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EXHIBIT 10.21
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 28, 1999 (the
"Agreement"), among Internet Media Corporation, a Nevada corporation
("Parent"), Santa Fe Wireless Internet, Inc., a New Mexico corporation
wholly owned by Parent ("Acquiror"), Santa Fe Trail Internet Plus, Inc., a
New Mexico corporation ("Target") (Acquiror and Target being hereinafter
collectively referred to as the "Constituent Corporations"), and Xxxxxxx
Xxxxx, the majority shareholder of Santa Fe Trail Internet Plus, Inc.,
executing this Agreement (the "Shareholder).
WHEREAS, the Boards of Directors of Parent, Acquiror and Target have
approved the acquisition of Target by Parent;
WHEREAS, in furtherance of such acquisition, the Boards of Directors of
Parent, Acquiror and Target have each approved the merger of Target into
Acquiror (the "Merger"), pursuant to an Agreement of Merger in the form
attached hereto as Exhibit "A" (the "Merger Agreement"), and the
transactions contemplated hereby, in accordance with the applicable
provisions of the statutes of the States of Nevada and New Mexico and upon
the terms and subject to the conditions set forth herein; and
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization with the meaning of Section 368(a)(1 )(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the
"Code"); and
WHEREAS, each of the parties to this Agreement desires to make certain
representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions thereto; and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Acquiror, Target and the Shareholder hereby agree as follows:
ARTICLE I. THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement and the
Merger Agreement, Target shall be merged with and into Acquiror, the
separate corporate existence of Target shall cease and Acquiror shall
continue as the surviving corporation, in accordance with the applicable
provisions of the Business Corporation Law of the State of New Mexico (the
"New Mexico Law"). Acquiror, as the surviving corporation after the Merger,
is hereinafter sometimes referred to as the "Surviving Corporation".
Section 1.2. Effective Time. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article VII, and
provided that this Agreement has not been terminated or abandoned pursuant
to Article IX, the Constituent Corporations shall cause the Merger to be
consummated by filing a Certificate of Merger (the "Certificate of Merger")
with the office of the Secretary of State of the State of New Mexico, in
such form as required by, and executed in accordance with, the relevant
provisions of the New Mexico Law. Subject to, and in accordance with, the
New Mexico Law, the Merger will become effective at the date and time the
Certificate of Merger is filed with the office of the Secretary of State of
the State of New Mexico or such later time or date as may be specified in
the Certificate of Merger (the "Effective Time"). Each of the parties shall
use its best efforts to cause the Merger to be consummated as soon as
practicable following the fulfillment or waiver of the conditions specified
in Article VII hereof.
Section 1.3. Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the New Mexico
Law. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, except as otherwise provided herein, all the
property, rights, privileges, powers and franchises of Target shall vest in
the Surviving Corporation, and all debts, liabilities and duties of Target
shall become the debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Articles of Incorporation: Bylaws. (a) At the Effective Time,
the Articles of Incorporation of Acquiror, as in effect immediately prior
to the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law and such
Articles of Incorporation.
(b) The Bylaws of Acquiror, as in effect immediately prior to the Effective
Time, shall be the Bylaws of the Surviving Corporation until thereafter
amended as provided by law, the Articles of Incorporation of the Surviving
Corporation and such Bylaws.
Section 1.5. Directors and Officers. The directors of Acquiror immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
Acquiror immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
Section 1.6. Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of Acquiror, the following
shall occur:
(a) each share of common stock of Target (the "Target Common Stock") held
in the treasury of Target and each such share of Target Common Stock owned
by Acquiror, Parent or any direct or indirect wholly-owned subsidiary of
Parent or of Target immediately prior to the Effective Time shall be
cancelled and extinguished without any conversion thereof and no payment
shall be made with respect thereto;
(b) each share of Target Common Stock which is outstanding immediately
prior to the Effective Time,
other than those shares of Target Common Stock cancelled as set forth in
subsection (a) hereof, shall be converted into the right to receive 66.66
shares of the $.0001 par value per share common stock of Parent (the
"Parent Common Stock"), a total of 100,000 shares of Parent Common Stock.
(c) the common stock, par value $.0001 per share, of Acquiror issued and
outstanding immediately prior to the Effective Time shall remain validly
issued, fully paid and non-assessable common stock of the Surviving
Corporation.
Section 1.7. Surrender of and Exchange of Target Common Stock. (a) As soon
as practicable after the Effective Time, the stock certificates
representing Target Common Stock issued and outstanding at the Effective
Time shall be surrendered for exchange to the Surviving Corporation. Until
so surrendered for exchange, each such stock certificate nominally
representing Target Common Stock shall be deemed for all purposes (except
for payment of dividends thereon or redemption thereof) to evidence the
ownership of the number of shares of Parent Common Stock which the holder
would be entitled to receive upon its surrender to the Surviving Corporation.
(b) No redemption with respect to Parent Common Stock shall be made with
respect to any unsurrendered certificates representing shares of Target
Common Stock with respect to which the shares of Parent Common Stock shall
have been issued in the Merger, until such certificates shall be
surrendered as provided herein.
(c) All rights to receive the Merger Consideration into which shares of
Target Common Stock shall have been converted pursuant to this Article I
shall be deemed to have been paid or issued, as the case may be, in full
satisfaction of all rights pertaining to such shares of Target Common Stock.
1.8. Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place (a) at the offices of Acquiror at 10:00
a.m. , local time, on the earlier of (i) July 31' 1999, and (ii) the third
business day immediately following the date on which the last of the
conditions set forth in Article VI is fulfilled or waived, or (b) at such
other time and place and on such other date as Parent and Target shall
agree (the "Closing Date").
ARTICLE II. FURTHER AGREEMENTS
Section 2.1. Employment Agreement -Shareholder. Prior to or at the Closing,
Acquiror and the Shareholder shall execute an employment agreement (the
"Xxxxx Employment Agreement"). The Xxxxx Employment Agreement shall be
substantially in the form attached hereto as Exhibit "B".
Section 2.2. Non-Competition Agreement. Prior to or at the Closing,
Acquiror and the Shareholder shall execute a non-competition agreement (the
"Agreement Not to Compete") substantially in the form attached hereto as
Exhibit "C".
Section 2.3. Confidentiality Agreement. Prior to or at the Closing,
Acquiror and the Shareholder shall execute a confidentiality agreement (the
"Confidentiality Agreement") substantially in the form attached hereto as
Exhibit "D".
Section 2.4. Continuity of Interest Agreement. Prior to or at the Closing,
Parent, Acquiror and the Shareholder shall execute a continuity of interest
agreement (the "Continuity of Interest Agreement") substantially in the
form attached hereto as Exhibit "E".
