EXHIBIT 2.1
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AGREEMENT AND PLAN OF MERGER
by and among
REQUESTAMERICA.COM, INC.,
a California corporation
WORLDBID CORPORATION,
a Nevada corporation
and
WORLDBID (ACQUISITION) CORPORATION,
a Nevada corporation
Dated as of February 2, 2001
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February 2,
2001, by and among Worldbid Corporation, a Nevada corporation ("Parent"),
Worldbid (Acquisition) Corporation, a Nevada corporation and the wholly-owned
subsidiary of Parent ("Sub"), and RequestAmerica.com, Inc., a California
corporation (the "Company"). Capitalized terms used and not otherwise defined
herein have the meanings set forth in Article 8.
RECITALS
A. The Boards of Directors of each of Parent, Sub and the Company have
determined that it is in the best interests of Parent, Sub and the Company (as
applicable) and their respective shareholders that Parent acquire the Company
through the merger of the Company with and into Sub (the "Merger") and, in
furtherance thereof, have approved the Merger, this Agreement and the
transactions contemplated hereby.
B. Pursuant to the Merger, among other things, and subject to the terms and
conditions of this Agreement, (i) all of the shares of capital stock of the
Company which are issued and outstanding immediately prior to the Effective Time
shall be converted into the right to receive shares of common stock, $0.001 par
value per share, of Parent ("Parent Common Stock"), and (ii) all Company Options
then outstanding will be converted into options exercisable for shares of Parent
Common Stock, on the terms and subject to the conditions set forth herein.
C. A portion of the shares of Parent Common Stock otherwise issuable or
reserved for issuance by Parent in connection with the Merger shall be subject
to future payment as set forth in Section 1.7 of this Agreement.
D. The Company, Sub and Parent desire to make certain representations,
warranties, covenants and agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the covenants, promises,
representations and warranties set forth herein, and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged by
the parties), intending to be legally bound hereby, the parties agree as
follows:
ARTICLE 1
THE MERGER
1.1 The Merger.
(a) At the Effective Time and upon the terms and subject to the
conditions of this Agreement and the applicable provisions of the
California Code and Nevada Law, the Sub shall be merged with and into the
Company, the separate corporate existence of the Sub shall cease, and the
Company shall continue as the surviving corporation ("Surviving
Corporation").
(b) The parties intend to adopt this Agreement as a tax-deferred plan
of reorganization and to consummate the Merger in accordance with the
provisions of Section 368(a)(1)(A)of the IRC by virtue of the provisions of
Section 368(a)(2)(E) of the IRC. However, Parent and Sub make no
representations or warranty to the Company or to any Company Shareholder or
other holder of Company securities regarding the tax treatment of the
Merger, whether the Merger will qualify as a tax-deferred plan of
reorganization under the IRC, or any of the tax consequences to any Company
Shareholder or such holder of this Agreement, the Merger or any of the
other transactions or agreements contemplated hereby, and the Company and
Company Shareholders acknowledge that the Company and Company Shareholders
are relying solely on their own tax advisors in connection with this
Agreement, the Merger and the other transactions contemplated by this
Agreement.
1.2 Effective Time. Unless this Agreement is earlier terminated pursuant to
Section 6.1, the closing of the Merger (the "Closing") will take place upon
satisfaction or waiver of the conditions set forth in Article 5 at the offices
of Brobeck, Phleger & Harrison LLP, 38 Technology Drive, Irvine, California
92618, unless another place or time is agreed to by Sub and the Company. 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 a Certificate of Merger (or like instrument), in
substantially the form attached hereto as Appendix 1.2 (the "Certificate of
Merger"), with the Secretary of State of the State of California, in accordance
with the relevant provisions of applicable law (the time of acceptance by the
Secretary of State of the State of California of such filing or such later time
as may be agreed to by the parties and set forth in the Certificate of Merger
being referred to herein as the "Effective Time").
1.3 Effect of the Merger on Constituent Corporations. At the Effective
Time, the effect of the Merger shall be as provided in the applicable provisions
of the California Code and Nevada Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the property, rights,
privileges, powers and franchises of the Company shall vest in the Surviving
Corporation, and all debts, liabilities, obligations, restrictions, disabilities
and duties of the Company shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation and By-Laws of Surviving Corporation.
(a) At the Effective Time, the articles of incorporation of the
Company, as in effect immediately prior to the Effective Time, shall be the
articles of incorporation of the Surviving Corporation until thereafter
amended as provided by law and such articles of incorporation and by-laws
of the Surviving Corporation.
(b) The by-laws of the Company, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by such by-laws, the articles of
incorporation and applicable law.
1.5 Directors and Officers of Surviving Corporation. The directors of Sub
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation,
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each to hold office in accordance with the articles of incorporation and by-laws
of the Surviving Corporation. The officers of Sub immediately prior to the
Effective Time shall be the officers of the Surviving Corporation, each to hold
office in accordance with the by-laws of the Surviving Corporation.
1.6 Shares of Parent Common Stock to be Issued; Effect on Outstanding
Securities of the Company. On the terms and subject to the conditions of this
Agreement, at the Effective Time, by virtue of the Merger and without any action
on the part of Sub, the Company or the holder of any shares of Company Common
Stock or Company Options, the following shall occur:
(a) Number of Shares of Parent Common Stock. The Company Shareholders
and holders of Company Options shall receive an interest in an aggregate of
Seven Hundred Fifty Thousand (750,000) shares of Parent Common Stock (less
the product of the Exchange Ratio multiplied by (i) any shares of Company
Common Stock to be cancelled pursuant to Section 1.6(c) and (ii) shares, if
any, held by Persons exercising dissenters rights in accordance with
Section 1.10) in accordance with this Section 1.6. No shares of Parent
Common Stock shall be issued to holders of Company Options, but rather, all
such Company Options shall be assumed by Parent in the manner set forth in
Section 1.6(d) below. Notwithstanding the foregoing, the aggregate number
of shares of Parent Common Stock issued in exchange for Company Common
Stock pursuant to this Section 1.6 (not including the Earn-Out Payment) and
the conversion of Company Options shall not exceed 750,000 shares.
(b) Conversion of Company Common Stock. Each share of Company Common
Stock issued and outstanding immediately prior to the Effective Time (other
than any shares of Company Common Stock to be cancelled pursuant to Section
1.6(c) and shares, if any, held by Persons exercising dissenters rights in
accordance with Section 1.10) shall be converted and exchanged, without any
action on the part of the holders thereof, into 0.0456093 shares of Parent
Common Stock (the "Exchange Ratio").
(c) Cancellation of Company Stock. Each share of Company Common Stock
owned by Parent, Sub or the Company immediately prior to the Effective Time
shall be automatically canceled and extinguished without any conversion
thereof and without any further action on the part of Parent, Sub or the
Company.
(d) Company Stock Plan. At the Effective Time, all options to purchase
Company Common Stock then outstanding under the Company's 2000 Stock
Option/Stock Issuance Plan (the "Company Stock Plan"), whether vested or
unvested ("Company Options"), shall be assumed by Parent, with such changes
as Parent may deem reasonably necessary, in connection with the Merger.
Each Company Option so assumed by Parent under this Agreement shall
continue to have, and be subject to, the same terms and conditions as were
applicable to such Company Option immediately prior to the Effective Time
(including, but not limited to, any repurchase rights or vesting
provisions), provided that (A) such Company Option shall be exercisable for
that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Common Stock that were
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issuable upon exercise of such Company Option immediately prior to the
Effective Time multiplied by the Exchange Ratio (rounded down to the
nearest whole number of shares of Parent Common Stock); (B) the per share
exercise price for the shares of Parent Common Stock issuable upon exercise
of such assumed Company Option, shall be equal to the quotient determined
by dividing the exercise price per share of Company Common Stock at which
such Company Option was exercisable immediately prior to the Effective Time
by the Exchange Ratio (rounded up to the nearest whole cent); and (C) the
Company Stock Plan shall be amended as may be requested by Parent. It is
the intention of the parties that the Company Options assumed by Parent
shall qualify following the Effective Time as incentive stock options as
defined in Section 422 of the Internal Revenue Code to the same extent the
Company Options qualified as incentive stock options immediately prior to
the Effective Time and the provisions of this Section 1.6(d) shall be
applied consistent with this intent.
(e) Registration on Form S-8. No later than twelve (12) months after
the Effective Time, Parent shall prepare and file with the SEC registration
statements on Form S-8 (or any successor or other appropriate form)
registering a number of shares of Parent Common Stock into which any
outstanding options issued under the Option Plan are convertible or
exercisable and shall use its commercially reasonable efforts to maintain
the effectiveness of such registration statements (and maintain the current
status of the prospectuses contained therein) for so long as any such
options remain outstanding.
(f) No Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of this Section 1.6, but in lieu thereof
each holder thereof who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the Closing Price on the
Closing Date.
(g) Capital Stock of Sub. At the Effective Time, each share of common
stock of Sub, par value $0.0001 per share ("Merger Sub Common Stock"),
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
nonassessable share of common stock, par value $0.01 per share, of the
Surviving Corporation ("Surviving Corporation Common Stock"). Each stock
certificate of Merger Sub evidencing ownership of Merger Sub Common Stock
shall evidence ownership of such shares of Surviving Corporation Common
Stock.
1.7 Earn-Out.
(a) If the Earn-Out Criteria, as set forth in Appendix 1.7, have been
satisfied on or prior to the second anniversary of the date of this
Agreement, at such time, Parent shall issue to those Company Shareholders,
set forth on Schedule 1.7 attached hereto, who were non-dissenting
shareholders as of the Effective Time, Parent Common Stock equal to the
total number of shares issuable pursuant to Section
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1.6(a), less the Indemnification Hold Back, if any, pursuant to the terms
set forth in Section 7.1 (representing 750,000 shares of Parent Common
Stock, less the product of the Exchange Ratio multiplied by (i) any shares
of Company Common Stock to be cancelled pursuant to Section 1.6(c) and (ii)
shares represented by Persons that received dissenters rights payments, if
any, in accordance with Section 1.10) and Parent shall pay cash in lieu of
fractional shares in accordance with Section 1.7(c) below (collectively,
the "Earn-Out Payment"). The Earn-Out Payment shall be equitably adjusted
to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock), reorganization,
reclassification, recapitalization or other like change with respect to
Parent Common Stock. Because all Company Options shall be assumed by Parent
in accordance with Section 1.6(d) above, no Earn-Out Payment shall be made
to holders of Company Options.
(b) Notwithstanding anything contained herein to contrary, in the
event that Parent effects a Corporate Transaction, then on the later of (i)
twelve months after the Effective Date or (ii) the consummation of the
Corporate Transaction, each former Company Shareholder entitled to an
Earn-Out Payment shall be paid the Earn-Out Payment as calculated in
accordance with Section 1.7(a) regardless of whether any portion of the
Earn-Out Criteria has been satisfied.
(c) No Fractional Shares. No fraction of a share of Parent Common
Stock will be issued by virtue of this Section 1.7, but in lieu thereof
each holder thereof who would otherwise be entitled to a fraction of a
share of Parent Common Stock (after aggregating all fractional shares of
Parent Common Stock to be received by such holder) shall receive from
Parent an amount of cash (rounded to the nearest whole cent) equal to the
product of (i) such fraction, multiplied by (ii) the Average Price.
1.8 Reservation of Shares. Parent will reserve sufficient shares of Parent
Common Stock for issuance pursuant to Sections 1.6(d) and 1.7.
1.9 Adjustments to Exchange Ratio. The Exchange Ratio shall be equitably
adjusted to reflect fully the effect of any stock split, reverse split, stock
combination, stock dividend (including any dividend or distribution of
securities convertible into Parent Common Stock or Company Common Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Parent Common Stock or Company Common Stock, the effective date of
which occurs after the date hereof and prior to the Effective Time.
