SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 23, 1999
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EMARKETPLACE, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-14731 33-0558415
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(STATE OR OTHER (COMMISSION (IRS EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
FORMATION)
255 WEST JULIAN STREET, SUITE 100, SAN JOSE, CA 95110
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (408) 295-6500
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(FORMER NAME OR FORMER ADDRESS, IF CHANGES SINCE LAST REPORT)
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ITEM 2 ACQUISITION OR DISPOSITION OF ASSETS.
On November 23, 1999, eMarketplace, Inc. (the "Company") and its wholly
owned subsidiary, TopTeam, Inc. ("TopTeam"), closed on the acquisition of six
Internet consulting companies (the "Interactive Architects"). In connection with
the acquisition of the Interactive Architects, the Company issued a total of
911,957 shares of its common stock in exchange for shares of common stock of
each of the Interactive Architects. Concurrently therewith, (i) the Company
contributed its newly purchased shares of the Interactive Architects to TopTeam
in exchange for TopTeam's issuance of 3,200,000 shares of its common stock, and
(ii) the stockholders of the Interactive Architects contributed all of the
remaining outstanding shares of the Interactive Architects (the shares not
purchased by the Company) to TopTeam in exchange for the issuance of 3,384,073
shares of TopTeam common stock.
In connection with the acquisition of the Interactive Architects, the
Company loaned TopTeam $1 million in exchange for which TopTeam issued to the
Company a promissory note in the aggregate principal amount of $1 million. The
note bears interest at a rate of seven percent (7%) per annum (the "Note").
Interest payments are due and payable monthly and the principal amount
outstanding is due and payable on November 22, 2001. TopTeam is required to
prepay the Note in full in the event that TopTeam consummates an initial public
offering of its common stock which generates gross proceeds of not less than $25
million. As consideration for the issuance of the Note, the Company received
250,000 shares of TopTeam Common Stock. In addition, the Company purchased
250,000 shares of TopTeam Series A Convertible Preferred Stock for the total
amount of $1 million.
As a result of these transactions, (a) the Company presently owns (i)
3,450,100 shares of TopTeam common stock (50.5% of the total number of shares of
TopTeam common stock outstanding), (ii) 250,000 shares TopTeam Series A
Convertible Preferred Stock, and (iii) rights to purchase 3,200,000 shares of
TopTeam common stock at a purchase price of $7.50 per share, and (b) TopTeam
owns all of the outstanding shares of capital stock of each of the Interactive
Architects.
THE SERIES A CONVERTIBLE PREFERRED STOCK
DESIGNATION AND AMOUNT; RANK. The shares of such series are designated as Series
A Convertible Preferred Stock (the "Series A Preferred Stock") and the number of
shares constituting such series is 250,000, all of which have been issued to the
Company. The Series A Preferred Stock has a par value of $0.001 per share and
ranks senior to TopTeam's common stock.
DIVIDENDS. Holders of Series A Preferred Stock are entitled to receive cash
dividends of $0.24 per share per annum payable on each February 1, May 1, August
1 and November 1, beginning February 1, 2000; provided however, that the
dividends on the Series A Preferred Stock may not be less than the amount paid
on any outstanding shares of common stock.
LIQUIDATION PREFERENCE. In the event of any liquidation, dissolution or winding
up of the affairs of TopTeam, each share of Series A Preferred Stock shall have
a liquidation preference of $4.00 per share plus unpaid dividends that have
accrued to the date of payment, if any. REDEMPTION. Commencing on December 31,
2000, the holders of a majority of the shares of Series A Preferred Stock
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outstanding may require that TopTeam redeem the shares of Series A Preferred
Stock held by them at a price equal to $4.00 per share plus accrued and unpaid
dividends.
CONVERSION. Each share of Series A Preferred Stock may be converted by a holder
into one share of TopTeam common stock at any time on or prior to December 25,
2000, subject to certain anit-dilution adjustments. Each share of Series A
Preferred Stock will be automatically converted into shares of common stock upon
the earlier of (i) TopTeam's sale of common stock generating gross proceeds of
not less than $25 million, (ii) the sale of all of substantially all of the
assets or capital stock of TopTeam for aggregate consideration of at least $25
million, or (iii) the date specified by written consent or agreement of the
holders of a majority of the then outstanding shares of Series A Preferred
Stock.
VOTING RIGHTS. Each holder of Series A Preferred Stock shall be entitled to vote
for each share of common stock into which the Series A Stock could be converted.
So long as not less than 20 percent of the Series A Preferred Stock originally
issued is still outstanding, TopTeam may not without first obtaining the
approval (by vote or written consent, as provided by law) of the holders of at
least a majority of the then outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of the shares
of Series A Preferred Stock so as to affect adversely the shares of Series A
Preferred Stock;
(b) increase or decrease (other than by redemption or conversion) the
total number of authorized shares of Series A Preferred Stock;
(c) authorize or issue, or obligate itself to issue, any other equity
security, including any other security convertible into or exercisable for any
equity security having a preference over, or being on a parity with, the Series
A Preferred Stock with respect to voting, dividends or upon liquidation; or
(d) amend the TopTeam's Certificate of Incorporation, bylaws or
Certificate of Designation with respect to the Series A Preferred Stock.
The following is a brief description of the acquisition transactions
involving each of the Interactive Architects.
ACQUISITION OF FULL MOON INTERACTIVE GROUP, INC.
As of November 5,1999, a Stock Purchase and Contribution Agreement was
executed among the Company , TopTeam, Full Moon Interactive Group, Inc. ("Full
Moon") and the Sellers identified therein, pursuant to which on November 23,
1999 (i) the Company acquired 520,740 shares of common stock of Full Moon (the "
Full Moon Shares") in exchange for its issuance of 333,274 shares of the
Company's common stock, (ii) TopTeam acquired 520,740 shares of common stock of
Full Moon in exchange for its issuance of 1,099,803 shares of TopTeam, and (iii)
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the Company contributed the Full Moon Shares to TopTeam in exchange for
1,099,803 shares of Common Stock of TopTeam. As a result, Full Moon became a
wholly owned subsidiary of TopTeam; provided however, that certain employees of
Full Moon hold options exercisable for Full Moon common stock. The Company and
TopTeam anticipate exchanging in the near future 98,726 shares of Company common
stock and 300,197 shares of TopTeam common stock for the shares of Full Moon
common stock issuable upon the exercise of such options.
ACQUISITION OF ORRELL COMMUNICATIONS, INC.
As of November 10,1999, a Stock Purchase and Contribution Agreement was
executed among the Company , TopTeam, Orrell Communications, Inc. ("Orrell
Communications ") and the Sellers identified therein, pursuant to which on
November 23, 1999 (i) the Company acquired 50,000 shares of common stock of
Orrell Communications (the " Orrell Shares") in exchange for its issuance of
75,000 shares of the Company's common stock, (ii) TopTeam acquired 50,000 shares
of common stock of Orrell Communications in exchange for its issuance of 300,000
shares of TopTeam, and (iii) the Company contributed the Orrell Shares to
TopTeam in exchange for 300,000 shares of Common Stock of TopTeam. As a result,
Orrell Communications became a wholly owned subsidiary of TopTeam.
ACQUISITION OF DEVRIES DATA SYSTEMS, INC.
As of November 10,1999, a Stock Purchase and Contribution Agreement was
executed among the Company , TopTeam, DeVries Data Systems, Inc. ("DeVries ")
and the Sellers identified therein, pursuant to which on November 23, 1999 (i)
the Company acquired 2,700,000 shares of common stock of DeVries (the " DeVries
Shares") in exchange for its issuance of 265,683 shares of the Company's common
stock, (ii) TopTeam acquired 330,000 shares of common stock of DeVries in
exchange for its issuance of 974,170 shares of TopTeam, and (iii) the Company
contributed the DeVries Shares to TopTeam in exchange for 774,170 shares of
Common Stock of TopTeam. As a result, DeVries became a wholly owned subsidiary
of TopTeam; provided however, that certain employees of DeVries hold options
exercisable for DeVries common stock. The Company and TopTeam anticipate
exchanging in the near future 34,317 shares of Company common stock and 125,830
shares of TopTeam common stock for the shares of DeVries common stock issuable
upon the exercise of such options.
ACQUISITION OF MUCCINO DESIGN GROUP, INC.
As of November 10,1999, a Stock Purchase and Contribution Agreement was
executed among the Company , TopTeam, Muccino Design Group, Inc. ("Muccino ")
and the Sellers identified therein, pursuant to which on November 23, 1999 (i)
the Company acquired 3,613 shares of common stock of Muccino (the " Muccino
Shares") in exchange for its issuance of 100,000 shares of the Company's common
stock, (ii) TopTeam acquired 5,419 shares of common stock of Muccino in exchange
for its issuance of 480,000 shares of TopTeam, and (iii) the Company contributed
the Muccino Shares to TopTeam in exchange for 320,000 shares of Common Stock of
TopTeam. As a result, Muccino became a wholly owned subsidiary of TopTeam.
ACQUISITION OF IMAGE NETWORK, INC.
As of November 9,1999, a Stock Purchase and Contribution Agreement was
executed among the Company , TopTeam, Image Network, Inc.("Image Network") and
the Sellers identified therein, pursuant to which on November 23, 1999 (i) the
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Company acquired 40 shares of common stock of Image Network (the " Image Network
Shares") in exchange for its issuance of 100,000 shares of the Company's common
stock, (ii) TopTeam acquired 60 shares of common stock of Image Network in
exchange for its issuance of 420,000 shares of common stock of TopTeam, and
(iii) the Company contributed the Image Network Shares to TopTeam in exchange
for 280,000 shares of Common Stock of TopTeam. As a result, Image Network became
a wholly owned subsidiary of TopTeam.
ACQUISITION OF ONCOURSE NETWORK, INC.
As of November 19,1999, a Stock Purchase and Contribution Agreement was
executed among the Company , TopTeam, OnCourse Network, Inc. ("OnCourse ") and
the Sellers identified therein, pursuant to which on November 23, 1999 (i) the
Company acquired 238,000 shares of common stock of OnCourse (the " OnCourse
Shares") in exchange for its issuance of 38,000 shares of the Company's common
stock, (ii) TopTeam acquired 238,000 shares of common stock of OnCourse in
exchange for its issuance of 110,000 shares of TopTeam, and (iii) the Company
contributed the OnCourse Shares to TopTeam in exchange for 110,000 shares of
Common Stock of TopTeam. As a result, OnCourse became a wholly owned subsidiary
of TopTeam.
ITEM 5. OTHER EVENTS.
As of November 23, 1999, TopTeam entered into an employment agreement
with Fred H. Walti, pursuant to which Mr. Walti has agreed to serve as TopTeam's
President and Chief Executive Officer for a period of five (5) years. Mr.
Walti's base salary will be at a rate of $170,000 per annum and he is entitled
to receive an annual cash bonus of up to 50% of his then current base salary
upon the achievement of certain performance targets established by TopTeam's
Board of Directors. Mr. Walti has also received options to purchase a total of
250,000 shares of TopTeam common stock at an exercise price of $7.50 per share,
50,000 shares of which vest immediately and the remainder of which vest in four
equal amounts on November 23, 2000, 2001, 2002 and 2003. The employment
agreement with Mr. Wilson contains other customary provisions including
severance arrangements and confidentiality provisions.
As of November 23, 1999, TopTeam entered into an employment agreement
with Robert Wilson, pursuant to which Mr. Wilson has agreed to serve as
TopTeam's Chief Financial Officer for a period of five (5) years. Mr. Wilson's
base salary will be at a rate of $125,000 per annum and he is entitled to
receive an annual cash bonus of up to 25% of his then current base salary upon
the achievement of certain performance targets established by TopTeam's Board of
Directors. Mr. Wilson has also received options to purchase a total of 125,000
shares of TopTeam common stock at an exercise price of $7.50 per share, 25,000
shares of which vest immediately and the remainder of which vest in four equal
amounts on November 23, 2000, 2001, 2002 and 2003. The employment agreement with
Mr. Wilson contains other customary provisions including severance arrangements
and confidentiality provisions.
On November 30, 1999, the Company closed its private offering of common
stock which had commenced in July 1999. Pursuant to the offering, the Company
issued a total of 826,225 shares of common stock raising gross proceeds of
approximately $3,200,000.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
The Registrant intends to file required financial statement disclosure
within 60 days following the date on which this Report on Form 8-K is required
to be filed.
(c) EXHIBITS.
(i) Stock Purchase and Contribution Agreement dated as of November 5, 1999, by
and among the Company, TopTeam, Full Moon Interactive Group, Inc. and the
Sellers identified therein.
(ii) Stock Purchase and Contribution Agreement dated as of November 10, 1999, by
and among the Company, TopTeam, Orrell Communications, Inc. and the Sellers
identified therein.
(iii) Stock Purchase and Contribution Agreement dated as of November 10, 1999,
by and among the Company, TopTeam, DeVries Data Systems, Inc. and the Sellers
identified therein.
(iv) Stock Purchase and Contribution Agreement dated as of November 10, 1999, by
and among the Company, TopTeam, Muccino Design Group, Inc. and the Sellers
identified therein.
(v) Stock Purchase and Contribution Agreement dated as of November 9, 1999, by
and among the Company, TopTeam, Image Network, Inc. and the Sellers identified
therein.
(vi) Stock Purchase and Contribution Agreement dated as of November 19, 1999, by
and among the Company, TopTeam, OnCourse Network, Inc. and Kent Rhodes.
(vii) Certificate of Designation with respect to the Series A Convertible
Preferred Stock of TopTeam.
(viii) Promissory Note issued by the Company dated November 23, 1999 in the
principal amount of $1,000,000.
(ix) Employment Agreement between TopTeam and Fred H. Walti, II, dated as of
November 23, 1999.
(x) Employment Agreement between TopTeam and Robert Wilson, dated as of November
23, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly authorized and caused the undersigned to sign this
Report on the Registrant's behalf.
EMARKETPLACE, INC.
By: /s/ L. WAYNE KILEY
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Name: L. Wayne Kiley
Title: Chief Executive Officer and President
Dated: December 8, 1999
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Execution Copy
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.
FULL MOON INTERACTIVE GROUP, INC.
AND
THE SELLERS IDENTIFIED HEREIN
Dated as of November 5, 1999
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TABLE OF CONTENTS
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ARTICLE I THE TRANSACTIONS AND RELATED MATTERS...................................................................1
1.1 Purchase and Exchange..................................................................................1
1.2 Contribution...........................................................................................1
1.3 Stock Certificates.....................................................................................2
1.4 Stock Option and Other Plans...........................................................................2
1.5 Tax Consequences.......................................................................................3
1.6 Closing ..............................................................................................3
1.7 Certificate of Incorporation of Top Team...............................................................3
1.8 By-Laws of Top Team....................................................................................3
1.9 Directors and Officers of Top Team.....................................................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY................................................................................3
2.1 Authorization..........................................................................................3
2.2 Ownership of Stock.....................................................................................4
2.3 Consents and Approvals.................................................................................4
2.4 Securities Matters.....................................................................................4
2.5 Brokerage Fees.........................................................................................5
2.6 Disclosure.............................................................................................5
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS.........................................................................5
3.1 Due Organization, Good Standing and Corporate Power....................................................5
3.2 Authorization and Validity of Agreement................................................................6
3.3 Capitalization.........................................................................................6
3.4 Consents and Approvals; No Violations..................................................................7
3.5 Company Reports and Financial Statements...............................................................8
3.6 Absence of Certain Changes.............................................................................8
3.7 Minute Books...........................................................................................8
3.8 Title to Properties; Encumbrances......................................................................8
3.9 Compliance with Laws...................................................................................9
3.10 Litigation.............................................................................................9
3.11 Employee Benefit Plans.................................................................................9
3.12 Employment Relations and Agreements...................................................................11
3.13 Client Relations......................................................................................11
3.14 Taxes .............................................................................................11
3.15 Liabilities...........................................................................................12
3.16 Intellectual Properties...............................................................................12
3.17 Material Contracts and Relationships..................................................................13
3.18 Absence of Certain Business Practices.................................................................14
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3.19 Transactions with Related Parties.....................................................................15
3.20 Broker's or Finder's Fee..............................................................................15
3.21 Accounts Receivable...................................................................................15
3.22 Inventories...........................................................................................15
3.23 Insurance.............................................................................................16
3.24 No Powers of Attorney or Suretyships..................................................................16
3.25 Banking Facilities....................................................................................16
3.26 Environmental Liabilities.............................................................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM..................................................................................18
4.1 Due Organization; Good Standing and Corporate Power...................................................18
4.2 Authorization and Validity of Agreement...............................................................18
4.3 Consents and Approvals; No Violations.................................................................18
4.4 EMKT Reports and Financial Statements.................................................................19
4.5 Capitalization........................................................................................19
4.6 Absence of Certain Changes............................................................................20
4.7 Compliance with Laws..................................................................................20
4.8 Liabilities...........................................................................................20
4.9 Litigation............................................................................................20
ARTICLE V ACTIONS PRIOR TO CLOSING DATE.........................................................................20
5.1 Access to Information Concerning Properties and Records...............................................20
5.2 Conduct of the Business of the Company Pending the Closing Date.......................................21
5.3 Best Efforts..........................................................................................22
5.4 No Solicitation of Other Offers.......................................................................22
5.5 Credit Facility.......................................................................................22
5.6 EMKT Contribution to Top Team Capital.................................................................23
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS..................................................................23
6.1 Conditions Precedent to Obligations of EMKT, Top Team and the Company and
the Sellers..................................................................................23
6.2 Conditions Precedent to Obligations of EMKT and Top Team..............................................23
6.3 Conditions Precedent to Obligations of the Company and the Sellers....................................24
ARTICLE VII TERMINATION AND ABANDONMENT...........................................................................25
7.1 Termination...........................................................................................25
7.2 Effect of Termination.................................................................................25
ARTICLE VIII INDEMNIFICATION.......................................................................................26
8.1 Indemnification by Sellers............................................................................26
8.2 Indemnification by Sellers Jointly and Severally......................................................26
8.3 Indemnification by EMKT and Top Team..................................................................27
8.4 Indemnification by Sellers for Tax Liabilities........................................................27
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8.5 Claims for Indemnification............................................................................28
8.6 Defense Claims........................................................................................28
8.7 Manner of Indemnification.............................................................................29
8.8 Limitations on Indemnification........................................................................29
ARTICLE IX MISCELLANEOUS.........................................................................................29
9.1 Fees and Expenses.....................................................................................29
9.2 Representations and Warranties........................................................................29
9.3 Extension; Waiver.....................................................................................30
9.4 Public Announcements..................................................................................30
9.5 Notices .............................................................................................30
9.6 Entire Agreement......................................................................................31
9.7 Binding Effect; Benefit; Assignment...................................................................31
9.8 Amendment and Modification............................................................................32
9.9 Further Actions.......................................................................................32
9.10 Headings .............................................................................................32
9.11 Counterparts..........................................................................................32
9.12 Applicable Law........................................................................................32
9.13 Severability..........................................................................................32
9.14 "Person" Defined......................................................................................32
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT, dated as of November 5,
1999 (this "AGREEMENT"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"), FULL
MOON INTERACTIVE GROUP, INC., a California corporation (the "COMPANY"), and each
of the other persons identified under the heading "Sellers" on the signature
pages of this Agreement (together, the "SELLERS"), and is made with reference to
the following facts:
A. The Sellers own all of all of the issued and outstanding shares of
common stock ("COMPANY STOCK") of the Company.
B. EMKT wishes to acquire from the Sellers and the Optionees referred
to below an aggregate of 642,500 shares of Company Stock in exchange for an
aggregate of 432,000 shares of EMKT common stock, par value $0.001 per share
("EMKT STOCK"). Immediately after such exchange, EMKT, the Sellers and the
Optionees will contribute all of their Company Stock to Top Team in exchange for
an aggregate of 2,800,000 shares of common stock, par value $0.001 per share, of
Top Team ("TOP TEAM STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE AND EXCHANGE. On the Closing Date (as defined in Section
1.6), each of the Sellers shall sell, and on the Option Closing Date (as defined
in Section 1.6) the Sellers shall cause each of the Optionees to sell, to EMKT
that number of shares of Company Stock set forth opposite such Seller's or
Optionee's name on Schedule 1.1 (the "PURCHASED COMPANY STOCK"), constituting in
the aggregate 50 percent of the number of outstanding shares of Company Stock
(on a fully diluted basis)(collectively, the "PURCHASE"), for a consideration
equal to that number of EMKT shares set forth opposite such Seller's or
Optionee's name on Schedule 1.1 (the "PURCHASE CONSIDERATION"). The Purchase
Consideration shall be payable on January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the purchase
of the Purchased Company Stock as contemplated by Section 1.1, (i) EMKT shall
contribute the Purchased Company Stock to Top Team in exchange for 1,400,000
shares of Top Team Stock and (ii) each Seller shall contribute to Top Team all
of his, her or its remaining Company Stock constituting (with the Optionee's
remaining stock) in the aggregate the remaining 50 percent of the outstanding
shares of Company Stock (on a fully diluted basis) in exchange for that number
of shares of Top Team Stock set forth opposite such Seller's name on Schedule
1.1. On the Option Closing Date, each Optionee shall contribute to Top Team all
of his, her or its remaining Company Stock . Such exchanges are
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referred to collectively herein as the "EXCHANGE." The Sellers and the Optionees
will receive an aggregate of shares of 1,400,000 shares of Top Team Stock. Such
shares of Company Stock contributed to Top Team are referred to herein as the
"CONTRIBUTED STOCK." Such shares of Top Team Stock received by the Sellers and
EMKT in exchange for the Contributed Stock are referred to herein as the
"EXCHANGE CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller shall
deliver to EMKT, and on the Option Closing Date, each Optionee shall deliver to
EMKT, certificates evidencing their respective shares of Contributed Stock,
which shall be Duly Endorsed. The term "DULY ENDORSED" means duly endorsed by
the person or persons in whose name a stock certificate is registered in blank
or accompanied by a duly executed stock assignment separate from such
certificate. Top Team will deliver to each Seller and EMKT on the Closing Date
and to each Optionee on the Option Closing Date duly issued and authenticated
certificates evidencing the Exchange Consideration issuable to such person
pursuant to Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to the Option Closing Date,
accelerate the vesting or exercisability of all outstanding employee stock
options to purchase Company Stock, whether set forth in any stock option plan or
plans of the Company ("COMPANY STOCK OPTION PLANS"), in an option agreement with
the optionee or otherwise. On the Option Closing Date, each such option (each, a
"COMPANY OPTION") granted by the Company to purchase shares of Company Stock
that is outstanding and unexercised immediately prior to Option Closing Date
shall be deemed to be exercised, and the optionees thereunder (the "OPTIONEES")
shall be deemed to be Sellers for purposes of Articles I and II of this
Agreement. As required by Section 6.2(e) hereof, the Sellers shall cause each
Optionee to deliver prior to the Closing a joinder agreement whereby each such
Optionee agrees to be bound by the provisions of Articles I and II of this
Agreement (other than the first sentence of Section 2.4(b)) as if he, she or it
were a Seller hereunder (each, a "JOINDER AGREEMENT"). In addition, the Company
shall cause the Common Stock Warrant Agreements, each dated November 1, 1999
issued to Grand Pacific Financing Corporation and Grand Pacific Finance
Corporation (the "GP WARRANTS") to be exercised prior to or concurrent with the
Closing.
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary, except for the GP Warrants (collectively with the
Company Stock Option Plans, the "COMPANY STOCK INCENTIVE PLANS") shall terminate
as of the Closing Date. The Company will take all steps to ensure that neither
the Company nor any of its Subsidiaries is or will be bound by any Company
Options, other options, warrants, rights or agreements which would entitle any
Person, other than EMKT, Top Team or either of their Affiliated Parties (as
defined in Section 8.1), to own any capital stock of the Company or any of its
Subsidiaries or to receive any payment in respect thereof. The Company will use
its best efforts to obtain all necessary consents to ensure that after the
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Option Closing Date, the only rights of the holders of Options to purchase
shares of Company Stock in respect of such Options will be to receive the
Purchase Consideration and the Exchange Consideration in cancellation and
settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
Consideration, together with (i) the contributions to be made in connection with
the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution of
EMKT to Top Team referred to in Section 5.5, shall constitute a contribution of
capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock from the Sellers and the exchange by the Sellers and
EMKT of the Contributed Stock for the Exchange Consideration shall take place at
the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Sections 6.1-6.3 are fulfilled or waived
(subject to applicable law) but in no event later than the fifth business day
thereafter, or at such other time and place and on such other date as EMKT, Top
Team and the Company shall mutually agree (the "CLOSING DATE"). The closing (the
"OPTION CLOSING") of the purchase of the Purchased Company Stock from the
Optionees and the exchange by the Optionees and EMKT of the Contributed Stock
for the Exchange Consideration shall take place at the offices of Kaye, Scholer,
Fierman, Hays & Handler, LLP, 1999 Avenue of the Stars, 16th Floor, Los Angeles,
California, as soon as practicable after the last of the conditions set forth in
Section 6.4 are fulfilled or waived (subject to applicable law) but in no event
later than the fifth business day thereafter, or at such other time and place
and on such other date as EMKT, Top Team and the Company shall mutually agree
(the "OPTION CLOSING DATE").
1.7 CERTIFICATE OF INCORPORATION OF TOP TEAM. The Certificate of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM. The By-Laws of Top Team, as in effect as of
the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date, the
directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and such
additional directors as shall be designated by Top Team, each to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of Top Team, until the next annual stockholders' meeting of Top Team and
until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to enter
into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of the
Company Stock set forth below such Seller's name on Schedule 1.1, free and clear
of any liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever. Upon consummation of
the Exchange, Top Team shall be the owner, beneficially and of record, of all of
the outstanding shares of capital stock of the Company, free and clear of any
liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team, except for security interests in favor of the
Company with respect to certain notes issued to the Optionees in connection with
the exercise of their Company Options.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been obtained, made and satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not be
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registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller (other than Pamela Flank) is (i) either an
"accredited investor" as defined in Rule 501(a) promulgated under the Securities
Act or (ii) a "qualified purchaser" within the meaning of Section 25102(n)(2) of
the California Law or (iii) has such knowledge and experience in financial and
business matters that he or she is capable of evaluating the merits and risks of
the Transactions. Such Seller is aware that the Consideration constitutes
"restricted," "letter" or "investment" securities and such Seller by reason of
his business or financial experience has the capacity to protect his own
interest in connection with the Transactions; and
(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without registration under the Securities Act and the California
Law, and any other applicable securities laws, or without an opinion of counsel
satisfactory to EMKT and Top Team that the transaction by which such shares are
proposed to be disposed of is exempt from the Securities Act, the California Law
and any other applicable securities laws, and acknowledges that EMKT and Top
Team will place a legend on the certificates representing such shares
substantially to such effect concerning these restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
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ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule
3.1 sets forth the name, state of incorporation or formation and equity
ownership of the Company in each Subsidiary of the Company. (A "SUBSIDIARY" of a
Person is a corporation, partnership, joint venture, limited liability company
and other entity in which such Person owns all or a majority of the equity
interest or is required to be consolidated on such Person's balance sheet
pursuant to GAAP.) The Company and each of its Subsidiaries is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and each such corporation has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of operations,
condition (financial or otherwise) or prospects (the "CONDITION") of the Company
and its Subsidiaries taken as a whole.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by it of the Transactions, have been duly authorized and approved by its Board
of Directors and no other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation of the Transactions (other than the approval
of this Agreement by the holders of a majority of the outstanding shares of
Company Stock and any other classes of capital stock entitled to vote thereon,
as required by the California General Corporation Law). This Agreement has been
duly executed and delivered by the Company and is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
20,000,000 shares of common stock, constituting the Company Stock, and 5,000,000
shares of preferred stock, (the "PREFERRED STOCK"). As of the date of this
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Agreement, (i) 1,041,480 shares of Company Stock are issued and outstanding,
(ii) 243,520 shares of Company Stock are reserved for issuance pursuant to
outstanding Company Options granted under the Company Stock Option Plans and
(iii) no shares of Preferred Stock are issued and outstanding. Except as set
forth on Schedule 3.3, all issued and outstanding shares of Company Stock have
been validly issued and are fully paid and nonassessable, and are not subject
to, nor were they issued in violation of, any preemptive rights. Except as set
forth in this Section 3.3 or on Schedule 3.3, (i) there are no shares of capital
stock of the Company authorized, issued or outstanding and (ii) there are not as
of the date hereof, and on the Closing Date there will not be, any outstanding
or authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or other
commitments, contingent or otherwise, relating to Company Stock or any other
shares of capital stock of the Company, pursuant to which the Company is or may
become obligated to issue shares of Common Stock, any other shares of its
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock of the
Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Except as set forth in
Schedule 3.4, (a) the execution and delivery of this Agreement by the Sellers
and the Company and the consummation by the Sellers and the Company of the
Transactions will not: (1) violate any provision of the Amended and Restated of
Incorporation, as amended, or By-Laws of the Company or any of its Subsidiaries;
(2) violate any statute, ordinance, rule, regulation, order or decree of any
court or of any governmental or regulatory body, agency or authority applicable
to such Seller or the Company or any of its Subsidiaries or by which any of
their respective properties or assets may be bound; (3) require any filing with,
or permit, consent or approval of, or the giving of any notice to, any
governmental or regulatory body, agency or authority, except with respect to the
filing of a Form D pursuant to Rule 503 of Regulation D under the Securities Act
and any corresponding state "blue sky filings"; or (4) result in a violation or
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breach of, conflict with, constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation,
payment or acceleration) under, or result in the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets of the
Company or any of its Subsidiaries under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, license, franchise, permit,
agreement, lease, franchise agreement or other instrument or obligation to which
the Company or any of its Subsidiaries is a party, or by which it or any of
their respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
(b) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Amended and Restated Articles of Incorporation or ByLaws,
(ii) any note, bond, mortgage, indenture, license, agreement, contract, lease,
commitment or other obligation to which the Company or any of its Subsidiaries
is a party or by which they or any of their properties or assets may be bound,
or (iii) any order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries, except in the case of
clauses (i) and (ii) above for defaults or evaluations, which would not have a
material adverse effect on the Condition of the Company and the Subsidiaries
taken as a whole.
3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheet as of the end of the fiscal year ended July 31, 1999 and the
consolidated statement of operations, consolidated statement of stockholders'
equity and consolidated statement of cash flow for the fiscal years ended July
31, 1999 in the form attached as an exhibit to Schedule 3.5 were prepared in
accordance with generally accepted accounting principles (as in effect in the
United States from time to time) applied on a consistent basis ("GAAP"), except
as may be indicated therein or in the notes or schedules thereto, and, in the
case of such interim statements, subject to normal year-end adjustments, and as
may be indicated in the notes thereto, and fairly present the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and the results of their operations and cash flows for the period
then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since July 31, 1999 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
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3.7 MINUTE BOOKS. The minute books of the Company and its
Subsidiaries, as previously made available to EMKT and its representatives,
contain accurate records of all meetings of and corporate actions or written
consents by the shareholders and Boards of Directors of the Company and its
Subsidiaries since the date of incorporation of the Company.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Except as set forth on
Schedule 3.8, the Company and each of its Subsidiaries has good, valid and
marketable title, or a valid leasehold interest in, to (i) all its material
tangible properties and assets (real and personal), including, without
limitation, all the properties and assets reflected in the consolidated balance
sheet as of July 31, 1999 delivered pursuant to Section 3.5 (the "BALANCE
SHEET") except as indicated in the notes thereto and except for properties and
assets reflected in the Balance Sheet that have been sold or otherwise disposed
of in the ordinary course of business, and (ii) all the tangible properties and
assets purchased by the Company and any of its Subsidiaries since the Balance
Sheet Date except for such properties and assets which have been sold or
otherwise disposed of in the ordinary course of business; in each case subject
to no encumbrance, lien, charge or other restriction of any kind or character,
except for (1) liens reflected in the Balance Sheet, (2) liens consisting of
zoning or planning restrictions, easements, permits and other restrictions or
limitations on the use of real property or irregularities in title thereto which
do not materially detract from the value of, or impair the use of, such property
by the Company or any of its Subsidiaries in the operation of its respective
business and (3) liens for current taxes, assessments or governmental charges or
levies on property not yet due and delinquent.
3.9 COMPLIANCE WITH LAWS. To the best knowledge of the Company and
the Sellers, the Company and each of its Subsidiaries are in compliance with all
applicable laws, regulations, orders, judgments and decrees except where the
failure to so comply would not have a material adverse effect on the Condition
of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge of the
Company any investigation by) any governmental or other instrumentality or
agency, pending, or, to the best knowledge of the Company, threatened, against
or affecting the Company or any of its Subsidiaries, or any of their properties
or rights which could have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole. There are no such suits, actions,
claims, proceedings or investigations pending or, to the best knowledge of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, neither the Company nor any of its Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could have a material adverse effect on the Condition of the Company and
its Subsidiaries taken as a whole or on the ability of the Company or any
Subsidiary to conduct its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the
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Employee Retirement Income Security Act of 1974, as amended ("ERISA"), whether
or not any such Employee Benefit Plans are otherwise exempt from the provisions
of ERISA, established, maintained or contributed to by the Company or any of its
Subsidiaries (including, for this purpose and for the purpose of all of the
representations in this Section 3.11, all employers (whether or not
incorporated) which by reason of common control are treated together with the
Company as a single employer within the meaning of Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and Top Team.
(d) CERTAIN PLANS. The Company has no Employee Benefit Plans
which are subject to Title IV of ERISA and which are Single Employer Plans (as
defined in Section 4001(a)(15) of ERISA).
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
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qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code and (2) Form 5500
for the most recently completed fiscal year for each Employee Benefit Plan
required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Each of the Company and
its Subsidiaries is in substantial compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice; (ii) no unfair labor practice complaint against the
Company or any of its Subsidiaries is pending before the National Labor
Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage
actually pending or to the best knowledge of the Company and the Sellers
threatened against or involving the Company or any of its Subsidiaries; (iv) no
representation question exists respecting the employees of the Company or any of
its Subsidiaries; (v) no grievance which might have a material adverse effect on
the Condition of the Company and its Subsidiaries as a whole or the conduct of
their respective businesses exists, no arbitration proceeding arising out of or
under any collective bargaining agreement is pending and to the best knowledge
of the Company and the Sellers no claim therefor has been asserted; (vi) no
collective bargaining agreement is currently being negotiated by the Company or
any of its Subsidiaries; and (vii) neither the Company nor any of its
Subsidiaries has experienced any material labor difficulty since the date of
incorporation of the Company. There is not now and to the best knowledge of the
Company and the Sellers, there will not be any change in relations with
employees of the Company or any of its Subsidiaries as a result of the
Transactions that could have a material adverse effect on the Condition of the
Company and its Subsidiaries taken as a whole. Except as disclosed in Schedule
3.12, there exist no employment, consulting, severance or indemnification
agreements between the Company and any director, officer or employee of the
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Company or any agreement that would give any Person the right to receive any
payment from the Company as a result of the Purchase or Exchange.
3.13 CLIENT RELATIONS. There has not been, and to the best knowledge of
the Company, there will not be, any change in relations with franchisees,
customers or clients of the Company or any of its Subsidiaries as a result of
the Transactions that could have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries. Such returns and reports are true,
correct and complete in all material respects and reflect accurately all
liability for Taxes of the Company and its Subsidiaries for the periods covered
thereby. All federal, state, local and foreign Taxes (including interest and
penalties) payable by, or due from, the Company or any of its Subsidiaries have
been fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. The Company has not received
any notice of any issue being raised since the date incorporation of the Company
by any federal, state, local or foreign taxing authority that, if raised with
respect to any other period not so examined, could reasonably be expected to
result in a proposed deficiency for any other period not so examined. No
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. For purposes of this Section 3.14, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including without limitation
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto; and "TAX RETURN" means
any report, return or other information or document required to be supplied to a
taxing authority in connection with taxes.
3.15 LIABILITIES. Neither the Company nor any of its Subsidiaries has
any outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in the Balance Sheet or
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referred to in the footnotes thereto, other than liabilities incurred subsequent
to the Balance Sheet Date in the ordinary course of business not involving
borrowings by the Company. Neither the Company nor any of its Subsidiaries is in
default in respect of the material terms and conditions of any indebtedness or
other agreement.
3.16 INTELLECTUAL PROPERTIES. For purposes of this Section 3.11,
"INTELLECTUAL PROPERTY" means domestic and foreign patents, patent applications,
patent licenses, software licenses, knowhow licenses, trade names, trademarks,
copyrights, unpatented inventions, service marks, trademark registrations and
applications, service mark registrations and applications, copyright
registrations and applications, trade secrets and other confidential proprietary
information. Schedule 3.16 contains an accurate and complete list of all
Intellectual Property which is of material importance to the operation of the
business of the Company or any of its Subsidiaries. Unless otherwise indicated
in Schedule 3.16 the Company (or the Subsidiary indicated) owns the entire
right, title and interest in and to the Intellectual Property listed on Schedule
3.16 used in the operation of its business (including, without limitation, the
exclusive right to use and license the same) and each item constituting part of
the Intellectual Property which is owned by the Company or a Subsidiary and
listed on Schedule 3.16 has been, to the extent indicated in Schedule 3.16, duly
registered with, filed in or issued by, as the case may be, the United States
Patent and Trademark Office or such other government entities, domestic or
foreign, as are indicated in Schedule 3.16 and such registrations, filings and
issuances remain in full force and effect. To the best knowledge of the Company
and the Sellers, except as stated in such Schedule 3.16, there are no pending or
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property. Schedule 3.16 lists all notices or claims
currently pending or received by the Company or any of its Subsidiaries during
the past two years which claim infringement, contributory infringement,
inducement to infringe, misappropriation or breach by the Company or any of its
Subsidiaries of any domestic or foreign patents, patent applications, patent
licenses and know-how licenses, trade names, trademark registrations and
applications, service marks, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
Except as set forth in Schedule 3.16 hereto, there is, to the best knowledge of
the Company, no reasonable basis upon which a claim may be asserted against the
Company or any of its Subsidiaries, for infringement, contributory infringement,
inducement to infringe, misappropriation or breach of any domestic or foreign
patents, patent applications, patent licenses, know-how licenses, trade names,
trademark registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
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(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries, subject as to
enforceability to applicable bankruptcy, insolvency, moratorium and similar laws
affecting creditors' rights generally and to general principals of equity. There
are no material liabilities of the Company or to the best knowledge of the
Company and the Sellers any other party to any Material Contract arising from
any breach or default of any provision thereof and no event has occurred that,
with the passage of time or the giving of notice or both, would constitute a
breach or default by the Company or to the best knowledge of the Company and the
Sellers any other party thereto.
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(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, (ii) supplier (or related group of suppliers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, and (iii) agent (or related group of agents) or representative (or
related group of representatives) who was paid $25,000 or more by the Company
and its Subsidiaries during the last fiscal year, respectively, which lists
itemize the actual dollar amounts.
(e) To the best knowledge of the Company, the Company and each
of its Subsidiaries has maintained and continues to maintain good relations with
its customers, suppliers and agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor any
of its Subsidiaries nor any employee, agent or other Person acting on the
Company's or any of its Subsidiaries' behalf, including, but not limited to, any
Seller, has, directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, competitor or governmental employee or
official (domestic or foreign) (i) that would subject the Company or its any of
its Subsidiaries to any damage or penalty in any civil, criminal or governmental
litigation or proceeding or (ii) that, if not given in the past, would have had
a material adverse effect on the Condition of the Company or any of its
Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since the date of incorporation of the Company and there are no
agreements or understandings now in effect between the Company and any Seller or
Related Party. Schedule 3.19 also (i) states the amounts due from the Company
(or any of its Subsidiaries) to any Seller or Related Party and the amounts due
from any Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since the date of incorporation of the
Company. After the Closing, there will be no obligations or other liabilities
between each of the Company and any of its Subsidiaries, on the one hand, and
any Seller or Related Party, on the other hand, other than pursuant to this
Agreement and the Transactions. "RELATED PARTY" means the Company and each of
its Subsidiaries and Affiliates, including but not limited to each of the
Sellers and any member of the immediate family of any of the Sellers; and
"AFFILIATE" means, in respect of any specified Person, any other Person that,
directly or indirectly, controls, is controlled by, or is under common control
with, such specified Person or if such specified Person bears a familial
relationship with such other Person.
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3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable of the Company as
reflected in the Balance Sheet, to the extent uncollected on the date of this
Agreement, and the accounts receivable reflected on the books of the Company
are, on the basis of existing facts, valid and existing and fully collectible
(except for a reserve of $100,000 and except as the collectibility thereof is
affected by any future bankruptcy, insolvency or similar proceeding with respect
to any account debtor) within one year from the Closing Date, represent monies
due for goods sold and delivered or services rendered, and (subject to the
aforesaid reserve) are subject to no refunds or other adjustments (except
discounts for prompt payment given in the ordinary course of business) and to
the best knowledge of the Company and the Sellers no defenses, rights of setoff,
assignments, restrictions, encumbrances or conditions enforceable by third
parties on or affecting any thereof. The Company has never factored any of its
accounts receivable.
3.22 INVENTORIES. The Company has no inventories.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies since the date of
incorporation of the Company (other than worker's compensation claims). In the
reasonable business judgment of the Company and the Sellers, the Company
(together with its Subsidiaries) has adequate liability and other insurance
policies insuring it against the risks of loss arising out of or related to its
assets and business. Without limitation, as to the tangible real and personal
property of the Company and its Subsidiaries, such insurance is, in the
reasonable business judgment of the Company and the Sellers, adequate to cover
the full replacement cost, less deductible amounts, of such tangible real and
personal property. Schedule 3.23 is a complete and correct list of all insurance
currently in place and accurately sets forth the coverages, deductible amounts,
carriers and expiration dates thereof. Schedule 3.23 is a complete and correct
list of all insurance with respect to which the policy period has expired, but
for which certain of the coverage years are still subject to audit or
retrospective adjustment by the carrier, and accurately sets forth such coverage
years and the coverages, deductible amounts, carriers and expiration dates
thereof. There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance to the Company or any of
its Subsidiaries or by any board of or by any governmental authority exercising
similar functions that require or recommend any changes in the conduct of the
business of the Company or its Subsidiaries or any repairs or other work to be
done on or with respect to any of the Company's or any of its Subsidiaries'
assets. Except as set forth on Schedule 3.23, no notice or other communication
has been received by the Company or its Subsidiaries from any insurance company
since the date of incorporation of the Company canceling or materially amending
or materially increasing the annual or other premiums payable under any of its
insurance policies, and, to the best knowledge of the Company and the Sellers,
no such cancellation, amendment or increase of premiums is threatened.
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3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, neither the
Company nor any of its Subsidiaries has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
on, under, at, from, or in any way affecting, any of their properties or assets,
or otherwise, in any manner which at the time of the action in question violated
any Environmental Law, governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and to the best knowledge of the Company and the Sellers, no prior owner of such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation AcT ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
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(b) To the best knowledge of the Company and the Sellers (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
Subsidiaries, and (ii) no claims have been made against the Company or any of
its Subsidiaries since the date of incorporation of the Company and no presently
outstanding citations or notices have been issued against the Company or any of
its Subsidiaries, where such could reasonably be expected to have a materially
adverse effect on the Condition of the Company or any of its Subsidiaries, which
in either case have been or are imposed by reason of or based upon any provision
of any Environmental Law, including, without limitation, any such obligations or
liabilities relating to or arising out of or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any Hazardous Materials by the Company or any of
its Subsidiaries, or any of their employees, agents, representatives or
predecessors in interest in connection with or in any way arising from or
relating to the Company or any of its Subsidiaries or any of their respective
properties, or relating to or arising from or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
or under any of the real properties owned or used by the Company or any of its
Subsidiaries or any other location where such could have a materially adverse
effect on the business or condition (financial or otherwise) of the Company (or
any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. The Company
(together with its consolidated Subsidiaries) owns or leases all of the
machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property (collectively, the "PERSONAL PROPERTY")
used by or relating to the Company or its Subsidiaries. All such Personal
Property is in good operating condition, except for reasonable wear and tear,
and sufficient to carry on the business of the Company and its Subsidiaries in
the normal course as it is presently conducted and is free from defects, whether
patent or latent. Except as set forth in Schedule 3.27, it is not necessary for
the Company or any of its Subsidiaries to acquire or obtain the use of any
additional personal property to carry on its business as presently and
foreseeably to be conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted or proposed to be conducted.
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4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and general equitable principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of EMKT or Top Team; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any governmental
or regulatory body, agency or authority applicable to EMKT or Top Team or by
which either of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
EMKT, Top Team or any of their Subsidiaries under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, franchise,
permit, agreement, lease or other instrument or obligation to which EMKT or Top
Team or any of their Subsidiaries is a party, or by which they or their
respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations, conditions
(financial or otherwise) or prospects of EMKT and its Subsidiaries taken as a
whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Convertible
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Preferred Stock, par value $0.001 per share ("PREFERRED STOCK"). As of the date
of this Agreement 100 shares of Top Team Stock and no shares of Preferred Stock
have been issued, and options to purchase 2,200,000 shares of Top Team Stock are
reserved for issuance pursuant to options that have been or are to be granted
under Top Team stock incentive plans. Except as set forth on Schedule 4.5, in
Section 5.5 and in this Section 4.5, there are not as of the date hereof, and as
of the Closing Date there will not be, any outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to any other shares of capital stock of Top
Team, pursuant to which Top Team is or may become obligated to issue shares of
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock of Top
Team. Top Team and EMKT have entered into letters of intent or agreements to
acquire five other companies in the interactive architecture business identified
on Schedule 4.5 (together with the Transactions, the "ROLL-UP"). Schedule 4.5
sets forth the PRO FORMA capitalization of Top Team following the Roll-Up and
the contribution by EMKT to the capital of Top Team of certain property, as
described in Section 5.5.
4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
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proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, each of the
Company and EMKT shall, and shall cause each of its Subsidiaries to, upon
reasonable notice, afford the other, and their respective counsel, accountants
and other authorized representatives, full access during normal business hours
to the properties, books and records of the Company and its Subsidiaries or EMKT
and its Subsidiaries (as applicable) in order that they may have the opportunity
to make such investigations as they shall desire of the affairs thereof; such
investigation shall not, however, affect the representations and warranties made
by the Company or EMKT in this Agreement. The Company acknowledges and agrees
that Top Team's auditors will be performing an audit of the Company's financial
statements (the "AUDIT"), and will provide all information and documents and
cooperate in any reasonable way so as to permit the Audit to be completed
promptly. The Company agrees to cause its officers and employees to furnish such
additional financial and operating data and other information and respond to
such inquiries as EMKT and Top Team shall from time to time reasonably request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved in writing by EMKT, during the period commencing on the
date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business and will use their commercially reasonable best efforts to preserve
intact their respective business organization, keep available the services of
their officers and employees and maintain satisfactory relationships with
licensers, suppliers, distributors, clients and others having business
relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Amended and Restated Articles of
Incorporation or By-Laws (or comparable governing documents); (ii) issue or sell
any shares of its capital stock (other than in connection with the exercise of
Company Options outstanding on the date hereof) or any of its other securities,
or issue any securities convertible into, or options, warrants or rights to
purchase or subscribe to, or enter into any arrangement or contract with respect
to the issuance or sale of, any shares of its capital stock or any of its other
securities, or make any other changes in its capital structure; (iii) declare,
pay or make any dividend or other distribution or payment with respect to, or
split, redeem or reclassify, any shares of its capital stock; (iv) enter into
any contract or commitment, except for contracts in the ordinary course of
business, including without limitation, any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
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securities or release or relinquish any material contract rights; (v) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices; (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries and employees in
the ordinary course of business and not to exceed $25,000 in the aggregate
outstanding at any time; (viii) authorize capital expenditures in excess of the
amount currently budgeted therefor; (ix) permit any insurance policy naming the
Company or any Subsidiary as a beneficiary or a loss payee to be cancelled or
terminated other than in the ordinary course of business; (x) amend any employee
or nonemployee benefit plan or program, employment agreement, license agreement
or retirement agreement, or pay any bonus or contingent compensation, except in
each case in the ordinary course of business consistent with past practice prior
to the date of this Agreement; (xi) agree, in writing or otherwise, to take any
of the foregoing actions; or (xii) agree to the settlement of any litigation;
(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective commercially reasonable best efforts to take, or cause to be taken,
all appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions, including, without limitation, their respective
commercially reasonable best efforts to obtain, prior to the Closing Date, all
licenses, permits, consents, approvals, authorizations, qualifications and
orders of governmental authorities and parties to contracts with the Company and
its Subsidiaries as are necessary for consummation of the Transactions and to
fulfill the conditions to the Transactions; provided, however, that no loan
agreement or contract for borrowed money shall be repaid except as currently
required by its terms, in whole or in part, and no contract shall be amended to
increase the amount payable thereunder or otherwise to be more burdensome to the
Company or any of its Subsidiaries in order to obtain any such consent, approval
or authorization without first obtaining the written approval of EMKT and Top
Team.
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5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly communicate to EMKT and
Top Team the terms of any proposal or inquiry that it may receive in respect of
any such transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with the Company.
