EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, DATED AS OF April 21, 2000 (this
"AGREEMENT"), by and among Xxxxxx.xxx, Inc., a Nevada corporation ("BIDHIT"), EZ
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Bidhit
("SUB"), EZBid Inc., a Delaware corporation ("EZBID"), and the shareholders of
EZBid, Systemax Inc., a Delaware corporation ("SYSTEMAX"), and Xxxx Xxxxxx, an
individual ("XXXXXX" and, together with Systemax, the "SHAREHOLDERS").
RECITALS
WHEREAS, the respective Boards of Directors of Bidhit, Sub, and EZBid have
approved the terms of this Agreement and the transactions contemplated hereby,
and the Shareholders have approved the terms of this Agreement and the
transactions contemplated hereby and waive any and all notices required under
the Delaware General Corporation Law (the "DGCL") and the Bylaws of EZBid.
INTENDING TO BE LEGALLY BOUND, and in consideration of the premises and the
mutual representations, warranties, covenants, and agreements contained herein,
Bidhit, Sub, EZBid, and the Shareholders hereby agree as follows:
ARTICLE I
THE MERGER
1.1 EFFECTIVE TIME OF THE MERGER. Subject to the provisions of this
Agreement, Sub will be merged with and into EZBid with EZBid being the surviving
corporation (the "MERGER"). A Certificate of Merger, substantially in the form
attached as EXHIBIT 1.1 (the "MERGER DOCUMENT"), shall be duly prepared,
executed, and acknowledged by EZBid and Bidhit, and thereafter delivered to the
Secretary of State of Delaware as soon as practicable on or after the Closing
Date (as defined in Section 1.2). The Merger shall become effective upon the
filing of the Merger Document with the Secretary of State of Delaware (the
"EFFECTIVE TIME").
1.2 CLOSING. The closing of the Merger (the "CLOSING") will take place at
the offices of Xxxxxxx Xxxxx & Xxxxx LLP, 000 Xxxxx Xxxxxx, Xxxxx 0000, Xxxxxxx,
Xxxxxxxxxx at 10:00 a.m., local time, on the date as soon as reasonably
practicable after all of the conditions set forth in Section VI are satisfied or
waived (the "CLOSING DATE").
1.3 EFFECTS OF THE MERGER. At the Effective Time, (i) the separate
existence of Sub shall cease and Sub shall be merged with and into EZBid (EZBid
after the Merger is sometimes referred to herein as the "SURVIVING
Corporation"), (ii) the Certificate of Incorporation of Sub shall be the
Certificate of Incorporation of the Surviving Corporation until duly amended,
(iii) the Bylaws of Sub shall be the Bylaws of the Surviving Corporation until
duly amended, (iv) the directors of Sub shall be the directors of the Surviving
Corporation, (v) the officers of Sub shall be the officers of the Surviving
Corporation, (vi) the issued and outstanding capital stock of Sub shall be the
issued and outstanding capital stock of the Surviving Corporation,
(vii) all contracts, agreements, purchase orders, leases, licenses, permits, and
authorizations affecting or relating to EZBid shall continue unimpaired as to
the Surviving Corporation and (viii) the Merger shall, from and after the
Effective Time, have all the effects provided by applicable law.
1.4 CONSIDERATION. At and as of the Effective Time, each issued and
outstanding share of the common stock of EZBid ("EZBID SHARES") shall be
converted into the right of the Shareholders to receive the following
consideration (the "CONSIDERATION"): (a) Five Million One Hundred Sixty-one
Thousand Four Hundred Five (5,161,405) shares of common stock of Bidhit, $0.001
par value ("CLOSING SHARES"), which shares shall be issued at Closing to the
Shareholders; and (b) Five Hundred Seventy-three Thousand Four Hundred Ninety
(573,490) Bidhit Shares (the "ESCROW SHARES" and together with the Closing
Shares, the "BIDHIT SHARES"), which shares shall be issued to the Shareholders
but placed in escrow, to be released to the Shareholders or returned to Bidhit
in accordance with the terms and conditions of the Escrow Agreement attached
hereto as EXHIBIT 1.4. Systemax shall be issued Ninety-seven and one-half
percent (97.5%) of the Bidhit Shares, and Xxxxxx shall be issued Two and
one-half percent (2.5%) of the Bidhit Shares. The Bidhit Shares will be issued
to the Shareholders pursuant to an exemption from the Securities Act
registration requirements and as such they will be deemed "restricted stock"
under Securities and Exchange Commission ("SEC") Rule 144.
1.5 DELIVERY. Each holder of a certificate or certificates representing
EZBid Shares shall surrender such certificates to Bidhit, together with such
duly executed documentation as may be reasonably required by Bidhit to effect a
transfer of such shares, and upon such surrender each holder shall be entitled
to receive the Consideration.
1.6 TAX CONSEQUENCES. It is the intent of the parties that the Merger will
be a "reorganization" within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "CODE").
1.7 NO FURTHER OWNERSHIP RIGHTS IN EZBID SHARES. All Bidhit Shares issued
at the Effective Time upon cancellation of the EZBid Shares in accordance with
the terms hereof shall respectively be deemed to have been delivered in full
satisfaction of all rights pertaining to the EZBid Shares. After the Effective
Time, there shall be no transfers on the stock transfer books of EZBid of the
EZBid Shares.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF EZBID AND THE SHAREHOLDERS. Except
as set forth in the Disclosure Schedule of EZBid attached hereto (the "EZBID
DISCLOSURE SCHEDULE"), the Shareholders and EZBid, jointly and severally,
represent and warrant to Bidhit and Sub as follows in this Section 2.1. For
purposes of this Section 2.1, "knowledge", "know," or "known" means actual
knowledge after reasonable inquiry.
2.1.1 ORGANIZATION, STANDING AND POWER. EZBid is a corporation duly
organized and validly existing under the laws of Delaware, has all requisite
power and authority to own, lease, and operate its properties and to carry on
its businesses as now being conducted,
and is duly qualified and in good standing to do business in each jurisdiction
in which a failure to so qualify would have a material adverse effect on the
Business Condition (as hereinafter defined) of EZBid. As used in this Agreement,
"BUSINESS CONDITION" with respect to any entity shall mean the business,
financial condition, results of operations, assets, or prospects (without giving
effect to the consequences of the transactions contemplated by this Agreement)
of such entity or entities. EZBid does not have any subsidiary. EZBid has
delivered to Bidhit complete and correct copies of the certificate of
incorporation, certificate, bylaws, and/or other primary governing and
organizational documents ("GOVERNING DOCUMENTS") of EZBid, in each case, as
amended to the date hereof. The minute books and stock records of EZBid contain
correct and complete records of all material proceedings and actions taken at
all meetings of, or effected by written consent of, the shareholders of EZBid
and its Board of Directors, and all original issuances and subsequent transfers,
repurchases, and cancellations of EZBid's capital stock. The EZBid Disclosure
Schedule contains a complete and correct list of the officers and directors of
EZBid.
2.1.2 CAPITALIZATION. The authorized capital stock of EZBid consists
of One Thousand Five Hundred (1,500) shares of EZBid common stock, without par
value ("EZBID SHARES"), of which Four Hundred (400) shares are issued and
outstanding. Systemax holds Three Hundred Ninety (390) EZBid Shares and Xxxxxx
holds Ten (10) EZBid Shares, which constitute one hundred percent (100%) of the
issued and outstanding shares of EZBid. True and complete copies of certificates
representing all EZBid Shares as of the date of this Agreement have been
delivered to Bidhit. All such issued and outstanding shares have been duly
authorized and validly issued, and are fully paid and nonassessable and were
issued in compliance with applicable federal and state securities laws. There
are not any options, warrants, calls, conversion rights, commitments,
agreements, contracts, understandings, restrictions, arrangements, or rights of
any character to which EZBid is a party or by which EZBid may be bound
obligating EZBid to issue, deliver, or sell, or cause to be issued, delivered,
or sold, additional shares of the capital stock of EZBid, or obligating EZBid to
grant, extend, or enter into any such option, warrant, call, conversion right,
commitment, agreement, contract, understanding, restriction, arrangement, or
right. EZBid does not have outstanding any bonds, debentures, notes, or other
indebtedness the holders of which have the right to vote (or convertible or
exercisable into securities having the right to vote) with holders of EZBid
Shares on any matter ("EZBID VOTING DEBT"). The Shareholders are the lawful
record and beneficial owners of all of the EZBid Shares shown as owned by such
Shareholders in the EZBid Disclosure Schedule and have valid title thereto, free
and clear of all liens, pledges, encumbrances, security interests, restrictions
on transfer (other than restrictions under federal and state securities laws),
claims, and equities of every kind. Except for this Agreement and the agreements
listed in the EZBid Disclosure Schedule, there are no outstanding warrants,
options, or rights of any kind to acquire from such Shareholders any EZBid
Shares.
2.1.3 AUTHORITY. The execution, delivery, and performance of this
Agreement by EZBid and the Shareholders have been duly authorized by all
necessary corporate action of the Board of Directors of EZBid and the
Shareholders. Certified copies of the resolutions adopted by the Board of
Directors of EZBid and the Shareholders approving this Agreement and the Merger
have been provided to Bidhit. The Shareholders have the full power and authority
to enter into this Agreement and the transactions contemplated herein. The
Shareholders and EZBid have duly and validly executed and delivered this
Agreement, and this Agreement
constitutes a valid, binding, and enforceable obligation of the Shareholders and
EZBid in accordance with its terms.
2.1.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the knowledge of
EZBid and the Shareholders, EZBid holds, and at all times has held, all
licenses, permits, and authorizations from all Governmental Entities (as defined
below) necessary for the lawful conduct of its business pursuant to all
applicable statutes, laws, ordinances, rules, and regulations of all such
authorities having jurisdiction over it or any part of its operations,
excepting, however, when such failure to hold would not have a material adverse
effect on EZBid's Business Condition. There are no violations or claimed
violations known by EZBid or the Shareholders of any such license, permit, or
authorization or any such statute, law, ordinance, rule, or regulation. To the
knowledge of EZBid and the Shareholders, neither the execution and delivery of
this Agreement by EZBid or the Shareholders, nor the performance by EZBid or the
Shareholders of their obligations under this Agreement will violate any
provision of law, will conflict with, result in the breach of any of the terms
or conditions of, constitute a breach of any of the terms or conditions of,
constitute a default under, permit any party to accelerate any right under,
renegotiate, or terminate, require consent, approval, or waiver by any party
under, or result in the creation of any lien, charge, encumbrance, or
restriction upon any of the properties, assets, or EZBid Shares pursuant to, any
of the Governing Documents or any agreement (including government contracts),
indenture, mortgage, franchise, license, permit, lease or other instrument of
any kind to which EZBid is a party or by which EZBid or any of its assets is
bound or affected, except where such violation, conflict, breach, default,
acceleration, termination, renegotiation, termination, consent, approval,
waiver, lien, charge, encumbrance, or restriction would not have a material
adverse effect on EZBid's Business Condition or on the ability of the parties to
consummate the transactions contemplated by this Agreement. Except as otherwise
provided on the EZBid Disclosure Schedule, no consent, approval, order or
authorization of or registration, declaration or filing with or exemption
(collectively "GOVERNMENTAL CONSENTS") by, any court, administrative agency or
commission or other governmental authority or instrumentality, whether domestic
or foreign (each a "GOVERNMENTAL ENTITY") is required by or with respect to
EZBid in connection with the execution and delivery of this Agreement by EZBid
or the consummation by EZBid of the transactions contemplated hereby, except for
the filing of the appropriate Merger Document with the Secretary of State of
Delaware and except for such other Governmental Consents, which if not obtained
or made would not have a material adverse effect on EZBid's Business Condition.
