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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 3, 1999
PopMail.com, inc.
(Exact name of registrant as specified in its charter)
Minnesota 0-23243 31-1487885
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4801 West 81st Street, Suite 112, Bloomington, MN 55437
(Address of principal executive offices) (Zip Code)
(Former Name or Former Address, if Changed Since Last Report)
Registrant's telephone number, including area code: (612) 837-9917
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Item 2. Acquisition of Disposition of Assets.
1. CONSUMMATION OF ASSET ACQUISITION. On December 3, 1999, ROI
Acquisition Corporation, a Texas corporation and wholly owned subsidiary ("Sub")
of PopMail.com, Inc. (the "Parent"), acquired, effective as of November 30,
1999, substantially all of the assets and assumed substantially all of the
liabilities of ROI Interactive, LLC, a Texas limited liability company (the
"Company"), solely in exchange for 2,750,000 shares of the voting common stock,
$.01 par value, of Parent (the "Parent Exchange Shares") in accordance with the
terms and provisions of a definitive Agreement and Plan of Reorganization, dated
July 19, 1999, as amended by that certain First Amendment to Agreement and Plan
of Reorganization, dated November 12, 1999 (as amended, the "Reorganization
Agreement"), by and among Parent, Sub, the Company, and the holders of
membership interests of the Company (the "Members"). ROI provides exclusive
email service and permission-based, opt-in marketing services to television
stations and major league sports franchises.
2. CLASSIFICATION OF PARENT EXCHANGE SHARES. Of the 2,750,000 Parent
Exchange Shares, 1,402,500 shares are Restricted Parent Exchange Shares,
1,225,000 shares are Unrestricted Parent Exchange Shares and 122,500 shares are
Additional Unrestricted Parent Exchange Shares. All stock certificates
representing the Parent Exchange Shares must contain the legend set forth in
Section 2.28 of the Reorganization Agreement which basically provides that the
shares may not be transferred unless the shares are either registered under the
Securities Act or Parent has received an opinion of counsel that such shares may
be transferred without first being registered under the Securities Act. In
addition, the shares issued to the Controlling Members (Gary W. Schneider and
John M. Palms, Jr. who collectively own approximately 70% of the Company) are
subject to a one year lock-up agreement in accordance with the provisions of
Section 2.29 of the Reorganization Agreement.
3. SALE OF UNRESTRICTED PARENT EXCHANGE SHARES. Section 7.11 of the
Reorganization Agreement provided that as a condition of the Company and the
Members to the Closing, the Members shall have found an independent third party
who is neither (i) acting on behalf of or as an agent of the Parent, Sub or the
Company, nor (ii) otherwise a Related Person with respect to Parent, Sub or the
Company (a "Third Party Purchaser") to purchase the Unrestricted Parent Exchange
Shares at a purchase price that would result in the Members receiving aggregate
gross proceeds of $2,450,000 from such sale or sales prior to income tax but
after applicable broker commissions on such sale or sales. Pursuant to the
provisions of Section 7.11 of the Reorganization Agreement, on November 29, 1999
the Members entered into a Stock Purchase Agreement with an affiliate of Stephen
D. King, the Chief Executive Officer and a director of Parent ("Purchaser"),
whereby the Purchaser purchased the 1,225,000 shares of the Unrestricted Parent
Exchange Shares at an aggregate cash purchase price of $2,450,000, such purchase
and sale being consummated on December 3, 1999. The funds for this purchase was
obtained from a loan by Parent.
4. OPTION TO SELL ADDITIONAL UNRESTRICTED PARENT EXCHANGE SHARES.
Pursuant to Section 6.17 of the Reorganization Agreement, the Members have the
option to sell the Additional Unrestricted Parent Exchange Shares on or before
March 30, 2000 to a Third Party Purchaser at a purchase price that would result
in the Members receiving aggregate gross proceeds of $245,000 from such sale or
sales prior to income tax but after applicable broker commissions on such sale
or sales. If the Members desire to exercise such option, the Members (acting by
and through Gary W. Schneider or John M. Palms, Jr. as their authorized
attorney-in-fact) are required to give notice to Parent of their intent to
engage in such a sale during the month of February 2000.
5. ADJUSTMENT OF RESTRICTED PARENT EXCHANGE SHARES. Pursuant to the
provisions of Section 6.13 of the Reorganization Agreement, if and only if the
aggregate value of the Restricted Parent Exchange Shares is less than $2,805,000
on the first anniversary of the Closing Date based upon the average of the
closing sales price of a share of the Parent Common Stock as reported on a
national securities exchange or quotation system for each trading day in the
60-calendar day period ending on the day before the day that is the first
anniversary of the Closing Date (the "60-Day Average Adjusted Price"), then
Parent shall issue the Additional Restricted Parent Exchange Shares to the
Members within 10 days after the first anniversary of the Closing Date. The term
"Additional Restricted Parent Exchange Shares" means shares of Parent Common
Stock equal in the aggregate to the lesser of (i) the minimum number of shares
of the Parent Common Stock required to be issued to the Members so that the
aggregate value of the Restricted Parent Exchange Shares as determined in
accordance with the provisions of Section 6.13 of the Reorganization Agreement
and such additional shares valued at the 60-Day Average Adjusted Price equals
$2,805,000, or (ii) the aggregate number of Restricted Parent Exchange Shares
issued at the Closing (said number being 1,402,500).
6. MISCELLANEOUS MATTERS. The terms of the acquisition were the result
of arms-length, good faith negotiations between the parties to the
Reorganization Agreement. All shares of common stock issued in the transaction
were issued (and will be issued, if Additional Restricted Parent Exchange Shares
are required to be issued) out of Parent's authorized but unissued common stock.
The Parent Exchange Shares issued were issued pursuant to the exemption from the
registration requirements of the Securities Act of 1933, as amended, provided by
Section 4(2) thereof.
The terms of the merger are more fully described in the Agreement and
Plan of Merger and the First Amendment to Agreement and Plan of Merger by and
among the parties which are filed herewith as Exhibits 2.0 and 2.1,
respectively, and incorporated herein by reference.
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Item 5. OTHER EVENTS
A. SALE OF KENWOOD RESTAURANT
The Company recently entered into an agreement to sell the assets used in the
operation of its Hotel Discovery restaurant in Cincinnati, Ohio to Wethgreen,
LLC, an Ohio limited liability company. The purchase price was $3,750,000 in the
form of a promissory note in that amount. The note required an immediate $25,000
payment; $100,000 per year during years 2 and 3; $125,000 per year during year
4; $150,000 per year during years 5-10; $200,000 per year during years 11-15 and
$250,000 per year during years 16 to 21. The note is secured by all inventory,
accounts receivables, equipment and other general intangible property of
Wethgreen, as well as a leasehold mortgage in the restaurant lease. The Company
is awaiting additional closing documentation from the landlord, which is a
condition to closing.
B. CONVERSION OF SERIES B CONVERTIBLE PREFERRED STOCK.
On November 24, 1999, the remaining holders of the Company's Series B
Convertible Preferred Stock (the "Series B") agreed with the Company to convert
their Series B into 8,533,498 shares of the Company's Common Stock. In exchange
for this conversion, the Company agreed to amend the Warrants held by the Series
B holders (which are exercisable for an aggregate of 4,407,098 shares of the
Company's Common Stock, subject to adjustment, and represent the economic
equivalent of certain of the options, warrants and other securities convertible
into, or exchangeable for, Common Stock of the Company that were outstanding on
May 3, 1999) to change the exercise price of the Warrants from various exercise
prices ranging from $0.75 to $6.50 per share of Common Stock (and having a
weighted average exercise price of approximately $1.51) to a single exercise
price of $0.75 per share of Common Stock. In addition, the Company and the
holders of the Series B agreed that if any of the outstanding warrants of the
Company, other than the warrants held by the Series B holders, are exercised for
an exercise price per share of less than $0.75, then the Series B holders will
be issued by the Company one share of Common Stock for every such warrant so
exercised. Currently, none of such warrants are exercisable for less than $0.75
per share. James L. Anderson, the Chairman of the Board of Directors of the
Company, was a holder of Series B prior to the conversion and serves as trustee
of a trust that also held Series B prior to the conversion.
In connection with the conversion of the Series B, in exchange for the
surrender and cancellation of the 900,000 warrants to purchase Common Stock of
the Company held by LegacyMaker, Inc. and all other warrants and rights to
purchase securities of the Company held by LegacyMaker (including
LegacyMakers's right to purchase from the Company shares of preferred stock
having substantially similar terms to the shares of Series A 8% Convertible
Preferred Stock and Series C 8% Convertible Preferred Stock of the Company for
the same consideration as the Series A and Seris C Preferred Shares were
originally issued by the Company), the Company agreed to issue to LegacyMaker
900,000 shares of Common Stock of the Company. This exchange is to occur
simultaneously with the Company's payment in full of its $550,000 promissory
note due to LegacyMaker and the satisfaction of certain other obligations of the
Company, but not before January 5, 2000. The Company has agreed to register the
900,000 shares of Common Stock with the Securities and Exchange Commission on
behalf of LegacyMaker.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements of Businesses Acquired. Pursuant to Item 7(a)(4),
financial statements required by this item will be filed before
February 14, 2000.
b. Pro Forma Financial Information. Pursuant to Item 7(b)(2), financial
statements required by this item will be filed before February 14,
2000.
(c) Exhibits
2.0 Agreement and Plan of Reorganization among ROI InterActive,
LLC, Cafe Odyssey, Inc. and ROI Acquisition Corporation
2.1 First Amendment to Agreement and Plan of Reorganization,
dated November 12, 1999 by and among Parent, Sub, the
Company, and the Members.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
POPMAIL.COM, INC.
Date: December 16, 1999 By: s/Thomas W. Orr
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Name: Thomas W. Orr
Title: Chief Financial Officer
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EXHIBIT 2.0
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
ROI INTERACTIVE, LLC
CAFE ODYSSEY, INC.
AND
ROI ACQUISITION CORPORATION
JULY ____, 1999
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TABLE OF CONTENTS
Page
ARTICLE I EXCHANGE OF ASSETS FOR STOCK...............................2
1.1 Acquisition of Assets.....................................2
1.2 Definition of Assets......................................2
1.3 Assumed Liabilities.......................................3
1.4 Excluded Liabilities......................................4
1.5 Consideration for Assets..................................5
(a) Parent Common Stock......................5
(b) Fractional Shares........................5
(c) No Dilution..............................6
(d) Delivery of Parent Exchange Shares......6
(e) Inspection of Books and Records..........6
1.6 Closing...................................................6
1.7 Liquidation and Dissolution of the Company................7
1.8 Release by Members........................................7
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND CONTROLLING MEMBERS....................................8
2.1 Organization and Qualification............................8
2.2 Articles of Organization and Regulations..................8
2.3 Execution, Delivery; Valid and Binding Agreement..........8
2.4 No Breach.................................................9
2.5 Value of Parent...........................................9
2.6 Governmental Authorities; Consents........................9
2.7 Capitalization of the Company.............................9
2.8 No Subsidiaries..........................................10
2.9 Financial Statements.....................................10
2.10 Absence of Undisclosed Liabilities.......................11
2.11 No Material Adverse Changes..............................11
2.12 Tax Matters..............................................11
2.13 Litigation...............................................13
2.14 Title to Properties......................................13
2.15 Intellectual Property....................................13
2.16 Compliance with Laws; Permits............................14
2.17 Employees................................................15
2.18 Employee Benefit Plans...................................15
2.19 Environmental Matters....................................16
2.20 Labor Relations..........................................17
2.21 Insurance................................................17
2.22 Agreements...............................................18
2.23 Books and Records........................................18
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2.24 Brokerage....................................................18
2.25 Indebtedness.................................................18
2.26 Customer Relationships.......................................19
2.27 Member Access to Information.................................19
2.28 Investment Representations...................................19
2.29 Lock-Up Agreement............................................20
2.30 Representations as to Qualification as a "C" Reorganization..20
(a) Value of Parent Common Stock.........................20
(b) Acquisition of Substantially All the Assets..........21
(c) Distribution of Acquisition Consideration to Members.21
(d) Company Liabilities..................................21
(e) Payment of Expenses..................................21
(f) Intercorporate Indebtedness..........................21
(g) No Investment Company................................21
(h) No Ownership Interest of Parent in the Company.......21
(i) Value of Assets......................................21
(j) No Bankruptcy........................................21
(k) Member-Employees.....................................21
2.31 Acquisition Consideration....................................22
2.32 Title to Membership Interest.................................22
2.33 Full Disclosure..............................................22
2.34 Representations and Warranties on Closing Date...............22
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB..............22
3.1 Incorporation and Corporate Power............................22
3.2 Execution, Delivery; Valid and Binding Agreement.............23
3.3 No Breach....................................................23
3.4 Governmental Authorities; Consents...........................23
3.5 Capital Stock................................................24
3.6 Financial Statements.........................................24
3.7 Absence of Undisclosed Liabilities...........................24
3.8 No Material Adverse Changes..................................25
3.9 Tax Matters..................................................25
3.10 Litigation...................................................26
3.11 Employees....................................................26
3.12 Employee Benefit Plans.......................................27
3.13 Compliance with Laws; Permits................................28
3.14 SEC Filings..................................................28
3.15 Brokerage....................................................29
3.16 Validity of Parent Common....................................29
3.17 Representations as to Qualification as a "C" Reorganization..29
(a) Value of Parent Common Stock.........................29
(b) No Plan to Reacquire Parent Common Stock.............29
(c) No Intention to Sell Assets..........................30
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(d) Continuity of Business...............................30
(e) Payment of Expenses..................................30
(f) Intercorporate Indebtedness..........................30
(g) No Investment Company................................30
(h) No Equity Interest in the Company....................30
(i) Fractional Shares....................................30
(j) Continuation of Sub..................................30
(k) Actions of Parent and Sub............................30
(l) Ownership of Sub.....................................30
(m) Member-Employees.....................................31
(n) Valid Business Reason................................31
3.18 Representations and Warranties on Closing....................31
ARTICLE IV CONDUCT OF COMPANY PENDING CLOSING............................31
4.1 Conduct and Preservation of Business.........................31
4.2 Restrictions on Certain Actions..............................31
ARTICLE V CONDUCT OF PARENT AND SUB PENDING CLOSING.....................33
5.1 Conduct and Preservation of Business.........................33
5.2 Restrictions on Certain Actions..............................33
ARTICLE VI ADDITIONAL AGREEMENTS.........................................34
6.1 Access to Information........................................34
6.2 Nondisclosure................................................34
6.3 Notification of Certain Matters..............................36
6.4 Reasonable Best Efforts......................................36
6.5 Public Announcements.........................................37
6.6 Indemnification of Claims of Brokers.........................37
6.7 Performance of Sub...........................................37
6.8 Characteristics of Parent Common Stock.......................37
6.9 Amendment of Schedules.......................................37
6.10 Further Assurances...........................................38
6.11 Fees and Expenses............................................38
6.12 Capital Contributions; Guarantee of LegacyMaker, Inc.........38
6.13 Adjustment of Restricted Parent Exchange Shares..............38
6.14 Management of Sub............................................39
6.15 No Solicitation..............................................39
6.16 Reservation of Shares........................................40
ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE
MEMBERS.......................................................40
7.1 Representations and Warranties True..........................40
7.2 Covenants and Agreements Performed...........................40
7.3 Certificate..................................................40
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7.4 Opinions of Counsel..........................................40
7.5 Legal Proceedings............................................41
7.6 Consents.....................................................41
7.7 Market Value of Parent Common Stock. .......................41
7.8 Non-competition Agreements...................................41
7.9 Other Documents..............................................41
7.10 Consummation of Popmail Merger...............................42
7.11 Sale of Unrestricted Parent Exchange Shares..................42
ARTICLE VIII CONDITIONS TO OBLIGATIONS OF PARENT AND SUB...................42
8.1 Representations and Warranties True..........................42
8.2 Covenants and Agreements Performed...........................43
8.3 Certificate..................................................43
8.4 Opinion of Counsel...........................................43
8.5 Legal Proceedings............................................43
8.6 Consents.....................................................43
8.7 Lock-up Agreements...........................................43
8.8 Employment and Non-Competition Agreements....................43
8.9 Noncompetition Agreements....................................44
8.10 Other Documents..............................................44
8.11 Consummation of Popmail Acquisition..........................44
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER.............................44
9.1 Termination..................................................44
9.2 Effect of Termination........................................45
9.3 Waiver.......................................................45
9.4 Remedies Not Exclusive.......................................46
ARTICLE X SURVIVAL OF REPRESENTATIONS
AND WARRANTIES/INDEMNIFICATION................................46
10.1 Survival.....................................................46
10.2 Indemnification by the Controlling Members...................47
10.3 Indemnification by Parent....................................48
10.4 Indemnification Procedure....................................49
10.5 Member Representative........................................51
10.6 Sole Remedy..................................................51
ARTICLE XI MISCELLANEOUS.................................................51
11.1 Notices......................................................51
11.2 Entire Agreement.............................................53
11.3 Binding Effect; Assignment; No Third Party Benefit...........53
11.4 Severability.................................................54
11.5 Governing Law................................................54
11.6 DTPA Waiver..................................................54
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11.7 Descriptive Headings.........................................54
11.8 Gender.......................................................54
11.9 References...................................................54
11.10 Counterparts.................................................54
11.11 Injunctive Relief............................................55
11.12 United States Dollars........................................55
ARTICLE XII DEFINITIONS...................................................55
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INDEX TO SCHEDULES AND EXHIBITS
Schedule A Company Disclosure Schedule
Schedule B Parent Disclosure Schedule
Exhibit 6.12 Form of LegacyMaker Guarantee
Exhibit 7.4 Form of Opinion of Counsel to Parent and Sub
Exhibit 7.8 Form of Noncompetition Agreement
Exhibit 8.4 Form of Opinion of Counsel to Company and Controlling Members
Exhibit 8.7 Form of Lock-Up Agreement
Exhibit 8.8 Form of Employment Agreement
Exhibit 8.9 Form of Noncompetition Agreement of Controlling Members
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
and entered in on this the _______ day of July, 1999, by and among CAFE ODYSSEY,
INC., a Minnesota corporation ("Parent"), ROI ACQUISITION CORPORATION, Texas
corporation and a wholly owned subsidiary of Parent ("Sub"), ROI INTERACTIVE,
LLC, a Texas limited liability company (the "Company"), and the holders of
membership interests of the Company (the "Membership Interests") identified on
the signature page hereto (the "Members").
W I T N E S S E T H:
WHEREAS, the Company is currently engaged in the business of providing
Internet based e-mail services (the "Acquired Business");
WHEREAS, Sub desires to acquire all of the assets of the Company
including the Acquired Business and assume certain liabilities of the Company in
exchange solely for voting stock of Parent;
WHEREAS, the respective Boards of Directors of Parent and Sub and the
managers of the Company have determined that the acquisition of the Company's
assets by Sub is desirable and in the best interests of the shareholders and
members of the respective companies;
WHEREAS, Gary W. Schneider ("Schneider") and John W. Palms, Jr.
("Palms") own approximately 70% of the Membership Interests of the Company and
are hereinafter referred to individually as a "Controlling Member" and
collectively as the "Controlling Members";
WHEREAS, Parent and popmail.com, inc., a Delaware corporation
("Popmail"), are parties to that certain Agreement and Plan of Merger dated as
of June 1, 1999 (the "Popmail Acquisition Agreement") pursuant to which, upon
the satisfaction of certain conditions precedent, Popmail is to merge with and
into Cafe Odyssey Acquisition Subsidiary, Inc., a Delaware corporation and a
wholly-owned subsidiary of Parent ("Survivor"), with Survivor being the
surviving corporation and successor to all of Popmail's assets and liabilities
(the "Popmail Merger");
WHEREAS, the respective Boards of Directors of Parent and Sub and the
managers and Members of the Company have approved the acquisition of the
Company's assets by Sub solely for voting stock of Parent upon the terms and
subject to the conditions set forth herein (the "Acquisition"); and
WHEREAS, the parties intend that the acquisition shall be treated for
United States federal income tax purposes as a reorganization within the meaning
of Section 368(a)(1)(C) of the Code and that this Agreement, as it relates to
the acquisition, shall constitute a "plan of reorganization" within the meaning
of Treasury Regulation Section 1.368-3;
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NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Sub, the Company and the Members hereby agree as follows:
ARTICLE I
EXCHANGE OF ASSETS FOR STOCK
1.1 Acquisition of Assets. Subject to the terms and conditions
specified in this Agreement, the Company shall convey, transfer and deliver to
Sub and Sub shall acquire from the Company, all of the Assets as specified
herein on the Closing Date.
