EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
APPLIED CAPITAL FUNDING, INC.,
APPLIED CAPITAL ACQUISITION CORP.,
AND
THE DUCK CORPORATION
TABLE OF CONTENTS
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I. THE MERGER 1
SECTION 1.01 THE MERGER 1
SECTION 1.02 EFFECTIVE TIME 1
SECTION 1.03 CLOSING 2
SECTION 1.04 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION 2
II. STATUS AND CONVERSION OF SECURITIES; OTHER AGREEMENTS 2
SECTION 2.01 COMMON STOCK OF DUCK AND THE MERGER-SUB 2
(a) 2
(b) 2
SECTION 2.02 CAPITAL STOCK OF THE PARENT 2
SECTION 2.03 STOCK OPTION PLAN 3
SECTION 2.04 CAPITAL STRUCTURE OF THE PARENT 3
SECTION 2.06 REGISTRATION 4
SECTION 2.07 CONSULTING AGREEMENT 5
SECTION 2.08 BOARD OF DIRECTORS OF THE PARENT 5
III. REPRESENTATIONS AND WARRANTIES 5
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF DUCK 5
(a) ORGANIZATION AND QUALIFICATION 5
(b) ORGANIZATIONAL DOCUMENTS; CAPITAL STOCK 5
(c) AUTHORITY RELATIVE TO THIS AGREEMENT 6
(d) NON-CONTRAVENTION; APPROVALS AND CONSENTS 6
(e) 7
LEGAL PROCEEDINGS 7
(f) TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS.(i) The 11
FINANCIAL STATEMENTS 11
(b) ABSENCE OF CERTAIN CHANGES OR EVENTS 11
(c) ABSENCE OF UNDISCLOSED LIABILITIES 11
(d) INFORMATION SUPPLIED 11
(e) COMPLIANCE WITH LAWS AND ORDERS 11
(f) COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS 11
(g) BROKERS 12
(h) CONSENTS WITHOUT ANY CONDITION 12
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE MERGER-SUB 13
(a) ORGANIZATION AND QUALIFICATION 13
(b) ORGANIZATIONAL DOCUMENTS; CAPITAL STOCK 13
(c) AUTHORITY RELATIVE TO THIS AGREEMENT 14
(d) NON-CONTRAVENTION; APPROVALS AND CONSENTS 14
(e) FINANCIAL STATEMENTS. The Parent has delivered to Duck
true, correct, and complete copies of the following:
the audited balance sheets of the Parent (the 15
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS 15
(g) ABSENCE OF UNDISCLOSED LIABILITIES 15
(h) LEGAL PROCEEDINGS 16
(i) INFORMATION SUPPLIED 16
(j) COMPLIANCE WITH LAWS AND ORDERS 16
(k) COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS 16
(l) EMPLOYEE BENEFIT PLANS 17
(m) PATENTS, TRADEMARKS, ET CETERA 17
(n) INSURANCE 17
(o) LABOR MATTERS 17
(p) TANGIBLE PROPERTY AND ASSETS 17
IV. COVENANTS 18
SECTION 4.01 COVENANTS OF THE PARENT AND THE MERGER-SUB 18
SECTION 4.02 COVENANTS OF DUCK 21
SECTION 4.03 DIRECTORS' AND OFFICERS' INSURANCE 22
SECTION 4.04 AMEX LISTING 22
V. CONDITIONS. 22
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER 22
(a) STOCKHOLDER APPROVAL 23
(b) STATE SECURITIES LAWS 23
(c) NO INJUNCTIONS OR RESTRAINTS 23
(d) CONSENTS AND APPROVALS 23
SECTION 5.02 CONDITIONS TO OBLIGATIONS OF THE PARENT AND THE MERGER-SUB 23
(a) REPRESENTATIONS AND WARRANTIES 23
(c) OTHER CLOSING DOCUMENTS 23
SECTION 5.03 CONDITIONS TO OBLIGATION OF DUCK TO EFFECT THE MERGER 24
(a) REPRESENTATIONS AND WARRANTIES 24
(b) PERFORMANCE OF OBLIGATIONS 24
(c) OTHER CLOSING DOCUMENTS 24
(d) REVIEW OF PROCEEDINGS 24
(f) LEGAL ACTION 25
(h) CAPITAL 25
VI. TERMINATION 25
SECTION 6.01 TERMINATION 25
SECTION 6.02 EFFECT OF TERMINATION 26
VII. INDEMNIFICATION 26
SECTION 7.01 INDEMNIFICATION BY THE PARENT 26
SECTION 7.02 INDEMNIFICATION BY DUCK 26
VIII.MISCELLANEOUS 27
SECTION 8.01 FURTHER ACTIONS 27
SECTION 8.02 AVAILABILITY OF EQUITABLE REMEDIES 27
SECTION 8.03 SURVIVAL 27
SECTION 8.04 MODIFICATION 27
SECTION 8.05 NOTICES 27
SECTION 8.06 WAIVER 28
SECTION 8.07 BINDING EFFECT 28
SECTION 8.08 NO THIRD-PARTY BENEFICIARIES 28
SECTION 8.09 SEVERABILITY 29
8.10 MERGER; ASSIGNABILITY 29
SECTION 8.11 HEADINGS 29
SECTION 8.12 COUNTERPARTS; GOVERNING LAW; JURISDICTION 29
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
APPLIED CAPITAL FUNDING, INC.,
APPLIED CAPITAL ACQUISITION CORP.,
AND
THE DUCK CORPORATION
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), is dated as of
June 9, 1999, by and among APPLIED CAPITAL FUNDING, INC., a Colorado
corporation, whose address is 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000,
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X 0X0 (the "Parent"), APPLIED CAPITAL
ACQUISITION CORP., a Delaware corporation and wholly-owned subsidiary of
Parent, whose address is 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000, Xxxxxxxxx,
Xxxxxxx Xxxxxxxx X0X 0X0 (the "Merger-Sub") and THE DUCK CORPORATION, a
Delaware corporation, whose address is 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 ("Duck"). Duck shall be the surviving corporation of the proposed
merger between the Merger-Sub and Duck and, in such capacity, Duck shall
sometimes be referred to herein as the "Surviving Corporation."
W I T N E S S E T H:
WHEREAS, the respective Board of Directors of the Parent, the Merger-Sub
and Duck have determined that it is advisable and in the best interests of their
respective equity owners to consummate the business combination transaction
provided for herein in which the Merger-Sub would merge (the "Merger") with and
into Duck; and
WHEREAS, Parent, the Merger-Sub and Duck desire to make certain
agreements in connection with the Merger.
NOW, THEREFORE, in consideration of the mutual premises, covenants,
and agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
I. THE MERGER.
SECTION 1.01 THE MERGER.
At the Effective Time (as defined in Section 1.02), upon the terms
and subject to the conditions of this Agreement, the Merger-Sub shall be merged
with and into Duck in accordance with the Delaware General Corporation Law (the
"DGCL"). Duck shall be the surviving corporation in the Merger, and the name of
the Surviving Corporation shall be "The Duck Corporation." As a result of the
Merger, all outstanding shares of capital stock of Duck (the "Duck Capital
Stock"), and any options, warrants or other securities convertible into Duck
Capital Stock shall be converted in the manner provided in Article II.
SECTION 1.02 EFFECTIVE TIME.
At the Closing (as defined in Section 1.03), a certificate of
merger (the "Certificate of Merger") shall be duly prepared by the Surviving
Corporation and delivered to the Secretary of State of Delaware for filing as
provided in the DGCL, on, or as soon as practicable after, the Closing Date (as
defined in Section 1.03). The Merger shall become effective as soon as the
Certificate of Merger has been filed with the Secretary of State of Delaware
(the date and time when such condition has been satisfied being referred to
herein as the "Effective Time").
SECTION 1.03 CLOSING.
The closing of the Merger (the "Closing") will take place at
the offices of Camhy Karlinsky & Xxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000 on or before July 15, 1999 (the "Closing Date"). At the Closing,
there shall be delivered to Duck and the Parent the certificates and other
documents and instruments required to be delivered under Article V. The
Closing will be effective as of the Effective Time.
SECTION 1.04 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING
CORPORATION.
At the Effective Time, (i) the Certificate of Incorporation of
Duck in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation and (ii) the By-Laws of Duck as in
effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation. The Certificate of Incorporation and By-Laws of Duck as
in effect as of the date hereof and to be in effect as of the Effective Time are
attached hereto as EXHIBITS 1.04-1 and 1.04-2, respectively.
SECTION 1.05 CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE PARENT
The Certificate of Incorporation and By-Laws of the Parent as in
effect as of the date hereof and to be in effect as of the Effective Time are
attached hereto as EXHIBITS 1.05-1 and 1.05-2, respectively.
SECTION 1.06 EMPLOYMENT AGREEMENTS
At the closing, Xxxxx Xxxxxx'x employment agreement Xxxxxx
Xxxxxx'x employment agreement , and Xxxxx Xxxxxxx'x Employment Agreement shall
be assigned to the Parent.
II. STATUS AND CONVERSION OF SECURITIES; OTHER AGREEMENTS.
SECTION 2.01 COMMON STOCK OF DUCK AND THE MERGER-SUB.
(a) Each share of common stock, par value $.01 per share, of
the Merger-Sub outstanding immediately prior to the Closing shall remain
outstanding and shall, by virtue of the Merger and without any further action on
the part of the holders thereof, be converted into one (1) share of common
stock, par value $.001 per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock"), so that at the Effective Time, the Parent shall be
the holder of all of the issued and outstanding shares of the Surviving
Corporation Common Stock.
(b) Each share of Duck Common Stock issued and outstanding
prior to the Closing shall be converted into .889334306 shares of common stock,
no par value, of the Parent (the "Parent Common Stock") for an aggregate of
fifteen million (15,000,000) shares of Parent Common Stock. As of the Closing
Date, the former holders of Duck Capital Stock (the "Former Duck Stockholders")
shall effectively own sixty percent (60%) of the outstanding Parent Common
Stock.
SECTION 2.02 CAPITAL STOCK OF THE PARENT.
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Immediately prior to the Effective Time, the Parent shall have an
aggregate of eight million (8,000,000) shares of Parent Common Stock issued and
outstanding and two million (2,000,000) shares of Series A preferred stock, no
par value, of the Parent (the "Series A Preferred Stock") issued and
outstanding. The Articles of Amendment to the Articles of Incorporation of the
Parent Designation of Powers, Preferences and Rights of Series A Preferred Stock
is attached hereto as EXHIBIT 2.02.
SECTION 2.03 STOCK OPTION PLAN.
