Exhibit 2.1
STOCK EXCHANGE AGREEMENT
and
PLAN OF REORGANIZATION
AMONG
SEQUIAM CORPORATION,
AND
SHAREHOLDERS OF BREKEL GROUP, INC.
June 17, 2002
TABLE OF CONTENTS
1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. Share Exchange. . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Representations and Warranties Concerning Transaction . . . . . . . . 7
4. Representations and Warranties Concerning Target and Its Subsidiaries 15
5. Pre-Closing Covenants . . . . . . . . . . . . . . . . . . . . . . . . 23
6. Post-Closing Covenants. . . . . . . . . . . . . . . . . . . . . . . . 25
7. Conditions to Obligation to Close . . . . . . . . . . . . . . . . . . 26
8. Remedies for Breaches of This Agreement . . . . . . . . . . . . . . . 29
9. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
10. Termination.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
11. Acknowledgements. . . . . . . . . . . . . . . . . . . . . . . . . . . 33
12. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Schedules and Exhibits:
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Schedule I Exceptions to Sellers' Representations and Warranties Concerning
Transaction
Schedule II Exceptions to Buyer's Representations and Warranties Concerning
Transaction
Schedule III Disclosure Schedule (Exceptions to Representations and
Warranties Concerning Target and Its Subsidiaries)
Exhibit A Buyer's Financial Statements
Exhibit B Target's Financial Statements
Exhibit C Closing Agenda
STOCK EXCHANGE AGREEMENT
------------------------
STOCK EXCHANGE AGREEMENT
This Stock Exchange Agreement and Plan of Reorganization (this "Agreement")
is entered into as of June 17, 2002, by and among SEQUIAM CORPORATION, a
California corporation ("Buyer"), and each of the undersigned shareholders of
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BREKEL GROUP, INC., a Delaware corporation (each a "Seller" and collectively,
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"Sellers"), with reference to the following facts:
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A. Each Seller owns that number of shares of common stock of Brekel
Group, Inc., a Delaware corporation ("Target") as set forth below such Seller's
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signature to this Agreement.
B. This Agreement contemplates a transaction in which Buyer shall
acquire by exchange from Sellers, between eighty and one hundred percent (80% -
100%) of all of the outstanding capital stock of Target in return for the
Exchange Shares (as hereinafter defined), at an exchange rate of 1:1.
C. Buyer and Sellers are referred to collectively herein as the
"Parties."
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Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows.
Definitions.
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"Accredited Investor" has the meaning set forth in Regulation D promulgated
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under the Securities Act.
"Adverse Consequences" means all actions, suits, proceedings, hearings,
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investigations, charges, complaints, claims, demands, injunctions, judgments,
orders, decrees, rulings, damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations, taxes, liens, losses,
expenses, and fees, including court costs and reasonable attorneys' fees and
expenses.
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
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promulgated under the Securities Exchange Act.
"Affiliated Group" means any affiliated group within the meaning of Code
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Sec.1504(a) or any similar group defined under a similar provision of state,
local, or foreign law.
"Applicable Rate" means the LIBOR rate of interest published from time to
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time by the Wall Street Journal plus 2% per annum.
"Buyer" has the meaning set forth in the preface above.
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"Closing" has the meaning set forth in Sec.2(c) below.
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"Closing Agenda" shall mean the Closing Agenda attached hereto as Exhibit C
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"Closing Date" has the meaning set forth in Sec.2(c) below.
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"Code" means the Internal Revenue Code of 1986, as amended.
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"Confidential Information" means any information concerning the businesses
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and affairs of the Target and its Subsidiaries that is not already generally
available to the public.
"Employee Benefit Plan" means any "employee benefit plan" (as such term is
----------------------
defined in ERISA Sec.3(3)) and any other material employee benefit plan, program
or arrangement of any kind.
"Employee Pension Benefit Plan" has the meaning set forth in ERISA
--------------------------------
Sec.3(2).
"Employee Welfare Benefit Plan" has the meaning set forth in ERISA
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Sec.3(1).
"Environmental, Health, and Safety Requirements" shall mean all federal,
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state, local, and foreign statutes, regulations, ordinances, and similar
provisions having the force or effect of law, all judicial and administrative
orders and determinations, and all common law concerning public health and
safety, worker health and safety, and pollution or protection of the
environment, including 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 any hazardous materials, substances, or wastes,
chemical substances, or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise, or radiation.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
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amended.
"ERISA Affiliate" means each entity that is treated as a single employer
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with the Target for purposes of Code Sec.414.
"Escrow Agent" shall have the meaning set forth in Sec.1.1.1.1(c) below.
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"Exchange Shares" means the shares of Buyer's common stock to be issued to
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the Sellers at Closing.
"Fiduciary" has the meaning set forth in ERISA Sec.3(21).
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"Financial Statement" means audited or unaudited, as the case may be,
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consolidated balance sheets and statement of income, changes in stockholder's
equity, and cash flow prepared in accordance with GAAP.
"FIRPTA Affidavit" has the meaning set forth in Sec.7(a) below.
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"GAAP" means United States generally accepted accounting principles as in
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effect from time to time, consistently applied.
"Income Tax" means any federal, state, local, or foreign income tax,
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including any interest, penalty, or addition thereto, whether disputed or not.
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"Income Tax Return" means any return, declaration, report, claim for
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refund, or information return or statement relating to Income Taxes, including
any schedule or attachment thereto, and including any amendment thereof.
"Indemnified Party" has the meaning set forth in Sec.8(d) below.
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"Indemnifying Party" has the meaning set forth in Sec.8(d) below.
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"Intellectual Property" means all of the following in any jurisdiction
----------------------
throughout the world: (a) all inventions (whether patentable or unpatentable and
whether or not reduced to practice), all improvements thereto, and all patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade
names, corporate names, Internet domain names, and rights in telephone numbers,
together with all translations, adaptations, derivations, and combinations
thereof and including all goods associated therewith, and all applications,
registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in
connection therewith, (d) all mask works and all applications, registrations,
and renewals in connection therewith, (e) all trade secrets and confidential
business information (including ideas, research and development, know-how,
formulas, compositions, manufacturing and production processes and techniques,
technical data, designs, drawings, specifications, customer and supplier lists,
pricing and cost information, and business and marketing plans and proposals),
(f) all computer software (including source code, executable code, data,
databases, and related documentation), (g) all material advertising and
promotional materials, (h) all other proprietary rights, and (i) all copies and
tangible embodiments thereof (in whatever form or medium).
"Knowledge" means actual knowledge after reasonable investigation under the
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circumstances.
"Law" means any constitution, statute, code, ordinance, regulation, rule,
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injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court.
"Lease Consents" means any and all written consents for the assignment of
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each of the Leases as may be required or advisable under each of the Leases.
"Leased Real Property" means all leasehold or subleasehold estates and
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other rights to use or occupy any land, buildings, structures, improvements,
fixtures, or other interest in real property held by any of Target or its
Subsidiaries.
"Leases" means all leases, subleases, licenses, concessions and other
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agreements (written or oral), including all amendments, extensions, renewals,
guaranties, and other agreements with respect thereto, pursuant to which any of
Buyer, Target or its Subsidiaries holds any Leased Real Property.
"Lien" means any mortgage, pledge, lien, encumbrance, charge, or other
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security interest, other than (a) liens for taxes not yet due and payable, (b)
purchase money liens and
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liens securing rental payments under capital lease arrangements, and (c) other
liens arising in the Ordinary Course of Business and not incurred in connection
with the borrowing of money.
"Material Adverse Effect" or "Material Adverse Change" means any effect or
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change that would be materially adverse to the business, assets, condition
(financial or otherwise), operating results, operations, or business prospects
of Target and its Subsidiaries, taken as a whole, or on the ability of any Party
to consummate timely the transactions contemplated hereby.
"Material Contracts" means, with respect to Buyer and its Subsidiaries, or
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Target and its Subsidiaries, the burden and benefit of and the right, title and
interest of such Party in, to and under all trade and non-trade contracts,
engagements or commitments, whether written or oral, either (a) between such
party and any of its officers, directors or shareholders, or their Affiliates,
(b) between such party and any other party, including any Seller (except as
between any Seller and any other Seller where such agreement is not related to
Target or its Subsidiaries), or (c) to which Buyer, Target or any of their
respective Subsidiaries is entitled and whereby such party is or could be
obligated to pay or entitled to receive the sum of $10,000 or more (in any form)
including, without limitation, any partnership or joint venture agreement,
options, warrants, pension plans, profit sharing plans, bonus plans, loan
agreements, security agreements, indemnities and guarantees, leases,
confidentiality agreements, licenses, any agreements with employees, licensees,
managers, accountants, suppliers, agents, distributors, officers, directors,
attorneys or others, any agreement under which the consequences of default or
termination could have a Material Adverse Effect, or other agreements which
cannot be terminated without liability on not more than one month's notice,
including, without limitation, those contracts listed in Sec.4(o) of the
Disclosure Schedule.
"Most Recent Balance Sheet" means the balance sheet contained within the
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Most Recent Financial Statements.
"Most Recent Financial Statements" means the Financial Statements for the
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Most Recent Fiscal Quarter End.
"Most Recent Fiscal Quarter End" means the quarter ended March 31, 2002.
---------------------------------
"Most Recent Fiscal Year End" means the fiscal year ended December 31,
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2001.
"Multiemployer Plan" has the meaning set forth in ERISA Sec.3(37).
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"Ordinary Course of Business" means the ordinary course of business
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consistent with past custom and practice (including with respect to quantity and
frequency).
"Owned Real Property" means all land, together with all buildings,
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structures, improvements, and fixtures located thereon, and all easements and
other rights and interests appurtenant thereto, owned by Target and its
Subsidiaries.
"Party" has the meaning set forth in the preface above.
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"PBGC" means the Pension Benefit Guaranty Corporation.
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"Person" means an individual, a partnership, a corporation, limited
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liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization, any other business entity or a
governmental entity (or any department, agency, or political subdivision
thereof).
"Prohibited Transaction" has the meaning set forth in ERISA Sec.406 and
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Code Sec.4975.
"Real Property" means Owned Real Property and Leased Real Property,
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collectively.
"Reportable Event" has the meaning set forth in ERISA Sec.4043.
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"Requisite Sellers" means Sellers collectively holding all at least eighty
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percent (80%) of the issued and outstanding Target Shares.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Exchange Act" means the Securities Exchange Act of 1934, as
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amended.
"Seller" has the meaning set forth in the preface above.
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"Subsidiary" means, with respect to any Person, any corporation, limited
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liability company, partnership, association, or other business entity of which
(i) if a corporation, a majority of the total voting power of shares of stock
entitled (without regard to the occurrence of any contingency) to vote in the
election of directors, managers, or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited
liability company, partnership, association, or other business entity (other
than a corporation), a majority of partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person or a combination thereof
and for this purpose, a Person or Persons owns a majority ownership interest in
such a business entity (other than a corporation) if such Person or Persons
shall be allocated a majority of such business entity's gains or losses or shall
be or control any managing director or general partner of such business entity
(other than a corporation). The term "Subsidiary" shall include all Subsidiaries
of such Subsidiary.
"Systems" means the computer software, computer hardware (whether general
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or special purpose), telecommunications capabilities (including all voice, data
and video networks) and other similar or related items of automated,
computerized, and/or software systems and any other networks or systems and
related services.
"Target" has the meaning set forth in the preface above.
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"Target Share" means any share of the common stock, par value $0.0001 per
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share, of Target.
"Target Shareholder" means a record owner of common stock of Target.
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"Tax" means any federal, state, local, or foreign income, gross receipts,
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license, payroll, employment, excise, severance, stamp, occupation, premium,
windfall profits, environmental (including taxes under Code Sec.59A), customs
duties, capital stock, franchise, profits, withholding, social security (or
similar), unemployment, disability, real property, personal property, sales,
use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty,
or addition thereto, whether disputed or not.
"Tax Benefit" has the meaning set forth in Sec.8(e) below.
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"Tax Return" means any return, declaration, report, claim for refund, or
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information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.
"Third Party Claim" has the meaning set forth in Sec.1.1.1.1(cc) below.
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SHARE EXCHANGE.
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(a) Target Shares. On and subject to the terms and conditions of
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this Agreement, Buyer shall acquire from each Seller, and each Seller shall
transfer and assign to Buyer at Closing, all of such Seller's Target Shares in
exchange for an equal number of Exchange Shares, as further specified below in
this Sec.2.
