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EXHIBIT 1.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
BY AND AMONG
WORLD COMMERCE ONLINE, INC.
LAKER PROJECT, INC.
AND
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
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TABLE OF CONTENTS
ARTICLE I..................................................................................1
1.1. THE MERGER...................................................................1
1.2. THE EFFECTIVE TIME OF THE MERGER.............................................1
1.3. EFFECT OF MERGER.............................................................2
1.4. CERTIFICATE AND BY-LAWS OF SURVIVING CORPORATION.............................2
1.5. TAKING OF NECESSARY ACTION...................................................2
ARTICLE II.................................................................................2
2.1. CONVERSION OF SHARES.........................................................2
2.2. EXCHANGE OF STOCK CERTIFICATES REPRESENTING COMPANY COMMON STOCK.............4
2.3. SHARES OF DISSENTING STOCKHOLDERS............................................6
ARTICLE III................................................................................6
3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION; CERTIFICATE AND BY-LAWS.......6
3.2. CORPORATE POWER..............................................................7
3.3. SUBSIDIARY...................................................................7
3.4. CAPITALIZATION...............................................................7
3.5. VALID AND BINDING AGREEMENT..................................................7
3.6. NO BREACH OF STATUTE OR CONTRACT.............................................7
3.7. FINANCIAL INFORMATION........................................................8
3.8. ABSENCE OF UNDISCLOSED LIABILITIES...........................................8
3.9. ABSENCE OF CERTAIN CHANGES...................................................8
3.10. TAXES.......................................................................8
3.11. CONTRACTS; INSURANCE.......................................................10
3.12. LITIGATION.................................................................11
3.13. TITLE TO PROPERTIES; LIENS AND ENCUMBRANCES................................11
3.14. INTELLECTUAL PROPERTY......................................................11
3.15. COMPLIANCE.................................................................11
3.16. COMPLIANCE WITH ENVIRONMENTAL LAWS.........................................12
3.17. BROKERS OR FINDERS.........................................................12
3.18. ACCOUNTS AND NOTES RECEIVABLE..............................................12
3.19. PERMITS AND LICENSES.......................................................12
3.20. BANKING ARRANGEMENTS.......................................................12
3.21. INTEREST IN ASSETS.........................................................13
3.22. EMPLOYEE BENEFIT PLANS.....................................................13
3.23. LABOR DISCUSSIONS..........................................................16
3.24. UNTRUE OR OMITTED FACTS....................................................16
ARTICLE IV................................................................................16
4.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION...............................16
4.2. CERTIFICATE OF INCORPORATION AND BY-LAWS....................................16
4.3. CORPORATE AUTHORITY; BINDING NATURE OF AGREEMENT............................17
4.4. NO BREACH OF STATUTE OR CONTRACT............................................17
4.5. SEC REPORTS AND FINANCIAL STATEMENTS........................................18
4.6. ISSUANCE OF ACQUIROR STOCK..................................................18
4.7. BROKERS OR FINDERS..........................................................18
4.8. LITIGATION..................................................................18
4.9. CONSENTS....................................................................19
4.10. INTELLECTUAL PROPERTY......................................................19
4.11. COMPLIANCE.................................................................19
4.12. VALID OFFERING.............................................................19
ARTICLE V.................................................................................19
5.1. CONFIDENTIALITY.............................................................19
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5.2. PUBLICITY...................................................................20
5.3. ACCOUNTING COOPERATION......................................................20
5.4. FURTHER ASSURANCES..........................................................20
5.5. EMPLOYMENT AGREEMENT WITH STOCKHOLDER.......................................20
5.6. LOCK-UP AGREEMENT...........................................................21
5.7. AMENDMENT TO EXCHANGE AGREEMENT.............................................21
5.8. BRIDGE LOAN.................................................................21
5.9. TAX MATTERS.................................................................21
5.10. CONTINUATION OF INDEMNIFICATION............................................21
ARTICLE VI................................................................................22
6.1. CONDITIONS TO OBLIGATIONS OF ACQUIROR AND MERGER SUB........................22
6.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY................................23
ARTICLE VII...............................................................................24
7.1. PLACE AND DATE OF CLOSING...................................................24
7.2. ITEMS TO BE DELIVERED BY THE COMPANY AND THE STOCKHOLDER....................24
7.3 ITEMS TO BE DELIVERED BY ACQUIROR...........................................25
ARTICLE VIII..............................................................................25
8.1. SURVIVAL....................................................................25
8.2. INDEMNIFICATION BY THE STOCKHOLDER..........................................25
8.3. INDEMNIFICATION BY ACQUIROR.................................................26
8.4. NATURE OF LIABILITY OF THE STOCKHOLDER......................................26
8.5. LIMITATIONS OF LIABILITY....................................................26
8.6. DEFENSE OF CLAIMS...........................................................27
ARTICLE IX................................................................................28
9.1. TERMINATION.................................................................28
9.2. EFFECT OF TERMINATION.......................................................28
ARTICLE X.................................................................................28
10.1. PARTIES IN INTEREST........................................................28
10.2. NOTICES....................................................................28
10.3. AFFILIATES.................................................................29
10.4. STOCKHOLDER................................................................29
ARTICLE XI................................................................................29
11.1. NON-ASSIGNABILITY; BINDING EFFECT..........................................29
11.2. NONSURVIVAL OF REPRESENTATIONS AND WARRANTIES..............................30
11.3. EXHIBITS AND SCHEDULES.....................................................30
11.4. WAIVER.....................................................................30
11.5. INDEPENDENT COVENANTS......................................................30
11.6. SEVERABILITY...............................................................30
11.7. ENTIRE AGREEMENT...........................................................30
11.8. MODIFICATIONS AND AMENDMENTS...............................................30
11.9. TIME OF ESSENCE............................................................30
11.10. GOVERNING LAW.............................................................31
11.11. EXCLUSIVE JURISDICTION; VENUE.............................................31
11.12. WAIVER OF JURY TRIAL......................................................31
11.13. CONSTRUCTION..............................................................31
11.14. SECTION HEADINGS..........................................................31
11.15. COUNTERPARTS..............................................................31
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List of Exhibits and Schedules
Exhibit Description
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Exhibit A Plan of Merger
Exhibit B Certificate of Designation
Exhibit C Financial Statements
Exhibit D Form of Employment Agreement
Exhibit E Amendment to Exchange Agreement
Schedule Description
-------- -----------
Schedule 3.4 Capitalization
Schedule 3.6 No Breach of Statute or Contract
Schedule 3.8 Absence of Undisclosed Liabilities
Schedule 3.9 Absence of Certain Changes
Schedule 3.10 Taxes
Schedule 3.11 Contracts; Insurance
Schedule 3.12 Litigation
Schedule 3.15 Compliance
Schedule 3.17 Brokers or Finders
Schedule 3.18 Accounts and Notes Receivable
Schedule 3.19 Permits and Licenses
Schedule 3.20 Banking Arrangements
Schedule 3.22 Employee Benefit Plans
Schedule 4.4 No Breach of Statute or Contract
Schedule 4.9 Consents
Schedule 5.6 Parties to Lock-Up Agreement
Schedule 5.8 Itemized Expenses for Bridge Loan
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement") is
made and entered into as of August 4, 2000, by and among WORLD COMMERCE ONLINE,
INC., a Delaware company ("Acquiror"), LAKER PROJECT, INC., a Delaware
corporation and wholly-owned subsidiary of Acquiror ("Merger Sub"), and
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware corporation (the "Company").
R E C I T A L S :
WHEREAS, Acquiror, Merger Sub and the Company intend to effect a merger
of Merger Sub with and into the Company (the "Merger") pursuant to this
Agreement and in accordance with the Delaware General Corporation Law ("Delaware
Law"); and
WHEREAS, the Board of Directors of the Company has determined that the
Merger is consistent with and in furtherance of the long term business strategy
of the Company and is fair to, and in the best interest of, the Company and its
stockholders and has approved and adopted the Plan of Merger attached hereto as
Exhibit A, this Agreement and the transactions contemplated thereby, and
recommended approval and adoption of this Agreement by the stockholders of the
Company; and
WHEREAS, it is intended that for federal income tax purposes the Merger
qualify as a tax free reorganization within the meaning of Section 368(a) of the
United States Internal Revenue Code of 1986, as amended (the "Code"), and that
for accounting purposes the Merger will be treated as a purchase.
NOW, THEREFORE, in consideration of the foregoing and the mutual
benefits to be derived from this Agreement and the representations, warranties,
covenants, agreements, conditions and promises contained herein, the parties
hereby agree as follows:
ARTICLE I
MERGER
1.1. The Merger. In accordance with the provisions of, and subject
to the terms and conditions of, this Agreement and Delaware Law, at the
Effective Time (defined below), Merger Sub shall be merged with and into the
Company, and the Company shall continue as the surviving corporation of the
Merger (the "Surviving Corporation"). Merger Sub and the Company are sometimes
herein referred to as the "Constituent Corporations".
1.2. The Effective Time of the Merger. Subject to the provisions of
this Agreement and Delaware Law, a certificate of merger with respect to the
Merger shall be executed, delivered and filed with the Secretary of State of the
State of Delaware by each of the Constituent
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Corporations on the Closing Date (as hereinafter defined). The Merger shall
become effective on the date and time of such filing (the "Effective Time").
1.3. Effect of Merger. At the Effective Time, the separate
existence of Merger Sub shall cease and Merger Sub shall be merged with and into
the Surviving Corporation, and the Surviving Corporation shall possess all of
the rights, privileges, powers and franchises as well of a public as of a
private nature, and be subject to all the restrictions, disabilities and duties
of each of the Constituent Corporations and shall have such other effects as
provided by Delaware Law.
1.4. Certificate and By-Laws of Surviving Corporation. From and
after the Effective Time: (a) the Certificate of Incorporation (the
"Certificate") of Merger Sub shall be the Certificate of the Surviving
Corporation; (b) the by-laws of Merger Sub shall be the by-laws of the Surviving
Corporation, unless and until altered, amended or repealed as provided in the
Certificate or such by-laws; and (c) the directors and officers of Merger Sub
shall be the directors of the Surviving Corporation, unless and until removed,
or until their respective terms of office shall have expired, in accordance with
the Certificate and the by-laws of the Surviving Corporation, as applicable.
1.5. Taking of Necessary Action. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may be
necessary or appropriate in order to effectuate the Merger as expeditiously as
reasonably practicable, in accordance with this Agreement.
