EXHIBIT 10.1
REORGANIZATION AGREEMENT BY & BETWEEN COLMENA CORP., A DELAWARE CORPORATION
("COLMENA"), AND NETWORTH SYSTEMS, INC., A FLORIDA CORPORATION ("NETWORTH")
TABLE OF CONTENTS
ARTICLE I: PLAN OF REORGANIZATION
1.1 Definitions
1.2 Reorganization
1.3 Effect of the Reorganization
1.4 Reserved
1.5 Reserved
1.6 Shares to Be Issued & Effect on Capital Stock
1.7 Exchange of Certificates
1.8 No Further Ownership Rights in NetWorth's Securities
1.9 Lost, Stolen or Destroyed Certificates
1.10 Tax Consequences and Accounting Treatment
1.11 Taking of Necessary Action & Further Action
ARTICLE II: NETWORTH'S REPRESENTATIONS AND WARRANTIES
2.1 Organization of NetWorth
2.2 NetWorth's Capital Structure
2.3 Subsidiaries
2.4 Authority
2.5 NetWorth's Financial Statements
2.6 No Undisclosed Liabilities
2.7 No Changes
2.8 Tax and Other Returns and Reports
2.9 Restrictions on Business Activities
2.10 Title of Properties, Absence of Liens and Encumbrances & Condition of
Equipment
2.11 Intellectual Property
2.12 Agreements, Contracts and Commitments
2.13 Interested Party Transactions
2.14 Governmental Authorization
2.15 Litigation
2.16 Accounts Receivable
2.17 Minute Books
2.18 Environmental and OSHA
2.19 Brokers' and Finders' Fees
2.20 Labor Matters
2.21 Insurance
2.22 Compliance with Laws
2.23 Complete Copies of Materials
2.24 Binding Agreements & No Default
2.25 Regulation SB Disclosure Document
2.26 FIRPTA
2.27 Employee Benefit Plans
2.28 Distribution Agreements
2.29 Disclosure to NetWorth's Stockholders
2.30 Representations Complete
ARTICLE III COLMENA'S REPRESENTATIONS AND WARRANTIES
3.1 Organization, Standing and Power
3.2 Capital Structure
3.3 Authority
3.4 Exchange Act Reports & Colmena's Financial Statements
3.5 Brokers' and Finders' Fees
3.6 Ownership of NetWorth's Common Stock
3.7 Litigation
3.8 Limited Activities
3.9 No Undisclosed Liabilities
3.10 No Changes
3.11 Tax and Other Returns and Reports
3.12 Environmental and OSHA
3.13 Representations Complete
ARTICLE IV CONDUCT PRIOR TO THE CLOSING
4.1 Conduct of Business of NetWorth
4.2 No Solicitation
4.3 Conduct of Business of Colmena
ARTICLE V ADDITIONAL AGREEMENTS
5.1 Report on Form 8-K
5.2 Consent of NetWorth's Stockholders
5.3 Access to Information
5.4 Confidentiality
5.5 Expenses
5.6 Public Disclosure
5.7 Consents
5.8 Affiliate Agreements
5.9 Legal Requirements
5.10 Blue Sky Laws
5.11 Best Efforts, Additional Documents and Further Assurances
5.12 Employment Agreements
5.13 Board of Directors
5.14 Additional Covenants by NetWorth
ARTICLE VI CONDITIONS TO THE REORGANIZATION
6.1 Conditions to Obligations of Each Party to Effect the Reorganization
6.2 Additional Conditions to Obligations of NetWorth
6.3 Additional Conditions to Obligations of Colmena
ARTICLE VII SURVIVAL OF CONDITION SUBSEQUENT, REPRESENTATIONS AND WARRANTIES,
COVENANTS; UNDISCLOSED LIABILITIES ESCROW
7.1 Survival of Condition Subsequent, Representations and Warranties &
Covenants
7.2 Escrow Arrangements
ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER
8.1 Termination
8.2 Effect of Termination
8.3 Amendment
8.4 Extension & Waiver
ARTICLE IX GENERAL PROVISIONS
9.1 Interpretation
9.2 Notice
9.3 Merger of All Prior Agreements Herein
9.4 Survival
9.5 Severability
9.6 Governing Law
9.7 Indemnification
9.8 Dispute Resolution
9.9 Benefit of Agreement
9.10 Further Assurances
9.11 Counterparts
9.12 License
SCHEDULES
Schedule 1.4 NetWorth's Constituent Documents
Schedule 1.7 NetWorth's Final Stockholder Data
Schedule 2 Exceptions to NetWorth's Representations & Warranties
Schedule 2.5(A) NetWorth's Financial Statements
Schedule 2.10(A)(1) Real Property
Schedule 2.10(C) Equipment
Schedule 2.11 Intellectual Property
Schedule 2.12 Contracts, Agreements & Commitments
Schedule 2.14 Governmental Authorization
Schedule 2.15 Litigation
Schedule 2.20 List of Employees
Schedule 2.21 Insurance
Schedule 2.27 Employee Benefit Plans
Schedule 2.28 Distribution Agreements
Schedule 4.1 Exceptions to Prohibited Pre-Closing Actions
Schedule 5.7 Consents
Schedule 5.8 Affiliates
Schedule 5.12 List and Summary of Employment Agreements
EXHIBITS
Exhibit 0.1 NetWorth Stockholders' Powers of Attorney
Exhibit 2.25 Regulation SB Disclosure Document
Exhibit 5.8 Affiliate Agreements
Exhibit 5.12 Copies of Contracts, Agreements & Commitments
Exhibit 6.2(D) Colmena Legal Opinion
Exhibit 6.3(E) NetWorth Legal Opinion
Exhibit 6.3(K) Confidentiality Agreements
Exhibit 7.2 Escrow Allocation Information
REORGANIZATION AGREEMENT
THIS REORGANIZATION AGREEMENT (the "Agreement") is made and entered
into by and among Colmena Corp., a publicly held Delaware corporation with a
class of securities registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended ("Colmena" and the "Exchange Act," respectively);
NetWorth Systems, Inc., a Florida corporation ("NetWorth"); Xxxxxx Xxxxx, a
Florida resident and the elected and serving president of NetWorth, acting as
the authorized attorney-in-fact for all of the securities holders of NetWorth
pursuant to the currently effective special powers of attorney annexed hereto
and made a part hereof as composite exhibit 0.1 ("Xx. Xxxxx" and the "NetWorth
Stockholders," respectively);" Colmena, NetWorth and the NetWorth Stockholders
being sometimes hereinafter collectively referred to as the "Parties" or
generically as a "Party").
PREAMBLE:
WHEREAS, the boards of directors of Colmena and NetWorth believe it is
in the best interests of each corporation and their respective stockholders that
NetWorth become a wholly owned subsidiary of Colmena and, in furtherance
thereof, have approved the Reorganization; and
WHEREAS, pursuant to the terms of the Reorganization, as hereinafter
set forth, among other things, all of the outstanding and reserved securities of
NetWorth (the "NetWorth's Securities") will be exchanged for approximately 60%
of the shares of Colmena's common stock, $0.01 par value ("Colmena's common
stock"), outstanding on the Closing Date, subject to adjustment up to 80% as
provided in this Agreement; and
WHEREAS, NetWorth, Colmena and the NetWorth Stockholders desire to make
certain representations and warranties and other agreements in connection with
the Reorganization and their subsequent operating and business relationships;
and
WHEREAS, the Parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code"):
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the Parties, intending to be legally bound, hereby agree as follows:
WITNESSETH:
ARTICLE I
PLAN OF REORGANIZATION
1.1 Definitions
The following terms, whether or not initially capitalized, will have
the meanings set forth below:
(A) 2003 10-KSB: Colmena's report on Commission Form 10-KSB for the
fiscal year ended September 30, 2003.
(B) Accredited Investor: A person or entity that meets the asset or income
requirements for treatment as an accredited
investor specified in Rule 501 of Commission
Regulation D promulgated under the Securities Act
(C) Affiliate: An entity or person that controls, is controlled
by or is under common control with another person.
(D) Colmena Financial
Statements: Financial statements, including all related
schedules and the notes thereto, of Colmena
included in the report on Commission Form 10-KSB
for the period ended September 30, 2003, as
amended; the reports on Commission Form 10-QSB
filed subsequent to September 30, 2003 and any
financial statements included in current reports
on Commission Form 8-K filed since the dates of
the Subsequent Quarterly Reports; all such
financial statements being hereinafter
collectively and generically referred to as the
"Colmena Financial Statements,"
(E) Colmena Schedules: The schedules referenced by the Section
designations of this Agreement as to which they
apply, annexed at the direction of Colmena to this
Agreement and constituting a material component of
this Agreement.
(F) Reserved
(G) Capital Stock: The generic term used for equity securities,
whether common, preferred or otherwise.
(H) Closing: The event at which the exchange of all of the
NetWorth securities will be exchanged for
approximately 60% of the outstanding shares of
Colmena's common stock.
(I) Closing Date: The date on which the Closing takes place.
(J) Commission: The United States Securities and Exchange
Commission.
(K) Code: The Internal Revenue Code of 1986, as amended.
(L)
Commercial
Software Rights: Packaged commercially available software programs
generally available to the public through retail
dealers in computer software which have been
licensed to end-user licenses and which are used
in the licensee's business but are in no way a
component of or incorporated in any of its
products and related trademarks, technology and
know-how.
(M) Reserved
(N) (1) Escrow Agent: The person or entity acting as escrow agent
pursuant to the terms of this Agreement.
(2) Escrow Funds: The accounts maintained by the Escrow Agent for
the Escrow Shares and related distributions.
(O) (1) Escrow Shares: The collective term for all shares of Colmena
common stock held by the Escrow Agent in the
Escrow Funds.
(2) Escrow Term: The periods of time during which the Escrow Agent
holds the Escrow Shares.
(P) Exchange Act: The Securities Exchange Act of 1934, as amended.
(Q) Exchange Act
Reports: All reports filed by Colmena with the Commission
pursuant to the Exchange Act, including all
exhibits filed therewith.
(R) Exchange Agent: The person or entity responsible following the
Closing, for issuing and delivering the shares of
Colmena's common stock to NetWorth's Stockholders
and the Escrow Agent.
(S) Exchange Ratio: The quotient obtained by dividing the shares of
Colmena's common stock to be issued to NetWorth by
the number of shares of NetWorth's common stock.
(T) GAAP: Generally accepted accounting principles,
consistently applied.
(U) Reserved.
(V) IRS: The United States Internal Revenue Service.
(W) Knowledge: When used to qualify a representation or warranty,
the word "knowledge" or any derivations or
variations thereof, whether in the form of a word
or phrase, will mean knowledge after reasonable
inquiry by a senior executive officer of the legal
entity on whose behalf the assertion is made and
will include information that such legal entity
should have had in the exercise of reasonable
diligence.