Section 2.5. Escrow Agreement. Upon delivery by Target of the audited
financial statements required under Section 4.7, Parent shall execute an
escrow agreement (the "Escrow Agreement") substantially in the form
attached hereto as Exhibit "F" and deliver to the Escrow Agent named
therein such executed document, along with a check in the amount of
$37,500, payable to Los Alamos National Bank.
Section 2.6. Registration Rights. Prior to or at the Closing, Parent shall
deliver to the holders of shares of Parent Common Stock received hereunder
a registration rights letter agreement (the "Registration Agreement")
substantially in the form attached hereto as Exhibit "G".
Section 2.7. Access to Information: Confidentiality. (a) From the date
hereof to the Effective Time, each of Parent, Acquiror and Target shall,
and shall cause their respective subsidiaries, affiliates, officers,
directors, employees, auditors and agents to, afford the officers,
employees and agents of one another complete access at all reasonable times
to one another s officers, employees, agents, properties, offices, plants
and other facilities and to all books and records, and shall furnish one
another with all financial, operating and other data and information as
each, through its officers, employees or agents, may reasonably request;
provided, however, that no party shall be required to provide access or
furnish information which it is prohibited by law or contract to provide or
furnish.
(b) Each of Parent, Acquiror and Target shall, and shall cause their
respective affiliates and their respective officers, directors, employees
and agents, to hold in strict confidence all data and information obtained
by them from one another or their respective subsidiaries, affiliates,
directors, officers, employees and agents (unless such information is or
becomes readily ascertainable from public or published information or trade
sources or public disclosure or such information is required by law) and
shall insure that such officers, directors, employees and agents do not
disclose such information to others without the prior written consent of
Parent, Acquiror or Target, as the case may be.
(c) In the event of the termination of this Agreement, Parent, Acquiror and
Target shall, and shall cause their respective affiliates, officers,
directors, employees and agents to, (i) return promptly every document
furnished to them by one another or any of their respective subsidiaries,
affiliates, officers, directors, employees and agents in connection with
the transactions contemplated hereby and any copies thereof, and (ii) shall
cause others to whom such documents may have been furnished promptly to
return such documents and any copies thereof any of them may have made.
(d) No investigation pursuant to this Section II shall affect any
representations or warranties of the parties herein or the conditions to
the obligations of the parties hereto.
Section 2.8. Notification of Certain Matters. Target shall give prompt
notice to Parent, and Parent shall give prompt notice to Target, of (a) the
occurrence or non-occurrence of any event, the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained
in this Agreement to be untrue or inaccurate, and (b) any failure of
Target, Parent or Acquiror, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to
this Article II shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 2.9. Further Action. Upon the terms and subject to the conditions
hereof, each of the parties hereto shall use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all other
things necessary , proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this Agreement.
Section 2.10. Public Announcements. Parent shall have the exclusive right
to issue a press release or otherwise make any public statements with
respect to the Merger.
Section 2.11. Registration Rights. The holders of Parent Common Stock
received hereunder shall have the registration rights with respect to their
respective shares of Parent Common Stock as are set forth in the
Registration Agreement.
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUIROR
Parent and Acquiror hereby, jointly and severally, represent and warrant to
Target that, except as set forth in the Disclosure Schedule delivered prior
to the date which is three days prior to the Closing Date by Parent and
Acquiror to Target (the "Parent Disclosure Schedule"):
Section 3.1. Organization and Qualification: Subsidiaries. Each of Parent
and Acquiror and each of Parent s other subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect. Neither
Parent nor any subsidiary has received any notice of proceedings relating
to revocation or modification of any such franchises, grants,
authorizations, licenses, permits, easements, consents, certificates,
approvals or orders. The term "Material Adverse Effect", as used herein,
means any change in or effect on the business of Parent or any of its
properties (including intangible properties), prospects, condition
(financial or otherwise), assets or subsidiaries, taken as a whole. Parent
has four wholly-owned subsidiaries: (a) Missouri Cable TV Corp., a
Louisiana corporation; (b) Winter Entertainment, Inc., a Delaware
corporation; (c) Santa Fe Wireless Internet, Inc., a New Mexico corporation
(Acquiror); and (d) CyberHighway, Inc., an Idaho corporation.
Section 3.2. Articles of Incorporation and Bylaws. Parent shall, as part of
the Parent Disclosure Schedule, furnish to Target a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Parent and Acquiror. Such Articles of Incorporation and Bylaws are
in full force and effect.
Section 3.3. Capitalization. The authorized capital stock of Parent
consists of 100,000,000 shares of Parent Common Stock, $0001 par value per
share. As of the date hereof, (a) 10,890, 120 shares of Parent Common Stock
are issued and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Parent Common Stock are held in the
treasury of Parent or by subsidiaries of Parent. 2,550,000 shares of Parent
Common Stock are reserved for future issuance under certain contracts, all
as described in the Parent Disclosure Schedule. Each of the outstanding
shares of capital stock of each of Parent s subsidiaries is duly
authorized, validly issued, fully paid and non-assessable and such shares
owned by Parent are owned free and clear of all security interests, liens,
claims, pledges, agreements, limitations on Parent s voting rights, charges
or other encumbrances of any nature whatsoever.
Section 3.4. Authority Relative to this Agreement. Each of Parent and
Acquiror has all necessary corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement by Parent and Acquiror and the consummation by
Parent and Acquiror of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquiror other than filing and recordation of appropriate merger documents
as required by the New Mexico Law. This Agreement has been duly executed
and delivered by Parent and Acquiror and, assuming the due authorization,
execution and delivery by Target, constitutes a legal, valid and binding
obligation of each such corporation.
Section 3.5. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Parent and Acquiror do not, and the
performance of this Agreement by Parent and Acquiror shall not, (i)
conflict with or violate either the Articles of Incorporation or Bylaws of
Parent or the Articles of Incorporation or Bylaws of Acquiror, (ii)
conflict with or violate any law, rule, regulation, order, judgment or
decree applicable to Parent or Acquiror or by which either of them or their
respective properties is bound or affected, or (iii) result in any breach
of or constitute a default (or an event which with notice or lapse of time
or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of
Parent or Acquiror pursuant to any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which Parent or Acquiror is a party or by which Parent or
Acquiror or any of their respective properties is bound or affected, except
for any such breaches, defaults or other occurrences which would not,
individually or in the aggregate, have a Material Adverse Effect.
