AGREEMENT AND PLAN OF SHARE EXCHANGE
DATED AS OF SEPTEMBER 25, 2OO1
BETWEEN
XPEDIAN, INC.
AND
GALA ENTERTAINMENT, INC.
TABLE OF CONTENTS
ARTICLE 1 The Share Exchange
Section 1.1 The Share Exchange
Section 1.2. Effective Time
Section 1.3. Closing of the Share Exchange
Section 1.4. Effects of the Share Exchange
Section E.5. Board of Directors and Officers
Section 1.6. Exchange of Shares
Section 1.7. Exchange of Certificates
Section 1.3. Stock Options
Section 1.9. Taking of Necessary Action; Further Action
Section 1.10. Change of Domicile
ARTICLE 2 Representations and Warranties of XPDN
Section 2.1. Organization and Qualification
Section 2.2. Capitalization of XPDN
Section 2.3. Authority Relative to this Agreement; Recommendations
Section 2.4. SEC Reports; Financial Statements
Section 2.5. Information Supplied
Section 2.6. Consents and Approvals; No Violations
Section 2.7. No Default
Section 2.8. No Undisclosed Liabilities; Absence of Changes
Section 2.9. Litigation
Section 2.10. Compliance with Applicable Law
Section 2.11. Employee Benefit Plans; Labor Matters
Section 2.12. Environmental Laws and Regulations
Section 2.13. Tax Matters
Section 2.14. Title to Property
Section 2.15. Intellectual Property
Section 2.16. Insurance
Section 2.17. Vote Required
Section 2.18. Tax Treatment
Section 2.19. Affiliates
Section 2.20. Certain Business Practices
Section 2.21. Insider Interests
Section 2.22. Opinion of Financial Adviser
Section 2.23. Disclosure
Section 2.24. No Existing Discussion
Section 2.25. Material Contracts
ARTICLE 3. Representations and Warranties of GALA
Section 3.1. Organization and Qualification
Section 3.2. Capitalization of GALA
Section 3.3. Authority Relative to this Agreement; Recommendation
Section 3.4. SEC Reports; Financial Statements
Section 3.5. Information Supplied
Section 3.6. Consents and Approvals; No Violations
Section 3.7. No Default
Section 3.8 No Undisclosed Liabilities; Absence of Changes
Section 3.9. Litigation
Section 3.10. Compliance with Applicable Law
Section 3.11. Employee Benefit Plans; Labor Matters
Section 3.12. Environmental Laws and Regulations
Section 3.13. Tax Matters
Section 3.14. Title to Property
Section 3.15. Intellectual Property
Section 3.16. Insurance
Section 3.17. Vote Required
Section 3.18. Tax Treatment
Section 3.19. Affiliates
Section 3.20. Certain. Business Practices
Section 3.21. Insider Interests
Section 3.22. Opinion of Financial Adviser
Section 3.23. Disclosure
Section 3.24. No Existing Discussions
Section 3.25. Material Contracts
ARTICLE 4. Covenants
Section 4.1. Conduct of Business of XPDN
Section 4.2. Conduct of Business of GALA
Section 4.3. Preparation of the Proxy Statement
Section 4.4. Other Potential Acquirers
Section 4.5. Meetings of Stockholders
Section 4.6. NASD OTC:BB Listing
Section 4.7. Access to Information
Section 4.8. Additional Agreements; Reasonable Efforts
Section 4.9. Employee Benefits; Stock Option and Employee Purchase Plans
Section 4.10. Public Announcements
Section 4.11. Indemnification
Section 4.12. Notification of Certain Matters
ARTICLE 5. Conditions to Consummation of tile Share Exchange
Section 5.1. Conditions to Each Party's Obligations to Effect the Share
Exchange
Section 5.2. Conditions to the Obligations of XPDN
Section 5.3. Conditions to the Obligations of GALA
ARTICLE 6. Termination; Amendment; Waiver
Section 6.1. Termination
Section 6.2. Effect of Termination
Section 6.3. Fees and Expenses
Section 6.4. Amendment
Section 6.5. Extension; Waiver
ARTICLE 7. Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties
Section 7.2. Entire Agreement; Assignment
Section 7.3. Validity
Section 7.4. Notices
Section 7.5. Governing Law
Section 7.6. Descriptive Headings
Section 7.7. Parties in Interest
Section 7.8. Certain Definitions
Section 7.9. Personal Liability
Section 7.10. Specific Performance
Section 7.11. Construction
Section 7.12. Counterparts
Section 7.13. Termination After Effective Date
Section 7.14. Trademark
AGREEMENT AND PLAN OF SHARE EXCHANGE
This Agreement and Plan of Share Exchange (this "Agreement"), dated as of
September 25, 2001 is between XPEDIAN, INC., a Florida corporation ("XPDN"), and
GALA ENTERTAINMENT, INC., a Florida corporation ("GALA ").
Whereas, the Boards of Directors of XPDN and GALA each have, in light of
and subject to the terms and conditions set forth herein, (i) determined that
the Share Exchange (as defined below) is fair to their respective stockholders
and in the best interests of such stockholders and (ii) approved the Share
Exchange in accordance with this Agreement;
Whereas, for Federal income tax purposes, it is intended that the Share
Exchange qualify as a reorganization under the provisions of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the "Code"); and
Whereas, XPDN and GALA desire to make certain representations, warranties,
covenants and agreements in connection with the Share Exchange and also to
prescribe various conditions to the Share Exchange.
Now, therefore, in consideration of the premises and the representations,
warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, XPDN and GALA hereby agree as follows;
ARTICLE I
The Share Exchange
Section 1.1 The Share Exchange. XPEDIAN, INC., a Florida Corporation, at
the Effective Time and upon the terms and subject to the conditions of this
Agreement and in accordance with and pursuant to the Florida Business
Corporation Act (the "FBCA"), shall exchange the shares as set forth below for
one hundred percent (100%) of the issued and outstanding shares of GALA (as
defined below) (the "Share Exchange"). Following the Share Exchange, GALA shall
continue as a wholly owned subsidiary of XPEDIAN, INC., and XPEDIAN, INC. shall
be the "acquiring" corporation (the "Acquiring Corporation"), and shall
continue to be governed by the laws of the jurisdiction of its incorporation or
organization. The Share Exchange is intended to qualify as a tax-free
reorganization under Section 368 of the Code as it relates to the non-cash
Exchange of stock referenced herein.
Section 1.2 - Effective Time. Subject to the terms and conditions set
forth in this Agreement, a Certificate of Share Exchange (the "Share Exchange
Certificate") shall be duly executed and acknowledged by GALA and XPDN, and
thereafter the Share Exchange Certificate reflecting the Share Exchange shall
be delivered to the Secretary of State of the State of Florida for filing
pursuant to the FBCA on the Closing Date (as defined in Section 1.3). The
Share Exchange shall become effective at such time as a properly executed and
certified copy of the Share Exchange Certificate is duly filed by the Secretary
of State of the State of Florida in accordance with the FBCA or such later time
as the parties may agree upon and set forth in the Share Exchange Certificate
(the time at which the Share Exchange becomes effective shall be referred to
herein as the "Effective Time").
Section 1.3 Closing of the Share Exchange. The closing of the Share
Exchange (the "Closing") will take place at a time and on a date to be
specified by the parties, which shall be no later than the second business day
after satisfaction of the latest to occur of the conditions set forth in
Article 5 (the "Closing Date"), at the offices of the Law Office of L. Van
Stillman, PA, 1177 George Bush Blvd. Suite 308, Delray Beach, Florida 33483,
unless another time, date or place is agreed to in writing by the parties
hereto.
Section 1.4. Effects of the Share Exchange. The Share Exchange shall have
the effects set forth in the FBCA. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all the properties,
rights, privileges, powers of GALA shall vest in the Acquiring Corporation,
and GALA shall remain a wholly owned subsidiary of XPDN.
Section 1.5. Board of Directors and Officers XPDN. At or prior to the
Effective Time, each of GALA and XPDN agrees to take such action as is
necessary (i) to cause the number of directors comprising the full Board of
Directors of XPDN to be seven persons and (ii) to cause Clyde Aycock, Eric
Henshiel, Michael Heilman, Jeffrey Stoller, Don Golden, ____________ and (the
"GALA Designees") to be elected as directors of XPDN. In addition, majority
stockholders of XPDN prior to the Effective Time shall take all action
necessary to cause, to the greatest extent practicable, the GALA Designees to
serve on XPDN's Board of Directors until the 2001 Annual Meeting. If a GALA
Designee, respectively, shall decline or be unable to serve as a director prior
to the Effective Time, GALA shall nominate another person to serve in such
person's stead, which such person shall be subject to approval of the other
party. From and after the Effective Time, and until successors are duly elected
or appointed and qualified in accordance with applicable law, Jeff Stoller
shall be Chief Executive Officer, President , and Michael Heilman shall be
Secretary and Treasurer of XPDN.
Section 1.6. Exchange of Shares.
-------------------
(a) At the Effective Time, each share of common stock, par value $.001 per
share of GALA (individually a "GALA Share" and collectively, the "GALA Shares")
issued and outstanding immediately prior to the Effective Time shall, by virtue
of the Share Exchange and without any action on the part of GALA , or XPDN or
the holder thereof; be converted into and shall become fully paid and
nonassessable XPDN common shares. The holder(s) of GALA shares shall receive a
total of 40,800,000 XPDN shares, to be distributed pro rata.
(b) At the Effective Time, each share of preferred stock, par value
$100.00 per share of GALA (individually a "GALA Share" and collectively, the
"GALA Shares") issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Share Exchange and without any action on the part of
GALA , or XPDN or the holder thereof; be converted into and shall become fully
paid and nonassessable XPDN preferred shares of an equal par value.
(c) At the Effective Time, each GALA share held in the treasury of GALA,
immediately prior to the Effective Time shall, by virtue of the Share Exchange
and without any action on the part of GALA or XPDN be canceled, retired and
cease to exist and no payment shall be made with respect thereto.
Section 1.7. Exchange of Certificates.
------------------------
(a) Prior to the Effective Time, XPDN shall enter into an agreement
with, and shall deposit with, The Law Office of L. Van Stillman, or such
other agent or agents as may be satisfactory to XPDN and GALA (the "Exchange
Agent"), for the benefit of the holders of GALA Shares, for Exchange
through the Exchange Agent in accordance with this Article I;
certificates representing the appropriate number of XPDN Shares to be issued
to holders of GALA Shares issuable pursuant to Section 1.6 in Exchange for
outstanding GALA Shares.
(b) As soon as reasonably practicable after the Effective Time, the
Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding GALA Shares (the "Certificates") whose shares were converted into
the right to receive XPDN Shares pursuant to Section 1.6: (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent and shall be in such form and have such
other provisions as GALA and XPDN may reasonably specify) and (ii) instructions
for use in effecting the surrender of the Certificates in Exchange for
certificates representing XPDN Shares. Upon surrender of a Certificate to the
Exchange Agent, together with such letter of transmittal, duly executed, and
any other required documents, the holder of such Certificate shall be entitled
to receive in Exchange therefore a certificate representing that number of
whole XPDN Shares which such holder has the right to receive pursuant to the
provisions of this Article I, and the Certificate so surrendered shall
forthwith be canceled. In no event will fractional shares be issued, but if a
certificate holder is entitled to a fractional interest, said interest will be
rounded up to the nearest whole number. In no event will XPDN be obligated to
issue shares in excess of the amount provided for in this agreement, or
40,800,000 shares. Until surrendered as contemplated by this Section 1.7,
each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing XPDN Shares as contemplated by this Agreement.
