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Exhibit 10.20
MERGER AGREEMENT
This MERGER AGREEMENT (the "Agreement") is made as of January 17, 2000
by and among xxxxxxx.xxx, inc., a Nevada corporation ("Quepasa"); Credito
Acquisition Inc., a Delaware corporation wholly owned by Quepasa (the "Merger
Sub"); xxxxxxx.xxx, Inc., an Arizona corporation ("Credito"); and Verde Capital
Partners, LLC, an Arizona limited liability company, and Verde Reinsurance
Company, Ltd., an Arizona corporation (together the "Shareholders" and
individually each a "Shareholder").
RECITALS
A. Quepasa wishes to acquire all of the outstanding capital stock
of Credito from the Shareholders.
B. The parties desire the transaction to be structured in a
manner that will qualify as a tax-free reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended
(the "Code").
C. Quepasa has caused the formation of Merger Sub for the purpose
of accomplishing a tax-free triangular merger with Credito.
D. The parties have determined that it is in their respective
best interests to merge Credito with and into Merger Sub (the "Merger") and to
undertake such other actions described herein, all on the terms and subject to
the conditions set forth in this Agreement.
NOW, THEREFORE, the parties agree as follows:
ARTICLE I.
THE MERGER
In connection with the Merger, the respective boards of directors of
Quepasa, the Merger Sub and Credito have, by resolutions duly adopted, approved
the following provisions of this Article 1 as the plan of merger required by the
applicable provisions of the Delaware General Corporation Law ("Delaware Law")
and the Arizona Business Corporation Act ("Arizona Law"):
1.1 The Merger. At the Effective Time (as defined in Section 1.3),
in accordance with this Agreement and Delaware Law and Arizona law, Credito
shall be merged with and into Merger Sub, the separate existence of Credito
(except as such existence may be continued by operation of law) shall cease, and
Merger Sub shall continue as the surviving corporation under the corporate name
it possesses immediately prior to the Effective Time. Merger Sub, in its
capacity as the corporation surviving the Merger, sometimes is referred to
herein as the "Surviving Corporation."
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1.2 Effect of the Merger. The Surviving Corporation shall possess
all the rights, privileges, immunities and franchises, of a public as well as of
a private nature, of each of Merger Sub and Credito (collectively, the
"Constituent Corporations"); all property, real, personal and mixed, and all
accounts payable arising in the ordinary course of business and accrued expenses
due on whatever account, and all debts, liabilities and duties due to each of
the Constituent Corporations shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; and the
Surviving Corporation shall be responsible and liable for all liabilities and
obligations of each of the Constituent Corporations, in each case in accordance
with Delaware Law and Arizona Law.
1.3 Consummation of the Merger. As soon as is practicable after
the satisfaction or waiver of the conditions set forth in Article 7, and in no
event later than five business days after such satisfaction or waiver, the
parties hereto will cause a certificate of merger relating to the Merger to be
delivered to the Secretary of State of the State of Delaware in accordance with
the relevant provisions of Delaware Law and will cause articles of merger
relating to the Merger to be delivered to the Arizona Corporation Commission in
accordance with the relevant provisions of Arizona Law. The Merger shall be
effective at such time as such certificate of merger and articles of merger are
duly filed with (i) the Secretary of State of the State of Delaware and (ii) the
Arizona Corporation Commission, respectively, which filings shall be made
reasonably simultaneously. The date and time when the Merger shall become
effective is referred to as the "Effective Time."
1.4 Certificate of Incorporation and Bylaws; Directors and
Officers. The Certificate of Incorporation and Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation and Bylaws of the Surviving Corporation immediately after the
Effective Time and shall thereafter continue to be its Certificate of
Incorporation and Bylaws until amended as provided therein and under Delaware
Law. The directors of Merger Sub holding office immediately prior to the
Effective Time shall be the directors of the Surviving Corporation immediately
after the Effective Time. The officers of Merger Sub holding office immediately
prior to the Effective Time shall be the officers (holding the same offices as
they held with the Merger Sub) of the Surviving Corporation immediately after
the Effective Time.
1.5 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the part of the Merger Sub, Credito or the
holders of any of the following securities:
(a) All of the shares of common stock, no par value, of
Credito (the "Credito Common Stock") issued and outstanding immediately
prior to the Effective Time shall automatically be cancelled and
extinguished and converted into and become a right to receive: (i)
681,818 shares of common stock, $.001 par value per share, of Quepasa
(the "Quepasa Common Stock"); and (ii) Common Stock Purchase Warrants
substantially in the form and on the terms as attached hereto as
Exhibit A (the "Warrants") to purchase 681,818 shares of Quepasa Common
Stock contingent upon Credito achieving certain performance objectives
as set forth in the Warrants (the Quepasa Common Stock issuable
pursuant to subsections (i) and (ii) above shall be considered the
"Quepasa Merger Shares").
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(b) Each option or warrant to purchase shares of Credito
Common Stock issued and outstanding immediately prior to the Effective
Time shall automatically be cancelled and extinguished and no payment
shall be made with respect thereto.
(c) Each share of Credito Common Stock issued and
outstanding immediately prior to the Effective Time and held in the
treasury of Credito shall automatically be cancelled and extinguished
and no payment shall be made with respect thereto.
(d) The number of shares set forth in subsection (a)
above shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution
of securities convertible into Quepasa Common Stock), reorganization,
recapitalization or other like change with respect to Quepasa Common
Stock occurring after the date hereof and prior to the Effective Time.
(e) Each share of common stock, par value $.001 per
share, of the Merger Sub issued and outstanding immediately prior to
the Effective Time shall automatically be converted into and become one
validly issued, fully paid and nonassessable share of common stock, par
value $.001 per share, of the Surviving Corporation.
1.6 Reorganization. The parties hereby adopt this Agreement as a
"plan of reorganization" and shall consummate the Merger in accordance with
Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code. None of the parties shall
take a reporting position inconsistent with the treatment of the Merger as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
1.7 Closing. The closing (the "Closing") of the transactions
contemplated by this Agreement shall occur as soon as each of the conditions to
Closing contained in Article VII are fulfilled or waived at the offices of Xxxxx
& Xxxxxx, L.L.P., Xxx Xxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000, or at such other
place or at such other time as the parties may mutually agree upon.
1.8 Delivery of Certificates and Warrants. At the Closing, Quepasa
shall deliver to each of the Shareholders a (i) stock certificate representing
all of the Quepasa Merger Shares each Shareholder is entitled to pursuant to
Section 1.5 of this Agreement at the Closing and (ii) a Warrant as provided in
Section 1.5 of this Agreement.
1.9 Taking of Necessary Action; Further Action. Quepasa and the
Merger Sub, on the one hand, and Credito and the Shareholders, on the other
hand, shall use all reasonable efforts to take all such actions (including
without limitation actions to cause the satisfaction of the conditions of the
other to effect the Merger) as may be necessary or appropriate in order to
effectuate the Merger as promptly as possible. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving
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Corporation with full possession of all the rights, privileges, immunities and
franchises of the Constituent Corporations, or fully subject the Surviving
Corporation to all debts and obligations of the Constituent Corporations, the
officers and directors of the Surviving Corporation are fully authorized in the
name of the Constituent Corporations or otherwise to take, and shall take, all
such actions.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF QUEPASA AND THE MERGER SUB
Quepasa and the Merger Sub hereby represent and warrant to Credito and
the Shareholders that, as of the date hereof, and again at the Effective Time,
except as set forth in a letter, dated as of the date hereof, furnished to
Credito and the Shareholders (the "Quepasa Disclosure Letter"):
2.1 Organization and Qualification. Each of Quepasa and the Merger
Sub is a corporation duly organized, validly existing and in good standing under
the laws of the State of Nevada and Delaware, respectively, and has the
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted in every jurisdiction where the failure
to do so would have a material adverse effect on its assets, financial
condition, operating results, customer, employee, supplier or franchise
relations, business condition or prospects, or financing arrangements. The
copies of the Articles of Incorporation and Bylaws of Quepasa and the
Certificate of Incorporation and Bylaws of the Merger Sub previously furnished
to Credito and the Shareholders reflect all amendments thereto and are correct
and complete.