(b) The execution and delivery of this Agreement by Parent and Acquiror
does not, and the performance of this Agreement by Parent and Acquiror
shall not, require any consent, approval, authorization or permit of, or
filing with or notification to, any governmental or regulatory authority,
domestic or foreign, except for applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), the Securities Exchange Act
of 1934 (the "Exchange Act") and State securities laws ("Blue Sky Laws").
Section 3.6. Compliance. Neither Parent nor any of its subsidiaries is in
conflict with, or in default or violation of, (a) its Articles of
Incorporation or Bylaws or equivalent organizational documents, (b) any
law, rule, regulation, order, judgment or decree applicable to Parent or
any of its subsidiaries or by which its or any of their respective
properties is bound or affected, including, without limitation, health and
safety, environmental, civil rights laws and regulations and zoning
ordinances and building codes, or (c) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise, easement, consent,
order or other instrument or obligation to which Parent or any of its
subsidiaries is a party or by which Parent or any of its subsidiaries or
its or any of their respective properties is bound or affected, except for
any such conflicts, defaults or violations which would not, individually or
in the aggregate, have a Material Adverse Effect.
Section 3.7. SEC Filings: Financial Statements. (a) Parent has filed all
forms, reports and documents required to be filed with the SEC and has
heretofore delivered to Target, in the form filed with the SEC, (i) its
Annual Report on Form 1 O-KSB for the year ended December 31,1998; (ii) its
Quarterly Report on Form 1 O-QSB for the period ended September 30, 1998,
(iii) all other reports or registration statements filed by Parent with the
SEC since December 31, 1998, and (iv) all amendments and supplements to all
such reports and registration statements filed by Parent with the SEC since
September 30,1998 (collectively, the "Parent SEC Reports"). The Parent SEC
Reports (x) were, and will be, prepared in accordance with the requirements
of the Securities Act or the Exchange Act, as the case may be, and (y) did
not, and will not, at the time they were, or will be, filed, contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(b) Each of the consolidated financial statements (including, in each case,
any related notes thereto) contained in the Parent SEC Reports has been,
and will be, prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved
(except as may be indicated in the notes thereto) and each fairly presents,
and will present, the consolidated financial position of Parent and its
subsidiaries as at the respective dates thereof and the consolidated
results of its operations and changes in financial position for the periods
indicated, except that the unaudited interim financial statements were or
are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(c) Except as and to the extent set forth on the consolidated balance sheet
of Parent and its subsidiaries as at December31, 1998, including the notes
thereto (the "1998 Balance Sheet"), neither Parent nor any of its
subsidiaries has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) which would be required to be
reflected on a balance sheet, or in the notes thereto, prepared in
accordance with generally accepted accounting principles, except for
liabilities or obligations incurred in the ordinary course of business
since December31 , 1998, which would not, individually or in the aggregate,
have a Material Adverse Effect.
(d) Parent has heretofore furnished to Target a complete and correct copy
of any amendments or modifications, which have not yet been filed with the
SEC, to agreements, documents or other instruments which previously had
been filed by Parent with the SEC pursuant to the Securities Act or the
Exchange Act. Section 3.8. Absence of Litigation. Except as disclosed in
the Parent Disclosure Schedule, there are no claims, actions, proceedings
or investigations pending or, to the best knowledge of Parent, threatened
against Parent or any of its subsidiaries, or any properties or rights of
Parent or any of its subsidiaries, before any court, arbitrator, or
administrative, governmental or regulatory authority or body, domestic or
foreign, that, individually or in the aggregate, would have a Material
Adverse Effect. As of the date hereof, neither Parent nor any of its
subsidiaries nor any of their properties is subject to any order, writ,
judgment, injunction, decree, determination or award having a Material
Adverse Effect.
Section 3.9. Absence of Certain Changes or Events. Since December 31, 1998,
except as contemplated or permitted by this Agreement or disclosed in
Parent SEC Reports filed since that date and through the date hereof,
Parent and its subsidiaries have conducted their businesses only in the
ordinary course and in a manner consistent with past practice and, since
such date, there has not been (a) any change in the financial condition,
results of operations, business or prospects of Parent or any of its
subsidiaries having a Material Adverse Effect, (b) any damage, destruction
or loss (whether or not covered by insurance) with respect to any assets of
Parent or any of its subsidiaries having a Material Adverse Effect, (c) any
material change by Parent in its accounting methods, principles or
practices, (d) any revaluation by Parent of any of its assets, including,
without limitation, writing down the value of inventory or any notes,
accounts receivable or other investments which would individually or in the
aggregate, exceed five percent of the total assets of Parent and its
subsidiaries as reflected on the consolidated balance sheets in Parent s
Annual Report on Form 10-KSB for the period ended December 31,1998; ( e)
any declaration, setting aside or payment of any dividends or distributions
in respect of shares of Parent Common Stock or any redemption, purchase or
other acquisition of any of its securities; (f) any change in the Federal
Communications Commission rules, regulations and orders affecting the
business of Parent or any of its subsidiaries which shall have a Material
Adverse Effect; or (g) any change in the status of any litigation, claims,
actions, proceedings or investigations pending or, to the best knowledge of
Parent, threatened against Parent or any of its subsidiaries, which, as a
result of such change, will have a Material Adverse Effect.
Section 3.10. Environmental Matters. To the best of Parent s knowledge,
there are no environmental liabilities (whether accrued, absolute,
contingent or otherwise) of Parent or any subsidiary.
Section 3.11. Labor Matters. Except as set forth in the Parent Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Parent or any of its subsidiaries, threatened, between Parent or any of its
subsidiaries and any of their respective employees, which controversies
have a Material Adverse Effect; (b) neither Parent nor any of its
subsidiaries is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by Parent or its
subsidiaries nor does Parent or any of its subsidiaries know of any
activities or proceedings of any labor union to organize any such
employees; (c) neither Parent nor any of its subsidiaries has breached or
otherwise failed to comply with any provision of any such agreement or
contract and there are no grievances outstanding against any such parties
under any such agreement or contract; (d) there are no unfair labor
practice complaints pending against Parent or any of its subsidiaries
before the National Labor Relations Board or any current union
representation questions involving employees of Parent or any of its
subsidiaries; and (e) neither Parent nor any of its subsidiaries has any
knowledge of any strikes, slowdowns, work stoppages, lockouts, or threats
thereof, by or with respect to any employees of Parent or any of its
subsidiaries.
Section 3.12. Contracts. The Parent Disclosure Schedule lists or describes
all material contracts or arrangements to which Parent or any subsidiary is
a party, or by which it is bound, as of the date hereof. All such contracts
and arrangements are in full force and effect and there has been no notice
of termination or threatened termination with respect to any such contracts
and arrangements, whether or not termination is permitted by the terms
thereof, and no event has occurred which, with the giving of notice or the
lapse of time, or both, would constitute a breach or default under any such
contract or arrangement, except for such breaches, defaults and events as
to which requisite waivers or consents have been obtained.
