Agreement and Plan of Reorganization
By and Among
Zapworld.com
and
Zap of Santa Cruz, Inc.
Dated as of January 20, 2000
INDEX OF EXHIBITS
Exhibit Description
Exhibit A Form of Agreement of Merger
Exhibit B Articles of Incorporation and Bylaws of Zap Santa Cruz
INDEX OF SCHEDULES
Schedule Description
2.7 Unaudited Asset List of Zap Santa Cruz
2.10 Tax Payments
2.12 Real Property Leases
2.13 Intellectual Property Rights
2.14 Agreements, Contracts and Commitments
2.15 Change of Control Payments
2.16 Interested Party Transactions
2.23 Bank Accounts
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered into as of January 20, 2000 among Zapworld.com, a California
corporation doing business at 117 Morris Street, Sebastopol, California 95472
("Zapworld") and Zap of Santa Cruz, Inc., a California corporation doing
business at 131 Center Street, #2 Santa Cruz, California 95061 ("Zap Santa
Cruz").
RECITALS
A. Zapworld and Zap Santa Cruz intend to effect a merger (the "Merger")
of Zap Santa Cruz with and into Zapworld in accordance with this Agreement and
California General Corporation Law ("California Law"). Upon consummation of the
Merger, Zap Santa Cruz will be merged into Zapworld and Zap Santa Cruz will
cease to exist.
B. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986,
as amended (the "Code").
C. The Board of Directors of Zap Santa Cruz has: (i) determined that
the Merger is consistent with and in furtherance of the long-term strategy of
Zap Santa Cruz and is in the best interests of its Shareholders; (ii) approved
this Agreement, the Merger and the other transactions contemplated by this
Agreement; and (iii) recommended that the shareholders of Zap Santa Cruz adopt
and approve the terms of this Agreement, the Merger, and the other transactions
contemplated by this Agreement.
D. The Shareholders of Zap Santa Cruz have approved this Agreement, the
Merger and the other transactions contemplated by this Agreement.
E. The Board of Directors of Zapworld has approved this Agreement, the
Merger and other transactions contemplated by this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
subject to and upon the terms and conditions of this Agreement and California
Law, Zap Santa Cruz shall be merged with and into Zapworld. After the merger,
the separate corporate existence of Zap Santa Cruz shall cease and Zapworld
shall continue as the surviving corporation.
1.2 Effective Time. Unless this Agreement is earlier terminated
pursuant to Section 9.1, the closing of the Merger (the "Closing") will take
place as promptly as
practicable, but no later than one (1) business day following satisfaction or
waiver of the conditions set forth in Article VI, at the law offices of Evers &
Hendrickson, LLP, 155 Montgomery Street, 12th Floor, San Francisco, California
94104, unless another place or time is agreed to by Zapworld and the Zap Santa
Cruz. The date upon which the Closing actually occurs is herein referred to as
the "Closing Date." On the Closing Date, the parties hereto shall cause the
Merger to be consummated by filing an Agreement of Merger, in substantially the
form attached hereto as Exhibit A (the "Agreement of Merger"), with the
Secretary of State of the State of California, in accordance with the relevant
provisions of California Law (the time of acceptance by the Secretary of State
of California of such filing being referred to herein as the "Effective Time").
The parties currently intend that the Closing Date will occur on or prior to
January 20, 2000.
1.3 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of California Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, power and franchises of
Zap Santa Cruz shall vest in Zapworld and all debts, liabilities and duties of
Zap Santa Cruz shall become the debts, liabilities and duties of the Zapworld.
1.4 Articles of Organization; Bylaws. The Bylaws of Zapworld, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Zapworld after the merger of Zap Santa Cruz into Zapworld.
1.5 Directors and Officers. The officers and directors of Zap Santa
Cruz shall no longer hold office immediately after the Effective Time, and the
officers and directors of Zapworld before the Effective Time shall be the
respective officers and directors of Zapworld after the Effective Time, each to
hold office in accordance with the Articles of Organization and Bylaws of
Zapworld.
1.6 Effect of Merger on Zap Santa Cruz Capital Stock. At the Effective
Time, all shares of Zap Santa Cruz Capital Stock ("Company Capital Stock") and
any right to acquire any shares of Zap Santa Cruz Capital Stock, including any
options or warrants issued and outstanding, whether or not vested, shall cease
to exist.
1.7 Effect of Merger on Zapworld Common Stock. The shares of Zapworld
outstanding immediately prior to the Effective Time shall remain issued and
outstanding immediately thereafter and shall be unaffected by the transaction
described herein.
1.8 Aggregate Shares to be Issued. As consideration for the
transactions described herein, Zapworld shall issue to the holders of Zap Santa
Cruz, shares of Zapworld Common Stock. The aggregate number of shares of Common
Stock that Zapworld shall issue to the holders of Zap Santa Cruz is 8,803 (Eight
Thousand Eight Hundred and Three).
1.9 Allocation and Fractional Shares.
(a) Allocation. The allocation of shares of Zapworld Common Stock set
forth in this Agreement shall be adjusted to reflect the effect of any stock
split, reverse split, stock dividend (including any dividend or distribution of
securities convertible into Zapworld
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Common Stock or Company Capital Stock), reorganization, recapitalization or
other like change with respect to Zapworld Common Stock occurring after the date
hereof and prior to the Effective Time.