The Parent's Stock Option Plan (the "Stock Option Plan") is
attached hereto as EXHIBIT 2.03, pursuant to which the Parent reserved for
issuance thereunder four million (4,000,000) shares of Parent Common Stock.
Within ten (10) days after the Closing, the Parent shall issue to certain
employees of the Parent stock options pursuant to the Stock Option Plan to
purchase an aggregate of three hundred and ninety-eight thousand and five
hundred (398,500) shares of Parent Common Stock, at exercise prices equal to the
fair market value of the Parent Common Stock on the date of grant.
SECTION 2.04 CAPITAL STRUCTURE OF THE PARENT.
(a) As of the Closing Date, and as of the Effective Time, the
Parent shall have either (i) cash on hand of not less than fifteen million
dollars ($15,000,000) or (ii) cash on hand of not less than fourteen million
dollars ($14,000,000) plus a promissory note, issued by Duck to Verus Capital
Corp. ("Verus"), in the amount of one million dollars ($1,000,000), less fees
and expenses of counsel, exchange listing fees, and premium payments for
directors & officer's insurance incurred in connection with the transactions
contemplated hereby, as set forth on SCHEDULE 2.04(a).
(b) As of the Effective Time, the Parent shall have the
following capital structure:
(i) AUTHORIZED SHARES.
A. Fifty million (50,000,000) shares of Parent
Common Stock.
B. Twenty million (20,000,000) shares of blank
check preferred stock ("Parent Preferred Stock").
(i) ISSUED AND OUTSTANDING SHARES.
A. Fifteen million (15,000,000) shares of Parent
Common Stock shall be issued to the Former Duck Stockholders, nine
hundred and ninety-seven thousand two hundred and ninety (997,290)
shares of which shall be issued to Travelers in consideration for
past and future services rendered to Duck and the Parent.
B. Eight million (8,000,000) shares of Parent
Common Stock shall be held by the former controlling stockholders
of the Parent.
C. Two million (2,000,000) shares of Series A
Preferred Stock shall be held by the existing stockholders of
the Parent.
(iii) ISSUED AND OUTSTANDING OPTIONS AND WARRANTS.
A. Twenty-one (21) options of the Parent (the
"Parent Options") shall be issued to the former holders of options
of Duck (the "Duck Options") and shall represent the rights to
acquire (i) five hundred and fifty-seven thousand six
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hundred and thirteen (557,613) shares of Parent Common Stock at
an exercise price of $.88 per share; (ii) five hundred and seventy
thousand nine hundred and fifty-two (570,952) shares of Parent
Common Stock at an exercise price of $1.12 per share; and (iii)
four hundred and seventy-four thousand and fourteen (474,014)
shares of Parent Common Stock at an exercise price of $2.25 per
share. Issuance of the Parent Options shall automatically cancel
the Duck Options.
B. Four (4) warrants of the Parent (the "Parent
Warrants") shall be issued to the former holders of warrants of
Duck (the "Duck Warrants"), representing the right to acquire an
aggregate of three million three hundred and forty-three thousand
two hundred and eleven (3,343,211 ) shares of Parent Common Stock
at an exercise price of $3.14 per share. Issuance of the Parent
Warrants shall automatically cancel the Duck Warrants. The Parent
shall reserve the aggregate number of shares of Parent Common
Stock underlying such warrants for fulfillment thereof in the
event such warrants are exercised. The form of the Parent Warrant
is attached hereto as EXHIBIT 2.04(b)(iii)(B).
C. Warrants have been issued to the holders of
the Series A Preferred Stock, representing the right to acquire an
aggregate of two million two hundred and twenty-eight thousand
eight hundred and eight (2,228,808) shares of Parent Common Stock
at an exercise price of $3.14 per share.
SECTION 2.05 EXCHANGE OF DUCK CAPITAL STOCK.
(a) The Parent shall authorize one or more persons to act as a
transfer and exchange agent hereunder (the "Exchange Agent") pursuant to an
agreement (the "Exchange Agent Agreement") in a form to be agreed upon by the
parties hereto. Promptly after the Closing, the Parent shall deposit or cause
to be deposited with the Exchange Agent the certificates representing the shares
of Parent Common Stock issuable to the holders of Duck Capital Stock.
(b) As soon as reasonably practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Duck Capital Stock (the "Duck Certificates") a form letter
of transmittal (which shall specify that delivery shall be effective, and risk
of loss and title to the Duck Certificates shall pass, only upon delivery of the
Duck Certificates to the Exchange Agent) and instructions for such holder's use
in effecting surrender of the Duck Certificates in exchange for certificates
representing shares of Parent Common Stock.
(c) As of the Effective Time, each holder of a Duck Certificate
shall surrender the same at the principal offices of the Exchange Agent, and
shall be entitled to receive in exchange therefor a certificates of the Parent
reflecting the amount of Parent Common Stock to be received by such holder.
SECTION 2.06 REGISTRATION
(a) Subject to the completion of an audit and the preparation
and delivery of audited financial statements, the Parent shall file, within
ninety (90) days after the Closing, a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating to
(i) any Parent Common Stock underlying the Series A Preferred Stock; (ii) any
Parent Common Stock underlying the Parent Warrants and Parent Options; and (iii)
the shares
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of Parent Common held pursuant to Section 2.04(b) that are not
currently free trading; PROVIDED, HOWEVER, that for a period commencing as of
the Closing Date and terminating on the earlier of (i) March 15, 2000 or (ii)
six (6) months after the effective date of the Registration Statement, each of
the Former Duck Stockholders shall not sell more than one-third (1/3) of their
individual shares, pursuant to a Lock-Up Agreement (the "Lock-Up Agreement")
substantially in the form attached hereto as EXHIBIT 2.06(a).
(b) The Parent shall file a Form-S-8 with the SEC to register
all shares of the Parent Common Stock underlying options granted under its stock
option plan, within one hundred and twenty (120) days after the Closing.
SECTION 2.07 CONSULTING AGREEMENT.
Upon the Closing, the Parent shall enter into a consulting
agreement (the "Consulting Agreement") with Verus for a two (2) year term, which
shall provide that Verus shall receive twelve thousand five hundred dollars
($12,500) per month for consulting services it renders to the Parent. The form
of the Consulting Agreement is attached hereto as EXHIBIT 2.07.
SECTION 2.08 BOARD OF DIRECTORS OF THE PARENT.
The Board of Directors (the "Board") of the Parent shall consist
of six (6) persons: one (1) person selected by Travelers (which shall initially
be Xxxx Xxxxxx), one (1) person selected by Xxxxxxx Technology Partners, two (2)
persons selected by Verus, and two (2) persons selected by the officers of the
Parent.
III. REPRESENTATIONS AND WARRANTIES.
SECTION 3.01 REPRESENTATIONS AND WARRANTIES OF DUCK.
Duck represents and warrants to the Parent and the Merger-Sub as
follows:
(a) ORGANIZATION AND QUALIFICATION. Duck is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full power and authority to conduct its business as and to the
extent now conducted, and currently proposed to be conducted, and to own, use
and lease its assets and properties, except for such failures to have such power
and authority which, individually or in the aggregate, do not and are not
reasonably expected to have a Material Adverse Effect (as defined in this
Section 3.01(a)) on Duck. Duck is duly qualified, licensed or admitted to do
business and is in good standing in New York. As used in this Agreement, a
"Material Adverse Effect" shall mean a material adverse effect on the
businesses, properties, assets, liabilities, condition (financial or otherwise)
or results of operations of an entity (or group of entities taken as a whole).
Notwithstanding the foregoing, a Material Adverse Effect shall not include any
change in political or economic matters of general applicability. Duck does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
(b) ORGANIZATIONAL DOCUMENTS; CAPITAL STOCK.
(i) Attached hereto as EXHIBIT 1.04-1 is a true and
complete copy of the Certificate of Incorporation of Duck as in effect on
the date hereof.
(ii) Duck has heretofore delivered a true and complete
table of all stockholders of Duck.
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(iii) Duck has heretofore delivered a true and complete
table of any outstanding or authorized Duck options, warrants, calls,
subscriptions, rights, agreements or other commitments of any character
(contingent or otherwise) obligating Duck to issue or sell any Duck
Common Stock of Duck Series A Preferred Stock.
(iv) Except as set forth on EXHIBIT 3.01(b)(iv), there
are no outstanding contractual obligations of Duck to repurchase, redeem,
or otherwise acquire any Duck Capital Stock.
(c) AUTHORITY RELATIVE TO THIS AGREEMENT. Duck has full power
and authority to enter into this Agreement and to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The
execution, delivery, and performance of this Agreement by Duck and the
consummation by Duck of the Merger and the transactions contemplated hereby have
been duly and validly approved by the Board of Directors of Duck, and upon the
approval of the stockholders of Duck, no other proceedings on the part of Duck
will be necessary to authorize the execution, delivery, and performance of this
Agreement by Duck and the consummation by Duck of the transactions contemplated
hereby. This Agreement has been duly and validly executed and delivered by Duck,
and constitutes the legal, valid, and binding obligation of Duck enforceable
against Duck in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer or similar laws affecting the enforcement of creditors' rights
generally and general principles of equity (whether considered in a proceeding
at law or in equity).
(d) NON-CONTRAVENTION; APPROVALS AND CONSENTS.
(i) The execution and delivery of this Agreement by Duck
does not, and the performance by Duck of its obligations hereunder and
the consummation of the transactions contemplated hereby will not,
conflict with, result in a violation or breach of, constitute (with or
without notice or lapse of time or both) a default under, result in or
give to any person any right of payment or reimbursement, termination,
cancellation, modification or acceleration of, or result in the creation
or imposition of any lien, claim, mortgage, encumbrance, pledge, security
interest, equity, or charge of any kind (any of the foregoing, a "Lien")
upon any of the assets or properties of Duck under any of the terms,
conditions, or provisions of (x) the Certificate of Incorporation of
Duck, (y) any statute, law, rule, regulation, or ordinance (collectively,
"Laws"), or any judgment, decree, order, writ, permit, or license
(collectively, "Orders"), of any court, tribunal, arbitrator, authority,
agency, commission, official, or other instrumentality of the United
States, any foreign country, or any domestic or foreign state, county,
city, or other political subdivision (a "Governmental or Regulatory
Authority"), applicable to Duck or any of its assets or properties, or
(z) any note, bond, mortgage, security agreement, indenture, license,
franchise, permit, concession, contract, lease (capital or operating) or
other instrument, obligation, or agreement of any kind (collectively,
"Contracts") to which Duck is a party or by which Duck or any of its
assets or properties is bound, excluding from the foregoing clauses (y)
and (z) conflicts, violations, breaches, defaults, terminations,
modifications, accelerations and creations, and impositions of Liens
which, individually or in the aggregate, could not be reasonably
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expected to have a Material Adverse Effect on Duck or on its ability
to consummate the transactions contemplated by this Agreement.
