AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made and
entered into effective as of April 3, 2000 (the "Agreement Date"), by and among
XXXXXXXXXXXXXX.XXX, INC., a Florida corporation ("Merchant"), WEB FINANCIAL
SERVICES CORPORATION , a Delaware corporation ("Target") and WFS ACQUISITION
CORP., a Delaware corporation that is a wholly-owned subsidiary of Merchant
("Newco").
RECITALS
A. Target is developing and marketing proprietary financial products
for use on the Internet.
B. Merchant provides businesses with real-time credit card
processing, shopping cart services, online checking transactions and secure
hosting services.
C. The parties intend that, subject to the terms and conditions
hereinafter set forth, Newco will merge with and into Target in a reverse
triangular merger (the "Merger"), with Target to be the surviving corporation of
the Merger, all pursuant to the terms and conditions of this Agreement and the
applicable provisions of the Delaware General Corporation Law (the Delaware
Law") and the Florida Business Corporation Act (the "Florida Law"). The Merger
is intended to be treated as a tax-free reorganization pursuant to the
provisions of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code"), by virtue of the provisions of Section 368(a)(2)(E) of the
Code.
D. Upon the effectiveness of the Merger, the outstanding Common Stock
of Target will be converted into Common Stock of Merchant in the manner and on
the basis determined herein.
AGREEMENT
NOW THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein contained,
the parties hereto do hereby agree as follows:
ARTICLE 1
PLAN OF REORGANIZATION
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
Newco and Target will execute Articles of Merger in substantially the form
attached hereto as Exhibit 1.1 and meeting the requirements of the Delaware Law
(the "Articles of Merger"), providing for the merger of Newco with and into
Target in a statutory merger in accordance with the terms and conditions of this
Agreement and the applicable provisions of Delaware Law, with Target as the
surviving corporation, and with the Merger to be effective upon the filing of
the Articles of Merger with the Florida Secretary of State (the "Effective
Time").
1.2 CONVERSION OF SHARES.
1.2.1 CONVERSION OF NEWCO COMMON STOCK. The shares of the
Common Stock of Newco, no par value, which are issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for a total of 100 fully paid and non-assessable shares of the Common Stock of
the surviving corporation of the merger between Newco and Target (the "Surviving
Corporation"), so that after giving effect to such conversion and exchange,
immediately following the Effective Time, all of the outstanding shares of the
Surviving Corporation will be held by Merchant. The shares referred to in
Section 1.2.1 shall not impact the number of shares to be delivered pursuant to
Section 1.2.2.
1.2.2 CONVERSION OF TARGET COMMON STOCK. Each share of the
Common Stock of Target, no par value (the "Target Common Stock") issued and
outstanding immediately prior to the Effective Time will, by virtue of the
Merger and at the Effective Time, and without any action on the part of any
holder thereof, be canceled and converted into the number of shares of validly
issued, fully paid and non-assessable Common Stock, $0.001 par value, of
Merchant ("MRTO Common Stock"), determined in accordance with the "Conversion
Ratio," which shall be the quotient determined by dividing (i) 1,250,000 by (ii)
the sum of the number of all shares of Target Common Stock outstanding
immediately prior to the Effective Time. The shares shall be adjusted for
Merchant's pending 2-for-1 stock split.
1.2.3 FRACTIONAL SHARES. No fractional shares of MRTO Common
Stock will be issued in connection with the Merger, but in lieu thereof each
holder of Target Common Stock who would otherwise be entitled to receive a
fraction of a share of MRTO Common Stock will receive from Merchant, promptly
after the Effective Time, an amount of cash equal to the per share market value
of MRTO Common Stock based on the average closing sale price of MRTO Common
Stock as quoted on the principal market or exchange on which shares of MRTO
Common Stock are then traded, during the five day period immediately preceding
(but not including) the Closing Date (as defined in Section 5.1 below),
multiplied by the fraction of a share of MRTO Common Stock to which such holder
would otherwise be entitled.
1.3 EFFECTS OF THE MERGER. At the Effective Time, the parties agree
that the following shall occur, whether by operation of law or by action of any
party hereto:
(a) The separate existence of Newco will cease and Newco will
be merged with and into Target, with Target being the Surviving Corporation,
pursuant to the terms of this agreement and the Articles of Merger.
(b) The Articles of Incorporation and Bylaws of Target as in
effect immediately prior to the Effective Time will be the Articles of
Incorporation and Bylaws of the Surviving Corporation.
(c) All shares of Newco Common Stock that are outstanding
immediately prior to the Effective Time will be converted into shares of Target
Common Stock as provided in Section 1.2.1 above, all shares of Target Common
Stock that are outstanding immediately prior to the Effective Time will be
converted into a right to receive shares of MRTO Common Stock as provided in
Section 1.2.2 above.
(d) The officers and directors of the Surviving Corporation
will be the officers and directors of Newco as in place immediately prior to the
Effective Time.
(e) The Merger will, from and after the Effective Time, have
all of the effects provided by applicable law, including, without limitation,
the Delaware Law.
1.4 PRIVATE PLACEMENT; CERTIFICATE LEGENDS. The issuance of shares
of MRTO Common Stock pursuant to this Article 1 shall not have been registered
under the Securities Act of 1933, as amended (the "Securities Act") and shall be
characterized as "restricted securities" under the federal securities laws, and
under such laws such shares may be resold without registration under the
Securities Act only in certain limited circumstances. Each certificate
evidencing shares of MRTO Common Stock to be issued pursuant to this Article 1
shall bear a legend reading substantially as follows:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. SUCH SHARES MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF
LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED."
and any legends required by state securities laws. Specifically, the shares of
MRTO Common Stock issuable in connection with the Merger will not be eligible
for public resale under Rule 144 for a period of one year following the Merger;
provided, however, that Article 9 below provides for certain registration rights
with respect to such shares.
1.5 TAX-FREE REORGANIZATION. The parties intend to adopt this
Agreement as a tax-free plan of reorganization and to consummate the Merger in
accordance with the provisions of Section 368(a)(1)(A) of the Code, by virtue of
the provisions of Section 368(a)(2)(E) of the Code. For purposes of this Section
1.5, Merchant and Target agree to report the transactions contemplated in this
Agreement in a manner consistent with the reorganization treatment they intend
and will not take any position inconsistent therewith in any tax return, refund
claim, litigation or otherwise unless required to do so by any governmental
authority. The shares of MRTO Common to be issued in the Merger will be issued
solely in exchange for the Target Common Stock pursuant to this Agreement, and
no transaction other than the Merger represents, provides for or is intended to
be an adjustment to the consideration paid for the Target Common Stock. Except
for the cash paid in lieu of fractional shares, Merchant will pay no
consideration that could constitute "other property" within the meaning of
Section 356 of the Code for shares of Target Common Stock in the Merger.
Merchant, Newco and Target will use all reasonable best efforts prior to the
Effective Time to cause the Merger to qualify as a reorganization under Section
368(a)(1)(A) of the Code.
1.6 PURCHASE ACCOUNTING. The parties intend that the Merger be
treated as a purchase for accounting purposes.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF TARGET
Target hereby represents and warrants to Merchant that, except as set
forth in the Target Disclosure Schedule attached hereto as Exhibit 2 (the
"Target Disclosure Schedule"), each of the representations, warranties and
statements set forth below in this Article 2 is true and correct.
2.1 ORGANIZATION; GOOD STANDING. Target is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has full corporate power and authority to carry on its business as
it is now being conducted and to own the properties and assets it now owns. The
copies of the charter documents of Target attached hereto as Exhibit 2.1 are
complete and correct copies of such instruments as presently in effect. Target
is duly qualified as a foreign corporation to do business and is in good
standing in Florida.
2.2 CAPITALIZATION OF TARGET. The authorized capital stock of Target
consists of 1,500 shares of Common Stock, of which 1,500 shares are currently
outstanding and held as set forth on Schedule 2.2 hereto. The outstanding shares
of Target Common Stock are held by the individuals and entities and in the
amounts indicated in Schedule 2.2. All issued and outstanding shares of Target
Common Stock are validly issued, fully paid and non-assessable. Except as set
forth on Schedule 2.2 or the Target Disclosure Schedule, there are no
outstanding (a) securities convertible into or exchangeable for shares of Target
Common Stock; or (b) options, warrants or other rights to purchase or subscribe
to capital stock of Target or securities convertible into or exchangeable for
capital stock of Target. The Merger will result in shares of MRTO Common Stock
being issued to the Target Stockholders as indicated in Schedule 2.2(a).
2.3 CORPORATE RECORD BOOKS. The corporate minute books of Target have
been made available to Merchant, are complete and correct and contain all of the
proceedings of the shareholders and directors of Target.
2.4 AUTHORIZATION, ETC. Target has full corporate power and authority
to enter into this Agreement and to carry out the transactions contemplated
hereby. Target has taken all actions required by law, its charter documents, or
otherwise to be taken by it to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby, and this
Agreement is a valid and binding agreement of Target, enforceable in accordance
with its terms.
2.5 NO VIOLATION. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will violate any
provision of the charter documents of Target, or, to the best knowledge of
Target, be in conflict with, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or cause the
acceleration of the maturity of any debt or obligation pursuant to, or result in
the creation or imposition of any security interest, lien or other encumbrance
upon any property or assets of Target under, any agreement or commitment to
which Target is a party or to which the assets of Target are subject, or violate
any statute, law, judgment, decree, order, regulation or rule of any court or
governmental authority by which Target is bound or to which its assets are
subject.
2.6 FINANCIAL STATEMENTS. Target has heretofore delivered to Merchant
unaudited financial statements (the "Financial Statements") as of and for the
period ended February 29, 2000 (the "Balance Sheet Date"). Such Financial
Statements and the notes thereto are complete and accurate and fairly present
the assets, liabilities, financial condition and results of operations of Target
as at the respective dates thereof all in accordance with generally accepted
accounting principles consistently applied throughout the periods involved,
provided that such Financial Statements do not include footnote disclosure.
Target's books and records have been maintained in accordance with good business
practice and are in a form and condition to be audited by Merchant's independent
accountants.
2.7 NO UNDISCLOSED LIABILITIES; ETC. Except as set forth in the
Financial Statements and the notes thereto, or in the Target Disclosure
Schedule, to the best knowledge of Target, Target has no material liabilities or
obligations of any nature (absolute, accrued, contingent or otherwise), except
for liabilities which have arisen after the Balance Sheet Date in the ordinary
course of business, and obligations arising by the application of law to the
conduct of Target's business.
