be secured under the
terms of the Pledge Agreement.
NOW, THEREFORE, in consideration for the mutual promises
expressed herein, and such other consideration as is hereby acknowledged by all
parties hereto as adequate consideration under the terms hereof, the parties
hereto do hereby agree as follows:
1. NOTE PRINCIPAL.
The Note is hereby amended to reflect that the principal
amount of the Note is One Million Five Hundred Twenty-Eight Thousand One Hundred
Sixty-Six and 67/00 Dollars ($1,528,166.67) rather than One Million Dollars
($1,000,000).
2. PAYEE OF THE NOTE; FIRST INTEREST PAYMENT.
The Note is hereby amended to reflect that: (i) the "Holder"
or "Bank" for all purposes of the Note is TADEO E-COMMERCE CORP., a Delaware
corporation ("Subsidiary"), having an address at 5 Hanover Square, New York, NY
10004, rather than TADEO HOLDINGS, INC.; and (ii) the first payment of interest
under the Note is not due until July 1, 1999.
<PAGE>
- 2 -
3. SECURITY.
Payee and Maker do hereby agree that all obligations under the
Note, as augmented under the terms hereof, are secured by the Collateral as
defined in, and under the terms of, the Pledge Agreement.
3. In all other respects, the Note is confirmed, ratified, and
approved and, as amended by this Allonge, shall continue in full force and
effect.
IN WITNESS WHEREOF, Maker and Payee have caused this Allonge
to be executed and delivered by their respective duly authorized officers as of
the date and year first above written.
AZUREL LTD.
By: /S/ GERARD SEMHON
Gerard Semhon, Chairman
TADEO HOLDINGS, INC.
By: /S/ ALEXANDER KALPAXIS
AGREED AND ACKNOWLEDGED:
TADEO E-COMMERCE CORP.
By: /S/ DAMON TESTAVERDE
CREDIT AGREEMENT
THIS CREDIT AGREEMENT is made as of the 28th day of May, 1999, by and
among TADEO HOLDINGS, INC., a Delaware corporation having an office and place of
business at 4207 Grand River Avenue, Suite 20, Novi, Michigan 48735 (hereinafter
called "Lender"), and AZUREL LTD., a Delaware corporation, having its principal
office and place of business at 509 Madison Avenue, New York, New York 10022
(hereinafter called "Borrower").
1. AMOUNT AND TERMS OF CREDIT. Subject to all of the terms and
conditions of this Agreement, Lender agrees to lend to Borrower and Borrower
agrees to borrow from Lender an aggregate principal amount of One Million
Dollars ($1,000,000.00) ("Loan").
The Loan shall be evidenced by a Credit Note in the amount of
$1,000,000.00, in the form of EXHIBIT A hereto (the "Credit Note"). Lender shall
record all advances under the Credit Note and all payments made by or on behalf
of Borrower on account thereof. Any payment on the Loan shall be credited first
to payment of late fees, if any, then to accrued and unpaid interest and the
balance, if any, to principal.
The proceeds of the Loan shall be used for general corporate purposes.
1.1 INTEREST. The outstanding principal balance of the Credit
Note shall bear interest at eight (8%) percent per annum, with default interest
charged on any amounts in default as provided in the Credit Note.
1.2 TERM. The term of the Loan is two years, commencing on May
28, 1999.
1.3 ADDITIONAL CONSIDERATION. As additional consideration for
Lender's agreement to make the Loan, Borrower has granted to Lender a warrant to
purchase 300,000 shares of Borrower's Common Stock, $.01 par value, in the form
of EXHIBIT B (the "Warrants"), the shares of Common Stock underlying such
Warrants being subject to the terms of a Registration Rights Agreement in the
form of EXHIBIT C (the "Registration Rights Agreement").
2. DEFINITIONS. The following terms shall have the following meanings
in this Agreement:
2.1 ACCOUNTING TERMS. All accounting terms not specifically
defined in this Agreement shall be construed in accordance with generally
accepted accounting principles as applied in the United States.
<PAGE>
2.2 MATERIAL ADVERSE EFFECT. A Material adverse Effect is a
material adverse impact on the results of operations, liquidity, or future
business prospects of the Borrower.
3. COLLATERAL. The obligations of Borrower to the Lender pursuant to
this Agreement and the Credit Note shall be secured as follows:
3.1 PLEDGE SECURITY AGREEMENT. A first perfected security
interest pursuant to the Pledge Security Agreement in 670 shares of the Common
Stock of each of Private Label Cosmetics, Inc. and Fashion Laboratories, Inc.
(collectively "PLC") in the form of EXHIBIT D hereto (the "Security Agreement").
4. CONDITIONS OF LENDING. Lender shall have no obligation to make any
advances of the Loan, except upon fulfillment of each of the following
conditions:
4.1 As of the date of this Agreement, the representations and
warranties of Borrower set forth in Section 5 of this Agreement shall be true
and correct in all material respects.
4.2 No Event of Default specified in Section 8 hereof, and no
event which with notice or lapse of time or both would become such an event of
default shall have occurred and be continuing.
5. REPRESENTATIONS AND WARRANTIES OF BORROWER. Borrower makes the
following representations and warranties to Lender which shall be deemed to be
continuing representations and warranties so long as any indebtedness of
Borrower to Lender arising hereunder remains unpaid:
5.1 Borrower is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which incorporated.
5.2 Borrower has the requisite corporate powers to transact
the business in which it is engaged and is duly licensed or qualified and in
good standing in each jurisdiction in which the conduct of its business requires
such license or qualification, except where the failure to be so licensed or
qualified could not reasonably be expected to have a material adverse effect on
the business, operations or condition (financial or otherwise) of the Borrower
("Material Adverse Effect").
5.3 Borrower has full power and authority to borrow hereunder
and to execute, deliver and perform this Agreement, the Credit Note, the
Warrants, the Registration
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<PAGE>
Rights Agreement and the Security Agreement, all of which have been duly
authorized by all proper and necessary corporate action.
5.4 This Agreement constitutes, and the Credit Note and the
Security Agreement when executed and delivered pursuant hereto will constitute
the legal, valid and binding obligations of Borrower enforceable in accordance
with their respective terms, except to the extent that enforcement of any such
obligations may be limited by bankruptcy, insolvency, reorganization or similar
laws of general application affecting the rights and remedies of creditors
generally.
5.5 No consent, approval or authorization of, or registration,
declaration or filing with, any governmental body or authority or any other
party is required in connection with the valid execution, delivery or
performance of this Agreement, the Credit Note, the Warrants, the Registration
Rights Agreement or Security Agreement or in connection with any other
transactions contemplated hereby.
5.6 As of the date of this Agreement, there are no material
actions, suits, or proceedings pending or, to the knowledge of Borrower,
threatened against Borrower.
5.7 Borrower is not in violation of any term of (i) any
charter, by-law, mortgage, indenture, indebtedness or other material instrument
or agreement, or (ii) of any order, writ, judgment, injunction, decree or
demand, or (iii) of any statute, rule or regulation, or the rules of the Nasdaq
Stock Market, Inc., which violation could reasonably be expected to have a
Material Adverse Effect; and the execution and delivery of this Agreement, the
Credit Note, the Warrants, the Registration Rights Agreement and the Security
Agreement and the performance of each is and will be in compliance with all of
the foregoing terms and will not result in any such violation.
5.8 Borrower is not the subject of any pending, or threatened,
litigation before any court or administrative tribunal, or the subject of any
inquiry from the Nasdaq Office of Listing Investigations, which litigation,
threatened litigation or inquiry could reasonably be expected to have a Material
Adverse Effect if it were to result in a decision adverse to the Borrower.
5.9 Borrower has duly filed all tax returns required to be
filed in any jurisdiction, including, without limitation, all Federal income tax
returns and have duly paid all taxes shown as being due thereon, except taxes
that are being contested in good faith by appropriate proceedings. All other
taxes, assessments and governmental charges on Borrower's assets and income
which are due and payable have been paid.
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<PAGE>
5.10 Borrower has good and marketable title to all of its
assets subject, as of the Closing Date, to no lien, pledge, assignment, security
interest or other encumbrances except as set forth on Exhibit "E" attached
hereto.
5.11 No proceeds of the loans will be used to acquire any
security in any transaction which is subject to Sections 13 and 14 of the
Securities Exchange Act of 1934, as amended. Borrower is not an "investment
company" or a company "controlled" by an "investment company" (within the
meaning of the Investment Company Act of 1940, as amended).
5.12 Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying margin stock (within the
meaning of Regulation U issued by the Board of Governors of the Federal Reserve
System). No proceeds of the loans will be used to purchase or carry any such
margin stock or to extend credit to others for the purpose of purchasing or
carrying any such margin stock.
6. AFFIRMATIVE COVENANTS. During the term of this Agreement and so long
as the Credit Note shall remain unpaid:
6.1 Borrower will furnish to Lender within forty-five (45)
days after the end of each fiscal quarter, and within one hundred twenty (120)
days after the end of each fiscal year, unaudited and audited, respectively,
consolidated financial statements of Borrower at and as of the end of each such
period, all in such detail as Lender may reasonably request, certified by either
the chief executive officer or the chief financial officer of Borrower.
6.2 Borrower shall also permit Lender to periodically inspect
and review Borrower's books and records, at reasonable times and upon reasonable
notice. Such inspections shall be at the Lender's expense.
6.3 Borrower will promptly inform Lender of the commencement
of any action, suit, counterclaim or proceeding against Borrower, or any of
Borrower's Subsidiaries involving (i) a claim in excess of One Hundred Fifty
Thousand Dollars ($150,000.00), unless such claim is fully covered by insurance.
6.4 Borrower will promptly pay all of its material taxes,
assessments and other governmental charges prior to the date on which all
penalties are attached thereto, establish adequate reserves for the payment of
taxes and assessments and make all required withholding and other tax deposits
unless the validity thereof is being contested in good faith or the failure to
do so could not reasonably be expected to result in a Material Adverse Effect.
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<PAGE>
6.5 Lender shall have the right to designate one person to be
appointed to the Borrower's Board of Directors, which designee shall also be
nominated for election to Borrower's Board of Directors at any stockholders
meetings at which directors are elected; PROVIDED, that such Lender designee
shall serve on the Compensation and Stock Option Committees of Borrower's Board
of Directors.
7. NEGATIVE COVENANTS. During the term of this Agreement and so long as
the Credit Note shall remain unpaid:
7.1 Borrower will not mortgage, pledge or otherwise encumber
or suffer to be encumbered any of its assets without the prior written consent
of Lender, except for liens granted to Lender or liens incurred in the ordinary
course of Borrower's business in connection with regular commercial transactions
usual and customary in Borrower's industry, and except for existing liens and
replacements, substitutions or extensions thereof which secure the same or
lesser amounts.
7.2 Borrower will not convey, lease or sell all or any
substantial portion of its property, assets or business to any other party,
except the sale of inventory in the ordinary course of business, if, after
giving effect to such transaction, the stated value of assets on Borrower's
balance sheet, exclusive of good will, shall be less than two-thirds of the
stated value of assets on Borrower's balance sheet, exclusive of good will,
immediately before such transaction.
7.3 Borrower will not guarantee, endorse or otherwise become
contingently liable for the debts or other obligations of any other person or
entity other than in the ordinary course of business consistent with past
business practice.
7.4 Borrower will not loan to, invest in or otherwise make
advances to any other person or entity, except for (a) intercompany loans to its
wholly-owned PLC or any of its other wholly-owned subsidiaries, (b) the
Borrower's equity investments in subsidiaries, (c) loans to employees consistent
with past business practices and (d) loans, investments or advances for any
other purpose which do not exceed $50,000 in aggregate principal amount
outstanding at any time.
7.5 Borrower will not pay dividends.
7.6 Lender shall have a right of first refusal, for a period
of fifteen (15) days after receipt of written notice from Borrower, to purchase
any debt or equity securities of Borrower on the same terms and conditions as
any bona fide third party.
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<PAGE>
8. EVENTS OF DEFAULT. At any time that the Credit Note is unpaid, the
occurrence of any one or more of the following events shall constitute an Event
of Default:
8.1 Nonpayment, within ten (10) days after the due date
therefor, of any part of principal of or interest on the Credit Note; or
8.2 The making of a general assignment by Borrower for the benefit of
creditors, or the institution by Borrower of any bankruptcy, reorganization,
arrangement or other type of insolvency case or proceeding under the United
States Bankruptcy Code or any other federal or state law, or of any formal or
informal proceeding for the dissolution or liquidation of, settlement of claims
or winding up of affairs of Borrower; or
8.3 The appointment of a receiver or trustee for Borrower or
for any assets of Borrower or the institution against Borrower of any
bankruptcy, reorganization, or insolvency proceeding under any federal or state
law or any proceeding for the liquidation or winding up of the affairs of
Borrower if Borrower shall fail to have such appointment vacated, or such
proceeding dismissed, within sixty (60) days after it is made or instituted; or
8.4 If the subject matter of any certificate, statement,
representation, warranty or audit heretofore or hereafter furnished by or on
behalf of Borrower to Lender (including, without limitation, the representations
and warranties contained herein) shall prove to be untrue or misleading in any
material respect or to have omitted any substantial contingent or unliquidated
liability or claim against Borrower; or
8.5 The occurrence of any event of default under the terms of
this Agreement, the Warrants, the Security Agreement, the Credit Note, or the
Registration Rights Agreement, or under the terms of any other loan agreement,
note, indenture or mortgage having a principal amount in any case of $100,000 or
more, or under any other agreement evidencing or securing other indebtedness of
Borrower to Lender, which default has not been cured or waived within any
applicable grace or notice period.
8.6 (1) If PLC shall at any time issue additional shares of
its capital stock, or securities exercisable for or convertible into its capital
stock, without the consent of Lender.
(2) If on or before October 1, 2000, all outstanding common
shares of each of the companies constituting PLC Capital Stock which on the date
of this Agreement have not yet been released from the Escrow created under that
certain Escrow Agreement by and among Michael J. Assante, Borrower and the
escrow agent, dated as of August 26, 1996, and delivered
- 6 -
<PAGE>
to Lender under the terms of the Security Agreement, are not also delivered to
Lender and held as collateral under the terms of the Security Agreement.
9. RIGHTS OF LENDER ON DEFAULT. Upon the occurrence of any of the
Events of Default enumerated in Section 8 hereof, the obligations of the Lender
under this Agreement may be immediately terminated, and all indebtedness
evidenced by the Credit Note shall immediately become due and payable, at the
option of the Lender. Borrower agrees that the rights and remedies herein are
cumulative, and not exclusive, and that Lender shall have in addition any rights
or remedies which it would otherwise have at law, including rights of offset.
10. EXPENSES. Borrower shall reimburse Lender promptly for all costs
and expenses, including reasonable counsel fees, of Lender incident to the
enforcement of any provision of this Agreement, the Credit Note, the Security
Agreement, the Warrants, the Registration Rights Agreement, and any other
documents furnished pursuant to this Agreement. In addition, simultaneously with
the funding of the Loan by Lender, Borrower shall pay the fees and expenses of
Lender's counsel incurred in connection with the negotiation and preparation of
the Agreement, the Credit Note, the Warrants, the Security Agreement and the
Registration Rights Agreement, up to a maximum of $30,000.
11. MISCELLANEOUS.
11.1 Any notice or demand to be given hereunder or any notice
or demand on the Credit Note, the Warrants, the Registration Rights Agreement,
the Security Agreement, or any other document delivered pursuant to this
Agreement shall be duly given if mailed by registered or certified mail to each
of the parties below and shall be effective on the date of mailing:
To Lender At: Tadeo Holdings, Inc.
4207 Grand River Avenue, Suite 20
Novi, Michigan 48735
Attention: Brian Bookmeier, President
To Borrower: Azurel Ltd.
509 Madison Avenue
New York, New York 10022
Attention: Gerard Semhon, Chairman
11.2 This Agreement, any and all other documents executed in
connection with this Agreement, and the acts and obligations of the parties
hereunder shall be construed and interpreted in accordance with the laws of the
State of New York.
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<PAGE>
11.3 BORROWER, BY EXECUTING THIS AGREEMENT OR ANY OTHER
DOCUMENT PROVIDED FOR BY THIS AGREEMENT, WAIVES ITS RIGHTS TO A TRIAL BY JURY IN
ANY ACTION, WHETHER ARISING IN CONTRACT OR TORT, BY STATUTE OR OTHERWISE, IN ANY
WAY RELATED TO THIS AGREEMENT OR ANY DOCUMENT PROVIDED FOR BY THIS AGREEMENT AND
CONSENTS TO THE NON-EXCLUSIVE JURISDICTION OF ANY NEW YORK STATE COURT OR
FEDERAL COURT IN NEW YORK COUNTY, NEW YORK WITH RESPECT TO ANY ACTION TO
INTERPRET OR ENFORCE THIS AGREEMENT. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
LENDER TO EXTEND CREDIT TO BORROWER AND NO WAIVER OR LIMITATION OF LENDER'S
RIGHTS UNDER THIS SECTION SHALL BE EFFECTIVE UNLESS IN WRITING AND MANUALLY
SIGNED ON LENDER'S BEHALF.
Borrower acknowledges that the above paragraph has been expressly
bargained for by Lender and that, but for Borrower's agreement thereto, Lender
would not extend the loans to Borrower for the term and interest rate provided
in the promissory note described herein.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
signed by their duly authorized officers as of the day and year first above
written.
BORROWER:
AZUREL, LTD.
Signature: /S/ GERARD SEMHON
Name: GERARD SEMHON
Date:____________________
LENDER:
TADEO HOLDINGS, INC.
Signature: /S/ ALEXANDER KALPAXIS
Name: ALEXANDER KALPAXIS
Date:______________________
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<PAGE>
EXHIBITS
A Credit Note [See Exhibit 10.2]
B Warrant [See Exhibit 10.6]
C Registration Rights Agreement [See Exhibit 10.8]
D Pledge Security Agreement [See Exhibit 10.5]
PLEDGE SECURITY AGREEMENT
PLEDGE SECURITY AGREEMENT, dated May 28, 1998, made by AZUREL LTD., a
Delaware corporation having its principal office and place of business at 509
Madison Avenue, New York, New York 10022 (the "Pledgor" or the "Borrower"), to
TADEO HOLDINGS, INC., a Delaware corporation, having an office at 4207 Grand
River Avenue, Suite 20, Novi, Michigan 48735 ("Lender").
W I T N E S S E T H:
Borrower is indebted to Lender pursuant to a Credit Agreement, dated as
of May 28, 1999, between Lender and Borrower (the "Loan Agreement"); and
WHEREAS, it is a condition to Lender's obligations under the Loan
Agreement that Pledgor pledge certain collateral, in form and amount
satisfactory to Lender, to Lender as security for Borrower's obligations under
the Loan Agreement; and
WHEREAS, Pledgor is the legal and beneficial owner of the Collateral
described in Section 1 and Exhibit A hereof, and, to induce Lender to extend
credit to Borrower pursuant to the Loan Agreement, Pledgor desires to pledge the
Collateral to Lender;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Pledgor hereby agrees with Lender as follows:
1. DEFINITIONS.
(a) "Debt" means all debts, liabilities and obligations of
Borrower to Lender pursuant to and under the Loan Agreement and the Credit Note
issued thereunder and all amendments thereto, and any extensions and renewals
thereof or of a part thereof, together with interest, fees, charges, expenses
and costs of collection (including reasonable attorneys' fees).
(b) "Collateral" means all securities specifically described
on Exhibit A, together with any substitutions or replacements thereto and all
securities which are added thereto as a result of a stock split or similar event
with respect to the collateral (including, without limitation, any stock
dividend or distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), option
or rights, whether as an addition to, in substitution of, or in exchange for any
shares of any Collateral, or otherwise, and all proceeds thereof. Exhibit A
hereto will be deemed to be amended automatically and immediately upon the
addition, substitution or replacement of the securities listed on Exhibit A and
upon such events, Pledgor shall promptly deliver all substitute, replacement or
additional securities to Lender as additional Collateral hereunder.
<PAGE>
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2. GRANT OF SECURITY INTEREST AND PLEDGE.
(a) Pledgor hereby grants to Lender a first priority security
interest in and lien upon the Collateral as security for the Debt and all costs,
expenses and attorneys' fees incurred by Lender in collecting the Debt or
enforcing the Loan Agreement and the Note.
(b) Concurrently with the execution of this Pledge Security
Agreement, Pledgor shall deliver to the Lender, all certificates representing
the Collateral and, if the Collateral is uncertificated, shall sign one or more
financing statements evidencing the pledge of such Collateral to the Lender.
Notwithstanding any contrary provision or inference herein or elsewhere, Lender
shall have no right to vote the Collateral (if applicable) at any time unless
and until an Event of Default has occurred. The security interest in and lien
upon the Collateral granted to Lender hereunder shall attach upon delivery of
the Collateral to the Lender. Lender shall have, in addition to the rights and
remedies described in this Pledge Security Agreement, all the rights and
remedies of a secured party under the New York Uniform Commercial Code. Pledgor
irrevocably appoints Lender as its lawful attorney and agent on Pledgor's behalf
to execute any UCC-1 financing statements or UCC-3 amendments, to file such
documents signed by Lender alone in any appropriate public office, and to
register a pledge of any of the Collateral with any issuer of the Collateral.
(c) If, while this Agreement is in effect, (i) Pledgor shall
become entitled to receive or shall receive any securities or any stock
certificate (including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), option
or rights, whether as an addition to, in substitution of, or in exchange for any
shares of any Collateral, or otherwise, or (ii) if any additional shares of
common stock of Private Label Cosmetics, Inc. and/or Fashion Laboratories, Inc.
are released to Pledgor under the terms of that certain Escrow Agreement, dated
as of August 22, 1996, by and among Michael J. Assante, Pledgor and Gersten,
Savage, Kaplowitz & Curtin LLP (the "Escrow Agreement"), then Pledgor agrees to
accept the same as Lender's agent and to hold the same in trust on behalf of and
for the benefit of Lender and to deliver the same forthwith to the Lender in the
exact form received, with the endorsement of Pledgor when necessary and/or
appropriate undated stock powers duly executed in blank, to be held by the
Lender, subject to the terms hereof, as additional collateral security for the
Debt. Any sums paid upon or in respect of the Collateral upon the liquidation or
dissolution of any issuer of securities constituting Collateral shall be paid
over to the Lender to be held by it in trust as additional collateral security
for the Debts; and in case any distributions of capital shall be made on or in
respect of the Collateral or any property shall be distributed upon or with
respect to the Collateral pursuant to the recapitalization or reclassification
of the capital of any issuer of securities constituting Collateral or pursuant
to the reorganization thereof, the property so distributed shall be delivered to
the Lender to be held by it as additional collateral security for the Debt. All
sums of money and property so paid or distributed in respect of the Collateral
which are received by Pledgor shall, until paid or delivered to the Lender, be
held by Pledgor in trust as additional collateral security for the Debt.
(d) Pledgor will not sell, transfer, pledge, exchange, assign
or otherwise dispose of or encumber the Collateral, or any interest therein or
any proceeds thereof, whether by operation of law or otherwise
<PAGE>
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(e) This Agreement is in addition to and without limitation of
any right of Lender under the Loan Agreement, or any other agreement, security
agreement, mortgage or guaranty granted by the Pledgor to Lender. This Agreement
is absolute and without any conditions. Lender can enforce its rights in the
Collateral immediately upon an Event of Default without having first to attempt
any collection from Borrower.
3. REPRESENTATIONS AND WARRANTIES.
Pledgor represents and warrants to Lender as follows:
(a) Pledgor owns and holds the Collateral free from any
security interest, lien, encumbrance or restriction whatsoever. No one (other
than Lender by reason of this Pledge Security Agreement) has any right, title,
claim or interest of any kind or nature in or to the Collateral.
(b) The security interest herein conferred upon Lender
constitutes the first and paramount lien upon all the Collateral.
(c) The securities which constitute the Collateral are fully
paid and non-assessable.
(d) The delivery of the Collateral to the Lender by Pledgor
under the terms of this Pledge Security Agreement and the compliance by Pledgor
with the other terms of this Pledge Security Agreement will not require the
consent of any governmental or regulatory authority or violate any provision of
or result in default under any other agreement to which Pledgor is a party or to
which its properties and assets are subject. Pledgor represents and warrants
that it is duly authorized to enter into this Pledge Security Agreement and the
transactions contemplated hereunder and that the person signing this Pledge
Security Agreement on behalf of Pledgor is duly authorized to act on its behalf.
Each delivery of additional Collateral and each delivery
of Collateral for substitution hereunder shall, in and of itself, constitute a
reaffirmation by Pledgor of the representations and warranties set forth above.
4. EVENTS OF DEFAULT AND REMEDIES.
(a) Each of the following shall constitute an Event of Default
under this Pledge Security Agreement:
1. An event occurs which constitutes an Event of Default
under the Loan Agreement;
2. The perfection of the security interest granted
Lender in the Collateral is impaired or is about to
become impaired; or
3. Pledgor fails to perform any term, condition or
covenant of this Agreement, or any representation or
warranty made by Pledgor in this Agreement or by
Borrower in the Loan Agreement or in connection
therewith is determined to be false.
<PAGE>
- 4 -
(b) Upon the occurrence of one or more of the foregoing Events
of Default, Lender may liquidate so much of the Collateral as is required to pay
the Debt and the costs, expenses and fees described in 2(a) hereof.
Upon the occurrence of an Event of Default, without limiting any other
right or remedy of Lender which may be available at law or in equity, Lender,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon Pledgor or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral,
or any part thereof, at public or private sale or sales, at any exchange,
brokers' board or elsewhere upon such terms and conditions as Lender may deem
advisable. Lender or its agent shall pay over the net proceeds of any such
collection, receipt, appropriation, realization or sale, after deduction of all
reasonable costs and expenses of every kind incurred therein or in any way
relating to the rights of Lender hereunder, including reasonable attorneys' fees
and legal expenses, to Lender for application by Lender to the payment, in whole
or in part, of the Debt, Pledgor remaining liable for any deficiency remaining
unpaid after such application, and only after so paying over such net proceeds
and after the payment by Lender of any other amount required by any provision of
law need Lender account for the surplus, if any, to Pledgor. Pledgor agrees that
Lender need not give more than ten days' notice of the time and place of any
public sale or of the time after which a private sale or other intended
disposition is to take place and that such notice is reasonable notification of
such matters. No notification need be given to Pledgor if it has signed after an
Event of Default a statement renouncing or modifying any right to notification
of sale or other intended disposition. In addition to the rights and remedies
granted to Lender in this Agreement, Lender shall have all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of
New York.
5. DURATION AND WAIVERS.
Irrespective of any action, omission or course of dealing whatever by
Lender, this Pledge Security Agreement shall remain in full effect until the
Debt to Lender shall have been paid in full. Without limiting the generality of
the foregoing, Pledgor (a) agrees that Lender shall have no duty to make any
presentment or collection or to preserve any right of any kind with reference to
the Collateral, (b) agrees that Lender shall at all times have the right to
grant any indulgence to Borrower and to deal in any other manner with Borrower
including (without limitation) the granting of any extension or renewal, the
increase or decrease of any rate of interest, the forbearance from exercising
any right, power or privilege, including (without limitation) any right to
demand security, the release of any security or of any obligor, the effecting of
any other release, compromise or settlement, the forbearance from proceeding
against any security or obligor, the substitution of security (even if of a
different character or value), and (c) waives presentment, demand, protest or
notice of protest or nonpayment of the Debt to Lender or any part thereof or of
the Collateral or any part thereof, waives notice of any default by Borrower,
waives notice of any act, omission, or course of dealing by Lender and waives
any other notice to which Pledgor might be entitled but for the within waiver.
<PAGE>
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6. PAYMENT OF DEBT.
Upon payment in full and cancellation of the debt secured hereby,
Lender shall, upon the request of Pledgor, promptly release the Collateral to
the Pledgor.
7. INTEREST AND INCOME FROM THE COLLATERAL.
Lender shall have no right to any interest or income paid or payable on
the Collateral and all such interest or income shall be the property of and
owned by Pledgor, unless and until an Event of Default has occurred.
8. DISPOSITION OF COLLATERAL. Pledgor recognizes that Lender may be
unable to effect a public sale of any or all the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such securities for their own account for investment
and not with a view to the distribution or sale thereof. Pledgor acknowledges
and agrees that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.
9. NOTICES.
All notices, statements, requests and demands given to or made upon
Lender or Pledgor in accordance with the provisions of this Pledge Security
Agreement shall be deemed to have been given or made when deposited in the mail,
postage prepaid, or in the case of telegraphic notice, when delivered to the
telegraph company, charges prepaid, addressed as follows:
If to Pledgor:
Azurel Ltd.
509 Madison Avenue
New York, New York 10022
Attn: Gerard Semhon, Chairman
If to Lender:
Tadeo Holdings, Inc.
4207 Grand River Avenue, Suite 20
Novi, Michigan 48735
Attn: Brian Bookmeier, President
or such other person, firm, officer, or address as any party shall for itself
from time to time designate by written notice to the other parties hereto,
provided, however, that notices may be given by telex, telecopier, courier
service, telephone, personal delivery or otherwise, effective the date of such
communication; provided that notices given by such means of communication are
confirmed by mail as aforesaid postmarked within one business day after such
other form of communication. All notices mailed hereunder in the manner required
by this paragraph shall be effective when delivered.