(c) No dividends or other distributions declared or made after the
Effective Time with respect to XPDN Shares with a record date after the
Effective Time shall be paid to the holder of any unsurrendered Certificate
with respect to the XPDN Shares represented thereby until the holder of
record of such Certificate shall surrender such Certificate.
(d) In the event that any Certificate for GALA Shares or XPDN Shares shall
have been lost, stolen or destroyed, the Exchange Agent shall issue in Exchange
thereforee, upon the making of an affidavit of that fact by the holder thereof
such XPDN Shares if any, as may be required pursuant to this Agreement;
provided, however, that XPDN or the Exchange Agent, may, in its respective
discretion, require the delivery of a suitable bond, opinion or indemnity.
(e) All XPDN Shares issued upon the surrender for Exchange of GALA Shares
in accordance with the terms hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such GALA Shares. There shall be no
further registration of transfers on the stock transfer books of either of GALA
or XPDN of the GALA Shares or XPDN Shares which were outstanding immediately
prior to the Effective Time. If after the Effective Time, Certificates are
presented to XPDN for any reason, they shall be canceled and Exchanged as
provided in this Article I.
(f) No fractional XPDN Shares shall be issued in the Share Exchange, but
in lieu thereof each holder of GALA Shares otherwise entitled to a fractional
XPDN Share shall, upon surrender of its, his or her Certificate or
Certificates, be entitled to receive an additional share to round up to the
nearest round number of shares.
Section 1.8. Stock Options. At the Effective Time, each outstanding option
to purchase GALA shares, if any (a "GALA Stock Option" or collectively, "GALA
Stock Options") issued pursuant to any GALA Stock Option Plan or GALA Long Term
Incentive Plan whether vested or unvested, shall be cancelled.
Section 1.9 Taking of Necessary Action: Further Action. If, at any time
after the Effective Time, GALA or XPDN reasonably determines that any deeds,
assignments, or instruments or confirmations or transfer are necessary or
desirable to carry out the purposes of this Agreement and to vest XPDN with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of GALA ) the officers and directors of XPDN and GALA
are fully authorized in the name of their respective corporations or
otherwise to take, and will take, all such lawful and necessary or desirable
action.
ARTICLE 2
Representations and Warranties of XPDN
Except as set forth on the Disclosure Schedule delivered by XPDN to GALA
(the "XPDN Disclosure Schedule"), XPDN hereby represents and warrants to GALA as
follows:
Section 2.1 - Organization and ion and Qualification.
(a) XPDN is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation or organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its businesses as now being conducted, except where the failure to be
so organized, existing and in good standing or to have such power and authority
would not have a Material Adverse Effect (as defined below) on XPDN When used
in connection with XPDN, the term "Material Adverse Effect" means any change or
effect (i) that is or is reasonably likely to be materially adverse to the
business, results of operations, condition (financial or otherwise) or
prospects of XPDN, other than any change or effect arising out of general
economic conditions unrelated to any business in which XPDN is engaged, or (ii)
that may impair the ability of XPDN to perform its obligations hereunder or to
consummate the transactions contemplated hereby.
(b) XPDN has heretofore delivered to GALA accurate and complete copies of
the Certificate of Incorporation and Bylaws (or similar governing documents),
as currently in effect, of XPDN. Except as set forth on Schedule 2.1 of the
XPDN Disclosure Schedule, XPDN is duly qualified or licensed and in good
standing to do business in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification or licensing necessary, except in such jurisdictions where
the failure to be so duly qualified or licensed and in good standing would not
have a Material Adverse Effect on XPDN.
Section 2.2. Capitalization of XPDN.
----------------------
(a) The authorized capital stock of XPDN consists of: (i) One Hundred
Million Common Shares, of which, as of September 24, 2001, 59,175,430 XPDN
Shares were issued and outstanding, (ii) No preferred shares are authorized,
and no XPDN Shares were held in treasury. All of the outstanding XPDN Shares
have been duly authorized and validly issued and are fully paid, non-assessable
and free of preemptive rights. Except as set forth herein, as of the date
hereof, there are no outstanding (i) shares of capital stock or other voting
securities of XPDN, (ii) securities of XPDN convertible into or Exchangeable
for shares of capital stock or voting securities of XPDN, except for the
preferred shares of XPDN, (iii) options or other rights to acquire from XPDN
and, except as described in the XPDN SEC Reports (as defined below), no
obligations of XPDN to issue, any capital stock, voting securities or
securities convertible into or Exchangeable for capital stock or voting
securities of XPDN, and (iv) equity equivalents, interests in the ownership or
earnings of XPDN or other similar rights (collectively, "XPDN Securities"). As
of the date hereof; except as set forth on Schedule 2.2(a) of the XPDN
Disclosure Schedule there are no outstanding obligations of XPDN or its
subsidiaries to repurchase, redeem or otherwise acquire any XPDN Securities or
stockholder agreements, voting trusts or other agreements or understandings to
which XPDN is a party or by which it its bound relating to the voting or
registration of any shares of capital stock of XPDN. For purposes of this
Agreement, "Lien" means, with respect to any asset (including, without
limitation, any security) any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind in respect of such asset.
(b) The XPDN Shares constitute the only class of equity securities of XPDN
registered or required to be registered under the Exchange Act.
(c) XPDN does not own directly or indirectly more than fifty percent (50%)
of the outstanding voting securities or interests (including membership
interests) of any entity, other than as specifically disclosed in the
disclosure documents.
Section 2.3. Authority Relative to this Agreement; Recommendation.
-----------------------------------------------------
XPDN has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, and the consummation of the
transactions contemplated hereby, have been duly and validly authorized by the
Board of Directors of XPDN (the "XPDN Board") and no other corporate
proceedings on the part of XPDN are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by XPDN and constitutes a valid, legal and
binding agreement of XPDN, enforceable against XPDN in accordance with its
terms.
Section 2.4. SEC Reports, Financial Statements.
---------------------------------
(a) XPDN has filed all required forms, reports and documents with the
Securities and Exchange Commission (the "SEC") since the filing of its initial
registration statement on Form 1OSB, each of which has complied in all material
respects with all applicable requirements of the Securities Act of 1933, as
amended (the "Securities Act"), and the Exchange Act (and the rules and
regulations promulgated thereunder, respectively), each as in effect on the
dates such forms, reports and documents were filed. XPDN has heretofore
delivered or promptly will deliver prior to the Effective Date to GALA , in the
form filed with the SEC (including any amendments thereto but excluding any
exhibits), (i) its Annual Report on Form 10-KSB for the fiscal year ended June
30, 2000, (ii) all definitive proxy statements relating to XPDN's meetings of
stockholders (whether annual or special) held, if any, and (iii) all other
reports or registration statements filed by XPDN with the SEC since the filing
of the Company's 10-SB (all of the foregoing, collectively, the "XPDN SEC
Reports"). None of such XPDN SEC Reports, including, without limitation, any
financial statements or schedules included or incorporated by reference
therein, contained, when filed, any untrue statement of a material fact or
omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited financial statements of XPDN included in the XPDN SEC Reports fairly
present, in conformity with generally accepted accounting principles applied
on a consistent basis (except as may be indicated in the notes thereto), the
financial position of XPDN as of the dates thereof and its results of
operations and changes in financial position for the periods then ended. All
material agreements, contracts and other documents required to be filed as
exhibits to any of the XPDN SEC Reports have been so filed.
(b) XPDN has heretofore made available or promptly will make available to
GALA a complete and correct copy of any amendments or modifications which are
required to he filed with the SEC but have not yet been filed with the SEC, to
agreements, documents or other instruments which previously had been filed by
XPDN with the SEC pursuant to the Exchange Act.
Section. 2.5. THIS SECTION LEFT BLANK INTENTIONALLY
-------------------------------------
Section. 2.6. Consents and Approvals; No Violations.
------------------------------------- Except for filings,
permits,authorizations, consents and approvals as may be required under, and
other applicable requirements to the Securities Act, the Exchange Act, state
securities or blue sky laws, the Hart-Scott-Rodino Antitrust Improvements Act
of 1916, as amended (the "HSR Act"), the rules of the National Association of
Securities Dealers, Inc. ("NASD"), the filing and recordation of the Share
Exchange Certificate as required by the FBCA and as set forth on Schedule 2.6
of the XPDN Disclosure Schedule no filing with or notice to, and no permit,
authorization, consent or approval of, any court or tribunal or administrative,
governmental or regulatory body, agency or authority (a "Governmental Entity")
is necessary for the execution and delivery by XPDN of this Agreement or the
consummation by XPDN of the transactions contemplated hereby, except where the
failure to obtain such permits, authorizations, consents or approvals or to
make such filings or give such notice would not have a Material Adverse Effect
on XPDN.
Except as set forth in Section 2.6 of the XPDN Disclosure Schedule,
neither the execution, delivery and performance of this Agreement by XPDN nor
the consummation by XPDN of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of
XPDN, (ii) result in a violation or breach of, or constitute (with or without
due notice or lapse of time or both) a default (or give rise to any right of
termination, amendment, cancellation or acceleration or Lien) under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which XPDN is
a party or by which any of its properties or assets may be bound, or (iii)
violate any order, writ, injunction, decree, law, statute, rule or regulation
applicable to XPDN or any or its properties or assets, except in the case of
(ii) or (iii) for violations, breaches or defaults which would not have a
Material Adverse Effect on XPDN.
Section 2.7. No Default. Except as set forth in Section 2.7 of the XPDN
Disclosure Schedule, XPDN is not in breach, default or violation (and no event
has occurred which with notice or the lapse of time or both would constitute a
breach default or violation) of any term, condition or provision of (i) its
Certificate of Incorporation or Bylaws (or similar governing documents), (ii)
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which XPDN is now a party or by which any of
its respective properties or assets may be bound or (iii) any order, writ
injunction, decree, law, statute, rule or regulation applicable to XPDN or any
of its respective properties or assets, except in, the case of (ii) or (iii)
for violations, breaches or defaults that would not have a Material Adverse
Effect on XPDN. Except as set forth in Section 2.7 of the XPDN Disclosure
Schedule, each note, bond, mortgage, indenture, lease, license, contract,
agreement or other instrument or obligation to which XPDN is now a party or by
which its respective properties or assets may be bound that is material to
XPDN and that has not expired is in full force and effect and is not subject
to any material default thereunder of which XPDN is aware by any party
obligated to XPDN thereunder.
Section 2.8. No Undisclosed Liabilities; Absence of Changes. Except as set
forth in Section 2.8 of the XPDN Disclosure Schedule and except as and to the
extent publicly disclosed by XPDN in the XPDN SEC Reports, as of March 31,
2001, XPDN does not have any liabilities or obligations of any nature, whether
or not accrued, contingent or otherwise, that would be required by generally
accepted accounting principles to be reflected on a balance sheet of XPDN
(including the notes thereto) or which would have a Material Adverse Effect on
XPDN. Except as publicly disclosed by XPDN, since March 31, 2001, XPDN has not
incurred any liabilities of any nature, whether or not accrued, contingent or
otherwise, which could reasonably be expected to have, and there have been no
events, changes or effects with respect to XPDN having or which reasonably
could be expected to have, a Material Adverse Effect on XPDN. Except as and to
the extent publicly disclosed by XPDN in the XPDN SEC Reports and except as set
forth in Section 2.8 of the XPDN Disclosure Schedule, since March 31, 2001,
there has not been (i) any material change by XPDN in its accounting methods,
principles or practices (other than as required after the date hereof by
concurrent changes in generally accepted accounting principles), (ii) any
revaluation by XPDN of any of its assets having a Material Adverse Effect on
XPDN, including, without limitation, any write-down of the value of any assets
other than in the ordinary course of business or (iii) any other action or
event that would have required the consent of any other party hereto pursuant
to Section 4.1 of this Agreement had such action or event occurred after the
date of this Agreement.