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES
2.1. Conversion of Shares.
(a) Effect of Share Conversion. At the Effective Time, each share
of common stock of the Company ("Company Common Stock"), issued and outstanding
immediately prior to the Effective Time other than Dissenting Shares shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into and represent the right to receive such number of validly
issued, fully paid and nonassessable shares of common stock, par value $.001 per
share ("Acquiror Common Stock"), of Acquiror equal to the product of a share of
Acquiror Common Stock multiplied by .07764 (the "Exchange Ratio"). Shares of
Company Common Stock that have not vested and are still subject to repurchase
rights shall, after being converted into shares of Acquiror Common Stock,
continue to be subject to the same vesting provisions and repurchase rights.
(b) Merger Sub Shares. Each share of common stock, par value $.001
per share, of Merger Sub issued and outstanding immediately prior to the
Effective Time shall, at the Effective Time, by virtue of the Merger and without
any action on the part of Acquiror, be converted into and represent the right to
receive one fully paid and nonassessable share of the common stock, par value
$.001 per share, of the Surviving Corporation.
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(c) No Further Rights in Company Common Stock. On and after the
Effective Time, holders of certificates which immediately prior to the Effective
Time represented shares of Company Common Stock (the "Common Stock
Certificates") shall cease to have any rights as stockholders of the Company,
except the right to receive the consideration set forth in this Article II for
each share of Company Common Stock held by them.
(d) Fractional Shares. No fractional shares of Acquiror Common
Stock shall be issued pursuant hereto. In lieu of any such fractional share of
Acquiror Common Stock, Acquiror shall pay to each former stockholder of the
Company who otherwise would be entitled to receive a fractional share of
Acquiror Common Stock an amount in cash determined by multiplying (i) the per
share closing price of Acquiror Common Stock on the domestic over-the-counter
bulletin board on the day before the Closing Date, as reported by the National
Quotation Bureau, Incorporated by (ii) the fractional interest in a share of
Acquiror Common Stock to which such holder would otherwise be entitled.
(e) Stock Options. At the Effective Time, the Company's
obligations with respect to each option to purchase shares of its Common Stock
("Company Option") that is then issued and outstanding under the Company's 1999
Equity Incentive Plan (the "Company Option Plan"), whether vested or unvested,
shall be assumed by Acquiror in accordance with the terms of the Company Option
Plan and the option agreement governing such Company Option Plan immediately
prior to the Effective Time; provided, however, that all rights with respect to
Company Common Stock under such outstanding Company Options shall thereupon be
converted into rights with respect to Acquiror Common Stock. Accordingly, from
and after the Effective Time: (i) each Company Option assumed by Acquiror may be
exercised solely for shares of Acquiror Common Stock; (ii) the number of shares
of Acquiror Common Stock subject to each such assumed Company Option shall be
equal to the product of the number of shares of Company Common Stock that were
subject to such Company Option immediately prior to the Effective Time
multiplied by the Exchange Ratio, rounded up or down, accordingly, to the
nearest whole number of shares of Acquiror Common Stock; (iii) the per share
exercise price for the shares of Acquiror Common Stock issuable upon the
exercise of each such assumed Company Option shall be determined by dividing the
exercise price per share of Company Common Stock subject to such Company Option,
as in effect immediately prior to the Effective time, by the Exchange Ratio, and
rounding the resulting exercise price up or down, accordingly, to the nearest
whole cent; and (iv) each such assumed Company Option shall vest in accordance
with the terms of the Company Option Plan.
(f) Preferred Stock. At the Effective Time, each share of Series A
preferred stock of the Company ("Company Preferred Stock"), issued and
outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into and represent the right to receive such number of validly issued, fully
paid and nonassessable shares of Series C preferred stock, par value $.001 per
share ("Acquiror Preferred Stock"), of Acquiror equal to the product of a share
of Acquiror Preferred Stock multiplied by the Exchange Ratio and divided by ten,
rounded up or down, accordingly, to the nearest whole number of shares of
Acquiror Preferred Stock. The rights, privileges,
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obligations and restrictions of the Acquiror Preferred Stock are set forth in
the Certificate of Designation attached hereto as Exhibit B.
(g) No Further Rights in Company Preferred Stock. On and after
the Effective Time, holders of certificates which immediately prior to the
Effective Time represented shares of Company Preferred Stock (the "Preferred
Stock Certificates") shall cease to have any rights as stockholders of the
Company, except the right to receive the consideration set forth in this Article
II for each share of Company Preferred Stock held by them.
2.2. Exchange of Stock Certificates Representing Company Common Stock.
(a) Exchange Agent. Immediately following the Effective Time,
Acquiror shall deliver, in trust, to an exchange agent selected by Acquiror,
which shall be Acquiror's transfer agent or such other party reasonably
satisfactory to the Company (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock and Company Preferred Stock,
certificates representing an aggregate number of shares of Acquiror Common Stock
and Acquiror Preferred Stock and cash in lieu of fractional shares of Acquiror
Preferred Stock (such cash and certificates for shares of Acquiror Common Stock
and Acquiror Preferred Stock, together with any dividends or distributions with
respect thereto, being hereinafter referred to as the "Exchange Fund") to be
paid pursuant to this Section 2.2 in exchange for shares of Company Common Stock
and Company Preferred Stock, as applicable.
(b) Exchange Procedures. As soon as practicable after the
Effective Time, Acquiror shall cause the Exchange Agent to mail to each holder
of record of Common Stock Certificate(s) and/or Preferred Stock Certificate(s)
(collectively, the Stock Certificates"): (i) a letter of transmittal which shall
specify that delivery of such Stock Certificates shall be deemed to have
occurred, and risk of loss and title to the Stock Certificates shall pass, only
upon delivery of the Stock Certificates to the Exchange Agent and shall be in
such form and have such other provisions as Acquiror may reasonably specify; and
(ii) instructions for use in effecting the surrender of the Common Stock
Certificates and Preferred Stock Certificates in exchange for certificates
representing shares of Acquiror Common Stock or Acquiror Preferred Stock, as
applicable, and cash in lieu of fractional shares. Upon surrender of a Stock
Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Stock Certificate shall be entitled to receive in
exchange therefor (x) a certificate representing that number of whole shares of
Acquiror Common Stock or Acquiror Preferred Stock, as applicable, (y) a check
representing the amount of cash in lieu of fractional shares, if any, which such
holder has the right to receive in respect of the Stock Certificate surrendered
pursuant to the provisions of this Article II, after giving effect to any
required withholding tax and (z) any dividends or distributions to which such
holder is entitled pursuant to Section 2.2(c) (subsections (x), (y), and (z)
hereinafter referred to as the "Merger Consideration"), and the Stock
Certificate so surrendered shall forthwith be canceled. No interest will be paid
or accrued on the cash in lieu of fractional shares, if any, and unpaid
dividends and distributions, if any, payable to holders of Stock Certificates.
If any certificate for Acquiror Common Stock or Acquiror Preferred Stock is to
be issued to a person other than a person in whose name the Stock Certificate
representing the
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shares of Company Common Stock or Company Preferred Stock, as applicable,
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay to the Exchange
Agent any transfer or other taxes required by reason of issuance of certificates
for such Acquiror Common Stock to a person other than the registered holder of
the Stock Certificate surrendered, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
(c) Distributions with Respect to Unexchanged Shares.
Notwithstanding any other provision of this Agreement, no dividends on Acquiror
Common Stock or Acquiror Preferred Stock shall be paid with respect to any
shares of Company Common Stock or Company Preferred Stock, as applicable,
represented by a Stock Certificate until such Stock Certificate is surrendered
for exchange as provided herein. Subject to the effect of applicable laws,
following surrender of any such Stock Certificate, there shall be paid to the
holder of the certificates representing whole shares of Acquiror Common Stock or
Acquiror Preferred Stock issued in exchange therefor, without interest: (i) at
the time of such surrender, the amount of dividends or other distributions with
a record date after the Effective Time theretofore payable with respect to such
whole shares of Acquiror Common Stock or Acquiror Preferred Stock, as
applicable, and not paid, less the amount of any withholding taxes which may be
required thereon; and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of Acquiror Common Stock or Acquiror Preferred
Stock, as applicable, less the amount of any withholding taxes which may be
required thereon.
(d) Closing of the Company's Stock Transfer Books. At or after the
Effective Time, there shall be no transfers on the stock transfer books of the
Company of the shares of Company Common Stock or Company Preferred Stock which
were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Stock Certificates are presented to the Surviving Corporation,
they shall be canceled and exchanged for the Merger Consideration pursuant to
this Article II.
(e) Unclaimed Exchange Funds. Any portion of the Exchange Fund
(including the proceeds of any investments thereof and any certificates
representing shares of Acquiror Common Stock or Acquiror Preferred Stock) that
remains unclaimed by the former stockholders of the Company one (1) year after
the Effective Time shall be delivered to the Acquiror. Any former stockholders
of the Company who have not theretofore complied with this Article II shall
thereafter look only to the Acquiror for the Merger Consideration deliverable in
respect of each share of Company Common Stock or Company Preferred Stock such
stockholder holds, as determined pursuant to this Agreement, without any
interest thereon.
(f) Effect of Escheat Laws. Notwithstanding the foregoing, neither
the Exchange Agent nor any party hereto shall be liable to a former holder of
shares of Company Common Stock for any Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar laws.
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(g) Lost Stock Certificates. In the event that any Stock
Certificate shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such Stock Certificate to be lost,
stolen or destroyed the shares of Acquiror Common Stock and cash in lieu of
fractional shares, and unpaid dividends and distributions on shares of Acquiror
Common Stock or Acquiror Preferred Stock, as applicable, as provided in this
Section 2.2 shall be deliverable in respect thereof pursuant to this Agreement.