Section 3.13. Title to Properties. Parent has, and at the Effective Time
will have, good and marketable title to the equipment and other property
shown as assets on its records and books of account as of December 31,
1998, free and clear of all liens, encumbrances and charges, except as
reflected in such records and books of account and in the 1998 Balance Sheet.
Section 3.14. Patents. To the best knowledge of Parent, Parent or its
subsidiaries own or possess adequate licenses or other valid rights to use
all patents, patent rights, inventions, designs, processes, formulae and
other proprietary information used or held for use in connection with the
business of Parent or any of its subsidiaries as currently being, or
proposed to be, conducted and is unaware of any assertions or claims
challenging the validity of any of the foregoing which would have a
Material Adverse Effect. The conduct of the business of Parent and its
subsidiaries as now conducted or proposed to be conducted does not and will
not conflict with any patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights or copyrights of others in
any way which would have a Material Adverse Effect. No material
infringement of any proprietary right owned by or licensed by or to Parent
or any of its subsidiaries is known to Parent which would have a Material
Adverse Effect.
Section 3.15. Taxes. Parent and its subsidiaries have filed all federal and
state tax returns and reports and, to the best of Parent s knowledge, all
state, local and foreign tax returns and reports required to be filed by
them and have paid and discharged all taxes, including sales and use tax,
shown as due thereon and have paid all applicable state and local ad
valorem taxes as are due, except such as are being contested in good faith
by appropriate proceedings and except for such filings, payments or other
occurrences which would not have a Material Adverse Effect. Neither the IRS
nor any other taxing authority or agency is now asserting or, to the best
of Parent s knowledge, threatening to assert against parent or any of its
subsidiaries any deficiency or claim for additional taxes or interest
thereon or penalties in connection therewith. Neither Parent nor any of its
subsidiaries has granted any waiver of any statute of limitations with
respect to, or any extension of a period for the assessment of, any
federal, state, county, municipal or foreign income tax.
Section 3.16. Brokers. No broker, finder or investment banker is entitled
to any brokerage, finder s or other fee or commission in connection with
the transactions contemplated by this Agreement based upon arrangements
made by and on behalf of Parent or Acquiror.
Section 3.17. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Parent or
Acquiror to Target pursuant to the provisions of this Agreement contains or
shall contain any untrue statement of a material fact or omits or shall
omit to state any material fact necessary , in light of the circumstances
under which it was or may be made, in order to make the statements herein
or therein not misleading.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF TARGET
Target and the Shareholder, and each of them, hereby, jointly and
severally, represent and warrant to Parent and Acquiror that, except as set
forth in the Disclosure Schedule delivered prior to the date which is three
days prior to the Closing Date by Target to Parent (the "Target Disclosure
Schedule"):
Section 4.1. Organization and Qualification: Subsidiaries. Target is a
corporation duly organized, validly existing and in good standing under the
laws of the State of New Mexico and has the requisite corporate power and
authority and is in possession of all franchises, grants, authorizations,
licenses, permits, easements, consents, certificates, approvals and orders
to own, operate or lease the properties that it purports to own, operate or
lease and to carry on its business as it is now being conducted, and is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned,
operated or leased or the nature of its activities makes such qualification
necessary, except for such failures which, when taken together with all
other such failures, would not have a Material Adverse Effect. Target has
not received any notice of proceedings relating to the revocation or
modification of any such franchises, grants, authorizations, licenses,
permits, easements, consents, certificates, approvals or orders. The term
"Material Adverse Effect" as used in this Article IV, means any change in
or effect on the business of Target that is or is reasonably likely to be
materially adverse to the business, operations, properties (including
intangible properties), prospects, condition (financial or otherwise),
assets or liabilities of Target taken as a whole. Target has no subsidiaries.
Section 4.2. Articles of Incorporation and Bylaws. Target shall, as part of
the Target Disclosure Schedule, furnish to Parent a complete and correct
copy of the Articles of Incorporation and the Bylaws, each as amended to
date, of Target. Such Articles of Incorporation and Bylaws are in full
force and effect.
Section 4.3. Capitalization. The authorized capital stock of Target
consists of 1 ,500 shares of Target Common Stock, no par value per share.
As of the date hereof, (a) 1 ,500 shares of Target Common Stock are issued
and outstanding, all of which are validly issued, fully paid and
non-assessable, and (b) no shares of Target Common Stock are held in the
treasury of Target or by any subsidiary of Target. Except as set forth in
the Target Disclosure Schedule, there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of Target or obligating Target to
issue or sell any shares of capital stock of, or other equity interests in,
Target. All shares of Target Common Stock subject to issuance shall be duly
authorized, validly issued, fully paid and non-assessable. There are no
outstanding contractual obligations of Target to repurchase, redeem or
otherwise acquire any shares of Target Common Stock.
Section 4.4. Authority Relative to this Agreement. Target has all necessary
corporate power and authority to enter into this Agreement and to carry out
its obligations hereunder. The execution and delivery of this Agreement by
Target and the consummation by Target of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the
part of Target subject to the approval of the Merger and adoption of this
Agreement by Shareholder in accordance with the New Mexico Law. This
Agreement has been duly executed and delivered by Target and, assuming the
due authorization, execution and delivery by Parent and Acquiror,
constitutes a legal, valid and binding obligation of Target.
Section 4.5. No Conflict: Required Filings and Consents. (a) The execution
and delivery of this Agreement by Target does not, and the performance of
this Agreement by Target shall not, (i) conflict with or violate the
Articles of Incorporation or Bylaws of Target, (i) conflict with or violate
any law, rule, regulation, order, judgment or decree applicable to Target
or by which its properties are bound or affected, or (iii) result in any
breach of or constitute a default (or an event which with notice or lapse
of time or both would become a default) under, or give to others any rights
of termination, amendment, acceleration or cancellation of, or result in
the creation of a lien or encumbrance on any of the properties or assets of
Target pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or
obligation to which Target is a party or by which Target or its properties
are bound or affected, except for such breaches, defaults or other
occurrences which would not, individually or in the aggregate have a
Material Adverse Effect.
(b) The execution and delivery of this Agreement by Target does not, and
the performance of this Agreement shall not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign.