(b) Fractional Shares. No fraction of a share of Zapworld Common Stock
will be issued at the Effective Time, but in lieu thereof, each holder of Zap
Santa Cruz Stock who would otherwise be entitled to a fraction of a share of
Zapworld Common Stock (after aggregating all fractional shares of Zapworld
Common Stock to be received by such holder) shall be entitled to receive from
Zapworld an amount of cash (rounded to the nearest whole cent) equal to the
product of: (i) such fraction, multiplied by; (ii) the average closing price of
a share of Zapworld Common Stock as reported on the OTC Bulletin Board for the
30-day period ending three days prior to the Closing Date or, if any such day
there are no sales reported, the average of the closing bid and ask prices for
Zapworld Common Stock reported on that date.
1.10 Surrender of Certificates and Check for $25,000.
(a) Exchange Agent. The Corporate Secretary of Zapworld shall serve as
the exchange agent (the "Exchange Agent") in the Merger.
(b) Zapworld to Provide Common Stock And $25,000 Check. Promptly after
the Effective Time, Zapworld shall make available to the Exchange Agent for
exchange in accordance with this Article I, a valid check in the amount of
$25,000 and the aggregate number of shares of Zapworld Common Stock issuable
pursuant to Section 1.8, in exchange for all outstanding shares of Zap Santa
Cruz Common Stock.
(c) Zap Santa Cruz to Deliver all Its Outstanding Stock. Promptly after
the Effective Time, Zap Santa Cruz shall deliver to the Exchange Agent all share
certificates of Zap Santa Cruz Common Stock outstanding as of the Effective
Time.
1.11 No Further Ownership Rights in Zap Santa Cruz Capital Stock. All
shares of Zap Santa Cruz Common Stock issued shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Zapworld Common
Stock, and after the Effective Time there shall be no further registration of
transfers on the records of the Zap Santa Cruz of shares of Zap Santa Cruz
Common Stock which were outstanding immediately prior to the Effective Time.
1.12 Lost, Stolen or Destroyed Certificates. In the event any
certificates evidencing shares of Zap Santa Cruz shall have been lost, stolen or
destroyed, the Exchange Agent shall issue in exchange for such lost, stolen or
destroyed certificates, upon the making of an affidavit of that fact by the
holder thereof, such shares of Zapworld Common Stock, if any, as may be required
pursuant to Section 1.9; provided, however, that Zapworld may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against
Zapworld or the Exchange Agent with respect to the certificates alleged to have
been lost, stolen or destroyed.
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1.13 Taking of Necessary Action; Further Action. If, at any time after
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest Zapworld with full right, title
and possession to all assets, property, rights, privileges, powers and
franchises of Zap Santa Cruz, the officers and directors of the Zapworld are
fully authorized in the name of Zap Santa Cruz to take, and will take, all such
lawful and necessary action.
ARTICLE II
REPRESENTATIONS/WARRANTIES OF ZAP SANTA CRUZ
Zap Santa Cruz hereby represents and warrants to Zapworld, subject to
the exceptions disclosed in the disclosure schedules supplied by the Zap Santa
Cruz to Zapworld, as follows:
2.1 Organization and Qualification. Zap Santa Cruz is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California. Zap Santa Cruz has the corporate power and authority to
own, lease and operate its properties and to carry on its business as now being
conducted. Zap Santa Cruz is duly qualified or licensed to do business and is in
good standing as a foreign corporation in each jurisdiction in which the failure
to be so qualified or licensed would have a material adverse effect on the
business, assets (including intangible assets), financial condition, results of
operations or prospects of the Zap Santa Cruz. Zap Santa Cruz has delivered a
true and correct copy of its Articles of Organization and Bylaws, each as
amended to date, to Zapworld. Exhibit B lists the Articles of Incorporation and
Bylaws of Zap Santa Cruz, and all amendments thereto. Such Articles of
Organization and Bylaws are in full force and effect. Zap Santa Cruz is not in
violation of any of the provisions of its Articles of Organization or Bylaws.
2.2 Subsidiaries. Zap Santa Cruz does not have, and has never had, any
subsidiaries or affiliated companies and does not otherwise own, and has never
otherwise owned, directly or indirectly, any shares of capital stock or any
equity, debt or similar interest in or any interest convertible, exchangeable or
exercisable for any equity, debt or similar interest in, or control, directly or
indirectly, any other corporation, partnership, association, joint venture or
other business entity. Zap Santa Cruz has not agreed, nor is Zap Santa Cruz
obligated, to make or be bound by any written, oral or other agreement,
contract, sub-contract, commitment or undertaking of any nature, as of the date
hereof or as may hereafter be in effect under which it may become obligated to
make, any future investment in or capital contribution to any other entity.