(b) Exchange Shares. On and subject to the terms and conditions
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of this Agreement, each Seller shall acquire from Buyer, and Buyer shall issue
to such Seller at Closing, one (1) Exchange Share for each one (1) Target Share
transferred and assigned by such Seller to Buyer, as further specified in this
Sec.2.
(c) Closing. Subject to satisfaction or waiver of all conditions
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to the obligations of the Parties to consummate the transactions contemplated
hereby (other than conditions with respect to actions the respective Parties
shall take at Closing itself), closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Xxx, Xxxxxxx &
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Xxxxx, LLP (the "Escrow Agent") located at 00000 Xxx Xxxxxx Xxxxxx, Xxxxx 000,
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Xxxxxx, Xxxxxxxxxx, commencing at 10:00 a.m. local time on July 9, 2002 (the
"Closing Date"). The Closing Date may be extended by Buyer for up to thirty
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(30) days by delivery of written notice to each of the Target Shareholders.
(d) Deliveries at Closing. All documents to be delivered at
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Closing shall be delivered to Escrow Agent to be held and delivered in
accordance with the Closing Agenda. Prior to Closing, (i) each Seller shall
deliver to Escrow Agent the various certificates, instruments, and documents
referred to in Sec.7(a) below, (ii) Buyer shall deliver to Escrow Agent the
various certificates, instruments, and documents referred to in Sec.7(b) below,
(iii) each Seller shall deliver to Escrow Agent original stock certificates
representing all of such Seller's Target Shares, endorsed in blank or
accompanied by duly executed assignment documents, and (iv) Buyer shall deliver
to Escrow Agent stock certificates representing such Seller's Exchange Shares
specified in Sec.2(b) above.
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REPRESENTATIONS AND WARRANTIES CONCERNING TRANSACTION.
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(e) Sellers' Representations and Warranties. Each Seller
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represents and warrants to Buyer that to such Seller's Knowledge, the statements
contained in this Sec.3(a) are correct and complete as of the date of this
Agreement and shall be correct and complete as of the Closing Date (as though
made then and as though the Closing Date were substituted for the date of this
Agreement throughout this Sec.3(a)) with respect to himself, herself, or itself,
except as set forth by such Seller in Schedule I attached hereto.
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(i) Organization of Certain Sellers. Such Seller (if a corporation or
---------------------------------
other entity) is duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation (or
other formation).
(ii) Authorization of Transaction. Such Seller has full power and
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authority (including full corporate or other entity power and
authority) to execute and deliver this Agreement and to perform his,
her, or its obligations hereunder. This Agreement constitutes the
valid and legally binding obligation of such Seller, enforceable in
accordance with its terms and conditions. Such Seller need not give
any notice to, make any filing with, or obtain any authorization,
consent, or approval of any government or governmental agency in order
to consummate the transactions contemplated by this Agreement. The
execution, delivery and performance of this Agreement and all other
agreements contemplated hereby have been duly authorized by such
Seller.
(iii) Noncontravention. Neither the execution and the delivery of this
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Agreement, nor the consummation of the transactions contemplated
hereby, shall (A) violate any Law to which such Seller is subject or,
if such Seller is an entity, any provision of its charter, bylaws or
other governing documents, (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in
any party the right to accelerate, terminate, modify, or cancel, or
require any notice under any agreement, contract, lease, license,
instrument, or other arrangement to which such Seller is a party or by
which he, she, or it is bound or to which any of such Seller's assets
is subject, or (C) result in the imposition or creation of a Lien upon
or with respect to the Target Shares.
(iv) Brokers' Fees. Such Seller has no liability or obligation to pay
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any fees or commissions to any broker, finder, or agent with respect
to the transactions contemplated by this Agreement.
(v) Investment. Such Seller (A) understands that the Exchange Shares
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have not been, and shall not be, registered under the Securities Act,
or under any state securities laws, and are being offered and sold in
reliance upon federal and state exemptions for transactions not
involving any public offering, (B) is acquiring the Exchange Shares
solely for his or its own account for investment purposes, and not
with a view to the distribution thereof, (C) is a sophisticated
investor with knowledge and experience in business and financial
matters, (D) has received certain information concerning Buyer and has
had the opportunity to obtain additional information as desired in
order to evaluate the merits and the risks inherent in holding the
Exchange Shares, (E) is able to bear the economic risk and lack of
liquidity inherent in holding the Exchange Shares, and (F) is an
Accredited Investor for the reasons set forth on Schedule I.
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(vi) Target Shares. Such Seller holds of record and owns beneficially
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the number of Target Shares set forth below his, her, or its signature
to this Agreement, free and clear of any restrictions on transfer
(other than any restrictions under the Securities Act and state
securities laws), taxes, Liens, options, warrants, purchase rights,
contracts, commitments,
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equities, claims, and demands. Seller is not a party to any option,
warrant, purchase right, or other contract or commitment that could
require such Seller to sell, transfer, or otherwise dispose of any
capital stock of Target (other than this Agreement). Such Seller is
not a party to any voting trust, proxy, or other agreement or
understanding with respect to the voting of any capital stock of
Target.
(f) Buyer's Representations and Warranties. Buyer represents and
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warrants to Sellers that the statements contained in this Sec.3(b) are correct
and complete as of the date of this Agreement and shall be correct and complete
as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Sec.3(b)), except as
set forth in Schedule II attached hereto.
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(i) Organization of Buyer. Buyer is a corporation (or other entity)
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duly organized, validly existing, and in good standing under the laws
of the jurisdiction of its incorporation (or other formation).
(ii) Authorization of Transaction. Buyer has full power and authority
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(including full corporate or other entity power and authority) to
execute and deliver this Agreement and to perform its obligations
hereunder. This Agreement constitutes the valid and legally binding
obligation of Buyer, enforceable in accordance with its terms and
conditions. Buyer need not give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions
contemplated by this Agreement. The execution, delivery and
performance of this Agreement and all other agreements contemplated
hereby have been duly authorized by Buyer.
(iii) Noncontravention. Neither the execution and the delivery of this
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Agreement, nor the consummation of the transactions contemplated
hereby, shall (A) violate any Law to which Buyer is subject or any
provision of its charter, bylaws, or other governing documents or (B)
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument, or other
arrangement to which Buyer is a party or by which it is bound or to
which any of its assets is subject.
(iv) Brokers' Fees. Buyer has no liability or obligation to pay any
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fees or commissions to any broker, finder, or agent with respect to
the transactions contemplated by this Agreement.
(v) Investment. Buyer is not acquiring Target Shares with a view to or
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for sale in connection with any distribution thereof within the
meaning of the Securities Act.
(vi) Reporting Requirements. Buyer's common stock is traded on the OTB
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Bulletin Board under trading symbol SQUM. Buyer has filed all of its
periodic reports required under the Securities Exchange Act.
(vii) Financial Statements. Attached hereto as Exhibit A are the
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following Financial Statements of Buyer and its Subsidiaries: (A)
audited Financial Statements of as of and for the Most Recent Fiscal
Year End for Buyer and its Subsidiaries; and (B) unaudited Financial
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Statements as of and for the Most Recent Fiscal Quarter End for Buyer
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and its Subsidiaries. The Financial Statements (including the notes
thereto) for Buyer and its Subsidiaries have been prepared in
accordance with GAAP applied on a consistent basis throughout the
periods covered thereby and present fairly the financial condition of
Buyer and its Subsidiaries as of such dates and the results of
operations of Buyer and its
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Subsidiaries for such periods, provided, however, that the Most Recent
Financial Statements are subject to normal year-end adjustments (which
shall not be material individually or in the aggregate) and lack
footnotes and other presentation items. The Financial Statements are
correct and complete and consistent with the books and records of
Buyer and its Subsidiaries.
(viii) Events Subsequent to Most Recent Fiscal Year End. Since the
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Most Recent Fiscal Year End, there has not been any Material Adverse
Change. Without limiting the generality of the foregoing, since that
date:
(A) none of Buyer and its Subsidiaries has sold, leased,
transferred, or assigned any material assets, tangible or intangible, outside
the Ordinary Course of Business;
(B) none of Buyer and its Subsidiaries has entered into
any material agreement, contract, lease, or license outside the Ordinary Course
of Business;
(C) no party (including any of Buyer and its
Subsidiaries) has accelerated, terminated, made material modifications to, or
canceled any material agreement, contract, lease, or license to which any of
Buyer and its Subsidiaries is a party or by which any of them is bound;
(D) none of Buyer and its Subsidiaries has imposed any
Lien upon any of its assets, tangible or intangible;
(E) none of Buyer and its Subsidiaries has made any
material capital expenditures outside the Ordinary Course of Business;
(F) none of Buyer and its Subsidiaries has made any
material capital investment in, or any material loan to, any other Person
outside the Ordinary Course of Business;
(G) Neither Buyer nor any of its Subsidiaries has
created, incurred, assumed, or guaranteed more than $100,000.00 in aggregate
indebtedness for borrowed money and capitalized lease obligations;
(H) none of Buyer and its Subsidiaries has transferred,
assigned, or granted any license or sublicense of any material rights under or
with respect to any Intellectual Property;
(I) there has been no change made or authorized in the
charter or bylaws of any of Buyer and its Subsidiaries, except as set forth in
Section (viii)(I) of Schedule II;
(J) none of Buyer and its Subsidiaries has declared, set
aside, or paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or otherwise acquired
any of its capital stock;
(K) none of Buyer and its Subsidiaries has experienced
any material damage, destruction, or loss (whether or not covered by insurance)
to its property;
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(L) none of Buyer and its Subsidiaries has made any loan
to, or entered into any other transaction with, any of its directors, officers,
and employees outside the Ordinary Course of Business;
(M) none of Buyer and its Subsidiaries has entered into
any employment contract or collective bargaining agreement, written or oral, or
modified the terms of any existing such contract or agreement;
(N) none of Buyer and its Subsidiaries has granted any
increase in the base compensation of any of its directors, officers, and
employees outside the Ordinary Course of Business;
(O) none of Buyer and its Subsidiaries has adopted,
amended, modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any
other Employee Benefit Plan);
(P) none of Buyer and its Subsidiaries has made any
other material change in employment terms for any of its directors, officers,
and employees outside the Ordinary Course of Business;
(Q) none of Buyer and its Subsidiaries has made any
loans or advances of money; and
(R) none of Buyer and its Subsidiaries has committed to
any of the foregoing.
(ix) Undisclosed Liabilities. None of Buyer and its Subsidiaries
-------------------------
has any material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, including
any liability for taxes), except for (A) liabilities set
forth on the face of the Most Recent Balance Sheet (rather
than in any notes thereto) and (B) liabilities which have
arisen after the Most Recent Fiscal Quarter End in the
Ordinary Course of Business.
(x) Legal Compliance. Each of Buyer and its Subsidiaries has
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complied with all applicable Laws, and no action, suit,
proceeding, hearing, investigation, charge, complaint,
claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply, except where
the failure to comply would not have a Material Adverse
Effect.
(xi) Tax Matters.
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(A) Each of Buyer and its Subsidiaries has filed all
federal Income Tax Returns and all other material Tax Returns that it was
required to file. All such Tax Returns were correct and complete in all material
respects. All Taxes due and owing by any of Buyer and its Subsidiaries (whether
or not shown on any Tax Return) have been paid. None of Buyer and its
Subsidiaries currently is the beneficiary of any extension of time within which
to
10
file any Tax Return. There are no Liens for Taxes (other than Taxes not yet due
and payable) upon any of the assets of Buyer or any of its Subsidiaries.
(B) There is no material dispute or claim concerning any
Tax liability of any of Buyer and its Subsidiaries either (1) claimed or raised
by any authority in writing or (2) as to which Buyer and its Subsidiaries has
Knowledge based upon personal contact with any agent of such authority.
(C) Buyer will make available upon written request, to
each Seller correct and complete copies of all federal, state, local and foreign
Tax Returns, examination reports, and statements of deficiencies assessed
against, or agreed to by any of Buyer and its Subsidiaries since the tax year
ending December 31, 2000. None of Buyer and its Subsidiaries has waived any
statute of limitations in respect of Taxes or agreed to any extension of time
with respect to a Tax assessment or deficiency.
