EXHIBIT 99.1
STOCK TENDER AND EXCHANGE AGREEMENT
THIS STOCK TENDER AND EXCHANGE AGREEMENT (this "Agreement") is made and
entered into as of the 22nd day of November, 2000, by and among SITESTAR
CORPORATION, a Nevada corporation (the "Company"), and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇")
and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ("▇▇▇▇▇") (collectively, ▇▇▇▇▇ and ▇▇▇▇▇ are sometimes
referred to in this Agreement as the "Majority Shareholders" or "Sellers".)
R E C I T A L S
A. The Sellers own all of the outstanding shares of the capital stock
of FRE ENTERPRISES, INC., a Virginia corporation and FRE COMMUNICATIONS, INC., a
Virginia corporation (collectively referred to as "FRE").
B. The Company and the Sellers desire the transactions contemplated by
this Agreement (the "Transaction") to constitute a tax-free reorganization
pursuant to ss.362(a)(1)(B) of the Internal Revenue Code of 1986, as amended,
and that this agreement constitute a plan of reorganization.
C. On the terms and subject to the conditions set forth in this
Agreement, the Sellers desire to tender to the Company, and the Company desires
to accept from the Sellers, all of the shares of the capital stock of FRE owned
by the Sellers in consideration for the issuance by the Company to the Sellers
of Sitestar Common Stock.
A G R E E M E N T
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NOW, THEREFORE, with reference to the foregoing facts, the parties
agree as follows:
Definitions.
Certain Definitions.
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All terms defined in this Agreement shall have the defined meanings when used in
this Agreement or in any agreement,note, certificate, report or other document
made or delivered pursuant to this Agreement, unless otherwise defined or the
context otherwise requires. The following terms shall have the following
meanings:
"Action" means any litigation, action, suit, proceeding,
arbitration or claim before any court or Governmental Authority, or
investigation by any Governmental Authority.
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"Affiliate" shall mean, with respect to any specified Person,
(i) any other Person who, directly or indirectly, owns or controls, is under
common ownership or control with, or is owned or controlled by, such specified
Person, (ii) any other Person who is a director, officer, partner or trustee of
the specified Person or a Person described in clause (i) of this definition or
any spouse ofthe specified Person or any such other Person, (iii) any relative
of the specified Person or any other Person described in clause (ii) of this
definition, or (iv) any Person of which the specified Person and/or any one or
more of the Persons specified in clause (i),(ii) or (iii) of this definition,
individually or in the aggregate, beneficially own 10% or more of any class of
voting securities or otherwise have a substantial beneficial interest.
"Annual Financial Statements" shall mean the audited balance
sheet of (audit in process) FRE as of December 31, 1999, the related statements
of income and retained earnings and cash flows for the fiscal year then ended,
including the notes (and schedules) to these financial statements.
"Best Efforts" shall mean theefforts that a prudent Person
desirous of achieving a result would use in similar circumstances to ensure that
the result is achieved as expeditiously as practicable under the circumstances;
provided, however, that an obligation to use Best Efforts under this Agreement
does not require the Person subject to that obligation to (i) take actions that
would result in a material adverse change in the benefits to such Person under
this Agreement or the transactions contemplated by this Agreement, (ii) make any
significant cash payments or (iii) incur any significant liability or
obligation.
"Best Knowledge" with respect to any Person shall mean and
include (i) actual knowledge of the Person, including, the actual knowledge of
any of the officers or directors of such Person, and (ii) that knowledge which a
prudent businessperson could have obtained in the management of his business
after making due inquiry, and after exercising due diligence, with respect
thereto.
"Business" shall mean website development and providing
Internet access, web hosting, toner/cartridge recharge services and internet
publications, all as currently conducted by the FRE.
"Business Condition" of any Person shall mean the financial
condition, results of operations, business, properties or prospects of such
Person.
"Charter Documents" shall mean (i) the Articles of
Incorporation, and (ii) the Bylaws.
"Company Annual Financial Statements" shall mean the audited
consolidated balance sheet (audit in process) of the Company as of December 31,
1999, the related consolidated statements of income and retained earnings and
cash flows for the fiscal year then ended, including the notes (and schedules)
to these financial statements.
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"Company Current Financial Statements" shall mean the
unaudited consolidated balance sheet of the Company as of September 30, 2000 and
the related consolidated statements of income and retained earnings for the
nine-months then ended.
"Contract" shall mean any written or oral note, bond,
debenture, mortgage, license, agreement, commitment, contract or understanding.
"Copyrights" shall mean all United States and foreign
copyrights, whether or not registered.
"Current Balance Sheet" shall mean the unaudited balance
sheet of FRE as at September 30, 2000 included in the Current Financial
Statements.
"Current Financial Statements" shall mean the unaudited
balance sheet of FRE as of September 30, 2000 and the related statements of
income and retained earnings for the nine-months then ended.
"Employment Agreements" shall mean employment agreements
entered into between the Company, on one hand, and each of the Sellers, on the
other hand, on the date of this Agreement.
"Employee Plan" with respect to any Person shall mean any
plan, arrangement or Contract providing compensation or benefits to, for or on
behalf of employees and/or directors of such Person and/or Affiliates of such
Person, including employment, deferred compensation, retirement or severance
Contracts; plans pursuant to which Equity Securities are issued, including stock
purchase, stock option, stock appreciation rights plans; bonus, severance,
phantom stock or incentive compensation plans or arrangements; supplemental
unemployment benefit, hospitalization or other medical, life or other insurance;
and ERISA Plans
"Environmental Laws" shall mean all present and future
statutes, regulations, rules, ordinances, codes, licenses, permits, orders,
approvals, plans, authorizations, concessions, franchises, and similar items, of
all Governmental Authorities and all applicable judicial, administrative, and
regulatory decrees, judgments, and orders relating to Hazardous Substances or
the protection of the environment in any respect, including, without limitation:
(i) all requirements, including, without limitation, those pertaining
tonotification, warning, reporting, licensing, permitting, investigation, and
remediation of Hazardous Substances; (ii) all requirements pertaining to the
protection of employees or the public from exposure to Hazardous Substances or
injuries or harm associated therewith; and (iii) the Comprehensive Environmental
Response, Compensation and Liability Act (42 U.S.C. ss.9601 et seq.), the
Resource Conservation and Recovery Act (49 U.S.C. ss.6901 et seq.), the
Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et seq.), the Clean
Air Act (42 U.S.C. ss.7401 et seq.), the Occupational Safety and Health Act (29
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U.S.C. ss.600 et seq.), the ▇▇▇▇▇▇-Cologne Water Quality Control Act (California
Water Code ss. 13000 et seq.), the California Hazardous Waste Control Law
(Division 20, Chapter 6.5 of the California Health and Safety Code, ss. 25100 et
seq.), the Safe Drinking Water and Toxic Enforcement Act of 1986 (Division 20,
Chapter 6.6 of the California Health and Safety Code, ss. 25249.5 et seq.), the
▇▇▇▇▇▇▇▇▇-▇▇▇▇▇▇▇-▇▇▇▇▇▇ Hazardous Substance Account Act (California Health &
Safety Code ss. 25300 et seq.), the Hazardous Materials Release Response Plans
and Inventory (Division 20, Chapter 6.95 of the California Health and Safety
Code, ss. 25500 et seq.) and all similar federal, state, local and municipal
laws as they may from time to time be modified, amended or superseded.
"Equity Securities" of any Person shall mean the capital stock
of such Person and/or any Stock Equivalents of such Person.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Exploit" shall mean manufacture, advertise, license, market,
merchandise, promote, publicize, sell, use, market, supply or distribute, and
"Exploitation" and "Exploited" shall have a correlative meaning.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Governmental Authority" shall mean any nation or government,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Hazardous Substance" means those substances defined as
hazardous substances in 42 ▇.▇.▇.▇▇. 9601(14) and all other substances defined
as hazardous under other applicable Laws.
"Indebtedness" means, with respect to any Person, (i) any
liability, contingent or otherwise, (a) for borrowed money, capitalized lease
obligations, purchase money obligations or other obligations relating to the
deferred purchase price of assets or property or (b) evidenced by a note, bond,
debenture, letter of credit or similar instrument given in connection with the
acquisition, other than in the ordinary course of business, of any property,
assets, securities or otherwise, including indebtedness created or arising under
conditional sale or other title retention agreements (even though the rights and
remedies of the lender under the agreements in the event of default are limited
to repossession or sale of the property), (ii) any liability of others described
in the preceding clause which such Person has guaranteed or which otherwise is
its legal liability, (iii) all indebtedness referred to above secured by (or for
which the holder of the indebtedness has an existing right, contingent or
otherwise, to be secured by), any Lien upon the property of such Person, whether
or not the obligations secured thereby have been assumed, and (iv) any
amendment, renewal, extension or refunding of any liability referred to in
clauses (i), (ii) and (iii) above; provided, however, that Indebtedness does not
include any trade payables of any Person incurred in the ordinary course of
business. The amount of Indebtedness of any Person at any date shall be the
outstanding balance at the date of all unconditional obligations as described
above and the maximum amount of any contingent obligations at the date.
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"IP" shall mean Patents, Trademarks, Copyrights, Know-How and
other rights and property commonly referred to as intellectual property, and
rights or licenses to use the same, and any and all applications therefor.
