AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into on
November 15, 2002 by PARAGON POLARIS XXXXXXXXXX.XXX INC., a Nevada corporation
("Paragon") and ICOWORKS, INC., a Nevada corporation ("Icoworks").
PRELIMINARY STATEMENTS
The Boards of Directors of Paragon and Icoworks deem it desirable and in
the best interests of their respective shareholders that Icoworks be merged with
and into Paragon (the "Merger") on the terms and conditions of this Agreement.
The Boards of Directors of Paragon and Icoworks, by resolutions duly
adopted, have approved and adopted this Agreement.
In consideration of the mutual benefits to be derived from the Merger and
the respective representations, warranties, covenants and agreements contained
in this Agreement, the parties agree as follows:
STATEMENT OF TERMS
SECTION 1
THE MERGER
1.1 The Merger. At the Effective Time (as defined in Section 1.3 below),
Icoworks will be merged with and into Paragon in accordance with this Agreement,
the Articles of Merger substantially in the form of Exhibit A attached to this
Agreement (the "Articles of Merger"), and the applicable provisions of Chapter
92A of the Nevada Revised Statutes (the "Nevada Law"). Following the Merger,
Paragon will continue as the surviving corporation ("Surviving Corporation") and
the separate existence of Icoworks will cease, except insofar as it may be
continued by the Nevada Law.
1.2 Closing. As soon as practicable following the satisfaction or waiver of
the conditions set forth in Section 5 of this Agreement, and provided that this
Agreement has not been terminated pursuant to Section 7, the parties to this
Agreement will hold a closing (the "Closing") for the purpose of confirming the
consummation of the Merger at a time and date mutually agreed upon by the
parties. Unless otherwise agreed by the parties, the Closing will be held at the
offices of Cane, X'Xxxxx & Xxxxxx LLC, 0000 Xxxx Xxxxxx Xxxxxx, Xxxxx 0000, Xxx
Xxxxx, XX 00000. The date on which the Closing actually occurs is referred to as
the "Closing Date." At the Closing, the parties will execute and exchange all
documents, certificates and instruments contemplated by this Agreement. The
parties agree to use commercially reasonable efforts and all due diligence to
cause the Closing to be consummated on or before May 1, 2003 unless such date is
extended by the mutual agreement of the parties.
1.3 Effective Time of the Merger. The Merger will be effective at the time
(the "Effective Time") upon the filing of the Articles of Merger with the
Secretary of State of the State of Nevada, which certificate is to be filed in
both places as soon as practicable on or after the Closing Date.
1.4 Effect of the Merger. The Merger will have the effects set forth in
Section 92A.250 of the Nevada Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the property, rights,
privileges, powers and franchises of Paragon and Icoworks will vest in Surviving
Corporation without further act or deed, and all debts, liabilities and duties
of Paragon and Icoworks will become the debts, liabilities and duties of
Surviving Corporation.
1.5 Certificate of Incorporation; Bylaws.
(a) The certificate of incorporation of Paragon as in effect
immediately prior to the Effective Time will continue unchanged, except to the
extent amended by the Articles of Merger, and will be
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the certificate of incorporation of Surviving Corporation until thereafter
amended in accordance with the terms thereof and in accordance with applicable
law. The Articles of Merger will effect a name change of the Surviving
Corporation to "Icoworks, Inc.".
(b) At the Effective Time, the by-laws of Paragon, as in effect
immediately prior to the Effective Time, will be the by-laws of Surviving
Corporation until thereafter amended in accordance with the terms thereof and in
accordance with applicable law.
1.6 Directors and Officers. The directors and officers of Icoworks
immediately prior to the Effective Time will be the directors and officers,
respectively, of Surviving Corporation after the Effective Time, until their
successors are duly elected, appointed or qualified or until their earlier
death, resignation or removal in accordance with certificate of incorporation
and bylaws of Surviving Corporation. Notwithstanding the terms of the first
sentence of this section 1.6 to the contrary, Paragon agrees to appoint a
majority of directors as nominated by Icoworks to the board of directors of the
Surviving Corporation immediately after the Closing Date.
1.7 Taking of Necessary Action. If after the Effective Time any further
action is necessary to carry out the purposes of this Agreement or to vest
Surviving Corporation with full title to all assets, rights, approvals,
immunities and franchises of either Paragon or Icoworks, and the officers and
directors of Paragon and Icoworks and Surviving Corporation will take all such
necessary action.
1.8 Private Placements. Icoworks acknowledges and agrees that Paragon will
be entitled to complete private placement transactions for gross proceeds not to
exceed $1,000,000 during the period between the date of this Agreement and the
Effective Time in order to raise the funds necessary to complete the acquisition
of Icoworks and to fund its ongoing working capital requirements.
1.9 Stock Split. Icoworks acknowledges and agrees that Paragon will be
entitled to at its election to proceed with a two-for-one split of its common
stock during the period between the date of this Agreement and the Effective
Time.
SECTION 2
PAYMENT OF MERGER CONSIDERATION
2.1 Merger Consideration.
(a) Conversion of Icoworks Common Stock. Each share of Icoworks common
stock, par value $0.001 per share ("Icoworks Common Stock") issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares, as defined in Section 2.4) will, by virtue of the Merger and without any
action on the part of the holder thereof, be converted into one share of Paragon
Common Stock (as defined in Section 4.3) (the "Merger Shares"), provided that if
the stock split contemplated by Section 1.9 of this Agreement is completed, each
share of Icoworks Common Stock will be converted into two shares of Paragon
Common Stock.
(b) Conversion of Icoworks Stock Options. Each option to purchase or
otherwise acquire shares of Icoworks Common Stock, whether for cash or based on
performance of milestones (each, a "Icoworks Stock Option") issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into an option to purchase or otherwise acquire an equal number of shares of
Paragon Common Stock on the same terms and conditions and will be recognized as
such by Paragon, provided that if the stock split contemplated by Section 1.9 of
this Agreement is completed, each Icoworks Stock Option will be converted into
an option to purchase twice the number of shares of Paragon Common Stock at
one-half of the original exercise price.
(c) Conversion of Icoworks Warrants. Each share purchase to purchase or
otherwise acquire shares of Icoworks Common Stock, whether for cash or based on
performance of milestones (each, a "Icoworks Warrant") issued and outstanding
immediately prior to the Effective Time will, by virtue
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of the Merger and without any action on the part of the holder thereof, be
converted into an option to purchase or otherwise acquire an equal number of
shares of Paragon Common Stock on the same terms and conditions and will be
recognized as such by Paragon, provided that if the stock split contemplated by
Section 1.9 of this Agreement is completed, each Icoworks Warrant will be
converted into a warrant to purchase twice the number of shares of Paragon
Common Stock at one-half of the original exercise price.
2.2 Conversion Procedure.
(a) Stock Certificate Conversion Procedure. After the Effective Time, each
holder of Icoworks Common Stock will be entitled to exchange his, her, or its
certificate representing the Icoworks Common Stock ("Icoworks Stock
Certificate") for a certificate representing the number of shares of Paragon
Common Stock into which the number of shares of Icoworks Stock previously
represented by such certificate surrendered have been converted pursuant to
Section 2.1(a) of this Agreement. Each holder of Icoworks Common Stock may
exchange his, her or its Icoworks Stock Certificate by delivering it to Paragon
duly endorsed in blank (or accompanied by duly executed stock powers duly
endorsed in blank), in each case in proper form for transfer, with signatures
guaranteed, and, if applicable, with all stock transfer and any other required
documentary stamps affixed thereto and with appropriate instructions to allow
the transfer agent to issue certificates for the Paragon Common Stock to the
holder thereof. Until surrendered as contemplated by this Section 2.2, each
Icoworks Stock Certificate will be deemed at any time after the Effective Time
to represent only the right to receive Paragon Common Stock certificates
representing the number of whole shares of Paragon Common Stock into which the
shares of Icoworks Common Stock formerly represented by such certificate have
been converted. Upon receipt of such duly endorsed Icoworks Stock Certificates,
Paragon will cause the issuance of the number of shares of Paragon Common Stock
as converted pursuant to Section 2.1(a) of this Agreement.
(b) Icoworks Stock Option Conversion Procedure. After the Effective Time,
to the extent determined necessary by Paragon, Paragon will replace the
certificate, agreement or other documentation evidencing any Icoworks Stock
Option ("Icoworks Stock Option Agreement") with a new certificate, agreement,
confirmation or other documentation for the purchase or Paragon of the same
number of shares of Paragon Common Stock as were subject to the Icoworks Stock
Option on terms as nearly equivalent to those of the Icoworks Stock Option
Agreement as may be accomplished under applicable law (the "Paragon Replacement
Stock Option"). Any holder of a Icoworks Stock Option may request Paragon
Replacement Stock Option by notifying Paragon of such request in writing and
including a copy of his, her or its Icoworks Stock Option Agreement. No
replacement of a Icoworks Stock Option will be issued until the original
Icoworks Stock Option Agreement and any other documentation deemed reasonably
necessary by Paragon is signed and surrendered to Paragon by the holder of the
Icoworks Stock Option Agreement. Until surrendered as contemplated by this
Section 2.2, each Icoworks Stock Option will be deemed at any time after the
Effective Time to represent only the right to receive a Paragon Replacement
Stock Option for the same number of shares of Icoworks Common Stock subject to
the Icoworks Stock Option.