1.10 Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any shares of Company Common Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with the
California Code and who, as of the Effective Time, has not effectively
withdrawn or lost such appraisal or dissenters' rights ("Dissenting
Shares") shall not be converted into or represent a right to receive Parent
Common Stock pursuant to Sections 1.6 and 1.7, but the
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holder thereof shall only be entitled to such rights as are granted by the
California Code.
(b) Notwithstanding the provisions of Section 1.10(a), if any holder
of shares of Company Common Stock who demands appraisal of such shares
under the California Code shall effectively withdraw or lose (through
failure to perfect or otherwise) the right to appraisal, then, as of the
later of (i) the Effective Time or (ii) the occurrence of such event, such
holder's shares shall automatically be converted into and represent only
the right to receive Parent Common Stock as provided in Sections 1.6 and
1.7, without interest thereon, upon surrender to the Company of the
certificate representing such shares in accordance with Section 1.11.
(c) The Company shall give Parent (i) prompt notice of its receipt of
any written demands for appraisal of any shares of Company Common Stock,
withdrawals of such demands, and any other instruments relating to the
Merger received by the Company and (ii) the opportunity to participate in
all negotiations and proceedings with respect to demands for appraisal
under the California Code. The Company shall not, except with the prior
written consent of Parent or as may be required under applicable law,
voluntarily make any payment with respect to any demands for appraisal of
Company Common Stock or offer to settle or settle any such demands.
1.11 Exchange Procedures.
(a) On the Closing Date, Parent or its agent shall deliver the
aggregate number of shares of Parent Common Stock issuable in exchange for
outstanding shares of Company Common Stock and cash in an amount sufficient
to permit the payment of cash in lieu of fractional shares pursuant to
Section 1.6(f).
(b) Exchange Procedures. At the Closing, each holder of record of a
certificate or certificates (the "Certificates") which immediately prior to
the Effective Time represented outstanding shares of Company Common Stock
and which shares were converted into the right to receive shares of Parent
Common Stock pursuant to Section 1.6, shall deliver the Certificates to
Parent. Upon surrender of a Certificate for cancellation and a stock power
endorsed in blank with respect to the shares held pursuant to Article 7,
Parent shall deliver to the holder of such Certificate in exchange therefor
a certificate representing the number of whole shares of Parent Common
Stock, to which such holder is entitled pursuant to Section 1.6, and the
Certificate so surrendered shall be canceled. Until surrendered, each
outstanding Certificate will be deemed, from and after the Effective Time,
for all corporate purposes, other than the payment of dividends, to
evidence the ownership of the number of full shares of Parent Common Stock
into which such shares of Company Common Stock shall have been so
converted.
(c) Distributions With Respect to Unexchanged Shares of Company Common
Stock. No dividends or other distributions with respect to Parent Common
Stock declared or made after the Effective Time and with a record date
after the Effective Time will be paid to the holder of any unsurrendered
Certificate with
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respect to the shares of Parent Common Stock represented thereby until the
holder of record of such Certificate shall surrender such Certificate.
Subject to applicable law, following surrender of any such Certificate,
there shall be paid to the record holder of the certificates representing
whole shares of Parent Common Stock issued in exchange therefor, without
interest, at the time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time theretofore
payable (but for the provisions of this Section 1.11(c)) with respect to
such whole shares of Parent Common Stock.
1.12 No Further Ownership Rights in Company Common Stock. All shares of
Parent Common Stock issued upon the surrender for exchange of shares of Company
Common Stock in accordance with the terms hereof (including any cash in lieu of
fractional shares) shall be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Company Common Stock, and there shall be
no further registration of transfers on the records of the Company of shares of
Company Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, Certificates are presented to the Surviving
Corporation for any reason, they shall be canceled and exchanged as provided in
this Article 1.
1.13 Lost, Stolen or Destroyed Certificates. In the event any certificates
evidencing shares of Company Common Stock shall have been lost, stolen or
destroyed, Parent or its agent shall cause certificates to be issued
representing such shares of Parent Common Stock in exchange for such lost,
stolen or destroyed Certificates, upon the making of an affidavit of that fact
by the holder thereof.
1.14 Exemption From Registration. The shares of Parent Common Stock to be
issued pursuant to Sections 1.6 and 1.7 in connection with the Merger will be
issued in a transaction exempt from registration provided under Rule 506 of
Regulation D promulgated under the Securities Act of 1933, as amended (the
"Securities Act").
1.15 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 or to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of the Company, the officers and directors of the Surviving
Corporation are fully authorized to take, and will use their reasonable efforts
to take, all such lawful and necessary action.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Sub, subject to
such exceptions as are specifically disclosed with respect to specific numbered
and lettered sections and subsections of this Article 2 in the disclosure
schedule (the "Company Disclosure Schedule") delivered herewith and dated as of
the date hereof, and numbered with corresponding numbered and lettered sections
and subsections, as follows:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of
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California. The Company is duly qualified to transact business and is in good
standing in each jurisdiction in which the failure to so qualify would have a
material adverse effect on its business or properties.
2.2 Capitalization and Voting Rights. The authorized capital of the Company
consists of:
(a) Common Stock. One Hundred Million (100,000,000) shares of common
stock, no par value, of which 15,387,500 shares are issued and outstanding.
(b) The outstanding shares of Company Common Stock are owned by the
shareholders and in the numbers specified in Appendix 2.2(b) hereto.
(c) The outstanding shares of Common Stock are all duly and validly
authorized and issued, fully paid and nonassessable, and were issued in
compliance with all applicable state and federal laws concerning the
issuance of securities.
(d) Except for currently outstanding options to purchase 1,056,500
shares of Company Common Stock granted to employees, directors, consultants
and advisers pursuant to the Company Stock Plan, there are not outstanding
any options, warrants, rights (including conversion or preemptive rights)
or agreements for the purchase or acquisition from the Company of any
shares of its capital stock. The Company is not a party or subject to any
agreement or understanding, and, to the Company's knowledge, there is no
agreement or understanding between any persons and/or entities, which
affects or relates to the voting or giving of written consents with respect
to any security or by a director of the Company.
(e) Parent's assumption of the Company Options pursuant to Section
1.6(d) hereof meets all of the requirements under the provisions of the
Company Stock Plan and any agreements thereunder.
(f) All securities of the Company (including, without limitation, the
Company Common Stock and Company Options) heretofore issued and sold by the
Company were issued and sold in compliance with all applicable federal and
state securities laws.
2.3 Subsidiaries. The Company does not presently own or control, directly
or indirectly, any interest in any other corporation, association, or other
business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.4 Authorization. All corporate action on the part of the Company, its
officers, directors and shareholders necessary for the authorization, execution
and delivery of this Agreement and the performance of all obligations of the
Company hereunder has been taken or will be taken prior to the Closing. The
Board of Directors of the Company has (i) unanimously approved this Agreement
and the Merger, (ii) determined that in its opinion the Merger is in the best
interests of the Company Shareholders and is on terms that are fair to such
shareholders and (iii) recommended that the Company Shareholders approve this
Agreement and the Merger. This Agreement constitutes the valid and legally
binding obligation of the Company, enforceable in accordance with its terms,
except (i) as limited by
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applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies. The execution and delivery of
this Agreement by the Company does not, and 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 material
obligation or loss of any material benefit under (i) any provision of the
Articles of Incorporation or Bylaws of the Company, as amended, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or any of its properties
or assets.
2.5 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of the Company is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for such filings as are required pursuant to applicable
federal and state securities laws and blue sky laws.
2.6 Litigation. There is no action, suit, proceeding or investigation
pending, or to the Company's knowledge, currently threatened against the Company
that questions the validity of this Agreement or the right of the Company to
enter into such agreement or to consummate the transactions contemplated hereby,
or that might result, either individually or in the aggregate, in any material
adverse change in the business, assets or condition of the Company, financially
or otherwise, or any change in the current equity ownership of the Company. The
Company is not a party or subject to the provisions of any order, writ,
injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company currently pending or that the Company intends to initiate.
2.7 Intellectual Property.
(a) Section 2.7A of the Company Disclosure Schedule sets forth a true
and complete list of all patents, patent rights, trademarks, trademark
rights, service marks, service mark rights, trade names, trade name rights
and copyrights necessary for its business (collectively, the "Intellectual
Property") and a description of all trade secrets, including know-how,
concepts, computer programs and other technical data, other than licenses
arising from the purchase of "off the shelf" or other standard products
necessary for the Company's business (the "Proprietary Information"). Any
intellectual property interests and rights of any other Person in the
Intellectual Property and Proprietary Information, or any portions thereof,
have been identified in Section 2.7B of the Company Disclosure Schedule.
Except as identified in Section 2.7B of the Company Disclosure Schedule,
the Company owns or has the right to use, without payment to any other
Person, all Intellectual Property and Proprietary Information, or portions
thereof, free and clear of all Liens. The Company has no notice or
knowledge of any objection or claim being asserted by any Person with
respect to the ownership, validity, enforceability or use of any such
Intellectual Property or Proprietary Information or challenging or
questioning the
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validity or effectiveness of any license relating thereto. The conduct of
the Company's business, as presently conducted and to the Company's
knowledge, as proposed to be conducted, does not violate, conflict or
infringe any contract, license, patent, copyright, trademark, trade secret,
or other intellectual property rights, or privacy, publicity or similar
rights of any other Person. There are no unresolved conflicts with, or
pending claims of, any other Person, whether in litigation or otherwise,
involving the Intellectual Property or the Proprietary Information, and
there are no Liens or rights of any other Person, including moral rights,
which would prevent the Company from fulfilling its obligations under this
Agreement. No activity or lack of activity of any employee, consultant, or
contractor of the Company has directly or indirectly resulted in any
unauthorized disclosure or unauthorized use of the Intellectual Property or
the Proprietary Information. The Company is not aware of any independently
developed trade secrets or technical information similar or identical to,
nor of any misappropriation of, its Intellectual Property or Proprietary
Information.
(b) Except as disclosed in Section 2.7C of the Company Disclosure
Schedule, the Company has not granted to any other person any options,
rights, licenses, or interests of any kind relating to the Intellectual
Property and Proprietary Information, or any portions thereof. Section 2.7C
of the Company Disclosure Schedule sets forth a true and complete list of
all such options, rights, licenses or interests.
2.8 Compliance with Other Instruments. The Company is not in violation in
any material respect of any provision of its Articles of Incorporation or Bylaws
nor, to its knowledge, in any material respect of any instrument, judgment,
order, writ, decree or contract, statute, rule or regulation to which the
Company is subject and a violation of which would have a material adverse effect
on the condition, financial or otherwise, or operations of the Company. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation, or
be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision or an event that
results in the creation of any lien, charge or encumbrance upon any assets of
the Company or the suspension, revocation, impairment, forfeiture or nonrenewal
of any material permit, license, authorization or approval applicable to the
Company, its business or operations or any of its assets or properties.
2.9 Agreements; Action.
(a) Except for agreements explicitly contemplated hereby, there are no
agreements, understandings or proposed transactions between the Company and
any of its officers, directors, affiliates or any affiliate thereof.
(b) Section 2.9(b) of the Company Disclosure Schedule sets forth a
true and complete list of all agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or by which it is bound that may involve (i)
obligations (contingent or otherwise) of, or payments to the Company, in
excess of $25,000, other than obligations of, or payments to, the Company
arising from purchase or sale agreements entered into in
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the ordinary course of business, (ii) the license of any patent, copyright,
trade secret or other proprietary right to or from the Company, other than
licenses arising from the purchase of "off the shelf" or other standard
products, and (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services.
(c) The Company has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities individually in excess of $25,000 or, in
the case of indebtedness and/or liabilities individually less than $25,000,
in excess of $100,000 in the aggregate, (iii) made any loans or advances to
any person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or entity
(including persons or entities the Company has reason to believe are
affiliated therewith) shall be aggregated for the purpose of meeting the
individual minimum dollar amounts of such subsections.