"Know-How" shall mean all lab journals, inventions, trade
secrets, know-how (including, without limitation, proprietary know-how and use
and application know-how), product designs, manufacturing, engineering and other
drawings, technology, other intangibles, technical information, safety
information, engineering data and design and engineering specifications,
research records, market surveys, promotional literature, supplier lists,
similar data and formulas and processes.
"Law" shall mean any federal, state or local statute, law,
rule, regulation, ordinance, order, code, policy or rule of common law, now or
hereafter in effect, and in each case as amended, and any judicial or
administrative interpretation thereof by a Governmental Authority or otherwise,
including any judicial or administrative order, consent, decree or judgment.
"Lien" shall mean any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, deposit arrangement, encumbrance,
lien (statutory or other), or preference, priority, or other security agreement
or preferential arrangement, charge, or encumbrance of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement, any financing lease having substantially the same economic
effect as any of the foregoing, and the filing of any financing statement under
the Uniform Commercial Code or comparable law of any jurisdiction to evidence
any of the foregoing).
"Material Contract" shall mean, with respect to any Person,
any Contract to which Person is a party or is otherwise bound which is:
A Contract which is to be performed in whole or in part at or after the date of
this Agreement and which (A) cannot be canceled upon 30 days' notice or less and
involves aggregate future payments by or to such Person of more than $10,000;
(B) involves material nonmonetary obligations to be performed later than one
year from the date hereof; (C) otherwise materially affects such Person; or (D)
was not entered into in the ordinary course of business;
A Contract pursuant to which such Person (A) has borrowed or is committed or
entitled to borrow money in an amount in excess of $10,000; (B) has lent or
committed to lend money; (C) has given or is committed to give a guarantee of,
or otherwise to incur primary or secondary liability for (including any letter
of credit), any obligation of any other party in any amount;
A Contract regarding advertising, brokerage, licensing, management,
representative or agency relationships;
A Contract with or concerning any labor or employee organization;
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A Contract for the sale of any properties, assets or rights of such Person for a
purchase price in excess of $25,000 or for the grant of any preferential right
to purchase any of such assets, properties or rights, or which requires the
consent of any third party to the transfer and assignment of such assets,
properties or rights;
A Contract with any Affiliate of such Person;
A Contract (A) under which the benefits cannot be retained upon the consummation
of the transactions contemplated by this Agreement without the written consent
or approval of other parties or (B) under which there will be a default as a
result of the consummation of the transactions contemplated by this Agreement
unless such other parties provide written consent or approval;
A Contract involving the lease of real or personal property; and
A Contract requiring such Person to make capital expenditures in excess of
$10,000.
"FRE Common Stock" shall mean the Common Stock, par value $___
per share, of FRE.
"FRE IP" shall mean all IP that FRE owns, licenses and/or
uses.
"FRE Material Contract" shall mean a Material Contract of FRE.
"FRE Shares" shall mean all of the shares of FRE Common Stock
held by the Sellers.
"Patents" shall mean all patents (including all reissues,
divisions, continuations, continuations in part and extensions thereof), patent
applications and patent disclosures docketed and all other patent rights.
"Permitted Liens" shall mean (i) Liens for current taxesnot
yet delinquent; (ii) restrictions imposed by Law; and (iii) easements and
restrictions which are neither individually nor in the aggregate material to
FRE.
"Person" shall mean an individual or a partnership,
corporation, trust, association, Limited Liability Company, Governmental
Authority or other entity.
"Real Estate" shall mean that certain real property located at
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇ , ▇▇▇▇▇.
"SEC" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act.
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"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
SEC thereunder.
"Securities" of any Person shall mean Equity Securities, Stock
Equivalents and any other "security" as that term is defined under the
Securities Act of such Person.
"Seller Representative" shall mean ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, or such
other Seller as may from time to time be elected by the holders of a majority of
the FRE Shares.
"Sitestar Shares" shall mean the shares of Sitestar Common
Stock to be issued to the Sellers in exchange for their FRE Shares.
"Sitestar Common Stock" shall mean the Common Stock, par value
$.001 per share, of the Company.
"Stock Equivalents" ofany Person shall mean options, warrants,
calls, rights, commitments, convertible securities and other securities pursuant
to which the holder, directly or indirectly, has the right to acquire (with or
without additional consideration) capital stock or equity of such Person.
"Subsidiary" of any Person shall mean any entity of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are owned directly or indirectly by such Person.
"Systems" of any Person shall mean all items, products or
systems of such Person used in the operation of such Person which incorporate
the processing of dates and date-related data (including, without limitation,
calculating, comparing and sequencing) that are operationally material to the b
usiness as conducted by such Person or its agents or other Persons, including,
without limitation, computer systems, infrastructure items, software
applications, hardware, and related equipment and utilities.
"Trademarks" shall mean all trademark, service ▇▇▇▇ and trade
name rights (including all registrations of trademarks and of other marks, all
registrations of trade names, labels and other trade rights and applications for
any of theforegoing) and all associated goodwill symbolized thereby or connected
therewith.
"Transfer" shall mean sell, assign, transfer, pledge, grant a
security interest in, or otherwise dispose of, with or without consideration,
and "Transferred" shall have a correlative meaning.
"Year 2000 Compliant" shall mean that all Systems accurately
process dates and date-related data (including, without limitation, calculating,
comparing and sequencing) in all material respects before, during and after the
year 2000.
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Other Definitions.
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In addition to the terms defined in Section 1(a) of this Agreement, the
following terms shall have the meanings given the terms in the Sections set
forth below:
Term Section
---- -------
Acquisition Proposal............................... 6(c)
Claim.............................................. 10(c)
Claim Notice....................................... 10(c)
Claim Dispute Notice............................... 10(f)
Closing............................................ 3(a)
Closing Date....................................... 3(a)
Company Indemnified Party.......................... 10(b)
Company Indemnified Parties........................ 10(b)
Contingent Shares.................................. 2(b)
Damages............................................ 10(b)
Direct Claim....................................... 10(c)
Employees.......................................... 9(c)
Indemnified Party.................................. 10(c)
Indemnifying Party................................. 10(c)
Initial Shares..................................... 2(b)
Market Price....................................... 2(b)
Notices............................................ 16(a)
Released Claims.................................... 6(e)
Returns............................................ 4(y)(ii)
Sellers Disclosure Letter.......................... 4
Short Period....................................... 4(y)(i)(D)
Subscriber Ratio................................... 2(b)
Tax Return......................................... 4(y)(i)(A)
Tax................................................ 4(y)(i)(B)
Taxing Authority................................... 4(y)(i)(C)
Third Party Claim.................................. 10(c)
Tender and Exchange of Shares.
Tender and Exchange of Shares.
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On the terms and subject to the conditions of this Agreement, at the Closing,
the Sellers shall tender, assign and transfer the FRE Shares to the Company, and
the Company shall accept the FRE Shares from the Sellers. The Sellers agree that
prior to the Closing they will not Transfer any of the FRE Shares.
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Exchange Consideration.
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The exchange consideration to be issued by the Company for the FRE Shares shall
be a number of shares of Sitestar Common Stock equal to: (i) the Initial Shares
plus (ii) the Contingent Shares. The "Initial Shares" shall mean a number of
shares (rounded to the nearest whole share) equal to (i) the Subscriber Ratio
multiplied by the quotient obtained by dividing $3,316,796 by the Market Price
less (ii) $829,199. The "Contingent Shares" shall mean a number of shares
(rounded to the nearest whole share) equal to (i) 4,145,995 less (ii) the
aggregate amount of unreimbursed Indemnification Claims of the Company
Indemnified Parties under Section 10 of this Agreement divided by the Market
Price. The "Market Price" shall be deemed to be $.20. The "Subscriber Ratio"
shall be a fraction, the numerator of which is the number of Persons
(subscribers) from whom FRE shall have received monthly internet access, web
hosting or other recurring service fees at standard rates during the calendar
month immediately prior to calendar month in which the Closing occurs, and the
denominator of which is 3,372. Each Seller shall be entitled to a number of the
Sitestar Shares equal to his pro rata share of such shares based on the number
of shares of FRE Common Stock tendered to the Company by such Seller (all shares
shall be rounded to the nearest whole number; no fractional shares shall be
issued). In the event post-close adjustments require an adjustment to the
purchase price, adjustments will be made based on a percentage basis, upward or
downward as required.
Closing and Deliveries.
The Closing.
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The closing of the tender of the FRE Shares (the "Closing") shall take place on
November 22, 2000, at 8:00 a.m., E.S.T. time, at ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇, or at such other place or time as the parties to this
Agreement shall mutually agree upon in writing. The date of the Closing is
referred to in this Agreement as the "Closing Date".
Deliveries by the Company at the Closing.
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At the Closing, the Company shall deliver to the Sellers: certificates
evidencing Initial Shares, registered in the name of the Sellers; each Seller,
other than the Majority Shareholders, shall receive his or her full pro rata
allocation of the Sitestar Shares; each Majority Shareholders shall receive his
full pro rata allocation of the Sitestar Shares less 4,145,995 shares (which
constitute Contingent Shares);
such documents and instruments as FRE may reasonably request to evidence the
satisfaction of all conditions precedent set forth in Section 8 of this
Agreement.
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Deliveries by the Sellers at the Closing.