2.3. Shares of Dissenting Stockholders. Notwithstanding anything in
this Agreement to the contrary, any shares of Company Common Stock or Company
Preferred Stock that are issued and outstanding as of the Effective Time and
that are held by a stockholder who has properly exercised his appraisal rights
(the "Dissenting Shares") under Delaware Law shall not be converted into the
right to receive shares of Acquiror Common Stock or Acquiror Preferred Stock, as
applicable, unless and until the holder shall have failed to perfect, or shall
have effectively withdrawn or lost, his right to dissent from the Merger under
Delaware Law and to receive such consideration as may be determined to be due
with respect to such Dissenting Shares pursuant to and subject to the
requirements of Delaware Law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company and the Stockholder, jointly and severally, make the
following representations and warranties to Acquiror, each of which shall be
deemed material (and Acquiror, in executing, delivering and consummating this
Agreement, has relied and will rely upon the correctness and completeness of
each of such representations and warranties):
3.1. Organization, Good Standing and Qualification; Certificate and
By-Laws. The Company is a corporation duly organized and validly existing under
the laws of the State of Delaware and is in good standing under such laws and
has requisite corporate power and authority to own properties owned by it and to
conduct business as being conducted by it, except where the failure to be
existing and in good standing or have such power would not have a Company
Material Adverse Effect (as defined herein). The Company is qualified to do
business as a foreign corporation in all jurisdictions in which its ownership of
property or activities might require its qualification to do business as a
foreign corporation, except where the failure to be so qualified would not have
a Company Material Adverse Effect. The Company has made available to Acquiror or
representatives of Acquiror true, correct and complete copies of its Certificate
and by-laws, each as amended to date. As used in this Agreement, "Company
Material Adverse Effect" means any material adverse change in, or material
adverse effect on, the business, financial condition or operations of the
Company, taken as a whole; provided, however, that, the effects of changes that
are generally applicable to: (a) the industries and markets in which the Company
operates; or (b) the United States economy shall be excluded from the
determination of Company Material Adverse Effect; and provided, further, that
any adverse effect on the Company resulting from the execution of this Agreement
and the announcement of this Agreement and the transactions contemplated hereby
shall also be excluded from the determination of Company Material Adverse
Effect.
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3.2. Corporate Power. The Company has all requisite corporate power
and authority to execute and deliver this Agreement, to carry out and perform
its obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance by the Company of this Agreement
and the consummation of the transactions contemplated herein have been duly and
validly authorized by the Board of Directors of the Company. Except for
obtaining the approval of its stockholders, no further corporate authorization
is necessary on the part of the Company to consummate the transactions
contemplated hereby.
3.3. Subsidiary. The Company has no subsidiaries and does not
directly or indirectly own of record or beneficially any capital stock or equity
interest or investment in any corporation, association or business entity.
3.4. Capitalization. The authorized capital stock of the Company
consists of 35,000,000 shares of common stock and 12,000,000 shares of preferred
stock. Schedule 3.4 sets forth all of the holders, and shares held, as of the
date of this Agreement, of the Company's common stock issued and outstanding and
preferred stock issued or outstanding. All the issued and outstanding shares of
common stock and preferred stock have been duly authorized and validly issued,
are fully paid and nonassessable, were not issued in violation of or subject to
any preemptive rights or other rights to subscribe for or purchase securities of
the Company. Except as set forth in Schedule 3.4, as of the date hereof, the
Company does not have outstanding any options to purchase, or any preemptive
rights or other rights to subscribe for or to purchase, any securities or
obligations convertible into, or any contracts or commitments to issue or sell,
shares of its capital stock or any such options, rights, convertible securities
or obligations. Except as set forth in Schedule 3.4, there are no existing
voting trusts or similar agreements to which the Company is a party with respect
to the voting of the capital stock of the Company. The Company holds no shares
of its capital stock in its treasury. All dividends and distributions of any
nature with respect to any capital stock of the Company, declared or set aside
prior to the Closing, have been paid.
3.5. Valid and Binding Agreement. Assuming this Agreement
constitutes the valid and binding obligation of the other parties hereto and
subject to the adoption of this Agreement by the Company's stockholders, this
Agreement, when executed and delivered by the Company, constitutes or will
constitute the legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject to: (a) applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally; and
(b) equitable defenses and to the discretion of the court before which any
proceedings seeking the remedy of specific performance and injunctive and other
forms of equitable relief may be brought.
3.6. No Breach of Statute or Contract. Except for: (a) the filing
of the Certificate of Merger; and (b) matters specifically described in this
Agreement or on Schedule 3.6, neither the execution, delivery and performance of
this Agreement by the Company nor compliance with the terms and provisions of
this Agreement on the part of the Company will: (i) violate any provision of the
Company's Certificate, by-laws or any other organizational documents of the
Company, as
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amended; (ii) require of the Company the issuance of any authorization, license,
consent or approval of or require notice to or filing with, any federal or state
governmental agency; or (iii) conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time or
both a default under any mortgage, indenture, agreement, permit, deed of trust,
lease, franchise, license or instrument to which the Company is a party or by
which it or any of its properties is bound, or any judgment, decree, order, rule
or regulation or other restriction of any court or any regulatory body,
administrative agency or other governmental body applicable to the Company or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company pursuant to any such term, except
in the case of clauses (ii) or (iii) for such violations, breaches or defaults
of which, or authorizations, licenses, consents, approvals, notices or filings
the failure of which to obtain or make, (x) would not have a Company Material
Adverse Effect or would not materially adversely affect the ability of the
Company to consummate the transactions contemplated by this Agreement, or (y)
would become applicable as a result of the business or activities in which
Acquiror or Merger Sub is or proposes to be engaged or as a result of any acts
or omissions by, or the status of any facts pertaining to, Acquiror or Merger
Sub.
3.7. Financial Information. The Company has prepared true and
complete copies of its unaudited consolidated and consolidating financial
statements for the period from inception to December 31, 1999 and for the
quarters ended March 31, and June 30, 2000 (the "Financial Statements," a copy
of which is attached as Exhibit C). Except as noted therein, the Financial
Statements fairly present, in all material respects, the financial position of
the Company as of the dates thereof and the results of its operations and cash
flows for the periods then ended subject, to normal year end adjustments.
3.8. Absence of Undisclosed Liabilities. Schedule 3.8 sets forth
all debts, liabilities or obligations, contingent or absolute ("Liabilities"),
of the Company, and the payment arrangements with each of the creditors for such
Liabilities.
3.9. Absence of Certain Changes. Except as disclosed on Schedule
3.9 in the Financial Statements, since March 31, 2000, the Company has not: (a)
suffered any change constituting a Company Material Adverse Effect; (b) amended
its Certificate or by-laws; (c) split, combined or reclassified Company Common
Stock; (d) declared or set aside or paid any dividend or other distribution with
respect to Company Common Stock; or (e) materially changed the Company's
accounting principles, practices or methods, except as required by GAAP or
applicable law.
3.10. Taxes. Except as set forth on Schedule 3.10:
(a) The Company has filed all Tax Returns that it was required to
file. All such Tax Returns were correct and complete in all respects. All Taxes
owed by the Company (whether or not shown on any Tax Return and whether or not
any Tax Return was required) have been paid. The Company has withheld and paid
all Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor, stockholder or
other third party. There are no liens on any of the assets of the Company
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that arose in connection with any failure (or alleged failure) to pay any Tax,
except for liens for Taxes not yet due.
(b) The Company is not a party to any Tax allocation or sharing
agreement. The Company (i) has not been a member of an Affiliated Group filing a
consolidated Federal income Tax Return and (ii) has no liability for the Taxes
of any Person under Treasury regulation section 1.1502-6 (or any similar
provision of state, local or foreign law), as a transferee or successor, by
contract or otherwise.
(c) The Company shall not be required to include in a taxable
period ending after the Closing Date taxable income attributable to income that
accrued in a prior taxable period but was not recognized in any prior taxable
period as a result of the installment method of accounting, the completed
contract method of accounting, the long-term contract method of accounting, the
cash method of accounting or Section 481 of the Code or any comparable provision
of state, local or foreign tax law. No issue relating to Taxes has been raised
in writing by a taxing authority during any pending audit or examination, and no
issue relating to Taxes was raised in writing by a taxing authority in any
completed audit or examination, that reasonably can be expected to recur in a
later taxable period.
(d) Except for limitations imposed by Sections 382 through 384 of
the Code and analogous provisions of state tax law, the transfer of the Company
pursuant to the terms of this Agreement will not result in any Tax liability to
the Company or result in a reduction of the amount of any net operating loss,
net operating loss carryover, net capital loss, net capital loss carryover, Tax
credit, Tax credit carryover, excess charitable contribution or basis of
property that otherwise would be available to the Company by reason or as a
result of deferred intercompany transactions, excess loss accounts, or
otherwise.
(e) The Company has not filed a consent under Section 341(f) of
the Code concerning collapsible corporations. The Company has not made any
payments, is not obligated to make any payments and is not a party to any
agreement that under certain circumstances could obligate it to make any
payments that will not be deductible under section 280G of the Code. The Company
has not been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(ii) of the Code.
(f) The Company has never been an S corporation (within the
meaning of Section 1361(a)(1) of the Code). All material elections with respect
to Taxes affecting the Company are disclosed or attached to a Tax Return of the
Company.
(g) As used in this Agreement, "Affiliated Group" means any
affiliated group within the meaning of Section 1504(a) of the Code or any
similar group defined under a similar provision of state, local or foreign law;
"Code" means the Internal Revenue Code of 1986, as amended; "Company" means the
Company and/or any corporation that at any time has been a subsidiary of the
Company; "Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization or a
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governmental entity (or any department, agency or political subdivision
thereof); "Tax" means any Federal, state, local or foreign income, gross
receipts, license, payroll, employment, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including Taxes under Section 59A of
the Code), customs duties, capital stock, franchise, profits, withholding,
social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on
minimum, estimated or other Tax of any kind whatsoever, including any interest,
penalty or addition thereto, whether disputed or not, and "Taxes" means any or
all of the foregoing collectively; and "Tax Return" means any return,
declaration, report, claim for refund or information return or statement
relating to Taxes, including any schedule or attachment thereto and including
any amendment thereof.
3.11. Contracts; Insurance. Except as set forth in Schedule 3.11, the
Company has no other currently existing contract, obligation, agreement, plan,
arrangement, commitment or the like of any material nature regarding the
following:
(a) Employment, bonus or consulting agreements, pension, profit
sharing, deferred compensation, stock bonus, retirement, stock option, stock
purchase, phantom stock or similar plans, including agreements evidencing rights
to purchase securities of the Company, and agreements among stockholders and the
Company;
(b) Loan or other agreements, notes, indenture, or instruments
relating to or evidencing indebtedness for borrowed money, or mortgaging,
pledging or granting or creating a lien or security interest or other
encumbrance on any of the Company's property or any agreement or instrument
evidencing any guaranty by the Company of payment or performance by any other
person;
(c) Agreements with dealers, sales representatives, brokers or
other distributors, jobbers, advertisers or sales agencies;
(d) Agreements with any labor union or collective bargaining
organization or other labor agreements;
(e) Contracts or series of contracts with the same person for the
furnishing or purchase of machinery, equipment, goods or services, including
without limitation agreements with processors and subcontractors;
(f) Joint venture contracts or arrangements or other agreements
involving a sharing of profits or expenses to which the Company is a party;
(g) Agreements limiting the freedom of the Company to compete in
any line of business or in any geographic area or with any person;
(h) Agreements providing for disposition of the business, assets
or shares of the Company, agreements of merger or consolidation to which the
Company is a party or letters of intent with respect to the foregoing;
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(i) Letters of intent or agreements with respect to the Merger of
the business, assets or shares of any other business;
(j) Insurance policies; and
(k) Leases for real or personal property.