<PAGE>
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10. GENERAL PROVISIONS.
Each right, power or privilege specified or referred to in this Pledge
Security Agreement is in addition to any other rights, powers and privileges
that Lender may otherwise have or acquire by operation of law, by other contract
or otherwise. No course of dealing in respect of, nor any omission or delay in
the exercise of, any right, power or privilege by Lender shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
further or other exercise thereof, as each right, power or privilege may be
exercised by Lender either independently or concurrently with other rights,
powers and privileges as often and in such order as Lender may deem expedient.
No waiver or consent granted by either party in respect of this Pledge Security
Agreement shall be binding upon that party unless specifically granted in
writing, which writing shall be strictly construed. This Pledge Security
Agreement shall not be altered or modified except by a written agreement
executed by all the parties hereto. This Pledge Security Agreement shall bind
Pledgor, Lender and their respective successors and assigns. The provisions of
this Pledge Security Agreement, and the respective rights and duties of Borrower
and Lender hereunder shall be governed by and construed in accordance with the
laws of the State of New York.
11. FURTHER ASSURANCES. Pledgor agrees that at any time and from time
to time upon the written request of Lender, Pledgor will execute and deliver
such financing statements, assignments and further documents and do such further
acts and things as Lender may reasonably request in order to establish, perfect
and maintain a valid security interest in the Collateral as security for the
Debt and to effect the purposes of this Agreement.
<PAGE>
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IN WITNESS WHEREOF, Pledgor has executed this Pledge Security Agreement
as of the date first above written.
PLEDGOR:
AZUREL LTD.
By: /S/ GERARD SEMHON
AGREED AND ACCEPTED:
TADEO HOLDINGS, INC.
By: /S/ ALEXANDER KALPAXIS
Name: Alexander Kalpaxis
Title: Executive Vice President
<PAGE>
EXHIBIT A
IDENTIFICATION OF COLLATERAL:
NUMBER OF SHARES
NAME OF COMPANY OF COMMON STOCK
Private Label Cosmetics, Inc. 670
Fashion Laboratories, Inc. 670
THIS WARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 300,000
Warrant No. __
WARRANT
To Purchase Common Stock of
AZUREL LTD.
THIS IS TO CERTIFY THAT TADEO HOLDINGS, INC. or registered
assigns, is entitled, at any time from the Closing Date (as hereinafter defined)
to the Expiration Date (as hereinafter defined), to purchase from Azurel Ltd., a
Delaware corporation (the "Company"), 300,000 shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, including fractional parts, at a purchase price equal to $1.50 per
share of Common Stock (as defined herein), all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Book Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
as of the last day of any month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by any firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
<PAGE>
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"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by SECTION 4.4.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean a date ten (10) years from the
date hereof.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on such
date, and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"Other Property" shall have the meaning set forth in Section
4.4.
<PAGE>
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"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated a date even herewith by and between the Company and TADEO
HOLDINGS, INC., as it may be amended from time to time.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
SECTION 9.1(A).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in SECTION
9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to SECTION 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
<PAGE>
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2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Closing Date and
until 5:00 p.m., New York time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at _____________ Madison
Avenue, New York New York 10022 or at the office or agency designated by the
Company pursuant to SECTION 12, (i) a written notice of Holder's election to
exercise this Warrant, which notice shall specify the number of shares of Common
Stock to be purchased, (ii) payment of the Warrant Price in cash or by wire
transfer or cashier's check drawn on a United States bank and (iii) this
Warrant. Such notice shall be substantially in the form of the subscription form
appearing at the end of this Warrant as Exhibit A, duly executed by Holder or
its agent or attorney. Upon receipt of the items referred to in clauses (i),
(ii) and (iii) above, the Company shall, as promptly as practicable, and in any
event within three (3) Business Days thereafter if requested in writing by
Holder and accompanied by Holder's payment of any additional transfer agent fees
required by such turnaround time, execute or cause to be executed and deliver or
cause to be delivered to Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise,
together with cash in lieu of any fraction of a share, as hereinafter provided.
The stock certificate or certificates so delivered shall be, to the extent
possible, in such denomination or denominations as Holder shall request in the
notice and shall be registered in the name of Holder or, subject to SECTION 9,
such other name as shall be designated in the notice. This Warrant shall be
deemed to have been exercised and such certificate or certificates shall be
deemed to have been issued, and Holder or any other Person so designated to be
named therein shall be deemed to have become a holder of record of such shares
for all purposes, as of the date the notice, together with the cash or check or
checks and this Warrant, is received by the Company as described above and all
taxes required to be paid by Holder, if any, pursuant to SECTION 2.2 prior to
the issuance of such shares have been paid. If this Warrant shall have been
exercised in part, the Company shall, at the time of delivery of the certificate
or certificates representing Warrant Stock, deliver to Holder a new Warrant
evidencing the rights of Holder to purchase the unpurchased shares of Common
Stock called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant, or, at the request of Holder, appropriate
notation may be made on this Warrant and the same returned to Holder.
Notwithstanding any provision herein to the contrary, the Company shall not be
required to register shares in the name of any Person who acquired this Warrant
(or part hereof) or any Warrant Stock otherwise than in accordance with this
Warrant.
2.2. PAYMENT OF TAXES AND CHARGES. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued, fully paid and nonassessable, and without any preemptive rights.
The Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect
<PAGE>
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to, the issue or delivery thereof, unless such tax or charge is imposed by law
upon Holder, in which case such taxes or charges shall be paid by Holder. The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
shares of Common Stock issuable upon exercise of this Warrant in any name other
than that of Holder, and in such case the Company shall not be required to issue
or deliver any stock certificate until such tax or other charge has been paid or
it has been established to the satisfaction of the Company that no such tax or
other charge is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock as of the Closing Date.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold pursuant
to a Registration Statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as Holder under SECTIONS 9, 10
AND 14 of this Warrant. The Company will, at the time of exercise of this
Warrant, in whole or in part, upon the request of Holder, acknowledge in
writing, in form reasonably satisfactory to Holder, its continuing obligation to
afford Holder all such rights; PROVIDED, HOWEVER, that if Holder shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with SECTION 9, transfer
of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
SECTION 2.1 or the office or agency designated by the Company pursuant to
SECTION 12, together with a written assignment of this Warrant substantially in
the form of EXHIBIT B hereto duly executed by Holder or its agent or attorney
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to SECTION 9, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with SECTION
9, may be exercised by a new Holder for the purchase of shares of Common Stock
without having a new Warrant issued.
<PAGE>
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3.2. DIVISION AND COMBINATION
Subject to SECTION 9, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the aforesaid office or agency
of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with SECTION 3.1 and with SECTION 9, as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this SECTION 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this SECTION 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this SECTION 4 at the time of
such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of
<PAGE>
- 7 -
shares of Common Stock which a record holder of the same number of shares of
Common Stock for which this Warrant is exercisable immediately prior to the
occurrence of such event would own or be entitled to receive after the happening
of such event, and (ii) the Current Warrant Price shall be adjusted to equal (A)
the Current Warrant Price multiplied by the number of shares of Common Stock for
which this Warrant is exercisable immediately prior to the adjustment divided by
(B) the number of shares for which this Warrant is exercisable immediately after
such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever, or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever,
then Holder shall receive Notice of the Company's determination to make such
distribution fifteen (15) days prior to the record date for determining those
Common Stock holders entitled to receive such distribution in accordance with
SECTION 5.2 of this Warrant. A reclassification of the Common Stock (other than
a change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2; PROVIDED, HOWEVER, that if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common Stock as a part of
such reclassification, such change shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Common Stock within the meaning
of Section 4.1, and in order for the Holder to receive any portion of the
reclassification distribution (other than an adjustment to the number of shares
of Common Stock for which the Warrant can be exercised) the Holder must exercise
the Warrant.
4.3. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this SECTION 4:
<PAGE>
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(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment shall occur. For the purpose of any
adjustment, any specified event shall be deemed to have occurred at the
close of business on the date of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
4.4. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company
other than solely a change or distribution as contemplated by SECTION 4.1
above), or sell, transfer or otherwise dispose of all or substantially all its
property, assets or business to another corporation and, pursuant to the terms
of such reorganization, reclassification, merger, consolidation or disposition
of assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring corporation
("Other Property"), are to be received by or distributed to the holders of
Common Stock of the Company (with any action pursuant to which such
distribution, reclassification, merger, etc., is to be undertaken being referred
to as the "Transaction"), then Holder shall receive notice of the Transaction
prior to the record date for determining those Common Stockholders entitled to
vote on and/or to receive a distribution in connection with consummation of such
Transaction in accordance with SECTION 5.2 of this Warrant. Upon the
consummation of any Transaction pursuant to which the Company is not the
surviving corporation, this Warrant, to the extent previously unexercised, shall
be of no further force and effect, null and void and unexercisable. The
foregoing provisions of this SECTION 4.4 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or dispositions of
assets.
<PAGE>
- 9 -
4.5. OTHER ACTION AFFECTING COMMON STOCK. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this SECTION 4, which would have a
materially adverse effect upon the rights of the Holder, the number of shares of
Common Stock and/or the purchase price thereof shall be adjusted in such manner
as may be equitable in the circumstances, as determined in good faith by the
Board of Directors of the Company.
5. NOTICES TO HOLDER
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to SECTION 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated specifying the number of
shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to SECTION 4.5) describing the number and kind of
any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
SECTION 15.2. The Company shall keep at its office or agency designated pursuant
to SECTION 12 copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder.
5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
<PAGE>
- 10 -
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 15 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up, at least 21 days' prior written notice of the date when the same shall take
place. Such notice in accordance with the foregoing clause also shall specify
(i) the date on which any such record is to be taken for the purpose of such
dividend, distribution or right, the date on which the holders of Common Stock
shall be entitled to any such dividend, distribution or right, and the amount
and character thereof, and (ii) the date on which any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any
such time is to be fixed, as of which the holders of Common Stock shall be
entitled to exchange their shares of Common Stock for securities or other
property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with SECTION 15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
<PAGE>
- 11 -
7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of SECTION 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrant and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
SECTION 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this SECTION 9.
9.1. RESTRICTIVE LEGEND. (a) The Holder by accepting this
Warrant and any Warrant Stock agrees that this Warrant and the Warrant Stock
issuable upon exercise hereof may not be assigned or otherwise transferred
unless and until (i) the Company has received an opinion of counsel for the
Holder that such securities may be sold pursuant to an exemption from
<PAGE>
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registration under the Securities Act of 1933, as amended (the "Securities Act")
or (ii) a registration statement relating to such securities has been filed by
the Company and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows unless such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933, as
amended (the "Act"). The securities may not be offered for
sale, sold or otherwise transferred except (i) pursuant to an
effective registration statement under the Act or (ii)
pursuant to an exemption from registration under the Act and
applicable state securities laws in respect of which the
Company has received an opinion of counsel satisfactory to the
Company to such effect. Copies of the agreement covering both
the purchase of the securities and restricting their transfer
may be obtained at no cost by written request made by the
holder of record of this certificate to the Secretary of the
Company at the principal executive offices of the Company."
(a) Except as otherwise provided in this SECTION 9, the
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933, as
amended, and may not be transferred in violation of such Act
and applicable state securities laws, the rules and
regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Restricted Common Stock, the
Holder shall give ten days' prior written notice (a "Transfer Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel who shall be
reasonably satisfactory to the Company, an opinion that the proposed Transfer of
such Warrants or such Restricted Common Stock may be effected without
registration under the Securities Act and applicable state securities laws.
After receipt of the Transfer Notice and opinion, the Company shall, within five
Business Days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in SECTION 9.1(A), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in SECTION 9.1(B), unless in the
opinion of counsel to the Company such legend is not required in order to ensure
compliance with the Securities Act. The Holder shall not be entitled
<PAGE>
- 13 -
to Transfer such Warrants or such Restricted Common Stock until receipt of
notice that such opinion of counsel referred to above under this SECTION 9.2(A)
is reasonably satisfactory to the Company.
9.3. REQUIRED REGISTRATION. Pursuant to the terms and
conditions set forth in the Registration Rights Agreement, the Company shall
prepare and file with the Commission a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrant and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act pursuant to the terms and
conditions of the Registration Rights Agreement.
9.4. TERMINATION OF RESTRICTIONS. Notwithstanding the
foregoing provisions of SECTION 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of SECTION 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act and applicable state
securities law. Whenever the restrictions imposed by SECTION 9 shall terminate
as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company upon written request of the Holder, at the expense
of the Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTION 9 HEREOF TERMINATED ON
________, 19__, AND ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in SECTION 9.1(A).
9.5. LISTING ON SECURITIES EXCHANGE. If the Company shall list
any shares of Common Stock on any securities exchange, it will, at its expense,
list thereon, maintain and, when necessary, increase such listing of, all shares
of Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this
<PAGE>
- 14 -
Warrant so long as any shares of Common Stock shall be so listed during any such
Exercise Period.
10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement and affidavit of the Holder shall be
sufficient indemnity), and in case of mutilation upon surrender and cancellation
hereof, the Company will execute and deliver in lieu hereof a new Warrant of
like tenor to Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to make, when
<PAGE>
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due, any payments provided for hereunder, or fails to comply with any other
provision of this Warrant, the Company shall pay to Holder such amounts as shall
be sufficient to cover any costs and expenses including, but not limited to,
reasonable attorneys' fees, including those of appellate proceedings, incurred
by Holder in collecting any amounts due pursuant hereto or in otherwise
enforcing any of its rights, powers or remedies hereunder.
14.2. NOTICE GENERALLY. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified mail, postage prepaid, or by a nationally recognized overnight courier
service or by facsimile (with confirmation back), and shall be deemed given when
so delivered personally or by overnight courier service or by facsimile, or, if
mailed, three (3) days after the date of deposit in the United States mails, as
follows:
(1) If to the Company, to:
509 Madison Avenue
New York, New York 10022
Attention: Gerard Semhon, Chairman
With a copy to:
Gersten Savage & Kaplowitz LLP
101 East 52nd Street
New York, New York 10022
Telephone # (212) 752-9700
Facsimile: (212) 980-5192
(2) If to the Holder, to:
4207 Grand River Avenue, Suite 20
Novi, Michigan 48735
Attention: Brian Bookmeier, President
With a copy to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Attention: Peter W. Rothberg, Esq.
Telephone #: 212-940-3000
Facsimile: 212-940-3111
<PAGE>
- 16 -
The Company or the Holder may change the foregoing address by notice given
pursuant to this SECTION 14.2.
14.3. REMEDIES. Holder in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under SECTION 9 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of SECTION 9 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of
SECTIONS 3.1 AND 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to SECTION 9 hereof, holders of Warrant Stock, and shall be enforceable
by any such Holder or holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Holder.
14.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
<PAGE>
- 17 -
IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: May 28, 1999
AZUREL LTD.
By: /S/ GERARD SEMHON
Name: Gerard Semhon
Title: Chairman
Attest:
By:______________________
Name:
Title:
<PAGE>
N50785.1
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Shares of Common Stock of
AZUREL LTD., and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is _________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF
COMMON STOCK
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of ____________
maintained for the purpose, with full power of substitution in the premises.
Dated:__________________ Print Name:___________________
Signature:_____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
FIRST AMENDMENT TO
CREDIT AGREEMENT
This AMENDMENT, made as of June 1, 1999 (the "Amendment"), to CREDIT
AGREEMENT, dated as of May 28, 1999 (the "Credit Agreement"), by and among TADEO
HOLDINGS, INC., a Delaware corporation ("Lender") and AZUREL LTD., a Delaware
corporation ("Borrower").
WHEREAS, Lender has previously advanced an aggregate of $1,500,000 to
Borrower as follows:
(i) $500,000 pursuant to a promissory note, dated March 31, 1999, which
matured on May 31, 1999 bearing interest at 20.8% and remains unpaid ("Note 1"),
and (ii) $1,000,000 pursuant to the Credit Note, dated as of May 28, 1999, made
by Borrower in favor of Lender (the "Credit Note").
WHEREAS, repayment of the Credit Note is secured, pursuant to the terms
of the Credit Agreement, by specified collateral identified in that certain
Pledge Security Agreement by and between Lender and Borrower, dated as of May
28, 1999 (the "Pledge Agreement");
WHEREAS, Lender and Borrower desire to : (i) amend the terms of the
Credit Agreement, (ii) amend Note 1 and amend the Credit Note for the purpose of
making the payee, or Lender, for all of such indebtedness Payee's wholly-owned
subsidiary, Tadeo E-Commerce Corp.; (iii) amend the Credit Note to include the
$500,000 unpaid principal plus $28,166.67 of accrued interest with respect to
funds advanced pursuant to Note 1, an aggregate of $528,166.67 (the "Secondary
Advances") as amounts to be repaid under the terms of and on the same schedule
as all funds advanced or owed under the original terms of the Credit Agreement
and the Credit Note, and to include the Secondary Advances as obligations to be
secured under the terms of the Pledge Agreement.
NOW, THEREFORE, in consideration for the mutual premises expressed
herein, and such other consideration as is hereby acknowledged by all parties
hereto as adequate consideration under the terms hereof, the parties hereto do
hereby agree as follows:
1. AMOUNT AND TERMS OF CREDIT.
Section 1 of the Credit Agreement is hereby amended by increasing the
aggregate principal amount of the Loan from One Million Dollars ($1,000,000) to
One Million Five Hundred Twenty-Eight Thousand One Hundred Sixty-Six and 67/00
Dollars ($1,528,166.67). All capitalized terms used herein and not otherwise
defined shall have the meanings ascribed thereto in the Credit Agreement.
2. ASSIGNMENT
All of Lender's rights and obligations under the Credit Agreement are
hereby assigned to Tadeo E-Commerce Corp. ("Tadeo E"), and such assignment is
hereby accepted and acknowledged by Borrower.
<PAGE>
3. ADDITIONAL CONSIDERATION
As additional consideration for amending the terms of Note 1, including
but not limited to extending the term for repayment thereof and reducing the
interest rate thereon to 8% per annum, Borrower does hereby agree to provide to
Tadeo E a Warrant for 200,000 shares of Borrower's Common Stock (the "Additional
Warrant") on the same terms as the Warrant, dated May 28, 1999, previously made
by Borrower in favor of Lender (the "First Warrant"), and Borrower does hereby
consent to the assignment of the First Warrant by Lender to Tadeo E.
4. MISCELLANEOUS
In all other respects, the Credit Agreement is confirmed ratified and
approved, and, as amended by this Amendment, shall continue in full force and
effect.
IN WITNESS WHEREOF, Lender and Borrower have caused this Amendment to
be executed and delivered by their respective duly authorized offices as of the
date and year first above written.
BORROWER:
AZUREL, LTD.
BY: /S/ GERARD SEMHON
LENDER
TADEO HOLDINGS, INC.
BY: /S/ ALEXANDER KALPAXIS
ACCEPTED AND ACKNOWLEDGED:
ASSIGNEE:
TADEO E-COMMERCE CORP.
BY: /S/ DAMON TESTAVERDE
REGISTRATION RIGHTS AGREEMENT
DATED AS OF MAY 28, 1999
BY AND BETWEEN
AZUREL LTD.
AND
TADEO HOLDINGS, INC.
This Registration Rights Agreement (this "Agreement") is made and
entered into as of May 28, 1999, by and between AZUREL LTD. a corporation
organized and existing under and by virtue of the laws of the State of Delaware
(the "Company"); and TADEO HOLDINGS, INC., a corporation organized and existing
under and by virtue of the laws of the State of Delaware (the "Investor").
This Agreement is made pursuant to SECTION 1.3 of the Credit Agreement
dated as of May 28, 1999, by and between the Company and the Investor (the
"Credit Agreement"). The Company has agreed to provide the Investor the
registration rights with respect to the Registerable Securities, as defined and
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the advance of funds under the Credit Agreement. Unless otherwise
separately defined herein, all capitalized terms used in this Agreement shall
have the meanings ascribed to them as set forth in the Warrant, dated May 28,
1999, made by the Company in favor of the Investor (the "Warrant").
The parties hereby agree as follows:
1. SECURITIES SUBJECT TO THIS AGREEMENT
(a) DEFINITIONS. The term "Registerable Securities" means the Warrant Stock
as defined in the Warrant. The term "1933 Act" means the securities Act of 1933,
as amended. The term "1934 Act" means the Securities Exchange Act of 1934, as
amended. The terms "register", "registered", and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the 1933 Act, and the declaration or
ordering of effectiveness of such registration statement or document.
(b) RESTRICTED SECURITIES. The Warrant Stock are "restricted securities",
as that term is defined in Rule 144 promulgated under the 1933 Act (the
"Restricted Securities"). For the
<PAGE>
purposes of this Agreement, any Registerable Security will cease to be a
Restricted Security when (i) a registration statement covering such Restricted
Security has been declared effective by the United States Securities and
Exchange Commission (the "Commission"), and the Restricted Security has been
disposed of pursuant to such effective registration statement; (ii) it can be
distributed to the public pursuant to Rule 144 (or any similar provision then in
force) under the 1933 Act; or (iii) it is exchanged (without additional cost,
expense or tax liability to the Investor) for an identical or substantially
identical security which is or has been registered under the 1933 Act or may be
sold and disposed of without an effective registration statement under the 1933
Act.
(c) REGISTERABLE SECURITIES. As to any particular Registerable Security,
such security will cease to be a Registerable Security when it ceases to be a
Restricted Security.
(d) HOLDERS OF REGISTERABLE SECURITIES. A Person is deemed to be a holder
of Registerable Securities whenever such Person owns Registerable Securities or
has a right to acquire such Registerable Securities, whether or not such
acquisition has actually been effected; PROVIDED, that in no event will any
Registerable Security be deemed to be owned by more than one Person.
(e) STOCK SPLITS, DIVIDENDS, ETC. The provisions of this Agreement shall
apply to any shares or other securities resulting from any stock split or
reverse split, stock dividend, reclassification of the capital stock of the
Company, consolidation or reorganization of the Company, and any shares or other
securities of the Company or of any successor company which may be received by
the Investor by virtue of its ownership of Registerable Securities.
2. REQUIRED REGISTRATION
(a) DEMAND REGISTRATION. The Company agrees to file within 30 days of the
written request of Investor one "shelf" registration statement on any
appropriate form pursuant to Rule 415 under the 1933 Act and/or any similar rule
that may be adopted by the SEC with respect to the Registerable Securities (the
"Shelf Registration"). The Company agrees to use its best efforts to have the
Shelf Registration declared effective as soon as reasonably practicable after
such filing, and to keep the Shelf Registration continuously effective (i) for a
period of three (3) years with respect to the Warrant Stock (or, if for any
reason the effectiveness of the Shelf Registration is suspended, such period
shall be extended by the aggregate number of days of each such suspension),
following the date on which the Shelf Registration is declared effective;
PROVIDED, HOWEVER, that the effectiveness of the Shelf Registration may be
terminated earlier with respect to any issue of securities if and to the extent
that none of the securities of such issue registered therein are Restricted
Securities or are outstanding.
The Company further agrees if necessary, to supplement or amend any Shelf
Registration, as required by the registration form utilized by the Company or by
the instructions applicable to such registration form or by the 1933 Act or the
rules and regulations thereunder, and the Company agrees to furnish to the
holders of Registerable Securities copies of any such supplement or amendment
prior to its being used and/or filed with the SEC. The Company
<PAGE>
agrees to pay all of its Registration Expenses (as hereinafter defined) in
connection with the Shelf Registration, whether or not it becomes effective.
The holders of the Registerable Securities to be registered shall pay, PRO
RATA, all underwriting discounts and commissions or placement fees of any
investment banker or bankers and/or manager or managers used in connection with
the sale of their Registerable Securities pursuant to the Registration
Statement.
(b) PIGGY-BACK REGISTRATION
(i) In the event that the Company proposes to register any Common
Stock under the 1933 Act, other than (i) pursuant to a registration statement on
Forms S-4 or S-8 or any successor to such Forms and (ii) other than pursuant to
Section 2(a) above, for the purpose of the sale of Common Stock owned by any
present or future holder of Common Stock (other than the Company), or any other
obligation of the Company to register securities on Form S-1, S-2 or S-3, or any
successor to such Forms, the Company shall mail or deliver to all holders of
Registerable Securities, at least 10 days prior to the filing with the SEC of
the registration statement covering such Common Stock, a written notice (a
"Registration Notice") of its intention so to register such Common Stock.
(ii) In the event that a Registration Notice shall have been so mailed
or delivered, each holder of Registerable Securities may elect to include in
such registration statement such percentage of its Registerable Securities as
equals the percentage derived by adding all of the shares of Common Stock
registered on behalf of each of the holders on whose behalf such registration
statement is being filed (excluding the holders of Registerable Securities) and
dividing such number by the total number of shares of Common Stock owned by such
holders (excluding the holders of Registerable Securities). To the extent that a
holder of Registerable Securities chooses to include such Registerable
Securities as it is entitled to include pursuant to the preceding sentence such
holder shall mail or deliver to the Company, a written notice (a "Supplemental
Notice") (A) specifying the number of shares of Registerable Securities proposed
to be sold or otherwise transferred by such holder, (B) describing the proposed
manner of sale or other transfer thereof under the Securities Act; PROVIDED,
HOWEVER, that such Supplemental Notice shall be so mailed or delivered by such
holder not more than 5 days after the date of delivery to such holder of a
Registration Notice.
3. HOLDBACK AGREEMENT; RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTERABLE
SECURITIES.
In connection with the piggyback registration statement referred to in
Section 2 above, to the extent not inconsistent with applicable law, each holder
of Registerable Securities whose securities are included in such registration
statement agrees not to effect any public sale or distribution of the issue
being registered or a similar security of the Company or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the Act, during the 14 Business Days prior to,
and for such period of time following the effective date not to exceed a 9-month
period as the Company or any managing
<PAGE>
underwriter of an offering of securities subject to such piggyback registration
may specify, if and to the extent timely notified of such restriction in writing
by the Company, in the case of a non-underwritten public offering, or by the
managing underwriter or underwriters, in the case of an underwritten public
offering, and the Company or such underwriter(s) provide a written opinion to
the effect that earlier sale of the Registerable Securities would materially,
adversely affect the Company's primary offering of securities.
4. REGISTRATION EXPENSES
Subject to the limitation on expenses provided in Section 2, all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all registration and filing fees, all fees and
expenses associated with filings required to be made with the National
Association of Securities Dealers, Inc. ("NASD") and/or The NASDAQ Stock Market
("NASDAQ"), as may be required by the rules and regulations of the NASD or
NASDAQ, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Registerable Securities), rating agency fees, printing
expenses (including expenses of printing certificates for the Registerable
Securities in a form eligible for deposit with the Depositary Trust Company and
of printing prospectuses if the printing of prospectuses is requested by a
holder of Registerable Securities), messenger and delivery expenses, internal
expenses (including, without limitation, all, salaries and expenses of their
officers and employees performing legal or accounting duties), fees and expenses
of counsel for the Company and its independent certified public accountants
(including the expenses of any special audit or "cold comfort" letters required
by or incident to such performance), securities acts liability insurance (if the
Company elects to obtain such insurance), fees and expenses of other Persons
retained by the Company (all such expenses being herein called "Registration
Expenses") will be borne by the Company; PROVIDED that in no event shall
Registration Expenses include any underwriting discounts, commissions or fees
attributable to the sale of the Registerable Securities.
5. FURTHER OBLIGATIONS OF THE COMPANY
(a) The Company shall, as soon as reasonably possible, use its best efforts
to register and qualify the Registrable Securities covered by any registration
statement described herein under such other securities or "blue sky" laws of
such jurisdictions as shall be reasonably requested by the Investor, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions unless the Company is already
subject to such service in such jurisdiction and except as may be required by
the 1933 Act.
(b) The Company shall as soon, as reasonably possible, furnish to the
Investor (or one broker or agent designated by the Investor) such numbers of
copies of a prospectus in conformity with the requirement of the 1933 Act, and
such other documents as the Investor may reasonably request in order to
facilitate the resale or other disposition of the Registerable Securities owned
by them.
<PAGE>
(c) Prior to filing any registration statement pursuant to this Agreement,
the Company shall provide a draft of the registration statement to the Investor
and its counsel within 10 days prior to filing, and the Company shall use
commercially reasonable efforts to include the comments of the Investor and its
counsel in the registration statement.
6. INDEMNIFICATION: CONTRIBUTION
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify each
holder of Registerable Securities, its general partners, general partners of the
general partner, limited partners, officers, directors, employees and agents and
each Person who controls such holder (within the meaning of the 1933 Act),
against all losses, damages, liabilities (joint or several) and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus,
or any amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus or preliminary prospectus,
in light of the circumstances under which they are made) not misleading, except
insofar as the same are contained in any information with respect to such holder
furnished in writing to the Company by such holder expressly for use therein or
any violation by the Company of the 1933 Act, 1934 Act, or the rules promulgated
thereunder that does not result from conduct by the Persons indemnifiable by the
Company under this Section 6(a). The Company also agrees to reimburse each such
holder and each such officer, director, partner and controlling Person for any
legal or other expenses reasonably incurred by such holder or such officer,
director, partner or controlling person in connection with investigating or
defending any such loss, damage, liability or action to the extent that the same
are not incurred in connection with the proviso of the preceding sentence.