Section 4.6. Compliance. Target is not in conflict with, or in default or
violation of, (a) its Articles of Incorporation or Bylaws or equivalent
organizational documents, (b) any law, rule, regulation, order, judgment or
decree applicable to Target or by which its properties are bound or
affected, including, without limitation, health and safety, environmental
and civil rights laws and regulations and zoning ordinances and building
codes, or (c) any note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise, easement, consent, order or other
instrument or obligation to which Target is a party or by which Target or
its properties are bound or affected, except for any such conflicts,
defaults or violations which would not, individually or in the aggregate,
have a Material Adverse Effect.
Section 4.7. Financial Statements. Target has delivered to Parent and
Acquiror copies of the its unaudited financial statements for the years
ended December 31' 1998, 1997, 1996 and I 995, and a statement of
operations and balance sheet as at March 31' 1999. All of such statements
are true and complete and have been prepared in accordance with generally
accepted accounting principles consistently followed throughout the periods
indicated, except as indicated in the notes thereto. Each of such balance
sheets presents a true and complete statement, as of its date, of the
financial condition and assets and liabilities of Target. Except to the
extent reflected or reserved against therein (including the notes thereto),
Target did not have, as of the date thereof, any liabilities or obligations
(whether accrued, absolute, contingent or otherwise) of a nature
customarily reflected in a corporate balance sheet or notes thereto,
prepared in accordance with generally accepted accounting principles. Each
of such statements of operations presents a true and complete statement of
the results of operations of Target.
Section 4.8. Bank Account Statements. Target has delivered to Parent and
Acquiror copies of the its bank account statements for the months of
August, September, October, November and December 1998 and January,
February and March 1999. All of such statements are true and complete.
Section 4.9. Absence of Certain Changes or Events. Since March 31' 1999,
except as contemplated by this Agreement or disclosed in the Target
Disclosure Schedule, Target has conducted its business only in the ordinary
course and in a manner consistent with past practice and, since such date,
there has not been (a) any change in the financial condition, results of
operations, business or prospects of Target having a Material Adverse
Effect, (b) any damage, destruction or loss (whether or not covered by
insurance) with respect to any assets of Target having a Material Adverse
Effect, (c) any material change by Target in its accounting methods,
principles or practices, (d) any revaluation by Target of any of its
assets, including, without limitation, writing down the value of inventory
or any notes, accounts receivable or other investments which would,
individually or in the aggregate, exceed five percent of the total assets
of Target as reflected on the financial statements for the period ended
March 31' 1999, or (e) any declaration, setting aside or payment of any
dividends or distributions in respect of shares of Target Common Stock or
any redemption, purchase or other acquisition of any of its securities,
except in the ordinary course of business consistent with past practice.
Section 4.10. Absence of Litigation. Except as disclosed in Target
Disclosure Schedule, there are no claims, actions, proceedings or
investigations pending or, to the best knowledge of Target, threatened
against Target, or any properties or rights of Target, before any court,
arbitrator, or administrative, governmental or regulatory authority or
body, that, individually or in the aggregate, would have a Material Adverse
Effect. As of the date hereof, neither Target nor its properties is subject
to any order, writ, judgment, injunction, decree, determination or award
having a Material Adverse Effect.
Section 4.11. Labor Matters. Except as set forth in the Target Disclosure
Schedule, (a) there are no controversies pending or, to the knowledge of
Target, threatened, between Target and any of its employees, which
controversies have a Material Adverse Effect; and (b) Target is not a party
to any collective bargaining agreement or other labor union contract.
Section 4.12. Contracts. The Target Disclosure Schedule lists or describes
all contracts, authorizations, approvals or arrangements to which Target is
a party, or by which it is bound, as of the date hereof, and which (a)
obligates or may obligate Target to pay more than $500; or (b) are
financing documents, loan agreements or agreements providing for the
guarantee of the obligations of any party in each case involving an
obligation in excess of $1,000.
Section 4.13. Title to Property and Leases. (a) Each asset owned or leased
by Target is owned or leased free and clear of any mortgages, pledges,
liens, security interests, conditional and installment sale agreements,
encumbrances, charges or other claims of third parties of any kind.
(b) All leases of real property leased for the use or benefit of Target to
which Target is a party, and all amendments and modifications thereof are
in full force and effect and have not been modified or amended and there
exists no material default under the leases by Target, nor any event which,
with the giving of notice or lapse of time, or both, would constitute a
material default thereunder by Target.
(c) A statement describing all assets of Target is included in the Target
Disclosure Schedule.
Section 4.14. Insurance. All material properties and risks of Target are
covered by valid and currently effective insurance policies issued in favor
of Target, in such amounts and against such risks and losses as are
customary in their locales of operation for companies operating similar
businesses and operations, and Target is included as an insured party under
such policies, with full rights as a loss payee. Copies of all such
insurance policies shall be included in the Target Disclosure Schedule.
Section 4.15. Taxes. Target has filed all federal and state tax returns and
reports and, to the best of Target s knowledge, all state, local and
foreign tax returns and reports required to be filed have been filed and
Target has paid and discharged all taxes, including sales and use taxes,
shown as due thereon and has paid all applicable state and local ad valorem
taxes as are due, except such as are being contested in good faith by
appropriate proceedings and except for such filings, payments or other
occurrences which would not have a Material Adverse Effect. Neither the IRS
nor any other taxing authority or agency is now asserting or, to the best
of Target s knowledge, threatening to assert against Target any deficiency
or claim for additional taxes or interest thereon or penalties in
connection therewith. Target has not granted any waiver of any statute of
limitations with respect to, or any extension of a period for the
assessment of, any federal, state, county, municipal or foreign income tax.
Section 4.16. Full Disclosure. No statement contained in any document,
certificate or other writing furnished or to be furnished by Target or the
Shareholder to Parent and Acquiror pursuant to the provisions of this
Agreement contains or shall contain any untrue statement of a material fact
or omits or shall omit to state any material fact necessary, in light of
the circumstances under which it was or may be made, in order to make the
statements herein or therein not misleading.
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER
The Shareholder hereby represents and warrants to Parent and Acquiror that:
Section 5.1. No Legal Disability. The Shareholder is under no legal
disability with respect to entering into this Agreement.
Section 5.2. Receipt of Disclosure The Shareholder hereby represents and
warrants that he has received and reviewed all of the information
concerning Parent required to be delivered by Parent hereunder. With
respect to such information, the Shareholder further represents and
warrants that he has had an opportunity to ask questions of, and to receive
answers from, the officers of Parent.
Section 5.3. Representation Relating to Parent Common Stock. The
Shareholder represents and warrants to Parent that the shares of Parent
Common Stock being acquired pursuant to this Agreement are being acquired
for his own account and for investment and not with a view to the public
resale or distribution of such shares and further acknowledge that the
shares being issued have not been registered under the Securities Act or
any state securities law and are "restricted securities", as that term is
defined in Rule 144 promulgated by the SEC. and must be held indefinitely,
unless they are subsequently registered or an exemption from such
registration is available.