1.2 Definition of Assets. As used herein the term "Assets" shall mean
all assets of the Company, including those relating to the Acquired Business,
whether such assets are tangible or intangible, of every kind, nature and
description wherever situated, including, without limitation, all of the assets
owned by the Company on the Closing Date but excluding the Company's charter to
exist as a limited liability company, the Company's membership records, the
Company's minute book, the Company's corporate seal, and other corporate records
having exclusively to do with its corporate organization and capitalization. The
Assets being conveyed hereunder include but are not limited to the following:
(a) All assets of the Company shown on the Company's Latest Balance
Sheet;
(b) All equipment and other items of tangible personal property
utilized in connection with the operation of the Acquired Business and whether
or not such items of tangible personal property are of such character to be
considered to be fixtures, including without limitation, those items of tangible
personal property described in the Company Disclosure Schedule;
(c) All cash, time and demand deposits and cash equivalents of the
Company as of the Closing;
(d) All accounts receivable of the Company;
(e) The interests of the Company in all commitments, contracts, leases,
and agreements between the Company and its clients or otherwise relating to the
Acquired Business (the "Contracts"). Such Contracts shall be described in the
Company Disclosure Schedule;
(f) The interests of the Company in all licenses and permits held by
the Company relating to the ownership, development and operation of the Assets
to the extent such licenses and permits are assignable, including those licenses
and permits identified in the Company Disclosure Schedule;
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(g) All insurance contracts with respect to the Assets and any and all
rights of the Company thereunder, including the insurance policies identified in
the Company Disclosure Schedule;
(h) All Intellectual Property owned by the Company, including such
property identified in the Company Disclosure Schedule;
(i) All financial, customer, administrative and personnel records
(including, without limitation, all equipment records, administrative files,
customer lists and records, and customer billing records, documents, catalogs,
books, records, files, operating manuals, and existing financial data relating
to the ownership and operation of the Assets);
(j) All goods and consumable supplies used in connection with the
operation of the Acquired Business or the Assets;
(k) The interests of the Company in and to all personal property,
tangible or intangible, arising or acquired by the Company in the Ordinary
Course of Business relating to the Assets, between the date of execution hereof
and the Closing Date;
(l) All prepaid expenses of the Company relating to the Acquired
Business;
(m) The interests of the Company in and to its telephone number and its
facsimile number;
(n) The interests of the Company in and to the name "ROI Interactive,
LLC" and any variation thereof including ROI Interactive, and any related
goodwill; and
(o) All computer software and all computer disks and programs owned,
licensed or otherwise used in the Acquired Business.
The Company shall convey good and marketable title to the Assets and
all parts thereof to Sub free and clear of all Encumbrances, except as expressly
provided herein or in the Company Disclosure Schedule to the contrary.
1.3 Assumed Liabilities. Sub shall assume, at and as of the Closing
Date, the following described liabilities, obligations, and commitments of the
Company;
(a) All of the liabilities and obligations of the Company that are
disclosed on the Company's Latest Balance Sheet, in the amounts recorded on its
books as of the Closing Date;
(b) All liabilities reflected in the Company Disclosure Schedule as of
the date of execution hereof to the extent and in the amount set forth in the
Company Disclosure Schedule;
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(c) All liabilities and obligations of the Company reflected on its
books of account on the Closing Date that have been incurred between the date of
the Company's Latest Balance Sheet and the Closing Date in "arm's length"
transactions in the Ordinary Course of Business, to the extent that the
transactions are not inconsistent with the representations, warranties, and
covenants of the Company and the Controlling Members contained in this
Agreement;
(d) All obligations of the Company under the Contracts described in
Section 1.2(e) hereof as of the Closing Date;
(e) The accrued but unpaid compensation earned by the employees of the
Company as of the Closing Date who elect to become employees of Sub as of the
Closing Date and the accrued vacation, holiday and sick leave payments or
benefits due such employees as of the Closing Date; and
(f) Accrued medical claims as of the Closing Date for employees of the
Company who elect to become employees of Sub as of the Closing Date, provided
such employee was covered for such claim under the Company's medical insurance
plan or policy and provided further that the aggregate exposure of Sub under
this Section 1.3(f) shall not exceed the aggregate deductible under the
Company's medical insurance plan or policy or the Company's self-funded
insurance limit under the Company's medical insurance plan or policy before
triggering the coverage under the Company's stop loss medical insurance policy.
The foregoing liabilities are hereinafter referred to as the "Assumed
Liabilities." The assumption of the Assumed Liabilities by Sub shall not in any
way limit the rights of Parent or Sub for any breach of the covenants,
representations or warranties of the Company or the Members contained in this
Agreement.
1.4 Excluded Liabilities. Sub will not assume, and will not discharge
or otherwise be liable for the following specific liabilities:
(a) Any liability of the Company to its Members, whether or not arising
from this plan and agreement of reorganization other than the liabilities
assumed by Sub pursuant to the provisions of Sections 1.3(e) and 1.3(f) hereof;
(b) Any liability or obligation of the Company with respect to Taxes,
assessments, or other governmental charges for periods (or portions of any
period) ending on or before the Closing Date, except to the extent disclosed on
the Company's Latest Balance Sheet or the Company's Disclosure Schedule as of
the date of execution hereof;
(c) Liabilities or obligations of the Company with respect to any
transactions occurring after the Closing Date;
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(d) Any Taxes imposed upon the Company or its Members by reason of
the transactions contemplated by this Agreement;
(e) Liabilities or obligations of the Company arising out of its
failure to comply with:
(i) Any provision of the federal securities laws, rules, or
regulations; and
(ii) The securities laws of any state or rules and regulations
of any authorities administering such laws;
(f) Any obligations of the Company under subscription agreements,
option agreements or other agreements to issue Membership Interests to
any employee of the Company or any other individual or entity; and
(g) Liabilities or obligations of the Company arising from or
related to any employee welfare benefit plans or employee pension benefit
plans within the meaning of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), maintained, sponsored or contributed to by
the Company.
The foregoing liabilities are hereinafter referred to as the "Excluded
Liabilities."
1.5 Consideration for Assets.
(a) Parent Common Stock. In exchange for the Assets transferred by
the Company, Sub shall issue and deliver to the Company an aggregate
number of shares of the voting Common Stock, par value $.01 per share, of
Parent (the "Parent Common Stock") equal to the sum of (i) the quotient
of (a) $2,550,000 divided by (b) the average sales price of the Parent
Common Stock on a national securities exchange or quotation system for
the close of business for each business day in the 60 consecutive
calendar-day period ending on the day before the Closing (such number of
shares of Parent Common Stock being referred to herein as the "Restricted
Parent Exchange Shares"), and (ii) the minimum number of shares of Parent
Common Stock that if sold by the Members on the Closing Date to a Third
Party Purchaser (as defined in Section 7.11 hereof) would result in the
Members receiving aggregate gross proceeds of $2,450,000 in cash from
such sale prior to income tax but after any applicable broker commissions
on such sale (such number of shares of Parent Common Stock being referred
to herein as the "Unrestricted Parent Exchange Shares"). The Restricted
Parent Exchange Shares and the Unrestricted Parent Exchange Shares are
hereinafter sometimes referred to as the "Acquisition Consideration."
(b) Fractional Shares. No fraction of a share of Parent Common
Stock shall be issued, but in lieu thereof the Company (or at the
Company's request each Member who would otherwise be entitled to a
fraction of a share of Parent Common Stock upon the
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dissolution of the Company) shall be paid an amount in cash equal to the
value of such fraction of a share based upon the closing sale price of
Parent Common Stock, on any securities exchange or quotation system on
which the shares of Parent Common Stock are then listed or quoted on the
last day on which there is a reported trade in the Parent Common Stock
prior to the Closing Date. No interest shall be paid on such amount. All
outstanding Membership Interests shall be aggregated for purposes of
computing the number of shares of Parent Common Stock to be issued
pursuant to this Section 1.5 and cash in lieu of fractional shares payable
hereunder.
(c) No Dilution. If, on or before the Closing Date, Parent (i)
declares any dividend payable in shares of Parent Common Stock, or (ii)
splits or combines or reclassifies the outstanding shares of Parent
Common Stock, the number of shares (or fraction of a share subject to the
provisions of Section 1.5(b) hereof) of the Restricted Parent Exchange
Shares (but not the Unrestricted Parent Exchange Shares) to be exchanged
for the Assets of the Company will be appropriately adjusted.
Notwithstanding the preceding, the number of shares of the Restricted
Parent Exchange Shares shall not be adjusted for any shares of Parent
Common Stock issued after the date hereof (i) in the Popmail Acquisition
or the acquisition by Parent or a subsidiary thereof of any other entity,
(ii) for cash or a promissory note, and (iii) pursuant to stock options,
stock warrants or convertible securities outstanding as of the date
hereof.
(d) Delivery of Parent Exchange Shares. On or prior to the Closing
Date, Parent or Sub shall deliver, or caused to be delivered, to the
Company the certificates representing the Restricted Parent Exchange
Shares and the Unrestricted Parent Exchange Shares along with the cash
required to effect the exchange referred to in Section 1.5(b) above.
(e) Inspection of Books and Records. The Members shall have the
right, at the expense of the Members, to inspect the books and records of
Parent to verify any adjustment required to be made pursuant to the
provisions of Section 1.5(c) in the number of shares of the Parent Common
Stock owned by the Members during the normal business hours of Parent
upon reasonable request to Parent.
1.6 Closing. The closing of the Merger (the "Closing") shall take place
(i) at the offices of Thompson & Knight, P.C., 1700 Pacific Avenue, Suite 3300,
Dallas, Texas, at 9:00 a.m., local time, on or before the 61st calendar day
after the date on which the closing under the Popmail Merger Agreement occurs
or (ii) at such other time or place or on such other date as the parties hereto
shall agree. The date on which the Closing is required to take place is herein
referred to as the "Closing Date." The transfer of the Assets and the Acquired
Business as provided in this Agreement shall be effected by deeds, bills of
sale, endorsements, assignments, drafts, checks and other instruments of
transfer and conveyance in that form necessary to effectively transfer all of
the Company's Assets and the Acquired Business to Sub as specified by this
Agreement and as reasonably required by Parent, Sub or their counsel. The
assignment and assumption of the Assumed Liabilities as provided in this
Agreement shall be effected by an assignment and assumption agreement and other
instruments of assignment and assumption in the form necessary to effectively
assign all of the
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Assumed Liabilities to Sub and to have Sub fully assume all the Assumed
Liabilities as specified by this Agreement and as reasonably required by the
Company or its counsel. All Closing transactions shall be deemed to have
occurred simultaneously.
1.7 Liquidation and Dissolution of the Company. Promptly after the
Closing Date but not later than 10 calendar days after the Closing Date, the
Company shall proceed, and the Members shall cause the Company to proceed, with
due diligence to wind up the Company's affairs, liquidate, and distribute the
Company's remaining assets, including the Acquisition Consideration received
pursuant to the exchange, to the Members and voluntarily dissolve the Company.
In connection with the winding up of the Company's affairs, the Company shall
proceed promptly after the Closing Date to prepare and file all income Tax
Returns and reports required under Applicable Law, covering all periods (or
portions of any period) ending on or before the Closing Date for which Tax
Returns and reports have not previously been filed.
1.8 Release by Members. Each Member as of the Closing, with the intent
of binding such Member and the heirs, executors, personal representatives,
successors and assigns of such Member hereby unconditionally releases, acquits
and forever discharges the Company, Sub, Parent and their respective
successors, assigns, officers, directors, managers, attorneys, accountants and
insurers from any and all claims, demands, actions, causes of action, debts,
sums of money, covenants, contracts, controversies, agreements, promises,
obligations, costs, expenses, damages, or any other claim or demand whatsoever
of whatever kind, character and description, whether based on facts presently
known or hereafter discovered, whether suspected or unsuspected, whether based
upon statutory law or common law, whether in contract, administrative or tort,
whether liquidated or unliquidated, matured or unmatured, disclosed and
undisclosed, which has accrued or which may ever accrue to such Member or the
heirs, personal representatives, successors or assigns of such Member for and
on account of any matter, cause or thing relating to, arising out of or in any
way connected with the ownership of Membership Interests of such Member (except
as against the Company, to the Member's allocable share of the Acquisition
Consideration upon the liquidation and dissolution of the Company), the
employment, if applicable, of such Member by the Company prior to the Closing
Date (except as to compensation and benefits earned and accrued by the Member
but unpaid by the Company and claims, if any, arising under this Agreement), or
the operation, acts or inactions of the Company and its officers and managers
prior to the Closing Date (the "Released Claims"). Each Member represents and
warrants to the Company, Parent and Sub that such Member has not assigned or
otherwise transferred expressly, impliedly or by operation of law any Released
Claim or any interest in or portion of any such claim, and that all Released
Claims of such Member are owned by such Member, who has the sole authority to
release them. This Release is for any relief, no matter how denominated,
including, but not limited to, distributions pertaining to Membership Interest
(other than for such Member's share of (i) the Acquisition Consideration upon
the liquidation and dissolution of the Company, and (ii) compensation and
benefits earned and accrued, if any, by the Member but unpaid by the Company.
Notwithstanding any of the foregoing provisions to the contrary, the parties
hereto specifically acknowledge the foregoing provisions shall not relate to or
otherwise be effective in connection with any claims that any Member may have
against Parent or Sub for the failure of Parent or Sub to fulfill its
obligations to such Member as set forth in this Agreement or the exhibits
attached hereto. Each Member agrees and covenants that in no event will
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<PAGE> 15
such Member commence any litigation or other legal or administrative proceeding
against the Company, Parent or Sub, and their respective officers, directors
and managers, whether in law or equity, whether in contract, administrative, or
tort, relating to any and all Released Claims.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
AND CONTROLLING MEMBERS
The Company and the Controlling Members jointly and severally represent
and warrant to Parent and Sub that, except as set forth in the Company
Disclosure Schedule attached hereto as Schedule A (the "Company Disclosure
Schedule") (which Company Disclosure Schedule sets forth the exceptions to the
representations and warranties contained in this Article II and items requiring
description by this Article II under captions referencing the Sections to which
such exceptions apply) that:
2.1 Organization and Qualification. The Company is a limited liability
company duly organized, validly existing and in good standing under the laws of
the state of its formation and has the power and authority and all
authorizations, licenses, permits and certifications necessary to own and
operate its properties and to carry on its business as now conducted and
presently proposed to be conducted. The Company is not qualified to do
business as a foreign limited liability company in any state, and the Company
is not required to be qualified to do business in any state other than Texas in
which the nature of its business or its ownership of property requires it to be
so qualified except for those jurisdictions in which the failure to be so
qualified would not, individually or in the aggregate, have a Material Adverse
Effect on the Company.
2.2 Articles of Organization and Regulations. The Company has made
available to Parent and Sub accurate and complete copies of (i) the Articles of
Organization and Regulations of the Company as currently in effect, (ii) the
ownership records of the Company and (iii) the minutes of all meetings of the
members and managers of the Company and any committees thereof (and all
consents in lieu of such meetings). Such records, minutes and consents
accurately reflect the equity ownership of the Company and, in all material
respects, all actions taken by such members, managers and committees. The
Company is not in violation of any provision of its Articles of Organization or
Regulations, other than violations which, individually or in the aggregate, do
not and will not have a Material Adverse Effect on the Company.
2.3 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by the Company and the Ancillary
Documents to which the Company is a party and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by the
Managers of the Company and the Controlling Members, and no other company
proceedings on the part of the Company are necessary to authorize the
execution, delivery and performance of this Agreement and the Ancillary
Documents to which the Company is a party. This Agreement has been and the
other agreements to be executed pursuant hereto will be at Closing duly
executed and delivered by the Company and constitute (or at Closing will
constitute) the valid and binding obligations of the Company and the Members,
enforceable in accordance with their
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<PAGE> 16
respective terms. The Company has full power and authority to execute and
deliver this Agreement and the Ancillary Documents to which the Company is a
party and to consummate the transactions contemplated hereby and thereby. Each
Member is over twenty-one (21) years of age, and each Member has the requisite
authority and capacity to execute and comply with the terms of this Agreement
and the Ancillary Documents to which such Member is a party and to perform such
Member's obligations contemplated by this Agreement and the Ancillary Documents
to which the Member is a party.
2.4 No Breach. The execution, delivery and performance of this Agreement
by the Company and the consummation by the Company of the transactions
contemplated hereby do not (i) conflict with or result in a violation of any
provision of the Articles of Organization or Regulations of the Company, (ii)
except as otherwise set forth in the Company Disclosure Schedule, constitute a
default under, or give rise to any right of termination, cancellation, or
acceleration under any material bond, debenture, note, mortgage, indenture,
lease, contract, agreement, or other instrument or obligation to which the
Company is a party or by which the Company or any of its properties may be
bound, (iii) result in the creation or imposition of any Encumbrance upon the
properties of the Company, or (iv) violate any Applicable Law binding upon the
Company except, in the case of clauses (ii), (iii), and (iv) above, for any
such conflicts, violations, defaults, terminations, cancellations,
accelerations or Encumbrances which would not, individually or in the
aggregate, have a Material Adverse Effect on the Company.
2.5 Value of Parent. The Company and the Members acknowledge that they
have had access to adequate information to assess the value of Parent and Sub.
The Company and the Members expressly waive any and all claims against Parent
and Sub and their respective directors, officers or shareholders relating to
the valuation of Parent or its assets or any representations as to such value
that may be deemed to have been made by Parent or Sub or any of their
respective directors, officers or shareholders with respect to such valuation.
2.6 Governmental Authorities; Consents. The Company is not required to
submit any notice, report or other filing with any governmental authority in
connection with the execution or delivery by it of this Agreement or the
consummation of the transactions contemplated hereby. Other than the filing by
the Company of any pre-Acquisition notification form required by the HSR Act,
no consent, approval or authorization of any governmental or regulatory
authority or any other Person is required to be obtained by the Company in
connection with its execution, delivery and performance of this Agreement or
the transactions contemplated hereby and except for such consents, approvals
and authorizations which, if not obtained, would not have a Material Adverse
Effect on the Company.
2.7 Capitalization of the Company. Except as otherwise set forth in the
Company Disclosure Schedule, the Members are the sole members of the Company
and the Membership Interests owned by the Members constitute the only issued
and outstanding equity interests of any type in the Company. Each Member owns
beneficially and of record free and clear of any Encumbrances the Membership
Interests set forth opposite such Member's name in the Company Disclosure
Schedule, and has the unrestricted right, power and authority to assign,
transfer and
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<PAGE> 17
deliver such Member's Membership Interest to the Company upon the liquidation
and dissolution of the Company in exchange for such Member's allocable share of
the Acquisition Consideration as set forth herein. The Membership Interests
were not issued in violation of any preemptive rights. Except as otherwise set
forth in the Company Disclosure Schedule, none of the Members has granted any
proxy with respect to any of the Membership Interests, deposited all or any
portion of the Membership Interests into a voting trust, or entered into any
voting agreement with respect to the Membership Interests. The Membership
Interests were issued to the Members in transactions exempt from the
registration requirements of and otherwise in compliance with all applicable
federal and state securities laws. Except as otherwise set forth in the
Company Disclosure Schedule, there are (and as of the Closing Date there will
be) outstanding (i) no equity or other voting securities of the Company other
than those held by the Members, (ii) no securities of the Company convertible
into or exchangeable for equity securities or other voting securities of the
Company, (iii) no options or other rights to acquire from the Company, and no
obligation of the Company to issue or sell, any equity securities or other
voting securities of the Company or any securities of the Company convertible
into or exchangeable for equity or other voting securities and (iv) no equity
equivalents, interests in the ownership or earnings, or other similar rights of
or with respect to the Company. There are (and as of the Closing Date there
will be) no outstanding obligations of the Company to repurchase, redeem or
otherwise acquire any of the foregoing securities, options, equity equivalents,
interests or rights.
2.8 No Subsidiaries. The Company has no subsidiaries. In addition, the
Company does not own, directly or indirectly, any capital stock or other
securities of any corporation or have any direct or indirect equity or
ownership interest in any other person. The Company does not have any direct
or indirect equity or ownership interest in any corporation, partnership, joint
venture, or other entity which is involved, directly or indirectly, in the
conduct of the business of the Company and the business of the Company is
conducted solely by the Company.