(b) INDEMNIFICATION BY HOLDERS OF REGISTERABLE SECURITIES. In connection
with any registration statement in which a holder of Registerable Securities is
participating, each such holder will furnish to the Company in writing, such
information and affidavits with respect to such holder as the Company reasonably
requests for use in connection with any such registration statement or
prospectus and agrees to indemnify, to the extent permitted by law, the Company,
the directors, officers, employees and agents and each Person who controls the
Company (within the meaning of the Act), and any investment advisor thereof or
agent therefor against any losses, damages, liabilities and expenses resulting
from any untrue statement of a material fact or any omission of a material fact
required to be stated in the registration statement or prospectus or any
amendment thereof or supplement thereto or necessary to make the statements
therein (in the case of a prospectus, in the light of the circumstances under
which they were made) not misleading, to the extent, but only to the extent,
that such untrue statement or omission is contained in or failed to be contained
in any information or affidavit with respect to such holder so furnished in
writing by such holder specifically for inclusion therein or resulting from the
violation of applicable securities laws by such holder or its agents in
connection with the sale of the Registerable Securities.
<PAGE>
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding against such person or
investigation thereof made in writing for which such person will claim
indemnification or contribution pursuant to this Agreement and, unless in the
reasonable judgment of counsel to such indemnified party a conflict of interest
may exist between such indemnified party and the indemnifying party with respect
to such claim which would not permit the same counsel to represent the
indemnifying and indemnified parties, permit the indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim (including as the result of a conflict of
interest which, in the reasonable judgment of counsel to such indemnified party,
does not permit the same counsel to represent the indemnified and indemnifying
parties), it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim other than counsel to the indemnifying party.
No indemnifying party will be required to consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. The
indemnifying party will not be subject to any liability for any settlement made
without its consent. The failure of any indemnified party to give such notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Agreement unless, and only to the extent that, the failure of the
indemnified party to give such notice is (i) deliberate and wilful and (ii)
results in actual harm to the indemnifying party.
(d) CONTRIBUTION. If the indemnification provided for in this Section 6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, damages, liabilities or expenses referred to therein by
reason other than that set forth in the exception in the first sentence of
Section 6(a) hereof and Section 6(b) hereof, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions or inactions which resulted in such losses, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The relative fault of such indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or indemnified parties, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, damages, liabilities and expenses referred to above shall
be deemed to include, subject to the limitations set forth in Section 5(c), any
legal or other fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by PRO RATA
allocation or by any other method of
<PAGE>
allocation which does not take account of the equitable considerations referred
to in the immediately preceding paragraph. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 6(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 6(d).
In the event that any provision of an indemnification clause in an
underwriting agreement executed by or on behalf of a holder of Registerable
Securities differs from a provision in this Section 6, such provision in the
underwriting agreement shall determine such holder's rights in respect thereof.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
The Investor may not participate in any underwritten registration with
respect to the Registerable Securities unless it (a) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements (including applicable "lock-up" arrangements described in Section 3
of this Agreement) and (b) agrees to pay its pro rata portion of all
underwriting discounts, commissions and fees.
8. RULE 144
The Company covenants that it will file the reports required to be filed by
it under the 1933 Act and the 1934 Act and the rules and regulations adopted by
the SEC thereunder (or, if it is not required to file such reports, it will make
publicly available such information including information required by Rule
15c2-11 promulgated under the 1934 Act as will enable the holders of
Registerable Securities to sell any Registerable Securities held by them without
registration as described in this Section 7); and it will take such further
action as any holder of Registerable Securities may reasonably request, all to
the extent required from time to time to enable such holder to sell Registerable
Securities without registration under the 1933 Act within the limitation of the
exemptions provided by (a) Rule 144 under the 1933 Act, as such Rule may be
amended from time to time, or (b) any similar rule or regulation hereafter
adopted by the SEC. Upon the reasonable request of any holder of Registerable
Securities, the Company will deliver to such holder a written statement as to
filings made by the Company with the SEC.
9. MISCELLANEOUS
(a) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company has obtained the
<PAGE>
written consent of holders of at least a majority of the then outstanding
Registerable Securities affected by such amendment, modification, supplement,
waiver or departure.
(b) NOTICES. All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, facsimile (with confirmation back),
nationally recognized overnight courier, or registered first-class mail:
(i) if to a holder of Registerable Securities, at the most current
address, and with a copy to be sent to each additional address given by
such holder to the Company, in writing, with a copy to each of such
holder's (i) litigation counsel and (ii) securities counsel which current
information is as follows:
With a copy to:
Tadeo Holdings, Inc.
4207 Grand River Avenue, Suite 20
Novi, Michigan 48735
Attention: Brian Bookmeier, President
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Attention: Peter W. Rothberg, Esq.
Telephone #: 212-940-3000
Facsimile: 212-940-3111
(ii) if to the Company at:
Azurel Ltd.
509 Madison Avenue
New York, New York 10022
Attention: Gerard Semhon, Chairman
With a copy to:
Gerster Savage & Kaplowitz LLP
101 East 52nd Street
New York, New York 10022
Telephone #: (212) 752-9700
Facsimile #: (212) 980-5192
All such notices and communications shall be deemed to have
been duly given when delivered by hand, if personally delivered, upon receipt if
delivered by facsimile, one-day
<PAGE>
after delivery to overnight courier priority delivery, or five Business Days
after being deposited in the mail, postage prepaid, if mailed.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within that jurisdiction. The parties hereto agree to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Agreement.
(g) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the holders
of Registerable Securities shall be enforceable to the fullest extent permitted
by law.
(h) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement
the Warrant and the Settlement Agreement, is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement and the Purchase Agreement (including the
exhibits and schedules thereto) supersede all prior agreements, negotiations,
and understandings between the parties with respect to such subject matter.
(i) ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is successfully
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
AZUREL, LTD
By: /S/ GERARD SEMHON
THE INVESTOR:
TADEO HOLDINGS, INC.
By: /S/ ALEXANDER KALPAXIS
Name: Alexander Kalpaxis
Title: Executive Vice President
THISWARRANT AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED IN
VIOLATION OF SUCH ACT, THE RULES AND REGULATIONS THEREUNDER OR THE
PROVISIONS OF THIS WARRANT.
No. of Shares of Common Stock: 200,000
Warrant No. __
WARRANT
To Purchase Common Stock of
AZUREL LTD.
THIS IS TO CERTIFY THAT TADEO E-COMMERCE CORP. or registered
assigns, is entitled, at any time from the Closing Date (as hereinafter defined)
to the Expiration Date (as hereinafter defined), to purchase from Azurel Ltd., a
Delaware corporation (the "Company"), 200,000 shares of Common Stock (as
hereinafter defined and subject to adjustment as provided herein), in whole or
in part, including fractional parts, at a purchase price equal to $1.50 per
share of Common Stock (as defined herein), all on the terms and conditions and
pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of
Common Stock issued by the Company after the Closing Date, other than Warrant
Stock.
"Book Value" shall mean, in respect of any share of Common
Stock on any date herein specified, the consolidated book value of the Company
as of the last day of any month immediately preceding such date, divided by the
number of Fully Diluted Outstanding shares of Common Stock as determined in
accordance with GAAP (assuming the payment of the exercise prices for such
shares) by any firm of independent certified public accountants of recognized
national standing selected by the Company and reasonably acceptable to the
Holder.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of New York.
"Closing Date" shall have the meaning set forth in the
Securities Purchase Agreement.
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency then administering the Securities Act and other
federal securities laws.
<PAGE>
- 2 -
"Common Stock" shall mean (except where the context otherwise
indicates) the Common Stock, $.01 par value, of the Company as constituted on
the Closing Date, and any capital stock into which such Common Stock may
thereafter be changed, and shall also include (i) capital stock of the Company
of any other class (regardless of how denominated) issued to the holders of
shares of Common Stock upon any reclassification thereof which is also not
preferred as to dividends or assets over any other class of stock of the Company
and which is not subject to redemption and (ii) shares of common stock of any
successor or acquiring corporation received by or distributed to the holders of
Common Stock of the Company in the circumstances contemplated by SECTION 4.4.
"Convertible Securities" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
"Current Warrant Price" shall mean, in respect of a share of
Common Stock at any date herein specified, the price at which a share of Common
Stock may be purchased pursuant to this Warrant on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect from time to time.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1.
"Expiration Date" shall mean a date ten (10) years from the
date hereof.
"Fully Diluted Outstanding" shall mean, when used with
reference to Common Stock, at any date as of which the number of shares thereof
is to be determined, all shares of Common Stock Outstanding at such date and all
shares of Common Stock issuable in respect of this Warrant, outstanding on such
date, and other options or warrants to purchase, or securities convertible into,
shares of Common Stock outstanding on such date which would be deemed
outstanding in accordance with GAAP for purposes of determining book value or
net income per share.
"GAAP" shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
"Holder" shall mean the Person in whose name the Warrant or
Warrant Stock set forth herein is registered on the books of the Company
maintained for such purpose.
"Other Property" shall have the meaning set forth in Section
4.4.
"Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common
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Stock, except shares then owned or held by or for the account of the Company or
any subsidiary thereof, and shall include all shares issuable in respect of
outstanding scrip or any certificates representing fractional interests in
shares of Common Stock.
"Person" shall mean any individual, sole proprietorship,
partnership, joint venture, trust, incorporated organization, association,
corporation, institution, public benefit corporation, entity or government
(whether federal, state, county, city, municipal or otherwise, including,
without limitation, any instrumentality, division, agency, body or department
thereof).
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated a date even herewith by and between the Company and TADEO
HOLDINGS, INC., as assigned to Tadeo E-Commerce Corp., as it may be amended from
time to time.
"Restricted Common Stock" shall mean shares of Common Stock
which are, or which upon their issuance on the exercise of this Warrant would
be, evidenced by a certificate bearing the restrictive legend set forth in
SECTION 9.1(A).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute a
sale thereof within the meaning of the Securities Act.
"Transfer Notice" shall have the meaning set forth in SECTION
9.2.
"Warrants" shall mean this Warrant and all warrants issued
upon transfer, division or combination of, or in substitution for, any thereof.
All Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may be
exercised.
"Warrant Price" shall mean an amount equal to (i) the number
of shares of Common Stock being purchased upon exercise of this Warrant pursuant
to SECTION 2.1, multiplied by (ii) the Current Warrant Price as of the date of
such exercise.
"Warrant Stock" shall mean the shares of Common Stock
purchased by the holders of the Warrants upon the exercise thereof.
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2. EXERCISE OF WARRANT
2.1. MANNER OF EXERCISE. From and after the Closing Date and
until 5:00 p.m., New York time, on the Expiration Date, Holder may exercise this
Warrant, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable hereunder.
In order to exercise this Warrant, in whole or in part, Holder
shall deliver to the Company at its principal office at 509 Madison Avenue, New
York New York 10022 or at the office or agency designated by the Company
pursuant to SECTION 12, (i) a written notice of Holder's election to exercise
this Warrant, which notice shall specify the number of shares of Common Stock to
be purchased, (ii) payment of the Warrant Price in cash or by wire transfer or
cashier's check drawn on a United States bank and (iii) this Warrant. Such
notice shall be substantially in the form of the subscription form appearing at
the end of this Warrant as Exhibit A, duly executed by Holder or its agent or
attorney. Upon receipt of the items referred to in clauses (i), (ii) and (iii)
above, the Company shall, as promptly as practicable, and in any event within
three (3) Business Days thereafter if requested in writing by Holder and
accompanied by Holder's payment of any additional transfer agent fees required
by such turnaround time, execute or cause to be executed and deliver or cause to
be delivered to Holder a certificate or certificates representing the aggregate
number of full shares of Common Stock issuable upon such exercise, together with
cash in lieu of any fraction of a share, as hereinafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible, in
such denomination or denominations as Holder shall request in the notice and
shall be registered in the name of Holder or, subject to SECTION 9, such other
name as shall be designated in the notice. This Warrant shall be deemed to have
been exercised and such certificate or certificates shall be deemed to have been
issued, and Holder or any other Person so designated to be named therein shall
be deemed to have become a holder of record of such shares for all purposes, as
of the date the notice, together with the cash or check or checks and this
Warrant, is received by the Company as described above and all taxes required to
be paid by Holder, if any, pursuant to SECTION 2.2 prior to the issuance of such
shares have been paid. If this Warrant shall have been exercised in part, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to Holder a new Warrant evidencing the
rights of Holder to purchase the unpurchased shares of Common Stock called for
by this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of Holder, appropriate notation may be made on
this Warrant and the same returned to Holder. Notwithstanding any provision
herein to the contrary, the Company shall not be required to register shares in
the name of any Person who acquired this Warrant (or part hereof) or any Warrant
Stock otherwise than in accordance with this Warrant.
2.2. PAYMENT OF TAXES AND CHARGES. All shares of Common Stock
issuable upon the exercise of this Warrant pursuant to the terms hereof shall be
validly issued, fully paid and nonassessable, and without any preemptive rights.
The Company shall pay all expenses in connection with, and all taxes and other
governmental charges that may be imposed with respect to, the issue or delivery
thereof, unless such tax or charge is imposed by law upon Holder, in
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which case such taxes or charges shall be paid by Holder. The Company shall not
be required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for shares of Common Stock
issuable upon exercise of this Warrant in any name other than that of Holder,
and in such case the Company shall not be required to issue or deliver any stock
certificate until such tax or other charge has been paid or it has been
established to the satisfaction of the Company that no such tax or other charge
is due.
2.3. FRACTIONAL SHARES. The Company shall not be required to
issue a fractional share of Common Stock upon exercise of any Warrant. As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Market Price per share
of Common Stock as of the Closing Date.
2.4. CONTINUED VALIDITY. A holder of shares of Common Stock
issued upon the exercise of this Warrant, in whole or in part (other than a
holder who acquires such shares after the same have been publicly sold pursuant
to a Registration Statement under the Securities Act or sold pursuant to Rule
144 thereunder), shall continue to be entitled with respect to such shares to
all rights to which it would have been entitled as Holder under SECTIONS 9, 10
AND 14 of this Warrant. The Company will, at the time of exercise of this
Warrant, in whole or in part, upon the request of Holder, acknowledge in
writing, in form reasonably satisfactory to Holder, its continuing obligation to
afford Holder all such rights; PROVIDED, HOWEVER, that if Holder shall fail to
make any such request, such failure shall not affect the continuing obligation
of the Company to afford to Holder all such rights.
3. TRANSFER, DIVISION AND COMBINATION
3.1. TRANSFER. Subject to compliance with SECTION 9, transfer
of this Warrant and all rights hereunder, in whole or in part, shall be
registered on the books of the Company to be maintained for such purpose, upon
surrender of this Warrant at the principal office of the Company referred to in
SECTION 2.1 or the office or agency designated by the Company pursuant to
SECTION 12, together with a written assignment of this Warrant substantially in
the form of EXHIBIT B hereto duly executed by Holder or its agent or attorney
and funds sufficient to pay any transfer taxes payable upon the making of such
transfer. Upon such surrender and, if required, such payment, the Company shall,
subject to SECTION 9, execute and deliver a new Warrant or Warrants in the name
of the assignee or assignees and in the denomination specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be canceled. A Warrant, if properly assigned in compliance with SECTION
9, may be exercised by a new Holder for the purchase of shares of Common Stock
without having a new Warrant issued.
3.2. DIVISION AND COMBINATION
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Subject to SECTION 9, this Warrant may be divided or combined
with other Warrants upon presentation hereof at the aforesaid office or agency
of the Company, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by Holder or its
agent or attorney. Subject to compliance with SECTION 3.1 and with SECTION 9, as
to any transfer which may be involved in such division or combination, the
Company shall execute and deliver a new Warrant or Warrants in exchange for the
Warrant or Warrants to be divided or combined in accordance with such notice.
3.3. EXPENSES. The Company shall prepare, issue and deliver at
its own expense (other than transfer taxes) the new Warrant or Warrants under
this SECTION 3.
3.4. MAINTENANCE OF BOOKS. The Company agrees to maintain, at
its aforesaid office or agency, books for the registration and the registration
of transfer of the Warrants.
4. ADJUSTMENTS
The number of shares of Common Stock for which this Warrant is
exercisable, or the price at which such shares may be purchased upon exercise of
this Warrant, shall be subject to adjustment from time to time as set forth in
this SECTION 4. The Company shall give Holder notice of any event described
below which requires an adjustment pursuant to this SECTION 4 at the time of
such event.
4.1. STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at any
time the Company shall:
(a) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(b) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which this Warrant is
exercisable immediately after the occurrence of any such event shall be adjusted
to equal the number of shares of Common Stock which a record holder of the same
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the occurrence of such event would own or be entitled to
receive after the happening of such event, and (ii) the Current Warrant Price
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shall be adjusted to equal (A) the Current Warrant Price multiplied by the
number of shares of Common Stock for which this Warrant is exercisable
immediately prior to the adjustment divided by (B) the number of shares for
which this Warrant is exercisable immediately after such adjustment.
4.2. CERTAIN OTHER DISTRIBUTIONS. If at any time the Company
shall take a record of the holders of its Common Stock for the purpose of
entitling them to receive any dividend or other distribution of:
(a) cash,
(b) any evidences of its indebtedness, any shares of its stock
or any other securities or property of any nature whatsoever, or
(c) any warrants or other rights to subscribe for or purchase
any evidences of its indebtedness, any shares of its stock or any other
securities or property of any nature whatsoever,
then Holder shall receive Notice of the Company's determination to make such
distribution fifteen (15) days prior to the record date for determining those
Common Stock holders entitled to receive such distribution in accordance with
SECTION 5.2 of this Warrant. A reclassification of the Common Stock (other than
a change in par value, or from par value to no par value or from no par value to
par value) into shares of Common Stock and shares of any other class of stock
shall be deemed a distribution by the Company to the holders of its Common Stock
of such shares of such other class of stock within the meaning of this Section
4.2; PROVIDED, HOWEVER, that if the outstanding shares of Common Stock shall be
changed into a larger or smaller number of shares of Common Stock as a part of
such reclassification, such change shall be deemed a subdivision or combination,
as the case may be, of the outstanding shares of Common Stock within the meaning
of Section 4.1, and in order for the Holder to receive any portion of the
reclassification distribution (other than an adjustment to the number of shares
of Common Stock for which the Warrant can be exercised) the Holder must exercise
the Warrant.
4.3. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock for which this Warrant is
exercisable and the Current Warrant Price provided for in this SECTION 4:
(a) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this Section 4 shall be made whenever and as often as any specified
event requiring an adjustment
<PAGE>
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shall occur. For the purpose of any adjustment, any specified event
shall be deemed to have occurred at the close of business on the date
of its occurrence.
(b) FRACTIONAL INTERESTS. In computing adjustments under this
Section 4, fractional interests in Common Stock shall be taken into
account to the nearest 1/10th of a share.
(c) WHEN ADJUSTMENT NOT REQUIRED. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling
them to receive a dividend or distribution or subscription or purchase
rights and shall, thereafter and before the distribution to
stockholders thereof, legally abandon its plan to pay or deliver such
dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of
such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
4.4. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION
OR DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company
other than solely a change or distribution as contemplated by SECTION 4.1
above), or sell, transfer or otherwise dispose of all or substantially all its
property, assets or business to another corporation and, pursuant to the terms
of such reorganization, reclassification, merger, consolidation or disposition
of assets, shares of common stock of the successor or acquiring corporation, or
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring corporation
("Other Property"), are to be received by or distributed to the holders of
Common Stock of the Company (with any action pursuant to which such
distribution, reclassification, merger, etc., is to be undertaken being referred
to as the "Transaction"), then Holder shall receive notice of the Transaction
prior to the record date for determining those Common Stockholders entitled to
vote on and/or to receive a distribution in connection with consummation of such
Transaction in accordance with SECTION 5.2 of this Warrant. Upon the
consummation of any Transaction pursuant to which the Company is not the
surviving corporation, this Warrant, to the extent previously unexercised, shall
be of no further force and effect, null and void and unexercisable. The
foregoing provisions of this SECTION 4.4 shall similarly apply to successive
reorganizations, reclassifications, mergers, consolidations or dispositions of
assets.
4.5. OTHER ACTION AFFECTING COMMON STOCK. In case at any time
or from time to time the Company shall take any action in respect of its Common
Stock, other than any action described in this SECTION 4, which would have a
materially adverse effect upon the rights of the Holder, the number of shares of
Common Stock and/or the purchase price thereof shall be
<PAGE>
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adjusted in such manner as may be equitable in the circumstances, as determined
in good faith by the Board of Directors of the Company.
5. NOTICES TO HOLDER
5.1. NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Common Stock for which this Warrant is exercisable, or whenever the price at
which a share of such Common Stock may be purchased upon exercise of the
Warrants, shall be adjusted pursuant to SECTION 4, the Company shall forthwith
prepare a certificate to be executed by the chief financial officer of the
Company setting forth, in reasonable detail, the event requiring the adjustment
and the method by which such adjustment was calculated specifying the number of
shares of Common Stock for which this Warrant is exercisable and (if such
adjustment was made pursuant to SECTION 4.5) describing the number and kind of
any other shares of stock or Other Property for which this Warrant is
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to the Holder in accordance with
SECTION 15.2. The Company shall keep at its office or agency designated pursuant
to SECTION 12 copies of all such certificates and cause the same to be available
for inspection at said office during normal business hours by the Holder or any
prospective purchaser of a Warrant designated by the Holder.
5.2. Notice of Corporate Action. If at any time
(a) the Company shall take a record of the holders of its
Common Stock for the purpose of entitling them to receive a dividend or
other distribution, or any right to subscribe for or purchase any
evidences of its indebtedness, any shares of stock of any class or any
other securities or property, or to receive any other right, or
(b) there shall be any capital reorganization of the Company,
any reclassification or recapitalization of the capital stock of the
Company or any consolidation or merger of the Company with, or any
sale, transfer or other disposition of all or substantially all the
property, assets or business of the Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company;
then, in any one or more of such cases, the Company shall give to Holder (i) at
least 15 days' prior written notice of the date on which a record date shall be
selected for such dividend, distribution or right or for determining rights to
vote in respect of any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or
<PAGE>
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winding up, and (ii) in the case of any such reorganization, reclassification,
merger, consolidation, sale, transfer, disposition, dissolution, liquidation or
winding up, at least 21 days' prior written notice of the date when the same
shall take place. Such notice in accordance with the foregoing clause also shall
specify (i) the date on which any such record is to be taken for the purpose of
such dividend, distribution or right, the date on which the holders of Common
Stock shall be entitled to any such dividend, distribution or right, and the
amount and character thereof, and (ii) the date on which any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up is to take place and the
time, if any such time is to be fixed, as of which the holders of Common Stock
shall be entitled to exchange their shares of Common Stock for securities or
other property deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up. Each such written notice shall be sufficiently given if addressed to Holder
at the last address of Holder appearing on the books of the Company and
delivered in accordance with SECTION 15.2.
6. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its certificate of incorporation or through any
reorganization, transfer of assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder against impairment. Without limiting the generality of the
foregoing, the Company will (a) not increase the par value of any shares of
Common Stock receivable upon the exercise of this Warrant above the amount
payable therefor upon such exercise immediately prior to such increase in par
value, (b) take all such action as may be necessary or appropriate in order that
the Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant, and (c) use its best efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.
Upon the request of Holder, the Company will at any time
during the period this Warrant is outstanding acknowledge in writing, in form
satisfactory to Holder, the continuing validity of this Warrant and the
obligations of the Company hereunder.
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7. RESERVATION AND AUTHORIZATION OF COMMON STOCK
From and after the Closing Date, the Company shall at all
times reserve and keep available for issue upon the exercise of Warrants such
number of its authorized but unissued shares of Common Stock as will be
sufficient to permit the exercise in full of all outstanding Warrants. All
shares of Common Stock which shall be so issuable, when issued upon exercise of
any Warrant and payment therefor in accordance with the terms of such Warrant,
shall be duly and validly issued and fully paid and nonassessable, and not
subject to preemptive rights.
Before taking any action which would cause an adjustment
reducing the Current Warrant Price below the then par value, if any, of the
shares of Common Stock issuable upon exercise of the Warrants, the Company shall
take any corporate action which may be necessary in order that the Company may
validly and legally issue fully paid and non-assessable shares of such Common
Stock at such adjusted Current Warrant Price.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock for which this Warrant is exercisable or
in the Current Warrant Price, the Company shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
8. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS
In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of SECTION 4 refers to the taking of a record of such holders, the Company will
in each such case take such a record and will take such record as of the close
of business on a Business Day. The Company will not at any time, except upon
dissolution, liquidation or winding up of the Company, close its stock transfer
books or Warrant transfer books so as to result in preventing or delaying the
exercise or transfer of any Warrant.
9. RESTRICTIONS ON TRANSFERABILITY
The Warrant and the Warrant Stock shall not be transferred,
hypothecated or assigned before satisfaction of the conditions specified in this
SECTION 9, which conditions are intended to ensure compliance with the
provisions of the Securities Act with respect to the Transfer of any Warrant or
any Warrant Stock. Holder, by acceptance of this Warrant, agrees to be bound by
the provisions of this SECTION 9.
9.1. RESTRICTIVE LEGEND. (a) The Holder by accepting this
Warrant and any Warrant Stock agrees that this Warrant and the Warrant Stock
issuable upon exercise hereof may not be assigned or otherwise transferred
unless and until (i) the Company has received an opinion of counsel for the
Holder that such securities may be sold pursuant to an exemption from
registration under the Securities Act of 1933, as amended (the "Securities Act")
or (ii) a
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registration statement relating to such securities has been filed by the Company
and declared effective by the Commission.
Each certificate for Warrant Stock issuable hereunder shall
bear a legend as follows unless such securities have been sold pursuant to an
effective registration statement under the Securities Act:
"The securities represented by this certificate have
not been registered under the Securities Act of 1933, as
amended (the "Act"). The securities may not be offered for
sale, sold or otherwise transferred except (i) pursuant to an
effective registration statement under the Act or (ii)
pursuant to an exemption from registration under the Act and
applicable state securities laws in respect of which the
Company has received an opinion of counsel satisfactory to the
Company to such effect. Copies of the agreement covering both
the purchase of the securities and restricting their transfer
may be obtained at no cost by written request made by the
holder of record of this certificate to the Secretary of the
Company at the principal executive offices of the Company."
(a) Except as otherwise provided in this SECTION 9, the
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"This Warrant and the securities represented hereby
have not been registered under the Securities Act of 1933, as
amended, and may not be transferred in violation of such Act
and applicable state securities laws, the rules and
regulations thereunder or the provisions of this Warrant."
9.2. NOTICE OF PROPOSED TRANSFERS. Prior to any Transfer or
attempted Transfer of any Warrants or any shares of Restricted Common Stock, the
Holder shall give ten days' prior written notice (a "Transfer Notice") to the
Company of Holder's intention to effect such Transfer, describing the manner and
circumstances of the proposed Transfer, and obtain from counsel who shall be
reasonably satisfactory to the Company, an opinion that the proposed Transfer of
such Warrants or such Restricted Common Stock may be effected without
registration under the Securities Act and applicable state securities laws.
After receipt of the Transfer Notice and opinion, the Company shall, within five
Business Days thereof, notify the Holder as to whether such opinion is
reasonably satisfactory and, if so, such holder shall thereupon be entitled to
Transfer such Warrants or such Restricted Common Stock, in accordance with the
terms of the Transfer Notice. Each certificate, if any, evidencing such shares
of Restricted Common Stock issued upon such Transfer shall bear the restrictive
legend set forth in SECTION 9.1(A), and the Warrant issued upon such Transfer
shall bear the restrictive legend set forth in SECTION 9.1(B), unless in the
opinion of counsel to the Company such legend is not required in order to ensure
compliance with the Securities Act. The Holder shall not be entitled to Transfer
such Warrants or such Restricted Common Stock until receipt of notice that such
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opinion of counsel referred to above under this SECTION 9.2(A) is reasonably
satisfactory to the Company.
9.3. REQUIRED REGISTRATION. Pursuant to the terms and
conditions set forth in the Registration Rights Agreement, the Company shall
prepare and file with the Commission a Registration Statement relating to the
offer and sale of the Common Stock issuable upon exercise of the Warrant and
shall use its best efforts to cause the Commission to declare such Registration
Statement effective under the Securities Act pursuant to the terms and
conditions of the Registration Rights Agreement.
9.4. TERMINATION OF RESTRICTIONS. Notwithstanding the
foregoing provisions of SECTION 9, the restrictions imposed by this Section upon
the transferability of the Warrants, the Warrant Stock and the Restricted Common
Stock (or Common Stock issuable upon the exercise of the Warrants) and the
legend requirements of SECTION 9.1 shall terminate as to any particular Warrant
or share of Warrant Stock or Restricted Common Stock (or Common Stock issuable
upon the exercise of the Warrants) (i) when and so long as such security shall
have been effectively registered under the Securities Act and disposed of
pursuant thereto or (ii) when the Company shall have received an opinion of
counsel reasonably satisfactory to it that such shares may be transferred
without registration thereof under the Securities Act and applicable state
securities law. Whenever the restrictions imposed by SECTION 9 shall terminate
as to this Warrant, as hereinabove provided, the Holder hereof shall be entitled
to receive from the Company upon written request of the Holder, at the expense
of the Company, a new Warrant bearing the following legend in place of the
restrictive legend set forth hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN WARRANT
CONTAINED IN SECTION 9 HEREOF TERMINATED ON ________, 19__, AND
ARE OF NO FURTHER FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination of,
or in substitution for, any Warrant or Warrants entitled to bear such legend
shall have a similar legend endorsed thereon. Whenever the restrictions imposed
by this Section shall terminate as to any share of Restricted Common Stock, as
hereinabove provided, the holder thereof shall be entitled to receive from the
Company, at the Company's expense, a new certificate representing such Common
Stock not bearing the restrictive legend set forth in SECTION 9.1(A).
