----------------------------------------
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission File No. 33-19139-NY
NETAMERICA.COM CORPORATION
--------------------------
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 11-2936371
-------- ----------
(State or Other Jurisdiction of (IRS Employer ID Number)
Incorporation or Organization)
2 Embarcedero Center, Suite 200, San Francisco, CA 94111
(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number, including area code: (415) 646-8033
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months
(or for such shorter period that the issuer was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.
12,773,266 shares common stock as of November 1, 1999
(Title of Class)
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<CAPTION>
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NETAMERICA.COM CORPORATION
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FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 1999
PART I - FINANCIAL INFORMATION Page
Item 1 -
Financial Statements
<S> <C>
Consolidated Balance Sheet for September 30, 1999 (unaudited) and December 31, 1998 3
Consolidated Statements of Income (unaudited) for the three months and nine months
ended September 30, 1999 and 1998 4
Consolidated Statements of Cash Flows (unaudited) for the nine months
ended September 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2 -
Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 22
Item 2 - Changes in Securities 22
Item 3 - Defaults Upon Senior Securities 22
Item 4 - Submission of Matters to a Vote of Security Holders 22
Item 5 - Other Information 22
Item 6 - Exhibits and Reports on Form 8-K 23
SIGNATURES 24
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
See Notes to Consolidated Financial Statements
Part I - Financial Information
Item 1. Financial Statements
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
September 30, December 31,
----------- -----------
1999 1998
(unaudited)
Assets
- ------
Current assets
<S> <C> <C>
Cash $ 154,684 $ 528,516
Interest Receivable 95,077 1,638
Accounts Receivable 600 --
----------- -----------
Total Current Assets 250,361 530,154
----------- -----------
Property, Plant & Equipment (Note 4) 484,480 6,875
Other assets
Goodwill 1,465,487 41,117
Deposits 137,721 --
Deferred Offering Costs 94,782 --
----------- -----------
Total Assets $ 2,432,832 578,146
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Accounts Payable and Accrued Expenses 607,146 $ 68,200
Short Term Debt 1,000,000 --
----------- -----------
Total Current Liabilities 1,607,146 68,200
----------- -----------
Stockholders' Equity
Common Stock, $.0001 par value; 300,000,000
shares authorized; issued and outstanding
12,773,266 shares and 7,243,023 shares,
respectively 1,277 724
Capital in Excess of Par Value 8,145,838 2,147,518
Retained (Deficit) Accumulated During
Development Stage (5,044,430) (1,338,296)
Less Subscriptions Receivable (2,276,999) (300,000)
Total stockholders' equity 825,686 509,946
----------- -----------
Total Liabilities and Stockholders' Equity $ 2,432,832 $ 578,146
=========== ===========
</TABLE>
See Notes to Consolidated Financial Statements
3
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Beginning of
Development Stage
Three Months ended Nine Months ended May 6, 1987 through
September 30 September 30 September 30
1999 1998 1999 1998 1999
---------------------------------------------------------------------
REVENUE
<S> <C> <C> <C>
Interest Income $ 43,782 -- $ 94,590 -- $ 139,196
EXPENSES
Selling, General & Administrative 1,415,377 8,137 2,947,961 8,137 3,380,442
Bad Debt -- -- 746,188 -- 1,631,188
Depreciation and Amortization 88,866 -- 98,859 -- 108,652
Interest 10,132 -- 10,132 -- 20,905
Loss from write down of Goodwill (Note 7) -- -- -- -- 44,855
------------------------------------------------------------------------
Total Expenses 1,514,375 8,137 3,803,140 8,137 5,186,042
Other Income 2,416 -- 2,416 -- 2,416
Income (Loss) Before Taxes (1,468,177) (8,137) (3,706,134) (8,137) (5,044,430)
Taxes (Note 3) -- -- -- -- --
INCOME (LOSS) (1,468,177) (8,137) (3,706,134) (8,137) (5,044,430)
========================================================================
Loss Per Common Share (Note 2) (0.11) -- (0.33) --
=======================================================
Weighted Average Number of Shares
(Note 2) 12,773,266 200,000 11,326,388 200,000
=======================================================
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
<TABLE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
From the
Beginning of
Development
For the Nine Months Stage on May 6
Ended 1987 to
September 30 September 30
1999 1998 1999
---------- ---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net Income (Loss) (3,706,134) (8,137) (5,044,430)
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and Amortization 98,859 -- 108,417
Bad Debt (Note 7) 746,188 -- 1,631,188
Write Off of Goodwill (Note 6) -- -- 44,855
Stock for Services/Expenses 451,447 8,100 540,573
Stock for Interest -- -- 10,773
(Increase) Decrease in Interest Receivable and
Other Advances (357,478) -- (1,278,617)
Increase (Decrease) in Accounts Payable and
Accrued Expenses 530,278 -- 534,278
---------- ---------- ----------
TOTAL (2,236,841) (37) (3,452,963)
CASH FLOWS FROM INVESTING ACTIVITIES
Payment for Purchase of Equipment (482,319) -- (486,814)
Payment for Purchase of Organizational Cost -- -- (700)
Cash Purchased by Stock Acquisition of 82,240 3,690 85,930
Loans to Affiliates -- (253,500) --
---------- ---------- ----------
TOTAL (400,079) (249,810) (401,584)
CASH FLOWS FROM FINANCING ACTIVITIES
Loans and Other Debt (Net) 350,000 255,000 813,000
Paid-In Capital Contributions -- -- 7,650
Proceeds from Stock Sales 1,997,588 -- 3,455,483
Less: Private Offering Costs (84,500) -- (266,902)
---------- ---------- ----------
TOTAL 2,263,088 255,000 4,009,231
INCREASE (DECREASE) IN CASH (373,832) 5,153 154,684
CASH BEGINNING OF PERIOD 528,516 -- --
---------- ---------- ----------
CASH END OF PERIOD 154,684 5,153 154,684
========== ========== ==========
Supplementary Cash Flow Information
Cash Paid For:
Interest -- -- --
Taxes -- -- --
</TABLE>
5
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Interim Financial Statements and Background and History
Interim financial statements:
- -----------------------------
The interim financial statements presented herein are unaudited and have been
prepared in accordance with the instructions to Form 10-QSB. These statements
should be read in conjunction with financial statements and notes thereto
included in our annual report on Form 10-KSB for the year ended December 31,
1998. The accompanying financial statements have not been examined by
independent accountants in accordance with generally accepted auditing
standards, but in the opinion of management such financial statements include
all adjustments (consisting only of normal recurring adjustments) necessary to
summarize fairly our financial position, results of operations, and cash flows.
The results of operations and cash flows for the nine months ended September 30,
1999 may not be indicative of the results that may be expected for the year
ending December 31, 1999.
Background And History
- ----------------------
NetAmerica.com Corporation is a consolidated group of companies including the
parent corporation, NetAmerica.com, and its subsidiaries, PolarCap, Inc.,
Telenisus Corporation and Rate Exchange, Inc. NetAmerica.com (formerly Venture
World, Ltd.) is a Delaware Corporation organized on May 6, 1987 for the purpose
of seeking out and developing general business opportunities.
PolarCap is a California corporation organized in April 1997 for the purpose of
investing in and developing rights to a variety of software technologies related
to multimedia, development tools, and applications technologies. PolarCap was
100% acquired by NetAmerica.com on September 30, 1998.
Telenisus is a Delaware corporation and as of September 30, 1999 was a 100%
owned subsidiary of the Company, organized in May 1999 for the purpose of
becoming a single source provider of secure and reliable Internet-based
business-to-business services.
During the third quarter, the Company acquired Rate Exchange, Inc., a Colorado
corporation, for stock and a note (Note 6). Rate Exchange is a
business-to-business e-commerce company seeking to develop new transaction
services for the telecommunications market. As of September 30, 1999, Rate
Exchange operated as a wholly-owned subsidiary of the Company.
Note 2 - Summary Of Significant Accounting Policies
Principles of Consolidation
- ----------------------------
The consolidated financial statements include the accounts of NetAmerica.com and
its subsidiaries. Collectively, these entities are referred to as the Company.
All significant intercompany transactions and accounts have been eliminated.
Cash and Cash Equivalents
- -------------------------
For purposes of the statements of cash flows, the Company considers all highly
liquid debt instruments with a maturity of three months or less to be
equivalents.
Nonmonetary Transactions
------------------------
Nonmonetary transactions are transactions for which no cash was exchanged and
for which shares of common stock were exchanged for goods or services. These
transactions are recorded at fair market value as determined by the board of
directors.
Earnings Per Share and Average Shares Outstanding
- -------------------------------------------------
The Company has adopted FASB Statement #128 which requires the presentation of
earnings per share by all entities that have outstanding common stock or
potential common stock, such as options, warrants and convertible securities,
that trade in a public market. Those entities that have only common stock
outstanding are required to present basic earnings per share amounts. Basic per
6
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
share amounts are computed by dividing net income (the numerator) by the
weighted-average number of common shares outstanding (the denominator). All
other entities are required to present basic and diluted per share amounts.
Diluted per share amounts assume the conversion, exercise or issuance of all
potential common stock instruments unless the effect is to reduce the loss or
increase the income per common share from continuing operations.
For the nine months ended September 30, 1999, basic and fully diluted earnings
per share are the same since all of the outstanding common stock equivalents
(options) would be antidilutive and would result in lower loss per share
calculations. The total outstanding options at September 30, 1999 is 2,280,000.
Note 3 - Income Taxes
The Company adopted Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes" in the fiscal year ended December 31, 1997 and has
applied the provisions of the statement on a retroactive basis to all the
previous years which resulted in no significant adjustment.
Statement of Financial Accounting Standards No. 109 " Accounting for Income
Taxes" requires an asset and liability approach for financial accounting and
reporting for income tax purposes. This statement recognizes (a) the amount of
taxes payable or refundable for the current year and (b) deferred tax
liabilities and assets for future tax consequences of events that have been
recognized in the financial statements or tax returns.
Deferred income taxes result from temporary differences in the recognition of
accounting transactions for tax and financial reporting purposes. There were no
temporary differences at September 30, 1999 and earlier years; accordingly, no
deferred tax liabilities have been recognized for all years.
The Company has cumulative net operating loss carryforwards of approximately
$1,860,000 at September 30, 1999. No effect has been shown in the financial
statements for the net operating loss carryforwards as the likelihood of future
tax benefit from such net operating loss carryforwards is not presently
determinable. Accordingly, the potential tax benefits of the net operating loss
carryforwards, estimated based upon current tax rates at September 30, 1999 have
been offset by valuation reserves in the same amount. The net operating losses
begin to expire in 2007.
Note 4 - Property And Equipment
Property and Equipment consists of the following:
September 30, 1999
------------------
Fixed Assets $499,487
Less: Accumulated depreciation (15,007)
------------------
$484,480
==================
Fixed assets are being depreciated on a straight line method over the estimated
useful life of 3 to 5 years. Depreciation expense for the nine months is
$12,095.
Note 5 - Use Of Estimates In The Preparation Of Financial Statements
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect reported amounts of assets and liabilities, disclosure of contingent
assets and liabilities at the date of the financial statements and revenues and
expenses during the reporting period. In these financial statements, assets,
liabilities and earnings involve extensive reliance on management's estimates.
Actual results could differ from those estimates.
Note 6 - Acquisition Of Subsidiary / Goodwill
On September 30, 1998, the Company purchased all of the outstanding stock of
PolarCap, Inc. for 2,400,000 shares of stock. The equity of PolarCap at
September 30, 1998 was $(87,310). The value of the stock was issued at $.001 for
a total purchase price of $2,400. All of the assets of PolarCap were established
at estimated fair market value leaving a value of $89,710 for goodwill that was
7
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
to be written off over three years. At the end of 1998, the Company determined
that $44,855 of the value of goodwill would be expensed in the current period
based on the estimated continued value and use of PolarCap and its corporate
image, operations, and personnel talent. Amortization expense for the nine
months is $11,214.
In the third quarter, 1999, the Company acquired Rate Exchange, Inc. a Colorado
corporation, a business-to-business e-commerce company seeking to develop new
transaction services for the telecommunications market. The Company paid 575,000
shares of common stock and $450,000 in a note. The transaction was valued at
$1,395,000 ($920,000 in stock and $450,000 in a note plus out of pocket expenses
of $25,000). The fair value of the Rate Exchange assets was $(116,134) before
the acquisition, creating goodwill in the amount of $1,435,584 which is being
amortized over five years. Amortization of this goodwill for third quarter was
$41,134.
Note 7 - Advances To Affiliate / Bad Debt
At the same time that the Company negotiated the purchase of PolarCap. (See Note
6), the Company negotiated, and later rescinded by mutual agreement, the
purchase of 100% of the ownership of A1 Internet, Inc., an Internet services
provider company based in Seattle, Washington. Between the time the Company
agreed to purchase and the time the recision agreement was reached (March 1999),
the Company advanced $1,631,188. In September 1999, the Company ultimately
agreed to a settlement with A1 Internet. As part of the settlement, the Company
received 100,000 restricted shares of Halo Holdings of Nevada, Inc. (now renamed
A1 Internet.com Inc.) stock. The value of the stock is uncertain at this time
and any recovery of the advances made to A1 Internet will be determined when the
stock is sold at a later date.
Note 8 - Common Stock Transactions
All stock transactions conducted during the period for which no cash was
exchanged and for which shares of stock were exchanged for assets or goods and
services were recorded at fair market value of the stock as best determined by
the board of directors.
Common stock transactions during the nine months ended September 30, 1999 are as
follows:
o 666,574 shares of stock issued for $66,657 in notes to related parties
($0.10) (January). The board has placed restrictions on this stock so that
the stock cannot be sold, traded, assigned, transferred or pledged until
the Company reaches $10,000,000 in gross revenues in a one year time
period.
o. 711,563 shares of stock were issued for $758,288 cash ($1.06) (February).
o 2,557,500 shares of stock issued for $2,728,000 in notes to related
parties and other investors ($1.06) (March).
o 30,000 shares of stock issued in lieu of a $30,000 outstanding notes
payable ($1.00) (March).
o 179,418 shares of stock issued for $179,418 of debt to creditors of A1
Internet ($1.00) (March).
o 250,000 shares of stock issued for $250,000 of legal fees ($1.00) (March)
o 496,188 shares of stock issued for $1.60 per share or $794,300 (May and
June).
o 13,768 shares of stock issued for $22,029 of debt to creditors of A1
Internet ($1.60) (May).
o 575,000 shares of stock issued for $1.60 per share for Rate Exchange,
Inc. (July).
o 50,000 shares of stock issued for $1.60 per share for cash (July and
August).
Note 9 - Note Receivable - Related Party
In January 1999, the Company sold 666,574 shares for $66,574 at a price of $.10
per share. (See Note 8 for restrictions placed on stock).
8
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In March 1999, the Company sold 2,557,500 shares to a related party and other
investors in exchange for $2,728,000 in notes payable at a price of $1.06 a
share.
Note 10 - Commitments And Contingencies
The Company has entered into a 12 month, renewable lease for office space in San
Francisco for $1,000 per month.
The Company, through its subsidiary Telenisus, entered into a lease agreement
for office space that calls for an irrevocable letter of credit in the amount of
$136,650 to be used as collateral for the rent. The Company deposited funds with
a local bank to secure the letter of credit. The lease extends to May 31, 2004.
Telenisus has also entered into several consulting contracts with various
entities for various services that will be performed over a period of two years.
The minimum commitments on these contracts call for payments of $549,000 over
the next twelve months. Stock options have also been granted to participants of
these contracts to purchase 625,000 shares of Telenisus stock for $1.00 per
share.
The Company, through its subsidiary Rate Exchange, has entered into a lease
agreement for office space that calls for a standby letter of credit of
$102,165.30 to be used as collateral for rent. The lease extends to August 25,
2002.
Rate Exchange has entered into various agreements as well:
o On July 23, 1999, Rate Exchange entered into an agreement with a consultant
for market development expertise as applied to the telecommunications
market. In exchange for these services, Rate Exchange has agreed to issue
up to 10% of its common stock over a 24 month period.
o On September 15, 1999, Rate Exchange and Donald Sledge entered into an
employment agreement under which Rate Exchange agreed to grant Mr. Sledge
an equity position of up to 10% of Rate Exchange's outstanding stock
through a stock purchase right.
When, and if, common stock is issued under the consultant and employment
agreements, it will reduce the Company's percentage ownership interest in Rate
Exchange to approximately 80%.
Note 11 - Options For Purchase Of Common Stock
As of September 30, 1999, the Company has outstanding 2,280,000 options for the
purchase of shares of the Company's common stock with exercise prices ranging
from $.05 per share to $2.75 per share. The options can be exercised at various
dates ranging from immediately to 3 years.
To date, no options have been exercised.
Note 12 - Short Term Debt
The Company issued a note for $450,000 for the purchase of Rate Exchange, Inc.
The note is due and payable on July 6, 2000 and bears interest at a rate of 6%
per annum. The note is also convertible into the Company's stock at a price of
$4.00 per share.
The Company, through its subsidiary, Telenisus, acquired short-term bridge note
financing in the amount of $550,000 in anticipation of a private placement
memorandum. The notes are from private individuals and carry an interest rate of
10% per annum and are due any time after six months from the date of the notes.
The notes are convertible into equity of Telenisus. (See Note 13). The notes are
secured by a security interest in all goods, inventory, accounts, equipment,
general intangibles and other property of Telenisus and the products and
proceeds of Telenisus.
Note 13 - Subsequent Event; Private Financing of Telenisus
In order to obtain the substantial capital needed to implement its business
plan, Telenisus, a wholly owned subsidiary of the Company (as of September 30,
1999), sought equity funding through a private placement memorandum. Telenisus
attempted to raise $7,000,000 through the issuance of 7 million of its common
shares for $1.00 per share.
9
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
On or about November 3, 1999, Telenisus announced the first closing of its first
independent private placement financing. The common stock issued in this
financing, together with stock issued in a Telenisus-subsidiary acquisition,
reduced the Company's percentage ownership interest in Telenisus to
approximately 15%.
Telenisus intends to use the proceeds of the financing to expand its management
team and to accelerate development of its four service families: virtual private
networks, managed firewall/security services, Web site and application hosting,
and e-commerce. Telenisus is also negotiating partnerships and other
acquisitions as a means to deliver its business Internet solutions to large and
mid-sized corporate customers.
Before the private placement memorandum became effective, Telenisus obtained
bridge financing in the amount of $550,000 as of September 30, 1999 and another
$200,000 after the end of the quarter. The bridge notes are convertible into
common shares of Telenisus at a price of $1.00 per share (see below for terms).
In addition to the conversion feature, a total of 2,950,000 warrants to purchase
common stock of Telenisus at $1 per share were issued to four of the note
holders. The warrants are to be exercised in full within a three day time period
after the delivery of the memorandum. The notes are convertible at the same time
at a rate of $1.00 per common share and must be exercised within the same three
day time period.
Note holders which exercised both the conversion of the bridge loan and the
purchase of warrants for common stock, were offered another warrant to purchase
common stock of Telenisus representing a total of 2,620,000 shares of common
stock for a price of $.05. The warrant is for a period of twelve (12) months
beyond the date of the original bridge note.
10
<PAGE>
NETAMERICA.COM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussions should be read in conjunction with our
Consolidated Financial Statements and the notes thereto presented in "Item 1
Financial Statements." The information set forth in this "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
includes forward-looking statements that involve risks and uncertainties. Many
factors could cause actual results to differ materially from those contained in
the forward-looking statements below. See "Outlook."
Company Overview
The Company was originally incorporated as Venture World, Ltd. on May
6, 1987 under the laws of the State of Delaware for the purpose of developing or
acquiring general business opportunities. In 1999 we changed the name of the
Company to NetAmerica.com Corporation. We did not have any material operations
from 1992 to 1998.
On September 30, 1998, we acquired PolarCap, Inc. As a result of this
acquisition, PolarCap became our wholly owned subsidiary. PolarCap is a
California corporation that was organized in April 1997 for the purpose of
investing in and developing rights to a variety of software technologies related
to multimedia, development tools, and applications technologies.
In September 1998, in connection with our strategy to acquire and
consolidate Internet service providers, we also entered into an acquisition
agreement pursuant to which we agreed to purchase the outstanding stock of Net
America, Inc., a Washington corporation, in exchange for 4,770,426 shares of our
common stock and our assumption of certain liabilities. Net America, Inc.
subsequently agreed to be renamed A1 Internet, Inc. and agreed to assign and
transfer to us all of its right, title and interest in the name "Net America."
A1 Internet was organized in April 1997 for the purpose of providing
Internet-based products and services to small and medium-sized Internet
providers.
We determined in March 1999 that it was not in our best interest to
complete the purchase of A1 Internet's stock after A1 Internet acknowledged that
certain representations made to us in the acquisition agreement were inaccurate.
Consequently, on March 16, 1999, we entered into an agreement with A1 Internet
to abandon the stock purchase. Nevertheless, in pursuing the proposed purchase
between August 1998 and the end of March 1999, we incurred the following costs:
o We made cash advances to A1 Internet for working capital in an
aggregate principal amount of $1,631,188;
o We issued 179,418 shares of our common stock to settle and
discharge obligations owed by A1 Internet to creditors;
o We issued 13,768 shares of our common stock and/or paid $10,534 to
certain private investors of A1 Internet who had invested and paid
$32,563 to A1 Internet before we terminated our acquisition
agreement with A1 Internet; and
o We issued or agreed to issue certain shares of our common stock to
compensate individuals and entities for ongoing services performed
for our benefit and the benefit of A1 Internet.
Therefore, as an additional provision in the recision agreement, A1
Internet agreed to repay certain of the costs we incurred prior to the recision.
As part of its plan to repay the costs, A1 Internet informed us that it had
entered into an agreement with another prospective acquiror, Halo Holdings of
Nevada, Inc., to sell substantially all of its assets in exchange for shares of
common stock and assumption of certain liabilities, including A1 Internet's
obligations to us. In September 1999, after further negotiations, we ultimately
agreed with A1 Internet to the following settlement of A1 Internet's obligations
to us:
o We retained the rights to the name "Net America," including all
rights to the internet domain name "netamerica.com;"
11
<PAGE>
o NetAmerica assigned to us 100,000 shares of Halo (now named A1
Internet.com Inc.) restricted common stock (at the time of
transfer, the shares had a market value of approximately
$631,250);
o
We agreed to pay $85,016 to the Internal Revenue Service in
satisfaction of A1 Internet's obligations for unpaid 1998 payroll
taxes;
o We agreed to deliver 23,305 shares of our common stock to settle
certain A1 Internet obligations; and
o All parties agreed that all of our further obligations to issue
stock or options were cancelled.
In May 1999, we incorporated Telenisus Corporation, a Delaware
corporation, as one of our wholly owned subsidiaries. Telenisus is a development
stage company that is seeking to become a single source provider of secure and
reliable Internet-based business-to-business services to corporate customers,
carriers, Internet service providers and marketers of telecommunications
services. Through acquisitions and internal business development, Telenisus
seeks to develop a full suite of Internet and data network management tools that
will enable customers to increase productivity, to reduce costs and to access a
wide range of Internet, e-commerce, security and communication applications from
a one-stop network service delivery provider.
On July 6, 1999, we acquired 100% of the outstanding stock of Rate
Exchange, Inc., a Colorado corporation, through a merger into Rate Exchange
(Delaware), Inc., dba RateXchange, Inc., one of our wholly owned Delaware
subsidiaries. The Delaware subsidiary was the surviving entity. We paid 575,000
shares of common stock and $450,000 in a note that is due one year from the date
of closing. On July 23, 1999, RateXchange entered into an agreement with a
consultant for market development expertise as applied to the telecommunications
market. In exchange for these services, RateXchange has agreed to issue up to
10% of its common stock. On September 15, 1999, RateXchange and Donald Sledge
entered into an employment agreement under which RateXchange agreed to grant Mr.
Sledge an equity position of up to 10% of RateXchange's outstanding stock
through a stock purchase right. When, and if, common stock is issued under the
consultant and employment agreements, it will reduce our percentage ownership
interest in RateXchange to approximately 80%.
RateXchange is a development stage business-to-business, e-commerce
company seeking to develop new transaction services for the estimated $1
trillion international market for telecommunications services. RateXchange has
operated an Internet-based lead generation service for trading in international
long-distance minutes, IP telephony minutes and IP bandwidth since January 1998.
The lead generation service has registered more than 2,000 members and
facilitated more than 400 offline transactions for 500 million minutes.
RateXchange historically has generated minimal revenues from these
lead-generation services and from the collection and dissemination of
telecommunications market data.
Results of Operations for Three Months Ended September 30, 1999 Compared to
September 30, 1998
The following table summarizes our results of operations as a
percentage of net sales for the three months ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Three Months Ended
September
--------------------------------------
1999 1998
----------- ------------
<S> <C> <C>
Revenue $43,782 $ 0
Expenses (including Selling, General & Administrative) $1,514,375 $8,137
Net Income (Loss) $(1,468,177) $(8,137)
</TABLE>
Revenue:
Revenues (interest income) for the three months ended September 30,
1999 were $43,782 compared to $0 for the three months ended September
30, 1998.
Selling, General and Administrative Expenses:
12
<PAGE>
Selling, general and administrative expenses increased to $1,415,377
from $8,137 for the three months ended September 30, 1999 and 1998,
respectively. The increase was due primarily to:
o increased business development and acquisition activity,
o the expansion of our executive management team and the addition of
certain advisors, and
o the addition of two operating subsidiaries this year compared to no
operating subsidiaries for the same period last year.
Net Income (Loss):
During the three months ended September 30, 1999, we incurred losses of
$(1,468,177) compared to losses of $(8,137) during the same period in
1998. Of the $(1,468,177) loss for the period were:
o $184,776 in legal and professional fees,
o $187,011 in outside services,
o $673,289 in officer/director/consulting fees and salaries,
o $75,000 in development costs,
o $100,241 in travel expenses, and
o $49,570 in recruiting expenses.
Because we are in the early growth stage, we anticipate that we will
continue to incur operating losses and cash flow deficiencies for the
foreseeable future.
Results of Operations for Nine Months Ended September 30, 1999 Compared
to September 30, 1998
The following table summarizes our results of operations as a
percentage of net sales for the nine months ended September 30, 1999 and 1998.
<TABLE>
<CAPTION>
Nine Months Ended
September 30
-----------------------------------
1999 1998
------------ ----------
<S> <C> <C>
Revenue $94,590 $ 0
Expenses (including Selling, General & Administrative) $3,803,140 $8,137
Net Income (Loss) $(3,706,134) $(8,137)
</TABLE>
Revenue:
Revenues (interest income) for the nine months ended September 30, 1999
were $94,590 compared to $0 for the nine months ended September 30,
1998.
Expenses:
Selling, general and administrative expenses increased to $2,947,961
from $8,137 for the nine months ended September 30, 1999 and 1998,
respectively. The increase was due primarily to:
o increased business development and acquisition activity,
o. the expansion of our executive management team and the addition of
certain advisors, and
13
<PAGE>
o the addition of two operating subsidiaries this year compared to no
operating subsidiaries for the same period last year.
Net Income (Loss):
During the nine months ended September 30, 1999, we incurred losses of
$(3,706,134) compared to losses of $(8,137) during the same period in
1998. Of the $(3,706,134) loss for the period were:
o $618,122 in legal and professional fees,
o. $796,474 in outside services,
o $708,543 in officer/director/consulting fees and salaries,
o $184,746 in development costs,
o $244,186 in travel expenses,
o $49,570 in recruiting expenses,
o 746,188 in bad debt, and
o 98,859 in depreciation and amortization.
Because we are in the early growth stage, we anticipate that we will
continue to incur operating losses and cash flow deficiencies for the
foreseeable future.
Liquidity and Capital Resources
We have financed our operations to date primarily through the sale of
equity securities. We have been unprofitable since inception and we have
incurred net losses in each year.
We had negative working capital of $(1,356,785) at September 30, 1999
compared to $461,954 on December 31, 1998. We currently have subscription
receivables in the amount of $2,276,999 which we expect to collect in the next
twelve (12) months. These receivables should be sufficient to cover our
operations and working capital requirements for the next twelve (12) months.
Nevertheless, we may be forced to seek additional financing sooner than
expected.
Our operating activities used $2,236,841 during the nine months ended
September 30, 1999 due primarily to our:
o operating losses,
o increased business development, and
o expansion of our executive management team.
Our investing activities consumed $400,079 during the nine months ended
September 30, 1998, primarily to purchase equipment and for the identification,
acquisition and integration of acquisition targets.
Financing activities generated $2,263,088 during the nine months ended
September 30, 1999. Financing activities during the nine months ended September
30, 1999 consisted primarily of proceeds from sales of common stock. The
proceeds of the sales of common stock were and will be used for acquisitions,
business development, accounts payable, equipment purchases, and for general
working capital. The various sales of common stock are as follows:
o Between November 1998 and March 1999, we sold a total of 1,817,813
shares of our restricted common shares to twenty-one accredited
14
<PAGE>
investors. The shares were sold at a subscription price of $1.60
per share (see discussion below on 50% bonus stock). After
deducting the offering expenses related to the offering, we
received $1,745,000 in cash, of which approximately $1,631,188 was
advanced to A1 Internet as working capital and for debt repayment.
o In January 1999, we sold 666,574 shares of common stock to certain
related parties at a price per share of $.10 for notes. In March
1999, we sold 2,557,500 additional common shares in a private
placement offering at a price per share of $1.60 for notes (see
discussion below on 50% bonus stock). As of September 30, 1999, we
have collected a total of approximately $750,000 from note
repayments from both the January and March offerings.
o In the second quarter 1999, we sold 496,188 shares of stock for
$1.60 in a private placement (see discussion below on 50% bonus
stock) and received a total of $794,300 net proceeds.
o In the third quarter 1999, we sold 50,000 shares of stock for
$1.60 in a private placement and received a total of $80,000 net
proceeds.