(X) Reserved.
(Y) NetWorth's Financial
Statements: NetWorth's financial statements (balance sheets,
income statements and related schedules and
footnotes) as of and for the fiscal year ending
December 31, 2003 (audited), any calendar quarter
ended between December 31, 2003 and the Closing
Date (unaudited), and NetWorth's balance sheet as
of the day preceding the date of this Agreement,
all prepared in conformity with GAAP and
applicable Commission auditing rules and
regulations.
(Z) Net Worth Schedules: The schedules referenced by the Section
designations of this Agreement as to which they
apply, annexed at the direction of NetWorth to
this Agreement and constituting a material
component of this Agreement.
(AA) Material: When used to qualify a representation or warranty,
the word "material" or any derivations or
variations thereof, whether in the form of a word
or phrase, will mean a variance that could have
negatively affected a decision by a reasonably
prudent person to engage in the transactions
contemplated by this Agreement, and will be
measured both on the occasion in which such term
is referenced as well as on an aggregate basis
with other similar matters.
(BB) NASD: The National Association of Securities Dealers,
Inc., a Delaware corporation and self regulatory
organization registered with the Commission.
(CC) OTC Bulletin Board: The over the counter electronic securities market
operated by the NASD.
(DD) Reserved.
(EE) Reserved.
(FF) Securities Act: The Securities Act of 1933, as amended.
(GG) Subsequent
Current Reports: Colmena's reports on Commission Form 8-K filed
after the Subsequent Quarterly Reports but prior
to the date of this Agreement.
(HH) Subsequent Exchange
Act Reports: Colmena's reports filed with the Commission
pursuant to requirements of the Exchange Act after
the date of this Agreement but prior to the date
of Closing on this Agreement.
(II) Subsequent
Quarterly Reports: Colmena's reports on Commission Form 10-QSB for
the quarterly periods following the 2003 10-KSB
filed prior to the date of this Agreement.
(JJ) Substantial
Compliance: Compliance which the Party for whose benefit or at
whose request an act is performed, or for whose
benefit or at whose request an act is refrained
from could under the circumstances be reasonably
expected to accept as full compliance.
(KK) Tax: For the purposes of this Agreement, a "Tax" or,
collectively, "Taxes," means any and all federal,
state, local and foreign taxes, assessments and
other governmental charges, duties, impositions
and liabilities, including taxes based upon or
measured by gross receipts, income, profits,
sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding,
payroll, recapture, employment, excise and
property taxes, together with all interest,
penalties and additions imposed with respect to
such amounts and any obligations under any
agreements or arrangements with any other person
with respect to such amounts.
(LL) Ten-Day
Average Price: The average closing transaction price of a
share of Colmena's publicly traded common stock
for the ten most recent days that Colmena's common
stock has traded ending on the trading day prior
to the date in question, as reported on the OTC
Bulletin Board.
(MM) Undisclosed Liabilities
Escrow Number: The shares of Colmena's common stock deducted from
the shares issuable to the NetWorth Stockholders
to be held in escrow as a means of generating
funds that may be required to pay for undisclosed
liabilities of NetWorth or to rectify other
violations of NetWorth's obligations under this
Agreement.
(NN) Undisclosed Liabilities
Escrow Agent: Xxxxxxx Xxxxx, Esq., or such other person
designated for such role by Colmena.
(OO) Additional defined terms are specified in certain sections and
subsections below and are characterized by the use of initial letter
capitalization.
1.2 Reorganization
(A) The Reorganization.
(1) At the Closing on this Agreement, Networth and all of the
NetWorth's Stockholders will exchange all of their NetWorth
securities, being an aggregate of 50,000,000 shares of common
stock, $0.0001 par value, 22,843,173 of which are issued and
outstanding, for 75,000,000 shares of Colmena common stock,
$0.01 par value, which represents approximately 60% of the
outstanding shares of Colmena's common stock, as called for by
this Agreement.
(2) The shares of Colmena's common stock will be issued by the
Exchange Agent following the Closing and will be distributed
as follows:
(a) 20% of the shares will be issued to Xxxxxxx Xxxxx,
Esq. as the Undisclosed Liabilities Escrow Agent, to
be used from time to time to discharge undisclosed
liabilities of NetWorth or other violations of its
obligations under this Agreement, as described in
Article Seven, with the balance, if any, transferred
to the NetWorth Stockholders in proportion to their
holdings of NetWorth common stock immediately prior
to the Closing, at such time as Colmena's audited
financial statements for the year ended December 31,
2004 are filed with the Commission.
(b) The balance of the Colmena shares will be issued to
NetWorth's Stockholders, in proportion to their
holdings of NetWorth common stock immediately prior
to the Closing.
(B) As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article VI, the Parties will cause the Reorganization to
be consummated by effecting the exchange all of NetWorth's common stock for the
initial shares of Colmena's common stock, as described above.
(C) The Closing Date and time of the Reorganization will be the date and
time on which the Closing of this Reorganization Agreement is consummated, which
shall, in any event, take place on or before September 30, 2004, unless the
Parties agree in writing to further extend the Closing Date.
(D) At the Closing the Parties will exchange all closing documentation,
certificates, resolutions, exhibits, schedules and opinions called for by this
Agreement, and
(1) All stockholders of NetWorth will have repaid NetWorth all
debts theretofore owed by them to NetWorth (either in the form
of loans to stockholders or advances to employees, consultants
or independent contractors);
(2) All of NetWorth's outstanding securities will be exchanged
with Colmena for approximately 60% of Colmena's common stock,
as specified above; provided that delivery of the certificates
for the shares of Colmena's common stock will be made directly
to NetWorth's Stockholders and the Escrow Agent by Colmena's
stock transfer agent as soon as practicable after the Closing.
1.3 Effect of the Reorganization.
At the Closing, the effect of the Reorganization will be that
NetWorth's will become a wholly owned subsidiary of Colmena and that the
stockholders of NetWorth immediately prior to the Closing will become
stockholders of Colmena at the Closing, with no further rights, title or
interest in NetWorth, other than indirectly as stockholders of Colmena.
1.4 Reserved.
1.5 Reserved
1.6 Maximum Shares to Be Issued & Effect on Capital Stock.
(A) The number of shares of Colmena's common stock to be issued in exchange
for all of the NetWorth Capital Stock (the only NetWorth securities to be
outstanding or reserved at the Closing) will be:
(1) Approximately 75,000,000 shares, or approximately 60% of the
outstanding shares of common stock as of the Closing Date.
(2) At the end of the fiscal year ending December 31, 2005, if
NetWorth achieves at least $250,000 in net, pre-tax profits,
Colmena will issue such additional shares of common stock so
as to give NetWorth a total of 80% of the outstanding shares
of Colmena's common stock at that time. If NetWorth fails to
meet 100% of the specified profit projection at that time, the
number of additional shares to be issued will be adjusted in
direct proportion to the percentage of net, pre-tax profit
actually achieved, provided, however, that if NetWorth fails
to achieve at least $125,000 in net, pre-tax profits at that
time, it will not receive any additional shares of Colmena
common stock.
(B) Adjustments to Exchange Ratio.
The Exchange Ratio (as provided in the foregoing paragraph) will be
adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into Colmena's common stock or NetWorth's common stock),
reorganization, recapitalization or other like change with respect to
Colmena's common stock or NetWorth's common stock occurring after the
date hereof and prior to the Closing.
(C) Fractional Shares.
No fraction of a share of Colmena's common stock will be issued, but in
lieu thereof each holder of shares of NetWorth's common stock who will
otherwise be entitled to a fraction of a share of Colmena's common
stock (after aggregating all fractional shares of Colmena's common
stock to be received by such holder) will be entitled to receive from
Colmena a whole share of Colmena's common stock.
1.7 Exchange of Certificates.
(A) Exchange Agent.
Unless modified by Colmena prior to the Closing Date, Colmena's current
transfer agent will serve as the Exchange Agent
(B) Colmena to Provide Common Stock.
Colmena will promptly make available to the Exchange Agent for exchange
in accordance with this Article I the shares of Colmena's common stock
issuable pursuant to Section 1.6 in exchange for all of the outstanding
shares of NetWorth's common stock.
(C) Exchange Procedures.
(1) All certificates for shares of NetWorth's outstanding common
stock will be tendered to Colmena at the Closing, with
medallion signature guarantees or otherwise in proper form for
immediate transfer to the order of Colmena, whereupon Colmena
will issue instructions to the Exchange Agent to issue shares
of Colmena's common stock, in the quantities and names set
forth in Schedule 17(C), subject to the Undisclosed
Liabilities Escrow requirements of Article VII.
Notwithstanding the foregoing, if any NetWorth Stockholder is
unable to deliver to Colmena either the Stockholder's stock
certificate or a share certificate that has been medallion
signature guaranteed, NetWorth will be authorized to cancel
any such shares and reissue said share certificate in the name
of Colmena.
(2) (a) As soon as practicable after the Closing, and subject to
and in accordance with the provisions of Article VII hereof,
Colmena will cause to be distributed to the Undisclosed
Liabilities Escrow Agent a certificate or certificates
representing that number of shares of Colmena's common stock
equal to the Undisclosed Liabilities Escrow Number which will
be registered in the name of the Undisclosed Liabilities
Escrow Agent.
(b) The shares registered in the name of the Undisclosed
Liabilities Escrow Agent will be beneficially owned by the
holders on whose behalf such shares were deposited in the
Undisclosed Liabilities Escrow Fund but will be available to
compensate Colmena for certain damages as provided in Article
VII.
(D) Transfers of Ownership.
If any certificate for shares of Colmena's common stock is to be issued
in a name other than that in which the certificate surrendered in
exchange therefor is registered, it will be a condition of the issuance
thereof that the certificate so surrendered will be properly endorsed
and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Colmena or any agent
designated by it any transfer or other Taxes required by reason of the
issuance of a certificate for shares of Colmena's common stock in any
name other than that of the registered holder of the certificate
surrendered, or established to the satisfaction of Colmena, or any
agent designated by it, that such Tax has been paid or is not payable.
(E) No Liability.
Notwithstanding anything to the contrary in this Section 17, neither
the Escrow Agent, the Exchange Agent, Colmena, NetWorth or any other
person will be liable to a holder of shares of Colmena's common stock
or NetWorth's Capital Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
1.8 No Further Ownership Rights in NetWorth's Securities.
(A) All shares of Colmena's common stock issued upon the surrender for
exchange of shares of NetWorth's Capital Stock in accordance with the terms
hereof will be deemed to have been issued in full satisfaction of all rights
pertaining to such shares of NetWorth's Capital Stock, and there will be no
further registration of transfers on the records of NetWorth, of shares of
NetWorth's Capital Stock which were outstanding immediately prior to the
Closing.