Each of the material contracts, agreements and understandings set forth in
Schedule 3.11 is in full force and effect, except where the failure to be in
full force and effect would not have a Company Material Adverse Effect. Except
as set forth on Schedule 3.15, to the knowledge of the Company, there are no
existing defaults by the Company thereunder, which default would result in a
Company Material Adverse Effect.
3.12. Litigation. Except as set forth on Schedule 3.12, there is
neither pending nor, to the Company's or Stockholder's knowledge, threatened any
legal or governmental action, suit, investigation, proceeding or claim, to which
the Company is or may be named as a party by or before any court, governmental
or regulatory authority or by any third party that is reasonably likely to have
a Company Material Adverse Effect. The Company is not a party or subject to the
provisions of any material injunction, judgment, decree, or order of any court,
regulatory body, administrative agency or other governmental body.
3.13. Title to Properties; Liens and Encumbrances. The Company has good
and valid title in all property and assets recorded on the Financial Statements,
free from all mortgages, pledges, liens, security interests, conditional sale
agreements, encumbrances or charges, except: (i) as would not have a Company
Material Adverse Effect; (ii) as shown on the Financial Statements; or (iii)
tax, materialmen's or like liens for obligations not yet due or payable or being
contested in good faith by appropriate proceedings. The Company owns or has
adequate rights to use all such properties or assets as are necessary to its
operations as now conducted.
3.14. Intellectual Property. Except for such claims, which individually
or in the aggregate, would not have a Company Material Adverse Effect, there are
no pending or threatened claims of which the Company has been given written
notice by any person against their use of any material trademarks, trade names,
service marks, service names, ▇▇▇▇ registrations, logos, assumed names and
copyright registrations, patents and all applications therefor which are owned
by the Company and used in its operations as currently conducted (the "Company
Intellectual Property"). To the Company's knowledge, the Company has such
ownership of or such rights by license, lease or other agreement to the Company
Intellectual Property as are necessary to permit it to conduct its operations as
currently conducted, except where the failure to have such rights would not have
a Company Material Adverse Effect.
3.15. Compliance. The Company is not in violation of any term of its
Certificate or by-laws, as amended. Except as set forth on Schedule 3.15, to the
best of the Company's and Stockholder's knowledge, the Company is not in
violation of or default under any provision of: (a) any mortgage, indenture,
contract, agreement, license, deed of trust, lease, franchise, permit
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or other instrument to which it is a party or by which it or any of its
properties are bound and there does not exist any state of facts which
constitutes an event of default or which, with notice or lapse of time or both,
would constitute an event of default; or (b) any judgment, decree, order,
statute, rule or regulation to which the Company is subject to, but excluding
from the foregoing clauses (a) and (b), defaults or violations which would not
have a Company Material Adverse Effect or which become applicable as a result of
the business or activities in which Acquiror or Merger Sub is or proposes to be
engaged or as a result of any acts or omissions by, or the status of any facts
pertaining to, Acquiror or Merger Sub.
3.16. Compliance with Environmental Laws. To the best of the Company
and Stockholder's knowledge, the Company is in material compliance with all
applicable statutes, laws and regulations relating to the protection of the
environment or occupational health and safety except for non-compliance which
would not, individually or in the aggregate, have a Company Material Adverse
Effect. The Company has not received any written notice of, or to the knowledge
of the Company and the Stockholder, is the subject of, any actions, claims,
investigations, demands or notices alleging liability under or non-compliance
with any laws relating to the protection of the environment or occupational
health and safety which would, individually or in the aggregate, have a Company
Material Adverse Effect.
3.17. Brokers or Finders. The Company represents, as to itself and
its Affiliates, that, except as set forth on Schedule 3.17, no agent, broker,
investment banker, financial advisor or other firm or person is or will be
entitled to any brokers' or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.
3.18. Accounts and Notes Receivable. Schedule 3.18 sets forth a true
and correct copy of all accounts and notes receivable of the Company as of the
date of this Agreement. Except as set forth on Schedule 3.18, all of the
accounts and notes receivable were or will have been created in the ordinary
course of the Company's business, from the sale of services or goods, and
neither the Company nor the Stockholder knows of any valid defense or right of
set-off to the rights of the Company to collect such accounts receivable in the
full amounts shown.
3.19. Permits and Licenses. Schedule 3.19 sets forth all permits,
licenses, orders, franchises and approvals from all federal, state, local and
foreign governmental regulatory bodies held by the Company. The Company has all
permits, licenses, orders, franchises and approvals of all federal, state, local
and foreign governmental or regulatory bodies, whose failure to be held would
have a Company Material Adverse Effect and such permits, licenses, orders,
franchises and approvals are in full force and effect, and no suspension or
cancellation of any of such other permits, licenses, etc. is pending or to the
knowledge of the Company or the Stockholder threatened; and the Company is in
compliance in all material respects with all requirements, standards and
procedures of the federal, state, local and foreign governmental bodies which
have issued such permits, licenses, orders, franchises and approvals.
3.20. Banking Arrangements. Schedule 3.20 sets forth the name of each
bank in or with which the Company has an account, credit line or safety deposit
box, and a brief description of each such account, credit line or safety deposit
box, including the names of all persons currently
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authorized to draw thereon or having access thereto; and the names of all
persons, if any, now holding powers of attorney from the Company and a summary
statement of the terms thereof.
3.21. Interest in Assets. Neither the Stockholder nor any Affiliate(s)
of the Stockholder owns any property or rights, tangible or intangible, used in
or related, directly or indirectly, to the business of the Company.
3.22. Employee Benefit Plans. Other than as set forth on Schedule 3.22
there are no: (a) "employee pension benefit plans" (within the meaning of
Section 3(2)(A) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) (collectively, the "Pension Plans") maintained by the
Company; and (b) the Company does not have any policies or plans, whether
written or not, that provide for vacation benefits, severance benefits, leave
rights or other benefits to its employees. There are no outstanding liabilities
of the Company to the Pension Plans, and the neither the Company nor the
Stockholder knows of any potential liabilities in connection therewith. There
are no actions, suits or claims, other than for benefits in the normal course,
pending or to the knowledge of the Company or the Stockholder threatened, and
neither the Company nor the Stockholder has any knowledge of any facts which
could give rise to any actions, suits or claims, against any of the Pension
Plans, or against the Company which might subject the Company to any material
liability.
(a) Welfare Plans; Claims. All of the "employee welfare benefit
plans" (within the meaning of Section 3(1) of ERISA) maintained by the Company
or to which it makes employer contributions with respect to its employees
(collectively, the "Welfare Plans") are listed in Schedule 3.22. There are no
actions, suits or claims (other than for benefits in the ordinary course),
pending or to the knowledge of the Company or the Stockholder threatened, and
neither the Company nor the Stockholder has any knowledge of any facts which
could give rise to any actions, suits or claims against any of the Welfare
Plans, or against the Company which might subject the Company to any material
liability.
(b) Pension Plans and Welfare Plans; Compliance. The Company is
in compliance in all material respects with all reporting and disclosure
requirements applicable to it under the Code and ERISA, and the Department of
Labor and Internal Revenue Service regulations promulgated thereunder, with
respect to all of the Pension Plans and Welfare Plans. No civil or criminal
action brought pursuant to the provisions of Title I, Subtitle B, Part 5 of
ERISA or any other federal or state law is pending or threatened against any
fiduciary of the Pension Plans or the Welfare Plans. No Pension Plans or Welfare
Plans, or any fiduciary thereof, has been, or is currently, the direct or
indirect subject of an audit, investigation or examination by any governmental
or quasi-governmental agency.
(c) Pension Plans and Welfare Plans; Prohibited Transactions. To
the knowledge of the Company and the Stockholder, none of the Pension Plans and
Welfare Plans, or any of their related trusts, or the Company or any trustee,
administrator or other "party in interest" or "disqualified person" (within the
meaning of Section 3(14) of ERISA or Section 4975(e)(2) of the Code,
respectively) with respect to the Pension Plans and Welfare Plans, has engaged
in any non-exempt "prohibited transaction" (within the meaning of Section 406 of
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ERISA or Section 4975(c) of the Code, respectively) with respect to the
participation of the Company therein, which could subject any of the Pension
Plans or Welfare Plans or related trusts, or any trustee, administrator or other
fiduciary of any such Pension Plan or Welfare Plan, or the Company or Acquiror,
or any other party dealing with the Pension Plans or Welfare Plans, to the
penalties or excise tax imposed on prohibited transactions by Section 502 of
ERISA or Section 4975 of the Code which could have a Company Material Adverse
Effect.
(d) Compliance with Rules, Regulations, etc. To the knowledge of
the Company and the Stockholder, (a) all of the Pension Plans and Welfare Plans
maintained by the Company comply currently, and have complied in the past, both
as to form and operation, in all material respects, with their terms and with
the provisions of ERISA and the Code, and all other applicable laws, rules and
regulations, (b) all necessary governmental approvals and determinations for the
Pension Plans have been obtained, including where applicable, a favorable
determination (covering all changes or amendments required by TEFRA, DEFRA and
REA) as to the qualification of such plans under Sections 401(a), 409 and 501(a)
of the Code, and (c) each of the Pension Plans maintained by the Company has
either obtained a favorable determination (covering all changes or amendments
required by TRA `86 and subsequent pension legislation, regulations or rulings)
from the Internal Revenue Service as to its qualification under Sections 401(a)
and 501(a) of the Code or is within the remedial amendment period (as provided
in Section 401(b) of the Code) for making any required changes or amendments,
and nothing has occurred since the date of each such determination or
recognition letter that would adversely affect such qualification. To the
knowledge of the Company and the Stockholder, all amounts that are currently
owing to plan participants, or contributions required to be made to the Pension
Plans and Welfare Plans maintained by the Company have been paid or contributed
with respect to all periods prior to the Closing Date.