After the A1 Internet recision agreement was reached, we authorized a
stock adjustment bonus of 50% to all the investors who had purchased or loaned
us money between August 1, 1998 and June 30, 1999. The stock bonus was awarded
retroactively and made the effective purchase price of the private placement
memorandum stock holders from $1.60 to $1.06.
Through our operating subsidiaries, we are developing various
Internet-based services and we are executing an overall business plan that
requires significant additional capital for among other uses:
o acquisitions,
o additional equipment and facilities,
o expansion into new domestic and international markets,
o additional management and personnel, and
o development of additional products and services.
Furthermore, our funding of working capital and current and future
operating losses will require additional capital investment. We do not currently
possess a bank source of financing and we have not had any revenues. We are
currently seeking financing, but there is no guarantee that such financing will
be available. Should we not be able to arrange such financing in the next twelve
(12) months we may be forced to curtail or cease operations.
Our business and operations have not been materially affected by
inflation during the periods for which financial information is presented.
Outlook
We have not had any long-term successful business operations and we are
currently seeking additional funding to concentrate our efforts in developing
Internet-based business-to-business e-commerce products and services. We are in
an early stage of development and we are subject to all the risks inherent in
the establishment of a new business enterprise. To address these risks, we must:
o establish market acceptance for our products and services,
o implement and successfully execute our business and marketing strategy
o respond to competitive developments,
o continue to develop and upgrade our technology,
15
<PAGE>
o continue to attract, retain and motivate qualified personnel, and
o obtain substantial additional capital to support the expenses of
developing and marketing new products and services.
We are also seeking to identify acquisition opportunities in the United
States, Europe and other international markets where we can acquire majority
interests in operating companies already offering one or more
business-to-business e-commerce applications or services or other
subscriber-based Internet or telecommunications services. Furthermore, we are
interested in acquisition opportunities that would complement or expand our
existing business. In addition to acquisitions of operating companies and the
startup of new companies, we intend to identify companies with which we may
enter into strategic relationships that may include a combination of exclusive
and non-exclusive licensing agreements, marketing or co-marketing agreements and
strategic minority investments. As of November 15, 1999, we do not have any
binding agreements with respect to future acquisitions or strategic
relationships; however, we are continuing to investigate potential
opportunities.
Telenisus Focus
We believe that most mid-sized companies lack the internal resources to
effectively combine advances in applications and bandwidth. We believe a large
and growing market has emerged for an outsourced network services provider
focused on delivering cohesive, cost-effective Internet services to small to
mid-sized corporations and telecommunications service providers. Consequently,
Telenisus is seeking to position itself to be a one-stop data and Internet
network service provider to meet increasing demand for secure hosting, Internet
provider network management and value-added network services.
Based on the market opportunity for Telenisus's proposed products and
services in North America, Europe and other international markets, we anticipate
that Telenisus's business plan will require significant capital and human
resources over the next 24 to 36 months. Because the capital requirements to
fully execute the Telenisus business plan are greater than what we can
contribute, Telenisus is currently seeking additional funding, which will result
in dilution of our 100% ownership of Telenisus.
RateXchange Focus
To better facilitate telecommunications transactions and to generate
increased revenues, RateXchange has developed and intends to launch the
Real-Time Bandwidth eXchange through strategic relationships with one or more
telecommunications carriers. The Real Time Bandwidth eXchange is a
fully-transactional online bandwidth exchange with immediate fulfillment. The
Real-Time Bandwidth eXchange will seek to manage transaction standards and
create a switched delivery mechanism with on demand transit between switching
hubs. RateXchange is thus seeking to become one of the first Internet based
electronic marketplaces to automate end-to-end all aspects of a transaction
between buyers and sellers of telecommunication commodities. Over the next
twelve (12) months, RateXchange plans to focus its research and development
efforts on applying the Real-Time Bandwidth eXhange and technology model to new
commodities such as bandwidth, domestic long-distance minutes and Internet
interconnectivity.
The current environment for trading telecommunications bandwidth is
marked by high search costs, high transaction failure rates and overall
inefficiency. We estimate that 90% of all bilateral transactions fail, and
fulfillment cycles average between 60 and 90 days. We believe there is a large
and growing market opportunity for our automated bandwidth exchange, fueled by
the growth of packet-switched networks, global deregulation and technology
advances.
Based on the market opportunity for RateXchange's proposed electronic
exchange for telecommunications products and services in North America, Europe
and other international markets, we anticipate that the RateXchange business
plan may require significant capital and human resources over the next 24 to 36
months. In the event that the capital requirements to fully execute
RateXchange's business plan are greater than what we can contribute, RateXchange
may seek additional capital or other financial resources, which may result in
dilution of our ownership of RateXchange.
16
<PAGE>
Forward-Looking Statements
This Outlook section, and other sections of this document, include
certain "forward-looking statements" within the meaning of that term in Section
27A of the Securities Act of 1933, and Section 21E of the Securities Act of
1934, including, among others, those statements preceded by, following or
including the words "believe," "expect," "intend," "anticipate" or similar
expressions. These forward-looking statements are based largely on the current
expectations of management and are subject to a number of risks and
uncertainties. Our actual results could differ materially from these
forward-looking statements. Important factors to consider in evaluating such
forward-looking statements include:
o changes in our business strategy or an inability to execute our
strategy due to unanticipated changes in the market,
o our ability to raise sufficient capital to meet operating
requirements,
o various competitive factors that may prevent us from competing
successfully in the marketplace,
o changes in external competitive market factors or in our internal
budgeting process which might impact trends in our results of
operations, and
o other risks described below in "Factors That May Affect Future
Results."
In light of these risks and uncertainties, there can be no assurance that the
events contemplated by the forward-looking statements contained in this Form
10-QSB will in fact occur.
Subsequent Events
Telenisus Financing
On or about November 3, 1999, Telenisus announced a first closing of its
first independent private placement financing. The common stock issued in this
financing, together with stock issued in a Telenisus-subsidiary acquisition,
reduced our percentage ownership interest in Telenisus to approximately 15%.
Telenisus intends to use the proceeds of the financing to expand its management
team and to accelerate development of its four service families: virtual private
networks, managed firewall/security services, Web site and application hosting,
and e-commerce. Telenisus is also negotiating partnerships and other
acquisitions as a means to deliver its business Internet solutions to large and
mid-sized corporate customers.
Collections of Private Placement Notes
Between September 30, 1999 and November 15, 1999 we collected a total
of approximately $275,000 from investor repayments of the notes issued by the
investors in our January and March 1999 private placements.
Factors That May Affect Future Results
We Have No Significant Operating History.
As a development stage company commencing business in the newly
emerging and rapidly changing Internet and e-commerce industries, we are subject
to all the substantial risks inherent in the commencement of a new business
enterprise. We can provide no assurance that we will be able to successfully
generate revenues, operate profitably, or make any distributions to the holders
of our securities. Additionally, we have no significant business history. Our
prospects must be considered in light of the risks, expenses and difficulties
encountered by companies in the early stages of development. Such risks include,
but are not limited to, an evolving and unpredictable business model and the
management of growth. We can provide no assurance that we will be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on our business.
17
<PAGE>
We Have Incurred Substantial Operating Losses and May Never Become Profitable.
At September 30, 1999, our accumulated deficit since inception was
$5,044,430. For the nine months ended September 30, 1999, we incurred net losses
of $3,706,134. We have incurred a net loss in each year of our existence, and
have financed our operations primarily through sales of equity securities. Our
expense levels are high and our revenues nonexistent. We expect to incur net
losses for the foreseeable future. We may never achieve or sustain significant
revenues or profitability on a quarterly or annual basis in the future.
We Currently Have Limited Funds and Limited Sources of Liquidity.
We require substantial capital to pursue our operating strategy and
currently have limited cash for operations. Until we can obtain revenues
sufficient to fund working capital needs, we will be dependent upon external
sources of financing including, at times, direct external investments in our
operating subsidiaries. We have no assurance that any additional financing will
be available to us or our subsidiaries on favorable terms, or at all. To date,
we have no internal sources of liquidity and we do not expect to generate any
significant internal cash flow for the foreseeable future, if at all. We expect
our current source of working capital to be from proceeds from our various
private placement offerings. However, we can provide no assurance that the
proceeds from the offerings will be sufficient to cover our cash requirements.
If adequate funds are unavailable, we may delay, curtail, reduce the scope of or
eliminate the expansion of our operations and/or our marketing and sales efforts
which could have a material adverse effect on our financial condition and
business operations.
As a Start-Up Company, Our Quarterly Operating Results May Fluctuate.
Based on our business and industry and as a start-up company, we expect to
experience significant fluctuations in our future quarterly operating results
due to a variety of factors, many of which are outside our control. Factors that
may adversely affect our quarterly operating results include:
o our ability to attract new customers at a steady rate and maintain
customer satisfaction,
o the demand for the products and services we intend to market,
o the amount and timing of capital expenditures and other costs relating
to the expansion of our operations,
o the introduction of new or enhanced services by us or our competitors,
and
o economic conditions specific to the Internet, e-commerce or all or a
portion of the technology market.
As an Internet Company, We are in an Intensely Competitive Industry.
The Internet and e-commerce industries are highly competitive, and have
few barriers to entry. Although there are few competitors who offer the same or
similar services of the type we offer, we can provide no assurance that
additional competitors will not enter markets that we intend to serve.
We believe that our ability to compete depends on many factors both
within and beyond our control, including the following:
o the timing and market acceptance of our business model,
o our competitors' ability to gain market control, and
o the success of our marketing efforts.
The Future Success of Our Business Depends on Our Ability to Attract and Retain
Qualified Personnel.
Our success depends in large part upon our ability to attract and
retain qualified management professionals and operations personnel. The
inability to attract or retain personnel could have a material adverse impact on
our results of operations. It is difficult to locate consulting professionals
and technical and sales personnel with the combination of skills and attributes
required to execute our strategy. Additionally, our consulting professionals and
18
<PAGE>
employees can terminate their employment at any time. Accordingly, we may be
unable to continue to retain and attract qualified consulting professionals and
employees.
Our Business is Dependent on the Maintenance of the Public Internet
Infrastructure.
Our success will depend, in large part, upon the maintenance of the
public Internet infrastructure as a reliable network backbone with the necessary
speed, data capacity, and security. To the extent that the Internet continues to
experience increased numbers of users, frequency of use, or increased
requirements of users, we can provide no assurance that the Internet
infrastructure will continue to be able to support the demands placed on it or
that the performance or reliability of the Internet will not be adversely
affected. In addition, the Internet could lose its viability as a form of media
due to delays in the development or adoption of new standards and protocols that
can handle increased levels of activity.
We Are Dependent on the Continued Growth of Online Commerce.
Our success is substantially dependent upon the widespread acceptance
and use of the Internet and other online services as an effective medium of
commerce. Rapid growth in the use of and interest in the Internet and other
online services is a recent phenomenon, and we can provide no assurance that
acceptance and use will continue to develop or that a sufficiently broad base of
consumers will adopt, and continue to use, the Internet and other online
services as a medium of commerce. Demand and market acceptance for recently
introduced services over the Internet are subject to a high level of uncertainty
and there exist few proven services or business models.
We Must Develop, Produce and Establish New Products and Services That Keep Up
With Rapid Technological Change.
The market for Internet professional services and business-to-business
e-commerce is characterized by rapid technological changes, frequent software
changes, frequent new products and service introductions and evolving industry
standards. The introduction of services embodying new processes and technologies
and the emergence of new industry standards can rapidly render existing services
obsolete and unmarketable. Our success in adjusting to rapid technological
change will depend on our ability to:
o develop and introduce new services that keep pace with technological
developments and emerging industry standards; and
o address the increasingly sophisticated and varied needs of customers.
Due to inadequate technical expertise, insufficient finances or other
reasons, we may be unable to accomplish these tasks. Such failure would have a
material adverse effect on our operating results and financial condition.
Our Operations May be Significantly Impaired by Changes in or Developments under
Domestic or Foreign Laws, Regulations, Licensing Requirements or
Telecommunications Standards.
We are not currently subject to direct regulation by any governmental
agency, other than regulations applicable to businesses generally. However, due
to the increasing popularity and use of the Internet, it is possible that a
number of laws and regulations may be adopted with respect to the Internet
covering issues such as user privacy, pricing, content, copyrights,
distribution, and characteristics and quality of products and services. The
adoption of such laws or regulations may decrease the growth of the Internet,
which could, in turn, decrease the demand for our services and increase our cost
of doing business. Moreover, the applicability to the Internet of existing laws
in various jurisdictions governing issues such as property ownership, sales and
other taxes, libel and personal privacy is uncertain and may take years to
resolve. Any such new legislation, the application of laws and regulations from
jurisdictions whose laws do not currently apply to our business, or the
application of existing laws to the Internet could have a material adverse
affect on our business.
The Volatility of Our Securities Prices May Increase.
19
<PAGE>
The market price of our common stock has in the past been, and may in
the future continue to be, volatile. A variety of events may cause the market
price of our common stock to fluctuate significantly, including:
o quarter to quarter variations in operating results,
o adverse news announcements,
o the introduction of new products and services, and
o market conditions in the Internet-based professional services,
business, and business-to-business e-commerce.
In addition, the stock market in recent years has experienced
significant price and volume fluctuations that have particularly affected the
market prices of equity securities of many companies in our business and that
often have been unrelated to the operating performance of such companies. These
market fluctuations may adversely affect the price of our common stock.
We May be Required to Issue Stock in the Future That Will Dilute the Value of
Our Existing Stock.
We have a number of outstanding options. The exercise of all of the
outstanding options would dilute the then-existing shareholders' percentage
ownership of our common stock, and any sales in the public market could
adversely affect prevailing market prices for our common stock. Moreover, our
ability to obtain additional equity capital could be adversely affected since
the holders of outstanding options will likely exercise the options when we
probably could obtain any needed capital on terms more favorable than those
provided by these securities. We lack control over the timing of any exercise or
the number of shares issued or sold if exercises occur.
We May Have to Discontinue Use of the NetAmerica Name.
A1 Internet agreed to assign and transfer to us all of its right, title
and interest in and to the name "Net America." A search of the U.S. Patent and
Trademark Office's registry revealed, however, that one or more other parties
may have registered trademarks sufficiently similar to "Net America" and that
those registrations could be a significant obstacle our registration, and
continued use, of the name "Net America" and related tradenames. If we are
forced to change our name at a time when we have established name recognition,
our business may suffer.
Our Failure to Manage Future Growth Could Adversely Impact Our Business Due to
the Strain on Our Management, Financial and Other Resources.
Because our business is in an early development stage, our ultimate
success depends on our ability to manage growth. In the future, we may have to
increase staff rapidly and integrate new personnel into our operations without
affecting productivity. We will have to ensure that our administrative systems
and procedures are adequate to handle such growth. It is unclear whether our
systems, procedures or controls will be adequate to support our operations or
that our management will be able to achieve the rapid execution necessary to
exploit our business plan. If our systems, procedures or controls are
inadequate, our operations and financial condition will suffer.
Our Operations Will be Significantly Impaired if Our Systems Fail to be Year
2000 Compliant.
The Year 2000 poses certain issues for business and consumer computing,
particularly the functionality of software for two-digit storage of dates. The
problem exists for many kinds of software, including software for personal
computers and embedded systems.
In assessing the effect of the Year 2000 problem, we have verified that all
of our personal computers and software are Year 2000 compliant. At the time of
selection of our critical applications software, we have requested and continue
to request written confirmation from our software vendors that their products
are Year 2000 compliant. The costs related to these efforts have not been and
are not expected to be material to our business.
We rely on outside vendors for utilities and telecommunications services.
We do not intend to independently evaluate the Year 2000 compliance of the
systems utilized to supply these services. We have received no assurance of
compliance from the providers of these services. We can provide no assurance
20
<PAGE>
that these suppliers will resolve any or all Year 2000 problems with these
systems before the occurrence of a material disruption to our business. Any
failure of these third-parties to resolve Year 2000 problems with their systems
in a timely manner could have a material adverse effect on our business.
We have not currently developed a formal contingency plan to be implemented
as part of our efforts to identify and correct Year 2000 problems affecting our
internal systems. However, if we deem it necessary, we may take the following
actions:
o accelerated replacement of affected equipment or software,
o short to medium-term use of back-up equipment and software,
o increased work hours for our personnel, and
o other similar approaches.
If we are required to implement any of these contingency plans, such plans could
have a material adverse effect on our business.
Based on the actions taken to date as discussed above, we are reasonably
certain that we have or will identify and resolve all Year 2000 problems that
could materially adversely affect our business and operations.
21
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
We previously reported in our June 30, 1999 Form 10-QSB that Gregory
Martin, a former officer and director of A1 Internet, had named us in a
lawsuit filed in the Superior Court of Washington (Civil Action No.
99-2-09171-0 SEA). In May 1999, we entered into a settlement agreement
with Mr. Martin in which Mr. Martin agreed to dismiss the lawsuit if we
agreed to (1) pay severance payments, (2) issue 50,000 shares of our
common stock, and (3) issue stock options to purchase our stock in
certain circumstances. The total cash paid in this settlement was
approximately $25,000, with stock options issuable to Mr. Martin based
on the successful ongoing contract negotiations with customer vendors.
As of September 30, 1999, we have fulfilled all of our current
obligations under the settlement agreement.
We previously reported in our March 31, 1999 Form 10-QSB that we were
involved in a dispute over a lease agreement signed for office space in
Seattle, Washington related to the business of A1 Internet. As part of
the settlement agreement with A1 Internet, A1 Internet agreed to assume
all obligations related to the lease dispute.
Other than those matters disclosed herein, there were no material
additions to, or changes in status of, any ongoing, threatened or
pending legal proceedings during the nine months ended September 30,
1999. From time to time, we are a party to various legal proceedings
incidental to our business. None of these proceedings is material to
the conduct of our business, operations or financial condition.
Item 2. Changes in Securities.
On July 6, 1999, we issued 575,000 shares of our restricted common
stock to the shareholders of Rate Exchange, Inc. to acquire all of the
outstanding stock of Rate Exchange, Inc. We issued the shares to
accredited investors only in reliance upon Section 4(2) of the 1933
Act.
In July and August 1999, we issued 50,000 shares of our restricted
common stock to certain private placement investors at a price of $1.60
per share. We issued the shares to accredited investors only in
reliance upon Rule 506 of Regulation D of the 1933 Act.
Item 3. Defaults Upon Senior Securities - None.
Item 4. Submission of Matters to a Vote of Security Holders
The date of our 1999 annual shareholders meeting has been postponed to
December 16, 1999. Since the 1999 annual shareholders meeting is
scheduled for a date that is more than thirty days from the anniversary
of our 1998 annual shareholders meeting, pursuant to Rules 14a-5(f) and
14a-8(c), shareholder proposals that are to be included in the proxy
materials related to our 1999 annual shareholders meeting must be
received at our principal executive offices on or before November 20,
1999.
Item 5. Other Information
On September 27, 1999, Gordon Reichard resigned as President and Chief
Executive Officer of NetAmerica.com to become President, Chief
Executive Officer and Director of Telenisus. Mr. Reichard will continue
to serve as an advisor to the Company concerning our Internet and
e-commerce operations.
On September 27, 1999, our Board of Directors (1) appointed Donald
Sledge to fill the directorship vacancy created by Mr. Reichard's
resignation, (2) increased the authorized number of directors to five,
and (3) appointed John Dixon to fill the newly created directorship.
Mr. Sledge will also serve as the Chief Executive Officer and Chairman
of the Board of RateXchange.
22
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation for NetAmerica.com Corporation,
as amended.
3.2 Amended and Restated Bylaws of NetAmerica.com Corporation.
10.1 Agreement and Plan of Merger between NetAmerica.com
Corporation and Rate Exchange, Inc., dated June 1, 1999.
10.2 Acquisition Agreement between NetAmerica.com Corporation and
PolarCap, Inc., filed with the Form 8-K dated September 22, 1998,
incorporated herein by reference.
10.3 Employment Agreement between NetAmerica.com Corporation and
Edward Mooney.
10.4 Employment Agreement between NetAmerica.com Corporation and
Douglas Cole.
10.5 Employment Agreement between RateXchange, Inc. and Donald
Sledge.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
23
<PAGE>
SIGNATURES
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.
Dated this 15th day of November,1999.
- -------------------------------------
NETAMERICA.COM CORPORATION
By:/s/Douglas Cole
---------------
Douglas Cole,
Chief Executive Officer and
Principal Accounting Officer
24
<PAGE>
106320.10
Exhibit Index
Exhibit No. Description
----------- -----------
3.1 Certificate of Incorporation for NetAmerica.com Corporation,
as amended.
3.2 Amended and Restated Bylaws of NetAmerica.com Corporation.
10.1 Agreement and Plan of Merger between NetAmerica.com
Corporation and Rate Exchange, Inc., dated June 1, 1999.
10.2 Acquisition Agreement between NetAmerica.com Corporation and
PolarCap, Inc., filed with the Form 8-K dated September 22,
1998, incorporated herein by reference.
10.3 Employment Agreement between NetAmerica.com Corporation and
Edward Mooney.
10.4 Employment Agreement between NetAmerica.com Corporation and
Douglas Cole.
10.5 Employment Agreement between RateXchange, Inc. and Donald
Sledge.
27.1 Financial Data Schedule.
CERTIFICATE OF INCORPORATION
OF
WORLD VENTURES, LTD.
The undersigned, being of legal age, in order to form a corporation under and
pursuant to the laws of the State of Delaware, do hereby set forth as follows:
FIRST: The name of the corporation is
WORLD VENTURES, LTD.
SECOND: The address of the initial registered office and registered agent in
this state is c/o United Corporate Services, Inc., 410 South State Street, in
the City of Dover, County of Kent, State of Delaware 19901 and the name of the
registered agent at said address is United Corporate Services, Inc.
THIRD: The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the corporation laws of
the State of Delaware.
FOURTH: The corporation shall be authorized to issue the following shares:
Class Number of Shares Par Value
- ----- ---------------- ---------
COMMON 300,000,000 $.0001
FIFTH; The name and address of the incorporator are as follows:
Name ADDRESS
- ---- -------
Ray A. Barr 9 East 40th Street
New York, New York 10016
SIXTH: The following provisions are inserted for the management of the business
and for the conduct of the affairs of the corporation, and for further
1
<PAGE>
definition, limitation and regulation of the powers of the corporation and of
its directors and stockholders:
(1) The number of directors of the corporation shall be such as
from time to time shall be fixed by, or in the manner provided in the
by-laws. Election of directors need not be by ballot unless the by-laws
so provide.
(2) The Board of Directors shall have power without the assent or
vote of the stockholders:
(a) To make. alter, amend, change, add to or repeal the
By-laws of the corporation; to fix and vary the amount to be
reserved for any proper purpose; to authorize and cause to be
executed mortgages and liens upon all or any part of the property
of the corporation; to determine the use and disposition of any
surplus or net profits; and to fix the times for the declaration
and payment of dividends.
(b) To determine from time to time whether, and to what times
and places, and under what conditions the accounts and books of the
corporation (other than the stock ledger) or any of them, shall be
open to the inspection of the stockholders.
(3) The directors in their discretion may submit any contract or act
for approval or ratification at any annual meeting of the stockholders or
at any meeting of the stockholders called for the purpose of considering
any such act or contract, and any contract or act that shall be approved
or be ratified by the vote of the holders of a majority of the stock of
the corporation which is represented in person or by proxy at such meeting
and entitled to vote thereat (provided that a lawful quorum of
stockholders be there represented in person or by proxy) shall be as valid
and as binding upon the corporation and upon all the stockholders as
though it had been approved or ratified by every stockholder of the
corporation, whether or not the contract or act would otherwise be open to
legal attack because of directors' interest, or for any other reason.
(4) In addition to the powers and authorities hereinbefore or by
statute expressly conferred upon them, the directors are hereby empowered
to exercise all such powers and do all such acts and things as may be
exercised or done by the corporation; subject, nevertheless, to the
provisions of the statutes of Delaware, of this certificate, and to any
by-laws from time to time made by the stockholders; provided, however,
that no by-laws so made shall invalidate any prior act of the directors
which would have been valid if such by-law had not been made.
SEVENTH: No director shall be liable to the corporation or any of
its stockholders for monetary damages for breach of fiduciary duty as a
director. except with respect to (1) a breach of the director's duty of loyalty
to the corporation or its stockholders, (2) acts or omissions not in good faith
2
<PAGE>
or which involve intentional misconduct or a knowing violation of law. (3)
liability under Section 174 of the Delaware General Corporation Law or (4) a
transaction from which the director derived an improper personal benefit, it
being the intention of the foregoing provision to eliminate the liability of the
corporation's directors to the corporation or its stockholders to the fullest
extent permitted by Section 102(b)(7) of the Delaware General Corporation Law,
as amended from time to time. The corporation shall indemnify to the fullest
extent permitted by Sections 102(b)(7) and 145 of the Delaware General
Corporation Law, as amended from time to time, each person that such Sections
grant the corporation the power to indemnify.
EIGHTH: Whenever a compromise or arrangement is proposed between
this corporation and its creditors or any class of them and/or between this
corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware, may, on the application in a summary
way of this corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this corporation under
the provisions of Section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for this corporation under the provisions of Section 279 Title 8 of the Delaware
Code order a meeting of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this corporation, as the case may be,
to be summoned in such manner as the said court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the stockholders or class of stockholders of this
corporation, as the case maybe, agree to any compromise or arrangement and to
any reorganization of this corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall. if sanctioned by the court to which the said application has been made,
be binding on all the creditors or class of creditors, and/or on all the
stockholders or class of stockholders, of this corporation, as the case may be,
and also on this corporation.
3
<PAGE>
NINTH: The corporation reserves the right to amend, alter, change or
repeal any provision contained in this certificate of incorporation in the
manner now or hereafter prescribed by law, and all rights and powers conferred
herein on stockholders, directors and officers are subject to this reserved
power.
IN WITNESS WHEREOF, the undersigned hereby executes t s document and
affirms that the facts set forth herein are true under penalties of perjury this
fifth day of Hay. 1987,
/s/Ray A. Barr
--------------------------
Ray A. Barr, Incorporator
4
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION WORLD VENTURES, LTD.
WORLD VENTURES, LTD. , a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware. DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of World
Ventures, Ltd., resolutions were duly adopted setting forth the proposed
amendment of the Certificate of Incorporation of said corporation, declaring
said amendment to be advisable and calling a meeting of the stockholders of said
corporation for consideration thereof. The resolutions setting forth the
proposed amendments are as follows:
RESOLVED, that the Certificate of Incorporation of this
corporation be amended as follows:
1. Article FIRST of the Certificate of Incorporation relating to
the name of the corporation, is hereby amended to read as follows:
FIRST: The name of the corporation is VENTURE WORLD, LTD.
5
<PAGE>
SECOND: The amendment effected herein was authorized by the
unanimous vote of the holders of all outstanding shares entitled to vote
herein at a meeting of shareholders pursuant to Sections 222 and 242 of the
General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said WORLD VENTURES, LTD. has caused this
Certificate to be sign e d by Alan Weisberger, its President, and attested by
Moshe MiLstein, its Secretary, this 14th day of April, 1988.
WORLD VENTURES, LTD.
---------------------------
Alan Weisberger, President
ATTEST:
/s/Moshe Milstein
- ------------------
Moshe Milstein, Secretary
6
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 03/21/1996
96-0081337 212SS09
CERTIFICATE
FOR RENEWAL AND REVIVAL OF CHARTER
OF
VENTURE WORLD. LTD.
-------------------
VENTURE WORLD, LTD., a corporation organized under the laws
of Delaware, the certificate of incorporation of Which was filed In
the office of the Secretary of State on the 6th day of May. 1987,
and recorded in the office of the Recorder of. Deeds for New Castle
County. the charter of which was voided for failure to pay taxes
and penalty, now desires to procure a restoration, renewal and
revival of its charter, and hereby certifies as follows.
FIRST: The name of this corporation is:
VENTURE WORLD, LTD.
SECOND: Its registered office in the State of Delaware is
located at 25 Greystone Manor, Lewes, DE 19958, County of Sussex.
The name its registered agent is Harvard Business Services, Inc.
THIRD: The date when the restoration, renewal, and revival
of the charter of this company is to commence is the Twenty-ninth
day of February, 1992 same being prior to the date of the expiration
of the charier. This renewal and revival of the charter of this
corporation is to be perpetual.
FOURTH: This corporation was duly organized and carried on
the business authorized by Its charter until the First day of March
A.D. 1992, at which time its charter became inoperative and void for
failure to pay taxes and penalty, and this certificate for renewal
and revival is filed by authority of the duly elected directors of
the corporation in accordance with the laws of the State of
Delaware.
IN TESTIMONY WHEREOF, and in compliance with the provisions
of Section 312 of the General Corporation Law of the State of
Delaware, as amended, providing for the renewal, extension and
restoration of charters, ___________________________, the Authorized
Officer VENTURE WORLD. LTD.. have hereunto signed to this
certificate this 11th day of March, 1996.
BY: ______________________________
Authorized Officer (title) Pres.