(B) If, after the Closing, Certificates are presented to NetWorth, for any
reason, they will be canceled and exchanged as provided in this Article I.
1.9 Lost, Stolen or Destroyed Certificates.
In the event any certificates evidencing shares of NetWorth's Capital
Stock will have been lost, stolen or destroyed, NetWorth's transfer
agent or share registrar will, prior to the Closing, have issued in
exchange for such lost, stolen or destroyed certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares
of its stock as may have been required pursuant to Section 1.6;
provided, however, that Colmena may, in its discretion and as a
condition precedent to the issuance of the shares of Colmena's common
stock to be exchanged therefor, require the owner of such lost, stolen
or destroyed certificates to deliver an affidavit concerning the lost
securities, as well as a bond in such sum as it may reasonably direct
as indemnity against any claim that may be made against Colmena or the
Exchange Agent with respect to the certificates alleged to have been
lost, stolen or destroyed.
1.10 Tax Consequences and Accounting Treatment.
It is intended by the Parties that the Reorganization will constitute a
reorganization within the meaning of Section 368(a)(1)(B) of the Code,
and the Parties agree that if modification of the terms of this
Agreement in a non-material manner to attain such qualification is
necessary, they will negotiate in good faith to make such required
modification.
1.11 Taking of Necessary Action: Further Action.
If, at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement including the
vesting in Colmena of full right, title and possession to all of
NetWorth's Capital Stock or compliance with the requirements of Code
Section 368(a)(1)(B), the officers and directors of Colmena and
NetWorth are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all lawful and
necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF NETWORTH
NetWorth hereby represents and warrants to Colmena, as a material
inducement to its entry into this Agreement, subject only to the exceptions
specifically disclosed in Schedule 2, as follows:
2.1 Organization of NetWorth.
(A) NetWorth is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida.
(B) NetWorth has the corporate power to own its property and to carry on
its business as now being conducted and as proposed to be conducted by NetWorth.
(C) NetWorth is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so qualified
would have a material adverse effect on the business, assets (including
intangible assets), financial condition, or results of operations of NetWorth.
(D) NetWorth has delivered a true and correct copy of its articles of
incorporation and bylaws (or similar governing instruments), each as amended to
date, to counsel for Colmena.
2.2 NetWorth's Capital Structure.
(A) The authorized Capital Stock of NetWorth consists of 50,000,000 shares
of common stock, $0.0001 par value, and there is no preferred stock;
(B) There are 22,843,173 shares of NetWorth common stock issued and
outstanding, held by the persons, and in the amounts, set forth on Schedule
1.7(C).
(C) All outstanding shares of NetWorth common or preferred stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the articles of incorporation or bylaws of
NetWorth or any agreement to which NetWorth is a party or is bound.
(D) NetWorth has no other outstanding securities or securities reserved for
issuance for any purpose, there being no other obligations directly or
indirectly obligating NetWorth to issue any of its securities to any person for
any purpose; and there are no other options, warrants, calls, rights,
commitments or agreements of any character to which NetWorth is a party or by
which it is bound obligating NetWorth to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or redeemed, any
shares of the NetWorth Capital Stock or obligating NetWorth to grant, extend or
enter into any such option, warrant, call, right, commitment or agreement.
2.3 Subsidiaries.
NetWorth has no subsidiaries or affiliated companies and does not
otherwise own any shares of stock or any interest in, or control,
directly or indirectly, any other corporation, partnership,
association, joint venture or business entity.
2.4 Authority.
(A) NetWorth has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
(B) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of NetWorth.
(C) This Agreement has been duly executed and delivered by NetWorth and,
subject to the proper authorization of this Agreement by Colmena's board of
directors and its due execution and delivery by Colmena to NetWorth, constitutes
the valid and binding obligation of NetWorth.
(D) The execution and delivery of this Agreement by NetWorth does not, and
the consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default under (with or without notice or
lapse of time, or both), or give rise to a right of termination, cancellation or
acceleration of any obligation or loss of a material benefit under (i) any
provision of the articles of incorporation or bylaws of NetWorth or (ii) any
material mortgage, indenture, lease, contract or other agreement or instrument,
permit, concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to NetWorth or its properties or
assets.
(E) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality ("Governmental Entity"), is
required by or with respect to NetWorth in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
state and federal securities laws (e.g., notification on Form D) and the laws of
any foreign country.
2.5 NetWorth's Financial Statements.
(A) Schedule 2.5(A) includes NetWorth's Financial Statements.
(B) NetWorth's Financial Statements are complete and correct in all
material respects and have been prepared in accordance GAAP throughout the
periods indicated.
(C) NetWorth's Financial Statements present fairly the financial condition
and operating results of NetWorth as of the dates and during the periods
indicated therein, subject to normal year-end audit adjustments, which will not
be material in the aggregate.
(D) NetWorth's financial statements comply with the requirements for
material acquisitions under Commission Regulation S-B and in a manner permitting
Colmena to comply with its obligation under the Securities Act and the Exchange
Act in conjunction therewith
2.6 No Undisclosed Liabilities.
NetWorth does not have any material liabilities or obligations, either
accrued or contingent (whether or not required to be reflected in
financial statements in accordance with generally accepted accounting
principles), and whether due or to become due, which individually or in
the aggregate (i) have not been reflected in the NetWorth Balance Sheet
(including the notes thereto) or (ii) have not been specifically
described in this Agreement or in the NetWorth Schedules.
2.7 No Changes.
Since the date of NetWorth's Financial Statements there has not been,
occurred or arisen any:
(A) Transaction by NetWorth except in the ordinary course of business as
conducted on that date, and except for any legal or accounting fees that may be
incurred relating to this Reorganization ;
(B) Capital expenditure by NetWorth, either individually or in the
aggregate, exceeding $5,000;
(C) Destruction, damage to, or loss of any assets (including without
limitation intangible assets) of NetWorth (whether or not covered by insurance),
either individually or in the aggregate, exceeding $5,000;
(D) Labor trouble or claim of wrongful discharge, sexual harassment or
other unlawful labor practice or action;
(E) Change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies in making
or reversing accruals, or any change in capitalization of software development
costs) by NetWorth;
(F) Declaration, setting aside, or payment of a dividend or other
distribution with respect to the shares of NetWorth, or any direct or indirect
redemption, purchase or other acquisition by NetWorth of any of its shares;
(G) Increase in the salary or other compensation payable or to become
payable by NetWorth to any of its officers, directors or employees, or the
declaration, payment, or commitment or obligation of any kind for the payment,
by NetWorth, of a bonus or other additional salary or compensation to any such
person;
(H) Acquisition, sale or transfer of any asset of NetWorth except in the
ordinary course of business;
(I) Formation, amendment or termination of any distribution agreement or
any material contract, agreement or license to which NetWorth is a party, other
than termination by NetWorth pursuant to the terms thereof;
(J) Loan by NetWorth to any person or entity, or guaranty by NetWorth of
any loan except for expense advances in the ordinary course of business
consistent with past practice;
(K) Waiver or release of any material right or claim of NetWorth, including
any write-off or other compromise of any material account receivable of
NetWorth;
(L) The notice or, to NetWorth's Knowledge, commencement or threat of
commencement of any governmental proceeding against or investigation of NetWorth
or its affairs;
(M) Other event or condition of any character that has or would, in
NetWorth's reasonable judgment, be expected to have a Material Adverse Effect on
NetWorth;
(N) Issuance, sale or redemption by NetWorth of any of its shares or of any
other of its securities other than issuances of shares of common stock pursuant
to outstanding Options and Warrants;
(O) Change in pricing or royalties set or charged by NetWorth except for
discounts extended in the ordinary course of business consistent with past
practice;
(P) Any event that if occurring or undertaken during the interim between
the execution of this Agreement and its Closing or earlier termination, would
have required disclosure to Colmena pursuant to Section 4.1; or
(Q) Negotiation or agreement by NetWorth to do any of the things described
in the preceding clauses (A) through (P) (other than negotiations with Colmena
and its representatives regarding the transactions contemplated by this
Agreement).
2.8 Tax and Other Returns and Reports.
(A) Tax Returns and Audits.
(1) NetWorth has accurately prepared and timely filed all required
federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any
and all Taxes relating or attributable to NetWorth or its
operations.
(2) The Returns are true and correct in all material respects and
have been completed in accordance with applicable law in all
material respects.
(3) NetWorth has timely paid all Taxes required to be paid with
respect to such Returns and has withheld with respect to its
employees all federal and state income Taxes, FICA, FUTA and
other Taxes it is required to withhold.
(4) The accruals for Taxes on the books and records of NetWorth
are sufficient to discharge the Taxes for all periods (or the
portion of any period) ending on or prior to the Closing Date.
(5) NetWorth has not been delinquent in the payment of any Tax nor
is there any Tax deficiency outstanding, proposed or assessed
against NetWorth, nor has NetWorth executed any waiver of any
statute of limitations on or extending the period for the
assessment or collection of any Tax.
(6) (a) No audit or other examination of any Return of NetWorth is
presently in progress.
(b) NetWorth does not have any liabilities for unpaid federal,
state, local and foreign Taxes, whether asserted or
unasserted, known or unknown, contingent or otherwise and
NetWorth has no Knowledge of any basis for the assertion of
any such liability attributable to NetWorth, or their
respective assets or operations.
(c) NetWorth is not (nor has it ever been) required to join
with any other entity in the filing of a consolidated Tax
return for federal Tax purposes or a consolidated or combined
return or report for state Tax purposes.
(7) NetWorth is not a party to or bound by any Tax indemnity, Tax
sharing or Tax allocation agreement.
(8) NetWorth has provided, or made available, to Colmena or its
legal counsel copies of all federal, state and local income
and all sales and use Tax Returns of NetWorth for all periods
since its date of incorporation.
(9) There are (and as of immediately following the Closing Date
there will be) no liens on the assets of NetWorth relating to
or attributable to Taxes.
(10) NetWorth has no Knowledge of any basis for the assertion of
any Tax claim which, if adversely determined, would result in
liens on the assets of NetWorth.
(11) NetWorth has no property which is being sold, conveyed or
transferred pursuant to this Agreement which in the hands of
Colmena would be treated as being owned by persons other than
Colmena pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954 as in effect immediately prior to the enactment
of the Tax Reform Act of 1986, or any analogous provisions of
any state law.
(12) None of the assets of NetWorth are treated as "Tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(13) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of NetWorth that,
individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Code.
(B) No Penalty.
NetWorth is not subject to any penalty by reason of a violation of any
order, rule or regulation of, or a default with respect to any return,
report or declaration required to be filed with, any Governmental
Entity to which it is subject, which violations or defaults,
individually or in the aggregate, would have a material adverse effect
on NetWorth.
