AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF
JUNE 14, 2004
AMONG
CONTINUUM GROUP B INC.
HW ACQUISITION CORPORATION
AND
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
SCHEDULES
3.1(b) Company Warrants, Notes and Voting Agreements
3.1(e) Company Litigation
3.1(f) Liabilities of Company
3.2(f) Liabilities of Parent and Acquisition Sub
4.1(a) Affiliates of Parent
4.1(b) Stockholders of Parent Receiving Registration Rights
EXHIBITS
Exhibit A Form of Certificate of Merger
Exhibit B Form of Stockholder Investment Representation Letter
Exhibit C Form of Affiliate Agreement
Exhibit D Form of Registration Rights Agreement
AGREEMENT AND PLAN OF REORGANIZATION,
dated as of June 14, 2004, among CONTINUUM
GROUP B INC., a Nevada corporation
("PARENT"), HW ACQUISITION CORPORATION, a
Delaware corporation and wholly-owned
subsidiary of Parent ("ACQUISITION SUB"),
and ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., a Delaware
corporation (the "COMPANY").
The Boards of Directors of Acquisition Sub and the Company have each
duly approved and adopted this Agreement and Plan of Reorganization (this
"AGREEMENT"), the Certificate of Merger in substantially the form of EXHIBIT A,
attached hereto (the "CERTIFICATE OF MERGER"), and the proposed merger of
Acquisition Sub with and into the Company (the "MERGER") in accordance with this
Agreement, the Certificate of Merger and Delaware General Corporation Law (the
"DELAWARE STATUTE"), whereby, among other things, (x) the issued and outstanding
shares, if any, of (i) Common Stock, $0.01 par value, of the Company (the
"COMPANY COMMON STOCK"), (ii) Series A Convertible Preferred Stock, $0.01 par
value, of the Company (the "SERIES A PREFERRED STOCK"), and (iii) Series B
Redeemable Convertible Participating Preferred Stock (the "SERIES B PREFERRED
STOCK") (in each instance, other than shares held by dissenting stockholders),
will be exchanged and converted into shares of common stock, $0.001 par value,
of Parent (the "PARENT COMMON STOCK"), and (y) the issued and outstanding
shares, if any, of Series C Convertible Preferred Stock, $0.01 par value, of the
Company (the "SERIES C PREFERRED STOCK", and, together with the Company Common
Stock, the Series A Preferred Stock and the Series B Preferred Stock, the
"COMPANY STOCK"), will be exchanged and converted into shares of Series A
Convertible Preferred Stock, $0.001 par value, of Parent (the "PARENT PREFERRED
STOCK"), in the manner set forth in Article 2 hereof and in the Certificate of
Merger, upon the terms and subject to the conditions set forth in this Agreement
and the Certificate of Merger.
NOW, THEREFORE, in consideration of the mutual benefits to be
derived from this Agreement and the Certificate of Merger and the
representations, warranties, covenants, agreements, conditions and promises
contained herein and therein, the parties hereby agree as follows:
ARTICLE 1
GENERAL
1.1 THE MERGER. In accordance with the provisions of this Agreement,
the Certificate of Merger and the Delaware Statute, Acquisition Sub shall be
merged with and into the Company, which at and after the Effective Time (as
defined below) shall be, and is sometimes herein referred to as, the "SURVIVING
CORPORATION". Acquisition Sub and the Company are sometimes referred to as the
"CONSTITUENT CORPORATIONS".
1.2 THE EFFECTIVE TIME OF THE MERGER. Subject to the provisions of
this Agreement, the Certificate of Merger shall be executed by the Surviving
Corporation and delivered to and filed with the Secretary of State of the State
of Delaware on the Closing Date (as defined below) in the manner provided under
Section 251 of the Delaware Statute. The Merger shall become effective upon the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware (the "Effective Time").
1.3 EFFECT OF MERGER. At the Effective Time, the separate existence
of Acquisition Sub shall cease and Acquisition Sub shall be merged with and into
the Surviving Corporation, and the Surviving Corporation shall succeed, without
other transfer, to all rights and property of each of the Constituent
Corporations and shall be subject to all the debts and liabilities of the
Constituent Corporations in the same manner as if the Surviving Corporation had
itself incurred them, and be subject to all the restrictions, disabilities and
duties of each of the Constituent Corporations as provided in Section 251 of the
Delaware Statute.
1.4 CHARTER AND BY-LAWS OF SURVIVING CORPORATION. From and after the
Effective Time, (i) the Certificate of Incorporation (the "CHARTER") of the
Company shall be amended so that Article Four shall read in its entirety as
follows: "The total number of shares of all classes of stock which the
corporation shall have authority to issue is one thousand (1,000), all of which
shall consist of Common Stock, $0.01 par value per share", and, as so amended,
shall be the Charter of the Surviving Corporation, unless and until altered,
amended or repealed as provided in the Delaware Statute, (ii) the by-laws of the
Company shall be the by-laws of the Surviving Corporation, unless and until
altered, amended or repealed as provided in the Delaware Statute, the Charter or
such by-laws, (iii) the directors of the Company shall be the directors of the
Surviving Corporation, unless and until removed, or until their respective terms
of office shall have expired, in accordance with the Delaware Statute, the
Charter and the by-laws of the Surviving Corporation, as applicable and (iv) the
officers of the Company shall be the officers of the Surviving Corporation,
unless and until removed, or until their terms of office shall have expired, in
accordance with the Delaware Statute, the Charter and the by-laws of the
Surviving Corporation, as applicable.
1.5 TAKING OF NECESSARY ACTION. Prior to the Effective Time, the
parties hereto shall do or cause to be done all such acts and things as may be
necessary or appropriate in order to effectuate the Merger as expeditiously as
reasonably practicable, in accordance with this Agreement, the Certificate of
Merger and the Delaware Statute.
1.6 TAX-FREE REORGANIZATION. For federal income tax purposes, the
parties intend that the Merger be treated as a tax-free reorganization within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "CODE"). The parties shall not take a position on any tax return or take
any action inconsistent with this Section 1.6 unless otherwise required by a
taxing authority.
1.7 CLOSING. Unless this Agreement shall have been terminated and
the transactions contemplated by this Agreement abandoned pursuant to the
provisions of Article 9, and subject to the provisions of Article 6, the closing
of the Merger (the "CLOSING") will take place at 10:00 a.m. (New York time) on a
date (the "CLOSING DATE") to be mutually agreed upon by the parties, which date
shall be not later than the third Business Day after all the conditions set
forth in Article 6 shall have been satisfied (or waived in accordance with
Section 10.10, to the extent the same may be waived), unless another date is
agreed to in writing by the parties. The Closing shall take place at the offices
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of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇ LLP ("OH&S"), ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇, unless another place is agreed to in writing by the parties. As used
herein, the term "BUSINESS DAY" shall mean any day other than a Saturday, Sunday
or day on which banks are permitted to close in the City and State of New York.
ARTICLE 2
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE CONSTITUENT
CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 CONVERSION OF STOCK AND CONSIDERATION.
(a) DEFINITIONS.
(i) "COMPANY STOCK FRACTION" shall equal 1.00 (which
reflects the effectiveness of the Company Reverse Stock Split (as defined in
Section 5.9).
(ii) "MERGER SHARES" shall mean, collectively, (x) the
16,833,471 shares of Parent Common Stock to be issued upon exchange and
conversion of outstanding Company Common Stock, Series A Preferred Stock, if
any, and Series B Preferred Stock, if any, in accordance with this Article 2 and
(y) the 5,000,000 shares of Parent Preferred Stock to be issued upon exchange
and conversion of Series C Preferred Stock, in accordance with this Article 2.
(b) EFFECTIVE OF MERGER. At the Effective Time, by virtue of the
Merger and without any action on the part of the parties, the following will
occur:
(i) CAPITAL STOCK OF THE COMPANY. All shares of (x) Company
Common Stock, Series A Preferred Stock, if any, and Series B Preferred Stock, if
any, outstanding immediately prior to the Effective Time (other than shares held
by the Company as treasury stock) will be cancelled and converted into and
become the right to receive, in the aggregate, 16,833,471 shares of Parent
Common Stock, to be distributed to the stockholders of the Company in accordance
with Section 2.1(b)(iv), and (y) Series C Preferred Stock, if any, outstanding
immediately prior to the Effective Time (other than shares held by the Company
as treasury stock) will be cancelled and converted into and become the right to
receive, in the aggregate, 5,000,000 shares of Parent Preferred Stock, to be
distributed to the stockholders of the Company in accordance with Section
2.1(b)(iv).
