EXHIBIT 2.7
PLAN AND AGREEMENT OF SHARE EXCHANGE
THIS PLAN AND AGREEMENT OF SHARE EXCHANGE (this "Agreement") is made and
entered into as of the 15" day of December, 1999, by and among SITESTAR
CORPORATION, a Nevada corporation (the "Company") and XXX XXXXXXXX ("Xxx"), XXX
XXXXXXXX ("Xxx"), XXXX XXXXXXX ("Xxxx") (collectively, Xxx, Xxx and Xxxx are
sometimes referred to herein as the "Majority Shareholders"), and those
individuals listed on Annex I attached hereto and incorporated herein by
reference (all such persons, but including Xxx, Xxx and Xxxx, are sometimes
referred to herein individually as a "Seller"and collectively as the "Sellers".)
A. The Sellers own all of the issued and outstanding shares of the
capital stock of Neocom.
RECITALS
B. The Company and the Sellers' desire the transaction
contemplated by this Agreement (the "Transaction") to constitute a tax
free reorganization pursuant to SS368 (a) (1) (B) of the Internal Revenue
Code of 1986, as amended.
C. On the terms and subject to the conditions set forth in this
Agreement, at the Effective Time, all of the Neocom Shares shall be
exchanged for Sitestar Common Stock in accordance with the terms of this
Agreement.
AGREEMENT
NOW, THEREFORE, with reference to the foregoing facts, the
parties agree as follows:
1. Definitions.
(a) Certain Definitions. All terms defined in this
Agreement shall have the defined meanings when used in this Agreement or
in any agreement, note, certificate, report or other document made or
delivered pursuant to this Agreement, unless otherwise defined or the
context otherwise requires. The following terms shall have the following
meanings:
"Action" means any litigation, action, suit,
proceeding, arbitration or claim before any court or Governmental
Authority, or investigation by any Governmental Authority.
"Affiliate" shall mean, with respect to any specified
Person, (i) any other Person who, directly or indirectly, owns or
controls, is under common ownership or control with, or is owned or
controlled by, such specified Person, (ii) any other Person who is a
director, officer, partner or trustee of the specified Person or a Person
described in clause (i) of this definition or any spouse of the specified
Person or any such other Person, (iii) any relative of the specified
Person or any other
Person described in clause (ii) of this definition, or (iv) any Person of
which the specified Person and/or any one or more of the Persons specified
in clause (i), (ii) or (iii) of this definition, individually or in the
aggregate, beneficially own 30% or more of any class of voting securities
or otherwise have a substantial beneficial interest.
"Annual Financial Statements" shall mean the audited
(audited by accountants hired by Sitestar) balance sheet of Neocom as of
December 31, 1998, the related statements of income and retained earnings
and cash flows for the fiscal year then ended, including the notes (and
schedules) to these financial statements.
"Assumption Agreement" shall mean the agreement
pursuant to which the Majority Shareholders assume the Assumed Debt.
"Assumed Debt" shall mean those certain loans
identified in Exhibit A to this Agreernent.
"Best Efforts" shall mean the efforts that a
reasonable Person desirous of achieving a result would use in similar
circumstances to ensure that the result is achieved as expeditiously as
practicable under the circumstances; provided, however, that an obligation
to use Best Efforts under this Agreement does not require the Person
subject to that obligation to (i) take actions that would result in a
material adverse change in the benefits to such Person under this
Agreement or the transactions contemplated by this Agreement, (ii) make
any significant cash payments or (iii) incur any significant liability or
obligation.
"Best knowledge" with respect to any Person shall mean
the actual knowledge of the Person, including, the actual knowledge of any
of the officers or directors of such Person.
"Business" shall mean website development and
providing Internet access, web hosting and custom applications software
development, all as currently conducted by Neocom.
"Business Condition" of any Person shall rnean the
financial condition, results of operations, business, or properties of
such Person, taken as a whole.
"Charter Documents" shall mean (i) the Articles of
Incorporation and (ii) the Bylaws.
"Company Annual Financial Statements" shall mean the
audited (audited by accountants hired by Sitestar) consolidated balance
sheet of the Company as of December 31, 1998, the related consolidated
statements of income and retained earnings and cash flows for the fiscal
year then ended, including the notes (and schedules) to these financial
statements.
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"Company Current Financial Statements" shall mean the unaudited
consolidated balance sheet of the Company as of September 30, 1999 and
the related consolidated statements of income and retained earnings
for the nine-months then ended.
"Contract" shall mean any written or oral note, bond,
debenture, mortgage, license, agreement, commitment, contract or
understanding.
"Copyrights" shall mean all United States and foreign
copyrights, whether or not registered.
"Current Balance Sheet" shall mean the unaudited
balance sheet of Neocom as at September 30, 1999 included in the Current
Financial Statements.
"Current Financial Statements" shall mean the
unaudited balance sheet of Neocom as of September 30, 1999 and the related
statements of income and retained earnings for the nine- months then
ended.
"Effective Time" shall mean December 15,1999 as
between the parties, subject to the articles of share exchange being made
effective by the Virginia State Corporation Commission and the State of
Nevada, if necessary.
"Employment Agreements" shall mean employment
agreements entered into between the Company, on one hand, and each of the
Majority Shareholders, on the other hand, on the date of this Agreement.
"Employee Plan" with respect to any Person shall mean
any plan, arrangement or Contract providing compensation or benefits to,
for or on behalf of employees and/or directors of such Person and/or
Affiliates of such Person, including employment, deferred compensation,
retirement or severance Contracts; plans pursuant to which Equity
Securities are issued, including stock purchase, stock option, stock
appreciation rights plans; bonus, severance, phantom stock or incentive
compensation plans or arrangements; supplemental unemployment benefit,
hospitalization or other medical, life or other insurance; and ERISA
Plans.
"Environmental Laws" shall mean all present and future
statutes, regulations, rules, ordinances, codes, licenses, permits,
orders, approvals, plans, authorizations, concessions, franchises, and
similar items, of all Governmental Authorities and all applicable
judicial, administrative, and regulatory decrees, judgments, and orders
relating to Hazardous Substances or the protection of the environment in
any respect, including, without limitation: (i) all requirements,
including, without limitation, those pertaining to notification, warning,
reporting, licensing, permitting, investigation, and remediation of
Hazardous Substances; (ii) all requirements pertaining to the protection
of employees or the public from exposure to Hazardous Substances or
injuries or harm associated therewith; and (iii) the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. ss.9601
et seq.), the Resource Conservation and Recovery Act (49 U.S.C. ss.6901 et
seq.),
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the Hazardous Materials Transportation Act (49 U.S.C. ss.1801 et seq.), the
Clean Air Act (42 U.S.C. ss.7401 et seq.), the Occupational Safety and
Health Act (29 U.S.C. ss.600 et seq.) and all similar applicable federal,
state, local and municipal laws as they may from time to time be modified,
amended or superseded.
"Equity Securities" of any Person shall mean the
capital stock of such Person and/or any Stock Equivalents of such Person.
"ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended.
"Exploit" shall mean manufacture, advertise, license,
market, merchandise, promote, publicize, sell, use, market, supply or
distribute, and "Exploitation" and "Exploited" shall have a correlative
meaning.
"GAAP" shall mean generally accepted accounting
principles, consistently applied.
"Governmental Authority" shall mean any nation or
government, any state or other political subdivision thereof, and any
entity exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Hazardous Substance" means those substances defined
as hazardous substances in 42 U.S.C. ss. 9601(14) and all other substances
defined as hazardous under other applicable Laws.
"Indebtedness" means, with respect to any Person, (i)
any liability, contingent or otherwise, (a) for borrowed money,
capitalized lease obligations, purchase money obligations or other
obligations relating to the deferred purchase price of assets or property
or (b) evidenced by a note, bond, debenture, letter of credit or similar
instrument given in connection with the acquisition, other than in the
ordinary course of business, of any property, assets, securities or
otherwise, including indebtedness created or arising under conditional
sale or other title retention agreements (even though the rights and
remedies of the lender under the agreements in the event of default are
limited to repossession or sale of the property), (ii) any liability of
others described in the preceding clause which such Person has guaranteed
or which otherwise is its legal liability, (iii) all indebtedness referred
to above secured by (or for which the holder of the indebtedness has an
existing right, contingent or otherwise, to be secured by), any Lien upon
the property of such Person, whether or not the obligations secured
thereby have been assumed, and (iv) any amendment, renewal, extension or
refunding of any liability referred to in clauses (i), (ii) and (iii)
above; provided, however, that Indebtedness does not include any trade
payables of any Person incurred in the ordinary course of business. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at the date of all unconditional obligations as described above
and the maximum amount of any contingent obligations at the date.
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"IP" shall mean Patents, Trademarks, Copyrights, Know-How and
other rights and property commonly referred to as intellectual
property, and rights or licenses to use the same, and any and all
applications therefor.
"Know-How" shall mean all lab journals, inventions,
trade secrets, know-how (including, without limitation, proprietary
know-how and use and application know-how), product designs,
manufacturing, engineering and other drawings, technology, other
intangibles, technical information, safety information, engineering data
and design and engineering specifications, research records, market
surveys, promotional literature, supplier lists, similar data and formulas
and processes.
"Law" shall mean any federal, state or local statute,
law, rule, regulation, ordinance, order, code, policy or rule of common
law, now or hereafter in effect, and in each case as amended, and
anyjudicial or administrative interpretation thereof by a Governmental
Authority or otherwise, including anyjudicial or administrative order,
consent, decree orjudgment.
"Lien" shall mean any mortgage, deed of trust, pledge,
security interest, hypothecation, assignment, deposit arrangement,
encumbrance, lien (statutory or other), or preference, priority, or other
security agreement or preferential arrangement, charge, or encumbrance of
any kind or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement, any financing lease
having substantially the same economic effect as any of the foregoing, and
the filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction to evidence any of the foregoing).