2.3 Zap Santa Cruz Capital Structure.
(a) Outstanding Stock. The authorized Zap Santa Cruz Capital Stock
consists entirely of 10,000 shares of No Par Common Stock, of which a total of
1,000 are issued and outstanding. All 1,000 shares of Zap Santa Cruz Common
Stock are now owned and held (and all of which at the Closing will be owned and
held) by Sarka Enterprises, Inc. Other than the 1,000 shares of Common Stock, no
other shares of the Zap Santa Cruz's Capital Stock are (or will at Closing be)
issued or outstanding. No fractional shares of the Zap Santa Cruz's Capital
Stock are (or will at Closing be) issued or outstanding. All issued
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and outstanding shares of the Zap Santa Cruz's Capital Stock have been duly
authorized and validly issued, are fully paid and non-assessable, are not
subject to any claim, lien, preemptive right, or right of rescission, and have
been offered, issued, sold and delivered by Zap Santa Cruz (and, if applicable,
transferred) in compliance with all registration or qualification requirements
(or applicable exemptions therefrom) of all applicable securities laws, the Zap
Santa Cruz's Articles of Organization and other charter documents and all
agreements to which the Zap Santa Cruz is a party.
(b) No Options, Warrants or Rights. There are no options, warrants,
convertible or other securities, calls, commitments, conversion privileges,
preemptive rights or other rights or agreements outstanding to purchase or
otherwise acquire (whether directly or indirectly) any shares of Zap Santa
Cruz's authorized but unissued Capital Stock or any securities convertible into
or exchangeable for any shares of Zap Santa Cruz's Capital Stock or obligating
Zap Santa Cruz to grant, issue, extend, or enter into, any such option, warrant,
convertible or other security, call, commitment, conversion privilege,
preemptive right or other right or agreement, and Zap Santa Cruz has no
liability for any dividends accrued but unpaid. No person or entity holds or has
any option, warrant or other right to acquire any issued and outstanding shares
of Zap Santa Cruz's Capital Stock from any record or beneficial holder of Zap
Santa Cruz's shares. No shares of Zap Santa Cruz's Capital Stock are reserved
for issuance under any stock purchase, stock option or other benefit plan. As a
result of the Merger, Zapworld will be the record and sole beneficial owner of
all outstanding Zap Santa Cruz's Capital Stock and all rights to acquire or
receive any Zap Santa Cruz's Capital Stock, whether or not such Capital Stock is
outstanding. All options expire, if not exercised immediately prior to the
Effective Time.
(c) No Voting Arrangements or Registration Rights. There are no voting
agreements, voting trusts, rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable securities laws)
applicable to any of the Zap Santa Cruz Capital Stock. Zap Santa Cruz is not
under any obligation to register under the 1933 Act or otherwise any of its
currently outstanding securities or any securities that may be subsequently
issued.
2.4 Authority. Zap Santa Cruz has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The requisite shareholder approval has been obtained in
accordance with Zap Santa Cruz's bylaws, charter provisions and the regulatory
requirements of the State of California. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of Zap Santa Cruz.
Zap Santa Cruz's Board of Directors has approved the Merger and this Agreement.
2.5 No Conflict. The execution and delivery of this Agreement by the
Company does not, and, as of the Effective Time, the consummation of the
transactions contemplated hereby will not, conflict with, or result in any
violation of, or default under (with or without notice or lapse of time, or
both), or give rise to a right of termination, cancellation or acceleration of
any obligation or loss of any benefit under (any such event, a "Conflict"): (i)
any provision of the Articles of Organization or Bylaws of the Zap Santa Cruz;
or (ii) any
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mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Zap Santa Cruz or its properties or
assets.
2.6 Consents. No consent, waiver, approval, order or authorization of,
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party (so as not to trigger any Conflict), is required by or with respect
to Zap Santa Cruz in connection with the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby, except
for: (i) the filing of the Agreement/Articles of Merger with the California
Secretary of State and (ii) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable federal and state securities laws.
2.7 Unaudited Asset List. Schedule 2.7 of the Disclosure Schedule sets
forth true and correct list of Zap Santa Cruz's unaudited assets as of the
Effective Time. Schedule 2.7 is complete and correct in all material respects.
2.8 No Liabilities. As of the Effective Time, Zap Santa Cruz does not
have any liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
known or unknown, matured or unmatured (whether or not required to be reflected
in financial statements in accordance with GAAP) ("Liabilities").
2.9 No Changes. As of the Effective Time, there has not been, occurred
or arisen any:
(a) amendments or changes to the Articles of Organization or Bylaws of
Zap Santa Cruz as listed in Exhibit B;
(b) destruction of, damage to or loss of any material assets listed in
Schedule 2.7;
(c) split, combination or reclassification of any Zap Santa Cruz
Capital Stock;
(d) sale, lease, license or other disposition of any of the assets of
Zap Santa Cruz listed in Schedule 2.7
2.10 Tax and Other Returns and Reports.
(a) Definition of Taxes. For the purposes of this Agreement, "Tax," or
collectively "Taxes," means any and all federal, state, local and foreign taxes,
assessments and other governmental charges, duties, impositions and liabilities,
including taxes based upon or measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad valorem, transfer, franchise,
withholding, payroll, recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with respect to such
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amounts and any obligations under any agreements or arrangements with any other
person with respect to such amounts and including any liability for taxes of a
predecessor entity.