5.5 EMKT CONTRIBUTION TO TOP TEAM CAPITAL. Simultaneously with the
Closing, EMKT shall contribute $2,000,000 to the capital of Top Team in exchange
for (i) 250,000 shares of Top Team Stock, (ii) 250,000 shares of Top Team
Preferred Stock, having the powers, preferences and rights set forth in Schedule
5.5, and (iii) rights, expiring on the six-month anniversary of the Closing
Date, to purchase 3,600,000 shares of Top Team Stock at a purchase price of
$7.50 per share. $1,000,000 of such cash will be available by Top Team to fund
the line of credit referred to in Section 6.3(f).
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
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(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) EMPLOYMENT AGREEMENTS. Fred Walti and Robert Wilson shall
have entered into employment agreements with Top Team in form and substance
satisfactory to Top Team;
(d) LEGAL OPINION. EMKT and Top Team shall have received an
opinion of Troop Steuber Pasich Reddick & Tobey, LLP, counsel to the Company in
form and substance acceptable to EMKT and Top Team;
(e) JOINDER AGREEMENTS. Each Optionee shall have executed a
Joinder Agreement in form and substance satisfactory to EMKT; and
(f) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS.
The obligation of the Company and the Sellers to effect the Transactions is also
subject to the satisfaction or waiver, on or prior to the Closing Date, of each
of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date;
(c) EMPLOYMENT AGREEMENTS. Fred Walti and Robert Wilson shall
have entered into employment agreements with Top Team in form and substance
satisfactory to Messrs. Walti and Wilson, respectively;
(d) STOCK INCENTIVE PLANS. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up
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to 100,000 shares of Top Team stock for issuance to former employees of the
Company pursuant to such plan;
(e) REGISTRATION RIGHTS. (i) EMKT and the Sellers shall have
entered into an agreement regarding "piggyback" registration rights for the
Purchase Consideration, which rights shall be subject to customary underwriters'
cut-backs and which shall be PARI PASSU with respect to other registration
rights granted by EMKT, whether prior or subsequent to the Closing Date;
(ii) Top Team and the Sellers shall have entered into an
agreement regarding "piggyback" registration rights for the Exchange
Consideration, which rights shall be subject to customary underwriters'
cut-backs and which shall be PARI PASSU with respect to other registration
rights granted by Top Team, whether prior or subsequent to the Closing Date Such
agreement shall also provide for a single "demand" registration right beginning
September 30, 2000 if Top Team shall not have filed prior to such date a
registration statement under the Securities Act under which the Sellers have had
the opportunity to register the Exchange Consideration;
(f) CREDIT FACILITY. Top Team shall make available to the
Company a line of credit in the amount of $1,000,000, evidenced by a revolving
promissory note having a term of 24 months and bearing interest at a rate of 10%
per annum;
(g) LEGAL OPINION. The Company and the Sellers shall have
received an opinion of Kaye, Scholer, Fierman, Hays and Handler, LLP, counsel to
EMKT and Top Team, in form and substance acceptable to the Company and the
Sellers; and
(h) INDEMNITY AGREEMENT. Top Team and Fred Walti shall have
entered an indemnity agreement with respect to certain obligations of the
Company personally guaranteed by Fred Walti.
6.4 CONDITIONS TO THE OPTION CLOSING. The respective obligations of
EMKT and Top Team, on the one hand, and the Optionees, on the other hand, to
effect the Transactions are subject to the satisfaction or waiver (subject to
applicable law) on or prior to the Option Closing Date of each of the following
conditions:
(a) CLOSING. The Closing shall have occurred; and
(b) SECURITIES LAWS. The Purchase and Exchange with respect to
the Optionee's Company Stock shall have been registered and qualified or exempt
from registration and qualification under the Securities Act, the California Law
and any other applicable securities or "blue sky" law.
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ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned, at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within 90
days after the date of this Agreement or there has been a material breach of any
representation, warranty, obligation, covenant or agreement set forth in this
Agreement on the part of the other party;
(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team or the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller shall severally and not
jointly, indemnify and hold harmless EMKT and Top Team and each of their
affiliates, directors, officers, employees, attorneys, agents and
representatives (collectively, the "AFFILIATED PARTIES") in respect of any and
all claims, losses, damages, liabilities, declines in value, penalties,
interest, costs and expenses (including, without limitation, any attorneys',
accountants' and consultants' fees and other expenses) reasonably incurred by
EMKT or Top Team or their respective Affiliated Parties, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
prime rate as reported from time to time by Bank of America NT & SA (the "PRIME
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RATE") then in effect, from the date such cash disbursements were made by EMKT
or Top Team or any of their Affiliated Parties until paid by such Seller, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Article II or III of this Agreement;
(b) Any misrepresentation contained in any certificate
furnished by such Seller individually pursuant to this Agreement or in
connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder in excess of $50,000.
8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of 18 months from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Any breach of any representation or warranty made by the
Sellers or the Company in Article III of this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any certificate
furnished by Sellers and/or the Company pursuant to this Agreement or in
connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder in excess of $50,000.
8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of 18 months from the Closing Date, jointly and severally, indemnify
and hold harmless each of the Sellers in respect of any and all claims, losses,
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damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT or Top Team for all claims
hereunder in excess of $50,000.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis (and after taking into account any insurance proceeds to which EMKT or Top
Team is entitled hereunder) EMKT and Top Team against all Taxes of the Company
(together with its consolidated Subsidiaries) for all taxable periods ending on
or before the date hereof or otherwise attributable to the operations,
transactions, assets, or income of the Company or its Subsidiaries prior to the
date hereof, together with any expenses (including, without limitation,
settlement costs and any legal, accounting and other expenses) incurred in
connection with the contesting, collection or assessment of such Taxes, and
together with interest at an annual rate equal to the Prime Rate then in effect.
Notwithstanding Sections 8.1 and 8.2, the Sellers' obligation to indemnify EMKT
and Top Team pursuant to this Section 8.4 shall continue until 90 days after all
applicable statutes of limitations have expired. For purposes of this Section
8.4, the term "AFTER-TAX BASIS" means determined after giving effect to (i) the
receipt by the indemnified party of such payment, if such receipt is taxable and
(ii) any tax deduction available on account of the payment of such Taxes; and
assuming that Taxes are payable at a combined effective rate of 45% of taxable
income.
8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
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a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, Top Team or any of its Subsidiaries, then
such indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, Top Team or any of their respective
Subsidiaries for any taxable period ending after the date hereof without the
express written consent of EMKT, Top Team or such affected Subsidiary, which
consent will not be unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
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8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire 18 months after the date hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such 18 months after the date hereof
identified as a claim for indemnification pursuant to this Agreement or (ii) as
to any matter that is based upon willful fraud by the indemnifying party, until
such time as such claims and matters are resolved. The liability of any Seller
shall not exceed the value of the Consideration received by such Seller.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that Top Team shall reimburse the Sellers for the reasonable fees and
costs of their counsel, not to exceed $50,000.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a material breach of the representations or warranties of EMKT
or Top Team or a failure of EMKT or Top Team to fulfill a material covenant
contained herein, then, in the case of clause (i) or (ii) above, the Company
shall, within two days after the first of such events has occurred, pay EMKT a
fee in lieu of reimbursement for such expenses equal to the costs of the Audit,
but not to exceed $20,000.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations
and warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT or Top Team, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
Full Moon Interactive Group, Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, California 90067
Attention: V. Joseph Stubbs, Esq.
Fax: 310-728-2243
(b) if to any Seller to his, her or its address on the
signature pages hereof
with a copy to:
Troop Steuber Pasich Reddick & Tobey, LLP
2029 Century Park East, 24th Floor
Los Angeles, California 90067
Attention: V. Joseph Stubbs, Esq.
Fax: 310-728-2243
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
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with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
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9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS.This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers (if
applicable) hereunto duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ Robert M. Wallace
----------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ Robert M. Wallace
----------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
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THE COMPANY: FULL MOON INTERACTIVE GROUP, INC.
By: /s/ Fred Walti
----------------------------------------
Fred Walti
President
SELLERS:
/s/ Fred Walti
---------------------------------------------
Fred Walti
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
/s/ Nancy Johnston
---------------------------------------------
Nancy Johnston
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
/s/ Randal Walti
---------------------------------------------
Randal Walti, Trustee of the Walti Family
Trust, 1996
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
/s/ Pamela Flank
---------------------------------------------
Pamela Flank
Address:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
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GRAND PACIFIC FINANCING CORPORATION
By: /s/ Michael Lin
----------------------------------------
Michael Lin, President
Address:
3501 Challenger Street, 2nd Floor
Torrance, CA 90503
GRAND PACIFIC FINANCE CORPORATION
By: /s/ Michael Lin
----------------------------------------
Michael Lin, President
Address:
41-99 Main Street, 2nd floor
Flushing, New York 11355
35
Execution Copy
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.,
ORRELL COMMUNICATIONS, INC.
AND
THE SELLERS IDENTIFIED HEREIN
Dated as of November 10, 1999
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TABLE OF CONTENTS
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ARTICLE I THE TRANSACTIONS AND RELATED MATTERS...................................1
1.1 Purchase and Exchange..................................................1
1.2 Contribution...........................................................1
1.3 Stock Certificates.....................................................2
1.4 Stock Option and Other Plans...........................................2
1.5 Tax Consequences.......................................................3
1.6 Closing................................................................3
1.7 Certificate of Incorporation of Top Team...............................3
1.8 By-Laws of Top Team....................................................3
1.9 Directors and Officers of Top Team.....................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
INDIVIDUALLY...........................................................4
2.1 Authorization..........................................................4
2.2 Ownership of Stock.....................................................4
2.3 Consents and Approvals.................................................4
2.4 Securities Matters.....................................................4
2.5 Brokerage Fees.........................................................5
2.6 Disclosure.............................................................5
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS.........................................6
3.1 Due Organization, Good Standing and Corporate Power....................6
3.2 Authorization and Validity of Agreement................................6
3.3 Capitalization.........................................................6
3.4 Consents and Approvals; No Violations..................................7
3.5 Company Reports and Financial Statements...............................8
3.6 Absence of Certain Changes.............................................8
3.7 Minute Books...........................................................9
3.8 Title to Properties; Encumbrances......................................9
3.9 Compliance with Laws...................................................9
3.10 Litigation.............................................................9
3.11 Employee Benefit Plans................................................10
3.12 Employment Relations and Agreements...................................12
3.13 Client Relations......................................................12
3.14 Taxes.................................................................12
3.15 Liabilities...........................................................13
3.16 Intellectual Properties...............................................13
3.17 Material Contracts and Relationships..................................14
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3.18 Absence of Certain Business Practices.................................16
3.19 Transactions with Related Parties.....................................16
3.20 Broker's or Finder's Fee..............................................16
3.21 Accounts Receivable...................................................16
3.22 Inventories...........................................................17
3.23 Insurance.............................................................17
3.24 No Powers of Attorney or Suretyships..................................17
3.25 Banking Facilities....................................................17
3.26 Environmental Liabilities.............................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EMKT AND TOP
TEAM..................................................................19
4.1 Due Organization; Good Standing and Corporate Power...................19
4.2 Authorization and Validity of Agreement...............................19
4.3 Consents and Approvals; No Violations.................................20
4.4 EMKT Reports and Financial Statements.................................20
4.5 Capitalization........................................................20
4.6 Absence of Certain Changes............................................21
4.7 Compliance with Laws..................................................21
4.8 Liabilities...........................................................21
4.9 Litigation............................................................21
4.10 Tax Status............................................................21
ARTICLE V ACTIONS PRIOR TO CLOSING DATE.........................................22
5.1 Access to Information Concerning Properties and Records...............22
5.2 Conduct of the Business of the Company Pending the Closing Date.......22
5.3 Best Efforts..........................................................23
5.4 No Solicitation of Other Offers.......................................23
5.5 EMKT Contribution to Top Team Capital.................................24
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS..................................24
6.1 Conditions Precedent to Obligations of EMKT, Top Team and
the Company and the Sellers...........................................24
6.2 Conditions Precedent to Obligations of EMKT and Top Team..............24
6.3 Conditions Precedent to Obligations of the Company and the Sellers....25
6.4 Conditions to the Option Closing......................................26
ARTICLE VII TERMINATION AND ABANDONMENT...........................................26
7.1 Termination...........................................................26
7.2 Effect of Termination.................................................27
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ARTICLE VIII INDEMNIFICATION.......................................................27
8.1 Indemnification by Sellers............................................27
8.2 Indemnification by Sellers Jointly and Severally......................28
8.3 Indemnification by EMKT and Top Team..................................28
8.4 Indemnification by Sellers for Tax Liabilities........................29
8.5 Claims for Indemnification............................................29
8.6 Defense Claims........................................................29
8.7 Manner of Indemnification.............................................30
8.8 Limitations on Indemnification........................................30
ARTICLE IX MISCELLANEOUS.........................................................30
9.1 Fees and Expenses.....................................................30
9.2 Representations and Warranties........................................31
9.3 Extension; Waiver.....................................................31
9.4 Public Announcements..................................................31
9.5 Notices...............................................................31
9.6 Entire Agreement......................................................33
9.7 Binding Effect; Benefit; Assignment...................................33
9.8 Amendment and Modification............................................33
9.9 Further Actions.......................................................33
9.10 Headings..............................................................33
9.11 Counterparts..........................................................33
9.12 Applicable Law........................................................33
9.13 Severability..........................................................33
9.14 "Person" Defined......................................................34
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT dated as of November 10,
1999 (this "AGREEMENT"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"), ORRELL
COMMUNICATIONS., a California corporation (the "COMPANY"), and each of the other
persons identified under the heading "Sellers" on the signature pages of this
Agreement (together, the "SELLERS"), and is made with reference to the following
facts:
A. The Sellers own of all of the issued and outstanding shares of
capital stock of the Company, consisting of common stock ("COMPANY STOCK") of
the Company.
B. EMKT wishes to acquire from the Sellers an aggregate of 50,000
shares of Company Stock, constituting in the aggregate 50 percent of the number
of outstanding shares of Company Stock (on a fully diluted basis), in exchange
for an aggregate of 75,000 shares of EMKT Common Stock, par value $0.001 per
share ("EMKT STOCK"). Immediately after such exchange, EMKT and the Sellers will
contribute all of their Company Stock to Top Team in exchange for an aggregate
of 600,000 shares of common stock, par value $0.001 per share, of Top Team ("TOP
TEAM COMMON STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE AND EXCHANGE. On the Closing Date (as defined in Section
1.6), each of the Sellers shall sell to EMKT that number of shares of Company
Common Stock set forth opposite such Seller's name on Schedule 1.1 (the
"PURCHASED COMPANY STOCK"), constituting in the aggregate 50 percent of the
number of outstanding shares of Company Stock (on a fully diluted and converted
basis) (the "PURCHASE"), for a consideration equal to that number of EMKT shares
set forth opposite such Seller's name on Schedule 1.1 (the "PURCHASE
CONSIDERATION"). The Purchase Consideration shall be payable on January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the purchase
of the Purchased Company Stock as contemplated by Section 1.1, (i) EMKT shall
contribute the Purchased Company Stock to Top Team in exchange for 300,000
shares of Top Team Stock and (ii) each Seller shall contribute to Top Team all
of his, her or its remaining Company Stock, constituting in the aggregate the
remaining 50 percent of the outstanding shares of Company Stock (on a fully
diluted and converted basis) in exchange for that number of shares of Top Team
Stock set forth opposite such Seller's name on Schedule 1.1. Such exchanges are
referred to collectively herein as the "EXCHANGE." The Sellers will receive an
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aggregate of 300,000 shares of Top Team Stock. Such shares of Company Stock
contributed to Top Team are referred to herein as the "CONTRIBUTED STOCK." Such
shares of Top Team Stock received by the Sellers and EMKT in exchange for the
Contributed Stock are referred to herein as the "EXCHANGE CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller shall deliver
to EMKT certificates evidencing their respective shares of Contributed Stock,
which shall be Duly Endorsed. The term "DULY ENDORSED" means duly endorsed by
the person or persons in whose name a stock certificate is registered in blank
or accompanied by a duly executed stock assignment separate from such
certificate. Top Team will deliver to each Seller and EMKT on the Closing Date
duly issued and authenticated certificates evidencing the Exchange Consideration
issuable to such person pursuant to Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to the Closing Date, use its
commercially reasonable best efforts to accelerate the vesting or exercisability
of all outstanding employee stock options to purchase Company Common Stock,
whether set forth in any stock option plan or plans of the Company ("COMPANY
STOCK OPTION PLANS"), in an option agreement with the optionee or otherwise. On
the Closing Date, the Company shall use its commercially reasonable best efforts
to cause each such option (each, a "COMPANY OPTION") granted by the Company to
purchase shares of Company Common Stock that is outstanding and unexercised
immediately prior to Closing Date to be exercised, and the optionees thereunder
(the "OPTIONEES") shall be deemed to be Sellers for purposes of Articles I and
II of this Agreement. As required by Section 6.2(e) hereof, the Sellers shall
cause each Optionee to deliver prior to the Option Closing a joinder agreement
whereby each such Optionee agrees to be bound by the provisions of Articles I
and II of this Agreement as if he or she were a Seller hereunder (each, a
"JOINDER AGREEMENT").
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary (collectively with the Company Stock Option Plans, the
"COMPANY STOCK INCENTIVE PLANS") shall terminate as of the Closing Date. The
Company will take all commercially reasonable steps to ensure that neither the
Company nor any of its Subsidiaries is or will be bound by any Company Options,
other options, warrants, rights or agreements which would entitle any Person,
other than EMKT, Top Team or either of their Affiliated Parties (as defined in
Section 8.1), to own any capital stock of the Company or any of its Subsidiaries
or to receive any payment in respect thereof. The Company will use its
commercially reasonable best efforts to obtain all necessary consents to ensure
that after the Closing Date, the only rights of the holders of Options to
purchase shares of Company Common Stock in respect of such Options will be to
receive the Purchase Consideration and the Exchange Consideration in
cancellation and settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
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Consideration, together with (i) the contributions to be made in connection with
the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution of
EMKT to Top Team referred to in Section 5.5, shall constitute a contribution of
capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock from the Sellers and the exchange by the Sellers and
EMKT of the Contributed Stock for the Exchange Consideration shall take place at
the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Article VI are fulfilled or waived (subject
to applicable law) but in no event later than the fifth business day thereafter,
or at such other time and place and on such other date as EMKT, Top Team and the
Company shall mutually agree (the "CLOSING DATE").
1.7 ARTICLES OF INCORPORATION OF TOP TEAM. The Articles of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM. The By-Laws of Top Team, as in effect as of
the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date, the
directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and such
additional directors as shall be designated by Top Team, each to hold office,
subject to the applicable provisions of the Articles of Incorporation and
By-Laws of Top Team, until the next annual stockholders' meeting of Top Team and
until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to enter
into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of the
Company Stock set forth below such Seller's name on Schedule 1.1, free and clear
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of any liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever. Upon consummation of
the Exchange, Top Team shall be the owner, beneficially and of record, of all of
the outstanding shares of capital stock of the Company, free and clear of any
liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team in connection with the Transactions.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been or prior to the Closing will have been obtained, made and
satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not
(except with respect to certain registration rights to be granted to the Sellers
pursuant to the Registration Rights Agreement referred to in Section 6,3(e)) be
registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller is either (i) an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act, (ii) a "qualified
purchaser" within the meaning of Section 25102(n)(2) of the California Law or
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(iii) has such knowledge and experience in financial and business matters that
he or she is capable of evaluating the merits and risks of the Transactions;
such Seller is aware that the Merger Consideration constitutes "restricted,"
"letter" or "investment" securities and such Seller by reason of his business or
financial experience has the capacity to protect his own interest in connection
with the Transactions; and
(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without either (i) registration under the Securities Act and the
California Law, and any other applicable securities laws, or (ii) an opinion of
counsel reasonably satisfactory to EMKT and Top Team that the transaction by
which such shares are proposed to be disposed of is exempt from the Securities
Act, the California Law and any other applicable securities laws, and
acknowledges that EMKT and Top Team will place a legend on the certificates
representing such shares substantially to such effect concerning these
restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule 3.1
sets forth the name, state of incorporation or formation and equity ownership of
the Company in each Subsidiary of the Company. (A "SUBSIDIARY" of a Person is a
corporation, partnership, joint venture, limited liability company and other
entity in which such Person owns all or a majority of the equity interest or is
required to be consolidated on such Person's balance sheet pursuant to GAAP.)
The Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and each such corporation has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company and each of its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
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such jurisdictions where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the business, properties,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects (the "CONDITION") of the Company and its Subsidiaries
taken as a whole.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by it of the Transactions, have been or prior to the Closing will be duly
authorized and approved by its Board of Directors and no other corporate action
on the part of the Company is necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation of the
Transactions (other than the approval of this Agreement by the holders of a
majority of the outstanding shares of Company Stock and any other classes of
capital stock entitled to vote thereon, as required by the California General
Corporation Law). This Agreement has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
100,000 shares of common stock constituting the Company Common Stock. As of the
date of this Agreement, (i) no shares of Company Common Stock are issued and
outstanding and (ii) no shares of Company Common Stock are reserved for issuance
pursuant to outstanding Company Options granted under the Stock Incentive Plan.
All issued and outstanding shares of Company Stock have been validly issued and
are fully paid and nonassessable, and are not subject to, nor were they issued
in violation of, any preemptive rights. Except as set forth in this Section 3.3
or on Schedule 3.3, (i) there are no shares of capital stock of the Company
authorized, issued or outstanding and (ii) there are not as of the date hereof,
and on the Closing Date there will not be, any outstanding or authorized
options, warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to Company Stock or any other shares of
capital stock of the Company, pursuant to which the Company is or may become
obligated to issue shares of Common Stock, any other shares of its capital stock
or any securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of the capital stock of the Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
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obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. (a) The execution and
delivery of this Agreement by the Sellers and the Company and the consummation
by the Sellers and the Company of the Transactions will not: (1) violate any
provision of the Articles of Incorporation, as amended, or By-Laws of the
Company or any of its Subsidiaries; (2) to the best knowledge of the Company and
the Sellers violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or authority
applicable to the Company or such Seller or any of its Subsidiaries or by which
any of their respective properties or assets may be bound; (3) to the best
knowledge of the Company and the Sellers require any filing with, or permit,
consent or approval of, or the giving of any notice to, any governmental or
regulatory body, agency or authority; or (4) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party, or by which it or any of their respective
properties or assets may be bound, excluding from the foregoing clauses (3) and
(4) filings, notices, permits, consents and approvals the absence of which, and
violations, breaches, defaults, conflicts and liens which, in the aggregate,
would not have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
(b) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Certification of Incorporation or By-Laws, (ii) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) to the
best knowledge of the Company and the Sellers any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries, except in the case of clauses (i) and (ii) above for defaults or
evaluations, which would not have a material adverse effect on the Condition of
the Company and the Subsidiaries taken as a whole.
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3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheet as of the end of the fiscal year ended June 31, 1999 and the
consolidated statements of operations, consolidated statements of stockholders'
equity and consolidated statements of cash flow for the fiscal year ended July
31, 1999 previously delivered to EMKT, were prepared in accordance with
generally accepted accounting principles (as in effect in the United States from
time to time) applied on a consistent basis ("GAAP"), except as may be indicated
therein or in the notes or schedules thereto, and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the date thereof and the results of their operations and cash flows for
the period then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since December 31, 1998 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
3.7 MINUTE BOOKS. The minute books of the Company and its Subsidiaries,
as previously made available to EMKT and its representatives, contain accurate
records of all meetings of and corporate actions or written consents by the
stockholders and Boards of Directors of the Company and its Subsidiaries since
December 31, 1995.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Except as disclosed in Schedule
3.8, the Company and each of its Subsidiaries has good, valid and marketable
title, or a valid leasehold interest in, to (i) all its material tangible
properties and assets (real and personal), including, without limitation, all
the properties and assets reflected in the consolidated balance sheet as of
December 31, 1998 delivered pursuant to Section 3.5 (the "BALANCE SHEET") except
as indicated in the notes thereto and except for properties and assets reflected
in the Balance Sheet that have been sold or otherwise disposed of in the
ordinary course of business, and (ii) all the tangible properties and assets
purchased by the Company and any of its Subsidiaries since the Balance Sheet
Date except for such properties and assets which have been sold or otherwise
disposed of in the ordinary course of business; in each case subject to no
encumbrance, lien, charge or other restriction of any kind or character, except
for (1) liens reflected in the Balance Sheet, (2) liens consisting of zoning or
planning restrictions, easements, permits and other restrictions or limitations
on the use of real property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such property by the
Company or any of its Subsidiaries in the operation of its respective business
and (3) liens for current taxes, assessments or governmental charges or levies
on property not yet due and delinquent.
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3.9 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries
are in compliance with all applicable laws, regulations, orders, judgments and
decrees except where the failure to so comply would not have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Company any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge, information
and belief of the Company, threatened, against or affecting the Company or any
of its Subsidiaries, or any of their properties or rights which could have a
material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole. There are no such suits, actions, claims, proceedings or
investigations pending or, to the best knowledge, information and belief of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, to the best knowledge of the Company and the
Sellers, neither the Company nor any of its Subsidiaries is subject to any
judgment, order or decree entered in any lawsuit or proceeding which could have
a material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole or on the ability of the Company or any Subsidiary to conduct
its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Company or any of its Subsidiaries (including, for this
purpose and for the purpose of all of the representations in this Section 3.11,
all employers (whether or not incorporated) which by reason of common control
are treated together with the Company as a single employer within the meaning of
Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
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4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and Top Team.
(d) RELATIONSHIP OF ACCRUED BENEFITS TO PENSION PLAN ASSETS.
As ofthe Balance Sheet Date, (1) the aggregate current value of all accrued
benefits (based upon actuarial assumptions which have been furnished to and
relied upon by EMKT, Top Team and Sub) under all Employee Benefit Plans which
are subject to Title IV of ERISA and which are Single Employer Plans (as defined
in Section 4001(a)(15) of ERISA) did not exceed the aggregate current value of
all assets of such Single Employer Plans allocable to such accrued benefits, and
the Balance Sheet Date, there has been (A) no material adverse change in the
financial condition of any Single Employer Plan, (B) no change in the actuarial
assumptions with respect to any Single Employer Plan and (C) no increase in
benefits under any Single Employer Plan as a result of plan amendments, change
in applicable law or otherwise, which individually or in the aggregate, would
create any such excess; and (2) using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of the Company and its Subsidiaries to all such Employee
Benefit Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
Multiemployer Plan ended prior to the date hereof, would not exceed $50,000.
There has been no material change in the financial condition of any
Multiemployer Plan or in any such actuarial assumption or computation method or
in benefits under any Multiemployer Plan as a result of collective bargaining or
otherwise since the close of each such fiscal year which, individually or in the
aggregate, would materially increase such liability.
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
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Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code and (2) Form 5500
for the most recently completed fiscal year for each Employee Benefit Plan
required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Except as set forth
on Schedule 3.12, to the best knowledge of the Company and the Sellers, each of
the Company and its Subsidiaries is in substantial compliance with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and has not and is not
engaged in any unfair labor practice; (ii) no unfair labor practice complaint
against the Company or any of its Subsidiaries is pending before the National
Labor Relations Board; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or to the best knowledge of the Company and the
Sellers threatened against or involving the Company or any of its Subsidiaries;
(iv) to the best knowledge of the Company and the Sellers no representation
question exists respecting the employees of the Company or any of its
Subsidiaries; (v) to the best knowledge of the Company and the Sellers no
grievance which might have a material adverse effect on the Condition of the
Company and its Subsidiaries as a whole or the conduct of their respective
businesses exists, no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; (vi) no collective bargaining agreement is currently being negotiated
by the Company or any of its Subsidiaries; and (vii) neither the Company nor any
of its Subsidiaries has experienced any material labor difficulty during the
last three years. There has not been, and to the best knowledge of the Company,
there will not be any change in relations with employees of the Company or any
of its Subsidiaries as a result of the Transactions that could have a material
adverse effect on the Condition of the Company and its Subsidiaries taken as a
whole. Except as disclosed in Schedule 3.12, there exist no employment,
consulting, severance or indemnification agreements between the Company and any
director, officer or employee of the Company or any agreement that would give
any Person the right to receive any payment from the Company as a result of the
Purchase or Exchange.
3.13 CLIENT RELATIONS. Except as set forth on Schedule 3.13, there
has not been, and to the best knowledge, information and belief of the Company
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and the Sellers, there will not be, any change in relations with franchisees,
customers or clients of the Company or any of its Subsidiaries as a result of
the Transactions that could have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries prior to the Closing Date. Such
returns and reports are true, correct and complete in all material respects and
reflect accurately all liability for Taxes of the Company and its Subsidiaries
for the periods covered thereby. All federal, state, local and foreign Taxes
(including interest and penalties) payable by, or due from, the Company or any
of its Subsidiaries or reports due prior to the Closing Date have been fully
paid or adequately disclosed. Tax liabilities for the period ending on the
Closing Date have been adequately disclosed and fully provided for in the books
and financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. To the best knowledge of the
Company and the Sellers, no issue has been raised during the past five years by
any federal, state, local or foreign taxing authority that, if raised with
respect to any other period not so examined, could reasonably be expected to
result in a proposed deficiency for any other period not so examined. The
federal income tax liability of the Company and its Subsidiaries has been
finally determined for all fiscal years to and including the fiscal year ended
December 31, 1998. To the best knowledge of the Company and the Sellers, no
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. For purposes of this Section 3.14, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including without limitation
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto; and "TAX RETURN" means
any report, return or other information or document required to be supplied to a
taxing authority in connection with taxes.
3.15 LIABILITIES. Except as set forth on Schedule 3.15, neither the
Company nor any of its Subsidiaries has any outstanding claims, liabilities or
indebtedness, whether absolute, accrued, condensed, contingent or otherwise,
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except as set forth in the Balance Sheet or referred to in the footnotes
thereto, other than liabilities incurred subsequent to the Balance Sheet Date in
the ordinary course of business not involving borrowings by the Company. Neither
the Company nor any of its Subsidiaries is in default in respect of the material
terms and conditions of any indebtedness or other agreement.
3.16 INTELLECTUAL PROPERTIES. In the operation of its business the
Company and its Subsidiaries have used, and currently use, domestic and foreign
patents, patent applications, patent licenses, software licenses, knowhow
licenses, trade names, trademarks, copyrights, unpatented inventions, service
marks, trademark registrations and applications, service mark registrations and
applications, copyright registrations and applications, trade secrets and other
confidential proprietary information (collectively the "INTELLECTUAL PROPERTY").
Schedule 3.16 contains an accurate and complete list of all Intellectual
Property (other than trade secrets and other confidential information) which is
of material importance to the operation of the business of the Company or any of
its Subsidiaries. Unless otherwise indicated in Schedule 3.16 the Company (or
the Subsidiary indicated) owns the entire right, title and interest in and to
the Intellectual Property listed on Schedule 3.16 used in the operation of its
business (including, without limitation, the exclusive right to use and license
the same) and each item constituting part of the Intellectual Property which is
owned by the Company or a Subsidiary and listed on Schedule 3.16 has been, to
the extent indicated in Schedule 3.16, duly registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office or such
other government entities, domestic or foreign, as are indicated in Schedule
3.16 and such registrations, filings and issuances remain in full force and
effect. To the best knowledge of the Company and the Sellers, except as stated
in such Schedule 3.16, there are no pending or threatened proceedings or
litigation or other adverse claims affecting or with respect to the Intellectual
Property. Schedule 3.16 lists all notices or claims currently pending or
received by the Company or any of its Subsidiaries during the past two years
which claim infringement, contributory infringement, inducement to infringe,
misappropriation or breach by the Company or any of its Subsidiaries of any
domestic or foreign patents, patent applications, patent licenses and know-how
licenses, trade names, trademark registrations and applications, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. Except as set forth in Schedule 3.16
hereto, there is, to the best knowledge, information and belief of the Company,
no reasonable basis upon which a claim may be asserted against the Company or
any of its Subsidiaries, for infringement, contributory infringement, inducement
to infringe, misappropriation or breach of any domestic or foreign patents,
patent applications, patent licenses, know-how licenses, trade names, trademark
registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
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(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries. To the best knowledge of
the Company and the Sellers, there are no material liabilities of any party to
any Material Contract arising from any breach or default of any provision
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thereof and no event has occurred that, with the passage of time or the giving
of notice or both, would constitute a breach or default by any party thereto.
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) sets forth a complete and correct list
of each (i) customer (or related group of customers) with whom the Company or
any of its Subsidiaries did $25,000 or more of business during the last fiscal
year, (ii) supplier (or related group of suppliers) with whom the Company or any
of its Subsidiaries did $25,000 or more of business during the last fiscal year,
and (iii) agent (or related group of agents) or representative (or related group
of representatives) who was paid $25,000 or more by the Company and its
Subsidiaries during the last fiscal year, respectively, which lists itemize the
actual dollar amounts.
(e) To the best knowledge of the Company and the Sellers, the
Company and each of its Subsidiaries has maintained and continues to maintain
good relations with its customers, suppliers and agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on
Schedule 3.18, neither the Company nor any of its Subsidiaries nor any employee,
agent or other person acting on the Company's or any of its Subsidiaries'
behalf, including, but not limited to, any Seller, has, directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
competitor or governmental employee or official (domestic or foreign) (i) that
would subject the Company or its any of its Subsidiaries to any damage or
penalty in any civil, criminal or governmental litigation or proceeding or (ii)
that, if not given in the past, would have had a material adverse effect on the
Condition of the Company or any of its Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since January 1, 1994 and there are no agreements or
understandings now in effect between the Company and any Seller or Related
Party. Schedule 3.19 also (i) states the amounts due from the Company (or any of
its Subsidiaries) to any Seller or Related Party and the amounts due from any
Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since January 1, 1994. After the Closing,
there will be no obligations or other liabilities between each of the Company
and any of its Subsidiaries, on the one hand, and any Seller or Related Party,
on the other hand, other than pursuant to this Agreement and the Transactions
contemplated hereby. "RELATED PARTY" means the Company and each of its
Subsidiaries and Affiliates, including but not limited to each of the Sellers
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and any member of the immediate family of any of the Sellers; and "AFFILIATE"
means, in respect of any specified Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
specified Person or if such specified Person bears a familial relationship with
such other Person.
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 3.21, the
accounts receivable of the Company as reflected in the Balance Sheet, to the
extent uncollected on the date of this Agreement, and the accounts receivable
reflected on the books of the Company are, on the basis of existing facts, valid
and existing and fully collectible (except for a reserve of $25,000) within one
year from the Closing Date, represent monies due for goods sold and delivered or
services rendered, and (subject to the aforesaid reserve) are subject to no
refunds or other adjustments (except discounts for prompt payment given in the
ordinary course of business) and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof. The Company has never factored any of its accounts
receivable.
3.22 INVENTORIES. The inventories reflected in the Balance Sheet were,
and those reflected on the books of the Company since such date have been,
determined and valued in accordance with generally accepted accounting
principles applied on a consistent basis as reflected in the consolidated
balance sheet, and existed on the respective dates. The inventories of the
Company consist of items which are good and merchantable, and are of a quality
and quantity presently usable or salable in the ordinary course of business.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies during the past
five years (other than worker's compensation claims). The Company (together with
its Subsidiaries) has to the best knowledge of the Company and the Sellers
adequate liability and other insurance policies insuring it against the risks of
loss arising out of or related to its assets and business. Without limitation,
as to the tangible real and personal property of the Company and its
Subsidiaries, the Company reasonably believes that such insurance is adequate to
cover the full replacement cost, less deductible amounts, of such tangible real
and personal property. Schedule 3.23 is a complete and correct list of all
insurance currently in place and accurately sets forth the coverages, deductible
amounts, carriers and expiration dates thereof. Schedule 3.23 is a complete and
correct list of all insurance with respect to which the policy period has
expired, but for which certain of the coverage years are still subject to audit
or retrospective adjustment by the carrier, and accurately sets forth such
coverage years and the coverages, deductible amounts, carriers and expiration
dates thereof. To the best knowledge of the Company and the Sellers there are no
outstanding requirements or recommendations by any insurance company that issued
any policy of insurance to the Company or any of its Subsidiaries or by any
board of or by any governmental authority exercising similar functions that
require or recommend any changes in the conduct of the business of the Company
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or its Subsidiaries or any repairs or other work to be done on or with respect
to any of the Company's or any of its Subsidiaries' assets. Except as set forth
on Schedule 3.23, no notice or other communication has been received by the
Company or its Subsidiaries from any insurance company within the five years
preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of its insurance
policies, and, to the knowledge of the Sellers and the Company, no such
cancellation, amendment or increase of premiums is threatened.
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, to the best
knowledge of the Company and the Sellers, neither the Company nor any of its
Subsidiaries has used, stored, treated, transported, manufactured, refined,
handled, produced or disposed of any Hazardous Materials on, under, at, from, or
in any way affecting, any of their properties or assets, or otherwise, in any
manner which at the time of the action in question violated any Environmental
Law, governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials and to the
best of the Company's and the Sellers' knowledge, no prior owner of such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide AcT ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
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and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
(b) To the best of the Company's and Sellers' knowledge (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the business or condition (financial or otherwise)
of the Company or any of its Subsidiaries, and (ii) no claims have been made
against the Company or any of its Subsidiaries during the past five years and no
presently outstanding citations or notices have been issued against the Company
or any of its Subsidiaries, where such could reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
Subsidiaries, which in either case have been or are imposed by reason of or
based upon any provision of any Environmental Law, including, without
limitation, any such obligations or liabilities relating to or arising out of or
attributable, in whole or in part, to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation or handling of any Hazardous
Materials by the Company or any of its Subsidiaries, or any of their employees,
agents, representatives or predecessors in interest in connection with or in any
way arising from or relating to the Company or any of its Subsidiaries or any of
their respective properties, or relating to or arising from or attributable, in
whole or in part, to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of any such substance, by any
other Person at or on or under any of the real properties owned or used by the
Company or any of its Subsidiaries or any other location where such could have a
materially adverse effect on the business or condition (financial or otherwise)
of the Company (or any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. Except as
set forth on Schedule 3.27, the Company (together with its consolidated
Subsidiaries) owns or leases all of the machinery, equipment, vehicles,
furniture, fixtures, leasehold improvements, repair parts, tools and other
property (collectively, the "PERSONAL PROPERTY") used by or relating to the
Company or its Subsidiaries. All such Personal Property is in good operating
condition and sufficient to carry on the business of the Company and its
Subsidiaries in the normal course as it is presently conducted and is free from
defects, whether patent or latent. Except as set forth in Schedule 3.27, it is
not necessary for the Company or any of its Subsidiaries to acquire or obtain
the use of any additional personal property to carry on its business as
presently and foreseeably to be conducted.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and general equitable principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of EMKT or Top Team; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any governmental
or regulatory body, agency or authority applicable to EMKT or Top Team or by
which either of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
EMKT or Top Team or any of their Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which
EMKT or Top Team or any of their Subsidiaries is a party, or by which they or
their respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations, conditions
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(financial or otherwise) or prospects of EMKT and its Subsidiaries taken as a
whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Preferred Stock, par value $0.001 per share ("PREFERRED
STOCK"). As of the date of this Agreement, (i) 100 shares of Top Team Stock and
no shares of Preferred Stock have been issued, and options to purchase 2,200,000
shares of Top Team Stock have been reserved for issuance pursuant to options
that have been or are to be granted under Top Team stock incentive plans. Except
as set forth on Schedule 4.5, in Section 5.5 and in this Section 4.5, there are
not as of the date hereof, and as of the Closing Date there will not be, any
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to any other shares of
capital stock of Top Team, pursuant to which Top Team is or may become obligated
to issue shares of capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of the
capital stock of Top Team. Top Team and EMKT have entered into letters of intent
or agreements to acquire five other companies in the interactive architecture
business identified on Schedule 4.5 (together with the Transactions, the
"ROLL-UP"). Schedule 4.5 sets forth the PRO FORMA capitalization of Top Team
following the Roll-Up and the contribution by EMKT to the capital of Top Team of
certain property, as described in Section 5.5.
4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by the EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
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4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
4.10 TAX STATUS. Neither EMKT nor Top Team has taken any action that
would cause the Purchase not to qualify as an installment sale for federal
income tax purposes or to cause the Exchange not to qualify as a tax-free
contribution to capital under Section 351 of the Code.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its Subsidiaries to, upon reasonable notice,
afford EMKT and Top Team, and their respective counsel, accountants and other
authorized representatives, full access during normal business hours to the
properties, books and records of the Company and its Subsidiaries in order that
they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; such investigation shall
not, however, affect the representations and warranties made by the Company in
this Agreement. The Company acknowledges and agrees that Top Team's auditors
will be performing an audit of the Company's financial statements (the "AUDIT"),
and will provide all information and documents and cooperate in any way so as to
permit the Audit to be completed promptly. The Company agrees to cause its
officers and employees to furnish such additional financial and operating data
and other information and respond to such inquiries as EMKT and Top Team shall
from time to time request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or Schedule 5.2 or
otherwise consented to or approved in writing by EMKT (which consent shall not
be unreasonably withheld, delayed or conditioned), during the period commencing
on the date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
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business and will use their best efforts to preserve intact their respective
business organization, keep available the services of their officers and
employees and maintain satisfactory relationships with licensers, suppliers,
distributors, clients and others having business relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Articles of Incorporation or By-Laws (or
comparable governing documents); (ii) issue or sell any shares of its capital
stock (other than in connection with the exercise of Company Options outstanding
on the date hereof) or any of its other securities, or issue any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issuance or sale of,
any shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) declare, pay or make any dividend
or other distribution or payment with respect to, or split, redeem or
reclassify, any shares of its capital stock; (iv) enter into any contract or
commitment, except for contracts in the ordinary course of business, including
without limitation, any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
release or relinquish any material contract rights; (v) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices, except that the Company may prepay its legal fees in connection with
the Transactions to the extent they do not exceed the amount set forth in
Section 9.1(a); (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries; (viii) authorize
capital expenditures in excess of the amount currently budgeted therefor; (ix)
permit any insurance policy naming the Company or any Subsidiary as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; (x) amend any employee or nonemployee benefit plan
or program, employment agreement, license agreement or retirement agreement, or
pay any bonus or contingent compensation, except in each case in the ordinary
course of business consistent with past practice prior to the date of this
Agreement; (xi) agree, in writing or otherwise, to take any of the foregoing
actions; or (xii) agree to the settlement of any litigation;
(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
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5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective commercially reasonable best efforts to take, or cause to be taken,
all appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions, including, without limitation, their respective best
efforts to obtain, prior to the Closing Date, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company and its Subsidiaries as are necessary
for consummation of the Transactions and to fulfill the conditions to the
Transactions; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its Subsidiaries in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of EMKT and Top Team (which shall not be
unreasonably withheld or delayed).
5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly communicate to EMKT and
Top Team the terms of any proposal or inquiry that it may receive in respect of
any such transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with the Company.
5.5 EMKT CONTRIBUTION TO TOP TEAM CAPITAL. Simultaneously with the
Closing, EMKT shall contribute $2,000,000 in cash to the capital of Top Team in
exchange for (i) 250,000 shares of Top Team Stock, 250,000 shares of Top Team
Preferred Stock, having the powers, preferences and rights set forth in Schedule
5.5, and (iii) rights, expiring on the six-month anniversary of the Closing
Date, to purchase 3,600,000 shares of Top Team Stock at a purchase price of
$7.50 per share.
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
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(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) EMPLOYMENT AGREEMENT. Lisa Orrell shall have entered into
an employment agreement with Top Team in form and substance reasonably
satisfactory to Top Team;
(d) LEGAL OPINION. EMKT and Top Team shall have received an
opinion of Landels, Ripley & Diamond, counsel to the Company, in form and
substance reasonably acceptable to EMKT and Top Team;
(e) JOINDER AGREEMENTS. Each Optionee shall have executed a
Joinder Agreement in form and substance reasonably satisfactory to EMKT; and
(f) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS.
The obligations of the Company and the Sellers to effect the Transactions are
also subject to the satisfaction or waiver, on or prior to the Closing Date, of
each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
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true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date; and
(c) STOCK INCENTIVE PLAN. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up to 30,000 shares of Top Team stock for
issuance to former employees of the Company pursuant to such plan; and
(d) REGISTRATION RIGHTS. Top Team and Sellers shall have
entered into an agreement regarding registration rights for the Purchase
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof. EMKT and Sellers shall
have entered into an agreement regarding registration rights for the Exchange
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof;
(e) LEGAL OPINION. The Company and the Seller shall have
received an opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to
EMKT and Top Team, in form and substance reasonably acceptable to the Company
and the Sellers.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned, at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within
six months after the date of this Agreement or there has been a material breach
of any representation, warranty, obligation, covenant or agreement set forth in
this Agreement on the part of the other party;
(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
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or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team, the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller, for a period of three
years from the date hereof, shall severally and not jointly, indemnify and hold
harmless EMKT and Top Team and each of their affiliates, directors, officers,
employees, attorneys, agents and representatives (collectively, the "AFFILIATED
PARTIES") in respect of any and all claims, losses, damages, liabilities,
declines in value, penalties, interest, costs and expenses (including, without
limitation, any attorneys', accountants' and consultants' fees and other
expenses) reasonably incurred by EMKT or Top Team or their respective Affiliated
Parties, together with interest on cash disbursements in connection therewith,
at an annual rate equal to the prime rate as reported from time to time by Bank
of America NT & SA (the "PRIME RATE") then in effect, from the date such cash
disbursements were made by EMKT or Top Team or any of their Affiliated Parties
until paid by such Seller, in connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Article II or III of this Agreement;
(b) Any misrepresentation contained in any written statement
or certificate furnished by such Seller individually pursuant to this Agreement
or in connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder relating back to the
first dollar.
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8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of three years from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Subject to Section 8.4 hereof, any breach of any
representation or warranty made by the Sellers or the Company in Article III of
this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any written statement
or certificate furnished by Sellers and/or the Company pursuant to this
Agreement or in connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder relating back to the first dollar.
8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of three years from the Closing Date, jointly and severally, indemnify
and hold harmless each of Sellers in respect of any and all claims, losses,
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
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No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT or Top Team for all claims
hereunder relating back to the first dollar.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis EMKT and Top Team against all Taxes of the Company (together with its
consolidated Subsidiaries) for all taxable periods ending on or before the date
hereof or otherwise attributable to the operations, transactions, assets, or
income of the Company or its Subsidiaries prior to the date hereof, together
with any expenses (including, without limitation, settlement costs and any
legal, accounting and other expenses) incurred in connection with the
contesting, collection or assessment of such Taxes, and together with interest
at an annual rate equal to the Prime Rate then in effect, but not for losses due
to any action or inaction taken or required to be taken by EMKT or Top Team
hereunder. Notwithstanding Sections 8.1 and 8.2, the Sellers' obligation to
indemnify EMKT and Top Team pursuant to this Section 8.4 shall continue until 90
days after all applicable statutes of limitations have expired. For purposes of
this Section 8.4, the term "AFTER-TAX BASIS" means determined after giving
effect to (i) the receipt by the indemnified party of such payment, if such
receipt is taxable and (ii) any tax deduction available on account of the
payment of such Taxes; and assuming that Taxes are payable at a combined
effective rate of 45% of taxable income.
8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim
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involves only money damages and does not seek an injunction or other equitable
relief, and (d) settlement or an adverse judgment of the third party claim is
not, in the good faith judgment of the indemnified party, likely to establish a
pattern or practice adverse to the continuing business interests of the
indemnified party. The indemnified party shall be entitled to participate in
(but not control) the defense of any such action, with its counsel and at its
own expense; provided, however, that if there are one or more legal defenses
available to the indemnified party that conflict with those available to the
indemnifying party, or if the indemnifying party fails to take reasonable steps
necessary to defend diligently the claim after receiving notice from the
indemnified party that it believes the indemnifying party has failed to do so,
the indemnified party may assume the defense of such claim; provided, further,
that the indemnified party may not settle such claim without the prior written
consent of the indemnifying party, which consent may not be unreasonably
withheld. If the indemnified party assumes the defense of the claim, the
indemnifying party shall reimburse the indemnified party for the reasonable fees
and expenses of counsel retained by the indemnified party and the indemnifying
party shall be entitled to participate in (but not control) the defense of such
claim, with its counsel and at its own expense. The parties agree to render,
without compensation, to each other such assistance as they may reasonably
require of each other in order to insure the proper and adequate defense of any
action, suit or proceeding, whether or not subject to indemnification hereunder.
Notwithstanding the foregoing, if any of Sellers assumes the defense of a claim
for Taxes for which they are obligated to indemnify EMKT, Top Team or any of its
Subsidiaries, then such indemnifying party shall not settle or otherwise agree
to a resolution of a dispute with respect to such claim if that settlement or
resolution would have an adverse impact on the liability of EMKT, Top Team or
any of their respective Subsidiaries for any taxable period ending after the
date hereof without the express written consent of EMKT, Top Team or such
affected Subsidiary, which consent will not be unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire on the third anniversary hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such third anniversary and identified as a
claim for indemnification pursuant to this Agreement or (ii) as to any matter
that is based upon willful fraud by the indemnifying party, until such time as
such claims and matters are resolved.