2.8 ABSENCE OF CERTAIN CHANGES. Except as and to the extent set forth
in the Target Disclosure Schedule, since the date of the Financial Statements,
Target has not:
(a) Suffered any material adverse change in its working
capital, financial condition, assets, liabilities (absolute, accrued,
contingent or otherwise), reserves, business, operations or prospects;
(b) Incurred any liabilities or obligations (absolute,
accrued, contingent or otherwise), except non-material items incurred
in the ordinary course of business and consistent with past practice),
or increased or experienced any change in any assumptions underlying,
or methods of calculating, any bad debt, contingency or other reserves;
(c) Paid, discharged or satisfied any claim, liabilities or
obligations (absolute, accrued, contingent or otherwise) other than the
payment, discharge or satisfaction in the ordinary course of business
and consistent with past practice or liabilities and obligations
reflected or reserved against in the Financial Statements or incurred
in the ordinary course of business and consistent with past practice,
or pursuant to this Agreement and the transactions contemplated hereby,
since the Balance Sheet Date;
(d) Permitted or allowed any of its property or assets
(real, personal or mixed, tangible or intangible) to be subjected to
any mortgage, pledge, lien, security interest, encumbrance, restriction
or charge of any kind, except for liens for current taxes not yet due;
(e) Received written notice of any fact or event which
materially adversely affects or may in the future materially adversely
affect the financial condition, results of operations, business,
properties, assets, liabilities, or future prospects of Target;
(f) Cancelled any debts;
(g) Entered into or amended any employment agreement, except
as contemplated by this Agreement;
(h) Sold, transferred, or otherwise disposed of any of its
properties or assets (real, personal or mixed, tangible or intangible),
except in the ordinary course of business and consistent with past
practice; and
(i) Agreed, whether in writing or otherwise, to take any
action described in this Section.
2.9 LITIGATION. There is no pending or threatened in writing action,
suit, inquiry, proceeding or investigation by or before any court or
governmental or other regulatory or administrative agency or commission against
or involving Target, or which questions or challenges the validity of this
Agreement or any action taken or to be taken by Target pursuant to this
Agreement or in connection with the transactions contemplated hereby. Target is
not in default under or in violation of any contract, commitment or restriction
to which it is a party or by which it is bound. Target is not in violation of,
or in default with respect to, any law, rule, regulations, order, judgment, or
decree; nor is Target required to take any action in order to avoid such
violation or default. Target is not subject to any judgment, order or decree
entered in any lawsuit or proceeding which may have a material adverse effect on
its business practices or on its ability to acquire any property or conduct its
business in any area.
2.10 COMPLIANCE. Except as set forth in the Target Disclosure Schedule,
to the knowledge of Target, each of Target and its properties are is in
compliance with all material Legal Requirements, including, without limitation,
those relating to zoning (but excluding those relating to Environmental, Health,
or Safety Requirements which are covered by Section 2.13 hereof), except for
such failures to comply or to be in compliance as have not had, and would not
have, individually or in the aggregate, a Material Adverse Effect with respect
to Target. Except as set forth in the Target Disclosure Schedule, Target has not
received any written notice asserting any non-compliance with any such Legal
Requirements, except for such failures to comply as have not had, and would not
have, a Material Adverse Effect with respect to Target.
2.11 TAXES.
(a) Except as set forth in the Target Disclosure Schedule, (A)
all federal, state and local income tax returns and reports and any other tax
return or report for which there is a liability for the payment of Taxes in
excess of $50,000 (collectively, "Target Tax Returns") required to be filed by
or on behalf of Target (and any combined, consolidated, unitary or affiliated
group of which Target is or has been a member prior to the Closing Date) for
Taxes have been duly and timely filed with the appropriate taxing authorities in
all jurisdictions in which such Target Tax Returns are required to be filed
(after giving effect to any valid extensions of time in which to make such
filings); (B) all such Target Tax Returns are correct and complete in all
material respects; and (C) all amounts shown as due on such Target Tax Returns
and any other required payment of any other Tax liability in excess of $50,000
due from Target (and any combined, consolidated, unitary or affiliated group of
which Target is or has been a member prior to the Closing Date) have been timely
paid or accrued for on the Target Financial Statements. Except as set forth in
the Target Disclosure Schedule, Target shall prepare and timely file, in a
manner consistent with prior years except as required by a change in applicable
laws and regulations, all Target Tax Returns required to be filed on or before
the Closing Date (after giving effect to any valid extensions of time in which
to make such filings).
(b) Target has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other party.
(c) Merchant has received copies of (A) all federal, state,
local and foreign income or franchise Target Tax Returns relating to the tax
periods ended in 1999 and (B) any audit report issued within the last twelve
(12) months (or otherwise with respect to any audit or investigation in
progress) relating to Taxes due from or with respect to Target and its income,
assets or operations.
(d) Except as set forth in the Target Disclosure Schedule, all
deficiencies asserted or assessments made as a result of any examinations by the
IRS or other taxing authority of Target Tax Returns have been fully paid, and
Target has not received written notice of any other audits or investigations by
any taxing authority in progress, nor has Target received any written notice
from any taxing authority that it intends to conduct such an audit or
investigation
(e) Target is not a party to any tax sharing or similar contract
or arrangement currently in effect (whether or not written) with any Person.
(f) Except as set forth in the Target Disclosure Schedule,
Target has not been a member of any consolidated, combined, unitary or
affiliated group of corporations for any tax purposes.
2.12 EMPLOYEE BENEFIT PLANS. Target does not have any "employee benefit
plan" (within the meaning of Section 3(3) of ERISA), or stock purchase, stock
option, severance, employment, change-in-control, fringe benefit, welfare
benefit, collective bargaining, bonus, incentive, deferred compensation and all
other employee benefit plans, agreements, programs, policies or other
arrangements, whether or not subject to ERISA (including any funding mechanism
therefor now in effect or required in the future as contemplated by this
Agreement or otherwise), whether formal or informal, oral or written, legally
binding or not, under which any employee or former employee of Target has, by
virtue of such employee or former employee's employment with Target, any present
or future right to benefits or under which Target has any present or future
liability.
2.13 ENVIRONMENTAL MATTERS. Except as set forth in the Target
Disclosure Schedule, Target has obtained and is in compliance with all Permits
issuable and issued pursuant to any Environmental, Health or Safety
Requirements; (ii) as of the date hereof, there are no administrative, civil or
criminal actions, suits, demands, notices, investigations, writs, injunctions,
decrees, orders or judgments outstanding or, to the knowledge of Target,
threatened against Target based upon or arising out of any Environmental, Health
or Safety Requirements; (iii) Target has not caused and has not received notice
and has no knowledge of any Release or threatened Release in a quantity
requiring reporting or remediation under any Environmental, Health or Safety
Requirements of any Hazardous Materials on or from the assets owned or operated
by Target; (iv) Target does not have any current liability in connection with
any Release of Hazardous Materials into the indoor or outdoor environment,
whether on-site or off-site; (v) none of the operations of Target involves the
treatment, storage or disposal of hazardous waste on any property owned, leased
or operated by Target or any subsidiary, as defined under 40 C.F.R. Parts
260-270 or any state equivalent; and (vi) Target has provided all Phase I
environmental assessments, and all reports of investigations conducted as a
result of any recommendation in any such assessments that have been performed
within the past three (3) years with respect to the currently or previously
owned, leased or operated properties of Target.
2.14 PATENTS PENDING. The Target Disclosure Schedule contains a
complete and accurate list and summary description of all Patent Pendings.
Except as set forth on the Target Disclosure Schedule, Target is the owner of
all right, title, and interest in and to each of the Patent Pendings, free and
clear of all liens, security interests, charges, encumbrances, entities, and
other adverse claims. Merchant acknowledges that Target does not own the Patent
Pending entitled "Method for Making an ATM Transaction Over a Public Telephone
Network", which is licensed by Xxxxxx Ice to Target pursuant to a license
agreement attached hereto as Exhibit 2.14 To Target's knowledge, there is no
potentially interfering patent or patent application of any third party.
2.15 REAL PROPERTY. Target does not own any real property or have any
contracts, agreements or options to acquire other real property. The Target
Disclosure Schedule identifies the real property ("Target Leased Real Property")
leased, subleased, occupied or used by Target pursuant to a Lease or other
agreement (each such Lease or other similar agreement being hereinafter referred
to as a "Target Lease") and Target owns or leases the improvements located on
such Target Leased Real Property. Target has not received any written
notification that it is in default with respect to any Target Leases pursuant to
which it occupies or uses any Target Leased Real Property and/or such
improvements nor, to the knowledge of Target, are there any disputes between any
Person and Target with respect to Target Leases, which default or dispute would
materially adversely affect the right of Target to remain in possession of the
property in question or otherwise adversely affect in any material respect the
ability to use such property for its current use.
2.16 TANGIBLE PERSONAL PROPERTY.
(a) The Tangible Personal Property owned, leased or used by
Target is in the aggregate in good operating condition and repair, normal "wear
and tear" excepted.
(b) Except as set forth in the Target Disclosure Schedule or
property and assets sold or disposed of in the ordinary course of business of
Target, Target has good and valid title to all Tangible Personal Property shown
on the Financial Statements as being owned by it, in each case free and clear of
all Liens, except for Permitted Liens.
2.17 CONTRACTS AND COMMITMENTS. The Target Disclosure Schedule contains
a true, complete and accurate list of all written contracts, agreements
instruments, leases, licenses, arrangements, or understandings to which Target
is a party or by which any of its assets or properties are bound. All contracts,
agreements, plans, leases, policies and licenses referred to in the Target
Disclosure Schedule are , to the best of Target's knowledge, valid and in full
force and effect, and true copies thereof have been heretofore made available to
Merchant.
2.18 CONSENTS. The Target Disclosure Schedule sets forth a true and
complete list of all consents of governmental and other regulatory agencies,
foreign or domestic, and of other third parties required to be received by or on
the part of Target to enable Target to enter into and carry out this Agreement.
All such requisite consents have been, or prior to the Closing will have been,
obtained.
2.19 INSURANCE. The Target Disclosure Schedule sets forth a list of all
policies or binders of fire, liability, workmen's compensation or other
insurance held by or on behalf of Target (specifying the insurer, the policy
number or covering note number with respect to such binders). Correct and
complete copies of such policies or binders have been delivered or made
available to Merchant. Target has not received written notice that it is in
default with respect to any material provision contained in any such policy or
binder and has not received written notice of cancellation or non-renewal of any
such policy or binder. All of such insurance is in full force and effect and all
premiums due and payable thereon have been paid.