9.5. LISTING ON SECURITIES EXCHANGE. If the Company shall list
any shares of Common Stock on any securities exchange, it will, at its expense,
list thereon, maintain and, when necessary, increase such listing of, all shares
of Common Stock issued or, to the extent permissible under the applicable
securities exchange rules, issuable upon the exercise of this Warrant so long as
any shares of Common Stock shall be so listed during any such Exercise Period.
<PAGE>
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10. SUPPLYING INFORMATION
The Company shall cooperate with Holder in supplying such
information as may be reasonably necessary for Holder to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of an exemption from the Securities Act for the
sale of any Warrant or Restricted Common Stock.
11. LOSS OR MUTILATION
Upon receipt by the Company from Holder of evidence reasonably
satisfactory to it of the ownership of and the loss, theft, destruction or
mutilation of this Warrant and indemnity reasonably satisfactory to it (it being
understood that the written agreement and affidavit of the Holder shall be
sufficient indemnity), and in case of mutilation upon surrender and cancellation
hereof, the Company will execute and deliver in lieu hereof a new Warrant of
like tenor to Holder; PROVIDED, in the case of mutilation, no indemnity shall be
required if this Warrant in identifiable form is surrendered to the Company for
cancellation.
12. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the Company
shall maintain an office or agency (which may be the principal executive offices
of the Company) where the Warrants may be presented for exercise, registration
of transfer, division or combination as provided in this Warrant.
13. LIMITATION OF LIABILITY
No provision hereof, in the absence of affirmative action by
Holder to purchase shares of Common Stock, and no enumeration herein of the
rights or privileges of Holder hereof, shall give rise to any liability of
Holder for the purchase price of any Common Stock or as a stockholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
14. MISCELLANEOUS
14.1. NONWAIVER AND EXPENSES. No course of dealing or any
delay or failure to exercise any right hereunder on the part of Holder shall
operate as a waiver of such right or otherwise prejudice Holder's rights, powers
or remedies. If the Company fails to make, when due, any payments provided for
hereunder, or fails to comply with any other provision of this Warrant, the
Company shall pay to Holder such amounts as shall be sufficient to cover any
costs and expenses including, but not limited to, reasonable attorneys' fees,
including those of
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appellate proceedings, incurred by Holder in collecting any amounts due pursuant
hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
14.2. NOTICE GENERALLY. Except as may be otherwise provided
herein, any notice or other communication or delivery required or permitted
hereunder shall be in writing and shall be delivered personally or sent by
certified mail, postage prepaid, or by a nationally recognized overnight courier
service or by facsimile (with confirmation back), and shall be deemed given when
so delivered personally or by overnight courier service or by facsimile, or, if
mailed, three (3) days after the date of deposit in the United States mails, as
follows:
(1) If to the Company, to:
509 Madison Avenue
New York, New York 10022
Attention: Gerard Semhon, Chairman
With a copy to:
Gersten Savage & Kaplowitz LLP
101 East 52nd Street
New York, New York 10022
Telephone # (212) 752-9700
Facsimile: (212) 980-5192
(2) If to the Holder, to:
5 Hanover Square
24th Floor
New York, NY 10004
Attention: Alexander Kalpaxis, Executive Vice President
With a copy to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Attention: Peter W. Rothberg, Esq.
Telephone #: 212-940-3000
Facsimile: 212-940-3111
The Company or the Holder may change the foregoing address by notice given
pursuant to this SECTION 14.2.
<PAGE>
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14.3. REMEDIES. Holder in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under SECTION 9 of this Warrant.
The Company agrees that monetary damages would not be adequate compensation for
any loss incurred by reason of a breach by it of the provisions of SECTION 9 of
this Warrant and hereby agrees to waive the defense in any action for specific
performance that a remedy at law would be adequate.
14.4. SUCCESSORS AND ASSIGNS. Subject to the provisions of
SECTIONS 3.1 AND 9, this Warrant and the rights evidenced hereby shall inure to
the benefit of and be binding upon the successors of the Company and the
successors and assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and, with
respect to SECTION 9 hereof, holders of Warrant Stock, and shall be enforceable
by any such Holder or holder of Warrant Stock.
14.5. AMENDMENT. This Warrant and all other Warrants may be
modified or amended or the provisions hereof waived with the written consent of
the Company and the Holder.
14.6. SEVERABILITY. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Warrant.
14.7. HEADINGS. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.
14.8. GOVERNING LAW. This Warrant shall be governed by the
laws of the State of New York, without regard to the provisions thereof relating
to conflict of laws.
<PAGE>
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
duly executed and its corporate seal to be impressed hereon and attested by its
Secretary or an Assistant Secretary.
Dated: June 1, 1999
AZUREL LTD.
By: /S/ GERARD SEMHON
Name: Gerard Semhon
Title: Chairman
Attest:
By:______________________
Name:
Title:
<PAGE>
EXHIBIT A
SUBSCRIPTION FORM
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of ______ Shares of Common Stock of
AZUREL LTD., and herewith makes payment therefor, all at the price and on the
terms and conditions specified in this Warrant and requests that certificates
for the shares of Common Stock hereby purchased (and any securities or other
property issuable upon such exercise) be issued in the name of and delivered to
_____________ whose address is _________________ and, if such shares of Common
Stock shall not include all of the shares of Common Stock issuable as provided
in this Warrant, that a new Warrant of like tenor and date for the balance of
the shares of Common Stock issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with the
name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of this
Warrant hereby sells, assigns and transfers unto the Assignee named below all of
the rights of the undersigned under this Warrant, with respect to the number of
shares of Common Stock set forth below:
NAME AND ADDRESS OF ASSIGNEE NO. OF SHARES OF
COMMON STOCK
and does hereby irrevocably constitute and appoint ______________
attorney-in-fact to register such transfer on the books of ____________
maintained for the purpose, with full power of substitution in the premises.
Dated:__________________ Print Name:___________________
Signature:_____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
[FORM]
ONLINE HOSTING AGREEMENT
This Online Hosting Agreement (this "Agreement") is being entered into
effective as of the 1st day of June, 1999 and is entered into by and between
Diplomat Direct Marketing Corporation, a Delaware corporation ("Diplomat"), and
Tadeo E-Commerce Corp., a Delaware corporation ("Tadeo").
R E C I T A L S
A. Historically, Diplomat has been engaged directly in, among other
things, the business of offering consumers the opportunity to place apparel
orders directly with Diplomat through its toll free telephone number and its web
site (the "Direct Access Business").
B. Recently, Tadeo was formed and Tadeo and Diplomat have entered into
a Web Design and Consulting Agreement of even date herewith (the "Web
Agreement") pursuant to which Tadeo has agreed to assist Diplomat in developing
the technology, and providing other services necessary, to further Diplomat's
Direct Access Business, including the hosting and maintenance of Diplomat's web
site (the "Web Site").
C. In connection with Diplomat's operation of its Direct Access
Business, Diplomat desires to obtain various online hosting services
("Services") from Tadeo, and Tadeo desires to provide such Services to Diplomat.
THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
Section 1. SERVICES.
Tadeo shall provide, directly or through a third party vendor
reasonably satisfactory to Diplomat, the Online Hosting Services described on
EXHIBIT A hereto, at the cost specified and on the other terms and conditions as
set forth on EXHIBIT A.
Section 2. COMPENSATION.
Diplomat will pay to Tadeo when due a fee for each of the Services
equal to the amount described in EXHIBIT A hereto relating to each such Service;
PROVIDED, that in the event Diplomat terminates this Agreement in accordance
with Section 3 hereof, the fee for the provision of each
<PAGE>
- 2 -
terminated Service shall cease to accrue on and after the effective date of such
termination. In the event that Diplomat terminates this Agreement other than in
accordance with Section 3, Diplomat shall be obligated to pay for the Services
in accordance with the fee schedule contained on EXHIBIT A throughout the
balance of the Period (as hereinafter defined) as though Tadeo continued to
provide the terminated Services through the balance of the Period. Late payments
shall accrue interest at a rate equal to fifteen (15%) percent per annum.
Section 3. TERM.
(a) The term of this Agreement shall begin on the date hereof
(the "Effective Date") and shall continue for a period of 12 months thereafter
(the "Period") in full force and effect until it is terminated in accordance
with this Section 3.
(b) Diplomat or Tadeo, if such party is not in default of the
terms of this Agreement, may extend the term of this Agreement for an additional
one year ("Additional Period"), provided the extending party gives the other
party at least sixty (60) days advance written notice before the end of the
Period. If either party elects to extend the Agreement for the Additional
Period, all other terms and conditions of this Agreement shall continue during
the Additional Period.
(c) Tadeo shall have the right (but not the obligation) to
terminate this Agreement and the rights granted to Diplomat hereunder if:
(i) Diplomat is in material breach of any of its
obligations hereunder, which breach is not cured within five days of receipt of
written notice from Tadeo of such breach;
(ii) The Web Agreement is terminated by any of Tadeo,
Diplomat, or any other party thereto [in the event the rights and obligations of
any party(ies) to such Web Agreement have been duly assigned to a third
party(ies) under the terms thereof] in accordance with the terms of the Web
Agreement, but not if the Web Agreement is terminated by Tadeo or its
assignee(s) other than in accordance with the terms of the Web Agreement;
(iii) Diplomat is the subject of a voluntary petition
in bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation or composition for the benefit of creditors, if such petition or
proceeding is not dismissed within 60 days of filing, or becomes the subject of
any involuntary petition in bankruptcy or any involuntary proceeding relating to
insolvency, receivership, liquidation or composition for the benefit of
creditors, if such petition or proceeding is not dismissed within 60 days of
filing;
(iv) Diplomat involuntarily dissolves or is
dissolved;
<PAGE>
- 3 -
(v) Diplomat is judicially adjudicated insolvent or
generally is unable to pay its debts as they mature or makes an assignment for
the benefit of its creditors; or
(vi) Upon Tadeo giving Diplomat at least sixty (60)
days advance written notice of termination of this Agreement.
(d) Diplomat shall have the right (but not the obligation) to
terminate this Agreement and the rights granted to Tadeo hereunder if:
(i) Tadeo is in material breach of any of its
obligations hereunder, which breach is not cured within five days of receipt of
written notice from Diplomat of such breach;
(ii) The Web Agreement is terminated by any of Tadeo,
Diplomat, or any other party thereto [in the event the rights and obligations of
any party(ies) to such Web Agreement have been duly assigned to a third
party(ies) under the terms thereof] in accordance with the terms of the Web
Agreement, but not if the Web Agreement is terminated by Diplomat or its
assignee(s) other than in accordance with the terms of the Web Agreement;
(iii) Tadeo is the subject of a voluntary petition in
bankruptcy or any voluntary proceeding relating to insolvency, receivership,
liquidation or composition for the benefit of creditors, if such petition or
proceeding is not dismissed within 60 days of filing, or becomes the subject of
any involuntary proceeding relating to insolvency, receivership, liquidation or
composition for the benefit of creditors, if such petition or proceeding is not
dismissed within 60 days of filing.
(iv) Tadeo involuntarily dissolves or is dissolved;
(v) Tadeo is judicially adjudicated insolvent or
generally is unable to pay its debts as they mature or makes an assignment for
the benefit of its creditors; or
(vi) Upon Diplomat giving Tadeo at least sixty (60)
days advance written notice of termination of this Agreement.
(e) Tadeo will have the right (but not the obligation) to
terminate this Agreement and the rights granted to Diplomat hereunder, upon 60
days written notice to Diplomat, following the acquisition of all or
substantially all of the assets of Diplomat by any Permitted Assignee (as
defined in Section 9(a) of this Agreement), or the acquisition of the beneficial
ownership of at least 20% (the "Threshold") of the voting power represented by
the voting securities of Diplomat, any successor thereto or any Permitted
Assignee by any person or
<PAGE>
- 4 -
"group" within the meaning of Sections 13(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), or any successor
provision to either of the foregoing, including any group acting for the purpose
of acquiring, holding or disposing of securities within the meaning of Rule
13d-5(b)(1) under the Exchange Act or any successor provision thereof (a
"group") other than The Rubin Family Irrevocable Stock Trust U/A dated April 30,
1997, organized under the laws of the State of New York (the "Trust"), Robert M.
Rubin ("Rubin"), or any affiliate of Rubin or the Trust. For purposes of this
Agreement, (i) the term "beneficial ownership" shall have the meaning set forth
in Rule 13d-3 of the Exchange Act or any successor provisions thereof, (ii) the
term "voting securities' means the common Stock, par value $.0001 per share, of
Diplomat and any other securities issued by Diplomat having the power to vote
generally in the election of directors of Diplomat and (iii) the term
"affiliate" means a person or entity directly or indirectly controlled by,
controlling or under common control with another person. For purposes of this
Section 3, an acquisition shall not include (A) the acquisition by a person of
voting securities of Diplomat pursuant to an involuntary disposition through
foreclosure or similar event, or (B) the acquisition by a person of voting
securities of Diplomat pursuant to a dividend intended to be on a tax-free basis
(a "Tax-Free Spin-Off") under the Internal Revenue Code of 1986, as amended from
time to time, but shall include a subsequent acquisition of voting securities
pursuant to a disposition by the person that acquired the voting securities in
such involuntary disposition or such Tax-Free Spin-Off. In the event any person
acquires beneficial ownership of voting power in excess of the Threshold as a
result of a transaction described in the immediately preceding sentence, the
Threshold with respect to such person shall be adjusted to an amount equal to
the percentage of beneficial ownership held by such person immediately following
such transaction.
(f) A party may exercise its right to terminate pursuant to
this Section 3 by sending appropriate written notice to the other party. No
exercise by a party of its rights under this Section will limit its remedies by
reason of the other party's default, the party's rights to exercise any other
rights under this Section 3, or any of that party's other rights.
Section 4. RECORDS AND ACCOUNTS.
Tadeo will maintain accurate books, records and accounts of all
transactions relating to the Services performed by it pursuant to this
Agreement. Diplomat may, at its own expense, examine and copy those books and
records as provided in this Section 4. Such books, records and accounts will be
maintained in a manner that allows Diplomat to separate these matters from those
relating to Tadeo's other operations. Such books, records and accounts will
reflect such information as would normally be examined by an independent
accountant in performing an audit pursuant to United States generally accepted
auditing standards for the purpose of certifying financial statements, and to
permit verification thereof by governmental agencies. Diplomat may make
examinations pursuant hereto during Tadeo's usual business hours, and at the
place in the continental United States where Tadeo regularly keeps these books
and records. Diplomat will be required to notify Tadeo at least five business
days before the date of planned examination. If Diplomat's examination is not
completed within one month from commencement, Tadeo at any time may require
Diplomat to terminate such examination on
<PAGE>
- 5 -
seven days' notice to Diplomat; PROVIDED that Tadeo has cooperated with Diplomat
in the examination of such books and records.
Section 5. NO RESTRICTIONS.
Nothing in this Agreement shall limit or restrict the right of any of
Diplomat's directors, officers or employees or any of Tadeo's directors,
officers or employees to engage directly or indirectly in the same or similar
business activities or lines of business as Diplomat or, respectively, or limit
or restrict the right of Diplomat or Tadeo as the case may be, to engage in any
other business or to render or obtain, as the case may be, services of any kind
to or from, as the case may be , any corporation, firm, individual, trust or
association.
Section 6. INDEPENDENT CONTRACTORS.
Tadeo and Diplomat are independent contractors. There is no
relationship of partnership, joint venture, employment, franchise or agency
between Tadeo and Diplomat. Neither Tadeo nor Diplomat shall have the power to
bind the other or incur obligations on the other's behalf without the other's
prior written consent. When Tadeo's employees act under the terms of this
Agreement, they shall be deemed at all times to be under the supervision and
responsibility of Tadeo and no person employed by Tadeo and acting under the
terms of this Agreement shall be deemed to be acting as agent or employee of
Diplomat or any customer of Diplomat for any purpose whatsoever.
Section 7. CONFIDENTIALITY.
Tadeo and Diplomat each agree to hold in strict confidence, and to use
reasonable efforts to cause each of their employees and representatives to hold
in strict confidence, all confidential information concerning Tadeo or Diplomat,
as the case may be, furnished to or obtained by the other party, in the course
of performing the obligations provided for under this Agreement except to the
extent that (a) such information has been in the public domain through no fault
of Tadeo or Diplomat, as the case may be, (b) disclosure or release is compelled
by judicial or administrative process, or (c) in the opinion of counsel to Tadeo
or Diplomat, as the as may be, disclosure or release is necessary pursuant to
requirements of law or the requirements of any governmental entity including,
without limitation, disclosure requirements under the securities laws of the
United States or similar laws of other jurisdictions applicable to Tadeo or
Diplomat, as the case may be.
Section 8. PROPRIETARY RIGHTS OF TADEO.
All materials, including but not limited to any computer software (in
object code and source code form), data or information developed or provided by
Tadeo, or its suppliers under this Agreement, and any know-how, methodologies,
equipment, or processes used by Tadeo to provide the Services to Diplomat,
including, without limitation, all copy-rights, trademarks,
<PAGE>
- 6 -
patents, trade secrets, and any other proprietary rights inherent therein and
appurtenant thereto (collectively, "Host Materials") shall remain the sole and
exclusive property of Tadeo or its suppliers. To the extent, if any, that
ownership of the Hose Materials does not automatically vest in Tadeo by virtue
of this Agreement or otherwise, Diplomat hereby transfers and assigns to Tadeo
all rights, title and interest which Diplomat may have in and to the Host
Materials. Diplomat acknowledges and agrees that Tadeo is in the business of
designing and hosting Web sites, and that Tadeo shall have the right to provide
to third parties services which are the same or similar to the Tadeo Services,
and to use or otherwise exploit any Host Materials in providing such services.
Section 9. DISPUTE RESOLUTION.
(a) In the event that any party to this Agreement has
any claim, right or cause of action against any other party to this Agreement,
which the parties shall be unable to settle by agreement between themselves,
such claim, right or cause of action, to the extent that the relief sought by
such party is for monetary damages or awards, shall be determined by arbitration
in accordance with the Rules of the American Arbitration Association ("AAA"),
through the adjudication by a single arbitrator, in New York, New York, with the
decision of such arbitrator to be final and binding upon all parties. The fees,
costs and expenses of such arbitration, as submitted by the AAA, shall be borne
equally by both Tadeo and Diplomat; PROVIDED, that each of Tadeo and Diplomat
shall pay the fees, costs and expenses of its own counsel, accountants and other
representatives in connection with such arbitration. The parameters of the AAA
proceedings undertaken in accordance with this Section 8 shall be prescribed
such that a decision shall be rendered within sixty (60) days following the
initial written reference of the related dispute to AAA arbitration.
(b) Notwithstanding any other provisions of this Section 8, in
the event that a party against whom any claim, right or cause of action is
asserted commences, or has commenced against it, bankruptcy, insolvency or
similar proceedings, the party or parties asserting such claim, right or cause
of action shall have no obligations under this Section 8 and may assert such
claim, right or cause of action in the manner and forum it deems appropriate,
subject to applicable laws. No determination or decision by the arbitrators
pursuant to this Section 8 shall limit or restrict the ability of any party
hereto to obtain or seek in any appropriate forum, any relief or remedy that is
not a monetary award or money damages.
Section 10. MISCELLANEOUS.
(a) Neither party any assign this Agreement, or their
respective rights and obligations hereunder, in whole or in part, without the
other party's prior written consent; PROVIDED, HOWEVER, that Tadeo shall be
entitled to assign all of its rights and obligations hereunder to any subsidiary
or affiliated entity without the consent of Diplomat. Any attempt to assign this
Agreement without such consent (if required) shall be void and of no effect AB
INITIO. Notwithstanding the immediately preceding sentence, either party may
assign this Agreement or all, but not less than all, of its rights and
obligations hereunder to any entity that acquires it by
<PAGE>
- 7 -
purchase of stock or by merger or otherwise, or by obtaining all or
substantially all of its assets (a "Permitted Assignee"); PROVIDED, that any
such Permitted Assignee thereafter succeeds to all of the rights and is subject
to all of the obligations of the assignor under this Agreement; and PROVIDED,
HOWEVER, that the provisions of this Section 9(a) shall in no way modify the
provisions of Section 3(d).
(b) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York applicable to
agreements made and to be performed entirely within such State, without regard
to the conflicts of law principles of such State. Each party shall comply in all
respects with all laws and regulations applicable to its activities under this
Agreement.
(c) Notwithstanding the provisions of Section 8, each party
hereto irrevocably submits to the exclusive jurisdiction of (a) the courts of
the State of New York, New York County, or (b) the Untied States District Court
for the southern District of New York, for the purposes of any suit, action or
other proceeding arising out of this Agreement or any transaction contemplated
hereby or thereby. Each of Diplomat and Tadeo agrees to commence any such
action, suit or proceeding either in the Untied States District Court for the
Southern District of New York, or if such suit, action or other proceeding may
not be brought in such court for jurisdictional reasons, in the courts of the
State of New York County. Each of Diplomat and Tadeo further agrees that service
of any process, summons, notice or documents by U.S. registered mail to such
party's respective address set forth below shall be effective service of process
for any action, suit or proceeding in New York with respect to any matters to
which it has submitted to jurisdiction in this Section 9(c). Each of Diplomat
and Tadeo irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby and thereby in (i) the courts of the State of
New York County, or (ii) the United States District Court for the Southern
District of New York, and hereby and thereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been brought
in an inconvenient forum.
(d) If any provisions of this Agreement (or any portion
thereof) or the application of any such provision (or any portion thereof) to
any person or circumstance shall be held invalid, illegal or unenforceable in
any respect by a court of competent jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision hereof (or the remaining
portion thereof) or the application of such provision to any other persons or
circumstances.
(e) All notices or other communications required or permitted
to be given hereunder shall be in writing and shall be delivered by hand, by
facsimile (with confirmation back), or sent, postage prepaid, by registered,
certified or express mail or nationally recognized overnight courier service and
shall be deemed given when so delivered by hand, by facsimile (with confirmation
back), or if mailed, three days after mailing (one business day in the case of
express mail or overnight courier service), as follows:
<PAGE>
- 8 -
(i) if to Tadeo:
Tadeo E-Commerce Corp.
5 Hanover Square
New York, New York 10004
Attention: Damon Testaverde, President
(ii) if to Diplomat:
Diplomat Direct Marketing Corporation
414 Alfred Avenue
Teaneck, New Jersey 07666
Attention: Warren H. Golden, President
(f) The provisions of Sections 7, 8 and 9 hereof shall survive
any termination of this Agreement.
(g) No failure to either party to exercise or enforce any of
its rights under this Agreement shall act as a waiver of such right.
(h) This Agreement, along with the Exhibit hereto, contains
the entire agreement and understanding between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements and
understandings relating to such subject matter. Neither party shall be liable or
bound to any other party in any manner by any representations, warranties or
convenants relating to such subject matter expect as specifically set forth
herein.
(i) This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more such counterparts have been signed by
each of the parties and delivered to each of the other parties.
(j) This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
(k) This Agreement is for the sole benefit of the parties
hereto and nothing herein expressed or implied shall give or be construed to
give to any person, other than the parties hereto any legal or equitable rights
hereunder.
(l) The headings contained in this Agreement or in any Exhibit
hereto are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All Exhibits annexed hereto or
referred to herein are hereby incorporated in and made a part of this Agreement
as if set forth in full herein. Any capitalized terms used in any Exhibit but
not otherwise defined therein, shall have the meaning as defined in this
Agreement. When a reference is made in this Agreement to a Section or an
Exhibit, such reference shall be to a Section of, or an Exhibit to, this
Agreement unless otherwise indicated.
<PAGE>
- 9 -
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of June 30, 1999.
TADEO E-COMMERCE CORP.
By: /s/ Damon Testaverde
Damon Testaverde
President
DIPLOMAT DIRECT MARKETING CORP.
By /s/ Warren H. Golden
Warren H. Golden
President
<PAGE>
EXHIBIT A
ONLINE HOSTING SERVICES
If requested by Diplomat, Tadeo will provide, by itself or through its
subsidiaries or affiliates, the Services described below:
(a) Scope and Description of Services. Tadeo will provide Diplomat with
all online hosting services currently provided to Diplomat through third party
contracts, including, without limitations, the development and maintenance for
Diplomat's operating divisions and/or operating subsidiaries of Commerce Web
Subsites (as defined below) within the www.______ web site on the Internet based
on online Enrollment and Information Forms, completed by Diplomat, submitted in
conformance with Tadeo's instructions. Notwithstanding anything herein to the
contrary, Tadeo and Diplomat will confer, from time to time, with respect to the
placement of the link to this information and the manner in which this link
appears on the subject web site; PROVIDED, that if mutual agreement is not
reached on such placement, the reasonable determination with respect thereto
made by Tadeo shall be final and binding on both parties. If a consumer places
an order directly on a Tadeo-operated Commerce Web Subsite for a Diplomat Direct
Access Business product, Tadeo agrees to transmit such order to Diplomat's
Direct Access Business network and Diplomat will convert that order to a message
and direct the order for internally processed fulfillment, with Diplomat
receiving 100% of the order's value subject to any processing charges (subject
to the terms of the Web Agreement). For the purposes of this Agreement, the
terms "Commerce Web Subsite" means a web site through which a consumer can place
an order for Diplomat products.
(b) Price. For the services described above, Diplomat will pay Tadeo a
monthly fee of $____________ for each Commerce Web Subsite hosted by Tadeo in
accordance with the Fee Schedule annexed as EXHIBIT A-1.
(c) Payment and Accounting. Tadeo will invoice Diplomat within 15 days
of the end of each month for Services rendered in such month. Diplomat will pay
such invoice within 30 days of receipt.
<PAGE>
EXHIBIT A-1
[Omitted]
WEB SITE DESIGN AND CONSULTING AGREEMENT
Agreement, effective as of June 1, 1999, by and between TADEO
E-COMMERCE CORP, a Delaware corporation having an address at 5 Hanover Square,
New York, NY 10004 ("Developer") and DIPLOMAT DIRECT MARKETING CORPORATION, a
Delaware corporation having an address at 414 Alfred Avenue, Teaneck, NJ 07666
("Client"), regarding Client's interest in securing the services of Developer to
design, develop, test, implement, launch and service a World Wide Web Site which
will be owned by Client and to provide various additional consulting and other
services after the site is successfully launched (the "Project").
The parties hereby agree as follows:
1. THE SITE. Client is planning to launch a new World Wide Web Site tentatively
entitled "_______" in conjunction and with the cooperation of Developer as the
initial hosting company (with the hosting company being identified as the
"Collaborator") and which will be devoted, at least initially, to issues related
to the women's apparel and accessories industry and infants' apparel and
accessories industry, and the Client's products and services, including but not
limited to women's apparel and accessories, infants' apparel and accessories,
and other materials and services manufactured and/or distributed, or otherwise
provided, by the Client (the "Site"). The Site, as presently contemplated, will
consist of the initial components set forth in EXHIBIT A (the "Site
Components"). The Site Components, as well as the contents therein and all
aspects whatsoever of the Site, may change as the Site is designed and
developed, and, thereafter from time to time as specified by Client (subject to
Developer's right to terminate this Agreement under Paragraph 9.1). All aspects
of the Site shall be subject to Client's approval, in its reasonable discretion.
As between Developer and Client, Client shall be solely responsible for the
editorial content of the Site.