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At the Closing, the Sellers shall deliver to the Company: the certificates
evidencing the FRE Shares, duly endorsed for transfer in blank or accompanied by
a stock power duly endorsed in blank;
the Employment and Non-compete Agreement duly executed by ▇▇▇▇▇ and ▇▇▇▇▇;
such documents and instruments as the Company may reasonably request to evidence
the satisfaction of all conditions precedent set forth in Section 7 of this
Agreement; and
Requisite asset schedule, customer lists, financial statements and tax returns.
Deliveries by the Company after the Closing.
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The Company shall deliver the Contingent Shares to the Majority Shareholders on
the third anniversary of the Closing; provided, however, that if as of the
second anniversary there remain any unresolved Claims (because of a dispute
between the Company and the Majority Shareholders, or because the amount of the
Claim has not been determined, such as a Third Party Claim which has not been
resolved, or otherwise), then the Company may elect not to issue such number of
Contingent Shares as may equal the maximum amount of such disputed or unresolved
Claims (as determined in good faith by the Company) divided by the Market Price;
provided, further, however, that at such time as such Claim is resolved, if it
is resolved for less that such maximum amount, the Company shall promptly issue
to the Sellers such additional Contingent Shares as shall equal such maximum
amount less the actual amount of such Claim, divided by the Market Price.
Further Assurances.
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At the Closing, each party to this Agreement shall deliver or cause to be
delivered, as appropriate, such further certificates, consents and other
documents as may be necessary to carry out the terms of this Agreement.
Representations and Warranties of the Majority Shareholders and Sellers. Except
as set forth in the disclosure letter delivered by the Majority Shareholders to
the Company concurrently with the execution and delivery of this Agreement,
which letter shall refer to the relevant Sections of this Agreement (the
"Sellers Disclosure Letter"), the Majority Shareholders jointly and severally,
represent and warrant to the Company as follows (and the Sellers each make the
representations under Section 4(o) only):
Organization, Standing and Corporate Power.
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FRE is a corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Virginia and has all requisite corporate power
and corporate authority to own, lease and operate its properties and assets and
to carry on its business as now being conducted. Complete and correct copies of
the Charter Documents of FRE have been delivered to the Company. FRE is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions except where the failure to so qualify would not have a material
adverse effect on FRE.
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Capitalization.
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The authorized capital stock of FRE consists solely of 5,000 shares of FRE
Common Stock. Except for 5,000 shares of FRE Common Stock, there are no
outstanding Equity Securities of FRE. All of the outstanding Equity Securities
of FRE are owned of record and beneficially as set forth in the General
Disclosure Schedule. All Equity Securities issued by FRE have been duly
authorized and validly issued and are fully paid and nonassessable. The holders
of the FRE Common Stock possess exclusive voting rights with respect to the
affairs of FRE.
There are no outstanding Stock Equivalents of FRE. FRE is not obligated to
purchase or redeem any Equity Securities or Stock Equivalents.
FRE has not, either directly or through any agent, offered any Securities of FRE
to or solicited any offers to acquire any such Securities from, or otherwise
approached, negotiated, or communicated in respect of any such Securities with,
any Person in such a manner as to require that the offer or sale of such
Securities be registered pursuant to the provisions of Section 5 of the
Securities Act and the rules and regulations of the SEC thereunder or the
securities laws of any state. FRE has complied with all federal and state
securities and blue sky laws in all offers, sales and purchases of its
Securities prior to the date hereof and has not violated any applicable law in
making such issuances and purchases of its Securities prior to the date hereof.
Any notices required to be filed under federal and state securities and blue sky
laws prior to the date hereof have been filed on a timely basis prior to or as
so required.
Each Seller has good and marketable title to his or her FRE Shares, free and
clear of all Liens, and at the Closing the Company will receive good and
marketable title to the FRE Share free and clear of all Liens. The FRE Shares
are not subject to any Stock Equivalents.
Authority; Enforceability; Effect of Agreement.
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Each Seller has the requisite capacity to enter into, execute and deliver this
Agreement and perform his obligations hereunder. This Agreement has been duly
executed and delivered by each Seller and, assuming this Agreement is duly
executed and delivered by the Company, constitutes a valid and legally binding
obligation of each Seller enforceable against such Seller in accordance with its
terms, subject to the effect of bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance and other similar laws relating to or
affecting creditors' rights generally, or the availability of equitable
remedies. No Seller has dissenter's rights under applicable law.
The execution and delivery by each Seller of this Agreement do not, and
compliance by each Seller with the provisions of this Agreement will not, (A)
conflict with or result in a breach or default under any of the terms,
conditions or provisions of any Contract to which any Seller or FRE is a party
or otherwise bound, or to which any property or asset of any Seller or FRE is
subject; (B) violate any Law applicable to any Seller or FRE; or (C) result in
the creation or imposition of any Lien on any asset of FRE.
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Assets.
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FRE has good and marketable title to all of its assets free and clear of all
Liens, other than Permitted Liens and Liens identified in the Sellers Disclosure
Letter.
FRE' s assets consist of all of the properties and assets used in the conduct of
the Business, including all of the properties and assets reflected on the
Current Balance Sheet, other than assets sold or transferred in the ordinary
course of business since the date of the Current Balance Sheet. Each item of
material tangible personal property of FRE is in good operating conditionand
repair, ordinary wear and tear excepted, and those items constitute sufficient
material tangible personal property for the requirements of the Business as
currently conducted.
Accounts Receivable; Subscribers.
--------------------------------
The Sellers Disclosure Letter sets forth atrue and complete schedule of the
Accounts Receivable of FRE as of the date of the Current Balance Sheet, setting
forth a description of the Accounts Receivable including the names and addresses
of the account debtors, the balance amount and aging as of the date indicated
therein. The Accounts Receivable, whether reflected on the Current Balance Sheet
or subsequently created, and all books, records and documents relating to such
Accounts Receivable, are genuine and materially accurate. All Accounts
Receivable of FRE, whether reflected on the Current Balance Sheet or
subsequently created: (A) constitute bona fide and valid rights of FRE to
collect payments from other Persons; (B) represent credit extended in a manner
consistent with FRE's trade practices; (C) are not subject to any defense,
counterclaim or offset; and (D) except for reserves for returns and bad debts
set forth in the Current Balance Sheet and arising in the ordinary course of
business since the date of the Current Balance Sheet, are fully collectable
within 90 days of the respective dates on which such Accounts Receivable were
billed. Since the date of the Current Balance Sheet, there have not been any
write-offs as uncollectable of any Accounts Receivable.
The Sellers Disclosure Letter sets forth a true and correct list of the names
and addresses of all Persons for whom the Company is providing internet access
as of October 31, 2000.
FRE Contracts.
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FRE is not a party to any Material Contract except as identified as such in the
Sellers Disclosure Schedule. True and correct copies of each FRE Material
Contract, including all amendments and modifications thereof and waivers
thereunder, have been delivered to the Company. To the Best Knowledge of the
Majority Shareholders, each FRE MaterialContract is in full force and effect,
and is the valid and binding obligation of each party to the Assumed Contract.
FRE has performed all of the obligations required to be performed by it to date
under each FRE Contract, and FRE is not in material breachof or default under
any FRE Contract. To the Best Knowledge of the Majority Shareholders, each other
party to each FRE Contract has performed all of the obligations required to be
performed by it to date under the FRE Contract and is not in material breach of
or in default under the FRE Contract, and no event has occurred or circumstance
exists which, with notice or lapse of time or both, would constitute a breach of
or default under any FRE Contract.
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Intellectual Property.
----------------------
The Sellers Disclosure Letter contains a true and complete list of all Patents,
Trademarks and registered Copyrights of FRE and the basis of the right of FRE to
use such Patents, Trademarks and Copyrights. The FRE IP constitutes all IP that
is required to enable FRE to conduct the Business.
Subsidiaries.
------------
FRE does not own, directly or indirectly, any shares of stock or any other
financial interest or investment (equity or debt) in any Person, and is not
subject to any agreement, obligation or commitment to make such investment. The
Business has been conducted solely by FRE in its own name.
Financial Statements.
---------------------
The Annual Financial Statements (as delivered to the Company) fairly present the
financial position and results of operations of FRE as at the dates of and for
the periods set forth in the Annual Financial Statements in accordance with
GAAP. The Current Financial Statements have been prepared in accordance with
GAAP (with the only exceptions that no notes have been prepared with respect to
the Current Financial Statements), consistent with the Annual Financial
Statements, and fairly present the financial position and results of operations
of FRE as at and for the nine months ended September 30, 2000, and are not
subject to year-end adjustments except for normal year-end adjustments that may
be required in the ordinary course of business. Except as set forth in the
Current Balance Sheet, FRE does not have any Indebtedness, obligation or
liability, absolute, accrued, contingent or otherwise.
Absence of Certain Changes and Events.
-----------------------------------------
Since May 9, 2000, except for this Agreement and changes contemplated by this
Agreement, FRE has conducted its business only in the ordinary course of
business and there has not been any: purchase, redemption, retirement or other
acquisition by FRE of any Equity Securities of Seller;
declaration or payment of any dividend or other distribution or payment to any
shareholder of FRE in respect of any Equity Securities of FRE;
increase by FRE in the compensation payable or to become payable by FRE to any
shareholder or to any director, officer or employee of FRE being paid $25,000 or
more at or at any time after September 30, 2000;
payment of any bonus, pension, retirement or insurance payment or arrangement to
or with, or advance or loan of any money to, any Person, or entry into any
employment, severance, loan or similar Contract with any Person, other than the
payment of salaries and other employee benefits in the ordinary course
consistent with past practice;
incurrence by FRE of any Indebtedness other than trade payables incurred by FRE
in the ordinary course of business which do not exceed $5,000; or
13
Transfer any assets to, or entry into any agreement or arrangement with, any
Seller or any officer or director of FRE (other than payment of salaries and
other employee benefits to officers in the ordinary course of business and
consistent with past practice) or any of their respective Affiliates.