2.1.5 INTELLECTUAL PROPERTY RIGHTS.
(a) The "EZBID INTELLECTUAL PROPERTY" consists of the following:
(i) 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 EZBid;
(ii) all goodwill associated with trademarks, trade names
service marks and trade dress owned by EZBid;
(iii) 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 EZBid;
(iv) 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 EZBid;
(v) all other tangible or intangible proprietary
information and materials owned by EZBid; and
(vi) 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 tangible and intangible proprietary information
described in (i) through (v) above that are being, and/or have been, used, or
are currently under development for use, in the business of EZBid as it has
been, is currently or is currently anticipated to be (up to the Closing),
conducted. EZBid Intellectual Property described in clauses (i) to (v) above is
referred to herein as "EZBid Owned Intellectual Property" and EZBid Intellectual
Property described in clause (vi) above is referred to herein as "EZBid Licensed
Intellectual Property." Unless otherwise noted, all references to "EZBid
Intellectual Property" shall refer to both EZBid Owned Intellectual Property and
EZBid Licensed Intellectual Property.
(b) The EZBid Disclosure Schedule 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 EZBid Owned Intellectual Property;
(ii) all hardware products and tools, software products and tools, and services
that are currently published, offered, or under development by EZBid; (iii) all
material licenses, sublicenses and other agreements to which EZBid is a party
and pursuant to which any other person is authorized to have access to or use
the EZBid Owned Intellectual Property or exercise any other right with regard
thereto; and (iv) all EZBid Licensed Intellectual Property (other than license
agreements for standard "shrink wrapped, off the shelf," commercially available,
third party products used by EZBid). The disclosures described in (iii) and (iv)
hereof include the names and dates of the relevant agreements, as well as the
identities of the parties thereto.
(c) The EZBid Intellectual Property consists solely of items and
rights that are either: (i) owned by EZBid, (ii) in the public domain, or (iii)
rightfully used and authorized for use by EZBid and its successors pursuant to a
valid license or other agreement. EZBid has all rights in the EZBid Intellectual
Property reasonably necessary to carry out EZBid's current, and anticipated
future (up to the Closing) activities and has or had all rights in the EZBid
Intellectual Property reasonably necessary to carry out EZBid'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 EZBid 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 EZBid Owned Intellectual Property are
adequately commented in accordance with current software industry standards.
(d) EZBid is not, nor as a result of the execution or delivery
of this Agreement, or performance of EZBid's obligations hereunder, will EZBid
be, in violation of any license, sublicense or other agreement relating to the
EZBid Intellectual Property to which EZBid is a party or otherwise bound. EZBid
is not obligated to 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 EZBid or its successors
in the EZBid Intellectual Property.
(e) To the knowledge of EZBid, the use, reproduction,
modification, distribution, licensing, sublicensing, sale, or any other exercise
of rights in any EZBid Owned Intellectual Property or any other authorized
exercise of rights in or to the EZBid Owned Intellectual Property by EZBid 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
EZBid, the use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any EZBid Licensed
Intellectual Property or any other authorized exercise of rights in or to the
EZBid Licensed Intellectual Property by EZBid 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. No claims (i) challenging the validity, effectiveness, or
ownership by EZBid of any of the EZBid 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 EZBid Owned Intellectual Property by EZBid 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 EZBid, are
threatened by any person nor, to the knowledge of EZBid, 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 EZBid Disclosure
Schedule and all copyright registrations held by EZBid are valid, enforceable
and subsisting. To the knowledge of EZBid, there is no material unauthorized
use, infringement or misappropriation of any of the EZBid Owned Intellectual
Property by any third party, employee or former employee.
(f) No parties other than EZBid possess any current or
contingent rights to any source code that is part of the EZBid Owned
Intellectual Property (including, without limitation, through any escrow
account).
(g) The EZBid Disclosure Schedule lists all parties who have
created any material portion of, or otherwise have any rights in or to, the
EZBid Owned Intellectual Property other than employees of EZBid whose work
product was created by them entirely
within the scope of their employment by EZBid and constitutes works made for
hire owned by EZBid. EZBid has secured from all parties who have created any
material portion of, or otherwise have any rights in or to, the EZBid Owned
Intellectual Property valid and enforceable written assignments or licenses of
any such work or other rights to EZBid and has provided true and complete copies
of such assignments or licenses to Bidhit.
(h) The EZBid Disclosure Schedule includes a true and complete
list of support and maintenance agreements relating to EZBid Owned Intellectual
Property or to which EZBid is a party as to EZBid Licensed Intellectual Property
including the identity of the parties and the respective dates of such
agreements and remedies for their breach.
(i) EZBid has obtained legally binding written agreements from
all employees and third parties with whom EZBid has shared confidential
proprietary information (i) of EZBid, or (ii) received from others which EZBid
is obligated to treat as confidential, which agreements require such employees
and third parties to keep such information confidential.
(j) EZBid has obtained any and all necessary consents from
consumers with regard to EZBid's collection and dissemination of personal
consumer information in accordance with EZBid's privacy policy as published on
its website. EZBid's practices regarding the collection and use of consumer
personal information are in accordance with EZBid's privacy policy as published
on its website.
2.1.6 FINANCIAL STATEMENTS. Attached as SCHEDULE 2.1.6 are the
following financial statements of EZBid: (i) unaudited balance sheets and
related statements of income at and as of the close of the fiscal year ended
December 31, 1999, and (ii) interim unaudited statements of income and earnings
and a balance sheet at and as of February 29, 2000 (the "CURRENT BALANCE SHEET")
(collectively, the statements referred to in items (i) and (ii) are referred to
as the "FINANCIAL STATEMENTS"). The Financial Statements: (i) are in accordance
with the books and records of EZBid; (ii) present fairly, in all material
respects, the financial position of EZBid at and as of the dates indicated; and
(iii) have been prepared in accordance with generally accepted accounting
principles consistently applied. There are no liabilities, claims or obligations
of any nature, whether accrued, absolute, contingent, anticipated, or otherwise,
whether due or to become due (collectively "LIABILITIES") other than (a)
Liabilities shown or provided for either in the Current Balance Sheet or the
EZBid Disclosure Schedule, or (b) Liabilities incurred in the ordinary course of
business that in the aggregate have not been materially adverse to EZBid's
Business Condition. The liabilities of EZBid were incurred in the ordinary
course of EZBid's business.
2.1.7 TAXES.
(a) All returns, reports, and other forms related to Taxes (as
defined below) required to be filed on or before the Closing Date with respect
to EZBid and all current and former members of the affiliated group, as defined
in Section 1504(a) of the Code, of which EZBid is a member (the "CONSOLIDATED
GROUP") or its predecessor in interest, under the laws of any jurisdiction,
domestic or foreign, have been or will have been filed prior to Closing, which
returns, reports, and statements are true, correct and complete in all material
respects, and all taxes, fees, and other governmental charges of any nature
whatsoever that were required to be
paid in connection with such returns, reports, and forms have been paid or will
have been paid prior to the Closing, and no penalties or other charges are due
or will become due with respect to the late filing of any such return, report,
or form. All Taxes shown to be due on such returns, reports, and forms have been
paid and all other Taxes otherwise accruing and payable prior to Closing will
have been paid or provided for. Complete and correct copies of the state tax
returns of EZBid or its predecessor in interest for any year or portion of a
year or other applicable tax period that ended between the period of inception
of EZBid and December 31, 1999, as filed with the IRS and/or any state taxing
authority, have previously been supplied to Bidhit.
(b) With respect to any taxable year ending on or before
December 31, 1999 or any other "open" year for which the Internal Revenue
Service or other taxing authority is not precluded from assessing a deficiency:
(i) neither EZBid nor the Shareholders have been notified that there is any
assessment or proposed assessment of deficiency or additional tax with respect
to EZBid or its predecessor in interest or the Consolidated Group, and (ii)
there is no completed, pending, or, to the knowledge of EZBid or the
Shareholders, threatened tax audit or investigation with respect to EZBid or its
predecessor in interest or the Consolidated Group. Neither EZBid, the
Shareholders, nor the Consolidated Group are a party to any agreement, contract,
or arrangement in the nature of a tax-sharing agreement, whether in writing or
otherwise. No consent has been filed under Section 341(f) of the Code with
respect to EZBid or its predecessor in interest. EZBid is not required to
include in income any adjustment pursuant to Section 481(a) of the Code (or
similar provisions of other law or regulations) in its current or in any future
taxable period by reason of a change in accounting method nor does EZBid have
any knowledge that the IRS (or other taxing authority) has proposed, or is
considering, any such change in accounting method. EZBid is not a party to any
agreement, contract, or arrangement that would result in the payment of any
"excess parachute payment" within the meaning of Section 280G of the Code. The
disclosure provided to the Shareholders in respect of each and every transaction
to be consummated in connection with this Agreement, whether performed prior to,
at, or following the Closing, and the resolutions adopted after review of the
foregoing, are sufficient to comply with the provisions of Section 280G of the
Code (and both its adopted and proposed Treasury Regulations) that allow for
approval by appropriate persons and exemption from the provisions of Section
280G of the Code of transactions that might otherwise result in the payment of
any "excess parachute payment" within the meaning of Section 280G of the Code.
EZBid is not a party to any "safe harbor lease" as defined in Section 168(f)(8)
of the Code as in effect prior to the enactment of the Tax Reform Act of 1986,
and none of the property of EZBid constitutes tax-exempt use property as defined
in Section 168(h) of the Code. None of the assets of EZBid secures debt the
interest on which is exempt from tax pursuant to Section 103 of the Code.
(c) The amounts reflected for Taxes on the balance sheet
included in the Financial Statements and the Current Balance Sheet are and will
be sufficient for the payment of all unpaid federal, state, local, and foreign
Taxes, assessments, and deficiencies for all periods prior to and including the
periods covered in the Financial Statements and the Current Balance Sheet. For
the purposes of this Agreement, the terms "TAX" and "TAXES" shall include all
federal, state, local, and foreign taxes, assessments, duties, tariffs,
registration fees, and other governmental charges including without limitation
all income, franchise, property, production, sales, use, payroll, license,
windfall profits, severance, withholding, excise, gross receipts and
other taxes, as well as any interest, additions or penalties relating thereto
and any interest in respect of such additions or penalties.