2. DEVELOPER'S SERVICES. Developer confirms that it is experienced in the custom
design, development, launch and delivery of web sites and agrees to provide the
following services for the Site, all subject to Client's approval:
a) THE SITE AND LAUNCH MODULE. During Phase I of the Project, the Developer
shall design, develop, test, implement and launch the overall Site structure and
programming and shall develop the Site Components, both for the initial version
of the Site to be launched (the "Launch Module") and so as to accommodate
Additional Modules (see Paragraph 2(b) below). During Phase I of the Project
Developer shall deliver to Client's reasonable satisfaction all materials,
information, software, source code, documentation, guides, manuals and similar
material as are necessary for Client to maintain, update, edit, modify,
terminate, redesign and otherwise operate and service the Site. Developer shall
be responsible for the design, structure and implementation of all aspects of
the Site
<PAGE>
to Client's reasonable satisfaction (other than the gathering and delivery to
Developer of editorial content therefor, which shall be the responsibility of
Client). As part of Developer's services required hereunder, but not in
limitation thereof, Developer shall:
(i) work and confer with Client throughout the design process to
ascertain both Client and Collaborator's design needs and requirements for the
Site;
(ii) design the look, operation, and programming of the Site,
including, without limitation, the functional specifications, user interface and
user interface specifications, technical design specifications, search and
retrieval software and graphic elements of the Site design (such as layout,
typeface, illustrations and photographs), both to accommodate Client's current
needs and so as to accommodate modifications and additions thereto as the Site
expands and changes;
(iii) develop and deliver necessary HTML programming;
(iv) incorporate Client Content (as hereinafter defined in Paragraph
3.1) for the launch;
(v) transfer Site files to Client's server;
(vi) fully test (and correct where needed) the Site and all Site
Components and aspects (conduct a soft launch - a Beta test in the staging area)
to Client's reasonable satisfaction;
(vii) launch the Site;
(viii) provide Client with all technical and design documents as well
as a troubleshooting guide needed to ensure that Client can with ease maintain,
update, modify, edit, cancel and otherwise operate the Site;
b) ADDITIONAL MODULES. At Client's request from time to time during the
Development Term (as defined in Paragraph 5), as Phase II of the Project
Developer agrees, if requested, to design, develop, implement, test and launch
Additional Modules subject to the fee schedule contained on Exhibit B, but only
to the extent that the requests are made in accordance with the Schedule annexed
hereto as EXHIBIT B (the "Schedule"). Additional Modules may update and expand
the entire Site, but also may include new material for the original Launch
Module.
c) DELIVERY. Developer agrees to submit to Client for its approval, and in
accordance with the Schedule, all of the Phase I Deliverables set forth in
EXHIBIT C and all of the Phase II Deliverables for each Additional Module
requested in accordance with the conditions of Paragraph 2(b) above
(collectively, the
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<PAGE>
"Deliverables," and each separate item a "Deliverable"). Upon receipt, Client
shall promptly review and determine whether each such Deliverable materially
satisfies the acceptance criteria set forth in EXHIBIT C (as supplemented for
the acceptance criteria with respect to any Additional Modules). Client shall
give Developer prompt written notice if Client determines that a Deliverable
does not materially satisfy the acceptance criteria, and such notice shall in
detail set forth the deficiencies found in the Deliverables by Client. Developer
shall, at no cost to Client, promptly correct any such deficiencies. Upon
completion of the corrective action by Developer, Client will reconsider
acceptance of the Deliverable. If the Deliverable still does not materially
satisfy the acceptance criteria within thirty (30) days of Client 's notice of
disapproval, and the end of such period is beyond the specific dates for
Deliverable delivery in the Schedule (as it may be supplemented), Client may:
(i) terminate this Agreement in accordance with Paragraph 9; or (ii) require
Developer to continue to attempt to correct the deficiencies, reserving the
right to terminate in accordance with Paragraph 9. It is understood that Client
may be obligated to obtain the approval also of Collaborator.
d) ONGOING CONSULTATION. Developer agrees to consult, strategize and
coordinate with Client and, if requested by Client, with Collaborator,
throughout the provision of Developer's services hereunder to ensure Client's
reasonable satisfaction with and reasonable approval of each aspect of the Site.
e) MAINTENANCE, AND ONGOING SERVICE.
(i) If requested by Client, and for consideration to Developer as
specified on EXHIBIT D, Developer agrees to provide, at its sole cost and
expense, all maintenance required to correct defects, bugs, viruses, design
flaws and similar inherent problems in the Site, during the Development Term and
for a period of one year thereafter (the "Maintenance Term"); PROVIDED, that the
Developer is not obligated to provide additional maintenance services requested
by Client during periods beyond the Maintenance Term, without its specific
written approval, which approval may be withheld in Developer's full discretion;
and further PROVIDED, that the Developer shall at no time be obligated to
provide such maintenance services in the event that such services are required
due to Client's modification or editing of the Site without Developer's written
approval thereof, Client's destruction of the Site, or Client's license of the
Site for use and/or operation by any other person without Developer's prior
written consent.
(ii) In addition, but only during the Development Term, Developer
agrees to provide other specified design, maintenance and other services
requested by Client, at the fees set forth on EXHIBIT D; PROVIDED, that
Developer shall have the ability to reject such requests(s) based upon
Developer's reasonable determination of Client's inability to pay timely for
such services.
3. CLIENT PROVIDED CONTENT.
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3.1. Client shall be responsible for obtaining all licenses, sublicenses,
assignments, permissions, waivers or other rights or clearances necessary for
Developer 's incorporation of any content provided by Client ("Client Content")
into the Deliverables. Client shall deliver one (1) copy of each item of Client
Content to be provided by Client to be incorporate into a Deliverable. Client
shall provide to Developer as part of that copy all credits and/or attributions
which must be included in the Deliverable. Developer shall use each item of
Client Content provided by Client only in conjunction with the Deliverable for
which it was provided.
3.2. In the event that Client does not obtain the licenses, sublicenses,
assignments, permissions, waivers or other rights or clearances necessary to use
particular materials as Client Content in a Deliverable, Developer shall not be
obligated to incorporate such materials into the Deliverable.
4. RIGHTS IN DELIVERABLE.
4.1. Developer acknowledges that Client shall retain all title to and all
rights in any intellectual property provided by Client to Developer under this
Agreement.
4.2. The original content component of the Deliverables produced by
Developer shall be considered to be works made for hire for all purposes,
including for purposes of interpretation under the U.S. Copyright Law, 17 U.S.C.
ss.101 et seq. To the extent that such Deliverables are not construed to be
works made for hire, Developer shall, and hereby does, perpetually, and without
further consideration, assign all right, title and interest to such Deliverables
to Client. All right, title and interest in the original content component of
the Deliverables produced by Developer, including any copyright or other
proprietary right in the Deliverables, shall be the sole property of Client.
Notwithstanding the foregoing, except as provided in Section 4.3, nothing herein
should be construed to vest ownership of any right, title or interest to any
computer software component ("Software") of a Deliverable under this Agreement.
4.3. Developer, or its licensors, shall retain all right, title and
interest to Software. Developer hereby grants, which Developer represents it has
full right, power and authority to grant, to Client a perpetual, worldwide,
royalty-free license, or sublicense, to duplicate, exhibit, perform, transmit,
broadcast, distribute, maintain and modify Software, provided that such Software
is only used by Client in accordance with this Paragraph 4.3 in connection with
substantially all of the content component of the Deliverables provided by
Developer to Client for use in connection with the Site.
4.4. Developer agrees to execute and deliver any documents and take all
such other actions as may be necessary or desirable in order to carry into
effect the
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provisions of this Paragraph 4, including, without limitation, the execution of
assignments, copyright registrations and patent applications.
5. TERM. The term of this Agreement during which period Developer shall be
obligated to provide to Client the services described in Paragraph 2
(collectively, the "Developer Services") shall extend for a period of twelve
(12) months from the date of this Agreement (the "Development Term"). The
parties may extend the Development Term of this Agreement by mutual written
agreement.
6. RESERVED.
7. CLIENT'S SERVICES AND DELIVERABLES. Client shall be responsible for
a) obtaining and securing a domain name and address for the Site;
b) preparing, gathering and/or writing all Client Content (including
illustrations, photographs, charts, graphs and similar information and material
to accompany the editorial content) to be included in the Site, including all
licenses, etc., as referenced in Paragraph 3 of this Agreement;
c) delivering to Developer fully edited editorial content in a mutually
agreed upon digital format;
d) housing the Site on Client's server; and e) coordinating with
Collaborator on all aspects of the Site development, design and operation.
8. THE SCHEDULE. In order to meet the Client's requirements for the Project,
Client and Developer have together developed the Schedule. Developer shall
provide all of its services under this Agreement in accordance with the
Schedule, unless Client and Developer agree otherwise. No changes may be made in
the Schedule without the written consent of Client and Developer.
9. TERMINATION.
9.1.
a) Client may terminate upon ten (10) days' prior written notice this
Agreement in the event (i) Client has rejected any Deliverable in accordance
with the provisions of Paragraph 2(c) and Developer has failed to correct the
deficiencies during the specified time period, (ii) Developer fails to meet any
deadline in the Schedule (following a 15-day cure period), or (iii) Developer
otherwise materially breaches any of its obligations, representations or
warranties under this Agreement.
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<PAGE>
b) Developer may terminate this Agreement upon ten (10) days' prior written
notice in the event that (i) Client fails to pay to Developer when due, after
three (3) days' prior notice of such failure to pay, the compensation amounts
required to be paid pursuant to Paragraph 12 and Schedule D, (ii) Client
materially changes the parameters for development of the Site or the Site
Components, (iii) Collaborator, other than Developer, unreasonably withholds its
approval of Developer's work product under this Agreement to the extent its
approval is necessary to launch the Site (if the initial collaborator is other
than Developer) or augment or maintain the Site, or (iv) Client otherwise
materially breaches any of its obligations, representations or warranties under
this Agreement. 9.2. Either party may terminate this Agreement, effective
immediately upon written notice if: (i) all or a substantial portion of the
assets of the other party are transferred to an assignee for the benefit of
creditors or to a receiver or to a trustee in bankruptcy; (ii) a proceeding is
commenced by or against the other party for relief under bankruptcy or similar
laws and such proceeding is not dismissed within sixty (60) days; or (iii) the
other party is adjudged bankrupt or insolvent. Termination of this Agreement
shall not relieve either party of any obligation accrued prior to the
termination date.
9.3. In the event Developer terminates this Agreement other than in
accordance with Paragraph 9.1(b) or Client terminates this Agreement in
accordance with Paragraph 9.1(a), then Client shall have no obligation to pay
any amounts owing under Paragraph 12, except for fees under Paragraph 12(a)
incurred prior to termination and the Royalties (as herein after defined) as
provided under Paragraph 12(b).
9.4. In the event Developer terminates this Agreement in accordance with
Paragraph 9.1(b) or Client terminates this Agreement other than in accordance
with Paragraph 9.1(a), then Client shall be obligated to pay (i) the amounts
owing under Paragraph 12(a) incurred prior to the date of termination, (ii) in
the event that such termination occurs prior to the Developer's receipt from
Client of aggregate Royalties of $500,000 Client shall continue to be obligated
to pay to Developer in cash (U.S. Dollars), within thirty (30) days of the date
of termination of this Agreement, the difference between $500,000 and the
aggregate amount of Royalties delivered to Developer prior to the date of
termination of this Agreement (which amount shall be credited as the payment of
Royalties for purposes of Paragraph 12(b)), and (iii) the Royalties owing under
Paragraph 12(c).
9.5. Termination of this Agreement shall not limit either party from
pursuing any remedies available to it for any breach of this Agreement. All
obligations of either party set forth in Paragraphs 4,9,12,16 and 17 of this
Agreement shall survive termination of this Agreement.
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<PAGE>
10. CREDIT. Provided Developer fully performs its obligations hereunder,
Developer shall be entitled to receive the following credit in the Site, the
size and placement of which shall be mutually determined by Client and
Developer:
"----------------------"
11. OWNERSHIP. Client shall own the Site and all aspects thereof, except as set
forth in Paragraphs 3 and 4. Client shall have the right to modify, edit,
destroy, license, exploit or use the Site in any way, without compensation or
consultation with Developer, subject to the provisions of Paragraph 2(e).
12. CONSIDERATION. In recognition and acknowledgment of the market consulting
and e-commerce content services previously provided by Client to Developer, for
which services Developer has previously advanced $500,000 to Client, in full
consideration for all of Developer's services and Deliverables provided
hereunder for Phase I and Phase II through and including launch of Site and
completion and launch of the scheduled Additional Modules pursuant to Paragraph
2(b), if any, and the Schedule, Client shall compensate Developer as follows:
a) Developer shall receive the related fees and other compensation as set
forth on Exhibit D; and
b) Developer shall receive royalties (the "Royalties") based upon sales
(whether direct or indirect), fees, licenses, royalties, consulting, or any
other forms of revenue or compensation which are derived, directly or
indirectly, from electronic commerce [(which includes but is not limited to
commercial transactions which are in any way solicited, or initiated, or
conducted, or concluded, or otherwise consummated (subject to subsequent
delivery or transfer of the subject matter of the transactions) through use of
Worldwide Web Sites or otherwise through use of the Internet], with the
exception only of revenue or compensation generated under written agreements
entered into with Fashionmall.com, Inc. and Catalog City (the "Royalty
Activities"), which Royalties shall equal 5% of all quarterly revenues, net of
returned merchandise, generated by Client and its consolidated subsidiaries, as
determined under generally accepted accounting principles ("GAAP"), consistently
applied for purposes of Client's financial reporting obligations with the
Securities and Exchange Commission (the "SEC") from Royalty Activities (which
for purposes of this subparagraph, 12(b) only shall also include revenue and
compensation generated under written agreements entered into with
Fashionmall.com, Inc. and Catalog City), until Developer has received Royalties
in cash the aggregate amount of which equals $500,000. The amount of Royalties
for which Client is obligated to pay Developer under the terms of this
Subparagraph 12(b) shall be paid to Developer within forty-five days following
the last day of each fiscal quarter of client, commencing with the quarter ended
June 30.
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<PAGE>
c) Client shall pay to Developer annually, not later than the Payment Date
(as defined herein), Royalties equal to twenty percent (20%) of Net EBIT (as
defined herein) generated by Client and its consolidated subsidiaries, from
Royalty Activities, in perpetuity, as provided herein. The period during which
Developer shall receive Royalties equal to twenty percent (20%) of Net EBIT
shall commence after Developer receives $500,000 from Client as provided in
subparagraph 12(b) above. For purposes of Paragraph 12(c), all as determined
under GAAP consistently applied by the Client's regular auditor for purposes of
Client's financial reporting obligations with the SEC, the capitalized terms
shall have the following meanings:
"Net EBIT" shall mean the amount, but not below zero, equal to EBIT for
the applicable fiscal year less the amount, if any, in the Offset Account.
"EBIT" shall mean revenues, net of returned merchandise, generated by
Client and its consolidated subsidiaries from Royalty Activities, less the sum
of:
(i) all direct expenses incurred in the Royalty Activities, including,
without limitation, cost of goods sold, costs of maintaining the Site and any
other Royalty Activities - related world wide web sites developed by the Client
or its consolidated subsidiaries, but excluding interest, amortization and
income taxes allocable to the Royalty Activities;
(ii) all variable indirect expenses of Client and its consolidated
subsidiaries allocable to the Royalty Activities (consistent with Client's
normal accounting procedures and practice, as such practices and procedures may
be amended from time to time), including, without limitation, costs of
order-entry, distribution and fulfillment, allocated based on the ratio of net
revenue of the Royalty Activities to net aggregate revenue of the Client and
consolidated subsidiaries; and
(iii) all fixed indirect expenses of Client and its consolidated
subsidiaries allocable to the Royalty Activities (consistent with Client's
normal accounting procedures and practice, as such practices and procedures may
be amended from time to time), including, without limitation, catalog production
and mailing costs, merchandising and marketing costs, allocated in accordance
with GAAP and Client's consistently applied reasonable allocation procedures, as
such procedures may be amended from time to time in accordance with GAAP;
(iv) with the calculation of EBIT, and each component thereof, being
all as determined under GAAP consistently applied by Client's regular auditor
for purposes of Client's financial reporting obligations with the SEC.
"Offset Account" shall mean the amount equal to, but not below zero, of
the aggregate negative EBIT for all periods, reduced by any EBIT.
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<PAGE>
"Payment Debt" shall mean the 105th day after the last day of the
Client's fiscal year for purposes of Client's financial reporting obligations
with the SEC.
d) The obligation to pay Royalties to Developer, except by operation of
law, shall not be assignable by Client to any person without the written consent
of Developer, which consent may be withheld in Developer's full discretion; and
PROVIDED, FURTHER, that at the option of Developer, in the event of the sale,
conveyance or disposition of all or substantially all of the assets of Client,
the effectuation by the Client of a transaction or series of related
transactions in which more than 50% of the voting power of the Client is
disposed of, for the consolidation, merger or other business combination of the
Client with or into any other Person (as defined below) or Persons when the
Client is not the survivor, the Developer may terminate this Agreement on ten
(10) days' written notice and Client shall be required to distribute, upon
consummation of and as a condition to any such transaction(s) an amount equal to
the difference between $750,000 and the aggregate amount of Royalties previously
distributed to Developer (which amount shall be credited as the payment of
Royalties for purposes of this Paragraph 12). "Person" shall
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<PAGE>
mean any individual, corporation, limited liability company, partnership,
association, trust or other entity or organization.
e) Along with any payment of Royalties made under this Agreement, Client
shall provide to Developer a written statement showing the detailed formula for
and the calculation of such Royalties (the "Statement"), which Statement shall
be certified by the Client's Chief Financial Officer or regular auditors that
made the related calculation of Royalties. In the event that Developer disputes
the amount of any payment of Royalties made by Client under the terms of this
Agreement, Client and its Chief Financial Officer or auditors shall promptly
submit such documentation for review by Developer and its representatives as
shall be reasonably requested by Developer within five business (5) days
following written request being given by Developer therefor. In the event that
Developer and Client fail to agree upon the amount of the related Royalties
payment within twenty-one (21) days following Developer's receipt of the
Statement, Developer shall be entitled to submit, but not later than 90 days
following Developer's receipt of the Statement, such dispute to arbitration by
the American Arbitration Association ("AAA"), through the adjudication by a
single arbitrator, in New York, New York, with the decision of such arbitrator
to be final and binding upon all parties. The fees, costs and expenses of such
arbitration, as submitted by the AAA, shall be borne equally by both Client and
Developer; PROVIDED, that each of Client and Developer shall pay the fees, costs
and expenses of its own counsel, accountants and other representatives in
connection with such arbitration. The parameters of the AAA proceedings
undertaken in accordance with this subparagraph 12(f) shall be prescribed such
that a decision shall be rendered within sixty (60) days following the initial
written reference of the related dispute to AAA arbitration by Developer. All
disputes with respect to the amount of any Royalties payment under the terms of
this Agreement shall be resolved by arbitration in accordance with this
subparagraph 12(f).
13. NO OBLIGATION TO PUBLISH. Nothing in this Agreement shall obligate Client to
launch, publish or continue to publish the Site; PROVIDED, that in the event
that Client (i) fails to launch the Site on or before September 1, 1999, or (ii)
fails to continue to publish the site for a period of at least five (5) years
from the date hereof (the "Publication Period"), and at all times during the
Publication Period Client does not use its best efforts to generate significant
revenue from use of the Site, or otherwise from electronic commerce generally,
then within thirty (30) days following its receipt of written notice from
Developer of a breach by Client of either subprovision (i) or (ii), Client shall
be obligated to pay to Developer the difference between $500,000 and the
aggregate amount of Royalties previously distributed to Developer (which amount
shall be credited as the payment of Royalties for purposes of Paragraph 12)
within thirty (30) days of written notification therefor given to Client by
Developer.
14. REPRESENTATIONS AND WARRANTIES.
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14.1.Developer represents and warrants to Client that: (i) Developer has
the full right, power and authority to enter into and to fully perform this
Agreement; (ii) the design of the Site and all design and programming aspects of
the Site as delivered by Developer shall be original and shall be owned by
Client as work for hire or by transfer of all rights, including the copyright
thereto; (iii) neither the design nor programming of the Site, nor any other
material or facet added to the Site by Developer (other than Client Content
supplied by Client) contains any libelous material or any material which
constitutes an invasion of privacy or publicity, or infringes any trademark,
copyright, patent, trade secret, or other intellectual property right; and (iv)
the Site as delivered by Developer shall be free of "bugs," viruses, defects or
design flaws.
14.2. Client represents and warrants to Developer that: (i) Client has the
full right, power and authority to enter into and to fully perform this
Agreement; (ii) to the extent that Client is required to obtain rights,
permissions and credit and/or attribution information with respect to the Client
Content, Client will do so accurately and completely; and (iii) the Client
Content provided by Client will not contain any libelous material or any
material which constitutes an invasion of any right of privacy or publicity, or
infringes upon any trademark, copyright, patent, trade secret or other
intellectual property right.
14.3. No party shall in any circumstances be liable to the other party or
any other party for any loss of business or profits, or any other indirect,
consequential, incidental, punitive or similar damages arising from the breach
of this Agreement, even if it has been advised of the possibility of such
damages.
14.4. THE WARRANTIES STATED HEREIN ARE LIMITED WARRANTIES AND THE ONLY
WARRANTIES MADE BY THE PARTIES. THE PARTIES WAIVE ALL OTHER WARRANTIES, EXPRESS
OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE.
15. INDEMNIFICATION.
15.1.During the Term of this Agreement and for one (1) year thereafter,
Developer shall indemnify and hold Client harmless from and against any and all
claims, demands, actions, losses, liabilities, damages, costs and expenses
(including, but not limited to, reasonable attorneys' fees) arising out of or
resulting from Developer 's material breach of Paragraph 14.1 of this Agreement,
provided that Client (i) notifies Developer promptly of any written claims or
demands against Client, (ii) gives Developer the opportunity to defend or settle
any such claim at Developer 's expense, and (iii) cooperates with Developer , at
Developer 's expense, in defending or settling such claim.
15.2. During the Development Term of this Agreement and for one (1) year
thereafter, Client shall indemnify and hold Developer harmless from and against
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any and all claims, demands, actions, losses, liabilities, damages, costs and
expenses (including, but not limited to, reasonable attorneys' fees) arising out
of or resulting from Client's material breach of Paragraph 14.2 of this
Agreement, provided that Developer (i) notifies Client promptly of any written
claims or demands against Developer , (ii) gives Client the opportunity to
defend or settle any such claim at Client's expense, and (iii) cooperates with
Client, at Client's expense, in defending or settling such claim.
16. CONFIDENTIALITY.
16.1.Each party shall retain in confidence and shall not, without the prior
written consent of the other party (the "Disclosing Party"), disclose in any
manner or use, except under the terms and prior to the termination of this
Agreement, any materials disclosed to a party (the "Receiving Party") by the
Disclosing Party and either marked at the time of disclosure as being
confidential or identified in writing by the Disclosing Party within thirty (30)
days of disclosure to the Receiving Party as being confidential ("Confidential
Information"); PROVIDED, that if the receiving Party is compelled by law
(whether through court order or subpoena) to disclose such Confidential
Information, the Receiving Party shall provide the Disclosing Party with prompt
notice of such compelled disclosure.
16.2. This Paragraph 16 shall impose no obligation upon the Receiving Party
with respect to any Confidential Information: (i) in the public domain at the
time received by Receiving Party; (ii) which enters the public domain other than
by breach of the Receiving Party's obligations hereunder; (iii) known to the
Receiving Party prior to receipt from the Disclosing Party; (iv) received by
Receiving Party from a third party if such third party has the right to make
such disclosure; or (v) independently developed by the Receiving Party without
access to Confidential Information.
16.3. Upon the Disclosing Party's request or termination of this Agreement,
the Receiving Party will, at its election, either promptly deliver to the
Disclosing Party or destroy all Confidential Information in every form in the
Receiving Party's possession.
17. GENERAL.
17.1.The relationship between the parties shall be that of independent
contractors. Nothing in this Agreement shall create, or be deemed to imply the
creation of, any partnership, joint venture or other relationship. Neither party
shall have the authority to incur any obligation, contractual or otherwise, in
the name or on behalf of the other party. Each party shall bear its own costs
and expenses in connection with performance of this Agreement.
17.2.This Agreement and any exhibits or appendices hereto constitute the
entire agreement between the parties with respect to the subject matter hereof
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and supersede all prior and contemporaneous communications. Neither this
Agreement nor any exhibits or appendices hereto shall be modified except by a
written agreement dated subsequent to the date of this Agreement and signed on
behalf of the parties by their respective duly authorized representatives.
17.3. If this Agreement shall be terminated or held by a court of competent
jurisdiction to be invalid, illegal or unenforceable as to particular
provisions, this Agreement shall remain in full force and effect as to the
remaining provisions.
17.4. No waiver of any breach of any provisions of this Agreement shall
constitute a waiver of any prior, concurrent or subsequent breach of the same or
any other provisions hereof or thereof, and no waiver shall be effective unless
made in writing and signed by the duly authorized representative of the party to
be charged.
17.5. All notices that Developer or Client may give to the other pursuant
to this Agreement shall be in writing and shall be hand delivered or sent by
registered or certified mail postage prepaid, return receipt requested, by
facsimile (with confirmation back), or by overnight courier service, postage
prepaid, to the parties at the addresses provided above or to such other address
or as either party shall designate by written notice given in accordance with
this Section, with notice being deemed given five days' after being deposited
with the United States mail, upon hand delivery, upon receipt of confirmation
back that a facsimile was received and one day after deliver to a nationally
recognized overnight courier service (if so deposited or delivered as described
above).
17.6. This Agreement shall be binding on Developer and Client and the
respective successors and permitted assigns of each party. Except as permitted
in this Agreement, no party may assign any of its rights or delegate any of its
obligations under this Agreement to any third party without the express written
consent of the other party, which consent may be withheld in either party's sole
discretion.
17.7. This Agreement between Developer and Client is not exclusive and the
parties are free to engage in other relationships of a similar nature with other
parties.
17.8. Client hereby grants Developer its permission to (i) disclose to
potential customers of Developer that Client is a customer of Developer , and
(ii) duplicate, exhibit, perform, transmit, broadcast and distribute
Deliverables to potential customers of Developer for purposes of publicizing
Developer's services.
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17.9. This Agreement shall be governed and construed in accordance with the
internal substantive laws of the State of New York without regard to its
conflicts of laws principles.
17.10. The section headings contained in this Agreement are for purposes of
convenience and reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
17.11. Neither party shall be in material breach if failure to perform any
obligation hereunder is caused solely by supervening conditions beyond that
party's control, including acts of God, civil commotions, strikes, labor
disputes and governmental demands or requirements.
17.12. This Agreement may be executed in counterparts which, when taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto, each acting with proper
authority, have executed this Agreement under seal as of the 30th day of June,
1999.
TADEO E-COMMERCE CORP. DIPLOMAT DIRECT MARKETING CORPORATION
By: /S/ DAMON TESTAVERDE By: /S/ WARREN H. GOLDEN
Damon Testaverde, President Warren H. Golden, President
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EXHIBIT A
[Omitted]
<PAGE>
EXHIBIT B
[Omitted]
<PAGE>
EXHIBIT C
[Omitted]
<PAGE>
EXHIBIT D
[Omitted]
SECURITIES PURCHASE AGREEMENT
SECURITIES PURCHASE AGREEMENT dated as of June 30, 1999, between
Diplomat Direct Marketing Corporation, a Delaware corporation with principal
executive offices located at 414 Alfred Avenue, Teaneck, N.J. 07666 (the
"Company"), Tadeo Holdings, Inc., having an address at 5 Hanover Square, New
York, New York 10004 ("Tadeo") and the undersigned ("Buyer").
W I T N E S S E T H:
WHEREAS, the Company desires to sell, and the Buyer desires to
purchase, upon the terms and subject to the conditions of this Agreement, 10,000
shares of newly created Series G 10% Convertible Preferred Stock of the Company,
$.01 par value (the "Preferred Stock"), having the rights, preferences and
privileges set forth in the Certificate of Designations to the Certificate of
Incorporation of the Company attached hereto as Annex I (the "Amendment");
WHEREAS, the Company has agreed to register on behalf of Buyer the
Conversion Shares (as hereinafter defined) acquired upon conversion of the
Preferred Stock, under the terms of that certain Registration Rights Agreement,
of even date herewith, by and among the Company, and Buyer (the "Registration
Agreement");
WHEREAS, the Company and Tadeo desire to exchange that number of
shares of the Common Stock of the Company, $.0001 par value (the "Company Common
Stock"), for that number of shares of the Common Stock of Tadeo, $.0001 par
value (the "Tadeo Common Stock"), in each case having a Market Value equal to
$1,000,000 at the close of trading on June 7, 1999, which Market Value shall be
determined to be the last sale price of a share of Company Common Stock or of
Tadeo Common Stock as reported by The Nasdaq Stock Market, Inc., with the shares
of Company Common Stock so received by Tadeo being referred to as the "Company
Exchange Shares" and the shares of Tadeo Common Stock so received by the Company
being referred to as the "Tadeo Exchange Shares;"
WHEREAS, upon the terms and subject to the conditions set forth in the
Amendment, the Preferred Stock is convertible into shares of Company Common
Stock and is redeemable by the Company under certain conditions;
NOW THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto, intending to be legally bound,
hereby agree as follows:
I. PURCHASE AND SALE OF PREFERRED STOCK
A. Transaction. Buyer hereby agrees to purchase from the Company, and
the Company has offered and hereby agrees to issue and sell to the Buyer in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act of 1933, as
<PAGE>
amended (the "Securities Act"), the Preferred Stock; and Company and Tadeo agree
to exchange the Company Exchange Shares for the Tadeo Exchange Shares.
B. Purchase Price; Form of Payment. The purchase price (the "Preferred
Purchase Price") for the Preferred Stock to be purchased by Buyer hereunder
shall be equal to $1,000,000, which shall be payable in cash on the Closing
Date; and the purchase price (the "Company Exchange Purchase Price") for the
Company Exchange Shares shall be the Tadeo Exchange Shares, and the purchase
price (the "Tadeo Exchange Purchase Price") for the Tadeo Exchange Shares shall
be the Company Exchange Shares, which Tadeo Exchange Purchase Price and Company
Exchange Purchase Price shall be exchanged on the Closing Date.
II. BUYER'S AND TADEO'S REPRESENTATIONS, WARRANTIES; ACCESS TO
INFORMATION; INDEPENDENT INVESTIGATION.