(ii) CANCELLATION OF CERTAIN SHARES OF COMPANY STOCK. All
shares of Company Stock that is held at the Effective Time by the Company as
treasury stock or that is authorized but unissued will be cancelled and no
payment will be made with respect to those shares;
(iii) CAPITAL STOCK OF ACQUISITION SUB. Each share of
capital stock of Acquisition Sub outstanding immediately prior to the Effective
Time will be converted into and become one validly issued, fully-paid, and
non-assessable share of Common Stock of the Surviving Corporation.
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(iv) EXCHANGE RATIO FOR COMPANY STOCK. Each share of Company
Common Stock, Series A Preferred Stock, if any, and Series B Preferred Stock, if
any, issued and outstanding at the Effective Time (other than shares held by
dissenting stockholders, if any), including all accrued and unpaid dividends
thereon, shall be exchanged and converted into the right to receive the Company
Stock Fraction (the "EXCHANGE RATIO") of a share of Parent Common Stock in
accordance with Section 2.2(a). Each share of Series C Preferred Stock, if any,
issued and outstanding at the Effective Time (other than shares held by
dissenting stockholders, if any), including all accrued and unpaid dividends
thereon, shall be exchanged and converted into the right to receive the Exchange
Ratio of a share of Parent Preferred Stock in accordance with Section 2.2(a).
All calculations pursuant to this Agreement shall be rounded to the nearest
one-billionth (.000000001).
(v) SHARES OF DISSENTING STOCKHOLDERS. Each issued and
outstanding share of Company Stock held by a dissenting stockholder, if any,
shall not be exchanged and converted as described in Section 2.1(b)(iv) but
shall become the right to receive such consideration as may be determined to be
due to such dissenting stockholder pursuant to the Delaware Statute; provided,
however, that each share of Company Stock issued and outstanding at the
Effective Time and held by a dissenting stockholder who or which shall, after
the Effective Time, withdraw his or its demand for appraisal or lose or fail to
perfect his or its right of appraisal as provided in the Delaware Statute shall
be deemed, as of the Effective Time, to be exchanged and converted into Parent
Common Stock or Parent Preferred Stock, as applicable, as provided in Section
2.1(b)(iv), without interest. After the Effective Time, as provided in Section
262 of the Delaware Statute, no dissenting stockholder will be entitled to vote
the shares of Company Stock subject to such dissenting stockholder's demand for
appraisal for any purpose or be entitled to the payment of dividends or other
distributions on such shares. The Company shall be entitled to make any payment
with respect to, or settle or offer to settle, any such demands.
(vi) ADJUSTMENTS FOR CAPITAL CHANGES. If, prior to the
Effective Time, Parent or the Company recapitalizes through a subdivision of its
outstanding shares into a greater number of shares, or a combination of its
outstanding shares into a lesser number of shares, or reorganizes, reclassifies
or otherwise changes its outstanding shares into the same or a different number
of shares or other classes, or declares a dividend on its outstanding shares
payable in shares of its capital stock or securities convertible into shares of
its capital stock, then the Exchange Ratio will be adjusted appropriately so as
to maintain the relative proportionate interests of the holders of shares of
Company Stock and the holders of shares of Parent Common Stock. Notwithstanding
the foregoing, no adjustment to the Exchange Ratio shall be made as a result of
the Company Reverse Stock Split.
2.2 EXCHANGE OF CERTIFICATES.
(a) PROCEDURE FOR EXCHANGE. Following the Effective Time, Parent
shall deliver to each holder of record, other than the Company and Parent or any
subsidiary of the Parent, of a certificate or certificates which immediately
prior to the Effective Time represented issued and outstanding shares of Company
Stock (each, a "COMPANY CERTIFICATE"), a certificate (a "PARENT CERTIFICATE")
representing that number of Merger Shares that such holder has the right to
receive pursuant to Section 2.1(b)(iv) with respect to such Company Certificate,
against receipt by Parent of (i) such Company Certificate for cancellation, (ii)
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an executed letter of transmittal, (iii) an executed stockholder investment
representation letter in the form attached hereto as EXHIBIT B (each, a
"STOCKHOLDER INVESTMENT REPRESENTATION LETTER") and (iv) a duly executed stock
power to be delivered to the transfer agent, and the Company Certificate so
surrendered shall forthwith be cancelled. In the event of a transfer of
ownership of shares of Company Stock that is not registered on the transfer
records of the Company, a Parent Certificate representing the proper number of
Merger Shares may be issued to a transferee if the Company Certificate
representing such Company Stock is presented to Parent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any
applicable stock or other transfer taxes have been paid. Until surrendered as
contemplated by this Section 2.2(a), each Company Certificate shall be deemed,
on and after the Effective Time, to represent only the right to receive upon
such surrender, Parent Certificates representing Merger Shares as contemplated
by Section 2.1(b)(iv), without interest.
(b) FRACTIONAL SHARES. No fractional shares of Parent Common
Stock or Parent Preferred Stock shall be issued in connection with the Merger,
but in lieu thereof each holder of (i) Company Common Stock, Series A Preferred
Stock or Series B Preferred Stock who would otherwise be entitled to receive a
fraction of a share of Parent Common Stock (after aggregating all fractional
shares of Parent Common Stock to be received by such holder) will receive from
Parent the nearest whole number of shares of Parent Common Stock and (ii) Series
C Preferred Stock who would otherwise be entitled to receive a fraction of a
share of Parent Preferred Stock (after aggregating all fractional shares of
Parent Preferred Stock to be received by such holder) will receive from Parent
the nearest whole number of shares of Parent Preferred Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN COMPANY STOCK. All Merger
Shares issued upon the surrender for exchange of shares of Company Stock in
accordance with the terms of this Article 2 shall be deemed to have been issued
in full satisfaction of all rights pertaining to such shares of Company Stock.
After the Effective Time, there will be no further registration of transfers of
the shares of Company Stock on the stock transfer books of the Company. If,
after the Effective Time, any Company Certificate is presented to the Surviving
Corporation, such Company Certificate shall be canceled and exchanged as
provided in this Article 2.
(d) NO LIABILITY. Neither Parent, Acquisition Sub nor the
Company shall be liable to any holder of shares of Company Stock or Parent
Common Stock, as the case may be, for Merger Shares (or dividends or
distributions with respect thereto) to be issued in exchange for Company Stock
pursuant to this Section 2.2, if, on or after the expiration of twelve (12)
months following the Effective Date, such shares are delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
(e) LOST, STOLEN OR DESTROYED COMPANY CERTIFICATES. In the event
any Company Certificate shall have been lost, stolen or destroyed, upon the
making of an affidavit to that effect by the person claiming such Company
Certificate to be lost, stolen or destroyed, Parent will issue in exchange for
such lost, stolen or destroyed Company Certificate the Merger Shares in respect
thereof pursuant to this Agreement.
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2.3 CONVERSION OF THE COMPANY OPTIONS AND ASSUMPTION OF COMPANY
OPTION PLANS; OTHER SECURITIES.
(a) At the Effective Time, each of the Company's then
outstanding stock options (collectively, the "COMPANY OPTIONS") which have not
been terminated, exercised or otherwise converted as of the Effective Time
(including, without limitation, the incentive stock options and non-qualified
stock options under the Horizon Live Distance Learning, Inc. 1998 Stock
Option/Stock Issuance Plan, as amended, and the 2004 Horizon-Wimba Stock Option
Plan (together, the "COMPANY OPTION PLANS") to purchase Company Common Stock),
by virtue of the Merger and without any further action on the part of any holder
thereof, shall be assumed by Parent and automatically converted into an option
to purchase a number of shares of Parent Common Stock determined by multiplying
the number of shares of Company Common Stock covered by such Company Option
immediately prior to the Effective Time by the Exchange Ratio (rounded to the
nearest whole number of shares), at an exercise price per share of Parent Common
Stock equal to the exercise price in effect under such Company Option
immediately prior to the Effective Time divided by the Exchange Ratio (rounded
up to the nearest cent), which option to purchase Parent Common Stock shall
contain the same term, status as an "incentive stock option" under Section 422
of the Code (if such Company Option was theretofore a Company incentive stock
option), vesting schedule and otherwise be on substantially the same terms and
conditions as set forth in the assumed Company Option (any such assumed Company
Option being herein referred to as an "ASSUMED OPTION"). In addition, at the
Effective Time, each of the Company Option Plans, by virtue of the Merger and
without any further action on the part of the Company or Parent, shall be
assumed by Parent. The parties intend that the assumption and conversion of
Company Options under this Section 2.3 shall meet the requirements of Section
424(a) of the Code and this Section 2.3 shall be interpreted in a manner
consistent with such interpretation.