(D) None of Buyer and its Subsidiaries is a party to or
bound by any tax allocation or sharing agreement. None of Buyer and its
Subsidiaries (1) has been a member of an Affiliated Group filing a
consolidated federal Income Tax Return (other than a group the common
parent of which was Buyer) or (2) has any liability for the Taxes of any
Person (other than any of Buyer and its Subsidiaries) under Reg.
Sec.1.1502-6 (or any similar provision of state, local, or foreign law), as
a transferee or successor, by contract, or otherwise.
(E) The unpaid Taxes of Buyer and its Subsidiaries (1)
did not, as of the Most Recent Fiscal Quarter End, exceed the reserve for
Tax liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto)
and (2) shall not exceed that reserve as adjusted for operations and
transactions through the Closing Date in accordance with the past custom
and practice of Buyer and its Subsidiaries in filing their Tax Returns.
(xii) Real Property. The Real Property known as 000 Xxxxxxx Xxxx, Xxxxxxx,
--------------
Florida, is the only parcel of Real Property used or intended to be
-------------
used in the business of Buyer and its Subsidiaries; and none of Buyer
or its Subsidiaries is a party to any agreement or option to purchase
any other real property or interest therein.
(xiii) Intellectual Property.
----------------------
(A) None of Buyer and its Subsidiaries has interfered
with, infringed upon, misappropriated, or violated any material Intellectual
Property rights of third parties in any material respect, and none of Buyer and
the directors and officers of Buyer and its Subsidiaries has ever received any
charge, complaint, claim, demand, or notice alleging any such interference,
infringement, misappropriation, or violation (including any claim that any of
Buyer and its Subsidiaries must license or refrain from using any Intellectual
Property rights of any third party). No third party has interfered with,
infringed upon, misappropriated, or violated any material Intellectual Property
rights of any of Buyer and its Subsidiaries in any material respect.
(B) With respect to each item of Intellectual Property
included as an asset on Buyer's Most Recent Balance Sheet:
11
1. Buyer and its Subsidiaries possess all right, title, and interest in
and to the item, free and clear of any Lien, license, or other restriction
except as specifically disclosed in the Notes to Buyer's Most Recent Financial
Statements;
2. the item is not subject to any outstanding injunction, judgment,
order, decree, ruling, or charge;
3. no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, or demand is pending or is threatened that challenges the
legality, validity, enforceability, use, or ownership of the item; and
4. none of Buyer and its Subsidiaries has ever agreed to indemnify any
Person for or against any interference, infringement, misappropriation, or other
conflict with respect to the item.
5. the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect in all material respects;
6. no party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof;
7. none of Buyer and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense, agreement,
or permission; and
8. no loss or expiration of the item is threatened,
pending, or reasonably foreseeable, except for patents expiring at the end of
their statutory terms (and not as a result of any act or omission by Buyer or
its Subsidiaries, including without limitation, a failure by Buyer or its
Subsidiaries to pay any required maintenance fees).
12
(xiv) Tangible Assets. The buildings, machinery, equipment, and other
----------------
tangible assets that Buyer and its Subsidiaries own and lease are free
from material defects (patent and latent), have been maintained in
accordance with normal industry practice, and are in good operating
condition and repair (subject to normal wear and tear).
(xv) Contracts. With respect to each Material Contract: (A) the
---------
agreement is legal, valid, binding, enforceable, and in full force and
effect in all material respects; (B) no party is in material breach or
default, and no event has occurred which with notice or lapse of time
would constitute a material breach or default, or permit termination,
modification, or acceleration, under the agreement; and (C) no party
has repudiated any material provision of the agreement.
(xvi) Notes and Accounts Receivable. All notes and accounts receivable
------------------------------
of Buyer and its Subsidiaries are reflected properly on their books
and records, are valid receivables subject to no setoffs or
counterclaims, are current and collectible, and shall be collected in
accordance with their terms at their recorded amounts, subject only to
the reserve for bad debts set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance
with the past custom and practice of Buyer and its Subsidiaries.
(xvii) Powers of Attorney. There are no material outstanding powers of
------------------
attorney executed on behalf of any of Buyer and its Subsidiaries.
(xviii) Litigation. Neither Buyer nor its Subsidiaries (A) is subject
----------
to any outstanding injunction, judgment, order, decree, ruling, or
charge or (B) is a party or is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before
any court or quasi-judicial or administrative agency of any federal,
state, local, or foreign jurisdiction or before any arbitrator.
(xix) Product Warranty. Substantially all of the products manufactured,
----------------
sold, leased, and delivered by Buyer and its Subsidiaries have
conformed in all material respects with all applicable contractual
commitments and all express and implied warranties, and none of Buyer
and its Subsidiaries has any material liability (whether known or
unknown, whether asserted or unasserted, whether absolute or
contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) for replacement or
repair thereof or other damages in connection therewith, subject only
to the reserve for product warranty claims set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in
accordance with the past custom and practice of Buyer and its
Subsidiaries. Substantially all of the products manufactured, sold,
leased, and delivered by Buyer and its Subsidiaries are subject to
standard terms and conditions of sale or lease.
(xx) Product Liability. None of Buyer and its Subsidiaries has any
------------------
material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to
become due) arising out of any injury to individuals or property as a
result of the ownership, possession, or use of any product
manufactured, sold, leased, or delivered by any of Buyer and its
Subsidiaries.
(xxi) Employees. No executive, key employee, or significant group of
---------
employees plans to terminate employment with any of Buyer and its
Subsidiaries during the next 12 months. None of Buyer and its
Subsidiaries is a party to or bound by any collective bargaining
agreement, nor has any of them experienced any strike or material
grievance, claim of unfair labor practices, or other collective
bargaining dispute within the past three
13
years. None of Buyer and its Subsidiaries has committed any material
unfair labor practice. There are no organizational efforts presently
being made or threatened by or on behalf of any labor union with
respect to employees of any of Buyer and its Subsidiaries.
(xxii) Employee Benefits.
------------------
(A) Neither Buyer nor any of its Subsidiaries currently
has any.
(B) None of Buyer, its Subsidiaries, and any ERISA
Affiliate contributes to, has any obligation to contribute to, or has any
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due), including any withdrawal
liability (as defined in ERISA Sec.4201), under or with respect to any
Multiemployer Plan.
(C) None of Buyer and its Subsidiaries maintains,
contributes to or has an obligation to contribute to, or has any material
liability or potential liability with respect to, any Employee Welfare Benefit
Plan providing medical, health, or life insurance or other welfare-type benefits
for current or future retired or terminated employees of the Buyer or any of its
Subsidiaries (or any spouse or other dependent thereof) other than in accordance
with COBRA.
(xxii) Guaranties. None of Buyer and its Subsidiaries is a guarantor
----------
or otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(xxiv) Environmental, Health, and Safety Matters. Each of Buyer, its
-------------------------------------------
Subsidiaries, and their respective predecessors and Affiliates has
complied and is in compliance, in each case in all material respects,
with all Environmental, Health, and Safety Requirements. None of
Buyer, its Subsidiaries, or their respective Affiliates has received
any written or oral notice, report or other information regarding any
actual or alleged material violation of Environmental, Health, and
Safety Requirements, or any material liabilities or potential material
liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any material investigatory, remedial or
corrective obligations, relating to any of them or its facilities
arising under Environmental, Health, and Safety Requirements.
(xxv) Business Continuity. None of the Systems that are used by or
--------------------
relied on by Buyer and/or its Subsidiaries in the conduct of their
respective businesses have experienced bugs, failures, breakdowns, or
continued substandard performance in the past twelve (12) months that
has caused any substantial disruption or interruption in or to the use
of any such Systems by Buyer or its Subsidiaries, and none of such
Systems have been sold or transferred. Each of Buyer and its
Subsidiaries is covered by business interruption insurance in scope
and amount customary and reasonable to ensure the ongoing business
operations of Buyer's and its Subsidiaries' respective businesses.
(xxvi) Certain Business Relationships With Buyer and Its Subsidiaries.
---------------------------------------------------------------
None of Sellers, their Affiliates, Sellers' directors, officers,
employees, and shareholders and Buyer's and its Subsidiaries'
directors, officers, employees, and shareholders have been involved in
any material business arrangement or relationship with any of Buyer
and its Subsidiaries within the past 12 months, and none of the
Sellers, their Affiliates, Sellers' directors, officers, employees,
and shareholders and Buyer's and its Subsidiaries' directors,
officers, employees, and shareholders owns any material asset,
tangible or intangible, which is
14
used in the business of any of Buyer and its Subsidiaries.
(xxvii) Disclosure. The representations and warranties contained in
----------
this Sec.0(f) do not contain any untrue statement of a material fact
or omit to state any material fact necessary in order to make the
statements and information contained in this Sec.0(f) not misleading.
(xxviii) Customers and Suppliers. Since the date of the Most Recent
-------------------------
Balance Sheet, no material supplier of Buyer or any its Subsidiaries
has indicated that it shall stop, or materially decrease the rate of,
supplying materials, products or services to Buyer or any of its
Subsidiaries, and no material customer has indicated that it shall
stop, or materially decrease the rate of, buying materials, products
or services from Buyer or any of its Subsidiaries.
REPRESENTATIONS AND WARRANTIES CONCERNING TARGET AND ITS SUBSIDIARIES. EACH
------------------------------------------------------------------------
SELLER REPRESENTS AND WARRANTS TO BUYER THAT TO SUCH SELLER'S KNOWLEDGE, THE
STATEMENTS CONTAINED IN THIS SEC.4 ARE CORRECT AND COMPLETE AS OF THE DATE OF
THIS AGREEMENT AND SHALL BE CORRECT AND COMPLETE AS OF THE CLOSING DATE (AS
THOUGH MADE THEN AND AS THOUGH THE CLOSING DATE WERE SUBSTITUTED FOR THE DATE OF
THIS AGREEMENT THROUGHOUT THIS SEC.4), EXCEPT AS SET FORTH IN THE DISCLOSURE
SCHEDULE ATTACHED HERETO AS SCHEDULE III (THE "DISCLOSURE SCHEDULE"). THE
------------- -------------------
DISCLOSURE SCHEDULE SHALL BE ARRANGED IN PARAGRAPHS CORRESPONDING TO THE
LETTERED AND NUMBERED PARAGRAPHS CONTAINED IN THIS SEC.0.
(a) Organization, Qualification, and Corporate Power. Each of Target and
---------------------------------------------------
its Subsidiaries is a corporation duly organized, validly existing, and in good
standing under the laws of the jurisdiction of its incorporation. Each of
Target and its Subsidiaries is duly authorized to conduct business and is in
good standing under the laws of each jurisdiction where such qualification is
required, except where the lack of such qualification would not have a Material
Adverse Effect. Each of Target and its Subsidiaries has full corporate power and
authority to carry on the businesses in which it is engaged and to own and use
the properties owned and used by it. Sec.4(a) of the Disclosure Schedule lists
the directors and officers of each of Target and its Subsidiaries.
(b) Capitalization. The entire authorized capital stock of Target consists
--------------
of 100,000,000 shares of common stock, $0.0001 par value, of which 21,687,094
Target Shares are issued and outstanding. All of the issued and outstanding
Target Shares have been duly authorized, are validly issued, fully paid, and
nonassessable. Excepts as set forth in the Disclosure Schedule, there are no
outstanding or authorized options, warrants, purchase rights, subscription
rights, conversion rights, exchange rights, or other contracts or commitments
that could require Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. Except as set forth in the Disclosure
Schedule, there are no outstanding or authorized stock appreciation, phantom
stock, profit participation, or similar rights with respect to Target. There
are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of the capital stock of Target.
(c) Noncontravention. Neither the execution and the delivery of this
----------------
Agreement, nor the consummation of the transactions contemplated hereby, shall
(i) violate any Law to which any of such Seller, Target and its Subsidiaries is
subject or any provision of the charter or bylaws of any of Target and its
Subsidiaries or (ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any
agreement, contract, lease, license, instrument, or other arrangement to which
any of Target and its Subsidiaries is a party or by which it is bound
15
or to which any of its assets is subject (or result in the imposition of any
Lien upon any of its assets), except where the violation, conflict, breach,
default, acceleration, termination, modification, cancellation, failure to give
notice, or Lien would not have a Material Adverse Effect. None of such Seller,
Target and its Subsidiaries needs to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions
contemplated by this Agreement, except where the failure to give notice, to
file, or to obtain any authorization, consent, or approval would not have a
Material Adverse Effect.