Section 2.9. Litigation. Except as publicly disclosed by XPDN in the XPDN
SEC Reports, there is no suit, claim, action, proceeding or investigation,
pending or, to the knowledge of XPDN, threatened against XPDN or any of its
subsidiaries or any or their respective properties or assets before any
Governmental Entity which, individually or in the aggregate, could reasonably
be expected to have a Material Adverse Effect on XPDN or could reasonably be
expected to prevent or delay the consummation of the transactions contemplated
by this Agreement. Except as publicly disclosed by XPDN in the XPDN SEC
Reports, XPDN is not subject to any outstanding order, writ, injunction or
decree which, insofar as can be reasonably foreseen in the future, could
reasonably be expected to have a Material Adverse Effect on XPDN or could
reasonably be expected to prevent or delay the consummation of the transactions
contemplated hereby.
Section 2. 10. Compliance with Applicable Law. Except as publicly
disclosed by XPDN in the XPDN SEC Reports, XPDN holds all permits, licenses,
variances, exemptions, orders and approvals of all Governmental Entities
necessary for the lawful conduct of their respective businesses (the "XPDN
Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders and approvals which would not have a Material Adverse
Effect on XPDN. Except as publicly disclosed by XPDN in the XPDN SEC Reports,
XPDN is in compliance with the terms or the XPDN Permits, except where the
failure so to comply would not have a Material Adverse Effect on XPDN. Except
as publicly disclosed by XPDN in the XPDN SEC Reports, the business of XPDN is
not being conducted in violation of any law, ordinance or regulation of any
Governmental Entity except that no representation or warranty is made in this
Section 2.10 with respect to Environmental Laws (as defined in Section 2.1.2
below) and except for violations or possible violations which do not, and,
insofar as reasonably can be foreseen, in the future will not, have a Material
Adverse Effect on XPDN. Except as publicly disclosed by XPDN in the XPDN SEC
Reports, no investigation or review by any Governmental Entity with respect to
XPDN is pending or, to the knowledge of XPDN, threatened, nor, to the knowledge
of XPDN, has any Governmental Entity indicated an intention to conduct the
same, other than, in each case, those which XPDN reasonably believes will not
have a Material Adverse Effect on XPDN.
Section 2.11. Employee Benefit Plans: Labor Matters.
-------------------------------------
(a) Except as set forth in Section 2.11(a) of the XPDN Disclosure Schedule
with respect to each employee benefit plan, program, policy, arrangement and
contract (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), maintained or contributed to at any time by XPDN or any
entity required to be aggregated with XPDN pursuant to Section 414 of the Code
(each, a "XPDN Employee Plan"), no event has occurred and to the knowledge of
XPDN, no condition or set of circumstances exists in connection with which XPDN
could reasonably be expected to be subject to any liability which would have a
Material Adverse Effect on XPDN.
(b) (i) No XPDN Employee Plan is or has been subject to Title IV of ERISA
or Section 412 of the Code; and (ii) each XPDN Employee Plan intended to
qualify under Section 401(a) of the Code and each trust intended to quality
under Section 501(a) of the Code is the subject of a favorable Internal Revenue
Service determination letter, and nothing has occurred which could reasonably
be expected to adversely affect such determination.
(c) Section 2.11(c) of the XPDN Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of each person who holds any
XPDN Stock Options, together with the number of XPDN Shares which are subject
to such option, the date of grant of such option, the extent to which such
option is vested (or will become vested as a result or the Share Exchange), the
option price of such option (to the extent determined as of the date hereof),
whether such option is a nonqualified stock option or is intended to qualify as
an incentive stock option within the meaning of Section 422(b) of the Code, and
the expiration date of such option. Section. 2.11(c) of the XPDN Disclosure
Schedule also sets forth the total number of such incentive stock options and
such nonqualified options. XPDN has furnished GALA with complete copies of the
plans pursuant to which the XPDN Stock Options were issued. Other than the
automatic vesting of XPDN Stock Options that may occur without any action on
the part of XPDN or its officers or directors, XPDN has not taken any action
that would result in any XPDN Stock Options that are unvested becoming vested
in connection with or as a result of the execution and delivery of this
Agreement or the consummation of the transactions contemplated hereby.
(d) XPDN has made available to GALA (I) a description of the terms of
employment and compensation arrangements of all officers of XPDN and a copy of
each such agreement currently in effect; (ii) copies of all agreements with
consultants who are individuals obligating XPDN to make annual cash payments in
an amount exceeding $60,000; (iii) a schedule listing all officers of XPDN who
have executed a non-competition agreement with XPDN and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of XPDN with or relating to its employees,
except programs and policies required to be maintained by law; and (v) copies
of all plans, programs, agreements and other arrangements of XPDN with or
relating to its employees which contain change in control provisions all of
which are set forth in Section 2.11(d) of the XPDN Disclosure Schedule.
(e) There shall be no payment, accrual of additional benefits,
acceleration of payments, or vesting in any benefit under any XPDN employee
Plan or any agreement or arrangement disclosed under this Section 2.1.1
solely by reason of entering into or in connection with the transactions
contemplated by this Agreement.
(f) There are no controversies pending or, to the knowledge of XPDN,
threatened, between XPDN and any of their employees, which controversies have
or could reasonably be expected to have a Material Adverse Effect on XPDN.
Neither XPDN nor any of its subsidiaries is a party to any collective
bargaining agreement or other labor union contract applicable to persons
employed by XPDN or any of its subsidiaries (and neither XPDN nor any of its
subsidiaries has any outstanding material liability with respect to any
terminated collective bargaining agreement or labor union contract), nor does
XPDN know of any activities or proceedings of any labor union to organize any
of its or employees. XPDN has no knowledge of any strike, slowdown, work
stoppage, lockout or threat thereof, by or with respect to any of its
employees.
Section 2.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as publicly disclosed by XPDN in the XPDN SEC Reports, (i) XPDN
is in material compliance with all applicable federal, state, local and foreign
laws and regulations relating to pollution or protection of human health or the
environment (including, without limitation, ambient air, surface water, ground
water, land surface or subsurface strata) (collectively, "Environmental Laws").
except for non-compliance that would not have a Material Adverse Effect on
XPDN, which compliance includes but is not limited to, the possession by XPDN
or all material permits and other governmental authorizations required under
applicable Environmental Laws, and compliance with the terms and conditions
thereof; (ii) XPDN has not received written notice of, or, to the knowledge of
XPDN, is the subject of, any action, cause of action, claim, investigation,
demand or notice by any person or entity alleging liability under or non-
compliance with any Environmental Law (an "Environmental Claim") that could
reasonably be expected to have a Material Adverse Effect on XPDN; and (iii) to
the knowledge of XPDN, there are no circumstances that are reasonably likely to
prevent or interfere with such material compliance in the future.
(b) Except as publicly disclosed by XPDN, there are no Environmental
Claims which could reasonably be expected to have a Material Adverse Effect on
XPDN that are pending or, to the knowledge of XPDN, threatened against XPDN or,
to the knowledge of XPDN, against any person or entity whose liability for any
Environmental Claim XPDN has or may have retained or assumed either
contractually or by operation of law.
Section 2.13. Tax Matters.
-----------
(a) Except as set forth in Section 2.13 of the XPDN Disclosure Schedule:
(i) XPDN has filed or has had filed on its behalf in a timely manner (within
any applicable extension periods) with the appropriate Governmental Entity all
income and other material Tax Returns (as defined herein) with respect to Taxes
(as defined herein) of XPDN and all Tax Returns were in all material respects
true, complete and correct; (ii) all material Taxes with respect to XPDN have
been paid in full or have been provided for in accordance with GAAP on XPDN's
most recent balance sheet which is part of the XPDN SEC Documents. (iii) there
are no outstanding agreements or waivers extending the statutory period of
limitations applicable to any federal, state, local or foreign income or other
material Tax Returns required to be filed by or with respect to XPDN; (iv) to
the knowledge of XPDN none of the Tax Returns of or with respect to XPDN is
currently being audited or examined by any Governmental Entity; and (v) no
deficiency for any income or other material Taxes has been assessed with
respect to XPDN which has not been abated or paid in full.
(b) For purposes of this Agreement, (i) "Taxes" shall mean all taxes,
charges, fees, levies or other assessments, including, without limitation,
income, gross receipts, sales, use, ad valorem, goods and services, capital,
transfer, franchise, profits, license, withholding, payroll, employment,
employer health, excise, estimated, severance, stamp, occupation, property or
other taxes, customs duties, fees, assessments or charges of any kind
whatsoever together with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority and. (ii.) "Tax Return"
shall mean any report, return, documents declaration or other information or
filing required to be supplied to any taxing authority or jurisdiction with
respect to Taxes.
Section 2.14. Title to Property. XPDN has good and defensible title to all
of its properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, would not have a Material Adverse
Effect on XPDN; and, to XPDN's knowledge, all leases pursuant to which XPDN
leases from others real or personal property are in good standing, valid and
effective in accordance with their respective terms, and there is not, to the
knowledge of XPDN, under any of such leases, any existing material default or
event of default (or event which with notice of lapse of time, or both, would
constitute a default and in respect of which XPDN has not taken adequate steps
to prevent such a default from occurring) except where the lack of such good
standing, validity and effectiveness, or the existence of such default or event,
would not have a Material Adverse Effect on XPDN.
Section 2.15. Intellectual Property.
---------------------
(a) XPDN owns, or possesses adequate licenses or other valid rights to use,
all existing United States and foreign patents, trademarks, trade names, service
marks, copyrights, trade secrets and applications therefore that are material to
its business as currently conducted (the "XPDN Intellectual Property Rights").
(b) The validity of the XPDN Intellectual Property Rights and the title
thereto of XPDN is not being questioned in any litigation to which XPDN is a
party.
(c) Except as set forth in Section 2.15(c) of the XPDN Disclosure Schedule,
the conduct of the business of XPDN as now conducted does not, to XPDN's
knowledge, infringe any valid patents, trademarks, trade names, service marks or
copyrights of others. The consummation of the transactions completed hereby will
not result in the loss or impairment of any XPDN Intellectual Property Rights.
(d) XPDN has taken steps it believes appropriate to protect and maintain
its trade secrets as such, except in cases where XPDN has elected to rely on
patent or copyright protection in lieu of trade secret protection.
Section 2.16. Insurance.
---------
XPDN currently does not maintain general liability and otherbusiness insurance.
Section. 2.17. LEFT BLANK INTENTIONALLY
------------------------
Section 2.18. Tax Treatment. ------------- Neither XPDN nor, to the
knowledge of XPDN, any of itsaffiliates has taken or agreed to take action that
would prevent the Share Exchange from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.
Section 2.19. Affiliates. Except for Principal XPDN Stockholder and the
directors and executive officers of XPDN, each of whom is listed in Section 2.19
of the XPDN Disclosure Schedule, there are no persons who, to the knowledge of
XPDN, may be deemed to be affiliates of XPDN under Rule 1-02(b) of Regulation
S-X of the SEC (the XPDN Affiliates").