"Material Contract" shall mean, with respect to any
Person, any Contract to which Person is a party or is otherwise bound
which is:
(i) A Contract which is to be performed in whole or in
part at or after the date of this Agreement and which (A) cannot be
canceled upon 30 days' notice or less and involves aggregate future
payments by or to such Person of more than $10,000; (B) involves material
nonmonetary obligations to be performed later than one year from the date
hereof-, (C) otherwise materially affects such Person; or (D) was not
entered into in the ordinary course of business;
(ii) A Contract pursuant to which such Person (A) has
borrowed or is committed or entitled to borrow money in an amount in
excess of $ 1 0,000; (B) has lent or committed to lend money; (C) has
given or is committed to give a guarantee of, or otherwise to incur
primary or secondary liability for (including any letter of credit), any
obligation of any other party in any amount;
(iii) A Contract regarding advertising, brokerage,
licensing, management, representative or agency relationships;
(iv) A Contract with or concerning any labor or
employee organization,
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(v) A Contract for the sale of any properties, assets
or rights of such Person for a purchase price in excess of $25,000 or for
the grant of any preferential right to purchase any of such assets,
properties or rights, or which requires the consent of any third party to
the transfer and assignment of such assets, properties or rights;
(vi) A Contract with any Affiliate of such Person;
(vii) A Contract (A) under which the benefits cannot
be retained upon the consummation of the transactions contemplated by this
Agreement without the written consent or approval of other parties or (B)
under which there will be a default as a result of the consummation of the
transactions contemplated by this Agreement unless such other parties
provide written consent or approval;
(viii) A Contract involving the lease of real or
personal property; and
(ix) A Contract requiring such Person to make capital
expenditures in excess of $10,000
"Neocom Common Stock" shall mean the Common Stock, par value
$__-per share, of Neocom.
"Neocom IP" shall rnean all IP that Neocom owns, licenses and/or
uses.
"Neocom Material Contract" shall mean a Material Contract of
Neocom.
"Neocom Shares" shall mean all of the shares of Neocom Common
Stock held by the Sellers.
"Patents" shall mean all patents (including all
reissues, divisions, continuations, continuations in part and extensions
thereod, patent applications and patent disclosures docketed and all other
patent rights.
"Permitted Liens" shall mean (i) Liens for current
taxes not yet delinquent; (ii) restrictions imposed by Law; and (iii)
easements and restrictions which are neither individually nor in the
aggregate material to Neocom.
"Person" shall mean an individual or a partnership,
corporation, trust, association, Limited Liability Company, Governmental
Authority or other entity.
"Real Estate" shall mean that certain real property
located at 00 Xxxx Xxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000.
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"SEC" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the
Securities Act.
"Securities Act" shall mean the Securities Act of
1933, as amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder.
" Securities " of any Person shall mean Equity
Securities, Stock Equivalents and any other "security" as that term is
defined under the Securities Act of such Person.
"Seller Representative" shall mean Xxx Xxxxxxxx, or
such other Seller as may from time to time be elected by the holders of a
majority of the Neocom Shares.
"Sitestar Shares" shall mean the shares of Sitestar
Common Stock to be issued to the Sellers upon conversion of their Neocom
Shares.
"Sitestar Common Stock" shall mean the Common Stock,
par value $.001 per share, of the Company.
"Stock Equivalents" of any Person shall mean options,
warrants, calls, rights, commitments, convertible securities and other
securities pursuant to which the holder, directly or indirectly, has the
right to acquire (with or without additional consideration) capital stock
or equity of such Person.
"Subsidiary" of any Person shall mean any entity of
which securities or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions are owned directly or indirectly by such Person.
"Systems" shall mean all items, products or systems of
Neocom or the Company, as the case may be, used in the operation of the
Business which incorporate the processing of dates and date-related data
(including, without limitation, calculating, comparing and sequencing)
that are operationally material to the Business as conducted by Neocom or
its agents or other Persons, including, without limitation, computer
systems, infrastructure items, software applications, hardware, and
related equipment and utilities.
"Trademarks" shall mean all trademark, service xxxx
and trade name rights (including all registrations of trademarks and of
other marks, all registrations of trade names, labels and other trade
rights and applications for any of the foregoing) and all associated
goodwill symbolized thereby or connected therewith.
"Transfer" shall mean sell, assign, transfer, pledge,
grant a security interest in, or otherwise dispose of, with or without
consideration, and "Transferred" shall have a correlative meaning.
Notwithstanding the foregoing, the definition of Transfer shall not
include the pledge of Sitestar Common Stock in connection with the
borrowing of money.
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"Year 2000 Compliant" shall mean that all Systems
accurately process dates and date-related data (including, without
limitation, calculating, comparing and sequencing) in all material
respects before, during and after the year 2000.
(b) Other Definitions. In addition to the terms
defined in the foregoing provisions of this Agreement, the following terms
shall have the meanings given the terms in the Sections set forth below:
Term Section
Acquisition 6 (c)
Proposal
Clairn 10(c)
Claim Notice 10(c)
Claim Dispute 10(f)
Notice
Closing 3(a)
Closing Date 3(a)
Company 10(b)
Indemnified
Party
Company 10(b)
Indemnified
Parties
Contingent 2(b)
Shares
Darnages 10(b)
Direct Claim 10(c)
Employees 9(c)
Indemnification 10(h)
Market Price
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Indemnifying 10(c)
Party
Indemnified 10(c)
Party
Initial Shares 2(b)
Market Price 2(b)
Notices 16(a)
Released Claims 6(e)
Remaining 2
Shares
Retums 4(y)(ii)
Sellers 4
Disclosure Letter
Short Period 4 (y)(i)(D)
Tax Return 4 (y) (i) (A)
Tax 4 (y) (i) (B)
Taxing Authority 4(y)(i)(C)
Third Party 10(c)
Claim
2. Exchange of Shares.
(a) Exchange of Shares. On the terms and subject to
the conditions of this Agreement, at the Effective Time, each share of
Neocom Common Stock issued and outstanding shall, and without any action
by the holder thereof, be exchanged into a number of shares of Sitestar
Common Stock as follows: (i) each Neocom Share owned by a Seller (other
than the Majority Shareholders) shall be converted into a number of shares
of Sitestar Common Stock equal to the quotient (rounded to the nearest
whole share) of Total Sitestar Shares divided by the number of Neocom
Shares. (ii) each Majority Shareholder shall receive his pro-rata portion
(rounded to the nearest whole share) of the Remaining Shares plus the
right to receive the Contingent Shares. The
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"Total Sitestar Shares" shall mean a number of shares (rounded to the
nearest whole share) equal to $6,918,000 divided by the Market Price. The
"Remaining Shares" shall mean the Total Sitestar Shares less 2,000,000
less the number of Sitestar Shares issued to the Sellers (other than
Majority Shareholders) under (i) above. The "Contingent Shares" shall mean
a number of shares (rounded to the nearest whole share) equal to (i)
2,000,000 less (ii) the aggregate amount of unreimbursed Indemnification
Claims of the Company Indemnified Parties under Section 10 of this
Agreement divided by the Indemnification Market Price. The "Market Price"
shall be deemed to be $1.02. The "Indemnification Market Price" shall be
as defined in Section 10(h).
The foregoing notwithstanding, Sitestar agrees to issue
additional Sitestar shares for distribution on a pro rata basis to all
Shareholders of Neocom equal in value to the tax liability suffered by the
Majority Shareholders as defined below. The Majority Shareholders may sell
enough Sitestar shares on or before July 31, 2001 in order to pay off
assumed liabilities under the Assumption Agreement of even date herewith
and/or "put" certain shares back to Neocom and/or Sitestar under said
Assumption Agreement. Such sale and/or "put" under the preceding sentence
will cause the Majority Shareholders to incur federal and state tax
liability. The aggregate of such federal and tax liability for the
Majority Shareholders is defined to be the "tax liability" above. Within
ninety days of July 31, 2001, the Shareholders of Neocom shall present in
writing to Sitestar a calculation of such liability. Within thirty days
thereafter, Sitestar shall issue as part of this section 368 (a) (1) (B)
stock exchange additional Sitestar shares equal in value to the tax
liability with such shares to be distributed to all Shareholders of Neocom
in proportion to their shareholding of Neocom on the closing date of this
Agreement. For purposes of the preceding sentence, such Sitestar shares
shall be valued at their market price at time of such distribution.
3. Closing and Deliveries.
(a) The Closin . The closing of the tender of the
Neocom Shares (the "Closing") shall take place on December 16, 1999, at
2:00 p.m., E.S.T. time, at 00 Xxxx Xxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxxx, or
at such other place or time as the parties to this Agreement shall
mutually agree upon in writing and shall be effective at the Effective
Time. The date of the Closing is referred to in this Agreement as the
"Closing Date".
(b) Manner of Exchange. Each holder of a certificate
of Neocom Common Stock, upon surrender of such certificate to Company's
registrar and transfer company (which shall act as exchange agent),
accompanied by a letter of transmittal or endorsed in blank or accompanied
by a stock power shall be entitled to receive in exchange therefor a
certificate or certificates representing the number of full shares of
Sitestar Common Stock for which shares of Neocom Common Stock theretofore
represented by the certificate or certificates so surrendered shall have
been exchanged as provided herein. Until so surrendered, each outstanding
certificate, prior to the Effective Time, represented Neocom Common Stock
will be deemed to evidence the right to receive the number of full shares
of Sitestar Common Stock into which the shares of Neocom Common Stock
thereby may be converted. Until such outstanding certificate formerly
representing Neocom Common Stock are surrendered, no dividend payable to
holders of record of Sitestar Common Stock
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for any period as of any date subsequent to the Effective Time shall be paid to
the holder of such outstanding certificates in respect thereof. After the
Effective Time, there shall be no further registry or transfer on the records of
Neocom of shares of Neocom Common Stock. If a certificate representing such
shares is presented to the exchange agent, it shall be canceled and exchanged
for a certificate representing shares of Sitestar Common Stock as herein
provided. Company will also issue a certificate in exchange for shares evidenced
by lost certificate (s) provided the record owner thereof provides Company with
such substantiation, indemnification and security as Company may reasonably
require. Upon surrender of certificates of Neocom Common Stock in exchange for
Sitestar Common Stock, there shall be paid to the recordholder of the
certificates of Sitestar Common Stock issued in exchange thereof (i) the amount
of dividends theretofore paid with respect to such full shares of Sitestar
Common Stock as of any date subsequent to the Effective Time which have not yet
been paid to a public official pursuant to abandoned property laws and (ii) at
the appropriate payment date the amount of dividends with a record date after
the Effective Time, but prior to surrender and payment date subsequent to
surrender. No interest shall be payable with respect to such dividends upon
surrender of outstanding certificates.
(c) Deliveries by the Sellers at the Closing. At the
Closing, the Sellers shall deliver to the Company:
(i) a certificate or certificates evidencing the
Neocom Shares, duly endorsed for transfer in blank or accompanied by a
stock power duly endorsed in blank;
(ii) the Assumption Agreement duly executed by the
Majority Shareholders; and
(iii) such documents and instruments as the Company
may reasonably request to evidence the satisfaction of all conditions
precedent set forth in Section 7 of this Agreement.