2.20 LABOR MATTERS. Target is not party to any collective bargaining
agreement or other labor agreement with any union or labor organization, and no
union or labor organization has been recognized by Target. Except as disclosed
in the Target Disclosure Schedule, as of the date hereof, (i) to the knowledge
of Target after reasonable inquiry, there is no union or labor organization
actively seeking to organize any employees of Target and (ii) there is no
strike, picketing or work stoppage by, or any lockout of, employees of Target
pending or, to the knowledge of Target, threatened, against or involving Target.
2.21 QUESTIONABLE PAYMENTS. Neither Target nor any current director or
officer has, directly or indirectly: (A) used any corporate funds for unlawful
contributions, gifts, entertainment, or other unlawful expenses relating to
political activity; (B) made any unlawful payment to foreign or domestic
government officials or employees or to foreign or domestic political parties or
campaigns from corporate funds; (C) established or maintained any unlawful or
unrecorded fund of corporate monies or other assets; (D) made any false or
fictitious entry on the books or records of Target; or (E) made any bribe,
kickback, or other payment of a similar or comparable nature, whether lawful or
not, to any person or entity, private or public, regardless of form, whether in
money, property, or services, to obtain favorable treatment in securing business
or to obtain special concessions, or to pay for favorable treatment for business
secured or for special concessions already obtained.
2.22 BROKERS. Except for Xxxxx Xxxxx, et al, for whom Target and
Merchant have agreed to pay, Target has not engaged, consented to or authorized
any broker, finder, investment banker or other third party to act on its behalf,
directly or indirectly, as a broker or finder in connection with the
transactions contemplated by this Agreement. Target has no liability or
obligation to pay any fees or commissions to any other broker, finder, or agent
with respect to the transactions contemplated by this Agreement for which
Merchant could become liable or obligated.
2.23 PRIOR ACTS. None of the stockholders, directors or officers has
committed any of the acts or subject to any of the restrictions listed in Rule
262 (b) promulgated pursuant to the Securities Act.
2.24 CERTAIN DEFINITIONS. The following definitions are used in this
Article 2:
"CONTRACT" shall mean, whether in writing or oral, any contract, note,
bond, deed, mortgage, indenture, lease, license, agreement or other instrument
or obligation.
"ENVIRONMENTAL, HEALTH OR SAFETY REQUIREMENTS" means (i) any and all
federal, state and local statutes, regulations and ordinances, and any rules of
common law, including, without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act (42 X.X.X.xx. 9601 et seq.), the
Hazardous Materials Transportation Act (49 X.X.X.xx. 1801 et seq.), the Resource
Conservation and Recovery Act (42 X.X.X.xx. 6901 et seq.), the Clean Water Act
(33 X.X.X.xx. 1251 et seq.), the Clean Air Act (42 X.X.X.xx. 7401 et seq.), the
Toxic Substance Control Act (15 X.X.X.xx. 2601 et seq.), the Federal
Insecticide, Fungicide and Rodenticide Act (7 X.X.X.xx. 136 et seq.), and the
Occupational Safety and Health Act (29 X.X.X.xx. 651 et seq.), and the
regulations promulgated pursuant to each of the foregoing; and (ii) with respect
to any Person, any and all administrative or judicial orders, consent decrees,
settlement agreements, injunctions, Permits, licenses, codes, covenants and deed
restrictions and other provisions having the force or effect of law, issued by a
Governmental Authority in respect of such Person's or its Subsidiaries'
operations or assets, or applicable thereto; in each case concerning pollution
or protection of the environment, or human health, or safety, including worker
safety, to the extent that such safety may be affected by exposure to Hazardous
Materials (including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage,
disposal, distribution, labeling, testing, processing, discharge, release,
threatened release, control, or cleanup of or exposure to any Hazardous
Materials, hazardous materials, or wastes).
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"GOVERNMENTAL AUTHORITY" shall mean any foreign, Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, including, without limitation, any court of competent
jurisdiction.
"HAZARDOUS MATERIAL" shall mean any chemical, waste, pollutant,
contaminant or substance that is regulated by any Environmental, Health or
Safety Requirements, including, without limitation, asbestos in friable
condition, urea formaldehyde foam insulation, petroleum and its derivatives,
by-products and other petroleum hydrocarbons, radioactive materials and
polychlorinated biphenyls (PCBs), and any material or substance which is defined
as a "hazardous waste," "hazardous substance," "hazardous material," "restricted
hazardous waste," "industrial waste," "solid waste," "contaminant," "pollutant,"
"toxic waste" or "toxic substance" under any Environmental, Health or Safety
Requirement.
"LEASES" with respect to any Person, shall mean all leases of real,
personal or intangible property under which either such Person or any of its
affiliates is lessee or lessor (or sublessee or sublessor).
"LEGAL REQUIREMENTS" with respect to any Person, shall mean (a) all
statutes, laws, ordinances, codes, rules, regulations, judgments, decrees,
decisions, writs, rulings, injunctions, orders and other requirements of any
Governmental Authority and (b) any consent, approval, authorization, waiver,
Permit, agreement, license, certificate, exemption, order, registration,
declaration or filing of, with or to any Governmental Authority, in each case
other than relating to Taxes, and in each case binding upon such Person or such
Person's assets, business or properties.
"LIEN" shall mean any encumbrance, charge, security interest, mortgage,
pledge, hypothecation, title defect, title retention agreement, lease, sublease,
license, occupancy agreement, easement, covenant running with the land,
encroachment, voting trust agreement, restriction, option, right of first offer
or refusal, proxy or lien, including, but not limited to, liens for taxes.
"MATERIAL ADVERSE EFFECT," with respect to any Person, shall mean any
change or effect that is or would be reasonably expected to be materially
adverse to the business, assets, properties, financial condition or results of
operations of such Person.
"PATENT PENDINGS" shall mean and include all patents pending and patent
applications.
"PERMIT" shall mean any federal, state, local, and foreign governmental
approval, authorization, certificate, easement, filing, franchise, license,
notice, permit, or right to which any Person is a party or that is or may be
binding upon or inure to the benefit of any Person or its securities, assets, or
business.
"PERMITTED LIEN" shall mean (i) any Lien for Taxes not yet due or
delinquent or as to which there is a good faith dispute and for which there are
adequate reserves on the financial statements of the Person affected thereby,
(ii) with respect to real property, any Lien which is not in a material
liquidated amount and which does not, individually or in the aggregate,
interfere materially with the current use or materially detract from the value
or marketability of such property (assuming its continued use in the manner in
which it is currently used), (iii) a Lien arising pursuant to any order of
attachment, distraint or similar legal process arising in connection with court
proceedings, so long as the execution or other enforcement thereof has been
stayed and the claims secured thereby are being contested in good faith by
appropriate proceedings and for which there are adequate reserves on the
financial statements of the Person affected thereby, (iv) Liens for assessments,
levies or other governmental charges not delinquent or being contested in good
faith and by appropriate proceedings and for which there are adequate reserves
on the financing statements of the Person affected thereby, (v) deposits or
pledges to secure bids, tenders, contracts, franchises, leases, statutory
obligations, indemnity, performance, surety and appeal bonds or other
obligations of a like nature, in each case arising in the ordinary course of
business, (vi) deposits or pledges to secure obligations under workers
compensation, social security or similar laws or under employment insurance,
(vii) mechanics', workers', materialmen's or other like Liens arising in the
ordinary course of business that do not materially detract from the value, or
interfere with the present use, of the properties or assets affected thereby and
(viii) Liens existing on the date hereof in respect of any capital leases in
effect on the date hereof.
"PERSON" shall mean and include an individual, a partnership, a joint
venture, a limited liability company, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
"TANGIBLE PERSONAL PROPERTY" shall mean, collectively, machinery,
equipment, furniture, fixtures and other tangible personal property.
"TAX" or "TAXES" shall mean all taxes, charges, fees, levies or other
assessments, and all estimated payments thereof, including, but not limited to,
income, excise, property, sales, use, value added, franchise, payroll, transfer,
transfer gain, gross receipts, withholding, social security and unemployment
taxes or other taxes of any kind, imposed by any Federal, state, county or local
government, or any subdivision or agency thereof (a "TAX AUTHORITY"), and any
interest, penalty and expense relating to such taxes, charges, fees, levies or
other assessments.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MERCHANT AND NEWCO
Each of Merchant and Newco, where applicable, hereby represents and
warrants to Target that, except as set forth in Merchant's Disclosure Schedule
attached hereto as Exhibit 3 ("Merchant's Disclosure Schedule"), each of the
following representations, warranties and statements is true and correct.
3.1 CORPORATE ORGANIZATION; ETC. Merchant is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida, and Newco is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Each of Merchant and Newco has
the corporate power and authority to carry on its business as now being
conducted and to own the properties and assets it now owns.
3.2 AUTHORIZATION, ETC. Each of Merchant and Newco has full corporate
power and authority to enter into this Agreement and to carry out the
transactions contemplated hereby. Each of Merchant and Newco has taken all
action required to authorize the execution and delivery of this Agreement and
the transactions contemplated hereby, and this Agreement is a valid and binding
agreement of Merchant and Newco, enforceable in accordance with its terms. No
filing, authorization or approval, governmental or otherwise, is necessary or
required to be made or obtained to enable Merchant and Newco, as applicable, to
enter into, and to perform its obligations under, this Agreement, except for (a)
the filing of the Articles of Merger with the Delaware Secretary of State, the
filing of such officers' certificates and other documents as are required to
effectuate the Merger under Delaware Law and the filing of appropriate documents
with relevant authorities of states other than Delaware and Florida in which any
parties hereto are qualified to do business, if any, and (b) such filings as may
be required to comply with federal and state securities laws in connection with
the issuance of shares of MRTO Common Stock as contemplated hereby, which
filings will be timely made by Merchant; all costs and expenses, including,
without limitation, legal fees associated with such filing will be borne by
Merchant.
3.3 NO VIOLATION. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated hereby will violate any
provisions of the Certificate of Incorporation or Bylaws of Merchant or Newco,
or violate, or be in conflict with, or constitute a default under, or cause the
acceleration of the maturity of any debt or obligation pursuant to, any
agreement, contract or commitment to which Merchant or Newco is a party or by
which Merchant or Newco is bound, or violate any statute, law, regulation,
judgment, decree, order, regulation or rule of any court or governmental
authority.