2.9 Restrictions on Business Activities.
There is no agreement, judgment, injunction, order or decree binding
upon NetWorth which has or could reasonably be expected to have the effect of
materially prohibiting or materially impairing any business practice of
NetWorth, any acquisition of property by NetWorth or the conduct of business by
NetWorth as currently conducted or as currently proposed to be conducted.
2.10 Title of Properties, Absence of Liens and Encumbrances & Condition of
Equipment.
(A) (1) Schedule 2.10(A)(1) sets forth a true and complete list of all real
property owned and leased by NetWorth and the aggregate annual
mortgage, rental or other fee payable therefor or under any such lease.
(2) All real property owned by NetWorth is held in fee simple absolute,
and is subject to no liens, encumbrances, assessments, obligations
running with the land, charges, pledges, security interests or other
impediments to transfer of title by full warrant deed without
exceptions of any kind or nature whatsoever.
(3) All deeds, titles, leases and mortgages are in good standing, valid
and effective in accordance with their respective terms, and there is
not with respect to NetWorth under any of such deeds, titles, leases or
mortgages, any existing default or event of default (or event which
with notice or lapse of time, or both, would constitute a default and
with respect to which NetWorth has not taken adequate steps to prevent
such default from occurring), except where the lack of such good
standing, validity and effectiveness or the existence of such default
or event of default would not have a material adverse effect on
NetWorth.
(B) NetWorth holds good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens, charges, pledges, security
interests or other encumbrances, except as reflected in NetWorth's
Financial Statements and except for such imperfections of title and
encumbrances, if any, which are not substantial in character, amount or
extent, and which do not materially detract from the value, or
interfere with the present use, of the property subject thereto or
affected thereby
(C) (1) The equipment owned or leased by NetWorth is listed in Schedule
2.10(C) (the "Equipment"), except individual pieces of equipment owned
by NetWorth with an individual value of less than $100.
(2) The Equipment is, taken as a whole:
(a) Adequate for the conduct of the business of NetWorth consistent
with its past practice;
(b) Suitable for the uses to which it is currently employed;
(c) In good operating condition;
(d) Regularly and properly maintained, reasonable wear and tear
excepted; and
(e) Not obsolete, dangerous or in need of renewal or replacement,
except for renewal or replacement in the ordinary course of
business.
2.11 Intellectual Property.
(A) (1) NetWorth owns, or is licensed to use, all patents,
trademarks, trade names, service marks, copyrights, and any
applications therefor, maskworks, net lists, schematics,
technology, know-how, computer software programs or
applications and tangible or intangible proprietary
information or material (excluding Commercial Software Rights
as defined in paragraph [B] below) that are used or currently
proposed to be used in the business of NetWorth as currently
conducted or as currently proposed to be conducted
("NetWorth's Intellectual Property Rights").
(2) Schedule 2.11 sets forth a complete list of all patents,
trademarks, registered and material unregistered copyrights,
trade names and service marks, and any applications therefor,
included in NetWorth Intellectual Property Rights, and
specifies the jurisdictions in which each such NetWorth's
Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration has
been filed, including the respective registration or
application numbers and the names of all registered owners,
together with a list of all of NetWorth's currently marketed
software products and an indication as to which, if any, of
such software products have been registered for patent or
copyright protection with the United States Office of Patents
and Trademarks or the United States Copyright Office and any
foreign offices and by whom such items have been registered.
(3) (a) Schedule 2.11 also sets forth a complete list of (i) any
requests NetWorth has received to make any such registration,
including the identity of the requestor and the item requested to
be so registered, and the jurisdiction for which such request has
been made and (ii) all licenses, sublicenses and other agreements
as to which NetWorth is a party and pursuant to which NetWorth or
any other person is authorized to use any NetWorth's Intellectual
Property Right or other trade secret material to NetWorth, and
includes the identity of all parties thereto, a description of the
nature and subject matter thereof, the applicable royalty and the
term thereof.
(b) NetWorth is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any license, sublicense or
agreement described on such list.
(4) NetWorth is the sole and exclusive owner or licensee of, with all
right, title and interest in and to (free and clear of any liens or
encumbrances), NetWorth Intellectual Property Rights, and has sole and
exclusive rights (and is not contractually obligated to pay any
compensation to any third party with respect thereto) to the use
thereof or the material covered thereby in connection with the services
or products with respect to which NetWorth Intellectual Property Rights
are being used.
(5) To the Knowledge of the NetWorth, no claims with respect to
NetWorth Intellectual Property Rights have been asserted or are
threatened by any person, nor, To the Knowledge of the NetWorth, is
there any valid grounds for any bona fide claims (i) to the effect that
the manufacture, sale, licensing or use of any product as now used,
sold or licensed or proposed for use, sale or license by NetWorth
infringes on any copyright, patent, trade xxxx, service xxxx or trade
secret, (ii) against the use by NetWorth of any trademarks, trade
names, trade secrets, copyrights, patents, technology, know-how or
computer software programs and applications used in NetWorth's business
as currently conducted or as proposed to be conducted, or (iii)
challenging the ownership, validity or effectiveness of any of NetWorth
Intellectual Property Rights.
(6) All trademarks, service marks and copyrights held by NetWorth are
valid and subsisting.
(7) To the Knowledge of NetWorth, there is no material unauthorized
use, infringement or misappropriation of any of NetWorth Intellectual
Property Rights by any third party, including any employee or former
employee of NetWorth.
(8) NetWorth has not been sued or charged as a defendant in any claim,
suit, action or proceeding which involves a claim of infringement of
any patents, trademarks, service marks, copyrights or violation of any
trade secret or other proprietary right of any third party and which
has not been finally terminated prior to the date hereof nor does it
have any Knowledge of any such charge or claim, and there is not any
infringement liability with respect to, or infringement or violation
by, NetWorth of any patent, trademark, service xxxx, copyright, trade
secret or other proprietary right of another.
(9) To NetWorth's Knowledge, none of NetWorth's Intellectual Property
Rights or products is subject to any outstanding order, judgment,
decree, stipulation or agreement restricting in any manner the
licensing thereof by NetWorth.
(10) There is no outstanding order, judgment, decree or stipulation on
NetWorth, and NetWorth is not party to any agreement, restricting in
any manner the licensing of NetWorth's products by NetWorth.
(11) NetWorth has not entered into any agreement to indemnify any other
person against any charge of infringement of any NetWorth's
Intellectual Property Right.
(12) Each material current and former employee of and consultant to
NetWorth has signed a confidentiality agreement substantially in
NetWorth's standard form as certified by NetWorth, delivered to Colmena
and included in Schedule 5.8.
(B) (1) To NetWorth's Knowledge, NetWorth has not breached or violated the
terms of its license, sublicense or other agreement relating to any
Commercial Software Rights and has a valid right to use such Commercial
Software Rights under such license and agreements.
(2) NetWorth is not, nor will it be as a result of the execution and
delivery of this Agreement or the performance of its obligations
hereunder, in violation of any license, sublicense or agreement
relating to its Commercial Software Rights.
(3) No claims with respect to the Commercial Software Rights have been
asserted or, To the Knowledge of NetWorth, are threatened by any person
against NetWorth, nor to the Knowledge of NetWorth are there any valid
grounds for any bona fide claims (i) to the effect that the
manufacture, sale, licensing or use of any product as now used, sold or
licensed or proposed for use, sale or license by NetWorth infringes on
any copyright, patent, trademark, service xxxx or trade secret, (ii)
against the use by NetWorth of any trademarks, trade names, trade
secrets, copyrights, patents, technology, know-how or computer software
programs and applications used in NetWorth's business as currently
conducted or as proposed to be conducted, or (iii) challenging the
validity or effectiveness of any of NetWorth's rights to use its
Commercial Software Rights.
(4) To the Knowledge of NetWorth, there is no material unauthorized
use, infringement or misappropriation of any of the Commercial Software
Rights by NetWorth or any employee or former employee of NetWorth
during the period of their employment.
(5) To the Knowledge of NetWorth, no Commercial Software Right is
subject to any outstanding order, judgment, decree, stipulation or
agreement restricting in any manner the use thereof by NetWorth.
2.12 Agreements, Contracts and Commitments.
(A) All of NetWorth's currently effective agreements, contracts and
commitments are listed in Schedule 2.12, including the name of the contracting
part, date of execution and termination, and copies of all such agreements,
contracts and commitments are annexed as exhibits to schedule 12.
(B) Subject to the terms and conditions of any agreement included as part
of Schedule 2.12, NetWorth does not have, is not a party to nor is it bound by:
(1) Any collective bargaining agreements;
(2) Any agreements that contain any unpaid severance liabilities
or obligations;
(3) Any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other
employee benefit plans or arrangements;
(4) Any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a
firm or other organization, not terminable by NetWorth on
thirty days notice without liability, except to the extent
general principles of wrongful termination law may limit
NetWorth's ability to terminate employees at will;
(5) Any agreement or plan, including any stock option plan, stock
appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the
value of any of the benefits of which will be calculated on
the basis of any of the transactions contemplated by this
Agreement;
(6) Any fidelity or surety bond or completion bond;
(7) Any lease of personal property having a value individually in
excess of $5,000;
(8) Any agreement of indemnification or guaranty not entered into
in the ordinary course of business;
(9) Any agreement, contract or commitment containing any covenant
limiting the freedom of NetWorth to engage in any line of
business or compete with any person;
(10) Any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of
$2,000 in any single instance or $10,000 in the aggregate;
(11) Any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary
course of business or any ownership interest in any
corporation, partnership, joint venture or other business
enterprise;
(12) Any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments
relating to the borrowing of money, extension of credit or
guaranties;
(13) Any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $1,000 or more in
any single instance or $10,000 or more in the aggregate;
(14) Any construction contracts;
(15) Any distribution, joint marketing or development agreement;
(16) Any other agreement, contract or commitment which involves
$1,000 or more in any single instance or more than $10,000 in
the aggregate and is not cancelable without penalty upon
thirty (30) days' notice, other than standard end-user
licenses of NetWorth's products and services in the ordinary
course of business consistent with past practice, or
(17) Any agreement that is otherwise Material to NetWorth's
business.
(C) (1) NetWorth has not breached, or received any claim or threat
that it has breached, any of the terms or conditions of any
agreement, contract or commitment to which it is bound
(including those set forth in any of the NetWorth Schedules)
in such manner as would permit any other party to cancel or
terminate the same.
(2) Each agreement, contract or commitment required to be set
forth in any of the NetWorth Schedules is in full force and
effect (assuming such agreement, contract or commitment has
been duly authorized, executed and delivered by the other
party or parties thereto) and, except as otherwise disclosed
or defaults fully remedied or resolved, is not subject to any
material default thereunder of which NetWorth has Knowledge by
any party obligated to NetWorth pursuant thereto.