Section 2.20. Certain Business Practices. None of XPDN or any directors,
officers, agents or employees of XPDN has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the Foreign Corrupt Practices Act of
1977, as amended (the "FCPA"), or (iii) made any other unlawful payment.
Section 2.21. Insider Interests. ----------------- Except as set forth in
Section 2.21 of the XPDN Disclosure Schedule, neither any Principal XPDN
Stockholder, nor any officer or director of XPDN has any interest in any
material property, real or personal, tangible or intangible, including without
limitation, any computer software or XPDN Intellectual Property Rights, used in
or pertaining to the business of XPDN, expect for the ordinary rights of a
stockholder or employee stock option holder.
Section 2.22. Opinion of Financial Adviser. ----------------------------
No advisers, as of the date hereof, have delivered to the XPDN Board a written
opinion to the effect that, as of such date, the shares to be delivered to the
holders of GALA shares is fair to the holders of XPDN Shares.
Section. 2.23. Disclosure. ---------- No representation or warranty of
XPDN in this Agreement or any certificate, schedule, document or other
instrument furnished or to be furnished to GALA pursuant hereto or in
connection herewith contains, as of the date of such representation, warranty
or instrument, or will contain any untrue statement of a material fact or, at
the date thereof, omits or will omit to state a material fact necessary to make
any statement herein or therein, in light of the circumstances under which such
statement is or will be made, not misleading.
Section 2.24. No Existing Discussions. As of the date hereof, XPDN is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to any Third Party Acquisition (as defined in Section
4.4).
Section 2.25. Material Contracts.
------------------
(a) XPDN has delivered or otherwise made available to GALA true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which XPDN is a
party affecting the obligations of any party thereunder) to which XPDN is a
party or by which any of its properties or assets are bound that are material
to the business, properties or assets of XPDN taken as a whole, including,
without limitation, to the extent any of the following are, individually or in
the aggregate, material to the business, properties or assets of XPDN taken as
a whole, all: (i) employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or indemnification
contracts (including, without limitation, any contract to which XPDN is a party
involving employees of XPDN); (ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting rights of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets or stack or
otherwise entered into since June 30, 2000; (vi) contracts or agreements with
any Governmental Entity. and (vii) all commitments and agreements to enter into
any of the foregoing (collectively, together with any such contracts entered
into in accordance with Section 4.1 hereof, the "XPDN Contracts"). XPDN is not a
party to or bound by any severance, golden parachute or other agreement with any
employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of compensation as
a result of the consummation of the transactions contemplated hereby.
(b) Each of the XPDN Contracts is valid and enforceable in accordance with
its terms, and there is no default under any XPDN Contract so listed either by
XPDN or, to the knowledge of XPDN, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by XPDN or, to the knowledge of XPDN, any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on XPDN.
(c) No party to any such XPDN Contract has given notice to XPDN of or made
a claim against XPDN with respect to any breach or default thereunder, in any
such case in which such breach or default could reasonably be expected to have a
Material Adverse Effect on XPDN
ARTICLE 3
Representations and Warranties of GALA
Except as set forth on the Disclosure Schedule delivered by GALA to XPDN
(the "GALA Disclosure Schedule"), GALA hereby represents and warrants to XPDN as
follows;
Section 3.1. Organization and Qualification.
------------------------------
(a) Each of GALA and its subsidiaries is duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation or
organization and has all requisite power and authority to own, lease and operate
its properties and to carry on its businesses as now being conducted, except
where the failure to be so organized, existing and in good standing or to have
such power and authority would not have a Material Adverse Affect (as defined
below) on GALA . When used in connection with GALA , the term "Material Adverse
Effect" means any change or effect (i) that is or is reasonably likely to be
materially adverse to the business, results of operations, condition (financial
or otherwise) or prospects of GALA and its subsidiaries, taken as a whole, other
than any change or effect arising out of general economic conditions unrelated
to any businesses in, which GALA and its subsidiaries are engaged, or (ii) that
may impair the ability of GALA to consummate the transactions contemplated
hereby.
(b) GALA has heretofore delivered to XPDN accurate and complete copies of
the Certificate of Incorporation and Bylaws (or similar governing documents), as
currently in effect, of GALA . Each of GALA and its subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not have a Material Adverse Effect on GALA .
Section 3.2. Capitalization of GALA .
-----------------------
(a) The total authorized capital stock of GALA consists of one million
(1,000,000) GALA common Shares, $.001 par value, one hundred (100) common Shares
are currently issued and outstanding and there are ten thousand (10,000) shares
of $100.00 par value preferred shares are authorized; 6,000 are presently
outstanding. All of the outstanding GALA Shares have been duly authorized and
validly issued, and are fully paid, nonassessable and free of preemptive rights.
(b) Except as set forth in Section 3.2(b) of the GALA Disclosure Schedule,
GALA is the record and beneficial owner of all of the issued and outstanding
shares of capital stock of its subsidiaries.
(c) Except as set forth in Section 3.2(c) of the GALA Disclosure Schedule,
between the date hereof and the Effective Time, no shares of GALA 's capital
stock have been issued and no GALA Stock options have been granted. Except as
set forth in Section 3.2(a) above, as of the date hereof, there are no
outstanding (i) shares of capital stock or other voting securities of GALA ,
(ii) securities of GALA or its subsidiaries convertible into or Exchangeable for
shares of capital stock or voting securities of GALA except as provided for in
Schedule 3.2(c), (iii) options or other rights to acquire from GALA or its
subsidiaries, or obligations of GALA or its subsidiaries to issue, any capital
stock, voting securities or securities convertible into or Exchangeable for
capital stock or voting securities of GALA , or (iv) equity equivalents,
interests in the ownership or earnings of GALA or its subsidiaries or other
similar rights (collectively, "GALA Securities"). As of the date hereof there
are no outstanding obligations of GALA or any of its subsidiaries to repurchase,
redeem or otherwise acquire any GALA Securities. There are no stockholder
agreements, voting trusts or other agreements or understandings to which GALA is
a party or by which it is bound relating to the voting or registration of any
shares of capital stock of GALA .
(d) Except as set forth in Section 3.2(d) of the GALA Disclosure Schedule,
there are no securities of GALA convertible into or Exchangeable for, no options
or other rights to acquire from GALA , and no other contract, understanding,
arrangement or obligation (whether or not contingent) providing for the issuance
or sale, directly or indirectly, of any capital stock or other ownership
interests in or any other securities of, any subsidiary of GALA .
(e) The GALA Shares constitute the only class of equity securities of GALA
or its subsidiaries.
(f) Except as set forth in Section 3.2(f) of the GALA Disclosure Schedule,
GALA does not own directly or indirectly more than fifty percent (50%) of the
outstanding voting securities or interests (including membership interests) of
any entity.
Section 3.3. Authority Relative to this Agreement Recommendation.
---------------------------------------------------
(a) GALA has all necessary corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of GALA (the "GALA Board"), and no other corporate
proceedings on the part of GALA are necessary to authorize this Agreement or to
consummate the transactions contemplated hereby, except, as referred to in
Section 3.17, the approval and adoption of this Agreement by the holders of at
least a majority of the then outstanding GALA Shares. This Agreement has been
duly and validly executed and delivered by GALA and constitutes a valid, legal
and binding agreement of GALA , enforceable against GALA in accordance with its
terms.
(b) The GALA Board has resolved to recommend that the stockholders of GALA
approve and adopt this Agreement.
Section 3.4. SEC Reports and Financial Statements.
-------------------------------------
GALA is not required to file forms, reports and documents with the SEC.
Section 3.5. Information Supplied. -------------------- None of the
information supplied or to be supplied by GALA for inclusion or incorporation by
reference to (i) the XPDN Proxy Statement, 8-K or other SEC Report will, at the
time the SEC Report is filed with the SEC and at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading and (ii) the Proxy Statement will, at
the date mailed to stockholders of XPDN, if any, and at the times of the meeting
or meetings of stockholders of XPDN to be held in connection with the Share
Exchange, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement, insofar as it relates to the meeting of GALA 's
stockholders to vote on the Share Exchange, will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and the 8-K will comply as to form in all material
respects with the provisions of the Securities Act and the rules and regulations
thereunder.
Section. 3.6. Consents and Approvals; No Violations.
------------------------------------- Except as set forth in Section 3.6 of the
GALA Disclosure Schedule, and for filings, permits, authorizations, consents and
approvals as may be required under, and other applicable requirements of, the
Securities Act, the Exchange Act, state securities or blue sky laws, the HSR
Act, the rules of the NASD and the filing and recordation of the Share Exchange
Certificate as required by the NCGL, no filing with or notice to, and no permit,
authorization, consent or approval of any Governmental Entity is necessary for
the execution and delivery by GALA of this Agreement or the consummation by GALA
of the transactions contemplated hereby, except where the failure to obtain such
permits, authorizations consents or approvals or to make such filings or give
such notice would not have a Material Adverse Effect on GALA .
Neither the execution, delivery and performance of this Agreement by GALA
nor the consummation by GALA of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provision of the respective
Certificate of Incorporation or Bylaws (or similar governing documents) of GALA
or any of GALA 's subsidiaries, (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, amendment, cancellation or acceleration
or Lien) under, any of the terms conditions or provisions of any note, bond,
mortgage, indenture, lease, license, contract agreement or other instrument or
obligation to which GALA or any of GALA 's subsidiaries is a party or by which
any of them or any of their respective properties or assets may be bound or
(iii) violate any order, writ, injunction, decree, law, statute, rule or
regulation applicable to GALA or any of GALA 's subsidiaries or any of their
respective properties or assets except in the case of (ii) or (iii) for
violations, breaches or defaults which would not have a Material Adverse Effect
on GALA .
Section 3.7. No Default. None of GALA or any of its subsidiaries is in
breach, default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or Bylaws
(or similar governing documents), (ii) any note, bond, mortgage, indenture,
lease, license, contract, agreement or other instrument or obligation to which
GALA or any of its subsidiaries is now a party or by which any of them or any of
their respective properties or assets may be bound or (iii) any order, writ,
injunction, decree, law, statute, rule or regulation applicable to GALA , its
subsidiaries or any of their respective properties or assets, except in the case
or (ii) or (iii) for violations, breaches or defaults that would not have a
Material Adverse Effect on GALA. Each note, bond, mortgage, indenture, lease,
license, contract, agreement or other instrument or obligation to which GALA or
any of its subsidiaries is now a party or by which any of them or any of their
respective properties or assets may be bound that is material to GALA and its
subsidiaries taken as a whole and that has not expired is in full force and
effect and is not subject to any material default thereunder of which GALA is
aware by any party obligated to GALA or any subsidiary thereunder.
Section 3.8. No Undisclosed Liabilities; Absence of Changes.
----------------------------------------------
Except as and to the extentdisclosed by GALA, neither GALA or its
subsidiaries had any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, that would be required by generally accepted
accounting principles to be reflected on a consolidated balance sheet or GALA
and its consolidated subsidiaries (including the notes thereto) or which would
have a Material Adverse Effect on GALA . Except as disclosed by GALA , none of
GALA or its subsidiaries has incurred any liabilities of any nature, whether or
not accrued, contingent or otherwise, which could reasonably be expected to
have, and there have been no events, changes or effects with respect to GALA or
its subsidiaries having or which could reasonably be expected to have, a
Material Adverse Effect on GALA . Except as and to the extent disclosed by GALA
there has not been (i) any material change by GALA in its accounting methods,
principles or practices (other than as required after the date hereof by
concurrent changes in generally accepted accounting principles, (ii) any
revaluation by GALA of any of its assets having a Material Adverse Effect on
GALA , including, without limitation, any write-down of the value of any assets
other than in the ordinary course of business or (iii) any other action or event
that would have required the consent of any other party hereto pursuant to
Section 4.2 of this Agreement had such action or event occurred after the date
of this Agreement.