Each of Buyer and Tadeo severally represents and warrants to and
covenants and agrees with the Company, with each such company only making
representations which refer to its own activities or to information concerning
its own operations, as follows:
A. Buyer is purchasing the Preferred Stock and the shares of Common
Stock issuable upon conversion of the Preferred Stock (the "Conversion Shares",
and collectively with the Preferred Stock, the "Securities"), and Tadeo is
purchasing the Company Exchange Shares, for its own account, for investment
purposes only and not with a view towards or in connection with the public sale
or distribution thereof in violation of the Securities Act.
B. Each of Buyer and Tadeo is (i) experienced in making investments of
the kind contemplated by this Agreement, (ii) capable, by reason of its business
and financial experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iii) able to afford the loss of its
investment in the Securities or in the Company Exchange Shares, respectively.
C. Each of Buyer and Tadeo understands that the Securities and the
Company Exchange Shares, respectively, are being offered and sold by the Company
in reliance on an exemption from the registration requirements of the Securities
Act and equivalent state securities and "blue sky" laws, and that the Company is
relying upon the accuracy of, and Buyer's and Tadeo's compliance with, each of
Buyer's and Tadeo's representations, warranties and covenants, respectively and
severally, as set forth in this Agreement to determine the availability of such
exemption and the eligibility of Buyer and Tadeo to purchase the Securities;
D. Each of Buyer and Tadeo has been furnished with or provided access
to all materials relating to the business, financial position and results of
operations of the Company, and all other materials requested by Buyer and Tadeo,
respectively, to enable it to make an informed investment decision with respect
to the Securities and the Company Exchange Shares, respectively.
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E. Each of Buyer and Tadeo acknowledges that it has been furnished
with copies of the Company's Annual Report on Form 10-KSB for the fiscal year
ended September 30, 1998 and all other reports and documents heretofore filed by
the Company with the Securities and Exchange Commission (the "Commission")
pursuant to the Securities Act and the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), since September 30, 1998 (collectively the
"Commission Filings").
F. Each of Buyer and Tadeo acknowledges that in making its decision to
purchase the Securities and the Company Exchange Shares, respectively, it has
been given an opportunity to ask questions of and to receive answers from the
Company's executive officers, directors and management personnel concerning the
terms and conditions of the private placement of the Securities and Company
Exchange Shares, respectively, by the Company.
G. Each of Buyer and Tadeo understands that the Securities and Company
Exchange Shares, respectively, have not been approved or disapproved by the
Commission or any state securities commission and that the foregoing authorities
have not reviewed any documents or instruments in connection with the offer and
sale to it of the Securities and Company Exchange Shares, respectively, and have
not confirmed or determined the adequacy or accuracy of any such documents or
instruments.
H. This Agreement has been duly and validly authorized, executed and
delivered by each of Buyer and Tadeo and is a valid and binding agreement of
each of Buyer and Tadeo enforceable against it in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting creditors' rights and
remedies generally.
I. AUTHORITY; VALIDITY AND ENFORCEABILITY. Each of Buyer and Tadeo, to
the extent it is a signatory, has the requisite corporate power and authority to
enter into this Agreement, the Registration Agreement and the Pledge Security
Agreement of even date herewith between the Company, the Buyer, the Rubin Family
Irrevocable Stock Trust (the "Rubin Trust"), a copy of which is annexed hereto
as Annex II (the "Pledge Agreement"). The execution, delivery and performance by
each of Tadeo and Buyer, to the extent it is a signatory of this Agreement, the
Registration Agreement and the Pledge Agreement, and the consummation by each of
Buyer and Tadeo of the transactions contemplated hereby and thereby has been
duly authorized by all necessary corporate action on the part of each of Buyer
and Tadeo, respectively. Each of this Agreement, the Registration Agreement and
the Pledge Agreement has been duly validly executed and delivered by each of
Buyer and Tadeo, to the extent it is a signatory, and each such instrument
constitutes a valid and binding obligation of each of Buyer and Tadeo
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting creditors' rights and remedies generally. The Tadeo
Exchange Shares have been duly and validly authorized for issuance by Tadeo.
J. COMMISSION FILINGS. None of the Tadeo Annual Report on Form 10-K
for the fiscal year ended June 30, 1998 and all other reports and documents
heretofore filed by Tadeo
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<PAGE>
with the Commission pursuant to the Securities Act and the Exchange Act since
June 30, 1998 (the "Tadeo Commission Filings") contained at the time they were
filed any untrue statement of a material fact or omitted to state any material
fact required to be stated therein or necessary to make the statements made
therein, in light of the circumstances under which they were made, not
misleading.
K. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. Tadeo has
delivered to the Company true and complete copies of its audited balance sheet
as at June 30, 1998 and the related audited statements of operations and cash
flows for the three fiscal years ended June 30, 1998, including the related
notes and schedules thereto, as well as the same financial statements as of and
for the three, six and nine month periods ended March 31, 1999 (collectively,
the "Financial Statements"). Each of the Financial Statements is complete and
correct in all material respects, has been prepared in accordance with United
States General Accepted Accounting Principles ("GAAP") (subject, in the case of
the interim Financial Statements, to normal year end adjustments and the absence
of footnotes) and in conformity with the practices consistently applied by Tadeo
without modification of the accounting principles used in the preparation
thereof, and fairly presents the financial position, results of operations and
cash flows of Tadeo as at the dates and for the periods indicated. For purposes
hereof, the audited balance sheet of Tadeo as at June 30, 1998 is hereinafter
referred to as the "Balance Sheet" and June 30, 1998 is hereinafter referred to
as the "Balance Sheet Date". Tadeo has no indebtedness, obligations or
liabilities of any kind (whether accrued, absolute, contingent or otherwise, and
whether due or to become due) that would have been required to be reflected in,
reserved against or otherwise described in the Balance Sheet or in the notes
thereto in accordance with GAAP, which was not fully reflected in, reserved
against or otherwise described in the Balance Sheet or the notes thereto or
otherwise described and reflected in the Financial Statements, or was not
incurred in the ordinary course of business consistent with Tadeo's past
practices since the Balance Sheet Date.
III. COMPANY'S REPRESENTATIONS
The Company represents and warrants to Buyer and Tadeo that:
A. CAPITALIZATION. 1. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, $.0001 par value (the "Company
Common Stock"), of which 15,245,813 shares are outstanding on the date hereof
and 1,000,000 shares of preferred stock, of which 444,014 shares are outstanding
on the date hereof which can be converted into a maximum of 15,388,972 shares of
Common Stock (not including the payment of dividends thereon in additional
shares of Common Stock), subject to anti-dilution and similar provisions. All of
the issued and outstanding shares of Common Stock and preferred stock have been
duly authorized and validly issued and are fully paid and non-assessable. As of
the date hereof, the Company has outstanding stock options and warrants to
purchase 1,654,900 shares of Common Stock. The Securities have been duly and
validly authorized and reserved for issuance by the Company, and when issued by
the Company pursuant to the terms of this Agreement will be duly and validly
issued, fully paid and non-assessable and will not subject the holder thereof to
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<PAGE>
personal liability by reason of being such holder. There are no preemptive,
subscription, "call" or other similar rights to acquire the Common Stock or the
Company's preferred stock that have been issued or granted to any person, except
as disclosed on Schedule III. A.1.
2. The Company does not own or control, directly or indirectly, any
interest in any other corporation, partnership, limited liability company,
unincorporated business organization, association, trust or other business
entity, except as disclosed on Schedule III.A.2.
B. ORGANIZATION; REPORTING COMPANY STATUS. 1. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and is duly qualified as a foreign corporation in all
jurisdictions in which the failure to so qualify would have a material adverse
effect on the business, properties, prospects, condition (financial or
otherwise) or results of operations of the Company or on the consummation of any
of the transactions contemplated by this Agreement (a "Material Adverse
Effect").
2. The Company has registered the Common Stock pursuant to Section 12
of the Exchange Act and has timely filed with the Commission all reports and
information required to be filed by it pursuant to all reporting obligations
under Section 13(a) or 15(d), as applicable, of the Exchange Act for the
12-month period immediately preceding the date hereof. The Common Stock is
listed and traded on the NASDAQ SmallCap Stock Market ("NASDAQ") and except for
a letter dated ___, 1999, a copy of which is annexed hereto as Schedule III B.2,
the Company has not received any notice regarding, and to its knowledge there is
no threat, of the termination or discontinuance of the eligibility of the Common
Stock for such listing.
C. AUTHORIZED SHARES. The Company has duly and validly authorized and
reserved for issuance shares of Common Stock sufficient in number for the
conversion of the Preferred Stock (assuming for purposes of this Section III.C.
a Conversion Price (as defined in the Amendment) of not greater than $.30. The
Company understands and acknowledges the potentially dilutive effect to the
Common Stock of the issuance of the Preferred Stock. The Company further
acknowledges that its obligation to issue Conversion Shares upon conversion of
the Preferred Stock in accordance with this Agreement and the Preferred Stock is
absolute and unconditional regardless of the dilutive effect that such issuance
may have on the ownership interests of other stockholders of the Company.
D. AUTHORITY; VALIDITY AND ENFORCEABILITY. The Company has the
requisite corporate power and authority to enter into this Agreement, the
Amendment, the Registration Agreement and the Pledge Agreement. The execution,
delivery and performance by the Company of this Agreement, the Amendment, the
Registration Agreement and the Pledge Agreement, and the consummation by the
Company of the transactions contemplated hereby and thereby (the issuance of the
Preferred Stock, the registration of the Conversion Shares and the pledge of
collateral pursuant to the Pledge Agreement), has been duly authorized by all
necessary corporate action on the part of the Company. Each of this Agreement,
the Amendment, the Registration Agreement and the Pledge Agreement has been duly
validly executed and delivered by the Company and each instrument constitutes a
valid and binding obligation of the Company enforceable against it in accordance
with its terms, subject to applicable bankruptcy, insolvency,
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<PAGE>
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors' rights and remedies generally. The Securities have been duly and
validly authorized for issuance by the Company.
E. NON-CONTRAVENTION. The execution and delivery by the Company of
this Agreement, the Amendment and the Pledge Agreement, the issuance of the
Securities, and the consummation by the Company of the other transactions
contemplated hereby and thereby, do not and will not conflict with or result in
a breach by the Company of any of the terms or provisions of, or constitute a
default (or an event which, with notice, lapse of time or both, would constitute
a default) under (i) the articles of incorporation or by-laws of the Company or
(ii) except for such conflict, breach or default which would not have a Material
Adverse Effect, any indenture, mortgage, deed of trust or other material
agreement or instrument to which the Company is a party or by which its
properties or assets are bound, or any law, rule, regulation, decree, judgment
or order of any court or public or governmental authority having jurisdiction
over the Company or any of the Company's properties or assets, including the
Rules of The Nasdaq Stock Market, Inc.
F. APPROVALS. No authorization, approval or consent of any court or
public or governmental authority is required to be obtained by the Company for
the issuance and sale of the Preferred Stock to Buyer as contemplated by this
Agreement, except such authorizations, approvals and consents that have been
obtained by the Company prior to the date hereof.
G. COMMISSION FILINGS. None of the Commission Filings contained at the
time they were filed any untrue statement of a material fact or omitted to state
any material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
H. ABSENCE OF CERTAIN CHANGES. Except as disclosed on Schedule
III.A.I., Schedule III.A.II, or Schedule III.H. or in the Financial Statements
(as defined in Section III.L. hereto), since the Balance Sheet Date (as defined
in Section III.L.), there has not occurred any change, event or development in
the business, financial condition, prospects or results of operations of the
Company, and there has not existed any condition having or reasonably likely to
have, a Material Adverse Effect.
I. FULL DISCLOSURE. There is no fact known to the Company (other than
general economic or industry conditions known to the public generally) that has
not been fully disclosed in writing to the Buyer that (i) reasonably would be
expected to have a Material Adverse Effect or (ii) reasonably would be expected
to materially and adversely affect the ability of the Company to perform its
obligations pursuant to this Agreement, the Amendment, the Warrants or the
Pledge Agreement.
J. ABSENCE OF LITIGATION. There is no action, suit, claim, proceeding,
inquiry or investigation pending or, to the Company's knowledge, threatened, by
or before any court or public or governmental authority, or under the aegis of
the Listing Investigations Division of The Nasdaq Stock Market, Inc., which, if
determined adversely to the Company, would have a Material Adverse Effect.
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<PAGE>
K. ABSENCE OF EVENTS OF DEFAULT. No "Event of Default" (as defined in
any agreement or instrument to which the Company is a party) and no event which,
with notice, lapse of time or both, would constitute an Event of Default (as so
defined), has occurred and is continuing, which could have a Material Adverse
Effect.
L. FINANCIAL STATEMENTS; NO UNDISCLOSED LIABILITIES. The Company has
delivered to Buyer true and complete copies of its audited balance sheet as at
September 30, 1998 and the related audited statements of operations and cash
flows for the three fiscal years ended September 30, 1998, including the related
notes and schedules thereto, as well as the same financial statements as of and
for the three and six month periods ended March 31, 1999 (collectively, the
"Financial Statements"), and all management letters, if any, from the Company's
independent auditors relating to the dates and periods covered by the Financial
Statements. Each of the Financial Statements is complete and correct in all
material respects, has been prepared in accordance with United States General
Accepted Accounting Principles ("GAAP") (subject, in the case of the interim
Financial Statements, to normal year end adjustments and the absence of
footnotes) and in conformity with the practices consistently applied by the
Company without modification of the accounting principles used in the
preparation thereof, and fairly presents the financial position, results of
operations and cash flows of the Company as at the dates and for the periods
indicated. For purposes hereof, the audited balance sheet of the Company as at
September 30, 1998 is hereinafter referred to as the "Balance Sheet" and
September 30, 1998 is hereinafter referred to as the "Balance Sheet Date". The
Company has no indebtedness, obligations or liabilities of any kind (whether
accrued, absolute, contingent or otherwise, and whether due or to become due)
that would have been required to be reflected in, reserved against or otherwise
described in the Balance Sheet or in the notes thereto in accordance with GAAP,
which was not fully reflected in, reserved against or otherwise described in the
Balance Sheet or the notes thereto or otherwise described and reflected in the
Financial Statements, or was not incurred in the ordinary course of business
consistent with the Company's past practices since the Balance Sheet Date.
M. COMPLIANCE WITH LAWS; PERMITS. The Company is in compliance with
all laws, rules, regulations, codes, ordinances and statutes (collectively
"Laws") applicable to it or to the conduct of its business, except for such
noncompliance which would not have a Material Adverse Effect. The Company
possesses all permits, approvals, authorizations, licenses, certificates and
consents from all public and governmental authorities which are necessary to
conduct its business, except for those the absence of which would not have a
Material Adverse Effect.
N. RELATED PARTY TRANSACTIONS. Except as disclosed on Schedule III.N.
or the Commission Filings, neither the Company nor any of its officers,
directors or "Affiliates" (as such term is defined in Rule 12b-2 under the
Exchange Act) has borrowed any moneys from or has outstanding any indebtedness
or other similar obligations to the Company. Neither the Company nor any of its
officers, directors or Affiliates (i) owns any direct or indirect interest
constituting more than a one percent equity (or similar profit participation)
interest in, or controls or is a director, officer, partner, member or employee
of, or consultant to or lender to or borrower from, or has the right to
participate in the profits of, any person or entity which is (x) a
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<PAGE>
competitor, supplier, customer, landlord, tenant, creditor or debtor of the
Company, (y) engaged in a business related to the business of the Company , or
(z) a participant in any transaction to which the Company is a party (other than
in the ordinary course of the Company's business) or (ii) is a party to any
contract, agreement, commitment or other arrangement with the Company.
O. INSURANCE. The Company maintains property and casualty, general
liability, workers' compensation, environmental hazard, personal injury and
other similar types of insurance with financially sound and reputable insurers
that is adequate, consistent with industry standards and the Company's
historical claims experience. The Company has not received notice from, and has
no knowledge of any threat by, any insurer (that has issued any insurance policy
to the Company) that such insurer intends to deny coverage under or cancel,
discontinue or not renew any insurance policy presently in force.
P. SECURITIES LAW MATTERS. Based, in part, upon the several
representations and warranties of Buyer and Tadeo set forth in Section II
hereof, the offer and sale by the Company of the Securities and Company Exchange
Shares is exempt from (i) the registration and prospectus delivery requirements
of the Securities Act and the rules and regulations of the Commission thereunder
and (ii) the registration and/or qualification provisions of all applicable
state securities and "blue sky" laws. Other than pursuant to an effective
registration statement under the Securities Act, the Company has not issued,
offered or sold preferred stock (including for this purpose any securities of
the same or a similar class as the preferred stock, or any securities
convertible into or exchangeable or exercisable for preferred stock or any such
other securities) or Company Common Stock other than the Company's Series F
Preferred Stock which was sold to a single "accredited investor" as defined in
Rule 501 promulgated under the Securities Act (an "Accredited Investor") and
100,000 shares of Company Common Stock which was sold to a single Accredited
Investor at $1.00 per share within the six-month period next preceding the date
hereof, except as disclosed on Schedule III.P., and the Company shall not
directly or indirectly take, and shall not permit any of its directors, officers
or Affiliates directly or indirectly to take, any action [including, without
limitation, any offering or sale to any person or entity of preferred stock or
Company Common Stock (or securities of the same or similar class as the
Preferred Stock or Company Common Stock)], so as to make unavailable the
exemption from Securities Act registration being relied upon by the Company for
the offer and sale to Buyer and Tadeo of the Preferred Stock and Company Common
Stock as contemplated by this Agreement. No form of general solicitation or
advertising has been used or authorized by the Company or any of its officers,
directors or Affiliates in connection with the offer or sale of the Preferred
Stock or Company Common Stock as contemplated by this Agreement or any other
agreement to which the Company is a party.
Q. ENVIRONMENTAL MATTERS. 1. The operations of the Company are in
material compliance with all applicable Environmental Laws and all permits
issued pursuant to Environmental Laws or otherwise;
2. To its knowledge, the Company has obtained or applied for all
material permits required under all applicable Environmental Laws necessary to
operate its business;
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<PAGE>
3. The Company is not the subject of any outstanding written order of
or agreement with any governmental authority or person respecting (i)
Environmental Laws, (ii) Remedial Action or (iii) any Release or threatened
Release of Hazardous Materials;
4. The Company has not received, since the Balance Sheet Date, any
written communication alleging that it may be in violation of any Environmental
Law or any permit issued pursuant to any Environmental Law, or may have any
liability under any Environmental Law;
5. The Company does not have any current contingent liability in
connection with any Release of any Hazardous Materials into the indoor or
outdoor environment (whether on-site or off-site);
6. To the Company's knowledge, there are no investigations of the
business, operations, or currently or previously owned, operated or leased
property of the Company pending or threatened which could lead to the imposition
of any liability pursuant to any Environmental Law;
7. There is not located at any of the properties of the Company any
(A) underground storage tanks, (B) asbestos-containing material or (C) equipment
containing polychlorinated biphenyls; and,
8. The Company has provided to Buyer all environmentally related
audits, studies, reports, analyses, and results of investigations that have been
performed with respect to the currently or previously owned, leased or operated
properties of the Company.
For purposes of this Section III.Q.:
"ENVIRONMENTAL LAW" means any foreign, federal, state or local
statute, regulation, ordinance, or rule of common law as now or hereafter in
effect in any way relating to the protection of human health and safety or the
environment including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss. 9601 ET SEQ.), the
Hazardous Materials Transportation Act (49 U.S.C. App. ss. 1801 ET SEQ.), the
Resource Conservation and Recovery Act (42 U.S.C. ss. 6901 ET SEQ.), the Clean
Water Act (33 U.S.C. ss. 1251 ET SEQ.), the Clean Air Act (42 U.S.C. ss. 7401 ET
SEQ.), the Toxic Substances Control Act (15 U.S.C. ss. 2601 ET SEQ.), the
Federal Insecticide, Fungicide, and Rodenticide Act (7 U.S.C. ss. 136 ET SEQ.),
and the Occupational Safety and Health Act (29 U.S.C. ss. 651 et SEQ.), and the
regulations promulgated pursuant thereto.
"HAZARDOUS MATERIAL" means any substance, material or waste which is
regulated by the United States, Canada or any of its provinces, or any state or
local governmental authority including, without limitation, petroleum and its
by-products, asbestos, and any material or substance which is defined as a
"hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or toxic substance" under any provision of any Environmental Law;
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<PAGE>
"RELEASE" means any release, spill, filtration, emission, leaking,
pumping, injection, deposit, disposal, discharge, dispersal, or leaching into
the indoor or outdoor environment, or into or out of any property;
"REMEDIAL ACTION" means all actions to (x) clean up, remove, treat or
in any other way address any Hazardous Material; (y) prevent the Release of any
Hazardous Material so it does not endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; or (z) perform pre-remedial
studies and investigations or post-remedial monitoring and care.
R. LABOR MATTERS. The Company is not party to any labor or collective
bargaining agreement and there are no labor or collective bargaining agreements
which pertain to employees of the Company. No employees of the Company are
represented by any labor organization and none of such employees has made a
pending demand for recognition, and there are no representation proceedings or
petitions seeking a representation proceeding presently pending or, to the
Company's knowledge, threatened to be brought or filed, with the National Labor
Relations Board or other labor relations tribunal. There is no organizing
activity involving the Company pending or to the Company's knowledge, threatened
by any labor organization or group of employees of the Company. There are no (i)
strikes, work stoppages, slowdowns, lockouts or arbitrations or (ii) material
grievances or other labor disputes pending or, to the knowledge of the Company,
threatened against or involving the Company. There are no unfair labor practice
charges, grievances or complaints pending or, to the knowledge of the Company,
threatened by or on behalf of any employee or group of employees of the Company.
S. ERISA MATTERS. The Company and its ERISA Affiliates are in
compliance in all material respects with all provisions of ERISA applicable to
it. Neither the Company nor any ERISA Affiliate maintains, contributes,
maintained or contributed to a plan subject to the provisions of Title IV of
ERISA or Section 412 of the Internal Revenue Code.
For purposes of this Section III.S.:
"ERISA" means the Employee Retirement Income Security Act of 1974, or
any successor statute, together with the final regulations promulgated
thereunder, as the same may be amended from time to time.
"ERISA AFFILIATE" means any trade or business (whether or not
incorporated) that is a member of a group of which the Company is a member and
which is treated as a single employer under ss. 414 of the Internal Revenue Code
of 1986, as amended (the "Internal Revenue Code").
T. TAX MATTERS. 1. The Company has filed all Tax Returns which it is
required to file under applicable Laws, except for such Tax Returns in respect
of which the failure to so file does not and could not have a Material Adverse
Effect; all such Tax Returns are true and accurate in all material respects and
have been prepared in compliance with all applicable Laws; the Company has paid
all Taxes due and owing by it (whether or not such Taxes are required to be
shown on a Tax Return) and have withheld and paid over to the appropriate taxing
authorities
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all Taxes which it is required to withhold from amounts paid or owing to any
employee, stockholder, creditor or other third parties; and since the Balance
Sheet Date, the charges, accruals and reserves for Taxes with respect to the
Company (including any provisions for deferred income taxes) reflected on the
books of the Company are adequate to cover any Tax liabilities of the Company if
its current tax year were treated as ending on the date hereof.
2. No claim has been made by a taxing authority in a jurisdiction
where the Company does not file tax returns that such corporation is or may be
subject to taxation by that jurisdiction. There are no foreign, federal, state
or local tax audits or administrative or judicial proceedings pending or being
conducted with respect to the Company; no information related to Tax matters has
been requested by any foreign, federal, state or local taxing authority; and,
except as disclosed above, no written notice indicating an intent to open an
audit or other review has been received by the Company from any foreign,
federal, state or local taxing authority. There are no material unresolved
questions or claims concerning the Company's Tax liability. The Company (A) has
not executed or entered into a closing agreement pursuant to ss. 7121 of the
Internal Revenue Code or any predecessor provision thereof or any similar
provision of state, local or foreign law; or (B) has not agreed to or is
required to make any adjustments pursuant to ss. 481 (a) of the Internal Revenue
Code or any similar provision of state, local or foreign law by reason of a
change in accounting method initiated by the Company or has any knowledge that
the IRS has proposed any such adjustment or change in accounting method, or has
any application pending with any taxing authority requesting permission for any
changes in accounting methods that relate to the business or operations of the
Company. The Company has not been a United States real property holding
corporation within the meaning of ss. 897(c) (2) of the Internal Revenue Code
during the applicable period specified in ss. 897(c) (1) (A) (ii) of the
Internal Revenue Code.
3. The Company has not made an election under ss. 341(f) of the
Internal Revenue Code. The Company is not liable for the Taxes of another person
that is not a subsidiary of the Company under (A) Treas. Reg. ss. 1.1502-6 (or
comparable provisions of state, local or foreign law), (B) as a transferee or
successor, (C) by contract or indemnity or (D) otherwise. The Company is not a
party to any tax sharing agreement. The Company has not made any payments, is
obligated to make payments or is a party to an agreement that could obligate it
to make any payments that would not be deductible under ss. 280G of the Internal
Revenue Code.
For purposes of this Section III.T.:
"IRS" means the United States Internal Revenue Service.
"TAX" or "TAXES" means federal, state, county, local, foreign, or
other income, gross receipts, ad valorem, franchise, profits, sales or use,
transfer, registration, excise, utility, environmental, communications, real or
personal property, capital stock, license, payroll, wage or other withholding,
employment, social security, severance, stamp, occupation, alternative or add-on
minimum, estimated and other taxes of any kind whatsoever (including, without
limitation, deficiencies, penalties, additions to tax, and interest attributable
thereto) whether disputed or not.
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"TAX RETURN" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including any
amendment thereof.
U. PROPERTY. The Company has good and marketable title to all real and
personal property owned by it, free and clear of all liens, encumbrances and
defects except as disclosed in the Commission Filings or the Financial
Statements such as do not materially affect the value of such property and do
not materially interfere with the use made and proposed to be made of such
property by the Company; and any real property and buildings held under lease by
the Company are held by it under valid, subsisting and enforceable leases with
such exceptions as are not material and do not interfere with the use made and
proposed to be made of such property and buildings by the Company.
V. INTELLECTUAL PROPERTY. The Company owns or possesses adequate and
enforceable rights to use all patents, patent applications, trademarks,
trademark applications, trade names, service marks, copyrights, copyright
applications, licenses, know-how (including trade secrets and other unpatented
and/or unpatentable proprietary or confidential information, systems or
procedures) and other similar rights and proprietary knowledge (collectively,
"Intangibles") necessary for the conduct of its business as now being conducted.
To the best of the Company's knowledge, the Company is not infringing upon or in
conflict with any right of any other person with respect to any Intangibles. No
claims have been asserted by any person to the ownership or use of any
Intangibles and the Company has no knowledge of any basis for such claim.
W. INTERNAL CONTROLS AND PROCEDURES. The Company maintains accurate
books and records and internal accounting controls which provide reasonable
assurance that (i) all transactions to which the Company is a party or by which
its properties are bound are executed with management's authorization; (ii) the
reported accountability of the Company's assets is compared with existing assets
at regular intervals; (iii) access to the Company's assets is permitted only in
accordance with management's authorization; and (iv) all transactions to which
the Company is a party or by which its properties are bound are recorded as
necessary to permit preparation of the financial statements of the Company in
accordance with U.S. generally accepted accounting principles.
X. PAYMENTS AND CONTRIBUTIONS. Neither the Company nor any of its
directors, officers or, to its knowledge, other employees has (i) used any
Company funds for any unlawful contribution, endorsement, gift, entertainment or
other unlawful expense relating to political activity; (ii) made any direct or
indirect unlawful payment of Company funds to any foreign or domestic government
official or employee; (iii) violated or is in violation of any provision of the
Foreign Corrupt Practices Act of 1977, as amended; or (iv) made any bribe,
rebate, payoff, influence payment, kickback or other similar payment to any
person with respect to Company matters.
Y. NO MISREPRESENTATION. No representation or warranty of the Company
contained in this Agreement, any schedule, annex or exhibit hereto or any
agreement, instrument or certificate furnished by the Company to Buyer or Tadeo
pursuant to this Agreement, contains
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any untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein, not
misleading.
Z. RIGHT OF FIRST REFUSAL. The Company has not granted any right of
first refusal to any person with respect to the issuance of Common Stock,
preferred stock or securities convertible into Common Stock which is currently
in effect.
AA. Company is purchasing the Tadeo Exchange Shares for its own
account, for investment purposes only and not with a view towards or in
connection with the public sale or distribution thereof in violation of the
Securities Act.
BB. Company is (i) experienced in making investments of the kind
contemplated by this Agreement, (ii) capable, by reason of its business and
financial experience, of evaluating the relative merits and risks of an
investment in the Securities, and (iii) able to afford the loss of its
investment in the Tadeo Exchange Shares.
CC. Company understands that the Tadeo Exchange Shares are being
offered and sold by Tadeo in reliance on an exemption from the registration
requirements of the Securities Act and equivalent state securities and "blue
sky" laws, and that Tadeo is relying upon the accuracy of, and Company's
compliance with, Company's representations, warranties and covenants set forth
in this Agreement to determine the availability of such exemption and the
eligibility of Company to purchase the Tadeo Exchange Shares;
DD. Company has been furnished with or provided access to all
materials relating to the business, financial position and results of operations
of Tadeo, and all other materials requested by Company to enable it to make an
informed investment decision with respect to the Tadeo Exchange Shares.