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ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that Top Team shall reimburse the Sellers for the reasonable fees and
costs of their counsel, not to exceed $20,000, and the Sellers will pay for the
amount in excess thereof.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a wilful and material breach of the representations or
warranties of EMKT or Top Team or a wilful failure of EMKT or Top Team to
fulfill a material covenant or contained herein, then, in the case of clause (i)
or (ii) above, the Company shall, within two days after the first of such events
has occurred, pay EMKT a fee in lieu of reimbursement for such expenses equal to
$40,000 plus the actual costs of the Audit.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT, Top Team or Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
30
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in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
Orrell Communications, Inc.
700 Gale Drive, No. 100
Campbell, California 95008
Attention: President
Fax: 408-871-3593
with a copy to:
Landels, Ripley & Diamond
350 The Embarcadero
Hills Plaza
San Francisco, California 94105-1250
Attention: Stanford Mattews, Esq.
(b) if to any Seller to his, her or its address on the
signature pages hereof
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
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or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void,
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unenforceable or against its regulatory policy, the remainder of the terms,
provisions, covenants and restrictions contained in this Agreement shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated.
9.14 "PERSON" DEFINED. "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers (if
applicable) hereunto duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ Robert M. Wallace
--------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ Robert M. Wallace
--------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
THE COMPANY: ORRELL COMMUNICATIONS, INC.
By: /s/ Lisa Orrell
--------------------------------------
Lisa Orrell
President
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SELLERS: /s/ Lisa Orrell
------------------------------------------
Lisa Orrell
Address:
Orrell Communications, Inc.
700 Gale Drive, No. 100
Campbell, California 95008
Fax: 408-871-3593
34
Execution Copy
================================================================================
STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.,
DEVRIES DATA SYSTEMS, INC.
AND
THE SELLERS IDENTIFIED HEREIN
Dated as of November 10, 1999
================================================================================
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C>
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS..............................1
1.1 Purchase and Exchange........................................................1
1.2 Contribution.................................................................1
1.3 Stock Certificates...........................................................2
1.4 Stock Option and Other Plans.................................................2
1.5 Tax Consequences.............................................................3
1.6 Closing......................................................................3
1.7 Certificate of Incorporation of Top Team.....................................3
1.8 By-Laws of Top Team..........................................................3
1.9 Directors and Officers of Top Team...........................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLERS
INDIVIDUALLY....................................................4
2.1 Authorization................................................................4
2.2 Ownership of Stock...........................................................4
2.3 Consents and Approvals.......................................................4
2.4 Securities Matters...........................................................4
2.5 Brokerage Fees...............................................................5
2.6 Disclosure .................................................................5
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE SELLERS........................6
3.1 Due Organization, Good Standing and Corporate Power..........................6
3.2 Authorization and Validity of Agreement......................................6
3.3 Capitalization...............................................................6
3.4 Consents and Approvals; No Violations........................................7
3.5 Company Reports and Financial Statements.....................................8
3.6 Absence of Certain Changes...................................................8
3.7 Minute Books.................................................................9
3.8 Title to Properties; Encumbrances............................................9
3.9 Compliance with Laws.........................................................9
3.10 Litigation .................................................................9
3.11 Employee Benefit Plans......................................................10
3.12 Employment Relations and Agreements.........................................12
3.13 Client Relations............................................................12
3.14 Taxes ................................................................12
3.15 Liabilities ................................................................13
3.16 Intellectual Properties.....................................................13
3.17 Material Contracts and Relationships........................................14
</TABLE>
i
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<TABLE>
<CAPTION>
<S> <C> <C>
3.18 Absence of Certain Business Practices.......................................16
3.19 Transactions with Related Parties...........................................16
3.20 Broker's or Finder's Fee....................................................16
3.21 Accounts Receivable.........................................................16
3.22 Inventories ................................................................17
3.23 Insurance ................................................................17
3.24 No Powers of Attorney or Suretyships........................................17
3.25 Banking Facilities..........................................................17
3.26 Environmental Liabilities...................................................18
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EMKT AND
TOP TEAM........................................................19
4.1 Due Organization; Good Standing and Corporate Power.........................19
4.2 Authorization and Validity of Agreement.....................................19
4.3 Consents and Approvals; No Violations.......................................20
4.4 EMKT Reports and Financial Statements.......................................20
4.5 Capitalization..............................................................20
4.6 Absence of Certain Changes..................................................21
4.7 Compliance with Laws........................................................21
4.8 Liabilities ................................................................21
4.9 Litigation ................................................................21
4.10 Tax Status ................................................................21
ARTICLE V ACTIONS PRIOR TO CLOSING DATE...................................22
5.1 Access to Information Concerning Properties and Records.....................22
5.2 Conduct of the Business of the Company Pending the Closing Date.............22
5.3 Best Efforts................................................................23
5.4 No Solicitation of Other Offers.............................................23
5.5 EMKT Contribution to Top Team Capital.......................................24
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS............................24
6.1 Conditions Precedent to Obligations of EMKT, Top Team
and the Company and the Sellers.............................................24
6.2 Conditions Precedent to Obligations of EMKT and Top Team....................24
6.3 Conditions Precedent to Obligations of the Company and the Sellers..........25
6.4 Conditions to the Option Closing............................................26
ARTICLE VII TERMINATION AND ABANDONMENT.....................................26
7.1 Termination ................................................................26
7.2 Effect of Termination.......................................................27
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VIII INDEMNIFICATION....................................................27
8.1 Indemnification by Sellers.....................................................27
8.2 Indemnification by Sellers Jointly and Severally...............................28
8.3 Indemnification by EMKT and Top Team...........................................28
8.4 Indemnification by Sellers for Tax Liabilities.................................29
8.5 Claims for Indemnification.....................................................29
8.6 Defense Claims.................................................................29
8.7 Manner of Indemnification......................................................30
8.8 Limitations on Indemnification.................................................30
ARTICLE IX MISCELLANEOUS......................................................31
9.1 Fees and Expenses..............................................................31
9.2 Representations and Warranties.................................................31
9.3 Extension; Waiver..............................................................31
9.4 Public Announcements...........................................................31
9.5 Notices ...................................................................31
9.6 Entire Agreement...............................................................33
9.7 Binding Effect; Benefit; Assignment............................................33
9.8 Amendment and Modification.....................................................33
9.9 Further Actions................................................................33
9.10 Headings ...................................................................33
9.11 Counterparts...................................................................33
9.12 Applicable Law.................................................................33
9.13 Severability...................................................................33
9.14 "Person" Defined...............................................................34
</TABLE>
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT dated as of November 10,
1999 (this "AGREEMENT"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"),
DEVRIES DATA SYSTEMS, INC., a Delaware corporation (the "COMPANY"), and each of
the other persons identified under the heading "Sellers" on the signature pages
of this Agreement (together, the "SELLERS"), and is made with reference to the
following facts:
A. The Sellers own of all of the issued and outstanding shares of
capital stock of the Company, consisting of options to purchase common stock
("COMPANY COMMON STOCK") and preferred stock ("COMPANY PREFERRED STOCK") of the
Company. The Company Common Stock and the Company Preferred Stock are referred
to collectively as the "COMPANY STOCK."
B. EMKT wishes to acquire from the Sellers an aggregate of 2,700,000
shares of Company Preferred Stock and from the Optionees referred to below an
aggregate of 348,750 shares of Company Common Stock, constituting in the
aggregate 45 percent of the number of outstanding shares of Company Stock (on a
fully diluted basis), in exchange for an aggregate of 300,000 shares of EMKT
Common Stock, par value $0.001 per share ("EMKT STOCK"). Immediately after such
exchange, EMKT, the Sellers and the Optionees will contribute all of their
Company Common Stock and Company Preferred Stock to Top Team in exchange for an
aggregate of 2,000,000 shares of common stock, par value $0.001 per share, of
Top Team ("TOP TEAM COMMON STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE AND EXCHANGE. On the Closing Date (as defined in Section
1.6), each of the Sellers shall sell, and on the Option Closing Date (as defined
in Section 1.6) the Sellers shall cause each of the Optionees to sell, to EMKT
that number of shares of Company Common Stock or Company Preferred Stock set
forth opposite such Seller's or Optionee's name on Schedule 1.1 (the "PURCHASED
COMPANY STOCK"), constituting in the aggregate 45 percent of the number of
outstanding shares of Company Stock (on a fully diluted and converted basis)
(the "PURCHASE"), for a consideration equal to that number of EMKT shares set
forth opposite such Seller's or Optionee's name on Schedule 1.1 (the "PURCHASE
CONSIDERATION"). The Purchase Consideration shall be payable on January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the purchase
of the Purchased Company Stock as contemplated by Section 1.1, (i) EMKT shall
contribute the Purchased Company Stock to Top Team in exchange for 900,000
shares of Top Team Stock and (ii) each Seller shall contribute to Top Team all
of his, her or its remaining Company Common Stock or Company Preferred Stock,
<PAGE>
constituting (with the Optionee's remaining Stock) in the aggregate the
remaining 55 percent of the outstanding shares of Company Stock (on a fully
diluted and converted basis) in exchange for that number of shares of Top Team
Stock set forth opposite such Seller's or name on Schedule 1.1. On the Option
Closing Date, each Optionee shall contribute to Top Team all of his, her or its
remaining Stock. Such exchanges are referred to collectively herein as the
"EXCHANGE." The Sellers or the Optionees will receive an aggregate of 1,100,000
shares of Top Team Stock. Such shares of Company Common Stock and Company
Preferred Stock contributed to Top Team are referred to herein as the
"CONTRIBUTED STOCK." Such shares of Top Team Stock received by the Sellers and
EMKT in exchange for the Contributed Stock are referred to herein as the
"EXCHANGE CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller shall deliver
to EMKT, and on the Option Closing Date, each Optionee shall deliver to EMKT,
certificates evidencing their respective shares of Contributed Stock, which
shall be Duly Endorsed. The term "DULY ENDORSED" means duly endorsed by the
person or persons in whose name a stock certificate is registered in blank or
accompanied by a duly executed stock assignment separate from such certificate.
Top Team will deliver to each Seller and EMKT on the Closing Date and to each
Optionee on the Option Closing Date duly issued and authenticated certificates
evidencing the Exchange Consideration issuable to such person pursuant to
Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to the Option Closing Date, use
its commercially reasonable best efforts to accelerate the vesting or
exercisability of all outstanding employee stock options to purchase Company
Common Stock, whether set forth in any stock option plan or plans of the Company
("COMPANY STOCK OPTION PLANS"), in an option agreement with the optionee or
otherwise. On the Option Closing Date, the Company shall use its commercially
reasonable best efforts to cause each such option (each, a "COMPANY OPTION")
granted by the Company to purchase shares of Company Common Stock that is
outstanding and unexercised immediately prior to Option Closing Date to be
exercised, and the optionees thereunder (the "OPTIONEES") shall be deemed to be
Sellers for purposes of Articles I and II of this Agreement. As required by
Section 6.2(e) hereof, the Sellers shall cause each Optionee to deliver prior to
the Option Closing a joinder agreement whereby each such Optionee agrees to be
bound by the provisions of Articles I and II of this Agreement as if he or she
were a Seller hereunder (each, a "JOINDER AGREEMENT").
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary (collectively with the Company Stock Option Plans, the
"COMPANY STOCK INCENTIVE PLANS") shall terminate as of the Closing Date. The
Company will take all commercially reasonable steps to ensure that neither the
Company nor any of its Subsidiaries is or will be bound by any Company Options,
other options, warrants, rights or agreements which would entitle any Person,
other than EMKT, Top Team or either of their Affiliated Parties (as defined in
Section 8.1), to own any capital stock of the Company or any of its Subsidiaries
or to receive any payment in respect
2
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thereof. The Company will use its commercially reasonable best efforts to obtain
all necessary consents to ensure that after the Option Closing Date, the only
rights of the holders of Options to purchase shares of Company Common Stock in
respect of such Options will be to receive the Purchase Consideration and the
Exchange Consideration in cancellation and settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
Consideration, together with (i) the contributions to be made in connection with
the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution of
EMKT to Top Team referred to in Section 5.5, shall constitute a contribution of
capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock from the Sellers and the exchange by the Sellers and
EMKT of the Contributed Stock for the Exchange Consideration shall take place at
the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Sections 6.1 - 6.3 are fulfilled or waived
(subject to applicable law) but in no event later than the fifth business day
thereafter, or at such other time and place and on such other date as EMKT, Top
Team and the Company shall mutually agree (the "CLOSING DATE"). The closing (the
"OPTION CLOSING") of the purchase of the Company Stock from the Optionees and
the exchange by the Optionees and EMKT of the Contributed Stock or the Exchange
Consideration shall take place at the offices of Kaye, Scholer, Fierman, Hays &
Handler, LLP, 1999 Avenue of the Stars, 16th Floor, Los Angeles, California
90067 as soon as practicable after the last of the conditions set forth in
Section 6.4 are fulfilled or waived (subject to applicable law), but in no event
before January 3, 2000 or later than the fifth business day thereafter, or at
such other time and place and on such other date as EMKT, Top Team and the
Company shall mutually agree (the "OPTION CLOSING DATE").
1.7 CERTIFICATE OF INCORPORATION OF TOP TEAM. The Certificate of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM. The By-Laws of Top Team, as in effect as of
the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date, the
directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and such
additional directors as shall be designated by Top Team, each to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of Top Team, until the next annual stockholders' meeting of Top Team and
until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to enter
into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of the
Company Stock set forth below such Seller's name on Schedule 1.1, free and clear
of any liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever. Upon consummation of
the Exchange, Top Team shall be the owner, beneficially and of record, of all of
the outstanding shares of capital stock of the Company, free and clear of any
liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team in connection with the Transactions.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been or prior to the Closing will have been obtained, made and
satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not
(except with respect to certain registration rights to be granted to the Sellers
pursuant to the Registration Rights Agreement referred to in Section 6,3(e))
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be registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller is either (i) an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act, (ii) a "qualified
purchaser" within the meaning of Section 25102(n)(2) of the California Law or
(iii) has such knowledge and experience in financial and business matters that
he or she is capable of evaluating the merits and risks of the Transactions;
such Seller is aware that the Merger Consideration constitutes "restricted,"
"letter" or "investment" securities and such Seller by reason of his business or
financial experience has the capacity to protect his own interest in connection
with the Transactions; and
(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without either (i) registration under the Securities Act and the
California Law, and any other applicable securities laws, or (ii) an opinion of
counsel reasonably satisfactory to EMKT and Top Team that the transaction by
which such shares are proposed to be disposed of is exempt from the Securities
Act, the California Law and any other applicable securities laws, and
acknowledges that EMKT and Top Team will place a legend on the certificates
representing such shares substantially to such effect concerning these
restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
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ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule 3.1
sets forth the name, state of incorporation or formation and equity ownership of
the Company in each Subsidiary of the Company. (A "SUBSIDIARY" of a Person is a
corporation, partnership, joint venture, limited liability company and other
entity in which such Person owns all or a majority of the equity interest or is
required to be consolidated on such Person's balance sheet pursuant to GAAP.)
The Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and each such corporation has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company and each of its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
such jurisdictions where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the business, properties,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects (the "CONDITION") of the Company and its Subsidiaries
taken as a whole.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery and
performance of this Agreement by the Company, and the consummation by it of the
Transactions, have been or prior to the Closing will be duly authorized and
approved by its Board of Directors and no other corporate action on the part of
the Company is necessary to authorize the execution, delivery and performance of
this Agreement by the Company and the consummation of the Transactions (other
than the approval of this Agreement by the holders of a majority of the
outstanding shares of Company Stock and any other classes of capital stock
entitled to vote thereon, as required by the California General Corporation
Law). This Agreement has been duly executed and delivered by the Company and is
a valid and binding obligation of the Company enforceable against the Company in
accordance with its terms, except to the extent that its enforceability may be
subject to applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
15,000,000 shares of common stock, par value $0.05 per share, constituting the
Company Common Stock, and 15,000,000 shares of preferred stock, par value $0.001
per share, constituting the Company Preferred Stock. As of the date of this
Agreement, (i) no shares of Company Common Stock are issued and outstanding,
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(775,000 shares of Company Common Stock are reserved for issuance pursuant to
outstanding Company Options granted under the Stock Incentive Plans, and (iii)
6,000,000 shares of Company Preferred Stock are issued and outstanding. All
issued and outstanding shares of Company Stock have been validly issued and are
fully paid and nonassessable, and are not subject to, nor were they issued in
violation of, any preemptive rights. Except as set forth in this Section 3.3 or
on Schedule 3.3, (i) there are no shares of capital stock of the Company
authorized, issued or outstanding and (ii) there are not as of the date hereof,
and on the Closing Date there will not be, any outstanding or authorized
options, warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to Company Stock or any other shares of
capital stock of the Company, pursuant to which the Company is or may become
obligated to issue shares of Common Stock, any other shares of its capital stock
or any securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of the capital stock of the Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. (a) The execution and
delivery of this Agreement by the Sellers and the Company and the consummation
by the Sellers and the Company of the Transactions will not: (1) violate any
provision of the Certificate of Incorporation, as amended, or By-Laws of the
Company or any of its Subsidiaries; (2) to the best knowledge of the Company and
the Sellers violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or authority
applicable to the Company or such Seller or any of its Subsidiaries or by which
any of their respective properties or assets may be bound; (3) to the best
knowledge of the Company and the Sellers require any filing with, or permit,
consent or approval of, or the giving of any notice to, any governmental or
regulatory body, agency or authority; or (4) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
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franchise agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party, or by which it or any of their respective
properties or assets may be bound, excluding from the foregoing clauses (3) and
(4) filings, notices, permits, consents and approvals the absence of which, and
violations, breaches, defaults, conflicts and liens which, in the aggregate,
would not have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
(b) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Certification of Incorporation or By-Laws, (ii) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) to the
best knowledge of the Company and the Sellers any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries, except in the case of clauses (i) and (ii) above for defaults or
evaluations, which would not have a material adverse effect on the Condition of
the Company and the Subsidiaries taken as a whole.
3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheets as of the end of the fiscal year ended December 31, 1998 and the
nine-month period ended September 30, 1999 and the consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of cash flow for the fiscal year ended December 31, 1998 and the
period ended September 30, 1999 previously delivered to EMKT, were prepared in
accordance with generally accepted accounting principles (as in effect in the
United States from time to time) applied on a consistent basis ("GAAP"), except
as may be indicated therein or in the notes or schedules thereto, and fairly
present the consolidated financial position of the Company and its consolidated
Subsidiaries as of the dates thereof and the results of their operations and
cash flows for the periods then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since December 31, 1998 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
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3.7 MINUTE BOOKS. The minute books of the Company and its Subsidiaries,
as previously made available to EMKT and its representatives, contain accurate
records of all meetings of and corporate actions or written consents by the
stockholders and Boards of Directors of the Company and its Subsidiaries since
December 31, 1995.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Except as disclosed in Schedule
3.8, the Company and each of its Subsidiaries has good, valid and marketable
title, or a valid leasehold interest in, to (i) all its material tangible
properties and assets (real and personal), including, without limitation, all
the properties and assets reflected in the consolidated balance sheet as of
December 31, 1998 delivered pursuant to Section 3.5 (the "BALANCE SHEET") except
as indicated in the notes thereto and except for properties and assets reflected
in the Balance Sheet that have been sold or otherwise disposed of in the
ordinary course of business, and (ii) all the tangible properties and assets
purchased by the Company and any of its Subsidiaries since the Balance Sheet
Date except for such properties and assets which have been sold or otherwise
disposed of in the ordinary course of business; in each case subject to no
encumbrance, lien, charge or other restriction of any kind or character, except
for (1) liens reflected in the Balance Sheet, (2) liens consisting of zoning or
planning restrictions, easements, permits and other restrictions or limitations
on the use of real property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such property by the
Company or any of its Subsidiaries in the operation of its respective business
and (3) liens for current taxes, assessments or governmental charges or levies
on property not yet due and delinquent.
3.9 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries are
in compliance with all applicable laws, regulations, orders, judgments and
decrees except where the failure to so comply would not have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Company any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge, information
and belief of the Company, threatened, against or affecting the Company or any
of its Subsidiaries, or any of their properties or rights which could have a
material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole. There are no such suits, actions, claims, proceedings or
investigations pending or, to the best knowledge, information and belief of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, to the best knowledge of the Company and the
Sellers, neither the Company nor any of its Subsidiaries is subject to any
judgment, order or decree entered in any lawsuit or proceeding which could have
a material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole or on the ability of the Company or any Subsidiary to conduct
its business as presently conducted.
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3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Company or any of its Subsidiaries (including, for this
purpose and for the purpose of all of the representations in this Section 3.11,
all employers (whether or not incorporated) which by reason of common control
are treated together with the Company as a single employer within the meaning of
Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and Top Team.
(d) RELATIONSHIP OF ACCRUED BENEFITS TO PENSION PLAN ASSETS.
As of [Insert date last actuarial calculation was made], (1) the aggregate
current value of all accrued benefits (based upon actuarial assumptions which
have been furnished to and relied upon by EMKT, Top Team and Sub) under all
Employee Benefit Plans which are subject to Title IV of ERISA and which are
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Single Employer Plans (as defined in Section 4001(a)(15) of ERISA) did not
exceed the aggregate current value of all assets of such Single Employer Plans
allocable to such accrued benefits, and since [Insert date last actuarial
calculation was made], there has been (A) no material adverse change in the
financial condition of any Single Employer Plan, (B) no change in the actuarial
assumptions with respect to any Single Employer Plan and (C) no increase in
benefits under any Single Employer Plan as a result of plan amendments, change
in applicable law or otherwise, which individually or in the aggregate, would
create any such excess; and (2) using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of the Company and its Subsidiaries to all such Employee
Benefit Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
Multiemployer Plan ended prior to the date hereof, would not exceed $50,000.
There has been no material change in the financial condition of any
Multiemployer Plan or in any such actuarial assumption or computation method or
in benefits under any Multiemployer Plan as a result of collective bargaining or
otherwise since the close of each such fiscal year which, individually or in the
aggregate, would materially increase such liability.
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code and (2) Form 5500
for the most recently completed fiscal year for each Employee Benefit Plan
required to file such form.
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3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Except as set forth on
Schedule 3.12, to the best knowledge of the Company and the Sellers, each of the
Company and its Subsidiaries is in substantial compliance with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and has not and is not
engaged in any unfair labor practice; (ii) no unfair labor practice complaint
against the Company or any of its Subsidiaries is pending before the National
Labor Relations Board; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or to the best knowledge of the Company and the
Sellers threatened against or involving the Company or any of its Subsidiaries;
(iv) to the best knowledge of the Company and the Sellers no representation
question exists respecting the employees of the Company or any of its
Subsidiaries; (v) to the best knowledge of the Company and the Sellers no
grievance which might have a material adverse effect on the Condition of the
Company and its Subsidiaries as a whole or the conduct of their respective
businesses exists, no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; (vi) no collective bargaining agreement is currently being negotiated
by the Company or any of its Subsidiaries; and (vii) neither the Company nor any
of its Subsidiaries has experienced any material labor difficulty during the
last three years. There has not been, and to the best knowledge of the Company,
there will not be any change in relations with employees of the Company or any
of its Subsidiaries as a result of the Transactions that could have a material
adverse effect on the Condition of the Company and its Subsidiaries taken as a
whole. Except as disclosed in Schedule 3.12, there exist no employment,
consulting, severance or indemnification agreements between the Company and any
director, officer or employee of the Company or any agreement that would give
any Person the right to receive any payment from the Company as a result of the
Purchase or Exchange.
3.13 CLIENT RELATIONS. Except as set forth on Schedule 3.13, there has
not been, and to the best knowledge, information and belief of the Company and
the Sellers, there will not be, any change in relations with franchisees,
customers or clients of the Company or any of its Subsidiaries as a result of
the Transactions that could have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries prior to the Closing Date. Such
returns and reports are true, correct and complete in all material respects and
reflect accurately all liability for Taxes of the Company and its Subsidiaries
for the periods covered thereby. All federal, state, local and foreign Taxes
(including interest and penalties) payable by, or due from, the Company or any
of its Subsidiaries or reports due prior to the Closing Date have been fully
paid or adequately disclosed. Tax liabilities for the period ending on the
Closing Date have been adequately disclosed and fully provided for in the books
and financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. To the best knowledge of the
Company and the Sellers, no issue has been raised during the past five years by
any federal, state, local or foreign taxing authority that, if raised with
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respect to any other period not so examined, could reasonably be expected to
result in a proposed deficiency for any other period not so examined. The
federal income tax liability of the Company and its Subsidiaries has been
finally determined for all fiscal years to and including the fiscal year ended
December 31, 1998. To the best knowledge of the Company and the Sellers, no
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. For purposes of this Section 3.14, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including without limitation
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto; and "TAX RETURN" means
any report, return or other information or document required to be supplied to a
taxing authority in connection with taxes.
3.15 LIABILITIES. Except as set forth on Schedule 3.15, neither the
Company nor any of its Subsidiaries has any outstanding claims, liabilities or
indebtedness, whether absolute, accrued, condensed, contingent or otherwise,
except as set forth in the Balance Sheet or referred to in the footnotes
thereto, other than liabilities incurred subsequent to the Balance Sheet Date in
the ordinary course of business not involving borrowings by the Company. Neither
the Company nor any of its Subsidiaries is in default in respect of the material
terms and conditions of any indebtedness or other agreement.
3.16 INTELLECTUAL PROPERTIES. In the operation of its business the
Company and its Subsidiaries have used, and currently use, domestic and foreign
patents, patent applications, patent licenses, software licenses, knowhow
licenses, trade names, trademarks, copyrights, unpatented inventions, service
marks, trademark registrations and applications, service mark registrations and
applications, copyright registrations and applications, trade secrets and other
confidential proprietary information (collectively the "INTELLECTUAL PROPERTY").
Schedule 3.16 contains an accurate and complete list of all Intellectual
Property (other than trade secrets and other confidential information) which is
of material importance to the operation of the business of the Company or any of
its Subsidiaries. Unless otherwise indicated in Schedule 3.16 the Company (or
the Subsidiary indicated) owns the entire right, title and interest in and to
the Intellectual Property listed on Schedule 3.16 used in the operation of its
business (including, without limitation, the exclusive right to use and license
the same) and each item constituting part of the Intellectual Property which is
owned by the Company or a Subsidiary and listed on Schedule 3.16 has been, to
the extent indicated in Schedule 3.16, duly registered with, filed in or issued
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by, as the case may be, the United States Patent and Trademark Office or such
other government entities, domestic or foreign, as are indicated in Schedule
3.16 and such registrations, filings and issuances remain in full force and
effect. To the best knowledge of the Company and the Sellers, except as stated
in such Schedule 3.16, there are no pending or threatened proceedings or
litigation or other adverse claims affecting or with respect to the Intellectual
Property. Schedule 3.16 lists all notices or claims currently pending or
received by the Company or any of its Subsidiaries during the past two years
which claim infringement, contributory infringement, inducement to infringe,
misappropriation or breach by the Company or any of its Subsidiaries of any
domestic or foreign patents, patent applications, patent licenses and know-how
licenses, trade names, trademark registrations and applications, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. Except as set forth in Schedule 3.16
hereto, there is, to the best knowledge, information and belief of the Company,
no reasonable basis upon which a claim may be asserted against the Company or
any of its Subsidiaries, for infringement, contributory infringement, inducement
to infringe, misappropriation or breach of any domestic or foreign patents,
patent applications, patent licenses, know-how licenses, trade names, trademark
registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
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(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries. To the best knowledge of
the Company and the Sellers, there are no material liabilities of any party to
any Material Contract arising from any breach or default of any provision
thereof and no event has occurred that, with the passage of time or the giving
of notice or both, would constitute a breach or default by any party thereto.
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) sets forth a complete and correct list
of each (i) customer (or related group of customers) with whom the Company or
any of its Subsidiaries did $25,000 or more of business during the last fiscal
year, (ii) supplier (or related group of suppliers) with whom the Company or any
of its Subsidiaries did $25,000 or more of business during the last fiscal year,
and (iii) agent (or related group of agents) or representative (or related group
of representatives) who was paid $25,000 or more by the Company and its
Subsidiaries during the last fiscal year, respectively, which lists itemize the
actual dollar amounts.
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(e) To the best knowledge of the Company and the Sellers, the
Company and each of its Subsidiaries has maintained and continues to maintain
good relations with its customers, suppliers and agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on
Schedule 3.18, neither the Company nor any of its Subsidiaries nor any employee,
agent or other person acting on the Company's or any of its Subsidiaries'
behalf, including, but not limited to, any Seller, has, directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
competitor or governmental employee or official (domestic or foreign) (i) that
would subject the Company or its any of its Subsidiaries to any damage or
penalty in any civil, criminal or governmental litigation or proceeding or (ii)
that, if not given in the past, would have had a material adverse effect on the
Condition of the Company or any of its Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since January 1, 1994 and there are no agreements or
understandings now in effect between the Company and any Seller or Related
Party. Schedule 3.19 also (i) states the amounts due from the Company (or any of
its Subsidiaries) to any Seller or Related Party and the amounts due from any
Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since January 1, 1994. After the Closing,
there will be no obligations or other liabilities between each of the Company
and any of its Subsidiaries, on the one hand, and any Seller or Related Party,
on the other hand, other than pursuant to this Agreement and the Transactions
contemplated hereby. "RELATED PARTY" means the Company and each of its
Subsidiaries and Affiliates, including but not limited to each of the Sellers
and any member of the immediate family of any of the Sellers; and "AFFILIATE"
means, in respect of any specified Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
specified Person or if such specified Person bears a familial relationship with
such other Person.
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 3.21, the
accounts receivable of the Company as reflected in the Balance Sheet, to the
extent uncollected on the date of this Agreement, and the accounts receivable
reflected on the books of the Company are, on the basis of existing facts, valid
and existing and fully collectible (except for a reserve of $50,000) within one
year from the Closing Date, represent monies due for goods sold and delivered or
services rendered, and (subject to the aforesaid reserve) are subject to no
refunds or other adjustments (except discounts for prompt payment given in the
ordinary course of business) and to no defenses, rights of setoff, assignments,
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restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof. The Company has never factored any of its accounts
receivable.
3.22 INVENTORIES. The inventories reflected in the Balance Sheet were,
and those reflected on the books of the Company since such date have been,
determined and valued in accordance with generally accepted accounting
principles applied on a consistent basis as reflected in the consolidated
balance sheet, and existed on the respective dates. The inventories of the
Company consist of items which are good and merchantable, and are of a quality
and quantity presently usable or salable in the ordinary course of business.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies during the past
five years (other than worker's compensation claims). The Company (together with
its Subsidiaries) has to the best knowledge of the Company and the Sellers
adequate liability and other insurance policies insuring it against the risks of
loss arising out of or related to its assets and business. Without limitation,
as to the tangible real and personal property of the Company and its
Subsidiaries, the Company reasonably believes that such insurance is adequate to
cover the full replacement cost, less deductible amounts, of such tangible real
and personal property. Schedule 3.23 is a complete and correct list of all
insurance currently in place and accurately sets forth the coverages, deductible
amounts, carriers and expiration dates thereof. Schedule 3.23 is a complete and
correct list of all insurance with respect to which the policy period has
expired, but for which certain of the coverage years are still subject to audit
or retrospective adjustment by the carrier, and accurately sets forth such
coverage years and the coverages, deductible amounts, carriers and expiration
dates thereof. To the best knowledge of the Company and the Sellers there are no
outstanding requirements or recommendations by any insurance company that issued
any policy of insurance to the Company or any of its Subsidiaries or by any
board of or by any governmental authority exercising similar functions that
require or recommend any changes in the conduct of the business of the Company
or its Subsidiaries or any repairs or other work to be done on or with respect
to any of the Company's or any of its Subsidiaries' assets. Except as set forth
on Schedule 3.23, no notice or other communication has been received by the
Company or its Subsidiaries from any insurance company within the five years
preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of its insurance
policies, and, to the knowledge of the Sellers and the Company, no such
cancellation, amendment or increase of premiums is threatened.
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
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safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, to the best
knowledge of the Company and the Sellers, neither the Company nor any of its
Subsidiaries has used, stored, treated, transported, manufactured, refined,
handled, produced or disposed of any Hazardous Materials on, under, at, from, or
in any way affecting, any of their properties or assets, or otherwise, in any
manner which at the time of the action in question violated any Environmental
Law, governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials and to the
best of the Company's and the Sellers' knowledge, no prior owner of such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
(b) To the best of the Company's and Sellers' knowledge (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the business or condition (financial or otherwise)
of the Company or any of its Subsidiaries, and (ii) no claims have been made
against the Company or any of its Subsidiaries during the past five years and no
presently outstanding citations or notices have been issued against the Company
or any of its Subsidiaries, where such could reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
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Subsidiaries, which in either case have been or are imposed by reason of or
based upon any provision of any Environmental Law, including, without
limitation, any such obligations or liabilities relating to or arising out of or
attributable, in whole or in part, to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation or handling of any Hazardous
Materials by the Company or any of its Subsidiaries, or any of their employees,
agents, representatives or predecessors in interest in connection with or in any
way arising from or relating to the Company or any of its Subsidiaries or any of
their respective properties, or relating to or arising from or attributable, in
whole or in part, to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of any such substance, by any
other Person at or on or under any of the real properties owned or used by the
Company or any of its Subsidiaries or any other location where such could have a
materially adverse effect on the business or condition (financial or otherwise)
of the Company (or any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. Except as
set forth on Schedule 3.27, the Company (together with its consolidated
Subsidiaries) owns or leases all of the machinery, equipment, vehicles,
furniture, fixtures, leasehold improvements, repair parts, tools and other
property (collectively, the "PERSONAL PROPERTY") used by or relating to the
Company or its Subsidiaries. All such Personal Property is in good operating
condition and sufficient to carry on the business of the Company and its
Subsidiaries in the normal course as it is presently conducted and is free from
defects, whether patent or latent. Except as set forth in Schedule 3.27, it is
not necessary for the Company or any of its Subsidiaries to acquire or obtain
the use of any additional personal property to carry on its business as
presently and foreseeably to be conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
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consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and general equitable principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of EMKT or Top Team; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any governmental
or regulatory body, agency or authority applicable to EMKT or Top Team or by
which either of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
EMKT or Top Team or any of their Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which
EMKT or Top Team or any of their Subsidiaries is a party, or by which they or
their respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations, conditions
(financial or otherwise) or prospects of EMKT and its Subsidiaries taken as a
whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Preferred Stock, par value $0.001 per share ("PREFERRED
STOCK"). As of the date of this Agreement, (i) 100 shares of Top Team Stock and
no shares of Preferred Stock have been issued, and options to purchase 2,200,000
shares of Top Team Stock have been reserved for issuance pursuant to options
that have been or are to be granted under Top Team stock incentive plans. Except
as set forth on Schedule 4.5, in Section 5.5 and in this Section 4.5, there are
not as of the date hereof, and as of the Closing Date there will not be, any
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to any other shares of
capital stock of Top Team, pursuant to which Top Team is or may become obligated
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to issue shares of capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of the
capital stock of Top Team. Top Team and EMKT have entered into letters of intent
or agreements to acquire five other companies in the interactive architecture
business identified on Schedule 4.5 (together with the Transactions, the
"ROLL-UP"). Schedule 4.5 sets forth the PRO FORMA capitalization of Top Team
following the Roll-Up and the contribution by EMKT to the capital of Top Team of
certain property, as described in Section 5.5.
4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by the EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
4.10 TAX STATUS. Neither EMKT nor Top Team has taken any action that
would cause the Purchase not to qualify as an installment sale for federal
income tax purposes or to cause the Exchange not to qualify as a tax-free
contribution to capital under Section 351 of the Code.
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ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its Subsidiaries to, upon reasonable notice,
afford EMKT and Top Team, and their respective counsel, accountants and other
authorized representatives, full access during normal business hours to the
properties, books and records of the Company and its Subsidiaries in order that
they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; such investigation shall
not, however, affect the representations and warranties made by the Company in
this Agreement. The Company acknowledges and agrees that Top Team's auditors
will be performing an audit of the Company's financial statements (the "AUDIT"),
and will provide all information and documents and cooperate in any way so as to
permit the Audit to be completed promptly. The Company agrees to cause its
officers and employees to furnish such additional financial and operating data
and other information and respond to such inquiries as EMKT and Top Team shall
from time to time request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or Schedule 5.2 or
otherwise consented to or approved in writing by EMKT (which consent shall not
be unreasonably withheld, delayed or conditioned), during the period commencing
on the date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business and will use their best efforts to preserve intact their respective
business organization, keep available the services of their officers and
employees and maintain satisfactory relationships with licensers, suppliers,
distributors, clients and others having business relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Certificate of Incorporation or By-Laws
(or comparable governing documents); (ii) issue or sell any shares of its
capital stock (other than in connection with the exercise of Company Options
outstanding on the date hereof) or any of its other securities, or issue any
securities convertible into, or options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of, any shares of its capital stock or any of its other
securities, or make any other changes in its capital structure; (iii) declare,
pay or make any dividend or other distribution or payment with respect to, or
split, redeem or reclassify, any shares of its capital stock; (iv) enter into
any contract or commitment, except for contracts in the ordinary course of
business, including without limitation, any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities or release or relinquish any material contract rights; (v) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
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(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices, except that the Company may prepay its legal fees in connection with
the Transactions to the extent they do not exceed the amount set forth in
Section 9.1(a); (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries; (viii) authorize
capital expenditures in excess of the amount currently budgeted therefor; (ix)
permit any insurance policy naming the Company or any Subsidiary as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; (x) amend any employee or nonemployee benefit plan
or program, employment agreement, license agreement or retirement agreement, or
pay any bonus or contingent compensation, except in each case in the ordinary
course of business consistent with past practice prior to the date of this
Agreement; (xi) agree, in writing or otherwise, to take any of the foregoing
actions; or (xii) agree to the settlement of any litigation;
(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective commercially reasonable best efforts to take, or cause to be taken,
all appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions, including, without limitation, their respective best
efforts to obtain, prior to the Closing Date, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company and its Subsidiaries as are necessary
for consummation of the Transactions and to fulfill the conditions to the
Transactions; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its Subsidiaries in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of EMKT and Top Team (which shall not be
unreasonably withheld or delayed).
5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
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representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly communicate to EMKT and
Top Team the terms of any proposal or inquiry that it may receive in respect of
any such transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with the Company.
5.5 EMKT CONTRIBUTION TO TOP TEAM CAPITAL. Simultaneously with the
Closing, EMKT shall contribute $2,000,000 in cash to the capital of Top Team in
exchange for (i) 250,000 shares of Top Team Stock, 250,000 shares of Top Team
Preferred Stock, having the powers, preferences and rights set forth in Schedule
5.5, and (ii) rights, expiring on the six-month anniversary of the Closing Date,
to purchase 3,600,000 shares of Top Team Stock at a purchase price of $7.50 per
share.
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
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(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) EMPLOYMENT AGREEMENT. Gregory de Vries shall have entered
into an employment agreement with Top Team in form and substance reasonably
satisfactory to Top Team;
(d) LEGAL OPINION. EMKT and Top Team shall have received an
opinion of Landels, Ripley & Diamond, counsel to the Company, in form and
substance reasonably acceptable to EMKT and Top Team;
(e) JOINDER AGREEMENTS. Each Optionee shall have executed a
Joinder Agreement in form and substance reasonably satisfactory to EMKT; and
(f) LEASES. The leases of real property between the Company
and Gregory de Vries shall have been amended (i) to reduce the terms thereof to
not greater than five years from the Closing Date, to allow for an annual base
rental increase of three percent per annum and, with respect to the lease of the
property at 267 Campbell Avenue, Campbell, California, to reduce the leased
premises to the top floor thereof.
(g) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS.
The obligations of the Company and the Sellers to effect the Transactions are
also subject to the satisfaction or waiver, on or prior to the Closing Date, of
each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date;
(c) STOCK INCENTIVE PLAN. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up to 300,000 shares of Top Team stock for
issuance to former employees of the Company pursuant to such plan;
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(d) REGISTRATION RIGHTS. Top Team and Sellers shall have
entered into an agreement regarding registration rights for the Purchase
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof. EMKT and Sellers shall
have entered into an agreement regarding registration rights for the Exchange
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof;
(e) LEGAL OPINION. The Company and the Seller shall have
received an opinion of Kaye, Scholer, Fierman, Hays & Handler, LLP, counsel to
EMKT and Top Team, in form and substance reasonably acceptable to the Company
and the Sellers; and
(f) INDEMNITY AGREEMENT. Top Team and Gregory de Vries shall
have entered into an indemnity agreement with respect to certain obligations of
the Company personally guaranteed by Gregory de Vries.
6.4 CONDITIONS TO THE OPTION CLOSING. The respective obligations of
EMKT and Top Team, on the one hand, and the Optionees, on the other hand, to
affect the Transactions are subject to the satisfaction or waiver (subject to
applicable law) on or prior to the Option Closing Date of each of the following
conditions:
(a) CLOSING. The Closing shall have occurred; and
(b) SECURITIES LAWS. The Purchase and Exchange with respect to
the Optionee's Company Stock shall have been registered and qualified or exempt
from registration and qualification under the Securities Act, the California Law
and any applicable securities or "blue sky" law. EMKT, Top Team, the Company and
the Sellers shall use their commercially reasonable best efforts to obtain such
registration and qualification. The costs and expenses thereof shall be borne by
EMKT and Top Team.
ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned, at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within
six months after the date of this Agreement or there has been a material breach
of any representation, warranty, obligation, covenant or agreement set forth in
this Agreement on the part of the other party;
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(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team, the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller, for a period of three
years from the date hereof, shall severally and not jointly, indemnify and hold
harmless EMKT and Top Team and each of their affiliates, directors, officers,
employees, attorneys, agents and representatives (collectively, the "AFFILIATED
PARTIES") in respect of any and all claims, losses, damages, liabilities,
declines in value, penalties, interest, costs and expenses (including, without
limitation, any attorneys', accountants' and consultants' fees and other
expenses) reasonably incurred by EMKT or Top Team or their respective Affiliated
Parties, together with interest on cash disbursements in connection therewith,
at an annual rate equal to the prime rate as reported from time to time by Bank
of America NT & SA (the "PRIME RATE") then in effect, from the date such cash
disbursements were made by EMKT or Top Team or any of their Affiliated Parties
until paid by such Seller, in connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Article II or III of this Agreement;
(b) Any misrepresentation contained in any written statement
or certificate furnished by such Seller individually pursuant to this Agreement
or in connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
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No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder relating back to the
first dollar.
8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of three years from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Subject to Section 8.4 hereof, any breach of any
representation or warranty made by the Sellers or the Company in Article III of
this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any written statement
or certificate furnished by Sellers and/or the Company pursuant to this
Agreement or in connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder relating back to the first dollar.
8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of three years from the Closing Date, jointly and severally, indemnify
and hold harmless each of Sellers in respect of any and all claims, losses,
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
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(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT or Top Team for all claims
hereunder relating back to the first dollar.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis EMKT and Top Team against all Taxes of the Company (together with its
consolidated Subsidiaries) for all taxable periods ending on or before the date
hereof or otherwise attributable to the operations, transactions, assets, or
income of the Company or its Subsidiaries prior to the date hereof, together
with any expenses (including, without limitation, settlement costs and any
legal, accounting and other expenses) incurred in connection with the
contesting, collection or assessment of such Taxes, and together with interest
at an annual rate equal to the Prime Rate then in effect, but not for losses due
to any action or inaction taken or required to be taken by EMKT or Top Team
hereunder. Notwithstanding Sections 8.1 and 8.2, the Sellers' obligation to
indemnify EMKT and Top Team pursuant to this Section 8.4 shall continue until 90
days after all applicable statutes of limitations have expired. For purposes of
this Section 8.4, the term "AFTER-TAX BASIS" means determined after giving
effect to (i) the receipt by the indemnified party of such payment, if such
receipt is taxable and (ii) any tax deduction available on account of the
payment of such Taxes; and assuming that Taxes are payable at a combined
effective rate of 45% of taxable income.
8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
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indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, Top Team or any of its Subsidiaries, then
such indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, Top Team or any of their respective
Subsidiaries for any taxable period ending after the date hereof without the
express written consent of EMKT, Top Team or such affected Subsidiary, which
consent will not be unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire on the third anniversary hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such third anniversary and identified as a
claim for indemnification pursuant to this Agreement or (ii) as to any matter
that is based upon willful fraud by the indemnifying party, until such time as
such claims and matters are resolved.
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ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that Top Team shall reimburse the Sellers for the reasonable fees and
costs of their counsel, not to exceed $20,000, and the Sellers will pay for the
amount in excess thereof.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a wilful and material breach of the representations or
warranties of EMKT or Top Team or a wilful failure of EMKT or Top Team to
fulfill a material covenant or contained herein, then, in the case of clause (i)
or (ii) above, the Company shall, within two days after the first of such events
has occurred, pay EMKT a fee in lieu of reimbursement for such expenses equal to
$40,000 plus the actual costs of the Audit.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT, Top Team or Sub, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
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in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
Devries Data Systems, Inc.
267 East Campbell Avenue, Suite 200
Campbell, California 95008
Attention: President
Fax: 408-866-8136
with a copy to:
Landels, Ripley & Diamond
350 The Embarcadero
Hills Plaza
San Francisco, California 94105-1250
Attention: Stanford Mattews, Esq.
(b) if to any Seller to his, her or its address on the
signature pages hereof
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
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or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
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policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers (if
applicable) hereunto duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ ROBERT M. WALLACE
------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ ROBERT M. WALLACE
-----------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
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THE COMPANY: DEVRIES DATA SYSTEMS, INC.
By: /s/ GREGORY de VRIES
-----------------------------------
Gregory de Vries
President
SELLERS: /s/ GREGORY de VRIES
--------------------------------------
Gregory de Vries
Address:
267 East Campbell Avenue, Suite 200
Campbell, California 95008
Fax: 408-866-8136
35
Execution Copy
================================================================================
STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.,
MUCCINO DESIGN GROUP, INC.
AND
THE SELLERS IDENTIFIED HEREIN
Dated as of November 10, 1999
================================================================================
1
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C> <C>
ARTICLE I THE TRANSACTIONS AND RELATED MATTERS.....................................................................1
1.1 Purchase and Exchange....................................................................................1
1.2 Contribution.............................................................................................1
1.3 Stock Certificates.......................................................................................2
1.4 Stock Option and Other Plans.............................................................................3
1.5 Tax Consequences.........................................................................................3
1.6 Closing ............................................................................................3
1.7 Certificate of Incorporation of Top Team.................................................................3
1.8 By-Laws of Top Team......................................................................................4
1.9 Directors and Officers of Top Team.......................................................................4
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY..................................................................................4
2.1 Authorization............................................................................................4
2.2 Ownership of Stock.......................................................................................4
2.3 Consents and Approvals...................................................................................4
2.4 Securities Matters.......................................................................................5
2.5 Brokerage Fees...........................................................................................5
2.6 Disclosure ............................................................................................6
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE
SELLERS..................................................................................................6
3.1 Due Organization, Good Standing and Corporate Power......................................................6
3.2 Authorization and Validity of Agreement..................................................................6
3.3 Capitalization...........................................................................................7
3.4 Consents and Approvals; No Violations....................................................................7
3.5 Company Reports and Financial Statements.................................................................8
3.6 Absence of Certain Changes...............................................................................8
3.7 Minute Books ............................................................................................9
3.8 Title to Properties; Encumbrances........................................................................9
3.9 Compliance with Laws.....................................................................................9
3.10 Litigation ............................................................................................9
3.11 Employee Benefit Plans..................................................................................10
3.12 Employment Relations and Agreements.....................................................................12
3.13 Client Relations........................................................................................12
3.14 Taxes ...........................................................................................12
3.15 Liabilities ...........................................................................................13
3.16 Intellectual Properties.................................................................................13
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3.17 Material Contracts and Relationships....................................................................14
3.18 Absence of Certain Business Practices...................................................................15
3.19 Transactions with Related Parties.......................................................................16
3.20 Broker's or Finder's Fee................................................................................16
3.21 Accounts Receivable.....................................................................................16
3.22 Inventories ...........................................................................................16
3.23 Insurance ...........................................................................................16
3.24 No Powers of Attorney or Suretyships....................................................................17
3.25 Banking Facilities......................................................................................17
3.26 Environmental Liabilities...............................................................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM....................................................................................19
4.1 Due Organization; Good Standing and Corporate Power.....................................................19
4.2 Authorization and Validity of Agreement.................................................................19
4.3 Consents and Approvals; No Violations...................................................................19
4.4 EMKT Reports and Financial Statements...................................................................20
4.5 Capitalization..........................................................................................20
4.6 Absence of Certain Changes..............................................................................20
4.7 Compliance with Laws....................................................................................20
4.8 Liabilities ...........................................................................................21
4.9 Litigation ...........................................................................................21
ARTICLE V ACTIONS PRIOR TO CLOSING DATE...........................................................................21
5.1 Access to Information Concerning Properties and Records.................................................21
5.2 Conduct of the Business of the Company Pending the Closing Date.........................................21
5.3 Best Efforts ...........................................................................................22
5.4 No Solicitation of Other Offers.........................................................................23
5.5 EMKT Contribution to Top Team Capital...................................................................23
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS....................................................................23
6.1 Conditions Precedent to Obligations of EMKT, Top Team
and the Company and the Sellers.........................................................................23
6.2 Conditions Precedent to Obligations of EMKT
and Top Team ...........................................................................................24
6.3 Conditions Precedent to Obligation of the Company
and the Sellers.........................................................................................24
ARTICLE VII TERMINATION AND ABANDONMENT.............................................................................25
7.1 Termination ...........................................................................................25
7.2 Effect of Termination...................................................................................26
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ARTICLE VIII INDEMNIFICATION.........................................................................................26
8.1 Indemnification by Sellers..............................................................................26
8.2 Indemnification by Sellers Jointly and Severally........................................................27
8.3 Indemnification by EMKT and Top Team....................................................................27
8.4 Indemnification by Sellers for Tax Liabilities..........................................................28
8.5 Claims for Indemnification..............................................................................28
8.6 Defense Claims..........................................................................................28
8.7 Manner of Indemnification...............................................................................29
8.8 Limitations on Indemnification..........................................................................29
ARTICLE IX MISCELLANEOUS...........................................................................................30
9.1 Fees and Expenses.......................................................................................30
9.2 Representations and Warranties..........................................................................30
9.3 Extension; Waiver.......................................................................................30
9.4 Public Announcements....................................................................................30
9.5 Notices ...........................................................................................30
9.6 Entire Agreement........................................................................................32
9.7 Binding Effect; Benefit; Assignment.....................................................................32
9.8 Amendment and Modification..............................................................................32
9.9 Further Actions.........................................................................................32
9.10 Headings ...........................................................................................32
9.11 Counterparts ...........................................................................................32
9.12 Applicable Law..........................................................................................32
9.13 Severability ...........................................................................................32
9.14 "Person" Defined........................................................................................33
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT, dated as of November
10, 1999 (this "Agreement"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"),
MUCCINO DESIGN GROUP, INC., a California corporation (the "COMPANY"), and each
of the other persons identified under the heading "Sellers" on the signature
pages of this Agreement (together, the "SELLERS"), and is made with reference to
the following facts:
A. The Sellers own all of all of the issued and outstanding shares of
common stock ("COMPANY STOCK") of the Company.