2.1.8 EMPLOYEES. EZBid does not have any written contract of
employment or other employment agreement with any of its employees that is not
terminable at will by EZBid. EZBid is not a party to any pending, or to the
knowledge of EZBid or the Shareholders, threatened, labor dispute. To the
knowledge of EZBid and the Shareholders, EZBid has complied in all material
respects with all applicable federal, state, and local laws, ordinances, rules
and regulations and requirements relating to the employment of labor, including
but not limited to the provisions thereof relating to wages, hours, collective
bargaining, payment of Social Security, unemployment and withholding taxes, and
ensuring equality of opportunity for employment and advancement of minorities
and women. There are no claims pending, or, to the knowledge of EZBid and the
Shareholders, threatened to be brought, in any court or administrative agency by
any former or current EZBid employees for compensation, pending severance
benefits, vacation time, vacation pay or pension benefits, or any other claim
pending from any current or former employee or any other person arising out of
EZBid's status as employer, whether in the form of claims for employment
discrimination, harassment, unfair labor practices, grievances, wrongful
discharge or otherwise.
2.1.9 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
the EZBid Disclosure Schedule, since December 31, 1999 and through the date of
this Agreement, there has not been:
(a) Any transaction involving more than $25,000 entered into by
EZBid other than in the ordinary course of business; any change (or any
development or combination of developments of which EZBid has knowledge that is
reasonably likely to result in such a change) in EZBid's Business Condition,
other than changes in the ordinary course of business that in the aggregate have
not been materially adverse to EZBid's Business Condition; or, without limiting
the foregoing, any loss of or damage to any of the properties of EZBid due to
fire or other casualty, or any other loss, whether or not insured, amounting to
more than $25,000 in the aggregate;
(b) Any declaration, payment, or setting aside of any dividend
or other distribution to or for the holders of any EZBid Shares;
(c) Any increase or decrease in the rates of compensation
payable or to become payable by EZBid to any director, officer, employee,
independent contractor, or the Shareholders or holders of other securities
issued by EZBid, or any bonus, percentage compensation, service award, or other
benefit granted, made, or accrued to or to the credit of any such person, or any
welfare, pension, retirement, or similar payment or arrangement made or agreed
to by EZBid, except for changes that have been approved in writing by Bidhit;
(d) Any termination, modification, or rescission of, or waiver
by EZBid of rights under, any existing contract having or likely to have a
material adverse effect on EZBid; or
(e) Any mortgage, pledge, imposition of any security interest,
claim, encumbrance, or other restriction on any of the assets, tangible or
intangible, of EZBid.
2.1.10 ACCOUNTS RECEIVABLE. All of the accounts receivable included in
the Current Balance Sheet will have arisen in the ordinary course of business,
have been collected or, to the knowledge of EZBid and the Shareholders, are good
and collectible in the aggregate recorded amounts thereof (less the allowance
for doubtful accounts also appearing in the Current Balance Sheet and net of
returns and payment discounts allowable by EZBid's policies).
2.1.11 LEASES IN EFFECT. All real property leases and subleases as to
which EZBid is a party and any amendments or modifications thereof are listed on
the EZBid Disclosure Schedule (each a "LEASE" and collectively, the "LEASES").
Each Lease is valid, in full force and effect, enforceable, and there are no
existing defaults, and EZBid has not received nor given notice of default or
claimed default with respect to any Lease, nor is there any event that with
notice or lapse of time, or both, would constitute a default thereunder.
2.1.12 PERSONAL PROPERTY. Except for the personal items owned by the
Shareholders and listed on the EZBid Disclosure Schedule, EZBid has good and
marketable title, free and clear of all title defects, security interests,
pledges, options, claims, liens, encumbrances, and restrictions of any nature
whatsoever (including, without limitation, leases, chattel mortgages,
conditional sale contracts, purchase money security interests, collateral
security arrangements, and other title or interest-retaining agreements) to all
inventory, receivables, furniture, machinery, equipment, and other personal
property, tangible or otherwise, reflected on the Current Balance Sheet or used
in EZBid's business as of the date of the Current Balance Sheet even if not
reflected thereon, except for acquisitions and dispositions in the ordinary
course of business. All computer equipment and other personal property listed on
the EZBid Disclosure Schedule and used by EZBid in the conduct of its business
are in good operating condition and repair, reasonable wear and tear excepted.
2.1.13 CERTAIN TRANSACTIONS. Neither the Shareholders nor any of the
directors or officers of EZBid, nor or any member of any of their families, is
presently a party to, or was a party to during the year preceding the date of
this Agreement, any transaction with EZBid, other than compensation arrangements
in the ordinary course of EZBid's business and purchases of securities disclosed
in the EZBid Disclosure Schedule, including, without limitation, any contract,
agreement, or other arrangement (i) providing for the furnishing of services to
or by, (ii) providing for rental of real or personal property to or from, or
(iii) otherwise requiring payments to or from, any such person or any
corporation, partnership, trust, or other entity in which any such person has or
had a 5%-or-more interest (as a shareholder, partner, beneficiary, or otherwise)
or is or was a director, officer, employee, or trustee.
2.1.14 LITIGATION AND OTHER PROCEEDINGS. Neither EZBid nor any of its
officers, directors, or employees is a party to any pending or, to the knowledge
of EZBid and the Shareholders, threatened action, suit, labor dispute (including
any union representation proceeding), proceeding, investigation, or
discrimination claim in or by any court or governmental board, commission,
agency, department, or officer, or any arbitrator, arising from the actions or
omissions of EZBid or, in the case of an individual, from acts in his capacity
as an officer, director, or employee of EZBid which individually or in the
aggregate would be
materially adverse to EZBid. EZBid is not subject to any order, writ, judgment,
decree, or injunction that has or could have a material adverse effect on
EZBid's Business Condition.
2.1.15 MAJOR CONTRACTS. EZBid is not a party to or subject to:
(a) Any union contract, or any employment contract or
arrangement providing for future compensation, written or oral, with any
officer, consultant, director or employee;
(b) Any plan or contract or arrangement, written or oral,
providing for bonuses, pensions, deferred compensation, retirement payments,
profit-sharing, or the like;
(c) Any joint venture contract or arrangement or any other
agreement that has involved or is expected to involve a sharing of profits;
(d) Any lease for real or personal property in which the amount
of payments which EZBid is required to make on an annual basis exceeds $10,000;
(e) Any material agreement, license, franchise, permit,
indenture or authorization that has not been terminated or performed in its
entirety and not renewed that may be, by its terms, terminated, impaired, or
adversely affected by reason of the execution of this Agreement, the Closing of
the Merger, or the consummation of the transactions contemplated hereby or
thereby;
(f) Except for trade indebtedness incurred in the ordinary
course of business, any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for borrowed money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee, or otherwise which
individually is in the amount of $10,000 or more;
(g) Any material license agreement, either as licensor or
licensee (excluding nonexclusive hardware and software licenses granted to EZBid
in the ordinary course of business); or
(h) Any contract containing covenants purporting to limit
EZBid's freedom to compete in any line of business in any geographic area.
All contracts, arrangements, plans, agreements, leases, licenses,
franchises, permits, indentures, authorizations, instruments and other
commitments that are listed in EZBid Disclosure Schedule pursuant to this
Section 2.1.15, are valid and in full force and effect and EZBid has not, nor,
to the knowledge of EZBid and the Shareholders, has any other party thereto,
breached any material provisions of, or is in default in any material respect
under the terms thereof.
2.1.16 INSURANCE AND BANKING FACILITIES. The EZBid Disclosure Schedule
contains a complete and correct list of (i) all contracts of insurance or
indemnity of EZBid in force as of the date of this Agreement (including name of
insurer or indemnitor, agent, annual premium, coverage, deductible amounts, and
expiration date) and (ii) the names and locations of
all banks in which EZBid has accounts or safe deposit boxes, the designation of
each such account and safe deposit box, and the names of all persons authorized
to draw on or have access to each such account and safe deposit box. All
premiums and other payments due from EZBid with respect to any such contracts of
insurance or indemnity have been paid, and EZBid does not know of any fact, act,
or failure to act which has or might cause any such contract to be canceled or
terminated. All material known claims for insurance or indemnity have been
presented.
2.1.17 EMPLOYEE BENEFIT PLANS. Each employee benefit plan, including
without limitation any personnel policies or fringe benefit plans, policies,
programs and arrangements, whether or not subject to ERISA (defined below),
whether or not funded, and whether or not terminated, including without
limitation stock option, stock bonus, phantom stock, deferred compensation,
pension, severance, savings, bonus, vacation, travel, incentive, and health,
disability, and welfare plans (each a "PLAN") covering active, former, or
retired employees of EZBid is listed in the EZBid Disclosure Schedule. EZBid has
made available to Bidhit a copy of each Plan, and where applicable, any related
trust agreement, annuity or insurance contract and, where applicable, all annual
reports (Form 5500) filed with the Internal Revenue Service. To the extent
applicable, each Plan complies, in all material respects, with the requirements
of the Employee Retirement Income Security Act of 1974 as amended ("ERISA"), and
the Code, and any Plan intended to be qualified under Section 401(a) of the Code
has been determined by the Internal Revenue Service to be so qualified and has
remained tax-qualified to this date and its related trust is tax-exempt and has
been so since its creation. No Plan is covered by Title IV of ERISA or Section
412 of the Code. No "PROHIBITED TRANSACTION" as defined in ERISA Section 406 or
Code Section 4975 has occurred with respect to any Plan. Each Plan has been
maintained and administered in material compliance with its terms and with the
requirements prescribed by any and all statutes, orders, rules and regulations,
including but not limited to ERISA and the Code, which are applicable to such
Plans. There are no pending or anticipated material claims against or otherwise
involving any of the Plans and no suit, action or other litigation (excluding
claims for benefits incurred in the ordinary course of Plan activities) has been
brought against or with respect to any Plan. All material contributions,
reserves or premium payments to the Plan, accrued to the date hereof have been
made or provided for. EZBid has not incurred any liability under Subtitle C or D
of Title IV of ERISA with respect to any "SINGLE-EMPLOYER PLAN" within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
EZBid, or any entity which is considered one employer with EZBid under Section
4001 of ERISA. EZBid has not incurred any withdrawal liability under Subtitle E
of Title IV of ERISA with respect to any "MULTIEMPLOYER PLAN" within the meaning
of Section 4001(a)(3) of ERISA. There are no restrictions on the rights of EZBid
to amend or terminate any Plan without incurring any liability thereunder. EZBid
has not engaged in or is a successor or parent corporation to an entity that has
engaged in a transaction described in ERISA Section 4069. There have been no
amendments to, written interpretation of, or announcement (whether or not
written) by EZBid relating to, or change in employee participation or coverage
under, any Plan that would increase materially the expense of maintaining such
Plan above the level of expense incurred in respect thereof for the year ended
December 31, 1999. Neither EZBid nor any of its ERISA affiliates have any
current or projected liability in respect of post-employment or post-retirement
welfare benefits for retired or former employees of EZBid. No tax under Section
4980B of the Code has been incurred in respect of any Plan that is a group
health plan, as defined in Section 5000(b)(1) of the Code.
2.1.18 CERTAIN AGREEMENTS. Neither the execution and delivery of this
Agreement, nor the consummation of the transactions contemplated hereby will (i)
result in any payment by EZBid (including, without limitation, severance,
unemployment compensation, parachute payment, bonus or otherwise) becoming due
to any director, employee, or independent contractor of EZBid under any Plan,
agreement or otherwise, (ii) materially increase any benefits otherwise payable
under any Plan or agreement, or (iii) result in the acceleration of the time of
payment or vesting of any such benefits.