2.10 Financial Statements. The Company has delivered to Parent its
unaudited financial statements (balance sheet and statement of operations,
statement of shareholders' equity and statement of cash flows, including notes
thereto) at December 31, 1999 and December 31, 2000 and for the fiscal years
then ended (collectively, the "Financial Statements"). The Financial Statements
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods indicated and with each
other, except that the Financial Statements may not contain all footnotes
required by generally accepted accounting principles. The Financial Statements
fairly present the financial condition and operating results of the Company as
of the dates, and for the periods, indicated therein, subject in the case of
unaudited Financial Statements to normal year-end audit adjustments. Except as
set forth in the Financial Statements, the Company has no material liabilities,
contingent or otherwise, other than (i) liabilities incurred in the ordinary
course of business subsequent to December 31, 2000 and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required under generally accepted accounting principles to be reflected in the
Financial Statements, which, in both cases, individually or in the aggregate,
are not material to the financial condition or operating results of the Company.
Except as disclosed in the Financial Statements, the Company is not a guarantor
or indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with generally accepted accounting
principles.
2.11 Changes. Since December 31, 2000 there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the Company from that reflected in the Financial
Statements, except
11
changes in the ordinary course of business that have not been, in the
aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of the Company;
(c) any waiver by the Company of a valuable right or of a material
debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and that is not material to the assets, properties, financial
condition, operating results or business of the Company;
(e) any material change or amendment to a material contract or
arrangement by which the Company or any of its assets or properties is
bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee; or
(g) any agreement or commitment by the Company to do any of the things
described in this Section 2.11.
2.12 Tax Matters.
(a) The Company has timely filed all Tax Returns required to be filed
and has paid all Taxes due and payable as of the date of this Agreement
(whether or not shown as due on such returns), including, without
limitation, all Taxes which the Company is obligated to withhold for
amounts paid or owing to employees, creditors and third parties. All Tax
Returns filed by the Company were complete and correct in all material
respects, and such Tax Returns correctly reflected the material facts
regarding the income, business assets, operations, activities, status and
other matters of the Company and any other information required to be shown
thereon. None of the Tax Returns filed by the Company or Taxes payable by
the Company has been the subject of an audit, action, suit, proceeding,
claim, examination, deficiency or assessment by any governmental authority,
and no such audit, action, suit, proceeding, claim, examination,
deficiency, or assessment is currently pending or, to the knowledge of the
Company, threatened. The Company is not currently the beneficiary of any
extension of time within which to file any Tax Return, and the Company has
not waived any statute of limitation with respect to any Tax or agreed to
any extension of time with respect to a Tax assessment or deficiency. All
material elections with respect to Taxes affecting the Company, as of the
date hereof, are set forth in the Financial Statements or in Section
2.12(a) of the Company Disclosure Schedule. The Company has substantial
authority for the treatment of all positions taken on its Tax Returns, and
none of the Tax Returns filed by the Company contains a disclosure
statement under former Section 6661 of the IRC or Section 6662 of the IRC
(or any similar provision of state, local or foreign Tax law). The Company
is
12
not subject to any private letter ruling of the Internal Revenue Service or
comparable rulings of any other Taxing Authority.
(b) The Company is not a party to any agreement, contract, arrangement
or plan that has resulted or would result, separately or in the aggregate,
in the payment of (i) any "excess parachute payments" within the meaning of
Section 280G of the IRC (without regard to the exceptions set forth in
Sections 280G(b)(4) and 280G(b)(5) of the IRC) or (ii) any amount for which
a deduction would be disallowed or deferred under Section 162 or Section
404 of the IRC. The Company has not agreed to make any adjustment under
Section 481(a) of the IRC (or any corresponding provision of state, local
or foreign Tax law) by reason of a change in accounting method or
otherwise, and will not be required to make such an adjustment as a result
of the transactions contemplated by this Agreement. The Company is not, and
has not been, a U.S. real property holding company (as defined in Section
897(c)(2) of the IRC) during the applicable period specified in Section
897(c)(1)(A)(ii) of the IRC.
(c) No claim has ever been made by a Tax Authority in a jurisdiction
where the Company does not file Tax Returns in which it is or may be
subject to Tax in that jurisdiction. The Company is not a party to any
joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for federal income tax purposes. The Company has
not filed a consent pursuant to Section 341(f) of the IRC relating to
collapsible corporations.
(d) The Company is not a party to any Tax sharing agreement or similar
arrangement. The Company has never been a member of a group filing a
consolidated federal income Tax Return (other than a group the common
parent of which was the Company), and the Company has no liability for the
Taxes of any person (other than the Company) under Treasury Regulation
Section 1.1502-6 (or any corresponding provision of state, local or foreign
Tax law), as a transferee or successor, by contract, or otherwise. The
Company does not have any net operating losses or other tax attributes
presently subject to limitation under Sections 382, 383 or 384 of the IRC,
or the federal consolidated return regulations (other than limitations
imposed as a result of the transactions contemplated pursuant to this
Agreement).
(e) There are no liens for Taxes upon any of the assets of the
Company, other than for ad valorem Taxes not yet due and payable. The
unpaid Taxes of the Company do not exceed the reserve for actual Taxes (as
opposed to any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) as shown on the Financial
Statements, and will not exceed such reserve as adjusted for the passage of
time through the Closing Date in accordance with the past custom and
practice of the Company in filing its Tax Returns. The Company will not
incur any liability for Taxes from the date of Financial Statements through
the Closing Date other than in the ordinary course of business and
consistent with past practice.
13
(f) Section 2.12(f) of the Company Disclosure Schedule contains a list
of all jurisdictions (whether foreign or domestic) to which any Tax is
properly payable by the Company.
(g) The Company has not been either a "distributing corporation" or a
"controlled corporation" (within the meaning of Section 355(a)(1)(A) of the
IRC) in any distribution of stock qualifying for tax-free treatment under
the IRC.
2.13 Permits. The Company has all franchises, permits, licenses and any
similar authority necessary for the conduct of its business, the lack of which
could materially and adversely affect the business, properties or financial
condition of the Company. The Company is not in default in any material respect
under any of such franchises, permits, licenses or other similar authority.
2.14 Irrevocable Proxies. Holders of more than fifty-one percent (51%) of
the shares of each class of Company capital stock issued and outstanding have
delivered to Parent, concurrently with the execution of this Agreement, an
irrevocable proxy ("Irrevocable Proxy") to vote all shares held by such
shareholders in favor of the Merger.
2.15 Corporate Documents; Minute Books. The Articles of Incorporation and
Bylaws of the Company and the copies of share certificates, transfer books and
the minute books of the Company in the form previously provided to Parent and
its representatives are complete and correct. The minute books of the Company
contain accurate and complete records of all meetings held of, and corporate
action taken by, the shareholders, the board of directors and committees of the
board of directors of the Company, and no meeting of any such shareholders,
board of directors or committee has been held for which minutes have not been
prepared and are not contained in such minute books.
2.16 Title to Property and Assets. Section 2.16 of the Company Disclosure
Schedule sets forth a true and complete list of all property and assets of the
Company necessary for its business. Except as set forth on Section 2.16 of the
Company Disclosure Schedule, the property and assets of the Company are owned by
the Company free and clear of all mortgages, liens, loans and encumbrances,
except (i) as reflected in the Financial Statements, (ii) for statutory liens
for the payment of current taxes that are not yet delinquent, and (iii) for
liens, encumbrances and security interests that arise in the ordinary course of
business and minor defects in title, none of which, individually or in the
aggregate, materially impair the Company's ownership or use of such property or
assets. All the tangible personal property owned by the Company is in all
material respects in good operating condition and repair, ordinary wear and tear
excepted. With respect to the property and assets it leases, the Company is in
material compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances, subject to clauses
(i) through (iii) above.
2.17 Real Property. Section 2.17 of the Company Disclosure Schedule sets
forth a complete list of all real property and interests in real property leased
by the Company. The Company does not own any interests in real property in fee.
The Company has a good and valid leasehold interest in all real property and
interests in real property shown in Section 2.17 of the Company Disclosure
Schedule to be leased by it, in each case free and
14
clear of all Liens except Permitted Liens. Except as disclosed in Section 2.17
of the Company Disclosure Schedule, the Company has never owned, leased or used,
or controlled any other Person which has owned, leased or used, any real
property or interests in real property, other than as now owned, leased or used
by the Company.
2.18 Certain Employee Matters.
(a) The Company is not bound by or subject to (and none of its assets
or properties is bound by or subject to) any written or oral, express or
implied, contract, commitment or arrangement with any employee of or
independent contractor to the Company. To the knowledge of the Company, no
officer, director or other employee of the Company is a party to or bound
by any contract (including licenses, covenants or agreements of any nature)
or other commitment or obligation, or subject to any judgment, decree or
order of any governmental authority, that may interfere with the use of
such director's, officer's or other employee's best efforts to promote the
interests of the Company, conflict with the business of the Company (as now
conducted or as proposed to be conducted) or have a material adverse effect
on the Company or its business. To the knowledge of the Company, no
activity of any employee of the Company as or while an employee of the
Company has caused a violation of any employment contract, confidentiality
agreement, patent disclosure agreement or other contract or agreement by
which any such employee is bound. To the knowledge of the Company, the
conduct of the business of the Company as presently conducted, or as
proposed to be conducted, will not conflict with or result in a breach of
the terms, conditions or provisions of, or constitute a default under, any
contract, covenant or instrument under which any such employees are now
obligated, except for any conflict, breach or default which would not have
a material adverse effect on the Company.
(b) Except as disclosed in Section 2.18(b) of the Company Disclosure
Schedule, all current and former members of management and key personnel
(including all employees involved in the development of Intellectual
Property and Proprietary Information) of and consultants to the Company
have executed and delivered to the Company a proprietary right and
confidential information agreement in the form previously provided to
Parent or its counsel. No employee, agent, consultant or contractor
associated with any of the members of management or key personnel of the
Company who has contributed to or participated in the conception and
development of Intellectual Property and Proprietary Information or other
proprietary rights of the Company has asserted or threatened any claim
against the Company, including any claim of moral rights, in connection
with such Person's involvement in the conception and development of the
Intellectual Property and Proprietary Information or other proprietary
rights of the Company and no such Person has a reasonable basis for any
such claim.
(c) Neither the Company nor, to the Company's knowledge, any of its
officers or employees have any patents or copyrights issued or applications
pending for any device, process, design or invention of any kind now used
or needed by the Company in the furtherance of its business operations as
presently conducted or as proposed to be conducted, which patents,
copyrights or applications have not been
15
assigned to the Company with such assignment duly recorded in the United
States Patent and Trademark Office or with the United States Department of
Commerce, Library of Congress, as the case may be.
(d) Since the date of its incorporation, the Company has not
experienced any labor disputes, union organization attempts or work
stoppage due to labor disagreements. The Company is in compliance in all
material respects with all applicable laws respecting employment and
employment practices, occupational safety and health standards, terms and
conditions of employment and wages and hours, and is not engaged in any
unfair labor practice or any other unlawful practice that may give rise to
a claim. There is no unfair labor practice charge or complaint against the
Company pending or threatened before the National Labor Relations Board or
any comparable state agency or authority. There is no labor strike,
dispute, request for representation, slowdown or stoppage actually pending
or threatened against or affecting the Company. No question concerning
representation has been raised or is threatened respecting the employees of
the Company. No grievance which might have a material adverse effect on the
Company, nor any arbitration proceeding arising out of collective
bargaining agreements, is pending or threatened against the Company.