(d) Brokers' Fees. None of Target and its Subsidiaries has any liability or
-------------
obligation to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement.
(e) Title to Assets. Target and its Subsidiaries have good and marketable
-----------------
title to, or a valid leasehold interest in, the properties and assets used by
them, located on their premises, or shown on the Most Recent Balance Sheet or
acquired after the date thereof, free and clear of all Liens, except for
properties and assets disposed of in the Ordinary Course of Business since the
date of the Most Recent Balance Sheet.
(f) Subsidiaries. Target's only subsidiary is Xxxxxxx Publishing Group,
------------
Inc., a Florida corporation ("Xxxxxxx"). Xxxxxxx has one thousand (1,000)
-------
shares of common stock authorized, $0.01 par value, of which one hundred (100)
shares are currently issued and outstanding and owned by Target. No preferred
shares have been issued. All of the issued and outstanding shares of capital
stock of each Subsidiary of Target have been duly authorized and are validly
issued, fully paid, and nonassessable. Target and/or one or more of its
Subsidiaries holds of record and owns beneficially all of the outstanding shares
of each Subsidiary of Target, free and clear of any restrictions on transfer
(other than restrictions under the Securities Act and state securities laws),
taxes, Liens, options, warrants, purchase rights, contracts, commitments,
equities, claims, and demands. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange
rights, or other contracts or commitments that could require any of Target and
its Subsidiaries to sell, transfer, or otherwise dispose of any capital stock of
any of its Subsidiaries or that could require any Subsidiary of Target to issue,
sell, or otherwise cause to become outstanding any of its own capital stock.
There are no outstanding stock appreciation, phantom stock, profit
participation, or similar rights with respect to any Subsidiary of Target.
There are no voting trusts, proxies, or other agreements or understandings with
respect to the voting of any capital stock of any Subsidiary of Target. None of
Target and its Subsidiaries controls directly or indirectly or has any direct or
indirect equity participation in any corporation, partnership, trust, or other
business association which is not a Subsidiary of Target except for the Redeemed
Shares. Except for the Subsidiaries set forth in Sec.4(f) of the Disclosure
Schedule, neither Target nor any of its Subsidiaries owns or has any right to
acquire, directly or indirectly, any outstanding capital stock of, or other
equity interests in, any Person.
(g) Financial Statements. Attached hereto as Exhibit B are the following
--------------------- ---------
Financial Statements of Target and its Subsidiaries: (i) unaudited Financial
Statements as of and for the Most Recent Fiscal Year for Target and its
Subsidiaries; and (ii) unaudited Most Recent Financial Statements for Target and
its Subsidiaries. The Financial Statements (including the
16
notes thereto) of Target and its Subsidiaries have been prepared in accordance
with GAAP applied on a consistent basis throughout the periods covered thereby
and present fairly the financial condition of Target and its Subsidiaries as of
such dates and the results of operations of Target and its Subsidiaries for such
periods, provided, however, that the Most Recent Financial Statements are
subject to normal year-end adjustments (which shall not be material individually
or in the aggregate) and lack footnotes and other presentation items. The
Financial Statements are correct and complete and consistent with the books and
records of Target and its Subsidiaries.
(h) Events Subsequent to Most Recent Fiscal Year End. Since the Most Recent
------------------------------------------------
Fiscal Year End, there has not been any Material Adverse Change. Without
limiting the generality of the foregoing, since that date:
(i) none of Target and its Subsidiaries has sold, leased, transferred,
or assigned any material assets, tangible or intangible, outside the
Ordinary Course of Business;
(ii) none of Target and its Subsidiaries has entered into any material
agreement, contract, lease, or license outside the Ordinary Course of
Business;
(iii) no party (including any of Target and its Subsidiaries) has
accelerated, terminated, made material modifications to, or canceled
any material agreement, contract, lease, or license to which any of
Target and its Subsidiaries is a party or by which any of them is
bound;
(iv) none of Target and its Subsidiaries has imposed any Lien upon any
of its assets, tangible or intangible;
(v) none of Target and its Subsidiaries has made any material capital
expenditures outside the Ordinary Course of Business;
(vi) none of Target and its Subsidiaries has made any material capital
investment in, or any material loan to, any other Person outside the
Ordinary Course of Business;
(vii) Neither Target nor any of its Subsidiaries has created, incurred,
assumed, or guaranteed more than $100,000.00 in aggregate indebtedness
for borrowed money and capitalized lease obligations;
(viii) none of Target and its Subsidiaries has transferred, assigned,
or granted any license or sublicense of any material rights under or
with respect to any Intellectual Property;
(ix) there has been no change made or authorized in the charter or
bylaws of any of Target and its Subsidiaries;
(x) none of Target and its Subsidiaries has issued, sold, or otherwise
disposed of any of its capital stock, or granted any options,
warrants, or other rights to purchase or obtain (including upon
conversion, exchange, or exercise) any of its capital stock;
(xi) none of Target and its Subsidiaries has declared, set aside, or
paid any dividend or made any distribution with respect to its capital
stock (whether in cash or in kind) or redeemed, purchased, or
otherwise acquired any of its capital stock;
(xii) none of Target and its Subsidiaries has experienced any material
damage, destruction, or loss (whether or not covered by insurance) to
its property;
(xiii) none of Target and its Subsidiaries has made any loan to, or
entered into any other transaction with, any of its directors,
officers, and employees outside the Ordinary Course of Business;
(xiv) none of Target and its Subsidiaries has entered into any
employment contract or collective bargaining agreement, written or
oral, or modified the terms of any existing
17
such contract or agreement;
(xv) none of Target and its Subsidiaries has granted any increase in
the base compensation of any of its directors, officers, and employees
outside the Ordinary Course of Business;
(xvi) none of Target and its Subsidiaries has adopted, amended,
modified, or terminated any bonus, profit sharing, incentive,
severance, or other plan, contract, or commitment for the benefit of
any of its directors, officers, and employees (or taken any such
action with respect to any other Employee Benefit Plan);
(xvii) none of Target and its Subsidiaries has made any other material
change in employment terms for any of its directors, officers, and
employees outside the Ordinary Course of Business;
(xviii) none of Target and its Subsidiaries has made any loans or
advances of money; and
(xix) none of Target and its Subsidiaries has committed to any of the
foregoing.
(i) Undisclosed Liabilities. None of Target and its Subsidiaries has any
------------------------
material liability (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether liquidated
or unliquidated, and whether due or to become due, including any liability for
taxes), except for (i) liabilities set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) and (ii) liabilities which have
arisen after the Most Recent Fiscal Quarter End in the Ordinary Course of
Business.
(j) Legal Compliance. Each of Target and its Subsidiaries has complied with
----------------
all applicable Laws, and no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, demand, or notice has been filed or commenced against
any of them alleging any failure so to comply, except where the failure to
comply would not have a Material Adverse Effect.
(k) Tax Matters.
------------
(i) Each of Target and its Subsidiaries has filed all federal Income Tax
Returns and all other material Tax Returns that it was required to file.
All such Tax Returns were correct and complete in all material respects.
All Taxes due and owing by any of Target and its Subsidiaries (whether or
not shown on any Tax Return) have been paid. None of Target and its
Subsidiaries currently is the beneficiary of any extension of time within
which to file any Tax Return. There are no Liens for Taxes (other than
Taxes not yet due and payable) upon any of the assets of Target or any of
its Subsidiaries.
(ii) There is no material dispute or claim concerning any
Tax liability of any of Target and its Subsidiaries
either (A) claimed or raised by any authority in
writing or (B) as to which such Seller of Target and
its Subsidiaries has Knowledge based upon personal
contact with any agent of such authority.
(iii) Such Seller have delivered to Buyer, to the extent same are
with in such Seller's possession and control, correct and
complete copies of all federal, state, local and foreign Tax
Returns, examination reports, and statements of deficiencies
assessed against, or agreed to by any of Target and its
Subsidiaries since the tax year ending December 31, 2000.
None of Target and its Subsidiaries has waived any statute
of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or
deficiency.
(iv) None of Target and its Subsidiaries is a party to or bound
by any tax
18
allocation or sharing agreement. None of Target and its
Subsidiaries (A) has been a member of an Affiliated Group
filing a consolidated federal Income Tax Return (other than
a group the common parent of which was Target) or (B) has
any liability for the Taxes of any Person (other than any of
Target and its Subsidiaries) under Reg. Sec.1.1502-6 (or any
similar provision of state, local, or foreign law), as a
transferee or successor, by contract, or otherwise.
(v) The unpaid Taxes of Target and its Subsidiaries (A) did not, as of the
Most Recent Fiscal Quarter End, exceed the reserve for Tax liability
(rather than any reserve for deferred Taxes established to reflect timing
differences between book and Tax income) set forth on the face of the Most
Recent Balance Sheet (rather than in any notes thereto) and (B) shall not
exceed that reserve as adjusted for operations and transactions through the
Closing Date in accordance with the past custom and practice of Target and
its Subsidiaries in filing their Tax Returns.
(l) Real Property. The real property known as 000 Xxxxxxx Xxxx, Xxxxxxx,
--------------
Florida, is the only Real Property used or intended to be used in the business
-------------
of Target and its Subsidiaries; and none of Target or its Subsidiaries is a
party to any agreement or option to purchase any other real property or interest
therein.
(m) Intellectual Property.
----------------------
(i) None of Target and its Subsidiaries has interfered with, infringed
upon, misappropriated, or violated any material Intellectual Property
rights of third parties in any material respect, and such Seller has not
ever received any charge, complaint, claim, demand, or notice alleging any
such interference, infringement, misappropriation, or violation (including
any claim that any of Target and its Subsidiaries must license or refrain
from using any Intellectual Property rights of any third party). No third
party has interfered with, infringed upon, misappropriated, or violated any
material Intellectual Property rights of any of Target and its Subsidiaries
in any material respect.
(ii) With respect to each item of Intellectual Property included as an
asset on Target's Most Recent Balance Sheet:
(A) Target and its Subsidiaries possess all right,
title, and interest in and to the item, free and clear of any Lien, license, or
other restriction, except as specifically disclosed in the Notes to Target's
Most Recent Financial Statements;
(B) the item is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;
(C) no action, suit, proceeding, hearing, investigation,
charge, complaint, claim, or demand is pending or is threatened that challenges
the legality, validity, enforceability, use, or ownership of the item; and
(D) none of Target and its Subsidiaries has ever agreed
to indemnify any Person for or against any interference, infringement,
misappropriation, or other conflict with respect to the item.
19
(E) the license, sublicense, agreement, or permission
covering the item is legal, valid, binding, enforceable, and in full force and
effect in all material respects;
(F) no party to the license, sublicense, agreement, or
permission has repudiated any material provision thereof;
(G) none of Target and its Subsidiaries has granted any
sublicense or similar right with respect to the license, sublicense, agreement,
or permission; and
(H) no loss or expiration of the item is threatened,
pending, or reasonably foreseeable, except for patents expiring at the end of
their statutory terms (and not as a result of any act or omission by such
Seller, Target or its Subsidiaries, including without limitation, a failure by
such Seller, Target or its Subsidiaries to pay any required maintenance fees).
(n) Tangible Assets. The buildings, machinery, equipment, and other
----------------
tangible assets that Target and its Subsidiaries own and lease are free from
material defects (patent and latent), have been maintained in accordance with
normal industry practice, and are in good operating condition and repair
(subject to normal wear and tear).
(o) Contracts. With respect to each Material Contract: (i) the agreement is
---------
legal, valid, binding, enforceable, and in full force and effect in all material
respects; (ii) no party is in material breach or default, and no event has
occurred which with notice or lapse of time would constitute a material breach
or default, or permit termination, modification, or acceleration, under the
agreement; and (iii) no party has repudiated any material provision of the
agreement; except that Target is currently in default under those Material
Contracts identified in Section (o) of the Disclosure Schedule.
(p) Notes and Accounts Receivable. All notes and accounts receivable of
--------------------------------
Target and its Subsidiaries are reflected properly on their books and records,
are valid receivables subject to no setoffs or counterclaims, are current and
collectible, and shall be collected in accordance with their terms at their
recorded amounts, subject only to the reserve for bad debts set forth on the
face of the Most Recent Balance Sheet (rather than in any notes thereto) as
adjusted for operations and transactions through the Closing Date in accordance
with the past custom and practice of Target and its Subsidiaries.