(d) Deliveries by the Company after the Closing. The
Company shall deliver the Contingent Shares to the Majority Shareholders
on the second anniversary of the Closing; provided, however, that if as of
the second anniversary there remain any unresolved Claims (because of a
dispute between the Company and the Sellers, or because the amount of the
Claim has not been determined, such as a Third Party Claim which has not
been resolved, or otherwise), then the Company may elect not to issue such
number of Contingent Shares as may equal the maximum amount of such
disputed or unresolved Claims (as determined in good faith by the Company)
divided by the Market Price; provided, further, however, that at such time
as such Claim is resolved, if it is resolved for less than such maximum
amount, the Company shall promptly issue to the Sellers such additional
Contingent Shares as shall equal such maximum amount less the actual
amount of such Claim, divided by the Indemnification Market Price. It is
agreed that the Contingent Shares shall be allocated to, and withheld
from, the Majority Shareholders.
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(e) Further Assurances' At the Closing, each party to
this Agreement shall deliver or cause to be delivered, as appropriate,
such further certificates, consents and other documents as may be
necessary to carry out the terms of this Agreement, including but not
limited to articles of share exchange to be filed with the Virginia State
Corporation Commission and Nevada Secretary of State.
4. Representations and Warranties of the Majority Shareholders.
Except as set forth in the disclosure letter delivered
by the Sellers to the Company concurrently with the execution and delivery
of this Agreement, which letter shall refer to the relevant Sections of
this Agreement (the "Sellers Disclosure Letter"), the Majority
Shareholders, represent and warrant to the Company, as follows:
(a) Organization, Standing and Corporate Power. Neocom
is a corporation duly organized, validly existing and in good standing
under the laws of the Commonwealth of Virginia and has all requisite
corporate power and corporate authority to own, lease and operate its
properties and assets and to carry on its business as now being conducted.
Complete and correct copies of the Charter Documents of Neocom have been
delivered to the Company. Neocom is duly qualified to do business as a
foreign corporation and is in good standing in all jurisdictions where the
failure to qualify would have a material adverse effect on the Business
Condition of Neocom.
(b) Capitalization.
(i) The authorized capital stock of Neocom consists
solely of 1,000 shares of Neocom Common Stock. Except for 500 shares of
Neocom Common Stock, there are no outstanding Equity Securities of Neocom.
All of the outstanding Equity Securities of Neocom are owned of record and
beneficially as set forth in the Sellers Disclosure Letter. All Equity
Securities issued by Neocom have been duly authorized and validly issued
and are fully paid and nonassessable. The Neocom Common Stock is the only
class of voting stock issued or authorized by Neocom.
(ii) There are no outstanding Stock Equivalents of
Neocom. Neocom is not obligated to purchase or redeem any Equity
Securities or Stock Equivalents.
(iii) Neocom has not, either directly or through any
agent, offered any Securities of Neocom to or solicited any offers to
acquire any such Securities from, or otherwise approached, negotiated, or
communicated in respect of any such Securities with, any Person in such a
manner as to require that the offer or sale of such Securities be
registered pursuant to the provisions of Section 5 of the Securities Act
and the rules and regulations of the SEC thereunder or the securities laws
of any state. No Majority Shareholder has any reason to believe that
Neocom has not complied with all federal and state securities and blue sky
laws in all offers, sales and purchases of its Securities prior to the
date hereof or any applicable law in making such issuances and purchases
of any Securities prior to the date hereof. Any notices required to be
filed under federal and state
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securities and blue sky laws prior to the date hereof have been filed on a
timely basis prior to or as so required.
(iv) At the Closing Date, the Company will receive
good and marketable title to the Neocom Shares free and clear of all
Liens. The Neocom Shares are not subject to any Stock Equivalents.
(c) Authority: Enforceability. Effect of Agreement.
(i) Each Seller has the requisite capacity to enter
into, execute and deliver this Agreement and perform his obligations
hereunder. Sellers have approved this Agreement by unanimous written
consent and as a result no Seller is entitled to exercise dissenter's
rights under Virginia law. This Agreement has been duly executed and
delivered by each Seller and, assuming this Agreement is duly executed and
delivered by the Company, constitutes a valid and legally binding
obligation of each Seller enforceable against such Seller in accordance
with its terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar laws
relating to or affecting creditors' rights generally, or the availability
of equitable remedies.
(ii) The execution and delivery by each Seller of this
Agreement does not, and compliance by each Seller with the provisions of
this Agreement will not, (A) conflict with or result in a breach or
default under any of the terms, conditions or provisions of any Material
Contract to which any Seller or Neocom is a party or otherwise bound, or
to which any property or asset of any Seller or Neocom is subject; (B)
violate any Law applicable to any Seller or Neocom; or (C) result in the
creation or imposition of any Lien on any asset of Neocom.
(d) Assets.
(i) Neocom has good and marketable title to all of its
assets free and clear of all Liens, other than Permitted Liens and Liens
identified in the Sellers Disclosure Letter.
(ii) Neocom's assets consist of all of the properties
and assets used in the conduct of the Business, including all of the
properties and assets reflected on the Current Balance Sheet, other than
assets sold or transferred in the ordinary course of business since the
date of the Current Balance Sheet or leased or licensed in the ordinary
course of business. Substantially all items of material tangible personal
property of Neocom, taken as a whole, are in good operating condition and
repair, ordinary wear and tear excepted, and those items constitute
sufficient material tangible personal property for the requirements of the
Business as currently conducted.
(e) Accounts Receivable; Subscribers.
(i) The Sellers Disclosure Letter sets forth a true
and complete schedule of the Accounts Receivable of Neocom as of the date
of the Current Balance Sheet, setting forth a
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description of the Accounts Receivable including the names and addresses of
the account debtors, the balance amount and auinly as of the date indicated
therein. The Accounts Receivable, whether reflected on the Current Balance
Sheet or subsequently created, and all books, records and documents
relating to such Accounts Receivable, are genuine and materially accurate.
All Accounts Receivable of Neocom, whether reflected on the Current Balance
Sheet or subsequently created: (A) constitute bona fide and valid rights of
Neocom to collect payments from other Persons; (B) represent credit
extended in a manner consistent with Neocom's trade practices; (C) are not
believed to be subject to any defense, counterclaim or offset; (D) except
for reserves for returns and bad debts set forth in the Current Balance
Sheet and arising in the ordinary course of business since the date of the
Current Balance Sheet and an additional 5% reserve of such Accounts
Receivable, are believed to be collectable in accordance with Neocom's past
practices. Except as identified in the Sellers Disclosure Schedule, since
the date of the Current Balance Sheet, there have not been any write-offs
in excess of $500.00 as uncollectable of any Accounts Receivable.
(ii) The Sellers Disclosure Letter sets forth a true
and correct list of the names and addresses of all Persons for whom the
Company is providing Internet access as of December 16, 1999.
(f) Material Contracts. To the Best Knowledge of the
Majority Shareholders, Neocom is not a party to any Material Contract
except as identified as such in the Sellers Disclosure Schedule. True and
correct copies of each written Neocom Material Contract, including all
amendments and modifications thereof and waivers thereunder, have been
delivered to the Company. Except as identified in Sellers Disclosure
Schedule: (i) each Neocom Material Contract is believed to be in full
force and effect, and is the valid and binding obligation of each party to
the Material Contract; (ii) Neocom has performed all of the obligations
required to be performed by it to date under each Material Contract; and
(iii) Neocom is not in material breach of or default under any Material
Contract. To the Best Knowledge of the Majority Shareholders, each other
party to each Material Contract is believed to have performed all of the
obligations required to be performed by it to date under the Material
Contract and is not in material breach of or in default under the Material
Contract, and to the Best knowledge of the Majority Shareholders no event
has occurred or circumstance exists which, with notice or lapse of time or
both, would constitute a material breach of or default under any Material
Contract.
(g) Intellectual Prope . The Sellers Disclosure Letter
contains a true and complete list of all Patents, Trademarks and
registered Copyrights of Neocom and the basis of the right of Neocom to
use such Patents, Trademarks and Copyrights. The Neocom IP constitutes all
of the IP that is required to enable Neocom to conduct the Business as
presently conducted.
(h) Subsidiaries. Neocom does not own, directly or
indirectly, any shares of stock or any other financial interest or
investment (equity or debt) in any Person, and is not subject to any
agreement, obligation or commitment to make such investment. The Business
has been conducted solely by Neocom in its own name.
14
(i) Financial Statements. The Annual Financial
Statements (as delivered to the Company), taken as whole, fairly present
the financial position and results of operations of Neocom as at the dates
of and for the periods set forth in the Annual Financial Statements in
accordance with GAAP. The Current Financial Statements have been prepared
in accordance with GAAP (with the only exceptions that no notes have been
prepared with respect to the Current Financial Statements and they are
subject to customary year end adjustments), consistent with the Annual
Financial Statements, and taken as a whole, fairly present the financial
position and results of operations of Neocom as at and for the nine months
ended September 30, 1999. Except as set forth in the Current Balance
Sheet, Neocom does not have any known Indebtedness.
0) Absence of Certain Changes and Events. Except as
otherwise disclosed in Sellers Disclosure Letter, since December 31, 1998,
except for this Agreement and changes contemplated by this Agreement,
Neocom has conducted its business only in the ordinary course of business
and there has not been any:
(i) purchase, redemption, retirement or other
acquisition by Neocom of any Equity Securities of Seller;
(ii) declaration or payment of any dividend or other
distribution or payment to any shareholder of Neocom in respect of any
Equity Securities of Neocom;
(iii) material increase by Neocom in the compensation
payable or to become payable by Neocom to any shareholder or to any
director, officer or employee of Neocom being paid $25,000 or more at or
at any time after October 31, 1998;
(iv) payment of any bonus, pension, retirement or
insurance payment or arrangement to or with, or advance or loan of any
money to, any Person, or entry into any employment, severance, loan or
similar Contract with any Person, other than payment of salaries and other
employee benefits in the ordinary course consistent with past practice;
(v) incurrence by Neocom of any Indebtedness other
than trade payables incurred by Neocom in the ordinary course of business
which do not exceed $5,000;
(vi) transfer of any assets to, or entry into any
agreement or arrangement with, any Seller or any officer or director of
Neocom (other than payment of salaries and other benefits in the ordinary
course of business and consistent with past practice) or any of their
respective Affiliates.