(e) The Company has properly classified all non-employee Persons
providing services to the Company, including all consultants, independent
contractors, or other persons that have or are performing services on
behalf of the Company. The Company is in compliance in all material
respects with all applicable equal employment opportunity laws, ordinances,
regulations, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, social security and similar taxes and occupation
safety and health and other applicable rules (the "Employment Regulations")
and is not engaged in any practice that may give rise to a claim under the
Employment Regulations. Other than as set forth in Section 2.18(d) of the
Company Disclosure Schedule, the Company (i) is not aware of any facts or
circumstances, which could form the basis for assertion of a claim or
liability, in each case, regarding non-compliance with Equal Opportunity
Discrimination laws, ordinances, regulations and other applicable rules,
and (ii) has not received notice of any discrimination claim or affirmative
action claim.
2.19 Benefit Plans.
(a) The Company does not have any Employee Benefit Plan as defined in
the Employee Retirement Income Security Act of 1974 ("ERISA"). All employee
benefits other than stock options are provided through Administaff
Companies, Inc. pursuant to the Administaff Contract.
(b) No facts or circumstances exist, no actions have been taken or
omitted to be taken, nothing has occurred, and nothing will occur as a
result of the execution of this Agreement or the consummation of the
transactions contemplated herein, such that the Company could be, or is,
subject (directly or indirectly, such as through an indemnification,
guarantee or similar agreement or obligation) to any liability for any
claims, judgments, damages, penalties, taxes (including excise taxes),
assessments or
16
similar items with respect to (i) any Benefit Plan currently or formerly
maintained by the Company or (ii) any Benefit Plan to which the Company has
contributed or has been obligated to contribute (other than liability for
benefit payments incurred in the normal operations of any such Benefit Plan
for periods preceding and through the Closing Date).
(c) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will (i) result in any
payment (including severance, unemployment compensation, golden parachute
or otherwise) becoming due to any director or any employee of the Company
under any Benefit Plan or otherwise, (ii) increase any benefits otherwise
payable under any Benefit Plan or (iii) result in any acceleration of the
time of payment or vesting of any such benefit.
2.20 Environmental and Safety Matters.
(a) The Company is not in violation of any Environmental Law relating
to the properties or facilities of the Company at which any part of the
Company's business is conducted, except where the violation would not
reasonably be expected to have a material adverse effect on the Company or
its business. The Company has not used, generated, manufactured or stored
on or under any part of its properties or facilities at which any part of
the Company's business is conducted, or transported to or from any part
thereof, any Hazardous Materials in violation of any applicable
Environmental Laws, except where the violation would not reasonably be
expected to have a material adverse effect on the Company or its business.
To the knowledge of the Company, there has not been any presence, disposal,
or release by the Company of any Hazardous Materials on, from or under any
part of the Company's properties or facilities at which any part of the
Company's business is conducted. No civil, criminal or administrative
action, proceeding or investigation is pending against the Company, or to
the Company's knowledge, threatened against the Company, and the Company is
not aware of any facts or circumstances which could form the basis for
assertion of a claim or liability, in each case, regarding non-compliance
with Environmental Laws relating to the Company's business.
(b) The Company is not in violation of any applicable statute, law or
regulation relating to the occupational health and safety, and to its
knowledge, no material expenditures are or will be required in order to
comply with any such existing statute, law or regulation.
2.21 Brokers' or Finders' Fees. No agent, broker, investment banker or
other person or firm acting on behalf of the Company or any of its directors or
executive officers, or under the authority of any of them will be entitled to
any broker's or finder's fee or any other commission or similar fee, directly or
indirectly, from the Company in connection with any of the transactions
contemplated hereby.
2.22 No Bankruptcy, etc. There has not been filed any petition or
application, or any proceedings commenced which have not been discharged, by or
against the Company or any of its assets under any law, domestic or foreign,
relating to bankruptcy, reorganization,
17
compromise arrangements, insolvency, readjustment of debt or creditors rights,
and no assignment or proposal for the benefit of creditors has been made by the
Company.
2.23 Disclosure. The Company has not failed to disclose to Parent any facts
which would have a material adverse effect on the Company or its business. No
representation or warranty of the Company contained in this Agreement contains
or will contain any untrue statement of a material fact or omits or will omit to
state any material fact necessary, in light of the circumstances under which it
was or will be made, in order to make the statements herein or therein not
misleading or necessary in order to fully and fairly provide the information
required to be provided by this Agreement.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF Parent AND SUB
Parent and Sub hereby represent and warrant to the Company, subject to such
exceptions as are specifically disclosed with respect to specific numbered and
lettered sections and subsections of this Article 3 in the disclosure schedule
(the "Parent Disclosure Schedule") delivered herewith and dated as of the date
hereof, and numbered with corresponding numbered and lettered sections and
subsections, as follows:
3.1 Organization and Qualification. Each of Parent and Sub is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation. Each of Parent and Sub is duly qualified to
transact business and is in good standing in each jurisdiction in which the
failure to so qualify would have a material adverse effect on its business or
properties.
3.2 Capitalization and Voting Rights. The authorized capital of Parent
consists of:
(a) 100,000,000 shares of Parent Common Stock, $0.001 par value per
share, of which 15,800,000 shares are issued and outstanding. 1,000,000
shares of preferred stock, $0.0001 par value per share, of which no shares
are issued and outstanding.
(b) The outstanding shares of Parent Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable, and were
issued in compliance with all applicable state and federal laws concerning
the issuance of securities.
(c) Schedule 3.2(c) sets forth the currently outstanding options,
warrants and other rights exercisable to purchase an aggregate of 5,560,000
shares of Parent Common Stock, including 1,710,000 shares granted to
employees pursuant to Parent's employee stock option plan (the "Parent
Option Plan"). Except as set forth on Schedule 3.2(c), there are no
outstanding options, warrants, rights (including conversion or preemptive
rights) or agreements for the purchase or acquisition from Parent or Sub of
any shares of their respective capital stock. In addition to the
aforementioned options, Parent has reserved an additional 547,500 shares of
Parent Common Stock for purchase upon exercise of options to be granted in
the future under the Parent Option Plan. Except as set forth on Schedule
3.2(c), neither Parent nor Sub is a party to or subject to any agreement or
understanding, and, to Parent's and Sub's knowledge, there is no agreement
or understanding between any Persons
18
which affects or relates to the voting or giving of written consents with
respect to any security or by a director of Parent or Sub.
3.3 Authorization. All corporate action on the part of Parent and Sub and
their respective officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement and the performance of
all obligations hereunder has been taken or will be taken prior to the Closing.
This Agreement constitutes the valid and legally binding obligation of Parent
and Sub, enforceable in accordance with its terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium and other laws of
general application affecting enforcement of creditors' rights generally and
(ii) as limited by laws relating to the availability of specific performance,
injunctive relief or other equitable remedies. The execution and delivery of
this Agreement by Parent and Sub does not, and 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 material obligation or loss of any material benefit under (i) any provision
of the Articles of Incorporation or Bylaws of Parent or Sub, or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Sub or any of their
respective properties or assets.
3.4 Governmental Consents. No consent, approval, order or authorization of,
or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of Parent or Sub is
required in connection with the consummation of the transactions contemplated by
this Agreement, except for such filings as are required pursuant to applicable
federal and state securities laws and blue sky laws.
3.5 Litigation. There is no action, suit, proceeding or investigation
pending, or to Parent's or Sub's knowledge, currently threatened against either
Parent or Sub that questions the validity of this Agreement or the right of
either Parent or Sub to enter into such agreement or to consummate the
transactions contemplated hereby, or that might result, either individually or
in the aggregate, in any material adverse change in the business, assets or
condition of either Parent or Sub, financially or otherwise, or any change in
the current equity ownership of Parent or Sub. Neither Parent nor Sub is a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by either Parent or Sub currently pending or that
either Parent or Sub intends to initiate.
3.6 Issuance of Parent Common Stock. The shares of Parent Common Stock to
be issued pursuant to the Merger, when issued in compliance with the terms of
this Agreement, will be duly authorized, validly issued, fully paid,
non-assessable and issued in compliance with applicable federal and state
securities laws.
3.7 No Conflicts. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby will not result in
any violation of Parent's or Sub's charter, bylaws or other governing document,
or be in conflict with or constitute, with or without the passage of time and
giving of notice, either a default under any such provision or an event that
results in the creation of any lien, charge or encumbrance
19
upon any assets of Parent or Sub or the suspension, revocation, impairment,
forfeiture or nonrenewal of any material permit, license, authorization or
approval applicable to Parent or Sub, their respective business or operations or
any of their respective assets or properties.
3.8 Brokers' or Finders' Fees. No agent, broker, investment banker or other
person or firm acting on behalf of Parent, Sub or any of their respective
directors or executive officers, or under the authority of any of them will be
entitled to any broker's or finder's fee or any other commission or similar fee,
directly or indirectly, from Parent or Sub in connection with any of the
transactions contemplated hereby.
3.9 Disclosure. Neither Parent nor Sub has failed to disclose to the
Company any facts, which would have a material adverse effect on Parent, Sub,
the Surviving Corporation or any of their respective business. No representation
or warranty of Parent or Sub contained in this Agreement contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was or
will be made, in order to make the statements herein or therein not misleading
or necessary in order to fully and fairly provide the information required to be
provided by this Agreement.
ARTICLE 4
ADDITIONAL AGREEMENTS
4.1 Registration Exemption and Resale. The parties hereto acknowledge and
agree that: (i) as a condition to effecting the issuance of Parent Common Stock
hereunder, Parent shall be entitled to obtain from each Company Shareholder a
Shareholder Certificate in the form attached hereto as Appendix 4.1 (or such
other form as shall be reasonably satisfactory to Parent) (the "Shareholder
Certificate") and that Parent will be relying upon the representations made by
each Company Shareholder in the applicable Shareholder Certificate in connection
with the issuance of Parent Common Stock to such shareholder, (ii) the shares of
Parent Common Stock issued pursuant to Sections 1.6 and 1.7 will not be
registered under the Securities Act and will constitute "restricted securities"
within the meaning of the Securities Act; and (iii) the certificates
representing the shares of Parent Common Stock shall bear appropriate legends to
identify such shares as being restricted under the Securities Act, to comply
with applicable state securities laws and, if applicable, to provide notice of
any applicable restrictions on transfer of such shares.
4.2 Shareholder Approval. As soon as practicable following the execution
and delivery of this Agreement, the Company shall give written notice of this
Agreement and the proposed Merger to all Company Shareholders and shall use
commercially reasonable efforts to take all other action necessary in accordance
with the California Code and its articles of incorporation and bylaws to convene
a meeting of the Company Shareholders or to secure the written consent of its
shareholders ("Company Shareholder Action") before February 28, 2001. The
Company shall submit this Agreement to the Company Shareholders for adoption
whether or not the Company's board of directors determines at any time
subsequent to declaring its advisability that this Agreement is no longer
advisable and recommends that the Company Shareholders reject it. The Company
shall consult with Sub regarding the date of the Company Shareholder Action and
shall not postpone or adjourn (other than for the absence of a quorum) any
meeting of the Company Shareholders
20
without the consent of Sub, which consent shall not be unreasonably withheld.
The Company shall use all commercially reasonable efforts required to solicit
and obtain from Company Shareholders proxies or written covenants in favor of
the Merger and shall take all other action necessary or advisable to secure the
vote or consent of shareholders required to effect the Merger. The materials
submitted to the Company Shareholders in respect of the Merger shall have been
subject to prior review and comment by Sub and shall include (a) information
regarding the Company, the terms of the Merger and this Agreement, (b) the
unanimous recommendation of the board of directors of the Company that the
Company Shareholders adopt this Agreement and approve and execute such other
documents as may be required to satisfy the applicable requirements of the
Securities Act in connection with the issuance and sale of Parent Common Stock
in the Merger and (c) the conclusion of the board of directors of the Company
that the terms and conditions of the Merger are advisable, fair and reasonable
to, and in the best interests of, the Company Shareholders.