2.13 Interested Party Transactions.
No officer, director or stockholder of NetWorth (nor any parent,
sibling, descendant or spouse of any of such persons, or any trust,
partnership, corporation or other entity (provided, that ownership of
no more than one percent of the outstanding voting stock of a publicly
traded corporation will not be deemed an "interest in any entity" for
purposes of this Section 2.13) in which any of such persons has or has
had an interest), has or has had, directly or indirectly:
(A) An interest in any entity which furnished or sold, or furnishes or
sells, services or products which NetWorth furnishes or sells, or proposes to
furnish or sell;
(B) Any interest in any entity which purchases from or sells or furnishes
to, NetWorth, any goods or services; or
(C) A beneficial interest in any contract or agreement required to be set
forth in Schedule 2.12.
2.14 Governmental Authorization.
(A) Schedule 2.14 accurately lists each material federal, state, county,
local or foreign governmental consent, license, permit, grant, or other
authorization issued to NetWorth:
(1) Pursuant to which NetWorth currently operates or
holds any interest in any of its properties; or
(2) Which is required for the operation of its business
or the holding of any such interest (hereinafter
collectively referred to as the "NetWorth
Authorizations").
(B) NetWorth Authorizations are in full force and effect and constitute all
the material authorizations required to permit NetWorth to operate or conduct
its business or hold any interest in its properties.
2.15 Litigation.
(A) Schedule 2.15 annexed hereto accurately lists all suits, actions and
legal, administrative, arbitration or other proceedings and governmental
investigations and all other claims, pending or, to NetWorth's Knowledge,
threatened or which NetWorth expects will ultimately be threatened or commenced.
(B) None of any such suits, actions, proceedings, investigations or claims
seeks to prevent the consummation of the Reorganization.
(C) There is no judgment, decree or order enjoining NetWorth with respect
to, or the effect of which is to prohibit, any business practice or the
acquisition of any property or the conduct of business of NetWorth.
(D) Schedule 2.15 also lists all suits and legal actions initiated by
NetWorth.
2.16 Accounts Receivable.
(A) All receivables of NetWorth arose in the ordinary course of business
and the aggregate amounts thereof are, to the best of NetWorth's Knowledge,
collectible (except to the extent reserved against as reflected in NetWorth's
Financial Statements) and are carried at values determined in accordance with
GAAP.
(B) To NetWorth's Knowledge, none of the receivables of NetWorth is subject
to any claim of offset, recoupment, setoff or counterclaim and there are no
facts or circumstances (whether asserted or unasserted) that would give rise to
any such claim.
(C) No receivables are contingent upon the performance by NetWorth of any
obligation or contract except for NetWorth's maintenance obligations under its
maintenance agreements (although no customer has claimed that NetWorth has
failed to perform its maintenance obligations).
(D) No person has any lien, charge, pledge, security interest or other
encumbrance on any of such receivables and no agreement for deduction or
discount has been made with respect to any of such receivables.
2.17 Minute Books.
The minute books of NetWorth made available to counsel for Colmena
contain a complete and accurate summary of all meetings of directors and
stockholders since the time of incorporation of NetWorth, and reflect all
transactions referred to in such minutes accurately in all material respects.
2.18 Environmental and OSHA.
(A) Hazardous Material.
(1) As of the Closing Date, no material amount of any substance
that is regulated by any Governmental Entity or that has been
designated by any Governmental Entity to be radioactive,
toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos,
urea-formaldehyde and all substances listed pursuant to the
United States Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time
to time ("CERCLA"), and the United States Resource Recovery
and Conservation Act of 1976, as amended from time to time
("RCRA"), and the regulations and publications promulgated
pursuant to said laws (a "Hazardous Material"), is present, as
a result of the actions of NetWorth (excluding failure of
NetWorth to remedy the presence of a Hazardous Material
resulting from the actions of any previous owner or occupier
of NetWorth's Property of which presence NetWorth does not
have Knowledge) in violation of any law in effect on or before
the Closing Date, in, on or under any property, including the
land and the improvements, ground water and surface water
thereof, that NetWorth has at any time owned, operated,
occupied or leased (collectively, "NetWorth's Property").
(2) In any event, NetWorth does not know of the presence of any
Hazardous Material in, on, under, adjacent to or in any way
affecting any NetWorth's Property.
(B) Hazardous Materials Activities.
At no time prior to the Closing Date has NetWorth transported, stored,
used, manufactured, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has NetWorth disposed of, transferred, sold, or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of CERCLA, RCRA, the
Toxic Substances Control Act of 1976, as amended ("TSCA"), or any other
applicable state or federal acts (including the rules and regulations
thereunder) as in effect on or before the Closing Date.
(C) Permits.
NetWorth currently holds no environmental approvals, permits, licenses,
clearances and consents and none are necessary for the conduct of
NetWorth's Hazardous Material Activities and other businesses of
NetWorth as such activities and businesses are currently being
conducted.
2.19 Brokers' and Finders' Fees.
NetWorth has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or
any similar charges in connection with this Agreement or any
transaction contemplated hereby.
2.20 Labor Matters.
(A) NetWorth is in compliance in all material respects with all currently
applicable laws and regulations respecting employment, discrimination in
employment, terms and conditions of employment, wages and hours, and
occupational safety and health and employment practices, and is not engaged in
any unfair labor practice.
(B) NetWorth has not received any notice from any Governmental Entity, and
to the Knowledge of NetWorth, there has not been asserted before any
Governmental Entity, any claim, action or proceeding to which NetWorth is a
party or involving NetWorth, and there is neither pending nor, to the Knowledge
of NetWorth, threatened, any investigation or hearing concerning NetWorth
arising out of or based upon any such laws, regulations or practices.
(C) NetWorth has not received notice of and to the best of its Knowledge,
there are no pending claims against NetWorth under any workers' compensation
plan or policy or for long term disability.
(D) To NetWorth's Knowledge, it has complied in all material respects with
all applicable provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA") and has no obligations with respect to any former
employees or qualifying beneficiaries thereunder.
(E) Schedule 2.20 lists all current employees of NetWorth and their current
salary and vacation accruals.
2.21 Insurance.
(A) Schedule 2.21 lists all insurance policies and fidelity bonds
covering
the assets, business, equipment, properties, operations, software errors and
omissions, employees, officers and directors of NetWorth as well as all claims
made under any insurance policy by NetWorth since its incorporation.
(B) There is no claim by NetWorth pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by the
underwriters of such policies or bonds.
(C) All premiums payable under all such policies and bonds have been
paid
and NetWorth is otherwise in compliance in all material respects with the terms
of such policies and bonds (or other policies and bonds providing substantially
similar insurance coverage).
(D) Such policies of insurance and bonds are of the type and in amounts
customarily carried by persons conducting businesses similar to that of
NetWorth.
(E) NetWorth does not know of any threatened termination of or Material
premium increase with respect to any of such policies.
(F) NetWorth has never been denied insurance coverage nor has any
insurance
policy of NetWorth ever been canceled for any reason.
2.22 Compliance with Laws.
NetWorth has not received any notices of violation with respect to and
to the best of its Knowledge has complied in all Material respects with and is
not in violation in any Material respect of any federal, state or local statute,
law or regulation with respect to the conduct of its business, or the ownership
or operation of its business, assets or properties.
2.23 Complete Copies of Materials.
NetWorth has delivered or made available true and complete copies of
each document (or summaries of same) which has been requested by Colmena or its
counsel.
2.24 Binding Agreements: No Default.
Each of the contracts, agreements and other instruments shown on the
Exhibits and Schedules referred to in this Agreement to which NetWorth is a
party is a legal, binding and enforceable obligation in favor of or against
NetWorth (assuming that such contracts, agreements and instruments are binding
on all other parties thereto, NetWorth having no reason to believe that they are
not), in accordance with its terms, and no party with whom NetWorth has an
agreement or contract is, to NetWorth's Knowledge, in default thereunder or has
breached any material terms or provisions thereof (subject to all applicable
bankruptcy, insolvency, reorganization and other laws applicable to creditors'
rights and remedies and to the exercise of judicial discretion in accordance
with general principles of equity).
2.25 Regulation SB Disclosure Document
(A) The information supplied by NetWorth responding to certain Items in
Commission Regulation S-B (other than Items 201, 501, 502, 506, 512 and, to the
extent of audit requirements, Item 310) annexed hereto as Exhibit 2.25 (the
"Regulation S-B Disclosure Documents"), part of which must be included in a
current report on Commission Form 8-K to be filed by Colmena within 15 days
after the Closing Date, as well as in all other reports which Colmena files
thereafter pursuant to the Exchange Act, will not contain any statement which,
at such time and in light of the circumstances under which it is made, is false
or misleading with respect to any Material fact, or will omit to state any
Material fact necessary in order to make the statements made therein not false
or misleading or omit to state any Material fact necessary to correct any
statement which has become false or misleading.
(B) If at any time prior to the Closing Date any event relating to NetWorth
or any of its affiliates, officers or directors should be discovered by NetWorth
which should be set forth in the Regulation S-B Disclosure Document, NetWorth
will promptly provide such information to Colmena, in writing.
2.26 FIRPTA ("Foreign Investment Real Property Tax Act").
NetWorth is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
2.27 Employee Benefit Plans.
(A) Schedule 2.27 lists all employee benefit plans (as defined in Section
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe or
employee benefit plans, programs or arrangements, and any current or former
employment or executive compensation or severance agreements, written or
otherwise, for the benefit of, or relating to, any employee of NetWorth, any
trade or business (whether or not incorporated) which is a member or which is
under common control with NetWorth (an "ERISA Affiliate" within the meaning of
Section 414 of the Code, or any subsidiary of NetWorth (together, the "Employee
Plans").
(B) (1) None of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person except as required by
applicable law, including but not limited to COBRA;
(2) (a) To NetWorth's Knowledge: all Employee Plans are in compliance
in all material respects with the requirements prescribed by
any and all applicable statutes (including ERISA and the Code),
orders, or governmental rules and regulations currently in
effect with respect thereto (including all applicable
requirements for notification to participants or beneficiaries
or the Department of Labor, the IRS or Secretary of the
Treasury), and NetWorth has performed in all Material respects
all obligations required to be performed by it under, is not in
default under or violation of, and has no Knowledge of any
default or violation by any other party to, any of the Employee
Plans;
(b) Each Employee Plan intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section
501(a) of the Code either has received a favorable
determination letter with respect to each such Employee Plan
from the IRS or still has a remaining period of time under
applicable Treasury Regulations or IRS pronouncements in which
to apply for such a determination letter and to make any
amendments necessary to obtain a favorable determination;
(c) No Employee Plan is or within the prior six years has been
subject to, and NetWorth has not incurred and does not expect
to incur any liability under, Title IV of ERISA or Section 412
of the Code; and
(d) To NetWorth's Knowledge, nothing in any Employee Plan precludes
or interferes with Colmena's ability to cause NetWorth to
terminate (or consolidate, at Colmena's option) any Employee
Plan after the Closing Date; provided that: (i) the Employee
Plans may be terminated prospectively only, subject to rights
accrued by NetWorth's employees at the time of such termination
and (ii) not more than sixty (60) days' notice may be required
to terminate certain Employee Plans.