(k) Litigation and Proceedings-. Except as identified
in Sellers Disclosure Letter, and with the exception of potential
litigation with xxxxxxxxxxxxxx.xxx and Intellimedia Commerce, there is no
pending or, to the Best knowledge of the Majority Shareholders, threatened
Action to which Neocom is a party or involving any of the assets, and
Neocom is not subject to any judgment,
15
order, writ, injunction, decree or regulatory directive or agreement, which
could have a material adverse effect on the Business Condition of Neocom.
(1) Brokers. Sellers retained and employed a Person as a
finder or broker in connection with this Agreement or the transactions
contemplated hereby and will pay at their expense all fees and charges
relating thereto.
(m) No Consents Required. Other than filing articles of
share exchange with the Virginia State Corporation Commission and complying
with provisions of Nevada corporate law applicable to the Company in order
to effect a merger, there are no approvals, authorizations, consents,
orders or other actions of, or filings with, any Governmental Authority
that are required to be obtained or made by Neocom in connection with the
execution of, and the consummation of the transactions contemplated under,
this Agreement.
(n) Environmental Compliance Matters.(i) The Real Estate
constitutes all of the real property used or occupied by Neocom; (ii)
Neocom and the Majority Shareholders have inspected the Real Estate and to
the knowledge of Neocom and the Majority Shareholders, there are no
Hazardous Substances incorporated in or deposited, stored or buried at or
upon the Real Estate; (iii) to the Best knowledge of Majority Shareholders
the Real Estate has never been used as a waste disposal site or a storage
site for petroleum products or chemicals; (iv) to the Best knowledge of
Majority Shareholders no existing structures on the Real Estate contain
asbestos so as to present an imminent and substantial endangerment to human
health to human health or the environment; (v) there are not now any
underground storage tanks on the Real Estate; (vi) Neocom has not allowed,
with the knowledge or consent of Neocom or any Seller, any Person occupying
the Real Estate to bring Hazardous Substances onto the Real Estate or to
process or store any Hazardous Substances on the Real Estate and, to the
knowledge of the Majority Shareholders, no Hazardous Substance has been
released into the environment by Neocom that may present an imminent and
substantial endangerment to human health; (vii) neither Neocom nor any
Majority Shareholder is aware of any complaints on file or matters pending
in any federal or state environmental protection offices involving any
allegation of Hazardous Substances on the Real Estate; and (viii) neither
Neocom nor any Majority Shareholder has received notice from any
environmental board, agency or authority requiring the removal of any
Hazardous Substances or other alleged harmful materials or wastes, or
advising of any pending or contemplated search or investigation of the Real
Estate or any portion of the Real Estate with respect the removal of any
Hazardous Substances or other alleged harmful materials or wastes.
(o) Securities Purchase. Each Seller has represented and
warranted as follows:
(i) Each Seller is acquiring the Sitestar Shares
for such Seller's own account, for investment purposes only.
16
(ii) Each Seller understands that an investment in the
Sitestar Shares involves a high degree of risk, and each Seller has the
financial ability to bear the economic risk of this investment in the
Sitestar Shares;
(iii) Each Seller has such knowledge and experience in
financial and business matters that such Seller is capable of evaluating
the merits and risks of an investment in the Sitestar Shares and in
protecting such Seller's own interest in connection with the investment;
(iv) Each Seller understands that the Sitestar Shares have
not been registered under the Securities Act or under any state securities
laws.
(v) Each Seller believes that such Seller has received all
the information such Seller considers necessary or appropriate for deciding
whether to invest in the Sitestar Shares, and such Seller has had an
opportunity to ask questions and receive answers from the Company and its
officers and directors regarding the business, prospects and financial
condition of the Company.
(vi) Each Seller agrees not to Transfer, with or without
consideration, any of the Shares except pursuant to an effective
registration statement under the Securities Act or an exemption from
registration. As a further condition to any such Transfer, except in the
event that such Transfer is made pursuant to an effective registration
statement under the Securities Act, if in the reasonable opinion of counsel
to the Company any Transfer of the Sitestar Shares by the contemplated
transferee thereof would not be exempt from the registration and prospectus
delivery requirements of the Securities Act, the Company may require the
contemplated transferee to furnish the Company with an investment letter
setting forth such information and agreements as may be reasonably
requested by the Company to ensure compliance by such transferee with the
Securities Act.
(vii) Each Seller agrees that each certificate evidencing
any of the Sitestar Shares shall contain the following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR AN EXEMPTION FROM REGISTRATION.
(p) Employee Plans. Except as set forth in the Sellers
Disclosure Letter, Neocom is not a party to, or obligated under, any
Employee Plan.
17
(q) Licenses, Compliance with Laws. Neocom:
(i) has all franchises, permits, licenses, and other rights which
it currently deems reasonably necessary for the conduct of its
business, except for franchises, permits, licenses and other rights
the failure of which to obtain would not have a material adverse
effect on the Business Condition and to the Best knowledge of the
Majority Shareholders there is not any basis for the denial of such
rights in the future;
(ii) is in compliance with, and is not in violation of, any Law
except where the failure to so comply, or such violations, in the
aggregate, will not have a material adverse effect on the Business
Condition.
(r) Insurance. Neocom has in full force and effect insurance with
respect to its assets and businesses against such casualties and
contingencies and of such types and forms and to such extent as it
deems reasonable and customary in the case of corporations or
organizations engaged in its businesses and in its respective areas.
Neocom has separately provided to the Company a true and correct list
of all insurance policies maintained by Neocom.
(s) Labor Relations. There is no pending or, to the Best knowledge of the
Majority Shareholders, threatened labor dispute, strike or work stoppage
affecting the business of Neocom.
(t) Banks, Agents, etc. The Sellers Disclosure Schedule contains a complete
and correct list setting forth the name of (i) each financial institution in
which Neocom has an account, safe deposit box or borrowing privilege and the
names of all persons authorized to draw thereon, to have access thereto or to
borrow thereupon, as the case may be, and (ii) each agent to whom Neocom has
granted a written power of attorney or similar authority to act on its behalf.
(u) Minute Books. The minute books of Neocom contain a complete summary of
all material meetings of directors and stockholders since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
(v) Conflicts of Interest. Neither Neocom nor any officer, employee, agent
or any other Person acting on behalf of Neocom has, directly or indirectly,
given or agreed to give or received or agreed to receive any money, gift or
similar benefit (other than legal price concessions to customers in the ordinary
course of business) to any customer, supplier, employee or agent of a customer
or supplier, or official or employee of any Governmental Authority or other
Person who is in of a position to help or hinder the business of (or assist in
connection with any actual of proposed transaction) Neocom which (a) might
subject Neocom to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (b) if not given in the past, might have had a
material adverse effect on the Business Condition of Neocom or (e) if not
continued in the future, might materially adversely affect the Business
Condition of Neocom.
18
(w) Year 2000. To the Best knowledge of the Majority Shareholders, all
Systems of Neocom are Year 2000 Compliant, except where the failure to be Year
2000 Compliant would not have a material, adverse effect on the Business
Condition of Neocom.
(X) Taxes.
(i) For the purposes of this Agreement, the following terms shall have
the respective meanings set forth below:
(A) "Tax Return" means any return, declaration, report, claim for
refund, or information return or statement relating to Income Taxes,
including any schedule or attachment thereto, and including any
amendment thereof
(B) "Tax" (including with correlative meaning, the term "Taxes"
and "Taxable") shall mean, with respect to Neocom, any federal, state,
local, foreign or other material tax or governmental charge, together
with any interest and any penalty, addition to Tax or additional
amount imposed by any Taxing Authority due from or allocable under any
applicable law or agreement to, Neocom.
(C) "Taxing Authority" shall mean any governmental authority
(domestic or foreign) responsible for the imposition of any such Tax.
(ii) Except as set forth in Sellers Disclosure Letter, Neocom has
filed all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all material respects. Except as set forth on
Sellers Disclosure Letter, all Taxes owed by Neocom (whether or not shown
on any Tax Return) have been paid or provision therefore made on the
financial statements of Neocom. Neocom currently is not the beneficiary of
any extension of time within which to file any Tax Return.
(iii) There is no material dispute or claim concerning any Income Tax
liability of Neocom either (A) claimed or raised by any Taxing Authority in
writing or (B) as to which any of the Sellers and the directors and
officers of Neocom has based upon personal contact with any agent of such
authority.
(iv) Sellers Disclosure Schedule lists all federal, state, local, and
foreign Tax Returns filed with respect to Neocom for taxable periods ended
on or after December 31, 1995, that have been audited, and indicates those
Tax Returns that currently are the subject of audit. The Majority
Shareholders have delivered to the Company correct and complete copies of
all federal Tax Returns, examination reports, and statements of
deficiencies assessed against, or agreed to by Neocom since December 31,
1996, by or with any Taxing Authority. Neocom has not waived any statute of
limitations in respect of Income Taxes or agreed to any extension of time
with respect to an Income Tax assessment or deficiency.
19
(v) Except as set forth in Sellers Disclosure Letter, the unpaid Taxes
of Neocom (A) did not, as of the most recent fiscal month end, exceed by
any material amount the reserve for Income Tax liability (rather than any
reserve for deferred taxes established to reflect timing differences
between book and tax income) set forth on the face of the most recent
balance sheet (rather than in any notes thereto) and (B) will not exceed by
any material amount that reserve as adjusted for operations and
transactions through the Closing Date in accordance with the past custom
and practice of Neocom in filing their Tax Returns.
(vi) Neocom (and any predecessor of Neocom) has been a validly
electing S corporation within the meaning of Code Sections 1361 and 1362 at
all times during its existence and Neocom will be an S corporation up to
and including the Closing Date.
(y) Adverse Change. Since September 30, 1999, there has been no
material adverse change in the Business Condition of Neocom.
5. Representations and Warranties of the Company .
The Company represents and warrants to the Sellers (with full
knowledge that the Sellers are relying on the same) as follows:
(a) Organization, Standing and Corporate Power. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has all requisite corporate power and
corporate authority to own, lease and operate its properties and assets and
to carry on its business as now being conducted. The Company is duly
qualified to do business in all jurisdictions where the failure to qualify
would have a material adverse effect upon the Company's properties and
business. The Company has delivered true, accurate and complete copies of
its Charter Documents to Neocom.
(b) Authority, Enforceabiliiy, Effect of Agreement.