3.4 NEWCO. Newco has been formed for the sole purpose of effecting the
Merger and, except as contemplated by this Agreement, Newco has not conducted
any business activities and does not have any material liabilities or
obligations. The sole stockholder of Newco is Merchant, and Merchant, as the
sole shareholder of Newco, has adopted this agreement in accordance with the
requirements of the Delaware Law.
3.5 DULY ISSUED SHARES. The shares of MRTO Common Stock to be issued
pursuant to the Merger will be duly and validly issued, fully paid and
non-assessable.
3.6 SEC FILINGS. Merchant has heretofore delivered to Target and the
Target Stockholders copies of its Annual Report on Form 10-KSB for the year
ended October 31, 1999 (the "Form 10-KSB") which contains audited financial
statements for Merchant as of and for the year ended October 31, 1999 and its
Quarterly Report on Form 10-QSB for the three months ended January 31, 2000 (the
"Form 10-QSB"), which contains unaudited financial statements for Merchant as of
and for the three months ended January 31, 2000 (the "Merchant Financial
Statements"). The Merchant Financial Statements and the notes thereto are true,
complete and accurate and fairly present the assets, liabilities, financial
condition and results of operations of Merchant as at the respective dates
thereof, all in accordance with generally accepted accounting principles
consistently applied throughout the periods involved, and consistent with the
books and records of Merchant.
3.7 FILINGS WITH THE SEC. Merchant has made all filings with the
Securities and Exchange Commission ("SEC") that it has been required to make
under the Securities Act and the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (collectively the "Public Reports"). Each of the Public
Reports has complied with all applicable requirements of the Securities Act and
the Exchange Act in all material respects. None of the Public Reports, as of
their respective dates, contained any untrue statement of a material fact or
omitted to state a material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. All financial statements set forth in the Public Reports present
fairly the financial condition of Merchant as of and for the periods ending on
their respective dates.
3.8 EVENTS SUBSEQUENT TO MOST RECENT PUBLIC REPORT. Since the end of
the period covered by the Merchant Financial Statements, except as disclosed in
the Form 10-KSB or Form 10-QSB or in the Merchant Disclosure Schedule, there has
not been any material adverse change in the business, financial condition,
operations, results of operations, or future prospects of Merchant, and Merchant
has not entered into any agreement, or otherwise operated, other than in the
ordinary course of business.
3.9 NO UNDISCLOSED LIABILITIES, ETC. To the best of its knowledge,
Merchant has no liabilities or obligations of any nature (absolute, accrued,
contingent or otherwise) which were not fully reflected or reserved against in
the Merchant Financial Statements, except for liabilities and obligations
incurred in the ordinary course of business and consistent with past practice
since the date thereof, and the reserves reflected in the Merchant Financial
Statements are adequate, appropriate and reasonable.
3.10 LITIGATION. Except as disclosed in the Form 10-KSB, there is no
pending or threatened action, suit, inquiry, proceeding or investigation by or
before any court or governmental or other regulatory or administrative agency or
commission pending or threatened against or involving Merchant, or which
questions or challenges the validity of this Agreement or any action taken or to
be taken by Merchant pursuant to this Agreement or in connection with the
transactions contemplated hereby; nor is there any valid basis for any such
action, proceeding or investigation. To the best of its knowledge, Merchant is
not in default under or in violation of, nor is there any valid basis for any
claim of default under or violation of, any agreement, contract, commitment or
restriction to which it is a party or by which it (or its assets) is bound.
Merchant is not in violation of, or in default with respect to, any provision of
its Articles of Incorporation or Bylaws, or any law, rule, regulations, order,
judgment, or decree; nor is Merchant required to take any action in order to
avoid such violation or default. Neither Merchant nor any of its assets is
subject to any judgment, order or decree entered in any lawsuit or proceeding
which may have an adverse effect on Merchant's business or financial condition,
or on its ability to acquire any property or conduct its business in any area.
3.11 BROKERS. Except for Xxxxx Xxxxx et al, for whom Target and
Merchant have agreed to pay, Merchant has not engaged, consented to or
authorized any other broker, finder, investment banker or other third party to
act on its behalf, directly or indirectly, as a broker or finder in connection
with the transactions contemplated by this Agreement, and Merchant agrees to
indemnify the Target Stockholders against, and to hold them harmless from, any
claim for brokerage or similar commissions or other compensation that may be
made against Target Stockholders by any third party in connection with the
transactions contemplated hereby.
3.12 TAXES.
(a) Except as set forth in the Merchant Disclosure Schedule, (A)
all federal, state and local income tax returns and reports and any other tax
return or report for which there is a liability for the payment of Taxes in
excess of $50,000 (collectively, "Merchant Tax Returns") required to be filed by
or on behalf of Merchant (and any combined, consolidated, unitary or affiliated
group of which Merchant is or has been a member prior to the Closing Date) for
Taxes have been duly and timely filed with the appropriate taxing authorities in
all jurisdictions in which such Merchant Tax Returns are required to be filed
(after giving effect to any valid extensions of time in which to make such
filings); (B) all such Merchant Tax Returns are correct and complete in all
material respects; and (C) all amounts shown as due on such Merchant Tax Returns
and any other required payment of any other Tax liability in excess of $50,000
due from Merchant (and any combined, consolidated, unitary or affiliated group
of which Target is or has been a member prior to the Closing Date) have been
timely paid or accrued for on the Merchant Financial Statements. Except as set
forth in the Merchant Disclosure Schedule, Merchant shall prepare and timely
file, in a manner consistent with prior years except as required by a change in
applicable laws and regulations, all Merchant Tax Returns required to be filed
on or before the Closing Date (after giving effect to any valid extensions of
time in which to make such filings). Merchant has established an adequate
accrual or reserve for the payment of all Taxes payable in respect of the
period, including portions thereof, subsequent to the period covered by such
Returns up to and including the Closing Date.
(b) Merchant has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any employee,
creditor, independent contractor or other party.
(c) Except as set forth in the Merchant Disclosure Schedule, all
deficiencies asserted or assessments made as a result of any examinations by the
IRS or other taxing authority of Merchant Tax Returns have been fully paid, and
Merchant has not received written notice of any other audits or investigations
by any taxing authority in progress, nor has Merchant received any written
notice from any taxing authority that it intends to conduct such an audit or
investigation.
(e) Merchant is not a party to any tax sharing or similar
contract or arrangement currently in effect (whether or not written) with any
Person.
(f) Except as set forth in the Merchant Disclosure Schedule,
Merchant has not been a member of any consolidated, combined, unitary or
affiliated group of corporations for any tax purposes.
3.13 CONTRACTS AND COMMITMENTS. The Public Reports contain a true,
complete and accurate list of all material written contracts, agreements
employment agreements, instruments, leases, licenses, arrangements, or
understandings to which Merchant is a party or by which any of its assets or
properties are bound. All contracts, agreements, plans, leases, policies and
licenses referred to in the Public Reports are , to the best of Merchant's
knowledge, valid and in full force and effect.
3.14 INTELLECTUAL PROPERTY. Merchant has valid, unrestricted and
exclusive ownership of or rights to use the patents, trademarks, trademark
registrations, trade names, copyrights, know-how, technology and other
intellectual property necessary to the conduct of its business. The Merchant
Disclosure Schedule lists all patents, trademarks, trademark registrations,
trade names and copyrights of Merchant. Merchant has been granted licenses,
know-how, technology and/or other intellectual property necessary to the conduct
of its business as set forth in the Merchant Disclosure Schedule. To the best of
Merchant's knowledge after due inquiry, Merchant is not infringing on the
intellectual property rights of any third party, nor is any third party
infringing on Merchant's intellectual property rights. There are no restrictions
in any agreements, licenses, franchises, or other instruments that preclude
Merchant from engaging in its business as presently conducted.
3.15 XXXXXX FINANCING. The agreements relating to the financing
transaction described in the Form 10-KSB with Xxxxxx Private Equity, which have
been filed as exhibits to the Form 10-KSB, are to Merchant's knowledge in full
force and effect.
3.16 OTHER FINANCING. As of the Closing, Merchant will have at least
$1.5 million of cash from private sales of common stock during the months of
March and April 2000 with a purchase price of $10.00 per share and an equity
line in the form of Exhibit 3.16 from Xxxxxx Investment Management Ltd. giving
Merchant the right to require Xxxxxx to purchase up to 300,000 shares of common
stock at $10.00 per share with a maximum of $500,000 per month. Merchant shall
make copies of the related agreements available for Target to review prior to
Closing. All conditions required to be satisfied by Merchant in such financing
agreements have been met and Merchant is not in default with respect to any such
funding.
3.17 PROJECTIONS. Merchant has provided its March 2000 projections to
Target. Such projections were prepared in good faith by Merchant and Merchant is
not aware of any material adjustment required to be made in the projections.
Target acknowledges that Merchant has no duty to update the projections and
Target acknowledges that it may not make any claim of indemnification under
Article 12 of this Agreement for any misstatements or inaccuracies in the
projections.
3.18 DISCLOSURE. The representations and warranties contained in this
Section 3 and in Merchant's Disclosure Schedule do not contain any untrue
statement of a material fact or omit to state any material facts necessary in
order to make the statements and information contained in this Section 3 and in
Merchant's Disclosure Schedule not misleading.
ARTICLE 4
CERTAIN COVENANTS OF THE PARTIES
4.1 SATISFACTION OF CONDITIONS. Each of the parties hereto will use its
commercially reasonable best efforts to take all actions and to do all things
necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in Articles 6 and 7 below).
4.2 CONSENTS. Each party will use its commercially reasonable best
efforts to obtain, prior to the Closing, all consents required of such party, in
the opinion of any party's legal counsel, to the consummation of the
transactions contemplated hereby.
4.3 SUPPLEMENTS TO SCHEDULES; ADVICE OF CHANGES. Each party hereto will
promptly advise the other parties hereto in writing (a) of any event occurring
subsequent to the Agreement Date that would render any representation or
warranty of such party contained in this Agreement, if made on or as of the date
of such event or the Closing Date, untrue or inaccurate in any material respect
(however, no notice need be provided regarding any event or action contemplated
or permitted under this Agreement) and (b) of the occurrence of any material
adverse change in such party's business, operations or financial condition.
4.4 OTHER TRANSACTIONS. From the date of this Agreement until the
Closing or Termination Date, Target will not enter into any discussions
concerning, or approve or recommend any merger, consolidation or disposition of
all or substantially all of its business, properties or assets, or proposal
therefor, or furnish or cause to be furnished any information concerning its
business, properties or assets to any party in connection with any such
transaction, other than the transactions contemplated by this Agreement.