2.9 Financial Statements. The Company has delivered to Parent and Sub
copies of its (i) unaudited balance sheet, as of March 31, 1999 (the "Company's
Latest Balance Sheet") and the Company will deliver to Parent and Sub by July
30, 1999 a copy of its unaudited balance sheet as of June 30, 1999 and its
unaudited statement of operations for the eleven-month period then ended
(collectively, the "Company's Latest Financial Statements"), and (ii) the
unaudited balance sheet, as of December 31, 1998 and its unaudited statement of
operations for the period then ended (the "Company's Year-end Financial
Statements," and, collectively, the "Company's Financial Statements"). The
Company's Financial Statements are true and correct, are based upon the
information contained in the books and records of the Company and fairly
present the financial condition of the Company as of the dates thereof and
results of operations, members' equity and cash flows for the periods referred
to therein. The Company's Year-end Financial Statements have been prepared in
accordance with generally accepted accounting principles, consistently applied
throughout the periods indicated. Except as otherwise set forth in the Company
Disclosure Schedule, the Company's Latest Financial Statements have been
prepared in accordance with generally accepted accounting principles applicable
to unaudited interim financial statements (and thus may not contain all notes
which are required to be prepared in accordance with generally accepted
accounting principles) consistent with Company's Year-end Financial Statements
and
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<PAGE> 18
reflect all adjustments necessary to fairly present the financial position,
results of operations and cash flows for the interim period(s) presented. The
Company will, at Parent's expense, provide such audited financial statements as
may be requested by Parent.
2.10 Absence of Undisclosed Liabilities. Except as disclosed in its
balance sheet for the fiscal year ended December 31, 1998, the Company has no
material liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise, whether due or to become due, whether known or unknown, and
regardless of when asserted) arising out of transactions or events heretofore
entered into, or any action or inaction, or any state of facts existing, with
respect to or based upon transactions or events heretofore occurring, except
liabilities which have arisen after December 31, 1998 in the Ordinary Course of
Business (none of which is a material uninsured liability for breach of
contract, breach of warranty, tort, infringement, claim or lawsuit) and other
liabilities which, in the aggregate, are not material to the Company.
2.11 No Material Adverse Changes. Since December 31, 1998, there has not
been any material adverse change in, or any event or condition that might
reasonably be expected to result in any material adverse change in, the assets,
financial condition, operating results, customer, employee or supplier
relations, business condition or prospects of the Company.
2.12 Tax Matters. Except as set forth in the Company Disclosure Schedule:
(a) The Company and any affiliated, combined or unitary group of
which the Company is or was a member for purposes of any Taxes has timely
filed, been included in or sent, and will, prior to the Closing, timely
file, be included in or send all Tax Returns required to be filed or sent
by or relating to any of them prior to the Closing relating to any Taxes
with respect to any income, properties or operations of the Company prior
to the Closing Date. For federal income tax purposes, the Company has
elected to be taxed as a corporation, and the Company has been taxed as a
corporation since its formation;
(b) as of the time of filing, the Tax Returns of the Company:
(i) correctly reflected (and, as to any Tax Returns not filed
as of the date hereof, will correctly reflect) in all material
respects the facts regarding the income, business, assets,
operations, activities and status of the Company and any other
information required to be shown therein;
(ii) constitute (and, as to any Tax Returns not filed as of the
date hereof, will constitute) complete and accurate representations
of the Tax liabilities for the periods covered; and
(iii) accurately set forth all items (to the extent required to
be included or reflected in the Tax Returns) relevant to future Tax
liabilities, including the Tax bases of properties and assets;
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<PAGE> 19
(c) The Company has timely paid all Taxes that have been shown as
due and payable on the Tax Returns that have been filed;
(d) The Company has established a reserve (in accordance with
generally accepted accounting principles) on the Company's Latest
Financial Statements for any Taxes that relate to past periods but are
not yet due; and will establish such a reserve for all other Taxes
payable for any periods that end before the Closing for which no Tax
Returns have yet been filed and for any periods that begin before the
Closing and end after the Closing to the extent such Taxes are
attributable to the portion of any such period ending at the Closing;
(e) The charges, accruals and reserves for Taxes reflected on the
Company's Latest Financial Statements are adequate to cover the Tax
liabilities accruing or payable by the Company in respect of periods (or
portions of any period) ending on or before the date hereof;
(f) The Company is not delinquent in the payment of any Taxes and
has not requested any extension of time within which to file or send any
Tax Return, which Tax Return has not since been filed or sent;
(g) To the Company's and the Member's Knowledge, no deficiency for
any Taxes has been proposed, asserted or assessed against the Company (or
any member of any affiliated or combined group of which the Company is or
has been a member for which the Company could be liable for Taxes);
(h) The Company has not granted any extension of the limitation
period applicable to any Tax claims and the Company has not waived any
such limitation period;
(i) The Company is not and has not been a party to any tax sharing
agreement with any corporation which, as of the Company, is not a member
of the affiliated group of which the Company is a member;
(j) The Company has not made any election under Section 341(f) or
Section 1362(a) of the Code;
(k) No Tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transactions contemplated in this Agreement;
(l) Neither the Company nor any affiliate is a party to any
agreement, contract plan or arrangement that has resulted or would
result, separately or in the aggregate, in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code and
the consummation of the transactions contemplated by this Agreement will
not be a factor causing payments to be made by the Company that are not
deductible (in whole or in part) under Section 280G of the Code;
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<PAGE> 20
(m) To the Company's and the Controlling Members' Knowledge, no
examinations of the Tax Returns of the Company are currently in progress
or, to the Knowledge of the Company and the Controlling Members,
threatened and no deficiencies have been asserted or assessed against the
Company as a result of any audit by the Internal Revenue Service or any
other taxing authority and no such deficiency has been proposed or
threatened; and
(n) There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of the Company.
2.13 Litigation. Except as provided in the Company Disclosure Schedule,
there are no Proceedings pending or, to the Knowledge of the Company and the
Controlling Members, threatened against the Company, at law or in equity, or
before or by any Governmental Entity.
2.14 Title to Properties. The Company has good and indefeasible title to
all properties (real, personal, and mixed, tangible and intangible) it owns or
purports to own, including without limitation the properties reflected in its
books and records and in the Company's Latest Balance Sheet, other than those
disposed of after the date of such balance sheet in accordance with this
Agreement or in the Ordinary Course of Business, free and clear of all
Encumbrances, except as set forth in the Company's Latest Balance Sheet as
securing specific liabilities, liens for Taxes not yet due and payable,
statutory liens (including materialmen's, mechanic's, repairmen's, landlord's,
and other similar liens) arising in connection with the Ordinary Course of
Business securing payments not yet due and payable, and such imperfections or
irregularities of title, if any, as (A) are not substantial in character,
amount, or extent and do not materially detract from the value of the property
subject thereto, (B) do not materially interfere with either the present or
intended use of such property, and (C) do not, individually or in the
aggregate, materially interfere with the conduct of the Company's normal
operations. No financing statement (or other instrument sufficient or
effective as a financing statement) under the Uniform Commercial Code with
respect to any properties of the Company has been filed and is effective in any
jurisdiction, and the Company has not signed any such financing statement (or
other instrument) or any mortgage or security agreement authorizing any secured
party thereunder to file any such financing statement (or other instrument).
2.15 Intellectual Property. As used herein, the term "Intellectual
Property" means the Company's name and all assumed business names, all
trademarks, service marks, trade names, copyrights, trade secrets, know-how,
technical information, technology, computer software (including documentation
and object and source codes), and similar rights, and all registrations,
applications, licenses and rights with respect to any of the foregoing. The
Company Disclosure Schedule describes all Intellectual Property owned, held, or
used by the Company. The Company Disclosure Schedule further specifies, as
applicable: (i) the nature of such Intellectual Property; and (ii) all
licenses, sublicenses, and other agreements to which the Company is a party and
pursuant to which the Company or any other person is authorized to use such
Intellectual Property, including the identity of all parties thereto, a
description of the nature and subject matter thereof, the applicable royalty,
and the term thereof. All maintenance fees/annuities have been paid and
renewals thereof have been duly made with respect to such applications, patents
and registrations.
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<PAGE> 21
The listed Intellectual Property constitutes all Intellectual Property
necessary for the operation of the Company's business as presently conducted.
The Company has good and indefeasible title to or is validly licensed to use
all such Intellectual Property. Each item of such Intellectual Property is in
full force and effect, the Company is in compliance with all its obligations
with respect thereto, and, to the Knowledge of the Company and the Controlling
Members, no event has occurred which permits, or upon the giving of notice or
the passage of time or otherwise would permit, revocation or termination of any
interest or right in any item of Intellectual Property. There are no (i)
Proceedings pending against the Company, (ii) to the Knowledge of the Company
and the Controlling Members, Proceedings threatened against the Company, or
(iii) notices received by the Company from another Person, asserting that (a)
use by the Company of any of such Intellectual Property (b) the making,
producing, using or selling of any commercial product of the Company, or (c)
the making, producing, using or selling of any experimental product of the
Company, infringes the rights of any other Person. The (d) use by the Company
of any of such Intellectual Property (e) the making, producing, using or
selling of any commercial product of the Company, or (f) the making, producing,
using or selling of any experimental product of the Company, does not infringe
the rights of any other Person. To the Knowledge of the Company and the
Controlling Members, none of such Intellectual Property is being infringed upon
by any other Person. None of such Intellectual Property owned by the Company
and, to the Knowledge of the Company and the Controlling Members, none of such
Intellectual Property held or used by the Company is subject to any outstanding
judgment, order, writ, injunction, or decree of any governmental entity, or any
agreement, arrangement, or understanding, written or oral, restricting the
scope or use thereof. The conduct of the businesses of the Company at any time
prior to the Closing Date did not, and the conduct of such businesses on a
basis consistent with past practice as of the Closing Date will not, infringe
upon or otherwise misappropriate any Intellectual Property of any other Person.
2.16 Compliance with Laws; Permits.
(a) The Company and its members, managers, officers, agents and
employees in their capacity as such have complied in all material
respects with all Applicable Laws and other requirements which materially
affect the business of the Company and to which the Company may be
subject, and to the Knowledge of the Company and the Controlling Members
no claims have been filed against the Company alleging a violation of any
such laws, regulations or other requirements.
(b) The Company has, in full force and effect, all material
licenses, permits and certificates, from federal, state and local
authorities (including, without limitation, federal and state agencies
regulating occupational health and safety) necessary to conduct its
business and own and operate its properties (collectively, the
"Permits"), except for Permits that the absence of which has not and will
not have a Material Adverse Effect on the Company. A true, correct and
complete list of all the Permits maintained by the Company is set forth
in the Company Disclosure Schedule. The Company has conducted its
business in all material respects in compliance with all material terms
and conditions of the Permits.
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<PAGE> 22
2.17 Employees. (a) No executive employee of the Company and, to the
Knowledge of the Company and the Controlling Members, no group of the Company's
employees has any plans to terminate his, her or its employment; (b) the Company
has no material labor relations problem pending and its labor relations are
satisfactory to the Company; (c) there are no workers' compensation claims
pending against the Company nor is the Company or the Controlling Members aware
of any facts that would give rise to such a claim; (d) to the Company's
Knowledge, no employee of the Company is subject to any secrecy or
noncompetition agreement or any other agreement or restriction of any kind that
would impede in any way the ability of such employee to carry out fully all
activities of such employee in furtherance of the business of the Company; (e)
no employee or former employee of the Company has any claim with respect to any
intellectual property rights of the Company; and (f) the Company has furnished
to Parent and Sub copies of all noncompetition agreements between the Company
and any of its managers or employees.
2.18 Employee Benefit Plans.
(a) The Company has listed all employee welfare benefit plans or
employee pension benefit plans within the meaning of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") maintained
or contributed to by the Company (collectively, "Plans") in the Company
Disclosure Schedule. No trust funds are so maintained in connection with
any employee welfare benefit plan. The Company has delivered or made
available to Parent and Sub a true, correct and complete copy of each of
the Plans identified on such schedule. As to each of such Plans that is
funded, the Company has delivered or made available to Parent and Sub a
true, correct and complete copy of the most recent annual financial
report with respect to such Plan, and any subsequent interim report.
There have been no adverse changes in the financial status of any such
Plans that are material since the date of the most recent report provided
with respect thereto.
(b) The Company has also specifically identified in the Company
Disclosure Schedule each of the Plans maintained by the Company that is
represented to be a qualified plan under Section 401(a) of the Code.
With respect to each of the Plans so identified, the following are true:
(i) the plan, in form and, to the Knowledge of the Company and the
Controlling Shareholders in, operation, currently satisfies, and for all
years subsequent to the establishment of, such plan has satisfied, the
qualification requirements of Section 401(a) or 403(a) of the Code, as
applicable; and (ii) except as identified in the Company Disclosure
Schedule, the IRS has issued a favorable letter of determination with
respect to the Plan as amended to date or has issued a favorable opinion
letter to the sponsor of a Plan that is maintained on a prototype basis,
and all amendments required by the Code as a condition of retention of
such qualified status as of the date hereof have been or will be adopted
within time limits required to maintain such status. Each of such Plans
is and has been operating in compliance in all material respects with all
amendments required by the Tax Reform Act of 1986 and subsequent
legislation and regulations.
(c) The Company and each subsidiary does not now maintain or
contribute to, nor, except as set forth in the Company Disclosure
Schedule, has the Company or any
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<PAGE> 23
subsidiary at any time maintained or contributed to, any employee benefit
plan which is subject to Title IV of ERISA. Except as set forth in the
Company Disclosure Schedule, all contributions payable to any of the
Plans maintained by the Company for any plan year ending prior to the
date hereof have been paid in full on a timely basis and no accumulated
funding deficiency (as defined in Section 302(a)(2) of ERISA) has been
incurred.
(d) The Company has not engaged in, nor entered into any arrangement
pursuant to which any person or entity is contractually bound to enter
into, any transaction which could result in imposition upon either the
Company of any excise tax under Sections 4971 through 4980B, inclusive,
and Section 5000 of the Code or civil liability under Section 502(i) or
502(l) of ERISA or otherwise incurred a liability for any excise tax,
other than excise taxes which have heretofore been paid or have been
accrued on the Company's Latest Financial Statements.
(e) The Company and each subsidiary has (i) filed or caused to be
filed on a timely basis each and every return, report, statement, notice,
declaration and other document required to be filed with any governmental
agency (including, without limitation, the IRS, the Department of Labor,
the Pension Benefit Guaranty Corporation and the Securities and Exchange
Commission) with respect to each of the Plans maintained by the Company;
(ii) timely complied with all applicable participant disclosure
requirements of ERISA; and (iii) has maintained in full force and effect
any bond required under ERISA in connection with such Plans.
(f) The Company is not and has never been a member of a controlled
group of corporations, an unincorporated trade or business under common
control, or a member of an affiliated service group (as such terms are
defined in Sections 414(b), 414(c) and 414(m) of the Code), involving any
other entity.
(g) The Company does not maintain any employee benefit plan
providing benefits to former employees or directors, other than health
coverage mandated by applicable law.
(h) The Company has complied in all respects with the "COBRA"
requirements of Section 4980B of the Code.
2.19 Environmental Matters. The Company has not received any written
notice of any investigation or inquiry from any Governmental Entity under any
Applicable Law pertaining to the environment, Hazardous Substances or Hazardous
Wastes ("Applicable Environmental Laws"), including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended by, inter alia, the Superfund Amendments and Reauthorization Act of
1986 ("CERCLA"), and the Resource Conservation and Recovery Act of 1976, as
amended by, inter alia, the Solid Waste Disposal Act Amendments of 1980, and
the Hazardous and Solid Waste Amendments of 1984 ("RCRA"). To the Knowledge of
the Company and the Controlling Members, as of the date hereof, the Company has
not used any property owned or leased by the
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<PAGE> 24
Company for Disposal of any Hazardous Substance. (The term "Hazardous
Substance" as used herein shall have the meaning specified in CERCLA, and the
terms "Hazardous Waste" and "Disposal" shall have the meanings specified in
RCRA.)
2.20 Labor Relations.
(a) There are (i) no collective bargaining agreements or other
similar agreements, arrangements or understandings, written or oral, with
employees as a group to or by which the Company is a party or is bound,
(ii) no employees of the Company are represented by any labor
organization, collective bargaining representative or group of employees,
(iii) no labor organization, collective bargaining representative or
group of employees claims to represent a majority of the employees of the
Company in an appropriate unit of the Company, (iv) the Company has not
been the subject of any representational campaign by any union or other
organization or group seeking to become the collective bargaining
representative of any of its employees or been subject to or, to the
Knowledge of the Company, threatened with any strike or other concerted
labor activity or dispute and (v) the Company is not obligated to
bargain collectively with respect to wages, hours and other terms and
conditions of employment with any recognized or certified labor
organization, collective bargaining representative or group of employees.
(b) The Company is in compliance in all material respects with all
Applicable Laws pertaining to employment and employment practices, wages,
hours, equal opportunity, collective bargaining, the payment of social
security and other taxes and other terms and conditions of employment in
respect of their respective employees, except for noncompliance with such
Applicable Laws which does not and will not have a Material Adverse
Effect on the Company. There is no pending or, to the Knowledge of the
Company and the Controlling Members, threatened Proceeding by or before,
and the Company is not subject to any judgment, order, writ, injunction
or decree of or inquiry from, the National Labor Relations Board, the
Equal Employment Opportunity Commission, the Department of Labor or any
other Governmental Entity in connection with any current, former or
prospective employee of the Company.
2.21 Insurance. The Company Disclosure Schedule lists and briefly
describes (i) each insurance policy maintained by the Company with respect to
the Company's properties, assets and operations including all policies of fire,
liability, casualty, life and other insurance held by the Company, (ii) sets
forth the date of expiration of each such insurance policy and (iii) briefly
summarizes all material claims currently outstanding under each such policy.
All of such insurance policies are in full force and effect. The Company is
not in default with respect to its obligations under any of such insurance
policies. To the Knowledge of the Company and the Controlling Members, there
has been no threatened termination of, or premium increase whether
retrospective or prospective with respect to any of such policies. All
premiums due and payable with respect to such policies have been timely paid.
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<PAGE> 25
2.22 Agreements.
(a) All agreements of any nature (written or oral) (collectively,
for purposes of this Section, "agreements") to which the Company is a
party or by which the Company or any of its properties is otherwise
bound, regardless of amount or subject matter, that are material to the
business, assets, results of operations, condition (financial or
otherwise) or prospects of the Company are listed in the Company
Disclosure Schedule.
(b) The Company has delivered to Parent and Sub accurate and
complete copies of the written agreements listed in the Company
Disclosure Schedule. Each of such agreements is a valid and binding
agreement of the Company and, to the Knowledge of the Company and the
Controlling Members, the other party or parties thereto, enforceable
against the Company and, to the Knowledge of the Company and the
Controlling Members, such other party or parties in accordance with its
terms. The Company is not in breach of or in default under any material
provision of any of such agreements, and the Company has not received any
notice from, or given any notice to, any other party indicating that the
Company is in breach of or in default under any of such agreements,
except in all such cases for such that would not, individually or in the
aggregate, have a Material Adverse Effect on the Company. To the
Knowledge of the Company and the Controlling Members, no other party to
any of such agreements is in breach of or in default under such
agreements, nor has any assertion been made by the Company of any such
breach or default.
(c) The Company has not received notice of any plan or intention of
any other party to any agreement to exercise any right of offset with
respect to, or any right to cancel or terminate, any agreement, and the
Company and the Controlling Members do not know of any fact or
circumstance that would justify the exercise by any such other party of
such a right other than the automatic termination of such agreement in
accordance with its terms. The Company does not currently contemplate
any amendment or change to any agreement, which amendment or change could
have a Material Adverse Effect on the Company.
2.23 Books and Records. All the books and records of the Company,
including all personnel files, employee data, and other materials relating to
employees have been in all material respects maintained in accordance with good
business practice and all Applicable Laws. Such books and records accurately
and fairly reflect, in reasonable detail, all material transactions, revenues,
expenses, assets and liabilities of the Company.
2.24 Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of the Company or
any of the Members.
2.25 Indebtedness. As of the Closing Date, the Company will not have any
outstanding obligations or liabilities of a nature required by generally
accepted accounting principles to be
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<PAGE> 26
recognized or discussed in the Financial Statements as debt which are not
recognized or discussed in the Financial Statements, other than trade payables
and similar obligations incurred in the Ordinary Course of Business.