(i) The Company has full corporate power and corporate authority
to enter into, execute and deliver this Agreement and perform its
obligations hereunder. This Agreement has been duly authorized by all
necessary corporate action of the Company. The Company represents and
warrants to each Seller that shareholder approval of this Agreement
and the issuance of shares hereunder is not required under applicable
law. This Agreement has been duly executed and delivered by the
Company and constitutes a valid and legally binding obligation of the
Company and is enforceable against the Company in accordance with its
terms, subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and other similar
laws relating to or affecting creditors' rights generally, or the
availability of equitable remedies.
(ii) The execution and delivery by the Company of this Agreement
do not, and compliance by the Company with the provisions hereof will
not, (A) conflict with or result in a breach or default under any of
the terms, conditions or provisions of any Contract to which the
20
Company is a party or otherwise bound, or to which any asset or
property of the Company is subject; or (B) violate any Law applicable
to the Company; or (C) result in the creation or imposition of any
Lien on any asset of the Company.
(c) Financial Statements. The Annual Company Financial Statements
(as delivered to the Sellers) fairly present the financial position
and results of operations of the Company as at the dates of and for
the periods set forth in the Annual Company Financial Statements in
accordance with GAAP. The Current Company Financial Statements have
been prepared in accordance with GAAP (with the only exceptions that
no notes have been prepared with respect to the Current Financial
Statements), consistent with the Annual Company Financial Statements,
and fairly present the financial position and results of operations of
the Company as at and for the nine months ended September 30, 1999,
and are not subject to year-end adjustments except for normal year-end
adjustments that may be required in the ordinary course of business.
(d) Litigation and Proceedings. There is no pending or, to the
best knowledge of the Company, threatened Action (or basis for any
Action) to which the Company is a party or involving any of it assets,
and the Company is not subject to any judgment, order, writ,
injunction, decree or regulatory directive or agreement, which could
any material adverse affect on the Business Condition of the Company.
(e) Sitestar Shares. Upon issuance, the Sitestar Shares will be
duly authorized, validly issued, fully paid and non-assessable shares
of the Common Stock of the Company.
(f) Brokers. The Company has not retained or otherwise engaged or
employed any Person, or paid or agreed to pay any fee or commission to
any Person, for or on account of acting as a finder or broker in
connection with this Agreement or the transactions contemplated
hereby.
(g) No Consents Required. There are no approvals, authorizations,
consents, orders or other actions of, or filings with, any Person that
are required to be obtained or made by the Company in connection with
the execution of, and the consummation of the transactions
contemplated under, this Agreement.
(h) Reliance upon Small Business Registration Circular filed with
SEC. The Company acknowledges the reliance of the Sellers upon the
accuracy and completeness of Form I 0- SB currently filed with the SEC
and any and all amendments thereto prior to the Closing Date. The
Company represents and warrants that the statements contained in such
Statement together with any such Form are true, accurate and complete
in all material respects and there are no omissions or statements
therein which cause same to be misleading. The Form 10-SB filed with
the SEC in October, 1999, did not at the time filed contain any
misstatement of fact or omit to state any fact, and no event or
circumstance has occurred since the date thereof that would make any
information contained therein materially misleading or incorrect, in
each case which fact would be material to the Sellers' decision to
exchange Neocom Shares for Sitestar Shares pursuant to this Agreement.
21
(i) Capitalization,
(i) The authorized capital stock of the Company consists
solely of 75,000,000 shares of Sitestar Common Stock and
10,000,000 shares of preferred stock. Except for approximately
18,600,000 shares of Sitestar Common Stock, there are no
outstanding Equity Securities of the Company. All Equity
Securities issued by the Company have been duly authorized and
validly issued and are fully paid and nonassessable. The Sitestar
Common Stock is the only class of voting stock issued or
authorized by the Company.
(ii) There are no outstanding Stock Equivalents of the
Company. The Company is not obligated to purchase or redeem any
Equity Securities or Stock Equivalents.
(iii) The Company has complied with all federal and state
securities and blue sky laws in all offers, sales and purchases
of its Securities prior to the date hereof or any applicable law
in making such issuances and purchases of any Securities prior to
the date hereof.
(iv) At the Closing Date, the Sellers will receive good and
marketable title to the Sitestar Shares free and clear of all
Liens. The Sitestar Shares are not subject to any Stock
Equivalents.
(j) Labor Relations. There is no pending or, to the Best knowledge of
the Company and its officers, threatened labor dispute, strike or work
stoppage affecting the business of the Company.
(k) Year 2000. To the Best Knowledge of the Company and its officers,
all Systems of Company are Year 2000 Compliant, except where the failure to
be Year 2000 Compliant would not have a material, adverse effect on the
Business Condition of the Company.
(l) Taxes.
(i) For the purposes of this Agreement, the following terms shall
have the respective meanings set forth below:
(A) "Tax Return" means any return, declaration, report,
claim for refund, or information return or statement relating to
Income Taxes, including any schedule or attachment thereto, and
including any amendment thereof.
(B) "Tax" (including with correlative meaning, the term
"Taxes" and "Taxable") shall mean, with respect to the Company,
any federal, state, local, foreign or other material tax or
governmental charge, together with any interest and any penalty,
addition to Tax or additional amount imposed by any Taxing
Authority due from or allocable under any applicable law or
agreement to, the Company.
22
(C) "Taxing Authority" shall mean any governmental authority
(domestic or foreign) responsible for the imposition of any such
Tax.
(ii) The Company has filed all Tax Returns that it was required
to file. All such Tax Returns were correct and complete in all
material respects. All Taxes owed by the Company (whether or not shown
on any Tax Return) have been paid. The Company currently is not the
beneficiary of any extension of time within which to file any Tax
Return.
(iii) There is no material dispute or claim concerning any Income
Tax liability of the Company either (A) claimed or raised by any
Taxing Authority in writing or (B) as to which any directors and
officers of the Company have knowledge based upon personal contact
with any agent of such authority.
(iv) The Company has not waived any statute of limitations in
respect of Income Taxes or agreed to any extension of time with
respect to an Income Tax assessment or deficiency.
(v) The unpaid Taxes of the Company (A) did not, as of the most
recent fiscal month end, exceed by any material amount the reserve for
Income Tax liability (rather than any reserve for deferred taxes
established to reflect timing differences between book and tax income)
set forth on the face of the most recent balance sheet (rather than in
any notes thereto) and (B) will not exceed by any material amount that
reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of the
Company in filing their Tax Returns.
6. Conduct and Transactions Prior to Closing.
(a) Conduct of Business. Prior to the Closing, except as contemplated by
this Agreement or with the prior written consent of the Company, each Majority
Shareholder agrees to cause Neocom:
(i) to conduct its operations according to its ordinary and usual
course;
(ii) not to Transfer any assets-,
(iii) not to amend, modify or terminate, or grant any waiver of any
right under, any Material Contract, and not to make any payment under any
Neocom Contract which is not required to be made in accordance with the
terms of the Neocom Contract;
(iv) to comply in all material respects with all of its obligations
and duties under any Neocom Contract and not to create or permit to exist
any material default or event of default on behalf of Neocom under any
Neocom Contract, or any event or circumstance which, with lapse of time or
notice, or both, would constitute a material default under a Neocom
Contract;
23
(v) to use its Best Efforts to preserve intact its business
organization and goodwill, keep available the services of its officers and
employees and maintain satisfactory relationships with those Persons having
business relationships with Neocom;
(vi) to duly comply with all Laws applicable to Neocom and to the
conduct of the Business;
(vii) not to make or agree to make any capital expenditures, other
than in the ordinary and usual course of business;
(viii) not to incur any material fixed or contingent obligation or
enter into any Contract or other transaction or arrangement relating to the
Business or the Assets outside the ordinary course of business which would
be a Material Contract;
(ix) to maintain its tangible personal property in a good condition
and state of repair, reasonable wear and tear excepted;
(x) not to commit any act or omit to do any act which would be or
result in a breach of any of its obligations, duties, agreements or
representations under any Neocom Contract to which it is a party or to
which it enters into subsequent to the date of this Agreement which would
have a material effect on the Business Condition of Neocom,
(xi) to bear the risk of loss or damage to the assets of Neocom on and
prior to the Closing Date, and maintain all properties necessary for the
conduct of the Business, whether owned or leased, in substantially the same
condition as they now are, normal wear and tear excepted;
(xii) to maintain the books, records and accounts of Neocom in the
usual, regular and ordinary manner, on a basis consistent with prior
periods;
(xiii) not to enter into any Material Contract of any kind or nature
with any Affiliate of Neocom, any Seller or any Affiliate of any Seller;
(xiv) not to enter into any transaction or perform any act which would
make any of the representations, warranties or agreements contained in this
Agreement false or misleading in any material respect if made again
immediately after such transaction or act; and
(xv) not to take any affirmative action or fail to take any action
within its control that is likely to cause any of the changes or events
listed in Section 6 (a) (i) to occur.
(b) Inspection of Records. Between the date of this Agreement and the
Closing, the Sellers shall allow the duly authorized officers, attorneys,
accountants and other representatives of the Company access at all reasonable
times, upon reasonable advance notice and during normal
24
business hours, to the records and files, correspondence, audits and properties,
as well as to all information in each case relating the business and affairs of
Neocom.
(c) Acquisition Proposals. During the period from the date of this
Agreement and extending through the earlier of termination of this Agreement or
the Closing Date, Neocom and each Seller agrees that (i) neither Neocom nor such
Seller nor any agent or representative of Neocom or any Seller, including
without limitation any investment banker, attorney or accountant, shall
initiate, solicit, intentionally encourage or accept the submission of any
proposal or offer with respect to a merger, acquisition, sale, consolidation or
similar transaction involving all or any significant portion of the assets or
any Equity Securities of Neocom (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal") or engage in any negotiations or
discussions concerning, or provide any confidential information or data to, any
Person relating to an Acquisition Proposal, and (ii) the Sellers shall notify
the Company immediately if any Acquisition Proposal is received by Neocom and/or
any Seller or agent or representative or any negotiations of discussions
relating to a potential Acquisition Proposal are sought to be initiated or
continued with Neocom and/or such Seller.
(d) Best Efforts. Between the date of this Agreement and the Closing, each
of the parties to this Agreement will use its or his Best Efforts to cause the
conditions to the obligations of the other parties set forth in Sections 6, 7, 8
or 9 of this Agreement, as the case may be, to be satisfied.