(b) Tax Returns and Audits. Except as set forth in Schedule 2.10, as of
the Effective Time:
(i) Zap Santa Cruz has prepared and filed all federal, state,
local and foreign returns, estimates, information statements and
reports required to be filed ("Returns") relating to any and all Taxes
concerning or attributable to the Company or its operations and such
Returns are true and correct and have been completed in accordance with
applicable law.
(ii) Zap Santa Cruz: (a) has paid or accrued all Taxes it is
required to pay or accrue; and (b) has withheld with respect to its
employees all federal and state income taxes, FICA, FUTA and other
Taxes required to be withheld as of that date.
(iii) Zap Santa Cruz has not been delinquent in the payment of
any Tax nor is there any Tax deficiency outstanding, proposed or
assessed against Zap Santa Cruz, nor has Zap Santa Cruz executed any
unexpired waiver of any statute of limitations on or extended the
period for the assessment or collection of any Tax.
(iv) No audit or other examination of any Return of Zap Santa
Cruz by any Tax authority is presently in progress, nor has Zap Santa
Cruz been notified of any request for such an audit or other
examination.
(v) Zap Santa Cruz has no knowledge of any basis for the
assertion of any claim relating or attributable to Taxes that, if
adversely determined, would result in any Lien on the assets of the
Company.
(vi) No adjustment or deficiency relating to any Return filed
or required to be filed by Zap Santa Cruz has been proposed formally
or, to the knowledge of Zap Santa Cruz, informally by any Tax authority
to Zap Santa Cruz or any representative thereof.
2.11 Restrictions on Business Activities. There is no agreement
(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which Zap Santa Cruz is a party or otherwise binding upon Zap Santa Cruz which
has or reasonably would be expected to have the effect of:
(a) prohibiting or impairing in any material respect:
(i) any material business practice of Zap Santa Cruz;
(ii) any acquisition of property (tangible or intangible) by
Zap Santa Cruz; or
(iii) the conduct of business by Zap Santa Cruz.
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OR
(b) after the consummation of the Merger, prohibiting or impairing in
any material respect:
(i) any material business practice of Zapworld;
(ii) any acquisition of property (tangible or intangible) by
Zapworld; or
(iii) the conduct of business by Zapworld.
Without limiting the foregoing, Zap Santa Cruz has not entered into any
agreement under which Zap Santa Cruz is restricted from selling, licensing or
otherwise distributing any of its products or services to any class of
customers, in any geographic area, during any period of time or in any segment
of the market.
2.12 Title to Properties; Absence of Liens and Encumbrances.
(a) Zap Santa Cruz does not own any real property, nor has it ever
owned any real property. Schedule 2.12 sets forth a list of all real property
currently leased by Zap Santa Cruz, the name of the lessor and the date of the
lease and each amendment thereto and, with respect to any current lease, the
aggregate annual rental and/or other fees payable under any such lease. All such
current leases are in full force and effect, are valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default or event of default (or event which with notice or
lapse of time, or both, would constitute a default).
(b) Zap Santa Cruz has good and marketable title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its tangible
properties and assets, real, personal and mixed, used or held for use in its
business, free and clear of any Liens.
(c) All facilities, machinery, equipment, fixtures, vehicles, and other
properties owned or leased by Zap Santa Cruz are: (i) adequate for the conduct
of the business of Zap Santa Cruz as currently conducted; and (ii) in good
operating condition, regularly and properly maintained, subject to normal wear
and tear and reasonably fit and usable for the purposes for which they are being
used.
2.13 Intellectual Property.
(a) Definitions. For all purposes of this Agreement, the following
terms shall have the following respective meanings:
(i) "Technology" shall mean any or all of the following: (A)
works of authorship including, without limitation, computer programs,
source code and executable code, whether embodied in software, firmware
or otherwise, documentation, designs, files,
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net lists, records, data and mask works; (B) inventions (whether or not
patentable), improvements and technology; (C) proprietary and
confidential information, including technical data and customer and
supplier lists, trade secrets and know how; (D) databases, data
compilations and collections and technical data; (E) logos, trade
names, trade dress, trademarks and service marks; (F) World Wide Web
addresses, domain names and sites; (G) tools, methods and processes;
and (H) all instantiations of the foregoing in any form and embodied in
any media.
(ii) "Intellectual Property Rights" shall mean any or all of
the following and all rights in, arising out of, or associated
therewith: (A) all United States and foreign patents, utility models
and applications therefor and all reissues, divisions, re-examinations,
renewals, extensions, provisionals, continuations and
continuations-in-part thereof and equivalent or similar rights anywhere
in the world in inventions and discoveries including without limitation
invention disclosures ("Patents"); (B) all trade secrets and other
rights in know-how and confidential or proprietary information; (C) all
copyrights, copyrights registrations and applications therefor and all
other rights corresponding thereto throughout the world ("Copyrights");
(D) all industrial designs and any registrations and applications
therefor throughout the world; (E) all rights in World Wide Web
addresses and domain names and applications and registrations therefor;
(F) all trade names, logos, common law trademarks and service marks,
trademark and service mark registrations and applications therefor and
all goodwill associated therewith throughout the world ("Trademarks");
(G) all computer software including all source code, object code,
firmware, development tools, files, records and data, and all media on
which any of the foregoing is recorded; and (H) any similar,
corresponding or equivalent rights to any of the foregoing anywhere in
the world.