(c) Icoworks Warrant Conversion Procedure. After the Effective Time, to the
extent determined necessary by Paragon, Paragon will replace the certificate,
agreement or other documentation evidencing any Icoworks Warrant ("Icoworks
Warrant Agreement") with a new certificate, agreement, confirmation or other
documentation for the purchase or Paragon of the same number of shares of
Paragon Common Stock as were subject to the Icoworks Warrant on terms as nearly
equivalent to those of the Icoworks Warrant Agreement as may be accomplished
under applicable law (the "Paragon Replacement Stock Option"). Any holder of a
Icoworks Warrant may request Paragon Replacement Stock Option by notifying
Paragon of such request in writing and including a copy of his, her or its
Icoworks Warrant Agreement. No replacement of a Icoworks Warrant will be issued
until the original Icoworks Warrant Agreement and any other documentation deemed
reasonably necessary by Paragon is signed and surrendered to Paragon by the
holder of the Icoworks Warrant Agreement. Until surrendered as contemplated by
this Section 2.2, each Icoworks Warrant will be deemed at any time after the
Effective Time to represent only the right to receive a Paragon Replacement
Stock Option for the same number of shares of Icoworks Common Stock subject to
the Icoworks Warrant.
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2.3 No Fractional Shares. No fractional shares of Paragon Common Stock will
be issued as a result of the Merger. In lieu of any such fractional shares, each
holder of Icoworks Common Stock who would otherwise have been entitled to
receive a fraction of a share of Paragon Common Stock in the Merger will be
rounded up to the next nearest whole number of shares of Paragon Common Stock.
2.4 Appraisal Rights. Notwithstanding any provision of this Agreement to
the contrary, shares of Icoworks Common Stock ("Dissenting Shares") that are
issued and outstanding immediately prior to the Effective Time and held by
stockholders who did not vote in favor of the Merger and who comply with all of
the relevant provisions of the Nevada Law (the "Icoworks Dissenting
Stockholders") will not be converted into or be exchangeable for the right to
receive Paragon Common Stock, unless and until such holders will have failed to
perfect or will have effectively withdrawn or lost their rights to appraisal
under the Nevada Law. Icoworks will give Paragon (i) immediate oral notice
followed by prompt written notice of any written demands for appraisal of any
shares of Icoworks Common Stock, attempted withdrawals of any such demands and
any other instruments served pursuant to the Nevada Law and received by Icoworks
relating to stockholders' rights of appraisal, and (ii) the will keep Paragon
informed of the status of all negotiations and proceedings with respect to
demands for appraisal under the Nevada Law. If any Icoworks Dissenting
Stockholder fails to perfect or will have effectively withdrawn or lost the
right to appraisal, the shares of Icoworks Common Stock held by such Dissenting
Stockholder will thereupon be treated as though such shares had been converted
into the right to receive Paragon Common Stock pursuant to Section 2.1 of this
Agreement.
2.5 No Further Ownership Rights in Icoworks Stock. The promise to exchange
the Icoworks Common Stock for shares of Paragon Common Stock in accordance with
the terms of this Section 2 will be deemed to have been given in full
satisfaction of all rights pertaining to the Icoworks Common Stock, and there
will be no further registration of transfers on the stock transfer books of
Icoworks of the shares of Icoworks Common Stock that were outstanding
immediately prior to the Effective Time. From and after the Effective Time, the
holders of Icoworks Common Stock outstanding immediately prior to the Effective
Time will cease to have any rights with respect to such Icoworks Common Stock,
except as otherwise provided in this Agreement or by law.
2.6 Distributions with Respect to Unsurrendered Icoworks Stock. No
dividends or other distributions with a record date after the Effective Time
will be paid to the holder of any unsurrendered Icoworks Stock Certificate until
the surrender of such Icoworks Stock Certificate in accordance with Section 2.2
of this Agreement. Following surrender of any such Icoworks Stock Certificate,
Paragon will pay to the holder of the Paragon Common Stock certificate issued in
exchange the Icoworks Stock Certificate, without interest, (i) at the time of
such surrender, the amount of dividends or other distributions with a record
date after the Effective Time previously paid with respect to such Paragon
Common Stock which such holder is entitled pursuant to Section 2.1 of this
Agreement, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
such surrender and with a payment date subsequent to such surrender payable with
respect to such Paragon Common Stock.
2.7 No Liability. Neither Paragon, nor Surviving Corporation will be liable
to any person in respect of shares of Icoworks Common Stock, or dividends or
distributions with respect thereto, pursuant to any applicable abandoned
property, escheat or similar law. If any Icoworks Stock Certificate has not have
been surrendered prior to seven years after the Effective Time (or immediately
prior to such earlier date on which any Icoworks Stock Certificate, or any
dividends or distributions payable to the holder of such Icoworks Stock
Certificate would otherwise escheat to or become the property of any
governmental body or authority), any such Paragon Common Stock, dividends or
distributions in respect of such Icoworks Stock Certificate will, to the extent
permitted by applicable law, become the property of Surviving Corporation, free
and clear of all claims or interest of any person previously entitled to such
certificate
2.8 Lost, Stolen or Destroyed Certificates. If any certificate
representing Icoworks Common Stock, any Icoworks Stock Option Agreement or any
Icoworks Warrant Agreement has been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the person claiming such certificate or
agreement to be lost, stolen or destroyed and, if required by Paragon, the
posting by such person of a bond in such reasonable amount as Paragon may direct
as indemnity against any claim that may be made against it with
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respect to such certificate, Paragon will cause to be issued in exchange for
such lost, stolen or destroyed certificate, the applicable Paragon Common Stock,
Paragon Replacement Stock Option or Paragon Replacement Warrant deliverable in
respect thereof, pursuant to Section 2.1 of this Agreement.
SECTION 3
REPRESENTATIONS OF ICOWORKS
Icoworks represents and warrants to Paragon and acknowledges that Paragon
is relying upon such representations and warranties, in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by or on behalf of Paragon:
3.1 Organization and Good Standing. Icoworks and each of its subsidiaries
(the "Subsidiaries") is a corporation duly organized, validly existing and in
good standing under the laws of its jurisdiction and has all requisite corporate
power and authority to own, lease and to carry on its business as now being
conducted. Icoworks and each of its Subsidiaries is duly qualified to do
business and is in good standing as a foreign corporation in each of the
jurisdictions in which it owns property, leases property, does business, or is
otherwise required to do so, where the failure to be so qualified would have a
material adverse effect on the business of Icoworks taken as a whole.
3.2 Authority. Icoworks has all requisite corporate power and authority to
execute and deliver this Agreement, the Articles of Merger, and any other
document contemplated by this Agreement or the Merger (collectively, the "Merger
Documents") to be signed by Icoworks and to perform its obligations thereunder
and to consummate the transactions contemplated thereby. The execution and
delivery of each of the Merger Documents by Icoworks and the consummation by
Icoworks of the transactions contemplated thereby have been duly authorized by
its Board of Directors and, by the Closing Date will have been adopted and
approved by the Icoworks Stockholders and, subject to such stockholder approval,
no other corporate or shareholder proceedings on the part of Icoworks are
necessary to authorize such documents or to consummate the transactions
contemplated thereby.
3.3 Capitalization of Icoworks. The entire authorized capital stock and
other equity securities of Icoworks (the "Icoworks Stock") consists of
100,000,000 shares of Icoworks Common Stock of which 6,357,460 shares of
Icoworks Common Stock are issued and outstanding. All of the issued and
outstanding shares of Icoworks Stock have been duly authorized, are validly
issued, were not issued in violation of any pre-emptive rights and are fully
paid and non-assessable, are not subject to pre-emptive rights and were issued
in full compliance with all federal, state, and local laws, rules and
regulations. Except as set forth on Disclosure Schedule 3.3, there are no
outstanding options, warrants, subscriptions, phantom shares, conversion rights,
or other rights, agreements, or commitments obligating Icoworks to issue any
additional shares of Icoworks Stock, or any other securities convertible into,
exchangeable for, or evidencing the right to subscribe for or acquire from
Icoworks any shares of Icoworks Stock. Except as set forth on Disclosure
Schedule 3.3, there are no agreements purporting to restrict the transfer of the
Icoworks Stock, no voting agreements, voting trusts, or other arrangements
restricting or affecting the voting of the Icoworks Stock.
3.4 Title to Icoworks Stock. Disclosure Schedule 3.4 contains a true and
complete list of the holders of all issued and outstanding shares of Icoworks
Stock (the "Icoworks Stockholders") including each holder's name, address,
number of shares held and date of issuance.