(e) COBRA. Except as set forth in Schedule 3.22, the Company and
all Commonly Controlled Entities (as hereinafter defined) have complied with the
continuation coverage requirements of group health plans provided in Section
4980B of the Code, Sections 601 et. seq. of ERISA, the Family and Medical Leave
Act of 1994, and the regulations promulgated thereunder, and (ii) there are no
individual claims by any employee of the Company for any illness or accident
which is expected to exceed $10,000 in health related costs to such employee or
employer within the twelve (12) month period following the Closing. A "Commonly
Controlled Entity" is any entity, whether or not incorporated, which is deemed
to be under common control (as defined in Section 414 of the Code or 4001(b) of
ERISA) with the Company.
(f) Profit Sharing Plans. Except as otherwise set forth in
Schedule 3.22 hereto, all discretionary, employer contributions that have been
declared by the Company have been contributed to the Company Employees' (401(k))
Profit Sharing Plan (the "Plan"), and all employer matching contributions for
employee 401(k) contributions made to the Plan prior to Closing, have been made
and contributed to the Plan. The Plan has been tested for compliance with, and
has satisfied the requirements of, Section 401(k)(3) of the Code for each plan
year ending prior to the Closing Date. The Plan permits, or prior to Closing
shall be amended to
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permit, employees of the Company to roll or directly transfer their vested
account balances to a qualified Employee Pension Plan at no cost to Acquiror.
(g) Miscellaneous Benefit Plan Matters. At no time during the
five (5) consecutive year period immediately preceding the first day of the year
in which the Closing Date occurs has the Company or any Commonly Controlled
Entity participated in or contributed to any multiemployer plan defined in
Section 4001(a)(3) of ERISA, or Section 414(f) of the Code, nor during such
period has the Company or any Commonly Controlled Entity had an obligation to
participate in or contribute to any such multiemployer plan. No agreement
subject to Section 4204 of ERISA has been entered into in connection with the
transactions contemplated in this Agreement other than as set forth in Schedule
3.22. None of the employee welfare benefit plans (as defined in Section 3.22.(a)
above) provides for or promises retiree medical, disability or life insurance
benefits to any current or former employee, officer or director of the Company.
(h) Pension Plans. With respect to any defined benefit plan
subject to Title IV of ERISA and maintained by the Company or a Commonly
Controlled Entity, neither such plan, the Company, nor any Commonly Controlled
Entity, has been or is expected to incur or would incur termination liability to
the Pension Benefit Guaranty Corporation (the "PBGC") if any defined benefit
plan were terminated on the Closing Date and the current present value of all
projected benefit liabilities under each defined benefit plan subject to Title
IV of ERISA would not, as of the Closing Date, exceed the then present value of
the assets of such defined benefit plan. No defined benefit plan or defined
contribution plan subject to Section 412 of the Code maintained by the Company
or a Common Controlled Entity has suffered any accumulated funding deficiency
within the meaning of Section 302 of ERISA and Section 412 of the Code. Neither
the Company nor any Commonly Controlled Entity has any outstanding liability
under Section 4971 of the Code. As of the Closing Date, all required premium
payments for any defined benefit plan subject to Title IV of ERISA have been
made, when due, to the PBGC, and all required premium payments for any defined
benefit plans for play years commencing in the plan year which would include the
Closing Date have been made to the PBGC. No event or condition exists with
respect to any defined benefit plan which could be deemed a "reportable
condition" as defined in Section 4043 of ERISA, with respect to which the 30-day
notice requirement has not been waived and which could result in a liability to
Acquiror, and no condition exists which would subject Acquiror to a fine under
Section 4071 of ERISA. There is no lien upon any property of the Company or any
Commonly Controlled Entity outstanding pursuant to Section 4068 of the PBGC.
There is no lien upon any property of the Company or any Common Controlled
Entity outstanding pursuant to Section 412(n) of the Code in favor of any
defined benefit plan. No assets of the Company or any Commonly Controlled Entity
have been provided as security for any defined benefit plan pursuant to Section
401(a)(29) of the Code.
(i) Excess Parachute Payments. Except as set forth in Schedule
3.22, no payment required to be made to any employee associated with the Company
as a result of the transactions contemplated hereby under any contract or
otherwise will, if made, constitute an "excess parachute payment" within the
meaning of Section 280G of the Code.
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3.23. Labor Discussions. The Company is not, and nor has it ever been,
a party to any agreement, collective bargaining or otherwise, with any party
regarding the rates of pay or working conditions of any of the Company's
employees, nor obligated under any agreement to recognize or bargain with any
labor organization or union, nor involved in any labor discussions with any unit
or group seeking to become the bargaining unit for any of its employees.
3.24. Untrue or Omitted Facts. No representation, warranty or statement
by the Company or the Stockholder in this Agreement contains any untrue
statement of a material fact, or omits or will omit to state a fact necessary in
order to make such representations, warranties or statements not materially
misleading. Without limitation of the foregoing, there is no fact known to the
Company or the Stockholder that has had, or which may be reasonably expected to
have, a Company Material Adverse Effect that has not been disclosed in writing
to Acquiror.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND MERGER SUB
Acquiror and Merger Sub hereby represent and warrant to, and covenant
with, the Company, as follows:
4.1. Organization, Good Standing and Qualification. Each of Acquiror
and Merger Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so organized,
existing and in good standing or to have such power and authority would not have
a Acquiror Material Adverse Effect (as defined herein). Acquiror and each of its
Subsidiaries is duly qualified or licensed to do business and in good standing
in each jurisdiction in which the property owned, leased or operated by it or
the nature of the business conducted by it makes such qualification or licensing
necessary, except where the failure to be so duly qualified or licensed and in
good standing would not have a Acquiror Material Adverse Effect. As used in this
Agreement, "Acquiror Material Adverse Effect" means any material adverse change
in, or material adverse effect on, the business, financial, condition or
operations of Acquiror and its Subsidiaries, taken as a whole; provided,
however, that the effects of changes that are generally applicable to: (a) the
industries or markets in which Acquiror and its Subsidiaries operate; (b) the
United States economy; or (c) the United States Securities markets, shall be
excluded from the determination of Acquiror Material Adverse Effect; and
provided, further, that any adverse effect on Acquiror and its Subsidiaries
resulting from the execution of this Agreement and the announcement of this
Agreement and the transactions contemplated hereby shall also be excluded from
the determination of Acquiror Material Adverse Effect.
4.2. Certificate of Incorporation and By-Laws. Acquiror has delivered
to the Company accurate and complete copies of its Certificate and by-laws,
including all amendments thereto. Except for such violations, which individually
or in the aggregate, would not have an Acquiror Material Adverse Effect, there
has not been any violation of any provisions of
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Acquiror's Certificate or its by-laws, and no action has been taken that is
inconsistent in any material respect with any resolution adopted by the
stockholders, the Board of Directors or any committee of the Board of Directors
of Acquiror. Merger Sub has delivered to the Company accurate and complete
copies of its Certificate and by-laws, including all amendments thereto. There
has not been any violation of any of the provisions of Merger Sub's Certificate
or by-laws, and no action has been taken that is inconsistent in any material
respect with any resolution adopted by the stockholders, the Board of Directors
or any committee of the Board of Directors of Merger Sub.
4.3. Corporate Authority; Binding Nature of Agreement. Acquiror and
Merger Sub each has all requisite corporate power and authority to execute and
deliver this Agreement, to carry out and perform its obligations hereunder and
to consummate the transactions contemplated hereby. The execution, delivery and
performance by Acquiror and Merger Sub of this Agreement and the consummation of
the transactions contemplated herein have been duly and validly authorized by
their respective Board of Directors. No further corporate authorization is
necessary on the part of Acquiror or Merger Sub to consummate the transactions
contemplated hereby. Assuming this Agreement constitutes the valid and binding
obligation of the other parties hereto, this Agreement, when executed and
delivered by Acquiror and Merger Sub, constitutes or will constitute the legal,
valid and binding obligation of Acquiror and Merger Sub, enforceable against
Acquiror and Merger Sub in accordance with its terms, subject to: (a) applicable
bankruptcy, insolvency, reorganization and moratorium laws and other laws of
general application affecting enforcement of creditors' rights generally; and
(b) equitable defenses and to the discretion of the court before which any
proceedings seeking the remedy of specific performance and injunctive and other
forms of equitable relief may be brought.
4.4. No Breach of Statute or Contract. Except for: (a) as set forth in
Schedule 4.4; (b) the filing of the Certificate of Merger; (c) applicable
requirements under corporation or "blue sky" laws of various states; and (d)
matters specifically described in this Agreement, neither the execution,
delivery and performance of this Agreement by Acquiror and Merger Sub, nor
compliance with the terms and provisions of this Agreement on the part of
Acquiror and Merger Sub will: (i) violate any provision of Acquiror's and Merger
Sub's Certificate, by-laws or any other organizational documents of Acquiror and
Merger Sub, as amended; (ii) require the issuance of any authorization, license,
consent or approval of or require notice to or filing with, any federal or state
governmental agency; or (iii) conflict with, result in the breach or violation
of, or constitute, either by itself or upon notice or the passage of time or
both a default under any mortgage, indenture, agreement, permit, deed of trust,
lease, franchise, license or instrument to which Acquiror or Merger Sub are a
party or by which they or any of their properties are bound, or any judgment,
decree, order, rule or regulation or other restriction of any court or any
regulatory body, administrative agency or other governmental body applicable to
Acquiror or Merger Sub or result in the creation of any mortgage, pledge, lien,
encumbrance or charge upon any of the properties or assets of the Company
pursuant to any such term, except in the case of clauses (ii) or (iii) for such
violations, breaches or defaults which, or authorizations, licenses, consents,
approvals, notices or filings the failure of which to obtain or make, (x) would
not have a Company Material Adverse Effect or would not materially adversely
affect the ability of Acquiror or Merger Sub to consummate the transactions
contemplated by this Agreement, or (y)
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would become applicable as a result of the business or activities in which the
Company is or proposes to be engaged or as a result of any acts or omissions by,
or the status of any facts pertaining to, the Company.
4.5. SEC Reports and Financial Statements. Acquiror was not required to
file with the Securities and Exchange Commission (the "SEC") any forms, reports,
schedules, statements or other documents under the Securities Exchange Act of
1934, as amended (the "Exchange Act") or the Securities Act of 1933, as amended
(the "Securities Act") (collectively, the "Acquiror SEC Documents") prior to
April 14, 2000. Since April 14, 2000, Acquiror has filed with the SEC true and
complete copies of all Acquiror SEC Documents. As of their respective dates or,
if amended, as of the date of the last such amendment, the Acquiror SEC
Documents, including, without limitation, any financial statements or schedules
included therein did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the consolidated balance sheets (including the
related notes) included in the Acquiror SEC Documents fairly presents in all
material respects the financial position of Acquiror and its consolidated
subsidiaries as of the respective dates thereof, and the other related
statements (including the related notes) included therein fairly present in all
material respects the results of operations and cash flows of Acquiror and its
consolidated subsidiaries for the respective periods or as of the respective
dates set forth therein. Each of the consolidated balance sheets and statements
of operations and cash flows (including the related notes) included in the
Acquiror SEC Documents has been prepared in all material respects in accordance
with GAAP applied on a consistent basis during the periods involved, except as
otherwise noted therein and subject, in the case of unaudited interim financial
statements, to normal year-end adjustments.