BY: ______________________________
Secretary
7
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
VENTURE WORLD, LTD.
Venture World Ltd. a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
1. That the Board of Directors of Venture World, Ltd. duly adopted resolutions
setting forth proposed amendments of the Certificate of Incorporation of said
corporation, declaring said amendments to be advisable and taking action of the
stockholders of said corporation for consideration thereof. The resolution
setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this corporation be
amended by changing the Article thereof numbered "FIRST". so that, as amended
said Article shall be and read as follows:
FIRST: The name of the corporation is NetAmerica International
Corporation. 2. That said amendments were duly adopted by the
shareholder vote in accordance with the provisions of Section 211 and
242 of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Venture World Ltd. Has caused this certificate
to be signed by Its Authorized Officer this 23rd day of September 1998.
By: /s/Gregory Martin
-----------------
Gregory Martin
President & CEO
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 11:15 AM 1010511998
981 386nild - 2125-WO
8
<PAGE>
CERTIFICATE OF AMENDMENT
TO THE CERTIFICATE OF INCORPORATION
OF
NetAmerica International Corporation
NetAmerica International Corporation, a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware:
DOES HEREBY CERTIFY:
1. That the Board of Directors of NetAmerica International
Corporation duly adopted resolutions setting forth proposed
amendment of the Certificate of incorporation of said corporation,
declaring said amendment to be advisable and taking action of the
stockholders of said corporation for. consideration thereof. The
resolution setting forth the proposed amendment is as follow:
FIRST- The name of the corporation is NetAmerica.com.
Corporation
2. That said amendments were duly adopted by shareholder
consent in accordance with the provisions of Sections 229 and 242
of the General Corporation Laws of the State of Delaware.
IN WITNESS HEREOF, said NetArnerica International
Corporation has caused this Certificate to be signed by its
authorized officer this 13th day of April, 1999.
By:/s/Douglas Cole
---------------
Douglas Cole
Chairman
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 0411311999
991145832 - 2125509
9
<PAGE>
NOTARY CERTIFICATE
State of Utah
SS.
County of Salt Lake
On the 13th day of April, 1999, Douglas D. Cole
personally appeared before me, a Notary Public, who acknowledged
that he executed the foregoing Articles of Amendment on behalf of
the above entity.
/s/Jennifer L. Clark
----------------------
Jennifer L. Clark
Notary Public
My Commission Expires: 7/1/02
NOTARY PUBLIC
JENNIFER L. CLARK
4606 SO. WASATCH BLVD.330
Salt Lake City, UT 84124
My Commission Expires
July 1, 2002
STATE OF UTAH
[Notary Seal]
10
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
NetAmerica.com Corporation
NetAmerica.com Corporation, a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware.
DOES HEREBY CERTIFY:
1. That the Board of Directors of NetAmerica.com
Corporation. duly adopted resolutions setdng forth proposed
amendment of the Certificate of Incorporation of said corporation,
declaring said amendments to be advisable and taking action of the
stockholders of said corporation for consideration thereof. The
resolution setting forth the proposed amendment is as follows:
FIRST:The name of the corporation is Telenisus Corporation.
2. That said amendments were duly adopted by shareholder
consent in accordance with the provisions of Section 228 and 242 of
the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, said Telenisus Corporation. Has caused
this certificate to be signed by its authorized officer this 6th
day of May 1999.
By:/s/Douglas D. Cole
------------------
Douglas Cole
Chairman
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 0510611999
991181409 - 2125509
11
<PAGE>
NOTARY CERTIFICATE
State of Utah
SS.
County of Salt Lake
On the 6th day of May 1999, Douglas D. Cole Personally
appeared before me, a Notary Public, who acknowledged that he
executed the foregoing Articles of Amendment on behalf of the above
entity.
NOTARY PUBLIC /s/Jennifer L. Clark
JENNIFER L. CLARK --------------------
4606 SO. WASATCH BLVD.330 Jennifer L. Clark
Salt Lake City, UT 84124 Notary Public
My Commission Expires
July 1, 2002 My Commission Expires: 7/1/02
STATE OF UTAH
12
<PAGE>
STATE OF DELAWARE
SECRETARY OF STATE
DIVISION OF CORPORATIONS
FILED 09:00 AM 0511811999
991197502 - 2125509
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
Telenisus Corporation
Telenisus Corporation, a corporation organized and existing
under and by virtue of the General Corporation Law of the State of
Delaware,
DOES HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of Telenisus
Corporation resolutions were duly adopted setting forth a proposed
amendment of the Certificate of incorporation of said corporation,
declaring said amendment to be advisable and calling a meeting of the
stockholders of said corporation for consideration thereof The
resolution setting forth the proposed amendment is as follows:
RESOLVED, that the Certificate of Incorporation of this
corporation be amended by changing the Article thereof numbered "FIRST"
so that, as amended said Article shall be and read as follows:
FIRST: The name of the corporation is NetAmerica.com Corporation
SECOND: That thereafter, pursuant to resolution of its Board of
Directors, a special meeting of the stockholders of said corporation
was duly called and held, upon notice in accordance with Section 222 of
the General Corporation law of the State of Delaware at which meeting
the necessary number of shares as required by statute were voted in
favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with
the provisions of Section 242 of the General Corporation Law of the
State of Delaware.
IN WITNESS WHEREOF, said Telenisus Corporation has caused this
certificate to be signed by its Authorized Officer this 18th day of
May, 1999.
By:/s/Gordon E. Reichard Jr.
-------------------------
Name: Gordon E. Reichard, Jr.
Title: President and CEO
Authorized Officer
13
B Y L A W S
Amended and Restated
O F
NETAMERICA.COM CORPORATION
A Delaware Corporation
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
ARTICLE I
<S> <C>
Offices.............................................................................................1
Section 1.01. Offices.....................................................................1
ARTICLE II
Shares..............................................................................................1
Section 2.01. Shares......................................................................1
ARTICLE III
Preemptive Rights...................................................................................1
Section 3.01. Preemptive Rights...........................................................1
ARTICLE IV
Perpetual Existence.................................................................................2
Section 4.01. Perpetual Existence.........................................................2
ARTICLE V
Non-Liability of Shareholders.......................................................................2
Section 5.01. Non-Liability of Shareholders...............................................2
ARTICLE VI
Meeting of Shareholders.............................................................................2
Section 6.01. Place of Meeting............................................................2
Section 6.02. Annual Meeting..............................................................2
Section 6.03. Special Meetings............................................................3
Section 6.04. Notice of Meetings..........................................................3
Section 6.05. Quorum, Manner of Acting and Adjournment....................................3
Section 6.06 Election Inspectors.........................................................4
Section 6.07. Organization................................................................4
Section 6.08. Voting; Proxies.............................................................4
Section 6.09. Voting Lists................................................................5
Section 6.10. Consent of Shareholders in Lieu of Meeting..................................5
ARTICLE VII
Board of Directors..................................................................................5
Section 7.01. Powers......................................................................5
Section 7.02. Number, Term of Office and Qualification....................................6
Section 7.03. Nomination of Directors.....................................................6
Section 7.04. Vacancies...................................................................6
Section 7.05. Removal of Directors by Stockholders........................................6
Section 7.06. Resignations................................................................7
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Section 7.07. Organization................................................................7
Section 7.08. Place of Meeting............................................................7
Section 7.09. Regular Meetings............................................................7
Section 7.10. Special Meetings............................................................7
Section 7.11. Quorum, Manner of Acting and Adjournment....................................7
Section 7.12. Action by Unanimous Written Consent.........................................7
Section 7.13. Interested Directors or Officers............................................8
Section 7.14. Compensation................................................................8
Section 7.15. Committees..................................................................8
ARTICLE VIII
Notices - Waivers - Meetings........................................................................9
Section 8.01. What Constitutes Notice.....................................................9
Section 8.02. Waivers of Notice..........................................................10
Section 8.03. Conference Telephone Meetings..............................................10
ARTICLE IX
Officers...........................................................................................10
Section 9.01. Number, Qualifications and Designation.....................................10
Section 9.02. Election and Term of Office................................................10
Section 9.03. Subordinate Officers, Committees and Agents................................10
Section 9.04. Resignations...............................................................11
Section 9.05. Removal....................................................................11
Section 9.06. Vacancies..................................................................11
Section 9.07. General Powers.............................................................11
Section 9.08. The President..............................................................11
Section 9.09. The Chairman...............................................................12
Section 9.10. The Vice Presidents........................................................12
Section 9.11. The Secretary..............................................................12
Section 9.12. The Treasurer..............................................................12
Section 9.13. Officer's Bonds............................................................12
Section 9.14. Compensation...............................................................13
ARTICLE X
Certificates of Stock, Transfer, Etc...............................................................13
Section 10.01. Issuance..................................................................13
Section 10.02. Transfer..................................................................13
Section 10.03. Stock Certificates........................................................13
Section 10.04. Lost, Stolen, Destroyed, or Mutilated Certificates........................13
Section 10.05. Record Holder of Shares...................................................14
Section 10.06. Determination of Shareholders of Record...................................14
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ARTICLE XI
<S> <C>
Indemnification of Directors, Officers, Etc........................................................14
Section 11.01. Directors and Officers; Third Party Actions...............................14
Section 11.02. Directors and Officers; Derivative Actions................................15
Section 11.03. Employees and Agents......................................................15
Section 11.04. Procedure for Effecting Indemnification...................................16
Section 11.05. Advancing Expenses........................................................16
Section 11.06. Scope of Article..........................................................17
ARTICLE XII
Insurance..........................................................................................17
Section 12.01. Insurance Against Liability Asserted Against Directors,
Officers, Etc....................................................................17
ARTICLE XIII
Miscellaneous......................................................................................17
Section 13.01. Corporate Seal............................................................17
Section 13.02. Checks....................................................................17
Section 13.03. Contracts.................................................................18
Section 13.04. Inspection................................................................18
Section 13.05. Fiscal Year...............................................................18
Section 13.06. Distributions.............................................................18
ARTICLE XIV
Amendments.........................................................................................18
Section 14.01. Amendments................................................................18
</TABLE>
<PAGE>
AMENDED AND RESTATED
BYLAWS
OF
NETAMERICA.COM CORPORATION
ARTICLE I
Offices
Section 1.01. Offices. The corporation may have offices at such places
within or without the State of Delaware as the Board of Directors may from time
to time determine or the business of the corporation may require, provided that
the corporation maintains a registered office within the State of Delaware.
ARTICLE II
Shares
Section 2.01. Shares. The Board of Directors shall have authority to
authorize the issuance, from time to time without any vote or other action by
the shareholders, of any or all shares of stock of the corporation of any class
at any time authorized, and any securities convertible into or exchangeable for
any such shares, in each case to such persons and for such consideration, and on
such terms as the Board of Directors from time to time in its discretion
lawfully may determine. Shares so issued, for which the consideration has been
paid to the corporation, shall be fully paid stock and the holders of such stock
shall not be liable for any further call or assessment thereon.
ARTICLE III
Preemptive Rights
Section 3.01. Preemptive Rights. No common shareholder of this corporation
shall by reason of such shareholder holding common shares of any class have any
preemptive or preferential rights of purchase to subscribe to any shares of any
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<PAGE>
class of this corporation, now or hereafter to be authorized, or any notes,
debentures, bonds or other securities convertible into or carrying options or
warrants to purchase shares of any class, now or hereafter to be authorized,
whether or not the issuance of any such shares, or such notes, debentures, bonds
or other securities, would adversely affect the dividend or voting rights of
such shareholder, other than such rights, if any, as the Board of Directors, in
its discretion from time to time, may grant and at such price as the Board of
Directors in its discretion may fix; and the Board of Directors may issue shares
of any class of this corporation, or any notes, debentures, bonds, or other
securities convertible into or carrying options or warrants to purchase shares
of any class, without offering any such shares of any class, either in whole or
in part, to the existing shareholders of any class.
ARTICLE IV
Perpetual Existence
Section 4.01. Perpetual Existence. The corporation is to have perpetual
existence.
ARTICLE V
Non-Liability of Shareholders
Section 5.01. Non-Liability of Shareholders. The private property of
the shareholders shall not be subject to the payment of corporate debts to any
extent whatsoever.
ARTICLE VI
Meeting of Shareholders
Section 6.01. Place of Meeting. All meetings of the shareholders of the
Corporation shall be held at such place within or without the State of Delaware
as shall be designated by the Board of Directors in the notice of such meeting.
Section 6.02. Annual Meeting. The Board of Directors may fix the date
and time of the annual meeting of the shareholders, but if no such date and time
is fixed by the Board of Directors, the meeting for any calendar year shall be
held on the second Tuesday of June, if not a legal holiday, and if a legal
holiday, then on the next succeeding day which is not a legal holiday. At the
2
<PAGE>
annual meeting, the shareholders then entitled to vote shall elect by written
ballot directors and shall transact such other business as may properly be
brought before the meeting.
Section 6.03. Special Meetings. Except as provided in the corporation's
Certificate of Incorporation, special meetings of the shareholders of the
corporation for any purpose or purposes for which meetings may lawfully be
called, may be called at any time for any purpose or purposes by the Board of
Directors or by any person or committee expressly so authorized by the Board of
Directors and by no other person or persons. At any time, upon written request
of any person or persons who have duly called a special meeting, which written
request shall state the purpose or purposes of the meeting, it shall be the duty
of the Secretary to fix the date of the meeting to be held at such date and time
as the Secretary may fix, not less than ten (10) nor more than sixty (60) days
after the receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the time and date of such meeting and
give notice thereof, the person or persons calling the meeting may do so.
Section 6.04. Notice of Meetings. Written notice of the place, date and
hour of every meeting of the shareholders, whether annual or special, shall be
given not less than ten (10) nor more than sixty (60) days before the date of
the meeting to each shareholder of record entitled to vote at the meeting. Every
notice of a special meeting shall state the purpose or purposes thereof.
Section 6.05. Quorum, Manner of Acting and Adjournment. The holders of
a majority of the stock issued and outstanding (not including treasury stock)
and entitled to vote at a meeting of the shareholders, present in person or
represented by proxy, shall constitute a quorum at all meetings of the
shareholders for the transaction of business except as otherwise provided by
statute, by the Certificate of Incorporation or by these Bylaws. If, however, a
quorum shall not be present or represented at any meeting of the shareholders,
the shareholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcement at the meeting, until a quorum shall be present or
represented. At any such adjourned meeting, at which a quorum shall be present
or represented, any business may be transacted which might have been transacted
at the meeting as originally noticed. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, a notice of the adjourned meeting shall be given to each
shareholder of record entitled to vote at the meeting. When a quorum is present
at any meeting, the vote of the holders of the majority of the stock having
voting power present in person or represented by proxy shall decide any
questions brought before such meeting, unless the question is one upon which, by
express provision of the applicable statute, the Certificate of Incorporation or
these Bylaws, a different vote is required, in which case such express provision
3
<PAGE>
shall govern and control the decision of such question. Except upon those
questions governed by the aforesaid express provisions, the shareholders present
in person or by proxy at a duly organized meeting can continue to do business
until adjournment, notwithstanding withdrawal of enough shareholders to leave
less than a quorum.
Section 6.06 Election Inspectors. The Board of Directors, in advance of
any meeting of the stockholders, may appoint an election inspector or inspectors
to act at such meeting (and at any adjournment thereof). If an election
inspector or inspectors are not so appointed, the chairman of the meeting may,
or upon request of any person entitled to vote at the meeting will, make such
appointment. If any person appointed as an inspector fails to appear or to act,
a substitute may be appointed by the chairman of the meeting. If appointed, the
election inspector or inspectors (acting through a majority of them if there be
more than one) will determine the number of shares outstanding, the
authenticity, validity, and effect of proxies, the credentials of persons
purporting to be stockholders or persons named or referred to in proxies, and
the number of shares represented at the meeting in person and by proxy; will
receive and count votes, ballots, and consents and announce the results thereof;
will hear and determine all challenges and questions pertaining to proxies and
voting; and, in general, will perform such acts as may be proper to conduct
elections and voting with complete fairness to all stockholders. No such
election inspector need be a stockholder of the corporation.
Section 6.07. Organization. At every meeting of the shareholders, the
President, or in the case of vacancy in office or absence of the President, such
person as may be designated by the Board of Directors, shall act as Chairman of
such meeting, and the Secretary, or, in the Secretary's absence, an assistant
secretary, or in the absence of both the Secretary and the assistant
secretaries, a person appointed by the Chairman of the Meeting shall act as
Secretary.
Section 6.08. Voting; Proxies. Each shareholder shall at every meeting
of the shareholders be entitled to one vote in person or by proxy for each share
of common stock registered in such shareholder's name on the books of the
corporation on the record date for such meeting. All elections of directors
shall be by written ballot, unless waived by the shareholders present or unless
action is taken pursuant to Section 6.10 of the Bylaws. The vote upon any other
matter need not be by ballot. No proxy shall be voted after three (3) years from
its date, unless the proxy provides for a longer period. Every proxy shall be
executed in writing by the shareholder or by such shareholder's duly authorized
attorney-in-fact and filed with the Secretary of the corporation. A proxy,
unless coupled with an interest, shall be revocable at will, notwithstanding any
other agreement or any provisions in the proxy to the contrary, but the
revocation of a proxy shall not be effective until notice thereof has been given
to the Secretary of the corporation. A duly executed proxy shall be irrevocable
if it states that it is irrevocable and if, and only as long as, it is coupled
with an interest sufficient in law to support an irrevocable power. A proxy may
4
<PAGE>
be made irrevocable regardless of whether the interest with which it is coupled
is an interest in the stock itself or an interest in the corporation generally.
A proxy shall not be revoked by the death or incapacity of the maker unless,
before the vote is counted or the authority is exercised, written notice of such
death or incapacity is given to the Secretary of the corporation. A facsimile
appearing to have been transmitted by a stockholder or by such stockholder's
duly authorized attorney-in-fact may be accepted as a sufficiently written and
executed proxy.
Section 6.09. Voting Lists. The officer who has charge of the stock
ledger of the corporation shall prepare, at least ten (10) days before every
meeting of shareholders, a complete list of the shareholders entitled to vote at
the meeting. The list shall be arranged in alphabetical order showing the
address of each shareholder and the number of shares registered in the name of
each shareholder. Such list shall be open to the examination of any shareholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting either at a place within
the city where the meeting is to be held, which place shall be specified in the
notice of the meeting, or, if not so specified, at the place where the meeting
is to be held. The list shall also be produced and kept at the time and place of
the meeting during the whole time thereof, and may be inspected by any
shareholder who is present. Except as otherwise provided by law, failure to
comply with this section shall not affect the validity of any action taken at
the meeting.
Section 6.10. Consent of Shareholders in Lieu of Meeting. Unless
otherwise provided in the Certificate of Incorporation, any action required by
law to be taken at any annual or special meeting of shareholders of the
corporation, or any action which may be taken at any annual or special meeting
of such shareholders, may be taken without a meeting, without prior notice and
without a vote, if a consent in writing, setting forth the action so taken,
shall be signed by the holders of outstanding stock having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted. Prompt notice of the taking of the corporate action without a meeting by
less than unanimous written consent shall be given to those shareholders who
have not consented in writing.
ARTICLE VII
Board of Directors
Section 7.01. Powers. The management of the corporation shall be under the
direction of the Board of Directors; and all powers of the corporation, except
those specifically reserved or granted to the shareholders by statute, the
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Certificate of Incorporation or these Bylaws, are hereby granted to and vested
in the Board of Directors.
Section 7.02. Number, Term of Office and Qualification. The Board of
Directors shall consist of such number of directors, not less than three (3) or
more than nine (9), as may be determined from time to time by the Board of
Directors subject to the provisions of the Certificate of Incorporation. The
term of each director shall be for one year from the date of such director's
election; however, each director shall serve until such director's successor
shall have been duly elected and qualified, unless such director shall resign,
become disqualified, disabled or shall otherwise be removed. At each annual
election, the directors chosen to succeed those whose terms then expire shall be
for the same term as the directors they succeed.
Section 7.03. Nomination of Directors. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors of the corporation, except as may be otherwise provided in the
Certificate of Incorporation. Nominations of persons for election to the Board
of Directors, or at any Special Meeting of shareholders called for the purpose
of electing directors, may be made (a) by or at the direction of the Board of
Directors (or any duly authorized committee thereof), or (b) by any shareholder
of the corporation who is a shareholder of record on the date of the giving of
the notice provided for herein and on the record date for the determination of
shareholders entitled to vote at such meeting.
Section 7.04. Vacancies. Vacancies and newly created directorships
resulting from any increase in the authorized number of directors may be filled
by a majority of the directors then in office, though less than a quorum, or by
a sole remaining director, and the director so chosen shall hold office until
such director's successor shall have been duly elected and qualified unless such
director shall resign, become disqualified, disabled or shall otherwise be
removed. If there are no directors in office, then an election of directors may
be held in the manner provided by statute. If, at the time of filling any
vacancy or any newly created directorship, the directors then in office shall
constitute less than a majority of the whole Board of Directors (as constituted
immediately prior to any such increase), the Court of Chancery may, upon
application of any shareholder or shareholders holding at least ten percent
(10%) of the total number of the shares at the time outstanding having the right
to vote for such directors, summarily order an election to be held to fill any
such vacancies or newly created directorships, or to replace the directors
chosen by the directors then in office.
Section 7.05. Removal of Directors by Stockholders. Except as limited
by the Certificate of Incorporation or by law, any director or the entire Board
of Directors may be removed, with or without cause, by the holders of a majority
of the shares entitled to vote at an election of directors.
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Section 7.06. Resignations. Any director of the corporation may resign
at any time by giving written notice to the Chairman of the Board or the
Secretary of the corporation. Such resignation shall take effect at the date of
the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 7.07. Organization. At every meeting of the Board of Directors,
the Chairman of the Board, if there be one, or, in the case of a vacancy in the
office or absence of the Chairman of the Board, one of the following officers
present in the order stated: the President; the Vice President; or a Chairman
chosen by a majority of the directors present, shall preside, and the Secretary,
or, in the Secretary's absence, an Assistant Secretary, or in the absence of the
Secretary and the Assistant Secretaries, any person appointed by the Chairman of
the meeting, shall act as Secretary.
Section 7.08. Place of Meeting. The Board of Directors may hold its
meetings, both regular and special, at such place or places within or without
the State of Delaware as the Chairman of the Board or the Board of Directors may
from time to time determine, or as may be designated in the notice calling the
meeting.
Section 7.09. Regular Meetings. Regular meetings of the Board of
Directors shall be held without notice at such time and at such place as shall
be determined from time to time by the Board of Directors.
Section 7.10. Special Meetings. Special meetings of the Board of
Directors shall be held whenever called by the Chairman of the Board of
Directors, the President or on the written request of three (3) or more of the
directors. Notice of each such meeting shall be given to each director in
writing, or by telephone or in person, at least twenty-four (24) hours before
the time at which the meeting is to be held. Each such notice shall state the
time and place of the meeting to be so held.
Section 7.11. Quorum, Manner of Acting and Adjournment. At all meetings
of the Board of Directors a majority of the total number of directors shall
constitute a quorum for the transaction of business and the act of a majority of
the directors present at any meeting at which there is a quorum shall be the act
of the Board of Directors, except as may be otherwise specifically provided by
statute or by the Certificate of Incorporation. If a quorum shall not be present
at any meeting of the Board of Directors, the directors present thereat may
adjourn the meeting from time to time, without notice other than announcement at
the meeting, until a quorum shall be present.
Section 7.12. Action by Unanimous Written Consent. Unless otherwise
restricted by the Certificate of Incorporation or these Bylaws, any action
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required or permitted to be taken at any meeting of the Board of Directors or of
any committee thereof may be taken without a meeting, if all members of the
Board or committee, as the case may be, consent thereto in writing, and the
writing or writings are filed with the minutes of proceedings of the Board or
committee as the case may be.
Section 7.13. Interested Directors or Officers. No contract or
transaction between the corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board or committee thereof
which authorized the contract or transaction, or solely because such director's
or officer's votes are counted for such purpose, if:
(1) The material facts as to such director's or officer's
relationship or interest and as to the contract or
transaction are disclosed or are known to the Board
of Directors or the committee, and the Board or
committee in good faith authorizes the contract or
transaction by the affirmative votes of a majority of
the disinterested directors, even though the
disinterested directors be less than a quorum; or
(2) The material facts as to such director's or officer's
relationship or interest and as to the contract or
transaction are disclosed or are known to the
shareholders entitled to vote thereon, and the
contract or transaction is specifically approved in
good faith by vote of the shareholders; or
(3) The contract or transaction is fair as to the
corporation as of the time it is authorized, approved
or ratified by the Board of Directors, a committee
thereof, or the shareholders.
Common or interested directors may be counted in determining the presence of a
quorum at a meeting of the Board of Directors or of a committee which authorizes
the contract or transaction.
Section 7.14. Compensation. Each director who is not also an employee
of the corporation or any subsidiary thereof shall be paid such compensation for
such director's services and shall be reimbursed for such expenses as may be
fixed by the Board of Directors.
Section 7.15. Committees. The Board of Directors may, by resolution
passed by a majority of the whole Board of Directors, designate one or more
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committees, each committee to consist of one or more of the directors of the
corporation. The Board of Directors may designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee. In the absence or disqualification of a
member of a committee, the member or members thereof present at any meeting and
not disqualified from voting, whether or not they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent provided in the resolution of the Board of Directors, shall have
and may exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it; but no
such committee shall have power or authority in reference to amending the
certificate of incorporation, adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
shareholders a dissolution of the corporation or a revocation of dissolution,
removing or indemnifying directors or amending these Bylaws; and unless the
resolution expressly so provides, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Unless
the Board of Directors otherwise provides, each committee may adopt, amend and
repeal rules for the conduct of its business. In the absence of a provision by
the Board of Directors or a provision in the rules of such committee to the
contrary, a majority of the entire authorized number of members of such
committee shall constitute a quorum for the transaction of business, the vote of
a majority of the members present at a meeting at the time of such vote if a
quorum is present shall be the act of such committee, and in other respects each
committee shall conduct its business in the same manner as the Board of
Directors conducts its business.
ARTICLE VIII
Notices - Waivers - Meetings
Section 8.01. What Constitutes Notice. Whenever, under the provisions
of the statutes or of the Certificate of Incorporation or of these Bylaws,
written notice is required to be given to any director or shareholder, such
notice may be given to such person, either personally or by sending a copy
thereof through the mail, by telegraph, by private delivery service, or by
facsimile transmission, charges prepaid, to such person's address appearing on
the books of the corporation. If the notice is sent by mail, by telegraph or by
private delivery service, it shall be deemed to have been given to the person
entitled thereto when deposited in the United States mail or with a telegraph
office or private delivery service for transmission to such person. If the
notice is sent by facsimile transmission, it shall be deemed to have been given
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upon transmission, if transmission occurs before 12:00 noon at the place of
receipt, and upon the day following transmission, if transmission occurs after
12:00 noon.
Section 8.02. Waivers of Notice. Whenever any written notice is
required to be given under the provisions of the Certificate of Incorporation,
these Bylaws, or by statute, a waiver thereof in writing, signed by the person
or persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the giving of such notice. Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the shareholders, directors, or members of a committee of directors need be
specified in any written waiver of notice of such meeting. Attendance of a
person, either in person or by proxy, at any meeting, shall constitute a waiver
of notice of such meeting, except when a person attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened.
Section 8.03. Conference Telephone Meetings. One or more directors may
participate in a meeting of the Board, or of a committee of the Board, by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other. Participation in a
meeting pursuant to this Section shall constitute presence in person at such
meeting.
ARTICLE IX
Officers
Section 9.01. Number, Qualifications and Designation. The officers of
the corporation shall be chosen by the Board of Directors and shall be a
President, a Secretary, a Treasurer, and such other officers as may be elected
in accordance with the provisions of Section 9.03 of this Article. One person
may hold more than one office. Officers may be, but need not be, directors or
shareholders of the corporation.
Section 9.02. Election and Term of Office. The officers of the
corporation, except those elected by delegated authority pursuant to Section
9.03 of this Article, shall be elected annually by the Board of Directors, and
each such officer shall hold such officer's office until such officer's
successor shall have been elected and qualified, or until such officer's earlier
resignation or removal.
Section 9.03. Subordinate Officers, Committees and Agents. The Board of
Directors may from time to time, elect such other officers, employees or other
agents as it deems necessary, who shall hold their offices for such terms and
shall exercise such powers and perform such duties as are provided in these
Bylaws, or as the Board of Directors may from time to time determine. The Board
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of Directors may delegate to any officer or committee the power to elect
subordinate officers and to retain or appoint employees or other agents, or
committees thereof, and to prescribe the authority and duties of such
subordinate officers, committees, employees or other agents.
Section 9.04. Resignations. Any officer or agent may resign at any time
by giving written notice to the Board of Directors, or to the President or the
Secretary of the corporation. Any such resignation shall take effect at the date
of the receipt of such notice or at any later time specified therein and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 9.05. Removal. Any officer, committee, employee or other agent
of the corporation may be removed, either for or without cause, by the Board of
Directors or other authority which elected or appointed such officer, committee
or other agent whenever in the judgment of such authority the best interests of
the corporation will be served thereby.
Section 9.06. Vacancies. A vacancy in any office because of death,
resignation, removal, disqualification, or any other cause, shall be filled by
the Board of Directors or by the officer or committee to which the power to fill
such officer has been delegated pursuant to Section 9.03 of this Article, as the
case may be, and if the office is one for which these Bylaws prescribe a term,
shall be filled for the unexpired portion of the term.