(iii) "Zap Santa Cruz Intellectual Property" shall mean any
Technology and Intellectual Property Rights including Zap Santa Cruz
Registered Intellectual Property Rights (as defined below) that are
owned (in whole or in part) by or exclusively licensed to Zap Santa
Cruz.
(iv) "Registered Intellectual Property Rights" shall mean all
United States, international and foreign: (A) Patents, including
applications therefor; (B) registered Trademarks, applications to
register Trademarks, including intent-to-use applications, or other
registrations or applications related to Trademarks; (C) Copyrights
registrations and applications to register Copyrights; and (E) any
other Technology that is the subject of an application, certificate,
filing, registration or other document issued by, filed with, or
recorded by, any state, government or other public or private legal
authority at any time.
(b) Schedule 2.13 lists all Registered Intellectual Property Rights
owned by, filed in the name of, or applied for, by Zap Santa Cruz and lists any
proceedings or actions known to Zap Santa Cruz before any court, tribunal
(including the United States Patent and Trademark Office (the "PTO") or
equivalent authority anywhere in the world) related to any of Zap Santa Cruz's
Registered Intellectual Property Rights or Company Intellectual Property.
(c) There are no facts or circumstances that would render any Zap Santa
Cruz Intellectual Property invalid or unenforceable.
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(d) Each item of Zap Santa Cruz Intellectual Property is free and clear
of any Liens.
(e) All Zap Santa Cruz Intellectual Property will be fully
transferable, alienable or licensable by Zapworld without restriction and
without payment of any kind to any third party.
(f) Zap Santa Cruz has not transferred ownership of, or granted any
exclusive license of or exclusive right to use, any Technology or Intellectual
Property Right.
2.14 Agreements, Contracts and Commitments. Except as set forth in
Schedule 2.14, Zap Santa Cruz is not currently a party to nor is it currently
bound by:
(a) any employment or consulting agreement, contract or commitment with
any officer, director, employee or member of the Zap Santa Cruz's Board of
Directors, other than those that are terminable by Zap Santa Cruz at will;
(b) any bonus, deferred compensation, pension, profit sharing or
retirement plans, or any other employee benefit plans or arrangements;
(c) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation rights plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will be
accelerated, by the occurrence of any of the transactions contemplated by this
Agreement;
(d) any lease of personal property having a value individually in
excess of $500;
(e) any agreement of indemnification or guaranty;
(f) any agreement, contract or commitment containing any covenant
limiting in any respect the right of Zap Santa Cruz to engage in any line of
business or to compete with any person or granting any exclusive distribution
rights;
(g) any agreement relating to capital expenditures and involving future
payments in excess of $500;
(h) any mortgages, indentures, loans or credit agreements, security
agreements or other agreements or instruments relating to the borrowing of money
or extension of credit;
(i) any purchase order or contract involving $500 or more in total
payments;
(j) any construction contracts;
(k) any dealer, distribution, joint marketing (excluding joint
marketing agreements: (i) involving financial obligations or liabilities to the
Company; or (ii) that do not
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involve rights to sell Company Products to end-users), development, content
provider, destination site or merchant agreement;
(l) any agreement pursuant to which the Company has advanced or loaned
any amount to any shareholder of the Company or any director, officer, employee
or consultant;
(m) any settlement agreement entered into since the Company's initial
incorporation; or
(n) any other agreement that involves $500 in total payment or more or
is not cancelable without penalty within thirty (30) days.
Zap Santa Cruz has not, and has not received notice that it has,
breached, violated or defaulted under, any of the terms or conditions of any
agreement, contract or commitment required to be set forth on Schedule 2.14.
2.15 Change of Control Payments. Schedule 2.15 sets forth each plan or
agreement pursuant to which any amounts may become payable (whether currently or
in the future) to current or former officers, directors or employees of Zap
Santa Cruz as a result of or in connection with the Merger.
2.16 Interested Party Transactions. Except as set forth in Schedule
2.16, to Zap Santa Cruz's knowledge, no officer, director or affiliate (as
defined under Regulation C under the Securities Act) of Zap Santa Cruz (nor any
ancestor, sibling, descendant or spouse of any of such persons, or any trust,
partnership or corporation in which any of such persons has or has had an
economic interest), has or has had, directly or indirectly: (a) an economic
interest in any entity that purchases from or sells or furnishes to, Zap Santa
Cruz, any goods or services; or (b) a beneficial interest in any contract or
agreement set forth in Schedule 2.14; provided, that ownership of no more than
one percent of the outstanding voting stock of a publicly traded corporation
shall not be deemed an "economic interest in any entity" for purposes of this
Section 2.16. There are no receivables of Zap Santa Cruz owing by any director,
officer, employee or consultant to Zap Santa Cruz (or any ancestor, sibling,
descendant, or spouse of any such persons, or any trust, partnership, or
corporation in which any of such persons has an economic interest).