(ii) Except (x) for the filing of the Certificate of
Merger and other appropriate merger documents required by the DGCL with
the Secretary of State of Delaware and (y) as otherwise disclosed in
SCHEDULE 3.01(d)(ii) hereto, and (z) for the approval of stockholders of
Duck, no consent, approval, or action of, filing with, or notice to any
Governmental or Regulatory Authority or other public or private third
party is necessary or required under any of the terms, conditions or
provisions of any Law or Order of any Governmental or Regulatory
Authority or any Contract to which Duck is a party or by which Duck or
any of its assets or properties is bound for the execution and delivery
of this Agreement by Duck, the performance by Duck of its obligations
hereunder or the consummation of the transactions contemplated hereby,
except for such consents, approvals, or actions of, filings with or
notices to any Governmental or Regulatory Authority or other public or
private third party the failure of which to make or obtain could not
reasonably be expected to have a Material Adverse Effect on Duck, the
Surviving Corporation, or on Duck's ability to consummate the
transactions contemplated by this Agreement.
(e) LEGAL PROCEEDINGS. There are no actions, suits,
arbitrations, or proceedings pending, nor to the knowledge of Duck, threatened
against, relating to or affecting, Duck or any of its assets and properties
which, individually or in the aggregate, could reasonably be expected to have a
Material Adverse Effect on Duck or on the ability of Duck to consummate the
transactions contemplated by this Agreement. Duck is not subject to any
judgment, decree, court order, or writ of any Governmental or Regulatory
Authority.
(f) TECHNOLOGY AND INTELLECTUAL PROPERTY RIGHTS.
(i) The "Duck Intellectual Property" consists of the
following:
all patents, trademarks, trade names, service
marks, mask works, domain names, copyrights and any renewal
rights, applications and registrations for any of the foregoing,
and all trade dress, supplier lists, trade secrets, know-how,
moral rights, computer software programs or applications (in both
source and object code form) owned by Duck;
C all goodwill associated with trademarks,
trade names service marks and trade dress owned by Duck;
D all software and firmware listings, and
updated software source code, and complete system build software
and instructions related to all software described herein owned by
Duck;
E all documents, records and files relating to
design, end user documentation, manufacturing, quality control,
sales, marketing or customer support for all intellectual property
described herein owned by Duck;
F all other tangible or intangible proprietary
information and materials owned by Duck; and
G all license and other rights in any third
party product, intellectual property, proprietary or personal
rights, documentation, or tangible or intangible property,
including without limitation the types of intellectual property
and
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tangible and intangible proprietary information described in
(A) through (E) above that are being, and/or have been, used, or
are currently under development for use, in the business of Duck
as it has been, is currently or is currently anticipated to be (up
to the Closing), conducted. Duck Intellectual Property described
in clauses (A) to (E) above is referred to herein as "Duck Owned
Intellectual Property" and Duck Intellectual Property described in
clause (F) above is referred to herein as "Duck Licensed
Intellectual Property." Unless otherwise noted, all references to
"Duck Intellectual Property" shall refer to both Duck Owned
Intellectual Property and Duck Licensed Intellectual Property.
(ii) SCHEDULE 3.01(f) lists: (i) all patents, registered
copyrights, trademarks, service marks, trade dress, any renewal
rights for any of the foregoing, and any applications and
registrations for any of the foregoing, that are included in the
Duck Owned Intellectual Property; (ii) all hardware products and
tools, software products and tools, and services that are
currently published, offered, or under development by Duck;
(iii) all material licenses, sublicenses and other agreements to
which Duck is a party and pursuant to which any other person is
authorized to have access to or use the Duck Owned Intellectual
Property or exercise any other right with regard thereto; and (iv)
all Duck Licensed Intellectual Property (other than license
agreements for standard "shrink wrapped, off the shelf,"
commercially available, third party products used by Duck). The
disclosures described in (iii), (iv) and (v) hereof include the
names and dates of the relevant agreements, as well as the
identities of the parties thereto.
(iii) The Duck Intellectual Property consists solely of
items and rights that are either: (i) owned by Duck, (ii) in the
public domain, or (iii) rightfully used and authorized for use by
Duck and its successors pursuant to a valid license or other
agreement. Duck has all rights in the Duck Intellectual Property
reasonably necessary to carry out Duck's current, and anticipated
future (up to the Closing) activities and has or had all rights in
the Duck Intellectual Property reasonably necessary to carry out
Duck's former activities, including without limitation, if
necessary to carry out such activities, rights to make, use,
exclude others from using, reproduce, modify, adapt, create
derivative works based on, translate, distribute (directly and
indirectly), transmit, display and perform publicly, license,
rent, lease, assign, and sell the Duck Intellectual Property in
all geographic locations and fields of use, and to sublicense any
or all such rights to third parties, including the right to grant
further sublicenses. All material software and firmware listings
that are part of the Duck Owned Intellectual Property are
adequately commented in accordance with current software industry
standards.
(iv) Duck is not, nor as a result of the execution or
delivery of this Agreement, or performance of Duck's obligations
hereunder, will Duck be, in violation of any license, sublicense
or other agreement relating to the Duck Intellectual Property to
which Duck is a party or otherwise bound. Except pursuant to the
terms of the agreements listed in on SCHEDULE 3.01(f), Duck is not
obligated to
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provide any consideration (whether financial or otherwise) to
any third party, nor is any third party otherwise entitled to
any consideration, with respect to any exercise of rights by
Duck or its successors in the Duck Intellectual Property.
(v) To the knowledge of Duck, the use, reproduction,
modification, distribution, licensing, sublicensing, sale, or any
other exercise of rights in any Duck Owned Intellectual Property
or any other authorized exercise of rights in or to the Duck Owned
Intellectual Property by Duck or its licensees does not and will
not infringe any copyright, patent, trade secret, trademark,
service xxxx, trade name, firm name, logo, trade dress, moral
right, other intellectual property right, right of privacy, right
of publicity or right in personal or other data of any person.
Further, to the knowledge of Duck, the use, reproduction,
modification, distribution, licensing, sublicensing, sale, or any
other exercise of rights in any Duck Licensed Intellectual
Property or any other authorized exercise of rights in or to the
Duck Licensed Intellectual Property by Duck or its licensees does
not and will not infringe any copyright, patent, trade secret,
trademark, service xxxx, trade name, firm name, logo, trade dress,
moral right, other intellectual property right, right of privacy,
right of publicity or right in personal or other data of any
person. Except as set forth on SCHEDULE 3.01(f), no claims
(i) challenging the validity, effectiveness, or ownership by Duck
of any of the Duck Owned Intellectual Property, or (ii) to the
effect that the use, reproduction, modification, manufacturing,
distribution, licensing, sublicensing, sale or any other exercise
of rights in any Duck Owned Intellectual Property by Duck or its
licensees infringes, or will infringe on, any intellectual
property or other proprietary or personal right of any person,
have been asserted or, to the knowledge of Duck, are threatened by
any person nor, to the knowledge of Duck, are there any valid
grounds for any bona fide claim of any such kind. All granted or
issued patents and mask works and all registered trademarks listed
on the Duck Disclosure Schedule and all copyright registrations
held by Duck are valid, enforceable and subsisting. To the
knowledge of Duck, there is no material unauthorized use,
infringement or misappropriation of any of the Duck Owned
Intellectual Property by any third party, employee or former
employee.
(vi) Except as set forth on SCHEDULE 3.01(f), no parties
other than Duck possess any current or contingent rights to any
source code that is part of the Duck Owned Intellectual Property
(including, without limitation, through any escrow account).
(vii) SCHEDULE 3.01(f) lists all parties who have created
any material portion of, or otherwise have any rights in or to,
the Duck Owned Intellectual Property other than employees of Duck
whose work product was created by them entirely within the scope
of their employment by Duck and constitutes works made for hire
owned by Duck. Duck has secured from all parties who have created
any material portion of, or otherwise have any rights in or to,
the Duck Owned Intellectual Property valid and enforceable written
assignments or licenses of any
9
such work or other rights to Duck and has provided true and
complete copies of such assignments or licenses to Parent.
(viii) SCHEDULE 3.01(f) includes a true and complete list
of support and maintenance agreements relating to Duck Owned
Intellectual Property or to which Duck is a party as to Duck
Licensed Intellectual Property including the identity of the
parties and the respective dates of such agreements and remedies
for their breach.
(ix) Duck has obtained legally binding written agreements
from all employees and third parties with whom Duck has shared
confidential proprietary information (i) of Duck, or (ii) received
from others which Duck is obligated to treat as confidential,
which agreements require such employees and third parties to keep
such information confidential.
(x) Duck has obtained any and all necessary consents
from consumers with regard to Duck's collection and dissemination
of personal consumer information in accordance with Duck's privacy
policy as published on its website. Duck's practices regarding
the collection and use of consumer personal information are in
accordance with Duck's privacy policy as published on its website.
(xi) To the knowledge of Duck, the Duck Owned
Intellectual Property is, and any products manufactured and
commercially released by Duck or currently under development, are
fully Year 2000 Compliant in all material respects and will not
cease to be fully Year 2000 Compliant in any material respect at
any time prior to, during or after the calendar year 2000. To the
best of Duck's knowledge, the Duck Licensed Intellectual Property
is fully Year 2000 Compliant in all material respects and will not
cease to be fully Year 2000 Compliant in any material respect at
any time prior to, during or after the calendar year 2000.
SCHEDULE 3.01(f) sets forth the tests, inquiries and other
activities undertaken by Duck up to Closing, with respect to the
Year 2000 Compliant nature of any and all Duck Licensed
Intellectual Property. For the purposes of this Agreement, "Year
2000 Compliant" means that neither the performance nor the
functionality of the applicable Duck Intellectual Property or
applicable product is or will be materially affected by dates
prior to, during or after the calendar year 2000 and in particular
(but without limitation):
A such Duck Intellectual Property or product
accurately receives, provides and processes, and will accurately
receive, provide and process, date/time data (including
calculating, comparing and sequencing) from, into and between the
twentieth and twenty-first centuries, including calendar years
1999 and 2000;
B such Duck Intellectual Property or product
will not malfunction, cease to function, provide invalid or
incorrect results or cause any interruption in the operation of
the business of Duck as a result of any date/time dat
C data-based functionality of such Duck
Intellectual Property or product behaves and will continue to
behave consistently for dates prior to, during and after the year
2000;
10
D in all interfaces and data storage of such
Duck Intellectual Property or product, the century in any date is
and will be specified either explicitly or by unambiguous
algorithms or inferencing rules; and
E the year 2000 is and will be recognized as a
leap year of such Duck Intellectual Property or product.