Section 3.9. Litigation.
----------
Except as set forth in Schedule 3.9 of the GALA Disclosure Schedule there
is no suit, claim, action, proceeding or investigation pending or, to the
knowledge of GALA , threatened against GALA or any of its subsidiaries or any of
their respective properties or assets before any Governmental Entity which,
individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on GALA or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated by this Agreement.
Except as disclosed by GALA , none of GALA or its subsidiaries is subject to any
outstanding order, writ, injunction or decree which, insofar as can be
reasonably foreseen in the future, could reasonably be expected 'to have a
Material Adverse Effect on GALA or could reasonably be expected to prevent or
delay the consummation of the transactions contemplated hereby.
Section 3.10. Compliance with Applicable Law. Except as disclosed by GALA,
GALA and its subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Permits"), except for failures to hold such permits,
licenses, variances, exemptions, orders and Governmental entities necessary for
the lawful conduct of their respective businesses (the "GALA approvals which
would not have a Material Adverse Effect on GALA . Except as disclosed by GALA ,
GALA and its subsidiaries are in compliance with the terms of the GALA Permits,
except where the failure so to comply would not have a Material Adverse Effect
on GALA . Except as disclosed by GALA , tile businesses of GALA and its
subsidiaries are not being conducted in violation of any law, ordinance or
regulation of any Governmental Entity except that no representation or warranty
is made in this Section 3.10 with respect to Environmental Laws and except for
violations or possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not, have a Material Adverse Effect on GALA .
Except as disclosed by GALA no investigation or review by any Governmental
Entity with respect to GALA or its subsidiaries is pending or, to the knowledge
of GALA , threatened, nor, to the knowledge of GALA , has any Governmental
Entity indicated an intention to conduct the same, other than, in each case,
those which GALA reasonably believes will not have a Material Adverse Effect on
GALA .
Section 3.11. Employee Benefit Plans, Labor Matters.
-------------------------------------
(a) With respect to each employee benefit plan, program policy, arrangement
and contract (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of ERISA), maintained or contributed to at any time by
GALA , any of its subsidiaries or any entity required to be aggregated with GALA
or any of its subsidiaries pursuant to Section 414 of the Code (each, a "GALA
Employee Plan"). No event has occurred and, to the knowledge of GALA, no
condition or set of circumstances exists in connection with which GALA or any of
its subsidiaries could reasonably be expected to be subject to any liability
which would have a Material Adverse Effect on GALA .
(b) (i) No GALA Employee Plan is or has been subject to Title IV or ERISA
or Section 412 of the Code; and (ii) each GALA Employee Plan intended to qualify
under Section 401(a) of the Code and each trust intended to qualify under
Section 501(a) of the Code is the subject of favorable internal Revenue Service
determination letter, and nothing has occurred which could reasonably be
expected to adversely affect such determination.
(c) Section 3.11(c) of the GALA Disclosure Schedule sets forth a true and
complete list, as of the date of this Agreement, of each person who holds any
GALA Stock Options, together with the number of GALA Shares which are subject to
such option, the date of grant of such option, the extent to which such option
is vested (or will become vested as a result of the Share Exchange), the option
price of such option (to the extent determined as of the date hereof), whether
such option is a nonqualified stock option or is intended to qualify as an
incentive stock option within the meaning of Section 422(b) of the Code, and the
expiration date of such option. Section 3. ii (c) of the GALA Disclosure
Schedule also sets forth the total number of such incentive stock options and
such nonqualified options. GALA has furnished XPDN with complete copies of the
plans pursuant to which the GALA Stock Options were issued. Other than the
automatic vesting of GALA Stock Options that may occur without any action on the
part of GALA or its officers or directors, GALA has not taken any action that
would result in any GALA Stock Options that are unvested becoming vested in
connection with or as a result of the execution and delivery of this Agreement
or the consummation of the transactions contemplated hereby.
(d) GALA has made available to XPDN (i) a description of the terms of
employment and compensation arrangements of all officers of GALA and a copy of
each such agreement currently in effect; (ii) copies of all agreements with
consultants who are individuals obligating GALA to make annual cash payments in
an amount exceeding $60,000; (iii) a schedule listing all officers of GALA who
have executed a non-competition agreement with GALA and a copy of each such
agreement currently in effect; (iv) copies (or descriptions) of all severance
agreements, programs and policies of GALA with or relating to its employees,
except programs and policies required to be maintained by law; and (v) copies of
all plans, programs, agreements and other arrangements of the GALA with or
relating to its employees which contain change in control provisions.
(e) Except as disclosed in Section 3.1.1(e) of the GALA Disclosure Schedule
there shall be no payment, accrual of additional benefits, acceleration of
payments, or vesting in any benefit under any GALA Employee Plan or any
agreement or arrangement disclosed under this Section 3.11 solely by reason of
entering into or in connection with the transactions contemplated by this
Agreement.
(f) There are no controversies pending or, to the knowledge of GALA
threatened, between GALA or any of its subsidiaries and any of their respective
employees, which controversies have or could reasonably be expected to have a
Material Adverse Effect on GALA . Neither GALA nor any of its subsidiaries is a
party to any collective bargaining agreement or other labor union contract
applicable to persons employed by GALA or any of its subsidiaries (and neither
GALA nor any of its subsidiaries has any outstanding material liability with
respect to any terminated collective bargaining agreement or labor union
contract), nor does GALA know of any activities or proceedings of any labor
union to organize any of its or any of its subsidiaries' employees. GALA has no
knowledge of any strike, slowdown, work stoppage, lockout or threat thereof by
or with respect to any of its or any of its subsidiaries' employees.
Section 3.12. Environmental Laws and Regulations.
----------------------------------
(a) Except as disclosed by GALA , (i) each of GALA and its subsidiaries is
in material compliance with all Environmental Laws, except for non-compliance
that would not have a Material Adverse Effect on GALA , which compliance
includes, but is not limited to, the possession by GALA and its subsidiaries of
all material permits and other government, authorizations required under
applicable Environmental Laws, and compliance with, the terms and conditions
thereof; (ii) none of GALA or its subsidiaries has received written notice of;
or, to the knowledge of GALA , is the subject of, any Environmental Claim that
could reasonably be expected to have a Material Adverse Effect on GALA ; and
(iii) to the knowledge of GALA , there are no circumstances that are reasonably
likely to prevent or interfere with such material compliance in the future.
(U) Except as disclosed by GALA , there are no Environmental Claims which
could reasonably be expected to have a Material Adverse Effect on GALA that are
pending or, to the knowledge of GALA , threatened against GALA or any of its
subsidiaries or, to the knowledge of GALA , against any person or entity whose
liability for any Environmental Claim GALA or its subsidiaries has or may have
retained or assumed either contractually or by operation of law.
Section 3.13. Tax Matters.
-----------
Except as set forth in Section 3.13 of the GALA Disclosure Schedule: (i)
GALA and each of its subsidiaries has filed or has had filed on its behalf in a
timely manner (within any applicable extension periods) with the appropriate
Governmental Entity all income and other material Tax Returns with respect to
Taxes of GALA and each of its subsidiaries and all Tax Returns were in all
material respects true, complete and correct; (ii) all material Taxes with
respect to GALA and each of its subsidiaries have been paid in full or have been
provided for in accordance with GAAP on GALA 's most recent balance sheet which
is part of the GALA SEC Documents; (iii) there are no outstanding agreements or
waivers extending the statutory period or limitations applicable to any federal,
state, local or foreign income or other material Tax Returns required to be
filed by or with respect to GALA or its subsidiaries; (iv) to the knowledge of
GALA none of the Tax Returns of or with respect to GALA or any of its
subsidiaries is currently being audited or examined by any Governmental Entity;
and (v) no deficiency for any income or other material Taxes has been assessed
with respect to GALA or any of its subsidiaries which has not been abated or
paid in, full.
Section. 3.14. Title to Property.
-----------------
GALA and each of its subsidiaries have good anddefensible title to all of
their properties and assets, free and clear of all liens, charges and
encumbrances except liens for taxes not yet due and payable and such liens or
other imperfections of title, if any, as do not materially detract from the
value of or interfere with the present use of the property affected thereby or
which, individually or in the aggregate, would not have a Material Adverse
Effect on GALA ; and, to GALA 's knowledge, all leases pursuant to which GALA or
any of its subsidiaries lease from others real or personal property are in good
standing, valid and effective in accordance with their respective terms, and
there is not, to the knowledge of GALA , under any or such leases, any existing
material default or event of default (or event which with notice or lapse of
time, or both, would constitute a material default and in respect of which GALA
or such subsidiary has not taken adequate steps to prevent such a default from
occurring) except where the lack of such good standing, validity and
effectiveness, or the existence of such default or event of default would not
have a Material Adverse Effect on GALA .
Section 3.15. Intellectual Property.
---------------------
(a) Each of GALA and its subsidiaries owns, or possesses adequate licenses
or other valid rights to use, all existing United States and foreign patents,
trademarks, trade names, services marks, copyrights, trade secrets, and
applications therefore that are material to its business as currently conducted
(the "GALA Intellectual Property Rights").
(b) Except as set forth in Schedule 3.15(b) of the GALA Disclosure Schedule
the validity of the GALA intellectual Property Rights and the title thereto of
GALA or any subsidiary, as the case may be, is not being questioned in any
litigation to which GALA or any subsidiary is a party.
(c) The conduct of the business of GALA and its subsidiaries as now
conducted does not, to GALA 's knowledge, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others. The consummation
of the transactions contemplated hereby will not result in the loss or
impairment of any GALA intellectual Property Rights.
(d) Each of GALA and its subsidiaries has taken steps it believes
appropriate to protect and maintain its trade secrets as such, except in cases
where GALA has elected to rely on patent or copyright protection in lieu of
trade secret protection.
Section 3.16. Insurance.
--------- GALA and its subsidiaries maintain general liability and other
business insurance that GALA believes to be reasonably prudent for its business.
Section 3.17. Vote Required. The affirmative vote of the holders of at
least a majority of the outstanding GALA Shares is the only vote of the holders
of any class or series of GALA 's capital stock necessary to approve and adopt
this Agreement and the Share Exchange.
Section 3.18. Tax Treatment.
-------------
Neither GALA nor, to the knowledge of GALA , any of its affiliates has
taken or agreed to take any action that would prevent the Share Exchange from
constituting a reorganization qualifying under the provisions of Section 368(a)
of the Code.
Section 3.19. Affiliates. Except for the directors and executive officers
of GALA , each of whom is listed in Schedule 3.19 of the GALA Disclosure
Schedule, there are no persons who, to the knowledge of GALA , may be deemed to
be affiliates of GALA under Rule 1-02(b) of Regulation S-X of the SEC (the "GALA
Affiliates").
Section 3.20. Certain Business Practices.
--------------------------
None of GALA , any of its subsidiaries or any directors, officers, agents
or employees of GALA or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful expenses relating
to political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns or violated any provision of the FCPA, or (iii) made any other
unlawful payment.