2.1.19 GUARANTEES AND SURETYSHIPS. EZBid has no powers of attorney
outstanding (other than those issued in the ordinary course of business with
respect to tax matters). EZBid has no obligations or liabilities (absolute or
contingent) as guarantor, surety, co-signer, endorser, co-maker, indemnitor, or
otherwise respecting the obligations or liabilities of any person, corporation,
partnership, joint venture, association, organization, or other entity.
2.1.20 BROKERS AND FINDERS. Neither EZBid nor the Shareholders have
retained any broker, finder, or investment banker in connection with this
Agreement or any of the transactions contemplated by this Agreement. Neither
EZBid nor the Shareholders will owe any fee or other amount to any broker,
finder, or investment banker in connection with this Agreement or the
transactions contemplated by this Agreement.
2.1.21 CERTAIN PAYMENTS. Neither EZBid nor the Shareholders, nor to
the knowledge of EZBid or the Shareholders, any person or other entity has,
directly or indirectly, on behalf of or with respect to EZBid: (i) made an
unreported political contribution; (ii) made or received any payment that was
not legal to make or receive; (iii) engaged in any transaction or made or
received any payment that was not properly recorded on the books of EZBid; or
(iv) created or used any "off-book" bank or cash account or "slush fund".
2.1.22 ENVIRONMENTAL MATTERS. To the knowledge of EZBid and the
Shareholders:
(a) There has not been a discharge or release on any real
property owned or leased by EZBid ("REAL PROPERTY") of any Hazardous Material
(as defined below) in violation of any federal, state or local statute,
regulation, rule or order applicable to health, safety and the environment,
including without limitation, contamination of soil, groundwater or the
environment, generation, handling, storage, transportation or disposal of
Hazardous Materials or exposure to Hazardous Materials;
(b) EZBid has not handled, generated, produced, manufactured,
installed, treated, stored, transported, released, spilled, discharged, or
disposed of any Hazardous Material in violation of any federal, state, or local
statute, regulation, rule, or order applicable to EZBid with regard to health,
safety, or the environment;
(c) EZBid has not received from any Governmental Entity or third
party any request for information, notice of claim, demand letter or other
notification, notice or information that EZBid is or may be potentially subject
to or responsible for any investigation or clean-up or other remediation of
Hazardous Material present on any Real Property;
(d) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses, the purpose of which was to discover,
identify or otherwise characterize the condition of the soil, groundwater, air,
or presence of asbestos at any of the Real Property sites;
(e) There is no asbestos present in any Real Property presently
owned or operated by EZBid, and no asbestos has been removed from any Real
Property while such Real Property was owned or operated by EZBid; and
(f) There are no underground storage tanks on, in, or under any
of the Real Property and no underground storage tanks have been closed or
removed from any Real Property that is or has been in the ownership of EZBid.
"HAZARDOUS MATERIAL" means any substance (i) that is a "hazardous waste" or
"hazardous substance" under any federal, state or local statute, regulation,
rule, or order, or (ii) that is toxic, explosive, corrosive, flammable,
infectious, radioactive, or otherwise hazardous and is regulated by any
Governmental Entity, or (iii) the presence of which on the Real Property causes
or threatens to cause a nuisance on the Real Property or to adjacent properties
or poses or threatens to pose a hazard to the health or safety of persons on or
about the Real Property, or (iv) the presence of which on adjacent properties
could constitute a trespass by EZBid or the then current owner(s) of any Real
Property.
2.1.23 DISCLOSURE. Neither the representations or warranties made by
EZBid or the Shareholders in this Agreement, nor the final EZBid Disclosure
Schedule or any other certificate executed and delivered by EZBid or the
Shareholders pursuant to this Agreement, when taken together, contains any
untrue statement of a material fact, or omits to state a material fact necessary
to make the statements or facts contained herein or therein not misleading in
light of the circumstances under which they were furnished.
2.1.24 RELIANCE. The foregoing representations and warranties are made
by EZBid and the Shareholders with the knowledge and expectation that Bidhit is
placing reliance thereon.
2.2 REPRESENTATIONS AND WARRANTIES OF BIDHIT AND SUB. Bidhit and Sub
represent and warrant to EZBid as follows in this Section 2.2. For purposes of
this Section 2.2, "knowledge", "know", or "known" means actual knowledge after
due inquiry.
2.2.1 ORGANIZATION, STANDING AND POWER. Each of Bidhit and Sub is a
corporation duly organized and validly existing under the laws of Delaware,
has all requisite power and authority to own, lease, and operate its
properties and to carry on its businesses as now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in
which a failure to so qualify would have a material adverse effect on the
Business Condition of Bidhit or Sub. Sub is a first-tier, wholly-owned
subsidiary of Bidhit.
2.2.2 AUTHORITY. The execution, delivery, and performance of this
Agreement by Bidhit and Sub has been duly authorized by all necessary corporate
action on the part of Bidhit and Sub and no other corporate proceedings on the
part of Bidhit and Sub are necessary to authorize this Agreement or to
consummate the transactions so contemplated. Each of Bidhit
and Sub has duly and validly executed and delivered this Agreement, and this
Agreement constitutes a valid, binding, and enforceable obligation of each of
Bidhit and Sub in accordance with its terms.
2.2.3 CAPITALIZATION. The authorized capital stock of Bidhit consists
of 50,000,000 shares of Common Stock, $0.001 par value (the "COMMON SHARES"), of
which 11,758,893 Common Shares are issued and outstanding. No other shares of
capital stock are outstanding. All such issued and outstanding shares have been
duly authorized and validly issued, and are fully paid and nonassessable. Except
for 1,113,750 options granted to employees, directors and contractors of Bidhit,
36,780 warrants issued to Salman Partners, and the further obligation of the
Company to give 100,000 Common Shares to Xxxx Xxxxxxxxxx under the Employment
Services Agreement dated May 20, 1999, there are no options, warrants,
conversion privileges, preemptive rights, rights of first refusal, proxy or
shareholder agreements, or other rights presently outstanding to purchase or
otherwise acquire any authorized but unissued shares of its capital stock or
other securities of Bidhit. All outstanding securities have been issued in
compliance with all applicable federal and state securities laws.
The authorized capital stock of Sub consists of 1,000 shares of common
stock without par value, of which 1,000 shares are issued and outstanding. No
other shares of capital stock are outstanding. All such issued and outstanding
shares have been duly authorized and validly issued, and are fully paid and
nonassessable and were issued in compliance with applicable federal and state
securities laws. There are no options, warrants, conversion privileges, or other
rights presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of its capital stock or other securities of Sub.
2.2.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. To the knowledge of
each of Bidhit and Sub, Bidhit and Sub hold, and at all times has held, all
licenses, permits, and authorizations from all Governmental Entities (as defined
below) necessary for the lawful conduct of its business pursuant to all
applicable statutes, laws, ordinances, rules, and regulations of all such
authorities having jurisdiction over it or any part of its operations,
excepting, however, when such failure to hold would not have a material adverse
effect on Bidhit's Business Condition. There are no violations or claimed
violations known by Bidhit or Sub of any such license, permit, or authorization
or any such statute, law, ordinance, rule, or regulation. To the knowledge of
Bidhit or Sub, neither the execution and delivery of this Agreement by Bidhit or
Sub, nor the performance by Bidhit or Sub of their obligations under this
Agreement will violate any provision of law, will conflict with, result in the
breach of any of the terms or conditions of, constitute a breach of any of the
terms or conditions of, constitute a default under, permit any party to
accelerate any right under, renegotiate, or terminate, require consent,
approval, or waiver by any party under, or result in the creation of any lien,
charge, encumbrance, or restriction upon any of the properties, assets, or
Bidhit Shares pursuant to, any of the Governing Documents or any agreement
(including government contracts), indenture, mortgage, franchise, license,
permit, lease or other instrument of any kind to which Bidhit is a party or by
which Bidhit or any of its assets is bound or affected, except where such
violation, conflict, breach, default, acceleration, termination, renegotiation,
termination, consent, approval, waiver, lien, charge, encumbrance, or
restriction would not have a material adverse effect on Bidhit's Business
Condition or on the ability of the parties to consummate the transactions
contemplated by this Agreement. No consent, approval, order or authorization of
or registration,
declaration or filing with or exemption (collectively "GOVERNMENTAL CONSENTS")
by, any court, administrative agency or commission or other governmental
authority or instrumentality, whether domestic or foreign (each a "GOVERNMENTAL
ENTITY") is required by or with respect to Bidhit or Sub in connection with the
execution and delivery of this Agreement by Bidhit or Sub or the consummation by
Bidhit or Sub of the transactions contemplated hereby, except for the filing of
the appropriate Merger Document with the Secretary of State of Delaware and
except for such other Governmental Consents, which if not obtained or made would
not have a material adverse effect on Bidhit's Business Condition.
2.2.5 INTELLECTUAL PROPERTY RIGHTS.
(a) The "BIDHIT INTELLECTUAL PROPERTY" consists of the
following:
(i) 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 Bidhit;
(ii) all goodwill associated with trademarks, trade names
service marks and trade dress owned by Bidhit;
(iii) 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 Bidhit;
(iv) 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 Bidhit;
(v) all other tangible or intangible proprietary
information and materials owned by Bidhit; and
(vi) 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 tangible and intangible proprietary information
described in (i) through (v) above that are being, and/or have been, used, or
are currently under development for use, in the business of Bidhit as it has
been, is currently or is currently anticipated to be (up to the Closing),
conducted. Bidhit Intellectual Property described in clauses (i) to (v) above is
referred to herein as "Bidhit Owned Intellectual Property" and Bidhit
Intellectual Property described in clause (vi) above is referred to herein as
"Bidhit Licensed Intellectual Property." Unless otherwise noted, all references
to "Bidhit Intellectual Property" shall refer to both Bidhit Owned Intellectual
Property and Bidhit Licensed Intellectual Property.
(b) The Bidhit Intellectual Property consists solely of items
and rights that are either: (i) owned by Bidhit, (ii) in the public domain, or
(iii) rightfully used and
authorized for use by Bidhit and its successors pursuant to a valid license or
other agreement. Bidhit has all rights in the Bidhit Intellectual Property
reasonably necessary to carry out Bidhit's current, and anticipated future (up
to the Closing) activities and has or had all rights in the Bidhit Intellectual
Property reasonably necessary to carry out Bidhit'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 Bidhit
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 Bidhit Owned Intellectual Property are adequately commented in accordance
with current software industry standards.
(c) Bidhit is not, nor as a result of the execution or delivery
of this Agreement, or performance of Bidhit's obligations hereunder, will Bidhit
be, in violation of any license, sublicense or other agreement relating to the
Bidhit Intellectual Property to which Bidhit is a party or otherwise bound.
Bidhit is not obligated to 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 Bidhit or its
successors in the Bidhit Intellectual Property.