4.3 Confidentiality. Each of the parties hereto hereby agrees to keep the
existence and terms of this Agreement (except to the extent contemplated hereby)
and such information or knowledge obtained in any investigation, or pursuant to
the negotiation and execution of this Agreement or the effectuation of the
transactions contemplated hereby, confidential; provided, however, that the
foregoing shall not apply to information or knowledge which (a) a party can
demonstrate was already lawfully in its possession prior to the disclosure
thereof by the other party, (b) is generally known to the public and did not
become so known through any violation of law, or a confidentiality agreement or
other contractual, legal or fiduciary obligation of confidentiality of the
disclosing party or any other party with respect to such information, (c) became
known to the public through no fault of such party, (d) is later lawfully
acquired by such party without confidentiality restrictions from other sources
not bound by applicable confidentiality restrictions, (e) is required to be
disclosed by order of court or Governmental or Regulatory Authority with
subpoena powers (provided that such party shall have provided the other party
with prior notice of such order and an opportunity to object or seek a
protective order and take any other available action), (f) is required to be
disclosed by applicable law or (g) which is disclosed in the course of any legal
action or other proceeding between any of the parties hereto.
4.4 Expenses. Whether or not the Merger is consummated, all fees and
expenses incurred in connection with the Merger including all legal, accounting,
financial advisory, consulting and all other fees and expenses of third parties
("Third Party Expenses") incurred by a party in connection with the negotiation
and effectuation of the terms and conditions of this Agreement and the
transactions contemplated hereby, shall be the obligation of the respective
party incurring such fees and expenses.
4.5 Approvals. The Company shall use commercially reasonable efforts to
obtain all Approvals from Governmental or Regulatory Authorities or under any of
the Contracts or other agreements as may be required in connection with the
Merger (all of such Approvals are set forth in the Disclosure Schedule) so as to
preserve all rights of and benefits to the Company thereunder and Sub shall
provide the Company with such assistance and information as is reasonably
required to obtain such Approvals.
21
4.6 Observation Rights. For the initial twelve (12) month period after the
date of this Agreement, the Company shall be entitled to designate one
individual (the "Observer") to attend and observe any regular or special meeting
of the Board of Directors of Parent. Parent shall give such Observer copies of
all notices, minutes, consents and other materials that it provides to its
directors. The initial Observer shall be Roy Berelowitz.
4.7 Market Listing. Parent shall use its best efforts to cause the shares
of Parent Common Stock to be issued in the Merger to be qualified for quotation
on the NASD over-the-counter bulletin board, subject to official notice of
issuance, if applicable, prior to the Closing Date. At all times, Parent shall
ensure that the number of authorized but unissued shares of Parent Common Stock
are sufficient to permit the exercise of the Company Options. Parent shall cause
the Parent Common Stock issuable pursuant to the Company Options, at the time of
such issuance, to be duly authorized, validly issued, fully-paid and
non-assessable and free and clear of any lien, pledge, security interest, claim
or other encumbrance.
4.8 Administaff Contract. Parent shall use reasonable commercial efforts to
assume the Administaff Contract and to maintain the Administaff Contract in full
force and effect until at least the second anniversary of the date of this
Agreement.
4.9 Company Conduct of Business. Except as expressly contemplated by this
Agreement, from the date of this Agreement until the earlier to occur of the
Closing or the termination of this Agreement, the Company shall not cause or
permit any of the following, without the prior written consent of Parent:
(a) Charter Documents. Amend the Company's Articles of Incorporation
or Bylaws;
(b) Issuances of Securities. Issue or sell any shares of its capital
stock or other securities, or issue, grant or sell any options, rights or
warrants with respect thereto, or acquire any capital stock or other
securities of any Person, or any equity interest in any Person or otherwise
make any loan or advance to or investment in any Person;
(c) Dividends; Changes in Capital Stock. Declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any of its capital stock, or split, combine or reclassify any of
its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, or repurchase or otherwise acquire, directly or indirectly,
any shares of its capital stock;
(d) Employee Plans. Increase, terminate, amend, or otherwise modify
any plan for the benefit of its employees;
(e) Intellectual Property. Transfer to any person or entity any rights
to its Intellectual Property other than pursuant to non-exclusive license
arrangements in the ordinary course of business consistent with past
practice;
22
(f) Exclusive Rights. Enter into or amend any agreements pursuant to
which any other party is granted exclusive marketing or other exclusive
rights of any type or scope with respect to any of its products or
technology;
(g) Assets. Sell, lease, license or otherwise dispose of, or write-off
or write-up or encumber, any of its properties or assets except in the
ordinary course of business consistent with past practices or where the
Company has reserved on its balance sheet for the disposition, write-off or
encumbrance of such properties or assets;
(h) Indebtedness. Other than in the ordinary course of business, incur
any indebtedness for borrowed money or guarantee any such indebtedness or
issue or sell any debt securities or guarantee any debt securities of
others;
(i) Capital Expenditures. Make any capital expenditures, capital
additions or capital improvements in excess of $25,000;
(j) Acquisitions. Acquire or agree to acquire by merging or
consolidating with, or by purchasing a substantial portion of the assets
of, or by any other manner, any business or any corporation, partnership,
association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets which are material,
individually or in the aggregate, to its business;
(k) Taxes. Other than in the ordinary course of business, make or
change any material election in respect of Taxes, adopt or change any
accounting method in respect of Taxes, enter into any closing agreement in
respect of Taxes, settle any claim or assessment in respect of Taxes, or
consent to any extension or waiver of the limitation period applicable to
any claim or assessment in respect of Taxes;
(l) Acceleration or Modification. Accelerate the vesting or otherwise
modify any options, restricted stock or other outstanding rights or other
securities; and
(m) Other. Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.9(a) through (l) above or any action which
would make any of its representations or warranties contained in this
Agreement materially untrue or incorrect or prevent it from performing or
cause it not to perform its covenants hereunder.
4.10 Indemnification.
(a) The Company shall and, from and after the Effective Time, Parent
and the Surviving Corporation shall, indemnify, defend and hold harmless
each Person who is now, or has been at any time prior to the date of this
Agreement or who becomes prior to the Effective Time, an officer, director
or employee of the Company (the "Indemnified Parties") against all losses,
claims, damages, costs, expenses, liabilities or judgments or amounts that
are paid in settlement with the approval of the Indemnifying Party (which
approval shall not be unreasonably withheld) of or in connection with any
claim, action, suit, proceeding or investigation based in whole or in part
on or arising in whole or in part out of the fact that such
23
person is or was a director, officer, or employee of the Company, whether
pertaining to any matter existing or occurring at or prior to the Effective
Time and whether asserted or claimed prior to, or at or after, the
Effective Time ("Indemnified Liabilities") including, without limitation,
all losses, claims, damages, costs, expenses, liabilities or judgments
based in whole or in part on, or arising in whole or in part out of, or
pertaining to this Agreement or the transactions contemplated hereby, in
each case to the full extent a corporation is permitted under the
California Code to indemnify its own directors, officers and employees, as
the case may be (the Company, Parent and the Surviving Corporation, as the
case may be, will pay expenses in advance of the final disposition of any
such action or proceeding to each Indemnified Party to the full extent
permitted by law upon receipt of any undertaking contemplated by the
California Code). Without limiting the foregoing, in the event any such
claim, action, suit, proceeding or investigation is brought against any
Indemnified Party (whether arising before or after the Effective Time), (i)
the Indemnified Parties may retain counsel satisfactory to them and the
Company (or them and Parent and the Surviving Corporation after the
Effective Time), (ii) the Company (or after the Effective Time, Parent and
the Surviving Corporation) shall pay all reasonable fees and expenses of
such counsel for the Indemnified Parties promptly as statements therefor
are received, and (iii) the Company (or after the Effective Time, Parent
and the Surviving Corporation) will use all reasonable efforts to assist in
the vigorous defense of any such matter, provided that none of the Company,
Parent or the Surviving Corporation shall be liable for any settlement of
any claim effected without its written consent, which consent, however,
shall not be unreasonably withheld. Any Indemnified Party wishing to claim
indemnification under this Section 4.10, upon learning of such claim,
action, suit, proceeding or investigation, shall promptly notify the
Company, Parent or the Surviving Corporation (but the failure to so notify
an Indemnifying Party shall not relieve such parties from any liability
which they may have under this Section 4.10, except to the extent such
failure prejudices such party), and shall deliver to the Company (or after
the Effective Time, Parent and the Surviving Corporation) the undertaking
contemplated by the California Code. The Indemnified Parties as a group may
retain only one law firm to represent them with respect to each such matter
unless there is, under applicable standards of professional conduct, a
conflict on any significant issue between the positions of any two or more
Indemnified Parties. The obligations of the parties set forth in this
Section 4.10(a) shall be in furtherance of and not in limitation of the
succeeding paragraphs of this Section 4.10.
(b) From and after the Effective Time, the Surviving Corporation and
Parent will fulfill, assume and honor in all respects the obligations of
the Company pursuant to the Company's Articles of Incorporation as in
effect immediately prior to the Effective Time and any indemnification
agreement between the Company and any of the Company's directors and
officers existing and in force as of the Effective Time.
(c) Parent and the Surviving Corporation shall, until the second
anniversary of the Effective Time or such earlier date as may be mutually
agreed upon by Parent, the Surviving Corporation and the applicable
Indemnified Party, cause to be maintained in effect, to the extent
available, the policies of directors' and officers' liability insurance
maintained by the Company as of the date hereof (or policies of at
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least the same coverage and amounts containing terms that are no less
advantageous to the insured parties) with respect to claims arising from
facts or events that occurred on or prior to the Effective Time.
4.11 Tax Matters.
(a) The Company shall prepare and file all Tax Returns relating to the
Company that are required to be filed on or prior to the Closing Date, and
shall pay, or cause to be paid, any and all Taxes due with respect to such
Tax Returns. All such Tax Returns shall be prepared in a manner consistent
with prior practice, and copies of such Tax Returns shall be provided to
Parent at least 30 days prior to the deadline for the filing of such Tax
Returns. If the Company is permitted, but not required, under applicable
Tax laws to treat the Closing Date as the last day of a Tax period, the
parties shall treat the Tax period as ending on the Closing Date. With
respect to any post-Closing period, the Company Shareholders shall not file
or cause to be filed any Tax Return for a post-Closing period on behalf of
the Company, Surviving Corporation or Parent.
(b) Parent and the Company shall promptly notify each other in writing
of any notice of any Tax audits of or assessments against the Company for
any pre-Closing periods. The failure of one party to notify the other party
of any such audit or assessment shall not relieve the other party of its
indemnification obligations under this Agreement except to the extent any
such failure actually prejudices the defense of any Tax claim.
4.12 Additional Documents and Further Assurances. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied. Each party hereto, at the request of the
other party hereto, shall execute and deliver such other instruments and do and
perform such other acts and things (including, but not limited to, all action
reasonably necessary to seek and obtain any and all consents and approvals of
any Government or Regulatory Authority or Person required in connection with the
Merger).
ARTICLE 5
CONDITIONS TO THE MERGER
5.1 Conditions to Obligations of Each Party to Effect the Merger. The
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Closing of the following
conditions:
(a) No Injunctions or Regulatory Restraints; Illegality. No temporary
restraining order, preliminary or permanent injunction or other Order
issued by any court of competent jurisdiction or Governmental or Regulatory
Authority or other legal or regulatory restraint or prohibition preventing
the consummation of the Merger shall be in effect; nor shall there be any
action taken, or any law or Order enacted, entered, enforced or deemed
applicable to the Merger or the other transactions contemplated by the
terms of this Agreement that would prohibit the consummation of the Merger
or which would permit consummation of the Merger
25
only if certain divestitures were made or if Sub were to agree to
limitations on its business activities or operations.