Litigation and Proceedings.
--------------------------
There is no pending or, to the best knowledge of the Sellers, threatened
Action(or basis for any Action) to which FRE is a party or involving any of the
assets, and FRE is not subject to any judgment, order, writ, injunction, decree
or regulatory directive or agreement, which could any material adverse affect on
the Business Condition of FRE.
Brokers.
-------
Neither any Seller nor FRE has retained or otherwise engaged or employed a
Person, or paid or agreed to pay any fee or commission to any Person, for or on
account of acting as a finder or broker in connection with this Agreement or the
transactions contemplated hereby.
No Consents Required.
--------------------
There are no approvals, authorizations, consents, orders or other actions of, or
filings with, any Person that are required to be obtained or made by FRE in
connection with the execution of, and the consummation of the transactions
contemplated under, this Agreement.
Environmental Compliance Matters.
----------------------------------
The Majority Shareholders agree to accept responsibility for any prior or future
environmental compliance matters related to the Real Estate.
Securities Purchase
-------------------
(the representations made in this Section 6(o) are made by all Sellers, not just
the Majority Shareholders): Each Seller is acquiring the Sitestar Shares for
such Seller's own account, for investment purposes only.
Each Seller understands that an investment in the Sitestar Shares involves a
high degree of risk, and each Seller has the financial ability to bear the
economic risk of this investment in the Sitestar Shares;
Each Seller is an "accredited investor" as that term is defined in Rule 501(a)
under Regulation D promulgated pursuant to the Securities Act. Each Seller has
such knowledge and experience in financial and business matters that such Seller
is capable of evaluating the merits and risks of an investment in the Sitestar
Shares and in protecting such Seller's own interest in connection with the
investment.
Each Seller understands that the Sitestar Shares have not been registered under
the Securities Act or under any state securities laws.
14
Each Seller believes that such Sellerhas received all the information such
Seller considers necessary or appropriate for deciding whether to invest in the
Sitestar Shares, and such Seller has had an opportunity to ask questions and
receive answers from the Company and its officers and directors regarding the
business, prospects and financial condition of the Company.
Each Seller agrees not to Transfer, with or without consideration, any of the
Shares except pursuant to an effective registration statement under the
Securities Act or an exemption from registration. As a further condition to any
such Transfer, except in the event that such Transfer is made pursuant to an
effective registration statement under the Securities Act, if in the reasonable
opinion of counsel to the Company any Transferof the Sitestar Shares by the
contemplated transferee thereof would not be exempt from the registration and
prospectus delivery requirements of the Securities Act, the Company may require
the contemplated transferee to furnish the Company with an investment letter
setting forth such information and agreements as may be reasonably requested by
the Company to ensure compliance by such transferee with the Securities Act.
Each Seller agrees that each certificate evidencing any of the
Sitestar Shares shall contain the following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR AN EXEMPTION FROM REGISTRATION.
No Material Adverse Change.
--------------------------
Since May 9, 2000 there has been no material adverse change in the Business
Condition of FRE.
Employee Plans.
--------------
FRE is not a party to, or obligated under, any Employee Plan.
Licenses; Compliance with Laws.
------------------------------
FRE: has all franchises, permits, licenses, and other rights which it currently
deems reasonably necessary for the conduct of its business and to the Best
Knowledge of the Sellers there is not any basis for the denial of such rights in
the future;
is in compliance with, and is not in violation of, any Law except where the
failure to so comply, or such violations, in the aggregate, will not have a
material adverse effect on the Business Condition of FRE;
15
Insurance.
---------
FRE has in full force and effect insurance with respect to its assets and
businesses against such casualties and contingencies and of such types and forms
and to such extent as it deems reasonable and customary in the case of
corporations or organizations engaged in its businesses and in its respective
areas. FRE has separately provided to the Company a true and correct list of all
insurance policies maintained by FRE and a general description of such policies.
Labor Relations.
----------------
There is no pending or, to the Best Knowledge of the Sellers, threatened labor
dispute, strike or work stoppage affecting the business of FRE.
Banks, Agents, etc.
---------------------
The Sellers Disclosure Schedule contains a complete and correct list setting
forth the name of (i) each financial institution in which FRE has an account,
safe deposit box or borrowing privilege and the names of all persons authorized
to draw thereon, to have access thereto or to borrow thereupon, as the case may
be, and (ii) each agent to whom FRE has granted a written power of attorney or
similar authority to act on its behalf.
Minute Books.
------------
The minute books of FRE contain a complete summary of all meetings of directors
and stockholders since the time of incorporation and reflect all transactions
referred to in such minutes accurately in all material respects.
Conflicts of Interest.
---------------------
Neither FRE nor any officer, employee, agent or any other Person acting on
behalf of FRE has, directly or indirectly, given or agreed to give or received
or agreed to receive any money, gift or similar benefit (other than legal price
concessions to customers in the ordinary course of business) to any customer,
supplier, employee or agent of a customer or supplier, or official or employee
of any Governmental Authority or other Person who was, is, or may be in of a
position to help or hinder the business of (or assist in connection with any
actual or proposed transaction) FRE which (a) might subject FRE to any damage or
penalty in any civil, criminal or governmental litigation or proceeding, (b) if
not given in the past, might have had a material adverse effect on the Business
Condition of FRE or (c) if not continued in the future, might materially
adversely affect the Business Condition of FRE.
Year 2000.
---------
All Systems of FRE are Year 2000 Compliant.
16
Taxes.
------
For the purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"Tax Return" means any return, declaration, report, claim for refund, or
information return or statement relating to Income Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
"Tax" (including with correlative meaning, the term "Taxes" and "Taxable") shall
mean, with respect to FRE, any federal, state, local, foreign or other material
tax or governmental charge, together with any interest and any penalty, addition
to Tax or additional amount imposed by any Taxing Authority due from or
allocable under any applicable law or agreement to, FRE.
"Taxing Authority" shall mean any governmental authority (domestic or foreign)
responsible for the imposition of any such Tax.
FRE has filed all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all material respects. All Taxes owed by FRE
(whether or not shown on any Tax Return) have been paid. FRE currently is not
the beneficiary of any extension of time within which to file any Tax Return.
Any unresolved tax issues will be the responsibility of the Majority
Shareholders.
There is no material dispute or claim concerning any Income Tax liability of FRE
either (A) claimed or raised by any Taxing Authority in writing or (B) as to
which any of the Sellers and the directors and officers of FRE has based upon
personal contact with any agent of such authority.
Sellers Disclosure Schedule lists all federal, state, local, and foreign Tax
Returns filed with respect to FRE for taxable periods ended on or after December
31, 1995, that have been audited, or for which said audit is in process, and
indicates those Tax Returns that currently are the subject of audit. The
Majority Shareholders have delivered to the Company correct and complete copies
of all federal Tax Returns, examination reports, and statements of deficiencies
assessed against, or agreed to by FRE since December 31, 1995 by or with any
Taxing Authority. FRE has not waived any statute of limitations in respect of
Income Taxes or agreed to any extension of time with respect to an Income Tax
assessment or deficiency.
FRE has not filed a consent under Code Section 341(f) concerning collapsible
corporations. FRE has not made any material payments, is obligated to make any
material payments, or is a party to any agreement that under certain
circumstances could obligate it to make any material payments that will not be
deductible under Code Section 280G. FRE is not a UnitedStates real property
holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). FRE is not a party
to any tax allocation or sharing agreement. FRE (A) is not a member of an
Affiliated Group filing a consolidated federal Tax Return or (B) has any
liability for the taxes of any Person (other than any of FRE) under Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
17
The unpaid Taxes of FRE (A) did not, as of the most recent fiscal month end,
exceed by any material amount the reserve for Income Tax liability (rather than
any reserve for deferred taxes established to reflect timing differences between
book and tax income) set forth on the face of the most recent balance sheet
(rather than in any notes thereto) and (B) will not exceed by any material
amount that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of FRE in filing
its Tax Returns.
FRE (and any predecessor of FRE) has been a validly electing C corporation
within the meaning of Code Sections 1361 and 1362 at all times during its
existence and FRE will be an C corporation up to and including the Closing Date.
Material Misstatements and Omissions.
-------------------------------------
No representations and warranties by any Seller in this Agreement, nor any
exhibit, schedule or certificate furnished by any Seller to the Company pursuant
to this Agreement, contains or will contain any untrue statement of material
fact or omits or will omit to state any material fact necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading.
Representations and Warranties of the Company.
The Company represents and warrants to the Sellers as follows:
Organization, Standing and Corporate Power.
--------------------------------------------
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevadaand has all requisite corporate
power and corporate authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted. The Company is duly
qualified to do business as a foreign corporation and is in good standing in all
jurisdictions except where the failure to so qualify would not have a material
adverse effect on Sitestar. The Company has delivered to Sitestar true and
complete copies of its Charter Documents.