2.17 Compliance with Laws. Zap Santa Cruz is not in material conflict
with, or in default or violation in any material respect of any law, rule,
regulation, order, judgment or decree applicable to Zap Santa Cruz or by which
its properties is bound or affected. No investigation or review by any
governmental or regulatory body or authority is pending or, to the knowledge of
Zap Santa Cruz, threatened against Zap Santa Cruz.
2.18 Litigation. There is no action, suit or proceeding of any nature
pending or to Zap Santa Cruz's knowledge threatened against Zap Santa Cruz, its
properties or any of its officers, directors or employees. There is no
investigation pending or, to Zap Santa Cruz's knowledge, threatened against Zap
Santa Cruz, its properties or any of its officers, directors or employees by or
before any Governmental Entity.
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2.19 Insurance. With respect to the insurance policies and fidelity
bonds covering the assets, business, equipment, properties, operations,
employees, officers and directors of Zap Santa Cruz, there is no claim by Zap
Santa Cruz pending under any of such policies or bonds as to which coverage has
been denied or disputed by the underwriters of such policies or bonds.
2.20 Minute Books. The minute books of Zap Santa Cruz made available to
Zapworld are the only minute books of Zap Santa Cruz and contain an accurate
summary of all meetings of directors (or committees thereof) and shareholders or
actions by written consent since the time of incorporation of Zap Santa Cruz.
2.21 Environmental Matters. The Zap Santa Cruz: (a) has obtained all
applicable and material permits, licenses and other authorizations that are
required under Environmental Laws; (b) is in compliance with all material terms
and conditions of such required permits, licenses and authorizations, and also
is in compliance with all other material limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and timetables
contained in such laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder; (c) is not aware of and has not received notice of any
event, condition, circumstance, activity, practice, incident, action or plan
that is reasonably likely to interfere with or prevent continued compliance or
that would give rise to any common law or statutory liability, or otherwise form
the basis of any Environmental Claim with respect to Zap Santa Cruz or any
person or entity whose liability for any Environmental Claim Zap Santa Cruz has
retained or assumed either contractually or by operation of law; (d) has not
disposed of, released, discharged or emitted any Hazardous Materials into the
soil or groundwater at any properties owned or leased at any time by Zap Santa
Cruz, or at any other property, or exposed any employee or other individual to
any Hazardous Materials or condition in such a manner as would result in any
material liability or result in any corrective or remedial action obligation
under Environmental Laws; and (e) has taken all actions necessary under
Environmental Laws to register any products or materials required to be
registered by Zap Santa Cruz (or any of its agents) thereunder. No Hazardous
Materials are present in, on, or under any properties owned or leased at any
time (including both land and improvements thereon) by Zap Santa Cruz so as to
give rise to any liability or corrective or remedial obligation of Zap Santa
Cruz under any Environmental Laws. For the purposes of this Section 2.21,
"Environmental Claim" means any notice, claim, act, cause of action or
investigation by any person alleging potential liability (including potential
liability for investigatory costs, cleanup costs, governmental response costs,
natural resources damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from: (i) the presence, or release into
the environment, of any Hazardous Materials; or (ii) any violation, or alleged
violation, of any Environmental Laws. "Environmental Laws" means all federal,
state, local and foreign laws and regulations relating to pollution or the
environment (including ambient air, surface water, ground water, land surface or
subsurface strata) or the protection of human health and worker safety,
including, without limitation, laws and regulations relating to emissions,
discharges, releases or threatened releases of Hazardous Materials, or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials. "Hazardous Materials"
means chemicals, pollutants, contaminants, wastes, toxic
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substances, radioactive and biological materials, asbestos-containing materials
(ACM), hazardous substances, petroleum and petroleum products or any fraction
thereof, excluding, however, Hazardous Materials contained in products typically
used for office and janitorial purposes properly and safely maintained in
accordance with Environmental Laws.
2.22 Brokers' and Finders' Fees. Zap Santa Cruz has not incurred, nor
will it incur, directly or indirectly, any liability for brokerage or finders'
fees or agents' commissions or any similar charges in connection with this
Agreement or any transaction contemplated hereby.
2.23 Bank Accounts. Schedule 2.23 constitutes a full and complete list
of all the bank accounts and safe deposit boxes of Zap Santa Cruz, the number of
each such account or box, and the names of the persons authorized to draw on
such accounts or to access such boxes.
2.24 Indemnification Obligations. To Zap Santa Cruz's knowledge, there
is no action, proceeding or other event pending against any officer or director
of Zap Santa Cruz which would give rise to any indemnification obligation of Zap
Santa Cruz to its officers and directors under its Articles of Organization,
Bylaws or any agreement between Zap Santa Cruz and any of such officers or
directors.
ARTICLE III
REPRESENTATIONS/WARRANTIES OF ZAPWORLD
Zapworld represent and warrants to the Zap Santa Cruz as follows:
3.1 Organization of Parent and Merger Sub. Zapworld is a corporation
duly organized, validly existing and in good standing under the laws of the
State of California.
3.2 Authority. Zapworld has all requisite corporate power and authority
to enter into this Agreement and the execution, delivery and performance of this
Agreement have been duly authorized by all necessary corporate action on the
part of Zapworld. No vote of Zapworld's stockholders is required with respect to
this Agreement and the transactions contemplated thereby.