(q) Powers of Attorney. There are no material outstanding powers of
--------------------
attorney executed on behalf of any of Target and its Subsidiaries.
(r) Litigation. Neither Target nor its Subsidiaries (i) is subject to any
----------
outstanding injunction, judgment, order, decree, ruling, or charge or (ii) is a
party or is threatened to be made a party to any action, suit, proceeding,
hearing, or investigation of, in, or before any court or quasi-judicial or
administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator.
(s) Product Warranty. Substantially all of the products manufactured, sold,
----------------
leased, and delivered by Target and its Subsidiaries have conformed in all
material respects with all applicable contractual commitments and all express
and implied warranties, and none of Target
20
and its Subsidiaries has any material liability (whether known or unknown,
whether asserted or unasserted, whether absolute or contingent, whether accrued
or unaccrued, whether liquidated or unliquidated, and whether due or to become
due) for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for
operations and transactions through the Closing Date in accordance with the past
custom and practice of Target and its Subsidiaries. Substantially all of the
products manufactured, sold, leased, and delivered by Target and its
Subsidiaries are subject to standard terms and conditions of sale or lease.
(t) Product Liability. None of Target and its Subsidiaries has any material
-----------------
liability (whether known or unknown, whether asserted or unasserted, whether
absolute or contingent, whether accrued or unaccrued, whether liquidated or
unliquidated, and whether due or to become due) arising out of any injury to
individuals or property as a result of the ownership, possession, or use of any
product manufactured, sold, leased, or delivered by any of Target and its
Subsidiaries.
(u) Employees. No executive, key employee, or significant group of
---------
employees plans to terminate employment with any of Target and its Subsidiaries
during the next 12 months. None of Target and its Subsidiaries is a party to or
bound by any collective bargaining agreement, nor has any of them experienced
any strike or material grievance, claim of unfair labor practices, or other
collective bargaining dispute within the past three years. None of Target and
its Subsidiaries has committed any material unfair labor practice. There are no
organizational efforts presently being made or threatened by or on behalf of any
labor union with respect to employees of any of Target and its Subsidiaries.
(v) Employee Benefits.
------------------
(i) Sec.4(v) of the Disclosure Schedule lists each Employee Benefit Plan
that any of Target and its Subsidiaries maintains or to which any of Target
and its Subsidiaries contributes or has any obligation to contribute.
(A) Each such Employee Benefit Plan (and each related
trust, insurance contract, or fund) has been maintained, funded and administered
in accordance with the terms of such Employee Benefit Plan and complies in form
and in operation in all material respects with the applicable requirements of
ERISA, the Code, and other applicable laws.
(B) All required reports and descriptions (including
annual reports (IRS Form 5500), summary annual reports, and summary plan
descriptions) have been timely filed and/or distributed in accordance with the
applicable requirements of ERISA and the Code with respect to each such Employee
Benefit Plan. The requirements of COBRA have been met in all material respects
with respect to each such Employee Benefit Plan which is an Employee Welfare
Benefit Plan subject to COBRA.
(C) All contributions (including all employer
contributions and employee salary reduction contributions) that are due have
been made within the time periods prescribed by ERISA and the Code to each such
Employee Benefit Plan that is an Employee Pension Benefit Plan and all
contributions for any period ending on or before the Closing Date that are not
yet due have been made to each such Employee Pension Benefit Plan
21
or accrued in accordance with the past custom and practice of Target and its
Subsidiaries. All premiums or other payments for all periods ending on or before
the Closing Date have been paid with respect to each such Employee Benefit Plan
that is an Employee Welfare Benefit Plan.
(D) Each such Employee Benefit Plan which is intended to
meet the requirements of a "qualified plan" under Code Sec.401(a) has received a
determination from the Internal Revenue Service that such Employee Benefit Plan
is so qualified, and the Sellers are not aware of any facts or circumstances
that could adversely affect the qualified status of any such Employee Benefit
Plan.
(E) The market value of assets under each such Employee
Benefit Plan that is an Employee Pension Benefit Plan (other than any
Multiemployer Plan) equals or exceeds the present value of all vested and
nonvested liabilities thereunder (determined in accordance with then current
funding assumptions).
(F) Sellers have delivered to Buyer correct and complete
copies of the plan documents and summary plan descriptions, the most recent
determination letter received from the Internal Revenue Service, the most recent
annual report (IRS Form 5500, with all applicable attachments), and all related
trust agreements, insurance contracts, and other funding arrangements which
implement each such Employee Benefit Plan.
(ii) None of Target, its Subsidiaries, and any ERISA Affiliate
contributes to, has any obligation to contribute to, or has any
material liability (whether known or unknown, whether asserted or
unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or
to become due), including any withdrawal liability (as defined in
ERISA Sec.4201), under or with respect to any Multiemployer Plan.
(iii) None of Target and its Subsidiaries maintains, contributes to or has
an obligation to contribute to, or has any material liability or potential
liability with respect to, any Employee Welfare Benefit Plan providing
medical, health, or life insurance or other welfare-type benefits for
current or future retired or terminated employees of the Target or any of
its Subsidiaries (or any spouse or other dependent thereof) other than in
accordance with COBRA.
(w) Guaranties. None of Target and its Subsidiaries is a guarantor or
----------
otherwise is responsible for any liability or obligation (including
indebtedness) of any other Person.
(x) Environmental, Health, and Safety Matters. Each of Target, its
---------------------------------------------
Subsidiaries, and their respective predecessors and Affiliates has complied and
is in compliance, in each case in all material respects, with all Environmental,
Health, and Safety Requirements. None of Target, its Subsidiaries, or their
respective Affiliates has received any written or oral notice, report or other
information regarding any actual or alleged material violation of Environmental,
Health, and Safety Requirements, or any material liabilities or potential
material liabilities (whether accrued, absolute, contingent, unliquidated or
otherwise), including any material investigatory, remedial or corrective
obligations, relating to any of them or its facilities arising under
Environmental, Health, and Safety Requirements.
22
(y) Business Continuity. None of the Systems that are used by or relied on
--------------------
by Target and/or its Subsidiaries in the conduct of their respective businesses
have experienced bugs, failures, breakdowns, or continued substandard
performance in the past twelve (12) months that has caused any substantial
disruption or interruption in or to the use of any such Systems by Target or its
Subsidiaries, and none of such Systems have been sold or transferred. Each of
Target and its Subsidiaries is covered by business interruption insurance in
scope and amount customary and reasonable to ensure the ongoing business
operations of Target's and its Subsidiaries' respective businesses.
(z) Certain Business Relationships With Target and Its Subsidiaries. None
-----------------------------------------------------------------
of Sellers, their Affiliates, Sellers' directors, officers, employees, and
shareholders and Target's and its Subsidiaries' directors, officers, employees,
and shareholders have been involved in any material business arrangement or
relationship with any of Target and its Subsidiaries within the past 12 months,
and none of the Sellers, their Affiliates, Sellers' directors, officers,
employees, and shareholders and Target's and its Subsidiaries' directors,
officers, employees, and shareholders owns any material asset, tangible or
intangible, which is used in the business of any of Target and its Subsidiaries.
(aa) Disclosure. The representations and warranties contained in this Sec.4
----------
do not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements and information
contained in this Sec.4 not misleading.
(bb) Customers and Suppliers. Since the date of the Most Recent Balance
-------------------------
Sheet, no material supplier of Target or any its Subsidiaries has indicated that
it shall stop, or materially decrease the rate of, supplying materials, products
or services to Target or any of its Subsidiaries, and no material customer has
indicated that it shall stop, or materially decrease the rate of, buying
materials, products or services from Target or any of its Subsidiaries.
PRE-CLOSING COVENANTS. THE PARTIES AGREE AS FOLLOWS WITH RESPECT TO THE PERIOD
----------------------
BETWEEN THE EXECUTION OF THIS AGREEMENT AND CLOSING.
(g) General. Each of the Parties shall use his or its reasonable
-------
best efforts to take all action 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 Sec.7 below).
(h) Notices and Consents. Each Seller shall cooperate with each
----------------------
of Target and its Subsidiaries to give any notices to third parties, and shall
cooperate with each of Target and its Subsidiaries to use its reasonable best
efforts to obtain any third party consents, referred to in Sec.4(c) above, the
Lease Consents, and the items set forth in Sec.5(b) of the Disclosure Schedule.
Each of the Parties shall (and Sellers shall cause each of Target and its
Subsidiaries to) give any notices to, make any filings with, and use its
reasonable best efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the transactions
contemplated by this Agreement.
(i) Operation of Business. Each Seller shall not cause or permit
----------------------
any of Target and its Subsidiaries to engage in any practice, take any action,
or enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, such Seller shall not cause or permit
23
any of Target and its Subsidiaries to (i) declare, set aside, or pay any
dividend or make any distribution with respect to its capital stock or redeem,
purchase, or otherwise acquire any of its capital stock, (ii) or otherwise
engage in any practice, take any action, or enter into any transaction of the
sort described in Sec.4(h) above.
(j) Preservation of Business. Each Seller shall cause each of
--------------------------
Target and its Subsidiaries to keep its business and properties substantially
intact, including its present operations, physical facilities, working
conditions, insurance policies, and relationships with lessors, licensors,
suppliers, customers, and employees.
(k) Full Access. Each Seller shall permit, and such Seller shall
------------
cause each of Target and its Subsidiaries to permit, representatives of Buyer
(including legal counsel and accountants) to have full access at all reasonable
times, and in a manner so as not to interfere with the normal business
operations of Target and its Subsidiaries, to all premises, properties,
personnel, books, records (including tax records), contracts, and documents of
or pertaining to Target and each of its Subsidiaries. Buyer shall treat and
hold as such any Confidential Information it receives from any of Sellers,
Target, and its Subsidiaries in the course of the reviews contemplated by this
Sec.5(e), shall not use any of the Confidential Information except in connection
with this Agreement, and, if this Agreement is terminated for any reason
whatsoever, shall return to such Seller, Target, and its Subsidiaries all
tangible embodiments (and all copies) of the Confidential Information which are
in its possession.
(l) Notice of Developments. Each Seller shall give prompt written
----------------------
notice to Buyer of any material adverse development causing a breach of any of
the representations and warranties in Sec.4 above. Each Party shall give prompt
written notice to the others of any material adverse development causing a
breach of any of his, her, or its own representations and warranties in Sec.3
above. No disclosure by any Party pursuant to this Sec.5(f), however, shall be
deemed to amend or supplement Schedule I, Schedule II, or the Disclosure
----------- ------------
Schedule or to prevent or cure any misrepresentation, breach of warranty, or
breach of covenant.
(m) Exclusivity. No Seller shall (and each Seller shall not cause
-----------
or permit any of Target and its Subsidiaries to) (i) solicit, initiate, or
encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any
substantial portion of the assets, of any of Target and its Subsidiaries
(including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding,
furnish any information with respect to, assist or participate in, or facilitate
in any other manner any effort or attempt by any Person to do or seek any of the
foregoing. No Seller shall vote his, her, or its Target Shares in favor of any
such acquisition.
(n) Maintenance of Real Property and Equipment. Each Seller shall
------------------------------------------
cause each of Target and its Subsidiaries to maintain the Real Property and
equipment, including all of the Improvements in substantially the same condition
as of the date of this Agreement, ordinary wear and tear excepted, and shall not
demolish or remove any of the existing Improvements, or erect new improvements
on the Real Property or any portion thereof, without the prior written consent
of Buyer.
(o) Material Contracts. Each Seller shall not cause or permit any
------------------
Material Contract to be amended, modified, extended, renewed or terminated, nor
shall such Seller
24
permit Target or its Subsidiaries to enter into any new Material Contract,
without the prior written consent of Buyer.
(p) Public Reporting. Buyer shall file with the Securities and
-----------------
Exchange Commission all reports required under the Securities Act and the
Securities Exchange Act in a timely manner.
POST-CLOSING COVENANTS. THE PARTIES AGREE AS FOLLOWS WITH RESPECT TO THE PERIOD
----------------------
FOLLOWING CLOSING.