4.5 REMEDIES. In the event of the breach or threatened breach of any of
the terms or conditions of this Agreement by any party hereto, then any party
adversely affected by such breach shall be entitled, if it so elects, to
institute and prosecute any proceedings in any court of competent jurisdiction
either in law or equity, for such relief as it deems appropriate including,
without limiting the generality of the foregoing proceedings, damages for any
breach of this Agreement, specific performance thereof by the breaching party,
or enjoining the breaching party from performing services for any other person,
firm or corporation. In the event of any such action or proceeding, the
prevailing party shall be entitled to recover its reasonable attorney's fees in
the prosecution of such action, in addition to any other relief to which it may
be entitled.
4.6 ACCESS TO INFORMATION. Until the Closing Date, each party hereto
will provide each other party, and its agents, with reasonable access to its
management and officers and material information regarding such party, including
without limitation, material information relating to such party's business and
financial condition. Each party will cause its accountants to cooperate with
each other party's accountants in making available all financial information
reasonably requested to evaluate such party's financial statements.
ARTICLE 5
CLOSING MATTERS
5.1 THE CLOSING. Subject to termination of this Agreement as provided
below, the closing of the transactions contemplated by this Agreement (the
"Closing") will take place at the offices of Merchant, 0000 X. Xxxxx Xxxxxxx,
Xxxx Xxxxx, Xxxxxxx 00000, on April 13, 2000 or such other day as mutually
agreed by the parties (the "Closing Date"), but not later than April 20, 2000
(the "Termination Date"), assuming the satisfaction or waiver, prior to the
Closing of all of the conditions thereto as set forth in this Agreement.
Concurrently with the Closing, the Articles of Merger will be filed in the
offices of the Delaware Secretary of State.
5.2 EXCHANGE OF CERTIFICATES, ETC.
(a) As of the Effective Time, all shares of Target Common Stock
that are outstanding immediately prior thereto will, by virtue of the Merger and
without further action, cease to exist, and all such shares will be converted
into the number of shares of MRTO Common Stock as set forth in Section 1.2.
(b) As of the Effective Time, all shares of Newco Common Stock
that are outstanding immediately prior thereto will, by virtue of the Merger and
without further action, cease to exist, and all certificates representing such
shares will be surrendered to Target at the Closing and exchanged for
certificates representing a number of shares of Target Common Stock as set forth
in Section 1.2.1 hereof. The shares referred to in Section 1.2.1 shall not
impact the number of shares to be delivered pursuant to Section 1.2.2.
(c) At and after the Effective Time, each certificate
representing outstanding shares of Target Common Stock will represent the number
of shares of MRTO Common Stock into which such shares of Target Common Stock
have been converted as set forth in Section 1.2.2 hereof, and such shares of
MRTO Common Stock will be deemed registered in the name of the holder of such
certificate. As soon as practicable after the Effective Time, each holder of
shares of Target Common Stock will surrender the certificates representing such
shares (the "Target Certificates") to Merchant for cancellation. Promptly
following the Effective Time and receipt of the Target Certificates and/or
Affidavit, Merchant will cause its transfer agent to issue to such surrendering
holder certificate(s) representing the number of shares of MRTO Common Stock to
which such holder is entitled pursuant to Article 1 hereof.
(d) After the Effective Time there will be no further
registration of transfers on the books of Target of Target Common Stock that was
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Target Certificates are presented for any reason, they will be cancelled
and exchanged as provided herein.
5.3 OTHER ITEMS TO BE DELIVERED AT CLOSING. At the Closing, the parties
will deliver to the indicated parties the various certificates, instruments and
documents referenced in Articles 6 and 7 below, including written confirmation
of satisfaction of the various covenants and conditions referenced in such
Articles.
5.4 FURTHER ASSURANCES. After the Closing Date, each of the parties
hereto shall from time to time, at the request of any other party, and without
further cost or expense to requesting party, take such other actions as a
requesting party may reasonably request, in order to consummate the transactions
contemplated hereby.
ARTICLE 6
CONDITIONS TO OBLIGATIONS OF TARGET
Target's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the Closing, of each of the following conditions (any
one or more of which may be waived by Target):
6.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Merchant contained herein shall be in all material respects true
and accurate as of the date when made and at and as of the Closing as though
such representations and warranties were made at and as of such date, except for
changes expressly permitted or contemplated by the terms of this Agreement, and
Target shall have received a certificate to such effect executed on behalf of
Merchant by its Chief Executive Officer.
6.2 PERFORMANCE. Merchant shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
6.3 INVESTIGATIONS; ETC. Neither any investigation of Merchant by
Target, nor Merchant's Disclosure Schedule or any supplement thereto provided by
Merchant, nor any other document delivered to Target by Merchant as contemplated
by this Agreement, shall have revealed any facts or circumstances which, in the
sole and exclusive judgment of Target, reflect in a material adverse way on the
financial condition, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves, business, operations or prospects of Merchant.
6.4 CONSENTS. The consents from third parties and government agencies
required to consummate the transactions contemplated hereby shall have been
obtained.
6.5 NO GOVERNMENTAL PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
6.6 EXECUTION OF EMPLOYMENT AGREEMENTS. On or before the Closing Date,
Xxx Xxxxxxxxx, Xxxxxxx Xxxx and Xxxx Ice shall have entered into Employment
Agreements with Target in the form of Exhibit 6.6 hereto.
6.7 AVAILABILITY OF FUNDS. Merchant shall have provided evidence
satisfactory to Target that $1,000,000, or such lesser amount that is mutually
agreed upon by Target and Merchant, is available, upon terms acceptable to
Target, to fund the cash payments to be made by Merchant as contemplated by this
Agreement. The Investment Agreement from Xxxxxx Private Equity, LLC is in full
force and effect, and there remains $35 million available to Merchant under such
credit facility.
6.8 MERCHANT FUNDING OF SPECIFIED TARGET OBLIGATIONS. Merchant shall
have provided evidence satisfactory to Target that effective as of the Closing
Merchant will fund Target with the capital required to satisfy certain
obligations as referenced in Sections 10.2 and 10.3 below.
6.9 NO INJUNCTION. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby which Target deems
unacceptable in its sole discretion.
6.10 MATERIAL CHANGE. From the date of this Agreement to the Closing
Date, neither Merchant nor Target shall have suffered any unanticipated material
adverse change (whether or not such change is referred to or described in any
supplement to the Schedules) in its business, prospects, financial condition,
working capital, assets, liabilities (absolute, accrued, contingent or
otherwise), reserves or operations.
6.11 CORPORATE APPROVALS. The principal terms of this Agreement shall
have been approved and adopted by the Target Stockholders, as required by the
Delaware Law and Target's Articles of Incorporation and Bylaws. The Principal
terms of this Agreement shall have also been approved and adopted by Merchant
and Newco, as required by the Florida Law and the Delaware Law by their
respective Boards of Directors.
6.12 OPINION OF COUNSEL. Merchant's counsel shall have delivered to
Target its opinion in the form attached hereto as Exhibit 6.12 with respect to
due incorporation and authorization of the transactions contemplated hereby.
6.13 ELECTION OF NOMINEE AS DIRECTOR OF MERCHANT. Xxx Xxxxxxxxx shall
have been elected to Merchant's Board of Directors, as provided in Section 10.4
below.
ARTICLE 7
CONDITIONS TO OBLIGATIONS OF MERCHANT
Each and every obligation of Merchant under this Agreement to be
performed on or before the Closing shall be subject to the satisfaction, on or
before the Closing, of each of the following conditions, unless waived in
writing by Merchant:
7.1 REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of Target contained in this Agreement and in the schedules,
certificates and other documents delivered and to be delivered by Target
pursuant hereto or in connection with the transactions contemplated hereby shall
be true, complete and accurate as of the date when made and at and as of the
Closing Date as though such representations and warranties were made at and as
of such date, except for changes expressly permitted or contemplated by the
terms of this Agreement or changes which are not material in the aggregate.
Merchant shall have received a certificate to such effect executed on behalf of
Target by its Chief Executive Officer.
7.2 PERFORMANCE. Target shall have performed and complied with all
agreements, obligations and conditions required by this Agreement to be
performed or complied with by it on or prior to the Closing.
7.3 INVESTIGATIONS; ETC. Neither any investigation of Target by
Merchant, nor Target's Disclosure Schedule nor any supplement thereto provided
by Target, nor any other document delivered to Merchant as contemplated by this
Agreement by Target, shall have revealed any facts or circumstances which, in
the sole and exclusive judgment of Merchant, reflect in a material adverse way
on the financial condition, assets, liabilities (absolute, accrued, contingent
or otherwise), reserves, business, operations or prospects of Target.
7.4 CONSENTS. The consents from third parties and government agencies
required to consummate the transactions contemplated hereby shall have been
obtained.
7.5 NO GOVERNMENT PROCEEDING OR LITIGATION. No suit, action,
investigation, inquiry or other proceeding by any governmental body or other
person or legal or administrative proceeding shall have been instituted or
threatened which questions the validity or legality of the transactions
contemplated hereby.
7.6 NO INJUNCTION. On the Closing Date there shall be no injunction,
writ, preliminary restraining order or any order of any nature issued by a court
of competent jurisdiction directing that the transactions provided for herein or
any of them not be consummated as so provided or imposing any conditions on the
consummation of the transactions contemplated hereby which Merchant deems
unacceptable in its sole discretion.
7.7 MATERIAL CHANGE. From the date of this Agreement to the Closing
Date, Target shall not have suffered any unanticipated material adverse change
(whether or not such change is referred to or described in any supplement to the
Schedules) in its business, prospects, financial condition, working capital,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves or
operations.
7.8 TARGET STOCKHOLDER APPROVAL. The proposed terms of this Agreement,
the Articles of Merger and the Merger shall have been duly and validly approved
and adopted by the requisite vote of the Target Stockholders, in accordance with
the provisions of the Delaware Law and Target's Articles of Incorporation and
Bylaws.
ARTICLE 8
CONDUCT OF BUSINESS PENDING THE CLOSING
After the date hereof and prior to the Closing and until the
Termination Date, and except as otherwise expressly consented to or approved by
Merchant in writing:
8.1 CONDUCT OF BUSINESS. Target will carry on its business diligently
and substantially in the same manner as heretofore conducted. Except as
otherwise agreed by Merchant in writing, until the Closing, Target will use its
best efforts to preserve its business, to keep available the services of its
present personnel, to preserve in full force and effect the contracts,
agreements, instruments, leases, licenses, arrangements, and understandings of
Target, and to preserve the good will of their suppliers, customers, and others
having business relations with any of them.