2.2 Authority Relative to This Agreement. Each of Quepasa and the
Merger Sub has the requisite corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder. The execution and delivery
of this Agreement by Quepasa and the Merger Sub and the consummation by Quepasa
and the Merger Sub of the transactions contemplated hereby have been duly
authorized by Quepasa and the Merger Sub, and no other corporate proceedings on
the part of Quepasa or the Merger Sub are necessary to authorize this Agreement
and such transactions. This Agreement has been duly executed and delivered by
Quepasa and the Merger Sub and constitutes a valid and binding obligation of
each, enforceable in accordance with its terms, except as the enforceability
thereof may be limited by bankruptcy, insolvency, reorganization or other
similar laws relating to the enforcement of creditors' rights generally and by
general principles of equity. Neither Quepasa nor the Merger Sub is subject to,
or obligated under, any provision of (a) its Articles or Certificate of
Incorporation, or its Bylaws, (b) any agreement, arrangement or understanding,
(c) any license, franchise or permit or (d) any law, regulation, order, judgment
or decree, which would be breached, or violated, or in respect of which a right
of termination or acceleration would arise or any encumbrance on any of its or
any of its subsidiaries' assets would be created, by its execution, delivery and
performance of this Agreement and the consummation by it of the transactions
contemplated hereby. Except for such filings to be made pursuant to Delaware and
Arizona Law in order to effect the Merger, National Market rules and federal and
state securities laws and filings required under the HSR Act, which Quepasa
agrees to make, no authorization, consent or approval of, or filing with, any
public body, court or authority is
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necessary on the part of Quepasa or the Merger Sub for the consummation by
Quepasa and the Merger Sub of the transactions contemplated by this Agreement.
2.3 No Material Adverse Changes. Except as set forth in the
Quepasa Business Reports (defined in Section 2.7) there has not been any
material adverse change in the assets, financial condition, operating results,
customer, employee, supplier or franchise relations, business condition or
prospects, or financing arrangements of Quepasa.
2.4 Validity of Stock. The Quepasa Merger Shares shall, when
issued: (i) be duly authorized, validly issued, fully paid and nonassessable and
free of liens and encumbrances created by any person other than the
Shareholders, and (ii) be free and clear of any transfer restrictions, liens and
encumbrances except for restrictions on transfer under applicable federal
securities laws, including Rule 144 promulgated under the Securities Act of
1933, as amended, (the "Securities Act").
2.5 Listing of Quepasa Common Stock. The Quepasa Common Stock is
and the Quepasa Merger Shares, when issued, shall be listed for trading on
Nasdaq and (i) Quepasa and the Quepasa Common Stock meet the criteria for
continued listing and trading on Nasdaq; (ii) Quepasa has not been notified by
Nasdaq (and is not aware) of any failure or potential failure to meet the
criteria for continued listing and trading on Nasdaq and (iii) no suspension of
trading in the Quepasa Common Stock is in effect.
2.6 Capitalization. The authorized equity capitalization of
Quepasa consists of 50,000,000 shares of Quepasa Common Stock and 5,000,000
shares of Preferred Stock. As of the date hereof, 14,452,921 shares of Quepasa
Common Stock are issued and outstanding, all of which shares are validly issued,
fully paid and nonassessable, and no shares of Preferred Stock are outstanding.
Except as disclosed in the Quepasa Disclosure Letter to this Agreement or in any
Quepasa Business Report (defined in Section 2.7), there are no options,
warrants, conversion privileges or other rights, agreements, arrangements or
commitments obligating Quepasa to issue or sell any shares of capital stock of
Quepasa or securities or obligations of any kind convertible into or
exchangeable for any shares of capital stock of Quepasa or of any other
corporation, nor are there any stock appreciation, phantom stock or similar
rights outstanding based upon the book value or any other attribute of Quepasa.
No holders of outstanding shares of Quepasa Common Stock are entitled to any
preemptive or other similar rights.
2.7 Financial Statements and SEC Filings. Quepasa has delivered to
the Shareholders true and correct copies of its Prospectus dated June 24, 1999,
its Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 1999
and September 30, 1999, its Current Reports on Form 8-K filed on August 2, 1999,
August 10, 1999, September 3, 1999 and November 1, 1999, and its Registration
Statement on Form S-8 filed October 1, 1999, constituting all filings made with
the Securities and Exchange Commission (the "SEC") from and after June 24, 1999,
the effective date of Quepasa's Registration Statement on Form S-1. Quepasa will
also deliver to the Shareholders, on or before the Effective Time, any reports
which are filed with the SEC after the date hereof and any other reports sent
generally to its shareholders after the date hereof, but not required to be
filed with the SEC. (All such reports are collectively referred to hereinafter
as the "Quepasa Business
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Reports"; and the financial statements, including the notes thereto, contained
in the Quepasa Business Reports are collectively referred to hereinafter as the
"Quepasa Financial Statements.") Quepasa has duly filed all reports required to
be filed by it with the SEC under the Securities Act and the Securities Exchange
Act of 1934, as amended, and no such report, nor any report sent to Quepasa's
shareholders generally, contains any untrue statement of material fact or omits
to state any material fact required to be stated therein or necessary to make
the statements in such report, in light of the circumstances under which they
were made, not misleading. The Quepasa Financial Statements included in the
Quepasa Business Reports were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved and present fairly the consolidated financial position, results of
operations, and cash flows of Quepasa and its consolidated subsidiaries as of
the dates and for the periods indicated therein, subject, in the case of
unaudited interim statements, to normal year-end accounting adjustments and the
absence of complete footnote disclosure. Except as set forth in the Quepasa
Business Reports, Quepasa has no material liabilities, contingent or otherwise,
other than (i) liabilities incurred in the ordinary course of business and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of Quepasa.
2.8 Absence of Undisclosed Liabilities. Except as and to the
extent stated in the Quepasa Financial Statements or the Quepasa Business
Reports, and except for those liabilities incurred in the normal course of
business of Quepasa and its subsidiaries, Quepasa does not have any material
liabilities or obligations (whether accrued, absolute, contingent, unliquidated,
known, unknown or otherwise, other than (i) liabilities incurred in the ordinary
course of business and (ii) obligations under contracts and commitments incurred
in the ordinary course of business, which, in both subsections (i) and (ii),
individually or in the aggregate, are not material to the financial condition or
operating results of Quepasa.
2.9 Litigation. Except as set forth in the Quepasa Disclosure
Letter or Business Reports, there are no actions, suits, proceedings, orders or
investigations pending or threatened against Quepasa, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
there is no basis known to Quepasa for any of the foregoing.
2.10 No Commissions. Quepasa has not incurred any obligation for
any finder's or broker's or agent's fees or commissions or similar compensation
in connection with the transactions contemplated hereby.
2.11 No Liabilities of Merger Sub. Except for its obligations under
this Agreement, the Merger Sub is not subject to any liabilities, obligations or
claims, whether absolute or contingent, liquidated or unliquidated, known or
unknown. The Merger Sub was formed solely for the purpose of consummating the
transactions contemplated by this Agreement and has not engaged in any business
or other activities for any other purpose.
2.12 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local
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governmental authority on the part of Quepasa or the Merger Sub is required in
connection with the consummation of the transactions contemplated by this
Agreement except the filing of the Certificate of Merger with the Secretary of
State of Delaware, the filing of the articles of merger with the Arizona
Corporation Commission, and the HSR Act filings required under Section 6.1.
2.13 Disclosure. Neither this Agreement nor any of the exhibits
hereto contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to the Shareholders which materially affects
adversely or could reasonably be anticipated to materially affect adversely the
business, including the operating results, assets, customer, supplier or
employee relations and business prospects, of Quepasa.