B. EMKT wishes to acquire from the Sellers and the Optionees referred
to below an aggregate of 3,613 shares of Company Stock in exchange for an
aggregate of 100,000 shares of EMKT common stock, par value $0.001 per share
("EMKT STOCK"). Immediately after such exchange, EMKT and the Sellers will
contribute all of their Company Stock to Top Team in exchange for an aggregate
of 800,000 shares of common stock, par value $0.001 per share, of Top Team ("TOP
TEAM STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE. On the Closing Date (as defined in Section 1.6),
each of the Sellers shall sell, and shall cause each of the Optionees to sell,
to EMKT that number of shares of Company Stock set forth opposite such Seller's
or Optionee's name on Schedule 1.1 (the "PURCHASED COMPANY STOCK"), constituting
in the aggregate 40 percent of the number of outstanding shares of Company Stock
(on a fully diluted basis), for a consideration equal to that number of EMKT
shares set forth opposite such Seller's or Optionee's name on Schedule 1.1 (the
"PURCHASE CONSIDERATION"). The Purchase Consideration shall be payable on
January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the
purchase of the Purchased Company Stock as contemplated by Section 1.1 (i) EMKT
shall contribute the Purchased Company Stock to Top Team in exchange for 320,000
shares of Top Team Stock and (ii) each Seller and Optionee shall contribute to
Top Team all of his, her or its remaining Company Stock constituting in the
aggregate the remaining 60 percent of the outstanding shares of Company Stock
(on a fully diluted basis) in exchange for that number of shares of Top Team
Stock set forth opposite such Seller's or Optionee's name on Schedule 1.1, for
an aggregate of 480,000 shares of Top Team Stock. Such shares of Company Stock
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contributed to Top Team are referred to herein as the "CONTRIBUTED STOCK." Such
shares of Top Team Stock received by the Sellers and EMKT in exchange for the
Contributed Stock are referred to herein as the "EXCHANGE CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller and
Optionee shall deliver to EMKT certificates evidencing their respective shares
of Company Stock, which shall be Duly Endorsed. The term "DULY ENDORSED" means
duly endorsed by the person or persons in whose name a stock certificate is
registered in blank or accompanied by a duly executed stock assignment separate
from such certificate. Top Team will deliver to each Seller and EMKT on the
Closing Date duly issued and authenticated certificates evidencing the Exchange
Consideration issuable to such person pursuant to Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to Closing, accelerate the
vesting or exercisability of all outstanding employee stock options to purchase
Company Stock, whether set forth in any stock option plan or plans of the
Company ("COMPANY STOCK OPTION PLANS"), in an option agreement with the optionee
or otherwise. At the Closing, each such option (each, a "COMPANY OPTION")
granted by the Company to purchase shares of Company Stock that is outstanding
and unexercised immediately prior to the Closing Date shall be deemed to be
exercised, and the optionees thereunder (the "OPTIONEES") shall be deemed to be
Sellers for purposes of Article I and II of this Agreement. As required by
Section 6.2(e) hereof, the Seller shall cause each Optionee to deliver prior to
the Closing a joinder agreement whereby each such Optionee agrees to be bound by
the provisions of Articles I and II of this Agreement as if he or she were a
Seller hereunder (each, a "JOINDER AGREEMENT").
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary (collectively with the Company Stock Option Plans, the
"COMPANY STOCK INCENTIVE PLANS") shall terminate as of the Closing Date. The
Company will take all steps to ensure that neither the Company nor any of its
Subsidiaries is or will be bound by any Company Options, other options,
warrants, rights or agreements which would entitle any Person, other than EMKT,
Top Team or either of their affiliates, to own any capital stock of the Company
or any of its Subsidiaries or to receive any payment in respect thereof. The
Company will use its best efforts to obtain all necessary consents to ensure
that after the Effective Time, the only rights of the holders of Options to
purchase shares of Common Stock in respect of such Options will be to receive
the Purchase Consideration and Exchange Consideration in cancellation and
settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
Consideration , together with (i) the contributions to be made in connection
with the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution
of EMKT to Top Team referred to in Section 5.6, shall constitute a contribution
of capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
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1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock (the "PURCHASE") and the exchange of the Contributed
Stock for the Exchange Consideration (the "EXCHANGE") shall take place at the
offices of Kaye, Scholer, Fierman, Hayes & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Article VI is fulfilled or waived (subject
to applicable law) but in no event later than the fifth business day thereafter,
or at such other time and place and on such other date as EMKT, Top Team and the
Company shall mutually agree (the "CLOSING DATE").
1.7 CERTIFICATE OF INCORPORATION OF TOP TEAM. The Certificate of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM.. The By-Laws of Top Team, as in effect as
of the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date,
the directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and
such additional directors as shall be designated by Top Team, each to hold
office, subject to the applicable provisions of the Certificate of Incorporation
and By-Laws of Top Team, until the next annual stockholders' meeting of Top Team
and until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to
enter into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of
the Company Stock set forth below such Seller's name on Schedule I, free and
clear of any liens, encumbrances, pledges, security interests, restrictions,
prior assignments and claims of any kind or nature whatsoever. Upon consummation
of the Exchange, Top Team shall be the owner, beneficially and of record, of all
of the outstanding shares of capital stock of the Company, free and clear of any
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liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been obtained, made and satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not be
registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller is (i) either an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act, (ii) a "qualified
purchaser" within the meaning of Section 25102(n)(2) of the California Law or
(iii) either alone or with his or her purchaser representative (within the
meaning of Rule 501(h) of Regulation D under the Securities Act), has such
knowledge and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of the Transactions; such Seller is
aware that the Merger Consideration constitutes "restricted," "letter" or
"investment" securities and such Seller by reason of his business or financial
experience has the capacity to protect his own interest in connection with the
Transactions; and
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(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without registration under the Securities Act and the California
Law, and any other applicable securities laws, or without an opinion of counsel
satisfactory to EMKT and Top Team that the transaction by which such shares are
proposed to be disposed of is exempt from the Securities Act, the California Law
and any other applicable securities laws, and acknowledges that EMKT and Top
Team will place a legend on the certificates representing such shares
substantially to such effect concerning these restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule 3.1
sets forth the name, state of incorporation or formation and equity ownership of
the Company in each corporation, partnership, joint venture, limited liability
company and other entity in which the Company owns all or a majority of the
equity interest or is required to be consolidated on the Company's balance sheet
pursuant to GAAP ("SUBSIDIARIES"). The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and each such corporation has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of operations,
condition (financial or otherwise) or prospects (the "CONDITION") of the Company
and its Subsidiaries taken as a whole.
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3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by it of the Transactions, have been duly authorized and approved by its Board
of Directors and no other corporate action on the part of the Company is
necessary to authorize the execution, delivery and performance of this Agreement
by the Company and the consummation of the Transactions (other than the approval
of this Agreement by the holders of a majority of the outstanding shares of
Company Stock and any other classes of capital stock entitled to vote thereon,
as required by the California General Corporation Law). This Agreement has been
duly executed and delivered by the Company and is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of common stock, constituting the Company. As of the date of
this Agreement 9,032 shares of Company Stock are issued and outstanding. All
issued and outstanding shares of Company Stock have been validly issued and are
fully paid and nonassessable, and are not subject to, nor were they issued in
violation of, any preemptive rights. Except as set forth in this Section 3.3 or
on Schedule 3.3, (i) there are no shares of capital stock of the Company
authorized, issued or outstanding and (ii) there are not as of the date hereof,
and on the Closing Date, there will not be, any outstanding or authorized
options, warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to Common Stock or any other shares of capital
stock of the Company, pursuant to which the Company is or may become obligated
to issue shares of Company Stock, any other shares of its capital stock or any
securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of the capital stock of the Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
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capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by the Sellers and the Company and the consummation by the
Sellers and the Company of the Transactions will not: (1) violate any provision
of the Articles of Incorporation, as amended, or By-Laws of the Company or any
of its Subsidiaries; (2) violate any statute, ordinance, rule, regulation, order
or decree of any court or of any governmental or regulatory body, agency or
authority applicable to such Seller or the Company or any of its Subsidiaries or
by which any of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party, or by
which it or any of their respective properties or assets may be bound, excluding
from the foregoing clauses (3) and (4) filings, notices, permits, consents and
approvals the absence of which, and violations, breaches, defaults, conflicts
and liens which, in the aggregate, would not have a material adverse effect on
the Condition of the Company and its Subsidiaries taken as a whole.
(a) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Certification of Incorporation or By-Laws, (ii) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except in the case of clauses (i) and (ii)
above for defaults or evaluations, which would not have a material adverse
effect on the Condition of the Company and the Subsidiaries taken as a whole.
3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheets as of the end of the fiscal year ended July 31, 1999 and the
consolidated statements of operations, consolidated statements of stockholders'
equity and consolidated statements of cash flow for the fiscal year ended July
31, 1999 previously delivered to EMKT, were prepared in accordance with
generally accepted accounting principles (as in effect in the United States from
time to time) applied on a consistent basis ("GAAP"), except as may be indicated
therein or in the notes or schedules thereto, and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the results of their operations and cash flows for
the periods then ended.
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3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since July 31, 1999 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
3.7 MINUTE BOOKS. The minute books of the Company and its Subsidiaries,
as previously made available to EMKT and its representatives, contain accurate
records of all meetings of and corporate actions or written consents by the
stockholders and Boards of Directors of the Company and its Subsidiaries since
December 31, 1995.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. The Company and each of its
Subsidiaries has good, valid and marketable title, or a valid leasehold interest
in, to (i) all its material tangible properties and assets (real and personal),
including, without limitation, all the properties and assets reflected in the
consolidated balance sheet as of December 31, 1998 delivered pursuant to Section
3.5 (the "BALANCE SHEET") except as indicated in the notes thereto and except
for properties and assets reflected in the balance sheet that have been sold or
otherwise disposed of in the ordinary course of business, and (ii) all the
tangible properties and assets purchased by the Company and any of its
Subsidiaries since the Balance Sheet Date except for such properties and assets
which have been sold or otherwise disposed of in the ordinary course of
business; in each case subject to no encumbrance, lien, charge or other
restriction of any kind or character, except for (1) liens reflected in the
Balance Sheet, (2) liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract from
the value of, or impair the use of, such property by the Company or any of its
Subsidiaries in the operation of its respective business and (3) liens for
current taxes, assessments or governmental charges or levies on property not yet
due and delinquent.
3.9 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries are
in compliance with all applicable laws, regulations, orders, judgments and
decrees except where the failure to so comply would not have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Company any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge, information
and belief of the Company, threatened, against or affecting the Company or any
of its Subsidiaries, or any of their properties or rights which could have a
material adverse effect on the Condition of the Company and its Subsidiaries
8
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taken as a whole. There are no such suits, actions, claims, proceedings or
investigations pending or, to the best knowledge, information and belief of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, neither the Company nor any of its Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could have a material adverse effect on the Condition of the Company and
its Subsidiaries taken as a whole or on the ability of the Company or any
Subsidiary to conduct its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Company or any of its Subsidiaries (including, for this
purpose and for the purpose of all of the representations in this Section 3.11,
all employers (whether or not incorporated) which by reason of common control
are treated together with the Company as a single employer within the meaning of
Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
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made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and Top Team.
(d) RELATIONSHIP OF ACCRUED BENEFITS TO PENSION PLAN ASSETS.
As of September 30, 1999 (1) the aggregate current value of all accrued benefits
(based upon actuarial assumptions which have been furnished to and relied upon
by EMKT and Top Team) under all Employee Benefit Plans which are subject to
Title IV of ERISA and which are Single Employer Plans (as defined in Section
4001(a)(15) of ERISA) did not exceed the aggregate current value of all assets
of such Single Employer Plans allocable to such accrued benefits, and since
December 31, 1998 there has been (A) no material adverse change in the financial
condition of any Single Employer Plan, (B) no change in the actuarial
assumptions with respect to any Single Employer Plan and (C) no increase in
benefits under any Single Employer Plan as a result of plan amendments, change
in applicable law or otherwise, which individually or in the aggregate, would
create any such excess; and (2) using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of the Company and its Subsidiaries to all such Employee
Benefit Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
Multiemployer Plan ended prior to the date hereof, would not exceed $50,000.
There has been no material change in the financial condition of any
Multiemployer Plan or in any such actuarial assumption or computation method or
in benefits under any Multiemployer Plan as a result of collective bargaining or
otherwise since the close of each such fiscal year which, individually or in the
aggregate, would materially increase such liability.
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
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all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code and (2) Form 5500
for the most recently completed fiscal year for each Employee Benefit Plan
required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Each of the Company and
its Subsidiaries is in substantial compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice; (ii) no unfair labor practice complaint against the
Company or any of its Subsidiaries is pending before the National Labor
Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or involving the Company or any of its
Subsidiaries; (iv) no representation question exists respecting the employees of
the Company or any of its Subsidiaries; (v) no grievance which might have a
material adverse effect on the Condition of the Company and its Subsidiaries as
a whole or the conduct of their respective businesses exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefor has been asserted; (vi) no collective bargaining
agreement is currently being negotiated by the Company or any of its
Subsidiaries; and (vii) neither the Company nor any of its Subsidiaries has
experienced any material labor difficulty during the last three years. There has
not been, and to the best knowledge of the Company and the Sellers, there will
not be any change in relations with employees of the Company or any of its
Subsidiaries as a result of the Transactions that could have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
Except as disclosed in Schedule 3.12, there exist no employment, consulting,
severance or indemnification agreements between the Company and any director,
officer or employee of the Company or any agreement that would give any Person
the right to receive any payment from the Company as a result of the Purchase or
Exchange.
3.13 CLIENT RELATIONS. There has not been, and to the best knowledge,
information and belief of the Company, there will not be, any change in
relations with franchisees, customers or clients of the Company or any of its
Subsidiaries as a result of the Transactions that could have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries. Such returns and reports are true,
correct and complete in all material respects and reflect accurately all
liability for Taxes of the Company and its Subsidiaries for the periods covered
thereby. All federal, state, local and foreign Taxes (including interest and
penalties) payable by, or due from, the Company or any of its Subsidiaries have
been fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. No issue has been raised during
the past five years by any federal, state, local or foreign taxing authority
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that, if raised with respect to any other period not so examined, could
reasonably be expected to result in a proposed deficiency for any other period
not so examined. The federal income tax liability of the Company and its
Subsidiaries has been finally determined for all fiscal years to and including
the fiscal year ended December 31, 1998. No examination of any Tax Return of the
Company or any of its Subsidiaries is currently in progress. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any Tax Return of the Company or any of its Subsidiaries. Neither
the Company nor any of its Subsidiaries is party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code.
The Company and each of its Subsidiaries have complied (and until the Closing
will comply) in all material respects with all applicable laws, rules and
regulations relating to the payment and withholding of taxes (including, without
limitation, withholding of taxes pursuant to Sections 1441 and 1442 of the Code
or similar provisions under any foreign laws) and have, within the time and in
the manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws. For purposes of this Section 3.14, the term
"TAXES" means all taxes, charges, fees, levies or other assessments, including
without limitation income, gross receipts, excise, property, sales, transfer,
license, payroll, withholding, capital stock and franchise taxes, imposed by the
United States or any state, local or foreign government or subdivision or agency
thereof, including any interest, penalties or additions thereto; and "TAX
RETURN" means any report, return or other information or document required to be
supplied to a taxing authority in connection with taxes.
3.15 LIABILITIES. Neither the Company nor any of its Subsidiaries has
any outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in the Balance Sheet or
referred to in the footnotes thereto, other than liabilities incurred subsequent
to the Balance Sheet Date in the ordinary course of business not involving
borrowings by the Company. Neither the Company nor any of its Subsidiaries is in
default in respect of the material terms and conditions of any indebtedness or
other agreement.
3.16 INTELLECTUAL PROPERTIES. In the operation of its business the
Company and its Subsidiaries have used, and currently use, domestic and foreign
patents, patent applications, patent licenses, software licenses, knowhow
licenses, trade names, trademarks, copyrights, unpatented inventions, service
marks, trademark registrations and applications, service mark registrations and
applications, copyright registrations and applications, trade secrets and other
confidential proprietary information (collectively the "INTELLECTUAL PROPERTY").
Schedule 3.16 contains an accurate and complete list of all Intellectual
Property which is of material importance to the operation of the business of the
Company or any of its Subsidiaries. Unless otherwise indicated in Schedule 3.16
the Company (or the Subsidiary indicated) owns the entire right, title and
interest in and to the Intellectual Property listed on Schedule 3.16 used in the
operation of its business (including, without limitation, the exclusive right to
use and license the same) and each item constituting part of the Intellectual
Property which is owned by the Company or a Subsidiary and listed on Schedule
3.16 has been, to the extent indicated in Schedule 3.16, duly registered with,
filed in or issued by, as the case may be, the United States Patent and
Trademark Office or such other government entities, domestic or foreign, as are
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indicated in Schedule 3.16 and such registrations, filings and issuances remain
in full force and effect. To the best knowledge of the Company and the Sellers,
except as stated in such Schedule 3.16, there are no pending or threatened
proceedings or litigation or other adverse claims affecting or with respect to
the Intellectual Property. Schedule 3.16 lists all notices or claims currently
pending or received by the Company or any of its Subsidiaries during the past
two years which claim infringement, contributory infringement, inducement to
infringe, misappropriation or breach by the Company or any of its Subsidiaries
of any domestic or foreign patents, patent applications, patent licenses and
know-how licenses, trade names, trademark registrations and applications,
service marks, copyrights, copyright registrations or applications, trade
secrets or other confidential proprietary information. Except as set forth in
Schedule 3.16 hereto, there is, to the best knowledge, information and belief of
the Company, no reasonable basis upon which a claim may be asserted against the
Company or any of its Subsidiaries, for infringement, contributory infringement,
inducement to infringe, misappropriation or breach of any domestic or foreign
patents, patent applications, patent licenses, know-how licenses, trade names,
trademark registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
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(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries. There are no material
liabilities of any party to any Material Contract arising from any breach or
default of any provision thereof and no event has occurred that, with the
passage of time or the giving of notice or both, would constitute a breach or
default by any party thereto.
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, (ii) supplier (or related group of suppliers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, and (iii) agent (or related group of agents) or representative (or
related group of representatives) who was paid $25,000 or more by the Company
and its Subsidiaries during the last fiscal year, respectively, which lists
itemize the actual dollar amounts.
(e) The Company and each of its Subsidiaries has maintained
and continues to maintain good relations with its customers, suppliers and
agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor
any of its Subsidiaries nor any employee, agent or other Person acting on the
Company's or any of its Subsidiaries' behalf, including, but not limited to, any
Seller, has, directly or indirectly, given or
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agreed to give any gift or similar benefit to any customer, supplier, competitor
or governmental employee or official (domestic or foreign) (i) that would
subject the Company or its any of its Subsidiaries to any damage or penalty in
any civil, criminal or governmental litigation or proceeding or (ii) that, if
not given in the past, would have had a material adverse effect on the Condition
of the Company or any of its Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since January 1, 1994 and there are no agreements or
understandings now in effect between the Company and any Seller or Related
Party. Schedule 3.19 also (i) states the amounts due from the Company (or any of
its Subsidiaries) to any Seller or Related Party and the amounts due from any
Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since January 1, 1994. After the Closing,
there will be no obligations or other liabilities between each of the Company
and any of its Subsidiaries, on the one hand, and any Seller or Related Party,
on the other hand, other than pursuant to this Agreement and the Transactions
contemplated hereby. "RELATED PARTY" means the Company and each of its
Subsidiaries and Affiliates, including but not limited to each of the Sellers
and any member of the immediate family of any of the Sellers; and "AFFILIATE"
means, in respect of any specified Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
specified Person or if such specified Person bears a familial relationship with
such other Person.
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable of the Company as
reflected in the Balance Sheet, to the extent uncollected on the date of this
Agreement, and the accounts receivable reflected on the books of the Company
are, on the basis of existing facts, valid and existing and fully collectible
(except for a reserve of $ 25,000) within one year from the Closing Date,
represent monies due for goods sold and delivered or services rendered, and
(subject to the aforesaid reserve) are subject to no refunds or other
adjustments (except discounts for prompt payment given in the ordinary course of
business) and to no defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions enforceable by third parties on or affecting any
thereof. The Company has never factored any of its accounts receivable.
3.22 INVENTORIES. The inventories reflected in the Balance Sheet were,
and those reflected on the books of the Company since such date have been,
determined and valued in accordance with generally accepted accounting
principles applied on a consistent basis as reflected in the Balance Sheet, and
existed on the respective dates. The inventories of the Company consist of items
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which are good and merchantable, and are of a quality and quantity presently
usable or salable in the ordinary course of business.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies during the past
five years (other than worker's compensation claims). The Company (together with
its Subsidiaries) has adequate liability and other insurance policies insuring
it against the risks of loss arising out of or related to its assets and
business. Without limitation, as to the tangible real and personal property of
the Company and its Subsidiaries, such insurance is adequate to cover the full
replacement cost, less deductible amounts, of such tangible real and personal
property. Schedule 3.23 is a complete and correct list of all insurance
currently in place and accurately sets forth the coverages, deductible amounts,
carriers and expiration dates thereof. Schedule 3.23 is a complete and correct
list of all insurance with respect to which the policy period has expired, but
for which certain of the coverage years are still subject to audit or
retrospective adjustment by the carrier, and accurately sets forth such coverage
years and the coverages, deductible amounts, carriers and expiration dates
thereof. There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance to the Company or any of
its Subsidiaries or by any board of or by any governmental authority exercising
similar functions that require or recommend any changes in the conduct of the
business of the Company or its Subsidiaries or any repairs or other work to be
done on or with respect to any of the Company's or any of its Subsidiaries'
assets. Except as set forth on Schedule 3.23, no notice or other communication
has been received by the Company or its Subsidiaries from any insurance company
within the five years preceding the date hereof canceling or materially amending
or materially increasing the annual or other premiums payable under any of its
insurance policies, and, to the best knowledge of the Sellers and the Company,
no such cancellation, amendment or increase of premiums is threatened.
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
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3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, neither the
Company nor any of its Subsidiaries has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
on, under, at, from, or in any way affecting, any of their properties or assets,
or otherwise, in any manner which at the time of the action in question violated
any Environmental Law, governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and to the best of the Company's and the Sellers' knowledge, no prior owner of
such property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
(b) To the best knowledge of the Company and the Sellers (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
Subsidiaries, and (ii) no claims have been made against the Company or any of
its Subsidiaries during the past five years and no presently outstanding
citations or notices have been issued against the Company or any of its
Subsidiaries, where such could reasonably be expected to have a materially
adverse effect on the Condition of the Company or any of its Subsidiaries, which
in either case have been or are imposed by reason of or based upon any provision
of any Environmental Law, including, without limitation, any such obligations or
liabilities relating to or arising out of or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any Hazardous Materials by the Company or any of
its Subsidiaries, or any of their employees, agents, representatives or
predecessors in interest in
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connection with or in any way arising from or relating to the Company or any of
its Subsidiaries or any of their respective properties, or relating to or
arising from or attributable, in whole or in part, to the manufacture,
processing, distribution, use, treatment, storage, disposal, transportation or
handling of any such substance, by any other Person at or on or under any of the
real properties owned or used by the Company or any of its Subsidiaries or any
other location where such could have a materially adverse effect on the business
or condition (financial or otherwise) of the Company (or any of its
Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. The Company
(together with its consolidated Subsidiaries) owns or leases all of the
machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property (collectively, the "PERSONAL PROPERTY")
used by or relating to the Company or its Subsidiaries. All such Personal
Property is in good operating condition and sufficient to carry on the business
of the Company and its Subsidiaries in the normal course as it is presently
conducted and is free from defects, whether patent or latent. Except as set
forth in Schedule 3.27, it is not necessary for the Company or any of its
Subsidiaries to acquire or obtain the use of any additional personal property to
carry on its business as presently and foreseeably to be conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of
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EMKT or Top Team; (2) violate any statute, ordinance, rule, regulation, order or
decree of any court or of any governmental or regulatory body, agency or
authority applicable to EMKT or Top Team or by which either of their respective
properties or assets may be bound; (3) except for any required securities
filings, require any filing with, or permit, consent or approval of, or the
giving of any notice to any governmental or regulatory body, agency or
authority; or (4) result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of EMKT, Top Team or any of their Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease or other instrument or obligation
to which EMKT or Top Team or any of their Subsidiaries is a party, or by which
they or their respective properties or assets may be bound, excluding from the
foregoing clauses (3) and (4) filings, notices, permits, consents and approvals
the absence of which, and violations, breaches, defaults, conflicts and liens
which, in the aggregate, would not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of operations,
conditions (financial or otherwise) or prospects of EMKT and its Subsidiaries
taken as a whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Preferred Stock, par value $0.001 per share ("PREFERRED
STOCK"). As of the date of this Agreement, (i) 100 shares of Top Team Stock and
no shares of Preferred Stock have been issued, and options to purchase 2,200,000
shares of Top Team Stock have been reserved for issuance pursuant to options
that have been or are to be granted under Top Team stock incentive plans. Except
as set forth on Schedule 4.5, in Section 5.5 and in this Section 4.5, there are
not as of the date hereof, and as of the Closing Date there will not be, any
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to any other shares of
capital stock of Top Team, pursuant to which Top Team is or may become obligated
to issue shares of capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of the
capital stock of Top Team. Top Team and EMKT have entered into letters of intent
or agreements to acquire five other companies in the interactive architecture
business identified on Schedule 4.5 (together with the Transactions, the
"ROLL-UP"). Schedule 4.5 sets forth the PRO FORMA capitalization of Top Team
following the Roll-Up and the contribution by EMKT to the capital of Top Team of
certain property, as described in Section 5.5.
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4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by the EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
4.10 TAX STATUS. Neither EMKT nor Top Team has taken any action that
would cause the Purchase not to qualify as an installment sale for federal
income tax purposes or to cause the Exchange not to qualify as a tax-free
contribution to capital under Section 351 of the Code.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its Subsidiaries to, upon reasonable notice,
afford EMKT and Top Team, and their respective counsel, accountants and other
authorized representatives, full access during normal business hours to the
properties, books and records of the Company and its Subsidiaries in order that
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they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; such investigation shall
not, however, affect the representations and warranties made by the Company in
this Agreement. The Company acknowledges and agrees that Top Team's auditors
will be performing an audit of the Company's financial statements (the "AUDIT"),
and will provide all information and documents and cooperate in any way so as to
permit the Audit to be completed promptly. The Company agrees to cause its
officers and employees to furnish such additional financial and operating data
and other information and respond to such inquiries as EMKT and Top Team shall
from time to time request. The Sellers acknowledge that as of the date hereof
the Audit has not been completed, and agree that if as a result of the Audit
there should result in a material adverse change in the Condition of the Company
from that shown in the financial statements delivered pursuant to Section 3.5,
then the parties shall negotiate in good faith in order to increase or decrease
the Consideration in order to equitably take into account such change of
Condition.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved in writing by EMKT, during the period commencing on the
date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business and will use their best efforts to preserve intact their respective
business organization, keep available the services of their officers and
employees and maintain satisfactory relationships with licensers, suppliers,
distributors, clients and others having business relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Articles of Incorporation or By-Laws (or
comparable governing documents); (ii) issue or sell any shares of its capital
stock (other than in connection with the exercise of Company Options outstanding
on the date hereof) or any of its other securities, or issue any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issuance or sale of,
any shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) declare, pay or make any dividend
or other distribution or payment with respect to, or split, redeem or
reclassify, any shares of its capital stock; (iv) enter into any contract or
commitment, except for contracts in the ordinary course of business, including
without limitation, any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
release or relinquish any material contract rights; (v) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices; (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries; (viii) authorize
capital expenditures in excess of the amount currently budgeted therefor; (ix)
permit any insurance policy naming the Company or any Subsidiary as a
beneficiary or a loss payee to be cancelled or
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terminated other than in the ordinary course of business; (x) amend any employee
or nonemployee benefit plan or program, employment agreement, license agreement
or retirement agreement, or pay any bonus or contingent compensation, except in
each case in the ordinary course of business consistent with past practice prior
to the date of this Agreement; (xi) agree, in writing or otherwise, to take any
of the foregoing actions; or (xii) agree to the settlement of any litigation;
(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective best efforts to take, or cause to be taken, all appropriate action,
and to make, or cause to be made, all filings necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, their respective best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its Subsidiaries as are necessary for
consummation of the Transactions and to fulfill the conditions to the
Transactions; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its Subsidiaries in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of EMKT and Top Team.
5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly
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communicate to EMKT and Top Team the terms of any proposal or inquiry that it
may receive in respect of any such transaction, or of any such information
requested from it or of any such negotiations or discussions being sought to be
initiated with the Company.
5.5 EMKT CONTRIBUTION TO TOP TEAM CAPITAL. Simultaneously with the
Closing, EMKT shall contribute $2,000,000 in cash to the capital of Top Team in
exchange for (i) 250,000 shares of Top Team Stock, 250,000 shares of Top Team
Preferred Stock, having the powers, preferences and rights set forth in Schedule
5.5, and (ii) rights, expiring on the six-month anniversary of the Closing Date,
to purchase 3,600,000 shares of Top Team Stock at a purchase price of $7.50 per
share.
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
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(c) EMPLOYMENT AGREEMENT. Alfredo Muccino shall have entered
into an employment agreement with Top Team in form and substance satisfactory to
Top Team;
(d) LEGAL OPINION. EMKT and Top Team shall have received an
opinion of Burriss & Monahan, counsel to the Company in form and substance
acceptable to EMKT and Top Team; and
(e) JOINDER AGREEMENTS. Each Optionee shall have executed a
Joinder Agreement in form and substance satisfactory to EMKT.
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(f) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY AND THE SELLERS.
The obligation of the Company and the Sellers to effect the Transactions is also
subject to the satisfaction or waiver, on or prior to the Closing Date, of each
of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date;
(c) STOCK INCENTIVE PLANS. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up to 48,000 shares of Top Team stock for
issuance to former employees of the Company pursuant to such plan;
(d) EMPLOYMENT AGREEMENT. Alfredo Muccino shall have entered
into an employment agreement with Top Team in form and substance satisfactory to
him;
(e) REGISTRATION RIGHTS. Top Team and Sellers shall have
entered into an agreement regarding registration rights for the Purchase
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof. EMKT and Sellers shall
have entered into an agreement regarding registration rights for the Exchange
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof; and
(f) LEGAL OPTION. The Company and the Sellers shall have
received an opinion of Kaye, Scholer, Fierman, Hays and Handler, LLP, counsel to
EMKT and Top Team, in form and substance acceptable to the Sellers.
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ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within
six months after the date of this Agreement or there has been a material breach
of any representation, warranty, obligation, covenant or agreement set forth in
this Agreement on the part of the other party;
(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team, or the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller shall severally and not
jointly, indemnify and hold harmless EMKT and Top Team and each of their
affiliates, directors, officers, employees, attorneys, agents and
representatives (collectively, the "AFFILIATED PARTIES") in respect of any and
all claims, losses, damages, liabilities, declines in value, penalties,
interest, costs and expenses (including, without limitation, any attorneys',
accountants' and consultants' fees and other expenses) reasonably incurred by
EMKT or Top Team or their respective Affiliated Parties, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
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prime rate as reported from time to time by Bank of America NT & SA (the "PRIME
RATE") then in effect, from the date such cash disbursements were made by EMKT
or Top Team or any of their Affiliated Parties until paid by such Seller, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Articles II or III of this Agreement;
(b) Any misrepresentation contained in any written statement
or certificate furnished by such Seller individually pursuant to this Agreement
or in connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder relating back to the
first dollar.
8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of three years from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Any breach of any representation or warranty made by the
Sellers or the Company in Article IV of this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any written statement
or certificate furnished by Sellers and/or the Company pursuant to this
Agreement or in connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
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No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder relating back to the first dollar.
8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of three years from the Closing Date, jointly and severally, indemnify
and hold harmless each of the Sellers in respect of any and all claims, losses,
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT, Top Team for all claims
hereunder relating back to the first dollar.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis EMKT and Top Team against all Taxes of the Company (together with its
consolidated Subsidiaries) for all taxable periods ending on or before the date
hereof or otherwise attributable to the operations, transactions, assets, or
income of the Company or its Subsidiaries prior to the date hereof or otherwise
attributable to consummation of the Transactions, together with any expenses
(including, without limitation, settlement costs and any legal, accounting and
other expenses) incurred in connection with the contesting, collection or
assessment of such Taxes, and together with interest at an annual rate equal to
the Prime Rate then in effect. Notwithstanding Sections 8.1 and 8.2, the
Sellers' obligation to indemnify EMKT and Top Team pursuant to this Section 8.4
shall continue until 90 days after all applicable statutes of limitations have
expired. For purposes of this Section 8.4, the term "AFTER-TAX BASIS" means
determined after giving effect to (i) the receipt by the indemnified party of
such payment, if such receipt is taxable and (ii) any tax deduction available on
account of the payment of such Taxes; and assuming that Taxes are payable at a
combined effective rate of 45% of taxable income.
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8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
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its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, Top Team or any of its Subsidiaries, then
such indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, Top Team or any of its Subsidiaries
for any taxable period ending after the date hereof without the express written
consent of EMKT, Top Team or such affected Subsidiary, which consent will not be
unreasonably withheld or delayed.
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8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire on the third anniversary hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such third anniversary and identified as a
claim for indemnification pursuant to this Agreement or (ii) as to any matter
that is based upon willful fraud by the indemnifying party, until such time as
such claims and matters are resolved.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that the Top Team shall reimburse the Sellers for the reasonable fees
and costs of their counsel, not to exceed $20,000.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a wilful and material breach of the representations or
warranties of EMKT, Top or Team or a wilful failure of EMKT or Top Team to
fulfill a material covenant or contained herein, then, in the case of clause (i)
or (ii) above, the Company shall, within two days after the first of such events
has occurred, pay EMKT a fee in lieu of reimbursement for such expenses equal to
$40,000.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT or Top Team, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
Mucccino Design Group, Inc.
448 South Market Street
San Jose, California 9513
Attention: President
Fax: 408-993-0864
(b) if to any Seller to its address on Schedule I
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
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or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
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9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers "hereunto
duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ Robert M. Wallace
--------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ Robert M. Wallace
--------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
THE COMPANY: MUCCINO DESIGN GROUP, INC.
By: /s/ Alfredo Muccino
--------------------------------------
Alfredo Muccino
President
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SELLERS:
----------------------------------------
Alfredo Muccino
Address:
c/oMucccino Design Group, Inc.
448 South Market Street
San Jose, California 9513
Fax: 408-993-0864
----------------------------------------
Kim Catanzero
Address:
c/oMucccino Design Group, Inc.
448 South Market Street
San Jose, California 9513
Fax: 408-993-0864
35
Execution Copy
================================================================================
STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.,
IMAGE NETWORK, INC.
AND
THE SELLERS IDENTIFIED HEREIN
Dated as of November 10, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I THE TRANSACTIONS AND RELATED MATTERS................1
1.1 Purchase and Exchange............................................1
1.2 Contribution.....................................................1
1.3 Stock Certificates...............................................2
1.4 Stock Option and Other Plans.....................................3
1.5 Tax Consequences.................................................3
1.6 Closing ....................................................3
1.7 Certificate of Incorporation of Top Team.........................3
1.8 By-Laws of Top Team..............................................4
1.9 Directors and Officers of Top Team...............................4
ARTICLE II REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY.............................4
2.1 Authorization....................................................4
2.2 Ownership of Stock...............................................4
2.3 Consents and Approvals...........................................4
2.4 Securities Matters...............................................5
2.5 Brokerage Fees...................................................5
2.6 Disclosure ....................................................6
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND
WARRANTIES OF THE COMPANY AND THE
SELLERS.............................................6
3.1 Due Organization, Good Standing and Corporate Power..............6
3.2 Authorization and Validity of Agreement..........................6
3.3 Capitalization...................................................7
3.4 Consents and Approvals; No Violations............................7
3.5 Company Reports and Financial Statements.........................8
3.6 Absence of Certain Changes.......................................8
3.7 Minute Books ....................................................9
3.8 Title to Properties; Encumbrances................................9
3.9 Compliance with Laws.............................................9
3.10 Litigation ....................................................9
3.11 Employee Benefit Plans..........................................10
3.12 Employment Relations and Agreements.............................12
3.13 Client Relations................................................12
3.14 Taxes ...................................................12
3.15 Liabilities ...................................................13
3.16 Intellectual Properties.........................................13
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3.17 Material Contracts and Relationships............................14
3.18 Absence of Certain Business Practices...........................15
3.19 Transactions with Related Parties...............................16
3.20 Broker's or Finder's Fee........................................16
3.21 Accounts Receivable.............................................16
3.22 Inventories ...................................................16
3.23 Insurance ...................................................16
3.24 No Powers of Attorney or Suretyships............................17
3.25 Banking Facilities..............................................17
3.26 Environmental Liabilities.......................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM...............................19
4.1 Due Organization; Good Standing and Corporate Power.............19
4.2 Authorization and Validity of Agreement.........................19
4.3 Consents and Approvals; No Violations...........................19
4.4 EMKT Reports and Financial Statements...........................20
4.5 Capitalization..................................................20
4.6 Absence of Certain Changes......................................20
4.7 Compliance with Laws............................................20
4.8 Liabilities.....................................................21
4.9 Litigation......................................................21
ARTICLE V ACTIONS PRIOR TO CLOSING DATE......................21
5.1 Access to Information Concerning Properties and Records.........21
5.2 Conduct of the Business of the Company Pending the Closing Date.21
5.3 Best Efforts ...................................................22
5.4 No Solicitation of Other Offers.................................23
5.5 EMKT Contribution to Top Team Capital...........................23
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS...............23
6.1 Conditions Precedent to Obligations of EMKT, Top Team
and the Company and the Sellers.................................23
6.2 Conditions Precedent to Obligations of EMKT
and Top Team ...................................................24
6.3 Conditions Precedent to Obligation of the Company
and the Sellers.................................................24
ARTICLE VII TERMINATION AND ABANDONMENT........................25
7.1 Termination ...................................................25
7.2 Effect of Termination...........................................26
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ARTICLE VIII INDEMNIFICATION....................................26
8.1 Indemnification by Sellers......................................26
8.2 Indemnification by Sellers Jointly and Severally................27
8.3 Indemnification by EMKT and Top Team............................27
8.4 Indemnification by Sellers for Tax Liabilities..................28
8.5 Claims for Indemnification......................................28
8.6 Defense Claims..................................................28
8.7 Manner of Indemnification.......................................29
8.8 Limitations on Indemnification..................................29
ARTICLE IX MISCELLANEOUS......................................30
9.1 Fees and Expenses...............................................30
9.2 Representations and Warranties..................................30
9.3 Extension; Waiver...............................................30
9.4 Public Announcements............................................30
9.5 Notices.........................................................30
9.6 Entire Agreement................................................32
9.7 Binding Effect; Benefit; Assignment.............................32
9.8 Amendment and Modification......................................32
9.9 Further Actions.................................................32
9.10 Headings........................................................32
9.11 Counterparts ...................................................32
9.12 Applicable Law..................................................32
9.13 Severability ...................................................32
9.14 "Person" Defined................................................33
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT, dated as of November
10, 1999 (this "Agreement"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"), IMAGE
NETWORK, INC., a California corporation (the "COMPANY"), and each of the other
persons identified under the heading "Sellers" on the signature pages of this
Agreement (together, the "SELLERS"), and is made with reference to the following
facts:
A. The Sellers own all of all of the issued and outstanding shares of
common stock ("COMPANY STOCK") of the Company.
B. EMKT wishes to acquire from the Sellers and the Optionees referred
to below an aggregate of 40 shares of Company Stock in exchange for an aggregate
of 100,000 shares of EMKT common stock, par value $0.001 per share ("EMKT
STOCK"). Immediately after such exchange, EMKT and the Sellers will contribute
all of their Company Stock to Top Team in exchange for an aggregate of 700,000
shares of common stock, par value $0.001 per share, of Top Team ("TOP TEAM
STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE. On the Closing Date (as defined in Section 1.6), each of
the Sellers shall sell, and shall cause each of the Optionees to sell, to EMKT
that number of shares of Company Stock set forth opposite such Seller's or
Optionee's name on Schedule 1.1 (the "PURCHASED COMPANY STOCK"), constituting in
the aggregate 40 percent of the number of outstanding shares of Company Stock
(on a fully diluted basis), for a consideration equal to that number of EMKT
shares set forth opposite such Seller's or Optionee's name on Schedule 1.1 (the
"PURCHASE CONSIDERATION"). The Purchase Consideration shall be payable on
January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the purchase
of the Purchased Company Stock as contemplated by Section 1.1 (i) EMKT shall
contribute the Purchased Company Stock to Top Team in exchange for 280,000
shares of Top Team Stock and (ii) each Seller and Optionee shall contribute to
Top Team all of his, her or its remaining Company Stock constituting in the
aggregate the remaining 60 percent of the outstanding shares of Company Stock
(on a fully diluted basis) in exchange for that number of shares of Top Team
Stock set forth opposite such Seller's or Optionee's name on Schedule 1.1, for
an aggregate of 420,000 shares of Top Team Stock. Such shares of Company Stock
contributed to Top Team are referred to herein as the "CONTRIBUTED
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STOCK." Such shares of Top Team Stock received by the Sellers and EMKT in
exchange for the Contributed Stock are referred to herein as the "EXCHANGE
CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller and Optionee
shall deliver to EMKT certificates evidencing their respective shares of Company
Stock, which shall be Duly Endorsed. The term "DULY ENDORSED" means duly
endorsed by the person or persons in whose name a stock certificate is
registered in blank or accompanied by a duly executed stock assignment separate
from such certificate. Top Team will deliver to each Seller and EMKT on the
Closing Date duly issued and authenticated certificates evidencing the Exchange
Consideration issuable to such person pursuant to Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to Closing, accelerate the
vesting or exercisability of all outstanding employee stock options to purchase
Company Stock, whether set forth in any stock option plan or plans of the
Company ("COMPANY STOCK OPTION PLANS"), in an option agreement with the optionee
or otherwise. At the Closing, each such option (each, a "COMPANY OPTION")
granted by the Company to purchase shares of Company Stock that is outstanding
and unexercised immediately prior to the Closing Date shall be deemed to be
exercised, and the optionees thereunder (the "OPTIONEES") shall be deemed to be
Sellers for purposes of Article I and II of this Agreement. As required by
Section 6.2(e) hereof, the Seller shall cause each Optionee to deliver prior to
the Closing a joinder agreement whereby each such Optionee agrees to be bound by
the provisions of Articles I and II of this Agreement as if he or she were a
Seller hereunder (each, a "JOINDER AGREEMENT").
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary (collectively with the Company Stock Option Plans, the
"COMPANY STOCK INCENTIVE PLANS") shall terminate as of the Closing Date. The
Company will take all steps to ensure that neither the Company nor any of its
Subsidiaries is or will be bound by any Company Options, other options,
warrants, rights or agreements which would entitle any Person, other than EMKT,
Top Team or either of their affiliates, to own any capital stock of the Company
or any of its Subsidiaries or to receive any payment in respect thereof. The
Company will use its best efforts to obtain all necessary consents to ensure
that after the Effective Time, the only rights of the holders of Options to
purchase shares of Common Stock in respect of such Options will be to receive
the Purchase Consideration and Exchange Consideration in cancellation and
settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
Consideration , together with (i) the contributions to be made in connection
with the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution
of EMKT to Top Team referred to in Section 5.6, shall constitute a contribution
of capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
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1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock (the "PURCHASE") and the exchange of the Contributed
Stock for the Exchange Consideration (the "EXCHANGE") shall take place at the
offices of Kaye, Scholer, Fierman, Hayes & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Article VI is fulfilled or waived (subject
to applicable law) but in no event later than the fifth business day thereafter,
or at such other time and place and on such other date as EMKT, Top Team and the
Company shall mutually agree (the "CLOSING DATE").
1.7 CERTIFICATE OF INCORPORATION OF TOP TEAM. The Certificate of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM.. The By-Laws of Top Team, as in effect as of
the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date, the
directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and such
additional directors as shall be designated by Top Team, each to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of Top Team, until the next annual stockholders' meeting of Top Team and
until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to enter
into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of the
Company Stock set forth below such Seller's name on Schedule I, free and clear
of any liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever. Upon consummation of
the Exchange, Top Team shall be the owner, beneficially and of record, of all of
the outstanding shares of capital stock of the Company, free and clear of any
liens, encumbrances, pledges, security interests, restrictions, prior
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assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been obtained, made and satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not be
registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller is (i) either an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act, (ii) a "qualified
purchaser" within the meaning of Section 25102(n)(2) of the California Law or
(iii) either alone or with his or her purchaser representative (within the
meaning of Rule 501(h) of Regulation D under the Securities Act), has such
knowledge and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of the Transactions; such Seller is
aware that the Merger Consideration constitutes "restricted," "letter" or
"investment" securities and such Seller by reason of his business or financial
experience has the capacity to protect his own interest in connection with the
Transactions; and
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(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without registration under the Securities Act and the California
Law, and any other applicable securities laws, or without an opinion of counsel
satisfactory to EMKT and Top Team that the transaction by which such shares are
proposed to be disposed of is exempt from the Securities Act, the California Law
and any other applicable securities laws, and acknowledges that EMKT and Top
Team will place a legend on the certificates representing such shares
substantially to such effect concerning these restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
ARTICLE III
JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES OF THE
COMPANY AND THE SELLERS
The Company and each of the Sellers hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule 3.1
sets forth the name, state of incorporation or formation and equity ownership of
the Company in each corporation, partnership, joint venture, limited liability
company and other entity in which the Company owns all or a majority of the
equity interest or is required to be consolidated on the Company's balance sheet
pursuant to GAAP ("SUBSIDIARIES"). The Company and each of its Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and each such corporation has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its business as now being conducted. The Company and each of its
Subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the property owned, leased or operated by
it or the nature of the business conducted by it makes such qualification
necessary, except in such jurisdictions where the failure to be so qualified or
licensed and in good standing would not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of operations,
condition (financial or otherwise) or prospects (the "CONDITION") of the Company
and its Subsidiaries taken as a whole.