8.2 AMENDMENTS. No change or amendment shall be made in the charter
documents of Target.
8.3 CAPITAL CHANGES; DIVIDENDS REDEMPTION. Target will not issue or
sell any additional shares of its capital stock or other securities, acquire
directly or indirectly, by redemption or otherwise, any such shares or split-up
any such capital stock, declare or pay any dividends thereon in cash, securities
or other property or make any other distribution with respect thereto, or grant
or enter into any options, warrants, calls or commitments of any kind with
respect thereto.
8.4 SUBSIDIARIES. Target will not organize any new subsidiary, acquire
any capital stock or other equity securities of any corporation, partnership, or
other entity or acquire any equity or ownership interest in any business.
8.5 CERTAIN CHANGES. Target will not:
(a) Borrow or agree to borrow any funds or incur, or assume or
become subject to, whether directly or by way of guarantee or
otherwise, any obligation or liability (absolute or contingent), except
obligations and liabilities incurred in the ordinary course of business
and consistent with past practice;
(b) Pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, contingent or otherwise), other than the payment,
discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities or obligations reflected
or reserved against in the Financial Statements or incurred in the
ordinary course of business and consistent with past practice since the
date of the Financial Statements;
(c) Prepay any obligation having a fixed maturity of more than
90 days from the date such obligation was issued or incurred;
(d) Permit or allow any of its property or assets (real,
personal or mixed, tangible or intangible) to be subjected to any
mortgage, pledge, lien or encumbrance;
(e) Write off as uncollectable any notes or accounts receivable
except in the ordinary course of business;
(f) Cancel any debts or waive any claims or rights of
substantial value or sell, transfer, or otherwise dispose of any of its
properties or assets, except in the ordinary course of business and
consistent with past practice;
(g) Grant any general increase in the compensation of its
officers or employees (including any such increase pursuant to any
bonus, pension, profit sharing or other plan or commitment) or any
increase in the compensation payable or to become payable to any
officer or employees;
(h) Pay, loan or advance any amount to, or sell transfer or
lease any properties or assets to, or enter into any agreement or
arrangement with, any Target Stockholders, officers or any affiliates;
(i) Agree, whether in writing or otherwise, to do any of the
foregoing.
8.6 CONTRACTS. No contract or commitment will be entered into, and no
purchase of raw material or supplies and no sale of assets will be made, by or
on behalf of Target, except (i) normal contracts or commitments for the purchase
of, and normal purchases of, inventory or supplies, made in the ordinary course
of business an consistent with past practice, and (ii) other contracts,
commitments, purchases or sales in the ordinary course of business and
consistent with past practice not in excess of $50,000 in the aggregate.
8.7 INSURANCE; PROPERTY. Target shall adequately insure all property,
real, personal and mixed, owned or leased by Target, against all ordinary and
insurable risks; and all such property shall be used, operated, maintained and
repaired in a careful and reasonably efficient manner.
8.8 NO DEFAULT. Target shall not do any act or omit to do any act, or
permit any action or omission to act, which will cause a breach of any material
contract or commitment of Target or which would cause the breach of any warranty
made hereunder.
8.9 COMPLIANCE WITH LAWS. Target shall duly comply with all laws
applicable to it and its properties, operations, business and employees.
8.10 MATERIAL DEVELOPMENTS. Target shall promptly notify Merchant of
the occurrence of any and all events which have, or may have, a material effect
upon the business or financial condition of Target.
8.11 MERCHANT'S COVENANTS. Except as contemplated in the Public
Filings, Sections 8.1, 8.2, 8.5, 8.7, 8.8, 8.9 and 8.10 shall apply to Merchant
as if Merchant was the Target in such Sections.
ARTICLE 9
REGISTRATION RIGHTS
9.1 REGISTRABLE SECURITIES. As used herein the term "Registrable
Securities" means (i) the 1,250,000 shares of MRTO Common Stock issued pursuant
to Section 1.2 of this Agreement, (ii) the Additional MRTO Shares, if any,
issued pursuant to Section 10.1 below, and (iii) any shares of MRTO Common Stock
issuable or issued in respect to any such shares, including any shares issued or
issuable upon any stock split, dividend or distribution, or any recapitalization
or other similar event, provided, however, that with respect to any particular
Registrable Security, a security shall cease to be a Registrable Security when
(i) it has been effectively registered under the Securities Act, and disposed of
pursuant thereto, (ii) registration under the Securities Act is no longer
required for the immediate public distribution of such security without
restriction, and any restrictive legends with respect thereto may be removed, or
(iii) it has ceased to be outstanding. In the event of any merger,
reorganization, consolidation, recapitalization or other change in corporate
structure affecting the MRTO Common Stock, such adjustment shall be made in the
definition of "Registrable Securities" as is appropriate in order to prevent any
dilution or enlargement of the rights granted pursuant to this Agreement.
9.2 PIGGYBACK REGISTRATION.
(a) NOTICE AND PIGGY BACK REGISTRATIONS. If Merchant at any time
or from time to time proposes to register any of its securities under the
Securities Act (other than in connection with a merger on Form S-4, pursuant to
Form S-8 or other comparable form (relating to equity securities to be issued
solely in connection with any acquisition of any entity or business or equity
securities issuable in connection with stock option or other employee benefit
plans) or the registration statement to be filed in connection with Merchant's
investment agreement with Xxxxxx Private Equity, LLC dated January 5, 2000),
then Merchant shall, on each such occasion, (i) promptly give to each holder of
Registrable Securities (each a "Holder" and collectively the "Holders") written
notice thereof, and (ii) upon the written request or requests of any Holders,
given within 20 days after Merchant's giving of such notice (which request shall
state the intended method of disposition of such Registrable Securities by the
prospective sellers), Merchant will cause the Registrable Securities as to which
registration shall have been so requested to be included in the securities to be
covered by the registration statement proposed to be filed by Merchant, all to
the extent requisite to permit the sale or other disposition (in accordance with
the written request of the Holders, as aforesaid) by the prospective seller or
sellers of such Registrable Securities so registered.
(b) UNDERWRITING; LIMITATION ON SHARES TO BE REGISTERED. If the
registration of which Merchant gives notice is for a registered public offering
involving an underwriting, Merchant shall so advise the Holders as a part of the
written notice given pursuant to Section 9.2(a) above. In such event the right
of any Holder to registration pursuant to Section 9.2(a) shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting
shall, solely with respect to the representations which they may make regarding
themselves, enter into the underwriting agreement in customary form with the
managing underwriter selected for such underwriting by Merchant, solely for the
purpose of confirming such representations. Notwithstanding any other provisions
of this Section 9.2, if the managing underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
managing underwriter may limit the Registrable Securities to be included in such
registration. No Registrable Securities shall be excluded from a registration
unless Merchant has first excluded all outstanding securities the holders of
which are not entitled by right to inclusion of securities in the registration
statement. After giving effect to the exclusion of such securities not having
registration rights, any exclusion of Registrable Securities shall be made pro
rata with holders of other securities having the right to include such
securities in the registration statement, based on the number of securities for
which registration is requested. Merchant shall advise all Holders who would
otherwise be distributing Registrable Securities through such underwriting of
any limitation on the number of Registrable Securities to be included as
provided herein, the basis for calculating the adjustment of the number of
Registrable Securities to be included in the registration by each Holder.
(c) TERMINATION OR DELAY OF REGISTRATION. Merchant shall have
the right to terminate, delay or withdraw any registration initiated by it under
this Section 9.2 prior to the effectiveness of such registration whether or not
any Holder has elected to include any Registrable Securities in such
registration. However, no such action shall relieve Merchant from its obligation
to pay registration expenses in connection therewith or to register the
Registrable Securities in a subsequent transaction.
9.3 DEMAND REGISTRATION.
(a) At any time after the first anniversary of the Closing Date,
the Holders of a majority of the then outstanding Registrable Securities shall
have the right, exercisable by written notice to Merchant, to have Merchant
prepare and file with the SEC under the Securities Act, a registration or
offering statement on Form S-3 or such other form, and such other documents,
including a prospectus, as may be necessary in the opinion of counsel for
Merchant, in order to comply with the provisions of the Securities Act, so as to
permit a public offering and sale of such of the Registrable Securities as the
Holders may elect to have included in such registration, by notice given to
Merchant within twenty (20) business days after receipt by the Holders of the
notice given by Merchant as described in this Section. Once effective, Merchant
shall use its best efforts to keep the Registration Statement effective for a
period of one year.
(b) Merchant covenants and agrees to give written notice of any
registration request under this Section 9.3 to all non-requesting Holders of
Registrable Securities within twenty (20) days from the date of the receipt of
any such registration request. Merchant shall use its best efforts to register
under the Securities Act, for public sale in accordance with the method of
disposition, the Registrable Securities specified in the notice requesting
registration as given by the Holders of a Majority of the Registrable Securities
as referenced above, and in all notices received by Merchant from the other
Holders within twenty (20) days after the giving of notice of such request by
Merchant. If such method of disposition shall be an underwritten public
offering, the Holders of a Majority of the Registrable Securities to be sold in
such offering may designate the managing underwriter of such offering, subject
to the approval of Merchant, which approval shall not be unreasonably withheld
or delayed. Merchant shall be obligated to register Registrable Securities
pursuant to this Section 9.3 on one occasion only, provided, however, that such
obligation shall be deemed satisfied only when a registration statement covering
all shares of Registrable Securities specified in notices received as aforesaid,
for sale in accordance with the method of disposition specified by the
requesting Holders, shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto. A registration which does not become
effective after Merchant has filed a registration statement with respect thereto
by reason of the refusal of the Holders of the Registrable Securities to proceed
shall be deemed to have been effected by Merchant at the request of such
Holders, unless such Holders shall have elected to pay all Registration Expenses
(as defined below) in connection with such registration.
(c) Merchant shall not be obligated to proceed with any
registration pursuant to this Section 9.3 during any period in which Merchant
would be required to undertake an audit it would not otherwise have to undertake
in the ordinary course of business, in order to have available for inclusion in
the registration statement current financial statements as required by the
Securities Act.
(d) If Merchant shall furnish to the Holders requesting a
registration pursuant to this Section 9.3 a certificate signed by the Chief
Executive Officer or President stating that in the good faith judgment of the
Board of Directors of Merchant it would be seriously detrimental to Merchant and
its shareholders for such registration statement to be filed and it is therefore
essential to defer the filing of the registration statement, Merchant shall have
the right to defer taking action with respect to such filing for a period of not
more than 90 days after the receipt of the request of the Target Stockholders
for registration pursuant to this Section 9.3; provided, however, that Merchant
may not make such deferral more than once in any twelve (12) month period.