(q) General. In case at any time after Closing any further action
-------
is necessary to carry out the purposes of this Agreement, each of the Parties
shall take such further action (including the execution and delivery of such
further instruments and documents) as any other Party reasonably may request,
all at the sole cost and expense of the requesting Party (unless the requesting
Party is entitled to indemnification therefor under Sec.8 below). Sellers
acknowledge and agree that from and after Closing, Buyer shall be entitled to
possession of all documents, books, records (including tax records), agreements,
and financial data of any sort relating to Target and its Subsidiaries.
(r) Litigation Support. In the event and for so long as any Party
------------------
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection with
(i) any transaction contemplated under this Agreement or (ii) any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving any of Target and its Subsidiaries, each of the
other Parties shall cooperate with him, her, or it and his, her, or its counsel
in the contest or defense, make available their personnel, and provide such
testimony and access to their books and records as shall be necessary in
connection with the contest or defense, all at the sole cost and expense of the
contesting or defending Party (unless the contesting or defending Party is
entitled to indemnification therefor under Sec.8 below).
(s) Transition. No Seller shall take any action that is designed
----------
or intended to have the effect of discouraging any lessor, licensor, customer,
supplier, or other business associate of any of Target and its Subsidiaries from
maintaining the same business relationships with Target and its Subsidiaries
after Closing as it maintained with Target and its Subsidiaries prior to
Closing.
(t) Confidentiality. Each Seller shall treat and hold as such all
---------------
of the Confidential Information, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to
Buyer or destroy, at the request and option of Buyer, all tangible embodiments
(and all copies) of the Confidential Information which are in his, her, or its
possession. In the event that any Seller is requested or required pursuant to
oral or written question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar
process to disclose any Confidential
25
Information, that Seller shall notify Buyer promptly of the request or
requirement so that Buyer may seek an appropriate protective order or waive
compliance with the provisions of this Sec.6(d). If, in the absence of a
protective order or the receipt of a waiver hereunder, any Seller is, on the
advice of counsel, compelled to disclose any Confidential Information to any
tribunal or else stand liable for contempt, that Seller may disclose the
Confidential Information to the tribunal; provided, however, that the disclosing
Seller shall use his, her, or its reasonable best efforts to obtain, at the
reasonable request of Buyer, an order or other assurance that confidential
treatment shall be accorded to such portion of the Confidential Information
required to be disclosed as Buyer shall designate.
(u) Exchange Shares. Each Exchange Share shall be imprinted with
----------------
a legend substantially in the following form:
The shares represented by this certificate were originally issued on
__________, 2002, and have not been registered under the Securities Act of
1933, as amended. These shares may not be sold or transferred in the
absence of registration or an exemption from registration under the
Securities Act of 1933, as amended, and any applicable state securities
laws.
Each holder desiring to transfer an Exchange Share first must furnish Buyer with
(i) a written opinion reasonably satisfactory to Buyer in form and substance
from counsel reasonably satisfactory to Buyer by reason of experience to the
effect that the holder may transfer the Exchange Share as desired without
registration under the Securities Act and (ii) a written undertaking executed by
the desired transferee reasonably satisfactory to Buyer in form and substance
agreeing to be bound by the restrictions on transfer contained herein.
(v) Return to Treasury. Target shall return to treasury all of
--------------------
the stock of Buyer beneficially owned by Target, and Buyer shall cancel such
stock.
(w) Public Reporting. Each Seller shall file in a timely manner
-----------------
all public reports and schedules required in connection with the transactions
contemplated in this Agreement by the Securities and Exchange Commission
pursuant to the Securities Act and the Securities Exchange Act, including,
without limitation, any Form 3 or Schedule 13-D.
CONDITIONS TO OBLIGATION TO CLOSE.
-------------------------------------
(x) Conditions to Buyer's Obligation. The obligation of the Buyer
--------------------------------
to each Seller to consummate the transactions to be performed by it in
connection with Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Sec.3(a) and Sec.4
above shall be true and correct in all material respects at and as of
the Closing Date;
(ii) such Seller shall have performed and complied with all of their
covenants hereunder in all material respects through Closing;
(iii) Target and its Subsidiaries shall have procured all of the third
party consents specified in Sec.5(b) above;
(iv) no action, suit, or proceeding shall be pending before any court
or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an
unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated
by this Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (C) affect
adversely the right of Buyer to own Target Shares and to control
Target and its Subsidiaries, or (D) affect materially and adversely
the right of any of Target and its Subsidiaries to own its assets and
to operate its
26
businesses (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
(v) Buyer shall have received the following from the Requisite Sellers:
(A) original counterpart of the Exchange Agreement, duly executed on
behalf of each Requisite Seller, and (B) all of the documents to be
delivered by each Requisite Seller pursuant to Section 2(d), including
all the documents to be delivered pursuant to this Section 7(a);
(vi) Target shall have redeemed Nine Million Five Hundred Thousand
(9,500,000) Target Shares from Xxxxxxxx X. Van den Brekel at the price
of $0.0001 per share (par value);
(vii) all actions to be taken by such Seller in connection with
consummation of the transactions contemplated hereby and all
certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby shall be reasonably
satisfactory in form and substance to Buyer;
(viii) Such Seller shall deliver to Buyer an affidavit, under penalties of
perjury, stating that Target is not and has not been a United States
real property holding corporation, dated as of the Closing Date and in
form and substance required under Treasury Regulation Sec.1.897-2(h)
so that Buyer is exempt from withholding any portion of the Purchase
Price thereunder (the "FIRPTA Affidavit");
-----------------
(ix) Such Seller (except any individual) shall have delivered to Buyer
copies of the certificate of incorporation of such Seller, certified
on or soon before the Closing Date by the Secretary of State (or
comparable officer) of the jurisdiction of such Seller's
incorporation, and copies of the certificate of good standing of such
Seller, issued on or soon before the Closing Date by the Secretary of
State (or comparable officer) of the jurisdiction of each such
Seller's organization ;
(x) Target shall have delivered to Buyer copies of the certificate of
incorporation of Target and each Target Subsidiary, certified on or
soon before the Closing Date by the Secretary of State (or comparable
officer) of the jurisdiction of Target and each Target Subsidiary, and
copies of the certificate of good standing of Target and each Target
Subsidiary, issued on or soon before the Closing Date by the Secretary
of State (or comparable officer) of the jurisdiction of Target and
each Target Subsidiary, as the case may be, and of each jurisdiction
in which Target and each Target Subsidiary is qualified to do
business, as the case may be;
(xi) Such Seller (except any individual) shall have delivered to Buyer a
certificate of the secretary or an assistant secretary of such Seller,
dated the Closing Date, in form and substance reasonably satisfactory
to Buyer, as to (A) the resolutions of the board of directors (or a
duly authorized committee thereof) of such Seller authorizing the
execution, delivery, and performance of this Agreement and the
transactions contemplated hereby; and (B) incumbency and signatures of
the officers of such Seller executing this Agreement or any other
agreement contemplated by this Agreement;
(xii) Target shall have delivered to Buyer a certificate of the secretary
or an assistant secretary of Target and Target Subsidiaries, dated the
Closing Date, in form and substance reasonably satisfactory to Buyer,
as to no
27
amendments since the date same were delivered to Buyer to (A) the
Certificate of Incorporation of Target and its Subsidiaries; (B) the
bylaws of Target and Target Subsidiaries; and (C) resolutions of the
board of directors (or a duly authorized committee thereof) of the
Target and Target Subsidiaries;
(xiv) Buyer shall have obtained approval of this Agreement from its board
of directors and shareholders in accordance with all Laws and its
articles of incorporation and bylaws; and
(xv) Target, on behalf of each Seller, shall have delivered to Buyer a
certificate to the effect that each of the conditions specified below
in Sec.7(b)(i)-(iv) is satisfied in all respects.
Buyer may waive any condition specified in this Sec.7(a), except the conditions
set forth in Sec.7(a)(xiv) above, if it executes a writing so stating at or
prior to Closing.
(y) Conditions to Each Seller's Obligation. Each Seller's obligation
----------------------------------------
to consummate the transactions to be performed by them in connection with
Closing is subject to satisfaction of the following conditions:
(i) the representations and warranties set forth in Sec.3(b) above
shall be true and correct in all material respects at and as of the
Closing Date, except to the extent that such representations and
warranties are qualified by terms such as "material" and "Material
Adverse Effect," in which case such representations and warranties
shall be true and correct in all respects at and as of the Closing
Date;
(ii) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through Closing, except
to the extent that such covenants are qualified by terms such as
"material" and "Material Adverse Effect," in which case Buyer shall
have performed and complied with all of such covenants in all respects
through Closing;
(iii) no action, suit, or proceeding shall be pending before
any court or quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction or before any arbitrator wherein an unfavorable
injunction, judgment, order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded
following consummation (and no such injunction, judgment, order, decree, ruling,
or charge shall be in effect);
28
(iv) the Parties, Target, and its Subsidiaries shall have received all
material authorizations, consents, and approvals of governments and
governmental agencies referred to in Sec.3(a)(ii), Sec.3(b)(ii), and
Sec.4(c) above;
(v) Target shall have redeemed Nine Million Five Hundred Thousand
(9,500,000) Target Shares from Xxxxxxxx X. Van den Brekel at the price
of $0.0001 per share (par value);
(vi) Buyer shall have obtained approval of this Agreement from its
shareholders in accordance with all Laws and its articles of
incorporation and bylaws and delivered to each Seller a copy of the
Exchange Agreement duly executed by Buyer; and
(vii) Buyer shall have delivered to such Seller a certificate to the
effect that each of the conditions specified above in
Sec.7(a)(i)-(xiv) is satisfied in all respects.
Each Seller, hereby appoints Target as such Seller's attorney-in-fact to execute
and deliver to Buyer a certificate regarding the satisfaction of the foregoing
conditions set forth in this Section 0(y), as provided in Section 0(x)(xii)
above.
REMEDIES FOR BREACHES OF THIS AGREEMENT.
--------------------------------------------
(z) Survival of Representations and Warranties. All of the
----------------------------------------------
representations and warranties of the Parties contained in this Agreement
(including, without limitation, the representations and warranties of the
Parties contained in Sec.3 and Sec.4 above) shall survive Closing (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of
warranty at the time of Closing) and continue in full force and effect until 30
days following the expiration of the applicable statutes of limitations
(including any extension thereto).
(aa) Indemnification Provisions for Buyer's Benefit.
--------------------------------------------------
(i) In the event any Seller breaches any of his, her, or its
representations, warranties, and covenants contained herein (other
than the covenants in Sec.2(a) above), and provided that Buyer makes a
written claim for indemnification against such Seller pursuant to
Sec.11(h) below within the survival period (if there is an applicable
survival period pursuant to Sec.8(a) above) then such Seller shall be
obligated to indemnify Buyer from and against the entirety of any
Adverse Consequences Buyer may suffer (including any Adverse
Consequences the Buyer may suffer after the end of any applicable
survival period) resulting from, arising out of, relating to, in the
nature of, or caused by the breach; provided, however, that (A)
Sellers shall not have any obligation to indemnify Buyer from and
against any Adverse Consequences resulting from, arising out of,
relating to, in the nature of, or caused by the breach of any
representation or warranty of Sellers contained in Sec.4 above until
Buyer has suffered Adverse Consequences by reason of all such breaches
in excess of a $10,000.00 aggregate deductible to be applied
proportionately to each Seller's liability (after which point Sellers
shall be obligated only to indemnify Buyer from and against further
such Adverse Consequences) and (B) there shall be an aggregate ceiling
on the obligation of such Seller to indemnify Buyer from and against
Adverse Consequences resulting from, arising out of, relating to, in
the nature of, or caused by breaches of the representations and
warranties of such Seller contained in this Agreement equal to the
greater of (i) total value of such Sellers' Target Shares at Closing
based upon the net value of the assets of Target at Closing, or (ii)
the value of the Exchange Shares issued to such Seller at the time of
the written claim for indemnification.
(ii) In the event any Seller breaches any of his, her, or its covenants
in Sec.2(a) above
29
and provided that Buyer makes a written claim for indemnification
against such Seller pursuant to Sec.11(h) below within the survival
period (if there is an applicable survival period pursuant to Sec.8(a)
above), then such Seller shall indemnify Buyer from and against the
entirety of any Adverse Consequences Buyer shall suffer (including any
Adverse Consequences Buyer shall suffer after the end of any
applicable survival period) resulting from, arising out of, relating
to, in the nature of, or caused by the breach.