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3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full power
and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the Transactions. The execution, delivery and
performance of this Agreement by the Company, and the consummation by it of the
Transactions, have been duly authorized and approved by its Board of Directors
and no other corporate action on the part of the Company is necessary to
authorize the execution, delivery and performance of this Agreement by the
Company and the consummation of the Transactions (other than the approval of
this Agreement by the holders of a majority of the outstanding shares of Company
Stock and any other classes of capital stock entitled to vote thereon, as
required by the California General Corporation Law). This Agreement has been
duly executed and delivered by the Company and is a valid and binding obligation
of the Company enforceable against the Company in accordance with its terms,
except to the extent that its enforceability may be subject to applicable
bankruptcy, insolvency, reorganization, moratorium and similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
100,000 shares of common stock, constituting the Company. As of the date of this
Agreement 100 shares of Company Stock are issued and outstanding. All issued and
outstanding shares of Company Stock have been validly issued and are fully paid
and nonassessable, and are not subject to, nor were they issued in violation of,
any preemptive rights. Except as set forth in this Section 3.3 or on Schedule
3.3, (i) there are no shares of capital stock of the Company authorized, issued
or outstanding and (ii) there are not as of the date hereof, and on the Closing
Date, there will not be, any outstanding or authorized options, warrants,
rights, subscriptions, claims of any character, agreements, obligations,
convertible or exchangeable securities, or other commitments, contingent or
otherwise, relating to Common Stock or any other shares of capital stock of the
Company, pursuant to which the Company is or may become obligated to issue
shares of Company Stock, any other shares of its capital stock or any securities
convertible into, exchangeable for, or evidencing the right to subscribe for,
any shares of the capital stock of the Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
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indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by the Sellers and the Company and the consummation by the
Sellers and the Company of the Transactions will not: (1) violate any provision
of the Articles of Incorporation, as amended, or By-Laws of the Company or any
of its Subsidiaries; (2) violate any statute, ordinance, rule, regulation, order
or decree of any court or of any governmental or regulatory body, agency or
authority applicable to such Seller or the Company or any of its Subsidiaries or
by which any of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to, any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation, payment or acceleration) under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets of the Company or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease, franchise agreement or other instrument or
obligation to which the Company or any of its Subsidiaries is a party, or by
which it or any of their respective properties or assets may be bound, excluding
from the foregoing clauses (3) and (4) filings, notices, permits, consents and
approvals the absence of which, and violations, breaches, defaults, conflicts
and liens which, in the aggregate, would not have a material adverse effect on
the Condition of the Company and its Subsidiaries taken as a whole.
(a) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Certification of Incorporation or By-Laws, (ii) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of its Subsidiaries, except in the case of clauses (i) and (ii)
above for defaults or evaluations, which would not have a material adverse
effect on the Condition of the Company and the Subsidiaries taken as a whole.
3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheets as of the end of the fiscal year ended July 31, 1999 and the
consolidated statements of operations, consolidated statements of stockholders'
equity and consolidated statements of cash flow for the fiscal year ended July
31, 1999 previously delivered to EMKT, were prepared in accordance with
generally accepted accounting principles (as in effect in the United States from
time to time) applied on a consistent basis ("GAAP"), except as may be indicated
therein or in the notes or schedules thereto, and fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the dates thereof and the results of their operations and cash flows for
the periods then ended.
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3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since July 31, 1999 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
3.7 MINUTE BOOKS. The minute books of the Company and its Subsidiaries,
as previously made available to EMKT and its representatives, contain accurate
records of all meetings of and corporate actions or written consents by the
stockholders and Boards of Directors of the Company and its Subsidiaries since
December 31, 1995.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. The Company and each of its
Subsidiaries has good, valid and marketable title, or a valid leasehold interest
in, to (i) all its material tangible properties and assets (real and personal),
including, without limitation, all the properties and assets reflected in the
consolidated balance sheet as of December 31, 1998 delivered pursuant to Section
3.5 (the "BALANCE SHEET") except as indicated in the notes thereto and except
for properties and assets reflected in the balance sheet that have been sold or
otherwise disposed of in the ordinary course of business, and (ii) all the
tangible properties and assets purchased by the Company and any of its
Subsidiaries since the Balance Sheet Date except for such properties and assets
which have been sold or otherwise disposed of in the ordinary course of
business; in each case subject to no encumbrance, lien, charge or other
restriction of any kind or character, except for (1) liens reflected in the
Balance Sheet, (2) liens consisting of zoning or planning restrictions,
easements, permits and other restrictions or limitations on the use of real
property or irregularities in title thereto which do not materially detract from
the value of, or impair the use of, such property by the Company or any of its
Subsidiaries in the operation of its respective business and (3) liens for
current taxes, assessments or governmental charges or levies on property not yet
due and delinquent.
3.9 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries are
in compliance with all applicable laws, regulations, orders, judgments and
decrees except where the failure to so comply would not have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Company any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge, information
and belief of the Company, threatened, against or affecting the Company or any
of its Subsidiaries, or any of their properties or rights which could have a
material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole. There are no such suits, actions, claims, proceedings or
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investigations pending or, to the best knowledge, information and belief of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, neither the Company nor any of its Subsidiaries
is subject to any judgment, order or decree entered in any lawsuit or proceeding
which could have a material adverse effect on the Condition of the Company and
its Subsidiaries taken as a whole or on the ability of the Company or any
Subsidiary to conduct its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Company or any of its Subsidiaries (including, for this
purpose and for the purpose of all of the representations in this Section 3.11,
all employers (whether or not incorporated) which by reason of common control
are treated together with the Company as a single employer within the meaning of
Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee
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Benefit Plan or related agreements. Benefits under all Employee Benefit Plans
are as represented and have not been increased subsequent to the date as of
which documents have been provided to EMKT and Top Team.
(d) RELATIONSHIP OF ACCRUED BENEFITS TO PENSION PLAN ASSETS.
As of September 30, 1999 (1) the aggregate current value of all accrued benefits
(based upon actuarial assumptions which have been furnished to and relied upon
by EMKT and Top Team) under all Employee Benefit Plans which are subject to
Title IV of ERISA and which are Single Employer Plans (as defined in Section
4001(a)(15) of ERISA) did not exceed the aggregate current value of all assets
of such Single Employer Plans allocable to such accrued benefits, and since
December 31, 1998 there has been (A) no material adverse change in the financial
condition of any Single Employer Plan, (B) no change in the actuarial
assumptions with respect to any Single Employer Plan and (C) no increase in
benefits under any Single Employer Plan as a result of plan amendments, change
in applicable law or otherwise, which individually or in the aggregate, would
create any such excess; and (2) using actuarial assumptions and computation
methods consistent with subpart 1 of subtitle E of Title IV of ERISA, the
aggregate liabilities of the Company and its Subsidiaries to all such Employee
Benefit Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
Multiemployer Plan ended prior to the date hereof, would not exceed $50,000.
There has been no material change in the financial condition of any
Multiemployer Plan or in any such actuarial assumption or computation method or
in benefits under any Multiemployer Plan as a result of collective bargaining or
otherwise since the close of each such fiscal year which, individually or in the
aggregate, would materially increase such liability.
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
all Employee Benefit Plans as in effect,
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together with all amendments thereto which will become effective at a later
date, as well as the latest Internal Revenue Service determination letter
obtained with respect to any such Employee Benefit Plan qualified under Section
401 or 501 of the Code and (2) Form 5500 for the most recently completed fiscal
year for each Employee Benefit Plan required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Each of the Company and
its Subsidiaries is in substantial compliance with all federal, state or other
applicable laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and has not and is not engaged in
any unfair labor practice; (ii) no unfair labor practice complaint against the
Company or any of its Subsidiaries is pending before the National Labor
Relations Board; (iii) there is no labor strike, dispute, slowdown or stoppage
actually pending or threatened against or involving the Company or any of its
Subsidiaries; (iv) no representation question exists respecting the employees of
the Company or any of its Subsidiaries; (v) no grievance which might have a
material adverse effect on the Condition of the Company and its Subsidiaries as
a whole or the conduct of their respective businesses exists, no arbitration
proceeding arising out of or under any collective bargaining agreement is
pending and no claim therefor has been asserted; (vi) no collective bargaining
agreement is currently being negotiated by the Company or any of its
Subsidiaries; and (vii) neither the Company nor any of its Subsidiaries has
experienced any material labor difficulty during the last three years. There has
not been, and to the best knowledge of the Company and the Sellers, there will
not be any change in relations with employees of the Company or any of its
Subsidiaries as a result of the Transactions that could have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
Except as disclosed in Schedule 3.12, there exist no employment, consulting,
severance or indemnification agreements between the Company and any director,
officer or employee of the Company or any agreement that would give any Person
the right to receive any payment from the Company as a result of the Purchase or
Exchange.
3.13 CLIENT RELATIONS. There has not been, and to the best knowledge,
information and belief of the Company, there will not be, any change in
relations with franchisees, customers or clients of the Company or any of its
Subsidiaries as a result of the Transactions that could have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries. Such returns and reports are true,
correct and complete in all material respects and reflect accurately all
liability for Taxes of the Company and its Subsidiaries for the periods covered
thereby. All federal, state, local and foreign Taxes (including interest and
penalties) payable by, or due from, the Company or any of its Subsidiaries have
been fully paid or adequately disclosed and fully provided for in the books and
financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. No issue has been raised during
the past five years by any federal, state, local or foreign taxing authority
that, if raised with respect
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to any other period not so examined, could reasonably be expected to result in a
proposed deficiency for any other period not so examined. The federal income tax
liability of the Company and its Subsidiaries has been finally determined for
all fiscal years to and including the fiscal year ended December 31, 1998. No
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. For purposes of this Section 3.14, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including without limitation
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto; and "TAX RETURN" means
any report, return or other information or document required to be supplied to a
taxing authority in connection with taxes.
3.15 LIABILITIES. Neither the Company nor any of its Subsidiaries has
any outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in the Balance Sheet or
referred to in the footnotes thereto, other than liabilities incurred subsequent
to the Balance Sheet Date in the ordinary course of business not involving
borrowings by the Company. Neither the Company nor any of its Subsidiaries is in
default in respect of the material terms and conditions of any indebtedness or
other agreement.
3.16 INTELLECTUAL PROPERTIES. In the operation of its business the
Company and its Subsidiaries have used, and currently use, domestic and foreign
patents, patent applications, patent licenses, software licenses, knowhow
licenses, trade names, trademarks, copyrights, unpatented inventions, service
marks, trademark registrations and applications, service mark registrations and
applications, copyright registrations and applications, trade secrets and other
confidential proprietary information (collectively the "INTELLECTUAL PROPERTY").
Schedule 3.16 contains an accurate and complete list of all Intellectual
Property which is of material importance to the operation of the business of the
Company or any of its Subsidiaries. Unless otherwise indicated in Schedule 3.16
the Company (or the Subsidiary indicated) owns the entire right, title and
interest in and to the Intellectual Property listed on Schedule 3.16 used in the
operation of its business (including, without limitation, the exclusive right to
use and license the same) and each item constituting part of the Intellectual
Property which is owned by the Company or a Subsidiary and listed on Schedule
3.16 has been, to the extent indicated in Schedule 3.16, duly registered with,
filed in or issued by, as the case may be, the United States Patent and
Trademark Office or such other government entities, domestic or foreign, as are
indicated in Schedule 3.16 and such registrations, filings and issuances
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remain in full force and effect. To the best knowledge of the Company and the
Sellers, except as stated in such Schedule 3.16, there are no pending or
threatened proceedings or litigation or other adverse claims affecting or with
respect to the Intellectual Property. Schedule 3.16 lists all notices or claims
currently pending or received by the Company or any of its Subsidiaries during
the past two years which claim infringement, contributory infringement,
inducement to infringe, misappropriation or breach by the Company or any of its
Subsidiaries of any domestic or foreign patents, patent applications, patent
licenses and know-how licenses, trade names, trademark registrations and
applications, service marks, copyrights, copyright registrations or
applications, trade secrets or other confidential proprietary information.
Except as set forth in Schedule 3.16 hereto, there is, to the best knowledge,
information and belief of the Company, no reasonable basis upon which a claim
may be asserted against the Company or any of its Subsidiaries, for
infringement, contributory infringement, inducement to infringe,
misappropriation or breach of any domestic or foreign patents, patent
applications, patent licenses, know-how licenses, trade names, trademark
registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
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(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries. There are no material
liabilities of any party to any Material Contract arising from any breach or
default of any provision thereof and no event has occurred that, with the
passage of time or the giving of notice or both, would constitute a breach or
default by any party thereto.
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) and (d) set forth a complete and correct
list of each (i) customer (or related group of customers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, (ii) supplier (or related group of suppliers) with whom the Company
or any of its Subsidiaries did $25,000 or more of business during the last
fiscal year, and (iii) agent (or related group of agents) or representative (or
related group of representatives) who was paid $25,000 or more by the Company
and its Subsidiaries during the last fiscal year, respectively, which lists
itemize the actual dollar amounts.
(e) The Company and each of its Subsidiaries has maintained
and continues to maintain good relations with its customers, suppliers and
agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Neither the Company nor any
of its Subsidiaries nor any employee, agent or other Person acting on the
Company's or any of its Subsidiaries' behalf, including, but not limited to, any
Seller, has, directly or indirectly, given or
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agreed to give any gift or similar benefit to any customer, supplier, competitor
or governmental employee or official (domestic or foreign) (i) that would
subject the Company or its any of its Subsidiaries to any damage or penalty in
any civil, criminal or governmental litigation or proceeding or (ii) that, if
not given in the past, would have had a material adverse effect on the Condition
of the Company or any of its Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since January 1, 1994 and there are no agreements or
understandings now in effect between the Company and any Seller or Related
Party. Schedule 3.19 also (i) states the amounts due from the Company (or any of
its Subsidiaries) to any Seller or Related Party and the amounts due from any
Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since January 1, 1994. After the Closing,
there will be no obligations or other liabilities between each of the Company
and any of its Subsidiaries, on the one hand, and any Seller or Related Party,
on the other hand, other than pursuant to this Agreement and the Transactions
contemplated hereby. "RELATED PARTY" means the Company and each of its
Subsidiaries and Affiliates, including but not limited to each of the Sellers
and any member of the immediate family of any of the Sellers; and "AFFILIATE"
means, in respect of any specified Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
specified Person or if such specified Person bears a familial relationship with
such other Person.
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. The accounts receivable of the Company as
reflected in the Balance Sheet, to the extent uncollected on the date of this
Agreement, and the accounts receivable reflected on the books of the Company
are, on the basis of existing facts, valid and existing and fully collectible
(except for a reserve of $ 25,000) within one year from the Closing Date,
represent monies due for goods sold and delivered or services rendered, and
(subject to the aforesaid reserve) are subject to no refunds or other
adjustments (except discounts for prompt payment given in the ordinary course of
business) and to no defenses, rights of setoff, assignments, restrictions,
encumbrances or conditions enforceable by third parties on or affecting any
thereof. The Company has never factored any of its accounts receivable.
3.22 INVENTORIES. The inventories reflected in the Balance Sheet were,
and those reflected on the books of the Company since such date have been,
determined and valued in accordance with generally accepted accounting
principles applied on a consistent basis as reflected in the Balance Sheet, and
existed on the respective dates. The inventories of the Company consist of items
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which are good and merchantable, and are of a quality and quantity presently
usable or salable in the ordinary course of business.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies during the past
five years (other than worker's compensation claims). The Company (together with
its Subsidiaries) has adequate liability and other insurance policies insuring
it against the risks of loss arising out of or related to its assets and
business. Without limitation, as to the tangible real and personal property of
the Company and its Subsidiaries, such insurance is adequate to cover the full
replacement cost, less deductible amounts, of such tangible real and personal
property. Schedule 3.23 is a complete and correct list of all insurance
currently in place and accurately sets forth the coverages, deductible amounts,
carriers and expiration dates thereof. Schedule 3.23 is a complete and correct
list of all insurance with respect to which the policy period has expired, but
for which certain of the coverage years are still subject to audit or
retrospective adjustment by the carrier, and accurately sets forth such coverage
years and the coverages, deductible amounts, carriers and expiration dates
thereof. There are no outstanding requirements or recommendations by any
insurance company that issued any policy of insurance to the Company or any of
its Subsidiaries or by any board of or by any governmental authority exercising
similar functions that require or recommend any changes in the conduct of the
business of the Company or its Subsidiaries or any repairs or other work to be
done on or with respect to any of the Company's or any of its Subsidiaries'
assets. Except as set forth on Schedule 3.23, no notice or other communication
has been received by the Company or its Subsidiaries from any insurance company
within the five years preceding the date hereof canceling or materially amending
or materially increasing the annual or other premiums payable under any of its
insurance policies, and, to the best knowledge of the Sellers and the Company,
no such cancellation, amendment or increase of premiums is threatened.
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
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3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, neither the
Company nor any of its Subsidiaries has used, stored, treated, transported,
manufactured, refined, handled, produced or disposed of any Hazardous Materials
on, under, at, from, or in any way affecting, any of their properties or assets,
or otherwise, in any manner which at the time of the action in question violated
any Environmental Law, governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous Materials
and to the best of the Company's and the Sellers' knowledge, no prior owner of
such property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide Act ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
(b) To the best knowledge of the Company and the Sellers (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
Subsidiaries, and (ii) no claims have been made against the Company or any of
its Subsidiaries during the past five years and no presently outstanding
citations or notices have been issued against the Company or any of its
Subsidiaries, where such could reasonably be expected to have a materially
adverse effect on the Condition of the Company or any of its Subsidiaries, which
in either case have been or are imposed by reason of or based upon any provision
of any Environmental Law, including, without limitation, any such obligations or
liabilities relating to or arising out of or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any Hazardous Materials by the Company or any of
its Subsidiaries, or any of their employees, agents, representatives or
predecessors in interest in connection with or in any way arising from
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or relating to the Company or any of its Subsidiaries or any of their respective
properties, or relating to or arising from or attributable, in whole or in part,
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transportation or handling of any such substance, by any other Person at or on
or under any of the real properties owned or used by the Company or any of its
Subsidiaries or any other location where such could have a materially adverse
effect on the business or condition (financial or otherwise) of the Company (or
any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. The Company
(together with its consolidated Subsidiaries) owns or leases all of the
machinery, equipment, vehicles, furniture, fixtures, leasehold improvements,
repair parts, tools and other property (collectively, the "PERSONAL PROPERTY")
used by or relating to the Company or its Subsidiaries. All such Personal
Property is in good operating condition and sufficient to carry on the business
of the Company and its Subsidiaries in the normal course as it is presently
conducted and is free from defects, whether patent or latent. Except as set
forth in Schedule 3.27, it is not necessary for the Company or any of its
Subsidiaries to acquire or obtain the use of any additional personal property to
carry on its business as presently and foreseeably to be conducted.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of
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EMKT or Top Team; (2) violate any statute, ordinance, rule, regulation, order or
decree of any court or of any governmental or regulatory body, agency or
authority applicable to EMKT or Top Team or by which either of their respective
properties or assets may be bound; (3) except for any required securities
filings, require any filing with, or permit, consent or approval of, or the
giving of any notice to any governmental or regulatory body, agency or
authority; or (4) result in a violation or breach of, conflict with, constitute
(with or without due notice or lapse of time or both) a default (or give rise to
any right of termination, cancellation or acceleration) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of EMKT, Top Team or any of their Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, franchise, permit, agreement, lease or other instrument or obligation
to which EMKT or Top Team or any of their Subsidiaries is a party, or by which
they or their respective properties or assets may be bound, excluding from the
foregoing clauses (3) and (4) filings, notices, permits, consents and approvals
the absence of which, and violations, breaches, defaults, conflicts and liens
which, in the aggregate, would not have a material adverse effect on the
business, properties, assets, liabilities, operations, results of operations,
conditions (financial or otherwise) or prospects of EMKT and its Subsidiaries
taken as a whole.
4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Preferred Stock, par value $0.001 per share ("PREFERRED
STOCK"). As of the date of this Agreement, (i) 100 shares of Top Team Stock and
no shares of Preferred Stock have been issued, and options to purchase 2,200,000
shares of Top Team Stock have been reserved for issuance pursuant to options
that have been or are to be granted under Top Team stock incentive plans. Except
as set forth on Schedule 4.5, in Section 5.5 and in this Section 4.5, there are
not as of the date hereof, and as of the Closing Date there will not be, any
outstanding or authorized options, warrants, rights, subscriptions, claims of
any character, agreements, obligations, convertible or exchangeable securities,
or other commitments, contingent or otherwise, relating to any other shares of
capital stock of Top Team, pursuant to which Top Team is or may become obligated
to issue shares of capital stock or any securities convertible into,
exchangeable for, or evidencing the right to subscribe for, any shares of the
capital stock of Top Team. Top Team and EMKT have entered into letters of intent
or agreements to acquire five other companies in the interactive architecture
business identified on Schedule 4.5 (together with the Transactions, the
"ROLL-UP"). Schedule 4.5 sets forth the PRO FORMA capitalization of Top Team
following the Roll-Up and the contribution by EMKT to the capital of Top Team of
certain property, as described in Section 5.5.
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4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by the EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
4.10 TAX STATUS. Neither EMKT nor Top Team has taken any action that
would cause the Purchase not to qualify as an installment sale for federal
income tax purposes or to cause the Exchange not to qualify as a tax-free
contribution to capital under Section 351 of the Code.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its Subsidiaries to, upon reasonable notice,
afford EMKT and Top Team, and their respective counsel, accountants and other
authorized representatives, full access during normal business hours to the
properties, books and records of the Company and its Subsidiaries in order that
they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; such investigation
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shall not, however, affect the representations and warranties made by the
Company in this Agreement. The Company acknowledges and agrees that Top Team's
auditors will be performing an audit of the Company's financial statements (the
"AUDIT"), and will provide all information and documents and cooperate in any
way so as to permit the Audit to be completed promptly. The Company agrees to
cause its officers and employees to furnish such additional financial and
operating data and other information and respond to such inquiries as EMKT and
Top Team shall from time to time request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or otherwise
consented to or approved in writing by EMKT, during the period commencing on the
date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business and will use their best efforts to preserve intact their respective
business organization, keep available the services of their officers and
employees and maintain satisfactory relationships with licensers, suppliers,
distributors, clients and others having business relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Articles of Incorporation or By-Laws (or
comparable governing documents); (ii) issue or sell any shares of its capital
stock (other than in connection with the exercise of Company Options outstanding
on the date hereof) or any of its other securities, or issue any securities
convertible into, or options, warrants or rights to purchase or subscribe to, or
enter into any arrangement or contract with respect to the issuance or sale of,
any shares of its capital stock or any of its other securities, or make any
other changes in its capital structure; (iii) declare, pay or make any dividend
or other distribution or payment with respect to, or split, redeem or
reclassify, any shares of its capital stock; (iv) enter into any contract or
commitment, except for contracts in the ordinary course of business, including
without limitation, any acquisition of a material amount of assets or
securities, any disposition of a material amount of assets or securities or
release or relinquish any material contract rights; (v) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices; (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries; (viii) authorize
capital expenditures in excess of the amount currently budgeted therefor; (ix)
permit any insurance policy naming the Company or any Subsidiary as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; (x) amend any employee or nonemployee benefit plan
or program, employment agreement, license agreement or retirement agreement, or
pay any bonus or contingent compensation, except in each case in the ordinary
course of business consistent with past practice prior to the date of this
Agreement; (xi) agree, in writing or otherwise, to take any of the foregoing
actions; or (xii) agree to the settlement of any litigation;
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(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective best efforts to take, or cause to be taken, all appropriate action,
and to make, or cause to be made, all filings necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
Transactions, including, without limitation, their respective best efforts to
obtain, prior to the Closing Date, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and its Subsidiaries as are necessary for
consummation of the Transactions and to fulfill the conditions to the
Transactions; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its Subsidiaries in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of EMKT and Top Team.
5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly communicate to EMKT and
Top Team the terms of any proposal or inquiry that it may receive in respect of
any such transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with the Company.
5.5 EMKT CONTRIBUTION TO TOP TEAM CAPITAL. Simultaneously with the
Closing, EMKT shall contribute $2,000,000 in cash to the capital of Top Team in
exchange for (i) 250,000 shares of Top Team Stock, 250,000 shares of
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Top Team Preferred Stock, having the powers, preferences and rights set forth in
Schedule 5.5, and (ii) rights, expiring on the six-month anniversary of the
Closing Date, to purchase 3,600,000 shares of Top Team Stock at a purchase price
of $7.50 per share.
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, at or prior to the Closing Date, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of the date hereof and at and as of the
Closing, with the same force and effect as though made on and as of the Closing
Date;
(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) EMPLOYMENT AGREEMENT. Scott Gardner shall have entered
into an employment agreement with Top Team in form and substance satisfactory to
Top Team;
(d) LEGAL OPINION. EMKT and Top Team shall have received an
opinion of Burriss & Monahan, counsel to the Company in form and substance
acceptable to EMKT and Top Team; and
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(e) JOINDER AGREEMENTS. Each Optionee shall have executed a
Joinder Agreement in form and substance satisfactory to EMKT.
(f) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATION OF THE COMPANY AND THE SELLERS.
The obligation of the Company and the Sellers to effect the Transactions is also
subject to the satisfaction or waiver, on or prior to the Closing Date, of each
of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date;
(c) STOCK INCENTIVE PLANS. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up to 42,000 shares of Top Team stock for
issuance to former employees of the Company pursuant to such plan;
(d) EMPLOYMENT AGREEMENT. Scott Gardner shall have entered
into an employment agreement with Top Team in form and substance satisfactory to
him;
(e) REGISTRATION RIGHTS. Top Team and Sellers shall have
entered into an agreement regarding registration rights for the Purchase
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof. EMKT and Sellers shall
have entered into an agreement regarding registration rights for the Exchange
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof; and
(f) LEGAL OPTION. The Company and the Sellers shall have
received an opinion of Kaye, Scholer, Fierman, Hays and Handler, LLP, counsel to
EMKT and Top Team, in form and substance acceptable to the Sellers.
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ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within
six months after the date of this Agreement or there has been a material breach
of any representation, warranty, obligation, covenant or agreement set forth in
this Agreement on the part of the other party;
(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team, or the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller shall severally and not
jointly, indemnify and hold harmless EMKT and Top Team and each of their
affiliates, directors, officers, employees, attorneys, agents and
representatives (collectively, the "AFFILIATED PARTIES") in respect of any and
all claims, losses, damages, liabilities, declines in value, penalties,
interest, costs and expenses (including, without limitation, any attorneys',
accountants' and consultants' fees and other expenses) reasonably incurred by
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EMKT or Top Team or their respective Affiliated Parties, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
prime rate as reported from time to time by Bank of America NT & SA (the "PRIME
RATE") then in effect, from the date such cash disbursements were made by EMKT
or Top Team or any of their Affiliated Parties until paid by such Seller, in
connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Articles II or III of this Agreement;
(b) Any misrepresentation contained in any written statement
or certificate furnished by such Seller individually pursuant to this Agreement
or in connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder relating back to the
first dollar.
8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of three years from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Any breach of any representation or warranty made by the
Sellers or the Company in Article IV of this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any written statement
or certificate furnished by Sellers and/or the Company pursuant to this
Agreement or in connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder relating back to the first dollar.
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8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of three years from the Closing Date, jointly and severally, indemnify
and hold harmless each of the Sellers in respect of any and all claims, losses,
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT, Top Team for all claims
hereunder relating back to the first dollar.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis EMKT and Top Team against all Taxes of the Company (together with its
consolidated Subsidiaries) for all taxable periods ending on or before the date
hereof or otherwise attributable to the operations, transactions, assets, or
income of the Company or its Subsidiaries prior to the date hereof or otherwise
attributable to consummation of the Transactions, together with any expenses
(including, without limitation, settlement costs and any legal, accounting and
other expenses) incurred in connection with the contesting, collection or
assessment of such Taxes, and together with interest at an annual rate equal to
the Prime Rate then in effect. Notwithstanding Sections 8.1 and 8.2, the
Sellers' obligation to indemnify EMKT and Top Team pursuant to this Section 8.4
shall continue until 90 days after all applicable statutes of limitations have
expired. For purposes of this Section 8.4, the term "AFTER-TAX BASIS" means
determined after giving effect to (i) the receipt by the indemnified party of
such payment, if such receipt is taxable and (ii) any tax deduction available on
account of the payment of such Taxes; and assuming that Taxes are payable at a
combined effective rate of 45% of taxable income.
8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
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its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
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defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, Top Team or any of its Subsidiaries, then
such indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, Top Team or any of its Subsidiaries
for any taxable period ending after the date hereof without the express written
consent of EMKT, Top Team or such affected Subsidiary, which consent will not be
unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire on the third anniversary hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such third anniversary and identified as a
claim for indemnification pursuant to this Agreement or (ii) as to any matter
that is based upon willful fraud by the indemnifying party, until such time as
such claims and matters are resolved.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that the Top Team shall reimburse the Sellers for the reasonable fees
and costs of their counsel, not to exceed $20,000.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a wilful and material breach of the representations or
warranties of EMKT, Top or Team or a wilful failure of EMKT or Top Team to
fulfill a material covenant or contained herein, then, in the case of clause (i)
or (ii) above, the Company shall, within two days after the first of such events
has occurred, pay EMKT a fee in lieu of reimbursement for such expenses equal to
$40,000.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT or Top Team, may (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
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9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
Image Network, Inc.
448 South Market Street
San Jose, California 9513
Attention: President
Fax: 408-993-1059
(b) if to any Seller to its address on Schedule I
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
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or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
9.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
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9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "PERSON" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers "hereunto
duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ ROBERT M. WALLACE
------------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ ROBERT M. WALLACE
------------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
THE COMPANY: IMAGE NETWORK, INC.
By: /s/ SCOTT GARDNER
------------------------------------------
Scott Gardner
President
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SELLERS: /s. SCOTT GARDNER
----------------------------------------------
Scott Gardner
Address:
c/o Mucccino Design Group, Inc.
448 South Market Street
San Jose, California 95113
Fax: 408-993-0864
33
Executive Copy
================================================================================
STOCK PURCHASE AND CONTRIBUTION AGREEMENT
BY AND AMONG
EMARKETPLACE, INC.,
TOP TEAM, INC.,
ONCOURSE NETWORK, INC.
AND
KENT RHODES
Dated as of November 19, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I THE TRANSACTIONS AND RELATED MATTERS....................1
1.1 Purchase and Exchange...............................................1
1.2 Contribution........................................................1
1.3 Stock Certificates..................................................2
1.4 Stock Option and Other Plans........................................2
1.5 Tax Consequences....................................................2
1.6 Closing ........................................................3
1.7 Certificate of Incorporation of Top Team............................3
1.8 By-Laws of Top Team.................................................3
1.9 Directors and Officers of Top Team..................................3
ARTICLE II REPRESENTATIONS AND WARRANTIES OF
SELLERS INDIVIDUALLY...................................3
2.1 Authorization.......................................................3
2.2 Ownership of Stock..................................................3
2.3 Consents and Approvals..............................................4
2.4 Securities Matters..................................................4
2.5 Brokerage Fees......................................................5
2.6 Disclosure ........................................................5
ARTICLE III JOINT AND SEVERAL REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND THE SELLERS..........................5
3.1 Due Organization, Good Standing and Corporate Power.................5
3.2 Authorization and Validity of Agreement.............................6
3.3 Capitalization......................................................6
3.4 Consents and Approvals; No Violations...............................7
3.5 Company Reports and Financial Statements............................8
3.6 Absence of Certain Changes..........................................8
3.7 Minute Books........................................................8
3.8 Title to Properties; Encumbrances...................................8
3.9 Compliance with Laws................................................9
3.10 Litigation ........................................................9
3.11 Employee Benefit Plans..............................................9
3.12 Employment Relations and Agreements................................11
3.13 Client Relations...................................................11
3.14 Taxes .......................................................12
3.15 Liabilities .......................................................12
3.16 Intellectual Properties............................................13
3.17 Material Contracts and Relationships...............................13
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3.18 Absence of Certain Business Practices..............................15
3.19 Transactions with Related Parties..................................15
3.20 Broker's or Finder's Fee...........................................16
3.21 Accounts Receivable................................................16
3.22 Inventories .......................................................16
3.23 Insurance .......................................................16
3.24 No Powers of Attorney or Suretyships...............................17
3.25 Banking Facilities.................................................17
3.26 Environmental Liabilities..........................................17
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF EMKT
AND TOP TEAM..........................................19
4.1 Due Organization; Good Standing and Corporate Power................19
4.2 Authorization and Validity of Agreement............................19
4.3 Consents and Approvals; No Violations..............................19
4.4 EMKT Reports and Financial Statements..............................20
4.5 Capitalization.....................................................20
4.6 Absence of Certain Changes.........................................20
4.7 Compliance with Laws...............................................20
4.8 Liabilities .......................................................20
4.9 Litigation .......................................................20
4.10 Tax Status .......................................................21
ARTICLE V ACTIONS PRIOR TO CLOSING DATE..........................21
5.1 Access to Information Concerning Properties and Records............21
5.2 Conduct of the Business of the Company Pending the Closing Date....21
5.3 Best Efforts.......................................................22
5.4 No Solicitation of Other Offers....................................23
ARTICLE VI CONDITIONS PRECEDENT TO TRANSACTIONS...................23
6.1 Conditions Precedent to Obligations of EMKT,
Top Team and the Company and the Sellers...........................23
6.2 Conditions Precedent to Obligations of EMKT and Top Team...........23
6.3 Conditions Precedent to Obligations of the Company and the Sellers.24
ARTICLE VII TERMINATION AND ABANDONMENT............................25
7.1 Termination .......................................................25
7.2 Effect of Termination..............................................25
ARTICLE VIII INDEMNIFICATION........................................25
8.1 Indemnification by Sellers.........................................25
8.2 Indemnification by Sellers Jointly and Severally...................26
8.3 Indemnification by EMKT and Top Team...............................27
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8.4 Indemnification by Sellers for Tax Liabilities.....................27
8.5 Claims for Indemnification.........................................28
8.6 Defense Claims.....................................................28
8.7 Manner of Indemnification..........................................29
8.8 Limitations on Indemnification.....................................29
ARTICLE IX MISCELLANEOUS..........................................29
9.1 Fees and Expenses..................................................29
9.2 Representations and Warranties.....................................29
9.3 Extension; Waiver..................................................29
9.4 Public Announcements...............................................30
9.5 Notices .......................................................30
9.6 Entire Agreement...................................................31
9.7 Binding Effect; Benefit; Assignment................................31
9.8 Amendment and Modification.........................................31
9.9 Further Actions....................................................31
9.10 Headings .......................................................31
9.11 Counterparts.......................................................32
9.12 Applicable Law.....................................................32
9.13 Severability.......................................................32
9.14 "Person" Defined...................................................32
iii
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STOCK PURCHASE AND CONTRIBUTION AGREEMENT
This STOCK PURCHASE AND CONTRIBUTION AGREEMENT dated as of November 19,
1999 (this "AGREEMENT"), is by and among EMARKETPLACE INC., a Delaware
corporation ("EMKT"), TOP TEAM, INC. a Delaware corporation ("TOP TEAM"),
ONCOURSE NETWORK, INC., a Delaware corporation (the "COMPANY"), KENT RHODES
(together with the other Persons executing a Joinder Agreement as described
herein, the "SELLERS"), and is made with reference to the following facts:
A. The Sellers own of all of the issued and outstanding shares of
capital stock of the Company, consisting of common stock ("COMPANY STOCK") of
the Company.
B. EMKT wishes to acquire from the Sellers an aggregate of 238,000
shares of Company Stock, constituting in the aggregate 50 percent of the number
of outstanding shares of Company Stock (on a fully diluted basis), in exchange
for an aggregate of 38,000 shares of EMKT Common Stock, par value $0.001 per
share ("EMKT STOCK"). Immediately after such exchange, EMKT and the Sellers will
contribute all of their Company Stock to Top Team in exchange for an aggregate
of 220,000 shares of common stock, par value $0.001 per share, of Top Team ("TOP
TEAM COMMON STOCK").
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements herein contained, the
parties hereto agree as follows:
ARTICLE I
THE TRANSACTIONS AND RELATED MATTERS
1.1 PURCHASE AND EXCHANGE. On the Closing Date (as defined in Section
1.6), each of the Sellers shall sell to EMKT that number of shares of Company
Common Stock set forth opposite such Seller's name on Schedule 1.1 (the
"PURCHASED COMPANY STOCK"), constituting in the aggregate 50 percent of the
number of outstanding shares of Company Stock (on a fully diluted and converted
basis) (the "PURCHASE"), for a consideration equal to that number of EMKT shares
set forth opposite such Seller's name on Schedule 1.1 (the "PURCHASE
CONSIDERATION"). The Purchase Consideration shall be payable on the later of the
Closing Date and January 3, 2000.
1.2 CONTRIBUTION. On the Closing Date, immediately after the purchase
of the Purchased Company Stock as contemplated by Section 1.1, (i) EMKT shall
contribute the Purchased Company Stock to Top Team in exchange for 110,000
shares of Top Team Stock and (ii) each Seller shall contribute to Top Team all
of his, her or its remaining Company Stock, constituting in the aggregate the
remaining 50 percent of the outstanding shares of Company Stock (on a fully
diluted and converted basis) in exchange for that number of shares of Top Team
Stock set forth opposite such Seller's name on Schedule 1.1. The Sellers will
receive an aggregate of 110,000 shares of Top Team Stock. Such exchanges are
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referred to collectively herein as the "EXCHANGE." Such shares of Company Stock
contributed to Top Team are referred to herein as the "CONTRIBUTED STOCK." Such
shares of Top Team Stock received by the Sellers and EMKT in exchange for the
Contributed Stock are referred to herein as the "EXCHANGE CONSIDERATION."
1.3 STOCK CERTIFICATES. On the Closing Date, each Seller shall
deliver to EMKT certificates evidencing their respective shares of Contributed
Stock, which shall be Duly Endorsed. The term "DULY ENDORSED" means duly
endorsed by the person or persons in whose name a stock certificate is
registered in blank or accompanied by a duly executed stock assignment separate
from such certificate. Top Team will deliver to each Seller and EMKT on the
Closing Date duly issued and authenticated certificates evidencing the Exchange
Consideration issuable to such person pursuant to Section 1.2.
1.4 STOCK OPTION AND OTHER PLANS.
(a) The Company shall, prior to the Closing Date, use its
commercially reasonable best efforts to accelerate the vesting or exercisability
of all outstanding employee stock options to purchase Company Common Stock,
whether set forth in any stock option plan or plans of the Company ("COMPANY
STOCK OPTION PLANS"), in an option agreement with the optionee or otherwise. On
the Closing Date, the Company shall use its commercially reasonable best efforts
to cause each such option (each, a "COMPANY OPTION") granted by the Company to
purchase shares of Company Common Stock that is outstanding and unexercised
immediately prior to Closing Date to be exercised, and the optionees thereunder
(the "OPTIONEES") shall be deemed to be Sellers for purposes of Articles I and
II of this Agreement. As required by Section 6.2(e) hereof, the Sellers shall
cause each Optionee to deliver prior to the Option Closing a joinder agreement
whereby each such Optionee agrees to be bound by the provisions of Articles I
and II of this Agreement as if he or she were a Seller hereunder (each, a
"JOINDER AGREEMENT").
(b) Any then outstanding stock appreciation rights or limited
stock appreciation rights shall be canceled as of immediately prior to the
Closing without any payment therefor. As provided herein, the Company Stock
Option Plans and any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any Subsidiary (collectively with the Company Stock Option Plans, the
"COMPANY STOCK INCENTIVE PLANS") shall terminate as of the Closing Date. The
Company will take all commercially reasonable steps to ensure that neither the
Company nor any of its Subsidiaries is or will be bound by any Company Options,
other options, warrants, rights or agreements which would entitle any Person,
other than EMKT, Top Team or either of their Affiliated Parties (as defined in
Section 8.1), to own any capital stock of the Company or any of its Subsidiaries
or to receive any payment in respect thereof. The Company will use its
commercially reasonable best efforts to obtain all necessary consents to ensure
that after the Closing Date, the only rights of the holders of Options to
purchase shares of Company Common Stock in respect of such Options will be to
receive the Purchase Consideration and the Exchange Consideration in
cancellation and settlement thereof.
1.5 TAX CONSEQUENCES. It is intended by the parties that the
contribution to Top Team of the Contributed Stock in exchange for the Exchange
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Consideration, together with (i) the contributions to be made in connection with
the Roll-Up (as defined in Section 4.5) and (ii) the capital contribution of
EMKT to Top Team referred to in Section 5.5, shall constitute a contribution of
capital under Section 351 of the Internal Revenue Code of 1986 (the "CODE").
1.6 CLOSING. The closing (the "CLOSING") of the purchase of the
Purchased Company Stock from the Sellers and the exchange by the Sellers and
EMKT of the Contributed Stock for the Exchange Consideration shall take place at
the offices of Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the
Stars, 16th Floor, Los Angeles, California, as soon as practicable after the
last of the conditions set forth in Article VI are fulfilled or waived (subject
to applicable law) but in no event later than the fifth business day thereafter,
or at such other time and place and on such other date as EMKT, Top Team and the
Company shall mutually agree (the "CLOSING DATE").
1.7 CERTIFICATE OF INCORPORATION OF TOP TEAM. The Certificate of
Incorporation of Top Team, as in effect as of the Closing Date, shall be as set
forth in Schedule 1.7.
1.8 BY-LAWS OF TOP TEAM. The By-Laws of Top Team, as in effect as of
the Closing Date, shall be as set forth in Schedule 1.8.
1.9 DIRECTORS AND OFFICERS OF TOP TEAM. As of the Closing Date, the
directors of Top Team shall be Robert Wallace, Fred Walti, Brian Burns and such
additional directors as shall be designated by Top Team, each to hold office,
subject to the applicable provisions of the Certificate of Incorporation and
By-Laws of Top Team, until the next annual stockholders' meeting of Top Team and
until their respective successors shall be duly elected or appointed and
qualified, and the persons set forth on Schedule 1.9 shall hold the offices of
Top Team therein indicated until their respective successors shall be duly
elected or appointed and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF SELLERS INDIVIDUALLY
Each Seller, severally and not jointly, hereby represents and warrants
to EMKT and Top Team that:
2.1 AUTHORIZATION. Such Seller has full power and authority to enter
into this Agreement and to perform his, her or its obligations under this
Agreement and to consummate the Purchase, the Exchange and the other
transactions contemplated hereby (collectively, the "TRANSACTIONS"). This
Agreement and all agreements or instruments herein contemplated to be executed
by such Seller are the valid and binding agreements of such Seller, enforceable
against such Seller in accordance with their respective terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
affecting creditors' rights generally and to general principles of equity.
2.2 OWNERSHIP OF STOCK. Such Seller is the record owner of all of the
Company Stock set forth below such Seller's name on Schedule 1.1, free and clear
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of any liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever. Upon consummation of
the Exchange, Top Team shall be the owner, beneficially and of record, of all of
the outstanding shares of capital stock of the Company, free and clear of any
liens, encumbrances, pledges, security interests, restrictions, prior
assignments and claims of any kind or nature whatsoever, except as otherwise
created by EMKT or Top Team in connection with the Transactions.
2.3 CONSENTS AND APPROVALS. Neither the execution and delivery of this
Agreement by such Seller nor the consummation of the Purchase and Exchange by
such Seller will violate, result in a breach of any of the terms or provisions
of, constitute a default (or any event that, with the giving of notice or the
passage of time or both, would constitute a default) under, result in the
acceleration of an indebtedness under or result in any right of termination of,
increase any amounts payable under, or conflict with, the trust agreements, if
any, relating to such Seller or any other agreement, indenture or other
instrument to which such Seller is a party or by which any of its properties are
bound, or any judgment, decree, order or award of any court, governmental body
or arbitrator (domestic or foreign) applicable to such Seller. All consents,
approvals and authorizations of, and declarations, filings and registrations
with, and payments of all taxes, fees, fines, and penalties to, any governmental
or regulatory authority (domestic or foreign) or any other Person (either
governmental or private) required in connection with the execution and delivery
by such Seller of this Agreement or the consummation of the Transactions by such
Seller have been or prior to the Closing will have been obtained, made and
satisfied.
2.4 SECURITIES MATTERS. Such Seller acknowledges that the shares of
EMKT Stock that constitute the Purchase Consideration and the shares of Top Team
Stock that constitute the Exchange Consideration have not been and will not
(except with respect to certain registration rights to be granted to the Sellers
pursuant to the Registration Rights Agreement referred to in Section 6,3(e)) be
registered under (i) the Securities Act of 1933, as amended (the "SECURITIES
ACT") inasmuch as they are being issued pursuant to an exemption from
registration granted under Section 4(2) of the Securities Act and Regulation D
promulgated thereunder relating to transactions not involving any public
offering, (ii) the California Corporate Securities Laws of 1968 (the "CALIFORNIA
LAW") or (iii) any other applicable securities laws, and that EMKT and Top
Team's reliance on such exemption or related exemptions is predicated in part on
the following representations and agreements made to EMKT and Top Team by such
Seller:
(a) Such Seller is acquiring the Purchase Consideration and
the Exchange Consideration (together, the "CONSIDERATION") to be issued to such
Seller hereunder for investment for his or her own account and not with a view
to or for sale in connection with any distribution and resale thereof, with no
intention of distributing or reselling the same; and such Seller is not aware of
any particular occasion, event or circumstance upon the occurrence or happening
of which he or it intends to dispose of such shares;
(b) Such Seller is either (i) an "accredited investor" as
defined in Rule 501(a) promulgated under the Securities Act, (ii) a "qualified
purchaser" within the meaning of Section 25102(n)(2) of the California Law or
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(iii) has such knowledge and experience in financial and business matters that
he or she is capable of evaluating the merits and risks of the Transactions;
such Seller is aware that the Merger Consideration constitutes "restricted,"
"letter" or "investment" securities and such Seller by reason of his business or
financial experience has the capacity to protect his own interest in connection
with the Transactions; and
(c) Such Seller agrees not to sell, transfer, assign, pledge,
hypothecate or otherwise dispose of his or its shares received in this
transaction without either (i) registration under the Securities Act and the
California Law, and any other applicable securities laws, or (ii) an opinion of
counsel reasonably satisfactory to EMKT and Top Team that the transaction by
which such shares are proposed to be disposed of is exempt from the Securities
Act, the California Law and any other applicable securities laws, and
acknowledges that EMKT and Top Team will place a legend on the certificates
representing such shares substantially to such effect concerning these
restrictions.
2.5 BROKERAGE FEES. No Person is entitled to any brokerage or finder's
fee or other commission from such Seller in respect of this Agreement or the
Transactions.
2.6 DISCLOSURE. The information provided by such Seller in this
Agreement and in any other writing furnished pursuant hereto does not and will
not contain an untrue statement of a material fact or omit to state a material
fact required to be stated herein or therein or necessary to make the statements
and facts contained herein or therein, in light of the circumstances under which
they are made, not false or misleading. Copies of all documents heretofore or
hereafter delivered or made available by such Seller to EMKT or Top Team
pursuant hereto were or will be complete and accurate records of such documents.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY AND KENT RHODES
Each of the Company and Kent Rhodes hereby, jointly and severally,
represents and warrants to EMKT and Top Team as follows:
3.1 DUE ORGANIZATION, GOOD STANDING AND CORPORATE POWER. Schedule 3.1
sets forth the name, state of incorporation or formation and equity ownership of
the Company in each Subsidiary of the Company. (A "SUBSIDIARY" of a Person is a
corporation, partnership, joint venture, limited liability company and other
entity in which such Person owns all or a majority of the equity interest or is
required to be consolidated on such Person's balance sheet pursuant to GAAP.)
The Company and each of its Subsidiaries is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and each such corporation has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. The Company and each of its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification necessary, except in
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such jurisdictions where the failure to be so qualified or licensed and in good
standing would not have a material adverse effect on the business, properties,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects (the "CONDITION") of the Company and its Subsidiaries
taken as a whole.
3.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. The Company has full
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution,
delivery and performance of this Agreement by the Company, and the consummation
by it of the Transactions, have been or prior to the Closing will be duly
authorized and approved by its Board of Directors and no other corporate action
on the part of the Company is necessary to authorize the execution, delivery and
performance of this Agreement by the Company and the consummation of the
Transactions (other than the approval of this Agreement by the holders of a
majority of the outstanding shares of Company Stock and any other classes of
capital stock entitled to vote thereon, as required by the Delaware General
Corporation Law). This Agreement has been duly executed and delivered by the
Company and is a valid and binding obligation of the Company enforceable against
the Company in accordance with its terms, except to the extent that its
enforceability may be subject to applicable bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles.
3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
1,000,000 shares of common stock, par value $0.01 per share, constituting the
Company Common Stock, and 150,000 shares of preferred stock, par value $0.01 per
share. As of the date of this Agreement, (i) 476,000 shares of Company Common
Stock are issued and outstanding, (ii) no shares of preferred stock are
outstanding and (iii) no shares of Company Common Stock are reserved for
issuance pursuant to outstanding Company Options granted under the Stock
Incentive Plans. All issued and outstanding shares of Company Stock have been
validly issued and are fully paid and nonassessable, and are not subject to, nor
were they issued in violation of, any preemptive rights. Except as set forth in
this Section 3.3 or on Schedule 3.3, (i) there are no shares of capital stock of
the Company authorized, issued or outstanding and (ii) there are not as of the
date hereof, and on the Closing Date there will not be, any outstanding or
authorized options, warrants, rights, subscriptions, claims of any character,
agreements, obligations, convertible or exchangeable securities, or other
commitments, contingent or otherwise, relating to Company Stock or any other
shares of capital stock of the Company, pursuant to which the Company is or may
become obligated to issue shares of Common Stock, any other shares of its
capital stock or any securities convertible into, exchangeable for, or
evidencing the right to subscribe for, any shares of the capital stock of the
Company.