Section 5.4. Consent to Legend. The Shareholder consents to the placement
of a legend restricting future transfer on the share certificates
representing the Parent Common Stock delivered hereunder, which legend
shall be in the following, or similar, form:
"THE STOCK REPRESENTED BY THIS CERTIFICATE HAS BEEN ISSUED IN RELIANCE UPON
THE EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2) OF THE SECURITIES
ACT OF 1933, AS AMENDED. THE STOCK MAY NOT BE TRANSFERRED WITHOUT
REGISTRATION EXCEPT IN TRANSACTIONS EXEMPT FROM SUCH REGISTRATION."
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by Target Pending the Merger. Target
covenants and agrees that, between the date of this Agreement and the
Effective Time, unless Parent shall otherwise agree in writing, the
business of Target shall be conducted only in, and Target shall not take
any action except in, the ordinary course of business and in a manner
consistent with past practice; and Target shall use its best efforts to
preserve substantially intact the business organization of Target, to keep
available the services of the present officers, employees and consultants
of Target and to preserve the present relationships of Target with
customers, suppliers and other persons with which Target has significant
business relations. By way of amplification and not limitation, except as
contemplated by this Agreement, Target shall not, directly or indirectly,
do, or propose to do, any of the following without the prior written
consent of Parent, which consent shall not be unreasonably withheld:
(a) amend or otherwise change its Articles of Incorporation or Bylaws or
equivalent organizational documents;
(b) issue, sell, pledge, dispose of, encumber or authorize the issuance,
sale, pledge, disposition or encumbrance of (i) any shares of capital stock
of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of capital stock, or any other
ownership interest, of Target or (ii) any assets of Target or any other
material assets of Target other than in the ordinary course of business
consistent with past practices;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
( d) reclassify , combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof; (ii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guaranty or endorse or otherwise as an
accommodation become responsible for, the obligations of any person, or
make any loans or advances, except in the ordinary course of business and
consistent with past practice; (iii) authorize any single capital
expenditure which is in excess of $1 ,000 or capital expenditures which
are, in the aggregate, in excess of $3,000 for Target; or (iv) enter into
or amend any contract, agreement, commitment or arrangement to any of the
effects set forth in this paragraph (e) of Section 6.1 ;
(1) increase the compensation payable or to become payable to its officers
or employees, except for increases in salary or wages of employees of
Target who are not officers of Target in accordance with past practices, or
grant any severance or termination pay to, or enter into any employment or
severance agreement with, any director or officer of Target, or establish,
adopt, enter into or amend any collective bargaining, bonus, profit
sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination, severance or
other plan, agreement, trust, fund, policy or arrangement for the benefit
of any directors, officers or employees;
(g) take any action other than in the ordinary course of business and in a
manner consistent with past practice with respect to accounting policies or
procedures (including, without limitation, procedures with respect to the
payments of accounts payable and collection of accounts receivable);
(h) settle or compromise any material federal, state, local or foreign
income tax liability; or
(i) pay, discharge, compromise or consent to any arrangements concerning or
satisfy any claims, liabilities or obligations (absolute, accrued, asserted
or unasserted, contingent or otherwise), other than the payment, discharge,
compromise, settlement, arrangement or satisfaction in the ordinary course
of business and consistent with past practice of liabilities reflected or
reserved against in the financial statements of Target or incurred in the
ordinary course of business and consistent with past practice.
Section 6.2. Conduct of Business by Parent and Acquiror Pending the Merger.
Parent and Acquiror covenant and agree that, between the date of this
Agreement and the Effective Time, Parent shall not sell or otherwise
dispose of all or substantially all of its assets.
Section 6.3. Approval of Shareholders. Target shall secure the written
consent of all of the shareholders of Target to this Agreement, the Merger
Agreement and the Merger.
Section 6.4. Securities Law Compliance. Parent shall take any action
required to be taken under applicable Federal and/or state securities laws
applicable to (a) the Merger and (b) the issuance of Parent Common Stock
pursuant to the Merger. Parent shall promptly deliver to Target copies of
any filings made by Parent and/or Acquiror pursuant to this Section 6.4.
Section 6.5. Third Party Consents. Each party to this Agreement shall use
its best efforts to obtain, as soon as reasonably practicable, all permits,
authorizations, consents, waivers and approvals from third parties or
governmental authorities necessary to consummate this Agreement and the
Merger Agreement and the transactions contemplated hereby and thereby,
including, without limitation, any permits, authorizations, consents,
waivers and approvals required in connection with the Merger.
ARTICLE VII. CONDITIONS OF MERGER
Section 7.1. Conditions to Obligation of Each Party to Effect the Merger.
The respective obligations of each party to effect the Merger shall be
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Shareholder Approval. This Agreement shall have been approved and
adopted by all of the shareholders of Target.
(b) No Order. No United States or state governmental authority or other
agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the conversion of Target Common Stock into the Merger
Consideration illegal or otherwise prohibiting consummation of the
transactions contemplated by this Agreement.
(c) No Challenge. There shall not be pending or threatened any action,
proceeding or investigation before any court or administrative agency by
any government agency or any other person challenging, or seeking material
damages in connection with the conversion of Target Common Stock into the
Merger Consideration pursuant to the Merger or otherwise materially
adversely affecting the business, assets, prospects, financial condition or
results of operations of Target, Acquiror, Parent or any of their
respective subsidiaries or affiliates.
(d) Tax Opinions. Target and the Shareholder shall receive an opinion of
Xxxxx X. Xxxxx, Esquire, to the effect that under the provisions of United
States federal income tax laws, rules and regulations, provided that the
Merger qualifies as a statutory merger under the applicable laws of the
State of New Mexico, it will be a reorganization within the meaning of
Sections 368(a)(1 )(A) and 368(a)(2)(D) of the Code and that, with respect
to the Parent Common Stock to be issued to the shareholders in the Merger,
the exchange provided for in Section 1.7 will not result in current income
to Target or the Shareholder.
Such opinions will be based upon certain assumptions and representations of
the respective managements of Parent and Target.
Section 7.2. Additional Conditions to Obligations of Parent and Acquiror.