3.3 Zapworld Common Stock. The shares of Zapworld Common Stock to be
issued pursuant to the Merger will, when issued and delivered in accordance with
this Agreement, be duly authorized, validly issued, fully paid and
non-assessable and will be issued in compliance with applicable federal and
state securities laws; provided, however, that the Zapworld Common Stock to be
issued hereunder will be subject to restrictions on transfer under applicable
federal and state securities laws.
ARTICLE IV
SECURITIES ACT COMPLIANCE; REGISTRATION
4.1 Securities Act Exemption. Zapworld Common Stock to be issued
pursuant to this Agreement initially will not be registered under the Securities
Act in reliance on the exemptions from the registration requirements of Section
5 of the Securities Act set forth in
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Section 4(2) thereof. Prior to the Closing Date, each of Zap Santa Cruz's
shareholders shall have provided Zapworld such representations, warranties,
certifications and additional information as Zapworld may reasonably request to
ensure the availability of such exemptions from the registration requirements of
the Securities Act.
4.2 Stock Restrictions. In addition to any legend imposed by applicable
state securities laws or by any contract which continues in effect after the
Effective Time, the certificates representing the shares of Zapworld Common
Stock issued pursuant to this Agreement shall bear a restrictive legend (and
stop transfer orders shall be placed against the transfer thereof with
Zapworld's transfer agent), stating substantially as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "ACT").
THEY MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, OR HYPOTHECATED EXCEPT IN
COMPLIANCE WITH RULE 144 IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO, OR AN OPINION OF COUNSEL, SATISFACTORY TO
THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT, OR A
NO-ACTION LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION.
4.3 The Company Shareholders' Restrictions Regarding Securities Law
Matters. Each shareholder of the Zap Santa Cruz, by virtue of the Merger and the
conversion into Zapworld Common Stock of the Zap Santa Cruz's Capital Stock held
by such shareholder, shall be bound by the following provisions:
(a) Such shareholder will not offer, sell, or otherwise dispose of any
shares of Zapworld Common Stock except in compliance with the Securities Act and
the rules and regulations thereunder.
(b) Such shareholder will not sell, transfer or otherwise dispose of
any shares of Zapworld Common Stock unless: (i) such sale, transfer or other
disposition is within the limitations of and in compliance with Rule 144
promulgated by the SEC under the Securities Act and the Shareholder furnishes
Zapworld with reasonable proof of compliance with such Rule; (ii) in the opinion
of counsel, reasonably satisfactory to Zapworld and its counsel, some other
exemption from registration under the Securities Act is available with respect
to any such proposed sale, transfer, or other disposition of Zapworld Common
Stock; or (iii) the offer and sale of Zapworld Common Stock is registered under
the Securities Act.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Access to Information. The Zap Santa Cruz shall afford Zapworld and
its accountants, legal counsel and other representatives reasonable access
during normal business hours during the period prior to the Effective Time to:
(a) all of the properties, books, contracts, commitments and records of Zap
Santa Cruz; (b) all other information concerning the business, properties, and
personnel of the Zap Santa Cruz as Zapworld may reasonably request; and (c) all
key employees of Zap Santa Cruz as identified by Zapworld. Zap Santa Cruz agrees
to provide Zapworld and its accountants, legal counsel and other representatives
copies of internal financial statements promptly upon request.
5.2 Confidentiality. All information not previously disclosed to the
public which shall have been furnished by Zap Santa Cruz or Zapworld to the
other party shall not be disclosed prior to the Closing Date to any person other
than the party's respective employees, legal counsel, and accountants, in
confidence, or used for any purpose other than as contemplated herein.
5.3 Consents. Zap Santa Cruz shall promptly apply for or otherwise seek
and use reasonable commercial efforts to obtain all consents and approvals
required to be obtained by it for the consummation of the Merger, including all
consents, waivers or approvals under any of the Contracts which are necessary in
order to preserve the benefits thereunder for Zapworld, or otherwise in
connection with the Merger.
5.4 Legal Conditions to the Merger. Zapworld and Zap Santa Cruz will
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on such party with respect to the Merger and
will promptly cooperate with and furnish information to any other party hereto
in connection with any such requirements imposed upon such other party in
connection with the Merger
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Zap Santa Cruz. The obligations of Zap
Santa Cruz to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of the
representations and warranties of Zapworld contained in this Agreement.
6.2 Conditions to the Obligations of Zapworld. The obligations of
Zapworld to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing of the
representations and warranties of Zap Santa Cruz contained in this Agreement.
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ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
7.1 Survival of Representations and Warranties.
(a) All of the Zap Santa Cruz's representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement shall
terminate not later than 5:00 p.m., California time, the date which is one year
following the Closing Date (the "Expiration Date"); provided, however, that the
representations and warranties relating or pertaining to any Tax or Returns
related to such Tax set forth in Section 2.10 hereof, shall survive until the
expiration of all applicable statues of limitations, or extensions thereof,
governing each Tax or Returns related to such Tax.