Section 3.21. Insider Interests. Except as set forth in Section 7.14 and
Schedule 3.21 of the GALA Disclosure Schedule, no officer or director of GALA
has any interest in any material, property, real or personal, tangible or
intangible, including without limitation, any computer software or GALA
Intellectual Property Rights, used in or pertaining to the business of GALA or
any subsidiary, except for the ordinary rights of a stockholder or employee
stock option holder.
Section 3.22. Opinion of Financial Adviser. No advisers, as of the date
hereof, have delivered to the GALA Board a written opinion to the effect that,
as of such date, the Exchange ratio contemplated by the Share Exchange is fair
to the holders of GALA Shares.
Section 3.24. Disclosure. No representation or warranty of GALA in this
Agreement or any certificate, schedule, document or other instrument furnished
or to be furnished to XPDN pursuant hereto or in connection herewith contains,
as of the date of such representation, warranty or instrument, or will contain
any untrue statement of a material fact or, at the date thereof, omits or will
omit to state a material fact necessary to make any statement herein or therein,
in light of the circumstances under which such statement is or will be made, not
misleading.
Section 3.25. No Existing Discussions. As of the date hereof GALA is not
engaged, directly or indirectly, in any discussions or negotiations with any
other party with respect to any Third Party Acquisition (as defined in Section
5.4).
Section 3.26. Material Contracts.
------------------
(a) GALA has delivered or otherwise made available to XPDN true, correct
and complete copies of all contracts and agreements (and all amendments,
modifications and supplements thereto and all side letters to which GALA is a
party affecting the obligations of any party thereunder) to which GALA or any of
its subsidiaries is a party or by which any of their properties or assets are
bound that are, material to the business, properties or assets of GALA and its
subsidiaries taken as a whole, including, without limitation, to the extent any
of the following are, individually or in the aggregate, material to the
business, properties or assets of GALA and its subsidiaries taken as a whole,
all: (i) employment, product design or development, personal services,
consulting, non-competition, severance, golden parachute or indemnification
contracts (including, without limitation, any contract to which GALA is a party
involving employees of GALA ); (ii) licensing, publishing, merchandising or
distribution agreements; (iii) contracts granting rights of first refusal or
first negotiation; (iv) partnership or joint venture agreements; (v) agreements
for the acquisition, sale or lease of material properties or assets or stock or
otherwise (vi) contracts or agreements with any Governmental Entity; and (vii)
all commitments and agreements to enter into any of the foregoing (collectively,
together with any such contracts entered into in accordance with Section 5.2
hereof; the "GALA Contracts"). Neither GALA nor any of its subsidiaries is a
party to or bound by any severance, golden parachute or other agreement with any
employee or consultant pursuant to which such person would be entitled to
receive any additional compensation or an accelerated payment of compensation as
a result of the consummation of the transactions contemplated hereby.
(b) Each of the GALA Contracts is valid and enforceable in accordance with
its terms, and there is no default under any GALA Contract so listed either by
GALA of, to the knowledge of GALA , by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a default thereunder by GALA or, to the knowledge of GALA , any other
party, in any such case in which such default or event could reasonably be
expected to have a Material Adverse Effect on GALA .
(c) No party to any such GALA Contract has given notice to GALA of or made
a claim against GALA with respect to any breach or default thereunder, in any
such case in which such breach or default could reasonably be expected to have a
Material Adverse Effect on GALA .
ARTICLE 4
Covenants
Section 4.1 - Conduct of Business of XPDN. Except as contemplated by this
Agreement or as described in Section 4. of the XPDN Disclosure Schedule, during
the period from the date hereof to the Effective Time, XPDN will conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement, seek to preserve intact its current
business organization, keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that goodwill and ongoing businesses
shall be unimpaired at the Effective Time Without limiting the generality of the
foregoing, except as otherwise expressly provided in this Agreement or as
described in Section 4.1 of the XPDN Disclosure Schedule, prior to the Effective
Time, XPDN will not, without the prior written consent of GALA :
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) amend the terms of any stock of any class or any other securities
(except bank loans) or equity equivalents;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, make any
other actual, constructive or deemed distribution in respect of its capital
stock or otherwise make any payments to stockholders in their capacity as such,
or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, share
Exchange, consolidation, restructuring, recapitalization or other reorganization
of XPDN (other than the Share Exchange);
(e) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business; (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person (iii) make
any loans, advances or capital contributions to, or investments in, any other
person; (iv) pledge or otherwise encumber shares of capital stock of XPDN; or
(v) mortgage or pledge any of its material assets, tangible or intangible, or
create or suffer to exist any material Lien thereupon (other than tax Liens for
taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit, stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph (f) shall not prevent
XPDN from (i) entering into employment agreements or severance agreements with
employees in the ordinary course of business and consistent with past practice
or (ii) increasing annual compensation and/or providing for or amending bonus
arrangements for employees for fiscal 2001 in the ordinary course of year-end
compensation reviews consistent with past practice and paying bonuses to
employees for fiscal 2001 in amounts previously disclosed to GALA (to the extent
that such compensation increases and new or amended bonus arrangements do not
reset in a material increase in benefits or compensation expense to XPDN);
(g) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions (other than in the ordinary course of
business);
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in, any material respect any of its assets including, without
limitation, writing down the value of inventory or writing-off notes or accounts
receivable other than in the ordinary course of business;
(j) (i) acquire (by share Exchange, consolidation, or acquisition of stock
or assets) any corporation, partnership or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in the ordinary course of business consistent with past
practice which would be material to XPDN; (iii) authorize any new capital
expenditure or expenditures which, individually is in excess of $1,000 or, in
the aggregate, are in excess of $5,000; provided, however that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts;
(k) make any tax election or settle or compromise any income tax liability
material to XPDN;
(l) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which could have a Material Adverse Effect on XPDN;
(m) commence any material research and development project or terminate any
material research and development project that is currently ongoing, in either
case, except pursuant to the terms of existing contracts or in the ordinary
course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(a) through 4.1(m) or any action which would make any
of the representations or warranties of, contained in this Agreement untrue or
incorrect.
Section 4.2. Conduct of Business of GALA . Except as contemplated by this
Agreement or as described in Schedule 4.2 of the GALA Disclosure Schedule during
the period from the date hereof to the Effective Time, GALA will conduct its
operations in the ordinary course of business consistent with past practice and,
to the extent consistent therewith, with no less diligence and effort than would
be applied in the absence of this Agreement, seek to preserve intact its current
business organization, keep available the service of its current officers and
employees and preserve its relationships with customers, suppliers and others
having business dealings with it to the end that goodwill and ongoing businesses
shall be unimpaired at the Effective Time. Without limiting the generality of
the foregoing, except as otherwise expressly provided in this Agreement or as
described in Schedule 4.2 of the GALA Disclosure Schedule, prior to the
Effective Time, GALA will not, without the prior written consent of:
(a) amend its Certificate of Incorporation or Bylaws (or other similar
governing instrument);
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any stock
of any class or any other securities (except bank loans) or equity equivalents
(including, without limitation, any stock options or stock appreciation rights;
(c) split, combine or reclassify any shares of its capital stock, declare,
set aside or pay any dividend or other distribution (whether in cash, stock or
property or any combination thereof) in respect of its capital stock, make any
other actual, constructive or deemed distribution in respect of its capital
stock or otherwise make any payments to stockholders in their capacity as such,
or redeem or otherwise acquire any of its securities;
(d) adopt a plan of complete or partial liquidation, dissolution, share
Exchange consolidation, restructuring, re-capitalization or other reorganization
of GALA (other than the Share Exchange);
(e) (i) incur or assume any long-term or short-term debt or issue any debt
securities except for borrowings or issuances of letters of credit under
existing lines of credit in the ordinary course of business (ii) assume,
guarantee, endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person; (iii) make
any loans, advances or capital contributions to or investments in, any other
person; (iv) pledge or otherwise encumber shares of capital stock of GALA or its
subsidiaries; or (v) mortgage or pledge any of its material assets, tangible or
intangible, or create or suffer to exist any material Lien thereupon (other than
tax Liens for taxes not yet due);
(f) except as may be required by law, enter into, adopt or amend or
terminate any bonus, profit sharing, compensation, severance, termination, stock
option, stock appreciation right, restricted stock, performance unit stock
equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement, trust,
plan, fund or other arrangement for the benefit or welfare of any director,
officer or employee in any manner, or increase in any manner the compensation or
fringe benefits of any director, officer or employee or pay any benefit not
required by any plan and arrangement as in effect as of the date hereof
(including, without limitation, the granting of stock appreciation rights or
performance units); provided, however, that this paragraph (f) shall not prevent
GALA or its subsidiaries from (i) entering into employment agreements or
severance agreements with employees in the ordinary course of business and
consistent with past practice or (ii) increasing annual compensation and/or
providing for or amending bonus arrangements for employees for fiscal 2001 in
the ordinary course of yearend compensation reviews consistent with past
practice and paying bonuses to employees for fiscal 2001 in amounts previously
disclosed to (to the extent that such compensation increases and new or amended
bonus arrangements do not result in a material increase in, benefits or
compensation expense to GALA );
(g) acquire, sell, lease or dispose of any assets in any single transaction
or series of related transactions other than in the ordinary course of business;
(h) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
principles or practices used by it;
(i) revalue in any material respect any of its assets, including, without
limitation, writing down the value of inventory of writing-off notes or accounts
receivable other than in the ordinary course of business;
(j) (i) acquire (by share Exchange, consolidation, or acquisition of stock
or assets) any corporation, partnership, or other business organization or
division thereof or any equity interest therein; (ii) enter into any contract or
agreement other than in, the ordinary course of business consistent with past
practice which would be material to GALA ; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of $1,000 or, in
the aggregate, are in excess of $5,000: provided, however that none of the
foregoing shall limit any capital expenditure required pursuant to existing
contracts;
(k) make any tax election or settle or compromise any income tax liability
material to GALA and its subsidiaries taken as a whole;
(l) settle or compromise any pending or threatened suit, action or claim
which (i) relates to the transactions contemplated hereby or (ii) the settlement
or compromise of which could have a Material Adverse Effect on, GALA ;
(m) commence any material research and development project or terminate any
material research and development project that is currently ongoing, in either
case, except pursuant to the terms of existing contracts or except in the
ordinary course of business; or
(n) take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.2(a) through 4.2(m) or any action which would make any
of the representations or warranties of the GALA contained in this Agreement
untrue or incorrect.
Section 4.3 Other Potential Acquirers.
-------------------------
(a) GALA , its affiliates and. their respective officers, directors,
employees, representatives and agents shall immediately cease any existing
discussions or negotiations, if any, with any parties conducted heretofore with
respect to any Third Party Acquisition
Section 4.4. Meetings of Stockholders. GALA shall take all action
necessary, in accordance with the respective FBCA to duly call, give notice of,
convene and hold a meeting of its stockholders as promptly as practicable, to
consider and vote upon the adoption and approval of this Agreement and the
transactions contemplated hereby. The stockholder votes required for the
adoption and approval of the transactions contemplated by this Agreement shall
be the vote required by the FBCA and its charter.
Section 4.5. OTC:BB Listing. The parties shall use all reasonable efforts
to cause the XPDN Shares, subject to Rule 144, to be traded on the
Over-the-Counter Bulletin Board (OTC:BB).