4.6. Issuance of Acquiror Stock. The issuance and delivery by Acquiror
of shares of Acquiror Common Stock and Acquiror Preferred Stock in connection
with the Merger and this Agreement have been duly and validly authorized by all
necessary action on the part of Acquiror. The shares of Acquiror Common Stock
and Acquiror Preferred Stock to be issued in connection with the Merger and this
Agreement, when issued in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable.
4.7. Brokers or Finders. Acquiror represents, as to itself, its
Subsidiaries and its affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any brokers'
or finder's fee or any other commission or similar fee in connection with any of
the transactions contemplated by this Agreement.
4.8. Litigation. There is neither pending nor, to Acquiror's knowledge,
threatened any legal or governmental action, suit, investigation, proceeding or
claim, to which Acquiror or Merger Sub is or may be named as a party by or
before any court, governmental or regulatory authority or by any third party
that is reasonably likely to have an Acquiror Material Adverse Effect. Neither
Acquiror nor Merger Sub is a party or subject to the provisions of any material
injunction, judgment, decree, or order of any court, regulatory body,
administrative agency or other governmental body
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4.9. Consents. Acquiror's and Merger Sub's execution and delivery of
this Agreement does not, and Acquiror's and Merger Sub's performance of this
Agreement and the consummation of the transaction contemplated hereby will not
require any filing to or receipt of any material consent from any person except
for: (a) as set forth in Schedule 4.9; (b) applicable requirements of the
Securities Act of 1933, as amended; (c) state securities or "Blue Sky" laws; and
(d) the filing of a Certificate of Merger as required by Delaware law.
4.10. Intellectual Property. Except for such claims, which individually
or in the aggregate, would not have an Acquiror Material Adverse Effect, there
are no pending or threatened claims of which Acquiror has been given written
notice by any person against its use of any material trademarks, trade names,
service marks, service names, ▇▇▇▇ registrations, logos, assumed names and
copyright registrations, patents and all applications therefor which are owned
by Acquiror and used in its operations as currently conducted (the "Acquiror
Intellectual Property"). To Acquiror's knowledge, Acquiror has such ownership of
or such rights by license, lease or other agreement to the Acquiror Intellectual
Property as are necessary to permit it to conduct its operation as currently
conducted, except where the failure to have such rights would not have an
Acquiror Material Adverse Effect.
4.11. Compliance. To the best of the Acquiror's knowledge, neither
Acquiror nor Merger Sub is in violation of or default under any provision of:
(a) any mortgage, indenture, contract, agreement, license, deed of trust, lease,
franchise, permit or other instrument to which either Acquiror or Merger Sub is
a party or by which either Acquiror or Merger Sub or any of their respective
properties are bound and there does not exist any state of facts which
constitutes an event of default or which, with notice or lapse of time or both,
would constitute an event of default; or (b) any judgment, decree, order,
statute, rule or regulation to which Acquiror or Merger Sub is subject to, but
excluding from the foregoing clauses (a) and (b), defaults or violations which
would not have an Acquiror Material Adverse Effect or which become applicable as
a result of any acts or omissions by, or the status of any facts pertaining to,
the Company.
4.12. Valid Offering. The Acquiror Common Stock and the Acquiror
Preferred Stock to be issued in the Merger will be either registered or
qualified under the securities laws of every state jurisdiction in which such
registration or qualification is required or exempt from such registration or
qualification.
ARTICLE V
ADDITIONAL AGREEMENTS AND POST CLOSING EVENTS OF THE PARTIES
The parties hereby further agree that, from and after the Closing:
5.1. Confidentiality. Notwithstanding anything to the contrary
contained in this Agreement, and subject only to any disclosure requirements
which may be imposed upon Acquiror under applicable state or federal securities
or antitrust laws, it is expressly understood
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and agreed by Acquiror and the Company that: (a) this Agreement, the Schedules
and Exhibits hereto, and the conversations, negotiations and transactions
relating hereto and/or contemplated hereby; and (b) all financial information,
business records and other non-public information concerning Acquiror or the
Company which any of the parties or their respective representatives has
received or may hereafter receive, shall be maintained in the strictest
confidence by the parties and their respective representatives, and shall not be
disclosed to any person that is not associated or affiliated with any of the
parties and involved in the transactions contemplated hereby, without the prior
written approval of Acquiror or the Company, as applicable. The parties hereto
shall use their best efforts to avoid disclosure of any of the foregoing or
undue disruption of any of the business operations or personnel of Acquiror or
the Company. In the event that the transactions contemplated hereby shall not be
consummated for any reason, each of the parties covenants and agrees that
neither it nor its representatives shall retain any documents, lists or other
writings which they may have received or obtained in connection herewith or any
documents incorporating any of the information contained in any of the same (all
of which, and all copies thereof in the possession or control of themselves or
their representatives, shall be returned to the original source of the material
at issue or destroyed, if certified as to such destruction by an officer of such
party). The parties hereto shall be responsible for any damages sustained by
reason of their respective breaches of this Section 5.1, and this Section 5.1
may be enforced by injunctive relief.
5.2. Publicity. The initial press releases with respect to the
execution of this Agreement shall be acceptable to Acquiror and the Company.
Thereafter, so long as this Agreement is in effect, neither the Company, nor any
of its Affiliates shall issue or cause the publication of any press release with
respect to the Merger, this Agreement or the other transactions contemplated
hereby or otherwise without the prior agreement of Acquiror.
5.3. Accounting Cooperation. The Company shall cause any accountants
retained by the Company to cooperate with Acquiror's accountants in connection
with ongoing audit work relating to periods prior to the Closing Date, as
required by applicable federal and state securities laws, and other reasonable
requirements. Such cooperation shall include, without limitation, providing such
assurances, comfort letters and access to work papers as may reasonably be
requested by Acquiror and its accountants.
5.4. Further Assurances. From time to time from and after the Closing,
the parties shall execute and deliver, or cause to be executed and delivered,
any and all such further agreements, certificates and other instruments, and
shall take or cause to be taken any and all such further action, as any of the
parties may reasonably deem necessary or desirable in order to carry out the
intent and purposes of this Agreement.
5.5. Employment Agreement with Stockholder. At the Closing, Acquiror
will enter into an employment agreement with the Stockholder in substantially
the form set forth as Exhibit D under which the Stockholder will provide
employment services to Acquiror under similar terms and conditions as other
executives of Acquiror.
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5.6. Lock-Up Agreement. Each of the stockholders of the Company set
forth on Schedule 5.6 shall execute a lock-up agreement (the "Lock-Up
Agreement") provided by Acquiror which shall prohibit the transfer of all shares
of Acquiror Common Stock acquired by each such stockholder pursuant to this
Agreement and the transactions contemplated hereby.
5.7. Amendment to Exchange Agreement. The Stockholder shall execute an
amendment to his Exchange Agreement in substantially the form set forth as
Exhibit E (the "Amendment to Exchange Agreement") which shall provide for
vesting and forfeiture upon termination of employment of certain shares of
Acquiror Common Stock acquired by Stockholder pursuant to this Agreement and the
transactions contemplated hereby.
5.8. Bridge Loan. Acquiror shall pay, on behalf of the Company, to the
appropriate entity or individual up to $300,000 for expenses related to the
continued operation of the Company from June 29 through the Closing Date
("Expense"), provided such Expenses are set forth on Schedule 5.8. The $300,000
in Expenses will include all legal fees and costs, including paralegal fees,
associated with the transaction contemplated hereby, provided such fees are not
more than $50,000. Any Expenses, including legal fees, costs and paralegal fees,
not required or which are above $300,000 or legal fees, costs or paralegal fees
associated with this transaction above $50,000, are the sole responsibility of
the stockholders of the Company. Payment for any Expenses by Acquiror pursuant
to this Section 5.8 shall occur as follows: (i) up to $100,000 at the Closing;
(ii) up to an additional $100,000 thirty (30) days after the Closing Date; and
(iii) up to an additional $100,000 sixty (60) days after the Closing Date.
5.9. Tax Matters. Acquiror and the Company shall use commercially
reasonable efforts prior to the Effective Time to cause the Merger to qualify as
a tax free reorganization under Section 368(a)(1) of the Code. The parties
hereto shall report the Merger as a reorganization within the meaning of Section
368(a) of the Code, and neither Acquiror, Merger Sub nor the Company shall take
any action or fail to take any action prior to or following the Closing that
would reasonably be expected to cause the Merger to fail to qualify as a
reorganization.
5.10. Continuation of Indemnification. Acquiror shall (and Acquiror
shall cause the Surviving Corporation to) fulfill and honor in all respects the
obligations of the Company pursuant to all indemnification agreements existing
on the date hereof and the certificate of incorporation and by-laws of the
Company in effect on the date hereof (and Acquiror shall also advance expenses
as incurred to the fullest extent permitted under applicable law provided the
person to whom expenses are advanced provides an undertaking to repay such
advances if it is ultimately determined that such person is not entitled
indemnification). The certificate of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification and
exculpation from liability set forth in the Company's certificate of
incorporation and by-laws on the date of this Agreement, which provisions shall
not be amended, repealed or otherwise modified in any manner that would
adversely affect the rights thereunder of any person entitled to indemnification
under this Section 5.10. For a period of two years after the Effective Time,
Acquiror shall maintain (to the extent available in the market) in effect a
directors' and officers' liability insurance policy covering those person who
are currently
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covered by the Company's directors' and officers' liability insurance policy (a
copy of which has been heretofore delivered to Acquiror) with coverage in amount
and scope at least as favorable as the Company's existing coverage (which
coverage may be an endorsement extending the period in which claims may be made
under such existing policy); provided that: (a) in no event shall Acquiror be
required to expend per year for such coverage more than an aggregate of 200% of
the current annual premium expended by the Company to provide such coverage; (b)
if the annual premiums of such insurance coverage exceed such amount, Acquiror
shall be obligated to obtain a policy with the greatest coverage available for a
cost not exceeding such amounts; and (c) if a policy of the type described in
this Section 5.10 is not available in the market, Acquiror shall obtain a policy
that is as close as possible to being as favorable as the Company's existing
coverage.