(e) Release. Except for salary and benefits accruing in the ordinary course
of business, each Seller hereby forever relieves, releases and discharges Neocom
from any and all claims, debts, liabilities, losses, demands, obligations,
promises, acts, agreements, costs and expenses, damages, actions and causes of
action, of whatever kind or nature, whether known or unknown, suspected or
unsuspected, existing now, existing as of the Closing or accruing after the
Closing based on, arising out of, or in connection with any action or omission
of Neocom prior to the Closing (collectively, "Released Claims") and agrees that
neither the Company nor Neocom shall have any liability or obligation whatsoever
to such Seller (or any Person claiming by or through it) arising out of or in
connection with the Released Claims. Each Seller represents that he has not
Transferred any Released Claims.
7. Conditions to the Obligations of the Company.
The obligation of the Company to purchase the Neocom Shares and to take the
other actions required to be taken by the Company at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Company in writing, in whole or in
part):
(a) Representations and Warranties. The representations and warranties of
the Majority Shareholders and of the Sellers (contained in this Agreement, any
exhibit or schedule hereto, or any certificate, instrument or other writing
delivered to the Company or its representatives
25
by any Seller, or any of their respective representatives) shall be true and
correct on the Closing Date with the same force and effect as though made on and
as of the Closing Date i.e., with respect to a representation that a state of
facts exists on or as of the date hereof, it is a condition that such state of
facts exists in all material respects on or as of the Closing Date, and with
respect to a representation that a state of facts has or has not changed between
a date prior to the date hereof and the date hereof, it is a condition that such
state of facts has or has not changed between such prior date and the Closing
Date), except as affected by transactions contemplated hereby and thereby and
except that any such representation or warranty made as of a specified date
(other than the date of this Agreement) shall only need to have been true on and
as of such date;
(b) Performance. Each Seller shall have performed all obligations and
complied with all covenants required by this Agreement to be performed or
complied with by such Seller on or prior to the Closing Date;
(c) Title to Neocom Shares. The Company shall have received good and
marketable title to the Neocom Shares, free and clear of all Liens except
Permitted Lien;
(d) Consents. The Sellers shall have delivered to the Company all consents
of third parties necessary so that Neocom will not be in breach of any Contract
as a result of the purchase of the Neocom Shares by the Company,
(e) Employment Agreements. The Sellers shall have executed and delivered to
the Company the Employment Agreements;
(f) Subscribers. Neocom shall have received monthly internet access, web
hosting or other recurring service fees from not less than 4, 1 00 Persons in an
aggregate amount of not less than $82,000 during the calendar month immediately
preceding the month in which the Closing occurs;
(g) Assumption Agreement. Neocom, the Majority Shareholders shall have
entered into the Assumption Agreement and it shall be in full force and effect.
(h) Other Matters. All corporate and other proceedings and actions taken in
connection with this Agreement and all agreements, instruments and documents
mentioned in this Agreement or incident to any such transactions shall be
reasonably satisfactory in form and substance to the Company and its counsel;
the Agreement and Plan shall have been approved by the Company and Neocom in
accordance with applicable law; no Seller shall have provided notice of exercise
of dissenter's rights under applicable law; and articles of share exchange shall
have been approved by all applicable regulatory action.
26
8. Conditions to the Obligations of the Sellers.
The obligation of the Sellers to sell the Neocom Shares and to take the
other actions required to be taken by the Sellers at the Closing is subject to
the satisfaction, at or prior to the Closing, of each of the following
conditions (any of which may be waived by the Sellers in writing, in whole or in
part):
(a) Representations and Warranties. The representations and warranties of
the Company (contained in this Agreement, any exhibit or schedule hereto, the
small Business Offering Circular and any amendment thereto filed with the SEC or
any certificate, instrument or other writing delivered to the Sellers or their
representatives by the Company, or any of its representatives) shall be true and
correct on the Closing Date with the same force and effect as though made on and
as of the Closing Date ia., with respect to a representation that a state of
facts exists on or as of the date hereof, it is a condition that such state of
facts exists in all material respects on or as of the Closing Date, and with
respect to a representation that a state of facts has or has not changed between
a date prior to the date hereof and the date hereof, it is a condition that such
state of facts has or has not changed between such prior date and the Closing
Date), except as affected by transactions contemplated hereby and thereby and
except that any such representation or warranty made as of a specified date
(other than the date of this Agreement) shall only need to have been true on and
as of such date;
(b) Performance. The Company shall have performed all obligations and
compiled with all covenants required by this Agreement to be performed or
complied with by the Company on or prior to the Closing Date-,
(c) Employment Agceements. The Company shall have executed and delivered to
the Sellers the Employment Agreements;
(d) Title to Sitestar Shares. Sellers shall have received good and
marketable title to the Sitestar Shares, free and clear of all Liens, except for
restrictions set forth herein;
(e) Other Matters. All corporate and other proceedings and actions taken in
connection with this Agreement and all agreements, instruments and documents
mentioned in this Agreement or incident to any such transactions shall be
reasonably satisfactory in form and substance to the Company and its counsel;
the Agreement and Plan shall have been approved by the Company and Neocom and
the holders'of Neocom Shares in accordance with applicable law; no Seller shall
have provided notice of exercise of dissenter's rights under applicable law; and
articles of share exchange shall have been filed with and approved by all
applicable regulatory authorities.
9. Further Agreements of the Parties.
(a) Further Agreements of the Sellers. The Majority Shareholders shall upon
the request of the Company from time to time execute and deliver to the Company
such further
27
documents and instruments of title, conveyance, transfer and assignment as may
be necessary or desirable in order to vest in the Company, free and clear of all
Liens (other than Permitted Liens), all right, title and interest in and to any
and all of the Neocom Shares.
(b) 8-K Financial Statements. The Majority Shareholders, at the expense of
the Company, shall promptly provide such assistance reasonably requested by the
Company to enable it to prepare financial statements and pro forma financial
statements sufficient to permit the Company to fully, completely and timely
comply with the Company's obligations to file financial statements relating to
the Business with the SEC and to obtain an audit of those statements, including
signing such representation letters as may reasonably be requested by the
auditors.
(c) Employees
(i) Schedule 8(c) lists the name, job title, current base salary or
hourly wage, date of hire and social security number of employees actively
employed by Neocom including individuals on short-term disability who were
so employed immediately before their disability (collectively, the
"Employees"). As to any individual on short-term disability, Schedule 8(c)
indicates the reason for such absence and the date the individual is
reasonably expected to return to active employment. Schedule 8(c) also
indicates the accumulated vacation pay accrued for each Employee as of the
Closing Date.
(ii) The Majority Shareholders jointly and severally agree to pay all
costs and expenses related to the termination of employment of any employee
of Neocom who is entitled to any severance in connection with his or her
termination (including indirect severance because such employee is entitled
to at least 10 days or more notice of termination).
(d) Public Offering, Bridge Funding and Right to Put Indebtedness of
Neocom. The Company agrees to file a registration statement with the SEC and to
grant Majority Shareholders registration rights pursuant to Section 9 hereof
within I 20 days following the Closing for a public offering of Sitestar Common
Stock and to register a sufficient number of Sitestar Shares such that the
proceeds to the Majority Shareholders will be sufficient to satisfy the Assumed
Debt, and shall use its best efforts to cause the registration statement to be
declared effective by the SEC. If on June 30, 2001 there is any Assumed Debt
and/or Advances (as defined in the Assumption Agreement), then the Majority
Shareholders shall have the put rights and other rights set forth in the
Assumption Agreement. The Majority Shareholders shall provide such information
regarding themselves and their plan of distribution as the Company may
reasonably request in order to complete the registration statement. The Majority
Shareholders agree not to sell their Sitestar Shares pursuant to the
registration statement during any period which Sitestar request the Majority
Shareholders to refrain from such sales.
10. [Intentionally Left Blank.
11. Survival of Representations and Warranties: Indemnity.
28
(a) Survival of Representations and Warranties. All representations and
warranties made in this Agreement or made in any document delivered pursuant to
this Agreement by or on behalf of any party shall survive the execution and
delivery of this Agreement and the Closing, regardless of notice of or any
investigation or right of investigation made prior to or after the date of this
Agreement by or on behalf of any party, and shall terminate and expire one year
following the Closing Date after which date they shall be of no further force or
effect.
(b) Indemnification by the Majority Shareholders. The Majority Shareholders
shall jointly and severally, indemnify, save and hold harmless the Company and
each of its officers, directors, employees, agents and affiliates, and each of
their successors and assigns (individually, a "Company Indemnified Party" and
collectively, the "Company Indemnified Parties") from and against any and all
costs, losses, claims, liabilities, fines, penalties, incidental and
consequential damages, lost profits and expenses (including interest which may
be imposed in connection therewith and court costs and reasonable fees and
disbursements of counsel) ("Damages") incurred in connection with, arising out
of, resulting from or incident to:
(i) any material breach of, or any material inaccuracy in any of, the
representations or warranties, or any default in any agreements, made by
the Sellers in this Agreement, any exhibit or schedule to this Agreement or
any certificate, instrument or writing delivered in connection with this
Agreement or in connection with any exhibit or schedule to this Agreement;
(ii) any claim and/or Action of Intellimedia Commerce, or any
successor or assign, as described in the Sellers Disclosure Schedule; or
(iii) the Assumed Debt, but subject to the Company's obligations as
set forth above and in the Assumption Agreement;
(c) Notice of Claim. If a claim for Damages (a "Claim") is to be made by a
party entitled to indemnification hereunder (an "Indemnified Party") against the
indemnifying party (the "Indemnifying Party"), the Indemnified Party shall give
written notice (a "Claim Notice") to the Indemnifying Party, and shall also
specify (to the extent that the information is available) the factual basis for
the Claim and the amount of the Damages, if known. The Indemnified Party shall
provide the Claim Notice as soon as practicable after such party becomes aware
of such Claim. If any Action is filed against any Indemnified Party, written
notice thereof shall be given to the Indemnifying Party as promptly as
practicable (and in any event within 15 calendar days after the service of the
citation or summons). The failure of any Indemnified Party to give timely notice
hereunder shall not affect rights to indemnification hereunder, except to the
extent that the Indemnifying Party has been damaged by such failure.