(b) Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery
upon exercise of the Assumed Options in accordance with this Section 2.3.
2.4 AUTHORIZATION OF THE MERGER, THIS AGREEMENT, AND THE CERTIFICATE
OF MERGER. In the event the Merger shall be approved by the stockholders of the
Company, as required by the Delaware Statute and as contemplated by this
Agreement, such approval shall constitute approval and ratification by the
stockholders of the Company of the (i) Merger, as required by the Delaware
Statute and (ii) provisions of this Agreement and the Certificate of Merger.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to Parent and Acquisition Sub that, except as disclosed
in the schedules attached hereto:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. The
Company (i) is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, and (ii) has all requisite
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corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as now being conducted, to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The Company has delivered to Parent true and
complete copies of the Charter and by-laws of the Company.
(b) CAPITALIZATION.
(i) As of the date of this Agreement (and prior to (v) the
Company Reverse Stock Split, (w) the conversion of the Series A Preferred Stock
and Series B Preferred Stock into Company Common Stock (which is contemplated to
be effected prior to the Closing), (x) the issuance of shares in connection with
contemplated combination with Wimba S.A., (y) the issuance of 1,000,000 shares
of common stock in connection with amounts owed under that Agreement, dated as
of December 10, 2003, among the Company and Argentum Management LLC, which
agreement is expected to be terminated effective as of August 31, 2004, and (z)
the issuance of shares of Series C Preferred Stock (which is contemplated to be
effected prior to the Closing), the authorized capital stock of the Company
consists of 27,830,307 shares designated as follows:
18,907,925 shares of Company Common Stock, of which
5,280,042 shares are outstanding; and
8,922,382 shares of preferred stock, $0.01 par value per
share, of which (i) 204,360 shares are designated as Series A Preferred Stock,
all of which shares are outstanding and (ii) 8,718,022 shares are designated as
Series B Preferred Stock, all of which shares are outstanding.
(ii) All of the issued and outstanding shares of Company
Stock have been duly authorized and are validly issued, fully paid,
non-assessable, and not subject to preemptive or similar rights of stockholders
or others, and all shares of Company Stock that have been reserved for issuance
will, upon issuance in compliance with the terms of the instruments pursuant to
which they are to be issued, be duly authorized, validly issued, fully paid,
non-assessable, and not subject to preemptive or similar rights of stockholders
or others.
(iii) Other than the Company Options or as set forth in
Schedule 3.1(b), there are no options, warrants or other rights, agreements,
arrangements or commitments of any character to which the Company or any of its
affiliates are a party or by which the Company is bound relating to the issued
or unissued capital stock of the Company or obligating the Company to issue or
sell any shares of capital stock of, or other equity interests in, the Company.
There are no outstanding contractual obligations of the Company to provide funds
to, or make investment (in the form of a loan, capital contribution or
otherwise) in, any other person or entity.
(c) AUTHORITY. The execution, delivery and performance by the
Company of this Agreement and the Certificate of Merger and the consummation of
the transactions contemplated hereby and thereby will, as of the Effective Time,
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement is, and the Certificate of Merger will be as of the
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Effective Time, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except to the
extent that enforceability may be limited by applicable bankruptcy,
reorganization, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally and by principles of equity
regardless of whether such enforceability is considered a proceeding in law or
equity. Neither the execution, delivery and performance by the Company of this
Agreement and the Certificate of Merger, nor the consummation of the
transactions contemplated hereby or thereby, will in any respect (A) conflict
with, (B) result in any violations of, (C) cause a default under (with or
without due notice, lapse of time or both), (D) give rise to any right of
termination, amendment, cancellation or acceleration of any obligation contained
in or the loss of any benefit under, (E) result in the creation of any
Encumbrance on or against any assets, rights or property of the Company under
any term, condition or provision of (x) any instrument or agreement to which the
Company is a party, or by which the Company or any of its properties, assets or
rights may be bound, (y) any law, statute, rule, regulation, order, writ,
injunction, decree, permit, concession, license or franchise of any federal,
state, municipal, foreign or other governmental court, department, commission,
board, bureau, agency or instrumentality ("GOVERNMENTAL AUTHORITY") applicable
to the Company or any of its properties, assets or rights or (z) the Company's
Charter or by-laws, as amended through the date hereof, respectively, in each
case, which conflict, breach, default or violation or other event would prevent
the consummation of the transactions contemplated by this Agreement or the
Certificate of Merger. Except as contemplated by this Agreement, no permit,
authorization, consent or approval of or by, or any notification of or filing
with, any Governmental Authority or other person is required in connection with
the execution, delivery and performance by the Company of this Agreement or the
Certificate of Merger or the consummation of the transactions contemplated
hereby or thereby, other than (i) the filing with the SEC of such reports and
information under the Securities and Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and (iv) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained or
made would materially impair the ability of the Company to consummate the
transactions contemplated by this Agreement, including, without limitation, the
Merger. As used herein, the term "Encumbrances" shall mean and include security
interests, mortgages, liens, pledges, guarantees, charges, easements,
reservations, restrictions, clouds, equities, rights of way, options, rights of
first refusal and all other encumbrances, whether or not relating to the
extension of credit or the borrowing of money.
(d) FINANCIAL INFORMATION.
(i) The Company has previously delivered to Parent the
following financial statements (collectively, the "COMPANY FINANCIAL
STATEMENTS):
(1) the unaudited balance sheet of the Company as at
March 31, 2004 (the "COMPANY INTERIM BALANCE SHEET") and the date thereof being
the "COMPANY INTERIM BALANCE SHEET DATE") and the related statement of income
for the three-month period then ended, prepared by the Company (the "COMPANY
INTERIM FINANCIAL STATEMENTS"); and
(2) the audited balance sheet of the Company as at
December 31, 2003 (the "COMPANY AUDITED BALANCE SHEET"); and the date thereof
being the "COMPANY AUDITED BALANCE SHEET DATE"), and the related audited
statement of income for the year then ended.
(ii) The Company Financial Statements (A) are in accordance
with the books and records of the Company, (B) fairly present the financial
condition of the Company as at the respective dates indicated and the results of
operations of the Company for the respective periods indicated and (C) have been
prepared in accordance with U.S. generally accepted accounting principles
consistently applied ("GAAP"), except as indicated therein and except for the
absence of complete footnote disclosure as required by GAAP and subject, in the
case of the Company Interim Financial Statements, to year-end audit adjustments.
(e) LITIGATION, ETC. Except as disclosed on Schedule 3.1(e),
there are no (i) actions, suits, claims, investigations or legal or
administrative or arbitration proceedings (collectively, "ACTIONS") pending, or
to the best knowledge of the Company, threatened against the Company, whether at
law or in equity, or before or by any Governmental Authority, (ii) judgments,
decrees, injunctions or orders of any Governmental Authority or arbitrator
against the Company which, if adversely determined, could reasonably be expected
to have a material adverse effect on the Company's operations or financial
condition, taken together as a whole (a "COMPANY MATERIAL ADVERSE EFFECT").
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth in
SCHEDULE 3.1(f) or as set forth or reserved against on the Company Interim
Balance Sheet or the notes, if any, thereto, at the Company Interim Balance
Sheet Date, the Company had no liability or obligation of any nature (whether
known or unknown, matured or unmatured, fixed or contingent, secured or
unsecured, accrued, absolute or otherwise ("LIABILITY")) that would be required
to be reflected or reserved against on the Company Interim Balance Sheet in
order for the Company Interim Balance Sheet to fairly present the financial
condition of the Company at the Company Interim Balance Sheet Date in accordance
with GAAP, except as disclosed or provided for thereon. Since the Company
Interim Balance Sheet Date, the Company has incurred no Liabilities other than
in the ordinary course of business.
(g) BROKERS. Neither the Company nor any of its officers,
directors or employees have employed any broker or finder or incurred any
liability for any brokerage fees, commissions or finders' fees in connection
with the transactions contemplated hereby.