3.5 Subsidiaries. All of the shares of capital stock of each Subsidiary are
owned by Icoworks and others in the amounts and relative percentages as set
forth on Disclosure Schedule 3.5. All of the issued and outstanding shares of
the Subsidiaries have been duly authorized, are validly issued, were not issued
in violation of any pre-emptive rights and are fully paid and non-assessable,
are not subject to pre-emptive rights and were issued in full compliance with
all federal, state, and local laws, rules and regulations. Except as set forth
on Disclosure Schedule 3.5, there are no outstanding options, warrants,
subscriptions, phantom shares, conversion rights, or other rights, agreements,
or commitments obligating Icoworks to issue any additional shares of the capital
stock of any Subsidiary, or any other securities
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convertible into, exchangeable for, or evidencing the right to subscribe for or
acquire from Icoworks or any Subsidiary any shares of the capital stock of any
Subsidiary. Icoworks does not own, directly or indirectly, any capital stock of
other equity securities of any corporation or other entity other than the
Subsidiaries listed on Disclosure Schedule 3.5 or have any director or
indirectly equity or ownership interest or participation in any other business.
Neither Icoworks nor any of its Subsidiaries has any obligation or has made any
commitment to invest any funds or contribute any assets or services in or to any
business or entity other than the Subsidiaries set forth on Disclosure Schedule
3.5.
3.6 Noncontravention. Neither the execution, delivery and performance
of the Merger Documents, nor the consummation of the Merger, will:
(1) Conflict with, result in a violation of, cause a default under
(with or without notice, lapse of time or both) or give rise to a right of
termination, amendment, cancellation or acceleration of any obligation
contained in or the loss of any material benefit under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of
the material properties or assets of Icoworks or any Subsidiary under any
term, condition or provision of any loan or credit agreement, note,
debenture, bond, mortgage, indenture, lease or other agreement, instrument,
permit, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Icoworks or any Subsidiary, or any of its
respective property or assets;
(2) Violate any provision of the certificate of incorporation or
by-laws of Icoworks; or
(3) Violate any order, writ, injunction, decree, statute, rule, or
regulation of any court or governmental or regulatory authority applicable
to Icoworks or any Subsidiary or any of its respective property or assets.
3.7 Actions and Proceedings. Except as disclosed in Disclosure
Schedule 3.7, there is no claim, charge, arbitration, grievance, action, suit,
investigation or proceeding by or before any court, arbiter, administrative
agency or other governmental authority now pending or, to the best knowledge of
Icoworks, threatened against Icoworks or which involves any of the business, or
the properties or assets of Icoworks that, if adversely resolved or determined,
would have a material adverse effect on the business, operations, assets,
properties, prospects, or conditions of Icoworks and its Subsidiaries taken as a
whole ("Icoworks Material Adverse Effect"). There is no reasonable basis for
any claim or action that, based upon the likelihood of its being asserted and
its success if asserted, would have such a Icoworks Material Adverse Effect.
Disclosure Schedule 3.7 lists all pending legal claims or proceedings, whether
or not such claim or proceeding would result in a Icoworks Material Adverse
Effect.
3.8 Compliance.
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(a) Icoworks and its Subsidiaries are in compliance with, are not in
default or violation in any material respect under, and have not been charged
with or received any notice at any time of any material violation by it of, any
statute, law, ordinance, regulation, rule, decree or other applicable regulation
to the business or operations of Icoworks;
(b) Icoworks and its Subsidiaries have duly filed all reports and
returns required to be filed by it with governmental authorities and has
obtained all governmental permits and other governmental consents, except as may
be required after the execution of this Agreement. All of such permits and
consents are in full force and effect, and no proceedings for the suspension or
cancellation of any of them, and no investigation relating to any of them, is
pending or to the best knowledge of Icoworks, threatened, and none of them will
be adversely affected by the consummation of the transactions contemplated
hereby.
3.9 Filings, Consents and Approvals. Except for any filings required by
applicable securities laws, the Registration Statement (as defined in Section
6.9), the filing of the Articles of Merger pursuant to the Nevada Law, the
approval of the Icoworks Stockholders, no filing or registration with, no notice
to and no permit, authorization, consent, or approval of any public or
governmental body or authority or other person or entity is necessary for the
consummation by Icoworks of the transactions contemplated by this
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Agreement or to enable the Surviving Corporation to continue to conduct
Icoworks' business after the Closing Date in a manner which is consistent with
that in which it is presently conducted.
3.10 Financial Representations. Attached to this Agreement as Disclosure
Schedule 3.10 are true, correct, and complete copies of (1) an audited
consolidated balance sheet for Icoworks dated as of June 30, 2001, together with
related statements of income, cash flows, and changes in shareholder's equity
for the fiscal year then ended, (ii) unaudited consolidated balance sheet for
Icoworks dated as of June 30, 2002, together with related statements of income,
cash flows, and changes in shareholder's equity for the fiscal year then ended
(collectively, the "Icoworks Financial Statements"). The Icoworks Financial
Statements (a) are in accordance with the books and records of Icoworks and (b)
present fairly the financial condition of Icoworks as of the respective dates
indicated and the results of operations for such periods. Icoworks has not
received any advice or notification from its independent certified public
accountants that Icoworks has used any improper accounting practice that would
have the effect of not reflecting or incorrectly reflecting in the Financial
Statements or the books and records of Icoworks, any properties, assets,
liabilities, revenues, or expenses. The books, records, and accounts of Icoworks
accurately and fairly reflect, in reasonable detail, the transactions, assets,
and liabilities of Icoworks. Icoworks has not engaged in any transaction,
maintained any bank account, or used any funds of Icoworks, except for
transactions, bank accounts, and funds which have been and are reflected in the
normally maintained books and records of Icoworks. All property and assets of
Icoworks, including the property and assets disclosed on the Financial
Statements are owned by Icoworks free and clear of all liens, charges,
encumbrances and security interests, except as disclosed in the Icoworks
Financial Statements. The Icoworks Financial Statements will also be deemed to
include the financial statements delivered by Icoworks pursuant to Section 6.12
of this Agreement.
3.11 Absence of Undisclosed Liabilities. Except as set forth in Disclosure
Schedule 3.11, Icoworks has no liabilities or obligations either direct or
indirect, matured or unmatured, absolute, contingent or otherwise, which:
(a) are not set forth in the Financial Statements or have not
heretofore been paid or discharged;
(b) did not arise in the regular and ordinary course of business under
any agreement, contract, commitment, lease or plan specifically disclosed (or
are not required to be disclosed in accordance with GAAP); or
(c) have not been incurred in amounts and pursuant to practices
consistent with past business practice, in or as a result of the regular and
ordinary course of its business since the date of the last Financial Statements.
For purposes of this Agreement, the term "liabilities" includes, any direct
or indirect indebtedness, guaranty, endorsement, claim, loss, damage,
deficiency, cost, expense, obligation or responsibility, fixed or unfixed, known
or unknown, asserted xxxxxx or inchoate, liquidated or unliquidated, secured or
unsecured.
3.12 Tax Matters. "Tax" or "Taxes" means any and all taxes, charges, fees,
levies, duties or other assessments whether federal, state, local or foreign,
based upon or measured by income, capital, net worth or gain and any other tax
including, recapture, gross receipts, profits. sales, use, occupation, use and
occupancy, value added, ad valorem, customers, transfer, franchise, shares,
withholding, payroll, employment, excise, or property taxes with respect to
Icoworks or its Subsidiaries, together with any interest, fines, penalties and
additions to tax imposed with respect thereto.
(a) As of the date hereof, (i) Icoworks and its Subsidiaries have
timely filed all Tax returns which are required to be filed on or prior to the
date hereof, taking into account any extensions of the filing deadlines which
have been validly granted to them; and (ii) all such returns are true and
correct in all material respects.
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(b) Icoworks and its Subsidiaries have paid all Taxes that have become
or are due with respect to any period ended on or prior to the date hereof, and
has established an adequate reserve therefore on its balance sheet for those
Taxes not yet due and payable.
(c) Neither Icoworks nor any of its Subsidiaries is presently under,
nor has Icoworks or any of its Subsidiaries received notice of, any contemplated
investigation or audit by the Internal Revenue Service or any foreign or state
taxing authority concerning any fiscal year or period ended prior to the date
hereof.
(d) All Taxes required to be withheld on or prior to the date hereof
from employees for income Taxes, social security Taxes, unemployment Taxes and
other similar withholding Taxes have been properly withheld and, if required on
or prior to the date hereof, have been deposited with the appropriate
governmental agency.
(e) Icoworks is not a party to any tax-sharing agreements or
similar contracts or arrangements.