(b) All of the outstanding shares of capital stock of each of
the Company's Subsidiaries have been duly authorized and validly issued, are
fully paid and nonassessable, are not subject to, nor were they issued in
violation of, any preemptive rights, and are owned, of record and beneficially,
by the Company, free and clear of all liens, encumbrances, options or claims
whatsoever. No shares of capital stock of any of the Company's Subsidiaries are
reserved for issuance and there are no outstanding or authorized options,
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warrants, rights, subscriptions, claims of any character, agreements,
obligations, convertible or exchangeable securities, or other commitments,
contingent or otherwise, relating to the capital stock of any Subsidiary of the
Company, pursuant to which such Subsidiary is or may become obligated to issue
any shares of capital stock of such Subsidiary or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any shares of
such Subsidiary. There are no restrictions of any kind that prevent the payment
of dividends by any of the Company's Subsidiaries. Except for the Subsidiaries
listed on Schedule 3.1, the Company does not own, directly or indirectly, any
capital stock or other equity interest in any Person or have any direct or
indirect equity or ownership interest in any Person and neither the Company nor
any of its Subsidiaries is subject to any obligation or requirement to provide
funds for or to make any investment (in the form of a loan, capital contribution
or otherwise) to or in any Person.
3.4 CONSENTS AND APPROVALS; NO VIOLATIONS. (a) The execution and
delivery of this Agreement by the Sellers and the Company and the consummation
by the Sellers and the Company of the Transactions will not: (1) violate any
provision of the Certificate of Incorporation, as amended, or By-Laws of the
Company or any of its Subsidiaries; (2) to the best knowledge of the Company and
the Sellers violate any statute, ordinance, rule, regulation, order or decree of
any court or of any governmental or regulatory body, agency or authority
applicable to the Company or such Seller or any of its Subsidiaries or by which
any of their respective properties or assets may be bound; (3) to the best
knowledge of the Company and the Sellers require any filing with, or permit,
consent or approval of, or the giving of any notice to, any governmental or
regulatory body, agency or authority; or (4) result in a violation or breach of,
conflict with, constitute (with or without due notice or lapse of time or both)
a default (or give rise to any right of termination, cancellation, payment or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of the Company or any
of its Subsidiaries under, any of the terms, conditions or provisions of any
note, bond, mortgage, indenture, license, franchise, permit, agreement, lease,
franchise agreement or other instrument or obligation to which the Company or
any of its Subsidiaries is a party, or by which it or any of their respective
properties or assets may be bound, excluding from the foregoing clauses (3) and
(4) filings, notices, permits, consents and approvals the absence of which, and
violations, breaches, defaults, conflicts and liens which, in the aggregate,
would not have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
(b) Neither the Company nor any Subsidiary is in default or in
violation (and no event has occurred which would notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Certification of Incorporation or By-Laws, (ii) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of its Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (iii) to the
best knowledge of the Company and the Sellers any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or any of its
Subsidiaries, except in the case of clauses (i) and (ii) above for defaults or
evaluations, which would not have a material adverse effect on the Condition of
the Company and the Subsidiaries taken as a whole.
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3.5 COMPANY REPORTS AND FINANCIAL STATEMENTS. Each of the consolidated
balance sheets as of the end of the fiscal year ended December 31, 1999 and the
ten-month period ended October 31, 1999 and the consolidated statements of
operations, consolidated statements of stockholders' equity and consolidated
statements of cash flow for the fiscal year ended December 31, 1999 and the
ten-month period ended October 31, 1999 previously delivered to EMKT, were
prepared in accordance with generally accepted accounting principles (as in
effect in the United States from time to time) applied on a consistent basis
("GAAP"), except as may be indicated therein or in the notes or schedules
thereto, and fairly present the consolidated financial position of the Company
and its consolidated Subsidiaries as of the dates thereof and the results of
their operations and cash flows for the periods then ended.
3.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 3.6,
since October 31, 1999 (the "BALANCE SHEET DATE") (i) there has not been any
material adverse change in the Condition of the Company and its Subsidiaries
taken as a whole; (ii) the businesses of the Company and each of its
Subsidiaries have been conducted only in the ordinary course; (iii) neither the
Company nor any of its Subsidiaries has incurred any material liabilities
(direct, contingent or otherwise) or engaged in any material transaction or
entered into any material agreement outside the ordinary course of business;
(iv) the Company and its Subsidiaries have not increased the compensation of any
officer or granted any general salary or benefits increase to their employees
other than in the ordinary course of business; and (v) neither the Company nor
any of its Subsidiaries has taken any action referred to in Section 5.2 except
as permitted or required thereby.
3.7 MINUTE BOOKS. The minute books of the Company and its Subsidiaries,
as previously made available to EMKT and its representatives, contain accurate
records of all meetings of and corporate actions or written consents by the
stockholders and Boards of Directors of the Company and its Subsidiaries since
December 31, 1995.
3.8 TITLE TO PROPERTIES; ENCUMBRANCES. Except as disclosed in Schedule
3.8, the Company and each of its Subsidiaries has good, valid and marketable
title, or a valid leasehold interest in, to (i) all its material tangible
properties and assets (real and personal), including, without limitation, all
the properties and assets reflected in the consolidated balance sheet as of
December 31, 1998 delivered pursuant to Section 3.5 (the "BALANCE SHEET") except
as indicated in the notes thereto and except for properties and assets reflected
in the Balance Sheet that have been sold or otherwise disposed of in the
ordinary course of business, and (ii) all the tangible properties and assets
purchased by the Company and any of its Subsidiaries since the Balance Sheet
Date except for such properties and assets which have been sold or otherwise
disposed of in the ordinary course of business; in each case subject to no
encumbrance, lien, charge or other restriction of any kind or character, except
for (1) liens reflected in the Balance Sheet, (2) liens consisting of zoning or
planning restrictions, easements, permits and other restrictions or limitations
on the use of real property or irregularities in title thereto which do not
materially detract from the value of, or impair the use of, such property by the
Company or any of its Subsidiaries in the operation of its respective business
and (3) liens for current taxes, assessments or governmental charges or levies
on property not yet due and delinquent.
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3.9 COMPLIANCE WITH LAWS. The Company and each of its Subsidiaries are
in compliance with all applicable laws, regulations, orders, judgments and
decrees except where the failure to so comply would not have a material adverse
effect on the Condition of the Company and its Subsidiaries taken as a whole.
3.10 LITIGATION. Except as set forth in Schedule 3.10, there is no
action, suit, proceeding at law or in equity, or any arbitration or any
administrative or other proceeding by or before (or to the best knowledge,
information and belief of the Company any investigation by) any governmental or
other instrumentality or agency, pending, or, to the best knowledge, information
and belief of the Company, threatened, against or affecting the Company or any
of its Subsidiaries, or any of their properties or rights which could have a
material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole. There are no such suits, actions, claims, proceedings or
investigations pending or, to the best knowledge, information and belief of the
Company, threatened, seeking to prevent or challenging the Transactions. Except
as disclosed in Schedule 3.10, to the best knowledge of the Company and the
Sellers, neither the Company nor any of its Subsidiaries is subject to any
judgment, order or decree entered in any lawsuit or proceeding which could have
a material adverse effect on the Condition of the Company and its Subsidiaries
taken as a whole or on the ability of the Company or any Subsidiary to conduct
its business as presently conducted.
3.11 EMPLOYEE BENEFIT PLANS.
(a) LIST OF PLANS. Set forth in Schedule 3.11 is an accurate
and complete list of all employee benefit plans ("EMPLOYEE BENEFIT PLANS")
within the meaning of Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"), whether or not any such Employee Benefit
Plans are otherwise exempt from the provisions of ERISA, established, maintained
or contributed to by the Company or any of its Subsidiaries (including, for this
purpose and for the purpose of all of the representations in this Section 3.11,
all employers (whether or not incorporated) which by reason of common control
are treated together with the Company as a single employer within the meaning of
Section 414 of the Code.
(b) STATUS OF PLANS. Neither the Company nor any of its
Subsidiaries maintains or contributes to any Employee Benefit Plan subject to
ERISA that is not in substantial compliance with ERISA or which has incurred any
accumulated funding deficiency within the meaning of Section 412 or 418B of the
Code, or that has applied for or obtained a waiver from the Internal Revenue
Service of any minimum funding requirement under Section 412 of the Code.
Neither the Company nor any of its Subsidiaries has incurred any liability to
the Pension Benefit Guaranty Corporation ("PBGC") in connection with any
Employee Benefit Plan covering any employees of the Company or any of its
Subsidiaries or ceased operations at any facility or withdrawn from any Employee
Benefit Plan in a manner which could subject it to liability under Section 4062,
4063 or 4064 of ERISA, and the Company knows of no facts or circumstances which
might give rise to any liability of the Company or any of its Subsidiaries to
the PBGC under Title IV of ERISA that could reasonably be anticipated to result
in any claims being made against the Company by the PBGC. Neither the Company
nor any of its Subsidiaries has incurred any withdrawal liability (including any
contingent or secondary withdrawal liability) within the meaning of Sections
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4201 and 4204 of ERISA, to any Employee Benefit Plan that is a Multiemployer
Plan (as defined in Section 4001(a)(3) of ERISA), and no event has occurred, and
there exists no condition or set of circumstances, that presents a material risk
of the occurrence of any withdrawal from or the partition, termination,
reorganization or insolvency of any Multiemployer Plan which could result in any
liability to a Multiemployer Plan.
(c) CONTRIBUTIONS. Full payment has been made of all amounts
which the Company or any of its Subsidiaries is required, under applicable law
or under any Employee Benefit Plan or any agreement relating to any Employee
Benefit Plan to which the Company or any of its Subsidiaries is a party, to have
paid as contributions thereto as of the last day of the most recent fiscal year
of such Employee Benefit Plan ended prior to the date hereof. The Company has
made adequate provision for reserves to meet contributions that have not been
made because they are not yet due under the terms of any Employee Benefit Plan
or related agreements. Benefits under all Employee Benefit Plans are as
represented and have not been increased subsequent to the date as of which
documents have been provided to EMKT and Top Team.
(d) RELATIONSHIP OF ACCRUED BENEFITS TO PENSION PLAN ASSETS.
As of the Balance Sheet Date, (1) the aggregate current value of all accrued
benefits (based upon actuarial assumptions which have been furnished to and
relied upon by EMKT, Top Team and Sub) under all Employee Benefit Plans which
are subject to Title IV of ERISA and which are Single Employer Plans (as defined
in Section 4001(a)(15) of ERISA) did not exceed the aggregate current value of
all assets of such Single Employer Plans allocable to such accrued benefits, and
since the Balance Sheet Date, there has been (A) no material adverse change in
the financial condition of any Single Employer Plan, (B) no change in the
actuarial assumptions with respect to any Single Employer Plan and (C) no
increase in benefits under any Single Employer Plan as a result of plan
amendments, change in applicable law or otherwise, which individually or in the
aggregate, would create any such excess; and (2) using actuarial assumptions and
computation methods consistent with subpart 1 of subtitle E of Title IV of
ERISA, the aggregate liabilities of the Company and its Subsidiaries to all such
Employee Benefit Plans which are Multiemployer Plans in the event of a complete
withdrawal therefrom, as of the close of the most recent fiscal year of each
Multiemployer Plan ended prior to the date hereof, would not exceed $50,000.
There has been no material change in the financial condition of any
Multiemployer Plan or in any such actuarial assumption or computation method or
in benefits under any Multiemployer Plan as a result of collective bargaining or
otherwise since the close of each such fiscal year which, individually or in the
aggregate, would materially increase such liability.
(e) TAX QUALIFICATION. Each Employee Benefit Plan intended to
be qualified under Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service and nothing has occurred since the
date of the last such determination which resulted or is likely to result in the
revocation of such determination.
(f) TRANSACTIONS. No Reportable Event (as defined in Section
4043 of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any Employee Benefit Plan and neither the
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Company nor any of its Subsidiaries has engaged in any transaction with respect
to the Employee Benefit Plans which would subject it to a tax, penalty or
liability for prohibited transactions under ERISA or the Code nor has any of
their respective directors, officers or employees to the extent they or any of
them are fiduciaries with respect to such Plans, breached any of their
responsibilities or obligations imposed upon fiduciaries under Title I of ERISA
or would result in any claim being made under or by or on behalf of any such
Plans by any party with standing to make such claim.
(g) OTHER PLANS. Neither the Company nor any of its
Subsidiaries currently maintains any employee or non-employee benefit plans or
any other foreign pension, welfare or retirement benefit plans other than those
listed in Schedule 3.11.
(h) DOCUMENTS. The Company has delivered or caused to be
delivered to EMKT, Top Team and their counsel true and complete copies of (1)
all Employee Benefit Plans as in effect, together with all amendments thereto
which will become effective at a later date, as well as the latest Internal
Revenue Service determination letter obtained with respect to any such Employee
Benefit Plan qualified under Section 401 or 501 of the Code and (2) Form 5500
for the most recently completed fiscal year for each Employee Benefit Plan
required to file such form.
3.12 EMPLOYMENT RELATIONS AND AGREEMENTS. (i) Except as set forth on
Schedule 3.12, to the best knowledge of the Company and the Sellers, each of the
Company and its Subsidiaries is in substantial compliance with all federal,
state or other applicable laws respecting employment and employment practices,
terms and conditions of employment and wages and hours, and has not and is not
engaged in any unfair labor practice; (ii) no unfair labor practice complaint
against the Company or any of its Subsidiaries is pending before the National
Labor Relations Board; (iii) there is no labor strike, dispute, slowdown or
stoppage actually pending or to the best knowledge of the Company and the
Sellers threatened against or involving the Company or any of its Subsidiaries;
(iv) to the best knowledge of the Company and the Sellers no representation
question exists respecting the employees of the Company or any of its
Subsidiaries; (v) to the best knowledge of the Company and the Sellers no
grievance which might have a material adverse effect on the Condition of the
Company and its Subsidiaries as a whole or the conduct of their respective
businesses exists, no arbitration proceeding arising out of or under any
collective bargaining agreement is pending and no claim therefor has been
asserted; (vi) no collective bargaining agreement is currently being negotiated
by the Company or any of its Subsidiaries; and (vii) neither the Company nor any
of its Subsidiaries has experienced any material labor difficulty during the
last three years. There has not been, and to the best knowledge of the Company,
there will not be any change in relations with employees of the Company or any
of its Subsidiaries as a result of the Transactions that could have a material
adverse effect on the Condition of the Company and its Subsidiaries taken as a
whole. Except as disclosed in Schedule 3.12, there exist no employment,
consulting, severance or indemnification agreements between the Company and any
director, officer or employee of the Company or any agreement that would give
any Person the right to receive any payment from the Company as a result of the
Purchase or Exchange.
3.13 CLIENT RELATIONS. Except as set forth on Schedule 3.13, there has
not been, and to the best knowledge, information and belief of the Company and
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the Sellers, there will not be, any change in relations with franchisees,
customers or clients of the Company or any of its Subsidiaries as a result of
the Transactions that could have a material adverse effect on the Condition of
the Company and its Subsidiaries taken as a whole.
3.14 TAXES. The Company has filed or caused to be filed, within the
times and in the manner prescribed by law, all federal, state, local and foreign
Tax Returns and tax reports that are required to be filed by, or with respect
to, the Company or any of its Subsidiaries prior to the Closing Date. Such
returns and reports are true, correct and complete in all material respects and
reflect accurately all liability for Taxes of the Company and its Subsidiaries
for the periods covered thereby. All federal, state, local and foreign Taxes
(including interest and penalties) payable by, or due from, the Company or any
of its Subsidiaries or reports due prior to the Closing Date have been fully
paid or adequately disclosed. Tax liabilities for the period ending on the
Closing Date have been adequately disclosed and fully provided for in the books
and financial statements of the Company and its Subsidiaries. All deficiencies
assessed as a result of any examination of such Tax Returns by federal, state,
local or foreign tax authorities have been paid, and deficiencies for all taxes
that have been proposed or asserted against the Company or any Subsidiary do not
exceed $10,000 in the aggregate for all periods. To the best knowledge of the
Company and the Sellers, no issue has been raised during the past five years by
any federal, state, local or foreign taxing authority that, if raised with
respect to any other period not so examined, could reasonably be expected to
result in a proposed deficiency for any other period not so examined. The
federal income tax liability of the Company and its Subsidiaries has been
finally determined for all fiscal years to and including the fiscal year ended
December 31, 1998. To the best knowledge of the Company and the Sellers, no
examination of any Tax Return of the Company or any of its Subsidiaries is
currently in progress. There are no outstanding agreements or waivers extending
the statutory period of limitation applicable to any Tax Return of the Company
or any of its Subsidiaries. Neither the Company nor any of its Subsidiaries is
party to any agreement, contract or arrangement that would result, separately or
in the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code. The Company and each of its Subsidiaries
have complied (and until the Closing will comply) in all material respects with
all applicable laws, rules and regulations relating to the payment and
withholding of taxes (including, without limitation, withholding of taxes
pursuant to Sections 1441 and 1442 of the Code or similar provisions under any
foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws. For purposes of this Section 3.14, the term "TAXES" means all
taxes, charges, fees, levies or other assessments, including without limitation
income, gross receipts, excise, property, sales, transfer, license, payroll,
withholding, capital stock and franchise taxes, imposed by the United States or
any state, local or foreign government or subdivision or agency thereof,
including any interest, penalties or additions thereto; and "TAX RETURN" means
any report, return or other information or document required to be supplied to a
taxing authority in connection with taxes.
3.15 LIABILITIES. Except as set forth on Schedule 3.15, neither the
Company nor any of its Subsidiaries has any outstanding claims, liabilities or
indebtedness, whether absolute, accrued, condensed, contingent or otherwise,
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except as set forth in the Balance Sheet or referred to in the footnotes
thereto, other than liabilities incurred subsequent to the Balance Sheet Date in
the ordinary course of business not involving borrowings by the Company. Neither
the Company nor any of its Subsidiaries is in default in respect of the material
terms and conditions of any indebtedness or other agreement.
3.16 INTELLECTUAL PROPERTIES. In the operation of its business the
Company and its Subsidiaries have used, and currently use, domestic and foreign
patents, patent applications, patent licenses, software licenses, knowhow
licenses, trade names, trademarks, copyrights, unpatented inventions, service
marks, trademark registrations and applications, service mark registrations and
applications, copyright registrations and applications, trade secrets and other
confidential proprietary information (collectively the "INTELLECTUAL PROPERTY").
Schedule 3.16 contains an accurate and complete list of all Intellectual
Property (other than trade secrets and other confidential information) which is
of material importance to the operation of the business of the Company or any of
its Subsidiaries. Unless otherwise indicated in Schedule 3.16 the Company (or
the Subsidiary indicated) owns the entire right, title and interest in and to
the Intellectual Property listed on Schedule 3.16 used in the operation of its
business (including, without limitation, the exclusive right to use and license
the same) and each item constituting part of the Intellectual Property which is
owned by the Company or a Subsidiary and listed on Schedule 3.16 has been, to
the extent indicated in Schedule 3.16, duly registered with, filed in or issued
by, as the case may be, the United States Patent and Trademark Office or such
other government entities, domestic or foreign, as are indicated in Schedule
3.16 and such registrations, filings and issuances remain in full force and
effect. To the best knowledge of the Company and the Sellers, except as stated
in such Schedule 3.16, there are no pending or threatened proceedings or
litigation or other adverse claims affecting or with respect to the Intellectual
Property. Schedule 3.16 lists all notices or claims currently pending or
received by the Company or any of its Subsidiaries during the past two years
which claim infringement, contributory infringement, inducement to infringe,
misappropriation or breach by the Company or any of its Subsidiaries of any
domestic or foreign patents, patent applications, patent licenses and know-how
licenses, trade names, trademark registrations and applications, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. Except as set forth in Schedule 3.16
hereto, there is, to the best knowledge, information and belief of the Company,
no reasonable basis upon which a claim may be asserted against the Company or
any of its Subsidiaries, for infringement, contributory infringement, inducement
to infringe, misappropriation or breach of any domestic or foreign patents,
patent applications, patent licenses, know-how licenses, trade names, trademark
registrations and applications, common law trademarks, service marks,
copyrights, copyright registrations or applications, trade secrets or other
confidential proprietary information. To the best knowledge of the Company,
except as indicated on Schedule 3.16, no Person is infringing the Intellectual
Property.
3.17 MATERIAL CONTRACTS AND RELATIONSHIPS.
(a) Except for agreements specifically identified on other
Schedules, Schedule 3.17 sets forth a complete and correct list of the
following:
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(i) All agreements (or groups of agreements with one
or more related entities) between the Company or any of its
Subsidiaries and any customer or supplier in excess of $25,000 and all
agreements extending beyond twelve months;
(ii) All agreements that relate to the borrowing or
lending by the Company (or any of its Subsidiaries) of any money or
that create or continue any material claim, lien, charge or encumbrance
against, or right of any third party with respect to, any asset of the
Company or any of its Subsidiaries;
(iii) All agreements by which the Company or any of
its Subsidiaries leases any real property, has the right to lease any
real property or leases capital equipment and all other leases
involving the Company or any of its Subsidiaries as lessee or lessor;
(iv) All agreements to which the Company or any of
its Subsidiaries is a party not in the ordinary course of business;
(v) All agreements to which the Company or any of its
Subsidiaries, on the one hand, and any of Sellers or any of their
respective Affiliates (as defined in Section 3.19) or Related Parties
(as defined in Section 3.19), on the other hand, are parties or by
which they are bound;
(vi) All contracts or commitments relating to the
employment of any Person or any commission or finder's fee arrangements
with others;
(vii) All material license agreements, whether as
licensor or licensee;
(viii) All other agreements to which the Company or
any of its Subsidiaries is a party or by which it is bound and that
involve $25,000 or more or that extend for a period of one year or
more; and
(ix) All other agreements to which the Company or any
of its Subsidiaries is a party or by which it is bound and that are or
may be material to the Condition of the Company or any of its
Subsidiaries.
As used in this Section 3.17 the word "AGREEMENT" includes both oral and written
contracts, leases, understandings, arrangements and all other agreements; and
the term "MATERIAL CONTRACTS" means the agreements of the Company or any of its
Subsidiaries required to be disclosed on Schedule 3.17, including agreements
specifically identified in other Schedules.
(b) All of the Material Contracts are in full force and
effect, are valid and binding and are enforceable in accordance with their terms
in favor of each of the Company and its Subsidiaries. To the best knowledge of
the Company and the Sellers, there are no material liabilities of any party to
any Material Contract arising from any breach or default of any provision
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thereof and no event has occurred that, with the passage of time or the giving
of notice or both, would constitute a breach or default by any party thereto.
(c) The Company and each of its Subsidiaries has fulfilled all
material obligations required pursuant to each Material Contract to have been
performed by the Company or its Subsidiaries prior to the date hereof, and to
the knowledge of the Sellers and the Company, the Company and each of its
Subsidiaries will be able to fulfill, when due, all of its obligations under
each of the Material Contracts that remain to be performed after the date
hereof.
(d) Schedules 3.17(c) sets forth a complete and correct list
of each (i) customer (or related group of customers) with whom the Company or
any of its Subsidiaries did $25,000 or more of business during the last fiscal
year, (ii) supplier (or related group of suppliers) with whom the Company or any
of its Subsidiaries did $25,000 or more of business during the last fiscal year,
and (iii) agent (or related group of agents) or representative (or related group
of representatives) who was paid $25,000 or more by the Company and its
Subsidiaries during the last fiscal year, respectively, which lists itemize the
actual dollar amounts.
(e) To the best knowledge of the Company and the Sellers, the
Company and each of its Subsidiaries has maintained and continues to maintain
good relations with its customers, suppliers and agents.
3.18 ABSENCE OF CERTAIN BUSINESS PRACTICES. Except as set forth on
Schedule 3.18, neither the Company nor any of its Subsidiaries nor any employee,
agent or other person acting on the Company's or any of its Subsidiaries'
behalf, including, but not limited to, any Seller, has, directly or indirectly,
given or agreed to give any gift or similar benefit to any customer, supplier,
competitor or governmental employee or official (domestic or foreign) (i) that
would subject the Company or its any of its Subsidiaries to any damage or
penalty in any civil, criminal or governmental litigation or proceeding or (ii)
that, if not given in the past, would have had a material adverse effect on the
Condition of the Company or any of its Subsidiaries.
3.19 TRANSACTIONS WITH RELATED PARTIES. Except as set forth on Schedule
3.19, there have been no transactions, including purchases or sales of assets or
entities, by or between the Company (or any of its Subsidiaries) and any Seller
or Related Party since January 1, 1994 and there are no agreements or
understandings now in effect between the Company and any Seller or Related
Party. Schedule 3.19 also (i) states the amounts due from the Company (or any of
its Subsidiaries) to any Seller or Related Party and the amounts due from any
Seller or Related Party to the Company or any of its Subsidiaries, (ii)
describes the transactions out of which such amounts due arose and (iii)
describes any interest of any Seller or Related Party in any supplier or
customer of, or any other entity that has had business dealings with, the
Company or any of its Subsidiaries since January 1, 1994. After the Closing,
there will be no obligations or other liabilities between each of the Company
and any of its Subsidiaries, on the one hand, and any Seller or Related Party,
on the other hand, other than pursuant to this Agreement and the Transactions
contemplated hereby. "RELATED PARTY" means the Company and each of its
Subsidiaries and Affiliates, including but not limited to each of the Sellers
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and any member of the immediate family of any of the Sellers; and "AFFILIATE"
means, in respect of any specified Person, any other Person that, directly or
indirectly, controls, is controlled by, or is under common control with, such
specified Person or if such specified Person bears a familial relationship with
such other Person.
3.20 BROKER'S OR FINDER'S FEE. No agent, broker, Person or firm acting
on behalf of the Company is, or will be, entitled to any fee, commission or
broker's or finder's fees from any of the parties hereto, or from any Person
controlling, controlled by, or under common control with any of the parties
hereto, in connection with this Agreement or any of the Transactions.
3.21 ACCOUNTS RECEIVABLE. Except as set forth on Schedule 3.21, the
accounts receivable of the Company as reflected in the Balance Sheet, to the
extent uncollected on the date of this Agreement, and the accounts receivable
reflected on the books of the Company are, on the basis of existing facts, valid
and existing and fully collectible (except for a reserve of $25,000) within one
year from the Closing Date, represent monies due for goods sold and delivered or
services rendered, and (subject to the aforesaid reserve) are subject to no
refunds or other adjustments (except discounts for prompt payment given in the
ordinary course of business) and to no defenses, rights of setoff, assignments,
restrictions, encumbrances or conditions enforceable by third parties on or
affecting any thereof. The Company has never factored any of its accounts
receivable.
3.22 INVENTORIES. The inventories reflected in the Balance Sheet were,
and those reflected on the books of the Company since such date have been,
determined and valued in accordance with generally accepted accounting
principles applied on a consistent basis as reflected in the consolidated
balance sheet, and existed on the respective dates. The inventories of the
Company consist of items which are good and merchantable, and are of a quality
and quantity presently usable or salable in the ordinary course of business.
3.23 INSURANCE. Schedule 3.23 sets forth a complete and correct list of
all insurance policies and of all claims made by each of the Company or any of
its Subsidiaries on any liability or other insurance policies during the past
five years (other than worker's compensation claims). The Company (together with
its Subsidiaries) has to the best knowledge of the Company and the Sellers
adequate liability and other insurance policies insuring it against the risks of
loss arising out of or related to its assets and business. Without limitation,
as to the tangible real and personal property of the Company and its
Subsidiaries, the Company reasonably believes that such insurance is adequate to
cover the full replacement cost, less deductible amounts, of such tangible real
and personal property. Schedule 3.23 is a complete and correct list of all
insurance currently in place and accurately sets forth the coverages, deductible
amounts, carriers and expiration dates thereof. Schedule 3.23 is a complete and
correct list of all insurance with respect to which the policy period has
expired, but for which certain of the coverage years are still subject to audit
or retrospective adjustment by the carrier, and accurately sets forth such
coverage years and the coverages, deductible amounts, carriers and expiration
dates thereof. To the best knowledge of the Company and the Sellers there are no
outstanding requirements or recommendations by any insurance company that issued
any policy of insurance to the Company or any of its Subsidiaries or by any
board of or by any governmental authority exercising similar functions that
require or recommend any changes in the conduct of the business of the Company
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or its Subsidiaries or any repairs or other work to be done on or with respect
to any of the Company's or any of its Subsidiaries' assets. Except as set forth
on Schedule 3.23, no notice or other communication has been received by the
Company or its Subsidiaries from any insurance company within the five years
preceding the date hereof canceling or materially amending or materially
increasing the annual or other premiums payable under any of its insurance
policies, and, to the knowledge of the Sellers and the Company, no such
cancellation, amendment or increase of premiums is threatened.
3.24 NO POWERS OF ATTORNEY OR SURETYSHIPS. Except as set forth on
Schedule 3.24, (a) the Company (together with its Subsidiaries) has not granted
any general or special powers of attorney and (b) the Company (together with its
Subsidiaries) does not have any obligation or liability (whether actual,
contingent or otherwise) as guarantor, surety, co-signer, endorser, co-maker,
indemnitor, obligor on an asset or income maintenance agreement or otherwise in
respect of the obligation of any Person.
3.25 BANKING FACILITIES. Schedule 3.25 sets forth a complete and
correct list of: (a) each bank, savings and loan or similar financial
institution in which the Company or any of its Subsidiaries has an account or
safety deposit box and the numbers of such accounts or safety deposit boxes
maintained thereat; and (b) the names of all persons authorized to draw on each
such account or to have access to any such safety deposit box, together with a
description of the authority (and conditions thereto, if any) of each person
with respect thereto.
3.26 ENVIRONMENTAL LIABILITIES.
(a) Except as set forth on Schedule 3.26 hereto, to the best
knowledge of the Company and the Sellers, neither the Company nor any of its
Subsidiaries has used, stored, treated, transported, manufactured, refined,
handled, produced or disposed of any Hazardous Materials on, under, at, from, or
in any way affecting, any of their properties or assets, or otherwise, in any
manner which at the time of the action in question violated any Environmental
Law, governing the use, storage, treatment, transportation, manufacture,
refinement, handling, production or disposal of Hazardous Materials and to the
best of the Company's and the Sellers' knowledge, no prior owner of such
property or asset or any tenant, subtenant, prior tenant or prior subtenant
thereof has used Hazardous Materials on or affecting such property or asset, or
otherwise in any manner which at the time of the action in question violated any
Environmental Law governing the use, storage, treatment, transportation,
manufacture, refinement, handling, production or disposal of Hazardous
Materials. "ENVIRONMENTAL LAWS" means any and all federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes, decrees
or requirements of any governmental authority regulating, relating to or
imposing liability or standards of conduct concerning any Hazardous Material or
environmental protection or health and safety, as now or may at any time
hereafter be in effect, including without limitation, the Clean Water Act also
known as the Federal Water Pollution Control Act ("FWPCA"), 33 U.S.C. ss. 1251
et seq., the Clean Air Act ("CAA"), 42 U.S.C. ss.ss. 7401 et seq., the Federal
Insecticide, Fungicide and Rodenticide AcT ("FIFRA"), 7 U.S.C. ss.ss. 136 et
seq., the Surface Mining Control and Reclamation Act ("SMCRA"), 30 U.S.C. ss.ss.
1201 et seq., the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), 42 U.S.C. ss. 9601 et seq., the Superfund Amendment
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and Reauthorization Act of 1986 ("SARA"), Public Law 99-499, 100 Stat. 1613, the
Emergency Planning and Community Right to Know Act ("EPCRKA"), 42 U.S.C. ss.
11001 et seq., the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C.
ss. 6901 et seq., the Occupational Safety and Health Act as amended ("OSHA"), 29
U.S.C. ss. 655 and ss. 657, together, in each case, with any amendment thereto,
and the regulations adopted and the official publications promulgated thereunder
and all substitutions thereof. "HAZARDOUS MATERIALS" means any flammable
materials, explosives, radioactive materials, hazardous materials, hazardous
wastes, hazardous or toxic substances, or similar materials defined in any
Environmental Law.
(b) To the best of the Company's and Sellers' knowledge (i)
neither the Company nor any of its Subsidiaries has any obligations or
liabilities, known or unknown, matured or not matured, absolute or contingent,
assessed or unassessed, where such would reasonably be expected to have a
materially adverse effect on the business or condition (financial or otherwise)
of the Company or any of its Subsidiaries, and (ii) no claims have been made
against the Company or any of its Subsidiaries during the past five years and no
presently outstanding citations or notices have been issued against the Company
or any of its Subsidiaries, where such could reasonably be expected to have a
materially adverse effect on the Condition of the Company or any of its
Subsidiaries, which in either case have been or are imposed by reason of or
based upon any provision of any Environmental Law, including, without
limitation, any such obligations or liabilities relating to or arising out of or
attributable, in whole or in part, to the manufacture, processing, distribution,
use, treatment, storage, disposal, transportation or handling of any Hazardous
Materials by the Company or any of its Subsidiaries, or any of their employees,
agents, representatives or predecessors in interest in connection with or in any
way arising from or relating to the Company or any of its Subsidiaries or any of
their respective properties, or relating to or arising from or attributable, in
whole or in part, to the manufacture, processing, distribution, use, treatment,
storage, disposal, transportation or handling of any such substance, by any
other Person at or on or under any of the real properties owned or used by the
Company or any of its Subsidiaries or any other location where such could have a
materially adverse effect on the business or condition (financial or otherwise)
of the Company (or any of its Subsidiaries).
3.27 MACHINERY, EQUIPMENT AND OTHER PERSONAL PROPERTY, ETC. Except as
set forth on Schedule 3.27, the Company (together with its consolidated
Subsidiaries) owns or leases all of the machinery, equipment, vehicles,
furniture, fixtures, leasehold improvements, repair parts, tools and other
property (collectively, the "PERSONAL PROPERTY") used by or relating to the
Company or its Subsidiaries. All such Personal Property is in good operating
condition and sufficient to carry on the business of the Company and its
Subsidiaries in the normal course as it is presently conducted and is free from
defects, whether patent or latent. Except as set forth in Schedule 3.27, it is
not necessary for the Company or any of its Subsidiaries to acquire or obtain
the use of any additional personal property to carry on its business as
presently and foreseeably to be conducted.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF EMKT AND TOP TEAM
Each of EMKT and Top Team represents and warrants to the Company and
the Sellers as follows:
4.1 DUE ORGANIZATION; GOOD STANDING AND CORPORATE POWER. Each of EMKT
and Top Team is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
4.2 AUTHORIZATION AND VALIDITY OF AGREEMENT. Each of EMKT and Top Team
has full corporate power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the Transactions. The
execution, delivery and performance of this Agreement by EMKT and Top Team, and
the consummation by each of them of the Transactions, have been duly authorized
by the Boards of Directors of EMKT and Top Team. No other corporate action on
the part of either of EMKT or Top Team is necessary to authorize the execution,
delivery and performance of this Agreement by each of EMKT and Top Team and the
consummation of the Transactions. This Agreement has been duly executed and
delivered by each of EMKT and Top Team and is a valid and binding obligation of
each of EMKT and Top Team, enforceable against each of EMKT and Top Team in
accordance with its terms, except that such enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally, and general equitable principles.
4.3 CONSENTS AND APPROVALS; NO VIOLATIONS. The execution and delivery
of this Agreement by EMKT and Top Team and the consummation by EMKT and Top Team
of the Transactions will not: (1) violate any provision of the Certificate of
Incorporation or By-Laws of EMKT or Top Team; (2) violate any statute,
ordinance, rule, regulation, order or decree of any court or of any governmental
or regulatory body, agency or authority applicable to EMKT or Top Team or by
which either of their respective properties or assets may be bound; (3) require
any filing with, or permit, consent or approval of, or the giving of any notice
to any governmental or regulatory body, agency or authority; or (4) result in a
violation or breach of, conflict with, constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the properties or assets of
EMKT or Top Team or any of their Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
franchise, permit, agreement, lease or other instrument or obligation to which
EMKT or Top Team or any of their Subsidiaries is a party, or by which they or
their respective properties or assets may be bound, excluding from the foregoing
clauses (3) and (4) filings, notices, permits, consents and approvals the
absence of which, and violations, breaches, defaults, conflicts and liens which,
in the aggregate, would not have a material adverse effect on the business,
properties, assets, liabilities, operations, results of operations, conditions
(financial or otherwise) or prospects of EMKT and its Subsidiaries taken as a
whole.
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4.4 EMKT REPORTS AND FINANCIAL STATEMENTS. The consolidated balance
sheet as of the end of the fiscal year ended June 30, 1999 as set forth in
EMKT's annual report on Form 10-K, as filed with the Securities and Exchange
Commission, and the consolidated statements of operations, consolidated
statements of stockholders' equity and consolidated statements of cash flow for
the fiscal year then ended, were prepared in accordance with GAAP, except as may
be indicated therein or in the notes or schedules thereto, and fairly present
the consolidated financial position of EMKT and its consolidated subsidiaries as
of the date thereof and the results of their operations and cash flows for the
fiscal year then ended.
4.5 CAPITALIZATION. The authorized capital stock of Top Team consists
of 30,000,000 shares of common stock, par value $0.001 per share, and 1,000,000
shares of Series A Preferred Stock, par value $0.001 per share ("PREFERRED
STOCK"). As of the date of this Agreement, (i) 100 shares of Top Team Stock and
no shares of Preferred Stock have been issued, options to purchase 2,200,000
shares of Top Team Stock have been reserved for issuance pursuant to options
that have been or are to be granted under Top Team stock incentive plans, and
rights to purchase 3,600,000 shares of Top Team Stock at $7.50 per share have
been issued.
4.6 ABSENCE OF CERTAIN CHANGES. Except as disclosed in Schedule 4.6,
since June 30, 1999 there has not been any material adverse change in the
Condition of EMKT and its Subsidiaries taken as a whole.
4.7 COMPLIANCE WITH LAWS. To the best knowledge of EMKT, EMKT and each
of its Subsidiaries are in compliance with all applicable laws, regulations,
orders, judgments and decrees except where the failure to so comply would not
have a material adverse effect on the Condition of the Company and its
Subsidiaries taken as a whole.
4.8 LIABILITIES. Neither EMKT nor any of its Subsidiaries has any
outstanding claims, liabilities or indebtedness, whether absolute, accrued,
condensed, contingent or otherwise, except as set forth in its balance sheet for
the fiscal year ended June 30, 1999 or referred to in the footnotes thereto,
other than liabilities incurred subsequent to such date in the ordinary course
of business not involving borrowings by the EMKT. Neither EMKT nor any of its
Subsidiaries is in default in respect of the material terms and conditions of
any indebtedness or other agreement.
4.9 LITIGATION. Except as set forth in the EMKT's Form 10-K for the
fiscal year ended June 30, 1999, there is no action, suit, proceeding, at law or
in equity, or any arbitration or any administrative or other proceeding by or
before (or to the best knowledge, information and belief of EMKT, any
investigation by or before) any governmental or other instrumentality or agency,
pending or, to the best of knowledge, information and belief of EMKT, threatened
against or affecting EMKT or any of its Subsidiaries or any of their properties
or rights which could have a material adverse effect on Condition of EMKT and
its Subsidiaries taken as a whole. There are no such suits, actions, claims,
proceedings or investigations pending, or to the best knowledge, information and
belief of the Company, threatened, seeking to prevent or challenge the
Transactions. Except as disclosed in such Form 10-K, neither EMKT nor any of its
Subsidiaries, is subject to any judgment, order or decree in any lawsuit or
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proceeding which could have a material adverse effect on the Condition of EMKT
and its Subsidiaries, taken as a whole, or on the ability of EMKT or any
Subsidiary to conduct its business as presently conducted.
4.10 TAX STATUS. Neither EMKT nor Top Team has taken any action that
would cause the Purchase not to qualify as an installment sale for federal
income tax purposes or to cause the Exchange not to qualify as a tax-free
contribution to capital under Section 351 of the Code.
ARTICLE V
ACTIONS PRIOR TO CLOSING DATE
5.1 ACCESS TO INFORMATION CONCERNING PROPERTIES AND RECORDS. During the
period commencing on the date hereof and ending on the Closing Date, the Company
shall, and shall cause each of its Subsidiaries to, upon reasonable notice,
afford EMKT and Top Team, and their respective counsel, accountants and other
authorized representatives, full access during normal business hours to the
properties, books and records of the Company and its Subsidiaries in order that
they may have the opportunity to make such investigations as they shall desire
of the affairs of the Company and its Subsidiaries; such investigation shall
not, however, affect the representations and warranties made by the Company in
this Agreement. The Company acknowledges and agrees that Top Team's auditors
will be performing an audit of the Company's financial statements (the "AUDIT"),
and will provide all information and documents and cooperate in any way so as to
permit the Audit to be completed promptly. The Company agrees to cause its
officers and employees to furnish such additional financial and operating data
and other information and respond to such inquiries as EMKT and Top Team shall
from time to time request.
5.2 CONDUCT OF THE BUSINESS OF THE COMPANY PENDING THE CLOSING DATE.
The Company agrees that, except as permitted, required or specifically
contemplated by, or otherwise described in, this Agreement or Schedule 5.2 or
otherwise consented to or approved in writing by EMKT (which consent shall not
be unreasonably withheld, delayed or conditioned), during the period commencing
on the date hereof and ending on the Closing Date:
(a) The Company and each of its Subsidiaries will conduct
their respective operations only according to their ordinary and usual course of
business and will use their best efforts to preserve intact their respective
business organization, keep available the services of their officers and
employees and maintain satisfactory relationships with licensers, suppliers,
distributors, clients and others having business relationships with them;
(b) Neither the Company nor any of its Subsidiaries shall (i)
make any change in or amendment to its Certificate of Incorporation or By-Laws
(or comparable governing documents); (ii) issue or sell any shares of its
capital stock (other than in connection with the exercise of Company Options
outstanding on the date hereof) or any of its other securities, or issue any
securities convertible into, or options, warrants or rights to purchase or
subscribe to, or enter into any arrangement or contract with respect to the
issuance or sale of, any shares of its capital stock or any of its other
securities, or make any other changes in its capital structure; (iii) declare,
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pay or make any dividend or other distribution or payment with respect to, or
split, redeem or reclassify, any shares of its capital stock; (iv) enter into
any contract or commitment, except for contracts in the ordinary course of
business, including without limitation, any acquisition of a material amount of
assets or securities, any disposition of a material amount of assets or
securities or release or relinquish any material contract rights; (v) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently, or otherwise) for the obligations of any other Person other than a
Subsidiary in the ordinary course of business and consistent with past practice;
(vi) incur, assume or prepay any indebtedness or other material liabilities
other than in the ordinary course of business and consistent with past
practices, except that the Company may prepay its legal fees in connection with
the Transactions to the extent they do not exceed the amount set forth in
Section 9.1(a); (vii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to Subsidiaries; (viii) authorize
capital expenditures in excess of the amount currently budgeted therefor; (ix)
permit any insurance policy naming the Company or any Subsidiary as a
beneficiary or a loss payee to be cancelled or terminated other than in the
ordinary course of business; (x) amend any employee or nonemployee benefit plan
or program, employment agreement, license agreement or retirement agreement, or
pay any bonus or contingent compensation, except in each case in the ordinary
course of business consistent with past practice prior to the date of this
Agreement; (xi) agree, in writing or otherwise, to take any of the foregoing
actions; or (xii) agree to the settlement of any litigation;
(c) The Company shall not, and shall not permit any of its
Subsidiaries to (i) take any action, engage in any transaction or enter into any
agreement which would cause any of the representations or warranties set forth
in Article III to be untrue as of the Closing Date, or (ii) purchase or acquire,
or offer to purchase or acquire, any shares of capital stock of the Company and
the Company shall not sell or pledge or agree to sell or pledge any stock owned
by it in any of the Subsidiaries, or allow any Subsidiary to pledge or agree to
sell or pledge any stock owned by it in any other Subsidiary.
(d) The Company will use its commercially reasonable best
efforts to deliver to EMKT prior to the Closing a consolidated balance sheet as
of the end of the fiscal year ended July 31, 1999 and the related consolidated
statements of operations, stockholders' equity and cash flows for the fiscal
year then ended, prepared in accordance with GAAP and on a basis consistent with
that of the statements delivered pursuant to Section 3.5.
5.3 BEST EFFORTS. Each of the Company, EMKT and Top Team shall, and the
Company shall cause each of its Subsidiaries to, cooperate and use their
respective commercially reasonable best efforts to take, or cause to be taken,
all appropriate action, and to make, or cause to be made, all filings necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the Transactions, including, without limitation, their respective best
efforts to obtain, prior to the Closing Date, all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company and its Subsidiaries as are necessary
for consummation of the Transactions and to fulfill the conditions to the
Transactions; provided, however, that no loan agreement or contract for borrowed
money shall be repaid except as currently required by its terms, in whole or in
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part, and no contract shall be amended to increase the amount payable thereunder
or otherwise to be more burdensome to the Company or any of its Subsidiaries in
order to obtain any such consent, approval or authorization without first
obtaining the written approval of EMKT and Top Team (which shall not be
unreasonably withheld or delayed).
5.4 NO SOLICITATION OF OTHER OFFERS. Neither the Company nor any of its
Subsidiaries, shall, directly or indirectly, take (and the Company shall not
authorize or permit its or its Subsidiaries, officers, directors, employees,
representatives, investment bankers, attorneys, accountants or other agents or
affiliates, to so take) any action to encourage, solicit, initiate or, subject
to the fiduciary duties of the Board of Directors under applicable law as
advised in writing by counsel, participate in any way in discussions or
negotiations with, or furnish any information to, any Person (other than EMKT,
Top Team or their respective officers, directors, representatives, agents,
affiliates or associates) in connection with any possible or proposed merger or
other business combination, sale or other disposition of assets, sale of shares
of capital stock or similar transactions involving the Company or any Subsidiary
or division of the Company. The Company will promptly communicate to EMKT and
Top Team the terms of any proposal or inquiry that it may receive in respect of
any such transaction, or of any such information requested from it or of any
such negotiations or discussions being sought to be initiated with the Company.
ARTICLE VI
CONDITIONS PRECEDENT TO TRANSACTIONS
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT, TOP TEAM AND THE
COMPANY AND THE SELLERS. The respective obligations of EMKT and Top Team, on the
one hand, and the Company and the Sellers, on the other hand, to effect the
Transactions are subject to the satisfaction or waiver (subject to applicable
law) on or prior to the Closing Date of each of the following conditions:
(a) INJUNCTION. No preliminary or permanent injunction or
other order shall have been issued by any court or by any governmental or
regulatory agency, body or authority which prohibits the consummation of the
Transactions and which is in effect on the Closing Date; and
(b) STATUTES. No statute, rule, regulation, executive order,
decree or order of any kind shall have been enacted, entered, promulgated or
enforced by any court or governmental authority which prohibits the consummation
of the Transactions or has the effect of making the purchase of the Company
Stock illegal.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF EMKT AND TOP TEAM. The
obligations of EMKT and Top Team to effect the Transactions are also subject to
the satisfaction or waiver, on or prior to the Closing Date, of each of the
following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of the Company contained herein shall be true and
correct in all material respects as of
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the date hereof and at and as of the Closing, with the same force and effect as
though made on and as of the Closing Date;
(b) PERFORMANCE BY COMPANY. The Company shall have performed
in all material respects all obligations and agreements, and complied in all
material respects with all covenants and conditions, contained in this Agreement
to be performed or complied with by it prior to the Closing Date;
(c) EMPLOYMENT AGREEMENTS. Kent Rhodes, Ph.D. and Todd
Knowlton shall each have entered into an employment agreement with Top Team in
form and substance reasonably satisfactory to Top Team;
(d) JOINDER AGREEMENTS. Each Seller other than Kent Rhodes
shall have executed a Joinder Agreement in form and substance reasonably
satisfactory to EMKT; and
(e) OTHER DOCUMENTS. EMKT and Top Team shall have received
such other documents, opinions, agreements, certificates and instruments as they
shall reasonably require in connection with the consummation of the
Transactions.
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND THE SELLERS.
The obligations of the Company and the Sellers to effect the Transactions are
also subject to the satisfaction or waiver, on or prior to the Closing Date, of
each of the following conditions:
(a) ACCURACY OF REPRESENTATIONS AND WARRANTIES. All
representations and warranties of EMKT and Top Team contained herein shall be
true and correct in all material respects as of the date hereof and at and as of
the Closing, with the same force and effect as though made on and as of the
Closing Date;
(b) PERFORMANCE BY EMKT AND TOP TEAM. Each of EMKT and Top
Team shall have performed in all material respects all obligations and
agreements, and complied in all material respects with all covenants and
conditions, contained in this Agreement to be performed or complied with by it
prior to the Closing Date; and
(c) STOCK INCENTIVE PLAN. Top Team shall have implemented a
stock option plan and restricted stock purchase plan prior to the Closing Date
and shall have reserved for issuance up to 25,000 shares of Top Team stock for
issuance to former employees of the Company pursuant to such plan; and
(d) REGISTRATION RIGHTS. Top Team and Sellers shall have
entered into an agreement regarding registration rights for the Purchase
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof. EMKT and Sellers shall
have entered into an agreement regarding registration rights for the Exchange
Consideration in form and content mutually satisfactory to the parties thereto.