3.2 REPRESENTATIONS AND WARRANTIES OF PARENT AND ACQUISITION SUB.
Parent and Acquisition Sub represent and warrant to the Company as follows:
(a) ORGANIZATION; GOOD STANDING; QUALIFICATION AND POWER. Each
of Parent and Acquisition Sub (i) is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, and
(ii) has all requisite corporate power and authority to own, lease and operate
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its properties and assets and to carry on its business as now being conducted,
to enter into this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. Parent has delivered to the
Company true and complete copies of the Charter and by-laws of each of Parent
and Acquisition Sub.
(b) CAPITALIZATION.
(i) The authorized capital stock of Parent consists of Fifty
Million (50,000,000) shares, of which Forty-Five Million (45,000,000) shares are
Parent Common Stock, and Five Million (5,000,000) shares are Parent Preferred
Stock.
(ii) As of the date of this Agreement, (A) 4,822,074 shares
of Parent Common Stock are issued and outstanding, (B) no shares of Parent
Preferred Stock are issued and outstanding, and (C) no shares of capital stock
are held in the treasury of Parent. Parent has provided a current and accurate
stockholder list (identifying both record and beneficial ownership) to the
Company, setting forth, among other things, the names and addresses of each
record and beneficial owner of Parent Common Stock.
(iii) All of the issued and outstanding shares of Parent
Common Stock have been duly authorized and are validly issued, fully paid,
non-assessable, and not subject to preemptive or similar rights of stockholders
or others, and all shares of Parent Common Stock that have been reserved for
issuance will, upon issuance in compliance with the terms of the instruments
pursuant to which they are to be issued, be duly authorized, validly issued,
fully paid, nonassessable, and not subject to preemptive or similar rights of
stockholders or others. Parent complied in all respects with all federal
securities and applicable state "blue sky" laws in connection with the offering,
issuance, sale and delivery of all of the issued and outstanding shares of
Parent Common Stock, and no such offering, issuance, sale or delivery was in
violation thereof.
(iv) There are no options, warrants or other rights,
agreements, arrangements or commitments of any character to which Parent or any
of its affiliates are a party or by which Parent is bound relating to the issued
or unissued capital stock of Parent or obligating Parent to issue or sell any
shares of capital stock of, or other equity interests in, Parent. There are no
outstanding contractual obligations of Parent to provide funds to, or make
investment (in the form of a loan, capital contribution or otherwise) in, any
other person or entity. There are no voting agreements, voting trusts, proxies,
rights of first refusal, rights of first offer, co-sale rights, options,
transfer restrictions or other agreements, instruments or undertakings (whether
written or oral, formal or informal), with respect to the voting, transfer or
disposition of Parent Common Stock or any other security of Parent to which
Parent is a party or is bound or, to the best knowledge of Parent, between or
among any persons other than Parent.
(v) Parent has duly authorized and reserved for issuance the
Merger Shares, and, when issued in accordance with the terms of Article 2, the
Merger Shares will be duly authorized, validly issued, fully paid, nonassessable
and not subject to preemptive or similar rights of stockholders or others.
(vi) There exists a sufficient number of authorized but
unissued shares of Parent Common Stock to allow for (i) the exercise in full of
the Assumed Options and (ii) the conversion in full of the Parent Preferred
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Stock, and Parent has duly reserved for issuance a sufficient number of shares
of Parent Common Stock to accommodate such exercise of the Assumed Options and
conversion of the Parent Preferred Stock, and when such shares are issued by
Parent, such shares will be duly authorized, validly issued, fully paid,
nonassessable and not subject to preemptive or similar rights of stockholders or
others.
(vii) The authorized capital stock of Acquisition Sub
consists of 1,000 shares of common stock, $0.001 par value per share. Parent
owns all the outstanding shares of capital stock of Acquisition Sub, and all of
such shares are validly issued, fully paid, nonassessable and not subject to
preemptive or similar rights of stockholders or others. Other than Acquisition
Sub, Parent does not own or control, directly or indirectly, any interest in any
other corporation, association, or other business entity. Parent is not a
participant in any joint venture, partnership, or similar arrangement. There are
no voting agreements, voting trusts, proxies, rights of first refusal, rights of
first offer, co-sale rights, options, transfer restrictions or other agreements,
instruments or undertakings (whether written or oral, formal or informal), with
respect to the voting, transfer or disposition of any equity security of
Acquisition Sub to which Acquisition Sub is a party or is bound or, to the best
knowledge of Parent and Acquisition Sub, between or among any persons other than
Acquisition.
(c) AUTHORITY. The execution, delivery and performance by Parent
of this Agreement and each of the Affiliate Agreements and the execution,
delivery and performance of this Agreement and the Certificate of Merger by
Acquisition Sub and the consummation of the transactions contemplated hereby and
thereby will, as of the Effective Time, have been duly authorized by all
necessary corporate action on the part of Parent and Acquisition Sub,
respectively. This Agreement will be valid and binding obligations of Parent as
of the Effective Time, enforceable against Parent in accordance with its terms,
except to the extent that enforceability may be limited by applicable
bankruptcy, reorganization, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by principles of
equity regardless of whether such enforceability is considered a proceeding in
law or equity; and this Agreement and the Certificate of Merger are the valid
and binding obligations of Acquisition Sub, enforceable against Acquisition Sub
in accordance with their respective terms. At the Effective Time, neither the
execution, delivery and performance by Parent of this Agreement, the execution,
delivery and performance of this Agreement and the Certificate of Merger by
Acquisition Sub, nor the consummation of the transactions contemplated hereby or
thereby, will in any respect (A) conflict with, (B) result in any violations of,
(C) cause a default under (with or without due notice, lapse of time or both),
(D) give rise to any right of termination, amendment, cancellation or
acceleration of any obligation contained in or the loss of any benefit under,
(E) result in the creation of any Encumbrance on or against any assets, rights
or property of Parent or Acquisition Sub, as the case may be, under any term,
condition or provision of (x) any instrument or agreement to which Parent or
Acquisition Sub is a party, or by which Parent or Acquisition Sub or any of
their respective properties, assets or rights may be bound, (y) any law,
statute, rule, regulation, order, writ, injunction, decree, permit, concession,
license or franchise of any Governmental Authority applicable to Parent or
Acquisition Sub or any of their respective properties, assets or rights or (z)
Parent's or Acquisition Sub's Charter or by-laws, as amended through the date
hereof, respectively, in each case, which conflict, breach, default or violation
or other event would prevent the consummation of the transactions contemplated
by this Agreement or the Certificate of Merger. Except as contemplated by this
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Agreement, no permit, authorization, consent or approval of or by, or any
notification of or filing with, any Governmental Authority or other person is
required in connection with the execution, delivery and performance by Parent or
Acquisition Sub of this Agreement or the Certificate of Merger (in the case of
Acquisition Sub) or the consummation of the transactions contemplated hereby or
thereby, other than (i) the filing with the SEC of such reports and information
under the Exchange Act, and the rules and regulations promulgated by the SEC
thereunder, as may be required in connection with this Agreement and the
transactions contemplated hereby, (ii) the filing of such documents with, and
the obtaining of such orders from, various state securities and blue-sky
authorities as are required in connection with the transactions contemplated
hereby, (iii) the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware and (iv) such other consents, waivers,
authorizations, filings, approvals and registrations which if not obtained or
made would materially impair the ability of Parent or Acquisition Sub to
consummate the transactions contemplated by this Agreement, including, without
limitation, the Merger (each of the actions reflected in clauses (i), (ii) and
(iii) to be taken by Parent).
(d) SEC DOCUMENTS.
(i) Except as set forth in SCHEDULE 3.2(d), Parent has
timely filed all forms, reports, statements and documents required to be filed
by it with the SEC since its inception required to be filed by it pursuant to
the federal securities laws and the SEC rules and regulations promulgated
thereunder (collectively, the "PARENT SEC DOCUMENTS"). Except as set forth in
SCHEDULE 3.2(d), each of the Parent SEC Documents was prepared in accordance,
and complied as of their respective filing dates in all material respects, with
the requirements of the Exchange Act or the Securities Act, as applicable, and
the rules and regulations promulgated thereunder, and, at the time of filing (or
if amended or superceded by a subsequent filing, then on the date of such
subsequent filing), none of the Parent SEC Documents (including all exhibits and
schedules thereto and documents incorporated by reference therein) contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading.