Section 9.07. General Powers. All officers of the corporation, as
between themselves and the corporation, shall, respectively, have such authority
and perform such duties in the management of the property and affairs of the
corporation as may be determined by these Bylaws, or in the absence of
controlling provisions in the Bylaws, as may be provided by resolution of the
Board of Directors.
Section 9.08. The President. The President shall, subject to the
control of the Board of Directors, have general and active supervision of the
affairs, business, officers and employees of the corporation. The President
shall have authority to sign, execute, and acknowledge, in the name of the
corporation deeds, mortgages, bonds, contracts or other instruments, authorized
by the Board of Directors, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors, or these Bylaws,
to some other officer or agent of the corporation. The President shall, from
time to time, in the President's discretion or at the order of the Board, submit
to the Board reports of the operations and affairs of the corporation. The
President shall also perform such other duties and have such other powers as may
be assigned to the President from time to time by the Board of Directors.
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Section 9.09. The Chairman. The Chairman of the Board shall preside at
all meetings of the shareholders and of the Board of Directors, and shall
perform such other duties as may from time to time be assigned to the Chairman
by the Board of Directors.
Section 9.10. The Vice Presidents. The corporation may have one or more
Vice Presidents, having such duties as from time to time may be determined by
the Board of Directors or by the President.
Section 9.11. The Secretary. The Secretary shall keep full minutes of
all meetings of the shareholders and of the Board of Directors; shall be ex
officio Secretary of the Board of Directors; shall attend all meetings of the
shareholders and of the Board of Directors; shall record all the votes of the
shareholders and of the directors and the minutes of the meetings of the
shareholders and of the Board of Directors and of committees of the Board in a
book or books to be kept for that purpose. The Secretary shall give, or cause to
be given, notices of all meetings of the shareholders of the corporation and of
the Board of Directors; shall be the custodian of the seal of the corporation
and see that it is affixed to all documents to be executed on behalf of the
company under its seal; shall have responsibility for the custody and
safekeeping of all permanent records and other documents of the corporation;
and, in general, shall perform all duties incident to the office of Secretary
and such other duties as may be prescribed by the Board of Directors or by the
President, under whose supervision the Secretary shall be. The Board of
Directors may elect one or more Assistant Secretaries to perform such duties as
shall from time to time be assigned to them by the Board of Directors or the
President.
Section 9.12. The Treasurer. The Treasurer shall have or provide for
the custody of all funds, securities and other property of the corporation;
shall collect and receive or provide for the collection or receipt of money
earned by or in any manner due to or received by the corporation; shall deposit
or cause to be deposited all said moneys in such banks or other depositories as
the Board of Directors may from time to time designate; shall make disbursements
of corporate funds upon appropriate vouchers; shall keep full and accurate
accounts of transactions of the Treasurer's office in books belonging to the
corporation; shall, whenever so required by the Board of Directors, render an
accounting showing the Treasurer's transactions as Treasurer, and the financial
condition of the corporation; and, in general, shall discharge any other duties
as may from time to time be assigned to the Treasurer by the Board of Directors.
The Board of Directors may elect one or more Assistant Treasurers to perform the
duties of the Treasurer as shall from time to time be assigned to them by the
Board of Directors or the Treasurer.
Section 9.13. Officer's Bonds. Any officer shall give a bond for the
faithful discharge of such officer's duties in such sum, if any, and with such
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surety or sureties as the Board of Directors shall require. The corporation may
obtain such bonds at its expense as the Board of Directors shall require.
Section 9.14. Compensation. The compensation of the officers and agents
of the corporation shall be fixed from time to time by the Board of Directors or
by such committee as may be designated by the Board of Directors to fix salaries
or other compensation of officers.
ARTICLE X
Certificates of Stock, Transfer, Etc.
Section 10.01. Issuance. The certificates for stock of the corporation
shall be numbered and registered in the stock ledger and transfer books or
equivalent records of the corporation as they are issued. They shall be signed
by the President, or a Vice President, and by the Secretary or an Assistant
Secretary or the Treasurer or an Assistant Treasurer, and may bear the corporate
seal, which may be a facsimile, engraved or printed. Any of or all the
signatures upon such certificate may be a facsimile, engraved or printed if such
certificate of stock is signed or countersigned by a transfer agent or by a
registrar. In case any officer, transfer agent or registrar who has signed, or
whose facsimile signature has been placed upon any share certificate shall have
ceased to be such officer, transfer agent or registrar before the certificate is
issued, it may be issued with the same effect as if such officer, transfer agent
or registrar were such officer, transfer agent or registrar at the date of its
issue.
Section 10.02. Transfer. Transfers of shares of stock of the
corporation shall be made on the books of the corporation upon surrender of the
certificates therefor, endorsed by the person named in the certificate or by
attorney lawfully constituted in writing. No transfer shall be made inconsistent
with the provisions of the Uniform Commercial Code, or the General Corporation
Law of Delaware, and any amendments and supplements thereto.
Section 10.03. Stock Certificates. Stock certificates of the
corporation shall be in such form as provided by statute and approved by the
Board of Directors. The stock record books and the blank stock certificate books
shall be kept by the Secretary or by any agency designated by the Board of
Directors for that purpose.
Section 10.04. Lost, Stolen, Destroyed, or Mutilated Certificates. The
Board of Directors may direct a new certificate or certificates to be issued in
place of any certificate or certificates theretofore issued by the corporation
alleged to have been lost, stolen or destroyed, upon the making of an affidavit
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of the fact by the person claiming the certificate of stock to be lost, stolen
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost, stolen or destroyed
certificate or certificates, or such owner's legal representative, to give the
corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the corporation with respect to the certificate alleged
to have been lost, stolen or destroyed.
Section 10.05. Record Holder of Shares. The corporation shall be
entitled to recognize the exclusive right of a person registered on its books as
the owner of shares to receive dividends, and to vote as such owner, and to hold
liable for calls and assessments a person registered on it books as the owner of
shares, and shall not be bound to recognize any equitable or other claim to or
interest in such share or shares on the part of any other person, whether or not
it shall have express or other notice thereof, except as otherwise provided by
the laws of Delaware.
Section 10.06. Determination of Shareholders of Record. In order that
the corporation may determine the shareholders entitled to notice of or to vote
at any meeting of shareholders or any adjournment thereof, or entitled to
receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change, conversion
or exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix, in advance, a record date, which shall not be more than sixty
(60) nor less than ten (10) days before the date of such meeting, nor more than
sixty (60) days prior to any other action. If no record date is fixed by the
Board of Directors, the record date for the determination of stockholders shall
be as provided in the General Corporation Law of Delaware.
A determination of shareholders of record entitled to notice of or to vote at a
meeting of shareholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE XI
Indemnification of Directors, Officers, Etc.
Section 11.01. Directors and Officers; Third Party Actions. To the
fullest extent of Delaware law, the corporation shall indemnify any director or
officer of the corporation who was or is a party or is threatened to be made a
party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation) by reason of the fact such director or
officer is or was an authorized representative of the corporation (which, for
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the purposes of this Article and Article XII of these Bylaws, shall mean a
director, officer, employee or agent of the corporation, or a person who is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise) for, from and against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by such director or officer in connection with such action, suit or proceeding
if such director or officer acted in good faith and in a manner such director or
officer reasonably believed to be in, or not opposed to, the best interests of
the corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such director's or officer's conduct was unlawful.
The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which such director or officer reasonably believed to be
in, or not opposed to, the best interests of the corporation, and, with respect
to any criminal action or proceeding, had reasonable cause to believe that such
director's or officer's conduct was unlawful.
Section 11.02. Directors and Officers; Derivative Actions. The
corporation shall indemnify any director or officer of the corporation who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such director or officer is or
was an authorized representative of the corporation, for, from and against
expenses (including attorneys' fees) actually and reasonably incurred by such
director or officer in connection with the defense or settlement of such action
or suit if such director or officer acted in good faith and in a manner
reasonably believed to be in, or not opposed to, the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable for negligence or misconduct in the performance of such director's or
officer's duty to the corporation unless and only to the extent that the Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other courts shall deem proper.
Section 11.03. Employees and Agents. To the extent that an authorized
representative of the company who neither was nor is a director or officer of
the corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 11.01 and 11.02 of this
Article or in defense of any claim, issue or matter therein, such representative
shall be indemnified by the corporation for, from and against expenses
(including attorneys' fees) actually and reasonably incurred by such authorized
representative in connection therewith. Such an authorized representative may,
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at the discretion of the Board of Directors, be indemnified by the corporation
in any other circumstances to any extent if the corporation would be required by
Sections 11.01 and 11.02 of this Article to indemnify such person in such
circumstances to such extent if such authorized representative were or had been
a director or officer of the corporation.
Section 11.04. Procedure for Effecting Indemnification. Indemnification
under Section 11.01, 11.02 or 11.03 of this Article shall be made when ordered
by a court and shall be made in a specific case upon a determination that
indemnification of the authorized representative is required or proper in the
circumstances because such authorized representative has met the applicable
standard of conduct set forth in Sections 11.01 or 11.02 of this Article. Such
determination shall be made:
(1) By the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties
to such action, suit or proceeding, or
(2) By the shareholders.
If a claim under this Article is not paid in full by the corporation within
ninety (90) days after a written claim has been received by the corporation, the
claimant may at any time thereafter bring suit against the corporation to
recover the unpaid amount of the claim and if successful in whole or in part,
the claimant shall be entitled to be paid also the expense of prosecuting such
claim. It shall be a defense to any such action (other than an action brought to
enforce a claim for expenses incurred in defending any action, suit or
proceeding in advance of its final disposition where the required undertaking
has been tendered to the corporation) that the claimant has not met the
standards of conduct which make it permissible for the corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on the corporation. Neither the failure of the corporation (including
its Board of Directors or its shareholders) to have made a determination prior
to the commencement of such action that indemnification of the claimant is
proper in the circumstances because such claimant had met the applicable
standard of conduct, nor an actual determination by the corporation (including
its Board of Directors or its shareholders) that the claimant has not met such
applicable standard of conduct shall be a defense to the action or create a
presumption that claimant had not met the applicable standard of conduct.
Section 11.05. Advancing Expenses. Expenses (including attorneys' fees)
incurred in defending a civil or criminal action, suit or proceeding may be paid
by the corporation in advance of the final disposition of such action, suit or
proceeding, as authorized by the Board of Directors in a specific case or if
requested by the Board of Directors upon a written opinion of independent legal
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counsel, upon receipt of an undertaking by or on behalf of an authorized
representative to repay such amount unless it shall ultimately be determined
that such authorized representative is entitled to be indemnified by the
corporation as required in this Article or authorized by law.
Section 11.06. Scope of Article. Each person who shall act as an
authorized representative of the corporation, shall be deemed to be doing so in
reliance upon such rights of indemnification as are provided in this Article.
The indemnification provided by the Article shall not be deemed exclusive of any
other rights to which those seeking indemnification may be entitled under any
agreement, vote of shareholders or disinterested directors, statute or
otherwise, both as to action in such authorized representative's official
capacity and as to action in another capacity while holding such office or
position, and shall continue as to a person who has ceased to be an authorized
representative of the corporation and shall insure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE XII
Insurance
Section 12.01. Insurance Against Liability Asserted Against Directors,
Officers, Etc. The corporation, whenever so authorized by the Board of
Directors, may purchase and maintain insurance on behalf of any authorized
representative against any liability asserted against such authorized
representative and incurred by such authorized representative in such capacity,
or arising out of such authorized representative's status as such, whether or
not the corporation would be authorized or required to indemnify such authorized
representative by law or Article XI of these Bylaws.
ARTICLE XIII
Miscellaneous
Section 13.01. Corporate Seal. The Board of Directors, at their
discretion, may adopt a corporate seal. The corporate seal of the corporation,
if any, shall have inscribed thereon the name of the corporation, the year of
its incorporation and the words "Corporate Seal, Delaware."
Section 13.02. Checks. All checks, notes, bills of exchange or other
orders in writing shall be signed by such person or persons as the Board of
Directors, or officer or officers authorized by resolution of the Board of
Directors may, from time to time, designate.
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Section 13.03. Contracts. Except as otherwise provided in these Bylaws,
the Board of Directors may authorize any officer or officers including the
President and any Vice President, or any agent or agents, to enter into any
contract or to execute or deliver any instrument on behalf of the corporation
and such authority may be general or confined to specific instances.
Section 13.04. Inspection. The books, accounts and records of the
corporation may be kept (subject to any provision in the Delaware General
Corporation Law) outside the State of Delaware at such place or places as may be
designated from time to time by the Board of Directors and shall be open for
inspection in person by any member of the Board of Directors at all times.
Section 13.05. Fiscal Year. The fiscal year of the corporation shall be
determined by the Board of Directors.
Section 13.06. Distributions. Subject to such restrictions or
requirements as may be imposed by applicable law or the corporation's
Certificate of Incorporation or as may otherwise be binding upon the
corporation, the Board of Directors may from time to time declare, and the
corporation may pay or make, dividends or other distributions to its
stockholders.
ARTICLE XIV
Amendments
Section 14.01. Amendments. These Bylaws may be amended or repealed, and
new Bylaws adopted, by the Board of Directors, unless the Certificate of
Incorporation or the General Corporation Law of Delaware reserve any particular
exercise of this power exclusively to the stockholders in whole or in part. The
corporation's stockholders may amend or repeal the corporation's Bylaws even
though the Bylaws may also be amended or repealed by its Board of Directors.
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Agreement and Plan of Merger
Dated as of June 1, 1999
Among
NetAmerica.com Corporation
as Acquiror
Rate Exchange (Delaware), Inc.
a subsidiary of the Acquiror
RateExchange, Inc.
and
the Shareholders of RateExchange, Inc.
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<TABLE>
<CAPTION>
Table of Contents
<S> <C>
1. Definitions....................................................................................................1
1.1 Cross-referenced Definitions....................................................................1
1.2 Standard Definitions............................................................................2
2. The Merger.....................................................................................................5
2.1 The Merger Generally............................................................................5
2.2 Conversion of Company Shares....................................................................5
2.3 Closing.........................................................................................6
2.4 Company Closing Liabilities.....................................................................7
2.5 Adjustment of Merger Consideration..............................................................9
3. Conditions Precedent...........................................................................................9
3.1 Conditions to the Obligations of All Parties....................................................9
3.2 Conditions to Obligations of the Acquiror and Newco............................................10
3.3 Conditions to Obligations of the Company and the Company Shareholders..........................10
4. Seller Representations and Warranties.........................................................................11
4.1 Existence and Power............................................................................11
4.2 Authorization..................................................................................11
4.3 Governmental Authorization; Consents...........................................................11
4.4 Non-Contravention..............................................................................12
4.5 Title..........................................................................................12
4.6 Capitalization.................................................................................12
4.7 No Subsidiaries................................................................................13
4.8 Financial Statements...........................................................................13
4.9 Absence of Certain Changes.....................................................................13
4.10 Properties.....................................................................................14
4.11 No Undisclosed Material Liabilities............................................................14
4.12 Litigation.....................................................................................14
4.13 Material Contracts.............................................................................15
4.14 Compliance with Laws; No Defaults..............................................................15
4.15 Finders'Fees...................................................................................15
4.16 Intellectual Property..........................................................................15
4.17 Employee Benefits..............................................................................16
4.18 Environmental Compliance.......................................................................16
4.19 Tax Matters....................................................................................17
4.20 Transactions with Affiliates...................................................................17
4.21 Non-competition................................................................................18
4.22 Other Information..............................................................................18
</TABLE>
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<CAPTION>
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5. Acquiror Representations and Warranties.......................................................................18
5.1 Organization and Existence.....................................................................18
5.2 Authorization..................................................................................18
5.3 Governmental Authorization.....................................................................18
5.4 Non-Contravention..............................................................................18
5.5 Title..........................................................................................19
5.6 Capitalization.................................................................................19
5.7 Financial Statements...........................................................................19
5.8 Absence of Certain Changes.....................................................................19
5.9 Compliance with Laws; No Defaults..............................................................19
5.10 Finders'Fees...................................................................................20
5.11 SEC Filings....................................................................................20
6. Covenants of the Company and the Company Shareholders.........................................................20
6.1 Conduct of the Company's Business..............................................................20
6.2 Other Offers...................................................................................21
6.3 Access to Information..........................................................................21
6.4 Confidentiality................................................................................21
6.5 Notices of Certain Events......................................................................22
6.6 Approvals......................................................................................22
6.7 Public Announcements...........................................................................22
6.8 Transfer Taxes.................................................................................22
6.9 Shareholder Actions............................................................................22
7. Acquiror Covenants............................................................................................23
7.1 Confidentiality................................................................................23
7.2 Payment of Certain Liabilities.................................................................23
7.3 Director.......................................................................................23
7.4 Officers and Directors Insurance Coverage......................................................24
7.5 Stock Ownership After Merger...................................................................24
7.6 Approvals......................................................................................26
7.7 Public Announcements...........................................................................26
7.8 Federal Tax Cooperation........................................................................26
7.9 Transfer Taxes.................................................................................26
8. Investor Matters..............................................................................................26
8.1 Representations and Warranties.................................................................26
8.2 Securities Legended and Not Registered.........................................................27
9. Survival; Indemnification.....................................................................................27
9.1 Survival.......................................................................................27
9.2 Indemnification................................................................................28
9.3 Procedures.....................................................................................29
</TABLE>
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<CAPTION>
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10. Termination..................................................................................................29
10.1 Grounds for Termination........................................................................29
10.2 Effect of Termination..........................................................................30
11. Miscellaneous................................................................................................30
11.1 Notices........................................................................................30
11.2 Amendment; No Waivers; Integration.............................................................30
11.3 Expenses.......................................................................................31
11.4 Assignment.....................................................................................31
11.5 Governing Law; Jurisdiction....................................................................31
11.6 Headings.......................................................................................31
11.7 Counterparts...................................................................................31
Exhibit A Form of Acquiror Note
B Form of Acquiror Pledge Agreement
C Form of Shareholder Pledge Agreement
D Form of Registration Rights Agreement
E Form of Employment Agreement
Schedule 4.13 Material Contracts.
4.16 Intellectual Property.
4.19 Tax Matters.
</TABLE>
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Agreement and Plan of Merger
AGREEMENT dated as of June 1, 1999 among NetAmerica.com
Corporation, a Delaware corporation (with its successors and assigns, the
"Acquiror"), Rate Exchange (Delaware), Inc., a subsidiary of the Acquiror (with
its successors and assigns, "Newco"), RateExchange, Inc., a Colorado corporation
(the "Company"), and each of the persons and entities listed on the signature
pages hereof (each, with its successors, a "Company Shareholder").
WHEREAS, the Company Shareholders are the owners of all of the
issued and outstanding shares of common stock of the Company;
WHEREAS, the Acquiror is a public company whose shares of common
stock are traded over the counter under the symbol NAMI;
WHEREAS, the Acquiror desires to acquire from the Company
Shareholders, through merger, all of the capital stock of the Company in
exchange for shares of the Acquiror's common stock, a promissory note and cash,
as more fully described below, and the Company Shareholders desire to have the
Acquiror acquire such shares, upon the terms and subject to the conditions
hereinafter set forth;
WHEREAS, the parties have agreed to cause the Acquiror to acquire
the stock of the Company by having the Company merge with and into Newco, a
subsidiary of the Acquiror formed for such purpose, with Newco being the
surviving company of such merger; and
WHEREAS, the parties intend that the Merger will qualify as a
reorganization under Section 368(a)(2)(D) of the Internal Revenue Code (as
defined below);
NOW, THEREFORE, the parties agree as follows:
1. Definitions
1.1 Cross-referenced Definitions. The following terms, when capitalized, are
used herein with the meaning set forth in the Section or portion of this
Agreement referred to below:
<TABLE>
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<S> <C> <C>
Acquiror Preamble p. 1
Acquiror Note Section 2.2(c)(ii) p. 5
Acquiror Pledge Agreement Section 2.3(b)(iii) p. 6
Acquiror SEC Reports Section 5.11 p. 20
Acquisition Proposal Section 6.2(i) p. 21
Closing Balance Sheet Section 2.4(a) p. 7
Closing Date Section 2.3(a)` p. 6
Closing Deadline Section 2.3(a) p. 6
Company Preamble p. 1
Company Shareholder Preamble p. 1
Damages Section 9.2(a) p. 28
Employment Agreement Section 2.3(b)(v) p. 6
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
Environmental Law Section 4.18 p. 16
Financial Statements Section 4.8 p. 13
Hazardous Substance Section 4.18 p. 16
Indemnified Party Section 9.3(a) p. 29
Indemnifying Party Section 9.3(a) p. 29
Merger Section 2.1 p. 5
Merger Time Section 2.3(d) p. 7
Newco Preamble p. 1
Notice of Alternative Calculation Section 2.4(b) p. 7
Registration Rights Agreement Section 2.3(b)(iv) p. 6
Shareholder Pledge Agreement Section 2.3(c)(ii) p. 7
Tax Affiliate Section 4.19 p. 17
</TABLE>
1.2 Standard Definitions. The following terms, when capitalized, are
used herein with the following meanings:
"Acquiror Share" means an issued and outstanding share of common
stock of the Acquiror.
"Affiliate" means, with respect to any Person, (i) any Person
directly or indirectly controlling, controlled by, or under common control with
such other Person or an Affiliate of such other Person, (ii) if such Person is a
corporation or similar entity, each member of such Person's board of directors
or similar body, (iii) if such Person is a natural person, any relative of such
Person and any corporation or similar entity of whose board of directors or
similar body such Person is a member, (iv) all general and limited partnerships
of which such Person is a general partner, (v) if such Person is a general or
limited partnership, all general partners of such Person, (vi) all trusts and
estates of which such Person is a fiduciary or beneficiary, (vii) if such Person
is an estate or trust, each fiduciary of such Person and each beneficiary of
such Person and (viii) all Affiliates of Affiliates of such Person. Each Company
Shareholder shall be deemed to be an "Affiliate" of the Company.
"Business Day" means each day other than a Saturday or a Sunday or
a day on which banks in San Francisco, California are authorized or required to
be closed.
"Colorado Statute" means the Colorado Business Corporation Act, as
amended.
"Company Closing Liabilities" means the aggregate amount, at the
Closing Date, of (i) liabilities of the Company properly shown on a balance
sheet prepared in accordance with GAAP, each such liability in the amount
properly shown on a balance sheet properly prepared in accordance with GAAP,
(ii) all prepayment premiums that would be payable if all Company Closing
Liabilities were paid in full on the Closing Date (whether or not any such
liability actually is so paid) and (iii) contingent liabilities, claims and
assessments that have been asserted, threatened or are reasonably likely to be
asserted (even if such items would not properly be shown on a balance sheet
pursuant to the provisions of GAAP, including without limitation FAS 5), each in
the amount that is the loss, cost and expense that the Company is reasonably
likely to incur on account of such liability, claim or assessment, provided that
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the "Company Closing Liabilities" shall not include the liabilities that the
Acquiror has agreed to pay pursuant to Section 7.2 (p. 23).
"Company Share" means an issued and outstanding share of common
stock of the Company.
"Contract" means each contract, agreement, lease, commitment,
arrangement, plan and understanding to which the Company is a party, whether or
not legally enforceable by the other party or parties thereto.
"Debt" of any Person means all obligations for borrowed money and
overdrafts, all obligations evidenced by bonds, debentures, notes or other
similar instruments, all obligations to pay the deferred purchase price of
property or services, except trade accounts payable, payroll liabilities and
deferred revenues arising in the ordinary course of business consistent with
past practice, all obligations as lessee which are capitalized in accordance
with GAAP, all obligations of others secured by a Lien on any asset of such
Person, whether or not such obligations are assumed by such Person, and all
obligations of others guaranteed by such Person.
"Delaware Statute" means the Delaware General Corporation Law, as
amended.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and the rules and regulations promulgated thereunder, as amended
from time to time.
"Financial Statement Date" means March 31, 1999.
"GAAP" means generally accepted accounting principles applied on a
basis consistent with that used to prepare the Financial Statements.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any obligation of
any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
obligation (whether arising by virtue of partnership arrangements, by agreement
to keep-well, to purchase assets, goods, securities or services, to take-or-pay,
or to maintain financial statement conditions or otherwise) or (ii) entered into
for the purpose of assuring in any other manner the obligee of such obligation
of the payment thereof or to protect such obligee against loss in respect
thereof (in whole or in part), provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Intellectual Property Right" means any trademark, service mark,
registration thereof or application for registration therefor, trade name,
invention, patent, patent application, trade secret, know-how, copyright,
copyright registration, application for copyright registration, or any other
similar type of proprietary intellectual property right, in each case which is
owned or licensed and used or held for use by the Company.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated thereunder, as amended
from time to time.
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"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, a Person shall be deemed to own
subject to a Lien any asset which it has acquired or holds subject to the
interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement relating to such asset.
"Majority Company Shareholders" means Company Shareholders that
own, at the time of determination (or, if the time of determination is after the
Closing Date, that owned at the Closing Date), in the aggregate, not less than
51% of the total number of Company Shares then owned by all of the Company
Shareholders.
"Material Adverse Change" means a material adverse change in the
business, assets, condition (financial or otherwise), results of operations or
prospects of the Company.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets, results of operations or
prospects of the Company.
"1933 Act" means the Securities Act of 1933 and the rules and
regulations issued thereunder, as amended from time to time.
"1934 Act" means the Securities Exchange Act of 1934 and the rules
and regulations issued thereunder, as amended from time to time.
"Person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or other entity or
organization, including a government or political subdivision or an agency or
instrumentality thereof.
"Prepayment Premium" means any premium, penalty or compensation
payable upon the repayment of any obligation prior to its stated maturity.
To "Register" any securities means to effect the registration of
such securities by preparing and filing a registration statement or similar
document in compliance with the 1933 Act, and the declaration or ordering of
effectiveness of such registration statement or document. The words "Registered"
and "Registration" have corresponding meanings.
"Rule 144" means Rule 144 promulgated by the Securities and
Exchange Commission under the 1933 Act and any successor rule to substantially
the same effect, in each case as amended from time.
"Tax" payable by any Person means any tax or charge or assessment
imposed on such Person, including without limitation any tax or governmental
charge or assessment measured by such Person's net income, gross income, gross
receipts or sales; any use, ad valorem, value added, franchise, profits,
license, payroll, employment, excise, severance, stamp, occupation, premium,
property, environmental, windfall profit, alternative or add-on minimum tax or
governmental charge or assessment; any withholding of amounts paid to or by such
Person on account of any such tax, governmental charge or assessment; and any
interest or any penalty, addition to tax or additional amount imposed by any
governmental authority responsible for the imposition of any Tax.
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"Transfer Tax" means any stock transfer, other transfer, sales,
use, documentary, stamp, registration and other similar Tax imposed on any party
to this Agreement by reason of its entry into this Agreement and the completion
of the transactions contemplated hereby on the Closing Date, but excluding Taxes
imposed on any party measured by the net or gross income of such party.
"Treasury Regulations" means the regulations promulgated by the
Department of Treasury pursuant to the Internal Revenue Code and published in
the Code of Federal Regulations, as amended from time to time.
2. The Merger
2.1The Merger Generally. At the Merger Time, the Company shall be merged
with and into Newco in accordance with the Colorado Statute and the Delaware
Statute (the "Merger"), whereupon the separate existence of the Company shall
cease, and Newco shall be the surviving corporation. From and after the Merger
Time, title to all property owned by each of Newco and the Company shall be
vested in Newco, and Newco shall have all liabilities of Newco and the Company,
all as provided by the Colorado Statute and the Delaware Statute. At the Merger
Time, the articles of incorporation and bylaws of Newco, as the surviving
company of the Merger, shall continue to be the same as the articles of
incorporation and bylaws of Newco in effect at the Merger Time. From and after
the Merger Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, the directors and officers of Newco at the
Merger Time shall continue to be the directors and officers of Newco, as the
surviving company of the Merger.
2.2 Conversion of Company Shares. At the Merger Time:
(a) Each share of capital stock of the Company held by the Company as
treasury stock immediately prior to the Merger Time shall be cancelled, and no
payment shall be made with respect thereof.
(b) Each share of common stock of Newco outstanding immediately prior to
the Merger Time shall be one share of common stock of Newco, as the surviving
company of the Merger, and after the Merger Time shall constitute the only
outstanding shares of capital stock of Newco, as the surviving company of the
Merger.
(c) Each Company Share outstanding immediately prior to the Merger Time
shall be converted into:
(i) a number of Acquiror Shares equal to 575,000 divided by the total
number of Company Shares outstanding immediately prior to the Merger Time; and
(ii) a promissory note of the Acquiror in substantially the form of
Exhibit A, in an original principal amount equal to $450,000 divided by the
total number of Company Shares outstanding immediately prior to the Merger Time
(subject to adjustment pursuant to Section 2.5 (p. 9)) (each, an "Acquiror
Note")
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Each Company Shareholder shall receive a single Acquiror Note in a principal
amount equal to $450,000 times the number of Company Shares held by it
immediately prior to the Merger Time divided by the total number of Company
Shares outstanding immediately prior to the Merger Time.
(d) No fractional Acquiror Shares shall be issued in the Merger. If a
Company Shareholder would be entitled to receive a fractional Acquiror Share,
such Company Shareholder shall instead receive, in lieu thereof, an amount in
cash determined by multiplying $6.00 by the fraction of an Acquiror Share to
which such Company Shareholder would otherwise have been entitled.