(a) FINANCIAL STATEMENTS. Duck has delivered to the Parent and
the Merger-Sub a true, correct and complete copy of the unaudited balance sheet
of Duck as of May 31, 1999 (the "Duck Balance Sheet"). The Duck Balance Sheet
fairly presents the financial condition, assets, liabilities, and stockholders'
equity of Duck as of its date.
(b) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in SCHEDULE 3.01(h) hereto or as contemplated hereby, since May 31, 1999, no
change, event, or development or combination of changes or developments
(including any worsening of any condition currently existing) has occurred or is
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Duck (without regard, however, to changes in conditions
generally applicable to the industry in which Duck is involved or general
economic conditions).
(c) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected or reserved against in the Duck Balance Sheet, Duck did not have at
such date and has not incurred since that date, any liabilities or obligations
(whether absolute, accrued, contingent, fixed or otherwise, or whether due or to
become due) of any nature, except liabilities or obligations which were incurred
in connection with this Agreement and the transactions contemplated hereby,
which were incurred in the ordinary course of business consistent with past
practice.
(d) INFORMATION SUPPLIED. Nothing in this Agreement or any
schedule, annex, certificate, document, or statement in writing which has been
supplied by or on behalf of Duck, in connection with the transactions
contemplated hereby, contains any untrue statement of a material fact, or omits
any statement of a material fact required to be stated or necessary in order to
make the statements contained herein or therein not misleading. There is no
fact known to Duck which materially and adversely affects Duck or the Surviving
Corporation, which has not been set forth in this Agreement or in the schedules,
annexes, certificates, documents, or statements in writing furnished by Duck in
connection with the transactions contemplated by this Agreement.
(e) COMPLIANCE WITH LAWS AND ORDERS. Duck holds all permits,
licenses, variances, exemptions, orders, and approvals of all Governmental and
Regulatory Authorities necessary for the lawful conduct of its business (the
"Duck Permits"), except for failures to hold such permits, licenses, variances,
exemptions, orders, and approvals which, individually or in the aggregate, do
not and are not reasonably expected to have a Material Adverse Effect on Duck.
Duck is in compliance with the terms of the Duck Permits, except failures so to
comply which, individually or in the aggregate, do not have and are not
reasonably expected to have a Material Adverse Effect on Duck. Duck is not in
violation of, or in default under, any Law or Order of any Governmental or
Regulatory Authority, except for violations which, individually or in the
aggregate, do not and are not reasonably expected to have a Material Adverse
Effect on Duck.
(f) COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS. Neither
Duck, nor to the knowledge of Duck, any other party thereto, is in breach or
violation of, or in default in the performance or observance of any term or
provision of, and no event has occurred which, with notice
11
or lapse of time or both, is reasonably expected to result in a default
under, (x) the Certificate of Incorporation of Duck or (y) any material
Contract to which Duck is a party or by which Duck or any of its assets or
properties is bound, except in the case of clause (y) for breaches,
violations, and defaults which, individually or in the aggregate, do not and
are not reasonably expected to have a Material Adverse Effect on Duck.
(g) BROKERS. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by Duck and its
affiliates directly with the Parent and the Merger-Sub without the intervention
of any person on behalf of Duck and its affiliates in such manner as to give
rise to any valid claim by any person against Duck, the Parent, or the Surviving
Corporation for a finder's fee, brokerage commission, or similar payment, except
as specifically set forth in SCHEDULE 3.01(m).
(h) CONSENTS WITHOUT ANY CONDITION. Duck has not made any
agreement or reached any understanding not approved by the Parent and the
Merger-Sub as a condition for obtaining any consent, authorization, approval,
order, license, certificate, or permit required for the consummation of the
transactions contemplated by this Agreement.
(i) TAX MATTERS.
(i) Except as set forth in SCHEDULE 3.01(o), Duck has
filed all tax returns required to be filed by applicable law prior to the
Closing. All tax returns were (and, as to tax returns not filed as of
the date hereof, will be) true, complete, and correct and filed on a
timely basis. Duck (x) has paid all taxes due, or claimed or asserted in
writing by any taxing authority to be due, for the periods covered by
such tax returns or (y) has duly and fully provided reserves (in
accordance with GAAP) adequate to reflect all such taxes.
(ii) Duck has established (and until the Closing will
maintain) on its books and records reserves adequate to reflect all
material taxes not yet due and payable. Duck has made available to the
Parent and the Merger-Sub complete, and accurate copies of all work
papers associated with the calculation of Duck's tax reserves.
(iii) There are no tax liens upon the assets of Duck.
(iv) Duck has not requested (and no request has been made
on its behalf) any extension of time within which to file any material
tax return.
(v) (A) No income tax returns have been examined by any
taxing authorities for any periods; and (B) no deficiency for any
material taxes has been suggested, proposed, asserted, or assessed
against Duck that has not been resolved and paid in full.
(vi) No audits or other administrative proceedings or
court proceedings are presently pending with regard to any taxes or tax
returns of Duck. Except as set forth on SCHEDULE 3.01(o), no written
claim has been made by a taxing authority in a jurisdiction where Duck
does not file tax returns such that it is or may be subject to taxation
by that jurisdiction.
(vii) To the extent requested by the Parent and the
Merger-Sub, Duck has made available to the Parent and the Merger-Sub (or,
in the case of tax returns to be filed on or before the Closing, will
make available) complete and accurate copies of all tax returns and
associated work papers filed by or on behalf of Duck for all taxable
years ending on or prior to the Closing.
12
(viii) No agreements relating to allocating or sharing of
any taxes have been entered into by Duck.
(ix) Duck has not entered into any transactions that
could give rise to an understatement of Federal Income Tax.
(x) Except as set forth on SCHEDULE 3.01(o), none of
Duck or any other person on behalf of Duck has agreed to or is required
to make any adjustments pursuant to Section 481(a) of the Code or any
similar provisions of state, local or foreign law by reason of a change
in accounting method initiated by Duck or has any application pending
with any taxing authority requesting permission for any change in
accounting methods that relate to the business or operations of Duck, and
Duck has no knowledge that the IRS has proposed any such adjustment or
change in accounting method.
(xi) Except as set forth on SCHEDULE 3.01(o), Duck has
not been, and is not now, a member of any consolidated, combined, unitary
or affiliated group of corporations for any tax purposes.
SECTION 3.02 REPRESENTATIONS AND WARRANTIES OF THE PARENT AND THE
MERGER-SUB.
The Parent and the Merger-Sub represent and warrant to Duck as
follows:
(a) ORGANIZATION AND QUALIFICATION. The Parent and the
Merger-Sub are corporations duly organized, validly existing, and in good
standing under the laws of Colorado and Delaware, respectively, and have full
corporate power and authority to conduct their business as and to the extent
now conducted, and currently proposed to be conducted, and to own, use and
lease their assets and properties. Except for the Parent's ownership of the
Merger-Sub, neither the Parent nor the Merger-Sub directly or indirectly own
any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any equity or similar interest in, any
corporation, partnership, joint venture, or other business association or
entity.
(b) ORGANIZATIONAL DOCUMENTS; CAPITAL STOCK.
(i) Attached hereto as EXHIBITS 3.02(a)-1 and 3.02(a)-2,
respectively, are true and complete copies of the Certificate of
Incorporation and By-Laws of the Merger-Sub as in effect on the date
hereof. Attached hereto as EXHIBITS 1.05-1 and 1.05-2, respectively, are
true and complete copies of the Certificate of Incorporation and By-Laws
of the Parent as in effect on the date hereof.
(ii) As of the Closing Date, the authorized capital stock
of the Parent will consist solely of fifty million (50,000,000) shares of
the Parent Common Stock and twenty million (20,000,000) shares of the
preferred stock, no par value, of the Parent (the "Parent Preferred
Stock"). As of the Closing Date, the authorized capital stock of the
Merger-Sub will consist solely of ten (10) shares of the common stock,
par value $.01 per share, of the Merger-Sub (the "Merger-Sub Common
Stock"). The shares of the Parent Common Stock issuable to the Former
Duck Stockholders pursuant to Article II hereof, will be, when issued in
accordance with this Agreement, duly authorized, validly issued, fully
paid, and nonassessable. The outstanding shares of the Parent Common
Stock are eligible for quotation on the Over-the-Counter Bulletin Board
(the "OTCBB").
(iii) Except as contemplated hereby, there are no
outstanding options, warrants, calls, subscriptions, rights, agreements
or other commitments of any character
13
(contingent or otherwise) obligating the Parent or the Merger-Sub to
issue, sell, repurchase, redeem, or otherwise acquire any shares of
the Parent Common Stock or the Merger-Sub Common Stock, respectively.
(iv) There are no debt obligations of the Parent or the
Merger-Sub of any nature whatsoever, and as of the Closing Date, neither
the Parent nor the Merger-Sub will have any debt, liabilities,
obligations, or contingent obligations of any nature whatsoever, except
as set forth on SCHEDULE 2.04(a).
(c) AUTHORITY RELATIVE TO THIS AGREEMENT. The Parent and the
Merger-Sub have full corporate power and authority to enter into this Agreement
and to perform their respective obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery, and performance of
this Agreement by the Parent and the Merger-Sub and the consummation by the
Parent and the Merger-Sub of the Merger and the transactions contemplated hereby
have been duly and validly approved by the respective Boards of Directors of the
Parent and the Merger-Sub and Parent as the sole stockholder of the Merger-Sub,
and no other corporate proceedings on the part of the Parent or the Merger-Sub
are necessary to authorize the execution, delivery, and performance of this
Agreement by the Parent and the Merger-Sub and the consummation by the Parent
and the Merger-Sub of the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by the Parent and the Merger-Sub,
and constitutes a legal, valid, and binding obligation of the Parent and the
Merger-Sub enforceable against the Parent and the Merger-Sub in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or transfer or similar laws
affecting the enforcement of creditors' rights generally and general principles
of equity (whether considered in a proceeding at law or in equity).
(d) NON-CONTRAVENTION; APPROVALS AND CONSENTS.
(i) The execution and delivery of this Agreement by the
Parent and the Merger-Sub does not, and the performance by the Parent and
the Merger-Sub of their obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a
violation or breach of, constitute (with or without notice or lapse of
time or both) a default under, result in, or give to any person any right
of payment or reimbursement, termination, cancellation, modification or
acceleration of, or result in the creation or imposition of any Lien on
any of the respective assets or properties of the Parent or the
Merger-Sub under any of the terms, conditions or provisions of (x) the
Certificate of Incorporation or By-Laws of the Parent, (y) any Laws or
Orders of any Governmental or Regulatory Authority applicable to the
Parent or the Merger-Sub or any of their respective assets or properties,
or (z) any Contracts to which either the Parent or the Merger-Sub is a
party or by which either the Parent or the Merger-Sub or any of their
respective assets or properties are bound, excluding from the foregoing
clauses (y) and (z) conflicts, violations, breaches, defaults,
terminations, modifications, accelerations, and creations and impositions
of Liens, which individually or in the aggregate, could not be reasonably
expected to have a Material Adverse Effect on the Parent or the
Merger-Sub or on their ability to consummate the transactions
contemplated by this Agreement.