(ii) The financial statements (including the notes thereto)
of Parent included in the Parent SEC Documents complied as to form in all
material respects with the then applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, were prepared
in accordance with Parent's books and records and in accordance with GAAP
applied on a consistent basis during the periods involved (except as may have
been indicated in the notes thereto) and fairly present the financial position
of Parent as at the dates thereof and the results of their operations,
stockholders' equity and cash flows for the period then ended.
(e) LITIGATION, ETC. There are no (i) Actions pending, or to the
best knowledge of Parent or Acquisition Sub, as applicable, threatened against
Parent or Acquisition Sub nor, to the best knowledge of Parent or Acquisition
Sub, as applicable, any basis therefor, whether at law or in equity, or before
or by any Governmental Authority, (ii) judgments, decrees, injunctions or orders
of any Governmental Authority or arbitrator against Parent or Acquisition Sub.
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(f) ABSENCE OF UNDISCLOSED LIABILITIES. Neither Parent nor
Acquisition Sub has any Liability, except for those Liabilities specifically
disclosed in the Parent SEC Documents, which Liabilities do not, in the
aggregate, exceed $60,000. Each Liability of Parent and Acquisition Sub is
specifically identified and set forth on SCHEDULE 3.2(f).
(g) NO BUSINESS ACTIVITIES. Since inception, neither Parent nor
Acquisition Sub has engaged in any business or operations other than
organizational activities and has not, other than issuing shares to
stockholders, commenced any business or operational activities. Except for the
Share Contribution Agreement, dated as of June 2, 2004 (the "SHARE CONTRIBUTION
AGREEMENT"), by and among Parent and the stockholders of Parent listed on
Schedule A thereto, neither Parent nor Acquisition Sub is a party to or bound
by, either directly or indirectly, any written or oral contract, commitment,
agreement, arrangement or understanding relating to any matter. Neither Parent
nor Acquisition Sub owns, leases or licenses any real or personal property or
assets.
(h) EMPLOYEE BENEFIT PLANS. Neither Parent nor Acquisition Sub
employs any person on a full- or part-time basis, and neither Parent nor
Acquisition Sub has any "Employee Benefit Plan" as defined in the Employee
Retirement Income Security Act of 1974.
(i) COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. Neither Parent
nor Acquisition Sub is in violation or default of any provision of its
respective Charter or by-laws. Neither Parent nor Acquisition Sub is in default
of any instrument, judgment, order, writ, decree, contract, agreement or
understanding to which it is a party or by which it is bound, either directly or
indirectly, or of any provision of any federal, state or local law, statute,
rule or regulation applicable to Parent or Acquisition Sub, including, without
limitation, the provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in (i) any violation or default
of any provision of Parent's or Acquisition Sub's Charter or by-laws or (ii) any
violation or conflict with any provision of any federal, state or local law,
statute, rule or regulation applicable to Parent or Acquisition Sub.
(j) BROKERS. Neither Parent, Acquisition Sub, nor any of their
respective officers, directors or employees have employed any broker or finder
or incurred any liability for any brokerage fees, commissions or finders' fees
in connection with the transactions contemplated hereby.
ARTICLE 4
RELATED AGREEMENTS
4.1 RELATED AGREEMENTS. Simultaneously with the execution and
delivery of this Agreement or on or prior to the Closing Date, the following
agreements (collectively referred to herein as the "RELATED AGREEMENTS") are
being executed and delivered by the respective parties thereto:
(a) AFFILIATE AGREEMENTS. Simultaneously with the execution and
delivery of this Agreement, each of the persons listed on SCHEDULE 4.1(a),
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attached hereto (each, a "PARENT AFFILIATE"), is entering into the Affiliate
Agreement in the form of EXHIBIT C (the "AFFILIATE AGREEMENT"), providing, among
other things, that each Parent Affiliate shall not transfer shares of Parent
Common Stock held (of record or beneficially) by such Parent Affiliate except as
permitted therein.
(b) REGISTRATION RIGHTS AGREEMENT. Parent and the stockholders
of Parent listed on SCHEDULE 4.1(b), attached hereto, are entering into a
Registration Rights Agreement, substantially in the form attached hereto as
EXHIBIT D (the "REGISTRATION RIGHTS AGREEMENT"), providing for, among other
things, the granting of piggy-back registration rights to such stockholders of
Parent.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
ADDITIONAL AGREEMENTS
5.1 OPERATION OF BUSINESS OF THE COMPANY AND PARENT. From and after
the date hereof until the Effective Time or the earlier termination of this
Agreement pursuant to Section 9.1 hereof (the "EXECUTORY PERIOD"), (a) the
Company shall operate its business as now operated and only in the normal and
ordinary course and, consistent with such operation, will use its commercially
reasonable efforts to preserve intact its business and assets, to keep available
the services of its officers and employees and to maintain satisfactory
relationships with persons having business dealings with it and (b) Parent and
Acquisition Sub shall not conduct or commence any operational activities of any
kind, other than activities which are, in the reasonable judgment and with the
prior written approval of the Company, necessary to consummate the transactions
contemplated hereby.
5.2 PREPARATION OF FILINGS. As promptly as practicable after the
date of this Agreement, Parent shall properly prepare, file and mail, if
applicable, and the Company shall fully cooperate in the preparation of, any
filings required under the Exchange Act (including, but not limited to, the
information required by Rule 14f-1 to be filed and mailed to the stockholders of
Parent), the Securities Act of 1933, as amended (the "SECURITIES ACT"), or any
other federal or state laws and Parent shall properly prepare and file any
filings required under state securities or "blue sky" laws, in each case
relating to the Merger and the transactions contemplated by this Agreement
(collectively, the "FILINGS"). Each party will notify the other party promptly
of the receipt of any comments from any government officials for amendments or
supplements to any Filing or for additional information and will supply the
other party with copies of all correspondence between such party or any of its
representatives, on the one hand, and any government officials, on the other
hand, with respect to the Merger or any Filing. Each party shall promptly
provide the other party (or its counsel) with copies of all filings made by such
party with any Governmental Authority in connection with this Agreement and the
transactions contemplated hereby and thereby. The Filings shall comply in all
material respects with all applicable requirements of law. Whenever any event
occurs which should be set forth in an amendment or supplement to any Filing,
Parent or the Company, as the case may be, shall promptly inform the other party
of such occurrence and cooperate in filing with any government officials, and/or
mailing to the stockholders of the Company, such amendment or supplement.
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5.3 LEGAL CONDITIONS TO MERGER. Each party hereto shall take all
reasonable actions necessary to comply promptly with all legal requirements that
may be imposed on such party with respect to the Merger and will take all
reasonable action necessary to cooperate with and furnish information to the
other party in connection with any such requirements imposed upon such other
party in connection with the Merger. Each party hereto shall take all reasonable
actions necessary (a) to obtain (and will take all reasonable actions necessary
to promptly cooperate with the other party in obtaining) any consent,
authorization, order or approval of, or any exemption by, any Governmental
Authority, or other third party, required to be obtained or made by such party
(or by the other parties) in connection with the Merger or the taking of any
action contemplated by this Agreement, (b) to defend, lift, rescind or mitigate
the effect of any lawsuit, order, injunction or other action adversely affecting
the ability of such party to consummate the transactions contemplated hereby and
(c) to fulfill all conditions precedent applicable to such party pursuant to
this Agreement.
5.4 CONSENTS. Each party hereto shall use its best efforts, and the
other parties shall cooperate with such efforts, to obtain any consents and
approvals of, or effect the notification of or filing with, each person or
authority, whether private or governmental, whose consent or approval is
required in order to permit the consummation of the Merger and the transactions
contemplated hereby and to enable the Surviving Corporation to conduct and
operate the business of the Company substantially as presently conducted and as
proposed to be conducted.
5.5 EFFORTS TO CONSUMMATE. Subject to the terms and conditions
herein provided, the parties hereto shall use their best efforts to do or cause
to be done all such acts and things as may be necessary, proper or advisable,
consistent with all applicable laws and regulations, to consummate and make
effective the transactions contemplated hereby and to satisfy or cause to be
satisfied all conditions precedent that are set forth in Article 6 as soon as
reasonably practicable.
5.6 NOTICE OF PROSPECTIVE BREACH. Each party hereto shall
immediately notify the other parties in writing upon the occurrence of any act,
event, circumstance or thing that is reasonably likely to cause or result in a
representation or warranty hereunder to be untrue at the Closing, the failure of
a closing condition to be achieved at the Closing, or any other breach or
violation hereof or default hereunder.