3.13 Absence of Changes. Except as set forth in Disclosure Schedule 3.13,
since June 30, 2002, neither Icoworks nor any of its Subsidiaries has:
(a) incurred any liabilities, other than liabilities incurred in the
ordinary course of business consistent with past practice, or discharged or
satisfied any lien or encumbrance, or paid any liabilities, other than in the
ordinary course of business consistent with past practice, or failed to pay or
discharge when due any liabilities of which the failure to pay or discharge has
caused or will cause any material damage or risk of material loss to it or any
of its assets or properties;
(b) sold, encumbered, assigned or transferred any fixed assets or
properties which would have been included in the assets of Icoworks of any
Subsidiary if the closing had been held on June 30, 2002 or on any date since
then, except for ordinary course of business transactions consistent with past
practice;
(c) created, incurred, assumed or guaranteed any indebtedness for money
borrowed, or mortgaged, pledged or subjected any of the assets or properties of
Icoworks or any Subsidiary to any mortgage, lien, pledge, security interest,
conditional sales contract or other encumbrance of any nature whatsoever;
(d) made or suffered any amendment or termination of any material
agreement, contract, commitment, lease or plan to which it is a party or by
which it is bound, or cancelled, modified or waived any substantial debts or
claims held by it or waived any rights of substantial value, whether or not in
the ordinary course of business;
(e) declared, set aside or paid any dividend or made or agreed to make
any other distribution or payment in respect of its capital shares or redeemed,
purchased or otherwise acquired or agreed to redeem, purchase or acquire any of
its capital shares or equity securities;
(f) suffered any damage, destruction or loss, whether or not covered by
insurance, materially and adversely its business, operations, assets, properties
or prospects;
(g) suffered any material adverse change in its business, operations,
assets, properties, prospects or condition (financial or otherwise);
(h) received notice or had knowledge of any actual or threatened
labor trouble, termination, resignation, strike or other occurrence, event or
condition of any similar character which has had or might have an adverse effect
on its business, operations, assets, properties or prospects;
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(i) made commitments or agreements for capital expenditures or capital
additions or betterments exceeding in the aggregate $5,000, except such as may
be involved in ordinary repair, maintenance or replacement of its assets;
(j) other than in the ordinary course of business, increase the
salaries or other compensation of, or made any advance (excluding advances for
ordinary and necessary business expenses) or loan to, any of its employees or
made any increase in, or any addition to, other benefits to which any of its
employees may be entitled;
(k) changed any of the accounting principles followed or the methods of
applying such principles;
(1) entered into any transaction other than in the ordinary course of
business consistent with past practice; or
(m) agreed, whether in writing or orally, to do any of the foregoing.
3.14 Personal Property. Disclosure Schedule 3.14 contains a list of all
material equipment, furniture, fixtures and other tangible personal property and
assets owned or leased by Icoworks and its Subsidiaries. Except as disclosed on
Disclosure Schedule 3.14, Icoworks or its Subsidiaries possesses all property
and items necessary for the continued operation of the business of Icoworks as
presently conducted. All of such items are in good operating condition (normal
wear and tear excepted), and are reasonably fit for the purposes for which such
item is presently used.
3.15 Insurance. The assets, properties and operations of Icoworks and its
Subsidiaries are insured under various policies of general liability and other
forms of insurance consistent with prudent business practices. All such policies
are in full force and effect in accordance with their terms, no notice of
cancellation has been received, and there is no existing default by Icoworks or
any event which, with the giving of notice, the lapse of time or both, would
constitute a default thereunder. All premiums to date have been paid in full.
3.16 Employees and Consultants. Disclosure Schedule 3.17 lists the name,
address, date of hire, title or position, compensation and benefits of each
employee or consultant of Icoworks or any of its Subsidiaries. All employees and
consultants have been paid all salaries, wages, income and any other sum due and
owing to them by Icoworks as at the end of the most recent completed pay period.
Icoworks is not aware of any labor conflict with any of Icoworks employees that
might reasonably be expected to have a Icoworks Material Adverse Effect. Neither
Icoworks nor any of its Subsidiaries has entered into any written contracts of
employment or consulting agreements other than as listed on Disclosure Schedule
3.17. All amounts required to be withheld by Icoworks or any Subsidiary from
employees salaries or wages and paid to any governmental or taxing authority
have been so withheld and paid. No employee of Icoworks or any of its
Subsidiaries is in violation of any term of any employment contract,
non-disclosure agreement, non-competition agreement or any other contract or
agreement relating to the relationship of such employee with Icoworks or the
Subsidiary or any other nature of the business conducted or to be conducted by
Icoworks or the Surviving Corporation.
3.17 Benefit Plans. Icoworks has no Employee Benefit Plans within the
meaning of the Employee Retirement Income Security Act of 1974, as amended, and
the rules and regulations promulgated thereunder.
3.18 Intellectual Property
(a) Intellectual Property Assets. The Intellectual Property Assets are all
those necessary for the operation of the business of Icoworks and its
Subsidiaries as it is currently conducted. The term "Intellectual Property
Assets" includes:
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(1) the name "Icoworks", all functional business names, trading names,
registered and unregistered trademarks, service marks, and applications
collectively, "Marks");
(2) all patents, patent applications, and inventions, methods,
processes and discoveries that may be patentable (collectively, "Patents");
(3) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(4) all know-how, trade secrets, confidential information, customer
lists, software, technical information, data, process technology, plans,
drawings, and blue prints owned, used, or licensed by Icoworks as licensee
or licensor (collectively, "Trade Secrets").
(b) Agreements. Disclosure Schedule 3.19 contains a complete and
accurate list and summary description, including any royalties paid or received
by Icoworks or its Subsidiaries, of all contracts and agreements relating to the
Intellectual Property Assets to which Icoworks or any Subsidiary is a party or
by which Icoworks or any Subsidiary is bound, except for any license implied by
the sale of a product and perpetual, paid-up licenses for commonly available
software programs with a value of less than $500 under which Icoworks or any
Subsidiary is the licensee. There are no outstanding or threatened disputes or
disagreements with respect to any such agreement.
(c) Intellectual Property and Know-How Necessary for the Business.
Except as set forth in Disclosure Schedule 3.19, Icoworks is the owner of all
right, title, and interest in and to each of the Intellectual Property Assets,
free and clear of all liens, security interests, charges, encumbrances, and
other adverse claims, and has the right to use without payment to a third party
of all the Intellectual Property Assets. Except as set forth in Disclosure
Schedule 3.19, all former and current employees and contractors of Icoworks have
executed written contracts, agreements or other undertakings with Icoworks that
assign all rights to any inventions, improvements, discoveries, or information
relating to the business of Icoworks. No employee, director, officer or
shareholder of any of Icoworks owns directly or indirectly in whole or in part,
any Intellectual Property Asset which Icoworks is presently using or which is
necessary for the conduct of its business. No employee or contractor of Icoworks
or any of its Subsidiaries has entered into any contract or agreement that
restricts or limits in any way the scope or type of work in which the employee
may be engaged or requires the employee to transfer, assign, or disclose
information concerning his work to anyone other than Icoworks or any Subsidiary.
(d) Patents. Disclosure Schedule 3.19 contains a complete and accurate
list and summary description of all Patents. Except as set forth in Disclosure
Schedule 3.19, Icoworks is the owner of all right, title, and interest in and
to each of the Patents, free and clear of all liens, security interests,
charges, encumbrances, and other adverse claims. All of the issued Patents are
currently in compliance with formal legal requirements (including payment of
filing, examination, and maintenance fees and proofs of working or use), are
valid and enforceable, and are not subject to any maintenance fees or taxes or
actions falling, due within ninety days after the Effective Time. No Patent has
been or is now involved in any interference, reissue, reexamination, or
opposition proceeding. There is no potentially interfering patent or patent
application of any third party. No Patent is infringed or has been challenged
or threatened in any way. None of the products manufactured and sold, nor any
process or know-how used, by Icoworks or its Subsidiaries infringe or is alleged
to infringe any patent or other proprietary night of any other person or entity.
All products made, used, or sold under the Patents have been marked with the
proper patent notice.
(e) Trademarks. Disclosure Schedule 3.19 contains a complete and
accurate list and summary description of all Marks and the jurisdiction where
the Xxxx is registered, if applicable. Icoworks is the owner of all night,
title, and interest in and to each of the Marks, free and clear of all liens,
security
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interests, charges. encumbrances, and other adverse claims. All Marks that have
been registered with the United States Patent and Trademark Office or any other
country's trademark registration office are currently in compliance with all
formal legal requirements (including the timely post-registration filing of
affidavits of use and incontestability and renewal applications), are valid and
enforceable, and are not subject to any maintenance fees or taxes or actions
falling due within ninety days after the Effective Time. No Xxxx has been or is
now involved in any opposition, invalidation, or cancellation and no such action
is threatened with the respect to any of the Marks. There is no potentially
interfering trademark or trademark application of any third party. No Xxxx is
infringed or has been challenged or threatened in any way. None of the Marks
used by Icoworks or its Subsidiaries infringes or is alleged to infringe any
trade name, trademark, or service xxxx of any third party. All products and
materials containing a Xxxx xxxx the proper federal or other registration notice
where permitted by law.
(f) Copyrights. Disclosure Schedule 3.19 contains a complete and
accurate list and summary description of all Copyrights. Icoworks is the owner
of all right, title, and interest in and to each of the Copyrights, free and
clear of all liens, security interests, charges, encumbrances, and other adverse
claims. All the Copyrights have been registered and are currently in compliance
with formal legal requirements, are valid and enforceable, and are not subject
to any maintenance fees or taxes or actions falling due within ninety days after
the Effective Time. No Copyright is infringed or has been challenged or
threatened in any way. None of the subject matter of any of the Copyrights
infringes or is alleged to infringe in any copyright of any third party or is a
derivative work based on the work of a third party. All works encompassed by
the Copyrights have been marked with the proper copyright notice.