(bb) Indemnification Provisions for Sellers' Benefit. In the
------------------------------------------------
event Buyer breaches any of its representations, warranties, and covenants
contained herein and provided that any Seller makes a written claim for
indemnification against Buyer pursuant to Sec.11(h) below within the survival
period (if there is an applicable survival period pursuant to Sec.8(a) above),
then Buyer agrees to indemnify each Seller from and against the entirety of any
Adverse Consequences suffered (including any Adverse Consequences suffered after
the end of any applicable survival period) resulting from, arising out of,
relating to, in the nature of, or caused by the breach.
(cc) Matters Involving Third Parties.
----------------------------------
(i) If any third party shall notify any Party (the "Indemnified Party")
-----------------
with respect to any matter (a "Third Party Claim") which may give rise
-----------------
to a claim for indemnification against any other Party (the
"Indemnifying Party") under this Sec.8, then the Indemnified Party
-------------------
shall promptly notify each Indemnifying Party thereof in writing;
provided, however, that no delay on the part of the Indemnified Party
in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the
extent) the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party shall have the right to assume the defense
of the Third Party Claim with counsel of his or its choice reasonably
satisfactory to the Indemnified Party at any time within 15 days after
the Indemnified Party has given notice of the Third Party Claim;
provided, however, that the Indemnifying Party must conduct the
defense of the Third Party Claim actively and diligently thereafter in
order to preserve its rights in this regard; and provided further that
the Indemnified Party may retain separate co-counsel at its sole cost
and expense and participate in the defense of the Third Party Claim.
(iii) So long as the Indemnifying Party has assumed and is conducting
the defense of the Third Party Claim in accordance with Sec.8(d)(ii)
above, (A) the Indemnifying Party shall not consent to the entry of
any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party
(not to be withheld unreasonably) unless the judgment or proposed
settlement involves only the payment of money damages by one or more
of the Indemnifying Parties and does not impose an injunction or other
equitable relief upon the Indemnified Party and (B) the Indemnified
Party shall not consent to the entry of any judgment or enter into any
settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably).
(iv) In the event none of the Indemnifying Parties assumes and conducts
the defense of the Third Party Claim in accordance with Sec.8(d)(ii)
above, however, (A) the Indemnified Party may defend against, and
consent to the entry of any judgment or enter into any settlement with
respect to, the Third Party Claim in any manner he or it reasonably
may deem appropriate (and the Indemnified Party need not consult with,
or obtain any consent from, any Indemnifying Party in connection
therewith) and (B) the Indemnifying Parties shall remain responsible
for any Adverse Consequences the
30
Indemnified Party may suffer resulting from, arising out of, relating
to, in the nature of, or caused by the Third Party Claim to the
fullest extent provided in this Sec.8.
(dd) Determination of Adverse Consequences. Indemnification
----------------------------------------
payments under this Sec.8 and Sec.9 shall be paid by the Indemnifying Party
without reduction for any Tax Benefits available to the Indemnified Party.
However, to the extent that the Indemnified Party recognizes Tax Benefits as a
result of any Adverse Consequences, the Indemnified Party shall pay the amount
of such Tax Benefits (but not in excess of the indemnification payment or
payments actually received from the Indemnifying Party with respect to such
Adverse Consequences) to the Indemnifying Party as such Tax Benefits are
actually recognized by the Indemnified Party. For this purpose, the Indemnified
Party shall be deemed to recognize a tax benefit ("Tax Benefit") with respect to
-----------
a taxable year if, and to the extent that, the Indemnified Party's cumulative
liability for Taxes through the end of such taxable year, calculated by
excluding any Tax items attributable to the Adverse Consequences from all
taxable years, exceeds the Indemnified Party's actual cumulative liability for
Taxes through the end of such taxable year, calculated by taking into account
any Tax items attributable to the Adverse Consequences for all taxable years (to
the extent permitted by relevant Tax law and treating such Tax items as the last
items claimed for any taxable year). The Parties shall make appropriate
adjustments for insurance coverage and take into account the time cost of money
(using the Applicable Rate as the discount rate) in determining Adverse
Consequences for purposes of this Sec.8. All indemnification payments under this
Sec.8 and Sec.9 shall be deemed adjustments to the Purchase Price.
(ee) Exclusive Remedy. Buyer and Sellers acknowledges and agree
-----------------
that the foregoing indemnification provisions in this Sec.8 shall be the
exclusive remedy of Buyer and Sellers with respect to Target, its Subsidiaries,
and the transactions contemplated by this Agreement. Without limiting the
generality of the foregoing, Buyer and Sellers hereby waive any statutory,
equitable, or common law rights or remedies relating to any environmental
matters, including without limitation any such matters arising under any
Environmental, Health, and Safety Requirements and including without limitation
any arising under CERCLA. Each Seller hereby agrees that he, she, or it shall
not make any claim for indemnification against any of Target and its
Subsidiaries by reason of the fact that he, she, or it was a director, officer,
employee, or agent of any such entity or was serving at the request of any such
entity as a partner, trustee, director, officer, employee, or agent of another
entity (whether such claim is for judgments, damages, penalties, fines, costs,
amounts paid in settlement, losses, expenses, or otherwise and whether such
claim is pursuant to any statute, charter document, bylaw, agreement, or
otherwise) with respect to any action, suit, proceeding, complaint, claim, or
demand brought by Buyer against such Seller (whether such action, suit,
proceeding, complaint, claim, or demand is pursuant to this Agreement,
applicable law, or otherwise).
TAX MATTERS. THE FOLLOWING PROVISIONS SHALL GOVERN THE ALLOCATION OF
------------
RESPONSIBILITY AS BETWEEN BUYER AND SELLERS FOR CERTAIN TAX MATTERS FOLLOWING
CLOSING DATE:
(ff) Responsibility for Filing Tax Returns. Buyer shall prepare
---------------------------------------
or caused to be prepared and file or caused to be filed all Income Tax Returns
for Target and its Subsidiaries which are filed after the Closing Date.
(gg) Cooperation on Tax Matters.
-----------------------------
31
(i) Buyer, the Target and its Subsidiaries and each Seller shall
cooperate fully, as and to the extent reasonably requested by any
Party, in connection with the filing of Tax Returns pursuant to this
Sec.9 and any audit, litigation or other proceeding with respect to
Taxes. Such cooperation shall include the retention and (upon the
other Party's request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other
proceeding and making employees available on a mutually convenient
basis to provide additional information and explanation of any
material provided hereunder.
(ii) Buyer and each Seller further agree, upon request, to use their
best efforts to obtain any certificate or other document from any
governmental authority or any other Person as may be necessary to
mitigate, reduce or eliminate any Tax that could be imposed
(including, but not limited to, with respect to the transactions
contemplated hereby).
(iii) Buyer and each Seller further agree, upon request, to provide any
other Party with all information that such Party may be required to
report pursuant to Code Sec.6043 and all Treasury Regulations
promulgated thereunder.
(hh) Tax Sharing Agreements. All Tax sharing agreements or
------------------------
similar agreements with respect to or involving Target and its Subsidiaries
shall be terminated as of the Closing Date and, after the Closing Date, Target
and its Subsidiaries shall not be bound thereby or have any liability
thereunder.
(ii) Certain Taxes and Fees. All transfer, documentary, sales,
-------------------------
use, stamp, registration and other such Taxes, and all conveyance fees,
recording charges and other fees and charges (including any penalties and
interest) incurred in connection with the consummation of the transactions
contemplated by this Agreement shall be borne by Buyer.
TERMINATION.
-----------
(jj) Termination of Agreement. Certain of the Parties may
--------------------------
terminate this Agreement as provided below:
(i) Buyer and Requisite Sellers may terminate this Agreement by mutual
written consent at any time prior to Closing;
(ii) Buyer may terminate this Agreement by giving written notice to all
Sellers at any time prior to Closing (A) in the event any Seller has
breached any material representation, warranty, or covenant contained
in this Agreement in any material respect, Buyer has notified such
Seller of the breach, and the breach has continued without cure for a
period of 30 days after the notice of breach or (B) if Closing shall
not have occurred on or before the Closing Date, as may be extended,
by reason of the failure of any condition precedent under Sec.7(a)
hereof (unless the failure results primarily from Buyer itself
breaching any representation, warranty, or covenant contained in this
Agreement); and
(iii) Requisite Sellers may terminate this Agreement by giving written
notice to Buyer at any time prior to Closing (A) in the event Buyer
has breached any material representation, warranty, or covenant
contained in this Agreement in any material respect, any Seller has
notified Buyer of the breach, and the breach has continued without
cure for a period of 30 days after the notice of breach or (B) if
Closing shall not have occurred on or before the Closing Date, as may
be extended, by reason of the failure of any condition precedent under
Sec.7(b) hereof (unless the failure results primarily from any
32
Seller breaching any representation, warranty, or covenant contained
in this Agreement).
(kk) Effect of Termination. If any Party terminates this
-----------------------
Agreement pursuant to Sec.10(a) above, all rights and obligations of the Parties
hereunder shall terminate without any liability of any Party to any other Party
(except for any liability of any Party then in breach); provided, however, that
the confidentiality provisions contained in Sec.5(e) above shall survive
termination.
ACKNOWLEDGEMENTS. EACH PARTY HEREBY ACKNOWLEDGES THAT SUCH PARTY HAS KNOWLEDGE
----------------
OF THE FOLLOWING FACTS AND CIRCUMSTANCES:
(ll) Related Parties. Buyer and Target share common control in
----------------
that Xxxxxxxx X. Van den Brekel and Xxxx X. Xxxxxxxxxxx are each officers and
directors of both Buyer and Target, and their respective Subsidiaries.
(mm) Benefit to Officers and Directors. The officers and
-------------------------------------
directors of Buyer own Target Shares, and thereby seek to gain a personal
benefit from this Agreement, as follows:
NAME TARGET SHARES EXCHANGE SHARES
Xxxxxxxx X. Van den Brekel 4,000,000 4,000,000
Xxxx X. Xxxxxxxxxxx 457,000 457,000
Each of the foregoing officers and directors of Buyer currently own common
shares of Buyer as set forth in each such Party's Schedule 13-D filed with the
Securities and Exchange Commission on April 17, 2002, and April 16, 2002,
respectively.
(nn) Legal Representation. EACH PARTY HERETO HEREBY ACKNOWLEDGES
---------------------
THAT BUYER HAS BEEN REPRESENTED BY XXX, XXXXXXX & XXXXX LLP ("LGD") IN
---
CONNECTION WITH THIS AGREEMENT, THAT LGD DID NOT REPRESENT ANY SELLER, TARGET OR
ITS SUBSIDIARIES, AND THAT EACH SELLER, TARGET AND ITS SUBSIDIARIES HAVE BEEN
ADVISED TO AND HAVE OBTAINED INDEPENDENT LEGAL COUNSEL IN CONNECTION WITH THIS
AGREEMENT. FURTHERMORE, EACH SELLER HEREBY ACKNOWLEDGES THAT TARGET IS BEING
REPRESENTED BY LGD REGARDING THE BUSINESS OF TARGET AND MATTERS UNRELATED TO
THIS AGREEMENT. EACH SELLER HEREBY WAIVES ANY CONFLICT OF INTEREST THAT MAY NOW
OR HEREINAFTER ARISE AS A RESULT OF LGD'S REPRESENTATION OF BUYER IN CONNECTION
WITH THIS AGREEMENT AND LGD'S REPRESENTATION OF BUYER AND TARGET IN UNRELATED
MATTERS.
MISCELLANEOUS.
-------------
(oo) Nature of Certain Obligations.
--------------------------------
(i) The covenants of each Seller in Sec.2(a) above concerning the sale
of his, her, or its Target Shares to Buyer and the representations and
warranties of each Seller in Sec.3(a) above concerning the transaction
are individual obligations. This means that the particular Seller
making the representation, warranty, or covenant shall be solely
responsible to the extent provided in Sec.8 above for any Adverse
Consequences Buyer may suffer as a result of any breach thereof.
(ii) The remainder of the representations, warranties, and covenants in
this Agreement are joint obligations. This means that each Seller
shall be responsible to the extent provided in Sec.8 above for his,
her, or its Allocable Portion of any Adverse Consequences
33
Buyer may suffer as a result of any breach thereof.