5.7 PUBLIC ANNOUNCEMENTS. The parties hereto agree that, to the
maximum extent feasible, but subject to the public disclosure and other legal
obligations of Parent and regulatory obligations to which each may be subject,
they shall advise and confer prior to the issuance (and provide copies to the
other party prior to issuance) of any public announcement or reports or
statements with respect to the Merger.
5.8 SUPPORT OF MERGER BY OFFICERS AND DIRECTORS. Each party hereto
shall use its or his best efforts to cause all of its officers and directors to
support the Merger and to take all actions and execute all documents reasonably
requested by the other parties hereto to carry out the intent of the parties
with respect to the transactions contemplated hereby.
5.9 COMPANY REVERSE STOCK SPLIT. The Company currently intends to
effect a 1:5.7968492 reverse stock split (the "COMPANY REVERSE STOCK SPLIT") of
the Company Common Stock prior to the Effective Time; PROVIDED, however, that
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the occurrence or non-occurrence for any reason of the Company Reverse Stock
Split prior to the Effective Time shall not be deemed to be a breach by the
Company of any representation, warranty, covenant or agreement under this
Agreement, and in the event the Company Reverse Stock Split does not occur prior
to the Effective Time, the parties agree that the Exchange Ratio shall be
re-calculated in such a manner as to put the parties in the same relative
economic position as if the Company Reverse Stock Split had been completed prior
to the Effective Time.
5.10 ACCESS TO RECORDS. From the date hereof until the Effective
Time, Parent shall cooperate in all respects with the preparation of the
historical and pro forma financials of the Surviving Corporation and Parent and
shall, at the Company's request, afford to the officers, independent certified
public accounts, counsel and other representatives of the Company, free and full
access at all reasonable times to all properties, books and records (including
tax returns filed and those in preparation) of Parent and Acquisition Sub and to
the work papers of the independent certified public accountants of Parent and
Acquisition Sub. Additionally, Parent and Acquisition Sub will cause its
officers to furnish to the Company and its accountants and other representatives
such additional financial and operating data, if any, and other information as
to the business and properties of Parent and Acquisition Sub as the Company or
such other representatives shall from time to time reasonably request.
ARTICLE 6
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The obligations of each
party to perform this Agreement and to effect the Merger are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by all parties hereto:
(a) APPROVALS. All authorizations, consents, orders or approvals
of, or declarations or filings with or expiration of waiting periods imposed by
any Governmental Authority necessary for the consummation of the transactions
contemplated hereby shall have been obtained or made or shall have occurred.
(b) LEGAL ACTION. No temporary restraining order, preliminary
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court or other
Governmental Authority and remain in effect. No litigation or proceeding shall
be pending which will have the probably effect of enjoining or preventing the
consummation of any of the transactions provided for in this Agreement.
(c) LEGISLATION. No federal, state, local or foreign statute,
rule or regulation shall have been enacted which prohibits, restricts or delays
the consummation of the transactions contemplated by this Agreement or any of
the conditions to the consummation of such transactions.
(d) WIMBA TRANSACTION. The closing of the transactions
contemplated by the Share Exchange Agreement, dated as of the date hereof, among
the Company, Wimba S.A. and the other parties thereto, shall have occurred in
accordance therewith.
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(e) RULE 14F-1 INFORMATION. Parent shall have filed with the SEC
and mailed to its stockholders, not less than 10 days prior to the Closing Date,
the information required by Rule 14f-1 of the Exchange Act.
6.2 CONDITIONS TO OBLIGATIONS OF PARENT AND ACQUISITION SUB. The
obligations of Parent to perform this Agreement and of Acquisition Sub to
perform this Agreement and the Certificate of Merger are subject to the
satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by Parent and Acquisition Sub:
(a) REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Parent and
Acquisition Sub shall have received a certificate signed by the Chief Executive
Officer of the Company on behalf of the Company to the effect that the
representations and warranties of the Company set forth in Section 3.1 shall be
true and correct in all material respects (except for any representation or
warranty that by its terms is qualified by materiality, in which case it shall
be true and correct in all respects) as of the date of this Agreement and as of
the Closing Date as though made at and as of such dates, respectively; PROVIDED,
however, that the parties agree that the Company's representations and
warranties and the certificate contemplated hereby do not extend to Wimba S.A.,
which the Company expects to acquire prior to the Closing Date.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. The Company shall
have performed in all material respects the obligations required to be performed
by it under this Agreement prior to or as of the Closing Date, and Parent and
Acquisition Sub shall have received a certificate signed by the Acting Chief
Executive Officer of the Company to that effect.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to perform this Agreement and the Certificate of Merger are subject to
the satisfaction of the following conditions unless waived (to the extent such
conditions can be waived) by the Company:
(a) REPRESENTATIONS AND WARRANTIES OF PARENT. The
representations and warranties of Parent and Acquisition Sub set forth in
Section 3.2 hereof shall be true and correct in all material respects (except
for any representation or warranty that by its terms is qualified by
materiality, in which case it shall be true and correct in all respects) as of
the date of this Agreement, and as of the effective date of the Stockholder
Action and as of the Closing Date as though made at and as of such dates,
respectively, and the Company shall have received a certificate signed by the
President of Parent and the President of Acquisition Sub to that effect.
(b) STOCKHOLDER APPROVAL; CERTIFICATE OF MERGER. This Agreement
and the Merger shall have been duly and validly approved and adopted by the
stockholders of the Company in accordance with the Delaware Statute and the
Company's Charter and By-laws, and the Certificate of Merger shall have been
executed and delivered by Acquisition Sub and the Company and filed with and
accepted by the Secretary of State of the State of Delaware.
(c) PERFORMANCE OF OBLIGATIONS OF PARENT AND ACQUISITION SUB.
Parent and Acquisition Sub shall have performed in all material respects their
respective obligations required to be performed by them under this Agreement and
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the Certificate of Merger prior to or as of the Closing Date and the Company
shall have received a certificate signed by the President of Parent and the
President of Acquisition Sub to that effect.
(d) RELATED AGREEMENTS. Each of the Related Agreements and the
Share Contribution Agreement shall each be in full force and effect and the
actions required to be taken thereunder by the parties thereto prior to the
Effective Time shall have been taken.
(e) PARENT PREFERRED STOCK CERTIFICATE OF DESIGNATIONS. The
Company shall have received evidence that the Certificate of Designations
designating the rights and preferences of the Parent Preferred Stock has been
properly filed with the Secretary of State of the State of Nevada and is
effective, and such Certificate of Designations shall be substantially similar
to the Certificate of Designations designating the rights and preferences of the
Company's Series C Preferred Stock.
(f) BOARD REPRESENTATION. Each person who is an officer and/or
director of Parent and/or Acquisition Sub, respectively, immediately prior to
the Effective Time shall have resigned his or her position, effective
immediately upon the Effective Time, and Parent shall have caused each person
listed on Schedule 6.3(f), hereto, to be duly appointed as a member of the board
of directors of Parent and/or to the office set forth opposite such person's
name.
(g) STOCK CERTIFICATES. Parent shall have delivered a letter to
the transfer agent directing the transfer agent to deliver the Merger Shares.
(h) BOARD APPROVAL. This Agreement and the Merger Agreement
shall have been approved by the Board of Directors of Parent.
(i) SUPPORTING DOCUMENTS. The Company shall have received copies
of such supporting documents and other information with respect to the
operations and affairs of Parent and Acquisition Sub as the Company may
reasonably request.
(j) FORM 8-K FINANCIALS. The consolidated historical and pro
forma financials of the Company, Acquisition Sub and Parent shall have been
prepared in accordance with the requirements of Form 8-K promulgated under the
Exchange Act and shall, in the Company's reasonable judgment, be in form
suitable for filing with the SEC.
(k) LIABILITIES OF PARENT AND ACQUISITION SUB. The Company shall
have received evidence satisfactory to the Company (in its sole discretion) that
Parent and Acquisition Sub have satisfied in full all Liabilities of Parent and
Acquisition Sub.
(l) CAPITALIZATION OF PARENT. The Company shall have received
evidence satisfactory to the Company (in its sole discretion), which evidence
may include, among other things, a certificate from Parent's transfer agent and
an opinion of Parent's legal counsel, that the outstanding capital stock of
Parent immediately prior to Closing consists solely of 1,500,000 shares of
Parent Common Stock.