Authority; Enforceability; Effect of Agreement.
----------------------------------------------
The Company has full corporate power and corporate authority to enter into,
execute and deliver this Agreement and perform its obligations hereunder. This
Agreement has been duly authorized by all necessary corporate action of the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and legally binding obligation of the Company and is
enforceable against the Company in accordance with its terms, subject to the
effect of bankruptcy, insolvency, reorganization, moratorium, fraudulent
conveyance and other similar laws relating to or affecting creditors' rights
generally, or the availability of equitable remedies.
18
The execution and delivery by the Company of this Agreement do not, and
compliance by the Company with the provisions hereof will not, (A) conflict with
or result in a breach or default under any of the terms, conditions or
provisions of any Contract to which the Company is a party or otherwise bound,
or to which any asset or property of the Company is subject; or (B) violate any
Law applicable to the Company; or (C) result in the creation or imposition of
any Lien on any asset of the Company.
Financial Statements.
--------------------
The Annual Company Financial Statements (as made available to the Sellers)
fairly present the financial position and results of operations of the Company
as at the dates of and for the periods set forth in the Annual Company Financial
Statements in accordance with GAAP. The Current Company Financial Statements
have been prepared in accordance with GAAP (with the only exceptions that no
notes have been prepared with respect to the Current Financial Statements),
consistent with the Annual Company Financial Statements, and fairly present the
financial position and results of operations of the Company as at and for the
nine months ended September 30, 2000, and are not subject to year-end
adjustments except for normal year-end adjustments that may be required in the
ordinary course of business.
Litigation and Proceedings.
--------------------------
There is no pending or, to the best knowledge of the Company, threatened Action
(or basis for any Action) to which the Company is a party or involving any of it
assets, and the Company is not subject to any judgment, order, writ, injunction,
decree or regulatory directive or agreement, which could any material adverse
affect on the Business Condition of the Company.
Sitestar Shares.
----------------
Upon issuance, the Sitestar Shares will be duly authorized, validly issued,
fully paid and non-assessable shares of the Common Stock of the Company.
Brokers.
-------
The Company has not retained or otherwise engaged or employed any Person, or
paid or agreed to pay any fee or commission to any Person, for or on account of
acting as a finder or broker in connection with this Agreement or the
transactions contemplated hereby.
No Consents Required.
--------------------
There are no approvals, authorizations, consents, orders or other actions of, or
filings with, any Person that are required to be obtained or made by the Company
in connection with the execution of, and the consummation of the transactions
contemplated under, this Agreement.
Form 10-SB.
----------
The Form 10-SB filed with the SEC in October 1999 did not, as of the date filed,
contain any misstatement of fact or omit to state any fact, in each case which
fact would be material to the Sellers' decision to exchange the FRE Shares for
the Sitestar Shares pursuant to this Agreement.
19
Capitalization.
--------------
The authorized capital stock of the Company consists solely of 75,000,000 shares
of Sitestar Common Stock and 10,000,000 shares of Preferred Stock. Except for
approximately 27.9 million shares of Sitestar Common Stock, there are no
outstanding Equity Securities of Sitestar. All Equity Securities issued by
Sitestar have been duly authorized and validly issued and are fully paid and
nonassessable. The holders of the Sitestar Common Stock possess exclusive voting
rights with respect to the affairs of Sitestar.
There are no outstanding Stock Equivalents of Sitestar. Sitestar is not
obligated to purchase or redeem any Equity Securities or Stock Equivalents.
Sitestar Shares.
----------------
The Sitestar Shares issued to the Sellers have been duly authorized and, upon
issuance in accordance with this Agreement, will be validly issued, fully paid
and non-assessable will be issued free and clear of any Liens imposed by
Sitestar other than as contemplated by this Agreement.
Labor Relations.
----------------
There is no pending or, to the Best Knowledge of Sitestar, threatened labor
dispute, strike or work stoppage affecting the business of Sitestar.
Taxes.
-----
The Company has filed all Tax Returns that it was required to file. All such Tax
Returns were correct and complete in all material respects. All Taxes owed by
the Company (whether or not shown on any Tax Return) have been paid. The Company
currently is not the beneficiary of any extension of time within which to file
any Tax Return.
There is no material dispute or claim concerning any Income Tax liability of the
Company either (A) claimed or raised by any Taxing Authority in writing or (B)
as to which any of the Sellers and the directors and officers of the Company has
based upon personal contact with any agent of such authority.
The Company has not waived any statute of limitations in respect of Income Taxes
or agreed to any extension of time with respect to an Income Tax assessment or
deficiency.
The unpaid Taxes of the Company (A) did not, as of the most recent fiscal month
end, exceed by any material amount the reserve for Income Tax liability (rather
than any reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth on the face of the most recent balance
sheet (rather than in any notes thereto) and (B) will not exceed by any material
amount that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the Company in
filing its Tax Returns.
20
Conduct and Transactions Prior to Closing.
Conduct of Business.
---------------------
Prior to the Closing, except as contemplated by this Agreement or with the prior
written consent of the Company, each Majority Shareholder agrees to cause FRE:
to conduct its operations according to its ordinary and usual course of
business; not to Transfer any assets;
not to amend, modify or terminate, or grant any waiver of any right under, any
FRE Material Contract, and not to make any payment under any FRE Contract which
is not required to be made strictly in accordance with the terms of the FRE
Contract;
to comply in all material respects with all of its obligations and duties under
any FRE Contract and not to create or permit to exist any material default or
event of default on behalf of FRE under any FRE Contract, or any event or
circumstance which, with lapse of time or notice, or both, would constitute a
material default under a FRE Contract;
to use its Best Efforts to preserve intact its business organization and
goodwill, keep available the services of its officers and employees and maintain
satisfactory relationships with those Persons having business relationships with
FRE;
to duly comply with all Laws applicable to FRE and to the conduct of the
Business;
not to make or agree to make any capital expenditures, other than in the
ordinary and usual course of business;
not to incur any material fixed or contingent obligation or enter into any
Contract or other transaction or arrangement relating to the Business or the
Assets outside the ordinary course of business which would be a Material
Contract;
to maintain its tangible personal property in a good condition and state of
repair, reasonable wear and tear excepted;
not to commit any act or omit to do any act which would be or result in a breach
of any of its obligations, duties, agreements or representations under any FRE
Contract which would have a material effect on the Business Condition of FRE;
to bear the risk of loss or damage to the assets of FRE on and prior to the
Closing Date, and maintain all properties necessary for the conduct of the
Business, whether owned or leased, in substantially the same condition as they
now are;
to maintain the books, records and accounts of FRE in the usual, regular and
ordinary manner, on a basis consistent with prior periods;
21
not to enter into any Contract of any kind or nature with any Affiliate of FRE,
any Seller or any Affiliate of any Seller;
not to enter into any transaction or perform any act which would make any of the
representations, warranties or agreements contained in this Agreement false or
misleading in any material respect if made again immediately after such
transaction or act; and
not to take any affirmative action or fail to take any action within its control
that is likely to cause any of the changes or events listed in Section 6(a) to
occur.
Inspection of Records.
---------------------
Between the date of this Agreement and the Closing, the Sellers shall allow the
duly authorized officers, attorneys, accountants and other representatives of
the Company access at all reasonable times, upon reasonable advance notice and
during normal business hours, to the records and files, correspondence, audits
and properties, as well as to all information in each case relating the business
and affairs of FRE.
Acquisition Proposals.
----------------------
During the period from the date of this Agreement and extending through the
earlier of termination of this Agreement or the Closing, FRE and each Seller
agrees that (i) neither FRE nor such Seller nor any agent or representative of
FRE or any Seller, including without limitation any investment banker, attorney
or accountant, shall initiate, solicit, intentionally encourage or accept the
submission of any proposal or offer with respect to a merger, acquisition, sale,
consolidation or similar transaction involving all or any significant portion of
the assets or any Equity Securities of FRE (any such proposal or offer being
hereinafter referred to as an "Acquisition Proposal") or engage in any
negotiations or discussions concerning, or provide any confidential information
or data to, any Person relating to an Acquisition Proposal, and (ii) the Sellers
shall notify the Company immediately if any Acquisition Proposal is received by
FRE and/or any Seller or agent or representative or any negotiations or
discussions relating to a potential Acquisition Proposal are sought to be
initiated or continued with FRE and/or such Seller.
Best Efforts.
------------
Between the date of this Agreement and the Closing, each of the parties to this
Agreement will use its or his Best Efforts to cause the conditions to the
obligations of the other parties set forth in Sections 7 or 8 of this Agreement,
as the case may be, to be satisfied.
22
Release.
-------
Except for obligations for salary and benefits accruing in the ordinary course
of business, each Seller hereby forever relieves, releases and discharges FRE
from any and all claims, debts, liabilities, losses, demands, obligations,
promises, acts, agreements, costs and expenses, damages, actions and causes of
action, of whatever kind or nature, whether known or unknown, suspected or
unsuspected, existing now, existing as of the Closing or accruing after the
Closing based on, arising out of, or in connection with any action or omission
of FRE prior to the Closing (collectively, "Released Claims") and agrees that
neither the Company nor FRE shall have any liability or obligation whatsoever to
such Seller (or any Person claiming by or through it) arising out of or in
connection with the Released Claims. Each Seller represents that he has not
Transferred any Released Claims.