(3) None of the following now exists or has existed within the six-year
period ending on the date hereof with respect to any Employee Plan:
(a) Any act or omission by NetWorth constituting a violation of
Section 402, 403, 404 or 405 of ERISA;
(b) Any act or omission by NetWorth which constitutes a violation
of Sections 406 and 407 of ERISA and is not exempted by Section
408 of ERISA or which constitutes a violation of Section
4975(c) of the Code and is not exempted by Section 4975(d) of
the Code;
(c) Any act or omission by NetWorth constituting a violation of
Section 503, 510 or 511 of ERISA; or
(d) Any act or omission by NetWorth which could give rise to
liability under Section 502 of ERISA or under Sections 4972 or
4975 through 4980 of the Code.
(4) (a) Each Employee Plan has been maintained in substantial
compliance with its terms, and all contributions, premiums or
other payments due from NetWorth to (or under) any such
Employee Plan have been fully paid or adequately provided for
on the audited NetWorth's Financial Statements for the most
recently-ended fiscal year.
(b) To NetWorth's Knowledge, all accruals thereon (including, where
appropriate proportional accruals for partial periods) have
been made in accordance with GAAP.
(c) There has been no amendment, written interpretation or
announcement (whether or not written) by NetWorth with respect
to, or change in employee participation or coverage under, any
Employee Plan that would increase Materially the expense of
maintaining such plans or arrangements, individually or in the
aggregate, above the level of expense incurred with respect
thereto for the most recently-ended fiscal year.
(5) NetWorth has provided to Colmena complete, accurate and current
copies of all Employee Plans and all amendments, documents,
correspondence and filings relating thereto, including but not limited
to any statements, filings, reports or returns filed with any
governmental agency with respect to the Employee Plans at any time
within the three-year period ending on the date hereof.
2.28 Distribution Agreements.
Schedule 2.28 discloses the names, addresses, telephone numbers, fax
numbers, e-mail addresses and federal Tax identification numbers of
each third party or parties who have the right to distribute NetWorth's
products or to market its services, together with a summary of the
agreements pursuant to which NetWorth's products are distributed or its
services are marketed.
2.29 Disclosure to NetWorth's Stockholders
Each of NetWorth's Stockholders hereby represents and warrants that he,
she or it:
(A) Has had access through the Commission's Internet web site at
xxx.xxx.xxx, in the XXXXX Archives sub-cite, to all of Colmena's reports filed
with the Commission during the past two fiscal years, has reviewed all such
reports and has, either directly or through a representative, been granted
access to all of Colmena's officers and directors, for purposes of providing all
disclosure required under applicable federal and state securities laws in
conjunction with the exchange contemplated by this Agreement;
(B) Has been advised that:
(1) The securities to be issued to them by Colmena in exchange for
their shares of NetWorth's common stock have not been
registered under the Securities Act, the Exchange Act or any
comparable state securities laws, but rather are being issued
in reliance on the exemption from registration under the
Securities Act provided by Section 4(2) thereof;
(2) All certificates for their shares of Colmena's common stock
will bear legends restricting any transactions therein,
directly or indirectly, unless they are first registered under
applicable federal and state securities laws or the proposed
transaction is exempt from such registration requirements, and
such facts are demonstrated to the satisfaction of Colmena and
its legal counsel, based on such third party legal opinions,
affidavits and transfer agency procedures as Colmena will
reasonably require or have in place generally;
(3) Colmena's transfer agent has been instructed to decline
transfers of certificates for their shares of Colmena's common
stock, unless the foregoing requirements have been met and
have been confirmed as having been met by a duly authorized
officer of Colmena.
(C) Has independently determined through his, her or its own legal counsel,
that all requirements of their states of domicile for the issuance of the shares
of Colmena's common stock called for by this Agreement have been met, or will
have been met, prior to Closing, by such legal counsel acting on behalf of the
Parties to this Agreement.
2.30 Representations Complete.
None of the representations or warranties made by NetWorth or its
stockholders, nor any statement made in any Schedule, Exhibit or certificate
furnished by NetWorth pursuant to this Agreement, when read in its entirety,
contains or will contain any untrue statement of a Material fact at the time the
Closing takes place, or omits or will omit to state any Material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COLMENA
Colmena represents and warrants to NetWorth as a Material inducement to
its entry into this Agreement, subject to the exceptions specifically disclosed
in the Colmena Schedules or in Colmena's Exchange Act Reports, as follows:
3.1 Organization, Standing and Power.
(A) Colmena is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(B) Colmena has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do business and is
in good standing in each jurisdiction in which the failure to be so qualified
would have a Material adverse effect on Colmena taken as a whole.
(C) A true and correct copy of its articles of incorporation and bylaws, as
amended to date, are available at the Commission's web site in the XXXXX
archives, filed as exhibits to the report on Form 10-KSB for the year ended
September 30, 2003, and any future modifications thereof will be filed with the
Commission and will also be available at such site.
3.2 Capital Structure.
(A) (1) The authorized stock of Colmena consists of 650,000,000 shares of
common stock, par value $0.01 per share, and 10,000,000 shares of
Preferred Stock, $0.001 par value per share, the attributes of which
are to be determined on a case by case basis by Colmena's board of
directors, including 2,000,000 shares of class A non-voting,
convertible preferred stock, the attributes of which are described in
Colmena's Exchange Act Reports.
(2) Colmena will have approximately 132,000,000 shares of common stock
issued and outstanding as of Closing, and 140,653,100 shares will be
reserved at Closing for future conversion of Colmena's class A
non-voting, convertible preferred stock.
(3) 1,406,531 shares of shares of Colmena's class A non-voting
convertible preferred stock will be outstanding as of Closing.
(4) There are no other options, warrants, calls, rights, commitments or
agreements of any character to which Colmena is a party or by which it
is bound obligating Colmena to issue, deliver, sell, repurchase or
redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the Capital Stock of Colmena or obligating
Colmena to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement, other than as disclosed in the Exchange
Act Reports.
(B) All of Colmena's shares of common and preferred stock have been duly
authorized, and all of their issued and outstanding shares of stock have been
validly issued, are fully paid and non-assessable and are free of any liens or
encumbrances other than any liens or encumbrances created by or imposed upon the
holders thereof.
(C) Subject to NetWorth's and the NetWorth Stockholders' compliance with
their obligations under this Agreement, the shares of Colmena's common stock to
be issued pursuant to the Reorganization will be duly authorized, validly
issued, fully paid, and non-assessable.
3.3 Authority.
(A) Colmena has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
(B) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Colmena
(C) This Agreement has been duly executed and delivered by Colmena and,
subject to having also been approved by NetWorth's board of directors and
properly executed and delivered by NetWorth, constitutes a valid and binding
obligation of Colmena.
(D) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict with, or
result in any violation of, or default (with or without notice or lapse of time,
or both), or give rise to a right of termination, cancellation or acceleration
of any obligation or to loss of a material benefit under:
(1) Any provision of the articles of incorporation or bylaws of
Colmena; or
(2) Any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to Colmena or its properties or assets, other than
any such conflicts, violations, defaults, terminations,
cancellations or accelerations which individually or in the
aggregate would not have a material adverse effect on the
ability of Colmena to consummate the transactions contemplated
hereby.
(E) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or with
respect to Colmena in connection with the execution and delivery of this
Agreement by Colmena or the consummation by Colmena of the transactions
contemplated hereby, except for:
(1) Such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required
under applicable state and federal securities laws (e.g, a
Form D Notification Statement) and the laws of any foreign
country; and
(2) Such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a
Material adverse effect on the ability of Colmena to
consummate the transactions contemplated hereby.
3.4 Exchange Act Reports; Colmena Financial Statements.
(A) All materials required to be filed by Colmena with the Commission
pursuant to Sections 13 or 15(d) of the Exchange Act since current management
took office starting in 1999, have been filed and are available on the
Commission's Internet web site at xxx.xxx.xxx in its XXXXX Archives sub-site.
(B) To the best of Colmena's Knowledge: (i) the Exchange Act Reports comply
in all Material respects with the requirements of the Exchange Act and do not
contain any untrue statement of a Material fact or omit to state a Material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances in which they were made, not misleading, except to
the extent corrected by a subsequently filed document with the Commission or by
information provided by Colmena to NetWorth; and (ii) Colmena is in compliance
with any applicable blue sky laws.
(C) The Colmena Financial Statements comply as to form in all Material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto, have been prepared in
accordance with GAAP and fairly present the consolidated financial position of
Colmena at the date thereof and of its operations and cash flows for the period
then ended, subject to normal year end audit adjustments.
(D) There has been no change in Colmena's accounting policies or estimates
except as described in the notes to Colmena's Financial Statements or in
subsequently filed Exchange Act Reports.
(E) Colmena has no material obligations, other than:
(1) Those set forth in Colmena's Financial Statements (obligations
not required to be set forth in Colmena's Financial Statements
under GAAP being deemed not Material);
(2) Those resulting from ongoing acquisition activities which
developed after the date of Colmena's Financial Statements but
are not yet definite enough to require filing in the Exchange
Act Reports;
(3) Those pertaining to confidential letters of intent; or
(4) Those disclosed by Colmena to NetWorth in writing.
(5) Colmena anticipates that at Closing, its liabilities will not
exceed $24,000.
(6) Colmena represents that at Closing, all compensation will have
been paid to all Colmena officers, independent contractors and
employees, and that there will be no accrued vacation time.
(F) The information provided by Colmena in the Current Report on Form 8-K
pertaining to this Reorganization (excluding information provided by or on
behalf of NetWorth, as to which Colmena makes no representation) will not
contain any statement which, at such time and in light of the circumstances
under which it will be made, is false or misleading with respect to any Material
fact, or will omit to state any Material fact necessary in order to make the
statements therein not false or misleading.
(G) If at any time prior to the Closing Date any event relating to Colmena
or any of its affiliates, officers or directors should be discovered by Colmena
which should be set forth in a current report on Form 8-K, Colmena will promptly
inform NetWorth.
(H) Colmena makes no representation or warranty with respect to any
information supplied by NetWorth which is contained in any of the foregoing
documents.