14
(ii) Except (x) for the filing of the Certificate of
Merger and other appropriate merger documents required by the DGCL with
the Secretary of State of Delaware and appropriate documents with the
relevant authorities of other states in which the Constituent Entities
are qualified to do business, and (y) as disclosed in SCHEDULE
3.02(d)(ii) hereto, no consent, approval, or action of, filing with or
notice to any Governmental or Regulatory Authority or other public or
private third party is necessary or required under any of the terms,
conditions or provisions of any Law or Order of any Governmental or
Regulatory Authority or any Contract to which the Parent or the
Merger-Sub is a party or by which the Parent or the Merger-Sub or any of
their respective assets or properties is bound for the execution and
delivery of this Agreement by the Parent and the Merger-Sub, the
performance by the Parent and the Merger-Sub of their respective
obligations hereunder or the consummation of the transactions
contemplated hereby, except for such consents, approvals or actions of,
filing with or notices to any Governmental or Regulatory Authority or
other public or private third party the failure of which to make or
obtain could not reasonably be expected to have a Material Adverse
Effect on the Parent, the Merger-Sub or the Surviving Corporation or
on the Parent's and the Merger-Sub's ability to consummate the
transactions contemplated by this Agreement.
(e) FINANCIAL STATEMENTS. The Parent has delivered to Duck
true, correct, and complete copies of the following: the audited balance sheets
of the Parent (the "Parent Balance Sheets") as of December 31, 1997 and December
31, 1998; the audited statement of operations of the Parent (the "Parent
Operations Statement") for the years ending December 31, 1997 and December 31,
1998; the audited statement of changes in stockholders' deficit of the Parent
(the "Parent Stockholders' Equity Statement") for the years ending December 31,
1997 and December 31, 1998; and the audited statement of cash flows of the
Parent (the "Parent Cash Flow Statement") for the years ending December 31, 1997
and December 31, 1998 (together, the "Parent Financial Statements"). The Parent
Financial Statements fairly present the financial condition, assets,
liabilities, stockholders equity and results of operations of the Parent for the
periods indicated. The Merger-Sub has delivered to Duck a true, correct and
complete copy of the Merger-Sub's unaudited balance sheet as of May 31, 1999.
Such unaudited balance sheet fairly presents the financial condition of the
Merger-Sub for the period indicated.
(f) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth
in SCHEDULE 3.02(f) hereto or as contemplated hereby, since May 31, 1999, no
change, event, or development or combination of changes or developments
(including any worsening of any condition currently existing) has occurred or is
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Parent or the Merger-Sub (without regard, however, to
changes in conditions generally applicable to the industries in which the Parent
and the Merger-Sub are involved or general economic conditions).
(g) ABSENCE OF UNDISCLOSED LIABILITIES. Except for matters
reflected or reserved against in the Parent Balance Sheets included in the
Parent Financial Statements or the unaudited Balance Sheet of the Merger-Sub,
neither Parent nor the Merger-Sub had at such date and has not incurred since
that date, any liabilities or obligations (whether absolute, accrued,
contingent, fixed or otherwise, or whether due or to become due) of any nature,
except liabilities or obligations which
15
were incurred in connection with this Agreement and the transactions
contemplated hereby or in the ordinary course of business consistent with
past practice.
(h) LEGAL PROCEEDINGS. Except as set forth in SCHEDULE
3.02(h), there are no actions, suits, arbitrations, or proceedings pending or to
the knowledge of the Parent or the Merger-Sub, threatened against, relating to
or affecting, nor to the knowledge of the Parent or the Merger-Sub, are there
any Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, the Parent or the Merger-Sub or
any of their assets and properties which, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect on the Parent or
the Merger-Sub or on the ability of the Parent or the Merger-Sub to consummate
the transactions contemplated by this Agreement. Neither the Parent nor the
Merger-Sub is subject to any judgment, decree, court order, or writ of any
Governmental or Regulatory Authority.
(i) INFORMATION SUPPLIED. Nothing in this Agreement or any
schedule, annex, certificate, document, or statement in writing which has been
supplied by or on behalf of the Parent or the Merger-Sub, in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits any statement of a material fact required to be stated or
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Parent or the Merger-Sub which
materially and adversely affects the Parent or the Merger-Sub, which has not
been set forth in this Agreement or in the schedules, exhibits, annexes,
certificates, documents, or statements in writing furnished by the Parent or the
Merger-Sub in connection with the transactions contemplated by this Agreement.
(j) COMPLIANCE WITH LAWS AND ORDERS. The Parent and the
Merger-Sub hold all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental and Regulatory Authorities necessary for the
lawful conduct of its business (the "Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders, and approvals which,
individually or in the aggregate, do not and are not reasonably expected to have
a Material Adverse Effect on the Parent or the Merger-Sub. The Parent and the
Merger-Sub are in compliance with the terms of the Permits, except failures so
to comply which, individually or in the aggregate, do not have and are not
reasonably expected to have a Material Adverse Effect on the Parent or the
Merger-Sub. The Parent and the Merger-Sub are not in violation of, or in
default under, any Law or Order of any Governmental or Regulatory Authority
except for violations which, individually or in the aggregate, do not and are
not reasonably expected to have a Material Adverse Effect on the Parent or the
Merger-Sub.
(k) COMPLIANCE WITH AGREEMENTS; CERTAIN AGREEMENTS. Neither
the Parent nor the Merger-Sub, nor to the knowledge of the Parent or the
Merger-Sub, any other party thereto, is in breach or violation of, or in
default in the performance or observance of any term or provision of and no
event has occurred which, with notice or lapse of time or both, is reasonably
expected to result in a default under, (x) the respective Certificates of
Incorporation and By-Laws of the Parent and the Merger-Sub or (y) any
material Contract to which the Parent or the Merger-Sub is a party or by
which the Parent or the Merger-Sub or any of their assets or properties is
bound, except in the case of clause (y) for breaches, violations, and
defaults which, individually or in the aggregate, do
16
not and are not reasonably expected to have a Material Adverse Effect on the
Parent or the Merger-Sub.
(l) EMPLOYEE BENEFIT PLANS. Except as contemplated by the
Stock Option Plan, neither the Parent nor the Merger-Sub has or contributes to
any pension, profit-sharing, option, other incentive plan, or any other type of
employee benefit plan, or have any obligation to or customary arrangement with
employees for bonuses, incentive compensation, vacations, severance pay, sick
pay, sick leave, insurance, service award, relocation, disability, tuition
refund, or other benefits, whether oral or written.
(m) PATENTS, TRADEMARKS, ET CETERA. Neither the Parent nor the
Merger-Sub has Intellectual Property.
(n) INSURANCE. Neither the Parent nor the Merger-Sub has an
insurance policy.
(o) LABOR MATTERS. Except as contemplated under the Stock
Option Plan, and other than Xxxxx Xxx, Xxxxxxx Xxxxxx and Xxxxx Xxxx, who are
officers of the Parent as of the date hereof, neither the Parent nor the
Merger-Sub has any employees.
(p) TANGIBLE PROPERTY AND ASSETS. Except as set forth on
SCHEDULE 3.02(p), the Parent and the Merger-Sub have no facilities or assets.
(q) BROKERS. All negotiations relative to this Agreement and
the transactions contemplated hereby have been carried out by the Parent and the
Merger-Sub and their affiliates directly with Duck, without the intervention of
any person on behalf of the Parent or the Merger-Sub and their affiliates in
such manner as to give rise to any valid claim by any person against the Parent,
the Merger-Sub, Duck or the Surviving Corporation for a finder's fee, brokerage
commission or similar payment, except as specifically set forth in SCHEDULE
3.02(q).
(r) TRANSACTIONS WITH AFFILIATES. Except as set forth on
SCHEDULE 3.02(r), neither the Parent nor the Merger-Sub is a party to any
material Contract with any of their affiliates or any director or officer for
the purchase, sale, lease or other disposition of property or services.
(s) TAX MATTERS.
(i) Except as set forth in SCHEDULE 3.02(s), the Parent
and the Merger-Sub have filed all tax returns required to be filed by
applicable law prior to the Closing. All tax returns were (and, as to
tax returns not filed as of the date hereof, will be) true, complete, and
correct and filed on a timely basis. The Parent and the Merger-Sub (x)
have paid all taxes due, or claimed or asserted in writing by any taxing
authority to be due, for the periods covered by such tax returns or (y)
have duly and fully provided reserves (in accordance with GAAP) adequate
to reflect all such taxes.
(ii) The Parent and the Merger-Sub have established (and
until the Closing will maintain) on their respective books and records
reserves adequate to reflect all material taxes not yet due and payable.
The Parent and the Merger-Sub have made available to Duck complete, and
accurate copies of all work papers associated with the calculation of the
Parent's and the Merger-Sub's respective tax reserves.
(iii) There are no tax liens upon the assets of the Parent
or the Merger-Sub.
(iv) The Parent and the Merger-Sub have not requested
(and no request has been made on their behalf) any extension of time
within which to file any material tax return.
17
(v) No income tax returns have been examined by any
taxing authorities for any periods; and no deficiency for any material
taxes has been suggested, proposed, asserted, or assessed against the
Parent or the Merger-Sub that has not been resolved and paid in full.
(vi) No audits or other administrative proceedings or
court proceedings are presently pending with regard to any taxes or tax
returns of the Parent or the Merger-Sub. Except as set forth on
SCHEDULE 3.02(s), no written claim has been made by a taxing authority in
a jurisdiction where the Parent or the Merger-Sub does not file tax
returns such that it is or may be subject to taxation by that
jurisdiction.
(vii) To the extent requested by Duck, the Parent and the
Merger-Sub have made available to Duck (or, in the case of tax returns to
be filed on or before the Closing, will make available) complete and
accurate copies of all tax returns and associated work papers filed by or
on behalf of the Parent or the Merger-Sub for all taxable years ending on
or prior to the Closing.
(viii) No agreements relating to allocating or sharing of
any taxes have been entered into by the Parent or the Merger-Sub.
(ix) Neither the Parent nor the Merger-Sub has entered
into any transactions that could give rise to an understatement of
Federal Income Tax.