Section. 4.6. Access to Information
(a) Between the date hereof and the Effective Time, XPDN will give GALA and
its authorized representatives, and GALA will give XPDN and its authorized
representatives, reasonable access to all employees, plants, offices, warehouses
and other facilities and to all books and records of itself and its
subsidiaries, will permit the other party to make such inspections as such party
may reasonably require and will cause its officers and those of its subsidiaries
to furnish the other party with such financial and operating data and other
information with respect to the business and properties of itself and its
subsidiaries as the other party may from time to time reasonably request.
(b) Between the date hereof and the Effective Time, XPDN shall furnish to
GALA , and GALA will furnish to XPDN, within 25 business days after the end of
each quarter, quarterly statements prepared by such party in conformity with its
past practices) as of the last day of the period then ended.
(c) Each of the parties hereto will hold and will cause its consultants and
advisers to hold in confidence all documents and information furnished to it in
connection with the transactions contemplated by this Agreement.
Section 4.7. Additional Agreements. Reasonable Efforts. Subject to the
terms and conditions herein provided, each of the parties hereto agrees to use
all reasonable efforts to take, or cause to be taken, all action, and to do, or
cause to be done, all things reasonably necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including, without limitation, (i)
cooperating in the preparation and filing of the Proxy Statement and the 8-K,
any filings that may be required under the HSR Act, and any amendments to any
thereof; (ii) obtaining consents of al third parties and Governmental Entities
necessary, proper or advisable for the consummation of the transactions
contemplated by this Agreement; (iii) contesting any legal proceeding relating
to the Share Exchange and (iv) the execution of any additional instruments
necessary to consummate the transactions contemplated hereby. Subject to the
terms and conditions of this Agreement, GALA and XPDN agree to use all
reasonable efforts to cause the Effective Time to occur as soon as practicable
after the stockholder votes with respect to the Share Exchange. In case at any
time after the Effective Time any further action is necessary to carry out the
purposes of this Agreement, the proper officers and directors of each party
hereto shall take all such necessary action.
Section 4.8. Employee Benefits Stock Option and Employee Purchase Plans.
Neither XPDN nor GALA has any, or
------------------------------------------------------------ contemplates the
institution of Employee Benefit Plans.
Section 4.9. Public Announcements. GALA , and XPDN will consult with one
another before issuing any press release or otherwise making any public
statements with respect to the transactions contemplated by this Agreement,
including, without limitation, the Share Exchange, and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law or by obligations pursuant to any
listing agreement with the NASD Over-the-Counter Bulletin Board (OTC:BB) as
determined by GALA or XPDN.
Section 4.10. Indemnification.
---------------
(a) To the extent, if any, not provided by an existing right under one of
the parties, directors and officers liability insurance policies, from and after
the Effective Time, XPDN shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless each person who is now, or has been at
any time prior to the date hereof, or who becomes prior to the Effective Time, a
director, officer or employee of the parties hereto or any subsidiary thereof
(each an "Indemnified Party" and, collectively, the "Indemnified Parties")
against all losses, expenses (including reasonable attorneys' fees and
expenses), claims, damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement arising out of actions or
omissions occurring at or prior to the Effective Time and whether asserted or
claimed prior to, at or after the Effective Time) that are in whole or in part
(i) based on, or arising out of the fact that such person is or was a director,
officer or employee of such party or a subsidiary of such party or (ii) based
on, arising out of or pertaining to the transactions contemplated by this
Agreement. In the event of any such loss expense, claim, damage or liability
(whether or not arising before the Effective Time), (i) XPDN shall pay the
reasonable fees and expenses of counsel selected by the indemnified Parties,
which counsel shall be reasonably satisfactory to XPDN, promptly after
statements therefore are received and otherwise advance to such Indemnified
Party upon request reimbursement of documented expenses reasonably incurred, in
either case to the extent not prohibited by the FBCA or its certificate of
incorporation or bylaws, (ii) XPDN will cooperate in the defense of any such
matter and (iii) any determination required to be made with respect to whether
an Indemnified Party's conduct complies with the standards set forth under the
FBCA and XPDN's certificate of incorporation or bylaws shall be made by
independent counsel mutually acceptable to XPDN and the Indemnified Party;
provided, however, that XPDN shall not be liable for any settlement effected
without its written consent (which consent shall not be unreasonably withheld).
The Indemnified Parties as a group may retain only one law firm with respect to
each related matter except to the extent there is, in the opinion of counsel to
an Indemnified Party, under applicable standards of professional conduct, or
conflict on any significant issue between positions of any two or more
Indemnified Parties.
(b) In the event XPDN or any of its successors or assigns (i) consolidates
with or merges into any other person and shall not be the continuing or
Acquiring corporation or entity or such consolidation or share Exchange or (ii)
transfers all or substantially all of its properties and assets to any person,
then and in either such case, proper provision shall be made so that the
successors and assigns of XPDN shall assume the obligations set forth in this
Section 4.11.
(c) To the fullest extent permitted by law, from and after the Effective
Time, all rights to indemnification now existing in favor of the employees,
agents, directors or officers of XPDN and GALA and their subsidiaries with
respect to their activities as such prior to the Effective Time, as provided in
XPDN's and GALA 's certificate of incorporation or bylaws, in effect on the date
thereof or otherwise in effect on the date hereof, shall survive the Share
Exchange and shall continue in full force and effect for a period of not less
than six years from the Effective Time.
(d) The provisions of this Section 4.11 are intended to be for the benefit
of and shall be enforceable by, each indemnified Party, his or her heirs and his
or her representatives.
Section 4.11. Notification of Certain Matters. The parties hereto shall
give prompt notice to the other parties, of (i) the occurrence or nonoccurrence
of any event the occurrence or nonoccurrence of which would be likely to cause
any representation or warranty contained in, this Agreement to be untrue or
inaccurate in any material respect at or prior to the Effective Time, (ii) any
material failure of such party to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder, (iii) any notice
of, or other communication relating to, a default or event which, with notice or
lapse of time or both, would become a default, received by such party or any of
its subsidiaries subsequent to the date of this Agreement and prior to the
Effective Time, under any contract or agreement material to the financial
condition, properties, businesses or results of operations of such party and its
subsidiaries taken other communication from any third party alleging that the
consent of such third party is or may as a whole to which such party or any of
its subsidiaries is a party or is subject, (iv) any notice or be required in
connection with the transactions contemplated by this Agreement, or (v) any
material adverse change in their respective financial condition, properties,
businesses, results of operations or prospects taken as a whole, other than
changes resulting from general economic conditions; provided, however, that the
delivery of any notice pursuant to this Section 4.11 shall not cure such breach
or non-compliance or limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
ARTICLE 5
Conditions to Consummation of the Share Exchange
Section 5.1 Conditions to Each Party's Obligations to Effect the Share
Exchange. The respective obligations of each party hereto to effect the Share
Exchange are subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) this Agreement shall have been approved and adopted by the stockholders
of GALA ; and
(b) this Agreement shall have been approved and adopted by the Board of
Directors of XPDN and GALA; and
(c) no statute, rule, regulation, executive order, decree, ruling or
injunction shall have been enacted, entered, promulgated or enforced by any
United States court or United States governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Share Exchange;
(d) any waiting period applicable to the Share Exchange under the HSR Act
shall have terminated or expired, and any other governmental or regulatory
notices or approvals required with respect to the transactions contemplated
hereby shall have been either filed or received; and
Section 5.2 Conditions to the Obligations of XPDN. The obligation of XPDN
to effect the Share Exchange is subject to the satisfaction at or prior to the
Effective Time of the following conditions:
(a) the representations of GALA contained in this Agreement or in any other
document delivered pursuant hereto shall be true and correct (except to the
extent that the breach thereof would not have a Material Adverse Effect on GALA
) at and as of the Effective Time with the same effect as if made at and as of
the Effective Time (except to the extent such representations specifically
related to an earlier date, in which case such representations shall be true and
correct as of such earlier date), and at the Closing GALA shall have delivered
to XPDN a certificate to that effect;
(b) each of the covenants and obligations of GALA to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time and
at the Closing GALA shall have delivered to XPDN a certificate to that effect;
(c) GALA shall have obtained the consent or approval of each person whose
consent or approval shall be required in order to permit the Share Exchange as
relates to any obligation, right or interest of GALA under any loan or credit
agreement, note, mortgage, indenture, lease or other agreement or instrument,
except those for which failure to obtain such consents and approvals would not,
in the reasonable opinion of XPDN, individually or in the aggregate, have a
Material Adverse Effect on GALA ;
(d) there shall have been no events, changes or effects with respect to
GALA or its subsidiaries having or which could reasonably be expected to have a
Material Adverse Effect on GALA ; and
Section 5.3 Conditions to the Obligations of GALA . The respective
obligations of GALA to effect the Share Exchange are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) the representations of XPDN contained in this Agreement or in any other
document delivered pursuant hereto shall be true and correct (except to the
extent that the breach thereof would not have a Material Adverse Effect on XPDN)
at and as of the Effective Time with the same effect as if made at and as of the
Effective Time (except to the extent such representations specifically related
to an earlier date, in which case such representations shall be true and correct
as of such earlier date), and at the Closing XPDN shall have delivered to GALA a
certificate to that effect;
(b) each of the covenants and obligations of XPDN to be performed at or
before the Effective Time pursuant to the terms of this Agreement shall have
been duly performed in all material respects at or before the Effective Time and
at the Closing XPDN shall have delivered to GALA a certificate to that effect;
and
(c) there shall have been no events, changes or effects with respect to
XPDN having or which could reasonably be expected to have a Material Adverse
Effect on XPDN.
ARTICLE 6
Termination; Amendment; Waiver
Section 6.1. Termination. This Agreement may be terminated and the Share
Exchange may be ----------- abandoned at any time prior to the Effective Time,
whether before or after approval and adoption of this Agreement by XPDN's or
GALA 's stockholders:
(a) by mutual written consent of XPDN and GALA ;
(b) by GALA or XPDN if (i) any court of competent jurisdiction in the
United States or other United States Governmental Entity shall have issued a
final order, decree or ruling or taken any other final action restraining,
enjoining or otherwise prohibiting the Share Exchange and such order, decree,
ruling or other action is or shall have become nonappealable or (ii) the Share
Exchange has not been consummated by September 30, 2001; provided, however, that
no party may terminate this Agreement pursuant to this clause (ii) if such
party's failure to fulfill any of its obligations under this Agreement shall
have been the reason that the Effective Time shall not have occurred on or
before said date,
(c) by XPDN if (i) there shall have been a breach of any representation or
warranty on the part of GALA set forth in this Agreement, or if any
representation or warranty of GALA shall have become untrue, in either case such
that the conditions set forth in Section 5.2(a) would be incapable of being
satisfied by September 30, 2001 (or as otherwise extended), (ii) there shall
have been a breach by GALA of any of their respective covenants or agreements
hereunder having a Material Adverse Effect on GALA or materially adversely
affecting (or materially delaying) the consummation of the Share Exchange, and
GALA , as the case may be, has not cured such breach within 20 business days
after notice by XPDN thereof, provided that XPDN has not breached any of its
obligations hereunder or (iii) XPDN shall have convened a meeting of its Board
of Directors to vote upon the Share Exchange and shall have failed to obtain the
requisite vote;
(d) by GALA if (i) there shall have been a breach of any representation or
warranty on the part of XPDN set forth in this Agreement, or if any
representation or warranty of XPDN shall have become untrue, in either case such
that the conditions set forth in Section 5.3(a) would be incapable of being
satisfied by September 30, 2001 (or as otherwise extended), (ii) there shall
have been a breach by XPDN of its covenants or agreements hereunder having a
Material Adverse Effect on XPDN or materially adversely affecting (or
materially, delaying) the consummation of the Share Exchange, and XPDN, as the
case may be, has not cured such breach within twenty business days after notice
by GALA thereof, provided that GALA has not breached any of its obligations
hereunder.