2.14 Reorganization Matters.
(a) Quepasa has, and at the Effective Time will have, no plan or
intention to:
(i) Liquidate Merger Sub;
(ii) Merge Merger Sub with or into any other corporation;
(iii) Sell or otherwise dispose of the stock of Merger Sub
except for transfers of stock to corporations "controlled" (within the meaning
of Section 368(c) of the Code) by Quepasa;
(iv) Cause Merger Sub to sell or otherwise dispose of any of
the assets of Merger Sub or assets acquired in the Merger from Credito except
for (i) sales or other dispositions made in the ordinary course of business,
(ii) transfers described in Section 368(a)(2)(C) of the Code; (iii) transfers to
members of the "qualified group" (within the meaning of Treasury Regulations
Section 1.368-1(d)(4)(ii)) encompassing Quepasa (the "Quepasa Group") following
the Effective Time, or (iv) transfers to a partnership if either (x) members of
the Quepasa Group, in the aggregate, own a significant interest in that
partnership business or (y) one or more members of the Quepasa Group have active
and substantial management functions as a partner with respect to that
partnership business;
(v) Cause Merger Sub to issue additional shares of stock that
would result in Quepasa losing "control" (within the meaning of Section 368(c)
of the Code) of Merger Sub following the Effective Time;
(vi) Cause Merger Sub or the Quepasa Group following the
Effective Time to discontinue the historic business conducted by Credito
preceding the Effective Time or fail to use in a business a significant portion
of the assets held by Credito immediately preceding the Effective Time;
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(vii) Acquire or cause any person "related" (within the
meaning of Treasury Regulations Section 1.368-1(e)(3)) to Quepasa to acquire any
of the Quepasa Common Stock issued in the Merger; or
(viii) Take any action that might otherwise cause the Merger
not to be treated as a "reorganization" within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
(b) Prior to the Effective Time, neither Quepasa nor any person
"related" to Quepasa will, "in connection with" the Merger, acquire any shares
of Credito capital stock. For purposes hereof, the term "related" has the
meaning in Treasury Regulations Section 1.368-1(e)(3) and the term "in
connection with" has the meaning in Treasury Regulations Section 1.368-1(e)(2).
(c) At the Effective Time:
(i) Quepasa will own all of the outstanding stock of Merger
Sub;
(ii) Merger Sub will own all of the assets ever owned by
Merger Sub; and
(iii) Neither Quepasa nor Merger Sub will be, nor will either
of Quepasa or Merger Sub have been at any time during the five-year period
preceding the Effective Time, the owner for federal income tax purposes of
shares of Credito capital stock.
(d) Quepasa has, and at the Effective Time will have, no plan or
intention to adopt any stock repurchase plan other than a plan that will limit
repurchases of Quepasa Common Stock to repurchases made on the open market on an
established securities exchange through a broker pursuant to an arrangement that
will preclude Quepasa from knowing the identity of the seller and seller from
knowing the identity of the purchaser.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF CREDITO
Credito hereby represents and warrants to Quepasa and Merger Sub that,
as of the date hereof and again at the Effective Time, except as set forth in a
letter, dated as of the date hereof, furnished to Quepasa and Merger Sub (the
"Credito Disclosure Letter"):
3.1 Organization and Qualification. Credito is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona, and has the requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted. Credito is duly
qualified to do business in every jurisdiction where the failure to do so would
have a material adverse change in its assets, financial condition, operating
results, customer, employee, supplier or franchise relations, business condition
or prospects, or financing arrangements. The copies of Credito's Articles of
Incorporation and Bylaws which have been furnished by Credito to Quepasa prior
to the date of this Agreement reflect all amendments made thereto and are
correct and complete.
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3.2 Authority Relative to this Agreement. Credito has the
requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by Credito and the consummation by Credito of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Credito and have been duly approved by the Shareholders, and no other corporate
proceedings on the part of Credito are necessary to authorize this Agreement and
such transactions. This Agreement has been duly executed and delivered by
Credito and constitutes a valid and binding obligation of Credito, enforceable
in accordance with its terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization or other similar laws relating
to the enforcement of creditors' rights generally and by general principles of
equity. Except as set forth in the Credito Disclosure Letter, Credito is not
subject to, or obligated under, any provision of (a) its Articles of
Incorporation or Bylaws, (b) any agreement, arrangement or understanding, (c)
any license, franchise or permit or (d) any law, regulation, order, judgment or
decree, which would be breached or violated, or in respect of which a right of
termination or acceleration would arise or any encumbrance on any of its assets
would be created, by its execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated hereby. Except for
such filings to be made pursuant to Arizona Law in order to effect the Merger
and filings required under the HSR Act, no authorization, consent or approval
of, or filing with, any public body, court or authority is necessary on the part
of Credito for the consummation by Credito of the transactions contemplated by
this Agreement.
3.3 Capitalization and Voting Rights. The authorized capital stock
of Credito consists of:
(a) Common Stock. One Million (1,000,000) Shares of
common stock, no par value, of which Two Thousand (2,000) shares are issued and
outstanding immediately prior to Closing.
(c) The outstanding shares of Credito Common Stock are
owned by the Shareholders and in the numbers specified in the Credito Disclosure
Letter.
(d) The outstanding shares of Credito Common Stock are
all duly and validly authorized and issued, fully paid and nonassessable, and
were issued in accordance with the registration or qualification provisions of
the Securities Act and any relevant state securities laws, or pursuant to valid
exemptions therefrom.
(e) There are not outstanding any options, warrants,
rights (including conversion or preemptive rights) or agreements for the
purchase or acquisition from Credito of any shares of its capital stock. Credito
is not a party or subject to any agreement or understanding, and, to Credito's
knowledge, there is no agreement or understanding between any persons or
entities, which affects or relates to the voting or giving of written consents
with respect to any security or by a director of Credito.
3.4 Balance Sheet. Credito has provided Quepasa with an unaudited
balance sheet, dated as of November 30, 1999 (the "Balance Sheet") and a
statement of profit and loss through
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November 30, 1999 (the "P&L Statement"). The Balance Sheet presents fairly in
all material respects the assets and liabilities of Credito as of the date
thereof, subject to normal year-end accounting adjustments and the absence of
footnote disclosure. Except as set forth in the Balance Sheet, Credito has no
material liabilities or obligations (whether accrued, absolute, contingent,
unliquidated, known, unknown or otherwise), other than (i) liabilities incurred
in the ordinary course of business and (ii) obligations under contracts and
commitments incurred in the ordinary course of business, which, in both
subsections (i) and (ii), individually or in the aggregate, are not material to
the financial condition or operating results of Credito. The P&L Statement
presents fairly in all material respects the information purported to be
presented therein.
3.5 No Material Adverse Changes. Except as disclosed in the
Credito Disclosure Letter, since November 30, 1999 there has not been a material
adverse change in the business or assets of eTrato. Without limiting the
foregoing, since November 30, 1999 there has not been:
(a) any change in the assets, liabilities, financial
condition or operating results of the Credito from that reflected in the Balance
Sheet, except changes in the ordinary course of business that have not been, in
the aggregate, materially adverse;
(b) any damage, destruction or loss, whether or not
covered by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of Credito (as such business
is presently conducted or proposed to be conducted immediately following the
Closing);
(c) any waiver by Credito of a material right or of a
material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by Credito, (i) except in the ordinary
course of business and (ii) that is not material to the assets, properties,
financial condition, operating results or business of Credito (as such business
is presently conducted or proposed to be conducted immediately following the
Closing);
(e) any material change or amendment to a material
contract or arrangement by which Credito or any of its assets or properties is
bound or subject;
(f) any material change in any compensation arrangement
or agreement with any employee;
(g) any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets;
(h) any resignation or termination of employment of any
key officer of Credito; and Credito, to its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(i) receipt of notice that there has been a loss of, or
material order cancellation by, any major customer of Credito;
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(j) any mortgage, pledge, transfer of a security interest
in, or lien, created by Credito, with respect to any of its material properties
or assets, except liens for taxes not yet due or payable;
(k) any loans or guarantees made by Credito to or for the
benefit of its employees, officers or directors, or any members of their
immediate families, other than travel advances and other advances made in the
ordinary course of its business;
(l) any declaration, setting aside or payment or other
distribution in respect of any of Credito's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by
Credito;
(m) to Credito's knowledge, any other event or condition
of any character that might be reasonably expected to materially and adversely
affect the assets, properties, financial condition, operating results or
business of Credito (as such business is presently conducted or proposed to be
conducted immediately following the Closing); or
(n) any agreement or commitment by Credito to do any of
the things described in this Section 3.5.
3.6 Litigation. There are no actions, suits, proceedings, orders
or investigations pending or threatened against Credito, at law or in equity, or
before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
there is no basis known to Credito for any of the foregoing.
3.7 Subsidiaries. Credito does not presently own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. Credito is not a participant in any joint venture,
partnership, or similar arrangement.