EE. Company acknowledges that it has been furnished with copies of the
Company's Annual Report on Form 10-KSB for the fiscal year ended June 30, 1998
and all other reports and documents heretofore filed by Tadeo with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Act and the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
since June 30, 1998 (collectively the "Tadeo Commission Filings").
FF. Company acknowledges that in making its decision to purchase the
Tadeo Exchange Shares it has been given an opportunity to ask questions of and
to receive answers from Tadeo's executive officers, directors and management
personnel concerning the terms and conditions of the private placement of the
Tadeo Exchange Shares by Tadeo.
GG. Company understands that the Tadeo Exchange Shares have not been
approved or disapproved by the Commission or any state securities commission and
that the foregoing authorities have not reviewed any documents or instruments in
connection with the offer and sale to it of the Tadeo Exchange Shares and have
not confirmed or determined the adequacy or accuracy of any such documents or
instruments.
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HH. Neither Company nor its affiliates nor any person acting on its or
their behalf has the intention of entering, or will enter into, prior to the
closing, any put option, short position or other similar instrument or position
with respect to the Tadeo Common Stock and neither Company nor any of its
affiliates nor any person acting on its or their behalf will use at any time
shares of Tadeo Common Stock acquired pursuant to this Agreement to settle any
put option, short position or other similar instrument or position that may have
been entered into prior to the execution of this Agreement.
IV. CERTAIN COVENANTS AND ACKNOWLEDGMENTS.
A. RESTRICTIVE LEGEND. Each of Tadeo and Buyer, on the one hand, and
Company, on the other hand, acknowledges and agrees that, upon issuance pursuant
to this Agreement, the Securities and the Company Exchange Shares, and the Tadeo
Exchange Shares, respectively, shall have endorsed thereon a legend in
substantially the following form (and a stop-transfer order may be placed
against transfer of the Preferred Stock, the Company Exchange Shares and the
Tadeo Exchange Shares):
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE,
AND ARE BEING OFFERED AND SOLD PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT OR SUCH OTHER LAWS."
B. FILINGS. Each of Tadeo, Buyer and the Company shall make all
necessary SEC, Nasdaq and "blue sky" filings required to be made by Tadeo, Buyer
and the Company, respectively, in connection with the sale of the Securities,
the Company Exchange Shares and the Tadeo Exchange Shares as contemplated under
the terms of this Agreement, and as required by all applicable laws and the
Rules of The Nasdaq Stock Market, Inc., and shall provide copies thereof to the
Buyer, Tadeo and the Company, as relevant, promptly after such filing.
C. REPORTING STATUS. So long as the Buyer and/or Tadeo beneficially
owns any of the Securities or Company Exchange Shares, on the one hand, and so
long as the Company beneficially owns any of the Tadeo Exchange Shares, on the
other hand, the Company and Tadeo, respectively, each shall use its best efforts
timely to file all reports required to be filed by it with the Commission
pursuant to Section 13 or 15(d) of the Exchange Act.
D. Reserved.
E. LISTING. Except to the extent the Company lists its Common Stock on
The New York Stock Exchange or the Nasdaq National Market System, the Company
shall use its best efforts to maintain its listing of the Common Stock on the
NASDAQ.
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F. RESERVED CONVERSION SHARES. The Company at all times from and after
the date hereof shall have a sufficient number of shares of Common Stock duly
and validly authorized and reserved for issuance to satisfy the conversion, in
full, of the Preferred Stock (assuming for purposes of this Section IV.F., a
Conversion Price of not greater than $.30). In the event the Current Market
Price (as defined in the Amendment) declines to $.30, the Company shall, within
10 days of the occurrence of such event, authorize and reserve for issuance such
additional shares of Common Stock sufficient in number for the conversion, in
full, of the Preferred Stock, assuming for purposes of this Section IV.F. a
Conversion Price of not greater than $.15 per share.
G. RIGHT OF FIRST REFUSAL. If the Company should propose (the
"Proposal") to issue Common Stock or securities convertible into Common Stock,
or to become obligated for any indebtedness having equity or other non-debt
features at less than par value (e.g., having any attendant equity or other
features other than strictly calling for repayment of full face principal and
accrued interest), or to issue any debt securities or other indebtedness having
an effective annual interest rate in excess of 9.9% (each a "Right of First
Refusal Security" and collectively, the "Right of First Refusal Securities"), in
each case on the date of issuance, during any period during which the Preferred
Stock is issued and outstanding (the "Right of First Refusal Period"), the
Company shall be obligated to offer the Buyer on the terms set forth in the
Proposal (the "Offer") and the Buyer shall have the right, but not the
obligation, to accept such Offer on such terms. If during the Right of First
Refusal Period, the Company provides written notice to the Buyer that it
proposes to issue any Right of First Refusal Securities on the terms set forth
in the Proposal, then the Buyer shall have ten (10) business days to accept or
reject such Offer in writing. If the Company fails to: (i) provide such written
notice to the Buyer of a Proposal during the Right of First Refusal Period, (ii)
offer the Buyer the opportunity to complete the transaction as set forth in the
Proposal, or (iii) enter into an agreement with the Buyer, at such terms after
the Buyer has accepted the Offer, then the Company shall pay to the Buyer, as
liquidated damages, an amount in total equal to ten percent (10%) of the amount
paid to the Company for the Right of First Refusal Securities. The foregoing
Right of First Refusal is and shall be senior in right to any other right of
first refusal issued by the Company to any other person. Notwithstanding the
foregoing, the Buyer shall have no rights under this paragraph 4.G. in respect
of Common Stock or any other securities of the Company issuable (i) upon the
exercise or conversion of options, warrants or other rights to purchase
securities of the Company outstanding as of the date hereof, or (ii) under the
Company's ____ Employee Stock Option Plan (in the form and with respect to the
number of shares of Common Stock to which such plan is subject on the date
hereof).
H. DIRECTOR DESIGNATION. Until such time as Buyer shall have sold,
redeemed, or converted, all of its shares of Preferred Stock acquired pursuant
to this Agreement, Tadeo shall have the right to designate an ex officio member
of the Company's Board of Directors, which designee shall receive notices of
(and related materials for discussion at), and shall be entitled to attend and
participate in all meetings of the Company's Board of Directors, as well as all
meetings of committees of the Company's Board of Directors, which notices (and
related materials) shall be delivered to such designee at the same time and in
the same manner as such communications are given to members of the Company's
Board of Directors. Such designee shall
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be reimbursed for the costs and expenses of his/her attendance at all such
meetings in the same manner and in the same amounts as are members of the
Company's Board of Directors, and such designee shall receive the same
compensation for attendance at meetings of the Company's Board of Directors
(including Committee meetings) as is received by members of the Company's Board
of Directors.
V. TRANSFER AGENT INSTRUCTIONS.
A. The Company undertakes and agrees that no instruction other than
the instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Company Exchange Shares
and/or Conversion Shares pursuant to an effective Securities Act registration
statement will be given to its transfer agent for the Company Exchange Shares
and/or Conversion Shares and that the Company Exchange Shares and the Conversion
Shares issuable upon conversion of the Preferred Stock otherwise shall be freely
transferable on the books and records of the Company as and to the extent
provided in this Agreement, the Registration Rights Agreement and applicable
law. Nothing contained in this Section V.A. shall affect in any way Buyer's
obligations and agreement to comply with all applicable securities laws upon
resale of such Company Exchange Shares and/or Conversion Shares. If, at any
time, Buyer or Tadeo provides the Company with an opinion of counsel reasonably
satisfactory to the Company that registration of the resale by Buyer and Tadeo
of such Company Exchange Shares and/or Conversion Shares is not required under
the Securities Act and that the removal of restrictive legends is permitted
under applicable law, the Company shall permit the transfer of such Company
Exchange Shares and/or Conversion Shares and, promptly instruct the Company's
transfer agent to issue one or more certificates for Company Common Stock
without any restrictive legends endorsed thereon.
B. Tadeo undertakes and agrees that no instructions other than the
instructions referred to in this Section V and customary stop transfer
instructions prior to the registration and sale of the Tadeo Exchange Shares
pursuant to an effective Securities Act registration statement will be given to
its transfer agent for Tadeo Exchange Shares and that the Tadeo Exchange Shares
otherwise shall be freely transferable on the books and records of Tadeo as and
to the extent provided in this Agreement and applicable law. Nothing contained
in this Section V.B. shall affect in any way the Company's obligations and
agreement to comply with all applicable securities laws upon resale of such
Tadeo Exchange Shares. If, at any time, Company provides Tadeo with an opinion
of counsel reasonably satisfactory to Tadeo that registration of the resale by
Company of such Tadeo Exchange Shares is not required under the Securities Act
and that the removal of restrictive legends is permitted under applicable law,
the Tadeo shall permit the transfer of such Tadeo Exchange Shares and, promptly
instruct Tadeo's transfer agent to issue one or more certificates for Tadeo
Common Stock without any restrictive legends endorsed thereon.
C. The Company shall permit Buyer to exercise its right to convert the
Preferred Stock by telecopying an executed and completed Notice of Conversion to
the Company. Each date on which a Notice of Conversion is telecopied to and
received by the Company in
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accordance with the provisions hereof shall be deemed a Conversion Date. The
Company shall transmit the certificates evidencing the shares of Company Common
Stock issuable upon conversion of any Preferred Stock (together with
certificates evidencing any Preferred Stock not being so converted) to Buyer via
express courier, by electronic transfer or otherwise, within five business days
after receipt by the Company of the Notice of Conversion (the "Delivery Date").
Within five business days after Buyer delivers the Notice of Conversion to the
Company, Buyer shall deliver to the Company the Preferred Stock being converted.
Buyer shall indemnify the Company for any damages to third parties as a result
of a claim by such third party to ownership of the Preferred Stock converted
prior to receipt of the Preferred Stock by the Company.
D. The Company understands that a delay in the issuance of the shares
of Company Common Stock upon the conversion of the Preferred Stock could result
in economic loss to Buyer. As compensation to Buyer for such loss (and not as a
penalty), the Company agrees to pay to Buyer for late issuance of Company Common
Stock issuable upon conversion of the Preferred Stock in accordance with the
following schedule (where "No. Business Days" is defined as the number of
business days beyond five (5) days from the Delivery Date):
NO. BUSINESS DAYS COMPENSATION FOR EACH 500 SHARES OF
PREFERRED STOCK NOT CONVERTED
TIMELY
1 $25
2 $50
3 $75
4 $100
5 $125
6 $150
7 $175
8 $200
9 $225
10 $250
More than 10 $250 + $100 for each
Business Day Late beyond 10
days
The Company shall pay to Buyer the compensation described above by the transfer
of immediately available funds upon Buyer's demand. Nothing herein shall limit
Buyer's right to pursue actual damages for the Company's failure to issue and
deliver Company Common Stock to Buyer (which actual damages shall be reduced by
the amount of any compensation paid by the Company as described above in this
Section V.D.), and in addition to any other remedies which may be available to
Buyer, in the event the Company fails for any reason to effect delivery of such
shares of Company Common Stock within five business days after the relevant
Delivery Date, Buyer shall be entitled to rescind the relevant Notice of
Conversion by delivering a notice to such effect to the Company whereupon the
Company and Buyer shall each be restored to their respective original positions
immediately prior to delivery of such Notice of Conversion on delivery.
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VI. DELIVERY INSTRUCTIONS.
The Securities, Company Exchange Shares and the Tadeo Exchange Shares
shall be delivered by the Company, on the one hand, and by Tadeo, on the other
hand, on a "delivery-against-payment basis" at the Closing.
VII. CLOSING DATE.
The date and time of the issuance and sale of the Preferred Stock,
Company Exchange Shares and Tadeo Exchange Shares (the "Closing Date") shall be
the date hereof or such other as shall be mutually agreed upon in writing. The
issuance and sale of the Securities, the Company Exchange Shares and the Tadeo
Exchange Shares shall occur on the Closing Date at the offices of Nixon,
Hargrave, Devans & Doyle LLP, 437 Madison Avenue, New York, New York.
VIII. CONDITIONS TO THE COMPANY'S OBLIGATIONS.
The Buyer and Tadeo each understands that the Company's obligation to
sell the Securities and the Company Exchange Shares on the Closing Date to Buyer
and Tadeo pursuant to this Agreement is conditioned upon:
A. Delivery by Buyer and Tadeo of the Preferred Purchase Price and the
Company Exchange Purchase Price, respectively;
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of Buyer and Tadeo contained in this Agreement as
if made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by Buyer and Tadeo in all material respects on or before the Closing Date of all
covenants and agreements of Buyer required to be performed by it pursuant to
this Agreement on or before the Closing Date
C. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
IX. CONDITIONS TO BUYER'S AND TADEO'S OBLIGATIONS.
The Company understands that the several obligations of Buyer to
purchase the Securities and of Tadeo to purchase the Company Exchange Shares on
the Closing Date pursuant to this Agreement is each conditioned upon:
A. Delivery by the Company of one or more certificates (I/N/O Buyer)
evidencing the Securities to be purchased by Buyer pursuant to this Agreement,
and delivery to
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Buyer of a fully-executed copy of this Agreement, the Registration Agreement and
the Pledge Agreement (including all collateral subject thereto, along with
executed stock powers in blank and related medallion signature guarantees); and
Delivery by Company of one or more certificates (I/N/O Tadeo) evidencing the
Company Exchange Shares to be purchased by Tadeo pursuant to this Agreement, and
delivery to Tadeo of a fully-executed copy of this Agreement.
B. The accuracy in all material respects on the Closing Date of the
representations and warranties of the Company contained in this Agreement as if
made on the Closing Date (except for representations and warranties which, by
their express terms, speak as of and relate to a specified date, in which case
such accuracy shall be measured as of such specified date) and the performance
by the Company in all material respects on or before the Closing Date of all
covenants and agreements of the Company required to be performed by it pursuant
to this Agreement on or before the Closing Date;
C. Buyer and Tadeo having received an opinion of counsel for the
Company, dated the Closing Date, in form, scope and substance reasonably
satisfactory to the Buyer and Tadeo.
D. There not having occurred (i) any general suspension of trading in,
or limitation on prices listed for, the Common Stock on the NASDAQ, (ii) the
declaration of a banking moratorium or any suspension of payments in respect of
banks in the United States, (iii) the commencement of a war, armed hostilities
or other international or national calamity directly or indirectly involving the
United States or any of its territories, protectorates or possessions, or (iv)
in the case of the foregoing existing at the date of this Agreement, a material
acceleration or worsening thereof.
E. There not having occurred any event or development, and there being
in existence no condition, having or which reasonably and foreseeable would have
a Material Adverse Effect.
F. The Company shall have delivered to Buyer and Tadeo reimbursement
of Buyer's out-of-pocket costs and expenses incurred in connection with the
transactions contemplated by the Note and this Agreement (including the fees and
disbursements of Buyer's legal counsel of $20,000).
G. There shall not be in effect any Law or order, ruling, judgment or
writ of any court or public or governmental authority restraining, enjoining or
otherwise prohibiting any of the transactions contemplated by this Agreement.
H. Buyer and Tadeo shall have received such written consents, in form
acceptable to Buyer and Tadeo, to the transactions contemplated by this
Agreement and the Amendment, as necessary to permit consummation thereof,
including but not limited to consents to the Company's payment of dividends on
the Preferred Stock out of legally available funds, the mandatory redemption of
the Preferred Stock under certain circumstances and the conversion to Conversion
Shares of the Preferred Stock, all in accordance with the terms and conditions
of
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the Amendment; PROVIDED, that such consents shall include written consents from
FINOVA Mezzanine Capital Inc. and from First Source Financial LLP.
X. SURVIVAL; INDEMNIFICATION.
A. The representations, warranties and covenants made by each of the
Company, on the one hand, and Buyer and Tadeo, on the other hand, in this
Agreement, the annexes, schedules and exhibits hereto and in each instrument,
agreement and certificate entered into and delivered by them pursuant to this
Agreement, shall survive the Closing and the consummation of the transactions
contemplated hereby. In the event of a breach or violation of any of such
representations, warranties or covenants, the party to whom such
representations, warranties or covenants have been made shall have all rights
and remedies for such breach or violation available to it under the provisions
of this Agreement or otherwise, whether at law or in equity, irrespective of any
investigation made by or on behalf of such party on or prior to the Closing
Date.
B. The Company hereby agrees to indemnify and hold harmless the Buyer
and Tadeo, their Affiliates and their respective officers, directors, partners
and members (collectively, the "Buyer Indemnitees"), from and against any and
all losses, claims, damages, judgments, penalties, liabilities and deficiencies
(collectively, "Losses"), and agrees to reimburse the Buyer Indemnitees for all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Buyer Indemnitees and to the
extent arising out of or in connection with:
1. any misrepresentation, omission of fact or breach of any of the
Company's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by the Company pursuant to this Agreement;
or
2. any failure by the Company to perform in any material respect any
of its covenants, agreements, undertakings or obligations set forth in this
Agreement, the annexes, schedules or exhibits hereto or any instrument,
agreement or certificate entered into or delivered by the Company pursuant to
this Agreement.
C. Buyer and Tadeo, severally, hereby agree to indemnify and hold
harmless the Company, its Affiliates and their respective officers, directors,
partners and members (collectively, the "Company Indemnitees"), from and against
any and all Losses, and agrees to reimburse the Company Indemnitees for all
out-of-pocket expenses (including the reasonable fees and expenses of legal
counsel), in each case promptly as incurred by the Company Indemnitees and to
the extent arising out of or in connection with:
1. any misrepresentation, omission of fact, or breach of any of Buyer
or Tadeo's representations or warranties contained in this Agreement, the
annexes, schedules or exhibits hereto or any instrument, agreement or
certificate entered into or delivered by Buyer or Tadeo pursuant to this
Agreement; or
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2. any failure by Buyer or Tadeo to perform in any material respect
any of its covenants, agreements, undertakings or obligations set forth in
this Agreement or any instrument, certificate or agreement entered into or
delivered by Buyer or Tadeo pursuant to this Agreement.
D. Promptly after receipt by either party hereto seeking
indemnification pursuant to this Section XI (an "Indemnified Party") of written
notice of any investigation, claim, proceeding or other action in respect of
which indemnification is being sought (each, a "Claim"), the Indemnified Party
promptly shall notify the party against whom indemnification pursuant to this
Section XI is being sought (the "Indemnifying Party") of the commencement
thereof; but the omission to so notify the Indemnifying Party shall not relieve
it from any liability that it otherwise may have to the Indemnified Party,
except to the extent that the Indemnifying Party is materially prejudiced and
forfeits substantive rights and defenses by reason of such failure. In
connection with any Claim as to which both the Indemnifying Party and the
Indemnified Party are parties, the Indemnifying Party shall be entitled to
assume the defense thereof. Notwithstanding the assumption of the defense of any
Claim by the Indemnifying Party, the Indemnified Party shall have the right to
employ separate legal counsel (together with appropriate local counsel) and to
participate in the defense of such Claim, and the Indemnifying Party shall bear
the reasonable fees, out-of- pocket costs and expenses of such separate legal
counsel to the Indemnified Party if (and only if): (x) the Indemnifying Party
shall have agreed to pay such fees, out-of-pocket costs and expenses, (y) the
Indemnified Party and the Indemnifying Party reasonably shall have concluded
that representation of the Indemnified Party and the Indemnifying Party by the
same legal counsel would not be appropriate due to actual or, as reasonably
determined by legal counsel to the Indemnified Party, (i) potentially differing
interests between such parties in the conduct of the defense of such Claim, or
(ii) if there may be legal defenses available to the Indemnified Party that are
in addition to or disparate from those available to the Indemnifying Party and
which can not be presented by counsel to the Indemnifying Party, or (z) the
Indemnifying Party shall have failed to employ legal counsel reasonably
satisfactory to the Indemnified Party within a reasonable period of time after
notice of the commencement of such Claim. If the Indemnified Party employs
separate legal counsel in circumstances other than as described in clauses (x),
(y) or (z) above, the fees, costs and expenses of such legal counsel shall be
borne exclusively by the Indemnified Party. Except as provided above, the
Indemnifying Party shall not, in connection with any Claim in the same
jurisdiction, be liable for the fees and expenses of more than one firm of legal
counsel for the Indemnified Party (together with appropriate local counsel). The
Indemnifying Party shall not, without the prior written consent of the
Indemnified Party (which consent shall not unreasonably be withheld), settle or
compromise any Claim or consent to the entry of any judgment that does not
include an unconditional release of the Indemnified Party from all liabilities
with respect to such Claim or judgment.
E. In the event one party hereunder should have a claim for
indemnification that does not involve a claim or demand being asserted by a
third party, the Indemnified Party promptly shall deliver notice of such claim
to the Indemnifying Party. If the Indemnified Party disputes the claim, such
dispute shall be resolved by mutual agreement of the Indemnified Party and the
Indemnifying Party or by binding arbitration conducted in accordance with the
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procedures and rules of the American Arbitration Association. Judgment upon any
award rendered by any arbitrators may be entered in any court having competent
jurisdiction thereof.
XI. GOVERNING LAW: MISCELLANEOUS.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to the conflicts of law
principles of such state. Each of the parties consents to the jurisdiction of
the federal courts whose districts encompass any part of the City of New York or
the state courts of the State of New York sitting in the City of New York in
connection with any dispute arising under this Agreement and hereby waives, to
the maximum extent permitted by law, any objection, including any objection
based on FORUM NON CONVENIENS, to the bringing of any such proceeding in such
jurisdictions. A facsimile transmission of this signed Agreement shall be legal
and binding on all parties hereto. This Agreement may be signed in one or more
counterparts, each of which shall be deemed an original. The headings of this
Agreement are for convenience of reference and shall not form part of, or affect
the interpretation of, this Agreement. If any provision of this Agreement shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement or the validity or enforceability of this Agreement
in any other jurisdiction. This Agreement may be amended only by an instrument
in writing signed by the party to be charged with enforcement. This Agreement
supersedes all prior agreements and understandings among the parties hereto with
respect to the subject matter hereof.
XII. NOTICES.
Except as may be otherwise provided herein, any notice or other
communication or delivery required or permitted hereunder shall be in writing
and shall be delivered personally or sent by certified mail, postage prepaid, or
by a nationally recognized overnight courier service, and shall be deemed given
when so delivered personally or by overnight courier service, or, if mailed,
three (3) days after the date of deposit in the United States mails, as follows:
(1) if to the Company, to: (3) if to Tadeo, to
Diplomat Direct Marketing Corporation Tadeo Holdings, Inc.
414 Alfred Avenue 5 Hanover Square
Teaneck, NJ 07666 New York, NY 10004
Attention: Warren Golden, President Attention: Alexander Kalpaxis,
Executive Vice-President
With a copy to: with a copy to:
Gersten, Savage & Kaplowitz LLP Nixon, Hargrave, Devans & Doyle LLP
101 East 52nd Street 437 Madison Avenue
New York, New York 10022 New York, New York 10022-7001
Attention: Frederic J. Gruder Attention: Peter W. Rothberg, Esq.
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<PAGE>
(2) if to Buyer, to
Tadeo E-Commerce Corp.
5 Hanover Square
New York, New York 10004
Attention: Damon Testaverde, President
with a copy to:
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022-7001
Attention: Peter W. Rothberg, Esq.
The Company, or Buyer or Tadeo may change its foregoing address by
notice given pursuant to this Section XII.
XIII. CONFIDENTIALITY.
Each of the Company, Buyer and Tadeo agrees to keep confidential and
not to disclose to or use for the benefit of any third party the terms of this
Agreement or any other information which at any time is communicated by the
other party as being confidential without the prior written approval of the
other party; PROVIDED, HOWEVER, that this provision shall not apply to
information which, at the time of disclosure, is already part of the public
domain (except by breach of this Agreement) and information which is required to
be disclosed by law (including, without limitation, pursuant to Item 10 of Rule
601 of Regulation S-K under the Securities Act and the Exchange Act).
XIV. ASSIGNMENT.
This Agreement shall not be assignable by any of the parties hereto
prior to the Closing without the prior written consent of the other party, and
any attempted assignment contrary to the provisions hereby shall be null and
void; PROVIDED, HOWEVER, that Buyer or Tadeo may assign its rights and
obligations hereunder, in whole or in part, to any affiliate of Buyer or Tadeo
who furnishes to the Company the representations and warranties set forth in
Section II hereof and otherwise agrees to be bound by the terms of this
Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and
delivered this Agreement on the date first above written.
DIPLOMAT DIRECT MARKETING CORPORATION
By:/S/ WARREN GOLDEN
Name: Warren Golden
Title: President
TADEO HOLDINGS, INC.
By: /S/ ALEXANDER KALPAXIS
Name: Alexander Kaplaxis
Title: Executive Vice President
BUYER:
TADEO E-COMMERCE CORP.
By: /S/ DAMON TESTAVERDE
Name: Damon Testaverde
Title: President
REGISTRATION RIGHTS AGREEMENT
DATED AS OF JUNE 30, 1999
BY AND BETWEEN
DIPLOMAT DIRECT MARKETING CORPORATION
AND
TADEO E-COMMERCE CORP.
This Registration Rights Agreement (this "Agreement") is made and
entered into as of June 30, 1999, by and between DIPLOMAT DIRECT MARKETING
CORPORATION a corporation organized and existing under and by virtue of the laws
of the State of Delaware (the "Company"), and TADEO E-COMMERCE CORP., a
corporation organized and existing under and by virtue of the laws of the State
of Delaware (the "Investor").
This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of June 30, 1999, by and among the Company, Tadeo Holdings, Inc. and
the Investor (the "Securities Agreement"). The Company has agreed to provide the
Investor the registration rights with respect to the Registerable Securities, as
defined and set forth in this Agreement. The execution and delivery of this
Agreement is a condition to the closing of the Securities Purchase Agreement.
Unless otherwise separately defined herein, all capitalized terms used in this
Agreement shall have the meanings ascribed to them as set forth in the
Securities Purchase Agreement.
The parties hereby agree as follows:
1. SECURITIES SUBJECT TO THIS AGREEMENT
(a) DEFINITIONS. The term "Registerable Securities" means both the
Conversion Shares and the Company Exchange Shares as defined in the Securities
Purchase Agreement, as well as any shares of Company Common Stock issued as
dividends by the Company under the terms of Section 4.1(iii) of the Amendment.
The term "1933 Act" means the securities Act of 1933, as amended. The term "1934
Act" means the Securities Exchange Act of 1934, as amended. The terms
"register", "registered", and "registration" refer to a registration effected by
preparing and filing a registration statement or similar document in compliance
with the 1933 Act, and the declaration or ordering of effectiveness of such
registration statement or document.
<PAGE>
(b) RESTRICTED SECURITIES. The Conversion Shares are "restricted
securities", as that term is defined in Rule 144 promulgated under the 1933 Act
(the "Restricted Securities"). For the purposes of this Agreement, any
Registerable Security will cease to be a Restricted Security when (i) a
registration statement covering such Restricted Security has been declared
effective by the United States Securities and Exchange Commission (the
"Commission"), and the Restricted Security has been disposed of pursuant to such
effective registration statement; (ii) it can be distributed to the public
pursuant to Rule 144 (or any similar provision then in force) under the 1933
Act; or (iii) it is exchanged (without additional cost, expense or tax liability
to the Investor) for an identical or substantially identical security which is
or has been registered under the 1933 Act or may be sold and disposed of without
an effective registration statement under the 1933 Act.
(c) REGISTERABLE SECURITIES. As to any particular Registerable Security,
such security will cease to be a Registerable Security when it ceases to be a
Restricted Security.
(d) HOLDERS OF REGISTERABLE SECURITIES. A Person is deemed to be a holder
of Registerable Securities whenever such Person owns Registerable Securities or
has a right to acquire such Registerable Securities, whether or not such
acquisition has actually been effected; PROVIDED, that in no event will any
Registerable Security be deemed to be owned by more than one Person.
(e) STOCK SPLITS, DIVIDENDS, ETC. The provisions of this Agreement shall
apply to any shares or other securities resulting from any stock split or
reverse split, stock dividend, reclassification of the capital stock of the
Company, consolidation or reorganization of the Company, and any shares or other
securities of the Company or of any successor company which may be received by
the Investor by virtue of its ownership of Registerable Securities.
2. REQUIRED REGISTRATION
(a) DEMAND REGISTRATION. (i) If the Company is then eligible to file with
the SEC a registration statement on Form S-3, the Company agrees to file within
30 days of the written request of Investor, and (ii) if the Company is not then
eligible to file with the SEC a registration statement on Form S-3 the Company
agrees to file within 60 days of the written request of Investor, one "shelf"
registration statement on any appropriate form pursuant to Rule 415 under the
1933 Act and/or any similar rule that may be adopted by the SEC with respect to
the Registerable Securities (the "Shelf Registration"). The Company agrees to
use its best efforts to have the Shelf Registration declared effective as soon
as reasonably practicable after such filing, and to keep the Shelf Registration
continuously effective (x) for a period of three (3) years in the case of
subprovision (i) above and (y) for a period of nine (9) months in the case of
subprovision (ii) above, in either case with respect to the Conversion Shares
(or, if for any reason the effectiveness of the Shelf Registration is suspended,
such period shall be extended by the aggregate number of days of each such
suspension), following the date on which the Shelf Registration is declared
effective; PROVIDED, HOWEVER, that the effectiveness of the Shelf Registration
may be terminated earlier with respect to any issue of securities if and to the
extent
- 2 -
<PAGE>
that none of the securities of such issue registered therein are Restricted
Securities or are outstanding.