Section 6.2. Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 6.1, this Agreement shall
forthwith became void and have no effect, without any liability on the part of
any party hereto or its affiliates, directors, owners or stockholders, other
than the provisions of this Section 6.2 and Sections 4.7(c) and 6.3 hereof
Nothing contained in this Section 6.2 shall relieve any party from liability for
any breach of this Agreement.
Section 6.3. Fees and Expenses. Except as specifically provided in this
Section 6.3, each party shall bear its own expenses in connection with this
Agreement and the transactions contemplated hereby.
Section 6.4. Amendment. This Agreement may not be amended except by an
instrument in writing signed on --------- behalf of the parties hereto.
Section 6.5. Extension: Waiver. At any time prior to the Effective
Time, each party hereto may (i) extend the time for the performance of any of
the obligations or other acts of any other party, (ii) waive any inaccuracies in
the representations and warranties of any other party contained herein or in any
document, certificate or writing delivered pursuant hereto or (iii) waive
compliance by any other party with any of the agreements or conditions contained
herein. Any agreement on the part of any 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. The failure of any party hereto to assert any of its
rights hereunder shall not constitute a waiver of such rights.
ARTICLE 7
Miscellaneous
Section 7.1. Nonsurvival of Representations and Warranties.
---------------------------------------------
The representations and warranties made herein shall not survive beyond the
Effective Time or a termination of this Agreement. This Section 7.1 shall not
limit any covenant or agreement of the parties hereto which by its terms
requires performance after the Effective Time.
Section 7.2. Entire Agreement; Assignment.
----------------------------
This Agreement (a) constitutes the entire agreement between the parties
hereto with respect to the subject matter hereof and supersedes all other prior
agreements and understandings both written and oral, between the parties with
respect to the subject matter hereof and (b) shall not be assigned by operation
of law or otherwise.
Section 7.3. Validity. If any provision of this Agreement, or the
application thereof to any person or circumstance, is held invalid or
unenforceable, the remainder of this Agreement and the application of such
provision to other persons or circumstances, shall not be affected thereby, and
to such end, the provisions of this Agreement are agreed to be severable.
Section 7.4. Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by facsimile
or by registered or certified mail (postage prepaid, return receipt requested),
to each other party as follows:
If to GALA :
GALA ENTERTAINMENT, INC.
1717 N. Bayshore Drive, Suite 4256
Miami, Florida 33132
If to XPDN:
XPEDIAN, INC.
c/o Michael Heilman
433 Maureen Lane
Severna, Maryland 21146
And copies of all notices to:
L. Van Stillman, Esq.
1177 George Bush Blvd. Suite 308
Delray Beach, Florida 33483
(561) 330-9903
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
Section 7.5. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with the
laws of the State of Florida, without regard to the principles of conflicts of
law thereof.
Section 7.6. Descriptive Headings.
--------------------
The descriptive headings herein are inserted for convenience of reference
only and are not intended to be part of or to affect the meaning or
interpretation of this Agreement.
Section 7.7. Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and its successors and
permitted assigns, and except as provided in Sections 4.9 and 4.11, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 7.3. Certain Definitions.
-------------------
For the purposes of this Agreement, the term.:
(a) "affiliate" means (except as otherwise provided in Sections 2.1.9, 3.19
and 4.13) a person that directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under common control with, the
first mentioned person;
(b) "business day" means any day other than a day on which Nasdaq is
closed;
(c) "capital stock" means common stock, preferred stock, partnership
interests, limited liability company interests or other ownership interests
entitling the holder thereof to vote with respect to matters involving the
issuer thereof.;
(d) "knowledge" or "known means, with respect to any matter in question, if
an executive officer of XPDN or GALA or its subsidiaries, as the case may be,
has actual knowledge of such matter;
(e) "person" means an individual, corporation, partnership, limited
liability company, association, trust, unincorporated organization or other
legal entity; and
(f) "subsidiary" or "subsidiaries" of XPDN, GALA or any other person, means
any corporation, partnership, limited liability company, association, trust,
unincorporated association or other legal entity of which XPDN, GALA or any such
other person, as the case may be (either alone or through or together with any
other subsidiary), owns, directly or indirectly, 50% or more of the capital
stock, the holders of which are generally entitled to vote for the election of
the board of directors or other governing body of such corporation or other
legal entity.
Section 7.9. Personal Liability. This Agreement shall not create or be
deemed to create or permit any personal liability or obligation on the part of
any direct or indirect stockholder of XPDN, GALA or any officer, director,
employee, agent, representative or investor of any party hereto.
Section 7.10. Specific Performance. The parties hereby acknowledge and
agree that the failure of any party to perform its agreements and covenants
hereunder, including its failure to take all actions as are necessary on its
part to the consummation of the Merge, will cause irreparable injury to the
other parties for which damages, even if available, will not be an adequate
remedy. Accordingly, each party hereby consents to the issuance of injunctive
relief by any court of competent jurisdiction to compel performance of such
party's obligations and to the granting by any court of the remedy of specific
performance of its obligations hereunder; provided, however, that, if a party
hereto is entitled to receive any payment or reimbursement of expenses pursuant
to Sections 6.3(a), (b) or (c), it shall not be entitled to specific performance
to compel the consummation of the Share Exchange.
Section 7.11. Construction. XPDN and GALA have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, the Agreement shall be construed as
if drafted jointly by the parties and no presumption or burden of proof shall
arise favoring or disfavoring any party by virtue of the authorship of any of
the provisions of this Agreement.
Section 7.12. Counterparts.
------------
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but a which shall constitute one and the same
agreement.
Section 7.13 Termination After Effective Date. Gala may, at its election
upon the happening of any of the following, "put" all stock issued hereunder by
XPDN in exchange for the shares of GALA with the effect that this agreement
shall be rescinded: (a) XPDN does not receive unrestricted capital, debt and/or
equity, in the amount of Fifty Thousand Dollars ($50,000) on or before October
3, 2001. (b) XPDN does not receive unrestricted capital in addition to the
foregoing amounts, debt and/or equity, in the amount of Two Hundred Thousand
Dollars ($200,000) on or before October 23, 2001. (c) XPDN does not receive
unrestricted capital in addition to the foregoing amounts, debt and/or equity,
in the amount of Two Hundred Fifty Thousand Dollars ($250,000) on or before
December 23, 2001. (d) XPDN does not receive unrestricted capital in addition to
the foregoing amounts, debt and/or equity, in a minimum amount of Two Million
Dollars ($2,000,000), net of all commissions and fees, on or before January 31,
2002. (e) XPDN does not obtain full, complete and unconditional releases of all
claims against XPDN, its officers and directors from (a) Arnold Wrobel, his
assigns. (f) A material breach of this Agreement by XPDN other than described in
(a) - (e) above. (g) Jeffrey Stoller is not President of XPDN and/or election of
directors other than as indicated herein above as GALA designees except with the
written consent of Jeffrey Stoller. (h) Failure to rescind, unwind, close or
otherwise terminate the association, activity or business with/of Mel Jackson
Financial Services (Charlotte, NC) within sixty (60) days from the date of this
agreement.
Section 7.14 Trademarks. The trademarks "Gala," "Gala Girls" and "Gala
-----------
Entertainment" as well as the domain names www.galacabaret.com,
www.galaentertainment.com and www.galagirls.com are the sole exclusive property
of Jeffrey Stoller. As additional consideration for Buyer to enter into this
agreement, Stoller agrees that Buyer may use the foregoing marks and domain
names, provided Buyer is not in default of this agreement.
In Witness Whereof each of the parties has caused this Agreement to be duly
executed. on its behalf as of the day and year first above written.
XPEDIAN, INC.
By: /s/ Clyde Aycock
Name: Clyde Aycock
Title: President
GALA ENTERTAINMENT, INC.
By: /s/ Jeffrey Stoller
Name: Jeffrey Stoller
Title: President
XPDN DISCLOSURE SCHEDULE
Schedule 2.1 Organization See Amended Articles/Bylaws/Minutes
Schedule 2.6 Consents & Approvals None Required
Schedule 2.7 No Default Not Applicable
Schedule 2.8 No Undisclosed Liability None Exist
Schedule 2.9 Litigation None Exist
Schedule 2.10 Compliance with Applicable Law Not Applicable - full disclosed in
1OKSB
Schedule 2.11 Employee Benefit Plans Section 2.11(a) Not Applicable -
None Exist
Section 2.11(b) No Benefit Plan
Exist
Section 2.11( c) No Options Exist
Section 2.E 1(d) No Agreements
Exist
Schedule 2.12 Environmental Laws and Regs Not Applicable
Schedule 2 13 Tax Matters None Exist
Schedule 2.14 Title to Property None Exist
Schedule 2.15 Intellectual Property None Exist
Schedule 2.16 Insurance None Exist
Schedule 2 1.7 Vote Required See Shareholder Meeting
Certificate
Schedule 2.13 Tax Treatment Not Applicable
Schedule 2 19 Affiliates None Exist
Schedule 2.20 Certain Business Practices None Exist
Schedule 2.21 Insider Interest None Exist
Schedule 2.22 Opinion of Financial Adviser Waived-None Exist
Schedule 4.1 Conduct of Business See Amended & Restated Articles
GALA DISCLOSURE SCHEDULE
Schedule 3.2(b) Subsidiary Stock Not Applicable
Schedule 3.2(c) Capital Stock Rights $600,000 preferred stock
convertible into common
(see alsoP. 1.6(b))
Schedule 3.2(d) Securities conversions None Exist
Schedule 3.2 (f) Subsidiaries Gala owns 100% of Hospitality
Adventures Ltd dba The
Clubhouse GCG (Kansas City, Mo.)
Schedule 3.6 Consents & Approvals None Required
Schedule 3.7 No Default Not Applicable
Schedule 3.8 No Undisclosed Liability None Exist
Schedule 3.9 Litigation a) Lamar Outdoor Advertising vs.
Hospitality Adventures
($22k, settled $470/month)
b) Entercom vs. Hospitality
Adventures ($4300, settled
$1000)
c) Present Industries vs. GEKC,Inc.
(the landlord of Hospitality
Adventures in Kansas City, Mo.
For a mechanics lien) (motion
for summary judgment to remove
lien filed, awaiting decision)
Schedule 3.10 Compliance with Applicable Law Not Applicable
Schedule 3.11 Employee Benefit Plans Section 3.11(c) No Options Exist
Section 3.11(c) No Agreements Exist
Schedule 3.12 Environmental Laws and Regs Not Applicable
Schedule 3.13 Tax Matters Payroll tax returns and payments.
Schedule 3.14 Title to Property None Exist
Schedule 3.15(b) Intellectual Property None Exist
Schedule 3.17 Vote Required See Shareholder Meeting Certificate
Schedule 3.18 Tax Treatment Not Applicable
Schedule 3.19 Affiliates Jeffrey Stoller, Michael Heilman
Schedule 3.20 Certain Business Practices None Exist
Schedule 3.21 Insider Interest None Exist
Schedule 3.22 Opinion of Financial Adviser Waived - None Exist
Schedule 4.2 Conduct of Business None Exist