3.8 Patents and Trademarks. Credito has sufficient ownership or
rights to all patents, trademarks, service marks, trade names, copyrights, trade
secrets, information, proprietary rights and processes necessary for its
business as now conducted and as proposed to be conducted immediately following
the Closing without, to its knowledge, any conflict with or infringement of the
rights of others. The Credito Disclosure Letter lists all patents, trademarks
and servicemarks, and pending applications therefor. There are no outstanding
options, licenses, or agreements of any kind relating to the foregoing, nor is
Credito bound by or a party to any options, licenses or agreements of any kind
with respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information, proprietary rights and processes of any
other person or entity. Credito has not received any communications alleging
that Credito has violated or, by conducting its business as proposed, would
violate any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
Credito is not aware that any of its employees is obligated under any contract
(including licenses, covenants or commitments of any nature) or other agreement,
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to Credito or that would conflict
with Credito's business as now
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conducted or proposed to be conducted immediately following the Closing. Neither
the execution nor delivery of this Agreement, nor the carrying on of Credito's
business by the employees of Credito, nor the conduct of Credito's business as
now conducted or proposed to be conducted immediately following the Closing,
will, to Credito's knowledge, conflict with or result in a breach of the terms,
conditions or provisions of, or constitute a default under, any contract,
covenant or instrument under which any of such employees is now obligated.
Credito does not believe it is or will be necessary to utilize any inventions of
any of its employees (or people it currently intends to hire) made prior to or
outside the scope of their employment by Credito. Credito has taken all
commercially reasonable action necessary to protect such trademark.
3.9 Compliance with Other Instruments. Credito is not in violation
or default of any provision of its Articles of Incorporation or Bylaws, or of
any instrument, judgment, order, writ, decree or contract to which it is a party
or by which it is bound, or, to Credito's knowledge, of any provision of any
federal or state statute, rule or regulation applicable to Credito. The
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated hereby will not result in any such violation or be
in conflict with or constitute, with or without the passage of time and giving
of notice, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of Credito or the suspension,
revocation, impairment, forfeiture, or nonrenewal of any permit, license,
authorization, or approval applicable to Credito, that adversely affects its
business as now conducted or proposed to be conducted immediately following the
Closing, or its properties or its financial condition.
3.10 Agreements; Action
(a) Except as set forth in the Credito Disclosure Letter, there
are no agreements, understandings or proposed transactions between Credito and
any of its officers, directors, affiliates, or any affiliate thereof.
(b) Except as set forth in the Credito Disclosure Letter, there
are no agreements, understandings, instruments, contracts, proposed
transactions, judgments, orders, writs or decrees to which Credito is a party or
by which it is bound that may involve (i) obligations (contingent or otherwise)
of, or payments to, Credito in excess of $20,000, or (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from Credito
(other than the license of Credito's software and products in the ordinary
course of business), or (iii) provisions restricting or affecting the
development, manufacture or distribution of Credito's products or services, or
(iv) indemnification by Credito with respect to infringements of proprietary
rights.
(c) Credito has not (i) declared or paid any dividends or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or any
other liabilities individually in excess of $20,000 or, in the case of
indebtedness and/or liabilities individually less than $20,000, in excess of
$50,000 in the aggregate, (iii) made any loans or advances to any person, other
than ordinary advances for
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travel expenses, or (iv) sold, exchanged or otherwise disposed of any of its
assets or rights, other than the sale of its inventory in the ordinary course of
business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities Credito has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
(e) Credito is not a party to and is not bound by any contract,
agreement or instrument, or subject to any restriction under its Articles of
Incorporation or Bylaws, that adversely affects its business as now conducted or
proposed to be conducted immediately following the Closing, or its properties or
its financial condition.
3.11 Related Party Transactions. Except as disclosed in the Credito
Disclosure Letter, no employee, officer, or director of Credito or member of his
or her immediate family is indebted to Credito, nor is Credito indebted (or
committed to make loans or extend or guarantee credit) to any of them. To
Credito's knowledge, none of such persons has any direct or indirect ownership
interest in any firm or corporation with which Credito is affiliated or with
which Credito has a business relationship, or any firm or corporation that
competes with Credito, except that employees, officers, or directors of Credito
and members of their immediate families may own up to one percent (1%) of the
stock in each publicly traded company that may compete with Credito. Except as
disclosed in the Credito Disclosure Letter, no member of the immediate family of
any officer or director of Credito is directly or indirectly interested in any
material contract with Credito.
3.12 Permits. Credito has all franchises, permits, licenses, and
any similar authority necessary for the conduct of its business as now being
conducted by it, the lack of which could materially and adversely affect the
business, properties or financial condition of Credito. Credito is not in
default in any material respect under any of such franchises, permits, licenses,
or other similar authority.
3.13 Employee Benefit Plans. Credito does not have any Employee
Benefit Plan as defined in the Employee Retirement Income Security Act of 1974.
3.14 Tax Returns, Payments and Elections. Credito has filed all tax
returns and reports (including information returns and reports) as required to
be filed by it by law as of the date hereof or at the Effective Time. These
returns and reports are true and correct in all material respects. Credito has
paid, or will pay prior to becoming delinquent, all taxes shown to be due and
payable on such returns and reports, and any assessments imposed, except those
contested by Credito in good faith and disclosed to Quepasa. Credito has not
elected pursuant to the Code to be treated as a collapsible corporation pursuant
to Section 1362(a) or Section 341(f) of the Code, nor has it made any other
elections pursuant to the Code (other than elections that relate solely to
methods of accounting, depreciation or amortization) that would have a material
adverse effect on Credito, its financial condition, its business as presently
conducted or proposed to be
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conducted immediately following the Closing or any of its properties or material
assets. Credito is not aware of any tax deficiency proposed or assessed against
it and has not executed any waiver of any statute of limitations on the
assessment or collection of any tax or governmental charge, nor is Credito aware
that any of Credito's federal income tax returns or any of its state income or
franchise tax or sales or use tax returns has ever been audited by governmental
authorities. Since the date of the Balance Sheet, Credito has not incurred any
taxes, assessments or governmental charges other than in the ordinary course of
business and Credito has made adequate provisions on its books of account for
all taxes, assessments and governmental charges with respect to its business,
properties and operations for such period. To Credito's knowledge, Credito has
withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositories.
3.15 Minute Books. The minute book of Credito provided to Quepasa
contains a complete summary of all meetings of directors and stockholders since
the time of incorporation and reflect all transactions referred to in such
minutes accurately in all material respects.
3.16 Labor Agreements and Actions; Employee Compensation. Credito
is not bound by or subject to (and none of its assets or properties is bound by
or subject to) any contract, commitment or arrangement with any labor union, and
no labor union has requested or, to Credito's knowledge, has sought to represent
any of the employees, representatives or agents of Credito. There is no strike
or other labor dispute involving Credito pending, or to Credito's knowledge,
threatened, that could have a material adverse effect on the assets, financial
condition, operating results, customer, employee, supplier or franchise
relations, business condition or prospects, or financing arrangements of Credito
(as such business is now conducted and as it is proposed to be conducted
immediately following the Closing), nor is Credito aware of any labor
organization activity involving its employees. Credito is not aware that any
officer or key employee, or that any group of key employees, intends to
terminate their employment with Credito, nor does Credito have a present
intention to terminate the employment of any of the foregoing. The employment of
each officer and employee of Credito is terminable at the will of Credito. To
Credito's knowledge, Credito has complied in all material respects with all
applicable state and federal equal employment opportunity and other laws related
to employment. Credito is not a party to or bound by any currently effective
employment contract, deferred compensation agreement, bonus plan, incentive
plan, profit sharing plan, retirement agreement, or other employee compensation
agreement.
3.17 Year 2000 Compliance. Credito has advised Quepasa and the
Merger Sub of all action taken by Credito to determine the effect on Credito's
business by reason of the advent of the year 2000, and have provided Quepasa and
the Merger Sub with copies of all material reports with respect to year 2000
issues, whether prepared internally or by an outside consultant.
3.18 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority on the part of
Credito is required in connection with the consummation of the transactions
contemplated by this Agreement, except (i) the filing of the Certificate of
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Merger with the Secretary of State of Delaware; (ii) the filing of the articles
of merger with the Arizona Corporation Commission; and (iii) the HSR Act filings
required under Section 6.1.
3.19 Title to Property and Assets. To its knowledge, Credito owns
its property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens that arise in the ordinary
course of business and do not materially impair Credito's ownership or use of
such property or assets. With respect to the property and assets it leases,
Credito is in compliance with such leases and, to its knowledge, holds a valid
leasehold interest free of any liens, claims or encumbrances.