2.26 Customer Relationships. The Company Disclosure Schedule sets forth a
complete and accurate list of all customer accounts presently held by the
Company. The Company uses commercially reasonable efforts to maintain a
satisfactory relationship with each of its customers and, although certain
contracts between the Company and its customers permit either party to
terminate the contract upon 30 days notice to the other party, the Company has
not received a notice of termination from any customer and has no present
Knowledge or other reason to believe any customer will not continue or
otherwise agree to remain or become a customer of Sub or will within the next
six (6) months terminate its business relationship with the Company or Sub as a
result of the transactions contemplated by this Agreement or otherwise.
2.27 Member Access to Information. Each Member by executing this
Agreement represents and warrants to Parent and Sub that such Member has (i)
been given the opportunity to review the SEC Filings (as defined in Section
3.14) made by Parent, (ii) been given the opportunity to ask questions of, and
receive answers from, Parent concerning the business, assets, results of
operation, and financial condition of Parent and the terms and conditions of
the Acquisition and the issuance of the Acquisition Consideration in exchange
for the Assets, (iii) been given the opportunity to obtain any additional
information about the business and financial condition of Parent which is
necessary to verify the accuracy of the information contained in the SEC
Filings and which Parent possesses or can reasonably obtain without the
expenditure of undue time or expense, which additional information has been
timely and satisfactorily received by such Member, and (iv) approved this
Agreement and the Acquisition with full knowledge and understanding of the
terms and conditions set forth in this Agreement.
2.28 Investment Representations. Each Member by executing this Agreement
represents and warrants to Parent, that such Member is acquiring the Restricted
Parent Exchange Shares hereunder as a result of the dissolution of the Company
for such Member's own account for investment, with no present intention of
reselling or otherwise distributing the same, except (i) pursuant to an
offering of shares duly registered under the Securities Act, or (ii) under
other circumstances which in the opinion of such Member's counsel to Parent at
the time does not require registration under the Securities Act. Each Member
by executing this Agreement further covenants and represents that none of the
shares of Parent Common Stock that will be issued to such Member pursuant to
the plan of reorganization set forth in this Agreement will be offered, sold,
assigned, pledged, transferred, or otherwise disposed of by such Member except
after full compliance with all of the applicable provisions of the Securities
Act and the rules and regulations of the Securities and Exchange Commission
provided, however, Parent acknowledges that the Company or the Members intend
to sell the Unrestricted Parent Exchange Shares immediately following the
Closing. The Company and each Member hereby confers full authority upon Parent
to instruct its transfer agent not to transfer any of the Restricted Parent
Exchange Shares until it has received written approval from Parent to the
effect that the provisions of this Section have been satisfied. The Company
and each Member acknowledges that Parent shall place a stop transfer order
against the transfer of the
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<PAGE> 27
Restricted Parent Exchange Shares and the Unrestricted Parent Exchange Shares
owned by the Company (or by a Member upon the dissolution of the Company or by
the Third Party Purchaser upon the sale of the Unrestricted Parent Exchange
Shares) until the holder thereof satisfies one of the conditions set forth in
this Section. All stock certificates representing the Restricted Parent
Exchange Shares and the Unrestricted Parent Exchange Shares shall be endorsed
with the following restrictive legend:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY APPLICABLE STATE SECURITIES LAW BUT HAVE BEEN ACQUIRED FOR
THE PRIVATE INVESTMENT OF THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL EITHER (i) A REGISTRATION
STATEMENT UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE
SECURITIES LAWS SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO,
OR (ii) THE CORPORATION HAS RECEIVED AN OPINION OF COUNSEL
ACCEPTABLE TO THE CORPORATION AND ITS COUNSEL THAT REGISTRATION
UNDER SUCH SECURITIES ACT OR SUCH APPLICABLE STATE SECURITIES LAWS
IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED OFFER, SALE OR
TRANSFER.
2.29 Lock-Up Agreement. Each Controlling Member by executing this
Agreement, covenants and represents that the Restricted Parent Exchange Shares
received by such Controlling Member upon the dissolution of the Company are
subject to a lock-up agreement and must be held for the minimum period
specified in Section 8.7 hereof. Each Controlling Member acknowledges that
Parent shall be duly authorized and empowered to place a stop transfer order
against the transfer of the aggregate number of shares of the Restricted Parent
Exchange Shares allocated to and owned by such Controlling Member as a result
of the Acquisition until the first anniversary of the Closing Date.
The certificate or certificates representing the Restricted Parent
Exchange Shares received by each Controlling Member will be endorsed with the
following restrictive legend.
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A MINIMUM HOLDING PERIOD OF ONE YEAR BY THE HOLDER HEREOF AND MAY NOT BE
OFFERED, SOLD OR TRANSFERRED UNTIL AFTER ONE YEAR FROM THE DATE OF THIS
CERTIFICATE.
2.30 Representations as to Qualification as a "C" Reorganization.
(a) Value of Parent Common Stock. The fair market value of the
Parent Common Stock plus cash in lieu of fractional shares received by
the Company and distributed to each Member will be approximately equal to
the fair market value of the Membership Interest surrendered in the
exchange.
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<PAGE> 28
(b) Acquisition of Substantially All the Assets. In the Acquisition,
Sub will acquire assets which will comprise at least 90% of the fair
market value of the net assets of, and at least 70% of the fair market
value of the gross assets of, the Company held by the Company immediately
prior to the transaction. In addition, in the Acquisition, Sub will
acquire all of the operating assets of the Company held by the Company
immediately prior to the transaction. For purposes of these
representations, assets of the Company used to pay the Company's
Acquisition expenses, amounts paid by the Company to dissenters, if any,
and all redemptions and distributions made by the Company in anticipation
of the Acquisition will be included as assets of the Company held
immediately prior to the transaction.
(c) Distribution of Acquisition Consideration to Members. The
Company will distribute the Parent Common Stock it receives in the
Acquisition to its Members, in pursuance of the plan of reorganization.
(d) Company Liabilities. The liabilities of the Company assumed by
Sub and the liabilities to which the transferred assets of the Company
are subject were incurred by the Company in the ordinary course of its
business.
(e) Payment of Expenses. Except as otherwise set forth in Section
6.11 hereof, Parent, Sub, the Company and the Members will pay their
respective expenses, if any, incurred in connection with the transaction.
(f) Intercorporate Indebtedness. There is no intercorporate
indebtedness existing between either Parent or Sub and the Company that
was issued, acquired, or will be settled at a discount.
(g) No Investment Company. No two parties to the transaction are
investment companies as defined in Section 368(a)(2)(F)(iii) of the Code.
(h) No Ownership Interest of Parent in the Company. Neither Parent
nor Sub owns directly or indirectly, nor has it owned during the past
five years, directly or indirectly, any Membership Interest in the
Company.
(i) Value of Assets. The fair market value of the assets of the
Company transferred to Sub will equal or exceed the sum of the
liabilities assumed by Sub, plus the amount of liabilities, if any, to
which the transferred assets are subject.
(j) No Bankruptcy. The Company is not under the jurisdiction of a
court in a Title 11 or similar case within the meaning of Section
368(a)(3)(A) of the Code.
(k) Member-Employees. None of the compensation received by any
Member-employee of the Company will be separate consideration for, or
allocable to, any of their
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<PAGE> 29
Membership Interests; none of the shares of Parent Common Stock received by any
Member-employees will be separate consideration for, or allocable to, any
employment agreement; and the compensation paid to any Member-employees will be
for services actually rendered and will be commensurate with amounts paid to
third parties bargaining at arm's length for similar services.
2.31 Acquisition Consideration. Parent and Sub are paying no
consideration for the Assets other than the Acquisition Consideration and cash
in lieu of fractional shares.
2.32 Title to Membership Interest. Each Controlling Member and each
Member (other than the Controlling Member) to the Knowledge of the Controlling
Members, owns beneficially and of record, free and clear of any Encumbrances
the Membership Interest set forth opposite such Member's name in the Company
Disclosure Schedule, and has the unrestricted right, power and authority to
sell, assign, transfer and deliver the Membership Interest to the Company in
exchange for such Member's allocable share of the Acquisition Consideration as
set forth herein.
2.33 Full Disclosure. No representation, warranty or statement of the
Company or any Controlling Member set forth in this Agreement or any Ancillary
Document contains or will contain any untrue statement of a material fact or
omits or will omit to state any material fact necessary to make the statements
contained herein or therein, in light of the circumstances under which they
were made, not misleading. There is no fact now known to the Company or the
Controlling Members relating to the Company or the Acquired Business which
adversely affects, or which in the future is expected by the Controlling
Members (so far as the Controlling Members can now reasonably foresee) to
adversely affect, any of the assets, or the operation of the business of the
Company that has not been set forth herein or hereafter communicated to Parent
in writing prior to the Closing Date.
2.34 Representations and Warranties on Closing Date. The representations
and warranties made in this Article II will be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if
such representations and warranties had been made on and as of the Closing
Date, except that any such representations and warranties which expressly
relate only to an earlier date shall be true and correct on the Closing Date as
of such earlier date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SUB
Parent and Sub hereby jointly and severally represent and warrant to the
Company and the Members that, except as set forth in the Parent Disclosure
Schedule attached hereto as Schedule B (the "Parent Disclosure Schedule")
(which Parent Disclosure Schedule sets forth the exceptions to the
representations and warranties contained in this Article III under captions
referencing the Sections to which such exceptions apply) that:
3.1 Incorporation and Corporate Power. Each of Parent and Sub is a
corporation duly incorporated, validly existing and in good standing under the
laws of the state of its incorporation
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<PAGE> 30
and has the corporate power and authority and all authorizations, licenses,
permits and certifications necessary to own and operate its properties and to
carry on its business as now conducted and presently proposed to be conducted.
The copies of the Articles of Incorporation and Bylaws of each of Parent and
Sub which have been furnished to the Company prior to the date hereof reflect
all amendments made thereto and are correct and complete as of the date hereof.
Parent is qualified to do business as a foreign corporation in Ohio and
Colorado, which are the only states in which the nature of its business or its
ownership of property requires it to be so qualified except for those
jurisdictions in which the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on Parent.
3.2 Execution, Delivery; Valid and Binding Agreement. The execution,
delivery and performance of this Agreement by each of Parent and Sub and the
Ancillary Documents to which Parent or Sub are a party and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
authorized by all requisite corporate action, and no other corporate
proceedings are necessary to authorize the execution, delivery or performance
of this Agreement and the Ancillary Documents to which Parent or Sub are a
party. This Agreement has been, and each of the Ancillary Agreements to be
executed by Parent and Sub at Closing will be, duly executed and delivered by
each of Parent and Sub and constitute the valid and binding obligation of each,
enforceable in accordance with their respective terms.
3.3 No Breach. The execution, delivery and performance of this Agreement
by each of Parent and Sub and the Ancillary Documents to which Parent or Sub
are a party and the consummation by them of the transactions contemplated
hereby and thereby do not (i) conflict with or result in a violation of any
provision of the charter or bylaws of either Parent or Sub, (ii) constitute a
default under, or give rise to any right of termination, cancellation, or
acceleration under any material bond, debenture, note, mortgage, indenture,
lease, contract, agreement, or other instrument or obligation to which Parent
or Sub is a party or by which either of them or any of their properties may be
bound, (iii) result in the creation or imposition of any Encumbrance upon the
properties of Parent or Sub, or (iv) violate any Applicable Law binding upon
Parent or Sub except, in the case of clauses (ii), (iii), and (iv) above, for
any such conflicts, violations, defaults, terminations, cancellations,
accelerations or Encumbrances which would not, individually or in the
aggregate, have a Material Adverse Effect on Parent.
3.4 Governmental Authorities; Consents. Other than with respect to any
securities law reporting obligation or the filing of any pre-Acquisition
notification form required by the HSR Act, neither Parent nor Sub is required
to submit any notice, report or other filing with any governmental authority in
connection with their respective execution or delivery of this Agreement or the
consummation of the transactions contemplated hereby, and no consent, approval
or authorization of any governmental or regulatory authority or any other
Person is required to be obtained by either Parent or Sub in connection with
their respective execution, delivery and performance of this Agreement or the
transactions contemplated hereby and except for such consents, approvals and
authorizations which, if not obtained, would not have a Material Adverse Effect
on Parent.
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<PAGE> 31
3.5 Capital Stock. The authorized capital stock of Parent consists of
100,000,000 shares of capital stock, of which 2,000 shares have been designated
as Series A 8% Convertible Preferred Stock, 5,000 shares have been designated as
Series B Convertible Preferred Stock, and 2,000 shares have been designated as
Series C 8% Convertible Preferred Stock. As of July 13, 1999, 8,813,159 shares
of Parent Common Stock, 1,150 shares of Series A 8% Convertible Preferred Stock,
and 2,000 shares of Series C 8% Convertible Preferred Stock were issued and
outstanding. All of the outstanding shares of Parent Common Stock and shares
of Series A 8% Convertible Preferred Stock and Series C 8% Convertible
Preferred Stock have been duly authorized and are validly issued, fully paid
and nonassessable. The Parent Disclosure Schedule lists all warrants, options,
conversion rights and agreements to purchase or otherwise acquire from Parent
any shares of capital stock or other securities of Parent outstanding as of
June 21, 1999 and on the Closing Date. All of the outstanding shares of
capital stock of Sub are owned directly by Parent.
3.6 Financial Statements. Sub was incorporated on June 23, 1999 and has
not yet commenced business and has no assets of the date hereof other than for
the sum of $1,000. Parent has delivered to the Company copies of its unaudited
balance sheet, as of April 30, 1999 ("Parent's Latest Balance Sheet") and its
unaudited statement of operations for the four-month period ended April 30,
1999 (collectively, "Parent's Latest Financial Statements"). Parent's Latest
Financial Statements and its balance sheet as of January 3, 1999 and statement
of operations for the year ended January 3, 1999 ("Parent's Year-end Financial
Statements," and collectively, "Parent's Financial Statements"), as well as the
other audited financial statements and unaudited interim financial statements
of Parent included in Parent's filings with the Securities and Exchange
Commission are true and correct, are based upon the information contained in
the books and records of Parent and fairly present the financial condition of
Parent as of the dates thereof and results of operations, shareholders' equity
and cash flows for the periods referred to therein. Parent's Year-end
Financial Statements have been prepared in accordance with generally accepted
accounting principles, consistently applied throughout the periods indicated.
Parent's Latest Financial Statements have been prepared in accordance with
generally accepted accounting principles applicable to unaudited interim
financial statements (and thus may not contain all notes which are required to
be prepared in accordance with generally accepted accounting principles)
consistent with Parent's Year-end Financial Statements and reflect all
adjustments necessary to fairly present the financial position, results of
operations and cash flows for the interim period(s) presented.
3.7 Absence of Undisclosed Liabilities. Except as disclosed in its
balance sheet for the fiscal year ended January 3, 1999, Parent has no material
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, whether known or unknown, and regardless of when
asserted) arising out of transactions or events heretofore entered into, or any
action or inaction, or any state of facts existing, with respect to or based
upon transactions or events heretofore occurring, except liabilities which have
arisen after January 3, 1999 in the Ordinary Course of Business (none of which
is a material uninsured liability for breach of contract, breach of warranty,
tort, infringement, claim or lawsuit) and other liabilities which, in the
aggregate, are not material to Parent.
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<PAGE> 32
3.8 No Material Adverse Changes. Since January 3, 1999, there has not
been any material adverse change in, or any event or condition that might
reasonably be expected to result in any material adverse change in, the assets,
financial condition, operating results, customer, employee or supplier
relations, business condition or prospects of Parent.
3.9 Tax Matters. Except as set forth on the Parent Disclosure Schedule:
(a) Each of Parent and any affiliated, combined or unitary group of
which Parent is or was a member for purposes of any Taxes (the "Parent
Group") has timely filed, been included in or sent, and will, prior to
the Closing, timely file, be included in or send all Tax Returns required
to be filed or sent by or relating to any of them prior to the Closing
relating to any Taxes with respect to any income, properties or
operations of the Parent Group prior to the Closing Date;
(b) As of the time of filing, the Tax Returns of the Parent Group:
(i) Correctly reflected (and, as to any Tax Returns not filed
as of the date hereof, will correctly reflect) in all material
respects the facts regarding the income, business, assets,
operations, activities and status of the Parent Group and any other
information required to be shown therein;
(ii) Constitute (and, as to any Tax Returns not filed as of the
date hereof, will constitute) complete and accurate representations
of the Tax liabilities for the periods covered; and
(iii) Accurately set forth all items (to the extent required to
be included or reflected in the Tax Returns) relevant to future Tax
liabilities, including the Tax bases of properties and assets;
(c) Parent has timely paid all Taxes that have been shown as due and
payable on the Tax Returns that have been filed by the Parent Group;
(d) Parent has established a reserve (in accordance with generally
accepted accounting principles) on Parent's Latest Financial Statements
for any Taxes that relate to past periods but are not yet due; and will
establish such a reserve for all other Taxes payable for any periods that
end before the Closing for which no Tax Returns have yet been filed and
for any periods that begin before the Closing and end after the Closing
to the extent such Taxes are attributable to the portion of any such
period ending at the Closing;
(e) The charges, accruals and reserves for Taxes reflected on
Parent's Latest Financial Statements are adequate to cover the Tax
liabilities accruing or payable by Parent in respect of periods prior to
the date hereof;
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<PAGE> 33
(f) Parent is not delinquent in the payment of any Taxes and has not
requested any extension of time within which to file or send any Tax
Return, which Tax Return has not since been filed or sent;
(g) To Parent's Knowledge, no deficiency for any Taxes has been
proposed, asserted or assessed against Parent (or any member of any
affiliated or combined group of which Parent is or has been a member for
which Parent could be liable for Taxes);
(h) Parent has not granted any extension of the limitation period
applicable to any Tax claims and Parent has not waived any such
limitation period;
(i) Parent is not and has not been a party to any tax sharing
agreement with any corporation which, as of Parent, is not a member of
the affiliated group of which Parent is a member;
(j) Parent has not made any election under Section 341(f) or
Section 1362(a) of the Code;
(k) No Tax is required to be withheld pursuant to Section 1445 of
the Code as a result of the transactions contemplated in this Agreement;
(l) Neither Parent nor any affiliate is a party to any agreement,
contract plan or arrangement that has resulted or would result,
separately or in the aggregate, in the payment of any "excess parachute
payments" within the meaning of Section 280G of the Code and the
consummation of the transactions contemplated by this Agreement will not
be a factor causing payments to be made by Parent that are not deductible
(in whole or in part) under Section 280G of the Code;
(m) To Parent's Knowledge, no examinations of the Tax Returns of
any member of the Parent Group are currently in progress or, to the
Knowledge of Parent, threatened and no deficiencies have been asserted or
assessed against any member of the Parent Group as a result of any audit
by the Internal Revenue Service or any other taxing authority and no such
deficiency has been proposed or threatened; and
(n) There are no liens for Taxes (other than for current Taxes not
yet due and payable) upon the assets of any member of the Parent Group.
3.10 Litigation. There are no Proceedings pending or, to the Knowledge of
Parent, threatened against Parent, at law or in equity, or before or by any
Governmental Entity.
3.11 Employees. (a) No executive employee of Parent and, to the Knowledge
of Parent, no group of Parent's employees has any plans to terminate his, her
or its employment; (b) Parent has complied in all material respects with all
laws relating to the employment of labor, including provisions thereof relating
to wages, hours, equal opportunity, collective bargaining and the payment
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<PAGE> 34
of social security and other taxes; (c) Parent has no material labor relations
problem pending and its labor relations are satisfactory; (d) there are no
workers' compensation claims pending against Parent nor is Parent aware of any
facts that would give rise to such a claim; and (e) no employee of Parent is
subject to any secrecy or noncompetition agreement or any other agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of Parent.
3.12 Employee Benefit Plans.
(a) Parent has listed all Plans maintained by Parent or any
subsidiary of Parent on the Parent Disclosure Schedule, and no trust
funds are so maintained in connection with any employee welfare benefit
plan. Parent has delivered or made available to the Company a true,
correct and complete copy of each of the Plans identified on such
schedule. As to each of such Plans that is funded, Parent has delivered
or made available to the Company a true, correct and complete copy of the
most recent annual financial report with respect to such Plan, and any
subsequent interim report. There have been no adverse changes in the
financial status of any such Plans that are material since the date of
the most recent report provided with respect thereto.