(d) To the knowledge of Bidhit, the use, reproduction,
modification, distribution, licensing, sublicensing, sale, or any other exercise
of rights in any Bidhit Owned Intellectual Property or any other authorized
exercise of rights in or to the Bidhit Owned Intellectual Property by Bidhit 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
Bidhit, the use, reproduction, modification, distribution, licensing,
sublicensing, sale, or any other exercise of rights in any Bidhit Licensed
Intellectual Property or any other authorized exercise of rights in or to the
Bidhit Licensed Intellectual Property by Bidhit 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. No claims (i) challenging the validity, effectiveness,
or ownership by Bidhit of any of the Bidhit 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 Bidhit Owned Intellectual Property by Bidhit 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 Bidhit, are
threatened by any person nor, to the knowledge of Bidhit, 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 and all copyright registrations, if
any, held by Bidhit are valid, enforceable and subsisting. To the knowledge of
Bidhit, there is no material unauthorized use, infringement or misappropriation
of any of the Bidhit Owned Intellectual Property by any third party, employee or
former employee.
(e) No parties other than Bidhit possess any current or
contingent rights to any source code that is part of the Bidhit Owned
Intellectual Property (including, without limitation, through any escrow
account).
(f) Bidhit has secured from all parties who have created any
material portion of, or otherwise have any rights in or to, the Bidhit Owned
Intellectual Property valid and enforceable written assignments or licenses of
any such work or other rights to Bidhit and has provided true and complete
copies of such assignments or licenses to EZBid.
(g) Bidhit has obtained legally binding written agreements from
all employees and third parties with whom Bidhit has shared confidential
proprietary information (i) of Bidhit, or (ii) received from others which Bidhit
is obligated to treat as confidential, which agreements require such employees
and third parties to keep such information confidential.
(h) Bidhit has obtained any and all necessary consents from
consumers with regard to Bidhit's collection and dissemination of personal
consumer information in accordance with Bidhit's privacy policy as published on
its website. Bidhit's practices regarding the collection and use of consumer
personal information are in accordance with Bidhit's privacy policy as published
on its website.
2.2.6 FINANCIAL STATEMENTS. The audited balance sheets and related
statements of income and earnings as of the close of the fiscal years ended
December 31, 1998 and 1999 as filed with the SEC on Form 10SB and 10KSB
(collectively referred to as the "BIDHIT FINANCIAL STATEMENTS") (i) are in
accordance with the books and records of Bidhit; (ii) present fairly, in all
material respects, the financial position of Bidhit as of the dates indicated;
and (iii) have been prepared in accordance with generally accepted accounting
principles consistently applied. There are no liabilities, claims or obligations
of any nature, whether accrued, absolute, contingent, anticipated, or otherwise,
whether due or to become due (collectively "LIABILITIES") other than (a)
Liabilities shown or provided for either in the balance sheet dated December 31,
1999 contained in the Bidhit Financial Statements, or (b) Liabilities incurred
in the ordinary course of business that in the aggregate have not been
materially adverse to Bidhit's Business Condition. The liabilities of Bidhit
were incurred in the ordinary course of Bidhit's business.
2.2.7 PERSONAL PROPERTY. Bidhit has good and marketable title, free
and clear of all title defects, security interests, pledges, options, claims,
liens, encumbrances, and restrictions of any nature whatsoever (including,
without limitation, leases, chattel mortgages, conditional sale contracts,
purchase money security interests, collateral security arrangements, and other
title or interest-retaining agreements) to all inventory, receivables,
furniture, machinery, equipment, and other personal property, tangible or
otherwise, used in Bidhit's business as of March 31, 2000, except for
acquisitions and dispositions in the ordinary course of business. All computer
equipment and other personal property used by Bidhit in the conduct of its
business are in good operating condition and repair, reasonable wear and tear
excepted.
2.2.8 LITIGATION AND OTHER PROCEEDINGS. Neither Bidhit nor any of its
officers, directors, or employees is a party to any pending or, to the knowledge
of Bidhit, threatened action, suit, labor dispute (including any union
representation proceeding), proceeding, investigation, or discrimination claim
in or by any court or governmental board, commission,
agency, department, or officer, or any arbitrator, arising from the actions or
omissions of Bidhit or, in the case of an individual, from acts in his capacity
as an officer, director, or employee of Bidhit which individually or in the
aggregate would be materially adverse to Bidhit. Bidhit is not subject to any
order, writ, judgment, decree, or injunction that has or could have a material
adverse effect on Bidhit's Business Condition.
2.2.9 ACCURACY OF INFORMATION. Bidhit has made with the SEC all
filings required by the Securities Exchange Act of 1934, as amended (all such
filings, including any exhibits to such filings, and any future filings made
thereunder are collectively, the "EXCHANGE ACT FILINGS"). None of the Exchange
Act Filings as of their respective dates 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.
2.2.10 DISCLOSURE. Neither the representations or warranties made by
Bidhit in this Agreement nor any other certificate executed and delivered by
Bidhit pursuant to this Agreement, when taken together, contains any untrue
statement of a material fact, or omits to state a material fact necessary to
make the statements or facts contained herein or therein not misleading in light
of the circumstances under which they were furnished.
2.2.11 RELIANCE. The foregoing representations and warranties are made
by Bidhit with the knowledge and expectation that EZBid is placing reliance
thereon.
ARTICLE III
COVENANTS OF EZBID AND THE SHAREHOLDERS
During the period from the date of this Agreement (except as otherwise
indicated) and continuing until the earlier of the termination of this Agreement
or the Effective Time (except for the covenants under Sections 3.8, 3.9 and
3.10, which shall survive closing), each of EZBid and the Shareholders jointly
and severally covenants and agrees (except as expressly contemplated by this
Agreement or as otherwise permitted by Bidhit's prior written consent) that:
3.1 CONDUCT OF BUSINESS.
3.1.1 ORDINARY COURSE. EZBid shall carry on its business in the
ordinary course and will use all reasonable efforts consistent with past
practice and policies to: (i) preserve intact its business organizations
(including its sales activities), and (ii) keep available the services of its
present officers, consultants, and employees and preserve its relationships with
customers, suppliers, distributors and others having business dealings with it.
EZBid shall promptly notify Bidhit of any event or occurrence or emergency which
is not in the ordinary course of business or which is material and adverse to
EZBid's Business Condition. The foregoing notwithstanding, EZBid shall not,
except with the written consent of Bidhit:
(a) enter into any commitment or transaction (i) to be performed
over a period longer than thirty days in duration or in excess of One Hundred
Thousand Dollars ($100,000), or (ii) to incur any material debt or liability, or
purchase assets (other than raw materials, supplies, or cash equivalents) for a
purchase price in excess of $5,000;
(b) grant any bonus, severance, or termination pay to any
officer, director, independent contractor or employee of EZBid;
(c) except in the ordinary course of business consistent with
prior practice, enter into or terminate any contracts, arrangements, plans,
agreements, leases, licenses, franchises, permits, indentures authorizations,
instruments and commitments, or amend or otherwise change the terms thereof;
(d) commence a lawsuit other than: (i) for the routine
collection of bills; (ii) in such cases where EZBid in good faith determines
that failure to commence suit would result in a material impairment of a
valuable aspect of EZBid's business, provided EZBid consults with Bidhit prior
to filing such suit; or (iii) for a breach of this Agreement;
(e) materially modify existing discounts or other terms and
conditions with any EZBid clients; or
(f) accelerate the vesting or otherwise modify, grant or issue
any EZBid option, restricted stock, or other outstanding rights or other
securities.
3.1.2 DIVIDENDS, ISSUANCE OF OR CHANGES IN SECURITIES. EZBid shall
not: (i) declare or pay the dividends on or make any other distributions
(whether in cash, stock or property) in respect of any of its capital stock, or
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in substitution
for shares of capital stock of EZBid, or repurchase or otherwise acquire,
directly or indirectly, any shares of common stock of EZBid except from former
employees, directors and consultants in accordance with agreements providing for
the repurchase of shares in connection with any termination of service to EZBid;
(ii) issue, deliver, or sell, or authorize, propose or agree to, or commit to
the issuance, delivery, or sale of any shares of its capital stock of any class,
any EZBid Voting Debt or any securities convertible into its capital stock, any
options, warrants, calls, conversion rights, commitments, agreements, contracts,
understandings, restrictions, arrangements or rights of any character obligating
EZBid to issue any such shares, EZBid Voting Debt or other convertible
securities; (iii) split, combine or reclassify any of its capital stock or issue
or authorize the issuance of any other securities in respect of, in lieu of or
in substitution for shares of capital stock of EZBid; (iv) repurchase or
otherwise acquire, directly or indirectly, any shares of its capital stock; or
(v) propose any of the foregoing.
3.1.3 GOVERNING DOCUMENTS. EZBid shall not amend its Governing
Documents.
3.1.4 EXCLUSIVITY; ACQUISITION PROPOSALS. Unless and until this
Agreement shall have been terminated by either party pursuant to Article VIII
hereof, Systemax shall not take or cause, directly or indirectly, any of the
following actions with any party other than Bidhit and its designees: (i)
solicit, encourage, initiate or participate in any negotiations, inquiries or
discussions with respect to any offer or proposal to acquire any of EZBid's
business, assets, or the EZBid Shares whether by merger, consolidation, other
business combination, purchase of assets, tender, or exchange offer or otherwise
(each of the foregoing, an "ACQUISITION"), (ii) disclose any information not
customarily disclosed to any person concerning its business or
properties or afford to any non-acquiring person or entity access to its
properties, books, or records, except in the ordinary course of business and as
required by law or pursuant to a governmental request for information, or (iii)
enter into or execute any agreement relating to an Acquisition. Systemax shall
provide Bidhit with written notice of the receipt of any offer or solicitation
of an offer for or relating to any Acquisition upon receipt thereof by EZBid or
either of the Shareholders. Notwithstanding the foregoing, after May 5, 2000 the
provisions of this Section 3.1.4 shall not apply; provided, however, in any such
event, Systemax shall provide Bidhit with prior written disclosure of the
identity of any third party with whom it proposes to enter into discussions and
reasonable detail on the terms and conditions thereof. Bidhit shall keep all
information required to be disclosed to it by the foregoing sentence
confidential.
3.1.5 NO ACQUISITIONS. EZBid shall not acquire or agree to acquire by
merging or consolidating with, or by purchasing a substantial portion of the
assets of, or by any other manner, any business or any corporation, partnership,
association, or other business organization or division thereof or otherwise
acquire or agree to make any such acquisition.
3.1.6 NO DISPOSITIONS. EZBid shall not sell, lease, license, transfer,
mortgage, encumber, or otherwise dispose of any of its assets or cancel,
release, or assign any indebtedness or claim.
3.1.7 INDEBTEDNESS. EZBid shall not incur any indebtedness for
borrowed money by way of direct loan, sale of debt securities, purchase money
obligation, conditional sale, guarantee, or otherwise.
3.1.8 COMPENSATION. EZBid shall not adopt or amend any Plan or pay any
pension or retirement allowance not required by any existing Plan. EZBid shall
not enter into or modify any employment contracts, increase the salaries, wage
rates, or fringe benefits of its officers, directors, or employees or pay
bonuses or other remuneration except for current salaries and other remuneration
for which EZBid is obligated pursuant to a written agreement a copy of which has
been provided to Bidhit.