2.3 Closing.
(a) The closing of the transactions necessary to effect the Merger shall
take place at the offices of the Acquiror in San Francisco on a date (the
"Closing Date") on or before the Closing Deadline (as defined below) designated
by the Acquiror by not less than three days prior written notice to the Company
Shareholders or, if the Acquiror fails to designate such a date, the Closing
Deadline (or in any event, another date agreed to by the Acquiror and the
Majority Company Shareholders). If any Company Shareholder at any time notifies
the Acquiror that the conditions precedent set forth in Article 3 to the
obligation of the Acquiror to consummate the Merger have been or shall be
satisfied on a particular date, the Acquiror shall use its best efforts to
designate a Closing Date that is as soon as is reasonably practicable after the
date such conditions precedent are satisfied. The "Closing Deadline" means June
30, 1999, or such later date that the parties may agree upon as the deadline to
complete the transactions necessary to consummate the Merger pursuant to this
Agreement.
(b) On the Closing Date, the Acquiror shall:
(i) deliver to each Company Shareholder a newly-issued certificate
representing 80% of the Acquiror Shares to be issued to such Company Shareholder
pursuant to the Merger (rounded to the nearest whole share) and issue to each
Company Shareholder a newly-issued certificate representing the remaining
Acquiror Shares to be issued pursuant to the Merger but retain possession of
such certificates as contemplated by the Shareholder Pledge Agreement referred
to below, all such certificates being registered in the name of the respective
Company Shareholders;
(ii) execute and deliver to each Company Shareholder an Acquiror Note;
(iii) execute and deliver to the Company Shareholders a Pledge Agreement
in substantially the form attached as Exhibit B (the "Acquiror Pledge
Agreement");
(iv) execute and deliver to the Company Shareholders a Registration
Rights Agreement in substantially the form attached as Exhibit D (the
"Registration Rights Agreement"); and
(v) execute and deliver to each of Sean Whelan and Ross Mayfield an
Employment Agreement in substantially the form attached as Exhibit E (each, an
"Employment Agreement").
(c) On the Closing Date, each Company Shareholder shall:
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(i) deliver to the Acquiror a certificate or certificates registered in
such Company Shareholder's name representing all of the Company Shares owned by
such Company Shareholder, duly endorsed or accompanied by stock powers duly
endorsed in the name of the Acquiror;
(ii) execute and deliver to the Acquiror a Shareholder Pledge Agreement
in substantially the form attached as Exhibit C (the "Shareholder Pledge
Agreement");
(iii) execute and deliver to the Acquiror the Registration Rights
Agreement; and
(iv) in the case of Company Shareholders Sean Whelan and Ross Mayfield
only, execute and deliver to the Acquiror the Employment Agreement to which such
Company Shareholder is a party.
(d) On the Closing Date (or, if not reasonably practicable, on the
following Business Day), the Company and Newco shall file with the Secretary of
State of the State of Delaware a certificate of merger complying with the
Delaware Statute and shall file with the Secretary of State of the State of
Colorado articles of merger complying with the Colorado Statute, and shall make
all other filings and take all other actions required by the Delaware Statute
and the Colorado Statute in connection with the Merger. The Merger shall become
effective at the "Merger Time," which is the time at which such certificate of
merger and articles of merger are duly filed with both the Secretaries of State
of the State of Delaware and of the State of Colorado.
(e) Subject to the terms and conditions of this Agreement, each party
shall use its best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable under Sections
252 and 251 of the Delaware Statute, Sections 111-107 and 111-101 through
111-105 of the Colorado Statute, other applicable provisions of the Delaware
Statute and the Colorado Statute and other applicable laws and regulations to
consummate the Merger. At and after the Merger Time, the officers and directors
of the Acquiror and Newco shall be authorized to execute and deliver, in the
name and on behalf of the Acquiror or Newco, any deeds, bills of sale,
assignments or assurances and to take and do, in the name and on behalf of the
Acquiror or Newco, any other actions and things to vest, perfect or confirm of
record or otherwise in Newco any and all right, title and interest in, to and
under any of the rights, properties or assets of the Company.
2.4 Company Closing Liabilities.
(a) As promptly as practicable after the Closing Date (but in no event
more than 30 days after the Closing Date), the Acquiror shall cause a balance
sheet of the Company as at the closing of business on the Closing Date, but
without giving effect to the Merger (the "Closing Balance Sheet"), to be
prepared in accordance with GAAP, and shall prepare a certificate based on such
Closing Balance Sheet (among other things) setting forth the Acquiror's
calculation of the Company Closing Liabilities, and the Acquiror shall deliver
the Closing Balance Sheet and such certificate to the Company Shareholders.
(b) If any Company Shareholder disagrees with the Acquiror's calculation
of the Company Closing Liabilities, such Company Shareholder shall raise such
disagreement with the other Company Shareholders. The Majority Company
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Shareholders may agree upon a proposed alternative calculation of the Company
Closing Liabilities, whereupon the Majority Company Shareholders may prepare one
(and only one) notice of such alternative calculation (the "Notice of
Alternative Calculation"), which shall set forth in detail the Majority Company
Shareholders' calculation of the Company Closing Liabilities and shall describe
and explain each item and amount included in the Acquiror's calculation of
Company Closing Liabilities with which the Majority Company Shareholders
disagree, and shall set forth in detail an alternate amount calculated by the
Majority Company Shareholders. The Notice of Alternative Calculation, if any,
shall be delivered to the Acquiror within 30 days after the Acquiror delivers
the documents referred to in subsection (a) to the Company Shareholders. Any
calculation, item or amount shown on the Acquiror's Closing Balance Sheet or
calculation of the Company Closing Liabilities that is not specifically
disagreed with in such a Notice of Alternative Calculation signed by the
Majority Company Shareholders and timely delivered shall be deemed to have been
agreed to by each of the Company Shareholders.
(c) If a Notice of Alternative Calculation shall be duly prepared,
signed and delivered as described in subsection (b), it shall be binding on the
Company Shareholders and the parties shall use their best efforts to reach
agreement on the disputed items or amounts in order to agree thereupon, none of
which agreed-upon amounts shall be more favorable to the Acquiror than the
amount thereof initially calculated by the Acquiror nor more favorable to the
Company Shareholders than the amount thereof set forth in the Notice of
Alternative Calculation. Any such amount agreed upon by the Acquiror and the
Majority Company Shareholders shall be conclusive and binding upon all parties
hereto, including any Company Shareholders that do not agree to it.
(d) If the Acquiror and the Majority Company Shareholders are not able
to reach agreement as to the amount of the Company Closing Liabilities within 30
days after the Acquiror's receipt of the Notice of Alternative Calculation, then
BDO Seidman, LLP shall determine the disputed amount of the Company Closing
Liabilities, which determination shall be binding upon all parties hereto. In
making such determination, such accountants shall follow the definition of
"Company Closing Liabilities" and, in addition, shall consider only those
calculations, items and amounts shown on the Acquiror's calculations of the
Company Closing Liabilities that were specifically disagreed with in a Notice of
Alternative Calculation signed by the Majority Company Shareholders and timely
delivered. Moreover, the amount of the Company Closing Liabilities determined by
such accountants shall not be greater than the amount set forth in the
Acquiror's certificate or less than the amount set forth in the Notice of
Alternative Calculation. Judgment upon any award rendered by such accountants
may be entered in any court having jurisdiction thereof.
(e) The Acquiror on the one hand, and the Company Shareholders (jointly
and severally) on the other hand, shall bear a portion of the reasonable costs
and expenses incurred in connection with such accountants' review and
determination (including without limitation such party's and the other party's
attorneys' fees and expenses and expenses incurred in gathering and presenting
information to the accountants) based on the ratio of the difference between the
finally determined amount and the amount proposed by such party and the total
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amount in dispute. For example, if the Acquiror's calculation of the Company
Closing Liabilities was $200,000 and the amount shown in the Notice of
Alternative Calculation was $150,000, the amount in dispute would be $50,000. If
the accountants were ultimately to resolve the matter by determining that the
amount of the Company Closing Liabilities is $180,000, the Acquiror would bear
40% of the expenses referred to above ($20,000 divided by $50,000) and the
Company Shareholders would jointly and severally bear 60% of the expenses
referred to above ($30,000 divided by $50,000). As a condition to referring any
dispute to such accountants rather than having the Acquiror's calculation be
determinative, the Company Shareholders shall provide reasonably adequate
assurances to the Acquiror that they will pay their portion of the cost of such
accountants' review.
2.5 Adjustment of Merger Consideration. Within 30 days after final
determination of the amount of the Company Closing Liabilities pursuant to
Section 2.4 (whether upon the failure of the Majority Company Shareholders
to object timely to the Acquiror's calculation thereof, upon agreement
between the Acquiror and the Majority Company Shareholders or upon
determination by the accountants referred to in Section 2.4(d)):
(i) The principal amount of each Acquiror Note shall be
automatically reduced by such Acquiror Notes' pro rata share (based on the
respective original principal amounts of the Acquiror Notes) of the amount
(if any) by which the Company Closing Liabilities exceeds $60,000, without
any notice or further action by any Person, effective as of the Closing Date
(so that interest shall accrue from the Closing Date on the principal amount
as so reduced).
(ii) If the amount of the Company Closing Liabilities is greater
than $510,000, the Acquiror Notes shall be cancelled in their entirety and
the Company Shareholders shall be jointly and severally obligated, at their
option, either:
(A) to pay to the Acquiror an amount equal to the lesser of (x) the
amount by which the Company Closing Liabilities exceed $510,000 or
(y) $3,450,000, or
(B) to return to the Acquiror a number of Acquiror Shares equal to the
amount payable pursuant to clause (A) divided by $6.
3. Conditions Precedent
3.1 Conditions to the Obligations of All Parties. The obligations
of the Acquiror, Newco, the Company and each Company Shareholder to consummate
the Merger are subject to the satisfaction of the following conditions
precedent:
(a) No provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the Merger;
(b) All actions by or in respect of or filings with any
governmental body, agency, official or authority required to permit the
consummation of the Merger pursuant to this Agreement shall have been obtained;
and
(c) No proceeding seeking to prohibit the Merger shall have been
instituted by any Person other than a party hereto before any court, arbitrator
or governmental body, agency or official and be pending.
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3.2 Conditions to Obligations of the Acquiror and Newco. The
obligations of the Acquiror and Newco to consummate the Merger, to issue the
Acquiror Shares and to deliver the Acquiror Notes are subject to the
satisfaction (or the written waiver by the Acquiror) of the following further
conditions precedent:
(a) Tender by the Company Shareholders of the documents required to
be delivered by Section 2.3(c) (p. 6);
(b) The Company and each Company Shareholder shall have performed
in all material respects all of their obligations hereunder required to be
performed on or before the Closing Date;
(c) The representations and warranties of the Company and each
Company Shareholder contained in this Agreement and in any certificate or other
writing delivered by the Company or any Company Shareholder pursuant hereto
shall be true and correct in all material respects;
(d) No court, arbitrator or governmental body, agency or official
shall have issued any order, and there shall not be any statute, rule or
regulation, restraining the effective operation by the Acquiror of the business
of the Company after the Closing Date;
(e) Tender to the Acquiror of the resignations of each member of
the Company's board of directors;
(f) Receipt by the Acquiror of a certificate of the chief executive
officer of the Company to the effect set forth in paragraphs (b) and (c) above;
and
(g) Receipt by the Acquiror of all documents it may reasonably
request relating to the existence of the Company and each Company Shareholder
that is not a natural person and the authority of the Person executing this
Agreement on behalf of the Company and each such Company Shareholder, all in
form and substance reasonably satisfactory to the Acquiror.
3.3 Conditions to Obligations of the Company and the Company
Shareholders. The obligations of the Company and each Company Shareholder to
consummate the Merger is subject to the satisfaction (or the written waiver by
the Majority Company Shareholders) of the following further conditions
precedent:
(a) Tender by the Acquiror of the documents required to be
delivered by Section 2.3(b) (p. 6);
(b) The Acquiror and Newco shall have performed in all material
respects all of their obligations hereunder required to be performed on or
before the Closing Date;
(c) The representations and warranties of the Acquiror and Newco
contained in this Agreement and in any certificate or other writing delivered by
the Acquiror or Newco pursuant hereto shall be true and correct in all material
respects;
(d) Receipt by the Company Shareholders of a certificate of the
chief executive officer of the Acquiror to the effect set forth in paragraphs
(b) and (c) above; and
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(e) Receipt by the Company Shareholders of all documents the
Company Shareholders may reasonably request relating to the existence of the
Acquiror and the authority of the Person executing this Agreement on behalf of
the Acquiror, all in form and substance reasonably satisfactory to the Majority
Company Shareholders.
4. Seller Representations and Warranties
The Company and the Company Shareholders hereby represent and
warrant to the Acquiror, on the date hereof and on the Closing Date, as follows:
4.1 Existence and Power. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Colorado,
and has all corporate powers and all governmental licenses, authorizations,
consents and approvals required to carry on its business as now conducted. Each
Company Shareholder that is a corporation, limited partnership, limited
liability company or similar entity is a corporation or other such entity duly
incorporated or formed, validly existing and in good standing under the laws of
its jurisdiction of incorporation or formation, and has all corporate or legal
powers required to execute, deliver and perform this Agreement, the Shareholder
Pledge Agreement and the Registration Rights Agreement. Each Company Shareholder
that executes this Agreement as a trustee, executor or personal representative
has all fiduciary powers (pursuant to the instruments and agreements
establishing such trust or estate and applicable law) required to execute,
deliver and perform this Agreement, the Shareholder Pledge Agreement and the
Registration Rights Agreement as such a trustee, executor or personal
representative.
4.2 Authorization. The execution, delivery and performance by the
Company and each Company Shareholder of this Agreement, the Shareholder Pledge
Agreement and the Registration Rights Agreement and the consummation by the
Company and each Company Shareholder of the transactions contemplated hereby are
within such party's corporate or legal powers and have been duly authorized by
all necessary corporate, entity, shareholder, partner, member, trustee and
beneficiary actions. The Company's board of directors has unanimously adopted,
approved, declared the advisability of and recommended to the Company's
shareholders this Agreement and the Merger. The Company Shareholders have
unanimously adopted and approved this Agreement and the Merger. This Agreement
constitutes a valid and binding agreement of the Company and each Company
Shareholder; the Shareholder Pledge Agreement and the Registration Rights
Agreement, when executed and delivered on the Closing Date, will each constitute
a valid and binding obligation of each Company Shareholder; and each Employment
Agreement, when executed and delivered on the Closing Date, will constitute a
valid and binding obligation of the Company Shareholder party thereto.
4.3 Governmental Authorization; Consents. The execution, delivery
and performance by the Company and each Company Shareholder of this Agreement,
the Shareholder Pledge Agreement, the Registration Rights Agreement and the
Employment Agreements, and the consummation of the Merger, require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority, other than the filing of a certificate of merger and articles of
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merger as contemplated by Section 2.3(d). No consent, approval, waiver or other
action by any Person under any contract, agreement, indenture, lease, instrument
or other document to which the Company or any Company Shareholder is a party or
by which any of them is bound is required or necessary for the execution,
delivery and performance of this Agreement, the Shareholder Pledge Agreement,
the Registration Rights Agreement or the Employment Agreements by the Company
and each Company Shareholder or the consummation of the transactions
contemplated hereby.
4.4 Non-Contravention. The execution, delivery and performance by
the Company and each Company Shareholder of this Agreement, the Shareholder
Pledge Agreement, the Registration Rights Agreement and the Employment
Agreements and the consummation of the Merger do not and will not (a) contravene
or conflict with the articles of incorporation or bylaws of the Company or the
articles of incorporation, bylaws or other governing documents of such Company
Shareholder (including such Company Shareholder's partnership agreement, limited
liability company agreement, trust agreement or other agreement or instrument,
as the case may be), (b) contravene or conflict with or constitute a violation
of any provision of any law, regulation, judgment, injunction, order or decree
binding upon or applicable to the Company or such Company Shareholder; (c)
contravene or conflict with, or constitute a violation of or default under, or
give rise to any right of termination, cancellation or acceleration of any right
or obligation of the Company under, or to a loss of any material benefit to
which the Company is entitled under any provision of any agreement, contract or
other instrument binding upon the Company or any license, franchise, permit or
other similar authorization held the Company; (d) contravene or conflict with or
constitute a violation of or default under any material provision of any
agreement, contract or other instrument binding upon such Company Shareholder or
(e) result in the creation or imposition of any Lien on any asset of the
Company.
4.5 Title. As of the Closing Date and as of the date hereof, each
Company Shareholder owns, legally, beneficially and of record, the number of
Company Shares set forth under such Company Shareholder's name on the signature
pages of this Agreement, subject to no Liens. All of the Company Shares owned by
each Company Shareholder have been duly authorized and validly issued and are
fully paid and nonassessable.
4.6 Capitalization. The authorized capital stock of the Company
consists of 100,000 shares of common stock. As of the date hereof and the
Closing Date, there are issued and outstanding 100,000 Company Shares. No
employee or other Person holds any option to purchase any shares of common stock
of the Company that is now exercisable or may at any time in the future become
exercisable, except for options that will be cancelled at or before the Closing
Date. Except as described in this Section, as of the date hereof and the Closing
Date, there are no outstanding (i) shares of capital stock or other voting
securities of the Company, (ii) securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of the Company or
(iii) options or other rights to acquire from the Company, or obligations of the
Company to issue, deliver, repurchase, redeem or otherwise acquire any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company (whether or not now
exercisable).
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4.7 No Subsidiaries. There are no subsidiaries of the Company. The
Company does not hold any shares of capital stock of any other corporation.
4.8 Financial Statements. The audited balance sheet, income
statement and statement of cash flows of the Company at the Financial Statement
Date and for the fiscal year of the Company then ended, which have been
delivered to the Company before the date hereof (the "Financial Statements"),
fairly present, in accordance with GAAP, the financial position of the Company
as of the date thereof and the results of operations and cash flows for the
period then ended.
4.9 Absence of Certain Changes. Except as required by this
Agreement, since the Financial Statement Date, the Company has conducted its
business in the ordinary course consistent with past practices and there has not
been:
(a) any Material Adverse Change or any event, occurrence, development or state
of circumstances or facts which could reasonably be expected to result in a
Material Adverse Change;
(b) any declaration, setting aside or payment of any dividend or
other distribution on any shares of the Company's capital stock, any payment on
account of the purchase, redemption, retirement or acquisition of any shares of
the Company's capital stock or any option, warrant or other right to acquire
shares of the Company's capital stock;
(c) any amendment of any term of any outstanding security of the
Company;
(d) any incurrence or assumption by the Company of any Debt;
(e) any creation or assumption by the Company of any Lien, other
than Liens arising in the ordinary course of business consistent with past
practice which (i) do not secure Debt, (ii) do not secure any obligation in an
amount exceeding $25,000 in the aggregate and (iii) do not in the aggregate
materially detract from the value of the Company's assets or materially impair
the use thereof in the operation of its business;
(f) any making or acquisition of any investment in any Person,
whether by means of share purchase, capital contribution, loan, time deposit or
otherwise, other than demand deposits and short-term cash investments made in
the ordinary course of business consistent with past practice;
(g) any damage, destruction or other casualty loss (whether or not
covered by insurance) affecting the business or assets of the Company which,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect;
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or business
(including the acquisition or disposition of any assets) or any relinquishment
by the Company of any contract or other right, in either case, material to the
Company, other than transactions and commitments in the ordinary course of
business consistent with past practice (and other than pursuant to this
Agreement);
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(i) any change in any method of accounting or accounting practice
by the Company;
(j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Company, (ii) entering into of any
employment, deferred compensation or other similar agreement (or any amendment
to any such existing agreement) with any director, officer or employee of the
Company, (iii) event or communication which causes the Company, any Company
Shareholder or the Acquiror to believe that any key employee may not continue to
be employed by the Company after the Closing Date, (iv) increase in benefits
payable under an existing severance or termination pay policy or employment
agreement or (v) increase in compensation, bonus or other benefits payable to
directors, officers or employees of the Company, whether or not in the ordinary
course of business or consistent with past practice; or
(k) any labor dispute, other than routine or immaterial individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of the Company, or any lockouts, strikes,
slowdowns, work stoppages or threats thereof by or with respect to any employees
of the Company.
4.10 Properties. The Company does not own any real property or
fixtures, including without limitation any plants, buildings, structures or
land. The Company has and will have after the Closing Date good and marketable
title to (or in the case of leased property valid leasehold interests in) all
property and assets (whether real or personal, tangible or intangible) reflected
on the Balance Sheet or acquired after the Financial Statement Date, except for
(i) assets that are not necessary to the operations of the Company and are in
the aggregate not material and (ii) inventory, in each case to the extent sold
in the ordinary course of business consistent with past practice. None of such
properties or assets is subject to any Liens, except Liens disclosed in the
Financial Statements securing obligations disclosed in such Financial Statements
and Liens which could be incurred after the Financial Statement Date without
causing the representation in Section 4.9(e) (p. 13) to be untrue.
4.11 No Undisclosed Material Liabilities. There are no liabilities
of the Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, and there is no existing condition,
situation or set of circumstances, which could reasonably be expected to result
in such a liability, other than:
(i) liabilities disclosed or provided for in the Balance Sheet; and
(ii) liabilities incurred in the ordinary course of business
consistent with past practice and in compliance with Section 4.9 (p. 13) since
the Financial Statement Date.
The Company has not Guaranteed any obligation of any other Person.
4.12 Litigation. There is no action, suit, investigation or
proceeding (or any basis therefor) pending against, or to the knowledge of the
Company or any Company Shareholder threatened against or affecting, the Company
or any of its properties before any court or arbitrator or any governmental
body, agency, official or authority which, if determined or resolved adversely
to the Company in accordance with the plaintiff's demands, would reasonably be
expected to have a Material Adverse Effect.
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4.13 Material Contracts. Except for agreements, contracts, plans,
leases, arrangements or commitments disclosed in Schedule 4.13, the Company is
not a party to or subject to:
(i) any lease providing for annual rentals of $10,000 or more;
(ii) any Contract for the purchase of materials, supplies, goods,
services, equipment or other assets providing for annual payments by the
Company of $10,000 or more;
(iii) any sales, distribution or other similar Contract providing
for the sale by the Company of goods that provides for annual payments to
the Company of $10,000 or more;
(iv) any partnership, joint venture or other similar Contract;
(v) any Contract relating to Debt of the Company;
(vi) any license agreement, franchise agreement or Contract in
respect of similar rights granted to or held by the Company;
(vii) any agency, dealer, sales representative or other similar
Contract;
(viii) any Contract that substantially limits the freedom of the
Company to compete in any line of business or with any Person or in any area
or which would so limit the freedom of the Company after the Closing Date;
or
(ix) any other Contract not made in the ordinary course of
business consistent with past practice that is material to the Company.
4.14 Compliance with Laws; No Defaults. The Company is not in
violation of, and has not since January 1, 1997 violated, any applicable
provision of any laws, statutes, ordinances or regulations, except for
violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The Company is not
in default under, and no condition exists that with notice or lapse of time or
both would constitute a default under, (i) any agreement relating to Debt of the
Company or (ii) any judgment, order or injunction of any court, arbitrator or
governmental body, agency, official or authority.
4.15 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of any Company Shareholder or the Company who might be entitled to any
fee or commission from the Acquiror, the Company or any of their respective
affiliates upon consummation of the transactions contemplated by this Agreement.
4.16 Intellectual Property.
(a) Schedule 4.16 is a complete list of all Intellectual Property
Rights of the Company, specifying as to each, as applicable: (i) the nature of
such Intellectual Property Right; (ii) the owner of such Intellectual Property
Right; (iii) the jurisdictions by or in which such Intellectual Property Right
is recognized without regard to registration or has been issued or registered or
in which an application for such issuance or registration has been filed,
including the respective registration or application numbers; and (iv) material
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licenses, sublicenses and other agreements as to which the Company is a party
and pursuant to which any Person is authorized to use such Intellectual Property
Right, including the identity of all parties thereto, a description of the
nature and subject matter thereof, the applicable royalty and the term thereof.
(b) The Company has not, since January 1, 1997, been sued or
charged in writing with or been a defendant in any claim, suit, action or
proceeding relating to its business that has not been finally terminated without
liability to the Company prior to the date hereof and that involves a claim of
infringement of any patents, trademarks, service marks or copyrights. Neither
the Company nor any Company Shareholder has any knowledge of any other claim or
infringement by the Company, and no knowledge of any continuing infringement by
any other Person of any Intellectual Property Rights. No Intellectual Property
Right is subject to any outstanding order, judgment, decree, stipulation or
agreement restricting the use thereof by the Company or restricting the
licensing thereof by the Company or any Person. The Company has not entered into
any agreement to indemnify any other Person against any charge of infringement
of any patent, trademark, service mark or copyright.
(c) None of the processes and formulae, research and development
results and other know-how of the Company, the value of which to the Company is
contingent upon maintenance of the confidentiality thereof, has been disclosed
by the Company to any Person other than employees, representatives and agents of
the Company.
4.17 Employee Benefits. There is no Person that at any time
conducted the business now conducted by the Company; the Company has not been a
member of a controlled group of corporations and trades or businesses (whether
or not incorporated) under common control that were treated as a single employer
under Section 414 of the Internal Revenue Code. There is no employee pension
benefit plan which is covered by Title IV of ERISA or subject to the minimum
funding standards under Section 412 of the Internal Revenue Code which is (or
has been at any time) maintained by the Company or contributed to by the Company
for persons who, at the time of such contribution, were employees of the
Company.
4.18 Environmental Compliance. No notice, demand, request for
information, citation, summons or order has been issued, no complaint has been
filed, no penalty has been assessed and no investigation or review is pending,
or to the knowledge of the Company or any Company Shareholder, threatened by any
governmental or other entity (i) with respect to any alleged violation by the
Company of any Environmental Law (as defined below), (ii) with respect to any
alleged failure by the Company to have any environmental permit, certificate,
license, approval, registration or authorization required in connection with the
conduct of its business or (iii) with respect to any generation, treatment,
storage, recycling, transportation or disposal or release, as defined in 42
U.S.C. ? 9601(22) of any Hazardous Substance (as defined below) generated or
used by the Company. The Company has not generated, transported, disposed of or
arranged for the transportation or disposal (directly or indirectly) of any
Hazardous Substance to any location which is listed or proposed for listing
under the Comprehensive Environmental Responses, Compensation and Liability Act
of 1980, as amended, or on any similar state list.
"Environmental Law" means each federal, state and local statute,
law, regulation, ordinance, rule, judgment, judicial decision, order, decree,
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code, plan, injunction, permit, concession, grant, franchise, license,
agreement, or governmental restriction, relating to the environment or to
emissions, discharges or releases of Hazardous Substances into the environment
including, without limitation, ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Hazardous Substances.
"Hazardous Substance" mean any and all pollutants, contaminants,
asbestos, petroleum or petroleum products, chemicals or industrial, toxic,
radioactive or hazardous substances, materials or wastes.
4.19 Tax Matters.
(a) Schedule 4.19 sets forth a list of each Tax Affiliate (as
defined below), if any, and the tax periods for which each Person so listed was
a Tax Affiliate. No federal income tax returns for the Company have been audited
by the Internal Revenue Service and the Company has not agreed with the Internal
Revenue Service to any extension of the statute of limitations with respect to
its federal income taxes for any year. The Company and each Tax Affiliate have
filed all United States federal income tax returns and all other material tax
returns which are required to be filed by them and have paid all Taxes due
pursuant to such returns or pursuant to any assessment received by the Company
or any Tax Affiliate. The charges, accruals and reserves on the books of the
Company in respect of Taxes are adequate. Schedule 4.19 sets forth a list of
states, territories and jurisdictions (whether foreign or domestic) to which any
Tax is or will be properly payable by the Company, and indicates for each
whether the Company is treated as the equivalent of an S corporation by or with
respect to each such jurisdiction. (b) The Company has timely filed a valid
election to be treated as an S corporation in accordance with the provisions of
Section 1362(a) of the Internal Revenue Code, effective for the tax year in
which it was incorporated and at all times subsequent thereto, and the Company
has qualified and continues to qualify as an S corporation for all years and
periods thereafter through and including the Closing Date. The Company does not
hold any asset which, if sold or otherwise disposed of by the Company, could
give rise to any taxable income pursuant to Section 1374 of the Internal Revenue
Code or any similar provision of state or local law.
"Tax Affiliate" during any period means each Person that, during
such period, conducted the business now conducted by the Company and each Person
that, during such period, was a member of (i) the affiliated group of
corporations (as defined in Section 1504(a) of the Internal Revenue Code) of
which the Company or such Person was a member or (ii) the combined, consolidated
or unitary group (for purposes of any applicable state or local Tax) of which
the Company or such Person was a member.
4.20 Transactions with Affiliates. The Company is not a party to
any Contract with any Affiliate or Company Shareholder.
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4.21 Non-competition. No Company Shareholder has any present
intention to engage, either directly or indirectly, as a principal or for its
own account or solely or jointly with others, or as stockholder in any
corporation or holder of an ownership interest in any other entity, in the
business of maintaining a medium for the multilateral exchange of communications
bandwidth.
4.22 Other Information. None of the documents or information
delivered to the Acquiror in connection with the transactions contemplated by
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading.