(b) Parent has also specifically identified on the Parent Disclosure
Schedule each of the Plans maintained by Parent or any subsidiary of
Parent that is represented to be a qualified plan under Section 401(a) of
the Code. With respect to each of the Plans so identified, the following
are true: (i) the plan, in form and operation, currently satisfies, and
for all years subsequent to the establishment of, such plan has
satisfied, the qualification requirements of Section 401(a) or 403(a) of
the Code, as applicable; and (ii) except as identified on the Parent
Disclosure Schedule, the IRS has issued a favorable letter of
determination with respect to the Plan as amended to date, and all
amendments required by the Code as a condition of retention of such
qualified status as of the date hereof have been or will be adopted
within time limits required to maintain such status. Each of such Plans
is and has been operating in compliance in all material respects with all
amendments required by the Tax Reform Act of 1986 and subsequent
legislation and regulations.
(c) Parent and each subsidiary does not now maintain or contribute
to, nor, except as set forth on the Parent Disclosure Schedule, has
Parent or any subsidiary at any time maintained or contributed to, any
employee benefit plan which is subject to Title IV of ERISA. Except as
set forth on Parent Disclosure Schedule, all contributions payable to any
of such Plans for any plan year ending prior to the date hereof have been
paid in full on a timely basis and no accumulated funding deficiency (as
defined in Section 302(a)(2) of ERISA) has been incurred.
(d) Parent has not engaged in, nor entered into any arrangement
pursuant to which any person or entity is contractually bound to enter
into, any transaction which could result in imposition upon either the
Company or Parent of any excise tax under Sections 4971 through 4980B,
inclusive, and Section 5000 of the Code or civil liability under Section
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502(i) or 502(l) of ERISA or otherwise incurred a liability for any
excise tax, other than excise taxes which have heretofore been paid or
have been accrued on the Parent's Latest Financial Statements.
(e) Parent and each subsidiary has (i) filed or caused to be filed
on a timely basis each and every return, report, statement, notice,
declaration and other document required to be filed with any governmental
agency (including, without limitation, the IRS, the Department of Labor,
the Pension Benefit Guaranty Corporation and the Securities and Exchange
Commission) with respect to each of the Plans maintained by Parent or any
of its subsidiaries; (ii) timely complied with all applicable participant
disclosure requirements of ERISA; and (iii) has maintained in full force
and effect any bond required under ERISA in connection with such Plans.
(f) Parent is not and has never been a member of a controlled group
of corporations, an unincorporated trade or business under common
control, or a member of an affiliated service group (as such terms are
defined in Sections 414(b), 414(c) and 414(m) of the Code), involving any
other entity.
(g) Parent does not maintain any employee benefit plan providing
benefits to former employees or directors, other than health coverage
mandated by applicable law.
(h) Parent has complied in all respects with the "COBRA"
requirements of Section 4980B of the Code.
3.13 Compliance with Laws; Permits.
(a) Parent and its officers, directors, agents and employees in
their capacity as such have complied in all material respects with all
Applicable Laws, regulations and other requirements which materially
affect the business of Parent and to which Parent may be subject, and,
except as set forth on the Parent Disclosure Schedule no claims have been
filed against Parent alleging a violation of any such laws, regulations
or other requirements. Parent has no Knowledge of any such action.
(b) Parent has, in full force and effect, all Permits necessary to
conduct its business and own and operate its properties. A true, correct
and complete list of all the Permits held by Parent is set forth on the
Parent Disclosure Schedule. Parent has conducted its business in all
material respects in compliance with all material terms and conditions of
such Permits.
3.14 SEC Filings. Parent has delivered to the Company copies of the
following documents previously filed by Parent with the Securities and Exchange
Commission (the "Commission"): (i) Parent's annual report on Form 10-K for the
fiscal year ended January 3, 1999, (ii) all proxy statements relating to annual
meetings of the shareholders of Parent held since December 31, 1997, (iii)
Parent's quarterly report on Form 10-Q for the quarter ended March 31, 1999,
(iv) the Form S-3
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Registration Statement of Parent as filed with the Commission on June 8, 1999,
(v) Amendment No. 1 to the Form S-3 Registration Statement of Parent as filed
with the Commission on June 25, 1999, and (vi) the Form 8-K of Parent as filed
with the Commission on June 22, 1999. Parent has filed all reports,
registration statements and other documents required to be filed by it under
the Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act")
(the "SEC Filings"). Parent has delivered to or made available for inspection
by the Company and the Members accurate and complete copies of all the SEC
Filings in the form filed by Parent with the Commission since November 1, 1997.
The SEC Filings were prepared in accordance and complied in all material
respects with the applicable requirements of the Securities Act or the Exchange
Act, as applicable. None of such forms, reports and statements, including,
without limitation, any financial statements, exhibits and schedules included
therein and incorporated therein by reference, at the time filed, declared
effective or mailed, as the case may be, contained an untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Except to the extent
information contained in any of the SEC Filings has been revised, corrected or
superseded by a later-filed form, report or document, none of the SEC Filings
filed after January 1, 1997 currently contains any untrue statement of a
material fact or omits a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.15 Brokerage. No third party shall be entitled to receive any brokerage
commissions, finder's fees, fees for financial advisory services or similar
compensation in connection with the transactions contemplated by this Agreement
based on any arrangement or agreement made by or on behalf of Parent or Sub or
any affiliate thereof.
3.16 Validity of Parent Common. The shares of Parent Common Stock to be
issued to the Company pursuant to this Agreement have been duly authorized and,
upon issuance, delivery and payment therefor, will be validly issued, fully
paid and nonassessable.
3.17 Representations as to Qualification as a "C" Reorganization.
(a) Value of Parent Common Stock. The fair market value of the
Parent Common Stock plus cash in lieu of fractional shares received by
the Company and distributed to each Member will be approximately equal to
the fair market value of the Membership Interest surrendered in the
exchange.
(b) No Plan to Reacquire Parent Common Stock. Neither Parent nor
Sub (nor, to the Knowledge of Parent and Sub, any Related Person to
Parent or Sub) has any plan or intention to redeem or otherwise
reacquire, directly or indirectly through any transaction, agreement or
arrangement with any other Person, any of the Parent Common Stock to be
issued in the Acquisition or to make any extraordinary distributions with
respect to such stock.
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(c) No Intention to Sell Assets. Sub has no plan or intention to
sell or otherwise dispose of any of the assets of the Company acquired in
the transaction, except for dispositions made in the ordinary course of
business or transfers described in Section 368(a)(2)(C) of the Code.
(d) Continuity of Business. Following the transaction, Sub will
continue the historic business of the Company or use a significant
portion of the Company's historic assets in a business.
(e) Payment of Expenses. Except as otherwise set forth in Section
6.11 hereof, Parent, Sub, the Company and the Members will pay their
respective expenses, if any, incurred in connection with the transaction.
(f) Intercorporate Indebtedness. There is no intercorporate
indebtedness existing between either Parent or Sub and the Company that
was issued, acquired, or will be settled at a discount.
(g) No Investment Company. No two parties to the transaction are
investment companies as defined in Section 368(a)(2)(F)(iii) of the Code.
(h) No Equity Interest in the Company. Neither Parent nor Sub owns,
directly or indirectly, nor has Parent or Sub owned during the past five
years, directly or indirectly, any membership interests in the Company.
(i) Fractional Shares. The payment of cash in lieu of fractional
shares of Parent Common Stock is solely for the purpose of avoiding the
expense and inconvenience to Parent of issuing fractional shares and does
not represent separately bargained-for consideration. The total cash
consideration that will be paid to the Members instead of using
fractional shares will not exceed one percent of the total consideration
that will be issued in the transaction to the Members in exchange for
their Membership Interests. The fractional share interests of each
Member will be aggregated, and no Member will receive cash in an amount
greater than the value of one full share of Parent Common Stock.
(j) Continuation of Sub. Parent has no plan or intention to
liquidate Sub, to merge Sub into another corporation, or to sell or
otherwise dispose of the stock of Sub.
(k) Actions of Parent and Sub. Neither Parent nor Sub shall take
any action that would jeopardize the characterization of the Acquisition
as a reorganization within the meaning of Section 368(a)(1)(C) of the
Code without first obtaining a legal opinion that such action should not
prevent the Acquisition from qualifying as a reorganization.
(l) Ownership of Sub. Sub is a wholly-owned subsidiary of Parent.
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(m) Member-Employees. None of the shares of Parent Common Stock
received by any Member-employee of the Company pursuant to the
transactions contemplated by this Agreement will be separate consideration
for, or allocable to, any employment agreement; and the compensation paid
to any Member-employees after the Closing Date will be for services
actually rendered and will be commensurate with amounts paid to third
parties bargaining at arm's-length for similar services.
(n) Valid Business Reason. There is a valid business reason for
not issuing all of the Parent Common Stock issuable pursuant to this
Agreement on the Closing Date; that is, the difficulty in determining the
relative values of the Company and Parent.
3.18 Representations and Warranties on Closing. The representations and
warranties made in this Article III will be true and correct in all material
respects on and as of the Closing Date with the same force and effect as if
such representations and warranties had been made on and as of the Closing
Date, except that any such representations and warranties which expressly
relate only to an earlier date shall be true and correct on the Closing Date as
of such earlier date.
ARTICLE IV
CONDUCT OF COMPANY PENDING CLOSING
The Company and the Controlling Members hereby covenant and agree with
Parent and Sub as follows:
4.1 Conduct and Preservation of Business. Except as contemplated by
Section 4.2 and elsewhere in this Agreement, during the period from the date
hereof to the Closing Date, the Company (i) shall conduct its operations
according to its Ordinary Course of Business and in material compliance with
all Applicable Laws, (ii) shall use its reasonable best efforts to preserve,
maintain and protect its properties and (iii) shall use its reasonable best
efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain existing relationships
with licensors, licensees, suppliers, contractors, distributors, customers and
others having business relationships with it; provided, however, that the
Company shall not be required to make any payments or enter into or amend any
contractual agreements, arrangements or understandings to satisfy any of the
foregoing obligations other than for those payments required to be made under
those agreements to which the Company is a party as of the date of execution
hereof.
4.2 Restrictions on Certain Actions. Except as otherwise expressly
provided in this Agreement, prior to the Closing Date, the Company shall not,
without the prior written consent of Parent and Sub, which consent shall not be
unreasonably withheld:
(a) Amend its Articles of Organization or Regulations; provided,
however, that the Company may amend its Regulations to clarify that the
Company has elected to be taxed as a corporation and to make any
conforming changes necessitated thereby;
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(b) Issue, sell or deliver (whether through the issuance or granting
of options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any Membership Interests or any other securities or equity
equivalents, or amend in any respect any of the terms of any such
securities outstanding as of the date hereof;
(c) (i) Split, combine or reclassify any of its equity securities,
(ii) declare, set aside or pay any dividend or other distribution
(whether in cash, equity interests or property or any combination
thereof) in respect of its Membership Interests, or make any other
distribution to the Members, (iii) repurchase, redeem or otherwise
acquire any of its securities or (iv) adopt a plan of complete or partial
liquidation or resolutions providing for or authorizing a liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or
other reorganization of the Company;
(d) (i) Create, incur, guarantee or assume any indebtedness for
borrowed money or otherwise become liable or responsible for the
obligations of any other Person; provided, however, the Company may
increase its current bank line of credit to an amount not to exceed
$200,000 and to use the proceeds from such line of credit in the Ordinary
Course of Business of the Company, (ii) make any loans, advances or
capital contributions to, or investments in, any other person (other than
customary loans or advances to employees in amounts not material to the
maker of such loan or advance and other than accounts receivable), (iii)
pledge or otherwise encumber any equity securities of the Company or (iv)
except in the Ordinary Course of Business or in connection with an
increase in the Company's bank line of credit as stated above, mortgage
or pledge any of its material assets, tangible or intangible, or create
any material lien thereupon;
(e) (i) Enter into, adopt or (except as may be required by law)
amend or terminate any bonus, profit sharing, compensation, severance,
termination, equity appreciation right, performance unit, equity
equivalent, equity interest purchase, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
manager, officer or employee, (ii) increase in any manner the
compensation or fringe benefits of any manager, officer or employee
(other than pursuant to the employment agreement of Schneider) or (iii)
pay to any manager, officer or employee any benefit not required by any
employee benefit agreement, trust, plan, fund or other arrangement as in
effect on the date hereof;
(f) Acquire, sell, lease, transfer or otherwise dispose of, directly
or indirectly, any assets outside the Ordinary Course of Business that in
the aggregate are material to the Company considered as a whole;
(g) Acquire (by merger, consolidation or acquisition of stock or
assets or otherwise) any corporation, partnership or other business
organization or division thereof;
(h) Make any capital expenditure or expenditures which,
individually, is in excess of $100,000 or, in the aggregate, are in
excess of $100,000;
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(i) Except as described in the Company Disclosure Schedule, make any
tax election or settle or compromise any federal, state, local or foreign
income tax liability material to the Company considered as a whole;
(j) Change any of the accounting principles or practices used by
it, except for any change required by reason of a concurrent change in
generally accepted accounting principles;
(k) Take any action which would make any of the representations or
warranties of the Company contained in this Agreement untrue or
inaccurate in any material respect as of any time from the date of this
Agreement to the Closing or would or might result in any of the
conditions set forth in this Agreement not being satisfied; or
(l) Authorize or propose, or agree in writing or otherwise to take,
any of the actions described in this Section 4.2.
ARTICLE V
CONDUCT OF PARENT AND SUB PENDING CLOSING
Parent and Sub hereby covenant and agree with the Company and the Members
as follows:
5.1 Conduct and Preservation of Business. During the period from the
date hereof to the Closing Date, and except as contemplated in the Popmail
Acquisition Agreement or as a result of the consummation thereof, Parent and
Sub (i) shall conduct its operations according to its Ordinary Course of
Business and in material compliance with all Applicable Laws, (ii) shall use
its reasonable best efforts to preserve, maintain and protect its properties
and (iii) shall use its reasonable best efforts to preserve intact its business
organization, to keep available the services of its officers and employees and
to maintain existing relationships with licensors, licensees, suppliers,
contractors, distributors, customers and others having business relationships
with it; provided, however, that neither Parent nor Sub shall be required to
make any payments or enter into or amend any contractual agreements,
arrangements or understandings to satisfy any of the foregoing obligations,
other than for those payments required to be made under those agreements to
which Parent or Sub is a party as of the date of execution hereof.
Notwithstanding the foregoing, nothing contained herein shall restrict the
ability of Parent or a subsidiary thereof to enter into any acquisition
transaction (including, without limitation, a merger) in which Parent or a
subsidiary thereof is the acquiring party or surviving corporation which is
consummated primarily through the issuance of shares of stock of Parent.
5.2 Restrictions on Certain Actions. Except as otherwise expressly
provided in this Agreement and except as contemplated in the Popmail
Acquisition Agreement or as a result of the consummation thereof, prior to the
Closing Date, neither Parent nor Sub shall, without the prior written consent
of the Company, which consent shall not be unreasonably withheld:
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(a) Amend its Articles of Incorporation or Bylaws;
(b) Take any action which would make any of the representations or
warranties of Parent and Sub contained in this Agreement untrue or
inaccurate in any material respect as of any time from the date of this
Agreement to the Closing or would or might result in any of the
conditions set forth in this Agreement not being satisfied; or
(c) Authorize or propose, or agree in writing or otherwise to take,
any of the actions described in this Section 5.2.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information.
(a) Subject to Applicable Law, between the date hereof and the
Closing, the Company (i) shall give Parent and its authorized
representatives reasonable access at the Company's principal office
during normal business hours, to all employees, all plants, offices and
other facilities, and all books and records of the Company, (ii) shall
permit Parent and its authorized representatives to make such inspections
as Parent may reasonably require to verify the accuracy of any
representation or warranty contained in Article II or the title of the
Company to any of its properties and (iii) shall cause the Company's
officers to furnish Parent and its authorized representatives with such
financial and operating data and other information with respect to the
Company as Parent may from time to time reasonably request; provided,
that the Company shall have the right to have a representative present at
all times and provided further, however, that no such activity shall be
disruptive to the ongoing conduct of the day-to-day business by the
Company.
(b) Subject to Applicable Law, between the date hereof and the
Closing, Parent and Sub (i) shall permit the Company and the Controlling
Members and their respective authorized representatives to make such
inspections as they may reasonably require to verify the accuracy of any
representation or warranty contained in Article III and (ii) shall cause
Parent's and Sub's officers to furnish the Company and the Controlling
Members and their respective authorized representatives with such
financial and operating data and other information with respect to Parent
and its subsidiaries as the Company may from time to time reasonably
request; provided, that Parent and Sub shall have the right to have a
representative present at all times and provided further, however, that
no such activity shall be disruptive to the ongoing conduct of the
day-to-day business by Parent or Sub.
6.2 Nondisclosure.
(i) Except as and to the extent required by Applicable Law and
except in connection with the exercise of their rights or the
performance of their obligations under this Agreement, the Company
and the Controlling Members agree that from
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and after the date hereof (and without limitation of time), such
parties shall (and shall cause its affiliates to) hold in
confidence, and shall use all reasonable best efforts to cause all
present and former members, managers, officers and employees of the
Company and its Affiliates to hold in confidence, any and all
proprietary, confidential or secret information or data of or in
respect of Parent and Sub (collectively, the "Parent Confidential
Information") and shall not disclose, publish or intentionally use
such Parent Confidential Information or data for any purpose other
than as provided in this Agreement (a) without the prior written
consent of Parent and Sub, (b) until such information or data has
been publicly disclosed by Parent or Sub or otherwise ceased to be
secret or confidential as evidenced by general public knowledge
through no fault of the Company or the Controlling Members;
provided, however, that the Company or the Controlling Members
shall have the right to disclose such Parent Confidential
Information or data, without consent, to the extent that, in the
opinion of its counsel, which counsel and opinion shall be
reasonably satisfactory to Parent, such disclosure is compelled by
any Governmental Entity, audit, defense or prosecution of a
Proceeding; provided further, however, that if the Company or the
Controlling Members propose to make such disclosure based upon such
opinion of counsel, it shall advise and consult with Parent and Sub
before such disclosure concerning the information or data it
proposes to disclose and shall give Parent an opportunity to seek a
protective order or other appropriate remedy to foreclose such
disclosure without penalty to the Company or the Controlling
Members.
(ii) Except as and to the extent required by Applicable Law and
except in connection with the exercise of their rights or the
performance of their obligations under this Agreement, Parent and
Sub agree that from and after the date hereof and ending on the
Closing Date, such parties shall (and shall cause its Affiliates to)
hold in confidence, and shall use all reasonable best efforts to
cause its Affiliates to hold in confidence, any and all proprietary,
confidential or secret information or data of or in respect of the
Company (the "Company Confidential Information") and shall not
disclose, publish or intentionally use such Company Confidential
Information or data for any purpose other than as provided in this
Agreement (a) without the prior written consent of the Company and
the Controlling Members, (b) until such information or data has been
publicly disclosed by the Company and the Controlling Members or
otherwise ceased to be secret or confidential as evidenced by
general public knowledge through no fault of Parent or Sub;
provided, however, that Parent or Sub shall have the right to
disclose such Company Confidential Information or data, without
consent, to the extent that, in the opinion of its counsel, which
counsel and opinion shall be reasonably satisfactory to the Company
and the Controlling Members, such disclosure is compelled by any
Governmental Entity, audit, defense or prosecution of a Proceeding;
provided further, however, that if Parent or Sub propose to make
such disclosure based upon such opinion of counsel, they shall
advise and consult with the Company and the Controlling Members
before such disclosure concerning the information or data it
proposes to disclose and shall give
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the Company and the Controlling Members an opportunity to seek a
protective order or other appropriate remedy to foreclose such
disclosure without penalty to Parent or Sub.
(iii) If this Agreement is terminated for any reason, upon the
written request of the Company, Parent and its affiliates and
representatives shall promptly return to the Company or destroy any
Company Confidential Information in their possession and shall
certify in writing to the Company that they have done so.
Similarly, if this Agreement is terminated for any reason, upon the
written request of Parent, the Company and the Controlling Members
shall promptly return to Parent or destroy any Parent Confidential
Information in their possession and shall certify in writing to
Parent that they have done so.