(x) Except as set forth on SCHEDULE 3.02(s), neither the
Parent, the Merger-Sub nor any other person on behalf of the Parent or
the Merger-Sub has agreed to or is required to make any adjustments
pursuant to Section 481(a) of the Code or any similar provision of state,
local or foreign law by reason of a change in accounting method initiated
by the Parent or the Merger-Sub or has any application pending with any
taxing authority requesting permission for any change in accounting
methods that relate to the business or operations of the Parent or the
Merger-Sub, and neither the Parent nor the Merger-Sub has knowledge that
the IRS has proposed any such adjustment or change in accounting method.
(xi) Except as set forth on SCHEDULE 3.02(s), neither the
Parent nor the Merger-Sub has been, or is now, a member of any
consolidated, combined, unitary or affiliated group of corporations for
any tax purposes.
(t) ACCURACY OF INFORMATION.
(i) The Parent has made with the SEC all filings
required by the Securities Exchange Act of 1934, as amended (all such
filings and any future filings made thereunder are collectively, the
"Exchange Act Filings"). None of the Exchange Act Filings contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The Parent has not been required to make any filings under
the Securities Act of 1933.
IV COVENANTS.
SECTION 4.01 COVENANTS OF THE PARENT AND THE MERGER-SUB.
The Parent and the Merger-Sub covenant and agree as follows:
18
(a) CERTIFICATE OF INCORPORATION AND BY-LAWS. As of the
Closing Date, the Certificate of Incorporation and By-Laws of the Merger-Sub
shall be substantially in the form of EXHIBITS 3.02(a)-1 and 3.02(a)-2,
respectively, and the Certificate of Incorporation and By-Laws of the Parent
shall be substantially in the form of EXHIBITS 1.05-1 and 1.05-2, respectively.
(b) SHARES AND OPTIONS. Except as contemplated hereby, until
the earlier of the Effective Time or the Termination of this Agreement pursuant
to Article VI (the "Release Time") without the prior written consent of Duck, no
share of capital stock of the Parent or the Merger-Sub or any option or warrant
for any such share, right to subscribe to or purchase any such share, or
security convertible into or exchangeable for any such share, shall be issued or
sold by the Parent or the Merger-Sub, nor shall the Parent or the Merger-Sub
enter into any agreement or commitment to effect any such issuance or sale.
(c) DIVIDENDS AND PURCHASES OF STOCK. Until the Release Time,
without the prior written consent of Duck, no cash or non-cash dividend, or
liquidating or other distribution or stock split shall be authorized, declared,
paid, or effected by the Parent or the Merger-Sub in connection with their
respective outstanding capital stock.
(d) BORROWING OF MONEY; WORKING CAPITAL. Until the Release
Time, neither the Parent nor the Merger-Sub shall incur indebtedness for
borrowed money. Until the Release Time, neither the Parent nor the
Merger-Sub shall guarantee the borrowing of money by any third party, enter
into or modify any capital or operating lease or enter into any material
agreement, which in any case would by their terms require the payment by the
Parent or the Merger-Sub of more than five thousand dollars ($5,000) by the
Parent or the Merger-Sub in any twelve (12) month period.
(e) ACCESS. Until the Release Time, the Parent and the
Merger-Sub will afford the directors, stockholders, counsel, agents,
investment bankers, accountants, and other representatives of Duck reasonable
access to the plants, properties, books, and records of the Parent and the
Merger-Sub, will permit them to make extracts from and copies of such books
and records, and will from time to time furnish Duck with such additional
financial and operating data and other information as to the financial
condition, results of operations, businesses, properties, assets,
liabilities, or future prospects of the Parent and the Merger-Sub as Duck
from time to time may reasonably request.
(f) CONDUCT OF BUSINESS. Except as otherwise contemplated or
permitted hereby, until the Release Time, neither the Parent nor the Merger-Sub
shall take any action that would or is reasonably likely to result in any of the
representations or warranties of the Parent or the Merger-Sub set forth in this
Agreement being untrue at the Closing Date, or in any of the conditions to the
Merger set forth in Article V not being satisfied. Except as otherwise
contemplated or permitted hereby, until the Release Time, the Parent or the
Merger-Sub will conduct their affairs in all respects only in the ordinary
course.
(g) ADVICE OF CHANGES. Until the Release Time, the Parent and
the Merger-Sub will promptly advise Duck in a reasonably detailed written notice
of any fact or occurrence or any pending threatened occurrence of which it
obtains knowledge and which (if existing and known at the date of the execution
of this Agreement) would have been required to be set forth or disclosed in or
pursuant to this Agreement, which (if existing or known at any time prior to or
at the Effective Time) would make the performance by any party of a covenant
contained in this Agreement
19
impossible or make such performance materially more difficult in the absence
of such fact or occurrence, or which (if existing or known at the time of the
Effective Time) would cause a condition to any party's obligations under this
Agreement not to be fully satisfied.
(h) PUBLIC STATEMENTS. Before either the Parent or the
Merger-Sub releases any information concerning this Agreement, the Merger, or
any other transactions contemplated by this Agreement which is intended for
or is reasonably expected to result in public dissemination thereof, the
Parent and the Merger-Sub shall cooperate with Duck, shall furnish drafts of
all documents or proposed oral statements to Duck for comments, and shall not
release any such information without the prior consent of Duck; PROVIDED,
HOWEVER, that the foregoing shall not be deemed to prevent the Parent or the
Merger-Sub from releasing any information or making any disclosure to the
extent that the Parent or the Merger-Sub reasonably determines that it is
required to do so by law.
i OTHER PROPOSALS. Until the Release Time the Parent
shall not authorize or permit any officer, director, employee, counsel,
agent, investment banker, accountant, or other representative of the Parent,
directly or indirectly, to: (i) initiate contact with any person or entity
in an effort to solicit any Takeover Proposal (as such term is defined in
this Section 4.01(i)); (ii) cooperate with, or furnish or cause to be
furnished any non-public information concerning the financial condition,
results of operations, businesses, properties, assets, liabilities, or future
prospects of the Parent to, any person or entity in connection with any
Takeover Proposal; (iii) negotiate with any person or entity with respect to
any Takeover Proposal; or (iv) enter into any agreement or understanding with
the intent to effect a Takeover Proposal; PROVIDED, HOWEVER, that the Parent
shall be entitled to take any action described in the foregoing clauses
(ii)-(iv) if and to the extent that the Board of Directors of the Parent
determines in good faith, based on the advice of their respective counsel,
that the failure to take any such action would violate their fiduciary duties
to the stockholders of the Parent. The Parent will immediately give written
notice to Duck of the details of any Takeover Proposal of which the Parent
becomes aware. As used in Section 4.01(i), "Takeover Proposal" shall mean
any proposal, other than as contemplated by this Agreement, for a merger,
consolidation, reorganization, other business combination, or
recapitalization involving the Parent, for the acquisition of a ten percent
(10%) or greater interest in the equity or in any class or series of capital
stock of the Parent, for the acquisition of the right to cast ten percent
(10%) or more of the votes on any matter with respect to the Parent, or for
the acquisition of one of their divisions or of a substantial portion of any
of their respective assets, the effect of which may be to prohibit, restrict,
or delay the consummation of the Merger or any of the other transactions
contemplated by this Agreement, or impair the contemplated benefits to Duck
of the Merger or any of the other transactions contemplated by this Agreement.
j CONSENTS WITHOUT ANY CONDITION. Neither the Parent nor the
Merger-Sub shall make any agreement or reach any understanding, not approved in
writing by Duck, as a condition for obtaining any consent, authorization,
approval, order, license, certificate, or permit required for the consummation
of the transactions contemplated by this Agreement.
k SEC FILINGS. The Parent shall use reasonable efforts to
prepare and file in a timely manner any Exchange Act Filings required to be made
prior to or after the Closing Date. If at any time prior to the Closing Date
the Parent finds that any Exchange Act Filing contained an untrue statement of a
material fact or omitted to state any material fact required to be stated
therein
20
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, the Parent shall, upon becoming
aware of any such untrue statement or omission, promptly notify Duck.
SECTION 4.02 COVENANTS OF DUCK.
Duck covenants and agrees as follows:
a CONDUCT OF BUSINESS. Until the Release Time, Duck shall
not take any action that would or is reasonably likely to result in any of the
representations or warranties of Duck set forth in this Agreement being untrue
at the Closing Date or to any of the conditions to the Merger set forth in
Article V not being satisfied. Until the Release Time, Duck will use all
reasonable efforts to preserve the business operations of Duck intact, to keep
available the services of its present personnel, and to preserve the good will
of its suppliers, customers, and others having business relations with any of
them.
b ADVICE OF CHANGES. Until the Release Time, Duck will
promptly advise the Parent and the Merger-Sub in a reasonably detailed written
notice of any fact or occurrence or any pending threatened occurrence of which
it obtains knowledge and which (if existing or known at the date of the
execution of this Agreement) would have been required to be set forth or
disclosed in or pursuant to this Agreement, which (if existing and known at any
time prior to or at the Effective Time) would make the performance by any party
of a covenant contained in this Agreement impossible or make such performance
materially more difficult than in the absence of such fact or occurrence, or
which (if existing and known at the time of the Effective Time) would cause a
condition to any party's obligations under this Agreement not to be fully
satisfied.
c PUBLIC STATEMENTS. Before Duck releases any information
concerning this Agreement, the Merger, or any of the other transactions
contemplated by this Agreement which is intended for, or is reasonably
expected to, result in public dissemination thereof, Duck shall cooperate
with the Parent and the Merger-Sub, shall furnish drafts of all documents or
proposed oral statements to the Parent and the Merger-Sub for comments, and
shall not release any such information without the prior consent of the
Parent and the Merger-Sub; PROVIDED, HOWEVER, that the foregoing shall not be
deemed to prevent Duck from releasing any information or making any
disclosure to the extent Duck reasonably determines that it is required to
do so by law.
d OTHER PROPOSALS. Until the Release Time, Duck shall not
authorize or permit any officer, director, employee, counsel, agent, investment
banker, accountant, or other representative of Duck, directly or indirectly, to
(i) initiate contact with any person or entity in an effort to solicit any
Takeover Proposal (as such term is defined in this Section 4.02(d)); (ii)
cooperate with, or furnish or cause to be furnished any non-public information
concerning the financial condition, results of operations, businesses,
properties, assets, liabilities, or future prospects of Duck to, any person or
entity in connection with any Takeover Proposal; (iii) negotiate with any person
or entity with respect to any Takeover Proposal; or (iv) enter into any
agreement or understanding with the intent to effect a Takeover Proposal;
PROVIDED, HOWEVER, that Duck shall be entitled to take any action described in
the foregoing clauses (ii)-(iv) if and to the extent that the Board of Directors
of Duck determines in good faith, based on the advice of their counsel, that the
failure to take any such action would violate their fiduciary duties to the
stockholders of Duck. Duck will immediately give written notice to the Parent
of the details of any Takeover Proposal of which Duck becomes
21
aware. As used in Section 4.02(d), "Takeover Proposal" shall mean any
proposal, other than as contemplated by this Agreement, for a merger,
consolidation, reorganization, other business combination, or
recapitalization involving Duck, for the acquisition of a ten percent (10%)
or greater interest in the equity or in any class or series of capital stock
of Duck, for the acquisition of the right to cast ten percent (10%) or more
of the votes on any matter with respect to Duck, or for the acquisition of
one of their divisions or of a substantial portion of any of their respective
assets, the effect of which may be to prohibit, restrict, or delay the
consummation of the Merger or any of the other transactions contemplated by
this Agreement, or impair the contemplated benefits to the Parent of the
Merger or any of the other transactions contemplated by this Agreement.
e APPROVAL OF STOCKHOLDERS. Duck shall, through its Board
of Directors, duly call, give notice of, convene, and hold a meeting of its
stockholders for the purpose of voting on the ratification and approval of this
Merger Agreement, or obtain the consent of its stockholders, as soon as
reasonably practicable following the date hereof.
f TRANSFER TAXES. The Parent and the Merger-Sub shall timely
prepare and file any declaration or filing necessary to comply with any transfer
tax statutes that require any such filing before the Effective Time.
g LOCK-UP AGREEMENTS. Duck shall use its best efforts to
obtain an executed Lock-Up Agreement from each Former Duck Stockholder.