3.1.9 CLAIMS. EZBid shall not settle any claim, action, or proceeding,
except in the ordinary course of business consistent with past practice.
3.2 ACCESS TO PROPERTIES AND RECORDS. Throughout the period between the
date of this Agreement and the Closing, EZBid shall give Bidhit and its
representatives reasonable access after written notice, during reasonable
business hours but in such a manner as not unduly to disrupt the business of
EZBid, to its premises, properties, contracts, commitments, books, records, and
affairs, and shall provide Bidhit with such financial, technical, and operating
data and other information pertaining to its business as Bidhit may reasonably
request. With EZBid's prior consent, which shall not be unreasonably withheld,
Bidhit shall be entitled to make appropriate inquiries of third parties in the
course of its investigation.
3.3 BREACH OF REPRESENTATIONS AND WARRANTIES. EZBid will not take any
action that would cause or constitute a breach of any of the representations and
warranties set forth in Section 2.1 or that would cause any of such
representations and warranties to be inaccurate in any material respect. In the
event of, and promptly after becoming aware of, the occurrence of or
the pending or threatened occurrence of any event that would cause or constitute
such a breach or inaccuracy, EZBid will give detailed notice thereof to Bidhit
and will use its best efforts to prevent or promptly remedy such breach or
inaccuracy.
3.4 CONSENTS. EZBid and the Shareholders will promptly apply for or
otherwise seek, and use their best efforts to obtain, all consents and
approvals, and make all filings, required with respect to the consummation of
the Merger.
3.5 TAX RETURNS. EZBid shall promptly provide Bidhit with copies of all
tax returns, reports, and information statements that have been filed or are
filed before the Closing Date on behalf of EZBid.
3.6 BEST EFFORTS. EZBid will use its best efforts to effectuate the
transactions contemplated hereby and to fulfill and cause to be fulfilled the
conditions to Closing under this Agreement.
3.7 SHAREHOLDER APPROVAL. Each of the Shareholders agrees to vote all of
such Shareholder's EZBid Shares for the approval of this Agreement and the
Merger Document as required by the DGCL by written consent solicited by EZBid
for such purpose or at a special meeting of shareholders of EZBid called for
such purpose.
3.8 RESTRICTIONS ON SALE OF SHARES. Each Shareholder hereby covenants and
agrees that it will not, during the period commencing on the Closing Date and
ending 180 days after the effective date of the Registration Statement (as
defined in Section 4.5 below), sell, offer to sell, contract to sell,
hypothecate, grant any option to sell or otherwise dispose of, directly or
indirectly, in any transaction effected on or through the NASD OTC Bulletin
Board or any other stock market, exchange or electronic trading system (an
"EXCHANGE TRANSACTION"), Bidhit Shares representing one-half of the total number
of Bidhit Shares issued to such Shareholder at Closing. Notwithstanding the
above, neither of the Shareholders shall be prevented from selling or otherwise
disposing of the Bidhit Shares at any time following the Closing Date in
connection with a transaction not involving an Exchange Transaction; provided,
however, that neither Shareholder shall sell or otherwise dispose of any Bidhit
Shares in a non-Exchange Transaction unless prior to such disposition the
intended transferee agrees with Bidhit in a written instrument approved by
Bidhit (which approval shall not be unreasonably withheld) to be bound by the
restrictions of this Section 3.8.
3.9 PRO FORMA TAX RETURNS. The Shareholders agree to provide Bidhit
with complete and correct copies of a pro forma federal tax returns of EZBid for
fiscal year ending 1999 as soon as practicable, but in no event later than
December 31, 2000.
3.10 LITIGATION CLAIMS. The Shareholders, jointly and severally, agree
to defend, indemnify, and hold Bidhit and its officers, directors, employees and
agents harmless from and against, and to cause Bidhit to be reimbursed with
respect to, any and all losses, damages, liabilities, claims, judgments,
settlements, fines, costs, and expenses (including reasonable attorneys' fees)
(to the extent not covered by any available insurance) of every nature
whatsoever incurred by Bidhit by reason of or arising out of or in connection
with the claims listed under Section 2.1.14 of the EZBid Disclosure Schedule.
The indemnification obligations of the
Shareholders under this Section 3.10 shall be separate and distinct from those
under Article VII below, and no Bidhit Shares subject to the Escrow Agreement
shall be used to satisfy the Shareholders' obligations hereunder.
3.11 PAYMENT OF BROKERS' AND FINDERS' FEES. Systemax shall pay all amounts
owing to brokers and finders under any agreements listed under Section 2.1.20 of
the EZBid Disclosure Schedule.
ARTICLE IV
COVENANTS OF BIDHIT AND SUB
During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time (except for
the covenants under Sections 4.3 and 4.5, which shall survive closing), each of
Bidhit and Sub agrees (except as expressly contemplated by this Agreement or
with EZBid's prior written consent) that:
4.1 BREACH OF REPRESENTATIONS AND WARRANTIES. Neither Bidhit nor Sub will
take any action which would cause or constitute a breach of any of the
representations and warranties set forth in Section 2.2 or which would cause any
of such representations and warranties to be inaccurate in any material respect.
In the event of, and promptly after becoming aware of, the occurrence of or the
pending or threatened occurrence of any event that would cause or constitute
such a breach or inaccuracy, Bidhit will give detailed notice thereof EZBid and
will use its best efforts to prevent or promptly remedy such breach or
inaccuracy.
4.2 CONSENTS. Each of Bidhit and Sub will promptly apply for or otherwise
seek, and use its best efforts to obtain, all consents, including Governmental
Consents and approvals, and make filings, to the extent any are required with
respect to the consummation of the Merger.
4.3 BOARD OF DIRECTORS OF BIDHIT. Bidhit will make two (2) seats available
on its board of directors for appointees to be nominated by Systemax. In
addition, each director appointed under this Section 4.3 will receive an option
to purchase One Hundred Thousand (100,000) common shares of Bidhit each at the
average closing price per share of Bidhit common shares on the NASD OTC Bulletin
Board for the thirty (30) days preceding the Closing Date (the "CLOSING PRICE").
For so long as Systemax holds One Hundred Thousand (100,000) shares of Bidhit,
prior to the annual meeting of Bidhit, the Board of Directors shall send a proxy
statement to the shareholders of Bidhit recommending to the shareholders the
election of the two (2) nominees of Systemax and soliciting the proxies of such
shareholders to vote for such nominees.
4.4 BEST EFFORTS. Each of Bidhit and Sub will use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement.
4.5 REGISTRATION RIGHTS. Bidhit shall file a registration statement with
the SEC registering under the Securities Act the resale of the Bidhit Shares by
the Shareholders as soon as is reasonably practicable after Closing (the
"REGISTRATION STATEMENT"). In the event that, at any time after the effective
date of the Registration Statement, the prospectus that forms a part of the
Registration Statement (the "PROSPECTUS") contains a material omission or
misstatement, Bidhit will promptly notify the Shareholders and the Shareholders
will upon receipt of such notice
immediately suspend all sales of Bidhit Shares made pursuant to the Prospectus.
The Company covenants and agrees to file an amendment to the Registration
Statement as soon as reasonably practicable to correct the material omission or
misstatement. All fees and expenses of the registration (other than underwriting
discounts and commissions and counsel fees of the selling shareholders) shall be
borne by Bidhit.
Bidhit will indemnify and hold harmless each Shareholder and each
other person, if any, who controls each Shareholder within the meaning of the
Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which such Shareholder or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses, claims, damages,
or liabilities (or actions in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained
in the Registration Statement, the Prospectus, or any amendment or supplement
thereof, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and will reimburse each such Shareholder
and each such controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that Bidhit will not be
liable in any such case if and to the extent that any such loss, claim, damage
or liability arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity with
information furnished by the Shareholders or such controlling person in writing
specifically for use in the Registration Statement or Prospectus; provided
further, however, that the liability of Bidhit shall not exceed the proceeds
received by the Shareholders from the sale of Bidhit Shares covered by the
Registration Statement.
Each Shareholder, severally and not jointly, will indemnify and hold
harmless Bidhit and each person, if any, who controls Bidhit within the meaning
of the Securities Act, each officer of Bidhit who signs the Registration
Statement, and each director of Bidhit against all losses, claims, damages or
liabilities, joint or several, to which Bidhit or such officer or director or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse Bidhit and each such officer, director, and controlling
person for any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that each Shareholder will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such Shareholder, as such, furnished
in writing to Bidhit by such Shareholder, specifically for use in the
Registration Statement or Prospectus; provided further, however, that the
liability of each Shareholder shall be limited to the proportion of any such
loss, claim, damage, liability or expense which is equal to the proportion that
the public offering price of shares sold by such Shareholder under the
Registration Statement bears to the total public offering price of all
securities sold thereunder,
but not to exceed the proceeds received by such Shareholder from the sale of
Bidhit Shares covered by the Registration Statement.
4.6 EXCHANGE ACT FILINGS. Bidhit shall file in a timely manner all
necessary Exchange Act Filings required to be filed on or prior to the date of
Closing.
4.7 ACCESS TO PROPERTIES AND RECORDS. Throughout the period between the
date of this Agreement and the Closing, Bidhit shall give EZBid and its
representatives reasonable access after written notice, during reasonable
business hours but in such a manner as not unduly to disrupt the business of
Bidhit, to its premises, properties, contracts, commitments, books, records, and
affairs, and shall provide EZBid with such financial, technical, and operating
data and other information pertaining to its business as EZBid may reasonably
request. With Bidhit's prior consent, which shall not be unreasonably withheld,
EZBid shall be entitled to make appropriate inquiries of third parties in the
course of its investigation.
ARTICLE V
ADDITIONAL AGREEMENTS
In addition to the foregoing, Bidhit, the Shareholders, and EZBid each
agree to take the following actions after the execution of this Agreement at or
prior to Closing, as applicable.
5.1 LEGAL CONDITIONS TO THE MERGER. Each of Bidhit, the Shareholders, and
EZBid will take all reasonable actions necessary to comply promptly with all
legal requirements which may be imposed on it with respect to the Merger. Each
of Bidhit, EZBid, and the Shareholders will take all reasonable actions to
obtain (and to cooperate with the other parties in obtaining) any consent
required to be obtained or made by EZBid, Bidhit, or the Shareholders in
connection with the Merger, or the taking of any action contemplated thereby or
by this Agreement.
5.2 TERMINATION OF PLANS. EZBid shall terminate all Plans prior to the
Effective Time.
5.3 EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
Notwithstanding the foregoing, Systemax, Inc. will pay all third party expenses
an costs incurred by or on behalf of EZBid in connection with this Agreement and
the transactions contemplated hereby. No expenses will be incurred by Systemax
by or on behalf of EZBid or the Surviving Corporation on and after Closing
without the prior approval of Bidhit.
5.4 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is reasonably necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of
EZBid, the proper officers and directors of each corporation that is a party to
this Agreement shall take all such necessary action.
5.5 CO-MARKETING AND PRODUCT DEVELOPMENT AGREEMENT. Bidhit and Systemax
shall enter into the Co-Marketing and Product Development Agreement
substantially in a form mutually agreed to by Bidhit and Systemax (the
"CO-MARKETING AGREEMENT").