(d) Defense of Claims. With respect to a claim filed by a third party
against an Indemnified Party, the Indemnified Party shall not in any event be
entitled to indemnification hereunder unless prompt notice is provided to the
Indemnifying Party. If after receipt of the Claim
29
Notice of a claim by a third party, the Indemnifying Party acknowledges in
writing to the Indemnified Party that the Indemnifying Party shall be obligated
under the terms of its indemnity hereunder in connection with such lawsuit or
action, the Indemnifying Party shall be entitled, if it so elects at its own
cost, risk and expense, (i) to take control of the defense and investigation of
such Action, (ii) to employ and engage attorneys of its own choice, but, in any
event, reasonably acceptable to the Indemnified Party, to handle and defend the
same unless the named parties to such Action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and the
Indemnified Party has been advised in writing by counsel that there may be one
or more legal defenses available to such Indemnified Party that are different
from or additional to those available to the Indemnifying Party, in which event
the Indemnified Party shall be entitled, at the Indemnifying Party's cost, risk
and expense, to separate counsel of its own choosing, and (iii) to compromise or
settle such Action, which compromise or settlement shall be made only with the
written consent of the Indemnified Party, such consent not to be unreasonably
withheld.
If the Indemnifying Party fails to assume the defense of such Claim within
15 calendar days after receipt of the Claim Notice and the Indemnifying Party is
otherwise obligated hereunder to indemnify against such Claim, the Indemnified
Party against which such Claim has been asserted will (upon delivering notice to
such effect to the Indemnifying Party) undertake, at the Indemnifying Party's
cost and expense, the defense, compromise or settlement of such Claim on behalf
of and for the account and risk of the Indemnifying Party. The Indemnified Party
assuming the defense of any Claim will keep the Indemnifying Party reasonably
informed of the progress of any such defense, compromise or settlement. Provided
the Indemnifying Party is liable hereunder for the underlying Claim, the
Indemnifying Party shall be liable for any settlement of any Action effected
pursuant to and in accordance with the terms hereof and for any final judgment
(subject to any right of appeal) and the Indemnifying Party agrees to indemnify
and hold harmless an Indemnified Party from and against any Damages by reason of
such settlement or judgment.
(e) No Claim by the Sellers. Although the Sellers may have relied on
information supplied by Neocom in making certain representations and warranties
contained in this Agreement and the Sellers' Disclosure Schedule, each Seller
agrees that he or she has no claim, and shall assert no claim, for contribution,
indemnification or otherwise, against Neocom with respect to any breach of any
covenant or of any of the representations and warranties or any inaccuracy in
the Sellers' Disclosure Schedule irrespective of whether the information
supplied by Neocom and relied upon by such Seller was incomplete or inaccurate
in any way or for whatsoever reason; further, the Sellers acknowledge that
Neocom has made no representation or warranty to the Sellers with respect to the
information supplied by it to the Sellers whatsoever.
(d) Liquidation of Indemnification Claims. Any Claim set forth in any Claim
Notice shall be deemed valid and binding upon the Majority Shareholders unless
the Majority Shareholders give written notice of dispute of the Claim, or a
portion of the Claim (a "Claim Dispute Notice"), within forty-five days from
receipt of the Claim Notice, which Claim Dispute Notice sets forth in reasonable
detail the basis for disputing the Claim (of portion of the Claim). Within
forty-five days following receipt of the Claims Dispute Notice, the Company and
30
the Majority Shareholders or their designated representative shall discuss the
Claim in person or by telephone. If the parties are unable to resolve the
dispute, either the Majority Shareholders or the Company shall have the right to
have the claim submitted to and settled by arbitration as hereinafter provided
(it being expressly understood and agreed that if such Claims Dispute Notice is
duly given, it is the intention of the parties to this Agreement that any such
indemnification claim shall be resolved by arbitration as provided in this
Section 10(e)). The arbitration shall be by a single arbitrator experienced in
the matters at issue selected by, and mutually acceptable to, the Indemnifying
Party and the Indemnified Party and shall be conducted in accordance with the
arbitration rules of the American Arbitration Association. The arbitrator must
be independent (not an agent, officer, director, attorney, employee, or
shareholder of the Company or any Seller or a relative or Affiliate of any of
those persons) without any economic or financial interest of any kind in the
outcome of the arbitration. Each arbitrator's conduct will be governed by the
Code of Ethics for Arbitrators in Commercial Disputes (1986) that has been
approved and recommended by the American Bar Association and the American
Arbitration Association. The parties shall request the arbitrator to convene a
hearing as promptly as practicable for the dispute to be held on such date and
at such time and place in Xxxxx County, Virginia, as the arbitrator designates
upon 30 days' advance notice to each Indemnified Party and each Indemnifying
Party. The parties shall request that the arbitrator render his decision within
30 days after the conclusion of the hearing. The arbitrator shall hear and
decide the dispute based on the evidence produced, notwithstanding the failure
or refusal to appear by a party who has been duly notified of the date, time,
and place of the hearing. The decision of the arbitrator shall be final and
binding as to any matters submitted under this Agreement, and to the extent that
the arbitrator's decision is that Damages have been incurred for which a party
is to be indemnified under this Agreement, the Damages shall be promptly
satisfied; provided, however, that, if necessary, such decision may be enforced
by either the Indemnifying Party or the Indemnified Party in any court of record
having jurisdiction over the subject matter or over any of the parties hereto.
The prevailing party shall recover all of such party's costs, and reasonable
attorneys' fees incurred in connection with any such arbitration.
(g) Company Indemnified Parties shall not be permitted to enforce any claim
for indemnification against the Majority Shareholders pursuant to this Agreement
until the aggregate amount of all claims for indemnification by such party
exceeds $125,000 (the "Threshold Amount"), in which event such party shall be
entitled to receive indemnification payments only to the extent such party's
damages exceed the Threshold Amount.
(h) For all claims of indemnification other than claims made for fraud, the
aggregate amount of Majority Shareholders' liability for indemnification shall
not exceed the Contingent Shares multiplied by the Market Price. Claims for
indemnification shall be satisfied solely out of the Contingent Shares and the
such shares shall be valued for purposes of indemnification shall be the greater
of (i) the Market Price or (ii) the average closing price of Sitestar Common
Stock on the over the counter market during the five trading days ending on the
third day prior to the date of the Claim Notice (the "Indemnification Market
Price").
31
(i) The indemnification provided for in this Paragraph I 1, subject to
the limitations set forth herein, shall be the exclusive remedy for damages
available to the parties for any breach of representation, warranty or
covenant by any party under this Agreement, except for matters of fraud. No
remedy conferred by any of the specific basis for indemnification under
this Agreement is intended to be exclusive of any other basis for indemnity
hereunder, and each and every basis for indemnity hereunder shall be
cumulative.
12. Non-Competition. During a Majority Shareholder's employment by the Company
and for three years from the effective date of termination with cause, or one
year from the effective date of termination without cause (together, the
"Covenant Period"), each Majority Shareholder agrees that he will not:
(i) engage or participate, in the state of Virginia, North Carolina,
Tennessee, West Virginia, Kentucky, Maryland or Washington D.C., directly
or indirectly in any business activity competitive with the business
conducted by the Company;
(ii) become interested (as owner, stockholder, lender, partner,
co-venturer, director, officer, employee, agent, consultant, or otherwise)
in any person, firm, corporation, association or other entity engaged in
any business that is competitive with the Business; provided, however,
notwithstanding the foregoing the Employee may beneficially own not more
than four percent (4%) of the outstanding securities of any class of any
publicly-traded securities of a Company that is engaged in activities
competitive with the Business;
(iii) solicit or call on, either directly or indirectly, for any
business purpose any customer with whom the Company shall have dealt at any
time during the Covenant Period;
(iv) influence or attempt to influence any supplier, customer or
potential customer of the Company to terminate or modify any written, oral
agreement or course of dealing with the Company; or
(v) directly or indirectly solicit for employment, or advise or
recommend to any other person that they solicit for employment, any
employee of the Company or any of its Affiliates.
(a) Remedies. Each Majority Shareholder acknowledges and agrees that, in
the event of a violation by such Majority Shareholder of the terms and
provisions of this Section 12, the remedies at law would not be adequate; and
accordingly, in such event the Company may proceed to protect and enforce its
rights under this Section 12 by an Action in equity for specific performance and
temporary, preliminary and permanent injunctive relief from violation of any of
the provisions of this Section 12 from any court of competent jurisdiction
without the necessity of proving the amount of any actual damages to the Company
resulting from the breach.
(b) Modification. If for any reason there should be a determination by a
court of competent jurisdiction that the provision of this Section 12 are too
broad or unreasonable and
32
therefore unenforceable, the provision of this Section 12 shall be deemed
modified, and fully enforceable as so modified, to the extent that the court
would find them to be fair, reasonable and enforceable under the circumstances.
13. Termination.
(a) Termination by Mutual Consent. This Agreement may be terminated at any
time prior to the Closing by the mutual agreement, in writing, of each of the
parties to this Agreement.
(b) Termination by the Company. The Company may (but shall not be obligated
to) terminate this Agreement prior to the Closing by giving written notice to
the Sellers if-
(i) there has been a material violation or breach by any Seller of any
agreement, covenant, representation or warranty contained in this
Agreement, which violation or breach shall not have been cured or corrected
within 15 days after receipt of notice thereof,
(ii) the Closing does not occur on or prior to December 31, 1999, or
such later date as may be agreed to in writing by the parties; or
(iii) any of the conditions in Section 7 have not been satisfied as of
the Closing or if the Company is made aware and determines in its
reasonable discretion that any condition will not be satisfied as of the
Closing (other than through the failure of the Company to comply with its
obligations under this Agreement) and the Company has not expressly waived
such condition in writing on or before the Closing.
(c) Termination by the Sellers. The Sellers may (but shall not be obligated
to) terminate this Agreement prior to the Closing by giving written notice to
the Company if-
(i) there has been a material violation or breach by the Company of
any agreement, covenant, representation or warranty contained in this
Agreement, which violation or breach shall not have been cured or corrected
within 15 days after receipt of notice thereof-,
(ii) the Closing does not occur on or prior to December 31, 1999, or
such later date as may be agreed to in writing by the parties; or
(iii) any of the conditions in Section 8 have not been satisfied as of
the Closing or if the Sellers are made aware and determine in their
reasonable discretion that any condition will not be satisfied as of the
Closing (other than through the failure of Neocom or the Sellers to comply
with its or their obligations under this Agreement) and Neocom has not
expressly waived such condition in writing on or before the Closing; or the
minimum tender referenced in Section 8 has not occurred.
33
In the event of such termination, no party shall have any obligation or
liability to any other in respect to this Agreement, except for any breach
of contract occurring prior to such termination.