5. Acquiror Representations and Warranties
The Acquiror and Newco hereby represent and warrant to the Company
Shareholders, on the date hereof and on the Closing Date, as follows:
5.1 Organization and Existence. Each of the Acquiror and Newco is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all corporate powers and all material governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
5.2 Authorization. The execution, delivery and performance by the
Acquiror and Newco of this Agreement, the Acquiror Notes, the Acquiror Pledge
Agreement, the Registration Rights Agreement and the Employment Agreements, and
the consummation by the Acquiror and Newco of the transactions contemplated
hereby are within the respective corporate powers of the Acquiror and Newco and
have been duly authorized by all necessary corporate action on the part of the
Acquiror and Newco. Newco's board of directors has unanimously adopted,
approved, declared the advisability of and recommended to the Acquiror this
Agreement and the Merger. The Acquiror, as sole shareholder of Newco, has
adopted and approved this Agreement and the Merger. This Agreement constitutes a
valid and binding agreement of the Acquiror and Newco and the Acquiror Notes,
the Acquiror Pledge Agreement, the Registration Rights Agreement and the
Employment Agreements, when executed and delivered on the Closing Date, will
constitute valid and binding obligations of the Acquiror.
5.3 Governmental Authorization. The execution, delivery and
performance by the Acquiror and Newco of this Agreement, the Acquiror Notes, the
Acquiror Pledge Agreement, the Registration Rights Agreement and the Employment
Agreements require no action by or in respect of, or filing with, any
governmental body, agency, official or authority.
5.4 Non-Contravention. The execution, delivery and performance by
the Acquiror and Newco of this Agreement, the Acquiror Notes, the Acquiror
Pledge Agreement, the Registration Rights Agreement and the Employment
Agreements do not and will not (a) contravene or conflict with the certificate
of incorporation or bylaws of the Acquiror or Newco, (b) contravene or conflict
with or constitute a violation of any provision of any provision of any law,
regulation, judgment, injunction, order or decree binding upon the Acquiror or
Newco, (c) contravene or conflict with, or constitute a violation of or default
under any agreement, contract or other instrument binding upon the Acquiror or
Newco.
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5.5 Title. Upon the issuance and sale contemplated by this
Agreement, each Company Shareholder will own, legally, beneficially and of
record, the Acquiror Shares represented by a certificate in the name of such
Company Shareholder, subject to no Liens. All of the Acquiror Shares will have
been duly authorized and validly issued and will be fully paid and
nonassessable.
5.6 Capitalization. The authorized capital stock of the Acquiror
consists of 300,000,000 shares of common stock. As of the date hereof and the
Closing Date, there are issued and outstanding 11,638,078 Acquiror Shares and
options, warrants and rights to acquire (pursuant to conversion of convertible
securities or otherwise), an aggregate of 2,500,000 Acquiror Shares. Except as
described in this Section, as of the date hereof and the Closing Date, there are
no outstanding (i) shares of capital stock or other voting securities of the
Acquiror, (ii) securities of the Acquiror convertible into or exchangeable for
shares of capital stock or voting securities of the Acquiror or (iii) options or
other rights to acquire from the Acquiror, or obligations of the Acquiror to
issue, deliver, repurchase, redeem or otherwise acquire any capital stock,
voting securities or securities convertible into or exchangeable for capital
stock or voting securities of the Acquiror (whether or not now exercisable).
5.7 Financial Statements. The audited balance sheet, income
statement and statement of cash flows of the Acquiror at December 31, 1998 and
for the fiscal year of the Acquiror then ended, which are included in the
Acquiror's Form 10-KSB filed pursuant to the 1934 Act, fairly present, in
accordance with generally accepted accounting principles, the financial position
of the Acquiror as of the date thereof and the results of operations and cash
flows for the period then ended. The unaudited balance sheet, income statement
and statement of cash flows of the Acquiror at March 31, 1999 and for the three
months then ended, which are included in the Acquiror's Form 10-QSB filed
pursuant to the 1934 Act, fairly present, in accordance with generally accepted
accounting principles, the financial position of the Acquiror as of the date
thereof and the results of operations and cash flows for the period then ended,
subject to normal year-end adjustments.
5.8 Absence of Certain Changes. Since March 31, 1999, there has not
been any material adverse change in the business, assets, condition (financial
or otherwise), result of operations or prospects of the Acquiror, or any event,
occurrence, development or state of circumstances or facts which could
reasonably be expected to result in such a material adverse change.
5.9 Compliance with Laws; No Defaults. The Acquiror is not in
violation of, and has not since January 1, 1997 violated, any applicable
provision of any laws, statutes, ordinances or regulations, except for
violations that have not had and would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the condition
(financial or otherwise), business, assets, results of operations or prospects
of the Acquiror. The Acquiror is not in default under, and no condition exists
that with notice or lapse of time or both would constitute a default under, (i)
any agreement relating to Debt of the Acquiror or (ii) any judgment, order or
injunction of any court, arbitrator or governmental body, agency, official or
authority.
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5.10 Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Acquiror who might be entitled to any fee or commission from the
Company, any Company Shareholder or any of their Affiliates upon consummation of
the transactions contemplated by this Agreement.
5.11 SEC Filings. The Acquiror has filed all reports required to be
filed with the Securities and Exchange Commission since January 1, 1998
(collectively, the "Acquiror SEC Reports"). None of the Acquiror SEC Reports, as
of their respective dates (as amended through the date hereof and as
supplemented by later Acquiror SEC Reports), contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Acquiror SEC Reports, taken together
with this Agreement and the other information regarding the Acquiror provided to
Sean Whelan on May 24, 1999 by the Acquiror, do not, as of the Closing Date,
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not misleading.
6. Covenants of the Company and the Company Shareholders
6.1 Conduct of the Company's Business. From the date hereof until
the Closing Date, the Company shall conduct its business in the ordinary course
consistent with past practice and use its reasonable efforts to preserve intact
its business organization and relationships with third parties and keep
available the services of its present officers and employees. Without limiting
the generality of the foregoing, from the date hereof until the Closing Date,
the Company agrees that it shall not:
(i) adopt any change in its articles of incorporation or bylaws;
(ii) merge or consolidate with any other Person or acquire a
material amount of assets of any other Person;
(iii) sell, lease, license or otherwise dispose of any material
assets or property except pursuant to existing contracts or commitments and
in the ordinary course consistent with past practice;
(iv) pay or discharge any liability or obligation of the Company
except when the same becomes due and payable (or, in the case of ordinary
trade obligations arising in the ordinary course of business, in the
ordinary course consistent with past practice); or
(v) agree or commit to do any of the foregoing.
The Company shall not (a) take or agree to take any action that would make any
representation and warranty of the Company or any Company Shareholder in this
Agreement (including without limitation the representations and warranties in
Section 4.9 (p. 13)) inaccurate in any respect at, or as of any time prior to,
the Closing Date or (ii) omit or agree to omit to take any action necessary to
prevent any such representation or warranty from being inaccurate in any respect
at any such time.
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6.2 Other Offers. Until after the Closing Date, neither the
Company, any Company Shareholder nor any officer, director, employee or agent of
any of them shall, directly or indirectly:
(i) take any action to solicit, initiate or encourage any offer or
proposal for, or any indication of interest in, a merger or other business
combination involving the Company, or the acquisition of any equity interest
in the Company, or the acquisition of a substantial portion of the assets of
the Company (other than the transaction with the Acquiror contemplated by
this Agreement) (an "Acquisition Proposal"); or (
ii) subject, in the case of the Company only, to the fiduciary
duties of the board of directors of the Company under applicable law, as
advised by legal counsel of recognized expertise, engage in negotiations
with, or disclose any non-public information relating to the Company to, or
afford access to the properties, books or records of the Company to, any
Person that may be considering making, or has made, an Acquisition Proposal.
The Company and each Company Shareholder shall promptly notify the Acquiror
after it receives any Acquisition Proposal or any indication that any Person is
considering making an Acquisition Proposal, or any request for non-public
information relating to the Company, or for access to the properties, books or
records of the Company by any Person that may be considering making, or has
made, an Acquisition Proposal, and shall keep the Acquiror fully informed as to
the status and details of any Acquisition Proposal or such indication or
request.
6.3 Access to Information. From the date hereof until the Closing
Date, the Company and each Company Shareholder (a) shall give the Acquiror, its
counsel, financial advisors, auditors and other authorized representatives full
access to the offices, properties, books and records of the Company, (b) shall
furnish to the Acquiror, its counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information relating to the Company as such Persons may reasonably request and
(c) shall instruct the employees, counsel and financial advisors of the Company
to cooperate with the Acquiror in its investigation of the Company; provided
that no investigation pursuant to this Section shall affect any representation
or warranty given by the Company or any Company Shareholder hereunder.
6.4 Confidentiality. Before the Closing Date and after any
termination of this Agreement, the Company and each Company Shareholder shall
hold, and shall use its best efforts to cause its officers, directors,
employees, accountants, counsel, consultants, advisors and agents to hold, in
confidence, unless compelled to disclose by judicial or administrative process
or by other requirements of law, all documents and information concerning the
Acquiror furnished to the Company or any Company Shareholder in connection with
the transactions contemplated by this Agreement, except to the extent that such
information can be shown to have been (a) previously known on a non-confidential
basis by the Company or such Company Shareholder, (b) in the public domain other
than by reason of the violation of this Section by the Company or a Company
Shareholder or (c) later lawfully acquired by the Company or such Company
Shareholder from sources other than the Acquiror and not in breach of any
confidentiality agreement with the Acquiror; provided that the Company and each
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Company Shareholder may disclose such information to its officers, directors,
employees, accountants, counsel, consultants, advisors and agents in connection
with the transactions contemplated by this Agreement, so long as such Persons
are informed by the Company or such Company Shareholder of the confidential
nature of such information and are directed by the Company or such Company
Shareholder to treat such information confidentially. The obligation of the
Company to hold any such information in confidence shall be satisfied if it
exercises the same care with respect to such information as it would take to
preserve the confidentiality of its own similar information. If this Agreement
is terminated, the Company and each Company Shareholder shall, and shall use its
best efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Acquiror, upon
request, all documents and other materials, and all copies thereof, obtained by
or on behalf of the Company or any Company Shareholder from the Acquiror in
connection with this Agreement that are subject to such confidence.
6.5 Notices of Certain Events. The Company and each Company
Shareholder shall promptly notify the Acquiror of:
(i) any notice or other communication from any Person alleging
that the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or involving
or otherwise affecting the Company or any Company Shareholder that, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 4.12 (p. 14) or that relate to the
consummation of the transactions contemplated by this Agreement.
6.6 Approvals. The Company and the Company Shareholders jointly and
severally agree to use reasonable efforts to obtain all consents, authorizations
or approvals required for completion of the transactions contemplated hereby.
6.7 Public Announcements. Neither the Company nor any Company
Shareholder shall issue any press release or make any public statement with
respect to this Agreement or the transactions contemplated hereby without the
prior written consent of the Acquiror (as to, among other things, the content of
such press release).
6.8 Transfer Taxes. The Company Shareholders shall pay when due all
Transfer Taxes imposed as a result of any transfer of Company Shares or property
of the Company pursuant to the Merger, and the Company Shareholders jointly and
severally agree to indemnify and hold harmless the Acquiror and the Company from
and against any such Transfer Taxes.
6.9 Shareholder Actions. Each Company Shareholder shall take all
actions available to it to cause the Company to comply with the covenants set
forth in this Article 6, including but not limited to voting its Company Shares
in opposition to any action that would violate such covenants and voting its
Company Shares in favor of actions taken to cause the Company to comply with
such covenants (including without limitation the removal of directors).
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7. Acquiror Covenants
7.1 Confidentiality. Before the Closing Date and after any
termination of this Agreement, the Acquiror shall hold, and shall use its best
efforts to cause its officers, directors, employees, accountants, counsel,
consultants, advisors and agents to hold, in confidence, unless compelled to
disclose by judicial or administrative process or by other requirements of law,
all documents and information concerning the Company furnished to the Acquiror
in connection with the transactions contemplated by this Agreement, except to
the extent that such information can be shown to have been (a) previously known
on a non-confidential basis by the Acquiror, (b) in the public domain other than
by reason of the Acquiror's violation of this Section or (c) later lawfully
acquired by the Acquiror from sources other than a Company Shareholder or the
Company and not in breach of any confidentiality agreement with the Company or
the Company Shareholders; provided that the Acquiror may disclose such
information to its officers, directors, employees, accountants, counsel,
consultants, advisors and agents in connection with the transactions
contemplated by this Agreement, so long as such Persons are informed by the
Acquiror of the confidential nature of such information and are directed by the
Acquiror to treat such information confidentially. The obligation of the
Acquiror to hold any such information in confidence shall be satisfied if it
exercises the same care with respect to such information as it would take to
preserve the confidentiality of its own similar information. If this Agreement
is terminated, the Acquiror shall, and shall use its best efforts to cause its
officers, directors, employees, accountants, counsel, consultants, advisors and
agents to, destroy or deliver to the Company, upon request, all documents and
other materials, and all copies thereof, obtained by or on behalf of the
Acquiror from the Company Shareholders and the Company in connection with this
Agreement that are subject to such confidence.
7.2 Payment of Certain Liabilities. The Acquiror shall pay on the
Closing Date one-half of the following liabilities of the Company, and shall pay
within thirty days after the Closing Date the balance of the following
liabilities of the Company: (i) liabilities for accrued compensation in the
amount of $25,384.60 to Sean Whelan and $17,500 to Ross Mayfield and (ii) up to
$25,000 of liabilities of the Company and the Company Shareholders for expenses
incurred for legal counsel and accountants in connection with this Agreement and
the transactions contemplated hereby.
7.3 Director. The Acquiror shall use its best efforts to cause Sean
Whelan (or, if he is not able or willing to serve, one of the Company
Shareholders designated by the Majority Company Shareholders) to be nominated
and elected to the board of directors of the Acquiror as soon as reasonably
practicable after the Merger Time, subject to the following conditions
precedent: (i) if the Company Shareholder so designated is not Sean Whelan, it
is another individual reasonably acceptable to the Acquiror, (ii) the person so
designated shall cooperate in the preparation of the relevant proxy statement
and furnish all information required for such proxy statement and (iii) the
person so designated shall not have been convicted of a felony or violation of
any securities laws, or otherwise be unqualified to serve as a director of the
Acquiror.
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7.4 Officers and Directors Insurance Coverage. For at least five
years after the Merger Time the Buyer shall use its best efforts to provide
officers' and directors' liability insurance covering the Person referred to in
Section 7.3 on terms no less favorable than customarily maintained by similar
companies (and in any event on terms no less favorable than maintained for
similarly-situated directors of the Acquiror).
7.5 Stock Ownership After Merger.
(a) Maintenance of Ownership of Newco. Until the first anniversary
of the Closing Date, the Acquiror shall not, without the prior written
approval of the Majority Company Shareholders (which shall not unreasonably
be withheld):
(i) take any action, or cause or permit Newco to take any action
(including without limitation the issuance, sale, transfer or disposition of
any capital stock of Newco or options or warrants to acquire capital stock
of Newco, the modification of the terms of any outstanding securities of
Newco or any recapitalization or similar transaction), if as a result the
Acquiror would (x) own less than 50% of the outstanding common stock of
Newco, (y) be entitled to less than 50% of the votes to be cast in the
election of directors of Newco or (z) be entitled to less than 50% of the
value to be distributed on liquidation of Newco (in each case on a
fully-diluted basis, i.e. assuming exercise of all options and warrants to
acquire capital stock of Newco);
(ii) cause or permit Newco to sell or dispose of all or
substantially all of its assets or to merge, consolidate or combine with any
other Person; or
(iii) cause or permit Newco to issue any capital stock of Newco
(or options or warrants to acquire capital stock of Newco or other
securities convertible into capital stock of Newco) ("Newco Equity
Securities") except that, so long as clause (i) above is not violated:
(x) Newco may issue stock options, stock purchase rights and stock
bonuses to employees, consultants, officers and directors of Newco as
compensation for services performed for Newco and
(y) if Newco shall first have given the Company Shareholders, not
less than 30 days before particular Newco Equity Securities are issued:
(A) a notice setting forth the price at which Newco proposes to
issue such Newco Equity Securities, the general terms of such Newco Equity
Securities and the maximum number or amount of such Newco Equity Securities
that it proposes to issue (a "Newco Issuance Notice") and
(B) a form of subscription agreement pursuant to which each
Company Shareholder may commit to purchase the Newco Equity Securities
described in such Newco Issuance Notice, at the price and on the terms
described in such Newco Issuance Notice, up to a maximum number or amount to
be specified by such Company Shareholder (a "Newco Subscription Agreement")
(it being understood that Newco may impose a minimum subscription
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requirement on the Company Shareholders by describing it in such Newco Issuance
Notice, provided that the minimum subscription shall not in any event have a
price in excess of $25,000); then Newco may issue the Newco Equity Securities
described in such Newco Issuance Notice at any time or from time to time during
the 180-day period following the date of such Newco Issuance Notice at the price
set forth in such Newco Issuance Notice (or a price that is less favorable to
the purchaser) and up to the maximum number or amount set forth in such Newco
Issuance Notice, provided that if any Company Shareholder that properly
completed, executed and delivered a Newco Subscription Agreement within 20 days
after the date of such Newco Issuance Notice is not given the opportunity to
purchase the maximum number or amount of such Newco Equity Securities that it
subscribed for:
(1) Newco shall not issue any such Newco Equity Securities to any
Person other than a Company Shareholder unless the aggregate amount or
number of such Newco Equity Securities issued to the Company Shareholders is
not less than the amount or number of such Newco Equity Securities issued to
other Persons (i.e. not less than 50% of such Newco Equity Securities are
issued to Company Shareholders); and
(2) if there is more than one such Company Shareholder, the number
or amount of Newco Equity Securities that each such Company Shareholder is
given the opportunity to purchase shall be allocated among them in
proportion to the number of Company Shares each held immediately before the
Merger.
A Company Shareholder who subscribes for Newco Equity Securities may, at its
option, pay all or a portion of the purchase price for such Newco Equity
Securities by transferring to Newco the Acquiror Note payable to such Company
Shareholder, and Newco will treat each Acquiror Note so transferred as if it
were cash in an amount equal to its principal amount plus the amount of accrued
and unpaid interest at the date so transferred.
(b) Protection of Pledged Stock. Until payment of all principal,
interest and other amounts payable on the Acquiror Notes, the Acquiror shall
not, without the prior written approval of the Majority Company Shareholders
(which shall not unreasonably be withheld):
(i) take any action, or cause or permit Newco to take any action
prohibited by subsection (a);
(ii) cause or permit Newco to issue capital stock to the Acquiror;
(iii) sell, transfer or dispose of, or create or suffer to exist
any Lien on, the shares of Newco common stock held by the Acquiror;
(iv) cause or permit Newco to incur any indebtedness for borrowed
money;
(v) create or suffer to exist any Lien on any assets of Newco;
(vi) cause or permit Newco to sell, transfer or dispose of any
assets of Newco, other than sales in the ordinary course of business or in
exchange for fair market value and other than the disposition or abandonment
of assets that are obsolete or no longer usable in Newco's business; or
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(vii) cause or permit Newco to issue options or warrants to purchase Newco's
capital stock unless: (A) the exercise price thereof is not less than
the fair market value of such stock at the time of issuance of such
option or warrant, as determined by the Board of Directors of Newco, and
(B) the aggregate number of shares issuable on exercise of such options,
if issued, would not (x) constitute more than 10% of the outstanding
common stock of Newco, (y) entitle the holders in the aggregate to more
than 10% of the votes to be cast in the election of directors of Newco
or (z) entitle the holder in the aggregate to more than 10% of the value
to be distributed on liquidation of Newco.
7.6 Approvals. The Acquiror shall obtain all consents,
authorizations or approvals required for it to complete the Merger.
7.7 Public Announcements. The Acquiror shall consult the chief
executive officer of the Company before issuing any press release or making any
public statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange, shall not issue any such press release or
make any such public statement prior to such consultation.
7.8 Federal Tax Cooperation. From time to time, before and after
the Closing Date, the Acquiror and Newco agree to treat the Merger as a
reorganization under Section 368(a)(2)(D) of the Internal Revenue Code and
shall, at the request and expense of the Company Shareholders, sign, file and
prepare filings and other documents, and take other actions and refrain from
taking other actions, in each case to the extent commercially reasonable, so
that the Merger will qualify as a reorganization under Section 368(a)(2)(D) of
the Internal Revenue Code. Neither the Acquiror nor Newco, however, is making
any representation as to, or undertaking any liability on account of, the
characterization or treatment of the transactions contemplated hereby for the
purpose of United States federal income taxes or any other Tax measured by the
net or gross income of any party.
7.9 Transfer Taxes. The Acquiror shall pay when due all Transfer
Taxes imposed as a result of any transfer of Acquiror Shares or Acquiror Notes
pursuant to the Merger, and the Acquiror agrees to indemnify and hold harmless
the Company Shareholders from and against any such Transfer Taxes.
8. Investor Matters
8.1 Representations and Warranties. Each Company Shareholder hereby
represents and warrants as to itself that:
(a) Such Company Shareholder is an "accredited investor" as
defined in Section 501 of Regulation D issued under the 1933 Act.
(b) Such Company Shareholder, either alone or with the assistance
of such Company Shareholder's professional advisors, has such knowledge and
experience in financial and business matters that it is capable of
evaluating the merits and risks of such Company Shareholder's investment in
the Acquiror.
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(c) Such Company Shareholder has either spoken or met with, or
been given reasonable opportunity to speak with or meet with,
representatives of the Acquiror for the purpose of asking questions of, and
receiving answers and information from, such representatives concerning such
Company Shareholder's investment in the Acquiror.
(d) Such Company Shareholder has sufficient financial resources to
be able to bear the risk of such Company Shareholder's investment in the
Acquiror.
(e) Such Company Shareholder will acquire the Acquiror Shares for
its own account for investment purposes and not with a view toward the sale
or distribution of all or any part of the Acquiror Shares. No one other than
such Company Shareholder will have any beneficial interest in the Acquiror
Shares acquired by such Company Shareholder.
8.2 Securities Legended and Not Registered. Each Company
Shareholder understands and agrees that, because the Acquiror Shares will not be
Registered, (i) the Acquiror Shares will have the status of securities acquired
in a transaction under Section 4(2) of the 1933 Act; and (ii) the Acquiror
Shares cannot be sold unless it or they are Registered or an exemption from
Registration is available. Each Company Shareholder agrees that it will in no
event sell or distribute all or any part of the Acquiror Shares unless (a) there
is an effective registration statement under the 1933 Act and applicable state
securities laws covering any such transaction involving the Acquiror Shares or
(b) the Acquiror receives an opinion of counsel for such Company Shareholder of
recognized expertise in securities regulation, in form and substance reasonably
acceptable to the Acquiror, stating that such transaction is exempt from
Registration, or (3) the Acquiror otherwise satisfies itself that such
transaction is exempt from Registration.
Such Company Shareholder consents to (A) the placing of a legend
to the foregoing effect on all certificates representing the Acquiror Shares,
stating that such securities have not been Registered and setting forth the
restriction on transfer contemplated hereby and (B) the placing of a stop
transfer order on the books of the Acquiror and with any transfer agents against
the Acquiror Shares, as deemed necessary by the Acquiror to comply with such
restrictions. Each Company Shareholder understands that, except pursuant to the
Registration Rights Agreement, the Acquiror has no obligation to such Company
Shareholder to Register the Acquiror Shares, and has not represented to such
Company Shareholder that it will Register the Acquiror Shares.
9. Survival; Indemnification
9.1 Survival. The covenants, agreements, representations and
warranties of the Acquiror and each Company Shareholder (but not the Company)
contained in this Agreement or in any certificate or other writing delivered
pursuant hereto or in connection herewith shall survive until eighteen months
after the Closing Date or, in the case of the representations and warranties
contained in Sections 4.2, 4.5, 4.14, 4.15, 4.17, 4.18, 4.19, 5.2, 5.5, 5.9 and
5.10 and the covenant contained in Section 6.8 (p. 22), until expiration of the
applicable statutory period of limitations (giving effect to any waiver,
mitigation or extension thereof), if later. Notwithstanding the preceding
sentence, any covenant, agreement, representation or warranty in respect of
which indemnity may be sought under Section 9.2 shall survive the time at which
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it would otherwise terminate pursuant to the preceding sentence, if notice of
the inaccuracy or breach thereof giving rise to such right to indemnity shall
have been given to the party against whom such indemnity may be sought prior to
such time. The covenants, agreements, representations and warranties of the
Company contained in this Agreement shall expire upon the purchase and sale of
the Company Shares pursuant to this Agreement.
9.2 Indemnification.
(a) The Company Shareholders shall jointly and severally indemnify
the Acquiror (and, effective at the Closing Date, the Company) against, and
hold them harmless from, any and all damages, losses, liabilities and
expenses (including without limitation reasonable expenses of investigation
and reasonable attorneys' fees and expenses in connection with any action,
suit or proceeding) (other than Company Closing Liabilities, to the extent
the principal amount of the Acquiror Notes and the number of Acquiror Shares
delivered are reduced on account thereof pursuant to Section 2.5 (p. 9))
("Damages") incurred or suffered by the Acquiror or the Company arising out
of (i) the conduct of the Acquiror's due diligence investigation of the
Company and pursuit of the transactions contemplated hereby and (ii) any
misrepresentation or breach of warranty, covenant or agreement made or to be
performed by any Company Shareholder pursuant to this Agreement, provided in
the case of Damages arising out of any Company Shareholder's
misrepresentation or breach of a provision of Article 8, each Company
Shareholder's indemnity shall extend only to Damages arising out of its own
misrepresentation or breach, and not that of other Company Shareholders.
(b) The Company Shareholders shall have no obligation pursuant to
subsection (a) unless the total amount that would be payable by the Company
Shareholders to the Acquiror pursuant to such subsection for all Damages
indemnified hereunder (without regard to the limitation in this subsection)
exceeds $200,000. After the Merger Time, no Company Shareholder shall have
any obligation to the Acquiror on account of Damages arising out of the
conduct of the Acquiror's due diligence investigation of the Company and
pursuit of the transactions contemplated hereby or any misrepresentation or
breach of warranty, covenant or agreement made or to be performed by any
Company Shareholder pursuant to this Agreement (other than those in Articles
2, 6 and 8), except pursuant to subsection (a). The Acquiror's recourse for
the obligations of the Company Shareholders pursuant to subsection (a) shall
be limited to the remedies set forth in the Shareholder Pledge Agreement.
(c) The Acquiror hereby indemnifies each Company Shareholder
against and agrees to hold them harmless from any and all Damages incurred
or suffered arising out of any misrepresentation or breach of warranty,
covenant or agreement made or to be performed by the Acquiror pursuant to
this Agreement.
(d) After the Merger Time, neither the Acquiror nor the Company
shall have any obligation to the Company Shareholders on account of Damages
arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by the Acquiror pursuant to this Agreement
(other than those in Articles 2 and 7), except pursuant to subsection (c).
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9.3 Procedures. (a) The party seeking indemnification under Section
9.2 (the "Indemnified Party") agrees to give prompt notice to the party against
whom indemnity is sought (the "Indemnifying Party") of the assertion of any
claim, or the commencement of any suit, action or proceeding in respect of which
indemnity may be sought. The Indemnifying Party may at the request of the
Indemnified Party participate in and control the defense of any such suit,
action or proceeding at its own expense, provided that failure by the
Indemnifying Party to notify the Indemnified Party of its election to control
the defense of any such suit, action or proceeding within 30 days after notice
thereof is given to the Indemnifying Party shall be deemed a waiver by the
Indemnifying Party of its right to control the defense of such suit, action or
proceeding. The Indemnifying Party shall not, in the defense of any such suit,
action or proceeding, consent to the entry of any judgment or enter into any
settlement (except, in each case, with the written consent of the Indemnified
Party, which consent shall not unreasonably be withheld) which does not include,
as to the Indemnified Party, an unconditional release of the Indemnified Party
from any and all liability in respect of such suit, claim or proceeding. The
Indemnified Party shall cooperate reasonably in the defense of any such suit,
action or proceeding.
(b) If the Indemnifying Party does not assume the defense of any
suit, action or proceeding, the Indemnified Party may defend, but shall have no
obligation to defend, against such suit, action or proceeding in any manner that
it may deem appropriate and, unless the Indemnifying Party deposits with the
Indemnified Party a sum equivalent to the total amount demanded in such suit,
claim or proceeding plus the Indemnified Party's estimate of the cost of
defending the same, the Indemnified Party may settle such claim or litigation on
such terms as it may deem appropriate and the Indemnifying Party shall promptly
reimburse the Indemnified Party for the amount of such settlement and for all
losses and expenses, legal or otherwise, incurred by the Indemnified Party in
connection with the defense against or settlement of such claim or litigation.