ARTICLE VI
CONDITIONS
6.1. Conditions to Obligations of Acquiror and Merger Sub. The
obligations of Acquiror to consummate the transactions contemplated by this
Agreement are further subject to the satisfaction, at or before the Closing
Date, of all the following conditions, any one or more of which may be waived in
writing by Acquiror:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by the Company and the Stockholder shall be
true and correct on and as of the Closing Date as though such representations
and warranties were made on and as of that date (other than those
representations and warranties that address matters only as of a particular date
or only with respect to a specific period of time which need only be true and
accurate as of such date or with respect to such period), except where the
failure of such representations and warranties to be so true and accurate
(without giving effect to any limitation as to "materiality" or "material
adverse effect" set forth therein), would not have a Company Material Adverse
Effect.
(b) Performance. The Company shall have performed, satisfied and
complied in all material aspects with all covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by the
Company on or before the Closing Date.
(c) Certification. Acquiror shall have received a certificate,
dated the Closing Date, signed by an officer of the Company certifying that the
conditions specified in Sections 6.1(a) and (b) above have been fulfilled.
(d) Resolutions. Acquiror shall have received certified
resolutions of the Board of Directors and the stockholders of the Company
authorizing the Company's execution, delivery and performance of this Agreement,
and all actions to be taken by the Company hereunder.
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(e) Good Standing Certificates. The Company shall have delivered
to Acquiror a certificate issued by the Secretary of State of California,
evidencing the good standing of the Company in California as of a date not more
than ten (10) calendar days prior to the Closing Date.
(f) Lock-Up Agreement. The Stockholders set forth on Schedule 5.6
shall have executed the Lock-Up Agreement.
(g) Amendment to Exchange Agreement. The Stockholder shall have
executed the Amendment to Exchange Agreement.
(h) Amendments to OA3, LLC Documents. The Company and OA3, LLC
shall have executed amendments to: (i) a Promissory Note executed by OA3, LLC on
May 12, 2000 in favor of the Company; and (ii) a Consulting Agreement for
Non-Technical Services executed by the Company and OA3, LLC on May 15, 2000.
(i) Legal Opinion of the Company's Counsel. Acquiror shall have
received the written opinion of ▇▇▇▇▇▇ Godward LLP, dated the Closing Date, in
form and substance reasonably satisfactory to Acquiror and its counsel.
(j) Certificate of Merger. A certificate of merger with respect to
the Merger shall have been executed, delivered and filed with the Secretary of
State of the State of Delaware by each of the Constituent Corporations on the
Closing Date.
6.2. Conditions to the Obligations of the Company. The obligations of
the Company to consummate the Merger and the transactions contemplated by this
Agreement are further subject to the satisfaction, at or before the Closing
Date, of all of the following conditions, any one or more of which may be waived
in writing by the Company:
(a) Accuracy of Representations and Warranties. All
representations and warranties made by Acquiror and Merger Sub shall be true and
correct on and as of the Closing Date as though such representations and
warranties were made on and as of that date (other than those representations
and warranties that address matters only as of a particular date or only with
respect to a specific period of time which need only be true and accurate as of
such date or with respect to such period), except where the failure of such
representations and warranties to be so true and accurate (without giving effect
to any limitation as to "materiality" or "material adverse effect" set forth
therein), would not have a Acquiror Material Adverse Effect.
(b) Performance. Acquiror and Merger Sub shall have performed,
satisfied and complied in all material aspects with all covenants, agreements
and conditions required by this Agreement to be performed, satisfied or complied
with by Acquiror on or before the Closing Date.
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(c) Certification. The Company shall have received a certificate,
dated the Closing Date, signed by an officer of Acquiror certifying that the
conditions specified in Sections 6.2(a) and (b) above have been fulfilled.
(d) Resolutions. The Company shall have received certified
resolutions of the Board of Directors of Acquiror and Merger Sub and certified
resolutions of Acquiror as stockholder of Merger Sub authorizing the Merger and
Acquiror's execution, delivery and performance of this Agreement, and all
actions to be taken by Acquiror and Merger Sub hereunder.
(e) Certificate of Designation. A certificate of designation with
respect to the shares of Acquiror Preferred Stock shall have been executed,
delivered and filed with the Secretary of State of the State of Delaware by
Acquiror.
(f) Legal Opinion of Acquiror's Counsel. The Company shall have
received the written opinion of ▇▇▇▇▇▇▇▇▇ Traurig, P.A., dated as of the Closing
Date, in form and substance reasonably satisfactory to the Company and its
counsel.
(g) Certificate of Merger. A certificate of merger with respect to
the Merger shall have been executed, delivered and filed with the Secretary of
State of the State of Delaware by each of the Constituent Corporations on the
Closing Date.
ARTICLE VII
CLOSING
7.1. Place and Date of Closing. The consummation of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, or such other location as is agreed to between the parties, at a
time mutually agreeable to the parties, or on such date as may be reasonably
required to accommodate a satisfaction of the conditions precedent to Closing
hereunder (the date of the Closing being referred to in this Agreement as the
"Closing Date").
7.2. Items to be Delivered by the Company and the Stockholder. At the
Closing, the Company and the Stockholder will deliver or cause to be delivered
to Acquiror:
(a) The certificate required by Section 6.1(c);
(b) The resolutions required by Section 6.1(d);
(c) The Good Standing Certificates required by Section 6.1(e);
(d) The Lock-Up Agreements required by Section 6.1(f);
(e) The Amendment to Exchange Agreement required by Section
6.1(g);
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(f) The Amendments required by Section 6.1(h);
(g) The opinion of ▇▇▇▇▇▇ Godward LLP, as required by Section
6.1(i); and
(h) Resignations of officers and directors of the Company.
7. 3. Items to be Delivered by Acquiror. At the Closing, Acquiror will
deliver or cause to be delivered to the Company and the Stockholder:
(a) The certificate required by Section 6.2(c);
(b) The resolutions required by Section 6.2(d); and
(c) The opinion of ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, P.A. as required by Section
6.2(f).
ARTICLE VIII
SURVIVAL OF REPRESENTATIONS; INDEMNIFICATION
8.1. Survival. Except as otherwise provided in Section 11.2 of this
Agreement, the parties hereto agree that their respective representations,
warranties, covenants and agreements contained in this Agreement shall survive
the Closing for a period of one (1) year from the Closing Date, except with
respect to the representations in Section 3.10, which shall survive the Closing
until expiration of the relevant statutes of limitations (the "Indemnification
Period"). To the extent that an Indemnified Party (as hereinafter defined)
asserts in writing a claim for Damages (as hereinafter defined) against an
Indemnifying Party (as hereinafter defined) prior to the expiration of the
Indemnification Period, which claim reasonably identifies the basis for the
claims and the amounts of any reasonably ascertainable damages, the
Indemnification Period shall be extended for such claim until such claim is
resolved, subject to the limitations hereinafter provided.
8.2. Indemnification by the Stockholder. The Stockholder agrees to
save, defend and indemnify the Company (after Closing) and Acquiror, their
officers, directors, employees and agents against and hold them harmless from
any and all liabilities, of every kind, nature and description, fixed or
contingent (including, without limitation, reasonable counsel fees and expenses
in connection with any action, claim or proceeding relating to such liabilities)
("Damages") arising from the breach of any of the Company's representations,
warranties, covenants or agreements contained herein or in the several Exhibits
hereto, and the representations, warranties, covenants or agreements of the
Stockholder contained herein, or the documents executed by Stockholder in
connection herewith, which arise during and the basis for which is made during
the Indemnification Period, including, without limitation, any tax liabilities
to the extent not so reflected or reserved against in the Financial Statements.
Any liability for indemnification provided for in this Section 8.2 shall be a
liability solely of the Stockholder.
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(a) Threshold; Ceiling. The Stockholder shall not be required to
make any indemnification payment pursuant to this Section 8.2 for any inaccuracy
in or breach of any of the Company's representations and warranties contained
herein until such time as the total amount of all Damages (including the Damages
arising from such inaccuracy or breach and all other Damages arising from any
other inaccuracies in or breaches of any representations or warranties) that
have been directly or indirectly suffered or incurred by the Indemnified Party,
or to which the Indemnified Party has or have otherwise become subject, exceeds
$100,000 in the aggregate. (If the total amount of such Damages exceeds
$100,000, then the Indemnified Party shall be entitled to be indemnified against
and compensated and reimbursed only for the portion of such Damages exceeding
$100,000.) In addition, the maximum liability of the Stockholder under this
Section 8.2 for breaches of the representations and warranties as set forth
herein shall be equal to the fair market value of Acquiror Common Stock received
by the Stockholder that is not subject to vesting under the Amendment to
Exchange Agreement, as measured on the Closing Date, as a result of the
consummation and closing of the Merger.
(b) Payment of Damages. Any Damages required to be paid by the
Stockholder pursuant to this Article VIII may be paid by Stockholder, at his
option, in cash or with shares of Acquiror Common Stock received by the
Stockholder as a result of the consummation and closing of the Merger, with each
such share of Acquiror Common Stock having a fair market value as measured on
the Closing Date.
(c) With respect to the obligation of the Stockholder to indemnify
for any Tax, (i) if the Stockholder requests that the Tax be paid and a suit
brought for a refund, the Stockholder shall advance the full amount of the Tax
on an interest-free basis; (ii) the Stockholder shall not be entitled to settle
or to contest in court any claim relating to Taxes if the settlement or an
adverse court decision of the claim would be likely, in the good faith judgment
of the Acquiror, to cause the Tax liability of the Company or of any affiliate
to increase in any taxable period ending after the Closing Date; and (iii) no
proceedings may be begun in any court unless the Stockholder, if requested by
the Acquiror, provides a counsel's opinion reasonably satisfactory to the
Acquiror that a reasonable basis exists to prevail in those proceedings.
8.3. Indemnification by Acquiror. Acquiror agrees to save, defend and
indemnify current holders of Company Common Stock and Company Preferred Stock
who will receive shares of Acquiror Common Stock and Acquiror Preferred Stock,
respectively, as a result of the consummation and closing of the Merger, against
and hold each of them harmless from any and all Damages arising from the breach
of any of Acquiror's representations, warranties, covenants or agreements
contained herein or the documents executed by Acquiror in connection herewith,
which arise during the Indemnification Period.