Top Team and the Sellers agree to negotiate the terms of such agreement in good
faith and as soon as possible after the execution hereof.
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ARTICLE VII
TERMINATION AND ABANDONMENT
7.1 TERMINATION. This Agreement may be terminated and the Transactions
may be abandoned, at any time prior to the Closing Date:
(a) by mutual consent of the Company and the Sellers, on the
one hand, and of EMKT and Top Team, on the other hand;
(b) by EMKT and Top Team, on the one hand, or the Company and
the Sellers, on the other hand, if the Closing shall not have occurred within
six months after the date of this Agreement or there has been a material breach
of any representation, warranty, obligation, covenant or agreement set forth in
this Agreement on the part of the other party;
(c) by EMKT and Top Team, if any of the conditions specified
in Sections 6.1 or 6.2 have not been met or waived by EMKT and Top Team prior to
or at such time as such condition can no longer be satisfied; or
(d) by the Company and the Sellers, if any of the conditions
specified in Sections 6.1 or 6.3 have not been met or waived by the Company and
the Sellers prior to or at such time as such condition can no longer be
satisfied.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1 by EMKT or Top Team, on the one hand, or the
Company and the Sellers, on the other hand, written notice thereof shall
forthwith be given to the other party or parties specifying the provision hereof
pursuant to which such termination is made, and this Agreement shall become void
and have no effect, and there shall be no liability hereunder on the part of
EMKT, Top Team, the Company or the Sellers, except that Section 9.1, Article
VIII and this Section 7.2 shall survive any termination of this Agreement.
Nothing in this Section 7.2 shall relieve any party to this Agreement of
liability for breach of this Agreement.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION BY SELLERS. Each Seller, for a period of three
years from the date hereof, shall severally and not jointly, indemnify and hold
harmless EMKT and Top Team and each of their affiliates, directors, officers,
employees, attorneys, agents and representatives (collectively, the "AFFILIATED
PARTIES") in respect of any and all claims, losses, damages, liabilities,
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declines in value, penalties, interest, costs and expenses (including, without
limitation, any attorneys', accountants' and consultants' fees and other
expenses) reasonably incurred by EMKT or Top Team or their respective Affiliated
Parties, together with interest on cash disbursements in connection therewith,
at an annual rate equal to the prime rate as reported from time to time by Bank
of America NT & SA (the "PRIME RATE") then in effect, from the date such cash
disbursements were made by EMKT or Top Team or any of their Affiliated Parties
until paid by such Seller, in connection with each and all of the following:
(a) Any breach of any representation or warranty made by such
Seller in Article II or III of this Agreement;
(b) Any misrepresentation contained in any written statement
or certificate furnished by such Seller individually pursuant to this Agreement
or in connection with the Transactions; and
(c) Any breach of any covenant, agreement or obligation of
such Seller individually contained in this Agreement or any other instrument
contemplated by this Agreement.
No claim, demand, suit or cause of action shall be brought
against such Seller under this Section 8.1 unless and until the aggregate amount
of claims under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and
Top Team and their respective Affiliated Parties shall be entitled to
indemnification from such Seller for all claims hereunder relating back to the
first dollar.
8.2 INDEMNIFICATION BY SELLERS JOINTLY AND SEVERALLY. The Sellers
shall, for a period of three years from the date hereof, jointly and severally
indemnify and hold harmless EMKT and Top Team and each of their respective
Affiliated Parties in respect of any and all claims, losses, damages,
liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys, accountants' and consultants'
fees and other expenses) reasonably incurred by EMKT or Top Team or their
respective Affiliated Parties, together with interest on cash disbursements in
connection therewith, at an annual rate equal to the Prime Rate then in effect,
from the date such cash disbursements were made by EMKT or Top Team or any of
their Affiliated Parties until paid by the Sellers, in connection with each and
all of the following:
(a) Subject to Section 8.4 hereof, any breach of any
representation or warranty made by the Sellers or the Company in Article III of
this Agreement or pursuant hereto;
(b) Any misrepresentation contained in any written statement
or certificate furnished by Sellers and/or the Company pursuant to this
Agreement or in connection with the Transactions; or
(c) Any breach of any covenant, agreement or obligation of
Sellers and/or the Company contained in this Agreement or any other instrument
contemplated by this Agreement.
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No claim, demand, suit or cause of action shall be brought against the
Sellers under this Section 8.2 unless and until the aggregate amount of claims
under Sections 8.1 and 8.2 exceeds $50,000, in which event EMKT and Top Team and
their respective Affiliated Parties shall be entitled to indemnification from
the Sellers for all claims hereunder relating back to the first dollar.
8.3 INDEMNIFICATION BY EMKT AND TOP TEAM. EMKT and Top Team shall, for
a period of three years from the Closing Date, jointly and severally, indemnify
and hold harmless each of Sellers in respect of any and all claims, losses,
damages, liabilities, declines in value, penalties, interest, costs and expenses
(including, without limitation, any attorneys', accountants' and consultants'
fees and other expenses) reasonably incurred by Sellers, together with interest
on cash disbursements in connection therewith, at an annual rate equal to the
Prime Rate then in effect, from the date that such cash disbursements were made
by Sellers until paid by EMKT or Top Team, in connection with each and all of
the following:
(a) Any breach of any representation or warranty made by EMKT
or Top Team in this Agreement or pursuant hereto; or
(b) Any breach of any covenant, agreement or obligation of
EMKT or Top Team contained in this Agreement or any other instrument
contemplated by this Agreement; or
(c) Any misrepresentation contained in any statement or
certificate furnished by EMKT or Top Team pursuant to this Agreement or in
connection with the Transactions.
No claim, demand, suit or cause of action shall be brought
against EMKT or Top Team under this Section 8.3 unless and until the aggregate
amount of claims under this Section 8.3 exceeds $50,000, in which event, Sellers
shall be entitled to indemnification from EMKT or Top Team for all claims
hereunder relating back to the first dollar.
8.4 INDEMNIFICATION BY SELLERS FOR TAX LIABILITIES. In addition to, and
not by way of limitation on, the indemnities set forth in this Article VIII, the
Sellers shall jointly and severally indemnify and hold harmless on an after-tax
basis EMKT and Top Team against all Taxes of the Company (together with its
consolidated Subsidiaries) for all taxable periods ending on or before the date
hereof or otherwise attributable to the operations, transactions, assets, or
income of the Company or its Subsidiaries prior to the date hereof, together
with any expenses (including, without limitation, settlement costs and any
legal, accounting and other expenses) incurred in connection with the
contesting, collection or assessment of such Taxes, and together with interest
at an annual rate equal to the Prime Rate then in effect, but not for losses due
to any action or inaction taken or required to be taken by EMKT or Top Team
hereunder. Notwithstanding Sections 8.1 and 8.2, the Sellers' obligation to
indemnify EMKT and Top Team pursuant to this Section 8.4 shall continue until 90
days after all applicable statutes of limitations have expired. For purposes of
this Section 8.4, the term "AFTER-TAX BASIS" means determined after giving
effect to (i) the receipt by the indemnified party of such payment, if such
receipt is taxable and (ii) any tax deduction available on account of the
payment of such Taxes; and assuming that Taxes are payable at a combined
effective rate of 45% of taxable income.
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8.5 CLAIMS FOR INDEMNIFICATION. Whenever any claim shall arise for
indemnification hereunder, the party entitled to indemnification (the
"INDEMNIFIED PARTY") shall promptly notify the party obligated to provide
indemnification (the "INDEMNIFYING PARTY") of the claim and, when known, the
facts constituting the basis for such claim; provided, however, that the failure
to so notify the indemnifying party shall not relieve the indemnifying party of
its obligation hereunder to the extent such failure does not materially
prejudice the indemnifying party. In the event of any claim for indemnification
hereunder resulting from or in connection with any claim or legal proceedings by
a third party, the notice to the indemnifying party shall specify, if known, the
amount or an estimate of the amount of the liability arising therefrom. If any
claims shall arise against Sellers hereunder, EMKT and Top Team may (but shall
not be required to) set-off against any amount then or thereafter payable (but
not yet paid) to such Seller.
8.6 DEFENSE CLAIMS. In connection with any claim giving rise to
indemnity hereunder resulting from or arising out of any claim or legal
proceeding by a Person who is not a party to this Agreement, the indemnifying
party at its sole cost and expense and with counsel reasonably satisfactory to
the indemnified party may, upon written notice to the indemnified party, assume
the defense of any such claim or legal proceeding if (a) the indemnifying party
acknowledges to the indemnified party in writing, within 15 days after receipt
of notice from the indemnifying party, its obligations to indemnify the
indemnified party with respect to all elements of such claim, (b) the
indemnifying party provides the indemnified party with evidence reasonably
acceptable to the indemnified party that the indemnifying party will have the
financial resources to defend against such third-party claim and fulfill its
indemnification obligations hereunder, (c) the third-party claim involves only
money damages and does not seek an injunction or other equitable relief, and (d)
settlement or an adverse judgment of the third party claim is not, in the good
faith judgment of the indemnified party, likely to establish a pattern or
practice adverse to the continuing business interests of the indemnified party.
The indemnified party shall be entitled to participate in (but not control) the
defense of any such action, with its counsel and at its own expense; provided,
however, that if there are one or more legal defenses available to the
indemnified party that conflict with those available to the indemnifying party,
or if the indemnifying party fails to take reasonable steps necessary to defend
diligently the claim after receiving notice from the indemnified party that it
believes the indemnifying party has failed to do so, the indemnified party may
assume the defense of such claim; provided, further, that the indemnified party
may not settle such claim without the prior written consent of the indemnifying
party, which consent may not be unreasonably withheld. If the indemnified party
assumes the defense of the claim, the indemnifying party shall reimburse the
indemnified party for the reasonable fees and expenses of counsel retained by
the indemnified party and the indemnifying party shall be entitled to
participate in (but not control) the defense of such claim, with its counsel and
at its own expense. The parties agree to render, without compensation, to each
other such assistance as they may reasonably require of each other in order to
insure the proper and adequate defense of any action, suit or proceeding,
whether or not subject to indemnification hereunder. Notwithstanding the
foregoing, if any of Sellers assumes the defense of a claim for Taxes for which
they are obligated to indemnify EMKT, Top Team or any of its Subsidiaries, then
such indemnifying party shall not settle or otherwise agree to a resolution of a
dispute with respect to such claim if that settlement or resolution would have
an adverse impact on the liability of EMKT, Top Team or any of their respective
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Subsidiaries for any taxable period ending after the date hereof without the
express written consent of EMKT, Top Team or such affected Subsidiary, which
consent will not be unreasonably withheld or delayed.
8.7 MANNER OF INDEMNIFICATION. All indemnification payments hereunder
shall be effected by payment of cash or delivery of a certified or official bank
check in the amount of the indemnification liability.
8.8 LIMITATIONS ON INDEMNIFICATION. Notwithstanding the provisions of
Section 8.1, 8.2 and 8.3 to the effect that an indemnifying party's obligation
under such section shall expire on the third anniversary hereof, such obligation
shall continue (i) as to any matter as to which a claim is submitted in writing
to the indemnifying party prior to such third anniversary and identified as a
claim for indemnification pursuant to this Agreement or (ii) as to any matter
that is based upon willful fraud by the indemnifying party, until such time as
such claims and matters are resolved.
ARTICLE IX
MISCELLANEOUS
9.1 FEES AND EXPENSES.
(a) Except as provided in paragraph (b) below, all costs and
expenses incurred in connection with this Agreement and the consummation of the
Transactions shall be paid by the party incurring such costs and expenses;
provided that Top Team shall reimburse the Sellers for the reasonable fees and
costs of their counsel, not to exceed $20,000, and the Sellers will pay for the
amount in excess thereof.
(b) If either (i) at any time while this Agreement is in
effect, the Company shall have consummated, or entered into an agreement
providing for, a merger of the Company with, sale of all or a substantial part
of the assets of the Company to, or any other business combination involving the
Company with, another Person, or (ii) this Agreement is terminated other than
solely because of a wilful and material breach of the representations or
warranties of EMKT or Top Team or a wilful failure of EMKT or Top Team to
fulfill a material covenant or contained herein, then, in the case of clause (i)
or (ii) above, the Company shall, within two days after the first of such events
has occurred, pay EMKT a fee in lieu of reimbursement for such expenses equal to
$40,000 plus the actual costs of the Audit.
9.2 REPRESENTATIONS AND WARRANTIES. The respective representations and
warranties of the Company and the Sellers, on the one hand, and EMKT and Top
Team, on the other hand, contained herein or in any certificates or other
documents delivered prior to or at the Closing shall not be deemed waived or
otherwise affected by any investigation made by any party.
9.3 EXTENSION; WAIVER. At any time prior to the Closing Date, the
parties hereto, by action taken by or on behalf of the respective Boards of
Directors of the Company, EMKT, Top Team or Sub, may (i) extend the time for the
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performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein by any other applicable party or in any document, certificate or writing
delivered pursuant hereto by any other applicable party or (iii) waive
compliance with any of the agreements or conditions contained herein. Any
agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
9.4 PUBLIC ANNOUNCEMENTS. The Company and the Sellers, on the one hand,
and EMKT and Top Team, on the other hand, agree to consult promptly with each
other prior to issuing any press release or otherwise making any public
statement with respect to the Transactions , and shall not issue any such press
release or make any such public statement prior to such consultation and review
by the other party of a copy of such release or statement, unless required by
applicable law.
9.5 NOTICES. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered in person or
mailed, certified or registered mail with postage prepaid, or sent by telex,
telegram or telecopier, as follows:
(a) if to the Company, to it at:
OnCourse Network, Inc.
2222 Michelson Drive
Suite 222-121
Irvine, California 92612
Attention: President
Fax ________________
(b) if to any Seller to his, her or its address on the
signature pages hereof
(c) if to either EMKT or Top Team, to it at:
c/o Full Moon Interactive Inc.
1111 Tamarind Avenue
Hollywood, California 90038
Attention: President
Fax: 323-856-3011
with a copy to:
eMarketplace, Inc.
225 W. Julian Street, Suite 100
San Jose, California 95110
Attention: Chairman
Fax 408 275-1958
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And to:
Kaye Scholer Fierman, Hays & Handler, LLP
1999 Avenue of the Stars
Los Angeles, California 90067
Attention: B.J. Yankowitz, Esq.
Fax: 310-788-1200
or to such other Person or address as any party shall specify by notice in
writing to each of the other parties. All such notices, requests, demands,
waivers and communications shall be deemed to have been received on the date of
delivery unless if mailed, in which case on the third business day after the
mailing thereof except for a notice of a change of address, which shall be
effective only upon receipt thereof.
9.6 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein or delivered pursuant hereto, collectively
contain the entire understanding of the parties hereto with respect to the
subject matter contained herein and supersede all prior agreements and
understandings, oral and written, with respect thereto.
9.7 BINDING EFFECT; BENEFIT; ASSIGNMENT. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto without the prior written consent of the other parties. Nothing
in this Agreement, expressed or implied, is intended to confer on any Person
other than the parties hereto or their respective successors and permitted
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
9.8 AMENDMENT AND MODIFICATION. Subject to applicable law, this
Agreement may be amended, modified and supplemented in writing by the parties
hereto in any and all respects before the Closing Date.
9.9 FURTHER ACTIONS. Each of the parties hereto agrees that, subject to
its legal obligations, it will use its best efforts to fulfill all conditions
precedent specified herein, to the extent that such conditions are within its
control, and to do all things reasonably necessary to consummate the
Transactions.
9.10 HEADINGS. The descriptive headings of the several Articles and
Sections of this Agreement are inserted for convenience only, do not constitute
a part of this Agreement and shall not affect in any way the meaning or
interpretation of this Agreement. References to Articles, Sections, Exhibits and
Schedules, unless otherwise specified, are to Articles, Sections, Exhibits and
Schedules of and to this Agreement.
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9.11 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all of which
together shall be deemed to be one and the same instrument.
9.12 APPLICABLE LAW. This Agreement and the legal relations between the
parties hereto shall be governed by and construed in accordance with the laws of
the State of California, without regard to the conflict of laws rules thereof.
9.13 SEVERABILITY. If any term, provision, covenant or restriction
contained in this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, unenforceable or against its regulatory
policy, the remainder of the terms, provisions, covenants and restrictions
contained in this Agreement shall remain in full force and effect and shall in
no way be affected, impaired or invalidated.
9.14 "PERSON" DEFINED. "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization, a group and a government or other department or agency thereof.
IN WITNESS WHEREOF, each of EMKT, Top Team, the Sellers and the Company
have caused this Agreement to be executed by their respective officers (if
applicable) hereunto duly authorized, all as of the date first above written.
EMKT: EMARKETPLACE, INC.
By: /s/ Robert M. Wallace
--------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
TOP TEAM: TOP TEAM, INC.
By: /s/ Robert M. Wallace
--------------------------------------
Robert M. Wallace,
Chairman of the Board of Directors
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THE COMPANY: ONCOURSE NETWORK, INC.
By: /s/ Kent Rhodes
--------------------------------------
Kent Rhodes, Ph.D.,
President
SELLERS:
/s/ Kent Rhodes
------------------------------------------
Kent Rhodes, Ph.D.
Address:
c/o OnCourse Network, Inc.
2222 Michelson Drive
Suite 222-121
Irvine, California 92612
Fax: _________________________
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CERTIFICATE OF DESIGNATION, VOTING POWERS, PREFERENCES
AND RIGHTS OF SERIES A PREFERRED STOCK
OF TOPTEAM, INC.
Pursuant to Section 151(g) of the Delaware General Corporation Law, I,
Robert Wallace, Chairman of the Board of Directors of TopTeam, Inc., a Delaware
corporation (the "CORPORATION"), hereby certify that the following is a true and
correct copy of a resolution duly adopted by the Corporation's Board of
Directors by unanimous written consent on October 9, 1999, and that the
resolution has not been rescinded or amended and is in full force and effect at
the date hereof:
RESOLVED, that pursuant to the authority expressly granted to and
vested in the Corporation's Board of Directors by the Corporation's Certificate
of Incorporation, the Board of Directors hereby creates a series of Preferred
Stock of the Corporation, to be designated "Series A Convertible Preferred
Stock," consisting of 250,000 shares (the "SERIES A PREFERRED STOCK"), and
hereby fixes the voting powers, designations, preferences and relative
participating, optional and other rights, and the qualifications, limitations or
restrictions thereof, of the Series A Preferred Stock, as follows:
1. DIVIDEND PROVISIONS.
(a) The holders of shares of Series A Preferred Stock shall be
entitled to receive dividends, out of any assets legally available therefor,
prior and in preference to any declaration or payment of any dividend (payable
other than in Common Stock or other securities and rights convertible into or
entitling the holder thereof to receive, directly or indirectly, additional
shares of Common Stock of the corporation) on the Common Stock of the
corporation, at the rate of $0.24 per share per annum, payable on each
February1, May 1, August 1 and November 1, beginning February 1, 2000; provided,
however, that the dividends per annum on the Series A Preferred Stock (as
determined on a per-annum basis and an as-converted basis for the Series A
Preferred Stock), shall not be less, on a per-share basis, than the amount paid
on any outstanding shares of Common Stock or other series of stock of the
corporation that is subordinate in right of liquidation payments. Such dividends
shall accrue on each share from the date of issuance thereof, and shall accrue
from day to day, whether or not earned or declared. Such dividends shall be
cumulative so that, except as provided below, if such dividends in respect of
any previous or current quarterly dividend period, at the quarterly rate
specified above, shall not have been paid, the deficiency shall first be fully
paid before any dividend or other distribution shall be paid on or declared and
set apart for the Common Stock. Any accumulation of dividends on the Series A
Preferred Stock shall not bear interest. Cumulative dividends with respect to a
share of Series A Preferred Stock which are accrued, payable or in arrears
shall, upon conversion of such share to Common Stock, be paid to the extent
assets are legally available therefor and any amounts for which assets are not
legally available shall be paid promptly as assets become legally available
therefor; any partial payment will be made pro rata among the holders of such
shares.
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(b) Unless full dividends on the Series A Preferred Stock for
all past dividend periods and the then current dividend period shall have been
paid or accrued and a sum sufficient for the payment thereof set apart: (A) no
dividend whatsoever (other than a dividend payable solely in Common Stock or
other securities and rights convertible into or entitling the holder thereof to
receive, directly or indirectly, additional shares of Common Stock) shall be
paid or declared, and no distribution shall be made, on any Common Stock, and
(B) no shares of Common Stock shall be purchased, redeemed, or acquired by the
corporation and no funds shall be paid into or set aside or made available for a
sinking fund for the purchase, redemption, or acquisition thereof; provided,
however, that this restriction shall not apply to the repurchase of shares of
Common Stock held by employees, officers, directors, consultants or other
persons performing services for the corporation or any wholly owned subsidiary
(including, but not by way of limitation, distributors and sales
representatives) that are subject to restrictive stock purchase agreements under
which the corporation has the option to repurchase such shares at cost upon the
occurrence of certain events, such as the termination of employment.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up
of the corporation, either voluntary or involuntary, the holders of Series A
Preferred Stock shall be entitled to receive, prior and in preference to any
distribution of any of the assets of the corporation to the holders of Common
Stock by reason of their ownership thereof, an amount per share equal to the sum
of $4.00 for each outstanding share of Series A Preferred Stock (the "ORIGINAL
SERIES A ISSUE PRICE") and an amount equal to accrued but unpaid dividends on
such share (such amount of accrued but unpaid dividends being referred to herein
as the "PREMIUM"). If upon the occurrence of such event, the assets and funds
thus distributed among the holders of the Series A Preferred Stock shall be
insufficient to permit the payment to such holders of the full aforesaid
preferential amounts, then the entire assets and funds of the corporation
legally available for distribution shall be distributed ratably among the
holders of the Series A Preferred Stock in proportion to the amount of such
stock owned by each such holder.
(b) After the distributions described in subsection (a) above
have been paid, the remaining assets of the corporation available for
distribution to shareholders shall be distributed among the holders of Series A
Preferred Stock and Common Stock pro rata based on the number of shares of
Common Stock held by each (assuming full conversion of all such Series A
Preferred Stock).
(c) (i) For purposes of this Section 2, a liquidation,
dissolution or winding up of the corporation shall be deemed to be occasioned
by, or to include, (A) the acquisition of the corporation by another entity by
means of any transaction or series of related transactions (including, without
limitation, any reorganization, merger or consolidation but excluding any merger
effected exclusively for the purpose of changing the domicile of the
corporation); or (B) a sale of all or substantially all of the assets of the
corporation, unless the corporation's shareholders of record as constituted
immediately prior to such acquisition or sale will, immediately after such
acquisition or sale (by virtue of securities issued as consideration for the
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corporation's acquisition or sale or otherwise) hold at least 50 percent of the
voting power of the surviving or acquiring entity (excluding for this purpose
any securities owned by eMarketplace, Inc.).
(ii) In any of such events, if the consideration received
by the corporation is other than cash, its value will be deemed
its fair market value. Any securities shall be valued as
follows:
(A) Securities not subject to investment letter or other
similar restrictions on free marketability:
(1) If traded on a securities exchange or through
NASDAQ-NMS, the value shall be deemed to be the average of the
closing prices of the securities on such exchange over the
30-day period ending three days prior to the closing;
(2) If actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale
prices (whichever is applicable) over the 30-day period ending
three days prior to the closing; and
(3) If there is no active public market, the value
shall be the fair market value thereof, as mutually determined
by the corporation and the holders of at least a majority of
the voting power of all then outstanding shares of Series A
Preferred Stock.
(B) The method of valuation of securities subject to
investment letter or other restrictions on free marketability
(other than restrictions arising solely by virtue of a
shareholder's status as an affiliate or former affiliate) shall
be to make an appropriate discount from the market value
determined as above in (A)(1), (2) or (3) to reflect the
approximate fair market value thereof, as mutually determined
by the corporation and the holders of at least a majority of
the voting power of all then outstanding shares of Series A
Preferred Stock.
(iii) In the event the requirements of this subsection 2(c)
are not complied with, the corporation shall forthwith either:
(A) cause such closing to be postponed until such time as
the requirements of this Section 2 have been complied with; or
(B) cancel such transaction, in which event the rights,
preferences and privileges of the holders of the Series A
Preferred Stock shall revert to and be the same as such rights,
preferences and privileges existing immediately prior to the
date of the first notice referred to in subsection 2(c)(iv)
hereof.
(iv) The corporation shall give each holder of record of
Series A Preferred Stock written notice of such impending
transaction not later
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than 20 days prior to the shareholders' meeting called to
approve such transaction, or 20 days prior to the closing of
such transaction, whichever is earlier, and shall also notify
such holders in writing of the final approval of such
transaction. The first of such notices shall describe the
material terms and conditions of the impending transaction and
the provisions of this Section 2, and the corporation shall
thereafter give such holders prompt notice of any material
changes. The transaction shall in no event take place sooner
than 20 days after the corporation has given the first notice
provided for herein or sooner than 10 days after the
corporation has given notice of any material changes provided
for herein; provided, however, that such periods may be
shortened upon the written consent of the holders of at least
50 % of the then outstanding shares of Series A Preferred
Stock.
3. REDEMPTION.
(a) At any time after December 31, 2000, but on a date (the
"REDEMPTION DATE") within 30 days after the receipt by the corporation of a
written request from the holders of not less than a majority of the then
outstanding Series A Preferred Stock that all or some of such holders' shares be
redeemed, and concurrently with surrender by such holders of the certificates
representing such shares, the corporation shall, to the extent it may lawfully
do so, redeem the shares specified in such request by paying in cash therefor a
sum per share equal to the sum of the Original Series A Issue Price plus the
Premium with respect thereto. Any redemption effected pursuant to this
subsection 3(a) shall be made on a pro rata basis among the holders of the
Series A Preferred Stock in proportion to the number of shares of Series A
Preferred Stock then held by such holders.
(b) At least 15 but no more than 30 days prior to the
Redemption Date, written notice shall be mailed, first class postage prepaid, to
each holder of record (at the close of business on the business day next
preceding the day on which notice is given) of the Series A Preferred Stock to
be redeemed, at the address last shown on the records of the corporation for
such holder, notifying such holder of the redemption to be effected, specifying
the number of shares to be redeemed from such holder, the Redemption Date, the
Redemption Price, the place at which payment may be obtained and calling upon
such holder to surrender to the corporation, in the manner and at the place
designated, his, her or its certificate or certificates representing the shares
to be redeemed (the "REDEMPTION NOTICE"). Except as provided in subsection
(3)(c) on or after the Redemption Date, each holder of Series A Preferred Stock
to be redeemed shall surrender to the corporation the certificate or
certificates representing such shares, in the manner and at the place designated
in the Redemption Notice, and thereupon the Redemption Price of such shares
shall be payable to the order of the person whose name appears on such
certificate or certificates as the owner thereof and each surrendered
certificate shall be canceled. In the event less than all the shares represented
by any such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(c) From and after the Redemption Date, unless there shall have
been a default in payment of the Redemption Price, all rights of the holders of
shares of Series A Preferred Stock designated for redemption in the Redemption
Notice as holders of Series A Preferred Stock (except the right to receive the
Redemption Price without interest upon surrender of their certificate or
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certificates) shall cease with respect to such shares, and such shares shall not
thereafter be transferred on the books of the corporation or be deemed to be
outstanding for any purpose whatsoever. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, if the funds of
the corporation legally available for redemption of shares of Series A Preferred
Stock on any Redemption Date are insufficient to redeem the total number of
shares of Series A Preferred Stock to be redeemed on such date, those funds
which are legally available will be used to redeem the maximum possible number
of such shares ratably among the holders of such shares to be redeemed based
upon their holdings of Series A Preferred Stock. The shares of Series A
Preferred Stock not redeemed shall remain outstanding and entitled to all the
rights and preferences provided herein. Subject to the rights of series of
Preferred Stock which may from time to time come into existence, at any time
thereafter when additional funds of the corporation are legally available for
the redemption of shares of Series A Preferred Stock, such funds will
immediately be used to redeem the balance of the shares which the corporation
has become obliged to redeem on any Redemption Date but which it has not
redeemed.
(d) On or prior to each Redemption Date, the corporation shall
deposit the Redemption Price of all shares of Series A Preferred Stock
designated for redemption in the Redemption Notice, and not yet redeemed or
converted, with a bank or trust corporation having aggregate capital and surplus
in excess of $100,000,000 as a trust fund for the benefit of the respective
holders of the shares designated for redemption and not yet redeemed, with
irrevocable instructions and authority to the bank or trust corporation to
publish the notice of redemption thereof and pay the Redemption Price for such
shares to their respective holders on or after the Redemption Date, upon receipt
of notification from the corporation that such holder has surrendered his, her
or its share certificate to the corporation pursuant to subsection (3)(b) above.
As of the date of such deposit (even if prior to the Redemption Date), the
deposit shall constitute full payment of the shares to their holders, and from
and after the date of the deposit the shares so called for redemption shall be
redeemed and shall be deemed to be no longer outstanding, and the holders
thereof shall cease to be shareholders with respect to such shares and shall
have no rights with respect thereto except the rights to receive from the bank
or trust corporation payment of the Redemption Price of the shares, without
interest, upon surrender of their certificates therefor, and the right to
convert such shares as provided in Section 4 hereof. Such instructions shall
also provide that any moneys deposited by the corporation pursuant to this
subsection (3)(d) for the redemption of shares thereafter converted into shares
of the corporation's Common Stock pursuant to Section 4 hereof prior to the
Redemption Date shall be returned to the Corporation forth with upon such
conversion. The balance of any moneys deposited by the corporation pursuant to
this subsection (3)(d) remaining unclaimed at the expiration of two years
following the Redemption Date shall thereafter be returned to the corporation
upon its request expressed in a resolution of its Board of Directors.
4. CONVERSION. The holders of the Series A Preferred Stock shall
have conversion rights as follows (the "CONVERSION RIGHTS"):
(a) RIGHT TO CONVERT. Each share of Series A Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after the
date of issuance of such share and on or prior to the fifth day prior to the
Redemption Date, if any, as may have been fixed in any Redemption Notice with
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respect to the Series A Preferred Stock, at the office of the corporation or any
transfer agent for such stock, into such number of fully paid and nonassessable
shares of Common Stock as is determined by dividing the Original Series A Issue
Price by the Conversion Price applicable to such share, determined as hereafter
provided, in effect on the date the certificate is surrendered for conversion.
The initial "CONVERSION PRICE" per share for shares of Series A Preferred Stock
shall be the Original Series A Issue Price; provided, however, that the
Conversion Price for the Series A Preferred Stock shall be subject to adjustment
as set forth in subsection 4(d).
(b) AUTOMATIC CONVERSION. Each share of Series A Preferred
Stock shall automatically be converted into shares of Common Stock at the
Conversion Price at the time in effect for such Series A Preferred Stock
immediately upon the earlier (i) the corporation's sale of its Common Stock
generating gross proceeds of not less than $25,000,000, including, but not
limited to, the exercise of rights to purchase common stock, (ii) the sale of
all or substantially all of the assets or capital stock, or a merger or
consolidation of the corporation with any other corporation or entity, for an
aggregate consideration of at least $25,000,000, or (iii) the date specified by
written consent or agreement of the holders of a majority of the then
outstanding shares of Series A Preferred Stock.
(c) MECHANICS OF CONVERSION. Before any holder of Series A
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, he shall surrender the certificate or certificates therefor, duly
endorsed, at the office of the corporation or of any transfer agent for the
Series A Preferred Stock, and shall give written notice to the corporation at
its principal corporate office, of the election to convert the same and shall
state therein the name or names in which the certificate or certificates for
shares of Common Stock are to be issued. The corporation shall, as soon as
practicable thereafter, issue and deliver at such office to such holder of
Series A Preferred Stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
such holder shall be entitled as aforesaid. Such conversion shall be deemed to
have been made immediately prior to the close of business on the date of such
surrender of the shares of Series A Preferred Stock to be converted, and the
person or persons entitled to receive the shares of Common Stock issuable upon
such conversion shall be treated for all purposes as the record holder or
holders of such shares of Common Stock as of such date. If the conversion is in
connection with an underwritten offering of securities registered pursuant to
the Securities Act of 1933, the conversion may, at the option of any holder
tendering Series A Preferred Stock for conversion, be conditioned upon the
closing with the underwriters of the sale of securities pursuant to such
offering, in which event the person(s) entitled to receive the Common Stock upon
conversion of the Series A Preferred Stock shall not be deemed to have converted
such Series A Preferred Stock until immediately prior to the closing of such
sale of securities.
(d) CONVERSION PRICE ADJUSTMENTS OF PREFERRED STOCK FOR CERTAIN
DILUTIVE ISSUANCES, SPLITS AND COMBINATIONS. The Conversion Price of the Series
A Preferred Stock shall be subject to adjustment from time to time as follows:
(i)(A) If the corporation shall issue after the date upon which
any shares of Series A Preferred Stock were first issued (the "PURCHASE
DATE"), any Additional Stock (as defined below) without consideration
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or for a consideration per share less than the Conversion Price for the
Series A Preferred Stock in effect immediately prior to the issuance of
such Additional Stock, the Conversion Price for the Series A Preferred
Stock in effect immediately prior to each such issuance shall forthwith
(except as otherwise provided in this clause (i)) be adjusted to a
price determined by multiplying such Conversion Price then in effect by
a fraction (x) the numerator of which shall be the number of shares of
Common Stock outstanding (or deemed to be outstanding) immediately
prior to such issuance or sale plus the number of shares of Common
Stock that the aggregate consideration received by the corporation for
the total number of shares of Additional Stock so issued or sold (or
deemed issued or sold) would purchase at the Conversion Price for the
Series A Preferred Stock immediately prior to such issuance or sale,
and (y) the denominator of which shall be the number of shares of
Common Stock outstanding (or deemed to be outstanding) immediately
prior to such issuance or sale plus the number of shares of such
Additional Stock so issued or sold (or deemed issued or sold).
(B) No adjustment of the Conversion Price for the Series A
Preferred Stock shall be made in an amount less than one cent per
share, provided that any adjustments which are not required to be made
by reason of this sentence shall be carried forward and shall be either
taken into account in any subsequent adjustment made prior to 3 years
from the date of the event giving rise to the adjustment being carried
forward, or shall be made at the end of 3 years from the date of the
event giving rise to the adjustment being carried forward. Except to
the limited extent provided for in subsections (E)(3) and (E)(4), no
adjustment of such Conversion Price pursuant to this subsection 4(d)(i)
shall have the effect of increasing the Conversion Price above the
Conversion Price in effect immediately prior to such adjustment.
(C) In the case of the issuance of Common Stock for cash, the
consideration shall be deemed to be the amount of cash paid therefor
before deducting any reasonable discounts, commissions or other
expenses allowed, paid or incurred by the corporation for any
underwriting or otherwise in connection with the issuance and sale
thereof.
(D) In the case of the issuance of the Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair value thereof as
determined in good faith by the Board of Directors irrespective of any
accounting treatment.
(E) In the case of the issuance (whether before, on or after
the applicable Purchase Date) of options to purchase or rights to
subscribe for Common Stock, securities by their terms convertible into
or exchangeable for Common Stock or options to purchase or rights to
subscribe for such convertible or exchangeable securities, the
following provisions shall apply for all purposes of this subsection
4(d)(i) and subsection 4(d)(ii):
(1) The aggregate maximum number of shares of Common
Stock deliverable upon exercise (assuming the satisfaction of any
conditions to exercisability, including without limitation, the passage
of time, but without taking into account potential antidilution
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adjustments) of such options to purchase or rights to subscribe for
Common Stock shall be deemed to have been issued at the time such
options or rights were issued and for a consideration equal to the
consideration (determined in the manner provided in subsections
4(d)(i)(C) and (d)(i)(D)), if any, received by the corporation upon the
issuance of such options or rights plus the minimum exercise price
provided in such options or rights (without taking into account
potential antidilution adjustments) for the Common Stock covered
thereby.
(2) The aggregate maximum number of shares of Common
Stock deliverable upon conversion of or in exchange (assuming the
satisfaction of any conditions to convertibility or exchangeability,
including, without limitation, the passage of time, but without taking
into account potential antidilution adjustments) for any such
convertible or exchangeable securities or upon the exercise of options
to purchase or rights to subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange thereof shall be
deemed to have been issued at the time such securities were issued or
such options or rights were issued and for a consideration equal to the
consideration, if any, received by the corporation for any such
securities and related options or rights (excluding any cash received
on account of accrued interest or accrued dividends), plus the minimum
additional consideration, if any, to be received by the corporation
(without taking into account potential antidilution adjustments) upon
the conversion or exchange of such securities or the exercise of any
related options or rights (the consideration in each case to be
determined in the manner provided in subsections 4(d)(i)(C) and
(d)(i)(D)).
(3) In the event of any change in the number of shares of
Common Stock deliverable or in the consideration payable to the
corporation upon exercise of such options or rights or upon conversion
of or in exchange for such convertible or exchangeable securities,
including, but not limited to, a change resulting from the antidilution
provisions thereof, the Conversion Price of the Series A Preferred
Stock, to the extent in any way affected by or computed using such
options, rights or securities, shall be recomputed to reflect such
change, but no further adjustment shall be made for the actual issuance
of Common Stock or any payment of such consideration upon the exercise
of any such options or rights or the conversion or exchange of such
securities.
(4) Upon the expiration of any such options or rights,
the termination of any such rights to convert or exchange or the
expiration of any options or rights related to such convertible or
exchangeable securities, the Conversion Price of the Series A Preferred
Stock, to the extent in any way affected by or computed using such
options, rights or securities or options or rights related to such
securities, shall be recomputed to reflect the issuance of only the
number of shares of Common Stock (and convertible or exchangeable
securities which remain in effect) actually issued upon the exercise of
such options or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to
such securities.
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(5) The number of shares of Common Stock deemed issued
and the consideration deemed paid therefor pursuant to subsections
4(d)(i)(E)(1) and (2) shall be appropriately adjusted to reflect any
change, termination or expiration of the type described in either
subsection 4(d)(i)(E)(3) or (4).
(ii) "ADDITIONAL STOCK" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to subsection
4(d)(i)(E)) by the corporation after the Purchase Date other than:
(A) Common Stock issued pursuant to a transaction
described in subsection 4(d)(iii) hereof;
(B) Shares of Common Stock issuable or issued to
employees of the corporation directly or pursuant to a stock option
plan or restricted stock plan approved by the shareholders and Board of
Directors of the corporation at any time when the total number of
shares of Common Stock so issuable or issued (and not repurchased at
cost by the corporation in connection with the termination of
employment) does not exceed 2,800,000;
(C) Shares of Common Stock issued or issuable (I) in a
public offering before or in connection with which all outstanding
shares of Series A Preferred Stock will be converted to Common Stock or
(II) upon exercise of warrants or rights granted to underwriters in
connection with such a public offering.
(iii) In the event the corporation should at any time or from
time to time after the Purchase Date fix a record date for the effectuation of a
split or subdivision of the outstanding shares of Common Stock or the
determination of holders of Common Stock entitled to receive a dividend or other
distribution payable in additional shares of Common Stock or other securities or
rights convertible into, or entitling the holder thereof to receive directly or
indirectly, additional shares of Common Stock (hereinafter referred to as
"COMMON STOCK EQUIVALENTS") without payment of any consideration by such holder
for the additional shares of Common Stock or the Common Stock Equivalents
(including the additional shares of Common Stock issuable upon conversion or
exercise thereof), then, as of such record date (or the date of such dividend
distribution, split or subdivision if no record date is fixed), the Conversion
Price of the Series A Preferred Stock shall be appropriately decreased so that
the number of shares of Common Stock issuable on conversion of each share of
such series shall be increased in proportion to such increase of the aggregate
of shares of Common Stock outstanding and those issuable with respect to such
Common Stock Equivalents with the number of shares issuable with respect to
Common Stock Equivalents determined from time to time in the manner provided for
deemed issuances in subsection 4(d)(i)(E).
(iv) If the number of shares of Common Stock outstanding at any
time after the Purchase Date is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date of such combination, the
Conversion Price for the Series A Preferred Stock shall be appropriately
increased so that the number of shares of Common Stock issuable on conversion of
each share of such series shall be decreased in proportion to such decrease in
outstanding shares.
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(e) OTHER DISTRIBUTIONS. In the event the corporation shall
declare a distribution payable in securities of other persons, evidences of
indebtedness issued by the corporation or other persons, assets (excluding cash
dividends) or options or rights not referred to in subsection 4(d)(iii), then,
in each such case for the purpose of this subsection 4(e), the holders of the
Series A Preferred Stock shall be entitled to a proportionate share of any such
distribution as though they were the holders of the number of shares of Common
Stock of the corporation into which their shares of Series A Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the corporation entitled to receive such distribution.
(f) RECAPITALIZATIONS.
(i) If at any time or from time to time there shall be a
recapitalization of the Common Stock (other than a subdivision, combination or
merger or sale of assets transaction provided for elsewhere in this Section 4 or
Section 2) provision shall be made so that the holders of the Series A Preferred
Stock shall thereafter be entitled to receive upon conversion of the Series A
Preferred Stock the number of shares of stock or other securities or property of
the Company or otherwise, to which a holder of Common Stock deliverable upon
conversion would have been entitled on such recapitalization. In any such case,
appropriate adjustment shall be made in the application of the provisions of
this Section 4 with respect to the rights of the holders of the Series A
Preferred Stock after the recapitalization to the end that the provisions of
this Section 4 (including adjustment of the Conversion Price then in effect and
the number of shares purchasable upon conversion of the Series A Preferred
Stock) shall be applicable after that event as nearly equivalent as may be
practicable.
(ii) In the case of any consolidation or merger of the
corporation with or into another corporation or the conveyance of all or
substantially all of the assets of the corporation to another corporation, each
share of Series A Preferred Stock shall thereafter be convertible into the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock of the corporation deliverable upon
conversion of the Series A Preferred Stock would have been entitled upon such
consolidation, merger or conveyance; and, in any such case, appropriate
adjustment (as determined by the Board of Directors) shall be made in the
application of the provisions herein set forth with respect to the rights and
interests thereafter of the holders of the Series A Preferred Stock, to the end
that the provisions set forth herein (including provisions with respect to
changes in and other adjustments of the Conversion Price in effect) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or any other property thereafter deliverable upon the conversion
of the Series A Preferred Stock.
(g) NO IMPAIRMENT. The corporation will not, by amendment of
its Certificate of Incorporation or through any reorganization,
recapitalization, 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 to be observed or performed
hereunder by the corporation, but will at all times in good faith assist in the
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carrying out of all the provisions of this Section 4 and in the taking of all
such action as may be necessary or appropriate in order to protect the
Conversion Rights of the holders of the Series A Preferred Stock against
impairment.
(h) NO FRACTIONAL SHARES AND CERTIFICATE AS TO ADJUSTMENTS.
(i) No fractional shares shall be issued upon the
conversion of any share or shares of the Series A Preferred Stock, and the
number of shares of Common Stock to be issued shall be rounded to the nearest
whole share. Whether or not fractional shares are issuable upon such conversion
shall be determined on the basis of the total number of shares of Series A
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
(ii) Upon the occurrence of each adjustment or
readjustment of the Conversion Price of Series A Preferred Stock pursuant to
this Section 4, the corporation, at its expense, shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and prepare and
furnish to each holder of Series A Preferred Stock a certificate setting forth
such adjustment or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The corporation shall, upon the written
request at any time of any holder of Series A Preferred Stock, furnish or cause
to be furnished to such holder a like certificate setting forth (A) such
adjustment and readjustment, (B) the Conversion Price for the Series A Preferred
Stock at the time in effect, and (C) the number of shares of Common Stock and
the amount, if any, of other property which at the time would be received upon
the conversion of a share of Series A Preferred Stock.
(i) NOTICES OF RECORD DATE. In the event of any taking by the
corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend (other than a cash dividend) or other distribution, any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, the corporation
shall mail to each holder of Series A Preferred Stock, at least 20 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right.
(j) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The
corporation shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock, solely for the purpose of effecting the
conversion of the shares of the Series A Preferred Stock, such number of its
shares of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Series A Preferred Stock; and if at
any time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of the
Series A Preferred Stock, in addition to such other remedies as shall be
available to the holder of such Preferred Stock, the corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
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shall be sufficient for such purposes, including, without limitation, engaging
in best efforts to obtain the requisite shareholder approval of any necessary
amendment to this Certificate of Designation.
(k) NOTICES. Any notice required by the provisions of this
Section 4 to be given to the holders of shares of Series A Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
corporation.
5. VOTING RIGHTS. The holder of each share of Series A Preferred
Stock shall have the right to one vote for each share of Common Stock into which
such Series A Preferred Stock could then be converted. With respect to any vote,
each holder of Series A Preferred Stock shall have full voting rights and powers
equal to the voting rights and powers of the holders of Common Stock, and shall
be entitled, notwithstanding any provision hereof, to notice of any
shareholders' meeting in accordance with the bylaws of the corporation, and
shall be entitled to vote, together with holders of Common Stock, with respect
to any question upon which holders of Common Stock have the right to vote.
Fractional votes shall not, however, be permitted and any fractional voting
rights available on an as-converted basis (after aggregating all shares into
which shares of Series A Preferred Stock held by each holder could be converted)
shall be rounded to the nearest whole number (with one-half being rounded
upward).
6. PROTECTIVE PROVISIONS. So long as not less than 20 percent of
the Series A Preferred Stock originally issued is still outstanding, the
corporation shall not without first obtaining the approval (by vote or written
consent, as provided by law) of the holders of at least a majority of the then
outstanding shares of Series A Preferred Stock:
(a) alter or change the rights, preferences or privileges of
the shares of Series A Preferred Stock so as to affect adversely the shares of
Series A Preferred Stock;
(b) increase or decrease (other than by redemption or
conversion) the total number of authorized shares of Series A Preferred Stock;
(c) authorize or issue, or obligate itself to issue, any other
equity security, including any other security convertible into or exercisable
for any equity security having a preference over, or being on a parity with, the
Series A Preferred Stock with respect to voting, dividends or upon liquidation,
or having rights similar to any of the rights of the Series A Preferred Stock
under this Section 6; or
(d) amend the corporation's Certificate of Incorporation or
bylaws or this Certificate of Designation.
7. STATUS OF CONVERTED OR REDEEMED STOCK. In the event any shares
of Series A Preferred Stock shall be redeemed or converted pursuant to Section 3
or Section 4 hereof, the shares so converted or redeemed shall be canceled and
shall not be issuable by the corporation. The Certificate of Incorporation of
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the corporation shall be appropriately amended to effect the corresponding
reduction in the corporation's authorized capital stock.
IN WITNESS WHEREOF, TopTeam, Inc. has caused this Certificate of
designation to be signed by its Chairman and attested to by its Assistant
Secretary as of this 9th day of November, 1999.
TOPTEAM, INC.
By: /s/ ROBERT WALLACE
------------------------------------------------------
Robert Wallace, Chairman of the Board of Directors
ATTEST:
/s/ BRIAN BURNS
- ----------------------
Brian Burns, Secretary
13
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE. THE
SECURITIES MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED
OF WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND UNDER ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL FOR THE COMPANY THAT THE PROPOSED TRANSACTION WILL BE EXEMPT FROM SUCH
REGISTRATION.
PROMISSORY NOTE
November __, 1999
$1,000,000.00
San Jose, California
For value received, TOPTEAM, INC., a Delaware corporation ("Maker"), promises to
pay to the order of EMARKETPLACE, INC., a Delaware corporation ("Payee"), at 255
West Julian Street, Suite 100, San Jose, California 95110, or at such other
location as Payee may from time to time designate, the principal sum of One
Million and no/100 Dollars ($1,000,000.00), or so much thereof as shall be
outstanding from time to time, together with interest thereon from the date
hereof until this Note has been paid in full on the terms and conditions
contained herein.
1. Interest shall be computed, and principal and interest shall be due
and payable, as follows:
(a) Interest shall accrue on the outstanding principal balance
hereunder at a per annum rate equal to the lesser of (i) seven percent
and (ii) the highest annual rate which may lawfully be charged and
collected under applicable law on the obligations evidenced by this
Note. Interest hereunder shall be computed on the basis of a 365-day
year and actual days elapsed.
(b) Installments of interest shall be payable on the first day of
each month during the term of this Note.
(c) The entire unpaid principal balance, together with all
accrued and unpaid interest, shall be due and payable on the second
anniversary of the date of this Note (the "Maturity Date"). All accrued
and unpaid interest shall be due and payable on the Maturity Date.
2. All payments shall be applied first to interest on the outstanding
principal balance at the interest rate stated in this Note and any balance shall
then be applied to reduction of principal, and interest shall thereafter cease
on the principal so paid. Principal and interest shall be payable in lawful
money of the United States.
<PAGE>
3. Maker shall have the right to prepay this Note, at any time, in
whole or in part, at a prepayment price equal to the principal being prepaid
plus accrued interest thereon, without any premium or penalty. This Note shall
be subject to mandatory prepayment in whole at a prepayment price equal to the
outstanding principal of this Note plus accrued interest thereon, without any
premium or penalty, on the date of closing of an initial public offering of the
Common Stock pursuant to a registration statement under the Securities Act of
1933 in a transaction that generates gross proceeds of not less than
$25,000,000.