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ARTICLE 7
ADDITIONAL AGREEMENTS
7.1 RESTRICTION ON TRANSFER.
(a) The shares of Parent Common Stock to be issued to each
stockholder of the Company pursuant to the Merger and any shares of capital
stock or other securities received with respect thereto (collectively, the
"RESTRICTED SECURITIES") shall not be sold, transferred, assigned, pledged,
encumbered or otherwise disposed of (each, a "TRANSFER") except upon the
conditions specified in this Section 7.1, which conditions are intended to
insure compliance with the provisions of the Securities Act. Each stockholder of
the Company shall observe and comply with the Securities Act and the rules and
regulations promulgated by the SEC thereunder as now in effect or hereafter
enacted or promulgated, and as from time to time amended, in connection with any
Transfer of Restricted Securities beneficially owned by the Stockholder.
(b) (i) Each certificate representing Restricted Securities
issued to a stockholder of the Company that is a "U.S. person" (as defined by
the Securities Act) and each certificate for such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of Sections 7.1(c) and 7.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES OR "BLUE-SKY" LAWS. THESE SECURITIES MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM. ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS
SUBJECT TO THE CONDITIONS SPECIFIED IN SECTION 7.1 OF THE
AGREEMENT AND PLAN OF REORGANIZATION, DATED AS OF JUNE 14,
2004, AMONG CONTINUUM GROUP B INC., HW ACQUISITION CORPORATION
AND ▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC., AND NO TRANSFER OF THESE SECURITIES
SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS,
CONTINUUM GROUP B INC. HAS AGREED TO DELIVER TO THE HOLDER
HEREOF A CONTINUUM GROUP B INC. CERTIFICATE, NOT BEARING THIS
LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE
NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE
OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF
RECORD OF THIS CERTIFICATE TO THE SECRETARY OF CONTINUUM GROUP
B INC."
(ii) Each certificate representing Restricted Securities issued
to a stockholder of the Company that is not a "U.S. person" (as defined by the
Securities Act) and each certificate for such securities issued to subsequent
transferees of any such certificate shall (unless otherwise permitted by the
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provisions of Sections 7.1(c) and 7.1(d) hereof) be stamped or otherwise
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ISSUED PURSUANT TO REGULATION S PROMULGATED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED. THESE SECURITIES MAY
NOT BE TRANSFERRED OR SOLD IN THE UNITED STATES OR TO U.S.
PERSONS EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF
REGULATION S, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM
REGISTRATION. HEDGING TRANSACTIONS INVOLVING SECURITIES
SOLD PURSUANT TO REGULATION S MAY NOT BE CONDUCTED UNLESS
IN COMPLIANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED."
(c) Upon approval of the Merger by the stockholders of the
Company as contemplated hereby, each stockholder of the Company is deemed to
agree (and by execution and delivery of the Stockholder Investment
Representation Letter each stockholder of the Company confirms its or his
agreement) that, prior to any Transfer of Restricted Securities to give written
notice to Parent of such stockholder's intention to effect such Transfer and to
comply in all other respects with the provisions of this Section 7.1. Each such
notice shall describe the manner and circumstances of the proposed Transfer and,
if requested by Parent, shall be accompanied by the written opinion, addressed
to Parent, of counsel for the holder of such Restricted Securities, stating that
in the opinion of such counsel (which opinion and counsel shall be reasonably
satisfactory to Parent) such proposed transfer does not involve a transaction
requiring registration or qualification of such Restricted Securities under the
Securities Act or the securities or "blue-sky" laws of any relevant state of the
United States. The holder thereof shall thereupon be entitled to Transfer such
Restricted Securities in accordance with the terms of the notice delivered by it
to Parent. Each certificate or other instrument evidencing the securities issued
upon the Transfer of any such Restricted Securities (and each certificate or
other instrument evidencing any untransferred balance of such Restricted
Securities) shall bear the applicable legend set forth in Section 7.1(b) unless
(x) in the opinion of Parent's counsel, registration of any future Transfer is
not required by the applicable provisions of the Securities Act or (y) Parent
shall have waived the requirement of such legends. No stockholder of the Company
shall Transfer any Restricted Securities until such opinion of counsel has been
given (unless waived by Parent or unless such opinion is not required in
accordance with the provisions of this Section 7.1(c)).
(d) Notwithstanding the foregoing provisions of this Section
7.1, the restrictions imposed by this Section 7.1 upon the transferability of
Restricted Securities shall cease and terminate when (i) any such shares are
sold or otherwise disposed of pursuant to an effective registration statement
under the Securities Act or as otherwise contemplated by Section 7.1(c) and,
pursuant to Section 7.1(c), the securities so transferred are not required to
bear the applicable legend set forth in Section 7.1(b) or (ii) the holder of
such Restricted Securities has met the requirements for Transfer of such
Restricted Securities pursuant to subparagraph (k) of Rule 144. Whenever the
restrictions imposed by this Section 7.1 shall terminate, as herein provided,
the holder of Restricted Securities as to which such restrictions have
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terminated shall be entitled to receive from Parent, without expense, a new
certificate not bearing the restrictive legend set forth in Section 7.1(b) and
not containing any other reference to the restrictions imposed by this Section
7.1.
7.2 CONFIDENTIALITY. Parent and the Acquisition Sub acknowledge and
recognize that the Subject Business has been conducted by the Company or is
currently planned to be conducted by the Surviving Corporation throughout the
world, and further acknowledge and recognize the highly competitive nature of
the industry in which the Subject Business is involved and that, accordingly, in
consideration of the premises contained herein, the consideration to be received
hereunder and the direct and indirect benefits to the Parent of the transactions
contemplated hereby, and in consideration of and as an inducement to the Company
to enter into this Agreement and to consummate the transactions contemplated
hereby, from and after the date hereof, Parent and the Acquisition Sub each
shall not use or disclose to any Person, any Confidential Information or the
terms and conditions of this Agreement, for any reason or purpose whatsoever,
nor shall Parent and the Acquisition Sub make use of any of the Confidential
Information or the terms and conditions of this Agreement for its or their own
purposes or for the benefit of any Person except (i) in order to facilitate the
fulfillment of such party's obligations hereunder, (ii) to the Company and the
Surviving Corporation, (iii) as required by law or judicial process, (iv) as
required to fulfill legal and regulatory obligations, if any or (v) to such
party's attorneys, accountants, other advisors, officers, employees, directors
and equityholders, as applicable, provided that such third party agrees to be
bound by the confidentiality provisions hereof. For purposes of this Agreement,
"CONFIDENTIAL INFORMATION" shall mean Intellectual Property Rights of the
Company or its affiliates and all information of a proprietary nature relating
to the Company or its affiliates or the Subject Business (other than information
that is in the public domain at the time of receipt thereof by Parent or the
Acquisition Sub or otherwise becomes public other than as a result of the breach
by Parent or the Acquisition Sub of its agreement hereunder or is rightfully
received from a third party without any obligation of confidentiality to the
Company or is independently developed by Parent or the Acquisition Sub). As used
herein, the term "SUBJECT BUSINESS" shall mean the business of the Company or
such business as is reasonably related to the business of the Company or is
reasonably based on its technology.
7.3 ASSUMPTION OF REGISTRATION RIGHTS AGREEMENT AND PREEMPTIVE
RIGHTS AGREEMENT. At the Effective Time, each of (i) the Registration Rights
Agreement to be entered into prior to the Effective Time among the Company and
the investors of the Series C Preferred Stock (the "COMPANY REGISTRATION RIGHTS
AGREEMENT"), and (ii) the Preemptive Rights Agreement to be entered into prior
to the Effective Time among the Company and the stockholders of the Company a
party thereto (the "COMPANY PREEMPTIVE RIGHTS AGREEMENT"), by virtue of the
Merger and without any further action on the part of Parent or any party to the
Company Registration Rights Agreement or the Preemptive Rights Agreement, shall
be assumed by Parent.
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ARTICLE 8
SURVIVAL; INDEMNIFICATION
8.1 INDEMNIFICATION: SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
SPECIFIC PERFORMANCE.