The obligations of Parent and Acquiror to effect the Merger are also
subject to the fulfillment of all of the following conditions precedent at
or prior to the Effective Time:
(a) Audit of Target. Target shall have delivered to Parent and Acquiror
audited financial statements for each of the years ending December 31,
1998, 1997 and 1996, which financial statements shall contain balance
sheets, statements of operations and statements of cash flows for each of
such periods and shall not be materially different from the unaudited
financial statements of Target required to be delivered by Target
hereunder. The cost of such audit shall be borne solely by Target.
(b) Customers of Target. The actual number of customers of Target who shall
be current in their accounts as of the last billing date immediately
preceding the Closing Date shall equal or exceed 2,100 customers. For
purposes of this Section 7.2(b), "customers" shall mean actually subscribed
and paying customers and shall exclude, without limitation, customers
obtained through free promotions, free bases or any other manner not
requiring payment for services.
(c) Representations and Warranties. The representations and warranties of
Target and the Shareholder contained in this Agreement shall be true and
correct in all material respects on and as of the Effective Time, except
for changes contemplated by this Agreement and except for those
representations and warranties which address matters only as of a
particular date (which shall remain true and correct as of such date), with
the same force and effect as if made on and as of the Effective Time, and
Parent and Acquiror shall have received a Certificate of the President of
Target which is to that effect, which certificate shall be in the form
attached hereto as Exhibit "H .
(d) Agreements and Covenants. Target and the Shareholder shall have
performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by
them on or prior to the Effective Time, and Parent and Acquiror shall have
received a Certificate of the President of Target to that effect, which
certificate shall be in the form attached hereto as Exhibit "H".
(e) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Target for the authorization, execution and delivery of this Agreement and
the consummation by it of the transactions contemplated hereby shall have
been obtained and made by Target.
(f) Employment Agreement -Shareholder. Acquiror and the Shareholder shall
have executed the Xxxxx Employment Agreement.
(g) Non-Competition Agreement. Acquiror and the Shareholder shall have
executed the Agreement Not to Compete.
(h) Confidentiality Agreement. Acquiror and the Shareholder shall have
executed the Confidentiality Agreement.
(i) Continuity of Interest Agreement. Parent, Acquiror and the Shareholder
shall have executed the Continuity of Interest Agreement.
(j) Escrow Agreement. Parent and Target shall have executed the Escrow
Agreement.
(k) Registration Agreement. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
(I) Opinion of Counsel. Parent and Acquiror shall have received, from
counsel for Target, an opinion substantially in the form attached hereto as
Exhibit "I", dated as of the Closing Date.
(m) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Target.
Section 7.3. Additional Conditions to Obligation of Target. The obligation
of Target to effect the Merger is also subject to fulfillment of all of the
following conditions precedent, at or prior to the Effective Time:
(a) Representations and Warranties. The representations and warranties of
Parent and Acquiror contained in the Agreement shall be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement and except for those representations and
warranties which address matters only as of a particular date (which shall
remain true and correct as of such date), with the same force and effect as
if made on and as of the Effective Time, and Target shall have received a
Certificate of the President of Parent which is to that effect, which
certificate shall be in the form attached hereto as Exhibit "J".
(b) Agreements and Covenants. Parent and Acquiror shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by them on or
prior to the Effective Time, and Target shall have received a Certificate
of the President of Parent which is to that effect, which certificate shall
be in the form attached hereto as Exhibit "J".
{c) Consents Obtained. All consents, waivers, approvals, authorizations or
orders required to be obtained, and all filings required to be made, by
Parent and Acquiror for the authorization, execution and delivery of this
Agreement and the consummation by them of the transactions contemplated
hereby shall have been obtained and made by Parent and Acquiror.
{d) Employment Agreement -Shareholder. Acquiror and the Shareholder shall
have executed the Xxxxx Employment Agreement.
{e) Non-Competition Agreement. Acquiror and the Shareholder shall have
executed the Agreement Not to Compete.
{f) Confidentiality Agreement. Acquiror and the Shareholder shall have
executed the Confidentiality Agreement.
{g) Continuity of Interest Agreement. Parent, Acquiror and the Shareholder
shall have executed the Continuity of Interest Agreement.
{h) Escrow Agreement. Parent and Target shall have executed the Escrow
Agreement.
{i) Registration Agreement. Parent shall have delivered a Registration
Agreement to each of the persons receiving shares of Parent Common Stock
hereunder.
{j) Opinion of Counsel. Target shall have received from Xxxxxx & Xxxxxx,
counsel for Parent and Acquiror, an opinion in substantially the form
attached hereto as Exhibit "K", dated as of the Closing Date.
{k) No Material Adverse Change. There shall have been no material adverse
change in the condition, financial or otherwise, of Parent.
ARTICLE VIII. INDEMNIFICATION
Section 8.1. General Indemnification Covenants. The Shareholder shall
indemnify , save and keep Parent and its affiliates, agents, attorneys,
successors and permitted assigns {including the Surviving Corporation) {the
"Parent Indemnitees"), harmless against and from all liability, demands,
claims, actions or causes of action, assessments, losses, fines, penalties,
costs, damages and expenses, including reasonable attorneys fees,
disbursements and expenses {collectively, the "Damages"), sustained or
incurred by any of the Parent Indemnitees as a result of, arising out of or
by virtue of any misrepresentation, breach of any warranty or
representation or non-fulfillment of any agreement or covenant on the part
of Target or the Shareholder, whether contained in this Agreement or the
Merger Agreement or any exhibit or schedule hereto or thereto or any
written statement or certificate furnished or to be furnished to Parent or
Acquiror pursuant hereto or in any closing document delivered by Target or
the Shareholder to Parent or Acquiror in connection herewith.
Section 8.2. Tax Indemnity. {a) The Shareholder hereby agrees to pay,
indemnify, defend and hold Parent and Acquiror harmless from and against
any and all taxes of Target with respect to any period {or any portion
thereof) up to and including the Effective Time, except for taxes of Target
which are reflected as current liabilities for taxes that exist as of the
Effective Time {"Current Tax Liabilities") on the financial statements
delivered to Parent and Acquiror hereunder, together with all reasonable
legal fees, disbursements and expenses incurred by Parent and Acquiror in
connection therewith.
{b) The Shareholder shall prepare and file any tax return of Target
required to be filed after the Effective Time and which relates to any
period or portion thereof up to and including the Effective Time.
{c) The indemnity provided for in this Section 8.2 shall be independent of
any other indemnity provision hereof and, anything in this Agreement to the
contrary notwithstanding, shall survive until the expiration of the
applicable statutes of limitation for the taxes referred to herein, and any
taxes subject to the indemnification for taxes set forth in this Section
7.2 shall not be subject to the provisions of Sections 9.1 or 9.4 hereof.