(b) All of Zapworld's representations and warranties contained herein
or in any instrument delivered pursuant to this Agreement shall terminate at the
Effective Time.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination. Except as provided in Section 9.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to the
Closing Date:
(a) by mutual written consent duly authorized by the Board of Directors
of Zapworld and Zap Santa Cruz;
(b) by either Zapworld or Zap Santa Cruz if: (i) the Closing Date has
not occurred by January 20, 2000; (ii) there shall be a final non-appealable
order of a federal or state court in effect preventing consummation of the
Merger; or (iii) there shall be any statute, rule, regulation or order enacted,
promulgated or issued or deemed applicable to the Merger by any Governmental
Entity that would make consummation of the Merger illegal;
(c) by Zapworld, if there shall be any action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger, by any Governmental Entity, which would: (i) prohibit Zapworld's
ownership or operation of any portion of the business of Zap Santa Cruz; or (ii)
compel Zapworld to dispose of or hold separate, as a result of the Merger, any
portion of the business or assets of Zap Santa Cruz;
(d) by Zapworld, if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of Zap
Santa Cruz;
(e) by Zap Santa Cruz if, it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Zapworld;
Where action is taken to terminate this Agreement pursuant to Section
9.1, it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. Any termination of this Agreement under
Section 9.1 above will be effective immediately upon the delivery of written
notice of the terminating party.
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8.3 Amendment. Except as is otherwise required by applicable law, prior
to the Closing, this Agreement may be amended by the parties hereto at any time
only by execution of an instrument in writing signed by Zapworld and Zap Santa
Cruz.
8.4 Extension; Waiver. At any time prior to the Effective Time,
Zapworld and Zap Santa Cruz, may, to the extent legally allowed: (a) extend the
time for the performance of any of the obligations of the other party hereto;
(b) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto; and (c)
waive compliance with any of the agreements or conditions for the benefit of
such party contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or at the time sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
that notices sent by mail will not be deemed given until received:
(a) if to Zapworld, to:
Zapworld.com
117 Morris Street
Sebastopol, California 95472
Attention: Garry Starr, President
Telephone: (707) 824-4150
Facsimile: (707) 824-4159
with a copy to:
Evers & Hendrickson, LLP
155 Montgomery Street, 12th Floor
San Francisco, California 94104
Attention: William D. Evers, Esq.
Telephone: (415) 772-8100
Facsimile: (415) 772-8101
(b) if to Zap Santa Cruz, to:
Zap of Santa Cruz, Inc.
P.O. Box 1202
Santa Cruz, California 95061-1202
Attention: Rosemary Sarka
Telephone: (831) 458-3573
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9.2 Expenses. Each party will bear its respective expenses and legal
fees incurred with respect to this Agreement, and the transactions contemplated
hereby.
9.3 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement.
9.4 Entire Agreement; Assignment. This Agreement, the schedules and
Exhibits hereto, and the documents and instruments and other agreements among
the parties hereto referenced herein: (a) constitute the entire agreement among
the parties with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
9.5 Severability. In the event that any provision of this Agreement or
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto.
9.6 Arbitration. Any controversy between Zapworld and Zap Santa Cruz
involving the construction or application of any of the terms, provisions, or
conditions of this Agreement shall, on the written request of either party
served on the other, be submitted to mediation before a mediator suitable to
both parties. If the parties fail to resolve any such controversy through
mediation, such controversy shall, on the written request of either party served
on the other, be submitted to arbitration. Arbitration shall comply with and be
governed by the provisions of the California Arbitration Act.
9.7 Selection of Arbitrators. Zapworld and Zap Santa Cruz shall each
appoint one person to hear and determine the dispute. If the two persons so
appointed are unable to agree, then those persons shall select a third impartial
arbitrator whose decision shall be final and conclusive upon both parties.
9.8 Costs of Arbitration. The costs of arbitration shall be allocated
to the losing party or in such proportions as the arbitrators decide.
9.9 Attorneys' Fees and Costs. If any legal action (including mediation
and arbitration) is necessary to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to reasonable attorneys' fees,
costs, and necessary disbursements in addition to any other relief to which that
party may be entitled. This provision shall be construed as applicable to the
entire agreement.
9.10 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, regardless of the laws
that might otherwise govern under applicable principles of conflicts of laws
thereof. Each of the parties hereto consents to the jurisdiction and venue of
the federal and state courts for San Francisco, California for purposes of any
action arising out of this Agreement, and agrees that process may be served upon
them in any manner authorized by this Agreement for delivery of notices,
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and waives any covenants not to assert or plead any objection which they might
otherwise have to such jurisdiction and such process.
9.11 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
(THIS SPACE INTENTIONALLY LEFT BLANK)
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WITNESS WHEREOF, Zapworld and Zap Santa Cruz have caused this Agreement
to be signed by their duly authorized respective officers, all as of the date
first written above.
Zapworld.com
By: /s/ Gary Starr
--------------------------
Name: Gary Starr
Dated: ____________________ Title: President
By: /s/ William Evers
-------------------------
Name: William Evers
Dated:_____________________ Title: Assistant Secretary
Zap of Santa Cruz, Inc.
By: /s/ Michael F. Sarka
-------------------------
Name: Michael F. Sarka
Dated: ____________________ Title: President
By: /s/ Rosemary Sarka
-------------------------
Name: Rosemary Sarka
Dated: ____________________ Title: Secretary
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