(a) Each of the Company, on the one hand, and Parent and
Acquisition Sub, on the other hand, shall indemnify, defend and hold the other
party (and its officers, directors, partners, employees, agents and affiliates)
harmless from and against all liability, loss or damage, together with all
reasonable costs and expenses related thereto (including legal and accounting
fees and expenses), arising from, relating to, or connected with any untruth,
inaccuracy or breach of any representations, warranties, covenants or agreements
contained herein prior to the Effective Time. Notwithstanding the foregoing, the
representations and warranties of the Company, Parent and Acquisition Sub shall
be deemed to be a condition to the Merger and, in the event the Closing
hereunder shall occur, all representations and warranties shall not in any event
survive beyond, and shall terminate and be of no further force or effect, at and
after the Effective Time.
(b) NOTWITHSTANDING ANYTHING ELSE TO THE CONTRARY CONTAINED
HEREIN, NO PARTY HERETO SHALL BE LIABLE TO ANY OTHER PARTY HERETO FOR INDIRECT,
INCIDENTAL, CONSEQUENTIAL, SPECIAL OR PUNITIVE DAMAGES (EVEN IF THAT PARTY HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES), ARISING FROM THE TERMINATION
OR IMPLEMENTATION OF THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO, LOSS OF
REVENUE OR ANTICIPATED PROFITS OR LOST BUSINESS.
(c) The transactions contemplated hereby are unique and the
parties hereto acknowledge that the breach or threatened breach of the binding
provisions of this Agreement may cause irreparable harm to the non-breaching
party or parties, as the case may be, for which an award of monetary damages may
be inadequate. Accordingly, in addition to and not in limitation of any other
remedies available for a breach or threatened breach by any party of any
provisions of this Agreement, the Company shall be entitled to an injunction
restraining Parent and/or Acquisition Sub from continuing such breach or
threatened breach and Parent shall be entitled to an injunction restraining the
Company from continuing such breach or threatened breach.
ARTICLE 9
TERMINATION; AMENDMENT, MODIFICATION AND WAIVER
9.1 TERMINATION. This Agreement may be terminated, and the Merger
abandoned, notwithstanding the approval by Parent, Acquisition Sub and the
Company of this Agreement, at any time prior to the Effective Time, by:
(a) the mutual consent of Parent, Acquisition Sub and the
Company; or
(b) either party, if the conditions set forth in Section 6.1
hereof shall not have been met by September 30, 2004, except if such conditions
have not been met solely as a result of the action or inaction of the party
seeking to terminate; or
(c) Parent, Acquisition Sub or the Company, if such party shall
have determined in its sole discretion, exercised in good faith, that the Merger
contemplated by this Agreement has become impracticable by reason of the
institution of any litigation, proceeding or investigation to restrain or
prohibit the consummation of the Merger, or which questions the validity or
legality of the transactions contemplated by this Agreement; or
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(d) Parent, Acquisition Sub or the Company, if any statute,
rule, regulation or other legislation shall have been enacted which, in the
reasonable judgment of such party, exercised reasonably and in good faith,
materially adversely impairs the conduct or operation of another party.
Any termination pursuant to this Section 9.1 (other than a termination pursuant
to Section 9.1(a) hereof) shall be effected by written notice from the party or
parties so terminating to the other parties hereto.
9.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement as provided in Section 9.1, this Agreement shall be of no further
force or effect, except for this Section 9.2, and Article 10, each of which
shall survive the termination of this Agreement.
ARTICLE 10
MISCELLANEOUS
10.1 EXPENSES. As used in this Agreement, "TRANSACTION COSTS" shall
mean, with respect to any party, all actual, out-of-pocket expenses incurred by
such party and paid to third parties in connection with this Agreement, the
Merger and all other transactions provided for herein and therein; but shall not
in any event include (a) general overhead, (b) the time spent by employees of
such party internally, (c) postage, telephone, telecopy, photocopy and delivery
expenses, (d) permit and filing fees, and (e) other non-material expenses that
are incidental to the ordinary course of business. Each party hereto shall bear
its own fees and expenses in connection with the transactions contemplated
hereby; provided, however, that in the event the Merger shall be consummated,
(x) except as set forth in clause (y), Parent and Acquisition Sub shall bear all
Transaction Costs and Liabilities of Parent and Acquisition Sub, whether or not
such Transaction Costs and Liabilities have been paid by Parent and Acquisition
Sub on or before the Closing Date and (y) the Company shall bear up to an
aggregate of $60,000 of properly documented Transaction Costs and Liabilities of
Parent.
10.2 DEFINITION OF BEST KNOWLEDGE. As used in this Agreement, the
term "BEST KNOWLEDGE and like phrases shall mean and include (i) actual
knowledge and (ii) that knowledge which a prudent business person (including the
officers, directors, and key employees of the party in question) could have
obtained in the management of his or her business affairs after making due
inquiry and exercising due diligence with respect thereto. In connection
therewith, the knowledge (both actual and constructive) of any officer,
director, or key employee of any party hereto shall be imputed to be the
knowledge of such party.
10.3 ENTIRE AGREEMENT. This Agreement (including the Schedules and
the Exhibits attached hereto) and the other writings referred to herein contain
the entire agreement among the parties hereto with respect to the transactions
contemplated hereby and supersede all prior agreements or understandings,
written or oral, among the parties with respect thereto.
10.4 DESCRIPTIVE HEADINGS. Descriptive headings are for convenience
only and shall not control or affect the meaning or construction of any
provision of this Agreement.
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10.5 NOTICES. All notices or other communications which are required
or permitted hereunder shall be in writing and sufficient if delivered
personally or sent by nationally-recognized overnight courier or by registered
or certified mail, postage prepaid, return receipt requested or by telecopier,
with confirmation as provided above addressed as follows:
(a) if to Parent or Acquisition Sub, to:
Continuum Group B Inc.
c/▇ ▇▇▇▇▇▇ Gundman Frome ▇▇▇▇▇▇▇▇▇▇ & Wolosky LLP
Park Avenue Tower
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Company, to:
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, Chairman
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇;
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. All such notices
or communications shall be deemed to be received (a) in the case of personal
delivery, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the next business day after the date when sent (c) in the
case of facsimile transmission or telecopier, upon confirmed receipt, and (d) in
the case of mailing, on the fifth business day following the date on which the
piece of mail containing such communication was posted.
10.6 COUNTERPARTS. This Agreement may be executed in any number of
counterparts by original or facsimile signature, each such counterpart shall be
an original instrument, and all such counterparts together shall constitute one
and the same agreement.
10.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly therein.
10.8 BENEFITS OF AGREEMENT. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and permitted assigns. This Agreement shall not
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be assignable by any party hereto without the consent of the other parties
hereto.
10.9 PRONOUNS. As used herein, all pronouns shall include the
masculine, feminine, neuter, singular and plural thereof whenever the context
and facts require such construction.
10.10 AMENDMENT, MODIFICATION AND WAIVER. This Agreement shall not
be altered or otherwise amended except pursuant to an instrument in writing
signed by Parent and the Company; provided, however, that after the approval and
adoption of this Agreement and the Merger by the stockholders of the Company, no
amendment of this Agreement shall be made which pursuant to the Delaware Statute
or other law requires the further approval of the stockholders of the Company;
provided further, however, that any party to this Agreement may waive in writing
any obligation owed to it by any other party under this Agreement. The waiver by
any party hereto of a breach of any provision of this Agreement shall not
operate or be construed as a waiver of any subsequent breach.
10.11 SEVERABILITY. If any provision of this Agreement is held
invalid or unenforceable by any court of competent jurisdiction, the other
provisions of this Agreement will remain in full force and effect. Any provision
of this Agreement held invalid or unenforceable only in part or degree will
remain in full force and effect to the extent not held invalid or unenforceable.
10.12 NO THIRD PARTY BENEFICIARIES. Nothing express or implied in
this Agreement is intended to confer, nor shall anything herein confer, upon any
person other than the parties and the respective successors or assigns of the
parties, any rights, remedies, obligations or liabilities whatsoever.
10.13 INTERPRETATION. This Agreement has been negotiated between the
parties and will not be deemed to be drafted by, or the product of, any party.
As such, this Agreement will not be interpreted in favor of, or against, any
party.
10.14 NO JOINT VENTURE. No party hereto shall make any warranties or
representations, or assume or create any obligations, on the other party's
behalf except as may be expressly permitted hereunder or in writing by such
other party. Each party hereto shall be solely responsible for the actions of
all its respective employees, agents and representatives.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement and Plan of Reorganization to be executed on its behalf as of the day
and year first above written.
CONTINUUM GROUP B INC.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Co-Executive Vice President
HW ACQUISITION CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Title: Executive Vice President
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
Title: Chief Executive Officer