5.6 PUBLIC ANNOUNCEMENTS. Bidhit and EZBid shall cooperate with each other
in releasing information concerning this Agreement and the transactions
contemplated herein. Each of the parties shall furnish to the other drafts of
all releases prior to publication. Nothing contained herein or in Section 3.1.4
above shall prevent either party at any time from furnishing any information to
any governmental agency or from issuing any release when it believes in good
faith and after consultation with the other party that it is legally required to
do so.
5.7 POST CLOSING ACCESS. After the Closing, the Surviving Corporation
shall provide the Shareholders with access at reasonable times to relevant books
and records necessary for the preparation of tax returns for EZBid and the
Shareholders or as reasonably necessary to enable Shareholders to comply with
other laws and regulations, and with orders, subpoenas, directives, or requests
of any government entity. Bidhit shall grant the Shareholders reasonable access
to and the right to make reasonable copies (at their own expense) of the
archival records of EZBid created before the closing for as long thereafter as
Bidhit has possession of such records. The Shareholders shall be entitled to use
and disclose any such records with the prior consent of Bidhit, which shall not
be unreasonably withheld. When Bidhit decides to dispose of such records, Bidhit
shall give the Shareholders prior notice of such planned disposal and the
Shareholders shall have the right to such records.
5.8 PRIOR ACTS INSURANCE; REIMBURSEMENT OF EXPENSES FOR CERTAIN CLAIMS.
Bidhit shall provide prior acts insurance coverage for the Shareholders and for
EZBid, with a deductible for errors and omissions of Twenty Five Thousand
Dollars ($25,000) per incident. Bidhit shall reimburse the Shareholders for any
and all losses, damages, liabilities, claims, judgments, settlements, fines,
costs, and expenses (including attorneys' fees) (each a "Claim") incurred by the
Shareholders and defense costs as and when incurred in connection with any
Claims that (a) are in excess of any insurance coverage; (b) are on the basis of
a deficiency in the performance of duties or a failure to meet the local
standard of care in the performance of professional services, which deficiency
or failure relates to the period before the Closing; and (c) do not constitute a
breach of any representation or warranty of the Shareholders contained herein.
5.9 FINANCING. Systemax agrees to subscribe, upon terms reasonably
acceptable to Systemax, for Two Hundred Thousand Dollars ($200,000) of
securities to be offered and sold by Bidhit in the First Financing (as defined
in Section 6.1.4 below), and to commit to a second tranche of Two Hundred
Thousand Dollars ($200,000) as described in Section 6.1.4 below.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligation of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of the following conditions:
6.1.1 GOVERNMENTAL APPROVALS. Other than the filing of the Merger
Document with the Secretary of State of Delaware, all Governmental Consents
legally required for the consummation of the Merger and the transactions
contemplated by this Agreement shall have been filed, occurred, or been
obtained, other than such Governmental Consents, for which the
failure to obtain would have no material adverse effect on the consummation of
the Merger or the other transactions contemplated hereby or on the Business
Condition of Bidhit, Sub, or EZBid.
6.1.2 CO-MARKETING AGREEMENT. Bidhit and EZBid shall have entered into
the Co-Marketing Agreement.
6.1.3 NO RESTRAINTS. No statute, rule, regulation, executive order,
decree or injunction shall have been enacted, entered, promulgated, or enforced
by any United States court or Governmental Entity of competent jurisdiction that
enjoins or prohibits the consummation of the Merger shall be in effect.
6.1.4 FINANCING. Bidhit shall have raised equity or convertible debt
financing from one or more third parties since February 29, 2000 in an aggregate
amount of at least Two Million Eight Hundred Thousand Dollars ($2,800,000) (the
"FIRST FINANCING") and shall have received a commitment for at least an
additional Two Million Eight Hundred Thousand Dollars ($2,800,000) to be paid in
one or more tranches (collectively with the First Financing, the "FINANCING").
The amounts referred to in the prior sentence are, in each case, exclusive of
the investment by Systemax contemplated by Section 5.9 above. The consideration
for the issuance of shares shall be cash. Bidhit shall have closed the First
Financing no later than May 31, 2000.
6.2 CONDITIONS OF OBLIGATIONS OF BIDHIT. In addition to those conditions
set forth in Section 6.1, the obligations of Bidhit to effect the Merger are
subject to the satisfaction of the following conditions unless waived by Bidhit:
6.2.1 OPINION OF COUNSEL. Bidhit shall have received an opinion dated
as of the Closing Date of outside counsel to EZBid reasonably acceptable to
Bidhit and their counsel, substantially in the form attached as EXHIBIT 6.2.1.
6.2.2 CONSENTS. Bidhit shall have received duly executed copies of all
material third-party consents, approvals, assignments, waivers, authorizations
or other certificates contemplated by this Agreement or the EZBid Disclosure
Schedule or reasonably deemed necessary by Bidhit's legal counsel to provide for
the continuation in full force and effect of any and all material contracts and
leases of EZBid and for Bidhit to consummate the transactions contemplated
hereby in form and substance reasonably satisfactory to Bidhit, except for such
thereof as Bidhit and EZBid shall have agreed in writing shall not be obtained.
6.2.3 REPRESENTATIONS AND WARRANTIES OF EZBID AND THE SHAREHOLDERS.
The representations and warranties of EZBid and the Shareholders shall be true
and correct in all material respects as of the original date of this Agreement
and as of the Closing Date as though made on and as of the Closing Date, except
as otherwise contemplated by this Agreement. Bidhit shall have received a
certificate signed by the President of EZBid to such effect immediately prior to
the Closing. Bidhit shall have completed a satisfactory due diligence review of
EZBid.
6.2.4 PERFORMANCE OF OBLIGATIONS OF EZBID AND THE SHAREHOLDERS. EZBid
and the Shareholders shall have performed in all material respects all
agreements and covenants required to be performed by them under this Agreement
prior to the Closing Date, except as
other otherwise contemplated by this Agreement. Bidhit shall have received a
certificate signed by the President of EZBid to such effect immediately prior to
the Closing.
6.2.5 RESIGNATION AND APPOINTMENT OF DIRECTORS. All of the existing
directors of EZBid shall have resigned from EZBid's board of directors.
6.2.6 DELIVERY OF EZBID CERTIFICATES. The Shareholders shall have
delivered all share certificates representing the EZBid Shares duly endorsed for
transfer as against payment to them of the Consideration.
6.2.7 FINANCING. Systemax shall have invested Two Hundred Thousand
Dollars ($200,000) in the First Financing on the terms contemplated by Section
5.9 above.
6.2.8 UPDATED BALANCE SHEET AND ELIMINATION OF INTERCOMPANY DEBT. At
Closing, EZBid shall provide to Bidhit an updated balance sheet as of the final
day of the last full month before the Closing Date (the "FINAL BALANCE SHEET").
The Final Balance Sheet shall be reasonably acceptable to Bidhit in form and
substance and shall not reflect any liability or payable (due to advances or
otherwise) owed by EZBid to Systemax (or any entity controlled by, affiliated
with or related to Systemax) and there shall not have been any material adverse
change in any asset or material increase in any liability outside the ordinary
course of business from those reflected on the Current Balance Sheet, nor shall
there be any material adverse change in any asset or material increase in any
liability from the date of the Final Balance Sheet to the Closing Date.
6.3 CONDITIONS OF OBLIGATIONS OF EZBID AND SHAREHOLDERS. In addition to
those conditions set forth in Section 6.1, the obligation of EZBid and the
Shareholders to effect the Merger is subject to the satisfaction of the
following conditions, unless waived by EZBid and the Shareholders:
6.3.1 OPINION OF BIDHIT'S COUNSEL. EZBid and the Shareholders shall
have received an opinion dated the Closing Date of Xxxxxxx Xxxxx & Xxxxx LLP,
substantially in the form attached as EXHIBIT 6.3.1.
6.3.2 CONSIDERATION. Bidhit shall have delivered certificates
representing the Closing Shares to the Shareholders and deposited the Escrow
Shares in accordance with the terms of the Escrow Agreement in accordance with
Sections 1.4 and 1.5 of this Agreement.
6.3.3 REPRESENTATIONS AND WARRANTIES OF BIDHIT AND SUB. The
representations and warranties of Bidhit and Sub shall be true and correct in
all material respects as of the original date of this Agreement and as of the
Closing Date as though made on and as of the Closing Date, except as otherwise
contemplated by this Agreement. EZBid shall have received a certificate signed
by the President of Bidhit to such effect immediately prior to the Closing.
EZBid shall have completed a satisfactory due diligence review of EZBid.
6.3.4 PERFORMANCE OF OBLIGATIONS OF BIDHIT AND SUB. Bidhit and Sub
shall have performed in all material respects all agreements and covenants
required to be performed by them under this Agreement prior to the Closing Date,
except as other otherwise contemplated
by this Agreement. EZBid shall have received a certificate signed by the
President of Bidhit to such effect immediately prior to the Closing.
ARTICLE VII
INDEMNIFICATION
7.1 INDEMNIFICATIONS RELATING TO AGREEMENT.
7.1.1 INDEMNIFICATION BY SHAREHOLDERS. The Shareholders, jointly and
severally, agree to defend, indemnify, and hold Bidhit harmless from and
against, and to cause Bidhit to be reimbursed with respect to, any and all
losses, damages, liabilities, claims, judgments, settlements, fines, costs, and
expenses (including reasonable attorneys' fees) (to the extent not covered by
any available insurance) ("INDEMNIFIABLE AMOUNTS") of every nature whatsoever
incurred by Bidhit by reason of or arising out of or in connection with (i) any
breach by EZBid or the Shareholders of any representation or warranty of EZBid
or the Shareholders contained in this Agreement, either as of the date of this
Agreement or as of the Closing Date, or in any certificate or other document
delivered to Bidhit pursuant to the provisions of this Agreement, and (ii) the
failure, partial or total, of EZBid or the Shareholders to perform any agreement
or covenant required by this Agreement to be performed by it or them. The
obligations of the Shareholders to indemnify Bidhit shall be determined without
regard to any right to indemnification to which the Shareholders may have in
their capacity as an officer, director, employee, agent or any other capacity of
EZBid and the Shareholders shall not be entitled to any indemnification from
EZBid for amounts paid hereunder.
7.1.2 INDEMNIFICATION BY BIDHIT. Bidhit agrees to defend, indemnify,
and hold the Shareholders harmless from and against, and to cause the
Shareholders to be reimbursed with respect to, any and all Indemnifiable Amounts
of every nature whatsoever incurred by the Shareholders by reason of or arising
out of or in connection with (i) any breach by Bidhit of any representation or
warranty of Bidhit and/or Sub contained in this Agreement or in any certificate
or other document delivered to the Shareholders pursuant to the provisions of
this Agreement, (ii) the failure, partial or total, of Bidhit to perform any
agreement or covenant required by this Agreement, or other agreements
contemplated by this Agreement, to be performed by it, and (iii) any action or
omission by Bidhit or its affiliates, agents or representatives.