(g) Trade Secrets. Icoworks has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of its Trade Secrets. Icoworks
has good title and an absolute (but not necessarily exclusive) right to use the
Trade Secrets. The Trade Secrets are not part of the public knowledge or
literature, and have not been used, divulged, or appropriated either for the
benefit of any person or entity or to the detriment of Icoworks. No Trade
Secret is subject to any adverse claim or has been challenged or threatened in
any way.
3.19 Real Property. Neither Icoworks nor any of its Subsidiaries owns any
real property. Disclosure Schedule 3.20 lists all leases, subleases or other
real property interests (collectively, "Leases") to which Icoworks or any of its
Subsidiaries is a party or bound. Each of the Leases are legal, valid, binding,
enforceable and in full force and effect in all material respects. All rental
and other payments required to be paid by Icoworks pursuant to any such Leases
have been duly paid and no event has occurred which, upon the passing of time,
the giving of notice, or both, would constitute a breach or default by any party
under any of the Leases. The Leases will continue to be legal, valid, binding,
enforceable and in full force and effect on identical terms following the
Closing Date. Neither Icoworks nor any of its Subsidiaries has assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any interest in
the Leases or the leasehold property pursuant thereto. Icoworks has delivered a
true and complete copy of each of the Leases to Paragon.
3.20 Environmental Matters. Icoworks knows of no violation or violations by
Icoworks or any of its Subsidiaries, or its respective employees or agents of
any environmental or safety statute, law or regulation that in the aggregate
would have a Icoworks Material Adverse Effect and, no material expenditures are
or will be required in order to comply with any such existing statute, law or
regulation. No action, proceeding, permit revocation, writ, injunction or claim
is pending or, to the best knowledge of Icoworks, threatened concerning
Icoworks' facilities and Icoworks is not aware of any fact or circumstance that
could involve Icoworks in any environmental litigation or impose any material
environmental liability upon Icoworks. No Hazardous Material (as defined below)
is present on any Icoworks facility and, to the best knowledge of Icoworks, no
reasonable likelihood exists that any Hazardous Material present on other
property will come to be present on a Icoworks facility. There are no
underground storage tanks, asbestos or PCBs present on any Icoworks facility.
For the purposes of this Section 3.20 the term "Hazardous Material" means any
material or substance that is prohibited or regulated by any environmental law
or that
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has been designated by any governmental authority to be radioactive, toxic,
hazardous or otherwise a danger to health, reproduction or the environment.
3.21 Material Contracts and Transactions. Disclosure Schedule 3.21
contains a list of all material contracts, agreements, licenses, permits,
arrangements, commitments, instruments, understandings or contracts, whether
written or oral, express or implied, contingent, fixed or otherwise, to which
Icoworks or any of its Subsidiaries is a party (collectively, the "Contracts").
(a) Except as listed on Disclosure Schedule 3.21, neither Icoworks nor
any of its Subsidiaries is a party to any written or oral:
(1) agreement for the purchase, sale or lease of any capital assets,
or continuing contracts for the purchase or lease of any materials,
supplies, equipment, real property or services;
(2) agreement regarding, sales agency, distributorship, or the payment
of commissions;
(3) agreement for the employment or consultancy of any person or
entity;
(4) note, debenture, bond, trust agreement, letter of credit agreement
loan agreement, or other contract or commitment for the borrowing or
lending of money, or agreement or arrangement for a line of credit or
guarantee, pledge, or undertaking of the indebtedness of any other person;
(5) agreement, contract, or commitment for any charitable or political
contribution;
(6) agreement, contract, or commitment limiting or restraining
Icoworks, their business or any successor thereto from engaging or
competing in any manner or in any business or from hiring any employees,
nor is any employee of Icoworks subject to any such agreement, contract, or
commitment;
(7) material agreement, contract, or commitment not made in the
ordinary course of business;
(8) agreement establishing or providing for any joint venture,
partnership, or similar arrangement with any other person or entity;
(9) agreement, contract or understanding containing a "change in
control," or similar provision; or
(10) power of attorney or similar authority to act.
(b) Each Contract is in full force and effect, and there exists no
material breach or violation of or default by Icoworks or any of its
Subsidiaries under any Contract nor by any other party to a Contract, or any
event that with notice or the lapse of time, or both, will create a material
breach or violation thereof or default under any Contract by Icoworks or by any
other party to a Contract. The continuation, validity, and effectiveness of
each Contract will in no way be affected by the consummation of the transactions
contemplated by this Agreement. Except as listed on Disclosure Schedule 3.21,
there exists no actual or threatened termination, cancellation, or limitation
of, or any amendment, modification, or change to any Contract. A true, correct
and complete copy (and if oral, a description of material terms) of each
Contract, as amended to date, has been furnished to Paragon.
3.22 Certain Transactions. Except as set forth in Disclosure Schedule 3.22,
Icoworks is not indebted, directly or indirectly, to any of its officers,
directors or shareholders or to their respective spouses
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or children, in any amount whatsoever; none of said officers, directors or, to
the best of Icoworks' knowledge, shareholders, or any members of their immediate
families, are indebted to Icoworks or any of its Subsidiaries or have any direct
or indirect ownership interest in any firm or corporation with which Icoworks
has a business relationship, or any firm or corporation that competes with
Icoworks. Icoworks is not a guarantor or indemnitor of any indebtedness of any
other person, firm or corporation.
3.23 No Brokers. Icoworks has not incurred any obligation or liability to
any party for any brokerage fees, agent's commissions, or finder's fees in
connection with the transactions contemplated by this Agreement for which
Paragon would be responsible.
3.24 Minute Books. The minute books of Icoworks and its Subsidiaries
provided to Paragon contain a complete summary of all meetings of directors and
shareholders since the time of incorporation of such entity and reflect all
transactions referred to in such minutes accurately in all material respects.
3.25 Completeness of Disclosure. No representation or warranty by Icoworks
in this Agreement nor any certificate, schedule, statement, document or
instrument furnished or to be furnished to Paragon pursuant hereto contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated herein or therein or necessary to
make any statement herein or therein not materially misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PARAGON
Paragon represents and warrants to Icoworks and acknowledges that Icoworks
is relying upon such representations and warranties in connection with the
execution, delivery and performance of this Agreement, notwithstanding any
investigation made by or on behalf of Icoworks.
4.1 Organization and Good Standing. Paragon is duly organized, validly
existing and in good standing under the laws of Nevada and has all requisite
corporate power and authority to own, lease and to carry on its business as now
being conducted. Paragon is duly qualified to do business and is in good
standing as a foreign corporation in each of the jurisdictions in which each
owns property, leases property, does business, or is otherwise required to do
so, where the failure to be so qualified would have a material adverse effect on
the businesses, operations, or financial condition of Paragon.
4.2 Authority. Paragon has all requisite corporate power and authority to
execute and deliver the Merger Documents to be signed by them and to perform its
obligations thereunder and to consummate the transactions contemplated thereby.
The execution and delivery of each of the Merger Documents by Paragon and the
consummation by Paragon of the transactions contemplated thereby have been duly
authorized by its Board of Directors and no other corporate or shareholder
proceedings on Paragon is necessary to authorize such documents or to consummate
the transactions contemplated thereby other than approval of the shareholders of
Paragon.
4.3 Capitalization of Paragon. The entire authorized capital stock and
other equity securities of Paragon ("Paragon Stock") consists of 25,000,000
shares of common stock, par value $0.001 ("Paragon Common Stock"), of which
there are currently 2,850,000 shares issued and outstanding. All of the issued
and outstanding shares of Paragon Stock have been duly authorized, are validly
issued, were not issued in violation of any pre-emptive rights and are fully
paid and non-assessable, are not subject to pre-emptive rights and were issued
in full compliance with all federal, state, and local laws, rules and
regulations. Except as set forth on Disclosure
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Schedule 4.3, there are no outstanding options, warrants, subscriptions, phantom
shares, conversion rights, or other rights, agreements, or commitments
obligating Paragon to issue any additional shares of Paragon Stock, or any other
securities convertible into, exchangeable for, or evidencing the right to
subscribe for or acquire from Paragon any shares of Paragon Stock. Except as set
forth on Disclosure Schedule 4.3, there are no agreements purporting to restrict
the transfer of the Paragon Stock, no voting agreements, voting trusts, or other
arrangements restricting or affecting the voting of the Paragon Stock.
4.4 Validity of Paragon Common Stock Issuable Upon the Merger. The shares
of Paragon Common Stock to be issued to the Icoworks Stockholders upon
consummation of the Merger in accordance with Section 2.1 of this Agreement have
been duly and validly authorized and, when so issued in accordance with the
terms of this Agreement, will be duly and validly issued, fully paid and
non-assessable.