(e) Merchant shall not be obligated to proceed with any
registration pursuant to this Section 9.3 during any period during which
Merchant is actively using its reasonable best efforts have to have a
registration statement previously filed with the SEC pursuant to Section 9.2
hereof declared effective or during any period in which the Registrable
Securities are included in a effective registration statement.
9.4 REGISTRATION PROCEDURES. In connection with each registration
statement filed pursuant to this Agreement, Merchant hereby agrees to:
(a) Keep each Holder advised in writing as to the initiation of
each participating registration and as to the completion thereof.
(b) Prepare and file with the SEC a registration statement
covering the Registrable Securities which are participating in the registration
as provided herein and use its best efforts to cause such registration statement
to become effective and remain effective until all the Registrable Securities
are sold or become capable of being publicly sold without registration under the
Securities Act.
(c) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective and
to comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such registration statement;
(d) Furnish to each Holder such numbers of copies of a summary
prospectus or other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such Holder may reasonably
request in order to facilitate the public sale or other disposition of the
securities owned by such Holder;
(e) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as each Holder shall request, and do any and all
other acts and things which may be necessary or advisable to enable such Holder
to consummate the public sale or other disposition in such jurisdictions of the
securities owned by such Holder, except that Merchant shall not for any such
purpose be required to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified or to file therein any general
consent to service of process;
(f) Use its best efforts to list such securities on any
securities exchange on which any securities of Merchant are then listed;
(g) Enter into and perform its obligations under an underwriting
agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter or underwriters of such underwritten
offering;
(h) Notify each Holder covered by such registration statement,
at any time when a prospectus relating thereto covered by such registration
statement is required to be
delivered under the Securities Act, of the happening of any event of which it
has knowledge as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing; and
(i) Take such other actions as shall be reasonably requested by
any Holder to facilitate the registration and sale of the Registrable
Securities.
9.5 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement pursuant to this Agreement:
(a) BY MERCHANT. Without limitation of any other indemnity
provided to any Holder pursuant to this Agreement, to the extent permitted by
law, Merchant shall indemnify and hold harmless each Holder, the affiliates,
officers, directors and partners of each Holder, any underwriter (as defined in
the Securities Act) for such Holder, and each person, if any, who controls such
Holder or underwriter (within the meaning of the Securities Act or the Exchange
Act) (each, a "Holder Indemnitee"), against any losses, claims, damages or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "VIOLATION"): (i) any untrue statement or alleged untrue
statement of a material fact contained in such registration statements including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading, (iii) any violation or alleged violation by Merchant of
the Securities Act, the Exchange Act, or any state securities law or any rule or
regulation promulgated under the Securities Act, the Exchange Act or any state
securities law, and Merchant shall reimburse each Holder Indemnitee for any
legal or other expenses incurred by them in connection with investigating,
defending or settling any such loss, claim, damage, liability or action;
provided, however, that Merchant shall not be liable to any Holder Indemnitee in
any such case for any such loss, claim, damage, liability or action to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by any such Holder or any officer,
director or controlling person thereof.
(b) BY HOLDERS. Each Holder will, if Registrable Securities held
by such Holder are included in the securities as to which such registration is
being effected, indemnify and hold harmless Merchant, its affiliates, its
counsel, officers, directors, shareholders and representatives, each other
Holder, any underwriter (as defined in the Securities Act) and each person, if
any, who controls Merchant or the underwriter (within the meaning of the
Securities Act or the Exchange Act) (each, a "Merchant Indemnitee"), against any
losses, claims, damages, or liabilities (joint or several) to which they may
become subject under the Securities Act, the Exchange Act or any state
securities law, and such Holder will reimburse each Merchant Indemnitee for any
legal or other expenses incurred by them in connection with investigating,
defending or settling any such loss, claim, damage, liability or action; insofar
as such losses, claims, damages or liabilities (or actions and respect thereof)
arise solely out of or are based solely upon any statements or information
provided by such Holder to Merchant in connection with the offer or sale of
Registrable Securities held by such Holder.
(c) NOTICE; RIGHT TO DEFEND. Promptly after receipt by an
indemnified party under this Section 9.5 of notice of the commencement of any
action (including any governmental action), such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 9.5, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in and if the indemnifying party agrees in writing that it will be
responsible for any costs, expenses, judgments, damages and losses incurred by
the indemnified party with respect to such claim, jointly with any other
indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified
party shall have the right to retain its own counsel, with the fees and expenses
to be paid by the indemnifying party, if the indemnified party reasonably
believes that representation of such indemnified party by the counsel retained
by the indemnifying party would be inappropriate due to actual or potential
differing interests between such indemnified party and any other party
represented by such counsel in such proceeding. The failure to deliver written
notice to the indemnifying party within a reasonable time of the commencement of
any such action shall relieve such indemnifying party of any liability to the
indemnified party under this Agreement only if and to the extent that such
failure is prejudicial to its ability to defend such action, and the omission so
to deliver written notice to the indemnifying party will not relieve it of any
liability that it may have to any indemnified party otherwise than under this
Agreement.
(d) CONTRIBUTION. If the indemnification provided for in this
Agreement is held by a court of competent jurisdiction to be unavailable to an
indemnified party with respect to any loss, liability, claim, damage or expense
referred to therein, then the indemnifying party, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such loss, liability, claim, damage or
expense in such proportion as is appropriate to reflect the relative fault of
the indemnifying party on the one hand and of the indemnified party on the other
hand in connection with the statements or omissions which resulted in such loss,
liability, claim, damage or expense as well as any other relevant equitable
considerations. The relevant fault of the indemnifying party and the indemnified
party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
Notwithstanding the foregoing, the amount any Target Stockholder shall be
obligated to contribute pursuant to the Agreement shall be limited to an amount
equal to the proceeds to such Target Stockholder of the Registrable Securities
sold pursuant to the registration statement which gives rise to such obligation
to contribute (less the aggregate amount of any damages which the Target
Stockholder has otherwise been required to pay in respect of such loss, claim,
damage, liability or action or any substantially similar loss, claim, damage,
liability or action arising from the sale of such Registrable Securities).
(e) SURVIVAL OF INDEMNITY. The indemnification provided by this
Agreement shall be a continuing right to indemnification and shall survive the
registration and sale of any Registrable Securities by any person entitled to
indemnification here under and the expiration or termination of this Agreement.
9.6 ASSIGNMENT OF REGISTRATION RIGHTS. The rights of the Holders under
this Article 9, including the rights to cause Merchant to register Registrable
Securities, shall be transferable to any transferee of Registrable Securities,
provided that a transfer of rights shall not be effective until Merchant is
given written notice of the transfer, stating the name and address of the
transferee and identifying the Registrable Securities with respect to which the
rights under this Article 9 are being assigned.
9.7 TERMINATION OF THIS AGREEMENT. This provisions of this Article 9
shall continue in full force and effect until such time as there are no
Registrable Securities outstanding.
9.8 FURNISH INFORMATION. It shall be a condition precedent to the
obligations of Merchant under this Article 9 to take any action as contemplated
by this Article 9 with respect to each Holder that such Holder shall furnish to
Merchant such information regarding the Holder, the Holder's Registrable
Securities and the intended method of disposition of the Registrable Securities
and such holder shall execute such documents in connection with such
registration as Merchant and/or any managing underwriters may reasonably
request.
9.9 EXPENSES OF REGISTRATION. All expenses incurred in connection with
all registrations contemplated by this Section, including without limitation all
registration and filing fees, qualification fees, listing fees, printing
expenses, fees and disbursements of counsel for Merchant, and blue sky fees and
expenses, but excluding underwriting discounts and commissions incurred by
Holders in connection with the sale of any Registrable Securities as
contemplated by this Article 9 (the "Registration Expenses"), shall be borne by
Merchant.
ARTICLE 10
ADDITIONAL TERMS AND COVENANTS
10.1 ISSUANCE OF ADDITIONAL SHARES.
(a) If on the first anniversary of the Closing Date (the
"Adjustment Date"), the Aggregate Value (as defined below) of the MRTO
Common Stock issued pursuant to this Agreement is less than $25
million, then Merchant shall issue to the Target Stockholders, on a
pro-rata basis, such number of additional shares of MRTO Common Stock
calculated by subtracting the Aggregate Value from $25 million and
dividing the result by the Average Price (as defined below) (the
"Additional MRTO Shares").
(b) If prior to the Adjustment Date, Merchant is acquired
through a merger, stock purchase or the sale of all or substantially
all of its assets, then the date of closing of such transaction shall
be deemed the Adjustment Date for purposes of determining whether the
Target Stockholders shall be issued additional shares. In that case,
the Additional MRTO Shares may be shares of MRTO Common Stock or
securities of the acquirer, depending on the consideration of the
transaction. If Merchant's shareholders other than the Target
Stockholders are to receive freely tradable securities, then the Target
Stockholders shall also receive freely tradable securities.
(c) The "Average Price" means the average of the closing or last
sale price for the 20 trading days ending on the Adjustment Date on the
principal market or exchange on which the MRTO Common Stock is then
traded. The "Aggregate Value" means 1,250,000 times the Average Price.
10.2 FUNDING OF CERTAIN TARGET OBLIGATIONS. Upon execution of this
Agreement, Merchant shall pay Target $140,000 towards the payment of outstanding
liabilities. After the Closing and in two equal monthly installments, and as a
condition and inducement thereto, Merchant shall, at Target's request and in
Target's sole and absolute discretion, either pay on behalf of Target or fund
Target with $140,000 per month for the first two (2) months. Such payments shall
be paid on May 1 and June 1, 2000 following the Closing and shall be used to
satisfy Target's obligations for accrued salaries, credit card debts and other
corporate obligations, as listed on Exhibit 10.2 attached hereto. The
aforementioned funding shall not, in the aggregate, exceed $420,000.
10.3 ADDITIONAL FUNDING. Commencing on April 3, 2000 and continuing
until the Closing or termination of this Agreement, Merchant shall be
responsible for paying all expenses of Target, provided that Merchant shall
approve in advance any expenditures outside the ordinary course of business.
Following the Closing, Merchant will provide to Target sufficient working
capital to permit Target to execute its business plan, as currently in effect,
or as hereafter approved by Merchant and the Target.