SECTION 4.03 DIRECTORS' AND OFFICERS' INSURANCE.
a The Parent shall at its expense, until the third (3rd)
anniversary of the Effective Time, cause to be maintained in effect, to the
extent available, policies of directors' and officers' liability insurance in a
face amount of not less than ten million dollars ($10,000,000).
b The provisions of this Section 4.03 are intended to be for
the benefit of, and shall be enforceable by, each party entitled to insurance
coverage under Section 4.03(a) above, and his or her heirs and legal
representatives, and shall be in addition to any other rights a Director or
Officer may have under the Certificate of Incorporation or By-Laws of the Parent
or under the Colorado Business Corporation Act or otherwise.
c In the event the Parent or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, in each such case, proper provision shall be made so that
the successors and assigns of the Parent, as the case may be, shall assume the
obligations set forth in this Section 4.03.
SECTION 4.04 AMEX LISTING.
The Parent shall use its best efforts to cause the shares of the
Parent Common Stock to be issued in the Merger in accordance with this Agreement
to be admitted for trading or authorized for quotation on the American Stock
Exchange ("AMEX"), subject to official notice of issuance, prior to the
Effective Time.
V. CONDITIONS.
SECTION 5.01 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
22
The respective obligations of each party to effect the Merger are
subject to the fulfillment, at or prior to the Closing, of each of the following
conditions:
a STOCKHOLDER APPROVAL. This Agreement and the Merger shall
have been adopted by the requisite vote of the stockholders of Duck.
b STATE SECURITIES LAWS. The Parent shall have received all
state securities or "Blue Sky" permits and other authorizations necessary to
issue the Parent Common Stock pursuant to the Merger.
c NO INJUNCTIONS OR RESTRAINTS. No court of competent
jurisdiction or other competent Governmental or Regulatory Authority shall have
enacted, issued, promulgated, enforced, or entered any Law or Order (whether
temporary, preliminary or permanent) which is then in effect and has the effect
of making illegal or otherwise restricting, preventing, or prohibiting
consummation of the Merger or the other transactions contemplated by this
Agreement.
d CONSENTS AND APPROVALS. Other than the filings provided
for by Section 1.02, all consents, approvals and actions of, filings with and
notices to any Governmental or Regulatory Authority or any other public or
private third parties required of the Parent, the Merger-Sub or Duck to
consummate the Merger shall have been obtained, all in form and substance
reasonably satisfactory to the Parent, the Merger-Sub and Duck, and no such
consent, approval, or action shall contain any term or condition which could be
reasonably expected to result in a material diminution of the benefits of the
Merger to the stockholders of the Parent, the Merger-Sub and Duck.
SECTION 5.02 CONDITIONS TO OBLIGATIONS OF THE PARENT AND THE MERGER-SUB.
The obligations of the Parent and the Merger-Sub to effect the
Merger is further subject to the fulfillment, at or prior to the Closing, of
each of the following additional conditions (all or any of which may be waived
in whole or in part by the Parent and the Merger-Sub and in their sole
discretion):
a REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by Duck in this Agreement shall be true and correct in all
material respects as of the Closing Date as though made on and as of the Closing
Date or, in the case of representations and warranties made as of a specified
date earlier than the Closing Date, on and as of such earlier date, and Duck
shall have delivered to the Parent and Merger-Sub a certificate, dated the
Closing Date and executed on behalf of Duck by a duly authorized officer, to
such effect.
b PERFORMANCE OF OBLIGATIONS. Duck shall have performed and
complied with, in all material respects, each agreement, covenant and obligation
required by this Agreement to be so performed or complied with by Duck at or
prior to the Closing, and Duck shall have delivered to the Parent and Merger-Sub
a certificate dated the Closing Date and executed on behalf of Duck by a duly
authorized officer, to such effect.
c OTHER CLOSING DOCUMENTS. Duck shall have delivered to the
Parent and the Merger-Sub at or prior to the Closing Date such other documents
as the Parent and the Merger-Sub may reasonably request in order to enable the
Parent and the Merger-Sub to determine whether the conditions to their
obligations under this Agreement have been met and otherwise to carry out the
provisions of this Agreement.
d REVIEW OF PROCEEDINGS. All actions, proceedings,
instruments, and documents required by the Parent and the Merger-Sub to carry
out this Agreement or incidental
23
thereto and all other related legal matters shall be subject to the
reasonable approval of Xxxxxxx Xxxxx & Xxxxx LLP, counsel to the Parent and
the Merger-Sub, and Duck shall have furnished such documents as such counsel
may have reasonably requested for the purpose of enabling it to pass upon
such matters.
e LEGAL OPINION. The Parent and the Merger-Sub shall receive
at the Closing Date an opinion of Camhy Xxxxxxxxx & Xxxxx LLP (the "CKS
Opinion"), counsel for Duck, addressed to the Parent and the Merger-Sub, in
substantially the form attached hereto as EXHIBIT 5.02(e).
f LEGAL ACTION. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit, or
otherwise challenge the consummation of, the transactions contemplated by this
Agreement, or to obtain substantial damages with respect thereto.
g LOCK-UP AGREEMENTS. Each Former Duck Stockholder shall
have executed and delivered to the Parent a Lock-Up Agreement.
SECTION 5.03 CONDITIONS TO OBLIGATION OF DUCK TO EFFECT THE MERGER.
The obligation of Duck to effect the Merger is further subject to
the fulfillment, at or prior to the Closing, of each of the following additional
conditions (all or any of which may be waived in whole or in part by Duck in its
sole discretion):
a REPRESENTATIONS AND WARRANTIES. The representations and
warranties made by the Parent and the Merger-Sub in this Agreement shall be true
and correct in all material respects as of the Closing Date as though made on
and as of the Closing Date or, in the case of representations and warranties
made as of a specified date earlier than the Closing Date, on and as of such
earlier date, and the Parent and the Merger-Sub shall have delivered to Duck a
certificate, dated the Closing Date and executed on behalf of the Parent and the
Merger-Sub by a duly authorized officer, to such effect.
b PERFORMANCE OF OBLIGATIONS. The Parent and the Merger-Sub
shall have performed and complied with in all material respects, each agreement,
covenant, and obligation required by this Agreement to be so performed or
complied with by the Parent and the Merger-Sub at or prior to the Closing, and
the Parent and the Merger-Sub shall have delivered to Duck a certificate, dated
the Closing Date and executed on behalf of the Parent and the Merger-Sub by a
duly authorized officer, to such effect.
c OTHER CLOSING DOCUMENTS. The Parent and the Merger-Sub
shall have delivered to Duck at or prior to the Effective Time such other
documents as Duck may reasonably request in order to enable Duck to determine
whether the conditions to its obligations under this Agreement have been met and
otherwise to carry out the provisions of this Agreement.
d REVIEW OF PROCEEDINGS. All actions, proceedings,
instruments, and documents required by Duck to carry out this Agreement or
incidental thereto and all other related legal matters shall be subject to the
reasonable approval of Camhy Xxxxxxxxx & Xxxxx LLP, counsel to Duck, and the
Parent and the Merger-Sub shall have furnished such documents as such counsel
may have reasonably requested for the purpose of enabling it to pass upon such
matters.
e LEGAL OPINION. Duck shall receive at the Closing Date an
opinion of Xxxxxxx Xxxxx & Xxxxx LLP (the "PGE Opinion"), counsel for the Parent
and the Merger-Sub, addressed to Duck, in substantially the form attached hereto
as EXHIBIT 5.03(e).
24
f LEGAL ACTION. There shall not have been instituted or
threatened any legal proceeding relating to, or seeking to prohibit or otherwise
challenge the consummation of, the transactions contemplated by this Agreement,
or to obtain substantial damages with respect thereto.
g AMEX LISTING. The shares of the Parent Common Stock issued
shall be eligible for quotation on the OTCBB, and an application shall have been
made to list such shares on the AMEX.
h CAPITAL. The Parent and the Merger-Sub shall be in strict
compliance with Section 2.04.
VI. TERMINATION.
SECTION 6.01 TERMINATION.