3.20 Insurance. Credito has in full force and effect fire and
casualty insurance policies, with extended coverage, sufficient in amount
(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed. Credito has in full force and effect product
liability and errors and omissions insurance in amounts customary for companies
similarly situated.
3.21 Disclosure. Neither this Agreement nor any of the exhibits
hereto contains any untrue statement of a material fact or omits a material fact
necessary to make the statements contained herein or therein, in light of the
circumstances in which they were made, not misleading, and there is no fact
which has not been disclosed to Quepasa which materially affects adversely or
could reasonably be anticipated to materially affect adversely the business,
including the operating results, assets, customer, supplier or employee
relations and business prospects, of Credito.
ARTICLE 4
ADDITIONAL REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder, severally and jointly, represents and warrants to
Quepasa and Merger Sub only with respect to itself and its own circumstances as
of the date hereof and again at the Effective Time, the following:
4.1 Authority. The Shareholder has the power and authority to
enter into this Agreement and to carry out its obligations hereunder. This
Agreement has been duly executed by the Shareholder and constitutes a valid and
binding obligation of the Shareholder, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization or other similar laws relating to the enforcement of creditors'
rights generally and by general principles of equity. The Shareholder is not
subject to, or obligated under, any agreement, arrangement or understanding, or
any law, regulation, order, judgment or decree, that would be breached or
violated, or in respect of which a right of termination or acceleration would
arise or any encumbrance on any of its assets would be created, by its
execution, delivery and performance of this Agreement and the consummation by it
of the transactions contemplated hereby. No authorization, consent or approval
of, or filing with, any public body, court or authority is necessary on the part
of the Shareholder for the consummation by it of the transactions contemplated
by this Agreement.
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4.2 Stock Ownership. The Shareholder represents that it is the
legal and beneficial owner of the number of shares of Credito Common Stock set
forth opposite his or its name in the Credito Disclosure Letter free and clear
of all restrictions, liens and encumbrances other than restrictions under
federal and state securities laws.
4.3 Purchase Entirely for Own Account. The Quepasa Merger Shares
to be received by each respective Shareholder will be acquired for investment
for the Shareholder's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and the Shareholder has
no present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, the Shareholder further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Quepasa Merger Shares.
4.4 Disclosure of Information. The Shareholder believes it has
received all the information it considers necessary or appropriate for deciding
whether to receive the Quepasa Merger Shares. The Shareholder further represents
that it has had an opportunity to ask questions and receive answers from Quepasa
regarding the business, properties, prospects and financial condition of
Quepasa. The foregoing, however, does not limit or modify the representations
and warranties of Quepasa in Article 2 of this Agreement or the right of the
Shareholder to rely thereon.
4.5 Investment Experience. The Shareholder is an investor in
securities of companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment of owning the
Quepasa Merger Shares.
4.6 Restricted Securities. The Shareholder understands that the
Quepasa Merger Shares it is acquiring are characterized as "restricted
securities" under the federal securities laws inasmuch as it is being acquired
from the Company in a transaction not involving a public offering, and that
under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, the Shareholder represents that it is familiar with SEC Rule
144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
4.7 Holding Period. The Shareholders agree that, for a period of
one year from the Effective Time, they will not transfer or otherwise dispose of
the Quepasa Merger Shares being issued to each Shareholder pursuant to the terms
of this Agreement.
4.8 Legend. It is understood that the certificates evidencing the
Quepasa Merger Shares may bear the following legend:
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a
registration statement in effect
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with respect to the securities under such Act or an opinion of
counsel reasonably satisfactory to Quepasa that such
registration is not required or unless sold pursuant to Rule
144 of such Act."
ARTICLE 5
CONDUCT OF BUSINESS PENDING THE MERGER
5.1 Conduct of Business Pending the Merger. Credito and the
Shareholders covenant and agree that, prior to the Effective Time, unless
Quepasa shall otherwise agree in writing or as otherwise expressly contemplated
or permitted by this Agreement:
(a) The businesses of Credito shall be conducted in the
ordinary course, on an arm's length basis and in accordance in all
material respects with all applicable laws, rules and regulations and
past custom and practice; Credito shall maintain its facilities in good
operating condition, ordinary wear and tear excepted; and Credito shall
use its reasonable best efforts to preserve intact its business
organization and goodwill, keep available the services of its officers
and employees as a group and maintain satisfactory relationships with
suppliers, distributors, customers and others having business
relationships with it;
(b) Credito shall not, directly or indirectly, do or
permit to occur any of the following: (i) issue, sell, pledge, dispose
of or encumber (A) any additional shares of, or any options, warrants,
conversion privileges or rights of any kind to acquire any shares of,
any of its capital stock, or (B) any of its assets, except in the
ordinary course of business; (ii) amend or propose to amend its
Restated Certificate of Incorporation or Bylaws; (iii) split, combine
or reclassify any outstanding shares of Credito Common Stock, or
declare, set aside or pay any dividend of other distribution payable in
cash, stock, property or otherwise with respect to shares of Credito
Common Stock; (iv) redeem, purchase or acquire or offer to acquire any
shares of Credito Common Stock or other securities of Credito; (v)
acquire (by merger, exchange, consolidation, acquisition of stock or
assets or otherwise) any corporation, partnership, joint venture or
other business organization or division or material assets thereof;
(vi) incur any indebtedness for borrowed money or issue any debt
securities except the borrowing of working capital in the ordinary
course of business and consistent with past practice; (vii) make any
investments other than short-term United States Treasury obligations or
short-term certificates of deposit of a commercial bank or trust
company; or (viii) enter into or propose to enter into, or modify or
propose to modify, any agreement, arrangement or understanding with
respect to any of the matters set forth in this Section 5.1(b);
(c) Credito shall not, directly or indirectly, enter into
or modify any contract, agreement or understanding, written or oral,
that involves consideration or performance of Credito of a value
exceeding $50,000 or a term exceeding one year;
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(d) Except as required by law, rule or regulation,
Credito shall not (i) enter into or modify any employment, severance or
similar agreements or arrangements with, or grant any bonuses, salary
increases, severance or termination pay to, any officers or directors
or consultants; or (ii) take any action with respect to the grant of
any bonuses, salary increases, severance or termination pay or with
respect to any increase of benefits payable in effect on the date
hereof;
(e) Credito shall not adopt or amend any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred
compensation, employment or other employee benefit plan, trust, fund or
group arrangement for the benefit or welfare of any employees or any
bonus, profit sharing, compensation, stock option, pension, retirement,
deferred compensation, employment or other employee benefit plan,
agreement, trust, fund or arrangements for the benefit or welfare of
any director; and
(f) Credito (i) shall not take any action which would
render, or which reasonably may be expected to render, any
representation or warranty made by it in this Agreement untrue at, or
at any time prior to, the Effective Time; and (ii) shall notify Quepasa
of any emergency or other change in the normal course of its business
or in the operation of its properties and of any governmental or third
party complaints, investigations or hearings (or communications
indicating that the same may be contemplated) if such emergency,
change, complaint, investigation or hearing would reasonably be
expected to be material, alone or in the aggregate, to the business,
operations or financial condition of Credito or to Credito's, Quepasa's
or the Merger Sub's ability to consummate the transactions contemplated
by this Agreement.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 HSR Act Filings. To the extent required by law, Credito on the
one hand and Quepasa and Merger Sub on the other shall each file with the United
States Federal Trade Commission (the "FTC") and the United States Department of
Justice (the "DOJ") any notifications required to be filed by their respective
"ultimate parent entities" under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), with respect to the transactions
contemplated herein. Each party shall be responsible for all expenses incurred
in the preparation of their respective HSR Act filings and each of Quepasa and
the Shareholders as a group, shall be responsible for half of the aggregate
filing fees to be paid in connection with the HSR Act filings. The parties shall
use their reasonable best efforts to make such filings promptly, to respond to
any requests for additional information made by either the FTC or DOJ, and to
cause the waiting periods under the HSR Act to terminate or expire at the
earliest possible date.
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6.2 Registration Rights. At the Effective Time, Quepasa and the
Shareholders shall enter into a Registration Rights Agreement in the form
attached hereto as Exhibit B (the "Registration Rights Agreement").
6.3 Non-Compete Agreement. Each Shareholder, shall, at the
Effective Time, enter into a non-compete agreement substantially in the form set
forth hereto as Exhibit C.