10. Termination
10.1 Grounds for Termination. This Agreement may be terminated at
any time prior to satisfaction of the conditions precedent to be satisfied on
the Closing Date:
(i) by mutual written agreement of the Majority Company
Shareholders and the Acquiror;
(ii) by the Majority Company Shareholders upon (x) the failure on
the Closing Date of a condition to the Company Shareholders' obligation to
consummate the Merger set forth in Section 3.3 (p. 10), but only if the
conditions set forth in Sections 3.1 and 3.2 are satisfied (or satisfaction
of such conditions is tendered by the Company and the Company Shareholders)
on or before the Closing Deadline or (y) the repudiation by the Acquiror of
this Agreement or its obligations hereunder in writing or breach by the
Acquiror of its obligations under Article 7 (p. 23), if the Acquiror fails
to cure such breach within five Business Days after written notice from the
Majority Company Shareholders specifying such breach and referring to this
Section;
-29-
<PAGE>
(iii) by the Acquiror upon (x) the failure on the Closing Date of
a condition to the Acquiror's obligation to consummate the Merger set forth
in Section 3.2 (p. 10), but only if the conditions set forth in Sections 3.1
and 3.3 are satisfied (or satisfaction of such conditions is tendered by the
Acquiror) on or before the Closing Deadline or (y) the repudiation by the
Company or any Company Shareholder of this Agreement or its obligations
hereunder in writing or breach by the Company or any Company Shareholder of
its obligations under Article 6 (p. 20), if the Company or such Company
Shareholder fails to cure such breach within five Business Days after
written notice from the Acquiror to the Company Shareholders specifying such
breach and referring to this Section;
(iv) by either the Acquiror or the Majority Company Shareholders,
upon the failure on the Closing Date of a condition to all parties'
obligations set forth in Section 3.1 (p. 9), or if the Merger is not
consummated in circumstances other than those described in clauses (ii) and
(iii) above.
The party or parties desiring to terminate this Agreement shall give notice of
such termination to the other party or parties.
10.2 Effect of Termination. If this Agreement is terminated, each
party shall remain fully liable for any and all Damages incurred or suffered by
the another party as a result of such party's breach of this Agreement.
11. Miscellaneous
11.1 Notices. All notices and other communications hereunder shall
be in writing (including facsimile transmission), and shall be given to each
party at the address or telecopier number set forth under its name on the
signature page hereof, or such other address or telecopier number as such party
may hereafter specify for the purpose by notice to the other. Each such notice
or other communication shall be effective (a) if given by mail, 72 hours after
such communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (b) otherwise, when delivered at the address or
received at the telecopier number specified in this Section.
11.2 Amendment; No Waivers; Integration. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by the Acquiror, the Company
and the Majority Company Shareholders or, in the case of a waiver, by the party
against whom the waiver is to be effective (or, in the case of waiver that is to
be effective against any Company Shareholder, by the Majority Company
Shareholders). No failure or delay by any party 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. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law. This Agreement, together with the exhibits and schedules
hereto, constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, among any of the parties with respect to
the subject matter of this Agreement.
-30-
<PAGE>
11.3 Expenses.
All costs and expenses incurred in connection with this Agreement
shall be paid by the party incurring such cost or expense, except as otherwise
expressly agreed in this Agreement (including without limitation in Sections 2.4
(p. 7) and 7.2 (p. 23). Without limiting the generality of the foregoing, the
Company shall not bear the costs and expenses of the Company Shareholders in
negotiating and entering into this Agreement, providing due diligence
information to the Acquiror, or complying with their obligations hereunder.
11.4 Assignment. No party hereto may assign, delegate or otherwise
transfer any of its obligations or rights under this Agreement.
11.5 Governing Law; Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of New York. Each
party submits to the nonexclusive jurisdiction of the United States District
Court for the Southern District of New York and of any New York state court
sitting in New York County for purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby. Each
party irrevocably waives any objection which it may now or hereafter have to the
laying of venue in any proceeding brought in such a court, and any claim that
any such proceeding was brought in an inconvenient forum.
11.6 Headings. The headings and captions in this Agreement are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
11.7 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement
shall become effective only when each party hereto shall have received
(including without limitation by facsimile transmission) a counterpart hereof
signed by each other party hereto.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first above written.
NETAMERICA.COM CORPORATION
By /s/ Douglas D. Cole
--------------------
Title: Chairman
Address for Notices:
--------------------
1896 School Street
Moraga, California 94556
Telecopier: (925) 377-2010
RATEEXCHANGE, INC.
By /s/ Sean Whelan
----------------
Title: President
Address for Notices (through Closing Date):
-------------------------------------------
c/o Sean Whelan
494 Filbert Street
San Francisco, California 94133
Telecopier: (415) 550-2488
Address for Notices (after Closing Date):
-----------------------------------------
c/o NetAmerica.com Corporation
1896 School Street
Moraga, California 94556
Telecopier: (925) 377-2010
/s/ Sean Whelan
---------------
SEAN WHELAN
Owner of 22,439 Company Shares
Address for Notices:
494 Filbert Street
San Francisco, California 94133
Telecopier: (415) 550-2488
-32-
<PAGE>
/s/ Ross Mayfield
-----------------
ROSS MAYFIELD
Owner of 2,900 Company Shares
Address for Notices:
--------------------
235 Churchill Avenue
Palo Alto, California 94301
Telecopier: (650) 473-9490
/s/ Steven D. Strong
--------------------
STEVEN D. STRONG
Owner of 19,807 Company Shares
Address for Notices:
--------------------
451 Union Street #2
San Francisco, California 94133
Telecopier: (415) 397-5777
/s/ Michael J. Scheele
-----------------------
MICHAEL J. SCHEELE
Owner of 21,098 Company Shares
Address for Notices:
--------------------
435 Alvarado Street
San Francisco, California 94114
Telecopier: (415) 824-2929
/s/ Richard Grange
-------------------
RICHARD C. GRANGE
Owner of 14,679 Company Shares
Address for Notices:
--------------------
1057 Cottonwood Circle
Golden, Colorado
Telecopier: (303) 239-1020
-33-
<PAGE>
/s/ Brad Grunewald
------------------
BRAD K. GRUNEWALD
Owner of 14,679 Company Shares
Address for Notices:
--------------------
1700 Bluff Street
Boulder, Colorado 80304
Telecopier: (303) 278-0728
/s/ Robin Warren
----------------
ROBIN WARREN
Owner of 3,016 Company Shares
Address for Notices:
--------------------
1290 Grove Street
San Francisco, California 94110
Telecopier: (312) 750-5917
/s/ Daniel Yamagishi
--------------------
DANIEL YAMAGISHI
Owner of 886 Company Shares
Address for Notices:
--------------------
930 Acoma Street
Denver, Colorado 80204
Telecopier: (303) 278-0728
/s/ Joe Germanotta
------------------
JOE GERMANOTTA
Owner of 496 Company Shares
Address for Notices:
--------------------
135 West 70th Street, #1A
New York, New York 10023
Telecopier: (212) 579-2120
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<PAGE>
Spousal Consent (Mayfield)
I acknowledge that I know the contents of the foregoing Agreement
and Plan of Merger. I am aware that, by its provisions, my spouse, Ross
Mayfield, agrees to a transaction involving the shares of common stock of
RateExchange, Inc., including my community interest in them, if any, undertakes
certain indemnity and other obligations and pledges certain shares of
NetAmerica.com Corporation. I hereby consent, on behalf of our marital
community, to the transactions contemplated by, and the obligations imposed by,
the foregoing Agreement and Plan of Merger.
/s/ Eneken Mayfield
-------------------
Name: Eneken Mayfield
Spousal Consent (Strong)
I acknowledge that I know the contents of the foregoing Agreement
and Plan of Merger. I am aware that, by its provisions, my spouse, Steven D.
Strong, agrees to a transaction involving the shares of common stock of
RateExchange, Inc., including my community interest in them, if any, undertakes
certain indemnity and other obligations and pledges certain shares of
NetAmerica.com Corporation. I hereby consent, on behalf of our marital
community, to the transactions contemplated by, and the obligations imposed by,
the foregoing Agreement and Plan of Merger.
------------------------------------
Name:
Spousal Consent (Scheele)
I acknowledge that I know the contents of the foregoing Agreement
and Plan of Merger. I am aware that, by its provisions, my spouse, Michael J.
Scheele, agrees to a transaction involving the shares of common stock of
RateExchange, Inc., including my community interest in them, if any, undertakes
certain indemnity and other obligations and pledges certain shares of
NetAmerica.com Corporation. I hereby consent, on behalf of our marital
community, to the transactions contemplated by, and the obligations imposed by,
the foregoing Agreement and Plan of Merger.
------------------------------------
Name:
-35-
<PAGE>
Spousal Consent (Warren)
I acknowledge that I know the contents of the foregoing Agreement
and Plan of Merger. I am aware that, by its provisions, my spouse, Robin A.
Warren, agrees to a transaction involving the shares of common stock of
RateExchange, Inc., including my community interest in them, if any, undertakes
certain indemnity and other obligations and pledges certain shares of
NetAmerica.com Corporation. I hereby consent, on behalf of our marital
community, to the transactions contemplated by, and the obligations imposed by,
the foregoing Agreement and Plan of Merger.
------------------------------------
Name:
Spousal Consent (Germanotta)
I acknowledge that I know the contents of the foregoing Agreement
and Plan of Merger. I am aware that, by its provisions, my spouse, Joe
Germanotta, agrees to a transaction involving the shares of common stock of
RateExchange, Inc., including my community interest in them, if any, undertakes
certain indemnity and other obligations and pledges certain shares of
NetAmerica.com Corporation. I hereby consent, on behalf of our marital
community, to the transactions contemplated by, and the obligations imposed by,
the foregoing Agreement and Plan of Merger.
/s/ Cynthia Bissett Germanotta
------------------------------
Name:
-36-
Mooney Employment Agreement
Employment Agreement
AGREEMENT dated as of April 1, 1999 between NetAmerica
International Corporation (the "Company") and Edward P. Mooney (the "Employee").
The Company and the Employee agree as follows:
1. Employment. (a) The Company hereby employs the Employee as its
Executive Vice President, and the Employee accepts such employment and agrees to
perform the services described in this Section 1 in accordance with this
Agreement.
(b) The duties of the Employee shall be those customary for an
Executive Vice President, including without limitation engagement in all aspects
of new business development for the Company; merger and acquisition work,
investor relations, technical due diligence and other duties included in the day
to day running of the business as designated by the Chief Executive Officer. In
the execution of his duties, the Employee shall report to the Chief Executive
Officer. The Employee is hereby also engaged to serve, without compensation
other than that provided in this Agreement, as a member of the Board of
Directors of the Company during the term of Employee's employment with the
Company. The Employee shall use his best efforts to promote the interest of the
Company.
2. Term. The Employee's employment shall provide begin on April 1,
1999 and continue until the term of the Employee's employment is terminated
pursuant to Section 5.
3. Compensation. (a) Base Salary. For the duration of the
Employee's employment, the Employee shall be paid a base salary of $10,000 per
calendar month. The base salary shall be prorated for actual periods of
employment that are less than a calendar month, and shall be payable monthly in
arrears.
(b) Stock Options. The Company shall issue to the Employee options
to purchase 100,000 shares of common stock of the Company at $1.60 per share
("Options") upon commencement of the term of the Employee's employment. The
Company and the Employee shall enter into a mutually acceptable stock option
agreement as promptly as practicable, which shall provide that:
(i) All Options shall be vested and exercisable on issuance as set
forth above, and shall be exercisable for a period of 5 years from the
date of issuance.
(ii)The Employee shall have the option at any time to effect a
cashless exercise of all Options that are then issued and vested (but not
less than all). Such cashless exercise shall be based upon the average
closing bid price of the shares for a 30-day period ending on the day one
business day prior to the date of notice of exercise (the "Market Price")
and shall constitute a conversion of the exercised Options into such
number of shares whose value at the Market Price is equal to the
"in-the-money" value of the Options exercised. The "in-the-money" value
of the Options means (x) the aggregate value of all shares issuable on
exercise of the Options, at the Market Price, minus (y) the aggregate
price payable on exercise of the Options.
1
<PAGE>
(iii) The Employee shall from time to time enter into customary
"lock-ups" or restrictions on trading securities of Company at the
request of underwriters of securities of the Company, on terms and
conditions substantially similar to those agreed to by directors and
principal shareholders of the Company.
Such agreement shall also contain terms and conditions customary for similar
issuances of options (including without limitation provisions by which the
number of shares and exercise price for the Options would be adjusted for stock
splits, recapitalizations, and be subject to customary to anti-dilution
protections).
(c) Discretionary Bonus. The Company may pay the Employee cash
bonuses, in amounts to be determined by the Board of Directors of the Company
(other than the Employee) or a compensation committee of the Board of Directors,
of up to 100% of his salary. The determination of the amount of such bonus will
be determined by the Board of Directors of the Company or its compensation
committee in its sole discretion.
(d) Special Bonus. In addition, the Company shall pay the Employee
a cash bonus of $125,000 upon the receipt by the Company, on or before December
31, 1999 of at least $3,000,000 aggregate net proceeds from borrowing and
issuance of debt or equity securities. It is understood that the Company's Board
of Directors will determine whether to pursue or complete a financing
transaction, and in making such determination the Board shall have no obligation
to the Employee, but shall act in accordance with its fiduciary duty to
Company's shareholders generally. 4. Other Benefits. (a) General Programs. The
Employee shall be entitled to participate in the employee benefit programs
established by the Company, such as medical, pension, disability and life
insurance plans, to the extent that the Employee is eligible for such benefits
in accordance with the Company's policies, as they may be changed from time to
time. Nothing in this Agreement requires the adoption or maintenance of any such
arrangements or plans. So long as the Company is not providing medical insurance
to the Employee, the Company will reimburse the Employee for all reasonable
costs he incurs in obtaining medical insurance coverage (pursuant to COBRA or
otherwise).
(b) Expense Reimbursement. The Company shall reimburse the
Employee for reasonable expenses necessarily incurred in the performance of the
Employee's duties that are pre-approved and otherwise incurred in accordance
with the Company's policies.
(b) Indemnification. The Company shall indemnify and hold harmless
the Employee from and against losses, liabilities and claims of third parties to
the maximum extent to which the Company is permitted by applicable law to
indemnify the Employee as an officer and director of the Company, provided that
the Company shall have no obligation to indemnify the Employee against losses,
claims or liabilities arising out of the Employee's breach of this Agreement or
the willful misconduct or gross negligence of the Employee.
5. Termination by the Company. (a) Termination For Cause. The
Company may terminate immediately the Employee's employment with the Company
(and the Company's obligations under this Agreement) for Cause. "Cause" means
any of the following: (i) breach of the Employee's obligations hereunder, (ii)
commission of fraud or material deception, whether or not in connection with the
Employee's employment by the Company, (iii) commission of a criminal offense,
whether or not in connection with the Employee's employment by the Company, (iv)
destruction or theft of the Company's property or (v) use by the Employee of
2
<PAGE>
drugs or alcohol to an extent that impairs the Employee's performance hereunder.
Upon termination of the Employee's employment pursuant to this subsection, or
upon the death of the Employee, all obligations of the Company to pay fees and
compensation and provide benefits to the Employee, and the Company's other
obligations hereunder, shall cease.
(b) Termination Without Cause. The Company may at any time
terminate the Employee's employment with the Company without cause. If the
Company elects to terminates the Employee's employment without cause, the
Company shall provide the Employee with written notice of such election (a
"Notice of Termination Without Cause"), setting forth the day such termination
will be effective (which may be the date of such notice or any time thereafter).
Notwithstanding any such termination, the Company shall pay to the Employee his
base salary pursuant to Section 3(a) for the remainder of the Severance Period,
including without limitation the portion of the Severance Period (if any) after
the termination of the Employee's employment becomes effective. The "Severance
Period" means the period beginning on the date the Company gives Employee a
Notice of Termination Without Cause and ending 180 days thereafter (or upon the
earlier termination with Cause). Such payments shall be made monthly in arrears
in accordance with the Company's normal payroll practices, and shall be subject
to appropriate deductions and withholding. The Company may elect to terminate
the Employee's employment earlier than the date stated in a Notice of
Termination Without Cause, but shall remain obligated to make payments pursuant
to this subsection for the remainder of the Severance Period. Upon termination
of the Employee's employment pursuant to this subsection, all obligations of the
Company to pay compensation and provide benefits to the Employee, other than
payment of base salary as set forth above in this Section, shall cease.
6. Covenant Not To Compete. During the period beginning on the
date hereof and ending on termination of the Employee's employment with the
Company (or, if later, at the end of the Severance Period), the Employee
covenants and agrees that the Employee shall not:
(a) directly or indirectly manage, operate, control, serve as a
employee to, be employed by, participate in, own or invest in any
business which competes with the Company (except for the passive
ownership of up to 5% of the common stock of any publicly-traded
company);
(b) hire, offer to hire, entice away or in any other manner
persuade or attempt to persuade any officer, employee or agent of the
Company to alter or discontinue his or her relationship with the Company;
(c) directly or indirectly solicit, divert, or attempt to solicit
or divert any customers or business of the Company; or
(d) directly or indirectly solicit, divert, or in any other manner
persuade or attempt to persuade any supplier or the Company to alter or
discontinue its relationship with the Company.
The Company and the Employee agree that this provision does not impose an undue
hardship on the Employee and is not injurious to the public; that this provision
is necessary to protect the valuable goodwill and the business of the Company;
that the nature of the Employee's responsibilities with the Company under this
Agreement require the Employee to have access to confidential information which
is valuable and confidential to the Company; and that the scope of this Section
is reasonable in terms of length of time and geographic scope.
3
<PAGE>
7. Confidentiality. The Employee acknowledges that by reason of
his employment, he will have access to trade secrets and confidential or
proprietary information belonging to the Company and its affiliates (including
without limitation Maroon Bells Capital Partners, Inc. and its affiliates),
including but not limited to: subscriber lists, potential subscribers and
methods of identifying potential subscribers, marketing plans, business plans,
long range plans, contract terms, compensation information, other information
about users (and potential users) of the Company's products and services,
financial information, computer programs and pricing and cost information. The
Employee agrees that during the Employee's employment and for an indefinite
period after termination of his employment (whether by the Company or the
Employee and whether with or without Cause) the Employee shall not directly or
indirectly use, reveal or divulge any trade secrets or confidential or
proprietary information belonging to the Company or its affiliates for any
reason. The Employee's obligation under this provision is in addition to any
obligations the Employee has under applicable law. The Employee agrees not to
violate in any way the rights that the Company or affiliates have with regard to
trade secrets or proprietary or confidential information.
8. Remedies. Notwithstanding other provisions of this Agreement
regarding dispute resolution, the Employee agrees that the Employee's violation
of either Sections 6 or 7 of this Agreement would cause the Company or its
affiliates irreparable harm which would not be adequately compensated by
monetary damages, and that an injunction may be granted by any court or courts
having jurisdiction, restraining the Employee from violation of the terms of
this Agreement, upon any breach or threatened breach by the Employee of
obligations set forth in either Section 6 or 7. The preceding sentence shall not
be construed to limit the Company or its affiliates from any other relief or
damages to which it may be entitled to as a result of the Employee's violation
of any obligation owed the Company under law or provision of this Agreement,
including either Section 6 or 7.
9. Dispute Resolution. Any controversy, claim or dispute of
whatever nature arising out of or relating to this Agreement, whether such
controversy, claim or dispute is based upon statute, contract, tort, common law
or otherwise, and whether such controversy, claim or dispute existed prior to or
arises after the date of this Agreement (any such controversy, claim or dispute
being a "Dispute"), shall be resolved in accordance with the procedures set
forth in this Section 9, which procedures shall be the sole and exclusive
procedures for the resolution of any Disputes (except as otherwise provided in
Section 8).
All Disputes shall be resolved by arbitration in San Francisco,
California, in accordance with the then current Non-Administered International
Arbitration Rules & Commentary of the CPR Institute by a sole arbitrator who has
had both training and experience as an arbitrator of general corporate,
commercial and employment matters and who is and for at least ten years has
been, a partner, shareholder or member in a law firm. If the Company and
Employee cannot agree on an arbitrator, then the arbitrator shall be selected by
the President of the CPR Institute in accordance with the criteria set forth in
the preceding sentence. The arbitrator may decide any issue as to whether, or as
to the extent to which, any Dispute is subject to the arbitration and other
dispute resolution provisions in this Agreement. The arbitrator must: (i) base
and render his or her award on the provisions of this Agreement and (ii) render
his or her award in a writing including an explanation of the reasons for such
award and the provisions of this Agreement supporting such award. Judgment upon
the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The statute of limitations applicable to the commencement
of a lawsuit shall apply to the commencement of an arbitration under this
subsection. The Employee acknowledges and agrees that the Employee has been
given the opportunity to negotiate this provision. No exercise of any rights
under this Section 9 shall limit the right of the Company or the Employee
pursuant to this Agreement to commence any judicial proceeding to obtain
injunctive relief. Reasonable attorneys' fees and expenses of arbitration
incurred in any Dispute relating to the interpretation or enforcement of this
Agreement shall be paid by the prevailing party in such Dispute.
4
<PAGE>
10. Representation of the Employee. The Employee represents and
warrants to the Company that the Employee is free to enter into this Agreement
and that he does not have any commitment, arrangement or understanding to or
with any party which restrains or is in conflict with the Employee's performance
of the covenants, services and duties provided for in this Agreement. The
Employee agrees to indemnify the Company and to hold it harmless against any and
all liabilities or claims arising out of breach of this representation and
warranty.
11. Miscellaneous. (a) Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission or similar writing) and shall be given,
if to the Employee:
-------------------
Telecopier:
if to the Company:
------------------
c/o
Telecopier:
with a copy to:
---------------
Scot J. Johnston
Dorsey & Whitney LLP
1420 Fifth Avenue
Seattle, Washington 98101
or such other address or telecopier number as such party may hereafter specify
for the purpose by notice to the others. Each such notice, request or other
communication shall be effective (a) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (b) otherwise, when delivered at the address or
received at the telecopier number specified in this Section. Failure to provide
a copy of any notice to a person that is not a party to this Agreement shall not
affect the effectiveness of the notice to such party.
(b) Amendment; No Waivers; Integration. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by each party hereto, or, in
the case of a waiver, by the party against whom the waiver is to be effective.
5
<PAGE>
No failure or delay by any party 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. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
This Agreement, together with the exhibits and schedules hereto, constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, among any of the parties with respect to the subject matter of this
Agreement.
(c) Assignment. Neither party hereto may assign, delegate or
otherwise transfer any of its obligations or rights or obligations under this
Agreement, provided that the Company may assign its rights and obligations under
this Agreement to a successor by sale, merger or liquidation, if such successor
carries on the Company's business substantially in the form in which it is being
conducted at the time of the sale, merger or liquidation.
(d) Disclosure. The Employee agrees to reveal the terms of this
Agreement to any future employer or potential employer of the Employee and
authorizes the Company, at its election, to make such disclosure.
(e) Right of Set-off. By accepting this Agreement, the Employee
consents to a deduction from any amounts the Company owes the Employee from time
to time (including amounts owed to the Employee as wages or other compensation,
or vacation pay, as well as any other amounts owed to the Employee by the
Company), to the extent of the amounts the Employee owes the Company. Whether or
not the Company elects to make any set-off in whole or in part, if the Company
does not recover by means of set-off the full amount the Employee owes it,
calculated as set forth above, the Employee agrees to pay immediately the unpaid
balance to the Company.
(f) Severability. In the event that any provision of this
Agreement or compliance by any of the parties with any provision of this
Agreement shall constitute a violation of any law, or be unenforceable or void,
then such provision, to the extent only that it is in violation of law, void or
unenforceable, shall be deemed modified to the extent necessary so that it is no
longer unenforceable, void or in violation of law. If such modification is not
possible, said provision, to the extent that it is in violation of law, void or
unenforceable, shall be deemed severable from the remaining provisions of this
Agreement, which provisions shall remain binding on the parties.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
(h) Headings.The headings and captions in this Agreement are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
(i) Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date hereof.
6
<PAGE>
NETAMERICA INTERNATIONAL CORPORATION
By________________________________
Title:
--------------------------------
EDWARD P. MOONEY
7
Employment Agreement
AGREEMENT dated as of April 1, 1999 between NetAmerica International
Corporation (the "Company") and Doug Cole (the "Employee").
The Company and the Employee agree as follows:
1. Employment. (a) The Company hereby employs the Employee as its
Chairman, and the Employee accepts such employment and agrees to perform the
services described in this Section 1 in accordance with this Agreement.
(b) The Employee shall provide services and business advice to the
Company as needed by the Company from time to time during the term of the
Employee's employment, include without limitation identification of business
acquisition opportunities, the provision of strategic advice regarding the
Company's business generally, detailed review of the Company's business and
operating plans, advice regarding and (as required) representation of the
Company in negotiations with sources of debt and equity financing, potential
acquisition targets and others, and such assistance as the Chief Executive
Officer or the Board of Directors of the Company may require from time to time.
In the execution of his duties, the Employee shall report to the Board of
Directors. The Employee is hereby also engaged to serve, without compensation
other than that provided in this Agreement, as a member of, and as Chairman of,
the Board of Directors of the Company during the term of Employee's employment
with the Company. The Employee shall use his best efforts to promote the
interest of the Company.
2. Term. The Employee's employment shall begin on April 1, 1999
and continue until the term of the Employee's employment is terminated pursuant
to Section 5.
3. Compensation. (a) Base Salary. For the duration of the
Employee's employment, the Employee shall be paid a base salary of $14,000 per
calendar month. The base salary shall be prorated for actual periods of
employment that are less than a calendar month, and shall be payable monthly in
arrears.
(b) Stock Options. The Company shall issue to the Employee options
to purchase 100,000 shares of common stock of the Company at $1.60 per share
("Options") upon commencement of the term of the Employee's employment. The
Company and the Employee shall enter into a mutually acceptable stock option
agreement as promptly as practicable, which shall provide that:
(i) All Options shall be vested and exercisable on issuance as set
forth above, and shall be exercisable for a period of 5 years from the date
of issuance.
(ii)The Employee shall have the option at any time to effect a
cashless exercise of all Options that are then issued and vested (but not
less than all). Such cashless exercise shall be based upon the average
closing bid price of the shares for a 30-day period ending on the day one
business day prior to the date of notice of exercise (the "Market Price")
and shall constitute a conversion of the exercised Options into such number
of shares whose value at the Market Price is equal to the "in-the-money"
value of the Options exercised. The "in-the-money" value of the Options
means (x) the aggregate value of all shares issuable on exercise of the
Options, at the Market Price, minus (y) the aggregate price payable on
exercise of the Options.
(iii) The Employee shall from time to time enter into customary
"lock-ups" or restrictions on trading securities of Company at the request
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<PAGE>
of underwriters of securities of the Company, on terms and conditions
substantially similar to those agreed to by directors and principal
shareholders of the Company.
Such agreement shall also contain terms and conditions customary for similar
issuances of options (including without limitation provisions by which the
number of shares and exercise price for the Options would be adjusted for stock
splits, recapitalizations, and be subject to customary to anti-dilution
protections).
(c) Discretionary Bonus. The Company may pay the Employee cash bonuses,
in amounts to be determined by the Board of Directors of the Company (other than
the Emplyee) or a compensation committee of the Board of Director, of up to 100%
of his salary. The determination of the amount of such bonus will be determined
by Board of Directors of the Company or its compensation committee in its sole
discretion.
(d) Special Fundraising Bonus. The Company shall pay the Employee a cash
bonus of $125,000 upon the receipt by the Company, on or before December 31,
1999 of at least $3,000,000 aggregate net proceeds from borrowing and issuance
of debt or equity securities.
(e)Special Acquisition Bonus. Upon completion of each transaction
pursuant to which the Company acquires all of the common stock of, or
substantially all of the customers of, another entity, the Company shall pay the
Employee a bonus in cash or in kind of 1% of the aggregate consideration paid by
the Company in such transaction, in the same form in which the Company paid such
consideration in such transaction. It is understood that the Company's Board of
Directors will determine whether to pursue or complete a financing transaction
or acquisition, and in making such determination the Board shall have no
obligation to the Employee, but shall act in accordance with its fiduciary duty
to Company's shareholders generally.
4. Other Benefits. (a) General Programs. The Employee shall be entitled
to participate in the employee benefit programs established by the Company, such
as medical, pension, disability and life insurance plans, to the extent that the
Employee is eligible for such benefits in accordance with the Company's
policies, as they may be changed from time to time. Nothing in this Agreement
requires the adoption or maintenance of any such arrangements or plans. So long
as the Company is not providing medical insurance to the Employee, the Company
will reimburse the Employee for all reasonable costs he incurs in obtaining
medical insurance coverage (pursuant to COBRA or otherwise).
(b) Expense Reimbursement. The Company shall reimburse the
Employee for reasonable expenses necessarily incurred in the performance of
the Employee's duties that are pre-approved and otherwise incurred in
accordance with the Company's policies.
(b) Indemnification. The Company shall indemnify and hold harmless
the Employee from and against losses, liabilities and claims of third
parties to the maximum extent to which the Company is permitted by
applicable law to indemnify the Employee as an officer and director of the
Company, provided that the Company shall have no obligation to indemnify the
Employee against losses, claims or liabilities arising out of the Employee's
breach of this Agreement or the willful misconduct or gross negligence of
the Employee.
5. Termination by the Company. (a) Termination For Cause. The
Company may terminate immediately the Employee's employment with the Company
(and the Company's obligations under this Agreement) for Cause. "Cause" means
any of the following: (i) breach of the Employee's obligations hereunder, (ii)
commission of fraud or material deception, whether or not in connection with the
Employee's employment by the Company, (iii) commission of a criminal offense,
whether or not in connection with the Employee's employment by the Company, (iv)
destruction or theft of the Company's property or (v) use by the Employee of
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<PAGE>
drugs or alcohol to an extent that impairs the Employee's performance hereunder.
Upon termination of the Employee's employment pursuant to this subsection, or
upon the death of the Employee, all obligations of the Company to pay fees and
compensation and provide benefits to the Employee, and the Company's other
obligations hereunder, shall cease.