This Agreement may be terminated, and the transactions
contemplated hereby may be abandoned at any time prior to the Effective Time,
whether prior to or after the Duck stockholders' approval:
a By mutual written agreement of the parties hereto duly
authorized by action taken by or on behalf of their respective Boards of
Directors.
b By either Duck, the Parent or the Merger-Sub upon written
notification to the other party, if:
ii the Duck stockholders' approval shall not be
obtained by reason of the failure to obtain the requisite vote upon a
vote held at a meeting of such stockholders or pursuant to a written
consent; or
iii facts exist which render impossible the satisfaction
of one or more of the conditions set forth in Section 5.01 and such are
not waived by the Parent, the Merger-Sub and Duck.
c By the Parent and the Merger-Sub upon written notification
to Duck, if:
iv there has been a material breach of any
representation, warranty, covenant, or agreement on the part of Duck set
forth in this Agreement which breach has not been cured within ten (10)
business days following receipt by Duck of notice of such breach from the
Parent or the Merger-Sub or assurance of such cure reasonably
satisfactory to the Parent or the Merger-Sub have not been given by or on
behalf of Duck within such ten (10) business day period; or
v facts exist which render impossible the satisfaction
of one or more of the conditions set forth in Section 5.02 and such are
not waived by the Parent or the Merger-Sub; or
vi the Parent or its stockholders receive a proposal or
offer for any Takeover Proposal, other than pursuant to the transactions
contemplated by this Agreement, in connection with which the Board of
Directors of the Parent exercises any of its rights specified in Section
4.01(i) and 4.01(j).
d By Duck upon written notification to the Parent or the
Merger-Sub, if:
25
vii at any time after July 15, 1999 if the Merger shall
not have been consummated on or prior to such date and such failure to
consummate the Merger is not caused by a breach of this Agreement by
Duck; or
viii there has been a material breach of any
representation, warranty, covenant, or agreement on the part of the
Parent or the Merger-Sub set forth in this Agreement which breach has not
been cured with ten (10) business days following receipt by the Parent or
the Merger-Sub of notice of such breach from Duck or assurance of such
cure reasonably satisfactory to Duck shall not have been given by or on
behalf of the Parent or the Merger-Sub within such ten (10) business day
period; or
ix facts exist which render impossible the satisfaction
of one or more of the conditions set forth in Section 5.03 and such are
not waived by Duck.
SECTION 6.02 EFFECT OF TERMINATION.
If this Agreement is validly terminated by the Parent, the
Merger-Sub or Duck pursuant to Section 6.01, this Agreement shall forthwith
become null and void and there shall be no liability or obligation on the
part of either the Parent, the Merger-Sub or Duck (or any of their respective
officers, directors, representatives, or affiliates), except that (i) the
provisions of this Section 6.02 will continue to apply following any such
termination, and (ii) nothing contained herein shall relieve the Parent, the
Merger-Sub or Duck from liability for wilful or intentional breach of their
respective obligations contained in this Agreement or for fraud.
VII. INDEMNIFICATION.
SECTION 7.01 INDEMNIFICATION BY THE PARENT.
a The Parent agrees to indemnify and hold harmless Duck and
its directors, officers, employees, counsel, and agents against and in respect
of any and all claims as and when incurred, arising out of or based upon any
breach or inaccuracy of any representation, warranty, covenant, or agreement of
the Parent or the Merger-Sub contained in this Agreement (including the Exhibits
and Schedules attached hereto) or any certificates delivered pursuant to this
Agreement.
b Each indemnified party (a "Duck Indemnitee") shall give the
Parent prompt notice of any claim asserted or threatened against such Duck
Indemnitee on the basis of which such Duck Indemnitee intends to seek
indemnification (but the obligations of the Parent shall not be conditioned
upon receipt of such notice, except to the extent that the Parent is actually
prejudiced by such failure to give notice). If the claim is a third party
claim, demand, action, or proceeding, the Parent promptly shall assume the
defense of any Duck Indemnitee, with counsel reasonably satisfactory to such
Duck Indemnitee, and the fees and expenses of such counsel shall be the sole
cost and expense of the Parent. Notwithstanding the foregoing, any Duck
Indemnitee shall be entitled, at his or its expense, to employ counsel separate
from counsel for the Parent and from any other party in such action, proceeding,
or investigation. No Duck Indemnitee may agree to a settlement of claim without
the prior written approval of the Parent which approval shall not be
unreasonably withheld. The Parent may not agree to a settlement of a claim
involving anything other than the payment of money without the prior written
approval of the Duck Indemnitee which shall not be unreasonably withheld.
SECTION 7.02 INDEMNIFICATION BY DUCK.
26
a Duck agrees to indemnify and hold harmless the Parent,
Merger-Sub and each of their respective officers, directors, counsel, and agents
against and in respect of any and all claims as and when incurred, arising out
of or based upon any breach or inaccuracy of any representation, warranty,
covenant, or agreement of Duck contained in this Agreement (including the
Exhibits and Schedules attached hereto) or any certificates delivered pursuant
to this Agreement.
b Each indemnified party (an "Indemnitee") shall give Duck
prompt notice of any claim asserted or threatened against such Indemnitee on the
basis of which such Indemnitee intends to seek indemnification (but the
obligations of Duck shall not be conditioned upon receipt of such notice,
except to the extent that Duck is actually prejudiced by such failure to give
notice). If the claim is a third party claim, demand, action, or proceeding,
Duck promptly shall assume the defense of any Indemnitee, with counsel
reasonably satisfactory to such Indemnitee, and the fees and expenses of such
counsel shall be the sole cost and expense of Duck. Notwithstanding the
foregoing, any Indemnitee shall be entitled, at his or their expense, to employ
counsel separate from counsel for Duck and from any other party in such action,
proceeding, or investigation. No Indemnitee may agree to a settlement of claim
without the prior written approval of Duck which approval shall not be
unreasonably withheld. Duck may not agree to a settlement of a claim involving
anything other than the payment of money without the prior written approval of
the Indemnitee which shall not be unreasonably withheld.
VIII. MISCELLANEOUS.
SECTION 8.01 FURTHER ACTIONS.
Each party hereto will execute such further documents and
instruments and take such further actions as may reasonably be requested by the
other party to consummate the Merger, to vest the Surviving Corporation with
full title to all assets, properties, rights, approvals, immunities, and
franchises of either of the Constituent Entities or to effect the other purposes
of this Agreement.
SECTION 8.02 AVAILABILITY OF EQUITABLE REMEDIES.
Since a breach of the provisions of this Agreement could not
adequately be compensated by money damages, any party shall be entitled, either
before or after the Effective Time, in addition to any other right or remedy
available to it, to an injunction restraining such breach or threatened breach
and to specific performance of any such provision of this Agreement, and, in
either case, no bond or other security shall be required in connection
therewith, and the parties hereby consent to the issuance of such an injunction
and to the ordering of specific performance.
SECTION 8.03 SURVIVAL.
The representations, warranties, covenants, and agreements
contained in this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger for a period of three (3) years after the
Effective Time.
SECTION 8.04 MODIFICATION.
This Agreement may be amended, supplemented, or modified by action
taken by or on behalf of the respective Boards of Directors of the parties
hereto at any time prior to the Effective Time. No such amendment, supplement,
or modification shall be effective unless set forth in a written instrument duly
executed by or on behalf of each party hereto.
SECTION 8.05 NOTICES.
27
Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be mailed by certified mail,
return receipt requested or by Federal Express, express mail or similar
overnight delivery or courier service or delivered (in person or by telecopy,
telex or similar telecommunications equipment) against receipt to the party to
which it is to be given at the address of such party set forth in the preamble
to this Agreement (or to such other address as the party shall have furnished in
writing in accordance with the provisions of this Section 8.05) with copies
(which copies shall not constitute notice) as follows:
If to the Parent or the Merger-Sub: 0000 Xxxx Xxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxxxx Xxxxxxxx X0X0X0
Attn: Xxxxx Xxxx
With a copy to: Xxxxxxx Xxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx X. Xxxxxx, Esq.
If to Duck: 000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxx Xxxxxx
With a copy to: Camhy Xxxxxxxxx & Xxxxx LLP
0000 Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxx X. XxXxxx, Esq.
Any notice shall be addressed to the attention of the Chief Executive
Officer. Any notice or other communication given by certified mail shall be
deemed given three business days after certification thereof, except for a
notice changing a party's address which will be deemed given at the time of
receipt thereof. Any notice given by other means permitted by this Section 8.05
shall be deemed given at the time of receipt hereof.
SECTION 8.06 WAIVER.
Any waiver by any party of a breach of any term of this Agreement
shall not operate as or be construed to be a waiver of any other breach of that
term or of any breach of any other term of this Agreement. The failure of a
party to insist upon strict adherence to any term of this Agreement on one or
more occasions will not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing and be authorized by a
resolution of the Board of Directors or by an officer of the waiving party.
SECTION 8.07 BINDING EFFECT.
The provisions of this Agreement shall be binding upon and inure
to the benefit of the Parent, the Merger-Sub, Verus, and Duck , and their
respective successors and assigns.
SECTION 8.08 NO THIRD-PARTY BENEFICIARIES.
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This Agreement does not create, and shall not be construed as
creating, any rights enforceable by any person not a party to this Agreement,
except as referred to in Sections 4.03, 7.01 and 7.02.
SECTION 8.09 SEVERABILITY.
If any provision of this Agreement is hereafter held to be
invalid, illegal, or unenforceable for any reason, such provision shall be
reformed to the maximum extent permitted so as to preserve the parties' original
intent, failing which, it shall be severed from this Agreement, with the balance
of this Agreement continuing in full force and effect. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable. If any provision is inapplicable to any
person or circumstance, it shall nevertheless remain applicable to all other
persons and circumstances.
SECTION 8.10 MERGER; ASSIGNABILITY.
This Agreement and the other agreements to be delivered pursuant
to this Agreement, and Exhibits attached hereto set forth the entire
understanding of the parties with respect to the subject matter hereof and
supersede all existing agreements concerning such subject matter. This
Agreement may not be assigned by any party without the prior written consent of
each other party to their Agreement.
SECTION 8.11 HEADINGS.
The headings in this Agreement are solely for convenience of
reference and shall be given no effect in the construction or interpretation of
this Agreement.
SECTION 8.12 COUNTERPARTS; GOVERNING LAW; JURISDICTION.
This Agreement may be executed in any number of counterparts (and
by facsimile), each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. It shall be governed by,
and construed in accordance with, the laws of the State of Delaware, without
giving effect to the rules governing the conflict of laws. Any action, suit, or
proceeding arising out of, based on, or in connection with this Agreement, the
Merger, or the other transactions contemplated hereby, or any document relating
hereto or delivered in connection with the transactions contemplated hereby, may
be brought only and exclusively in the Federal or State Courts located in the
State of New York; and each party covenants and agrees not to assert, by way of
motion, as a defense or otherwise, in any such action, suit or proceeding, any
claim that it is not subject personally to the jurisdiction of such court if it
has been duly served with process, that its property is exempt or immune from
attachment or execution, that the action, suit, or proceeding is brought in an
inconvenient forum, that the venue of the action, suit, or proceeding is
improper, or that this Agreement or the subject matter hereof may not be
enforced in or by such court.
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IN WITNESS WHEREOF, this Agreement has been executed by duly
authorized officers of each of the parties hereto as of the date first above
written.
THE DUCK CORPORATION
By: s/ Xxxxxx Xxxxxx
-------------------------
Name:
Title:
APPLIED CAPITAL FUNDING, INC.
By: s/ Xxxxx Xxxx
-------------------------
Name:
Title:
APPLIED CAPITAL ACQUISITION CORP.
By: s/ Xxxxx Xxx
-------------------------
Name:
Title:
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