6.4 Listing of Shares. Quepasa will cause, at its own expense, the
Quepasa Merger Shares to be listed on the Nasdaq National Market or any other
exchange or trading system on which its common stock regularly trades.
6.5 Expenses. Except as provided in Section 6.1 and Section 6.4
herein, each party to this Agreement (Quepasa on the one hand and each of the
Shareholders on the other hand, for itself and Credito) shall bear their own
expenses in connection with this Agreement and the transactions contemplated
herein. Notwithstanding the foregoing, in the event any party materially
breaches the terms of this Agreement prior to the Effective Time and the Merger
is not consummated, the breaching party agrees to pay the nonbreaching party an
amount equal to all of the expenses incurred by the nonbreaching party in
connection with the preparation and negotiation of this Agreement and any other
matters otherwise related to the transactions contemplated herein, including but
not limited to all fees and expenses incurred by the nonbreaching party to
accountants and attorneys. Nothing herein shall be deemed to limit the right or
remedy of a party in the event of a material breach of this Agreement by the
other party.
6.7 Taxes. At the Closing, the Shareholders shall be responsible
for any sales, transfer or other similar taxes (excluding income taxes) which
result from the Merger.
6.8 Notification of Certain Matters. Each party shall give prompt
notice to the others of (a) the occurrence or failure to occur of any event,
which occurrence or failure would be likely to cause any representation or
warranty on its part contained in this Agreement to be untrue or inaccurate at,
or at any time prior to, the Effective Time, and (b) any material failure of
such party, or any officer, director, shareholder, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it hereunder.
6.9 Access to Information; Confidentiality.
(a) Quepasa and Credito shall each have the opportunity
to make a complete due diligence review of the books, records, business
and affairs of the other.
(b) To facilitate the due diligence review, Quepasa and
Credito shall provide to each other and each other's agents complete
access to all of each other's records and documents, shall provide each
other with personal, bank and professional references, and shall use
reasonable efforts to make available for consultation customers and
suppliers.
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(c) Each party agrees that all non-public information
provided to the other will be treated as confidential, and if this
Agreement is terminated, will return to the other party all
confidential documents (and all copies thereof) in its possession, or
will certify to the other that all such documents not returned have
been destroyed. Further, regardless of whether this Agreement is
terminated, each party shall continue to hold all confidential
information of the other in strictest confidence. Non-public
information shall not include any information which a party can
demonstrate: (i) was already in such party's possession prior to
negotiations related to this transaction; (ii) is or becomes publicly
and openly known and in the public domain through no fault of such
party; or (iii) is received by such party in a non-confidential manner
from a third party having the right to disclose such information.
ARTICLE 7
CONDITIONS
7.1 Conditions to Obligations of Each Party To Effect the Merger.
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) there shall not be pending by or before any court or
other governmental body an order or injunction restraining or
prohibiting the transactions contemplated hereby.
(b) no party hereto shall have terminated this Agreement
as permitted herein; and
(c) the applicable waiting period under the HSR Act
relating to all transactions contemplated by this Agreement shall have
expired or been terminated.
7.2 Additional Conditions to Obligation of Credito and the
Shareholders. The obligation of Credito and the Shareholders to effect the
Merger is also subject to the fulfillment at or prior to the Effective Time of
the following conditions:
(a) the representations and warranties of Quepasa and the
Merger Sub set forth in Article 2 that are qualified by materiality
shall be true and correct and the representation and warranties of
Quepasa and the Merger Sub that are not so qualified shall be true and
correct in all material respects on and as of the Effective Time with
the same force and effect as if made on and as of the Effective Time,
and each of Quepasa and the Merger Sub shall in all material respects
have performed each obligation and agreement and complied with each
covenant to be performed and complied with by it hereunder at or prior
to the Effective Time;
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(b) Quepasa shall have furnished to Credito a certificate
in which Quepasa and the Merger Sub shall certify that neither Quepasa
nor Merger Sub has any reason to believe that the conditions set forth
in Section 7.2(a) have not been fulfilled;
(c) Quepasa shall have furnished to the Shareholders (i)
a copy of the text of the resolutions by which the corporate action on
the part of Quepasa and the Merger Sub necessary to approve this
Agreement, the Merger and the issuance of the Quepasa Merger Shares
were taken and (ii) certificates executed on behalf of Quepasa
certifying, in each case, that such copy is a true, correct and
complete copy of such resolutions and that such resolutions were duly
adopted and have not been amended or rescinded;
(d) Quepasa shall have issued to each Shareholder,
certificates for the number of shares of Quepasa Common Stock to which
such Shareholder is entitled and the Warrants pursuant to Section 1.5
hereof.
(e) Opinions of Xxxxxxxxxx, Xxxxx & Xxxxxx, P.C. and/or,
Xxxxxx Xxxxxxxx Xxxxxx & Xxxxxxx based on customary reliance and
subject to customary qualifications, addressed to Credito and the
Shareholders to the effect that:
(i) Quepasa is a corporation validly existing
and in good standing under the laws of the State of Nevada.
(ii) The Merger Sub is a corporation validly
existing and in good standing under the laws of the State of
Delaware.
(iii) Quepasa has the corporate power to
consummate the transactions on its part contemplated by this
Agreement. Quepasa has duly taken all requisite corporate
action to authorize this Agreement and the certificate of
merger contemplated in Section 1.3; this Agreement has been
duly executed and delivered by Quepasa and constitutes a valid
and binding obligation of Quepasa, except as the
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or other
similar laws relating to the enforcement of creditors' rights
generally and by general principles of equity; Quepasa is not
subject to, or obligated under, any provision of its Articles
of Incorporation or Bylaws, which would be breached or
violated by its execution, delivery and performance of this
Agreement and the consummation by it of the transactions
contemplated hereby; and, to counsel's knowledge, Quepasa is
not required to obtain any material consents from any third
party for the consummation of the actions contemplated herein,
which consent has not been obtained.
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(iv) The Merger Sub has the corporate power to
consummate the transactions on its part contemplated by this
Agreement. The Merger Sub has duly taken all requisite
corporate action to authorize this Agreement and the articles
and certificate of merger contemplated in Section 1.3; and
this Agreement and such articles and certificate of merger
have been duly executed and delivered by the Merger Sub and
constitute valid and binding obligations of the Merger Sub,
except as the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization or other similar laws
relating to the enforcement of creditors' rights generally and
by general principles of equity; the Merger Sub is not subject
to, or obligated under, any provision of its Certificate of
Incorporation or Bylaws, which would be breached or violated
by its execution, delivery and performance of this Agreement
and the consummation by it of the transactions contemplated
hereby; and to counsel's knowledge, the Merger Sub is not
required to obtain any material consents from any third party
for the consummation of the actions contemplated herein, which
consent has not been obtained.
(v) The Quepasa Merger Shares, when issued
pursuant to the terms of this Agreement and the Warrants, will
have been duly authorized and validly issued, fully paid and
non-assessable.
(vi) Except as disclosed in the Quepasa
Disclosure Letter or Business Reports, to counsel's knowledge,
there are no actions, suits, proceedings, orders or
investigations threatened, instituted or pending against
Quepasa, at law or in equity, or before or by any federal,
state, municipal or other governmental department, commission,
board, bureau, agency or instrumentality.
(vii) No actions are required to be taken in order
to make the Merger effective under Delaware Law or Arizona Law
which have not been taken on or prior to the delivery of such
letter except the delivery of the articles of merger and
certificate of merger contemplated in Section 1.3 to the
Arizona Corporation Commission and the Secretary of State of
the State of Delaware, respectively, and the filing thereof,
in accordance with Arizona and Delaware Law;
(f) Quepasa shall have obtained each consent and approval
necessary in order that the Merger and the transactions contemplated
herein not constitute a breach or violation of, or result in a right of
termination or acceleration or any encumbrance on any of Quepasa's
assets pursuant to the provisions of, any agreement, arrangement or
understanding or any license, franchise or permit;
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(g) Between the date hereof and the Effective Time, (i)
there shall have been no material adverse change in the assets,
financial condition, operating results, customer, employee, supplier or
franchise relations, business condition or prospects, or financing
arrangements of Quepasa, (ii) there shall have been no adverse federal,
state or local legislative or regulatory change affecting in any
material respect the services, products or business of Quepasa and
(iii) none of the properties and assets of Quepasa shall have been
damaged by fire, flood, casualty, act of God or the public enemy or
other cause (regardless of insurance coverage for such damage) which
damages would have a material adverse effect on the assets, financial
condition, operating results, customer, employee, supplier or franchise
relations, business condition or prospects, or financing arrangements
of Quepasa, and Quepasa shall have delivered to the Shareholders a
certificate, dated as of the Effective Time to that effect; and
(h) All corporate and other proceedings in connection
with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance
to Credito's counsel, and Credito and its counsel shall have received
all such counterpart original and certified or other copies of such
documents as they may reasonably request.