In furtherance thereof, each Seller acknowledges that
he or she is familiar with Section 1542 of the Civil Code of the State of
California, which provides as follows:
A general release does not extend to claims which the creditor
did not know or suspect to exist in his favor at the time of
executing the release, which if known by him, must have
materially affected his settlement with the debtor.
Each Seller waives any and all rights it has or may
have under California Civil Code Section 1542 and/or any successor section to it
with respect to the claims released hereby.
Conditions to the Obligations of the Company.
The obligation of the Company to purchase the FRE Shares and
to take the other actions required to be taken by the Company at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Company in writing, in
whole or in part):
Representations and Warranties.
--------------------------------
The representations and warranties of the Majority Shareholders and the other
Sellers (contained in this Agreement, any exhibit or schedule hereto, or any
certificate, instrument or other writingdelivered to the Company or its
representatives by any Seller, or any of their respective representatives) shall
be true and correct on the Closing Date with the same force and effect as though
made on and as of the Closing Date (i.e., with respect to a representation that
a state of facts exists on or as of the date hereof, it is a condition that such
state of facts exists in all material respects on or as of the Closing Date, and
with respect to a representation that a state of facts has or has not changed
between a date prior to the date hereof and the date hereof, it is a condition
that such state of facts has or has not changed between such prior date and the
Closing Date), except as affected by transactions contemplated hereby and
thereby and except that any such representation or warranty made as of a
specified date (other than the date of this Agreement) shall only need to have
been true on and as of such date;
23
Performance.
-----------
Each Seller shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by such Seller on or
prior to the Closing Date;
Title to FRE Shares.
-------------------
The Company shall have received good and marketable title to the FRE Shares,
free and clear of all Liens;
Consents.
--------
The Sellers shall have delivered to the Company all consents of third parties
necessary so that FRE will not be in breach of any Contract as a result of the
purchase of the FRE Shares by the Company;
Employment Agreements.
---------------------
The Sellers shall have executed and delivered to the Company the Employment
Agreements;
Subscribers.
-----------
FRE shall have received monthly internet access, web hosting or other recurring
service fees from not less than 3,372 Persons in an aggregate amount of not less
than $61,000 during the calendar month immediately preceding the month in which
the Closing occurs;
Other Matters.
--------------
All corporate and other proceedings and actions taken in connection with this
Agreement and all agreements, instruments and documents mentioned in this
Agreement or incident to any such transactions shall be reasonably satisfactory
in form and substance to the Company and its counsel. Conditions to the
Obligations of the Sellers.
The obligation of the Sellers to sell the FRE Shares and to
take the other actions required to be taken by the Sellers atthe Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by the Sellers in writing, in
whole or in part):
Representations and Warranties.
------------------------------
The representations and warranties ofthe Company (contained in this Agreement,
any exhibit or schedule hereto, or any certificate, instrument or other writing
delivered to the Sellers or their representatives by the Company, or any of its
representatives) shall be true and correct on the Closing Date with the same
force and effect as though made on and as of the Closing Date (i.e., with
respect to a representation that a state of facts exists on or as of the date
24
hereof, it is a condition that such state of facts exists in all material
respects on or as of the Closing Date, and with respect to a representation that
a state of facts has or has not changed between a date prior to the date hereof
and the date hereof, it is a condition that such state of facts has or has not
changed between such prior date and the Closing Date), except as affected by
transactions contemplated hereby and thereby and except that any such
representation or warranty made as of a specified date (other than the date of
this Agreement) shall only need to have been true on and as of such date;
Performance.
-----------
The Company shall have performed all obligations and complied with all covenants
required by this Agreement to be performed or complied with by the Company on or
prior to the Closing Date;
Employment Agreements.
---------------------
The Company shall have executed and delivered to the Sellers the Employment
Agreements; and
Other Matters.
--------------
All corporate and other proceedings and actions taken in connection with this
Agreement and all agreements, instruments and documents mentioned in this
Agreement or incident to any such transactions shall be reasonably satisfactory
in form and substance to the Sellers and their counsel.
Further Agreements of the Parties.
Further Agreements of the Sellers.
-----------------------------------
The Sellers shall upon the request of the Company from time to time execute and
deliver to the Company such documents and instruments of title, conveyance,
transfer and assignment as may be necessary or desirable in order to vest in the
Company, free and clear of all Liens, all right, title and interest inand to any
and all of the FRE Shares.
8-K Financial Statements.
------------------------
The Majority Shareholders shall promptly provide such assistance reasonably
requested by the Company to enable it to prepare financial statements and pro
forma financial statements sufficient to permit the Company to fully, completely
and timely comply with the Company's obligations to file financial statements
relating to the Business with the SEC and to obtain an audit of those
statements, including signing such representation letters as may reasonably be
requested by the auditors.
25
Employees.
---------
Schedule 11(h) lists the name, job title, current base salary or hourly wage,
date of hire and social security number of employees actively employed by FRE
including individuals on short-term disability who were so employed immediately
before their disability (collectively, the "Employees"). As to any individual on
short-term disability, Schedule 11(h) indicates the reason for such absence and
the date the individual is reasonably expected to return to active employment.
Schedule 11(h) also indicates the accumulated vacation pay accrued for each
Employee as of the Closing Date.
The Majority Shareholders jointly and severally agree to pay all costs and
expenses related to the termination of employment of any employee of FRE who is
entitled to any severance in connection with his or her termination (including
indirect severance because such employee is entitled to at least 10 days or more
notice of termination).
Sale of Shares.
--------------
All shares issued to Majority Shareholders will be restricted from sale for a
period of one (1) year from the close of the transaction. At the end of the one
year restriction period, the shares may be registered for sale in the public
market, subject to the rules and regulations governing the Securities and
Exchange Act of 1934 Rule 144 and other applicable securities laws, on a
quarterly basis, over a two (2) year period at 12.5% per quarter. Survival of
Representations and Warranties; Indemnity.
Survival of Representations and Warranties.
-------------------------------------------
All representations and warranties made in this Agreement or made in any
document delivered pursuant to this Agreement by or on behalf of any party shall
survive the execution and delivery of this Agreement and the Closing, regardless
of notice of or any investigation or right of investigation made prior to or
after the date of this Agreement by or on behalf of any party, and shall
terminate and expire two years following the Closing Date after which date they
shall be of no further force or effect.
Indemnification By The Majority Shareholders.
---------------------------------------------
The Majority Shareholders shall, jointly and severally, indemnify, save and hold
harmless the Company and each of its officers, directors, employees, agents and
affiliates, and each of their successors and assigns (individually, a "Company
Indemnified Party" and collectively, the "Company Indemnified Parties") from and
against any and all costs, losses, claims, liabilities, fines, penalties,
incidental and consequential damages, lost profits and expenses (including
interest which may be imposed in connection therewith and court costs and
reasonable fees and disbursements of counsel) ("Damages") incurred in connection
with, arising out of, resulting from or incident to: all liabilities of or
claims against the Company Indemnified Parties of any nature, whether accrued,
absolute, contingent or otherwise, arising out of the Business attributable to
any state of facts existing or any event occurring at or prior to the Closing
(whether known or unknown to the Majority Shareholders or the Company), to the
extent not reflected as a liability on the Current Balance Sheet or for accounts
payable and approved expenses incurred by FRE in the ordinary course of business
subsequent to the date of the Current Balance Sheet;
26
any breach of, or any inaccuracy in any of, the representations or warranties,
or any default in any agreements, made by the Sellers in this Agreement, any
exhibit or schedule to this Agreement or any certificate, instrument or writing
delivered in connection with this Agreement or in connection with any exhibit or
schedule to this Agreement;
all liabilities of or claims against the Company Indemnified Parties of any
nature, whether accrued, absolute, contingent or otherwise, arising under any
Environmental Laws and relating to the ownership or use by FRE of any of the
Real Estate prior to the Closing;
any Action, compromise, settlement, assessment or judgment arising out of or
incidental to any of the matters indemnified against in this Section 10(b);
provided, however, that the Sellers shall not be obligated to indemnify a
Company Indemnified Party and hold it or him harmless under this Section 10(b)
with respect to any settlement of a claim to which the Seller Representative has
not consented, which consent shall not unreasonably be withheld. If, by reason
of the claim of any third Person relating to any of the matters subject to
indemnification under this Section 10(b), a Lien, attachment, garnishment or
execution is placed upon any of the property or assets of any Company
Indemnified Party, the Sellers shall also, promptly upon demand, furnish an
indemnity bond satisfactory to the Company Indemnified Party to obtain the
prompt release of such Lien, attachment, garnishment or execution.
Notice of Claim.
---------------
If a claim for Damages (a "Claim") is to be made by a party entitled to
indemnification hereunder (an "Indemnified Party") against the indemnifying
party (the "Indemnifying Party"), the Indemnified Party shall give written
notice (a "Claim Notice") to the Indemnifying Party, which notice shall specify
whether the Claim arises as a result of a claim by a person against the
Indemnified Party (a "Third Party Claim") or whether the Claim does not so arise
(a "Direct Claim"), and shall also specify (to the extent that the information
is available) the factual basis for the Claim and the amount of the Damages, if
known. If the Claim is a Third Party Claim, the Indemnified Party shall provide
the Claim Notice as soon as practicable after such party becomes aware of such
Claim. If any Action is filed against any Indemnified Party, written notice
thereof shall be given to the Indemnifying Party as promptly as practicable (and
in any event within 15 calendar days after the service of the citation or
summons). The failure of any Indemnified Party to give timely notice hereunder
shall not affect rights to indemnification hereunder, except to the extent that
the Indemnifying Party has been damaged by such failure.