4. The occurrence of any of the following shall constitute an "Event of
Default" hereunder:
(a) Default in the payment of any installment of interest or
principal on this Note when due or in the performance of any other
obligation of Maker hereunder pursuant to the terms hereof.
(b) The filing by Debtor of any petition for relief under any
applicable bankruptcy or insolvency law.
Upon the occurrence of any such Event of Default, then in addition to
all other rights and remedies set forth herein, or at law or in equity, the
entire unpaid balance of principal on this Note, together with all accrued
interest thereon may be declared by Payee to be immediately due and payable
without notice to Maker.
5. If this Note is not paid when due or if an Event of Default occurs,
Maker promises to pay all costs of collection, including, but not limited to,
reasonable attorneys' fees incurred by Payee on account of such collection,
whether or not suit is filed hereon.
6. Except as expressly provided herein, Maker waives presentment,
demand, notice, protest and all other demands or notices in connection with the
delivery, acceptance, endorsement, performance, default, or enforcement of this
Note, assents to any and all extensions or postponements of the time of payment
or any other indulgence, to any substitution, exchange, or release of security,
or to the addition or release of any other party or person primarily or
secondarily liable.
7. This Note shall be governed by and construed in accordance with the
laws of the State of California.
8. Reference in this Note to "Payee" shall mean the original Payee
hereunder so long as such payee shall be the Payee of this Note and thereafter
shall mean any subsequent Payee of this Note.
9. Time is of the essence of each obligation of Maker hereunder.
10. No delay or omission on the part of Payee in exercising any rights
hereunder, or any other instrument given to secure this Note, whether before or
after a default or Event of Default hereunder or under said instruments, shall
operate as a waiver of such right or default or Event of
-2-
<PAGE>
Default or of any other right hereunder or under said instruments, and the
acceptance at any time by Payee of any past-due amounts shall not be deemed to
be a waiver of the right to require prompt payment when due of any other amounts
then or thereafter due and payable hereunder or thereunder.
11. In the event that any provision of this Note shall become declared
inoperable by any Court or become inoperable as a result of any law or ruling
hereafter adopted by any governmental authority, the remainder of its terms
shall remain in full force and effect and modification of the terms hereof
required by law shall apply as though the same were an original term or
condition hereof.
12. The remedies of Payee as provided herein or at law or in equity,
shall be cumulative and concurrent, and may be pursued singly, successively, or
together at the sole discretion of Payee.
13. Maker may not assign its duties and obligations under this Note
without the prior written consent of Payee, which consent may be given or denied
in Payee's sole and absolute discretion. Payee may not assign its rights, duties
and obligations under this Note to any person or entity, other than an affiliate
of Payee, without the prior written consent of Maker, which consent may be given
or denied in Maker's sole and absolute discretion.
MAKER: TOPTEAM, INC.
By: /s/ ROBERT WALLACE
---------------------------------------
Robert Wallace, Chairman
-3-
EMPLOYMENT AGREEMENT
The effective date of this Agreement by and between TOPTEAM, INC. a
Delaware corporation (the "Company"), and FRED H. WALTI, II (the "Officer")
shall be the closing date of the roll-up transaction by and between Full Moon
Interactive Group, Inc. and TopTeam, Inc.
WITNESSETH
WHEREAS, the Company desires to employ Officer, and Officer desires to
accept such employment with the Company upon the terms and conditions set forth
herein,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and the Officer agree as follows:
AGREEMENT
1. EMPLOYMENT AND DUTIES.
The Company hereby employs Officer as President and Chief Executive
Officer and Officer hereby accepts employment by the Company upon the terms and
conditions set forth herein, with the authority and responsibilities customarily
afforded the principal executive of a company. Officer shall faithfully and
diligently develop and direct all aspects of the Company's business plan and
reporting requirements that the Company's Board of Directors may adopt, in
accordance with the Company's bylaws, and do and perform all acts in the
ordinary course of the Company's business (with such limits as the Board of
Directors of the Company may prescribe) necessary and conducive to the Company's
best interests. All other officers of the Company shall report to Officer, and
Officer shall have authority, among other things, to hire and terminate
employees. Officer shall devote full time, energy, and skill to the business of
the Company and to the promotion of the Company's best interests, except for
vacations and absences made necessary because of illness or personal matters.
Officer shall report directly to the Board of Directors. The primary place of
employment shall be at the Company's principal offices in Los Angeles,
California.
2. TERM.
The term of this Agreement shall commence as of the closing date of the
roll-up transaction between the Company and Full Moon Interactive Group, Inc.
and shall expire five years hence, unless sooner terminated as hereinafter set
forth (the "Term"). This Agreement will renew for an additional two years unless
the Company's Board of Directors advises Officer in writing of its intent not to
renew six (6) months prior to the expiration of the Term.
<PAGE>
3. COMPENSATION.
Subject to the provisions of Paragraphs 4 and 5 of this Agreement, the
Company shall pay Officer for all services to be performed by Officer during the
Term of this Agreement the following compensation:
(a) BASE SALARY. The Company shall pay Officer a base salary at the
rate of no less than $170,000 per annum ("Base Salary"), payable in periodic
payments in accordance with the Company's practices for other executive,
managerial, and supervisory employees, as such practices may be determined from
time to time. The Company's Board of Directors will review such Base Salary
annually and, in its discretion, may grant increases thereof based upon
Officer's performance;
(b) ANNUAL CASH BONUS. The Officer shall be entitled to receive an
Annual Cash Performance Bonus of up to 50% of his then current gross annual
salary upon the achievement of reasonable corporate performance targets
established by the Board of Directors ("Annual Cash Performance Bonus"). For the
initial year, the Board of Directors shall provide in writing to the Officer
specific performance targets prior to the effective date of this Agreement. In
subsequent years and no later than sixty (60) days following the Company's
fiscal year end, the Annual Cash Performance Bonus will be established in
writing by the Board at an amount no less than the initial Annual Cash
Performance Bonus, provided the corresponding performance targets are achieved;
(c) STOCK OPTIONS. Upon the execution of this Agreement, the Company
shall grant Officer an option pursuant to the Company's 1999 Stock Plan (a copy
of which is attached hereto as Exhibit A) to purchase a total of 250,000 shares
of common stock at an exercise price of $7.50 per share with 50,000 shares being
immediately exercisable upon execution of this Agreement and the remaining
amounts becoming exercisable in four (4) equal, annual installment amounts on
the anniversary date hereof. In the event of a Change of Control as the term is
defined in Paragraph 4 or an Involuntary Termination, all of Officer's unvested
options will accelerate and become immediately exercisable. A copy of the form
of option agreement containing the terms and conditions of the stock options
granted hereunder is attached hereto as Exhibit B.
(d) WITHHOLDING. All such payments will be subject to such deductions
as may be required to be made pursuant to law, government regulations, or order,
or by agreement with, or consent of, the Officer;
(e) BENEFITS. Officer shall be entitled to participate in such life
insurance, medical, dental, long-term disability, pension, and retirement plans,
and other programs as may be approved from time to time by the Company for the
benefit of its officers. Officer also shall be entitled to no less than three
weeks of vacation with pay during each consecutive 12-month period during the
term of Officer's employment hereunder, to be taken at such times and in such
periods as Officer and the Company shall mutually determine and provided that no
vacation time shall interfere with the duties required to be rendered by Officer
hereunder; and
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<PAGE>
(f) BUSINESS EXPENSES. The Company agrees that during the term of this
Agreement Officer shall be entitled to reimbursement by the Company for all
reasonable expenses actually and necessarily incurred by Officer on the
Company's behalf in the course of Officer's employment hereunder, for which
Officer shall submit substantiation in a form satisfactory to the Company and
which are approved by the Company in its reasonable discretion.
4. TERMINATION.
(a) Officer's employment with the Company may be terminated, subject to
the notification provisions set forth in Paragraph 4(b) below, as follows:
(i) Termination for Cause, which means
(1) Officer willfully and unreasonably refuses to perform
services hereunder;
(2) Officer materially breaches Paragraph 6 of this
Agreement;
(3) Officer engages in acts of dishonesty or fraud in
connection with the services performed hereunder that
have a material adverse effect on the Company; or
(4) Officer engages in other serious misconduct of such a
nature that the continued employment of Officer may,
in the reasonable discretion of the Board of
Directors, be expected to materially and adversely
affect the business or properties of the Company,
including acts which violate securities laws,
misrepresentation of material facts to the Board or
the shareholders, or criminal acts.
(ii) Involuntary Termination, which is defined as termination by
the Company of Officer's employment, other than in a
Termination for Cause, Voluntary Termination, a
discontinuation of employment in accordance with Paragraph
5 or due to death or retirement on or after age 65.
Involuntary Termination as defined herein shall include a
termination by Officer for Good Reason; or
(iii) Voluntary Termination, which means termination by Officer
of Officer's employment by the Company.
(b) TERMINATION PAYMENTS. In the event of Officer's termination,
severance payments ("Severance Amount Payments") shall be made
as follows:
(i) TERMINATION FOR CAUSE. If Officer's employment with the
Company is Terminated for Cause, all accrued salary and
vacation as of the date of Termination for Cause, shall be
paid to Officer. If the Company determines that a reason
constituting cause for termination under clauses
4(a)(i)(1)-(4) has occurred, it shall give Officer written
notice thereof at least 30 days prior to the proposed date
of termination of employment. If Officer undertakes the
necessary steps to remedy the condition constituting cause
within 30 days after the receipt of such notice, then a
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<PAGE>
reason for termination for cause shall be deemed not to
have occurred. If Officer shall not remedy the condition
constituting cause within such time period, then
Termination for Cause shall occur on the date set forth in
the notice from the Company.
(ii) VOLUNTARY TERMINATION. In the event of Voluntary
Termination during the term of Officer's employment
hereunder, Officer shall immediately be paid all accrued
salary and vacation pay as of the date of termination, but
no other compensation or reimbursement of any kind,
including without limitation, severance compensation.
(iii) INVOLUNTARY TERMINATION. In the event of an Involuntary
Termination including death or retirement on or after age
65, during the term of Officer's employment hereunder and
except as provided in Paragraph 5, the Company shall pay
the Officer, or a designated beneficiary in the event of
Officer's death, or if none, to Officer's then living
spouse, or if none, to the duly appointed personal
representative of Officer's estate, an amount equal to:
1) the then current Base Salary for the duration of the
Term set forth in Paragraph 3(a) herein on the
effective date of the termination, but in no event,
less than an amount equal to two years of the then
current Base Salary, plus
2) all accrued salary and vacation pay
3) the then maximum Annual Cash Performance Bonus for
the then current fiscal year set in accordance with
Paragraph 3(b)
4) and benefits for the later of the duration of the
Term and two years from the date of termination
If the Officer determines that a reason constituting
termination for Good Reason as defined in Paragraph 4(c) below
has occurred, he shall provide the Company written notice
thereof at least 30 days prior to the proposed date of
termination of employment. If the Company shall take the
necessary steps to remedy the condition constituting Good
Reason(s) for termination within 30 days after the receipt of
such notice, then a reason for termination for Good Reason
shall be deemed not to have occurred. If the Company shall not
remedy the condition constituting Good Reason within such time
period, then Termination for Good Reason shall occur on the
date set forth in the notice from the Officer.
(c) DEFINITIONS. All the terms defined in this paragraph 4 shall have
the meanings given below throughout this Agreement:
(i) a "CHANGE OF CONTROL" shall be deemed to have occurred if:
a) a tender offer or exchange offer is made and
consummated for the ownership of securities of the
Company representing 50 percent or more of the
combined voting power of the Company's then
outstanding voting securities; or
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<PAGE>
b) the Company transfers substantially all of its assets
to another corporation which is not a wholly-owned
subsidiary of the Company.
(ii) a "GOOD REASON" shall mean:
c) the assignment of Officer to any duties inconsistent
with, or any adverse change in, Officer's titles or
positions, duties, responsibilities or status with the
Company, or the removal of Officer from, or failure to
reelect Officer to, any of such positions: or
d) the failure of the Company to provide support,
information, assistance and staffing reasonably
appropriate for Officer to carry out Officer's duties
or to achieve the performance goals set by the
Company; or
e) any other material breach by the Company of this
Agreement which is not cured within thirty (30) days
of notice thereof by the Officer to the Company; or
f) during the initial year of this Agreement, the failure
of the Company to obtain Officer's consent in writing
to the nomination of the Company's Chairman of the
Board other than Robert M. Wallace; or
g) Officer is not elected to the Company's Board of
Directors; or
h) a change in the location of the Officer's principal
place of employment, which shall be designated and
operated as the Company's executive offices, by the
Company by more than thirty miles from the location
where the Officer was principally employed immediately
prior to the effective date of this Agreement.
(d) CERTAIN PAYMENT REDUCTIONS:
(i) For purposes of this subparagraph (d), (i) a Payment shall
mean any payment or distribution in the nature of
compensation to or for the benefit of Officer, whether paid
or payable pursuant to this Agreement or otherwise; (ii)
Agreement Payment shall mean a Payment paid or payable
pursuant to this Agreement (determined without regard to
this subparagraph (d)); (iii) Net After Tax Receipt shall
mean the Present Value of a Payment net of all taxes
imposed on Officer with respect thereto under Sections 1
and 4999 of the Internal Revenue Code of 1986, as amended
(the "Code"), determined by applying the highest marginal
rate under Sections 1 of the Code which applied to the
taxable income of Officer for the immediately preceding
taxable year; (iv) "Present Value" shall mean such value
determined in accordance with Section 280G(d)(4) of the
Code; and (v) "Reduced Amount" shall mean the smallest
aggregate amount of Payments which (a) is less than the sum
of all Payments (determined without regard to this
subparagraph (d)) and (b) results in aggregate Net After
Tax Receipts which are equal to or greater than the Net
After Tax Receipts which would result if the aggregate
Payments were equal to the sum of all Payments (determined
without regard to this subparagraph (d)) or any other
amount less than the sum of all payments (determined
without regard to this subparagraph (d)).
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(ii) Anything in this Agreement to the contrary notwithstanding,
in the event the Company's independent public accounts (the
"Accounting Firm") shall determine that receipt of all
Payments would subject Officer to tax under Section 4999 of
the Code, it shall determine whether some amount of
Payments would meet the definition of a "Reduced Amount."
If the Accounting Firm determines that there is a Reduced
Amount, the aggregate Agreement Payments shall be reduced
to such Reduced Amount; provided, however, that if the
Reduced Amount exceeds the aggregate Agreement Payments,
the aggregate Payments shall, after the reduction of all
Agreement Payments, be reduced (but not below zero) in the
amount of such excess.
(iii) If the Accounting Firm determines that aggregate Agreement
Payments or Payments, as the case may be, should be reduced
to the Reduced Amount, the Company shall promptly give
notice to Officer to that effect and a copy of the detailed
calculation thereof, and Officer may then elect, in
Officer's sole discretion, which and how much of the
Payments shall be eliminated or reduced (as long as after
such election the present value of the aggregate Payments
equals the Reduced Amount), and Officer shall advise the
Company in writing of Officer's election within ten days of
Officer's receipt of notice. If no such election is made by
Officer within such ten-day period, the Company may elect
which of the Agreement Payments or Payments, as the case
may be, shall be eliminated or reduced (as long as after
such election the present value of the aggregate Agreement
Payments or Payments, as the case may be, equals the
Reduced Amount) and shall notify Officer promptly of such
election. All determinations made by the Accounting Firm
under this Paragraph 4(d) shall be binding upon the Company
and Officer and shall be made within 60 days after a
termination of Officer's employment. As promptly as
practicable following such determination, the Company shall
pay to or distribute for Officer's benefit such Payments as
are then due to Officer under this Agreement and shall
promptly pay to or distribute for Officer's benefit in the
future such Payments as become due to Officer under this
Agreement.
(iv) While it is the intention of the Company and Officer to
reduce the amounts payable or distributable to Officer
hereunder only if the aggregate Net After Tax Receipts to
Officer would thereby be increased, as a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that amounts will have been
paid or distributed by the Company to or for Officer's
benefit pursuant to this Agreement which should not have
been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or
distributed by the Company to or for Officer's benefit
pursuant to this Agreement could have been so paid or
distributed ("Underpayment"), in each case, consistent with
the calculation of the Reduced Amount hereunder. In the
event that the Accounting Firm, based either upon the
assertion of a deficiency by the Internal Revenue Service
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against the Company or Officer which the Accounting Firm
believes has a high probability of success or controlling
precedent or other substantial authority, determines that
an Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for Officer's benefit
shall be treated for all purposes as a loan AB INITIO to
Officer which Officer shall repay to the Company together
with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that
no such loan shall be deemed to have been made and no
amount shall be payable by Officer to the Company if and to
the extent such deemed loan and payment would not either
reduce the amount on which Officer is subject to tax under
Section 1and Section 4999 of the Code or generate a refund
of such taxes. In the event that the Accounting Firm, based
upon controlling precedent or other substantial authority,
determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or
for Officer's benefit together with interest at the
applicable federal rate provided for under Section
7872(f)(2) of the Code.
(v) The Company will bear the fees and expenses of the
Accounting Firm in making the determinations required by
the Paragraph 4(d).
5. DISABILITY.
In the event that Officer is permanently disabled so as to be unable to
fully perform the services required hereunder, Officer's obligation to perform
such services will terminate and the Company may terminate this Agreement upon
five days' written notice to Officer. In the event of such termination,
Officer's Base Salary as defined in Paragraph 3 (a) hereof and benefits as
defined in Paragraph 3 (e) hereof shall continue during the then remaining Term
of this Agreement, reduced by any payments received by Officer during such term
under a long-term disability plan or policy maintained by the Company. For
purposes hereof, "Disability" shall mean that by reason of physical or mental
disability, officer will be unable to perform substantially the duties of
employment under this Agreement for a period of 180 consecutive days.
6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
Officer acknowledges that the Company may disclose certain confidential
information to Officer during the term of this Agreement to enable Officer to
perform the duties required hereunder. Officer hereby covenants and agrees that
he will not, without the prior written consent of the Company, during the term
of this Agreement or for a two year period thereafter, knowingly disclose or
permit to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"Confidential Information" shall include, but not be limited to, any and all
records, notes, memoranda, data, ideas, processes, methods, techniques, systems,
formulas, patents, models, devices, programs, computer software, writings,
research, personnel information, customer information, the Company's financial
information, plans, or any other information of whatever nature in the
possession or control of the Company which has not been published or disclosed
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to the general public, or which gives to the Company an opportunity to obtain an
advantage over competitors who do not know of or use it. Confidential
Information will not, however, include information that Officer can establish:
(a) was already known to the Officer at the time it was disclosed through no
wrongful act of the Officer; (b) has become publicly known through no wrongful
act of the Officer; (c) has been rightfully received from a third party without
restriction on disclosure and without breach of an obligation of
confidentiality; or (d) has been independently developed by the Officer without
reference to the Confidential Information. Officer further agrees that if
Officer's employment hereunder is terminated for any reason, he will leave with
the Company and will not take originals or copies of any records, papers,
programs, computer software, and documents or any matter of whatever nature that
bears secret or Confidential Information of the Company.
The foregoing paragraph shall not be applicable if and to the extent
Officer is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge. Officer hereby does assign,
to the Company, its parent, subsidiary, successors, assigns, and nominees, all
inventions, discoveries, improvements, copyrightable material, trademarks,
programs, computer software, and ideas concerning the same, capable of use in
connection with the business of the Company, which Officer may make or conceive,
either solely or jointly with others, during the period of Employment by the
Company, its parent, subsidiaries, or successors.
Officer agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge, and deliver to the Company all such papers,
including applications for patents, applications for copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns, and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material, or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns, or nominees. Officer will report
to the Company all discoveries, inventions, or improvements of whatever nature
conceived or made by Officer at any time he was employed by the Company, its
parent, subsidiaries, or successors. All such discoveries, inventions, and
improvements which are applicable in any way to the Company's business shall be
the sole and exclusive property of the Company. The covenants set forth in this
paragraph which are made by Officer are in consideration of the employment or
continuing employment of, and the compensation paid to, Officer during
employment by the Company. The foregoing covenants will not prohibit Officer
from disclosing confidential or other information to other employees of the
Company or to third parties to the extent that such disclosure is necessary to
the performance of the duties required under this Agreement. Any breach of this
covenant of nondisclosure will result in the forfeiture by Officer and all other
persons of any and all rights to severance pay and supplemental pension benefits
unpaid at the time of breach and in such event the Company shall have no further
obligation to pay any amount related thereto.
This Agreement does not apply to any invention that qualifies fully
under the provisions of Section 2870(a) of the California Labor Code, which
reads as follows:
Section 2870. Inventions on Own Time--Exemption from Agreement
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(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to
practice of the invention to the employer's business, or actual or demonstrably
anticipated research or development of the employer; or
(2) Result from any work performed by the employee for the
employer.
7. ADDITIONAL REMEDIES.
Officer recognizes that irreparable injury will result to the Company
and to its business and properties in the event of any breach by Officer of any
of the provisions of Paragraph 6 of this Agreement, and that Officer's continued
employment is predicated on the commitments undertaken by Officer pursuant to
said paragraph. In the event of any breach of any of Officer's commitments
pursuant to Paragraph 6, the Company shall be entitled, in addition to any other
remedies and damages available, to injunctive relief to restrain the violation
of such commitments by Officer or by any person or persons acting for or with
Officer in any capacity whatsoever.
8. NONASSIGNMENT.
This Agreement is personal to Officer and shall not be assigned by him.
Officer shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may not assign
this Agreement without Officer's consent to any other entity that, in connection
with such assignment, acquires all or substantially all of the Company's assets
or into or with which the Company is merged and consolidated.
9. WAIVER.
The waiver of a breach of any provision of this Agreement by a party
shall not be construed as a waiver of any subsequent breach by said party.
10. SEVERABILITY.
If any clause, phrase, provision, or portion of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remained of this Agreement and shall not affect the
application of any clause, provision, or portion hereof to other persons or
circumstances.
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11. ARBITRATION.
(a) The terms of this Paragraph 11 contain the sole and exclusive
method, means and procedure to resolve any and all claims, disputes or
disagreements arising under this Agreement, except those arising under the
provisions of Paragraph 6, above. Nothing in this Paragraph 11 shall prohibit a
party from seeking and obtaining injunctive relief from a court of competent
jurisdiction pending the outcome of arbitration. A party bringing an action for
injunctive relief shall not be deemed to have waived his or its right to demand
arbitration of all disputes. The parties irrevocably waive any and all rights to
the contrary and shall at all times conduct themselves in accordance with the
terms of this Paragraph 11; any attempt to circumvent the terms of this
Paragraph 11 shall be null and void and of force or effect.
(b) Either party desiring to arbitrate shall give written notice to the
other party within a reasonable period of time after the party becomes aware of
the need for arbitration. The arbitration shall be conducted in Los Angeles,
California, in accordance with the National Rules of the American Arbitration
Association ("AAA"), and shall be conducted by a single arbitrator selected from
the approved AAA panel or by stipulation of the parties. In any arbitration
hereunder, the parties shall be entitled to all rights of discovery provided for
in the California Code of Civil Procedure for judicial proceedings. The
arbitrator shall give effect to statutes of limitation in determining any claim.
The decision of the arbitrator shall be final and binding. Judgment on any award
rendered by such arbitrator shall be final and binding. Judgment on any award
rendered by such arbitrator may be entered in any court having jurisdiction over
the subject matter of the controversy. The prevailing party shall receive an
award of costs and expenses related to the arbitration, including attorneys'
fees. The fees and costs of the arbitrator and the cost of any record or
transcript of the arbitration shall be borne by the losing party. Should Officer
or the Company institute any legal action or administrative proceeding with
respect to any claim waived by this agreement or pursue any dispute or matter
covered by this paragraph by any method other than said arbitration, the
responding party shall be entitled to recover from the other party all damages,
costs, expenses and attorneys' fees incurred as a result of such action.
12. RELEVANT LAW.
This Agreement shall be construes and enforced in accordance with the
laws of the State of California.
13. NOTICES.
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 48 hours after mailing at any general or branch
United States Post Office, by registered or certified mail, postage prepaid,
addressed as follows, or to such other address as shall have been designated in
writing by the addressee:
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(a) if to the Company: (b) if to the Officer:
c/o eMarketplace, Inc. c/o Full Moon Interactive Group, Inc
255 West Julian Street 1111 Tamarind Avenue
Suite 100 Hollywood, CA 90038
San Jose, CA 95110 Facsimile (323) 856-3011
Facsimile (408) 275-1958
14. ENTIRE AGREEMENT.
This Agreement sets forth the entire understanding of the parties and
supersedes all prior agreements, arrangements, and communications, whether oral
or written, pertaining to the subject matter hereof; and this Agreement shall
not be modified or amended except by written agreement of the Company and
Officer.
15. ATTORNEY'S FEES.
If any action or proceeding is brought to enforce or interpret any
provision of this Agreement, the prevailing party shall be entitled to recover
as an element of its cost, and not its damages, its reasonable attorneys' fees,
costs and expenses.
16. HEADINGS.
The subject heading of the paragraphs and subparagraphs of this
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.
EMPLOYER: TOPTEAM, INC. EMPLOYEE: FRED H. WALTI, II
BY: /s/ ROBERT WALLACE BY: /s/ FRED H. WALTI, II
---------------------- --------------------------
OFFICER: Chairman
DATE: DATE:
EMPLOYMENT AGREEMENT
The effective date of this Agreement by and between TOPTEAM, INC. a
Delaware corporation (the "Company"), and ROBERT WILSON (the "Officer") shall be
the effective date of the acquisition of Full Moon Interactive Group, Inc. by
TopTeam, Inc.
WITNESSETH
WHEREAS, the Company desires to employ Officer, and Officer desires to
accept such employment with the Company upon the terms and conditions set forth
herein,
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, the Company and the Officer agree as follows:
AGREEMENT
1. EMPLOYMENT AND DUTIES.
The Company hereby employs Officer as Chief Financial Officer and
Officer hereby accepts employment by the Company upon the terms and conditions
set forth herein, with the authority and responsibilities customarily afforded
the chief financial officer of a company. Officer shall faithfully and
diligently manage and direct Company's financial and accounting activities, in
accordance with the Company's bylaws, and do and perform all acts in the
ordinary course of the Company's business (with such limits as the Board of
Directors of the Company may prescribe) necessary and conducive to the Company's
best interests. Officer shall devote full time, energy, and skill to the
business of the Company and to the promotion of the Company's best interests,
except for vacations and absences made necessary because of illness or personal
matters. Officer shall report to the Board or a designated officer of the
Company. The primary place of employment shall be at the Company's principal
offices in Los Angeles, California.
2. TERM.
The term of this Agreement shall commence as of the effective date of
the roll-up transaction between the Company and Full Moon Interactive Group,
Inc. and shall expire five years hence, unless sooner terminated as hereinafter
set forth (the "Term"). This Agreement will renew for an additional two years if
the Company's Board of Directors does not advise Officer in writing of its
intent to renew six (6) months prior to the expiration of the Term.
<PAGE>
3. COMPENSATION.
Subject to the provisions of Paragraphs 4 and 5 of this Agreement, the
Company shall pay Officer for all services to be performed by Officer during the
Term of this Agreement the following compensation:
(a) BASE SALARY. The Company shall pay Officer a base salary at the
rate of no less than $125,000 per annum ("Base Salary"), payable in periodic
payments in accordance with the Company's practices for other executive,
managerial, and supervisory employees, as such practices may be determined from
time to time. The Company's Board of Directors will review such Base Salary
annually and, in its discretion, may grant increases thereof based upon
Officer's performance;
(b) ANNUAL CASH BONUS. The Officer shall be entitled to receive an
Annual Cash Performance Bonus of up to 25% of his then current gross annual
salary upon the achievement of reasonable corporate performance targets
established by the Board of Directors ("Annual Cash Performance Bonus"). For the
initial year, the Board of Directors shall provide in writing to the Officer
specific performance targets prior to the effective date of this Agreement. In
subsequent years and no later than sixty (60) days following the Company's
fiscal year end, the Annual Cash Performance Bonus will be established in
writing by the Board at an amount no less than the initial Annual Cash
Performance Bonus, provided the corresponding performance targets are achieved;
(c) STOCK OPTIONS. Upon the execution of this Agreement, the Company
shall grant Officer an option pursuant to the Company's 1999 Stock Plan (a copy
of which is attached hereto as Exhibit A) to purchase a total of 125,000 shares
of common stock at an exercise price of $7.50 per share with 25,000 shares being
immediately exercisable upon execution of this Agreement and the remaining
amounts becoming exercisable in four (4) equal, annual installment amounts on
the anniversary date hereof. In the event of a Change of Control as the term is
defined in Paragraph 4 or an Involuntary Termination, all of Officer's unvested
options will accelerate and become immediately exercisable. A copy of the form
of option agreement containing the terms and conditions of the stock options
granted hereunder is attached hereto as Exhibit B.
(d) WITHHOLDING. All such payments will be subject to such deductions
as may be required to be made pursuant to law, government regulations, or order,
or by agreement with, or consent of, the Officer;
(e) BENEFITS. Officer shall be entitled to participate in such life
insurance, medical, dental, long-term disability, pension, and retirement plans,
and other programs as may be approved from time to time by the Company for the
benefit of its officers. Officer also shall be entitled to no less than three
weeks of vacation with pay during each consecutive 12-month period during the
term of Officer's employment hereunder, to be taken at such times and in such
periods as Officer and the Company shall mutually determine and provided that no
vacation time shall interfere with the duties required to be rendered by Officer
hereunder; and
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(f) BUSINESS EXPENSES. The Company agrees that during the term of this
Agreement Officer shall be entitled to reimbursement by the Company for all
reasonable expenses actually and necessarily incurred by Officer on the
Company's behalf in the course of Officer's employment hereunder, for which
Officer shall submit substantiation in a form satisfactory to the Company and
which are approved by the Company in its reasonable discretion.
4. TERMINATION.
(a) Officer's employment with the Company may be terminated, subject to
the notification provisions set forth in Paragraph 4(b) below, as follows:
(i) Termination for Cause, which means
(1) Officer willfully and unreasonably refuses to
perform services hereunder;
(2) Officer materially breaches Paragraph 6 of this
Agreement;
(3) Officer engages in acts of dishonesty or fraud in
connection with the services performed hereunder
that have a material adverse effect on the Company;
or
(4) Officer engages in other serious misconduct of such
a nature that the continued employment of Officer
may, in the reasonable discretion of the Board of
Directors, be expected to materially and adversely
affect the business or properties of the Company,
including acts which violate securities laws,
misrepresentation of material facts to the Board or
the shareholders, or criminal acts.
(ii) Involuntary Termination, which is defined as termination
by the Company of Officer's employment, other than in a
Termination for Cause, Voluntary Termination, a
discontinuation of employment in accordance with Paragraph
5 or due to death or retirement on or after age 65.
Involuntary Termination as defined herein shall include a
termination by Officer for Good Reason; or
(iii) Voluntary Termination, which means termination by Officer
of Officer's employment by the Company.
(b) TERMINATION PAYMENTS. In the event of Officer's termination,
severance payments ("Severance Amount Payments") shall be made
as follows:
(i) TERMINATION FOR CAUSE. If Officer's employment with the
Company is Terminated for Cause, all accrued salary and
vacation as of the date of Termination for Cause, shall be
paid to Officer. If the Company determines that a reason
constituting cause for termination under clauses
4(a)(i)(1)-(4) has occurred, it shall give Officer written
notice thereof at least 30 days prior to the proposed date
of termination of employment. If Officer undertakes the
necessary steps to remedy the condition constituting cause
within 30 days after the receipt of such notice, then a
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reason for termination for cause shall be deemed not to
have occurred. If Officer shall not remedy the condition
constituting cause within such time period, then
Termination for Cause shall occur on the date set forth in
the notice from the Company.
(ii) VOLUNTARY TERMINATION. In the event of Voluntary
Termination during the term of Officer's employment
hereunder, Officer shall immediately be paid all accrued
salary and vacation pay as of the date of termination, but
no other compensation or reimbursement of any kind,
including without limitation, severance compensation.
(iii) INVOLUNTARY TERMINATION. In the event of an Involuntary
Termination including death or retirement on or after age
65, during the term of Officer's employment hereunder and
except as provided in Paragraph 5, the Company shall pay
the Officer, or a designated beneficiary in the event of
Officer's death, or if none, to Officer's then living
spouse, or if none, to the duly appointed personal
representative of Officer's estate, an amount equal to:
1) the then current Base Salary for the duration of
the Term set forth in Paragraph 3(a) herein on
the effective date of the termination, but in no
event, less than an amount equal to two years of
the then current Base Salary, plus
2) all accrued salary and vacation pay
3) the then maximum Annual Cash Performance Bonus
for the then current fiscal year set in
accordance with Paragraph 3(b)
4) and benefits for the later of the duration of the
Term and two years from the date of termination
If the Officer determines that a reason constituting
termination for Good Reason as defined in Paragraph 4(c)
below has occurred, he shall provide the Company written
notice thereof at least 30 days prior to the proposed date
of termination of employment. If the Company shall take
the necessary steps to remedy the condition constituting
Good Reason(s) for termination within 30 days after the
receipt of such notice, then a reason for termination for
Good Reason shall be deemed not to have occurred. If the
Company shall not remedy the condition constituting Good
Reason within such time period, then Termination for Good
Reason shall occur on the date set forth in the notice
from the Officer.
(c) DEFINITIONS. All the terms defined in this paragraph 4 shall have
the meanings given below throughout this Agreement:
(i) a "CHANGE OF CONTROL" shall be deemed to have occurred if:
a) a tender offer or exchange offer is made and
consummated for the ownership of securities of the
Company representing 50 percent or more of the
combined voting power of the Company's then
outstanding voting securities; or
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b) the Company transfers substantially all of its assets
to another corporation which is not a wholly-owned
subsidiary of the Company.
(ii) a "GOOD REASON" shall mean:
a) the assignment of Officer to any duties inconsistent
with, or any adverse change in, Officer's titles or
positions, duties, responsibilities or status with
the Company, or the removal of Officer from, or
failure to reelect Officer to, any of such positions:
or
b) the failure of the Company to provide support,
information, assistance and staffing reasonably
appropriate for Officer to carry out Officer's duties
or to achieve the performance goals set by the
Company; or
c) any other material breach by the Company of this
Agreement which is not cured within thirty (30) days
of notice thereof by the Officer to the Company; or
d) a change in the location of the Officer's principal
place of employment, which shall be designated and
operated as the Company's executive offices, by the
Company by more than thirty miles from the location
where the Officer was principally employed
immediately prior to the effective date of this
Agreement.
(d) CERTAIN PAYMENT REDUCTIONS:
(i) For purposes of this subparagraph (d), (i) a Payment shall
mean any payment or distribution in the nature of
compensation to or for the benefit of Officer, whether paid
or payable pursuant to this Agreement or otherwise; (ii)
Agreement Payment shall mean a Payment paid or payable
pursuant to this Agreement (determined without regard to
this subparagraph (d)); (iii) Net After Tax Receipt shall
mean the Present Value of a Payment net of all taxes imposed
on Officer with respect thereto under Sections 1 and 4999 of
the Internal Revenue Code of 1986, as amended (the "Code"),
determined by applying the highest marginal rate under
Sections 1 of the Code which applied to the taxable income
of Officer for the immediately preceding taxable year; (iv)
"Present Value" shall mean such value determined in
accordance with Section 280G(d)(4) of the Code; and (v)
"Reduced Amount" shall mean the smallest aggregate amount of
Payments which (a) is less than the sum of all Payments
(determined without regard to this subparagraph (d)) and (b)
results in aggregate Net After Tax Receipts which are equal
to or greater than the Net After Tax Receipts which would
result if the aggregate Payments were equal to the sum of
all Payments (determined without regard to this subparagraph
(d)) or any other amount less than the sum of all payments
(determined without regard to this subparagraph (d)).
(ii) Anything in this Agreement to the contrary notwithstanding,
in the event the Company's independent public accounts (the
"Accounting Firm") shall determine that receipt of all
Payments would subject Officer to tax under Section 4999 of
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the Code, it shall determine whether some amount of Payments
would meet the definition of a "Reduced Amount." If the
Accounting Firm determines that there is a Reduced Amount,
the aggregate Agreement Payments shall be reduced to such
Reduced Amount; provided, however, that if the Reduced
Amount exceeds the aggregate Agreement Payments, the
aggregate Payments shall, after the reduction of all
Agreement Payments, be reduced (but not below zero) in the
amount of such excess.
(iii) If the Accounting Firm determines that aggregate Agreement
Payments or Payments, as the case may be, should be reduced
to the Reduced Amount, the Company shall promptly give
notice to Officer to that effect and a copy of the detailed
calculation thereof, and Officer may then elect, in
Officer's sole discretion, which and how much of the
Payments shall be eliminated or reduced (as long as after
such election the present value of the aggregate Payments
equals the Reduced Amount), and Officer shall advise the
Company in writing of Officer's election within ten days of
Officer's receipt of notice. If no such election is made by
Officer within such ten-day period, the Company may elect
which of the Agreement Payments or Payments, as the case may
be, shall be eliminated or reduced (as long as after such
election the present value of the aggregate Agreement
Payments or Payments, as the case may be, equals the Reduced
Amount) and shall notify Officer promptly of such election.
All determinations made by the Accounting Firm under this
Paragraph 4(d) shall be binding upon the Company and Officer
and shall be made within 60 days after a termination of
Officer's employment. As promptly as practicable following
such determination, the Company shall pay to or distribute
for Officer's benefit such Payments as are then due to
Officer under this Agreement and shall promptly pay to or
distribute for Officer's benefit in the future such Payments
as become due to Officer under this Agreement.
(iv) While it is the intention of the Company and Officer to
reduce the amounts payable or distributable to Officer
hereunder only if the aggregate Net After Tax Receipts to
Officer would thereby be increased, as a result of the
uncertainty in the application of Section 4999 of the Code
at the time of the initial determination by the Accounting
Firm hereunder, it is possible that amounts will have been
paid or distributed by the Company to or for Officer's
benefit pursuant to this Agreement which should not have
been so paid or distributed ("Overpayment") or that
additional amounts which will have not been paid or
distributed by the Company to or for Officer's benefit
pursuant to this Agreement could have been so paid or
distributed ("Underpayment"), in each case, consistent with
the calculation of the Reduced Amount hereunder. In the
event that the Accounting Firm, based either upon the
assertion of a deficiency by the Internal Revenue Service
against the Company or Officer which the Accounting Firm
believes has a high probability of success or controlling
precedent or other substantial authority, determines that an
Overpayment has been made, any such Overpayment paid or
distributed by the Company to or for Officer's benefit shall
be treated for all purposes as a loan AB INITIO to Officer
which Officer shall repay to the Company together with
interest at the applicable federal rate provided for in
Section 7872(f)(2) of the Code; provided, however, that no
such loan shall be deemed to have been made and no amount
shall be payable by Officer to the Company if and to the
extent such deemed loan and payment would not either reduce
the amount on which Officer is subject to tax under Section
1and Section 4999 of the Code or generate a refund of such
taxes. In the event that the Accounting Firm, based upon
controlling precedent or other substantial authority,
determines that an Underpayment has occurred, any such
Underpayment shall be promptly paid by the Company to or for
Officer's benefit together with interest at the applicable
federal rate provided for under Section 7872(f)(2) of the
Code.
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(v) The Company will bear the fees and expenses of the
Accounting Firm in making the determinations required by the
Paragraph 4(d).
5. DISABILITY.
In the event that Officer is permanently disabled so as to be unable to
fully perform the services required hereunder, Officer's obligation to perform
such services will terminate and the Company may terminate this Agreement upon
five days' written notice to Officer. In the event of such termination,
Officer's Base Salary as defined in Paragraph 3 (a) hereof and benefits as
defined in Paragraph 3 (e) hereof shall continue during the then remaining Term
of this Agreement, reduced by any payments received by Officer during such term
under a long-term disability plan or policy maintained by the Company. For
purposes hereof, "Disability" shall mean that by reason of physical or mental
disability, officer will be unable to perform substantially the duties of
employment under this Agreement for a period of 180 consecutive days.
6. NONDISCLOSURE OF CONFIDENTIAL INFORMATION.
Officer acknowledges that the Company may disclose certain confidential
information to Officer during the term of this Agreement to enable Officer to
perform the duties required hereunder. Officer hereby covenants and agrees that
he will not, without the prior written consent of the Company, during the term
of this Agreement or for a two year period thereafter, knowingly disclose or
permit to be disclosed to any third party by any method whatsoever any of the
confidential information of the Company. For purposes of this Agreement,
"Confidential Information" shall include, but not be limited to, any and all
records, notes, memoranda, data, ideas, processes, methods, techniques, systems,
formulas, patents, models, devices, programs, computer software, writings,
research, personnel information, customer information, the Company's financial
information, plans, or any other information of whatever nature in the
possession or control of the Company which has not been published or disclosed
to the general public, or which gives to the Company an opportunity to obtain an
advantage over competitors who do not know of or use it. Confidential
Information will not, however, include information that Officer can establish:
(a) was already known to the Officer at the time it was disclosed through no
wrongful act of the Officer; (b) has become publicly known through no wrongful
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act of the Officer; (c) has been rightfully received from a third party without
restriction on disclosure and without breach of an obligation of
confidentiality; or (d) has been independently developed by the Officer without
reference to the Confidential Information. Officer further agrees that if
Officer's employment hereunder is terminated for any reason, he will leave with
the Company and will not take originals or copies of any records, papers,
programs, computer software, and documents or any matter of whatever nature that
bears secret or Confidential Information of the Company.
The foregoing paragraph shall not be applicable if and to the extent
Officer is required to testify in a judicial or regulatory proceeding pursuant
to an order of a judge or administrative law judge. Officer hereby does assign,
to the Company, its parent, subsidiary, successors, assigns, and nominees, all
inventions, discoveries, improvements, copyrightable material, trademarks,
programs, computer software, and ideas concerning the same, capable of use in
connection with the business of the Company, which Officer may make or conceive,
either solely or jointly with others, during the period of Employment by the
Company, its parent, subsidiaries, or successors.
Officer agrees, without charge to the Company and at the Company's
expense, to execute, acknowledge, and deliver to the Company all such papers,
including applications for patents, applications for copyright and trademark
registrations, and assignments thereof, as may be necessary, and at all times to
assist the Company, its parent, subsidiaries, successors, assigns, and nominees
in every proper way to patent or register said programs, computer software,
ideas, inventions, discoveries, improvements, copyrightable material, or
trademarks in any and all countries and to vest title thereto in the Company,
its parent, subsidiaries, successors, assigns, or nominees. Officer will report
to the Company all discoveries, inventions, or improvements of whatever nature
conceived or made by Officer at any time he was employed by the Company, its
parent, subsidiaries, or successors. All such discoveries, inventions, and
improvements which are applicable in any way to the Company's business shall be
the sole and exclusive property of the Company. The covenants set forth in this
paragraph which are made by Officer are in consideration of the employment or
continuing employment of, and the compensation paid to, Officer during
employment by the Company. The foregoing covenants will not prohibit Officer
from disclosing confidential or other information to other employees of the
Company or to third parties to the extent that such disclosure is necessary to
the performance of the duties required under this Agreement. Any breach of this
covenant of nondisclosure will result in the forfeiture by Officer and all other
persons of any and all rights to severance pay and supplemental pension benefits
unpaid at the time of breach and in such event the Company shall have no further
obligation to pay any amount related thereto.
This Agreement does not apply to any invention that qualifies fully
under the provisions of Section 2870(a) of the California Labor Code, which
reads as follows:
Section 2870. Inventions on Own Time--Exemption from Agreement
(a) Any provision in an employment agreement which provides that an
employee shall assign, or offer to assign, any of his or her rights in an
invention to his or her employer shall not apply to an invention that the
employee developed entirely on his or her own time without using the employer's
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equipment, supplies, facilities, or trade secret information except for those
inventions that either:
(1) Relate at the time of conception or reduction to practice of the
invention to the employer's business, or actual or demonstrably anticipated
research or development of the employer; or
(2) Result from any work performed by the employee for the employer.
7. ADDITIONAL REMEDIES.
Officer recognizes that irreparable injury will result to the Company
and to its business and properties in the event of any breach by Officer of any
of the provisions of Paragraph 6 of this Agreement, and that Officer's continued
employment is predicated on the commitments undertaken by Officer pursuant to
said paragraph. In the event of any breach of any of Officer's commitments
pursuant to Paragraph 6, the Company shall be entitled, in addition to any other
remedies and damages available, to injunctive relief to restrain the violation
of such commitments by Officer or by any person or persons acting for or with
Officer in any capacity whatsoever.
8. NONASSIGNMENT.
This Agreement is personal to Officer and shall not be assigned by him.
Officer shall not hypothecate, delegate, encumber, alienate, transfer or
otherwise dispose of his rights and duties hereunder. The Company may not assign
this Agreement without Officer's consent to any other entity that, in connection
with such assignment, acquires all or substantially all of the Company's assets
or into or with which the Company is merged and consolidated.
9. WAIVER.
The waiver of a breach of any provision of this Agreement by a party
shall not be construed as a waiver of any subsequent breach by said party.
10. SEVERABILITY.
If any clause, phrase, provision, or portion of this Agreement or the
application thereof to any person or circumstance shall be invalid or
unenforceable under any applicable law, such event shall not affect or render
invalid or unenforceable the remained of this Agreement and shall not affect the
application of any clause, provision, or portion hereof to other persons or
circumstances.
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11. ARBITRATION.
(a) The terms of this Paragraph 11 contain the sole and exclusive
method, means and procedure to resolve any and all claims, disputes or
disagreements arising under this Agreement, except those arising under the
provisions of Paragraph 6, above. Nothing in this Paragraph 11 shall prohibit a
party from seeking and obtaining injunctive relief from a court of competent
jurisdiction pending the outcome of arbitration. A party bringing an action for
injunctive relief shall not be deemed to have waived his or its right to demand
arbitration of all disputes. The parties irrevocably waive any and all rights to
the contrary and shall at all times conduct themselves in accordance with the
terms of this Paragraph 11; any attempt to circumvent the terms of this
Paragraph 11 shall be null and void and of force or effect.
(b) Either party desiring to arbitrate shall give written notice to the
other party within a reasonable period of time after the party becomes aware of
the need for arbitration. The arbitration shall be conducted in Los Angeles,
California, in accordance with the National Rules of the American Arbitration
Association ("AAA"), and shall be conducted by a single arbitrator selected from
the approved AAA panel or by stipulation of the parties. In any arbitration
hereunder, the parties shall be entitled to all rights of discovery provided for
in the California Code of Civil Procedure for judicial proceedings. The
arbitrator shall give effect to statutes of limitation in determining any claim.
The decision of the arbitrator shall be final and binding. Judgment on any award
rendered by such arbitrator shall be final and binding. Judgment on any award
rendered by such arbitrator may be entered in any court having jurisdiction over
the subject matter of the controversy. The prevailing party shall receive an
award of costs and expenses related to the arbitration, including attorneys'
fees. The fees and costs of the arbitrator and the cost of any record or
transcript of the arbitration shall be borne by the losing party. Should Officer
or the Company institute any legal action or administrative proceeding with
respect to any claim waived by this agreement or pursue any dispute or matter
covered by this paragraph by any method other than said arbitration, the
responding party shall be entitled to recover from the other party all damages,
costs, expenses and attorneys' fees incurred as a result of such action.
12. RELEVANT LAW.
This Agreement shall be construes and enforced in accordance with the
laws of the State of California.
13. NOTICES.
All notices, requests, demands and other communications in connection
with this Agreement shall be made in writing and shall be deemed to have been
given when delivered by hand or 48 hours after mailing at any general or branch
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United States Post Office, by registered or certified mail, postage prepaid,
addressed as follows, or to such other address as shall have been designated in
writing by the addressee:
(a) if to the Company: (b) if to the Officer:
c/o eMarketplace, Inc. c/o Full Moon Interactive Group, Inc
255 West Julian Street 1111 Tamarind Avenue
Suite 100 Hollywood, CA 90038
San Jose, CA 95110 Facsimile (323) 856-3011
Facsimile (408) 275-1958
14. ENTIRE AGREEMENT.
This Agreement sets forth the entire understanding of the parties and
supersedes all prior agreements, arrangements, and communications, whether oral
or written, pertaining to the subject matter hereof; and this Agreement shall
not be modified or amended except by written agreement of the Company and
Officer.
15. ATTORNEY'S FEES.
If any action or proceeding is brought to enforce or interpret any
provision of this Agreement, the prevailing party shall be entitled to recover
as an element of its cost, and not its damages, its reasonable attorneys' fees,
costs and expenses.
16. HEADINGS.
The subject heading of the paragraphs and subparagraphs of this
Agreement are included for purposes of convenience only, and shall not affect
the construction or interpretation of any of its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date
first set forth above.
EMPLOYER: TOPTEAM, INC. EMPLOYEE: ROBERT WILSON
BY: /s/ ROBERT WALLACE BY: /s/ ROBERT WILSON
------------------------ ----------------------
OFFICER: CHAIRMAN
DATE: DATE:
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