4.5 Actions and Proceedings. There is no claim, charge, arbitration,
grievance, action, suit, investigation or proceeding by or before any court,
arbiter, administrative agency or other governmental authority now pending or,
to the best knowledge of Paragon, threatened against Paragon which involves any
of the business, or the properties or assets of Paragon that, if adversely
resolved or determined, would have a material adverse effect on the business,
operations, assets, properties, prospects or conditions of Paragon taken as a
whole. There is no reasonable basis for any claim or action that, based upon the
likelihood of its being asserted and its success if asserted, would have such a
material adverse effect.
4.6 Financial Representations. The audited and unaudited financial
statements of Paragon as filed with the United States Securities and Exchange
Commission (collectively, the "Paragon Financial Statements") (a) are in
accordance with the books and records of Paragon and (b) present fairly the
financial condition of Paragon as of the respective dates indicated and the
results of operations for such periods, except that any unaudited interim
financial statements were or will be subject to normal and recurring year-end
adjustments. Paragon has not received any advice or notification from its
independent certified public accountants that Paragon has used any improper
accounting practice that would have the effect of not reflecting or incorrectly
reflecting in the Paragon Financial Statements or the books and records of
Paragon, any properties, assets, liabilities, revenues, or expenses. The books,
records, and accounts of Paragon accurately and fairly reflect, in reasonable
detail, the transactions, assets, and liabilities of Paragon. Paragon has not
engaged in any transaction, maintained any bank account, or used any funds of
Paragon, except for transactions, bank accounts, and funds which have been and
are reflected in the normally maintained books and records of Paragon.
4.7 Absence of Certain Changes or Events. Except as and to the extent
disclosed in the Paragon Financial Statements, since June 30, 2002, there has
not been (a) a material adverse effect to the business, operations or financial
conditions of Paragon, or (b) any significant change by Paragon in its
accounting methods, principles or practices.
4.8 Filings, Consents and Approvals. Except for any filings required by
applicable securities laws, filing of the Registration Statement (as defined in
Section 6.9), the filing of the Articles of Merger pursuant to the Nevada Law,
no filing or registration with, no notice to and no permit, authorization,
consent, or approval of any public or governmental body or authority or other
person or entity is necessary for the consummation by Paragon of the
transactions contemplated by this Agreement or to enable Paragon to continue to
conduct its business after the Closing Date in a manner which is consistent with
that in which it is presently conducted.
4.10 Material Contracts and Transactions. There are no material contracts,
agreements, licenses, permits, arrangements, commitments, instruments,
understandings or contracts, whether written or oral, express or implied,
contingent, fixed or otherwise, to which Paragon is a party other then retainer
agreements with legal counsel and accountants.
4.11 No Brokers. Paragon has not incurred any obligation or liability to
any party for any brokerage fees, agent's commissions, or finder's fees in
connection with the transactions contemplated by this Agreement for which
Icoworks would be responsible.
4.12 Minute Books. The minute books of Paragon provided to Icoworks contain
a complete summary of all meetings of directors and shareholders since the time
of incorporation of such entity and reflect all transactions referred to in such
minutes accurately in all material respects.
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4.13 SEC Filings. Paragon has furnished or made available to Icoworks a
true and complete copy of each report, schedule, registration statement and
proxy statement filed by Paragon with the SEC since the inception of Paragon (as
such documents have since the time of their filing been amended, the "Paragon
SEC Documents"). Paragon has timely filed with the SEC all documents required to
have been filed pursuant to the Securities Act and the Exchange Act. As of their
respective dates, the Paragon SEC Documents complied in all material respects
with the requirements of the Securities Act, or the Exchange Act, as the case
may be, and the rules and regulations of the SEC thereunder applicable to such
Paragon SEC Documents, and none of Paragon SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.14 Completeness of Disclosure. No representation or warranty by Paragon
in this Agreement nor any certificate, schedule, statement, document or
instrument furnished or to be furnished to Icoworks pursuant hereto contains or
will contain any untrue statement of a material fact or omits or will omit to
state a material fact required to be stated herein or therein or necessary to
make any statement herein or therein not materially misleading.
SECTION 5
CLOSING CONDITIONS
5.1 Conditions Precedent to Closing by Paragon. The obligation of Paragon
to consummate the Merger is subject to the satisfaction of the conditions set
forth below, unless any such condition is waived Paragon at the Closing. The
Closing of the transactions contemplated by this Agreement will be deemed to
mean a waiver of all conditions to Closing.
(a) Representations and Warranties. The representations and warranties
of Icoworks set forth in this Agreement will be true, correct and complete in
all respects as of the Closing Date, as though made on and as of the Closing
Date and Icoworks will have delivered to Paragon a certificate dated as of the
Closing Date, to the effect that the representations and warranties made by
Icoworks in this Agreement are true and correct.
(b) Performance. All of the covenants and obligations that Icoworks is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects.
(c) Merger Documents. This Agreement and all other Merger Documents
necessary or reasonably required to consummate the Merger, all in form and
substance reasonably satisfactory to Paragon, will have been executed and
delivered to Paragon.
(d) Opinion of Icoworks' Counsel. Icoworks will furnish Paragon with a
legal opinion of its legal counsel, dated as of the Closing Date, in the form
attached hereto as Exhibit B.
(e) Employment Agreements. Surviving Corporation will have entered
into employment agreements or consulting agreements with certain key executives
and other personnel determined by Paragon on terms agreeable to Paragon,
Icoworks, and the applicable key executives or other personnel.
(f) Exercise of Appraisal Rights. The holders of no more than two (2)
percent of the issued and outstanding shares of Icoworks Common Stock will
have exercised appraisal rights under the Nevada Law as Dissenting Shareholders.
Icoworks and Paragon will have resolved all matters of appraisal and payment
under the Nevada Law for each Dissenting Shareholder to Paragon's satisfaction.
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(g) Supplement to Disclosure Schedules. Any additional disclosures
made in the supplemental Disclosure Schedules of Icoworks made pursuant to
Section 6.4 of this Agreement will be acceptable to Paragon in their sole
discretion.
(h) Third Party Consents. Icoworks will have received duly executed
copies of all third-party consents and approvals contemplated by the Merger
Documents, in form and substance reasonably satisfactory to Paragon.
(i) No Material Adverse Change. No Icoworks Material Adverse Effect
will have occurred since the date of this Agreement.
(j) No Action. No suit, action, or proceeding will be pending or
threatenedbefore any governmental or regulatory authority wherein an unfavorable
judgment, order, decree, stipulation, injunction or charge would (i) prevent the
consummation of any of the transactions contemplated by this Agreement, or (ii)
cause the transactions to be rescinded following consummation.
(k) Due Diligence Review. Paragon will be reasonably satisfied
in all respects with their due diligence investigation and review of Icoworks.
(n) Registration Statement. The Registration Statement as described in
Section 6.9 of this Agreement, will have been declared effective by the SEC.
(o) Compliance with Securities Laws. Paragon will have received
evidence satisfactory to Paragon in its discretion that the Merger and all
shares of Paragon Common Stock issuable in the Merger comply with all applicable
securities laws.
(p) Approval by Icoworks Stockholders. The shareholders of Paragon
will have approved and adopted this Agreement and the Merger as required by the
Nevada Law.
5.2 Conditions Precedent to Closing by Icoworks. The obligation of Icoworks
to consummate the Merger is subject to the satisfaction of the conditions set
forth below, unless such condition is waived by Icoworks at the Closing. The
Closing of the Merger will be deemed to mean a waiver of all conditions to
Closing.
(a) Representations and Warranties. The representations and warranties
of Paragon set forth in this Agreement will be true, correct and complete in all
respects as of the Closing Date, as though made on and as of the Closing Date
and Paragon will have delivered to Icoworks a certificate dated the Closing
Date, to the effect that the representations and warranties made by Paragon in
this Agreement are true and correct.
(b) Performance. All of the covenants and obligations that Paragon
is required to perform or to comply with pursuant to this Agreement at or prior
to the Closing must have been performed and complied with in all material
respects. Paragon must have delivered each of the documents required to be
delivered by it pursuant to this Agreement.
(c) Approval by Icoworks Stockholders. The shareholders of Icoworks
will have approved and adopted this Agreement and the Merger as required by the
Nevada Law.
(d) Merger Documents. This Agreement and all other Merger Documents
necessary or reasonably required to consummate the transaction contemplated by
this Agreement, all in form and substance reasonably satisfactory to Icoworks,
will have been executed and delivered by Paragon, as applicable.
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(e) Secretary's Certificate - Paragon. Icoworks will have received a
certificate of the Secretary of Paragon attaching (a) a copy of Paragon's
certificate of incorporation, as amended through the Closing Date certified by
the Secretary of State of the State of Nevada; (b) a true and correct copy of
Paragon's bylaws, as amended; (c) certified copies of resolutions duly adopted
by the Board of Directors of Paragon approving the execution and delivery of
this Agreement and the other Merger Documents and the consummation of the Merger
and the other transactions contemplated hereby and thereby; and (d) a
certificate as to the incumbency and signatures of the officers of Paragon
executing this Agreement and the Merger Documents executed by Paragon on the
Closing Date as contemplated by this Agreement.