Defense of Claims.
-----------------
With respect to a Third Party Claim, if after receipt of the Claim Notice the
Indemnifying Party acknowledges in writing to the Indemnified Party that the
Indemnifying Party shall be obligated under the terms of its indemnity hereunder
in connection with such lawsuit or action, the Indemnifying Party shall be
entitled, if it so elects at its own cost, risk and expense, (i) to take control
of the defense and investigation of such Action, (ii) to employ and engage
27
attorneys of its own choice, but, in any event, reasonably acceptable to the
Indemnified Party, to handle and defend the same unless the named parties to
such Action include both the Indemnifying Party and the Indemnified Party and
the Indemnified Party has been advised in writing by counsel that there may be
one or more legal defenses available to such Indemnified Party that are
different from or additional to those available to the Indemnifying Party, in
which event the Indemnified Party shall be entitled, at the Indemnifying Party's
cost, risk and expense, to separate counsel of its own choosing, and (iii) to
compromise or settle such Action, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to be
unreasonably withheld.
If the Indemnifying Party fails to assume the defense
of such Claim within 15 calendar days after receipt of the Claim Notice, the
Indemnified Party against which such Claim has been asserted will (upon
delivering notice to such effect to the Indemnifying Party) have the right to
undertake, at the Indemnifying Party's cost and expense, the defense, compromise
or settlement of such Claim on behalf of and for the account and risk of the
Indemnifying Party. If the Indemnified Party assumes the defense of the Claim,
the Indemnified Party will keep the Indemnifying Party reasonably informed of
the progress of any such defense, compromise or settlement. The Indemnifying
Party shall be liable for any settlement of any Action effected pursuant to and
in accordance with this Section 10(e) and for any final judgment (subject to any
right of appeal) and the Indemnifying Party agrees to indemnify and hold
harmless an Indemnified Party from and against any Damages by reason of such
settlement or judgment.
No Claim by the Sellers.
------------------------
Although the Sellers may have relied on information supplied by FRE in making
certain representations and warranties contained in this Agreement and the
Sellers' Disclosure Schedule, each Seller agrees that he or she has no claim,
and shall assert no claim, for contribution, indemnification or otherwise,
against FRE with respect to any breach of any covenant or of any of the
representations and warranties or any inaccuracy in the Sellers' Disclosure
Schedule irrespective of whether the information supplied by FRE and relied upon
by such Seller was incomplete or inaccurate in any way or for whatsoever reason;
further, the Sellers acknowledge that FRE has made no representation or warranty
to the Sellers with respect to the information supplied by it to the Sellers
whatsoever.
Liquidation of Indemnification Claims.
---------------------------------------
Any Claim set forth in any Claim Notice shall be deemed valid and binding upon
the Sellers unless the Sellers give written notice of dispute of the Claim, or a
portion of the Claim (a "Claim Dispute Notice"), within 45 days from receipt of
the Claim Notice, which Claim Dispute Notice sets forth in reasonable detail the
basis for disputing the Claim (or portion of the Claim). Within 15 days
following receipt of the Claims Dispute Notice, the Company and the Seller
Representative(and any other Majority Shareholder who desires to participate)
28
shall discuss the Claim in person or by telephone. If the parties are unable to
resolve the dispute, either the Majority Shareholders or the Company shall have
the right to have the claim submitted to and settled by arbitration as
hereinafter provided (it being expressly understood and agreed that if such
Claims Dispute Notice is duly given, it is the intention of the parties to this
Agreement that any such indemnification claim shall be resolved by arbitration
as provided in this Section 10(g)). The arbitration shall be by a single
arbitrator experienced in the matters at issue selected by, and mutually
acceptable to, the Indemnifying Party and the Indemnified Party and shall be
conducted in accordance with the arbitration rules of the American Arbitration
Association. The arbitrator must be independent (not an agent, officer,
director, attorney, employee, or shareholder of the Company or any Seller or a
relative or Affiliate of any of thosepersons) without any economic or financial
interest of any kind in the outcome of the arbitration. Each arbitrator's
conduct will be governed by the Code of Ethics for Arbitrators in Commercial
Disputes (1986) that has been approved and recommended by the American Bar
Association and the American Arbitration Association. The parties shall request
the arbitrator to convene a hearing as promptly as practicable for the dispute
to be held on such date and at such time and place in Los Angeles County,
California, as the arbitrator designates upon 30 days' advance notice to each
Indemnified Party and each Indemnifying Party. The parties shall request that
the arbitrator render his decision within 30 days after the conclusion of the
hearing. The arbitrator shall hear and decide the dispute based on the evidence
produced, notwithstanding the failure or refusal to appear by a party who has
been duly notified of the date, time, and place of the hearing. The decision of
the arbitrator shall be final and binding as to any matters submitted under this
Agreement, and to the extent that the arbitrator's decision is that Damages have
been incurred for which a party is to be indemnified under this Agreement, the
Damages shall be promptly satisfied; provided, however, that, if necessary, such
decision may be enforced by either the Indemnifying Party or the Indemnified
Party in any court of record having jurisdiction over the subject matter or over
any of the parties hereto. The prevailing party shall recover all of such
party's costs, and reasonable attorneys' fees incurred in connection with any
such arbitration.
Noncompetition.
Covenant Not to Compete.
-----------------------
For a period of three years from the Closing Date, each Seller agrees that he
will not, directly or indirectly, whether individually or as a member, officer,
director, investor, stockholder, employee or consultant of any Person, (i)
engage, within the states of Virginia and North Carolina in a business which
competes with any line of business engaged in or about to be engaged in by the
Company, or (ii) induce or attempt to induce (A) any employee of the Company to
leave the employ of the Company or in any way interfere adversely with the
relationship between any such employee and the Company, (B) any employee of the
Company to work for, render services or provide advice to or supply confidential
29
business information or trade secrets of the Company to any Person, or (C) any
customer, supplier, licensee, licensor or other business relation of the Company
to cease doing business with the Company or in any way interfere with the
relationship between any such customer, supplier, licensee, licensor or other
business relation and the Company. The ownership by a Seller of four percent or
less of the outstanding capital stock of any corporation engaged in any business
which competes with any line of business engaged in or about to be engaged in by
the Company, where the capital stock of the corporation is listed on a national
securities exchange or actively quoted on the Nasdaq National Market or Nasdaq
SmallCap Market, shall not be deemed a violation by a Seller of this Section 11,
provided that such Seller is not an officer, director or employee of, or a
consultant to, such corporation.
Remedies.
--------
Each Seller acknowledges and agrees that, in the event of a violation by such
Seller of the terms and provisions of this Section 11, the remedies at law would
not be adequate; and accordingly, in such event the Company may proceed to
protect and enforce its rights under this Section 11 by an Action in equity for
specific performance and temporary, preliminary and permanent injunctive relief
from violation of any of the provisions of this Section 11 from any court of
competent jurisdiction without the necessity of proving the amount of any actual
damages to the Company resulting from the breach.
Modification.
------------
If for any reason there should be a determination by a court of competent
jurisdiction that the provisions of this Section 11 are too broad or
unreasonable and therefore unenforceable, the provisions of this Section 11
shall be deemed modified, and fully enforceable as so modified, to the extent
that the court would find them to be fair, reasonable and enforceable under the
circumstances. Termination. Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual agreement, in writing,
of each of the parties to this Agreement. Termination by the Company. The
Company may (but shall not be obligated to) terminate this Agreement prior to
the Closing by giving written notice to the Sellers if: there has been a
material violation or breach by any Seller of any agreement, covenant,
representation or warranty contained in this Agreement, which violation or
breach shall not have been cured or corrected within 15 days after receipt of
notice thereof;
the Closing does not occur on or prior to November 22, 2000, or such later date
as may be agreed to in writing by the parties; or
any of the conditions in Section 7 have not been satisfied as of the Closing or
if the Company is made aware and determines in its reasonable discretion that
any condition will not be satisfied as of the Closing (other than through the
failure of the Company to comply with its obligations under this Agreement) and
the Company has not expressly waived such condition in writing on or before the
Closing.
30
Termination by the Sellers.
----------------------------
The Sellers may (but shall not be obligated to) terminate this Agreement prior
to the Closing by giving written notice to the Company if: there has been a
material violation or breach by the Company of any agreement, covenant,
representation or warranty contained in this Agreement, which violation or
breach shall not have been cured or corrected within 15 days after receipt of
notice thereof;
the Closing does not occur on or prior to November 22, 2000, or such later date
as may be agreed to in writing by the parties; or
any of the conditions in Section 8 have not been satisfied as of the Closing or
if the Sellers are made aware and determine in their reasonable discretion that
any condition will not be satisfied as of the Closing (other than through the
failure of FRE or the Sellers to comply with its or their obligations under this
Agreement) and FRE has not expressly waived such condition in writing on or
before the Closing.
In the event of such termination, no party shall have any
obligation or liability to any other in respect to this Agreement, except for
any breach of contract occurring prior to such termination.