6.3 Notification of Certain Matters. The Company and the Controlling
Members shall give prompt notice to Parent and Sub of (i) the discovery of any
fact or circumstance which would be likely to cause any representation or
warranty contained in Article II to be untrue or inaccurate at or prior to the
Closing, (ii) the occurrence or nonoccurrence of any event which would be
likely to cause any representation or warranty contained in Article II to be
untrue or inaccurate in any material respect at or prior to the Closing and
(iii) any material failure of the Company or the Members to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied
by the Company or the Members hereunder or in any Ancillary Document. Parent
and Sub shall give prompt notice to the Company and the Controlling Members of
(i) the discovery of any fact or circumstance which would be likely to cause
any representation or warranty contained in Article III to be untrue or
inaccurate at or prior to the Closing, (ii) the occurrence or nonoccurrence of
any event which would be likely to cause any representation or warranty
contained in Article III to be untrue or inaccurate in any material respect at
or prior to the Closing and (iii) any material failure of Parent or Sub to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by Parent or Sub hereunder or in any Ancillary Document. The
delivery of any notice pursuant to this Section 6.3 shall not be deemed to (i)
modify the representations or warranties hereunder of the party delivering such
notice, (ii) modify the conditions set forth in Articles VII and VIII or (iii)
limit or otherwise affect the remedies available hereunder to the party
receiving such notice; provided, however, that if the Closing shall occur, then
all matters disclosed pursuant to this Section 6.3 at or prior to the Closing
shall be waived and no party shall be entitled to make a claim thereon pursuant
to the terms of this Agreement.
6.4 Reasonable Best Efforts. Each party hereto agrees that it will not
voluntarily undertake any course of action inconsistent with the provisions or
intent of this Agreement and will use its reasonable best 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 to consummate
the transactions contemplated by this Agreement, including, without limitation,
(i) cooperation in determining whether any other consents, approvals, orders,
authorizations, waivers, declarations, filings or registrations of or with any
Governmental Entity or third party are required in connection with the
consummation of the transactions contemplated hereby, (ii) using its reasonable
best efforts to obtain any such consents, approvals, orders, authorizations and
waivers required to consummate
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the transactions contemplated by this Agreement and to effect any such
declarations, filings and registrations, (iii) using its reasonable best
efforts to cause to be lifted or rescinded any injunction or restraining order
or other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, (iv) using its reasonable best efforts to
defend, and to cooperate in defending, all lawsuits or other Proceedings
challenging this Agreement or the consummation of the transactions contemplated
hereby, (v) causing the conditions set forth in Articles VII and VIII, as
applicable, to be satisfied on or prior to the Closing Date and (vi) the
execution of any additional instruments necessary to consummate the
transactions contemplated hereby.
6.5 Public Announcements. Except as may be required by Applicable Law
or by obligations pursuant to any listing agreement with any national securities
exchange, neither Parent and Sub, on the one hand, nor the Company, on the
other, shall issue any press release or otherwise make any public statement
with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of the other party. Notwithstanding anything to the
contrary contained herein, each party prior to or after Closing or termination
of this Agreement, as applicable, may issue any press release or make any
public statement without approval of the other as may be required by law,
provided the party issuing the press release or making such statement shall
give prior notice thereof to the other party and consult with the other party
as to the contents thereof.
6.6 Indemnification of Claims of Brokers. The Controlling Members, on
the one hand, and Parent, on the other, shall indemnify and hold each other
harmless from any claim or demand for commission or other compensation by any
broker, finder, agent or similar intermediary claiming to have been employed by
or on behalf of the Company or Parent or any of Parent's affiliates, as the
case may be, and shall bear the cost of legal fees and expenses incurred in
defending against any such claim.
6.7 Performance of Sub. Parent shall cause Sub to comply with all its
obligations hereunder and, subject to the terms and conditions hereof, to
consummate the Acquisition as contemplated herein.
6.8 Characteristics of Parent Common Stock. The Parent Common Stock
owned, as a result of the transactions contemplated by this Agreement, by the
current holders of Membership Interests will have no less favorable
characteristics (as to voting rights, liquidity, transferability,
anti-dilution, price or any other material characteristics) than any other
common equity securities of the same issuer, provided that the Parent Common
Stock issued pursuant to this Agreement shall not be registered under any
Federal or State securities law and will therefore be subject to legal
restrictions on transfer.
6.9 Amendment of Schedules. Each party hereto agrees that, with respect
to the representations and warranties of such party contained in this
Agreement, such party shall have the continuing obligation until the Closing to
supplement or amend the Schedules hereto with respect to any matter hereafter
arising or discovered which, if existing or known at the date of this
Agreement, would have been required to be set forth or described in the
Schedules. For all purposes of this Agreement, including without limitation for
purposes of determining whether the conditions
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set forth in Sections 7.1 and 8.1 have been fulfilled, the Schedules hereto
shall be deemed to include only that information contained therein on the date
of this Agreement and shall be deemed to exclude all information contained in
any supplement or amendment thereto; provided, however, that if the Closing
shall occur, then all matters disclosed pursuant to any such supplement or
amendment at or prior to the Closing shall be waived and no party shall be
entitled to make a claim thereon pursuant to the terms of this Agreement.
6.10 Further Assurances. At and after the Closing Date, the directors
and officers of Sub shall be authorized to execute and deliver, in the name and
on behalf of the Company or Sub, any deeds, bills of sale, assignments or
assurances, and to take and do, in the name and on behalf of the Company or
Sub, any other actions and things to vest, perfect or confirm of record or
otherwise in Sub any and all right, title and interest in, to and under any of
the rights, properties or assets of the Company or Sub acquired or to be
acquired by Sub as a result of, or in connection with, the Acquisition.
Further, at and after the Closing Date, the directors and officers of Sub, or
the managers and officers of the Company, shall be authorized to execute and
deliver, on the name and on behalf of Sub or the Company, respectively, as
required, any instruments of assignment and assumption necessary to effectively
assign all of the Assumed Liabilities to Sub and to have Sub fully assume all
the Assumed Liabilities as specified by this Agreement.
6.11 Fees and Expenses. Except as otherwise expressly provided in this
Agreement, all fees and expenses, including fees and expenses of counsel,
financial advisors and accountants, incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring
such fee or expense. Notwithstanding the foregoing, if the Closing shall
occur, Parent will at Closing pay the Company's attorneys and accountants
directly for reasonable attorney's fees, accounting fees, and expenses incurred
by the Company in connection with the transactions contemplated by this
Agreement provided that the amount and nature of such fees and expenses to be
so paid shall be appropriately documented to Parent's reasonable satisfaction.
In addition, if the Closing shall have occurred, Parent shall bear the expense
of relocating the business of the Company into such facilities as may be agreed
upon by Parent and the Company.
6.12 Capital Contributions; Guarantee of LegacyMaker, Inc. For the
purpose of funding Sub's operations and growth, Parent shall make an aggregate
capital contribution to Sub of $2,000,000, payable to Sub in four equal
installments of $500,000, payable on the day after Closing and upon the 90th,
180th and 270th day thereafter (the "Parent Capital Contributions"). The
Parent Capital Contributions will be considered equity contributions of
additional paid-in-capital to Sub by Parent. Parent shall cause the payment of
the Parent Capital Contributions to be guaranteed by LegacyMaker, Inc. and
shall cause LegacyMaker to deliver at Closing a guarantee agreement to such
effect (the "LegacyMaker Guarantee"). The LegacyMaker Guarantee shall be
substantially in the form of the Guarantee attached hereto as Exhibit 6.12. At
Closing, LegacyMaker shall have cash or marketable securities having an
aggregate value of not less than $2,000,000.
6.13 Adjustment of Restricted Parent Exchange Shares. If and only if the
aggregate value of the Restricted Parent Exchange Shares (as adjusted for any
shares of Parent Common Stock received or surrendered by the Members as the
result of a stock split, stock dividend, combination,
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reclassification, recapitalization or other distribution payable in Parent
Common Stock) is less than $2,550,000 on the first anniversary of the Closing
Date based upon the average of the closing sales prices of a share of Parent
Common Stock as reported on a national securities exchange or quotation system
for each trading day in the 60-calendar day period ending on the day before the
day that is the first anniversary of the Closing Date (the 60-Day Average
Adjusted Price"), then Parent shall issue the Additional Restricted Parent
Exchange Shares to the Members within 10 days after the first anniversary of
the Closing Date. For purposes of this Agreement the Additional Restricted
Parent Exchange Shares shall mean shares of Parent Common Stock equal in the
aggregate to the lesser of (i) the minimum number of shares of Parent Common
Stock required to be issued to the Members so that the aggregate value of the
Restricted Parent Exchange Shares as determined in accordance with the prior
provisions of this Section and such additional shares valued at the 60-Day
Average Adjusted Price equals $2,550,000, or (ii) the aggregate number of the
Restricted Parent Exchange Shares issued to the Members at the Closing. Such
Additional Restricted Parent Exchange Shares, if any, shall be allocated among
the Members in proportion to their respective Membership Interests. The
parties to this Agreement shall treat the issuance of any Additional Restricted
Parent Exchange Shares pursuant to this Section as additional Acquisition
Consideration. The Members' rights to receive Additional Restricted Parent
Exchange Shares pursuant to this Section are not assignable except by operation
of law.
6.14 Management of Sub. On the Closing Date, Palms and Schneider shall
become employed by Sub. On the Closing Date, Schneider shall be elected Chief
Executive Officer of Sub and shall perform the functions and bear the
responsibilities typical of such office, including responsibility for
personnel, budgets, marketing, products, product development, sales and overall
direction of Sub. On the Closing Date, Parent, acting through its board of
directors, shall increase the number of its directors by one and elect
Schneider as a director of Parent to fill such vacancy. For so long as
Schneider shall remain CEO of the Sub he shall (i) be entitled to nominate one
member for election to the board of directors of Parent in the same way other
board members are nominated and submitted for election by the shareholders of
Parent, (ii) be involved in and consulted concerning any and all business
acquisitions related to Sub, and (iii) have sole control over the use of the
Parent Capital Contributions for use in the growth and development of the Sub's
business within the scope of the Sub's business plan and budget as may from
time to time be approved by its board of directors.
6.15 No Solicitation. Unless and until this Agreement shall have been
terminated by either party in accordance with the provisions of Section 9.1
hereof, the Company and the Members shall not, and shall not authorize or
permit any of its officers, managers, employees or representatives, without
first obtaining the written consent of Parent or Sub, to solicit, initiate,
encourage, negotiate or conclude any transaction which entails the sale of all
or any part of the assets of the Company (other than sales in the Ordinary
Course of Business), any acquisition or consolidation of the Company with any
person or entity other than Parent or Sub, the sale or other transfer of any
Membership Interest of the Company to any person or entity other than Parent or
Sub. In the event the Company or the Members receive or learn that any of the
Company's officers, managers, employees or representatives has received, from
any third party any offer to enter into any such
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prohibited transaction, then the Company and the Members shall promptly
communicate to Parent or Sub the material terms of such offer and the identity
of the third party making such offer.
6.16 Reservation of Shares. Parent shall reserve out of its authorized
but unissued shares of Parent Common Stock a sufficient number of shares to
permit it to issue the Restricted Parent Exchange Shares, the Unrestricted
Parent Exchange Shares and the Additional Restricted Parent Exchange Shares in
accordance with the terms of this Agreement.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE MEMBERS
The obligations of the Company and the Members to consummate the
transactions contemplated by this Agreement shall be subject to the fulfillment
on or prior to the Closing Date of each of the following conditions, unless
waived by the Company and the Controlling Members as provided herein:
7.1 Representations and Warranties True. All the representations and
warranties of Parent and Sub contained in this Agreement, and in any agreement,
instrument or document delivered pursuant hereto or in connection herewith on
or prior to the Closing Date, shall be true and correct in all material
respects on and as of the Closing Date as if made on and as of such date,
except as affected by transactions contemplated or permitted by this Agreement
(including without limitation the Popmail Acquisition) and except to the extent
that any such representation or warranty is made as of a specified date, in
which case such representation or warranty shall have been true and correct in
all material respects as of such specified date.
7.2 Covenants and Agreements Performed. Except as affected by
transactions contemplated or permitted by this Agreement (including without
limitation the Popmail Acquisition), Parent and Sub shall have performed and
complied with in all material respects all covenants and agreements required by
this Agreement to be performed or complied with by them on or prior to the
Closing Date.
7.3 Certificate. The Company shall have received a certificate executed
on behalf of Parent by the Chairman of the Board, the President or the Vice
President - Finance of Parent, dated the Closing Date, representing and
certifying, in such detail as the Company may reasonably request, that the
conditions set forth in this Article VII have been fulfilled and that Parent
and Sub are not in breach of any provision of this Agreement, including,
without limitation, any representation or warranty made herein.
7.4 Opinions of Counsel. The Company shall have received an opinion of
Thompson & Knight, P.C., legal counsel to Parent and Sub, dated the Closing
Date, with respect to the matters set forth in Exhibit 7.4. In rendering such
opinion, such counsel may rely as to factual matters upon certificates or other
documents furnished by directors and officers of each of Parent and Sub and by
government officials and upon such other documents and data as such counsel
deems appropriate as a basis for such opinion. To the extent the foregoing
opinion concerns the laws of any jurisdiction
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other than Texas, such counsel may rely upon the opinion of legal counsel, who
shall be reasonably satisfactory to the Company and who shall be admitted to
practice in such other jurisdiction. Any opinion relied upon by such counsel,
which shall be in form and substance reasonably satisfactory to the Company,
shall be delivered together with the opinion of such counsel, which shall state
that such counsel believes that its reliance thereon is justified.
7.5 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit or obtain damages or other
relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
7.6 Consents. All consents, approvals, orders, authorizations and
waivers of, and all declarations, filings and registrations with, third parties
(including Governmental Entities) required to be obtained or made by or on the
part of the parties hereto, or otherwise reasonably necessary for the
consummation of the transactions contemplated hereby, shall have been obtained
or made, and all thereof shall be in full force and effect at the time of
Closing, unless the failure to obtain or make any such consent, approval,
order, authorization, waiver, declaration, filing or registration would not
have a Material Adverse Effect on Parent or Sub or on the business, assets,
results of operations, condition (financial or otherwise) or prospects of
Parent or Sub considered as a whole.
7.7 Market Value of Parent Common Stock. The average of the closing
sale prices of a share of the Parent Common Stock as reported on a national
securities exchange or quotation system for each business day in the
60-calendar day period ending on the day before the day for Closing shall have
been not less than $3.00 per share.
7.8 Non-competition Agreements. James Anderson, Marcos Rodriguez and
Stephen King shall have each have executed and delivered a Non-competition
Agreement with Sub in substantially the form attached hereto as Exhibit 7.8.
7.9 Other Documents. The Company shall have received the certificates,
instruments and documents listed below:
(a) A copy of the resolutions of the Board of Directors of Parent
authorizing the execution, delivery and performance by Parent of this
Agreement, certified by the secretary or an assistant secretary of
Parent.
(b) Copies of the resolutions of the Board of Directors of Sub, and
those of Parent, as the sole stockholder of Sub, authorizing the
execution, delivery and performance by Sub of this Agreement, certified
by the secretary or an assistant secretary of Sub.
(c) A certificate from the Secretary of State of Minnesota, dated
not more than 10 days prior to the Closing Date, as to the legal
existence and good standing of Parent under the laws of such state.
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(d) Certificates from the Secretary of State of Texas and the
Comptroller of Public Accounts of the State of Texas, dated not more than
10 days prior to the Closing Date, as to the legal existence and good
standing of Sub under the laws of such state.
(e) The executed LegacyMaker Guarantee, as described in Section
6.12.
(f) An assignment and assumption of the Assumed Liabilities executed
by Sub.
(g) The executed Employment Agreement between Sub and Schneider.
(h) Such other certificates, instruments and documents as may be
reasonably requested by the Company to carry out the intent and purposes
of this Agreement.
7.10 Consummation of Popmail Merger. The Popmail Merger shall have
become effective.
7.11 Sale of Unrestricted Parent Exchange Shares. The Members shall have
found an independent third party who is neither (i) acting on behalf of or as
agent of Parent, Sub or the Company, nor (ii) otherwise a Related Person with
respect to Parent, Sub or the Company (a "Third Party Purchaser") to purchase
the Unrestricted Parent Exchange Shares issued hereunder at a purchase price
that would result in the Members receiving aggregate gross proceeds of
$2,450,000 from such sale or sales prior to income tax but after applicable
broker commissions on such sale or sales. The Third Party Purchaser shall have
entered into a binding agreement to purchase the Unrestricted Parent Exchange
Shares on the foregoing terms, and the Third Party Purchaser shall have
established (to the reasonable satisfaction of the Company and the Controlling
Members) its financial ability to consummate such purchase immediately after
the Closing.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS OF PARENT AND SUB
The obligations of Parent and Sub to consummate the transactions
contemplated by this Agreement shall be subject to the fulfillment on or prior
to the Closing Date of each of the following conditions, unless waived by
Parent and Sub as provided herein:
8.1 Representations and Warranties True. All the representations and
warranties of the Company and the Members contained in this Agreement, and in
any agreement, instrument or document delivered pursuant hereto or in
connection herewith on or prior to the Closing Date, shall be true and correct
in all material respects on and as of the Closing Date as if made on and as of
such date, except as affected by transactions contemplated or permitted by this
Agreement and except to the extent that any such representation or warranty is
made as of a specified date, in which case such representation or warranty
shall have been true and correct in all material respects as of such specified
date.
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8.2 Covenants and Agreements Performed. The Company and the Members
shall have performed and complied with in all material respects all covenants
and agreements required by this Agreement to be performed or complied with by
the Company or the Members on or prior to the Closing Date.
8.3 Certificate. Parent and Sub shall have received a certificate
executed on behalf of the Company by the President or Chairman of the Company,
dated the Closing Date, representing and certifying, in such detail as Parent
may reasonably request, that the conditions set forth in this Article VIII have
been fulfilled and that the Company and the Members are not in breach of any
provision of this Agreement including, without limitation, any representation
or warranty made herein.
8.4 Opinion of Counsel. Parent shall have received an opinion of
Gardere & Wynne, LLP, legal counsel to the Company on behalf of the Company and
the Controlling Members, dated the Closing Date, with respect to the matters set
forth in Exhibit 8.4. In rendering such opinion, such counsel may rely as to
factual matters upon certificates or other documents furnished by managers and
officers of the Company and by government officials and upon such other
documents and data as such counsel deems appropriate as a basis for such
opinion. To the extent the foregoing opinion concerns the laws of any
jurisdiction other than Texas, such counsel may rely upon the opinion of legal
counsel, who shall be reasonably satisfactory to Parent, admitted to practice
in such other jurisdiction. Any opinion relied upon by such counsel, which
shall be in form and substance reasonably satisfactory to Parent, shall be
delivered together with the opinion of such counsel, which shall state that
such counsel believes that its reliance thereon is justified.
8.5 Legal Proceedings. No Proceeding shall, on the Closing Date, be
pending or threatened seeking to restrain, prohibit or obtain material damages
or other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby.
8.6 Consents. All consents, approvals, orders, authorizations and
waivers of, and all declarations, filings and registrations with, third parties
(including Governmental Entities) required to be obtained or made by or on the
part of the parties hereto, or otherwise reasonably necessary for the
consummation of the transactions contemplated hereby, shall have been obtained
or made, and all thereof shall be in full force and effect at the time of
Closing, unless the failure to obtain or make any such consent, approval,
order, authorization, waiver, declaration, filing or registration would not
have a Material Adverse Effect on Parent or Sub or on the business, assets,
results of operations, condition (financial or otherwise) or prospects of the
Company considered as a whole.
8.7 Lock-up Agreements. Each of the Controlling Members shall have
signed a lock-up agreement preventing it, him or her from selling any of the
shares of Parent Common Stock received by it, him or her as a part of the
Acquisition Consideration for one year after the Closing Date in substantially
the form attached hereto as Exhibit 8.7.
8.8 Employment and Non-Competition Agreements. Schneider shall have
executed and delivered an Employment Agreement with Sub in substantially the
form attached hereto as Exhibit 8.8.
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8.9 Noncompetition Agreements. Schneider and Palms shall have each
entered into a Noncompetition Agreement with Parent and Sub substantially in the
form attached hereto as Exhibits 8.9(a) and 8.9(b), respectively.
8.10 Other Documents. Parent or Sub, as applicable, shall have received
the certificates, instruments and documents listed below:
(a) A Bill of Sale and Assignment Agreement each duly executed by
the Company transferring the Assets to Sub free and clear of any
Encumbrances except as otherwise set forth herein.
(b) All the Company's books and records, including, without
limitation bank account records, accounting records, computer records and
all contracts with third parties.
(c) A copy of the resolutions of the Managers and the Members of the
Company authorizing the execution, delivery and performance by the
Company of this Agreement, certified by the secretary or an assistant
secretary of the Company.