The Company further agrees if necessary, to supplement or amend any
Shelf Registration, as required by the registration form utilized by the Company
or by the instructions applicable to such registration form or by the 1933 Act
or the rules and regulations thereunder, and the Company agrees to furnish to
the holders of Registerable Securities copies of any such supplement or
amendment prior to its being used and/or filed with the SEC. The Company agrees
to pay all of its Registration Expenses (as hereinafter defined) in connection
with the Shelf Registration, whether or not it becomes effective.
The holders of the Registerable Securities to be registered shall pay,
PRO RATA, all underwriting discounts and commissions or placement fees of any
investment banker or bankers and/or manager or managers used in connection with
the sale of their Registerable Securities pursuant to the Registration
Statement.
(b) PIGGY-BACK REGISTRATION
(i) Other than with respect to the Company's registration statement on
Form S-1 which is filed on or before June 15, 1999, in the event that the
Company proposes to register any shares of its common stock, $.0001 par value
(the "Common Stock"), under the 1933 Act, other than (i) pursuant to a
registration statement on Forms S-4 or S-8 or any successor to such Forms and
(ii) other than pursuant to Section 2(a) above, for the purpose of the sale of
Common Stock by the Company for its own account, or of Common Stock owned by any
present or future holder of Common Stock, or any other obligation of the Company
to register securities on Form S-1, S-2 or S-3, or any successor to such Forms,
the Company shall mail or deliver to all holders of Registerable Securities, at
least 10 days prior to the filing with the SEC of the registration statement
covering such Common Stock, a written notice (a "Registration Notice") of its
intention so to register such Common Stock.
(ii) In the event that a Registration Notice shall have been so mailed
or delivered, each holder of Registerable Securities may elect to include in
such registration statement such percentage of its Registerable Securities as
equals the percentage derived by adding all of the shares of Common Stock
registered on behalf of each of the holders on whose behalf such registration
statement is being filed (excluding the holders of Registerable Securities) and
dividing such number by the total number of shares of Common Stock owned by such
holders (excluding the holders of Registerable Securities). To the extent that a
holder of Registerable Securities chooses to include such Registerable
Securities as it is entitled to include pursuant to the preceding sentence such
holder shall mail or deliver to the Company, a written notice (a "Supplemental
Notice") (A) specifying the number of shares of Registerable Securities proposed
to be sold or otherwise transferred by such holder, (B) describing the proposed
manner of sale or other transfer thereof under the Securities Act; PROVIDED,
HOWEVER, that such Supplemental Notice shall be so mailed or delivered by such
holder not more than 5 days after the date of delivery to such holder of a
Registration Notice.
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<PAGE>
3. HOLDBACK AGREEMENT; RESTRICTIONS ON PUBLIC SALE BY HOLDERS OF REGISTERABLE
SECURITIES.
In connection with the piggyback registration statement referred to in
Section 2 above, to the extent not inconsistent with applicable law, each holder
of Registerable Securities whose securities are included in such registration
statement agrees not to effect any public sale or distribution of the issue
being registered or a similar security of the Company or any securities
convertible into or exchangeable or exercisable for such securities, including a
sale pursuant to Rule 144 under the Act, during the 14 Business Days prior to,
and for such period of time following the effective date not to exceed a 9-month
period as the Company or any managing underwriter of an offering of securities
subject to such piggyback registration may specify, if and to the extent timely
notified of such restriction in writing by the Company, in the case of a
non-underwritten public offering, or by the managing underwriter or
underwriters, in the case of an underwritten public offering, and the Company or
such underwriter(s) provide a written opinion to the effect that earlier sale of
the Registerable Securities would materially, adversely affect the Company's
primary offering of securities.
4. REGISTRATION EXPENSES
Subject to the limitation on expenses provided in Section 2, all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, all registration and filing fees, all fees and
expenses associated with filings required to be made with the National
Association of Securities Dealers, Inc. ("NASD") and/or The NASDAQ Stock Market
("NASDAQ"), as may be required by the rules and regulations of the NASD or
NASDAQ, fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel in connection with blue sky
qualifications of the Registerable Securities), rating agency fees, printing
expenses (including expenses of printing certificates for the Registerable
Securities in a form eligible for deposit with the Depositary Trust Company and
of printing prospectuses if the printing of prospectuses is requested by a
holder of Registerable Securities), messenger and delivery expenses, internal
expenses (including, without limitation, all, salaries and expenses of their
officers and employees performing legal or accounting duties), fees and expenses
of counsel for the Company and its independent certified public accountants
(including the expenses of any special audit or "cold comfort" letters required
by or incident to such performance), securities acts liability insurance (if the
Company elects to obtain such insurance), fees and expenses of other Persons
retained by the Company (all such expenses being herein called "Registration
Expenses") will be borne by the Company; PROVIDED that in no event shall
Registration Expenses include any underwriting discounts, commissions or fees
attributable to the sale of the Registerable Securities.
- 4 -
<PAGE>
5. FURTHER OBLIGATIONS OF THE COMPANY
(a) The Company shall, as soon as reasonably possible, use its best efforts
to register and qualify the Registrable Securities covered by any registration
statement described herein under such other securities or "blue sky" laws of
such jurisdictions as shall be reasonably requested by the Investor, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions unless the Company is already
subject to such service in such jurisdiction and except as may be required by
the 1933 Act.
(b) The Company shall as soon, as reasonably possible, furnish to the
Investor
(or one broker or agent designated by the Investor) such numbers of copies of a
prospectus in conformity with the requirement of the 1933 Act, and such other
documents as the Investor may reasonably request in order to facilitate the
resale or other disposition of the Registerable Securities owned by them.
(c) Prior to filing any registration statement pursuant to this Agreement,
the Company shall provide a draft of the registration statement to the Investor
and its counsel within 10 days prior to filing, and the Company shall use
commercially reasonable efforts to include the comments of the Investor and its
counsel in the registration statement.
6. INDEMNIFICATION: CONTRIBUTION
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify each
holder of Registerable Securities, its general partners, general partners of the
general partner, limited partners, officers, directors, employees and agents and
each Person who controls such holder (within the meaning of the 1933 Act),
against all losses, damages, liabilities (joint or several) and expenses
(including reasonable costs of investigation and legal expenses) arising out of
or based upon any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus,
or any amendment or supplement thereto, or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein (in the case of a prospectus or preliminary prospectus,
in light of the circumstances under which they are made) not misleading, except
insofar as the same are contained in any information with respect to such holder
furnished in writing to the Company by such holder expressly for use therein or
any violation by the Company of the 1933 Act, 1934 Act, or the rules promulgated
thereunder that does not result from conduct by the Persons indemnifiable by the
Company under this Section 6(a). The Company also agrees to reimburse each such
holder and each such officer, director, partner and controlling Person for any
legal or other expenses reasonably incurred by such holder or such officer,
director, partner or controlling person in connection with investigating or
defending any such loss, damage, liability or action to the extent that the same
are not incurred in connection with the proviso of the preceding sentence.
(b) INDEMNIFICATION BY HOLDERS OF REGISTERABLE SECURITIES. In connection
with any registration statement in which a holder of Registerable Securities is
participating, each such holder will furnish to the Company in writing, such
information and affidavits with respect to
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<PAGE>
such holder as the Company reasonably requests for use in connection with any
such registration statement or prospectus and agrees to indemnify, to the extent
permitted by law, the Company, the directors, officers, employees and agents and
each Person who controls the Company (within the meaning of the Act), and any
investment advisor thereof or agent therefor against any losses, damages,
liabilities and expenses resulting from any untrue statement of a material fact
or any omission of a material fact required to be stated in the registration
statement or prospectus or any amendment thereof or supplement thereto or
necessary to make the statements therein (in the case of a prospectus, in the
light of the circumstances under which they were made) not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in or failed to be contained in any information or affidavit with
respect to such holder so furnished in writing by such holder specifically for
inclusion therein or resulting from the violation of applicable securities laws
by such holder or its agents in connection with the sale of the Registerable
Securities.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any person entitled to
indemnification hereunder agrees to give prompt written notice to the
indemnifying party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding against such person or
investigation thereof made in writing for which such person will claim
indemnification or contribution pursuant to this Agreement and, unless in the
reasonable judgment of counsel to such indemnified party a conflict of interest
may exist between such indemnified party and the indemnifying party with respect
to such claim which would not permit the same counsel to represent the
indemnifying and indemnified parties, permit the indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to such
indemnified party. If the indemnifying party is not entitled to, or elects not
to, assume the defense of a claim (including as the result of a conflict of
interest which, in the reasonable judgment of counsel to such indemnified party,
does not permit the same counsel to represent the indemnified and indemnifying
parties), it will not be obligated to pay the fees and expenses of more than one
counsel with respect to such claim other than counsel to the indemnifying party.
No indemnifying party will be required to consent to entry of any judgment or
enter into any settlement which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such indemnified party of a
release from all liability in respect of such claim or litigation. The
indemnifying party will not be subject to any liability for any settlement made
without its consent. The failure of any indemnified party to give such notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Agreement unless, and only to the extent that, the failure of the
indemnified party to give such notice is (i) deliberate and wilful and (ii)
results in actual harm to the indemnifying party.
(d) CONTRIBUTION. If the indemnification provided for in this Section 6
from the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, damages, liabilities or expenses referred to therein by
reason other than that set forth in the exception in the first sentence of
Section 6(a) hereof and Section 6(b) hereof, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions or inactions which resulted in such
- 6 -
<PAGE>
losses, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party and
indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 6(c), any legal or other fees or expenses
reasonably incurred by such party in connection with any investigation or
proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by PRO RATA
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 1933 Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
If indemnification is available under this Section 6, the indemnifying
parties shall indemnify each indemnified party to the full extent provided in
Sections 6(a) and (b) without regard to the relative fault of said indemnifying
party or indemnified party or any other equitable consideration provided for in
this Section 6(d).
In the event that any provision of an indemnification clause in an
underwriting agreement executed by or on behalf of a holder of Registerable
Securities differs from a provision in this Section 6, such provision in the
underwriting agreement shall determine such holder's rights in respect thereof.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS.
The Investor may not participate in any underwritten registration with
respect to the Registerable Securities unless it (a) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements (including applicable "lock-up" arrangements described in Section 3
of this Agreement) and (b) agrees to pay its pro rata portion of all
underwriting discounts, commissions and fees.
8. RULE 144
The Company covenants that it will file the reports required to be
filed by it under the 1933 Act and the 1934 Act and the rules and regulations
adopted by the SEC thereunder (or, if it is not required to file such reports,
it will make publicly available such information including information required
by Rule 15c2-11 promulgated under the 1934 Act as will enable the holders of
Registerable Securities to sell any Registerable Securities held by them without
registration as described in this Section 8); and it will take such further
action as any holder of Registerable
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<PAGE>
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell Registerable Securities without registration under
the 1933 Act within the limitation of the exemptions provided by (a) Rule 144
under the 1933 Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the reasonable
request of any holder of Registerable Securities, the Company will deliver to
such holder a written statement as to filings made by the Company with the SEC.
9. MISCELLANEOUS
(a) AMENDMENTS AND WAIVERS. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departures from the provisions hereof may not be given
unless the Company has obtained the written consent of holders of at least a
majority of the then outstanding Registerable Securities affected by such
amendment, modification, supplement, waiver or departure.
(b) NOTICES. All notices and other communications provided for or permitted
hereunder shall be made by hand delivery, facsimile (with confirmation back),
nationally recognized overnight courier, or registered first-class mail:
(i) if to a holder of Registerable Securities, at the most current
address, and with a copy to be sent to each additional address given by such
holder to the Company, in writing, with a copy to each of such holder's (i)
litigation counsel and (ii) securities counsel which current information is as
follows:
With a copy to:
Tadeo E-Commerce Corp.
5 Hanover Square
New York, NY 10004
Attention: Damon Testaverde, President
Nixon, Hargrave, Devans & Doyle LLP
437 Madison Avenue
New York, New York 10022
Attention: Peter W. Rothberg, Esq.
Telephone #: 212-940-3000
Facsimile: 212-940-3111
(ii) if to the Company at:
Diplomat Direct Marketing Corporation
414 Alfred Avenue
Teaneck, NJ 07666
Attention: Warren Golden, President
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<PAGE>
With a copy to:
Gersten Savage & Kaplowitz LLP
101 East 52nd Street
New York, New York 10022
Telephone #: (212) 752-9700
Facsimile #: (212) 980-5192
All such notices and communications shall be deemed to have been duly
given when delivered by hand, if personally delivered, upon receipt if delivered
by facsimile, one-day after delivery to overnight courier priority delivery, or
five Business Days after being deposited in the mail, postage prepaid, if
mailed.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties hereto.
(d) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed wholly within that jurisdiction. The parties hereto agree to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Agreement.
(g) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the holders
of Registerable Securities shall be enforceable to the fullest extent permitted
by law.
(h) ENTIRE AGREEMENT. This Agreement, together with the Purchase Agreement
the Warrant and the Settlement Agreement, is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein and therein. This Agreement and the Purchase Agreement (including the
exhibits and schedules thereto) supersede all prior agreements, negotiations,
and understandings between the parties with respect to such subject matter.
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<PAGE>
(i) ATTORNEYS' FEES. In any action or proceeding brought to enforce any
provision of this Agreement, or where any provision hereof is successfully
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees in addition to any other available remedy.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
DIPLOMAT DIRECT MARKETING CORPORATION
By: /S/ WARREN GOLDEN
THE INVESTOR:
TADEO E-COMMERCE CORP.
By: /S/ DAMON TESTAVERDE
Name: Damon Testaverde
Title: President
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PLEDGE SECURITY AGREEMENT
PLEDGE SECURITY AGREEMENT, dated June 30, 1999, made by DIPLOMAT DIRECT
MARKETING CORPORATION, a Delaware corporation having its principal office and
place of business at 414 Alfred Avenue, Teaneck N.J. 07666 (the "Borrower"),
RUBIN FAMILY IRREVOCABLE STOCK TRUST, having an address at 25 Highland
Boulevard, Dix Hills, N.Y. 11746 (the "Pledgor"), and TADEO E-COMMERCE CORP., a
Delaware corporation, having an office at 5 Hanover Square, New York, NY 10004
("Lender").
W I T N E S S E T H:
Borrower is the issuer of 10,000 shares of Series G Preferred Stock,
$.01 par value (the "Preferred Stock"), to Lender pursuant to a Securities
Purchase Agreement, dated as of June __, 1999, between Lender and Borrower (the
"Securities Agreement"); and
WHEREAS, it is a condition to Lender's obligations under the Securities
Agreement that Pledgor pledge certain collateral to Lender, in form and amount
satisfactory to Lender, as security for Borrower's obligations with respect to
the shares of Preferred Stock sold to Lender under the Securities Agreement,
including but not limited to obligations for redemption and payment of
cumulative dividends, which obligations are specified under the terms of the
Securities Agreement and the Certificate of Designation, as filed with the
Secretary of State of Delaware, which creates the Preferred Stock (the
"Certificate"); and
WHEREAS, Pledgor is a principal stockholder of Borrower and the legal
and beneficial owner of the Collateral described in Section 1 and Exhibit A
hereof, and, to induce Lender to purchase the Preferred Stock from Borrower
pursuant to the Securities Agreement, Pledgor desires to pledge the Collateral
to Lender;
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and adequacy of which is hereby
acknowledged, the Borrower and Pledgor hereby agree with Lender as follows:
1. DEFINITIONS.
(a) "Debt" means all debts, liabilities and obligations of
Borrower to Lender (or to Lender's successor(s) as a holder of the Preferred
Stock) pursuant to and under the Securities Agreement and pursuant to the
Certificate with respect to the Preferred Stock, and all amendments to either,
and any extensions and renewals thereof or of a part thereof, together with
interest, fees, charges, expenses and costs of collection (including reasonable
attorneys' fees).
(b) "Collateral" means all securities specifically described
on Exhibit A, together with any substitutions or replacements thereto and all
securities which are added thereto as a result of a stock split or similar event
with respect to the collateral (including, without limitation, any stock
dividend or distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), option
or rights, whether as an addition to, in substitution of, or in exchange for any
shares of any Collateral, or otherwise,
<PAGE>
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and all proceeds thereof. Exhibit A hereto will be deemed to be amended
automatically and immediately upon the addition, substitution or replacement of
the securities listed on Exhibit A and upon such events, Pledgor shall promptly
deliver all substitute, replacement or additional securities to Lender as
additional Collateral hereunder.
2. GRANT OF SECURITY INTEREST AND PLEDGE.
(a) Pledgor hereby grants to Lender a first priority security
interest in and lien upon the Collateral as security for the Debt and all costs,
expenses and attorneys' fees incurred by Lender in collecting the Debt or
enforcing the Loan Agreement and the Note.
(b) Concurrently with the execution of this Pledge Security
Agreement, Pledgor shall deliver to the Lender, all certificates representing
the Collateral and, if the Collateral is uncertificated, shall sign one or more
financing statements evidencing the pledge of such Collateral to the Lender.
Notwithstanding any contrary provision or inference herein or elsewhere, Lender
shall have no right to vote the Collateral (if applicable) at any time unless
and until an Event of Default has occurred. The security interest in and lien
upon the Collateral granted to Lender hereunder shall attach upon delivery of
the Collateral to the Lender. Lender shall have, in addition to the rights and
remedies described in this Pledge Security Agreement, all the rights and
remedies of a secured party under the New York Uniform Commercial Code. Pledgor
irrevocably appoints Lender as its lawful attorney and agent on Pledgor's behalf
to execute any UCC-1 financing statements or UCC-3 amendments, to file such
documents signed by Lender alone in any appropriate public office, and to
register a pledge of any of the Collateral with any issuer of the Collateral.
(c) If, while this Agreement is in effect, Pledgor shall
become entitled to receive or shall receive any securities or any stock
certificate (including, without limitation, any certificate representing a stock
dividend or a distribution in connection with any reclassification, increase or
reduction of capital, or issued in connection with any reorganization), option
or rights, whether as an addition to, in substitution of, or in exchange for any
shares of any Collateral, or otherwise, then Pledgor agrees to accept the same
as Lender's agent and to hold the same in trust on behalf of and for the benefit
of Lender and to deliver the same forthwith to the Lender in the exact form
received, with the endorsement of Pledgor when necessary and/or appropriate
undated stock powers duly executed in blank, to be held by the Lender, subject
to the terms hereof, as additional collateral security for the Debt. Any sums
paid upon or in respect of the Collateral upon the liquidation or dissolution of
any issuer of securities constituting Collateral shall be paid over to the
Lender to be held by it in trust as additional collateral security for the
Debts; and in case any distributions of capital shall be made on or in respect
of the Collateral or any property shall be distributed upon or with respect to
the Collateral pursuant to the recapitalization or reclassification of the
capital of any issuer of securities constituting Collateral or pursuant to the
reorganization thereof, the property so distributed shall be delivered to the
Lender to be held by it as additional collateral security for the Debt. All sums
of money and property so paid or distributed in respect of the Collateral which
are received by Pledgor shall, until paid or delivered to the Lender, be held by
Pledgor in trust as additional collateral security for the Debt.
<PAGE>
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(d) Pledgor will not sell, transfer, pledge, exchange, assign
or otherwise dispose of or encumber the Collateral, or any interest therein or
any proceeds thereof, whether by operation of law or otherwise.
(e) This Agreement is in addition to and without limitation of
any right of Lender under the Securities Agreement, the Certificate, or any
other agreement, security agreement, mortgage or guaranty granted by the
Borrower or Pledgor to Lender. This Agreement is absolute and without any
conditions. Lender can enforce its rights in the Collateral immediately upon an
Event of Default without having first to attempt any collection from Borrower or
Pledgor.
(f) This Pledge Agreement and the obligations hereunder are
non-recourse against the Pledgor.
3. REPRESENTATIONS AND WARRANTIES.
Pledgor represents and warrants to Lender as follows:
(a) Pledgor owns and holds the Collateral free from any
security interest, lien, encumbrance or restriction whatsoever. No one (other
than Lender by reason of this Pledge Security Agreement) has any right, title,
claim or interest of any kind or nature in or to the Collateral.
(b) The security interest herein conferred upon Lender
constitutes the first and paramount lien upon all the Collateral.
(c) The securities which constitute the Collateral are fully
paid and non-assessable.
(d) The delivery of the Collateral to the Lender by Pledgor
under the terms of this Pledge Security Agreement and the compliance by Pledgor
with the other terms of this Pledge Security Agreement will not require the
consent of any governmental or regulatory authority or violate any provision of
or result in default under any other agreement to which Pledgor is a party or to
which its properties and assets are subject. Pledgor represents and warrants
that it is duly authorized to enter into this Pledge Security Agreement and the
transactions contemplated hereunder and that the person(s) signing this Pledge
Security Agreement on behalf of Pledgor is duly authorized to act on its behalf.
Each delivery of additional Collateral and each delivery of
Collateral for substitution hereunder shall, in and of itself, constitute a
reaffirmation by Pledgor of the representations and warranties set forth above.
4. EVENTS OF DEFAULT AND REMEDIES.
(a) Each of the following shall constitute an Event of Default
under this Pledge Security Agreement:
1. An event occurs which constitutes an Event of Default
under the Securities Agreement and/or the
Certificate;
<PAGE>
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2. The perfection of the security interest granted
Lender in the Collateral is impaired or is about to
become impaired; or
3. Borrower and/or Pledgor fails to perform any term,
condition or covenant of this Agreement, or any
representation or warranty made by Pledgor and/or
Borrower in this Agreement, or by Borrower in the
Securities Agreement and/or the Certificate, or in
connection therewith is determined to be false.
(b) Upon the occurrence of one or more of the foregoing Events
of Default, Lender may liquidate so much of the Collateral as is required to pay
the Debt and the costs, expenses and fees described in 2(a) hereof.
Upon the occurrence of an Event of Default, without limiting any other
right or remedy of Lender which may be available at law or in equity, Lender,
without demand of performance or other demand, advertisement or notice of any
kind (except the notice specified below of time and place of public or private
sale) to or upon Pledgor or any other person (all and each of which demands,
advertisements and/or notices are hereby expressly waived), may forthwith
collect, receive, appropriate and realize upon the Collateral, or any part
thereof, and/or may forthwith sell, assign, give an option or options to
purchase, contract to sell or otherwise dispose of and deliver said Collateral,
or any part thereof, at public or private sale or sales, at any exchange,
brokers' board or elsewhere upon such terms and conditions as Lender may deem
advisable. Lender or its agent shall pay over the net proceeds of any such
collection, receipt, appropriation, realization or sale, after deduction of all
reasonable costs and expenses of every kind incurred therein or in any way
relating to the rights of Lender hereunder, including reasonable attorneys' fees
and legal expenses, to Lender for application by Lender to the payment, in whole
or in part, of the Debt, Borrower remaining liable for any deficiency remaining
unpaid after such application, and only after so paying over such net proceeds
and after the payment by Lender of any other amount required by any provision of
law need Lender account for the surplus, if any, to Pledgor. Pledgor agrees that
Lender need not give more than ten days' notice of the time and place of any
public sale or of the time after which a private sale or other intended
disposition is to take place and that such notice is reasonable notification of
such matters. No notification need be given to Pledgor if it has signed after an
Event of Default a statement renouncing or modifying any right to notification
of sale or other intended disposition. In addition to the rights and remedies
granted to Lender in this Agreement, Lender shall have all the rights and
remedies of a secured party under the Uniform Commercial Code of the State of
New York.
5. DURATION AND WAIVERS.
Irrespective of any action, omission or course of dealing whatever by
Lender, this Pledge Security Agreement shall remain in full effect until the
Debt to Lender shall have been paid in full. Without limiting the generality of
the foregoing, Pledgor and Borrower (a) agree that Lender shall have no duty to
make any presentment or collection or to preserve any right of any kind with
reference to the Collateral, (b) agree that Lender shall at all times have the
right to grant any indulgence to Borrower and to deal in any other manner with
Borrower including (without limitation) the granting of any extension or
renewal, the increase or decrease of any rate of interest, the forbearance from
exercising any right, power or privilege, including (without limitation) any
right to demand security, the release of any security or of any obligor, the
<PAGE>
- 5 -
effecting of any other release, compromise or settlement, the forbearance from
proceeding against any security or obligor, the substitution of security (even
if of a different character or value), and (c) waive presentment, demand,
protest or notice of protest or nonpayment of the Debt to Lender or any part
thereof or of the Collateral or any part thereof, waive notice of any default by
Borrower, waive notice of any act, omission, or course of dealing by Lender and
waive any other notice to which Pledgor or Borrower might be entitled but for
the within waiver.
6. PAYMENT OF DEBT.
Upon payment in full and cancellation of the debt secured hereby,
Lender shall, upon the request of Pledgor, promptly release the Collateral to
the Pledgor.
7. INTEREST AND INCOME FROM THE COLLATERAL.
Lender shall have no right to any interest or income paid or payable on
the Collateral and all such interest or income shall be the property of and
owned by Pledgor, unless and until an Event of Default has occurred.
8. DISPOSITION OF COLLATERAL. Pledgor recognizes that Lender may be
unable to effect a public sale of any or all the Collateral by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, but may be compelled to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to agree, among
other things, to acquire such securities for their own account for investment
and not with a view to the distribution or sale thereof. Pledgor acknowledges
and agrees that any such private sale may result in prices and other terms less
favorable to the seller than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner.
9. NOTICES.
All notices, statements, requests and demands given to or made upon
Lender, Borrower, or Pledgor in accordance with the provisions of this Pledge
Security Agreement shall be deemed to have been given or made when deposited in
the mail, postage prepaid, or in the case of telegraphic notice, when delivered
to the telegraph company, charges prepaid, addressed as follows:
If to Pledgor:
Rubin Family Irrevocable Stock Trust
25 Highland Boulevard
Dix Hills, New York 11746
Attn: Marjorie Rubin, Co-Trustee
If to Lender:
Tadeo E-Commerce Corp.
5 Hanover Square
New York, NY 10004
Attn: Damon Testaverde, President
<PAGE>
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If to Borrower:
Diplomat Direct Marketing Corporation
414 Alfred Avenue
Teaneck, New Jersey 07666
Attn: Warren Golden, President
or such other person, firm, officer, or address as any party shall for itself
from time to time designate by written notice to the other parties hereto,
provided, however, that notices may be given by telex, telecopier, courier
service, telephone, personal delivery or otherwise, effective the date of such
communication; provided that notices given by such means of communication are
confirmed by mail as aforesaid postmarked within one business day after such
other form of communication. All notices mailed hereunder in the manner required
by this paragraph shall be effective when delivered.
10. GENERAL PROVISIONS.
Each right, power or privilege specified or referred to in this Pledge
Security Agreement is in addition to any other rights, powers and privileges
that Lender may otherwise have or acquire by operation of law, by other contract
or otherwise. No course of dealing in respect of, nor any omission or delay in
the exercise of, any right, power or privilege by Lender shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
further or other exercise thereof, as each right, power or privilege may be
exercised by Lender either independently or concurrently with other rights,
powers and privileges as often and in such order as Lender may deem expedient.
No waiver or consent granted by any party in respect of this Pledge Security
Agreement shall be binding upon that party unless specifically granted in
writing, which writing shall be strictly construed. This Pledge Security
Agreement shall not be altered or modified except by a written agreement
executed by the party(ies) to be charged by such amendment. This Pledge Security
Agreement shall bind Pledgor, Borrower, Lender and their respective successors
and assigns. The provisions of this Pledge Security Agreement, and the
respective rights and duties of Borrower, Pledgor and Lender hereunder shall be
governed by and construed in accordance with the laws of the State of New York.
11. FURTHER ASSURANCES. Pledgor agrees that at any time and from time
to time upon the written request of Lender, Pledgor and/or Borrower will execute
and deliver such financing statements, assignments and further documents and do
such further acts and things as Lender may reasonably request in order to
establish, perfect and maintain a valid security interest in the Collateral as
security for the Debt and to effect the purposes of this Agreement.
<PAGE>
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IN WITNESS WHEREOF, Pledgor, Borrower and Lender have executed this
Pledge Security Agreement as of the date first above written.
PLEDGOR:
RUBIN FAMILY IRREVOCABLE STOCK TRUST
By: /S/ MAJORIE RUBIN
Marjorie Rubin, Trustee
By: /S/ ROBERT SCHULMAN
Robert Schulman, Trustee
AGREED AND ACCEPTED:
LENDER: BORROWER:
TADEO E-COMMERCE CORP. DIPLOMAT DIRECT MARKETING
CORPORATION
By: /S/ DAMON TESTAVERDE By: /S/ WARREN GOLDEN
Name: Damon Testaverde Warren Golden, President
Title: President
<PAGE>
EXHIBIT A
IDENTIFICATION OF COLLATERAL:
NUMBER OF SHARES
NAME OF COMPANY OF COMMON STOCK
TADEO HOLDINGS, INC. 300,000