13. Certain Tax Matters.
The following provisions shall govern the allocation of responsibility
as between the Company and Sellers for certain tax matters following the Closing
Date:
(a) Tax Periods Ending on or Before the Closing Date. The
Company shall prepare or cause to be prepared and file or cause to be filed all
Tax Returns for FRE for all periods ending on or prior to the Closing Date which
are filed after the Closing Date. The Company shall permit the Seller
Representative to review and comment on each such Tax Return described in the
preceding sentence prior to filing and shall make such revisions to such Tax
Returns as are reasonably requested by the Seller Representative. To the extent
permitted by applicable law, Sellers shall include any income, gain, loss,
deduction or other tax items for such periods on their Tax Returns. The Sellers
shall reimburse the Company for any Taxes of FRE with respect to such periods
within 15 days after payment by the Company or FRE of such Taxes to the extent
such Taxes are not reflected in thereserve for Tax liability (rather than any
reserve for deferred Taxes established to reflect timing differences between
book and Tax income) shown on the face of the Current Balance Sheet.
31
(b) Tax Periods Beginning Before and Ending After the Closing
Date. The Company shall prepare or cause to be prepared and file or cause to be
filed any Tax Returns of FRE for Tax periods which begin before the Closing Date
and end after the Closing Date. The Sellers shall pay to the Company within 15
days after the dateon which Taxes are paid with respect to such periods an
amount equal to the portion of such Taxes which relates to the portion of such
Taxable period ending on the Closing Date to the extent such Taxes are not
reflected in the reserve for Tax Liability (rather than any reserve for deferred
Taxes established to reflect timing differences between book and Tax income)
shown on the face of the Current Balance Sheet. For purposes of this Section, in
the case of any Taxes that are imposed on a periodic basis and are payable for a
Taxable period that includes (but does not end on) the Closing Date, the portion
of such Tax which relates to the portion of such Taxable period ending on the
Closing Date shall in the case of any Taxes other than Taxes based upon or
related to income or receipts, be deemed to be the amount of such Tax for the
entire Taxable period multiplied by a fraction the numerator of which is the
number of days in the Taxable period ending on the Closing Date and the
denominator of which is the number of days in the entire Taxable period, and in
the case of any Tax based upon or related to income or receipts be deemed equal
to the amount which would be payable if the relevant Taxable period ended on the
Closing Date. Any credits relating to a Taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
Taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of FRE.
(c) Refunds and Tax Benefits. Any Tax refunds that are
received by the Company or FRE, and any amounts credited against Tax to which
the Company or FRE become entitled, that relate to Tax periods or portions
thereof ending on or before the Closing Date shall be for the account of the
Sellers, and the Company shall pay over to the Sellers any such refund or the
amount of any such credit within fifteen (15) days after receipt or entitlement
thereto. In addition, to the extent that a claim for refund or a proceeding
results in a payment or credit against Tax by a taxing authority to the Company
or FRE of any amount accrued on the Current Balance Sheet, the Company shall pay
such amount to the Sellers within fifteen (15) days after receipt or entitlement
thereto.
(d) Cooperation on Tax Matters.
(i) The Company and the Sellers shall cooperate fully,
as and to the extent reasonably requested by the other party, in connection with
the filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient basis to
provide additional information and explanation of any material provided
32
hereunder. The Company and the Sellers agree (A) to retain all books and records
with respect toTax matters pertinent to FRE relating to any taxable period
beginning before the Closing Date until the expiration of the statute of
limitations (and, to the extent notified by Company or the Sellers, any
extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to
give the other party reasonable written notice prior to transferring, destroying
or discarding any such books and records and, if the other party so requests,
FRE or the Sellers, as the case may be, shall allow the other party to take
possession of such books and records.
(ii) The Company and the Sellers further agree, upon
request, to use their Best Efforts to obtain any certificate or other document
fromany governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) The Company and Sellers further agree, upon
request, to provide the other party with all information that either party may
be required to report pursuant to Section 6043 of the Code and all Treasury
Department Regulations promulgated thereunder.
(e) Tax Sharing Agreements. All tax sharing agreements or
similar agreements with respect to or involving FRE shall be terminated as of
the Closing Date and, after the Closing Date, FRE shall not be bound thereby or
have any liability thereunder.
(f) Certain Taxes. All transfer, documentary, sales, use,
stamp, registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any tax imposed
by the Commonwealth of Virginia) shall be paid by the Sellers when due, and the
Sellers will, at their own expense, file all necessary Tax Returns and other
documentation with respect to all such transfer, documentary, sales, use, stamp,
registration and other Taxes and fees, and, if required by applicable law,
Company will, and will cause its affiliates to, join in the execution of any
such Tax Returns and other documentation.
(g) C Corporation Status. FRE and the Sellers will not revoke
FRE's election to be taxed as an C corporation within the meaning of Code
Sections 1361 and 1362. FRE and the Sellers will not take or allow any action
other than the sale of FRE Common Stock pursuant to this Agreement that would
result in the termination of FRE's status as a validly electing C corporation
within the meaning of Code Sections 1361 and 1362.
33
14. Miscellaneous.
Notices.
-------
All notices, requests, demands and other communications (collectively,
"Notices") given pursuant to this Agreement shall be in writing, and shall be
delivered by personal service, courier, facsimile transmission (which must be
confirmed) or by United States first class, registered or certified mail,
postage prepaid, to the following addresses:
(i) if to the Company, to:
Sitestar Corporation.
ATTN: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Tel No. ▇▇▇-▇▇▇-▇▇▇▇ Fax No. ▇▇▇-▇▇▇-▇▇▇▇
(ii) if to the Sellers, to:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Tel No. ▇▇▇-▇▇▇-▇▇▇▇
Fax No. ▇▇▇-▇▇▇-▇▇▇▇
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.
Entire Agreement.
-----------------
This Agreement contains the sole and entire agreement and
understanding of the parties withrespect to the entire subject matter of this
Agreement, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this
Agreement are hereby merged herein.
Assignment.
----------
No party may assign this Agreement, and any attempted or purported assignment or
any delegation of any party's duties or obligations arising under this Agreement
to any third party or entity shall be deemed to be null and void, and shall
constitute a material breach by such party of its duties and obligations under
this Agreement. This Agreement shall inure to the benefit of and be binding upon
any successors of each party by way of merger or consolidation.
34
Waiver and Amendment.
---------------------
No provision of this Agreement may be waived unless in writing signed by all the
parties to this Agreement, and waiver of any one provision of this Agreement
shall not be deemed to be a waiver of any other provision. This Agreement may be
amended only by a written agreement executed by all of the parties to this
Agreement.
Governing Law.
--------------
This Agreement has been made and entered into in the State of California and
shall be construed in accordance with the laws of the State of California
without giving effect to the principles of conflicts of law thereof.
Severability.
------------
Whenever possible each provision of this Agreement shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement shall be or become prohibited or invalid under applicable law,
such provision shall be ineffective to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining
provisions of this Agreement.
Captions.
--------
The various captions of this Agreement are for reference only and shall not be
considered or referred to in resolving questions of interpretation of this
Agreement.
Counterparts.
------------
This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
Costs and Attorneys' Fees.
-------------------------
If any action, suit, arbitration or other proceeding is instituted to remedy,
prevent or obtain relief from a default in the performance by any party to this
Agreement of its obligations under this Agreement, the prevailing party shall
recover all of such party's attorneys' fees incurred in each and every such
action, suit, arbitration or other proceeding, including any and all appeals or
petitions therefrom. As used in this Section, attorneys' fees shall be deemed to
mean the full and actual costs of any legal services actually performed in
connection with the matters involved calculated on the basis of the usual fee
charged by the attorney performing such services and shall not be limited to
"reasonable attorneys' fees" as defined in any statute or rule of court.
35
Rights Cumulative.
------------------
No right granted to the parties under this Agreement on default or breach is
intended to be in full or complete satisfaction of any damages arising out of
such default or breach, and each and every right under this Agreement, or under
any other document or instrument delivered hereunder, or allowed by law or
equity, shall be cumulative and may be exercised from time to time. Judicial
Interpretation. Should any provision of this Agreement require judicial
interpretation, it is agreed that a court interpreting or construing the same
shall not apply a presumption that the terms hereof shall be more strictly
construed against any Person by reason of the rule of construction that a
document is to be construed more strictly against the Person who itself or
through its agent prepared the same, it being agreed that all parties have
participated in the preparation of this Agreement.
Force Majeure.
-------------
If any party to this Agreement is delayed in the performance of any of its
obligations under this Agreement or is prevented from performing any such
obligations due to causes or events beyond its control, including, without
limitation, acts of God, fire, flood, earthquake, strike or other labor problem,
injunction or other legal restraint, present or future law, governmental order,
rule or regulation, then such delay or nonperformance shall be excused and the
time for performance thereof shall be extended to include the period of such
delay or nonperformance.
Seller Representative.
---------------------
Any consent, approval, demand or waiver required of or made by the Sellers
pursuant to this Agreement shall be made by the holders of a majority of the FRE
Shares. The Company shall be entitled to rely, without investigation or inquiry,
upon any consent, approval or waiver of the Sellers set forth in any written
certificate, instrument or other document signed by the Seller Representative as
to any such approval, consent, waiver or notice of the Sellers, and any such
written agreement, certificate or other document shall be binding upon all
Sellers.
IN WITNESS WHEREOF, this Agreement has been made and entered into as of
the date and year first above written.
SITESTAR CORPORATION
a Nevada corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Its: President and CEO
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇.
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