7.2 THIRD PARTY CLAIMS. If any claim or demand is asserted against a party
in respect of which such party may be entitled to indemnification under this
Agreement, written notice of such claim or demand shall promptly be given by
such party (the "INDEMNIFIED PARTY") to the party or parties who may be
responsible for payment of indemnification under this Agreement (each an
"INDEMNIFYING PARTY"), which notice shall include a description of the facts
within the Indemnified Party's knowledge that relate to such claim or demand.
The Indemnifying Party shall have the right, but not the obligation, by
notifying the Indemnified Party within sixty (60) days after its receipt of the
notice of the claim or demand, to assume the entire control of (subject to the
right of the Indemnified Party to participate, at the Indemnified Party's
expense and with counsel of the Indemnified Party's choice), the defense,
compromise, or settlement of the matter, including, at the Indemnifying Party's
expense, employment of counsel of the Indemnifying Party's choice. Any damages
to the assets or business of the Indemnified Party caused by a failure by the
Indemnifying Party to defend, compromise, or settle
a claim or demand in a reasonable and expeditious manner requested by the
Indemnified Party, after the Indemnifying Party has given notice that it will
assume control of the defense, compromise, or settlement of the matter, shall be
included in the damages for which the Indemnifying Party shall be obligated to
indemnify the Indemnified Party. Any settlement or compromise of a matter by the
Indemnifying Party shall include a full release of claims against the
Indemnified Party that have arisen out of the indemnified claim or demand.
7.3 LIMITATIONS. There shall be no liability for indemnification under
this Article VII unless the aggregate amount of all such liabilities exceeds
$25,000 (the "THRESHOLD AMOUNT"); provided that any amounts relating to legal
expenses payable by any party shall not be subject to the Threshold Amount; and
provided further that at such time as the amount to which a party is entitled to
be indemnified exceeds the Threshold Amount, such party shall be entitled to be
indemnified up to the full Indemnifiable Amounts including the Threshold Amount.
Any qualification in the representations and warranties as to "materially" or
"material" shall be disregarded in determining indemnifiable amounts after the
$25,000 threshold has been exceeded. The total liability of Bidhit on the one
hand, and the Shareholders on the other, for indemnification under this Article
VII shall be limited to Five Million Dollars ($5,000,000).
7.4 SET-OFF. Bidhit shall be entitled to set off any amounts required to
be paid by the Shareholders against the Escrow Shares subject to and in
accordance with the provisions of the Escrow Agreement.
7.5 TIME LIMIT. The provisions of this Article VII shall apply only to
Indemnifiable Amounts that are incurred or relate to claims that are asserted in
writing with reasonable detail within two (2) years from the Closing Date;
provided that obligations of one or more Shareholders for Indemnifiable Amounts
arising out of fraud or willful misstatements or omissions of each such
Shareholder will have no time limit; provided further that the obligation of the
Shareholders to indemnify for breaches of the representations, warranties and
covenants in Sections 2.1.7 relating to taxes shall continue until thirty (30)
days after the expiration of all statutes of limitations applicable to such
taxes.
7.6 TAX CONSEQUENCES. As stated in Sections 1.6, it is the intent of the
parties that the Merger is intended to be a "reorganization" within the meaning
of Section 368 of the Code, and no party shall take any position inconsistent
with this interpretation. However no party or its counsel shall have any
obligation, of indemnification or otherwise, in the event it is determined that
the tax consequences differ from those intended.
7.7 BINDING EFFECT. The indemnification obligations of the parties
contained in this Article VII are an integral part of this Agreement and Merger
in the absence of which the parties would not have entered into this Agreement.
7.8 GENERAL. The indemnification provisions of this Article VII are in
addition to any other remedy in law or equity available to any party for any
breach of representation, warranty or covenant or any claim, cause of action or
right of any nature in connection with this Agreement.
ARTICLE VIII
TERMINATION
8.1 MUTUAL AGREEMENT. This Agreement may be terminated at any time prior
to the Effective Time by the written consent of Bidhit and EZBid.
8.2 TERMINATION BY BIDHIT. This Agreement may be terminated by Bidhit
alone, by means of written notice to EZBid, if there has been a material breach
by EZBid or the Shareholders of any representation, warranty, covenant, or
agreement set forth in the Agreement or other ancillary agreements, which breach
has not been cured within ten business days following receipt by EZBid of notice
of such breach.
8.3 TERMINATION BY EZBID. This Agreement may be terminated by EZBid alone,
by means of written notice to Bidhit, if there has been a material breach by
Bidhit and/or Sub of any representation, warranty, covenant, or agreement set
forth in the Agreement or other ancillary agreements, which breach has not been
cured within ten business days following receipt by Bidhit and/or Sub of notice
of such breach.
8.4 OUTSIDE DATE. This Agreement may be terminated by Bidhit alone or by
EZBid alone by means of written notice if the Effective Time does not occur on
or prior to May 31, 2000.
8.5 EFFECT OF TERMINATION. In the event of termination of this Agreement
by either Bidhit or EZBid as provided in this Article, and notwithstanding that
EZBid may have taken certain actions in contemplation of the Closing, this
Agreement shall forthwith become void and have no effect, and there shall be no
liability or obligation on the part of Sub, Bidhit, other than as set forth in
Section 5.5, EZBid, or their respective officers, directors, or shareholders,
except that (i) the provisions of Sections 5.3, 9.2, and 9.12 shall survive any
such termination and abandonment, and (ii) no party shall be released or
relieved from any liability arising from the willful breach by such party of any
of its representations, warranties, covenants, or agreements as set forth in
this Agreement.
ARTICLE IX
MISCELLANEOUS
9.1 ENTIRE AGREEMENT. This Agreement, including the exhibits and schedules
delivered pursuant to this Agreement, contains all of the terms and conditions
agreed upon by the parties relating to the subject matter of this Agreement and
supersedes all prior agreements, negotiations, correspondence, undertakings, and
communications of the parties, whether oral or written, respecting that subject
matter.
9.2 GOVERNING LAW. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Washington as applied to agreements
entered into and entirely to be performed within that state. The parties
irrevocably consent to the jurisdiction of the state and federal courts located
in King County Washington with respect to any matter arising out of this
agreement.
9.3 HEADINGS. The headings contained in this Agreement are intended
principally for convenience and shall not, by themselves, determine the rights
of the parties to this Agreement.
9.4 NOTICES. All notices, requests, demands or other communications which
are required or may be given pursuant to the terms of this Agreement shall be in
writing and shall be deemed to have been duly given (i) on the date of delivery
if personally delivered by hand, (ii) upon the third day after such notice is
(a) deposited in the United States mail, if mailed by registered or certified
mail, postage prepaid, return receipt requested, or (b) sent by a nationally
recognized overnight express courier, or (iii) by facsimile upon written
confirmation (other than the automatic confirmation that is received from the
recipient's facsimile machine) of receipt by the recipient of such notice:
IF TO BIDHIT: Bidhit, Inc.
00000 Xxxxx Xxxxx Xxxxxxx
Xxxxx 000
Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxx Xxxxx
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
WITH A COPY TO: Xxxxxxx Xxxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxxx, Esq.
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
IF TO THE SHAREHOLDERS: Systemax Inc.
00 Xxxxxx Xxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Attention: Xxxxxxx Xxxxx, CEO
AND: Xxxx Xxxxxx
Midwest Micro Corp.
Xxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
WITH A COPY TO: Xxxx Xxxx, Esq.
c/o Systemax Inc.
00 Xxxxxx Xxxx Xxxx
Xxxx Xxxxxxxxxx, XX 00000
Telephone No.: (000) 000-0000
Such addresses may be changed, from time to time, by means of a notice given in
the manner provided in this Section 9.4.
9.5 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, such provision and all other related provisions
shall be modified rather than voided, if possible, in order to achieve the
intent of the parties to this Agreement to the extent possible. In any event,
all other unrelated provisions of this Agreement shall be deemed valid and
enforceable to the full extent.
9.6 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties contained in this Agreement, including the exhibits and schedules
delivered pursuant to this Agreement, shall survive the Effective Time for two
(2) years.
9.7 ASSIGNMENT. No party to this Agreement may assign, by operation of law
or otherwise, all or any portion of its rights, obligations, or liabilities
under this Agreement without the prior written consent of the other party to
this Agreement, which consent may be withheld in the absolute discretion of the
party asked to grant such consent. Any attempted assignment in violation of this
Section 9.7 shall be voidable and shall entitle the other party to this
Agreement to terminate this Agreement at its option.
9.8 COUNTERPARTS. This Agreement may be signed in any number of
counterparts with the same effect as if the signatures to each counterpart were
upon a single instrument. All counterparts shall be deemed an original of this
Agreement.
9.9 AMENDMENT. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
9.10 EXTENSION, WAIVER. At any time prior to the Effective Time, any party
hereto may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(ii) waive any inaccuracies in the representations and warranties made to such
party contained herein or in any document delivered pursuant hereto, and (iii)
waive compliance with any of the agreements, covenants or conditions for the
benefit of such party contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party.
9.11 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits, or Schedules, such reference shall be to a Section, Exhibit,
or Schedule to this Agreement unless otherwise indicated. The words "include,"
"includes," and "including" when used therein shall be deemed in each case to be
followed by the words "without limitation".
9.12 CONFIDENTIALITY. Bidhit, Sub, EZBid, and the Shareholders agree to
keep confidential and not to disclose any of the terms and conditions of this
Agreement or the subject matter hereof, at any time, whether or not a Closing
occurs hereunder, except to the extent that such terms and conditions otherwise
become public through no fault of the disclosing party and Bidhit, Sub, and
EZBid agree to advise all of their respective officers, directors, shareholders,
employees, counsel, agents, and representatives of this obligation.
9.13 ATTORNEYS' FEES. In the event of any action to enforce any provision
of this Agreement, or on account of any default under or breach of this
Agreement, the prevailing party in such action shall be entitled to recover, in
addition to all other relief, from the other party all
attorneys' fees incurred by the prevailing party in connection with such action
(including, but not limited to, any appeal thereof).
(THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK)
SIGNATURE PAGE
AGREEMENT AND PLAN OF MERGER
IN WITNESS WHEREOF, Bidhit, Sub, the Shareholders, and EZBid have executed
this Agreement as of the date first written above.
BIDHIT, INC. EZBID INC.
By /s/ Xxx Xxxxx By /s/ Xxxx Xxxxxx
------------------------------ ------------------------------
Xxx Xxxxx, President Xxxx Xxxxxx, President
EZ ACQUISITION CORP. SHAREHOLDERS
SYSTEMAX INC.
By /s/ Xxx Xxxxx By /s/ Xxxxxxx Xxxxx
------------------------------ ------------------------------
Xxx Xxxxx, President Xxxxxxx Xxxxx, Chief Executive Officer
By /s/ Xxxx Xxxxxx
------------------------------
Xxxx Xxxxxx
EXHIBITS
Exhibit 1.1 (Certificate of Merger)
Exhibit 1.4 (Escrow Agreement)
Exhibit 6.2.1 (EZBid Form of Legal Opinion)
Exhibit 6.3.1 (Opinion of Xxxxxxx Xxxxx & Xxxxx LLP)
SCHEDULES
Schedule 2.1 (EZBid Disclosure Schedule)
Schedule 2.1.6 (EZBid Financial Statements)