(b) Legal Proceedings. No Governmental or Regulatory Authority shall
have notified either party to this Agreement that such Governmental or
Regulatory Authority intends to commence proceedings to restrain or
prohibit the transactions contemplated hereby or force rescission, unless
such Governmental or Regulatory Authority shall have withdrawn such notice
and abandoned any such proceedings prior to the time which otherwise would
have been the Closing Date.
(c) Shareholder Approval. The Merger shall have been approved by the
requisite votes of the Company Shareholders in accordance with the
California Code.
5.2 Additional Conditions to Obligations of the Company. The obligations of
the Company to consummate the Merger and the other transactions contemplated by
this Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in writing,
exclusively by the Company:
(a) Representations and Warranties. Each of the representations and
warranties made by Parent and Sub in this Agreement shall be true and
correct in all material respects (if not qualified by materiality) and in
all respects (if qualified by materiality) when made and on and as of the
Closing Date as though such representation or warranty was made on and as
of the Closing Date.
(b) Performance. Parent and Sub shall have performed and complied with
in all material respects each agreement, covenant and obligation required
by this Agreement to be so performed or complied with by such party at or
before the Closing Date.
(c) Corporate Officers' Certificates. Each of Parent and Sub shall
have delivered to the Company a certificate, dated the Closing Date and
executed by an authorized officer, substantially in the form set forth in
Appendix 5.2(c) hereto.
5.3 Additional Conditions to the Obligations of Parent and Sub. The
obligations of Parent and Sub to consummate the Merger and the other
transactions contemplated by this Agreement shall be subject to the satisfaction
at or prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Parent and Sub:
(a) Representations and Warranties. Each of the representations and
warranties made by the Company in this Agreement shall be true and correct
in all material respects (if not qualified by materiality) and in all
respects (if qualified by materiality) when made and on and as of the
Closing Date as though such representation or warranty was made on and as
of the Closing Date.
(b) Performance. The Company shall have performed and complied with in
all material respects each agreement, covenant and obligation required by
this Agreement to be so performed or complied with by the Company on or
before the Closing Date.
26
(c) Corporate Officers' Certificates. The Company shall have delivered
to Parent and Sub a certificate, dated the Closing Date and executed by an
authorized officer, substantially in the form set forth in Appendix 5.3(c)
hereto.
(d) Third Party Consents. Parent and Sub shall have been furnished
with evidence satisfactory to them that the Company has obtained the
consents, approvals and waivers necessary for the execution of this
Agreement and the consummation of the transactions contemplated hereby
(except for such consents, approvals and waivers the failure of which to
receive could not reasonably be expected to have a material adverse effect
on the Company).
(e) Limitation on Dissent. Holders of no more than five percent of the
outstanding shares of Company Common Stock shall have exercised, nor shall
they have any continued right to exercise, appraisal, dissenters' or
similar rights under applicable law with respect to their shares by virtue
of the Merger.
(f) Delivery of Documents. There shall have been delivered to Parent
the following:
(i) a properly executed statement by the Company satisfying the
requirements of Treasury Regulation Sections 1.897-2(h) and
1.1445-2(c)(3) in a form reasonably acceptable to Parent and any
clearance certificate or similar document(s) which may be required by
any governmental authority related to Taxes;
(ii) a certificate of the Secretary or Assistant Secretary of the
Company, dated the Closing Date, as to the continued existence of the
Company, certifying an attached copy of the Bylaws of the Company, the
authorization of the execution, delivery and performance of this
Agreement, the resolutions adopted by the Board of Directors of the
Company authorizing the actions to be taken by the Company under this
Agreement and the approval of the Merger by the Company Shareholders;
(iii) a certificate of the Secretary of State of the State of
California, dated not more than ten (10) days prior to the Closing
Date, to the effect that the Company is in good standing in the State
of California and that all annual reports, if any, have been filed as
required and that all fees have been paid in connection therewith; and
(iv) the Shareholder Certificates as provided for in Section 4.1.
(g) Approval of Parachute Payments. With respect to all payments that
would constitute "excess parachute payments" (within the meaning of Section
280G of the IRC) but for the exceptions set forth in Sections 280G(b)(4)
and 280G(b)(5) of the IRC, the Company shall have obtained the shareholder
approval described in Section 280G(b)(5)(B) of the IRC so that such
payments will not be nondeductible under Section 280G of the IRC and will
not be subject to the tax imposed under Section 4999 of the IRC.
27
ARTICLE 6
TERMINATION; AMENDMENT AND WAIVER
6.1 Termination. Except as provided in Section 6.2 below, this Agreement
may be terminated and the Merger abandoned at any time prior to the Effective
Time:
(a) by mutual agreement of the Company and Parent;
(b) by Parent (provided Parent is not in material breach of this
Agreement), if there has been a breach by the Company of any
representation, warranty, covenant or agreement set forth in this Agreement
which is material and which the Company fails to cure within five (5)
business days after notice thereof is given by Parent (except that no cure
period shall be provided for a breach by the Company which by its nature
cannot be cured);
(c) by the Company (provided the Company is not in material breach of
this Agreement), if there has been a breach by Parent or Sub of any
representation, warranty, covenant or agreement set forth in this Agreement
which is material and which such party fails to cure within five (5)
business days after notice thereof is given by the Company (except that no
cure period shall be provided for a breach by Parent or Sub which by its
nature cannot be cured);
(d) by either party if (i) any permanent injunction or other order of
a court or other competent authority preventing the consummation of the
transactions contemplated by this Agreement shall have become final and
nonappealable; or (ii) there shall be any final action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to this Agreement or the transactions contemplated by it by any
governmental entity which would make consummation of said transaction
illegal; or
(e) if the Merger shall not have been approved by the requisite votes
of the Company Shareholders in accordance with the California Code.
6.2 Effect of Termination. In the event of a valid termination of this
Agreement as provided in Section 6.1 above, this Agreement shall forthwith
become void and there shall be no liability or obligation on the part of Sub or
the Company, or their respective officers, directors or stockholders or
Affiliates; provided, however, that each party shall remain liable for any
breaches of this Agreement prior to its termination; and provided further that,
the provisions of Sections 4.3, 4.4, 6.2 and 7.2(c) and the applicable
definitions set forth in Article 9 of this Agreement shall remain in full force
and effect and survive any termination of this Agreement.
6.3 Amendment. Except as is otherwise required by applicable law after the
Company Shareholders approve the Merger and this Agreement, this Agreement may
be amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
6.4 Extension; Waiver. At any time prior to the Effective Time, Sub and the
Company may, to the extent legally allowed, (a) extend the time for the
performance of any
28
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, covenants 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 7
Indemnification
7.1 Release of Indemnification Shares. No later than the date on which the
Earn-Out Criteria have been satisfied or the Earn-Out Payment is due in
accordance with Section 1.7(b)(the "Release Date"), Parent shall issue to each
former Company Shareholder entitled to such shares, such former Company
Shareholder's pro-rata portion of the Indemnification Shares pursuant to the
terms set forth in this Article 7, less any Indemnification Shares withheld by
Parent for Damages pursuant to this Article 7. Notwithstanding the foregoing, a
portion of the Indemnification Shares, which, in the reasonable judgment of
Parent, subject to the objection of the Shareholders' Agent and the subsequent
arbitration of the matter in the manner provided in Section 7.4(d) hereof, are
necessary to satisfy any unsatisfied claims specified in any Officer's
Certificate (the "Indemnification Hold Back") theretofore delivered to the
Shareholders' Agent prior to the Release Date with respect to facts and
circumstances existing prior to such Release Date, shall not be issued until
such claims have been resolved.
7.2 Indemnification by the Company Shareholders.
(a) All representations and warranties made by the Company herein, or
in any certificate, schedule or exhibit delivered pursuant hereto, shall
survive the Closing and continue in full force and effect for a period of
twelve (12) months after the Effective Date (the "Survival Period").
(b) Subject to the limitations set forth in this Article 7, the
Company Shareholders will indemnify and hold harmless Parent and the
Surviving Corporation and its respective officers, directors, agents and
employees, and each Person, if any, who controls or may control Parent or
the Surviving Corporation within the meaning of the Securities Act
(hereinafter referred to individually as a "Shareholder Indemnified
Person") from and against any and all losses, costs, damages, liabilities
and expenses, including, without limitation reasonable legal fees, (net of
any recoveries under existing insurance policies, Tax benefit received by
any Shareholder Indemnified Person or its Affiliates as a result of such
damages, indemnities from third parties or in the case of third party
claims, by any amount actually recovered by a Shareholder Indemnified
Person pursuant to counterclaims made by any of them directly relating to
the facts giving rise to such third party claims) (collectively, "Damages")
arising out of any breach of the representations, warranties, covenants and
agreements given or made by the Company in this Agreement, the Company
Disclosure Schedule or any applicable exhibit or schedule to this
Agreement. The Shareholder Indemnified Persons shall act in good faith and
in a commercially reasonable manner to mitigate any Damages they may
suffer.
29
Notwithstanding the foregoing, Parent shall be entitled to indemnification
hereunder only if the aggregate amount of Damages suffered by Parent
exceeds $50,000 and then only to the extent of the Indemnification Shares.
The Company Shareholders shall not have any liability under this Agreement
whatsoever in excess of the Indemnification Shares.
(c) Nothing in this Agreement shall limit the liability (i) of the
Company for any breach of any representation, warranty or covenant if the
Merger does not close, or (ii) of any Company Shareholder in connection
with any breach by such shareholder of the Irrevocable Proxy.
7.3 Officer's Certificate. Notwithstanding Section 7.2, Parent may not
withhold any Indemnification Shares with respect to the indemnification
obligations of the Company Shareholders set forth in Section 7.2 unless and
until an Officer's Certificate or Certificates identifying the requirements of
Section 7.4 and identifying Damages has been delivered to the Shareholders'
Agent as provided in Section 7.4 below and such amount is determined pursuant to
this Article 7 to be payable, in which case, and subject to the limitations
contained elsewhere in this Article 7, Parent shall withhold Indemnification
Shares equal in value to the amount of Damages, and the Earn-Out Payment
payable, if any, to the former Company Shareholders shall be offset by such
shares.
7.4 Claims Upon Indemnification Shares.
(a) Delivery of Officer's Certificate. In the event that Parent wishes
to make a claim on the Indemnification Shares, then on or before the last
day of the Survival Period, Parent shall deliver to the Shareholders' Agent
a certificate signed by an executive officer of Parent (an "Officer's
Certificate") specifying, in reasonable detail, (i) the nature of the
misrepresentation, breach of warranty or claim to which such item is
related; (ii) the individual items and amounts of Damages incurred by the
Shareholder Indemnified Person or an estimate of amounts of Damages
anticipated to be incurred by the Shareholder Indemnified Person related to
a claim, as determined in the reasonable judgment of Parent; and (iii) the
date on which each such item was paid, or properly accrued or arose.
(b) No Objections to Claims. For a period of forty-five (45) days
after delivery of an Officer's Certificate to the Shareholders' Agent, the
Shareholders' Agent may deliver to Parent a written objection to the claim
made in the Officer's Certificate. If no objection has been delivered by
the Shareholders' Agent after the expiration of such forty-five (45) day
period, Parent may deduct from the total number of Indemnification Shares
that number of Indemnification Shares having a value equal to the amount of
the Damages set forth in the Officer's Certificate. For the purpose of
compensating Parent for its Damages pursuant to this Agreement, each
Indemnification Share shall be valued at the Average Price.
(c) Objections to Claims. In case the Shareholders' Agent shall so
object in writing to any claim or claims made by Parent in any Officer's
Certificate, Parent shall have forty-five (45) days to respond in a written
statement to the objection of the Shareholders' Agent. If after such
forty-five (45) day period there remains a
30
dispute as to any claims, the Shareholders' Agent and Parent shall attempt
in good faith for sixty (60) days to agree upon the rights of the
respective parties with respect to each of such claims. If the
Shareholders' Agent and Parent should so agree, a memorandum setting forth
such agreement shall be prepared and signed by both parties.