(b) Termination Without Cause. The Company may at any time
terminate the Employee's employment with the Company without cause. If the
Company elects to terminates the Employee's employment without cause, the
Company shall provide the Employee with written notice of such election (a
"Notice of Termination Without Cause"), setting forth the day such termination
will be effective (which may be the date of such notice or any time thereafter).
Notwithstanding any such termination, the Company shall pay to the Employee his
base salary pursuant to Section 3(a) for the remainder of the Severance Period,
including without limitation the portion of the Severance Period (if any) after
the termination of the Employee's employment becomes effective. The "Severance
Period" means the period beginning on the date the Company gives Employee a
Notice of Termination Without Cause and ending 180 days thereafter (or upon the
earlier termination with Cause). Such payments shall be made monthly in arrears
in accordance with the Company's normal payroll practices, and shall be subject
to appropriate deductions and withholding. The Company may elect to terminate
the Employee's employment earlier than the date stated in a Notice of
Termination Without Cause, but shall remain obligated to make payments pursuant
to this subsection for the remainder of the Severance Period. Upon termination
of the Employee's employment pursuant to this subsection, all obligations of the
Company to pay compensation and provide benefits to the Employee, other than
payment of base salary as set forth above in this Section, shall cease.
6. Covenant Not To Compete. During the period beginning on the date
hereof and ending on termination of the Employee's employment with the Company
(or, if later, at the end of the Severance Period), the Employee covenants and
agrees that the Employee shall not:
(a) directly or indirectly manage, operate, control, serve as a
employee to, be employed by, participate in, own or invest in any
business which competes with the Company (except for the passive
ownership of up to 5% of the common stock of any publicly-traded
company);
(b) hire, offer to hire, entice away or in any other manner
persuade or attempt to persuade any officer, employee or agent of the
Company to alter or discontinue his or her relationship with the Company;
(c) directly or indirectly solicit, divert, or attempt to solicit
or divert any customers or business of the Company; or
(d) directly or indirectly solicit, divert, or in any other manner
persuade or attempt to persuade any supplier or the Company to alter or
discontinue its relationship with the Company.
The Company and the Employee agree that this provision does not impose an undue
hardship on the Employee and is not injurious to the public; that this provision
is necessary to protect the valuable goodwill and the business of the Company;
that the nature of the Employee's responsibilities with the Company under this
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<PAGE>
Agreement require the Employee to have access to confidential information which
is valuable and confidential to the Company; and that the scope of this Section
is reasonable in terms of length of time and geographic scope.
7. Confidentiality. The Employee acknowledges that by reason of
his employment, he will have access to trade secrets and confidential or
proprietary information belonging to the Company and its affiliates (including
without limitation Maroon Bells Capital Partners, Inc. and its affiliates),
including but not limited to: subscriber lists, potential subscribers and
methods of identifying potential subscribers, marketing plans, business plans,
long range plans, contract terms, compensation information, other information
about users (and potential users) of the Company's products and services,
financial information, computer programs and pricing and cost information. The
Employee agrees that during the Employee's employment and for an indefinite
period after termination of his employment (whether by the Company or the
Employee and whether with or without Cause) the Employee shall not directly or
indirectly use, reveal or divulge any trade secrets or confidential or
proprietary information belonging to the Company or its affiliates for any
reason. The Employee's obligation under this provision is in addition to any
obligations the Employee has under applicable law. The Employee agrees not to
violate in any way the rights that the Company or affiliates have with regard to
trade secrets or proprietary or confidential information.
8. Remedies. Notwithstanding other provisions of this Agreement
regarding dispute resolution, the Employee agrees that the Employee's violation
of either Sections 6 or 7 of this Agreement would cause the Company or its
affiliates irreparable harm which would not be adequately compensated by
monetary damages, and that an injunction may be granted by any court or courts
having jurisdiction, restraining the Employee from violation of the terms of
this Agreement, upon any breach or threatened breach by the Employee of
obligations set forth in either Section 6 or 7. The preceding sentence shall not
be construed to limit the Company or its affiliates from any other relief or
damages to which it may be entitled to as a result of the Employee's violation
of any obligation owed the Company under law or provision of this Agreement,
including either Section 6 or 7.
9. Dispute Resolution. Any controversy, claim or dispute of
whatever nature arising out of or relating to this Agreement, whether such
controversy, claim or dispute is based upon statute, contract, tort, common law
or otherwise, and whether such controversy, claim or dispute existed prior to or
arises after the date of this Agreement (any such controversy, claim or dispute
being a "Dispute"), shall be resolved in accordance with the procedures set
forth in this Section 9, which procedures shall be the sole and exclusive
procedures for the resolution of any Disputes (except as otherwise provided in
Section 8).
All Disputes shall be resolved by arbitration in San Francisco,
California, in accordance with the then current Non-Administered International
Arbitration Rules & Commentary of the CPR Institute by a sole arbitrator who has
had both training and experience as an arbitrator of general corporate,
commercial and employment matters and who is and for at least ten years has
been, a partner, shareholder or member in a law firm. If the Company and
Employee cannot agree on an arbitrator, then the arbitrator shall be selected by
the President of the CPR Institute in accordance with the criteria set forth in
the preceding sentence. The arbitrator may decide any issue as to whether, or as
to the extent to which, any Dispute is subject to the arbitration and other
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<PAGE>
dispute resolution provisions in this Agreement. The arbitrator must: (i) base
and render his or her award on the provisions of this Agreement and (ii) render
his or her award in a writing including an explanation of the reasons for such
award and the provisions of this Agreement supporting such award. Judgment upon
the award rendered by the arbitrator may be entered by any court having
jurisdiction thereof. The statute of limitations applicable to the commencement
of a lawsuit shall apply to the commencement of an arbitration under this
subsection. The Employee acknowledges and agrees that the Employee has been
given the opportunity to negotiate this provision. No exercise of any rights
under this Section 9 shall limit the right of the Company or the Employee
pursuant to this Agreement to commence any judicial proceeding to obtain
injunctive relief. Reasonable attorneys' fees and expenses of arbitration
incurred in any Dispute relating to the interpretation or enforcement of this
Agreement shall be paid by the prevailing party in such Dispute.
10. Representation of the Employee. The Employee represents and
warrants to the Company that the Employee is free to enter into this Agreement
and that he does not have any commitment, arrangement or understanding to or
with any party which restrains or is in conflict with the Employee's performance
of the covenants, services and duties provided for in this Agreement. The
Employee agrees to indemnify the Company and to hold it harmless against any and
all liabilities or claims arising out of breach of this representation and
warranty.
11. Miscellaneous. (a) Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including facsimile
transmission or similar writing) and shall be given,
if to the Employee:
-------------------
Telecopier:
if to the Company:
------------------
c/o
Telecopier:
with a copy to:
---------------
Scot J. Johnston
Dorsey & Whitney LLP
1420 Fifth Avenue
Seattle, Washington 98101
or such other address or telecopier number as such party may hereafter specify
for the purpose by notice to the others. Each such notice, request or other
communication shall be effective (a) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (b) otherwise, when delivered at the address or
received at the telecopier number specified in this Section. Failure to provide
a copy of any notice to a person that is not a party to this Agreement shall not
affect the effectiveness of the notice to such party.
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<PAGE>
(b) Amendment; No Waivers; Integration. Any provision of this
Agreement may be amended or waived if, and only if, such amendment or waiver is
in writing and signed, in the case of an amendment, by each party hereto, or, in
the case of a waiver, by the party against whom the waiver is to be effective.
No failure or delay by any party 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. The rights and remedies herein provided
shall be cumulative and not exclusive of any rights or remedies provided by law.
This Agreement, together with the exhibits and schedules hereto, constitutes the
entire agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements, understandings and negotiations, both written
and oral, among any of the parties with respect to the subject matter of this
Agreement.
(c) Assignment. Neither party hereto may assign, delegate or
otherwise transfer any of its obligations or rights or obligations under this
Agreement, provided that the Company may assign its rights and obligations under
this Agreement to a successor by sale, merger or liquidation, if such successor
carries on the Company's business substantially in the form in which it is being
conducted at the time of the sale, merger or liquidation.
(d) Disclosure. The Employee agrees to reveal the terms of this
Agreement to any future employer or potential employer of the Employee and
authorizes the Company, at its election, to make such disclosure.
(e) Right of Set-off. By accepting this Agreement, the Employee
consents to a deduction from any amounts the Company owes the Employee from time
to time (including amounts owed to the Employee as wages or other compensation,
or vacation pay, as well as any other amounts owed to the Employee by the
Company), to the extent of the amounts the Employee owes the Company. Whether or
not the Company elects to make any set-off in whole or in part, if the Company
does not recover by means of set-off the full amount the Employee owes it,
calculated as set forth above, the Employee agrees to pay immediately the unpaid
balance to the Company.
(f) Severability. In the event that any provision of this
Agreement or compliance by any of the parties with any provision of this
Agreement shall constitute a violation of any law, or be unenforceable or void,
then such provision, to the extent only that it is in violation of law, void or
unenforceable, shall be deemed modified to the extent necessary so that it is no
longer unenforceable, void or in violation of law. If such modification is not
possible, said provision, to the extent that it is in violation of law, void or
unenforceable, shall be deemed severable from the remaining provisions of this
Agreement, which provisions shall remain binding on the parties.
(g) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
(h) Headings.The headings and captions in this Agreement are
included for convenience of reference only and shall be ignored in the
construction or interpretation hereof.
(i) Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
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<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date hereof.
NETAMERICA INTERNATIONAL CORPORATION
By________________________________
Title:
--------------------------------
DOUG COLE
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EXECUTION COPY
EMPLOYMENT AGREEMENT
(Donald Sledge)
This Employment Agreement ("Agreement") is entered into effective as of
September 15, 1999, by and between RateXchange, Inc., (the "Company"), a wholly
owned subsidiary of NetAmerica.com, Inc. ("NetAmerica.com"), and Donald Sledge
("Employee"). The Company and Employee agree as follows:
1. Employment. The Company hereby employs Employee, and Employee
accepts such employment, upon the terms and conditions set forth in this
Agreement.
2. Position and Duties. During Employee's employment hereunder, he
shall serve as the Company's Chief Executive Officer, and shall perform such
employment duties as the Company shall assign to him from time to time. In
addition, Employee shall serve as the Chairman of the Board of Directors of the
Company, upon his nomination and election, or appointment, in accordance with
the Company's by laws. Employee also agrees to serve on the NetAmerica.com Board
of Directors immediately upon appointment by the Board of Directors of
NetAmerica.com ("NetAmerica Board") to serve the remaining term of a vacant
position on such Board. Thereafter, it is expected that the NetAmerica Board
will recommend to the shareholders Employee's election at the annual meeting to
serve a full term on the Board. Upon termination of Employee's employment, for
whatever reason, Employee agrees to resign immediately from the Boards of
Directors of the Company and NetAmerica.com.
Employee agrees to serve the Company faithfully and to the best of his
ability and to devote his full time, attention and efforts to the business and
affairs of the Company during the term of his employment. Employee hereby
confirms that he is under no contractual commitments inconsistent with his
obligations set forth in this Agreement. Employee agrees that, during the term
of this Agreement, he will not render or perform any services for any
corporation, firm, entity or person, other than the Company and NetAmerica.com,
without the written consent of the Company, except that Employee shall be
entitled without prior written consent to hold positions on the Board of
Directors of entities that do not compete with the Company. Employee has, as of
the date of this Agreement, disclosed to the Board of Directors of the Company
the positions Employee currently holds on other Boards of Directors, and the
Company has consented to such positions.
3. Term. Unless terminated at an earlier date in accordance with
Section 5 of this Agreement, the term of this Agreement shall be from September
15, 1999, to September 14, 2002 (the "Term").
<PAGE>
4. Compensation. As compensation for all services to be rendered by
Employee under this Agreement, the Company shall provide to Employee the
following:
4.01 Base Salary. The Company shall pay to Employee an annual
base salary of $300,000, less legally required deductions and
authorized withholdings, payable in periodic installments in accordance
with the standard payroll practices of the Company in effect from time
to time. Employee shall be eligible for annual salary increases which
shall be determined by the Company in its sole discretion.
4.02 Incentive Bonus. Employee shall be eligible for an annual
incentive bonus ("Bonus") of up to 50% of his annual base salary, less
legally required or legally authorized deductions and withholdings. The
amount of any Bonus paid to Employee shall be based upon criteria upon
which the Employee and the Company shall mutually agree, except that
Employee shall be guaranteed a Bonus of $150,000 for the first year of
the term of this Agreement, as follows: (a) 50% of such guaranteed
Bonus shall be due upon execution of this Agreement; and (b) the
remaining 50% of such guaranteed Bonus shall be paid to Employee on or
about September 14, 2000, provided Employee has remained employed
continuously for the first year of the Term, and has not been
terminated for Cause, as defined in this Agreement, during that first
year. The amount of any Bonus payable to Employee for the remaining
years of the Term shall be determined by the Company in its sole
discretion, based upon the eligibility criteria upon which the Company
and Employee have agreed.
4.03 Equity Position. The Company agrees to make available to
Employee stock equal to 10 % of the common shares of Company stock
outstanding as of the date of execution of this Agreement. The Company
and Employee agree to work cooperatively to design and implement a
stock plan and/or other executive compensation arrangement as soon as
administratively possible to provide Employee with such Company stock,
taking into account Employee's tax objectives. Employee shall be
entitled to receive such shares of Company stock pursuant to either:
(i) the grant of options to acquire such shares, such options to be fully
(100%) vested at the time of grant, or
(ii) the issuance and/or transfer by the Company of shares of Company stock to
Employee, or
(iii) such other arrangement which is mutually agreed upon by Employee and the
Company.
<PAGE>
If the Company does not pursue independent financing, the
Company and Employee intend that Employee shall receive, or have the
option to acquire, stock in NetAmerica.com in an amount equal to 10% of
the outstanding common stock of NetAmerica.com as of the date of
execution of this Agreement. Such ownership interest in NetAmerica.com
would be in lieu of the ownership interest in the Company as described
above in this Section 4.03. To that end, the Company and Employee agree
to work cooperatively to structure a stock plan or other arrangement
which will permit, under certain circumstances, the conversion of
Employee's ownership rights or interests in the Company to comparable
interests in NetAmerica.com, as permitted under applicable tax,
corporate and securities laws, and taking into consideration Employee's
tax objectives.
4.04 Employee Benefits; Automobile Allowance. The Company
shall reimburse Employee for costs incurred by him for disability and
life insurance for himself, and for health insurance for himself and
his dependents, and shall provide an automobile allowance, the total of
such reimbursed costs and auto allowance not to exceed $2,000 per
month. In addition, Employee shall be entitled to participate in all
employee benefit plans or programs which are established by the Company
to the extent that his position, title, tenure, salary, health, and
other qualifications make him eligible to participate. Employee's
participation in any such plan or program shall be subject to the
provisions, rules, and regulations applicable thereto, as the same may
be amended from time to time. The Company does not guarantee the
adoption or continuance of any particular employee benefit plan or
program, and nothing in this Agreement is intended to, or shall in any
way restrict the right of the Company, to amend, modify or terminate
any of its benefits during the term of Employee's employment.
4.05 Entertainment Expenses. The Company shall pay or
reimburse Employee for job-related entertainment expenses in the nature
of tickets to sporting events or similar entertainment, in a minimum
amount of $5,000 annually, and for other expenses in keeping with the
Company's policies.
5. Termination.
5.01 Termination Due to Employee's Death or Disability.
Employee's employment pursuant to this Agreement shall terminate
automatically prior to the expiration of the Term in the event of
Employee's death or Disability, as defined herein. "Disability" shall
mean a physical or mental impairment of Employee which results in
Employee's inability to perform one or more of the essential functions
of Employee's position, with or without reasonable accommodation,
provided Employee has exhausted Employee's entitlement to any
applicable leave, if Employee desires to take such leave and satisfies
all eligibility requirements for such leave.
<PAGE>
5.02 Termination by the Company for Cause. Employee's
employment pursuant to this Agreement shall terminate prior to the
expiration of the Term in the event that there is "Cause" to terminate
Employee's employment, which shall be defined as any of the following:
(i) Employee's material breach of any obligation to the
Company under the terms of this Agreement;
(ii) Employee's conviction, or the entry of a plea of
guilty or nolo contendere by Employee, of any crime
involving moral turpitude or any felony;
(iii) Any acts of Employee constituting gross negligence or
misconduct in connection with his employment with the
Company, or Employee's breach of any fiduciary duty
to the Company or to NetAmerica.com; or
(iv) Employee's failure to carry out any reasonable
directive of the Company or NetAmerica.com, any
conduct by Employee which is detrimental to the
Company or NetAmerica.com, or any failure by Employee
to comply with any of the policies or performance
standards of the Company or, as applicable,
NetAmerica.com.
The Company's determination that there is Cause to terminate
Employee's employment shall be subject to the dispute resolution
procedures pursuant to Section 16 of this Agreement.
5.03 Termination by the Company without Cause. The Company may
terminate Employee's employment at any time prior to the expiration of
the Term for any reason, including a sale, merger, or change of control
in the ownership of the Company, and without prior notice, provided the
Company pays to Employee the severance pay described in Section 5.05.4.
5.04 Termination by Employee. Employee may terminate his
employment at any time during the term of this Agreement by giving
sixty (60) days' prior written notice thereof to the Company's Board of
Directors. In the event of termination by Employee under this Section
5.04, the Company may at its option elect to have Employee cease to
provide services immediately, provided that during such 60-day notice
period Employee shall be entitled to continue to receive his base
salary.
<PAGE>
5.05 Effect of Termination.
5.5.1 Survival of Provisions. Notwithstanding any
termination or expiration of this Agreement, or any
termination of Employee's employment with the Company
pursuant to this Section 5, Employee, in
consideration of Employee's employment hereunder to
the date of such termination or expiration, shall
remain bound by the provisions of this Agreement
which specifically relate to periods, activities or
obligations upon or subsequent to the termination of
Employee's employment, including, but not limited to,
the provisions of Sections 6, 7, and 8.
5.5.1 Termination due to Death or Disability. In the
event Employee's employment terminates prior to the
expiration of the Term due to his death or
Disability, Employee shall not be entitled to any
further compensation under the provisions of this
Agreement, except for his base salary earned through
the date of termination, and the portion of any
annual Incentive Bonus under Section 4.02 of this
Agreement which previously had been approved by the
Company but was unpaid as of Employee's death or
Disability. Employee (or, in the event of death,
Employee's estate) shall be entitled to such unpaid
portion of any approved annual Incentive Bonus only
if Employee (or the authorized representative of
Employee's estate) signs a comprehensive general
release of claims in a form acceptable to the
Company. Payments of such approved but unpaid annual
Incentive Bonus shall not commence until after
Employee (or the authorized representative of his
estate) signs such a release, and after any
revocation period referenced in such release has
expired. If Employee (or the authorized
representative of his Estate) does not sign such a
general release of claims, Employee (or his estate)
shall not be entitled to receive any compensation
under the provisions of this Agreement except for
Employee's base salary earned through the date of
death or Disability. In the case of Disability, if
Employee violates any of the provisions of Sections 7
or 8 of this Agreement, the Company's obligations to
pay the unpaid portion of any approved annual
Incentive Bonus to Employee shall cease on the date
of such violation.
5.05.3 Termination for Cause. In the event of a termination
for Cause under Section 5.02, Employee shall not be
entitled to receive any further compensation under
the provisions of this Agreement, except for his base
salary earned through the date of termination.
<PAGE>
5.05.4 Termination without Cause. In the event of
termination without Cause under Section 5.03,
Employee shall be entitled to severance pay
consisting of the following: (1) base salary
continuation for 12 months following the date of
termination, at the rate in effect at the time of
termination, which shall be paid on the Company's
regular paydays; and (2) a lump sum payment of
$150,000. Employee shall only be entitled to the
foregoing severance pay if Employee signs a
comprehensive general release of claims in a form
acceptable to the Company. Employee's severance pay
shall not commence until the first payday after
Employee signs such a release, and after any
revocation period referenced in such release has
expired. If Employee does not sign such a general
release of claims, Employee shall not be entitled to
receive any compensation under the provisions of this
Agreement except for his base salary earned through
the date of termination. If Employee violates any of
the provisions of Sections 7 or 8 of this Agreement,
the Company's obligations to pay severance pay to
Employee shall cease on the date of such violation.
5.05.5 Termination Occasioned by Employee. In the event
Employee terminates his employment under Section
5.04, Employee shall not be entitled to receive any
further compensation under the provisions of this
Agreement, except for his base salary earned through
the date of termination.
6. Return of Proprietary Property. Employee agrees that all property in
Employee's possession that he obtains or is assigned in the course of his
employment with the Company, including, without limitation, all documents,
reports, manuals, memoranda, customer lists, credit cards, keys, access cards,
and all other property relating in any way to the business of the Company, is
the exclusive property of the Company, even if Employee authored, created, or
assisted in authoring or creating such property. Employee shall return to the
Company all such property immediately upon termination of employment or at such
earlier time as the Company may request.
7. Confidential Information. Except as permitted or directed by the
Company's Board of Directors, during the time Employee is employed by the
Company or at any time thereafter, Employee shall not divulge, furnish, or make
accessible to anyone or use in any way (other than in the ordinary course of the
business of the Company) any confidential or secret information or knowledge of
the Company, whether developed by himself or by others. Such confidential and/or
secret information encompassed by this Section 7 includes, but is not limited
to, the Company's customer and supplier lists, business plans, and financial,
marketing, and personnel information. Employee agrees to refrain from any acts
or omissions that would reduce the value of any confidential or secret knowledge
or information to the Company, both during his employment hereunder and at any
time after the termination of his employment. Employee's obligations of
confidentiality under this Section 7 shall not apply to any knowledge or
information that is now published publicly or that subsequently becomes
generally publicly known, other than as a direct or indirect result of a breach
of this Agreement by Employee.
8. Patent and Related Matters.
8.01 Disclosure and Assignment. Employee agrees to promptly
disclose in writing to the Company complete information concerning each
and every invention, discovery, improvement, device, design, process,
or product made, developed, perfected, devised, conceived or first
reduced to practice by Employee, either solely or in collaboration with
others, during Employee's term of employment by the Company, or within
six months thereafter, relating to the business, products, practices or
techniques of the Company (hereinafter referred to as "Developments").
Employee, to the extent that Employee has the legal right to do so,
hereby acknowledges that any and all of said Developments are the
property of the Company and hereby assigns and agrees to assign to the
Company any and all of Employee's right, title and interest in and to
any and all of such Developments.
8.02 Limitation The provisions of this Section 8 shall not
apply to any Development meeting the following conditions:
(i) such Development was developed entirely on Employee's own
time; and
(ii) such Development was made without the use of any Company
equipment, supplies, facilities or trade secret information;
and
(iii) such Development does not relate at the time of conception
or reduction to practice to (a) to the business of the
Company, or (b) to the Company's actual or demonstrably
anticipated research or development; and
(iv) such Development does not result from any work performed by
Employee for the Company.
8.03 Assistance of Employee. Upon request and without
further compensation therefor, but at no expense to Employee, and
whether during the term of Employee's employment by the Company or
thereafter, Employee will do all lawful acts, including, but not
limited to, the execution of papers and the giving of testimony, that
in the opinion of the Company, its successors and assigns, may be
necessary or desirable in obtaining, sustaining, reissuing, extending
or enforcing Letters Patent, and for perfecting, affirming and
recording the Company's complete ownership and title thereto, and to
cooperate otherwise in all proceedings and matters relating thereto.
9. Confidentiality of this Agreement. Employee agrees to keep the terms
of this Agreement confidential, and not to disclose such terms to any other
RateXchange, Inc. or NetAmerica.com employee, other than authorized members of
the respective Boards of Directors of the Company and RateXchange, Inc.
<PAGE>
10. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company. Employee may not assign this Agreement or any rights
hereunder. Any purported or attempted assignment or transfer by Employee of this
Agreement or any of Employee's duties, responsibilities, or obligations
hereunder shall be void.
11. Governing Law, Construction and Severability. This Agreement is
made under and shall be governed by and construed in accordance with the laws of
the State of California. In the event any provision of this Agreement (or
portion thereof) shall be held illegal or invalid for any reason, said
illegality or invalidity will not in any way affect the legality or validity of
any other provision (or portion thereof) of this Agreement.
12. Company Remedies. Employee acknowledges that the remedy at law for
any breach of any of the provisions of Sections 6 or 7 will be inadequate, and
that the Company shall be entitled, in addition to any remedy at law or in
equity, to preliminary and permanent injunctive relief and specific performance.
13. Entire Agreement. This Agreement contains the entire agreement
between the Company and Employee with respect to his employment by the Company
and there are no undertakings, covenants, or commitments other than as set forth
herein. This Agreement may not be altered or amended, except by a writing
executed by the party against whom such alteration or amendment is to be
enforced. This Agreement supersedes, terminates, replaces, and supplants any and
all prior understandings or agreements between the parties relating in any way
to the hiring or employment of Employee by the Company, including but not
limited to, the offer letter from the Company to Employee dated September 8,
1999.
14. Counterparts. This Agreement may be simultaneously executed in any
number of counterparts, and such counterparts executed and delivered, each as an
original, shall constitute but one and the same instrument.
15. Waivers. No failure on the part of either party to exercise, and no
delay in exercising, any right or remedy hereunder shall operate as a waiver
thereof; nor shall any single or partial exercise of any right or remedy
hereunder preclude any other or further exercise thereof, or the exercise of any
other right or remedy granted hereby or by any related document or by law. No
single or partial waiver of rights or remedies hereunder, nor any course of
conduct of the parties, shall be construed as a waiver of rights or remedies by
either party (other than as expressly and specifically waived).
<PAGE>
16. Dispute Resolution. Any controversy, claim or dispute of whatever
nature arising out of or relating to this Agreement or Employee's employment,
including but not limited to discrimination claims, whether such controversy,
claim or dispute is based on statute, contract, tort, common law or otherwise,
and whether such controversy, claim or dispute existed prior to or arises after
the date of this Agreement (any such controversy, claim or dispute being a
"Dispute"), shall be resolved in accordance with the procedures set forth in
this Section 16, which procedures shall be the sole and exclusive procedures for
the resolution of any Disputes (except as otherwise provided in Section 12).
All Disputes shall be resolved by arbitration in San
Francisco, California, in accordance with the then current Non-Administered
International Arbitration Rules & Commentary of the CPR Institute by a sole
arbitrator who has had both training and experience as an arbitrator of general
corporate, commercial and employment matters and who is and for at least ten
years has been a partner, shareholder or member in a law firm. If the Company
and Employee cannot agree on an arbitrator, then the arbitrator shall be
selected by the President of the CPR Institute in accordance with the criteria
set forth in the preceding sentence. The arbitrator may decide any issue as to
whether, or as to the extent to which, any Dispute is subject to the arbitration
and other Dispute resolution provisions in this Agreement. The arbitrator must:
(i) base and render his or her award on the provisions of this Agreement or
applicable law and (ii) render his or her award in writing including an
explanation of the reasons for such award and the provisions of this Agreement
supporting such award. Judgment upon the award rendered by the arbitrator may be
entered by any court having jurisdiction thereof. The statute of limitations
applicable to the commencement of a lawsuit shall apply to the commencement of
an arbitration under this subsection. The Employee acknowledges and agrees that
the Employee has been given the opportunity to negotiate this provision. No
exercise of any rights under this Section 16 shall limit the right of the
Company or the Employee pursuant to this Agreement to commence any judicial
proceeding to obtain injunctive relief. Reasonable attorney's fees and expenses
of arbitration incurred in any Dispute relating to the interpretation or
enforcement of this Agreement shall be paid by the prevailing party in such
Dispute.
17. Notices. All notices, requests, demands, consents, or other communications
required or permitted under this Agreement shall be in writing and shall be
deemed to have been duly given if delivered by overnight courier or express mail
service or by postage prepaid registered or certified mail, return receipt
requested (the return receipt constituting prima facie evidence the giving of
such notice request, demand or other communication), by personal delivery, or by
<PAGE>
fax with confirmation of receipt and a copy mailed with postage prepaid, to the
following address or such other address of which a party may subsequently give
notice to the other parties. Notice is effective immediately if by personal
delivery or by fax with confirmation received and a copy mailed the same day.
Notice sent by overnight courier or by registered or certified mail is effective
the earlier of actual receipt or the fifth date after the date mailed as
evidenced by the sender's certified or registered receipt.
To the Company: Rate Xchange, Inc.
450 Sansome Street, Suite 1550
San Francisco, California 94111
Attn: Mr. Ross Mayfield
To Employee: Mr. Donald Sledge
==============================
18. Attorneys Fees. Should any party hereto retain counsel for the purpose of
enforcing, or preventing the breach of, any provision hereof including, but not
limited to, the institution of any action or proceeding, whether by arbitration,
judicial or quasi-judicial action or otherwise, to enforce any provision hereof,
or for damages for any alleged breach of any provision hereof, or for a
declaration of such party's rights or obligations hereunder, then whether the
matter is settled by negotiation, or by arbitration or judicial determination,
the prevailing party shall be entitled to be reimbursed by the losing party for
all costs and expenses incurred thereby, including, but not limited to,
reasonable attorney's fees for the services rendered to such prevailing party.
IN WITNESS WHEREOF, the parties have signed this Agreement.
Rate Xchange, Inc.
Dated:_________________________________
By: Ross Mayfield
Its: President
Signed:_________________________________
Donald Sledge
Dated:__________________________________
NetAmerica.com, Inc.
Dated:__________________________________
By: Edward Mooney
Its:_____________________________________
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