3.5 Brokers' and Finders' Fees.
Except as disclosed in the Exchange Act Reports, Colmena has not
incurred, and will not incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement, the Reorganization or any transaction
contemplated hereby.
3.6 Ownership of NetWorth's Capital Stock.
As of the execution of this Agreement and immediately prior to closing,
Colmena does not otherwise own any shares of NetWorth's Capital Stock.
3.7 Litigation.
There are no suits, actions or legal, administrative, arbitration or
other proceedings or governmental investigations against Colmena pending or, to
Colmena's Knowledge, threatened, which (i) if determined adversely to Colmena,
could be expected to result in a Material adverse effect on the financial
condition or results of operations of Colmena, or (ii) seek to prevent the
consummation of the Reorganization, except as may be disclosed in the Exchange
Act Reports.
3.8 Limited Activities
(A) Colmena is a holding company with no material day-to-day operations or
assets other than acquisition-related activities and compliance with applicable
laws, including federal securities and internal revenue laws.
(B) Colmena currently has no operating subsidiaries.
(C) NetWorth, through its officers, has become familiar with the operations
and prospects of Colmena, to the extent that information concerning them is
available to Colmena or has been filed by Colmena with the Commission.
3.9 No Undisclosed Liabilities.
Colmena does not have any Material liabilities or obligations, either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with GAAP), and whether due or to become due, which
individually or in the aggregate, (i) have not been reflected in the Colmena
Financial Statements (including the notes thereto) or (ii) have not been
specifically described in this Agreement or in the Exchange Act Reports,
including as set forth above in Article 3.4(E)(5)&(6).
3.10 No Changes.
Since the date of its latest Exchange Act Report there has not been,
occurred or arisen any:
(A) Destruction, damage to, or loss of any assets (including without
limitation intangible assets) of Colmena (whether or not covered by insurance),
either individually or in the aggregate, exceeding $5,000.
(B) Labor trouble or claim of wrongful discharge, sexual harassment or
other unlawful labor practice or action;
(C) Change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies in making
or reversing accruals, or any change in capitalization of software development
costs) by Colmena;
(D) Declaration, setting aside, or payment of a dividend or other
distribution in respect to the shares of Colmena, or any direct or indirect
redemption, purchase or other acquisition by Colmena of any of its shares;
(E) Other event or condition of any character that has or would, in
Colmena's reasonable judgment, be expected to have a Material adverse effect on
Colmena;
(F) Negotiation or agreement by Colmena to do any of the things described
in the preceding clauses (A) through (E) other than negotiations with Colmena
and its representatives regarding the transactions contemplated by this
Agreement or other acquisitions.
3.11 Tax and Other Returns and Reports.
(A) Tax Returns and Audits.
(1) Colmena, because of its lack of revenues, has not prepared and
filed federal, state, local or foreign returns, estimates,
information statements and reports ("Returns") relating to any
and all Taxes relating or attributable to Colmena or its
operations since current management was elected in 1999.
Colmena will provide NetWorth with what Returns it has
(excluding for tax year 2003), and NetWorth will assume
responsibility for filing those Returns as well as Returns
beginning with tax year 2003.
(2) Colmena has withheld with respect to its employees all federal
and state income taxes, FICA, FUTA and other Taxes it is
required to withhold.
(3) The accruals for any Taxes on the books and records of Colmena
are sufficient to discharge the Taxes for all periods (or the
portion of any period) ending on or prior to the Closing Date.
(4) Colmena has not been delinquent in the payment of any Tax nor,
except as disclosed in the Exchange Act Reports and except for
an unpaid Florida tax lien of $267.72 and an unpaid Delaware
franchise tax of $1,814, is there any Tax deficiency
outstanding, proposed or assessed against Colmena, nor has
Colmena executed any waiver of any statute of limitations on
or extending the period for the assessment or collection of
any Tax.
(5) Except as disclosed in the Exchange Act Reports and except as
noted in subsection (4) immediately above:
(a) No audit or other examination of any Return of
Colmena is presently in progress.
(b) Colmena does not have any liabilities for unpaid
federal, state, local and foreign Taxes, whether
asserted or unasserted, known or unknown, contingent
or otherwise and Colmena has no Knowledge of any
basis for the assertion of any such liability
attributable to Colmena or its assets or operations.
(6) Colmena is not a party to or bound by any tax indemnity, tax
sharing or tax allocation agreement.
(7) Reserved.
(8) There are (and as of immediately following the Closing Date
there will be) no liens on the assets of Colmena relating to
or attributable to Taxes, except as noted in subsection (4)
immediately above.
(9) Colmena has no Knowledge of any basis for the assertion of any
Tax claim which, if adversely determined, would result in
liens on the assets of Colmena.
(10) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of Colmena that,
individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Code.
(11) As of Closing, Colmena will have no employees or independent
contractors, all compensation due and owing such persons will
have been fully paid, and there will be no outstanding loans
due any officer, director, independent contractor or employee
of Colmena.
(B) No Penalty.
Colmena is not subject to any penalty by reason of a violation of any
order, rule or regulation of, or a default with respect to any return,
report or declaration required to be filed with, any Governmental
Entity to which it is subject, which violations or defaults,
individually or in the aggregate, would have a material adverse effect
on Colmena.
3.12 Environmental and OSHA.
(A) Hazardous Material.
(1) As of the Closing Date, no Material amount of any substance
that is regulated by any Governmental Entity or that has been
designated by any Governmental Entity to be radioactive,
toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos,
urea-formaldehyde and all substances listed pursuant to CERCLA
or RCRA, and the regulations and publications promulgated
pursuant to said laws (a "Hazardous Material"), is present, as
a result of the actions of Colmena (excluding failure of
Colmena to remedy the presence of a Hazardous Material
resulting from the actions of any previous owner or occupier
of Colmena's property of which presence Colmena does not have
Knowledge) in violation of any law in effect on or before the
Closing Date, in, on or under any property, including the land
and the improvements, ground water and surface water thereof,
that Colmena owns, operates, occupies or leases.
(2) In any event, Colmena does not know of the presence of any
Hazardous Material in, on or under any of its property.
(B) Hazardous Materials Activities.
At no time prior to the Closing Date has Colmena transported, stored,
used, manufactured, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has Colmena disposed of, transferred, sold, or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of CERCLA, RCRA, TSCA or
any other applicable state or federal acts (including the rules and
regulations thereunder) as in effect on or before the Closing Date.
(C) Permits.
Colmena currently holds no environmental approvals, permits, licenses,
clearances and consents and none are necessary for the conduct of
Colmena's Hazardous Material Activities and other businesses of Colmena
as such activities and businesses are currently being conducted.
3.13 Representations Complete.
None of the representations or warranties made by Colmena, nor any
statement made in any Schedule, Exhibit or certificate furnished by Colmena
pursuant to this Agreement, when read in its entirety, contains or will contain
any untrue statement of a Material fact at the Closing Date, or omits or will
omit to state any Material fact necessary in order to make the statements
contained herein or therein, in the light of the circumstances under which made,
not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE CLOSING
4.1 Conduct of Business of NetWorth
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, NetWorth agrees
(except to the extent that Colmena will otherwise consent in writing):
(A) To carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent with such business, use all reasonable efforts consistent with past
practice and policies to preserve intact NetWorth's present business
organizations, keep available the services of its present officers and key
employees and preserve their relationships with customers, suppliers,
distributors, licensors, licensees, and others having business dealings with it,
to the end that NetWorth's goodwill and ongoing businesses will be unimpaired at
the Time of Closing; and
(B) Not to:
(1) Enter into any commitment or transaction not in the ordinary
course of business (i) to be performed over a period longer
than six (6) months in duration, or (ii) to purchase fixed
assets for a purchase price in excess of $10,000;
(2) Grant any severance or termination pay to any director,
officer or employee except (i) payments made pursuant to
standard written agreements outstanding on the date hereof or
(ii) in the case of employees who are not officers, grants
which are made in the ordinary course of business in
accordance with NetWorth's standard past practices;
(3) Except for licenses granted to end-users pursuant to
NetWorth's standard license agreements, transfer to any person
or entity any rights to NetWorth's Intellectual Property;
(4) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any
type or scope with respect to any products of NetWorth;
(5) Violate, amend or otherwise modify the terms of any of the
contracts or agreements required to be set forth in NetWorth
Schedules;
(6) Commence any litigation;
(7) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) with
respect to any of its Capital Stock, or split, combine or
reclassify any of its Capital Stock or issue or authorize the
issuance of any other securities with respect to, in lieu of
or in substitution for shares of Capital Stock of NetWorth, or
repurchase or otherwise acquire, directly or indirectly, any
shares of its Capital Stock except from former employees,
directors and consultants in accordance with agreements
providing for the repurchase of shares at cost in connection
with any termination of service to NetWorth;
(8) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of,
any shares of its Capital Stock or securities convertible
into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible
securities;
(9) Cause or permit any amendments to its articles of
incorporation or bylaws;
(10) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any
assets which are Material, individually or in the aggregate,
to the business of NetWorth;
(11) Sell, lease, license or otherwise dispose of any of its
properties or assets which are Material, individually or in
the aggregate, to the business of NetWorth, except in the
ordinary course of business;
(12) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of
NetWorth or guarantee any debt securities of others;
(13) Adopt or amend any employee benefit plan, or enter into any
employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the
salaries or wage rates of its employees;
(14) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of
business;
(15) Pay, discharge or satisfy in an amount in excess of $1,000 in
any one case any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or
reserved against in NetWorth's Financial Statements (or the
notes thereto), excl;xxxxx any legal or accounting fees
incurred in connection with this Reorganization;
(16) Make or change any Material election with respect to Taxes,
adopt or change any accounting method with respect to Taxes,
file any Material Return or any amendment to a Material
Return, enter into any closing agreement, settle any claim or
assessment with respect to Taxes, or consent to any extension
or waiver of the limitation period applicable to any claim or
assessment with respect to Taxes; or
(17) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(C)(1) through 4.1(C)(16)
above, or any action which would make any of the
representations or warranties or covenants of NetWorth
contained in this Agreement Materially untrue or incorrect.
(C) To promptly notify Colmena of any event:
(1) Or occurrence or emergency which, in the reasonable judgment
of NetWorth, is not in the ordinary course of business of
NetWorth; and
(2) Which could, in the reasonable judgment of NetWorth, have a
Material adverse effect on NetWorth.