14. Certain Tax Matters.
The following provisions shall govern the allocation of responsibility as
between the Company and Sellers for certain tax matters following the Closing
Date:
(a) Tax Periods Ending on or Before the Closing Date. The Company shall
prepare or cause to be prepared and file or cause to be filed all Tax Returns
for Neocom for all periods ending on or prior to the Closing Date which are
filed after the Closing Date. The Company shall permit the Seller Representative
to review and comment on each such Tax Return described in the preceding
sentence prior to filing and shall make such revisions to such Tax Returns as
are reasonably requested by the Seller Representative. To the extent permitted
by applicable law, Sellers shall include any income, gain, loss, deduction or
other tax items for such periods on their Tax Returns in a manner consistent
with the Schedule K- Is furnished by Neocom to the Sellers for such periods. The
Sellers shall reimburse the Company for any Taxes of Neocom with respect to such
periods within 15 days after payment by the Company or Neocom of such Taxes to
the extent such Taxes are not reflected in the reserve for Tax liability (rather
than any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) shown on the face of the Current Balance Sheet.
(b) Tax Periods Beginning Before and Ending After the Closing Date. The
Company shall prepare or cause to be prepared and file or cause to be filed any
Tax Returns of Neocom for Tax periods which begin before the Closing Date and
end after the Closing Date. The Sellers shall pay to the Company within 15 days
after the date on which Taxes are paid with respect to such periods an amount
equal to the portion of such Taxes which relates to the portion of such Taxable
period ending on the Closing Date to the extent such Taxes are not reflected in
the reserve for Tax Liability (rather than any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) shown on
the face of the Current Balance Sheet. For purposes of this Section, in the case
of any Taxes that are imposed on a periodic basis and are payable for a Taxable
period that includes (but does not end on) the Closing Date, the portion of such
Tax which relates to the portion of such Taxable period ending on the Closing
Date shall (x) in the case of any Taxes other than Taxes based upon or related
to income or receipts, be deemed to be the amount of such Tax for the entire
Taxable period multiplied by a fraction the numerator of which is the number of
days in the Taxable period ending on the Closing Date and the denominator of
which is the number of days in the entire Taxable period, and (y) in the case of
any Tax based upon or related to income or receipts be deemed equal to the
amount which would be payable if the relevant Taxable period ended on the
Closing Date. Any credits relating to a Taxable period that begins before and
ends after the Closing Date shall be taken into account as though the relevant
Taxable period ended on the Closing Date. All determinations necessary to give
effect to the foregoing allocations shall be made in a manner consistent with
prior practice of Neocom.
34
(c) Refunds and Tax Benefits. Any Tax refunds that are received by the
Company or Neocom, and any amounts credited against Tax to which the Company or
Neocom become entitled, that relate to Tax periods or portions thereof ending on
or before the Closing Date shall be for the account of the Sellers, and the
Company shall pay over to the Sellers any such refund or the amount of any such
credit within fifteen (I 5) days after receipt or entitlement thereto. In
addition, to the extent that a claim for refund or a proceeding results in a
payment or credit against Tax by a taxing authority to the Company or Neocom of
any amount accrued on the Current Balance Sheet, the Company shall pay such
amount to the Sellers within fifteen (I 5) days after receipt or entitlement
thereto.
(d) Cooperation on Tax Matters.
(i) The Company and the Sellers shall cooperate fully, as and to the
extent reasonably requested by the other party, in connection with the
filing of Tax Returns pursuant to this Section and any audit, litigation or
other proceeding with respect to Taxes. Such cooperation shall include the
retention and (upon the other party's request) the provision of records and
information which are reasonably relevant to any such audit, litigation or
other proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any material
provided hereunder. The Company and the Sellers agree (A) to retain all
books and records with respect to Tax matters pertinent to Neocom relating
to any taxable period beginning before the Closing Date until the
expiration of the statute of limitations (and, to the extent notified by
Company or the Sellers, any extensions thereof) of the respective taxable
periods, and to abide by all record retention agreements entered into with
any taxing authority, and (B) to give the other party reasonable written
notice prior to transferring, destroying or discarding any such books and
records and, if the other party so requests, Neocom or the Sellers, as the
case may be, shall allow the other party to take possession of such books
and records.
(ii) The Company and the Sellers further agree, upon request, to use
their Best Efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) The Company and Sellers further agree, upon request, to provide
the other party with all information that either party may be required to
report pursuant to Section 6043 of the Code and all Treasury Department
Regulations promulgated thereunder.
(e) Tax Sharing Agreements. All tax sharing agreements or similar
agreements with respect to or involving Neocom shall be terminated as of the
Closing Date and, after the Closing Date, Neocom shall not be bound thereby or
have any liability thereunder.
(f) Certain Taxes. All transfer, documentary, sales, use, stamp,
registration and other such Taxes and fees (including any penalties and
interest) incurred in connection with this Agreement (including any tax imposed
by the state of Virginia) shall be paid by the Sellers when
35
due, and the Sellers will, at their own expense, file all necessary Tax Returns
and other documentation with respect to all such transfer, documentary, sales,
use, stamp, registration and other Taxes and fees, and, if required by
applicable law, Company will, and will cause its affiliates to, join in the
execution of any such Tax Returns and other documentation.
(g) S Corporation Status. Prior to the Effective Time, Neocom and the
Sellers will not revoke Neocom's election to be taxed as an S corporation within
the meaning of Code Sections 1361 and 1362. Neocom and the Sellers will not take
or allow any action other than the sale of Neocom Common Stock pursuant to this
Agreement that would result in the termination of Neocom's status as a validly
electing S corporation within the meaning of Code Sections 1361 and 1362.
15. Miscellaneous
(a) Notices. All notices, requests, demands and other communications
(collectively, "Notices") given pursuant to this Agreement shall be in writing,
and shall be delivered by personal service, courier, facsimile transmission
(which must be confirmed) or by United States first class, registered or
certified mail, postage prepaid, to the following addresses:
(i) if to the Company, to: Sitestar Corporation.
ATTN: Clinton 1. Xxxxxx
00000 Xxxxxxx Xxxxxxxxx Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Tel No. 000-000-0000 Fax No. 000-000-0000
(ii) if to the Sellers, to:
Xxxxxx Xxxxxxxx
00 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Tel No. 000-000-0000 Fax No. 000-000-0000
with a copy to: A. 1. Xxxxxxxx, Esq., 00 X. Xxxxxxxxx Xxxxxx, Xxxxx
0000, Xxxxxxx, Xxxxxxxx 2401 1.
Any Notice, other than a Notice sent by registered or certified mail, shall be
effective when received; a Notice sent by registered or certified mail, postage
prepaid return receipt requested, shall be effective on the earlier of when
received or the third day following deposit in the United States mails. Any
party may from time to time change its address for further Notices hereunder by
giving notice to the other parties in the manner prescribed in this Section.
36
(b) Entire Ageement. This Agreement contains the sole and entire agreement
and understanding of the parties with respect to the entire subject matter of
this Agreement, and any and all prior discussions, negotiations, commitments and
understandings, whether oral or otherwise, related to the subject matter of this
Agreement are hereby merged herein.
(c) Assignment. No party may assign this Agreement, and any attempted or
purported assignment or any delegation of any partys duties or obligations
arising under this Agreement to any third party or entity shall be deemed to be
null and void, and shall constitute a material breach by such party of its
duties and obligations under this Agreement. This Agreement shall inure to the
benefit of and be binding upon any successors of each party by way of merger or
consolidation.
(d) Waiver and Amendment. No provision of this Agreement may be waived
unless in writing signed by all the parties to this Agreement, and waiver of any
one provision of this Agreement shall not be deemed to be a waiver of any other
provision. This Agreement may be amended only by a written agreement executed by
all of the parties to this Agreement.
(e) Governing Law. This Agreement has been made and entered into in the
Commonwealth of Virginia and shall be construed in accordance with the laws of
the Commonwealth of Virginia without giving effect to the principles of
conflicts of law thereof.
(f) Severability . Whenever possible each provision of this Agreement shall
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement shall be or become prohibited or invalid
under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity without invalidating the remainder of such provision
or the remaining provisions of this Agreement.
(g) Captions. The various captions of this Agreement are for reference only
and shall not be considered or referred to in resolving questions of
interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
(i) Costs and Attorneys' Fees. If any action, suit, arbitration or other
proceeding is instituted to remedy, prevent or obtain relief from a default in
the performance by any party to this Agreement of its obligations under this
Agreement, the prevailing party shall recover all of such party's attorneys'
fees incurred in each and every such action, suit, arbitration or other
proceeding, including any and all appeals or petitions therefrom. As used in
this Section, attorneys' fees shall be deemed to mean the full and actual costs
of any legal services actually performed in connection with the matters involved
calculated on the basis of the usual fee charged by the attorney performing such
services and shall not be limited to "reasonable attomeys' fees" as defined in
any statute or rule of court.
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(j) Rights Cumulative. No right granted to the parties under this Agreement
on default or breach is intended to be in full or complete satisfaction of any
damages arising out of such default or breach, and each and every right under
this Agreement, or under any other document or instrument delivered hereunder,
or allowed by law or equity, shall be cumulative and may be exercised from time
to time.
(k) Force Maieure. If any party to this Agreement is delayed in the
performance of any of its obligations under this Agreement or is prevented from
performing any such obligations due to causes or events beyond its control,
including, without limitation, acts of God, fire, flood, earthquake, strike or
other labor problem, injunction or other legal restraint, present or future law,
governmental order, rule or regulation, then such delay or nonperformance shall
be excused and the time for performance thereof shall be extended to include the
period of such delay or nonperformance.
(l) Seller Representative. Any consent, approval, demand or waiver required
of or made by the Sellers pursuant to this Agreement shall be made by the
Majority Shareholders. The Company shall be entitled to rely, without
investigation or inquiry, upon any consent, approval or waiver of the Sellers
set forth in any written certificate, instrument or other document signed by the
Seller Representative as to any such approval, consent, waiver or notice of the
Sellers, and any such written agreement, certificate or other document shall be
binding upon all Sellers.
IN WITNESS WHEREOF, this Agreement has been made and entered into as of the date
and year first above written.
SITESTAR CORPORATION a Nevada corporation
/s/ Xxxxxxx Xxxxxx
By: _______________________________
Its: President
/s/ Xxx Xxxxxxxx
----------------------------------
Xxx Xxxxxxxx
/s/ Xxx Xxxxxxxx
----------------------------------
Xxx Xxxxxxxx
/s/ Xxxx Xxxxxxx
----------------------------------
Xxxx Xxxxxxx
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