(f) Supplement to Disclosure Schedules. Any additional disclosures
made in the supplemental Disclosure Schedules of Paragon made Pursuant to
Section 6.4 of this Agreement will be acceptable to Icoworks in its sole
discretion.
(g) Exercise of Appraisal Rights. The holders of no more than two (2)
percent of the issued and outstanding shares of Paragon Common Stock will have
exercised appraisal rights under the Nevada Law as Dissenting Shareholders.
Icoworks and Paragon will have resolved all matters of appraisal and payment
under the Nevada Law for each Dissenting Shareholder to Icoworks' satisfaction.
(h) Third Party Consents. Icoworks will have received duly executed
copies of all third-party consents and approvals contemplated by the Merger
Documents, in form and substance reasonably satisfactory to Icoworks.
(i) No Material Adverse. No event will have occurred since the date of
this Agreement that has had a material adverse effect on the business,
operations, assets, properties, prospects or conditions of Paragon taken as a
whole.
(j) No Action. No suit, action, or proceeding will be pending or
threatened before any governmental or regulatory authority wherein an
unfavorable judgment, order, decree, stipulation, injunction or charge would (i)
prevent consummation of any of the transactions contemplated by this Agreement;
or (ii) cause the transactions to be rescinded following consummation.
SECTION 6
ADDITIONAL COVENANTS OF THE PARTIES
6.1 Access and Investigation. Between the date of this Agreement and the
Closing Date, Icoworks, on the one hand, and Paragon, on the other hand, will,
and will cause each of their respective representatives to, (a) afford the other
and its representatives full and free access to its personnel, properties,
contracts, books and records, and other documents and data, (b) furnish the
other and its representatives with copies of all such contracts, books and
records, and other existing documents and data as required by this Agreement and
as the other may otherwise reasonably request, and (c) furnish the other and its
representatives with such additional financial, operating, and other data and
information as the other may reasonably request. All of such access,
investigation and communication by a party and its representatives will be
conducted during normal business hours and in a manner designed not to interfere
unduly with the normal business operations of the other party. Each party will
instruct its auditors to cooperate with the other party and its representatives
in connection with such investigations.
6.2 Confidentiality. All information regarding the business of Icoworks
including, without limitation, financial information that Icoworks provides to
Paragon during Paragon's due diligence investigation of Icoworks will be kept in
strict confidence by Paragon and will not be used (except in connection with due
diligence), dealt with, exploited or commercialized by Paragon or disclosed to
any third party (other than Paragon's professional accounting and legal
advisors) without the prior written consent of Icoworks. If the transactions
contemplated by this Agreement do not proceed for any reason, then upon receipt
of a written request from the Icoworks, Paragon will immediately return to
Icoworks any information
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received regarding Icoworks' business. Likewise, all information regarding the
business of Paragon including, without limitation, financial information that
Paragon provides to Icoworks during its due diligence investigation of Paragon
will be kept in strict confidence by Icoworks and will not be used (except in
connection with due diligence), dealt with, exploited or commercialized by
Icoworks or disclosed to any third party (other than Icoworks' professional
accounting and legal advisors) without Paragon's prior written consent. If the
transactions contemplated by this Agreement do not proceed for any reason, then
upon receipt of a written request from Paragon, Icoworks will immediately return
to Paragon (or as directed by Paragon) any information received regarding
Paragon's business.
6.3 Notification. Between the date of this Agreement and the Effective
Time, each of the parties to this Agreement will promptly notify the other
parties in writing if it becomes aware of any fact or condition that causes or
constitutes a material breach of any of its representations and warranties as of
the date of this Agreement, if it becomes aware of the occurrence after the date
of this Agreement of any fact or condition that would cause or constitute a
material breach of any such representation or warranty had such representation
or warranty been made as of the time of occurrence or discovery of such fact or
condition. Should any such fact or condition require any chance in the
Disclosure Schedules relating to such party, such party will promptly deliver to
the other parties a supplement to the Disclosure Schedules specifying such
change. During the same period, each party will promptly notify the other
parties of the occurrence of any material breach of any of its covenant in this
Agreement or of the occurrence of any event that may make the satisfaction of
such conditions impossible or unlikely.
6.4 Exclusivity. Until such time, if any, as this Agreement is terminated
pursuant to Article 7, Icoworks will not, directly or indirectly solicit,
initiate, entertain or accept any inquiries or proposals from, discuss or
negotiate with, provide any nonpublic information to, or consider the merits of
any unsolicited inquiries or proposals from, any person or entity (other than
Paragon) relating to any transaction involving the sale of the business or
assets (other than in the ordinary course of business), or any of the capital
stock of Icoworks, or any merger, consolidation, business combination, or
similar transaction. Icoworks will promptly notify Paragon if it receive an
unsolicited offer for such a transaction, or obtains information that such an
offer is likely to be made, which notice will include the identity of the
prospective offeror and the price and terms of the proposed offer.
6.5 Conduct of Icoworks Business Prior to Closing. From the date of this
Agreement to the Closing Date, and except to the extent that Paragon otherwise
consents in writing, Icoworks will operate its business substantially as
presently operated and only in the ordinary course and in compliance with all
applicable laws, and use its best efforts to preserve intact its good reputation
and present business organization and to preserve its relationships with persons
having business dealings with it.
6.6 Certain Acts Prohibited - Icoworks. Between the date of this Agreement
and the Closing Date, Icoworks will not, without the prior written consent of
Paragon:
(a) amend its certificate of incorporation, by-laws or other
organizational documents;
(b) incur any liability or obligation other than in the ordinary course
of business or encumber or permit the encumbrance of any properties or assets of
Icoworks, except as disclosed in a Disclosure Schedule to this Agreement;
(c) dispose of or contract to dispose of any Icoworks property or
assets except in the ordinary course of business consistent with past practice;
(d) issue, deliver, sell, pledge or otherwise encumber or subject to
any lien any shares of the Icoworks Stock, or any rights, warrants or options to
acquire, any such shares, voting securities or convertible securities;
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(e) not (i) declare, set aside or pay any dividends on, or make any
other distributions in respect of the Icoworks Stock, or (ii) split, combine or
reclassify any Icoworks Stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of Icoworks
Stock; or
(f) not materially increase benefits or compensation expenses of
Icoworks, other than as contemplated by the terms of any employment agreement in
existence on the date of this Agreement, increase the cash compensation of any
director, executive officer or other key employee or pay any benefit or amount
not required by a Plan or arrangement as in effect on the date of this Agreement
to any such person.
6.7 Certain Acts Prohibited - Paragon. Between the date of this Agreement
and the Closing Date, Paragon will not, without the prior written consent of
Icoworks:
(a) amend its certificate of incorporation, by-laws or other
organizational documents;
(b) incur any liability or obligation other than in the ordinary course
of business or encumber or permit the encumbrance of any properties or assets of
Paragon, except as disclosed in a Disclosure Schedule to this Agreement;
(c) dispose of or contract to dispose of any Paragon property or
assets except in the ordinary course of business consistent with past practice;
(d) issue or sell shares of Paragon Stock, or any rights, warrants or
options to acquire, any such shares, voting securities or convertible
securities, other than in private placement transactions as contemplated with
Section 1.8 of this Agreement and up to 1,000,000 share purchase warrants or
options; or
(e) except as contemplated in Section 1.9 of this Agreement, not (i)
declare, set aside or pay any dividends on, or make any other distributions in
respect of the Paragon Stock, or (ii) split, combine or reclassify any Paragon
Stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of Paragon Stock.
6.8 Registration Statement. As soon as is practical after execution of this
Agreement, Paragon will prepare and file with the SEC a registration statement
on Form S-4 (the "Registration Statement") covering the issuance of the Merger
Shares. Icoworks and Paragon will each use their commercially reasonable efforts
to cause the Registration Statement to become effective. Once the Registration
Statement is effective, each of Paragon and Icoworks will promptly submit this
Agreement to its shareholders for their approval and use its reasonable efforts
to obtain approval of the Merger by its shareholders. Icoworks agrees to
cooperate with Paragon in preparing the Registration Statement and will provide
all necessary information about Icoworks' business and business plans, officers
and directors, financial statements (including audited financial statements
where required) and other information required by the SEC regulations or
otherwise reasonably deemed necessary by Paragon and its legal counsel.
6.9 Public Announcements. Paragon and Icoworks each agree that they will
not release or issue any reports or statements or make any public announcements
relating to this Agreement or the transactions contemplated herein without the
prior written consent of the other party, except as may be required upon written
advice of counsel to comply with applicable laws or regulatory requirements
after consulting with the other party hereto and seeking their consent to such
announcement.
6.10 Paragon Board of Directors. Immediately upon the Closing, the current
directors of Paragon will adopt resolutions appointing a new board of directors
for Paragon consisting of a majority of the directors nominated by Icoworks.