(d) Arbitration. If no such agreement can be reached after good faith
negotiation, either Parent or the Shareholders' Agent may, by written
notice to the other, demand arbitration of the matter unless the amount of
the Damages is at issue in pending litigation with a third party, in which
event arbitration shall not be commenced until such amount is ascertained
or both parties agree to arbitration; and in either such event the matter
shall be settled by arbitration conducted by three (3) arbitrators. Within
fifteen (15) days after such written notice is sent, Parent and the
Shareholders' Agent shall each select one (1) arbitrator, and the two (2)
arbitrators so selected shall select a third arbitrator. The decision of
the arbitrators as to the validity and amount of any claim in such
Officer's Certificate shall be binding and conclusive upon the parties to
this Agreement, and the parties shall be entitled to act in accordance with
such decision.
(e) Judgment upon any award rendered by the arbitrators may be entered
in any court having jurisdiction. Any such arbitration shall be held in
Seattle, Washington under the commercial rules then in effect of the
American Arbitration Association. For purposes of this Section 7.4(e), in
any arbitration hereunder in which any claim or the amount thereof stated
in the Officer's Certificate is at issue, Parent shall be deemed to be the
non-prevailing party unless the arbitrators award Parent more than one-half
(1/2) of the amount in dispute, plus any amounts not in dispute; otherwise,
the Company Shareholders shall be deemed to be the non-prevailing party.
The non-prevailing party to an arbitration shall pay its own expenses, the
fees of each arbitrator, the administrative fee of the American Arbitration
Association, and the expenses, including without limitation, attorneys'
fees and costs, reasonably incurred by the other party to the arbitration.
7.5 Shareholders' Agent.
(a) Roy Berelowitz shall be constituted and appointed as agent
("Shareholders' Agent") for and on behalf of the Company Shareholders to
give and receive notices and communications, to authorize release to Parent
of the Indemnification Shares (or some portion thereof) in satisfaction of
claims by Parent, to object to such releases, to agree to, negotiate,
defend, enter into settlements and compromises of, and demand arbitration
and comply with orders of courts and awards of arbitrators with respect to
such claims, and to take all actions necessary or appropriate in the
judgment of the Shareholders' Agent for the accomplishment of the
foregoing. Such agency may be changed by the holders of a majority in
interest of the Indemnification Shares from time to time upon not less than
ten (10) days' prior written notice to Parent. No bond shall be required of
the Shareholders' Agent, and the Shareholders' Agent shall receive no
compensation for his services, but shall be entitled to reimbursement from
Parent of reasonable and documented out-of-pocket expenses (including
reasonable legal fees) in an aggregate amount not to
31
exceed $20,000. Notices or communications to or from the Shareholders'
Agent shall constitute notice to or from each of the Company Shareholders.
(b) The Shareholders' Agent shall not be liable for any act done or
omitted hereunder as Shareholders' Agent while acting in good faith and in
the exercise of reasonable judgment and any act done or omitted pursuant to
the advice of counsel shall be conclusive evidence of such good faith. The
Company Shareholders shall severally indemnify the Shareholders' Agent and
hold him harmless against any loss, liability or expense incurred without
gross negligence or bad faith on the part of the Shareholders' Agent and
arising out of or in connection with the acceptance or administration of
his duties hereunder.
(c) The Shareholders' Agent shall have reasonable access to
information about Parent and the Surviving Corporation and the reasonable
assistance of Parent's and the Surviving Corporation's officers and
employees for purposes of performing his duties and exercising his rights
hereunder, provided that the Shareholders' Agent shall treat confidentially
and not disclose any nonpublic information from or about Parent or the
Surviving Corporation to anyone (except on a need to know basis to
individuals who agree to treat such information confidentially).
(d) Parent acknowledges that Roy Berelowitz may have a conflict of
interest with respect to his duties as Shareholders' Agent, and in such
regard will act in the best interests of the Company Shareholders.
7.6 Actions of the Shareholders' Agent. A decision, act, consent or
instruction of the Shareholders' Agent shall constitute a decision of all the
Company Shareholders regarding the Indemnification Shares and shall be final,
binding and conclusive upon each such Company Shareholder, and Parent may rely
upon any decision, act, consent or instruction of the Shareholders' Agent as
being the decision, act consent or instruction of each and every such Company
Shareholder. Parent is hereby relieved from any liability to any person for any
acts done by it in accordance with such decision, act consent or instruction of
the Shareholders' Agent.
7.7 Third-Party Claims. In the event Parent becomes aware of a third-party
claim which Parent believes may result in a demand against the Indemnification
Shares, Parent shall immediately notify the Shareholders' Agent of such claim,
and the Shareholders' Agent and the Company Shareholders shall be entitled, at
their expense, to participate in any defense of such claim. Parent may not
effect the settlement of any such claim without the consent of the Shareholders'
Agent, which consent shall not be unreasonably withheld. In the event that the
Shareholders' Agent has consented to any such settlement, the Shareholders'
Agent shall have no power or authority to object under this Article 7 to the
amount of any claim by Parent against the Indemnification Shares for indemnity
with respect to such settlement.
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ARTICLE 8
MISCELLANEOUS PROVISIONS
8.1 Notices. All notices, requests and other communications hereunder must
be in writing and will be deemed to have been duly given only if delivered
personally against written receipt or by facsimile transmission against
facsimile confirmation or sent by internationally recognized overnight courier
prepaid, to the parties at the following addresses or facsimile numbers:
If to Parent or Sub to:
1110 - 1175 Douglas St.
Victoria, British Columbia
Canada V8W 2E1
Facsimile No.: (250) 475-2281
Attn: Chief Executive Officer
with a copy (which shall not constitute notice) to:
Dorsey & Whitney LLP
1420 Fifth Avenue, Suite 3400
Seattle, Washington 98101
Facsimile No.: (206) 903-8820
Attn: Randal Jones, Esq.
If to the Company to:
505 N. Tustin Avenue
Suite 216
Santa Ana, CA 92705
Facsimile No.: (714) 664-0459
Attn: Roy Berelowitz
with a copy (which shall not constitute notice) to:
Brobeck, Phleger & Harrison LLP
38 Technology Drive
Irvine, California 92618
Facsimile No.: (949) 790-6301
Attn: Ethan D. Feffer, Esq.
All such notices, requests and other communications will (a) if delivered
personally or by internationally recognized courier service to the address as
provided in this Section 8.1, be deemed given upon delivery or, (b) if delivered
by facsimile transmission to the facsimile number as provided for in this
Section 8.1, be deemed given upon facsimile confirmation. Any party from time to
time may change its address, facsimile number or other information for the
purpose of notices to that party by giving notice specifying such change to the
other party hereto.
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8.2 Entire Agreement. This Agreement and the exhibits and schedules hereto,
including the Company Disclosure Schedule and the Sub Disclosure Schedule,
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.
8.3 Further Assurances; Post-Closing Cooperation. At any time or from time
to time after the Closing, the parties shall execute and deliver to the other
party such other documents and instruments, provide such materials and
information and take such other actions as the other party may reasonably
request to consummate the transactions contemplated by this Agreement and
otherwise to cause the other party to fulfill its obligations under this
Agreement and the transactions contemplated hereby. Each party agrees to use
commercially reasonable efforts to cause the conditions to its obligations to
consummate the Merger to be satisfied.
8.4 Waiver. Any term or condition of this Agreement may be waived at any
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by law or otherwise afforded, will be cumulative and not
alternative.
8.5 Third Party Beneficiaries. The terms and provisions of this Agreement
are intended solely for the benefit of each party hereto and their respective
successors or permitted assigns, and it is not the intention of the parties to
confer third-party beneficiary rights on any Person not a party to this
Agreement.
8.6 No Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned (by operation of law or
otherwise) by any party without the prior written consent of the other party and
any attempt to do so will be void. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and their respective successors and assigns.
8.7 Headings. The headings and table of contents used in this Agreement
have been inserted for convenience of reference only and do not define or limit
the provisions hereof.
8.8 Invalid Provisions. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
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8.9 Governing Law. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of California, including, without
limitation, without giving effect to any other choice of law or conflict of law
provision or rule (whether of the State of California or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the
State of California.
8.10 WAIVER OF TRIAL BY JURY. IN ANY ACTION OR PROCEEDING ARISING HEREFROM,
THE PARTIES HERETO CONSENT TO TRIAL WITHOUT A JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER OR THEIR SUCCESSORS
IN RESPECT OF ANY MATTER ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT,
REGARDLESS OF THE FORM OF ACTION OR PROCEEDING.
8.11 Construction. The parties hereto agree that this Agreement is the
product of negotiation between sophisticated parties and individuals, all of
whom were represented by counsel, and each of whom had an opportunity to
participate in and did participate in, the drafting of each provision hereof.
Accordingly, ambiguities in this Agreement, if any, shall not be construed
strictly or in favor of or against any party hereto but rather shall be given a
fair and reasonable construction without regard to the rule of contra
proferentum.
8.12 Counterparts. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
8.13 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.
Except where this Agreement specifically provides for arbitration, it is 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.
ARTICLE 9
DEFINITIONS
9.1 Definitions. As used in this Agreement, the following defined terms
shall have the meanings indicated below:
"Administaff Contract" means that certain Client Service Agreement
between the Company and Administaff Companies, Inc. dated April 1, 2000.
"Affiliate" means, as applied to any Person, (a) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (b) any other Person that owns or controls (i) ten percent or more
of any class of equity securities of that Person or any of its Affiliates or
(ii) ten percent or more of any class of equity securities (including any equity
securities issuable upon the exercise of any option or convertible security) of
that Person or any of its Affiliates, or (c) as to a corporation, each director
and officer thereof, and as to a partnership, each general partner thereof, and
as to a limited
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liability company, each managing member or similarly authorized person thereof..
For the purposes of this definition, "control" (including with correlative
meanings, the terms "controlling," "controlled by," and "under common control
with") as applied to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies of
that Person, whether through ownership of voting securities or by contract or
otherwise.
"Agreement" means this Agreement and Plan of Merger, including (unless
the context otherwise requires) the exhibits and the schedules and the
certificates and instruments delivered in connection herewith, or incorporated
by reference, as the same may be amended or supplemented from time to time in
accordance with the terms hereof.
"Approval" means any approval, authorization, consent, permit,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from or made with, or any notice, statement or other
communication required to be filed with or delivered to, any Governmental or
Regulatory Authority or any other Person.
"Average Price" means the per share average of the closing prices of
one share of Parent Common Stock on the on the NASD over-the-counter bulletin
board for ten (10) trading days. If the "Average Price" is calculated for
purposes of Section 1.7, then the ten (10) trading days shall begin on the date
that is ten (10) trading days prior to the date the Earn-Out Payment is required
to be made pursuant to Section 1.7. If the "Average Price" is calculated for
purposes of Article 7, then the ten (10) trading days shall begin on the
business day immediately following the day on which Parent delivers to the
Shareholders' Agent the Officer's Certificate with respect to the claim for such
Damages.
"Benefit Plans" means all plans for the benefit of the Company's
employees, including but not limited to any employment agreements, executive
compensation, fringe benefit, incentive, stock option, performance pay, loan or
loan guarantee, plant closing, change of control, equity-based or deferred
compensation plans, and any other similar fringe or employee benefit plans,
funds, programs or arrangements maintained or contributed to by the Company for
the benefit of any officers or employees of the Company.
"California Code" means the California Corporations Code and all
amendments and additions thereto.
"Certificates" has the meaning ascribed to it in Section 1.11.
"Certificate of Merger" has the meaning ascribed to it in Section 1.2.
"Closing" means the closing of the transactions contemplated by
Section 1.2.