10.4 BOARD OF DIRECTORS. Effective as of the Closing, Xxx Xxxxxxxxx
shall be elected to Merchant's Board of Directors. Commencing with the effective
date of this Agreement and continuing until the Closing or Termination Date,
Xxx. Xxxxxxxxx shall have the right to attend all meetings of the Board of
Directors of Merchant as an observer, and shall be provided with copies of all
actions for written consent distributed to or executed by the directors. During
the term that Xxx Xxxxxxxxx serves as a member of Merchant's Board of Directors,
Merchant shall maintain $1 million of director and officer insurance. Merchant
agrees to use its best efforts to maintain Xx. Xxxxxxxxx position on the
Merchant Board of Directors until the later of (i) the second anniversary of the
Closing Date, or (ii) the date the equity interest of the Target Stockholders in
Merchant falls below 2%, unless Xx. Xxxxxxxxx otherwise agrees in writing.
10.5 BROKER'S FEES. Target and Merchant each agree to pay Xxxxx Xxxxx
et al a finder's fee not to exceed 62,500 shares of restricted Merchant common
stock. Target's stockholders will issue shares to Xxxxx et al from the MRTO
Common Stock issued pursuant to Section 1.2 and Merchant shall issue newly
authorized shares.
10.6 DELIVERY OF DISCLOSURE SCHEDULES. The parties agree that the
Disclosure Schedules and Exhibits shall be delivered to the other parties not
later than one day prior to the Closing.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; TERMINATION
11.1 INVESTIGATIONS; SURVIVAL OF WARRANTIES. Except as otherwise
expressly provided for elsewhere in this Agreement, the representations,
warranties and agreements of the parties contained herein or in any certificates
or other documents delivered prior to or at the Closing shall survive the
Closing for a period of one year and not be deemed waived or otherwise affected
by any investigation made by any party hereto.
11.2 METHODS OF TERMINATION. The transactions contemplated herein may
be terminated and/or abandoned at any time but not later than the Closing:
(a) By mutual and joint consent of the parties hereto; or
(b) By Merchant, (i) at any time if the representations and
warranties of Target contained in Article 2 hereof were incorrect in
any material respect when made or at any time thereafter, or (ii) upon
written notice to Target given on the Closing Date if all of the
conditions precedent to the obligations of Merchant set forth in this
Agreement have not been fulfilled; or
(c) By Target, (i) at any time if the representations and
warranties of Merchant contained in Article 3 hereof were incorrect in
any material respect when made or at any time thereafter, or (ii) upon
written notice to Merchant given on the Closing Date if all of the
conditions precedent to the obligations of Target set forth in this
Agreement have not been fulfilled.
11.3 PROCEDURE UPON TERMINATION. In the event of termination and
abandonment of this Agreement pursuant to Section 11.2 hereof, notice thereof
shall forthwith be given by the initiating party or parties to the other parties
to this Agreement, and the transactions contemplated by this Agreement shall be
terminated and/or abandoned, without further action by any party. If the
transactions contemplated by this Agreement are terminated and/or abandoned as
provided herein:
(a) Target shall be entitled to retain the $140,000 deposit
previously delivered;
(b) Each party will redeliver all documents, work papers and
other material of any other party relating to the transactions
contemplated hereby, whether so obtained before or after the execution
hereof, to the party furnishing the same;
(c) All confidential information received by any party hereto
with respect to the business of any other party shall be treated in
accordance with Section 13.9 hereof; and
(d) No party hereto shall have any liability or further
obligation to any other party to this Agreement except as stated in
subparagraphs (a), (b) and (c) of this Section 11.3 other than
liability for damages resulting from representations and warranties
being inaccurate when made.
ARTICLE 12
INDEMNIFICATION
12.1 INDEMNIFICATION OF MERCHANT. In the event that the transactions
contemplated by this Agreement are consummated, then subject to the limitations
set forth in this Article 12, Merchant shall be indemnified and held harmless
from, against and in respect of all of Merchant's losses, liabilities, damages,
costs and expenses, including without limitation, reasonable attorneys fees,
arising from any misrepresentation or breach of any representation, warranty,
covenant or agreement made by Target in this Agreement, provided that Merchant
makes a written claim for indemnification within the one year survival period
referenced in Section 11 above.
12.2 INDEMNIFICATION BY MERCHANT. In the event that the transactions
contemplated by this Agreement are consummated, then subject to the limitations
set forth in this Article 12, Merchant shall indemnify and hold harmless each of
the Target Stockholders from, against and in respect of all of the Target
Stockholders' losses, liabilities, damages, costs and expenses, including
without limitation, reasonable attorneys fees, arising from any
misrepresentation or breach of any representation, warranty, covenant or
agreement made by Merchant in this Agreement.
12.3 PAYMENT OF INDEMNIFICATION OBLIGATIONS. Target's obligations
hereunder may be paid by the Target Stockholders using the shares of Merchant
Common Stock issued hereunder. For purposes of this Section, such shares shall
be valued at $20.00 per share.
12.4 LIMITATIONS.
(a) LIMITATIONS ON ACTIONS BY MERCHANT. Notwithstanding anything
to the contrary contained herein, Merchant will not assert an
indemnification claim under Section 12.1 until the total of all losses,
liabilities, costs and expenses suffered by Merchant and as to which
Merchant is entitled to indemnification under Section 12.1 (the
"Adverse Consequences to Merchant") equals or exceeds in the aggregate
$50,000, at which time all claims for indemnity with respect to all
Adverse Consequences to Merchant, including those constituting the
$50,000 base amount, may be claimed in full, to the extent of the
indemnity obligations set forth herein.
(b) LIMITATIONS ON ACTIONS AGAINST MERCHANT. Notwithstanding
anything to the contrary contained herein, no indemnification claim
will be asserted against Merchant under Section 12.2 above until the
total of all losses, liabilities, costs and expenses as to which an
indemnification claim may be brought against Merchant under Section
12.2 (the "Adverse Consequences to Target Stockholders") equals or
exceeds in the aggregate $50,000, at which time all claims for
indemnity with respect to all Adverse Consequences to Target
Stockholders, including those constituting the $50,000 base amount, may
be claimed in full, to the extent of the indemnity obligations set
forth herein.
ARTICLE 13
MISCELLANEOUS PROVISIONS
13.1 WAIVER OF COMPLIANCE. Any failure of Target, on the one hand, or
Merchant, on the other, to comply with any obligation, covenant, agreement or
condition herein may be expressly waived in writing by the other party, but such
waiver or failure to insist upon strict compliance with such obligation,
covenant, agreement or condition shall not operate as a waiver of, or estoppel
with respect to, any subsequent or other failure.
13.2 NOTICES. All notices, requests, demands and other communications
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or if mailed, certified or registered mail,
return receipt requested, with postage prepaid or if delivered to an overnight
courier that guarantees next-day delivery:
(a) If to Target or the Target Stockholders, to:
Xxx Xxxxxxxxx
Web Financial Services, Inc.
0000 Xxxxx Xxxxxxx Xxxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
with a copy, to:
Xxxx Xxxxxxxx, Esq.
Xxxxxxxxx Xxxxxxx LLC
One Boca Place
0000 Xxxxxx Xxxx
Xxxx Xxxxx, Xxxxxxx 00000
or to such other person or address as Target shall furnish to Merchant in
writing.
(b) If to Merchant, to:
Xxxxx Xxxxxxxx
Xxxxxxxxxxxxxx.xxx, Inc.
0000 X. Xxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
with a copy, to:
Xxxxxxx X. Xxxxxx, P.A.
Broad and Xxxxxx
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
or to such other person or address as Merchant shall furnish to Target in
writing.
13.3 ASSIGNMENT. This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns, but this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any party
without the prior written consent of the other parties.
13.4 GOVERNING LAW. This Agreement and the legal relations among the
parties hereto shall be governed by and construed in accordance with the laws of
the State of Florida, without regard to its conflicts of law doctrine.
13.5 COUNTERPARTS. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
13.6 HEADINGS. The headings of the Sections and Articles of this
Agreement are inserted for convenience only and shall not constitute a part
hereof or affect in any way the meaning or interpretation of this Agreement.
13.7 ENTIRE AGREEMENT. This Agreement, including the Exhibits and
Schedules hereto; and the other documents and certificates delivered pursuant to
the terms hereof, set forth the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein, and supersede
all prior agreements, covenants, arrangements, communications, representations
or warranties, whether oral or written, by any officer, employee or
representative of any party hereto.
13.8 THIRD PARTIES. Except as specifically set forth or referred to
herein, nothing herein expressed or implied is intended or shall be construed to
confer upon or give to any person or corporation other than the parties hereto
and their successors or assigns, any rights or remedies under or by reason of
this Agreement.
13.9 CONFIDENTIALITY. Each of Merchant and the Target will hold and
will cause its consultants and advisors to hold in strict confidence, unless
compelled to disclose by judicial or administrative process or, in the opinion
of its counsel, by other requirements of law, all documents and information
concerning the other parties furnished it by such other party or its
representatives in connection with the transactions contemplated by this
Agreement, including, without limitation, all letters of intent negotiated among
and/or executed by the parties hereto and/or their affiliates, principals or
related entities and any standstill agreements with respect thereto and
confidential and proprietary information of the disclosing party (except to the
extent that such information can be shown to have been (i) previously known by
the party to which it was furnished, (ii) generally available to the public
other than as a result of disclosure by the party to whom it was furnished, or
(iii) later lawfully acquired from other sources by the party to which it was
furnished), and each party will not release or disclose such information to any
other person, except its auditors, attorneys, financial advisors, bankers and
other consultants and advisors in connection with this Agreement. If the
transactions contemplated by this Agreement are not consummated, such confidence
shall be maintained except to the extent such information comes into the public
domain through no fault of the party required to hold it in confidence, and all
such documents (including copies thereof) shall be returned to the other party
immediately upon the written request of such other party. Each party shall be
deemed to have satisfied its obligation to hold confidential information
concerning or supplied by the other party if it exercises the same care as it
takes to preserve confidentiality for its own similar information.
REMAINDER OF PAGE INTENTIONALLY BLANK
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed all as of the day and year first above written.
WEB FINANCIAL SERVICES CORPORATION, INC.,
a Delaware corporation
By: /s/ XXX XXXXXXXXX
------------------------------
Xxx Xxxxxxxxx, President
XXXXXXXXXXXXXX.XXX, INC.,
a Florida corporation
By: /s/ XXXXX XXXXXXXX
------------------------------
Xxxxx Xxxxxxxx, President
WFS ACQUISITION CORP.
a Delaware corporation
By: /s/ XXXXX XXXXXXXX
------------------------------
Xxxxx Xxxxxxxx, President