6.11 Paragon Name Change. Paragon agrees that it will change its corporate
name to Icoworks, Inc., which name change will be effective only if the
shareholders of Paragon approve the name
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change in accordance with Nevada Law and the Merger is consummated. Paragon
agrees to use its commercially reasonably efforts to seek such shareholder
approval of the name change and to recommend to its shareholders that they
approve the name change. If the Merger is not consummated for any reason,
Paragon will not proceed with the change of its corporate name to Icoworks, Inc.
6.12 Icoworks Financial Statements. Following the execution of this
Agreement, Icoworks will complete and deliver to Paragon the audited
consolidated balance sheet for Icoworks dated as of June 30, 2002, together with
related statements of income, cash flows, and changes in shareholder's equity
for the fiscal year then ended and any further financial statements required to
be filed with the SEC in connection with the Registration Statement. Upon
delivery, these financial statements will be deemed to be incorporated into the
definition of "Icoworks Financial Statements" for the purposes of Section 3.10
of this Agreement and all representations and warranties of Icoworks to the
Financial Statements will apply to the financial statements delivered pursuant
to this Section 6.12.
SECTION 7
TERMINATION
7.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time of the transactions contemplated hereby by:
(a) Mutual agreement of Paragon and Icoworks;
(b) Paragon, if there has been a breach by Icoworks of any material
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Icoworks that is not cured, to the reasonable satisfaction of
Paragon, within ten business days after notice of such breach is given by
Paragon (except that no cure period will be provided for a breach by Icoworks
that by its nature cannot be cured);
(c) Icoworks, if there has been a breach by Paragon of any material
representation, warranty, covenant or agreement set forth in this Agreement on
the part of Paragon that is not cured by the breaching party, to the reasonable
satisfaction of Icoworks, within ten business days after notice of such breach
is given by Icoworks (except that no cure period will be provided for a breach
by Paragon that by its nature cannot be cured); or
(d) Paragon or Icoworks, if the transactions contemplated by this
Agreement have not been consummated prior to May 1, 2003 unless the parties
agree to extend such date.
7.2 Effect of Termination. In the event of the termination of this
Agreement as provided in Section 7.1, this Agreement will be of no further force
or effect, provided, however, that no termination of this Agreement will relieve
any party of liability for any breaches of this Agreement that are based on a
wrongful refusal or failure to perform any obligations.
SECTION 8
MISCELLANEOUS PROVISIONS
8.1 Effectiveness of Representations; Survival. Each party is entitled to
rely on the representations, warranties and agreements of each of the other
parties and all such representation, warranties and agreement will be effective
regardless of any investigation that any party has undertaken or failed to
undertake. The representation, warranties and agreements will survive the
Closing Date and continue in full force and effect until the second anniversary
of the Closing Date; provided that the representations and warranties regarding
Taxes will survive until the expiration of any applicable statute of limitations
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8.2 Further Assurances. Each of the parties hereto will cooperate with the
others and execute and deliver to the other parties hereto such other
instruments and documents and take such other actions as may be reasonably
requested from time to time by any other party hereto as necessary to carry out,
evidence, and confirm the intended purposes of this Agreement.
8.3 Amendment. This Agreement may not be amended except by an instrument in
writing signed by each of the parties.
8.4 Expenses. Each party to this Agreement will bear its respective
expenses incurred in connection with the preparation, execution, and performance
of this Agreement and the transactions contemplated hereby, including all fees
and expenses of agents, representatives, counsel, and accountants.
8.5 Entire Agreement. This Agreement, the exhibits, schedules attached
hereto and the other Paragon Documents contain the entire agreement between the
parties with respect to the subject matter hereof and supersede all prior
arrangements and understandings, both written and oral, expressed or implied,
with respect thereto. Any preceding correspondence or offers are expressly
superseded and terminated by this Agreement.
8.6 Severability. It is the desire and intent of the parties that the
provisions of the Paragon Documents be enforced to the fullest extent
permissible under the law and public policies applied in each jurisdiction in
which enforcement is sought. Accordingly, if any provision of the Paragon
Documents will for any reason be held or adjudged to be invalid, illegal, or
unenforceable by any court of competent jurisdiction, such paragraph or part
thereof so adjudicated invalid, illegal, or unenforceable will be deemed
separate, distinct, and independent, and the remainder of the Paragon Documents
will remain in full force and effect and will not be affected by such holding or
adjudication.
8.7 Notices. All notices and other communications required or permitted
under to this Agreement must be in writing and will be deemed given if sent by
personal delivery, faxed with electronic confirmation of delivery,
internationally-recognized express courier or registered or certified mail
(return receipt requested), postage prepaid, to the parties at the following
addresses (or at such other address for a party as will be specified by like
notice):
If to Icoworks:
ICOWORKS, INC.
000 Xx Xxxxxx, Xxxxx 000
Xxxx xx Xxxxxxxxxxxx,
Xxxxx of California
Attention: Mr. Xxxxxx Xxxxxxx
Telephone: 000-000-0000
______________________
Fax: 000-000-0000
______________________
If to Paragon:
PARAGON POLARIS XXXXXXXXXX.XXX INC.
x/x Xxxxx 0000, 000 Xxxxxxxxx Xxxxxx
Xxxxxxxxx, XX Xxxxxx
Facsimile: ______________________
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With a copy (which will not constitute notice) to:
Xxxxxxx X. Xxxxxx Xxxxxxx X. Cane
Cane O'Xxxxx Xxxxxx, LLC Cane O'Xxxxx Xxxxxx, LLC
Xxxxx 0000, Xxxxx Xxxxxx Xxxxx 000, Xxx 00
0000 Xxxx Xxxxxxx St., Box 11122 0000 Xxxx Xxxxxx Xxxxxx
Xxxxxxxxx, Xxxxxxx Xxxxxxxx Las Vegas, Nevada
Canada V6E 3P3 USA 89102
Facsimile: (000) 000-0000 Facsimile: (000) 000-0000
All such notices and other communications will be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a fax, when the party sending such fax has received electronic
confirmation of its delivery, (c) in the case of delivery by
internationally-recognized express courier, on the business day following
dispatch and (d) in the case of mailing, on the fifth business day following
mailing.
8.8 Headings. The headings contained in this Agreement are for convenience
purposes only and will not affect in any way the meaning or interpretation of
this Agree-ment.
8.9 Benefits. This Agreement is and will only be construed as for the
benefit of or enforceable by those persons party to this Agreement.
8.10 Assignment. This Agreement may not be assigned (except by operation of
law) by any party without the consent of the other parties.
8.11 Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of Nevada applicable to contracts made and
to be performed therein. The parties hereby (i) submit to personal jurisdiction
in the State of Nevada, and (ii) waive any and all rights under the laws of any
state to object to jurisdiction within the State of Nevada for the purposes of
litigation to enforce this Agreement.
8.12 Construction. The language used in this Agreement will be deemed to be
the language chosen by the parties to express their mutual intent, and no rule
of strict construction will be applied against any party.
8.13 Counterparts. This Agreement may be executed in one or more
counterparts, all of which will be considered one and the same agreement and
will become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
8.14 Fax Execution. This Agreement may be executed by delivery of executed
signature pages by fax and such fax execution will be effective for all
purposes.
8.15 Schedules and Exhibits. The schedules and exhibits are attached to
this Agreement and incorporated herein.
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8.16 Independent Legal Advice. Icoworks acknowledges that Cane O'Xxxxx
Xxxxxx, LLC have acted solely for Paragon in the negotiation and execution of
this Agreement and Cane O'Xxxxx Xxxxxx, LLC have advised IcoworksCo to obtain
the advice of its own independent legal counsel.
IN WITNESS WHEREOF the parties hereto have executed this agreement as of
the day and year first above written.
PARAGON POLARIS XXXXXXXXXX.XXX INC.
a Nevada corporation by its
authorized signatory:
/s/ Xxxxxx Foo
_____________________________
Signature of Authorized Signatory
Xxxxxx Foo
_____________________________
Name of Authorized Signatory
President
____________________________
Position of Authorized Signatory
ICOWORKS, INC.
a Nevada corporation by its
authorized signatory:
/s/ Xxxxxx Xxxxxxx
_____________________________
Signature of Authorized Signatory
Xxxxxx Xxxxxxx
_____________________________
Name of Authorized Signatory
President
____________________________
Position of Authorized Signatory
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DISCLOSURE SCHEDULES TO AGREEMENT AND PLAN OF MERGER
Unless otherwise indicated herein, capitalized terms used in these
Disclosure Schedules have the same meaning assigned to them in the Agreement and
Plan of Merger entered into on November 15, 2002 by Paragon Polaris
Xxxxxxxxxx.xxx, Inc. and Icoworks, Inc. (the "Agreement")
Headings and titles contained in these Disclosure Schedules are for
reference purposes only and do not affect in any way the meaning or
interpretation of these Disclosure Schedules or the Agreement. Capitalized terms
used in these Disclosure Schedules have the meanings assigned to such terms in
the Agreement.
Disclosure of any item on any part or section in these Disclosure Schedules
is deemed to be disclosure of such item on all other parts and sections of these
Schedules when so indicated, except where the indicated Disclosure Schedules
indicates "none."
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