"Closing Date" has the meaning ascribed to it in Section 1.2.
"Closing Price" means the average high and low price of the Parent
Common Stock on the NASD over-the-counter bulletin board as quoted by Bloomberg.
"Company" has the meaning ascribed to it in the forepart of this
Agreement.
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"Company Common Stock" means the common stock of the Company, no par
value per share.
"Company Disclosure Schedule" means the schedules delivered to Sub by
or on behalf of the Company, containing all lists, descriptions, exceptions and
other information and materials as are required to be included therein in
connection with the representations and warranties made by the Company in
Article 2 of this Agreement or otherwise.
"Company Option(s)" means any Option to purchase any shares of Company
Common Stock.
"Company Shareholder Action" has the meaning ascribed to it in Section
4.2.
"Company Shareholders" means and includes all the shareholders of the
Company as of the date of this Agreement.
"Company Stock Plan" means the 2000 Stock Option/Stock Issuance Plan.
"Contract" means any contract, agreement or other business arrangement
(whether oral or written) including:
(a) any continuing contract for the purchase of materials,
supplies, equipment or services involving in the case of any such
contact more than $50,000 over the life of the contract;
(b) any mortgage, promissory note, loan agreement or other
contract for the borrowing of money, any currency exchange,
commodities or other hedging arrangement or any leasing transaction of
the type required to be capitalized in accordance with generally
accepted accounting principles;
(c) any contract for capital expenditures in excess of $50,000 in
the aggregate;
(d) any contract limiting the freedom of the Company to engage in
any line of business or to compete with any other Person or any
confidentiality, secrecy or non-disclosure contract;
(e) any contract pursuant to which the Company is a lessor of any
machinery, equipment, motor vehicles, office furniture, fixtures or
other personal property;
(f) any contract with any Person with whom the Company does not
deal at arm's length;
(g) any contract that is not terminable by the Company upon 30
days (or less) notice by the Company without penalty or obligation to
make payments based on such termination; or
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(h) any agreement of guarantee, support, indemnification,
assumption or endorsement of, or any similar commitment with respect
to, the obligations, liabilities (whether accrued, absolute,
contingent or otherwise) or indebtedness of any other Person.
"Corporate Transaction" means either of the following
shareholder-approved transactions:
(a) a merger or consolidation in which securities possessing more
than seventy-five percent (75%) of the total combined voting power of
the outstanding securities are transferred to a Person or Persons
different from the Persons holding those securities immediately prior
to such transaction, or
(b) the sale, transfer or other disposition of all or
substantially all of the assets of a Person.
"Dissenting Shares" has the meaning ascribed to it in Section 1.10.
"Earn-Out Payment" has the meaning ascribed to it in Section 1.7.
"Earn-Out Criteria" means the criteria set forth on Appendix 1.7(a).
"Effective Time" has the meaning ascribed to it in Section 1.2.
"Environmental Laws" shall mean any federal, state or local laws,
ordinances, codes, regulations, rules, policies and orders that are intended to
assure the protection of the environment, or that classify, regulate, call for
the remediation of, require reporting with respect to, or list or define air,
water, groundwater, solid waste, hazardous or toxic substances, materials,
wastes, pollutants or contaminants, or which are intended to assure the safety
of employees, workers or other persons, including the public.
"Exchange Ratio" shall mean 0.0456093.
"Financial Statements" has the meaning ascribed to it in Section 2.10.
"GAAP" means generally accepted accounting principles in the United
States, as in effect from time to time.
"Governmental or Regulatory Authority" means any court, tribunal,
arbitrator, authority, agency, bureau, board, commission, department, official
or other instrumentality of the United States, any foreign country or any
domestic or foreign state, county, city or other political subdivision, and
shall include any stock exchange, quotation service and the National Association
of Securities Dealers.
"Hazardous Materials" shall mean any toxic or hazardous substance,
material or waste or any pollutant or contaminant, or infectious or radioactive
substance or material, including without limitation, those substances, materials
and wastes defined in or regulated under any Environmental Laws.
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"Income Tax" means (a) any income, alternative or add-on minimum tax,
gross income, gross receipts, franchise, profits, including estimated taxes
relating to any of the foregoing, or other similar tax or other like assessment
or charge of similar kind whatsoever, excluding any Other Tax, together with any
interest and any penalty, addition to tax or additional amount imposed by any
Taxing Authority responsible for the imposition of any such Tax (domestic or
foreign); or (b) any liability of a Person for the payment of any taxes,
interest, penalty, addition to tax or like additional amount resulting from the
application of Treas. Reg. ss.1.1502-6 or comparable provisions of any Taxing
Authority in respect of a Tax Return of a Relevant Group or any Contract.
"Indemnification Hold Back" has the meaning ascribed to it in Section
7.1.
"Indemnification Shares" means those shares of Parent Common Stock
issuable to the Company Shareholders pursuant to Section 1.7 that shall be
available to compensate Parent for certain damages as provided in Article 7. To
the extent not used for such purposes, such Indemnification Shares shall be
issued, all as provided in Article 7 hereof. The number of Indemnification
Shares shall be equitably adjusted to reflect fully the effect of any stock
split, reverse split, stock combination, stock dividend (including any dividend
or distribution of securities convertible into Parent Common Stock),
reorganization, reclassification, recapitalization or other like change with
respect to Parent Common Stock.
"Intellectual Property" has the meaning ascribed to it in Section
2.7(a).
"Internal Revenue Code" and "IRC" means the Internal Revenue Code of
1986, as amended, and the rules and regulations promulgated thereunder.
"Lien" means any mortgage, pledge, assessment, security interest,
lease, lien, easement, license, covenant, condition, restriction, adverse claim,
levy, charge, option, equity, adverse claim or restriction or other encumbrance
of any kind, or any conditional sale Contract, title retention Contract or other
Contract to give any of the foregoing, except for any restrictions on transfer
generally arising under any applicable federal or state securities law.
"material adverse effect" means that such event, change or effect is,
individually or in the aggregate, materially adverse to the business,
operations, prospects, properties, assets (including intangible assets),
liabilities (including contingent liabilities), condition (financial or other)
or results of operations of a Person or the ability of the Person to consummate
the Merger and the other transactions contemplated by this Agreement.
"Merger" has the meaning ascribed to it in Recital A to this
Agreement.
"Nevada Law" means the Nevada Revised Statutes and all amendments and
additions thereto.
"Observer" has the meaning ascribed to it in Section 4.6.
"Officer's Certificate" has the meaning ascribed to it in Section 7.4.
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"Option" with respect to any Person means any security, right,
subscription, warrant, option, "phantom" stock right or other Contract that
gives the right to (a) purchase or otherwise receive or be issued any shares of
capital stock or other equity interests of such Person or any security of any
kind convertible into or exchangeable or exercisable for any shares of capital
stock or other equity interests of such Person or (b) receive any benefits or
rights similar to any rights enjoyed by or accruing to the holder of shares of
capital stock or other equity interests of such Person, including any rights to
participate in the equity, income or election of directors or officers of such
Person.
"Order" means any writ, judgment, decree, injunction or similar order
of any Governmental or Regulatory Authority (in each such case whether
preliminary or final).
"Other Tax" means any sales, use, ad valorem, business license,
withholding, payroll, employment, excise, stamp, transfer, recording,
occupation, premium, property, value added, customs, duties, severance, windfall
profit or license tax, governmental fee or other similar assessment or charge,
together with any interest and any penalty, addition to tax or additional amount
imposed by any Taxing Authority responsible for the imposition of any such tax
(domestic or foreign).
"Parent" has the meaning ascribed to it in the forepart of this
Agreement.
"Parent Common Stock" has the meaning ascribed to it in Recital B to
this Agreement.
"Parent Disclosure Schedule" has the meaning ascribed to it in the
forepart of Article 3.
"Parent Option Plan" has the meaning ascribed to it in Section 3.2(d).
"Person" means any natural person, corporation, general partnership,
limited partnership, limited liability company or partnership, proprietorship,
other business organization, trust, union, association or Governmental or
Regulatory Authority.
"Proprietary Information" has the meaning ascribed to it in Section
2.7(a).
"Release Date" has the meaning ascribed to it in Section 7.1.
"Section" or "Sections" refers to any section or sections of this
Agreement or the Internal Revenue Code, as the context requires.
"Securities Act" has the meaning ascribed to it in Section 1.14.
"Shareholder Certificate" has the meaning ascribed to it in Section
4.1(a).
"Sub" has the meaning ascribed to it in the forepart of this
Agreement.
"Survival Period" has the meaning ascribed to it in Section 7.2(a).
"Surviving Corporation" has the meaning ascribed to it in Section 1.1.
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"Tax" or "Taxes" means Income Taxes and/or Other Taxes, as the context
requires.
"Tax Returns" means any return, declaration, report, information
return, schedule, claim for refund, certificate, statement or other document
relating to Taxes, including all schedules and attachments thereto, and
including all amendments thereof, and the term "Tax Return" means any one of the
forgoing Tax Returns.
"Taxing Authority" means, without limitation, any governmental agency,
board, bureau, body, department or authority of any United States federal, state
or local jurisdiction or any foreign jurisdiction, having or purporting to
exercise jurisdiction with respect to any Tax.
"Third Party Expenses" has the meaning ascribed to it in Section 4.4.
9.2 Construction.
(a) Unless the context of this Agreement otherwise requires, (i) words
of any gender include each other gender, (ii) words using the singular or
plural number also include the plural or singular number, respectively,
(iii) the terms "hereof," "herein," "hereby" and derivative or similar
words refer to this entire Agreement as a whole and not to any particular
Article, Section or other subdivision, (iv) the terms "Article" or
"Section" or other subdivision refer to the specified Article, Section or
other subdivision of the body of this Agreement, (v) the phrases "ordinary
course of business" and "ordinary course of business consistent with past
practice" refer to the business and practice of the Company, (vi) the words
"include," "includes" and "including" shall be deemed to be followed by the
phrase "without limitation," and (vii) when a reference is made in this
Agreement to exhibits, such reference shall be to an exhibit to this
Agreement unless otherwise indicated. All accounting terms used herein and
not expressly defined herein shall have the meanings given to them under
GAAP. The term "party" or "parties" when used herein refer to Sub, on the
one hand, and the Company, on the other.
(b) When used herein, the phrase "to the knowledge of" any Person, "to
the best knowledge of" any Person, "known to" any Person or any similar
phrase, means (i) with respect to any Person who is an individual, the
actual knowledge of such Person, (ii) with respect to any other Person, the
actual knowledge of the directors and officers of such Person and other
individuals that have a similar position or have similar powers and duties
as the officers and directors of such Person, and (iii) in the case of each
of (i) and (ii), the knowledge of facts that such individuals should have
after due inquiry. For this purpose, "due inquiry" with respect to any
matter means inquiry of and consultations with (A) the directors and
officers of such Person and other individuals that have a similar position
or have similar powers and duties as such officers and directors, (B) other
employees of and the advisors to such Person, including legal counsel and
outside auditors who have principal responsibility for the matter in
question or are otherwise likely to have information relevant to the
matter, and (C) the stockholders owning more than 10% of the equity
interests, by vote or value, of such Person.
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IN WITNESS WHEREOF, Parent, Sub and the Company have caused this Agreement
to be signed by their duly authorized representatives, all as of the date first
written above.
WORLDBID CORPORATION REQUESTAMERICA.COM, INC.
a Nevada corporation a California corporation
By: /s/ Barry Alexander By: /s/ Roy Berelowitz (initialed)
--------------------------- ---------------------------
Name: Barry Alexander Name: Roy Berelowitz
Title: Secretary Title: President
WORLDBID (ACQUISITION) CORPORATION,
a Nevada corporation
By: /s/ Barry Alexander
---------------------------
Name: Barry Alexander
Title: Secretary
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