(d) Certificates from the Secretary of State of Texas and the
Comptroller of Public Accounts of the State of Texas, dated not more than
10 days prior to the Closing Date, as to the legal existence and good
standing of the Company under the laws of such state.
8.11 Consummation of Popmail Acquisition. The Popmail Acquisition shall
have become effective.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing in the following
manner:
(a) By mutual written consent of the Company, the Controlling
Members, Parent and Sub; or
(b) By either the Company, the Controlling Members, Parent or Sub,
if:
(i) The Closing shall not have occurred on or before March 15,
2000, unless such failure to close shall be due to a breach of this
Agreement by the party seeking to terminate this Agreement pursuant
to this clause (i); or
(ii) There shall be any statute, rule or regulation that makes
consummation of the transactions contemplated hereby illegal or
otherwise prohibited or a Governmental Entity shall have issued an
order, decree or ruling or
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taken any other action permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions
contemplated hereby, and such order, decree, ruling or other action
shall have become final and nonappealable; or
(iii) Neither Parent nor any direct or indirect parent company
of Parent shall be a reporting company under the Securities
Exchange Act of 1934 as of December 31, 1999 ; or
(c) By the Company and the Controlling Members, subject to the
provisions of Section 7.1 above, if (i) any of the representations and
warranties of Parent and Sub contained in this Agreement shall not be
true and correct in any material respect, when made or at any time prior
to the Closing as if made at and as of such time, in any respect which is
material to Parent and Sub or the ability of Parent and Sub to consummate
the transactions contemplated hereby or (ii) Parent or Sub shall have
failed to fulfill in any material respect any of its material obligations
under this Agreement, which failure is material to the obligations of
Parent and Sub under this Agreement, and, in the case of each of clauses
(i) and (ii), such misrepresentation, breach of warranty or failure
(provided it can be cured) has not been cured within 30 days of actual
knowledge thereof by Parent or Sub; or
(d) By Parent and Sub, subject to the provisions of Section 8.1
above, if (i) any of the representations and warranties of the Company
and the Members contained in this Agreement shall not be true and correct
in any material respect, when made or at any time prior to the Closing as
if made at and as of such time, in any respect which is material to the
Company considered as a whole or the ability of the Company and the
Members to consummate the transactions contemplated hereby or (ii) the
Company and the Members shall have failed to fulfill in any material
respect any of their material obligations under this Agreement, which
failure is material to the obligations of the Company under this
Agreement, and, in the case of each of clauses (i) and (ii), such
misrepresentation, breach of warranty or failure (provided it can be
cured) has not been cured within 30 days of actual knowledge thereof by
the Company and the Controlling Members.
9.2 Effect of Termination. In the event of the termination of this
Agreement pursuant to Section 9.1 by Parent and Sub, on the one hand, or the
Company and the Members, on the other, written notice thereof shall forthwith
be given to the other party specifying the provision hereof pursuant to which
such termination is made, and this Agreement shall become void and have no
effect, and there shall be no liability hereunder on the part of Parent, Sub or
the Company or any of their respective directors, officers, managers,
employees, stockholders, members or representatives, except that the agreements
contained in this Section 9.2 and in Sections 6.2, 6.6 and 6.11 shall survive
the termination hereof. Nothing contained in this Section 9.2 shall otherwise
relieve any party from liability for damages actually incurred as a result of
any breach of this Agreement.
9.3 Waiver. Each of the Company and the Members, on the one hand, and
Parent and Sub, on the other, may (i) waive any inaccuracies in the
representations and warranties of the other contained herein or in any
document, certificate or writing delivered pursuant hereto and (ii) waive
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compliance by the other with any of the other's agreements or fulfillment of
any conditions to its own obligations contained herein. Any agreement on the
part of a party hereto to any such waiver shall be valid only if set forth in
an instrument in writing signed by or on behalf of such party. No failure or
delay by a party hereto in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege.
9.4 Remedies Not Exclusive. In the event this Agreement is terminated
prior to Closing, the rights and remedies provided in this Article IX shall be
cumulative and not exclusive of any rights or remedies provided by law. The
rights and remedies of any party based upon, arising out of, or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant or agreement contained
in this Agreement (or in any other agreement between the parties) as to which
there is no inaccuracy or breach.
ARTICLE X
SURVIVAL OF REPRESENTATIONS AND WARRANTIES/INDEMNIFICATION
10.1 Survival. All representations and warranties, covenants and
agreements of the parties contained in this Agreement shall survive the
Closing. All representations, warranties, covenants and agreements of the
parties contained in this Agreement shall expire, terminate and be of no force
and effect on and after the expiration of the close of business on the first
anniversary of the Closing Date, except that:
(a) The representations and warranties regarding capitalization,
title to the Membership Interests and title to the Company's property
contained in Sections 2.7, 2.14 and 2.15, respectively, shall survive
indefinitely; and
(b) The representations and warranties regarding the Taxes, Tax
Return filings and payments of Taxes, contained in Section 2.12 and
Section 3.9 hereof shall survive until ninety (90) days after the
expiration of the applicable statutory period of limitation (including
extensions thereto granted prior to the Closing Date).
(c) The covenant set forth in Section 6.13 hereof shall survive
until ninety (90) days after the first anniversary of the Closing Date.
(d) The covenants set forth in Sections 6.2, 6.14, 6.16 and Articles
X hereof shall survive for the minimum period required to effectuate the
intent of the provisions of such Sections or Article.
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10.2 Indemnification by the Controlling Members.
(a) Subject to the terms and conditions of this Article X, the
Controlling Members, jointly and severally (but not any other Member or
the spouse of any other Member) shall indemnify, defend and hold harmless
Parent and the Surviving Corporation (collectively, the "Parent
Indemnitees") from and against any and all claims, losses, damages,
liabilities, judgments, costs and expenses (including reasonable
attorneys' fees and expenses) (collectively, "Damages"), incurred by any
of the Parent Indemnitees by reason of or resulting from (i) any breach
by the Company or the Controlling Members of any of their
representations, warranties, covenants or agreements contained in this
Agreement, (ii) the Excluded Liabilities, and (iii) the operation of the
Company prior to the Closing Date other than for the Assumed Liabilities
(collectively "Parent Claims"). If the Acquisition is consummated, the
Controlling Members shall not be entitled to any indemnity, contribution
or other reimbursement from the Company or Sub with respect to the
indemnification obligations of the Controlling Members pursuant to this
Article. Notwithstanding the foregoing, the indemnification obligations
of the Controlling Members pursuant to this Section 10.2 shall be subject
to the following limitations:
(i) No indemnification shall be required to be made by the
Controlling Members pursuant to this Article X with respect to any
Parent Claims to the extent that the aggregate amount of Damages
incurred by Parent and Sub exceeds $255,000.
(ii) No indemnification shall be required to be made by any
Controlling Member pursuant to this Article X with respect to any
Parent Claims unless and until the aggregate amount of Damages
incurred by the Parent Indemnitees with respect to all Parent
Claims exceeds $50,000, it being agreed and understood that, if
such amount is exceeded, the Controlling Members shall not be
liable to the full extent of such Damages but shall be liable only
to the extent that the aggregate amount of Damages incurred by the
Parent Indemnitees exceeds $50,000.
(iii) The amount of Damages required to be paid by the
Controlling Members to the Parent Indemnitees pursuant to this
Article X as a result of any Parent Claim shall be reduced to the
extent of any amounts to which the Parent Indemnitees are entitled
to receive pursuant to the terms of the insurance policies (if any)
covering such Parent Claim.
(iv) The amount of Damages required to be paid by the
Controlling Members to the Parent Indemnitees pursuant to this
Article X as a result of any Parent Claim shall be reduced by the
amount of any Tax benefit realized or to be realized by the Parent
Indemnitees as a result of such Parent Claim (the "Parent Claim
Reduction Amount"). The Parent Claim Reduction Amount shall be
calculated on a present value basis using the appropriate
applicable federal tax rate
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for the month that the Parent Claim was suffered as specified under
Section 1274(d) of the Code.
(v) No indemnification shall be required to be made by the
Controlling Members pursuant to this Article X with respect to any
Parent Claims arising out of or resulting from the breach of the
representations and warranties of the Company and the Members
contained in Article II if the Member Representative can establish
that Parent had actual Knowledge on or before the Closing Date of
the event, occurrence, condition or circumstance constituting such
breach.
(vi) The indemnification obligations of the Controlling Members
pursuant to this Article X shall be limited to actual damages and
shall not include incidental, consequential, indirect, punitive or
exemplary damages.
(vii) All indemnification obligations of the Controlling Members
shall be made in cash or at the option of the Controlling Members
in shares of Parent Common Stock having a fair market value based
upon the 60-Day Average Adjusted Price equal to the amount of such
obligation.
10.3 Indemnification by Parent.
(a) Subject to the terms and conditions of this Article X, Parent
shall indemnify, defend and hold harmless the Members from and against
any and all Damages incurred by any Member by reason of or resulting from
any breach by Parent or Sub of any of its representations, warranties,
covenants or agreements contained in this Agreement or the Assumed
Liabilities (collectively "Member Claims"). Notwithstanding the
foregoing, the indemnification obligations of Parent pursuant to this
Section 10.3 shall be subject to the following limitations:
(i) No indemnification shall be required to be made by Parent
pursuant to this Article X with respect to any Member Claims to the
extent that the aggregate amount of Damages incurred by the Members
exceeds $255,000.
(ii) No indemnification shall be required to be made by Parent
pursuant to this Article X with respect to any Member Claims unless
and until the aggregate amount of Damages incurred by the
Controlling Members with respect to all Member Claims exceeds
$50,000, it being agreed and understood that, if such amount is
exceeded, Parent shall not be liable to the full extent of such
Damages but shall be liable only to the extent that the aggregate
amount of Damages incurred by the Members exceeds $50,000.
(iii) The amount of Damages required to be paid by Parent to the
Members pursuant to this Article X as a result of any Member Claim
shall be reduced to the
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extent of any amounts to which the Members are entitled to receive
pursuant to the terms of the insurance policies (if any) covering
such Member Claim.
(iv) The amount of Damages required to be paid by Parent to the
Members pursuant to this Article X as a result of any Member Claim
shall be reduced by the amount of any Tax benefit realized or to be
realized by the Members Indemnitees as a result of such Member
Claim (the "Member Claim Reduction Amount"). The Member Claim
Reduction Amount shall be calculated on a present value basis using
the appropriate applicable federal tax rate for the month that the
Member Claim was suffered as specified under Section 1274(d) of the
Code.
(v) No indemnification shall be required to be made by Parent
pursuant to this Article X with respect to any Member Claims
arising out of or resulting from the breach of the representations
and warranties of Parent or Sub contained in Article III if Parent
can establish that a Member had actual knowledge on or before the
Closing Date of the event, occurrence, condition or circumstance
constituting such breach.
(vi) The indemnification obligations of Parent pursuant to this
Article X shall be limited to actual damages and shall not include
incidental, consequential, indirect, punitive or exemplary damages.
(vii) All indemnification obligations of Parent shall be made in
shares of Parent Common Stock having a fair market value based upon
the 60-Day Average Adjusted Price equal to the amount of such
obligation.
10.4 Indemnification Procedure.
(a) Parent Claims. Parent shall give prompt written notice to the
Member Representative of any claim or event with respect to which any
Parent Indemnitee believes it is or may be entitled to indemnification
pursuant to Section 10.2 (a "Notice of Parent Claim"). The Notice of
Parent Claim shall set forth with reasonable specificity (i) the basis
under this Agreement, and the facts that otherwise form the basis, of
such Parent Claim, (ii) an estimate of the amount of the Damages related
to such Parent Claim (which estimate shall not be conclusive of the final
amount of such Damages) and an explanation of the calculation of such
estimate, including a statement of any significant assumptions employed
therein, and (iii) the date on and manner in which the Parent Indemnitee
became aware of the existence of such Parent Claim.
If the Member Representative objects to either (i) the basis for the
Parent Claim or (ii) the amount of Damages determined under Section 10.2
related to the Parent Claim, the Member Representative shall give written
notice of such objection to Parent within 20 consecutive Business Days
following its receipt of the Notice of Parent Claim. Within 10
consecutive Business Days following Parent's receipt of such objection,
the Member
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<PAGE> 57
Representative and Parent shall attempt to mutually resolve any disputed
issues. If the Member Representative and Parent are unable to resolve
the dispute, they shall submit the issue to an independent public
accounting firm of recognized national standing (a "National Accounting
Firm") mutually agreeable to the Member Representative and Parent to
resolve the dispute and determine the amount of Damages, if any. If the
Member Representative and Parent cannot decide on a mutually agreeable
National Accounting Firm, each of the Member Representative and Parent
shall select one National Accounting Firm and the two National Accounting
Firms so selected shall select a National Accounting Firm to resolve the
dispute. The National Accounting Firm so selected shall have the
authority to retain any experts that are, in its discretion, necessary to
assist it in resolving the dispute. The costs and expenses of the
National Accounting Firm charged in connection with this Section 10.4,
including costs and expenses incurred to retain any experts and, if
necessary, the costs and expenses of the National Accounting Firms
selected by the Member Representative and Parent to select a National
Accounting Firm, shall be borne equally by the Controlling Members and
Parent. Each of the Controlling Members, on the one hand, and Parent, on
the other, shall be solely responsible for all other costs and expenses
incurred by each of them pursuant to this Section 10.4.
In the event the Parent Claim involves any action by an unaffiliated
third party, no compromise or settlement thereof may be effected by
Parent without the Member Representative's consent (which shall not be
unreasonably withheld).
(b) Member Claims. The Member Representative shall give prompt
written notice to Parent of any claim or event with respect to which any
Member believes it is or may be entitled to indemnification pursuant to
Section 10.3 (a "Notice of Member Claim"). The Notice of Member Claim
shall set forth with reasonable specificity (i) the basis under this
Agreement, and the facts that otherwise form the basis, of such Member
Claim, (ii) an estimate of the amount of the Damages related to such
Member Claim (which estimate shall not be conclusive of the final amount
of such Damages) and an explanation of the calculation of such estimate,
including a statement of any significant assumptions employed therein,
and (iii) the date on and manner in which the Member became aware of the
existence of such Member Claim.
If Parent objects to either (i) the basis for the Member Claim or
(ii) the amount of Damages determined under Section 10.3 related to the
Member Claim, Parent shall giving written notice of such objection to the
Member Representative within 20 consecutive Business Days following its
receipt of the Notice of Member Claim. Thereafter, the dispute shall be
resolved in the same manner as is set forth in Section 10.4(a) with
respect to a Parent Claim.
In the event the Member Claim involves any action by an unaffiliated
third party, no compromise or settlement thereof may be effected by the
Controlling Members without Parent's consent (which shall not be
unreasonably withheld).
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<PAGE> 58
10.5 Member Representative. For purposes of this Article X, the Members
shall be represented by Schneider or such other person (the "Member
Representative") as may be designated from time to time by the Members upon
written notice to Parent. Parent shall (i) give the Member Representative and
its agents, representatives and advisors access to all employees, offices and
other facilities, and all books and records of the Parent and the Surviving
Corporation and (ii) furnish the Member Representative and its agents,
representatives and advisors with such financial and operating data and other
information with respect to Parent and the Surviving Corporation, in each case
as the Member Representative may reasonably require to verify the accuracy of
any Parent Claim or Damages alleged by any Parent Indemnitee.
10.6 Sole Remedy. Except as otherwise provided in this Section, the
Company, the Members, Parent and Sub acknowledge and agree that, following the
Closing, the indemnification provided in this Article X shall be the sole and
exclusive remedy available to the Members on the one hand and Parent and Sub on
the other hand with respect to any claims arising out of, based upon or in any
way connected with the transactions contemplated by this Agreement, including,
without limitation, for any breach or inaccuracy of the representations and
warranties set forth in Article II or Article III, except for any claim for
fraudulent inducement. The provisions of the foregoing sentence shall apply
only to monetary damages and shall not restrict a party from seeking specific
performance or other nonmonetary and equitable remedies for breach of another
part of this Agreement.
ARTICLE XI
MISCELLANEOUS
11.1 Notices. All notices, requests, demands and other communications
required or permitted to be given or made hereunder by any party hereto shall
be in writing and shall be deemed to have been duly given or made if delivered
personally, or transmitted by first class registered or certified mail, postage
prepaid, return receipt requested, or sent by prepaid overnight delivery
service, or sent by telefax, to the parties at the following addresses (or at
such other addresses as shall be specified by the parties by like notice):
(a) If to Parent:
Cafe Odyssey, Inc.
4801 West 81st Street, Suite 112
Bloomington, MN 55437
Attention: Stephen D. King
Telefax: (612) 837-9916
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<PAGE> 59
(b) If to Parent or Sub:
ROI Acquisition Corporation
1333 Corporate Drive, Suite 350
Irving, Texas 75038
Attention: James L. Anderson
Telefax: (972) 550-5517
with a copy (which shall not constitute notice) to:
Thompson & Knight, P.C.
1700 Pacific Avenue
Suite 3300
Dallas, Texas 75201
Attention: David L. Emmons
Telefax: (214) 969-1751
(c) If to the Company:
ROI Interactive
4113 Rawlins
Dallas, Texas 75219
Attention: John M. Palms, Jr. and Gary W. Schneider
Telefax: (214) 219-7640
with a copy (which shall not constitute notice) to:
Gardere & Wynne L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attention: James F. Adams
Telefax: 214-999-4667
(d) If to the Member Representative in connection with Article X:
Mr. Gary W. Schneider
5225 Streamwood Lane
Plano, Texas 75093
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<PAGE> 60
with a copy (which shall not constitute notice) to:
Gardere & Wynne L.L.P.
3000 Thanksgiving Tower
1601 Elm Street
Dallas, Texas 75201
Attention: James F. Adams
Telefax: 214-999-4667
11.2 Entire Agreement. This Agreement, together with the Schedules,
Exhibits, Annexes, Ancillary Documents and other writings referred to herein or
delivered pursuant hereto, constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof. Each party to this Agreement
acknowledges that no representations, inducements, or agreements, oral or
otherwise have been made by any party, or anyone acting on behalf of any party,
which are not embodied herein or in the Schedules and Exhibits hereto, and no
other agreement, statement or promise not contained in this Agreement or in the
Schedules or Exhibits hereto shall be binding. The parties hereto have had the
opportunity to consult with their respective attorneys concerning the meaning
and the import of this Agreement and the Schedules and Exhibits hereto and each
has read this Agreement and the Schedules and Exhibits hereto, as signified by
such party's signature below, and are executing the same for the purposes and
consideration herein expressed.
11.3 Binding Effect; Assignment; No Third Party Benefit. This Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, heirs, personal representatives and permitted assigns;
provided, however, that neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (by
operation of law or otherwise) without the prior written consent of the other
parties, except that upon written notice to the Company and the Members (i) Sub
may assign to Parent or any other direct wholly owned domestic corporate
subsidiary of Parent all of Sub's rights, interests or obligations hereunder,
provided as a condition of such assignment to any subsidiary of Parent, such
subsidiary shall be required to make the same representations to the Company
and the Members as Parent had under Article III hereof except that the
representations in Sections 3.5, 3.6, 3.14, 3.16 and 3.17 shall be omitted and
a comparable representation as those set forth in Sections 2.14, 2.15, 2.22,
2.23 and 2.26 hereof shall be added and (ii) in the event the Popmail
Acquisition is not consummated on or before November 30, 1999, Parent and Sub
shall assign to Popmail, or a designee of Popmail, all of Parent's and Sub's
rights, interests, duties and obligations hereunder with the exception that (a)
Popmail may acquire all the outstanding Membership Interests of the Company for
an aggregate purchase price of $5,000,000 in cash (b) upon such assignment
Popmail shall be required to make the same representations to the Company and
the Members as Parent had under Article III hereunder except that the
representations in Sections 3.5, 3.6, 3.14, 3.16 and 3.17 shall be omitted and
a comparable representation as those set forth in Sections 2.14, 2.15, 2.22,
2.23 and 2.26 hereof shall be added, and (c) the closing of such acquisition of
the Membership Interests for cash shall occur
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<PAGE> 61
within 30 days after the date of such assignment. The Company and the Members
hereby consent to such assignment. Except as set forth in this Section 11.3,
nothing in this Agreement, express or implied, is intended to or shall confer
upon any Person other than Parent, Sub, the Company and the Members any rights,
benefits or remedies of any nature whatsoever under or by reason of this
Agreement.