7.3 Additional Conditions to Obligations of Quepasa and the Merger
Sub. The obligations of Quepasa and the Merger Sub to effect the Merger are also
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of Credito and the
Shareholders set forth in Article 3 and Article 4 respectively that are
qualified by materiality shall be true and correct and the
representation and warranties of Credito and the Shareholders that are
not so qualified shall be true and correct in all material respects on
and as of the Effective Time with the same force and effect as if made
on and as of the Effective Time, and each of Credito and the
Shareholders shall in all material respects have performed each
obligation and agreement and complied with each covenant to be
performed and complied with by it hereunder at or prior to the
Effective Time;
(b) Credito shall have furnished to Quepasa a certificate
in which Credito and the Shareholders shall certify that they have no
reason to believe that the conditions set forth in Section 7.3(a) have
not been fulfilled;
(c) Credito shall have furnished to Quepasa (i) a copy of
the text of the resolutions by which the Board of Directors and
Shareholders of Credito approved this Agreement (including, without
limitation, the plan of merger contained herein) and the Merger; and
(ii) a certificate executed on behalf of Credito by its corporate
secretary certifying to Quepasa that such copy is a true, correct and
complete copy of such resolutions and that such resolutions were duly
adopted and have not been amended or rescinded;
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(d) The Shareholders shall have delivered the original
certificate(s) for the shares of Credito Common Stock duly endorsed to
the Surviving Corporation for cancellation;
(e) Quepasa shall have received a letter addressed to
Quepasa from Xxxxx & Xxxxxx, L.L.P., based on customary reliance and
subject to customary qualifications, to the effect that:
(i) Credito is a corporation validly existing
and in good standing under the laws of the State of Arizona.
(ii) The authorized capital of Credito consists
of 1,000,000 shares of common stock, having no par value;
(iii) Credito has the corporate power to
consummate the transactions on its part contemplated by this
Agreement. Credito has duly taken all requisite corporate
action to authorize this Agreement and the articles and
certificate of merger contemplated in Section 1.3; this
Agreement and such articles and certificate of merger have
been duly executed and delivered by Credito and constitute
valid and binding obligations of Credito, except as the
enforceability thereof may be limited by bankruptcy,
insolvency, reorganization, fraudulent conveyance or other
similar laws relating to the enforcement of creditors' rights
generally and by general principles of equity; Credito is not
subject to, or obligated under, any provision of its Articles
of Incorporation or Bylaws which would be breached or
violated, or in respect of which a right of termination or
acceleration would arise or any encumbrance on any of its
assets would be created, by its execution, delivery and
performance of this Agreement and the consummation by it of
the transactions contemplated hereby; and to counsel's
knowledge, Credito is not required to obtain any material
consents from any third party for the consummation of the
actions contemplated herein, which consent has not been
obtained.
(iv) Except as disclosed in the Credito
Disclosure Letter, to counsel's knowledge, there are no
actions, suits, proceedings, orders or investigations
threatened, instituted or pending against Credito, at law or
in equity, or before or by any federal, state, municipal or
other governmental department, commission, board, bureau,
agency or instrumentality.
(v) No actions are required to be taken in order
to make the Merger effective under Delaware Law or Arizona Law
which have not been taken on or prior to the delivery of such
letter except
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the delivery and filing of the articles of merger contemplated
in Section 1.3 with the Arizona Corporation Commission in
accordance with Arizona Law and the filing of a certificate of
merger with the Secretary of State of the State of Delaware.
(f) Credito and each of the Shareholders shall have
obtained each consent and approval necessary in order that the Merger
and the transactions contemplated herein not constitute a breach or
violation of, or result in a right of termination or acceleration or
any encumbrance on any of Credito's assets pursuant to the provisions
of, any agreement, arrangement or understanding or any license,
franchise or permit;
(g) Between the date hereof and the Effective Time, (i)
there shall have been no material adverse change in the assets,
financial condition, operating results, customer, employee, supplier or
franchise relations, business condition or prospects, or financing
arrangements of Credito, (ii) there shall have been no adverse federal,
state or local legislative or regulatory change affecting in any
material respect the services, products or business of Credito and
(iii) none of the properties and assets of Credito shall have been
damaged by fire, flood, casualty, act of God or the public enemy or
other cause (regardless of insurance coverage for such damage) which
damages may have a material adverse effect on the assets, financial
condition, operating results, customer, employee, supplier or franchise
relations, business condition or prospects, or financing arrangements
of Credito, and Credito and the Shareholders shall have delivered to
Quepasa a certificate, dated as of the Effective Time to that effect;
(h) Quepasa shall have received an opinion from
Cruttenden Xxxx Incorporated, in form and substance reasonably
satisfactory to Quepasa, to the effect that the terms of the Merger are
fair from a financial point of view; and
(i) All corporate and other proceedings in connection
with the transactions contemplated at the Closing and all documents
incident thereto shall be reasonably satisfactory in form and substance
to Quepasa's counsel, and Quepasa and its counsel shall have received
all such counterpart original and certified or other copies of such
documents as they may reasonably request.
ARTICLE 8
INDEMNITIES
8.1 Survival of Representations and Warranties. All
representations and warranties made by Quepasa, the Merger Sub, Credito and the
Shareholders in this Agreement shall survive for six months from the date of
this Agreement and no claim for any breach thereof may be made unless notice
thereof is given to the other party prior to such date; provided, however, that
the representations and warranties contained in Section 3.14 shall survive until
the end of the applicable
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statute of limitations and the representations and warranties contained in
Section 4.2 shall survive for ten (10) years; and provided further, however,
that the limitations on survival shall not apply to any breach of this Agreement
constituting fraud.
8.2 Shareholders Agreement to Indemnify. Subject to the
limitations in this Article 8, the Shareholders, severally and jointly, agree to
indemnify and hold harmless Quepasa and Merger Sub and their respective
directors, officers, employees and agents from and against all proceedings,
judgments, decrees, demands, claims, actions, losses, damages, liabilities,
costs and expenses, including, without limitation, reasonable attorneys' fees
and costs (collectively referred to as "Losses") asserted against or incurred by
Quepasa, Merger Sub or their respective directors, officers, employees or agents
resulting from a breach of any covenant, agreement, representation or warranty
of Credito or the Shareholders contained in this Agreement or the exhibits
hereto.
8.3 Quepasa and the Merger Sub's Agreement to Indemnify. Subject
to the limitations in this Article 8, Quepasa and the Merger Sub hereby agree to
indemnify and hold harmless the Shareholders and their agents from and against
all Losses asserted against or incurred by the Shareholders or their agents
resulting from a breach of any covenant, agreement, representation or warranty
of Quepasa or Merger Sub contained in this Agreement or the exhibits hereto.
8.4 Notice of Claim. Any party who has a claim which would give
rise to liability pursuant to this Article 8 shall give prompt notice to the
other party of such claim, together with a reasonable description thereof. With
respect to any claim by a third party which is covered by the indemnifications
contained hereunder, the party obligated to indemnify shall be afforded the
opportunity, at its expense, to defend or settle such claim if, within 10 days
of notice thereof, it acknowledges in writing its indemnification obligation
hereunder, utilizes counsel reasonably satisfactory to the indemnified party,
commences such defense promptly and pursues such defense with diligence;
provided, however, that such indemnifying party shall secure the consent of the
indemnified party to any settlement, which consent shall not be unreasonably
withheld. If an indemnified party defends any claim hereunder, such party shall
use reasonable efforts in such defense and to mitigate Losses arising
thereunder, and shall not settle any claim without the consent of the
indemnifying party, which shall not be unreasonably withheld.
8.5 Certain Limitations.
(a) Cap. The Shareholders' indemnification liability
under Section 8.2 and Quepasa's indemnification liability under Section 8.3
shall be limited to the aggregate amount of consideration paid to the
Shareholders hereunder (the "Cap"), and such amounts shall be the exclusive
remedies of each of the parties in any cause of action based thereon (subject to
the exception in Section 8.5(c)) against the parties for any inaccuracy,
misrepresentation, breach of, or default in, any of the representations,
warranties or covenants given or made by the parties to this Agreement or in any
certificate, document or instrument delivered by or on behalf of any party
pursuant hereto.