Notwithstanding anything in this Agreement to the contrary, the Shareholder
will not be obligated to indemnify Parent and Acquiror under any provision
of this Agreement, with respect to taxes or other liabilities that arise as
a direct result of a failure of the Merger to qualify as a reorganization
within the meaning of Section 368{a){1 ){A) and 368{a){2){D) of the Code,
provided that the Shareholder is not in breach of any of his
representations, covenants or agreements contained in the Continuity of
Interest Agreement.
Section 8.3. Release by the Shareholder. The Shareholder hereby releases
and discharges Parent and Acquiror and each of its officers, directors,
agents and attorneys from, and agree and covenant that, in no event, will
the Shareholder commence any litigation or other legal or administrative
proceeding against Parent, Acquiror or any of their officers, directors,
agents or attorneys, whether in law or equity, relating to any and all
claims and demands, known and unknown, suspected and unsuspected, disclosed
and undisclosed, for damages, actual or consequential, past, present and
future, arising out of or in any way connected with his ownership or
alleged ownership of Target Common Stock prior to the Effective Time, other
than claims or demands arising out of the transactions contemplated by this
Agreement and the Merger Agreement.
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
shareholders of Target:
(a) By mutual consent of the Boards of Directors of Parent and Target.
(b) By either Parent or Target, if (i) the Merger shall not have been
consummated by July 31' 1999 (the "Termination Date"); (ii) the requisite
consent of the shareholders of Target to approve this Agreement, the Merger
Agreement and the transactions contemplated hereby and thereby shall not be
obtained; (iii) any governmental or regulatory body, the consent of which
is a condition to the obligations of Parent, Acquiror and Target to
consummate the transactions contemplated hereby or by the Merger Agreement,
shall have been unsuccessful, or (iv) any court of competent jurisdiction
in the United States or any state shall have issued an order, judgment or
decree (other than a temporary restraining order) restraining, enjoining or
otherwise prohibiting the Merger and such order, judgment or decree shall
have become final and non-appealable; provided however, that the right to
terminate this Agreement under this Section 8.1 (b) shall not be available
to any party whose willful failure to fulfill any material obligation under
this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall forthwith become
void and there shall be no liability on the part of either Parent, Acquiror
or Target or their respective officers or directors, except that nothing in
this Section 9.2 shall relieve any party from liability for any breach of
this Agreement.
Section 9.3. Expenses. Unless otherwise provided herein, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated.
Section 9.4. Amendment. This Agreement may be amended by the parties hereto
by action taken by or on behalf of their respective Boards of Directors at
any time prior to the Effective Time. This Agreement may not be amended
except by an instrument in writing signed by each of the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party
or parties to be bound thereby.
ARTICLE X. GENERAL PROVISIONS
Section 10.1. Survival of Representation. Warranties and Agreements. The
representations, warranties and agreements in this Agreement shall survive
the Merger indefinitely.
Section 10.2. Publicity. There shall be no public announcements with
respect to the Merger made by Target. The right to publicize the execution
of this Agreement and the Merger Agreement, as well as the consummation of
the Merger, shall be that of Parent.
Section 10.3. Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice, except that
notices of changes of address shall be effective upon receipt):
(a) If to Parent or Acquiror: Internet Media Corporation
0000 Xxxxxxxx Xxxx Xxxx
Xxxxx Xxxxx, Xxxxxxxxx 00000
with copies to: Xxxxxx & Xxxxxx, Attorneys at Law
000 Xxxxxx Xxxx Xxxxxx
Xxxxxxxxxx, Xxxxx 00000
(b) if to Target or
the Shareholder: Santa Fe Trail Internet Plus, Inc.
X.X. Xxxxxx 000
Xxx Xxxxxx, Xxx Xxxxxx 00000-0000
with copies to: Xxxxx X. Xxxxx, Esquire
Xxxxx, Katz, Salazar, Alley & Xxxxx
000 Xxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxxx Xx, Xxx Xxxxxx 00000
Section 10.4. Non-Waiver. The failure in anyone or more instances of a
party to insist upon performance of any of the terms, covenants or
conditions of this Agreement, to exercise any right or privilege conferred
in this Agreement, or the waiver by said party of any breach of any of the
terms, covenants or conditions of this Agreement, shall not be construed as
a subsequent waiver of any such terms, covenants, conditions, rights or
privileges, but the same shall continue and remain in full force and effect
as if no such forbearance or waiver had occurred. No waiver shall be
effective unless it is in writing and signed by an authorized
representative of the waiving party.
Section 10.5. Arbitration. Any dispute arising under this Agreement and/or
the Merger Agreement, as well as any of the transactions contemplated
hereby and thereby, shall be resolved by arbitration in Dallas, Texas,
under the Rules of the American Arbitration Association, as then in effect.
The determination and award of the arbitrator, which aware may include
punitive damages, shall be final and binding on the parties and may be
entered as a judgment in any court of competent jurisdiction. It is
expressly agreed that the arbitrators, as part of their award, can award
attorneys fees to the prevailing party.
Section 10.6. Binding Effect: Benefit. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their successors and
permitted assigns. Nothing in this Agreement, express or implied, is
intended to confer on any person other than the parties hereto and their
respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, including,
without limitation, third party beneficiary rights.
Section 10.7. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law, or public policy, all other conditions and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner adverse to any party. Upon such determination that
any term or other provision is invalid, illegal or incapable of being
enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as
possible in an acceptable manner to the end that transactions contemplated
hereby are fulfilled to the extent possible.
Section 10.8. Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and undertakings, both oral
and written, among the parties, or any of them, with respect to the subject
matter hereof and, except as otherwise expressly provided herein, are not
intended to confer upon any other person any rights or remedies hereunder.
Section 10.9. Assignability. This Agreement shall not be assignable by
either party or by operation of law, except with the express written
consent of each other party.
Section 10.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Texas applicable to
contracts executed in and to be performed in such State.
Section 10.11. Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.12. Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Acquiror and Target, by their respective
officers thereunto duly authorized, and the Shareholder have caused this
Agreement to be executed as of the date first written above.
INTERNET MEDIA CORPORATION
ATTEST:
By: /s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx, President
/s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx Secretary
SANTA FE WIRELESS INTERNET, INC.
ATTEST:
/s/ Xxxxx X. Xxxxxx
Xxxxx X. Xxxxxx Secretary
By: /s/ Xxxxxxx X. Xxxxxx
Xxxxxxx X. Xxxxxx
Chief Executive Officer
SANTA FE TRAIL INTERNET PLUS, INC.
ATTEST:
/s/ Secretary By: /s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx
President
/s/ Xxxxxxx Xxxxx
Xxxxxxx Xxxxx, individually