(pp) Press Releases and Public Announcements. No Party shall
-------------------------------------------
issue an ypress release or make any public announcement relating to the subject
matter of this Agreement prior to Closing without the prior written approval of
Buyer and Requisite Sellers; provided, however, that any Party may make any
public disclosure it believes in good faith is required by applicable law or any
listing or trading agreement concerning its publicly-traded securities (in which
case the disclosing Party shall use its reasonable best efforts to advise the
other Parties prior to making the disclosure). Each Seller and Buyer hereby
acknowledge and agree that Buyer, upon execution of this Agreement, shall issue
a press release regarding the general terms of this Agreement in accordance with
Regulation FD.
(qq) No Third-Party Beneficiaries. This Agreement shall not
------------------------------
confer any rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns.
(rr) Entire Agreement. This Agreement (including the documents
-----------------
referred to herein) constitutes the entire agreement among the Parties and
supersedes any prior understandings, agreements, or representations by or among
the Parties, written or oral, to the extent they relate in any way to the
subject matter hereof.
(ss) Succession and Assignment. This Agreement shall be binding
---------------------------
upon and inure to the benefit of the Parties named herein and their respective
successors and permitted assigns. No Party may assign either this Agreement or
any of his or its rights, interests, or obligations hereunder without the prior
written approval of Buyer and Requisite Sellers; provided, however, that Buyer
may (i) assign any or all of its rights and interests hereunder to one or more
of its Affiliates and (ii) designate one or more of its Affiliates to perform
its obligations hereunder (in any or all of which cases Buyer nonetheless shall
remain responsible for the performance of all of its obligations hereunder).
(tt) Counterparts. This Agreement may be executed in one or more
------------
counterparts (including by means of facsimile), each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
(uu) Headings. The section headings contained in this Agreement
--------
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
(vv) Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given (i) when
delivered personally to the recipient, (ii) one business day after being sent to
the recipient by reputable overnight courier service (charges prepaid), (iii)
one business day after being sent to the recipient by facsimile transmission or
electronic mail, or (iv) four business days after being mailed to the recipient
by certified or registered mail, return receipt requested and postage prepaid,
and addressed to the intended recipient as set forth below:
If to Sellers: [Seller's Name]
34
c/o Brekel Group, Inc.
000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Secretary
If to Buyer: Sequiam Corporation. Copy to: Xxx, Xxxxxxx &
Xxxxx, LLP
000 Xxxxxxx Xxxx 00000 Xxx Xxxxxx Xxx.,
Xxxxxxx, Xxxxxxx 00000 Suite 700
Attn: Xx. Xxxxxxx X. XxxxxxXxxxxx Xxxxxx, Xxxxxxxxxx 00000
Tel. 407/000-0000 Attn: Xx. Xxxxxxx X. Xxx
Fax: 407/ 000-0000 Tel. 949/000-0000
Fax: 949/000-0000
Any Party may change the address to which notices, requests, demands, claims,
and other communications hereunder are to be delivered by giving the other
Parties notice in the manner herein set forth.
(ww) Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the domestic laws of the State of California
without giving effect to any choice or conflict of law provision or rule
(whether of the State of Delaware or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of
California.
(xx) Amendments and Waivers. No amendment of any provision of
------------------------
this Agreement shall be valid unless the same shall be in writing and signed by
Buyer and Requisite Sellers. No waiver by any Party of any provision of this
Agreement or any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be valid unless the same shall be
in writing and signed by the Party making such waiver nor shall such waiver be
deemed to extend to any prior or subsequent default, misrepresentation, or
breach of warranty or covenant hereunder or affect in any way any rights arising
by virtue of any prior or subsequent such occurrence.
(yy) Severability. Any term or provision of this Agreement that
------------
is invalid or unenforceable in any situation in any jurisdiction shall not
affect the validity or enforceability of the remaining terms and provisions
hereof or the validity or enforceability of the offending term or provision in
any other situation or in any other jurisdiction.
(zz) Expenses. Each of Buyer, Sellers, Target, and its
--------
Subsidiaries shall bear his, her, or its own costs and expenses (including legal
fees and expenses) incurred in connection with this Agreement and the
transactions contemplated hereby.
(aaa) Construction. The Parties have participated jointly in the
------------
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the Parties and no presumption or burden of proof shall
arise favoring or disfavoring any Party by virtue of the authorship of any of
the provisions of this Agreement. Any reference to any federal, state, local, or
foreign
35
statute or law shall be deemed also to refer to all rules and regulations
promulgated thereunder, unless the context requires otherwise. The word
"including" shall mean including without limitation.
(bbb) Incorporation of Exhibits, Annexes, and Schedules. The
------------------------------------------------------
Exhibits, Annexes, and Schedules identified in this Agreement are incorporated
herein by reference and made a part hereof.
(ccc) Governing Language. This Agreement has been negotiated and
-------------------
executed by the Parties in English. In the event any translation of this
Agreement is prepared for convenience or any other purpose, the provisions of
the English version shall prevail.
* * * *
[signatures begin on the following page]
36
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on as of the
date first above written.
"BUYER"
SEQUIAM CORPORATION,
A CALIFORNIA CORPORATION
By:
-----------------------------------------------
Xxxxxxxx X. Van den Brekel, President
Stock Exchange Agreement
Sequiam Corporation and Shareholders of Brekel Group, Inc. June 17, 2002
Signature of Xxxxxxxx X. Van den Brekel
Stock Exchange Agreement
Sequiam Corporation and Shareholders of Brekel Group, Inc. June 17, 2002
Signature of Xxxxx Xxxxxx
SCHEDULE I
EXCEPTIONS TO SELLER'S REPRESENTATIONS AND WARRANTIES CONCERNING TRANSACTION
1. Name of Seller:
2. Accredited Investor. The Seller is an "accredited investor" as that term
-------------------
is defined in Regulation D promulgated under the Securities Act by virtue
of being (initial all applicable responses):
_______ A SMALL BUSINESS INVESTMENT COMPANY LICENSED BY THE U.S. SMALL
BUSINESS ADMINISTRATION UNDER THE SMALL BUSINESS INVESTMENT COMPANY
ACT OF 1958,
_______ A BUSINESS DEVELOPMENT COMPANY AS DEFINED IN THE INVESTMENT COMPANY
ACT OF 1940,
_______ A NATIONAL OR STATE-CHARTERED COMMERCIAL BANK, WHETHER ACTING IN AN
INDIVIDUAL OR FIDUCIARY CAPACITY,
_______ AN INSURANCE COMPANY AS DEFINED IN SECTION 2(13) OF THE SECURITIES
ACT,
_______ AN INVESTMENT COMPANY REGISTERED UNDER THE INVESTMENT COMPANY ACT OF
1940,
_______ AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF TITLE I OF THE EMPLOYEE
RETIREMENT INCOME SECURITY ACT OF 1974, WHERE THE INVESTMENT DECISION
IS MADE BY A PLAN FIDUCIARY, AS DEFINED IN SECTION 3(21) OF SUCH ACT,
WHICH IS EITHER A BANK, INSURANCE COMPANY, OR REGISTERED INVESTMENT
ADVISOR, OR AN EMPLOYEE BENEFIT PLAN WHICH HAS TOTAL ASSETS IN EXCESS
OF $5,000,000,
_______ A PRIVATE BUSINESS DEVELOPMENT COMPANY AS DEFINED IN SECTION
202(A)(22) OF THE INVESTMENT ADVISORS ACT OF 1940,
_______ AN ORGANIZATION DESCRIBED IN SECTION 501(C)(3) OF THE INTERNAL REVENUE
CODE, A CORPORATION OR A PARTNERSHIP WITH TOTAL ASSETS IN EXCESS OF
$5,000,000,
_______ A NATURAL PERSON (AS OPPOSED TO A CORPORATION, PARTNERSHIP, TRUST OR
OTHER LEGAL ENTITY) WHOSE NET WORTH, OR JOINT NET WORTH TOGETHER WITH
HIS/HER SPOUSE, EXCEEDS $1,000,000,
_______ ANY TRUST, WITH TOTAL ASSETS IN EXCESS OF $5,000,000, NOT FORMED FOR
THE SPECIFIC PURPOSE OF ACQUIRING THE SECURITIES OFFERED, WHOSE
PURCHASE IS DIRECTED BY A SOPHISTICATED PERSON AS DESCRIBED IN SECTION
506(B)(2)(II) OF REGULATION D,
_______ A NATURAL PERSON (AS OPPOSED TO A CORPORATION, PARTNERSHIP, TRUST OR
OTHER LEGAL ENTITY) WHOSE INDIVIDUAL INCOME WAS IN EXCESS OF $200,000
IN EACH OF THE TWO MOST RECENT YEARS (OR WHOSE JOINT INCOME WITH SUCH
PERSON'S SPOUSE WAS AT LEAST $300,000 DURING SUCH YEARS) AND WHO
REASONABLY EXPECTS AN INCOME IN EXCESS OF SUCH AMOUNT IN THE CURRENT
YEAR, OR
_______ A CORPORATION, PARTNERSHIP, TRUST OR OTHER LEGAL ENTITY (AS OPPOSED TO
A NATURAL PERSON) AND ALL OF SUCH ENTITY'S EQUITY OWNERS FALL INTO ONE
-------
OR MORE OF THE CATEGORIES ENUMERATED ABOVE;
SCHEDULE I
3. Exceptions: (please explain each exception with reference to the particular
section of the Agreement wherein the representation or warranty is made,
i.e. Sec.3(a)(i). Use additional pages if necessary. Attach any supporting
or explanatory documentation. If none, state "None.")
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"SELLER"
-----------------------------------
Print Name:
-------------------------
SCHEDULE I - Page 2
SCHEDULE II
"EXCEPTIONS TO BUYER'S' REPRESENTATIONS AND WARRANTIES CONCERNING TRANSACTION"
(f)(I) Amendment to Bylaws.
---------------------
Sequiam Corporation has or will present to its shareholders for approval an
amendment to its Bylaws as follows:
WHEREAS, Section 11 of the Bylaws of the Corporation read as follows:
Section 11. Informal Action by Shareholders:
Unless otherwise provided by law, any action required to be taken at a meeting
of the shareholders, or any other action which may be taken at a meeting of the
shareholders, may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by all of the shareholders entitled
to vote with respect to the subject matter thereof.
SCHEDULE II
SCHEDULE III
"DISCLOSURE SCHEDULE"
(EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES CONCERNING TARGET AND ITS
SUBSIDIARIES)
4(A) Officers and Directors of Target and Xxxxxxx Publishing Group, Inc.
--------------------------------------------------------------------------
Target
------
Xxxxxxxx X. Van den Brekel, Director, Chairman of the Board, President and CEO
Xxxx X. Xxxxxxxxxxx, Director, Senior Vice President, Secretary and Treasurer
Xxxx Xxxxxxx, Director
Xxxxxxx Xxxxxxx, Director
Xxxxxx Xxxxxxx, Director
Xxxxxxx
-------
Xxxxxxxx X. Van den Brekel, Director, Chairman of the Board, President
Xxxx X. Xxxxxxxxxxx, Director, Secretary
0(B)/ 0(H)(X) Options
-------
Xxxxxxx Xxxxx holds the right to convert that certain Promissory Note -- Payable
on Demand made by Target payable to Xxxxxxx Xxxxx in the principal amount of
$75,000, into 75,000 common shares of Target.
0(M)(II)(C)/ 0(O)/ 4(R) Threatened Breach of Contract
--------------------------------
On or about May 20, 2002, Brekel Group received notice of potential litigation
regarding Brekel Group's performance obligations under that certain Agreement
and Plan of Merger with Xxxxxx X. Xxxxxx and Xxxxxx X. Xxxxxxx pursuant to which
Brekel Group acquired Xxxxxxx Publishing Group, Inc.
4(O) Material Contracts in Default
--------------------------------
1. Six Equipment Lease Agreements with Heaidelberg Print Finance Americas,
Inc., dated as follows: June 14, 2001, June 20, 2001, August 28, 2001, June 20,
2001 and November 29, 2001
2. Building Lease agreement with East Group Properties, LP, dated May 1, 2001
4(V) Employee Benefit Plans
------------------------
FirstPublish, Inc. 2000 Stock Incentive Plan
(h) Notices and Consents (None)
----------------------
SCHEDULE III - Page 1
Exhibit A
"BUYER'S FINANCIAL STATEMENTS"
Exhibit A
Exhibit B
"TARGET'S FINANCIAL STATEMENTS"
Exhibit B
EXHIBIT C
CLOSING AGENDA
Exhibit B