(b) Basket. In no event shall the Shareholders as a party
on the one hand or Quepasa as a party on the other hand be required to indemnify
the other party for any Losses
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relating to any matter subject to indemnification under this Article 8, unless
and until such Losses exceed in the aggregate $150,000 (the "Basket"), in which
event all such Losses in excess of the Basket shall be recoverable by the
indemnified party.
(c) Fraud. The Basket and Cap shall not apply to any
breach of this Agreement constituting fraud.
8.6 Satisfaction of Obligations. If an indemnifying party becomes
obligated to indemnify another party with respect to any claim for
indemnification hereunder and the amount of liability with respect thereto shall
have been finally determined, subject to the limitations set forth in Section
8.5, the indemnifying party shall pay such amount to the indemnified party
within ten days following receipt by the indemnifying party of written demand
from the indemnified party.
8.7 Arbitration. Claims relating to the breach or alleged breach
of any representation, warranty, agreement or covenant under this Agreement or
otherwise relating to the indemnification obligations set forth in Article 8 of
this Agreement, unless mutually settled by Quepasa and the Shareholders, shall
be resolved by binding arbitration in accordance with the rules of the American
Arbitration Association (the "AAA"). Any arbitration shall be conducted by a
panel of three arbitrators approved by the AAA and mutually acceptable to
Quepasa and the Shareholders. If Quepasa and the Shareholders are unable to
agree on a panel of arbitrators, then the AAA shall select the panel. The
arbitrators' resolution of the dispute shall be final, binding, nonappealable
and fully enforceable by a court of competent jurisdiction under the Federal
Arbitration Act. The arbitration shall take place in the municipality in
Phoenix, Arizona.
8.8 Exclusive Remedy. The rights and remedies provided for in this
Agreement (including the rights to indemnification) shall be exclusive and no
other rights and remedies that may exist at law or in equity may be asserted
against a party.
ARTICLE 9
TERMINATION, AMENDMENT AND WAIVER
9.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time:
(a) by mutual consent of a duly authorized officer of
Quepasa, Credito and each of the Shareholders;
(b) by either party if the other party breaches any of
its material representations, warranties or covenants contained herein
and, if such breach is curable, is not cured within fifteen (15)
business days after notice thereof;
(c) by either party if obligations to close the
transactions contemplated by this Agreement shall become incapable of
satisfaction; or
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(d) by any of Quepasa, Credito or the Shareholders if the
Merger shall not have been consummated by March 31, 2000 or such later
date as may be agreed upon by the parties;
provided, however, that no party shall have the right to terminate this
Agreement unilaterally if the event giving rise to such right shall be primarily
attributable to such party or to any affiliated party.
9.2 Effect of Termination. In the event of termination of this
Agreement as provided in Section 9.1, this Agreement shall become void and there
shall be no liability or further obligation hereunder on the part of Quepasa,
the Merger Sub, Credito, the Shareholders or their respective shareholders,
officers or directors, except as set forth in Section 6.9 and Article 8 hereof
and except for liability arising from a willful breach of this Agreement.
9.3 Amendment. This Agreement may not be amended except by an
instrument in writing approved by the parties to this Agreement and signed on
behalf of each of the parties hereto.
9.4 Waiver. At any time prior to the Effective Time, any party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of any other party hereto or (b) waive compliance with any of the
agreements of any other party or with any conditions to its own obligations, in
each case only to the extent such obligations, agreements and conditions are
intended for its benefit.
ARTICLE 10
GENERAL PROVISIONS
10.1 Public Statements. Except as required by applicable law, no
party shall make any public announcement or statement with respect to the
Merger, this Agreement or any related transaction without the approval of the
other parties, which approval will not be unreasonably withheld. Each party
agrees to consult with the other parties prior to issuing any such public
announcement or statement.
10.2 Notices. All notices and other communications hereunder shall
be in writing and shall be sufficiently given if made by hand delivery, by
telecopier, by recognized overnight courier service, or by registered or
certified mail (postage prepaid and return receipt requested) to the parties at
the following addresses (or at such other address for a party as shall be
specified by it by like notice):
If to Quepasa or
the Merger Sub: xxxxxxx.xxx, inc.
000 Xxxx Xxx Xxxxx, 0xx Xxxxx
Xxxxxxx, Xxxxxxx 00000
FAX: 000-000-0000
Attn: Xxxx Xxxxxxxx
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With a copy to: Xxxxxxxxxx, Xxxxx & Xxxxxx, P.C.
000 00xx Xxxxxx, 00xx Xxxxx
Xxxxxx, XX 00000
FAX: 000-000-0000
Attn: Xxxxxxx Xxxxxxx
If to Credito: xxxxxxx.xxx, Inc.
0000 Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
FAX: 000-000-0000
Attn: Xxxxxx X. Xxxxxx XX
With a copy to: Xxxxx & Xxxxxx, L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
FAX: 000 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
If to the Shareholders: Verde Capital Partners, LLC
0000 Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
FAX: 000-000-0000
Attn: Xxxxxx X. Xxxxxx XX
Verde Reinsurance Company, Ltd.
0000 Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxx 00000
FAX: 000-000-0000
Attn: Xxxxxx X. Xxxxxx XX
With a copy to: Xxxxx & Xxxxxx, L.L.P.
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
FAX: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxx, Esq.
All such notices and other communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; three business days
after being deposited in the mail, postage prepaid, if delivered by mail; the
next business day, if by recognized overnight courier service; and when receipt
acknowledged, if telecopied.
10.3 Interpretation. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to
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Sections and Articles refer to sections and articles of this Agreement unless
otherwise stated. Words such as "herein," "hereinafter," "hereof," "hereto,"
"hereby" and "hereunder," and words of like import, unless the context requires
otherwise, refer to this Agreement (including the exhibits and attachments
hereto). As used in this Agreement, the masculine, feminine and neuter genders
shall be deemed to include the others if the context requires.
10.4 Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated and the parties shall negotiate
in good faith to modify this Agreement to preserve each party's anticipated
benefits under this Agreement.
10.5 Miscellaneous. This Agreement (together with all other
documents and instruments referred to herein): (a) constitutes the entire
agreement, and supersedes all other prior agreements, representations,
warranties and undertakings, both written and oral, among the parties, with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder; (c) shall not be assigned by
operation of law or otherwise, except that Quepasa and the Merger Sub may assign
all or any portion of their rights under this Agreement to any wholly owned
subsidiary, but no such assignment shall relieve Quepasa and the Merger Sub of
their obligations hereunder, and except that this Agreement may be assigned by
operation of law to any corporation with or into which Quepasa may be merged;
and (d) shall be governed in all respects, including validity, interpretation
and effect, by the internal laws of the State of Arizona, without giving effect
to the principles of conflict of laws thereof. This Agreement may be executed in
two or more counterparts, which together shall constitute a single agreement.
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MERGER AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, Quepasa, the Merger Sub, Credito and the
Shareholders have caused this Agreement to be executed on the date first written
above by their respective officers thereunder duly authorized.
XXXXXXX.XXX, INC., a Nevada corporation
By /s/ Xxxx Xxxxxxxx
-------------------------------
Name:
Title:
CREDITO ACQUISITION INC., a Delaware corporation
By /s/ Xxxx Xxxxxxxx
-------------------------------
Name:
Title:
XXXXXXX.XXX, INC., a Delaware corporation
By /s/ Xxxxxx X. Xxxxxx XX
-------------------------------
Name:
Title:
VERDE CAPITAL PARTNERS, LLC, an Arizona limited liability
company
By /s/ Xxxxxx X. Xxxxxx XX
-------------------------------
Name:
Title:
VERDE REINSURANCE COMPANY, LTD., an Arizona company
By /s/ Xxxxxx X. Xxxxxx XX
-------------------------------
Name:
Title:
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EXHIBIT A
FORM OF COMMON STOCK PURCHASE WARRANT
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EXHIBIT B
FORM OF REGISTRATION RIGHTS AGREEMENT
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34
EXHIBIT C
FORM OF NON-COMPETE AGREEMENT
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EXHIBIT D
FORM OF EMPLOYMENT AGREEMENT
35