11.4 Severability. If any provision of this Agreement is held to be
unenforceable, this Agreement shall be considered divisible and such provision
shall be deemed inoperative to the extent it is deemed unenforceable, and in
all other respects this Agreement shall remain in full force and effect;
provided, however, that if any such provision may be made enforceable by
limitation thereof, then such provision shall be deemed to be so limited and
shall be enforceable to the maximum extent permitted by Applicable Law.
11.5 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Texas.
11.6 DTPA Waiver. To the extent applicable to the transaction
contemplated hereby, each of Parent and Sub waives the provisions of the Texas
Deceptive Trade Practices Act, Chapter 17, Subchapter E, Sections 17.41 through
17.63, inclusive, Texas Bus. & Com. Code.
11.7 Descriptive Headings. The descriptive headings herein are inserted
for convenience of reference only, do not constitute a part of this Agreement
and shall not affect in any manner the meaning or interpretation of this
Agreement.
11.8 Gender. Pronouns in masculine, feminine and neuter genders shall be
construed to include any other gender, and words in the singular form shall be
construed to include the plural and vice versa, unless the context otherwise
requires.
11.9 References. All references in this Agreement to Articles, Sections
and other subdivisions refer to the Articles, Sections and other subdivisions
of this Agreement unless expressly provided otherwise. The words "this
Agreement", "herein", "hereof", "hereby", "hereunder" and words of similar
import refer to this Agreement as a whole and not to any particular subdivision
unless expressly so limited. Whenever the words "include", "includes" and
"including" are used in this Agreement, such words shall be deemed to be
followed by the words "without limitation". Each reference herein to a
Schedule or Exhibit refers to the item identified separately in writing by the
parties hereto as the described Schedule or Exhibit to this Agreement. All
Schedules and Exhibits are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
11.10 Counterparts. This Agreement may be executed by the parties hereto
in any number of counterparts, each of which shall be deemed an original, but
all of which shall constitute one and the same agreement. Each counterpart may
consist of a number of copies hereof each signed by less than all, but together
signed by all, the parties hereto.
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<PAGE> 62
11.11 Injunctive Relief. The parties hereto acknowledge and agree that
irreparable damage would occur in the event any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement, and shall be entitled to enforce specifically the provisions of this
Agreement, in any court of the United States or any state thereof having
jurisdiction, in addition to any other remedy to which the parties may be
entitled under this Agreement or at law or in equity.
11.12 United States Dollars. Unless expressly indicated otherwise, all
dollar amounts in this Agreement and the Schedules and Exhibits hereto are
expressed in United States dollars.
ARTICLE XII
DEFINITIONS
As used in this Agreement, each of the following terms has the meaning given it
below:
"Affiliate" shall mean, with respect to any person, any other person that,
directly or indirectly, through one or more intermediaries, controls, is
controlled by or is under common control with, such person.
"Ancillary Documents" shall mean each agreement, instrument, and document
(other than this Agreement) executed or to be executed by the Company, Parent,
Sub or their respective members or shareholders in connection with the
execution of this Agreement or the consummation of the transactions
contemplated hereby.
"Applicable Law" shall mean any statute, law, rule or regulation or any
judgment, order, writ, injunction or decree of any Governmental Entity to which
a specified person or property is subject.
"Business Day" shall mean a day on which banks are open for the
transaction of business in Dallas, Texas.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Encumbrances" shall mean liens, charges, pledges, options, mortgages,
deeds of trust, security interests, claims, restrictions (whether on voting,
sale, transfer, disposition or otherwise), easements and other encumbrances of
every type and description, whether imposed by law, agreement, understanding or
otherwise.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Governmental Entity" shall mean any court or tribunal in any jurisdiction
(domestic or foreign) or any public, governmental, or regulatory body, agency,
department, commission, board, bureau or other authority or instrumentality
(domestic or foreign, federal or state).
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<PAGE> 63
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" as used with respect to a Person (including references to such
Person being aware of a particular matter) shall mean those facts that are
actually known by the chief executive officer, president, chief financial
officer, or any senior executive or other vice president of such Person without
any inquiry or investigation.
"Material Adverse Effect" shall mean with respect to any person, any
adverse change or adverse condition in or relating to the financial condition,
of such person and its subsidiaries that is material to such person and its
subsidiaries taken as a whole.
"Ordinary Course of Business" shall mean an action taken by a Person if:
(i) Such action is taken in the ordinary course of the normal
day-to-day operations of such Person;
(ii) Such action is not required to be authorized by the Board of
Directors or managers of such Person and is not required to be
specifically authorized by the parent corporation, if any, of such
Person; and
(iii) Such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the Board of Directors or
managers, in the ordinary course of the normal day-to-day operations of
other Persons that are in the same line of business as such Person.
"Person" shall mean any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, enterprise, limited liability
company, unincorporated organization or Governmental Entity.
"Proceedings" shall mean all proceedings, actions, claims, suits,
investigations and inquiries by or before any arbitrator or Governmental
Entity.
"Reasonable best efforts" shall mean a party's best efforts in accordance
with reasonable commercial practice and without the incurrence of unreasonable
expense.
"Related Person" shall mean either (i) a member of an affiliated group
within the meaning of Section 1504 of the Code, but without regard to Section
1504(b), which includes Parent (generally, a corporation of which Parent owns
at least 80% of both the vote and value, directly or indirectly through other
affiliated corporations), or (ii) a corporation that is controlled by Parent,
or that controls Parent, under the rules of Section 304(a)(2) of the Code
without regard to Treasury Regulation section 1.1502-80(b) (generally, a
corporation that Parent owns at least 50% of its vote
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<PAGE> 64
or value, subject to various attribution rules, or a corporation that owns at
least 50% of the vote or value of Parent, subject to various attribution
rules) in each case as defined in Treasury Regulation Section 1.368-1(e)(3).
"Tax" shall mean any income taxes or similar assessments or any sales,
excise, occupation, use, ad valorem, property, production, severance,
transportation, employment, payroll, franchise or other tax imposed by any
United States federal, state or local (or any foreign or provincial) taxing
authority, including any interest, penalties or additions attributable thereto.
"Tax Return" shall mean any return or report, including any related or
supporting information, with respect to Taxes.
"Trading Day" shall mean a day on which the principal national securities
exchange on which shares of Parent Common Stock are listed or admitted to
trading is open for the transaction of business or, if the shares of Parent
Common Stock are not listed or admitted to trading on any national securities
exchange, a Business Day.
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its representative thereunto duly authorized, all as
of the date first above written.
"PARENT"
CAFE ODYSSEY, INC.
By: s/ Stephen D. King
-----------------------
STEPHEN D. KING,
Chief Executive Officer
"SUB"
ROI ACQUISITION CORPORATION
By: s/ James L. Anderson
-----------------------
JAMES L. ANDERSON,
President
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<PAGE> 65
"THE COMPANY"
ROI Interactive, LLC
By: s/ Gary W. Schneider
-----------------------------
GARY W. SCHNEIDER,
Chief Executive Officer
"MEMBERS"
s/Gary W. Schneider s/ John M. Palms, Jr.
-------------------------- --------------------------
GARY W. SCHNEIDER JOHN M. PALMS, JR.
s/ Ed Bardwell s/ Shain McCaig
-------------------------- --------------------------
ED BARDWELL SHAIN McCAIG
s/ Merry Payne s/ Steve Maudlin
-------------------------- --------------------------
MERRY PAYNE STEVE MAUDLIN
WORLDWIDE TV.COM s/ Scott Hull
--------------------------
SCOTT HULL
By:
--------------------------
Name: --------------------------
Title: --------------------------
CONSENT AND AGREEMENT OF SPOUSES
We, the undersigned, do severally certify that we are the respective
spouses of the Members identified in the foregoing Agreement and Plan of
Reorganization, which Members entered into and signed the foregoing Agreement.
Each of us has read the foregoing Agreement and we understand its provisions,
purposes and effect. We severally approve and consent to the foregoing
Agreement. We do not hereby or otherwise assume any liability or other
obligation, including without limitation, the obligation of indemnification
other than to the extent of our interest in the Acquisition Consideration as
defined in the foregoing Agreement and Plan of Reorganization, subject to the
provisions of Section 10.2 hereof. We do not join in any warranty,
representation, covenant or
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<PAGE> 66
assertion made by any Member or the Company in this Agreement. We do, however,
disclaim any ownership interest, whether legal or beneficial, either in the
Membership Interests of the Company or the assets of the Company other than to
the extent of that portion of the Acquisition Consideration transferred to our
respective spouses hereunder.
s/ Donna Schneider s/ Anna Palms
-------------------------- --------------------------
DONNA SCHNEIDER ANNA PALMS
s/ Tammy Bardwell s/ Chuck Payne
-------------------------- --------------------------
TAMMY BARDWELL CHUCK PAYNE
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<PAGE> 1
FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
THIS FIRST AMENDMENT TO AGREEMENT AND PLAN OF REORGANIZATION
(the "Amendment") is made and entered into as of the 12th day of November, 1999,
by and among POPMAIL.COM, INC., a Minnesota corporation formerly known as CAFE
ODYSSEY, INC. ("Parent"), ROI ACQUISITION CORPORATION, a Texas corporation and a
wholly owned subsidiary of Parent ("Sub"), ROI INTERACTIVE, LLC, a Texas limited
liability company (the "Company"), and the holders of membership interests of
the Company (the "Membership Interests") identified on the signature page hereto
(the "Members").
W I T N E S S E T H:
WHEREAS, on July 19, 1999, the parties hereto executed that certain
Agreement and Plan of Reorganization (the "Reorganization Agreement") pertaining
to the acquisition of all of the assets of the Company including the Acquired
Business and the assumption of certain liabilities of the Company in exchange
solely for voting stock of Parent;
WHEREAS, all defined terms not otherwise defined herein shall have the
meaning ascribed to such term in the Reorganization Agreement;
WHEREAS, Section 7.11 of the Reorganization Agreement provided in part
that as a condition to the Closing, the Members shall have found a Third Party
Purchaser to purchase the Unrestricted Parent Exchange Shares at a purchase
price that would result in the Members receiving aggregate gross proceeds of
$2,450,000 from such sale or sales prior to income tax but after applicable
broker commissions on such sale or sales, and that such Third Party Purchaser
shall have entered into a binding agreement to purchase the Unrestricted Parent
Exchange Shares on the foregoing terms; and
WHEREAS, the parties hereto desire to (i) modify Section 1.5(a) of the
Reorganization Agreement to change the number of shares of Parent Common Stock
to be delivered at Closing, (ii) modify Section 1.6 of the Reorganization
Agreement to extend the Closing Date and provide for a subsequent extension at
the election of Parent, and modify Section 7.11 to provide for the sale of the
Unrestricted Parent Exchange Shares received in a delayed Closing, (iii) add a
new Section 6.17 to provide for the sale of the Additional Unrestricted Exchange
Shares, (iv) delete the provisions of Section 7.7 of the Reorganization
Agreement pertaining to a minimum $3.00 per share market value of Parent Common
Stock in their entirety, and (v) amend Section 6.13 of the Reorganization
Agreement to increase the minimum required value of the Restricted Parent
Exchange Shares.
1
<PAGE> 2
NOW, THEREFORE, for and in consideration of the foregoing premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged and confessed, the parties hereto agree as follows:
1. Amendment of Agreement.
(a) Amendment of Section 1.5(a). Section 1.5(a) of the Reorganization
Agreement is hereby amended to read in its entirety as follows:
1.5. Consideration for Assets.
(a) Parent Common Stock. In exchange for the Assets transferred
by the Company, Sub shall issue and deliver to the Company an aggregate
number of shares of the voting Common Stock, par value $.01 per share,
of Parent (the "Parent Common Stock") equal to the sum of:
(i) (A) 1,402,500 shares of Parent Common Stock if the
Closing occurs at the Scheduled Closing in accordance with Section 1.6
or (B) 1,530,000 shares of Parent Common Stock if there is a Delayed
Closing pursuant to an extension in accordance with Section 1.6 (such
shares are referred to herein as the "Restricted Parent Exchange
Shares"), plus
(ii) (A) 1,225,000 shares of Parent Common Stock if the
Closing occurs at the Scheduled Closing in accordance with Section 1.6
or (B) 1,347,500 shares of Parent Common Stock if there is a Delayed
Closing pursuant to an extension in accordance with Section 1.6 (such
shares are referred to herein as the "Unrestricted Parent Exchange
Shares"), plus
(iii) 122,500 shares of Parent Common Stock (such shares
are referred to herein as the "Additional Unrestricted Parent Exchange
Shares").
The Restricted Parent Exchange Shares, the Unrestricted Parent Exchange
Shares and the Additional Unrestricted Parent Exchange Shares are
hereinafter sometimes referred to as the "Acquisition Consideration."
(b) Amendment of Section 1.6. The first sentence of Section 1.6 of the
Reorganization Agreement is hereby amended to read in its entirety as follows:
2
<PAGE> 3
1.6 Closing. The Closing of the sale of the Assets pursuant to
this Agreement (the "Closing") shall take place at the offices of
Thompson & Knight LLP, 1700 Pacific Avenue, Suite 3300, Dallas, Texas,
at 9 o'clock a.m., local time on or before December 3, 1999 or such
other time or place or such other date as the parties hereto shall
agree (the "Scheduled Closing"); provided, however, Parent or Sub shall
have the right to extend the Closing from the Scheduled Closing until
December 30, 1999 (a "Delayed Closing") upon written notice of such
election to the Company not later than December 2, 1999.
(c) Amendment of Section 6.13. Section 6.13 of the Reorganization
Agreement is hereby amended to read in its entirety as follows:
6.13 Adjustment of Restricted Parent Exchange Shares. If and only
if the aggregate value of the Restricted Parent Exchange Shares (as
adjusted for any shares of Parent Common Stock received or surrendered
by the Members as the result of a stock split, stock dividend,
combination, reclassification, recapitalization or other distribution
payable in Parent Common Stock) is less than $2,805,000 on the first
anniversary of the Closing Date based upon the average of the closing
sales prices of a share of Parent Common Stock as reported on a
national securities exchange or quotation system for each trading day
in the 60-calendar day period ending on the day before the day that is
the first anniversary of the Closing Date (the 60-Day Average Adjusted
Price"), then Parent shall issue the Additional Restricted Parent
Exchange Shares to the Members within 10 days after the first
anniversary of the Closing Date. For purposes of this Agreement the
Additional Restricted Parent Exchange Shares shall mean shares of
Parent Common Stock equal in the aggregate to the lesser of (i) the
minimum number of shares of Parent Common Stock required to be issued
to the Members so that the aggregate value of the Restricted Parent
Exchange Shares as determined in accordance with the prior provisions
of this Section and such additional shares valued at the 60-Day Average
Adjusted Price equals $2,805,000, or (ii) the aggregate number of the
Restricted Parent Exchange Shares issued to the Members at the Closing.
Such Additional Restricted Parent Exchange Shares, if any, shall be
allocated among the Members in proportion to their respective
Membership Interests. The parties to this agreement shall treat the
issuance of any Additional Restricted Parent Exchange Shares pursuant
to this Section as additional Acquisition Consideration. The Members'
rights to receive Additional Restricted Parent Exchange Shares pursuant
to this Section are not assignable except by operation of law.
3
<PAGE> 4
(d) Addition of New Section 6.17. A new Section 6.17 is hereby added
to the Reorganization Agreement, which Section shall read in its entirety as
follows:
6.17 Sale of Additional Unrestricted Parent Exchange Shares. The
Members (acting by and through Schneider or Palms as their authorized
attorney-in-fact) shall have the option to sell to a qualified Third
Party Purchaser (as defined in Section 7.11) the Additional
Unrestricted Parent Exchange Shares on or before March 30, 2000 at a
purchase price that would result in the Members receiving aggregate
gross proceeds of $245,000 from such sale or sales prior to income tax
but after applicable broker commissions on such sale or sales. The
Members (acting by and through Schneider or Palms as their authorized
attorney-in-fact) shall give notice to Parent of their intent to engage
in such a sale during the month of February 2000.
(e) Deletion of Section 7.7. Section 7.7 of the Reorganization
Agreement is hereby deleted in its entirety.
(f) Amendment of Section 7.11. Section 7.11 of the Reorganization
Agreement is hereby amended to read in its entirety as follows:
7.11 Sale of Unrestricted Parent Exchange Shares. The Members
shall have found an independent third party who is neither (i) acting
on behalf of or as agent of Parent, Sub or the Company, nor (ii)
otherwise a Related Person with respect to Parent, Sub or the Company
(a "Third Party Purchaser") to purchase the Unrestricted Parent
Exchange Shares issued hereunder at a purchase price that would result
in the Members receiving aggregate gross proceeds of $2,450,000 (if the
Closing occurs at the Scheduled Closing in accordance with Section 1.6)
or $2,695,000 (if there is a Delayed Closing pursuant to an extension
in accordance with Section 1.6) from such sale or sales prior to income
tax but after applicable broker commissions on such sale or sales. The
Third Party Purchaser shall have entered into a binding agreement to
purchase the Unrestricted Parent Exchange Shares on the foregoing
terms, and the Third Party Purchaser shall have established (to the
reasonable satisfaction of the Company and the Controlling Members) its
financial ability to consummate such purchase immediately after the
Closing.
2. Counterpart and Facsimile Execution. This Amendment may be
executed by the parties hereto in any number of counterparts, each of which
shall be deemed an original, but all of which shall constitute one and the same
agreement. Each counterpart may consist of a number of copies hereof each signed
by less than all, but together signed by all, the parties hereto. In order to
facilitate the execution of this
4
<PAGE> 5
Amendment, an executed counterpart of the signature page or pages to the
Amendment may be delivered by facsimile transmission to the other parties hereto
and such facsimile signature shall be deemed an original signature for purposes
of this Amendment and shall be binding on the parties hereto. An original
executed counterpart of said signature page shall be promptly forwarded to the
other parties hereto.
3. Ratification of Reorganization Agreement. Except as modified by
the provisions of Section 1 hereof, the Reorganization Agreement and the
Exhibits attached thereto are not otherwise modified hereby.
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be
executed on its behalf by its representative thereunto duly authorized, all as
of the date first above written.
"PARENT"
POPMAIL.COM, INC.
By: s/ James L. Anderson
---------------------------------
JAMES L. ANDERSON,
Chief Executive Officer
"SUB"
ROI ACQUISITION CORPORATION
By: s/ James L. Anderson
---------------------------------
JAMES L. ANDERSON,
President
"THE COMPANY"
ROI INTERACTIVE, LLC
By: s/ Gary W. Schneider
---------------------------------
GARY W. SCHNEIDER,
Chief Executive Officer
5
<PAGE> 6
MEMBERS
s/ Gary W. Schneider
- ------------------------------------
GARY W. SCHNEIDER
s/ John M. Palms, Jr.
- ------------------------------------
JOHN M. PALMS, JR.
s/ Ed Bardwell
- ------------------------------------
ED BARDWELL
s/ Shain McCaig
- ------------------------------------
SHAIN McCAIG
s/ Merry Payne
- ------------------------------------
MERRY PAYNE
s/ Steve Mauldin
- ------------------------------------
STEVE MAULDIN
s/ Scott Hull
- ------------------------------------
SCOTT HULL
6
<PAGE> 7
WORLDWIDETV.COM, INC.
By: s/ signature illegible
---------------------------------
Title: CFO
---------------------------------
CONSENT AND AGREEMENT OF SPOUSES
We, the undersigned, do severally certify that we are the respective
spouses of the Members identified in the foregoing First Amendment to Agreement
and Plan of Reorganization, which Members entered into and signed the foregoing
Amendment. Each of us has read the foregoing Amendment and we understand its
provisions, purposes and effect. We severally approve and consent to the
foregoing Amendment. We do not hereby or otherwise assume any liability or other
obligation, including without limitation, the obligation of indemnification
other than to the extent of our interest in the Acquisition Consideration as
defined in the Agreement and Plan of Reorganization, subject to the provisions
of Section 10.2 thereof. We disclaim any ownership interest, whether legal or
beneficial, either in the Membership Interests of the Company or the assets of
the Company other than to the extent of that portion of the Acquisition
Consideration transferred to our respective spouses under the Agreement and Plan
of Reorganization, as amended.
s/ Donna Schneider
- ------------------------------------
DONNA SCHNEIDER
s/ Anna Palms
- ------------------------------------
ANNA PALMS
s/ Tammy Bardwell
- ------------------------------------
TAMMY BARDWELL
s/ Chuck E. Payne
- ------------------------------------
CHUCK PAYNE