8.4. Nature of Liability of the Stockholder. Each of the indemnity
obligations of the Stockholder contained in this Agreement is a liability solely
of the Stockholder.
8.5. Limitations of Liability.
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(a) Claims. All claims for Damages arising out of breaches of
representations or warranties regarding tax deficiency assessments relating to
federal and state income tax returns filed prior to Closing, shall be computed
net of the present value of all readily ascertainable future tax benefits
associated therewith. No claim shall be made for matters adequately covered by
insurance. The parties waive subrogation rights against each other with respect
to all matters as to which an insurance recovery shall have been actually
received after the Closing so long as the terms of any insurance policy are not
violated by such waiver.
(b) Liability of the Stockholder. Upon a Final Determination (as
provided in Section 8.5 (d) of the amount of any claim for Damages made against
the Stockholder by Acquiror, Acquiror shall be entitled to recover the amount of
such Damages as finally determined.
(c) Liability of Acquiror. Upon a Final Determination (as provided
in Section 8.5(d)) of the amount of any claim for Damages made against Acquiror
by the Stockholder, the Stockholder shall be entitled to recover an amount that,
after any Taxes payable by Acquiror with respect to the payment from the
Stockholder (taking into account any tax benefit to Acquiror from the payment of
such Damages), shall be equal to the amount of such Damages as finally
determined.
(d) Final Determination. For the purposes of Section 8.5, a Final
Determination shall exist when (i) the parties agree upon the amount, or (ii) a
court of competent jurisdiction shall have made a final determination with
respect thereto and appeal therefrom shall not have been taken within thirty
(30) days from the date of such determination, or such greater or lesser time as
a court of competent jurisdiction shall require. The asserting party will assign
to the other party any claims against which the asserting party has been
indemnified and has been paid as provided herein, as to which there may be
claims against others, and the other party in all respects shall be subrogated
to the rights of the asserting party in connection therewith.
8.6. Defense of Claims. Each party entitled to indemnification under
this Article VIII (the "Indemnified Party") agrees to notify the party required
to provide indemnification (the "Indemnifying Party") with reasonable promptness
of any claim asserted against it in respect of which the Indemnifying Party may
be liable under this Agreement, which notification shall be accompanied by a
written statement setting forth the basis of such claim and the manner of
calculation thereof. The failure of the Indemnified Party to promptly give
notice shall not preclude such Indemnified Party from obtaining indemnification
under this Article VIII, except to the extent, and only to the extent, that the
Indemnifying Party's failure materially prejudices the rights or increases the
liabilities and obligations of the Indemnifying Party. The Indemnifying Party
shall have the right, at its election, to defend or compromise any such claim at
its own expense with counsel of its choice; provided, however, that (i) such
counsel shall have been approved by the Indemnified Party prior to engagement,
which approval shall not be unreasonably withheld or delayed; (ii) the
Indemnified Party may participate in such defense, if it so chooses with its own
counsel and at its own expense; and (iii) any such defense or compromise shall
be conducted in a manner which is reasonable and not contrary to the Indemnified
Party's interest. In the event the Indemnifying Party does not undertake to
defend or
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compromise, the Indemnifying Party shall promptly notify the Indemnified Party
of its intention not to undertake to defend or compromise the claim.
ARTICLE IX
TERMINATION OF AGREEMENT
9.1. Termination. Notwithstanding anything to the contrary contained
herein this Agreement may be terminated and the Merger contemplated herein may
be abandoned at any time prior to the Effective Time, whether before or after
stockholder approval thereof by either Acquiror or the Company.
9.2. Effect of Termination. In the event of the termination of this
Agreement as provided in Section 9.1, written notice thereof shall forthwith be
given to the other party or parties specifying such termination is being made,
and this Agreement shall forthwith become null and void, and there shall be no
liability on the part of Acquiror, Merger Sub or the Company or their respective
directors, officers, employees, stockholders, representatives, agents or
advisors.
ARTICLE X
PARTIES
10.1. Parties in Interest. Nothing in this Agreement, whether expressed
or implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any persons other than the parties to it and their respective
heirs, executors, administrators, personal representatives, successors and
permitted assigns, nor is anything in this Agreement intended to relieve or
discharge the obligations or liability of any third persons to any party to this
Agreement, nor shall any provision give any third persons any right of
subrogation or action over or against any party to this Agreement.
10.2. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given: (a) on the date of service if served personally or by telecopier on the
party to whom notice is to be given, or on the day after the date sent by
recognized overnight courier service with all charges prepaid; or (b) three (3)
days after being deposited in the United States mail if sent by first class
mail, registered or certified, postage prepaid, and properly addressed as
follows:
(a) If to Acquiror and Merger Sub:
WORLD COMMERCE ONLINE, INC.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇▇▇▇▇
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with a copy to:
▇▇▇▇▇▇▇▇▇ TRAURIG, P.A.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ESQ.
(b) If to the Company:
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
with a copy to:
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
▇▇▇▇ ▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
ATTENTION: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ESQ.
or to such other address as either party shall have specified by notice in
writing given to the other party.
10.3. Affiliates. Wherever used in this Agreement, the term "Affiliate"
means, in respect to any person or entity, any other person or entity that
directly, or indirectly through one or more intermediaries, controls, is
controlled by, or is under common control with the first person or entity.
10.4. Stockholder. Wherever use in this Agreement, the term
"Stockholder" shall mean ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III.
ARTICLE XI
MISCELLANEOUS
11.1. Non-Assignability; Binding Effect. Neither this Agreement, nor
any of the rights or obligations of the parties hereunder, shall be assignable
by any party hereto without the prior written consent of all other parties
hereto. Otherwise, this Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective heirs, executors,
administrators, personal representatives, successors and permitted assigns.
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11.2. Nonsurvival of Representations and Warranties. None of the
representations and warranties in this Agreement or in any schedule, instrument
or other document delivered pursuant to this Agreement shall survive the
termination of this Agreement. This Section 11.2 shall not limit any covenant or
agreement contained in this Agreement which by its terms contemplates
performance after the Effective Time.
11.3. Exhibits and Schedules. All exhibits and schedules attached
hereto (the "Exhibits") shall be construed with and deemed an integral part of
this Agreement to the same extent as if the same had been set forth verbatim
herein. Any matter disclosed pursuant to the Exhibits shall be deemed to be
disclosed for all purposes under this Agreement, and all references to this
Agreement herein or in any such Exhibits shall be deemed to refer to and include
all such Exhibits.
11.4. Waiver. No waiver by either party of any default or
nonperformance hereunder shall be deemed a waiver of any subsequent default or
nonperformance. No waiver shall be effective unless in writing, and signed by
the party or parties to which the performance of duty is owed. No delay in the
serving of any right or remedy shall constitute a waiver of any right or remedy.
11.5. Independent Covenants. The parties agree that each of the
covenants and provisions contained in this Agreement shall be deemed severable
and construed as independent of any other covenant or provision.
11.6. Severability. If all or any portion of a covenant or provision in
this Agreement is held invalid, unreasonable or unenforceable by a court or
agency having valid jurisdiction in an unappealed final decision, the remaining
covenants and provisions shall remain valid and enforceable. Both parties
expressly agree to be bound by any lesser covenant or provision subsumed within
the terms of such covenant or provision that imposes the maximum duty permitted
by law, as if the resulting covenant or provision were separately stated in, and
made a part of this Agreement.
11.7. Entire Agreement. This Agreement contains and represents the
entire and complete understanding and agreement concerning and in reference to
the arrangement between the parties hereto. The parties hereto agree that no
prior statements, representations, promises, agreements, instructions, or
understandings, written or oral, pertaining to this Agreement, other than those
specifically set forth and stated herein, shall be of any force or effect.
11.8. Modifications and Amendments. This Agreement may not be, and
shall not be construed to have been modified, amended, rescinded, canceled, or
waived, in whole or in part, except if done so in writing and executed by the
parties hereto.
11.9. Time of Essence. The parties to this Agreement acknowledge and
agree that time is of the essence with respect to the consummation of the
transactions contemplated by this Agreement.
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11.10. Governing Law. The validity, interpretation and enforcement of
this Agreement shall be governed by, and construed and enforced in accordance
with the local laws of the State of Florida without giving effect to its
conflicts of laws provisions, and to the exclusion of the law of any other
forum, without regard to the jurisdiction in which any action or special
proceeding may be instituted.
11.11. Exclusive Jurisdiction; Venue. EACH PARTY HERETO AGREES TO
SUBMIT TO THE EXCLUSIVE PERSONAL JURISDICTION AND VENUE OF THE STATE AND/OR
FEDERAL COURTS LOCATED IN ORANGE COUNTY, FLORIDA, FOR RESOLUTION OF ALL DISPUTES
ARISING OUT OF, IN CONNECTION WITH, OR BY REASON OF THE INTERPRETATION,
CONSTRUCTION, AND ENFORCEMENT OF THIS AGREEMENT, AND HEREBY WAIVES THE CLAIM OR
DEFENSE THEREIN THAT SUCH COURTS CONSTITUTE AN INCONVENIENT FORUM.
11.12. Waiver of Jury Trial. AS A MATERIAL INDUCEMENT FOR THIS
AGREEMENT, EACH PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND
IRREVOCABLY WAIVES ALL RIGHTS TO A TRIAL BY JURY OF ANY ISSUES SO TRIABLE.
11.13. Construction. Each party to this Agreement has had the
opportunity to consult with counsel of its choice and make comments concerning
this Agreement. No legal or other presumption against the party drafting this
Agreement concerning its construction, interpretation or otherwise shall accrue
to the benefit of any party to this Agreement and each party expressly waives
the right to assert such a presumption in any proceedings or disputes connected
with, arising out of, or involving this Agreement.
11.14. Section Headings. The titles to the numbered sections in this
Agreement are solely for the convenience of the parties and shall not be used to
explain, modify, simplify, or aid in the interpretation of said covenants or
provisions set forth herein.
11.15. Counterparts. This Agreement may be executed by each party upon
a separate counterpart, and in such case one copy of this Agreement shall
consist of enough of such copies to reflect the signature of all of the parties
to this Agreement. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, and it shall not be necessary in
making proof of this Agreement or the terms of this Agreement to produce or
account for more than one of such counterparts.
[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement and Plan
of Merger and Reorganization as of the date first set forth above.
WORLD COMMERCE ONLINE, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇
Chairman of the Board
Chief Executive Officer
LAKER PROJECT, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇
Chairman of the Board
Chief Executive Officer
▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, III
Chief Executive Officer
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