4.2 No Solicitation.
(A) Prior to the Closing NetWorth will not (nor will NetWorth permit any of
NetWorth's officers, directors, stockholders affiliated with any officer or
director or NetWorth's agents, representatives or affiliates to) directly or
indirectly, take any of the following actions with any party other than Colmena
and its designees:
(1) Solicit, encourage, initiate or participate in any
negotiations or discussions with respect to, any offer or
proposal to acquire all or substantially all of NetWorth's
business and properties or Capital Stock whether by merger,
purchase of assets, tender offer or otherwise;
(2) Except as required by law and except for disclosures made to
financial institutions and others in the ordinary course of
business, disclose any information not customarily disclosed
to any person other than its attorneys or financial advisors
concerning NetWorth's business and properties or afford to any
person or entity access to its properties, books or records;
or
(3) Assist or cooperate with any person to make any proposal to
purchase all or any part of NetWorth's Capital Stock or of its
assets (other in the ordinary course of business).
(B) In the event NetWorth receives any offer or proposal, directly or
indirectly, of the type referred to in Section 4.2(A)(1) and (3) above, or any
request for disclosure or access pursuant to Section 4.2(A)(2) above, NetWorth
will immediately inform Colmena thereof and will cooperate with Colmena by
furnishing any information Colmena may reasonably request.
4.3 Conduct of Business of Colmena.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, as the case may
be, Colmena agrees (except to the extent that NetWorth will otherwise consent in
writing), that Colmena will promptly notify NetWorth of any event or occurrence
or emergency which is not in the ordinary course of business of Colmena and
which is Material and adverse to the business of Colmena.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Report on Form 8-K.
(A) Within fifteen days following the Closing Date, Colmena, with the
assistance and cooperation of NetWorth's current officers, auditors, employees
and legal counsel, will prepare and file with the Commission a current report on
Commission Form 8-K (the "8-K Report") disclosing the Reorganization and
containing information concerning NetWorth required by Commission Regulation
S-B.
(B) Colmena and NetWorth will use their best efforts to secure the
Commission's acceptance of NetWorth's audited financial statements, as complying
with the requirements of Regulation S-B, and NetWorth will make any
modifications to its financial statements suggested by the Commission; and, if
required, will use best efforts to secure from the Commission required
extensions of time in which to provide materials complying with Commission
Regulation S-B.
5.2 Consent of NetWorth's Stockholders.
Because each NetWorth Stockholder has independently made the decision
to exchange all of his, her or its NetWorth Securities for shares of Colmena's
common stock, no formal stockholder action by NetWorth will be required in
conjunction with authorization of this Agreement or the Closing; however, each
NetWorth Stockholder must have become a party to this Agreement through the
grant of a power of attorney to Xx. Xxxxx. Xx. Xxxxx hereby represents and
warrants that he has such valid power of attorney on behalf of all such NetWorth
Stockholders, and that he will indemnify Colmena against all loss in the event
any NetWorth Stockholder claims that Xx. Xxxxx did not have such valid power of
attorney.
5.3 Access to Information.
(A) NetWorth will afford Colmena and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing to all:
(1) Of its properties, books, contracts, commitments and records;
and
(2) Other information concerning the business, properties and
personnel of NetWorth as Colmena may reasonably request.
(B) NetWorth agrees to provide to Colmena and its accountants, counsel and
other representatives copies of internal financial statements promptly upon
request.
(C) No information or Knowledge obtained in any investigation pursuant to
this Section 5.3 will affect or be deemed to modify any representation or
warranty contained herein or the conditions to the obligations of the Parties to
consummate the Reorganization.
5.4 Confidentiality.
(A) From the date hereof to and including the Closing Date, the Parties
will maintain, and cause their directors, employees, agents and advisors to
maintain, in confidence and not disclose or use for any purpose, except the
evaluation of the transactions contemplated hereby and the accuracy of the
respective representations and warranties of the Parties contained herein,
information concerning the other Parties and obtained directly or indirectly
from such Parties, or their directors, employees, agents or advisors, or as was
in the possession of such Party prior to obtaining such information from such
other Party as to which the fact of prior possession such possessing Party will
have the burden of proof and such information as is or becomes:
(1) Available to the non-disclosing Party from third parties not
subject to an undertaking of confidentiality or secrecy;
(2) Generally available to the public other than as a result of a
breach by the non-disclosing party hereunder; or
(3) Required to be disclosed under applicable law.
(B) In the event that the transactions contemplated hereby will not be
consummated, all such information which will be in writing will be returned to
the Party furnishing the same, including to the extent reasonably practicable,
copies or reproductions thereof which may have been prepared.
5.5 Expenses.
Whether or not the Reorganization is consummated, all expenses incurred
in connection with the Reorganization and this Agreement will be the sole
obligation of the Party incurring such expenses.
5.6 Public Disclosure.
Unless otherwise required by law, prior to the Closing Date no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement will be made by any Party unless approved by Colmena and NetWorth
prior to release, provided that such approval will not be unnecessarily
withheld, subject, in the case of Colmena, to Colmena's obligation to comply
with applicable securities laws.
5.7 Consents.
Colmena and NetWorth will promptly apply for or otherwise seek, and use
their best efforts to obtain, all consents and approvals required to be obtained
by them for the consummation of the Reorganization, and NetWorth will use its
best efforts to obtain all consents, waivers and approvals under any of
NetWorth's agreements, contracts, licenses, leases or mortgages in order to
preserve the benefits thereunder for NetWorth and otherwise in connection with
the Reorganization; all of such consents and approvals being set forth in
Schedule 5.7.
5.8 Affiliate Agreements.
(A) Schedule 5.8 sets forth those persons who are, in NetWorth's reasonable
judgment, Affiliates of NetWorth.
(B) NetWorth will provide Colmena such information and documents as Colmena
will reasonably request for purposes of reviewing such list.
(C) NetWorth will use its best efforts to deliver or cause to be delivered
to Colmena, concurrently with the execution of this Agreement (and in any case
prior to the Closing Date) from each of the Affiliates of NetWorth, an executed
Affiliate Agreement in the form annexed hereto as Exhibit 5.8.
(D) Colmena will be entitled to place appropriate legends on the
certificates evidencing any Colmena's common stock to be received by such
Affiliates pursuant to the terms of this Agreement, and to issue appropriate
stop transfer instructions to the transfer agent for Colmena's common stock,
consistent with the terms of such Affiliate Agreements, in addition to the
legends and stop transfer instructions placed and issues on all certificates to
be issued to NetWorth's stockholders in conjunction with the Reorganization
based on the Parties' reliance on Section 4(2) of the Securities Act
5.9 Legal Requirements.
Colmena and NetWorth will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any Party in
connection with any such requirements imposed upon such other Party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other Parties in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.10 Blue Sky Laws.
Legal counsel to NetWorth has taken such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of Colmena's common stock to the NetWorth
Stockholders.
5.11 Best Efforts: Additional Documents and Further Assurances.
(A) Each of the Parties to this Agreement will use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and cause to be
fulfilled the conditions to the Reorganization and the condition subsequent
under this Agreement.
(B) Each Party, at the request of another Party, will execute and deliver
such other instruments and do and perform such other acts and things as may be
reasonably necessary or desirable for effecting completely the consummation of
this Agreement and the transactions contemplated hereby.
5.12 Employment Agreements.
The individuals set forth on Schedule 5.12 will as of the Closing Date
be parties to the employment agreements included in composite Exhibit 5.12
hereto (the "Employment Agreements"), which will supersede all prior employment
agreements or arrangements with any such persons, and which will conform to the
forms of employment agreements established by Colmena for use by all material
employees of Colmena.
5.13 Colmena's Board of Directors and Officers.
Immediately following Closing, Xxxxxx Xxxxx and Xxxx Xxxxx will be
appointed to fill vacancies on Colmena's board of directors and thereafter,
Colmena will call its annual meeting of stockholders, nominating as director
candidates such persons as the NetWorth Stockholders shall deem appropriate;
provided that the NetWorth Stockholders shall use their best efforts for a
period of three years following the Closing, to elect Mesrrs Xxxxxxx X. Xxxxx,
Xxxxxx Xxxxxxxxx and Xxxxxxxx Xxx Xxxxx, current members of Colmena's board of
directors, as members of Colmena's board of directors, to represent the
interests of the stockholders of Colmena who held shares immediately prior to
the Closing, and to provide assistance and continuity of information and
management to the directors and management of Colmena selected by the NetWorth
Stockholders. In addition, Colmena's only current officers (its President, Chief
Financial Office, and Legal Counsel) will have resigned effective upon closing.
5.14 Additional Covenants by NetWorth
As of Closing all accrued obligations by NetWorth to its employees,
consultants and independent contractors involving payments due for services
rendered, whether in the form of salaries, bonuses, benefits, benefit plans, or
other fees or consideration of any kind, will be fully and irrevocably
discharged, except for no more than $25,000 in accrued salary involving
obligations for the most recent pay period and accrued vacation costs.
ARTICLE VI
CONDITIONS TO THE REORGANIZATION
6.1 Conditions to Obligations of Each Party to Effect the Reorganization.
The respective obligations of each party to this Agreement to effect
the Reorganization will be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(A) No Injunctions or Restraints: Illegality.
No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Reorganization will
be in effect, nor will any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor will there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Reorganization, which makes the consummation of the
Reorganization illegal.
(B) NetWorth Information Required by Commission Regulation S-B
The provision by NetWorth on a timely basis in full compliance with the
requirements of Commission Regulation S-B for Material acquisitions, of all
information concerning its past operations, including audited financial
statements, will constitute a condition subsequent to the obligations of Colmena
under this Agreement and in the event of the failure of such condition
subsequent, including if the Commission determines that the audited financial
statements do not fully meet the requirements of Regulation S-B then, at
Colmena's sole option:
(1) The Reorganization may be rescinded; or
(2) If the Escrow Term has not yet expired, the Undisclosed
Liabilities Escrow Shares will be deemed defaulted to Colmena
and the Reorganization will be restructured in a manner
complying with Colmena's reporting and other obligations under
the Exchange Act, including the sale by Colmena of NetWorth.
6.2 Additional Conditions to Obligations of NetWorth.
The obligations of NetWorth to consummate and effect this Agreement and
the transactions contemplated hereby will be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by NetWorth:
(A) Representations, Warranties and Covenants.
The representations and warranties of Colmena in this Agreement will be
true and correct in all material respects on and as of the Closing Date
as though such representations and warranties were made on and as of
such time and Colmena will have performed and complied in all Material
respects with all covenants, obligations and conditions of this
Agreement required to be performed and complied with by it as of the
Closing Date.
(B) Certificate of Colmena.
NetWorth will have been provided with a certificate executed on behalf
of Colmena by its President and its Chief Financial Officer, Treasurer
or officer exercising such functions to the effect that, as of the
Closing Date:
(1) All representations and warranties made by Colmena under this
Agreement are true and complete in all material respects; and
(2) All covenants, obligations and conditions of this Agreement to
be performed by Colmena on or before such date have been so
performed in all Material respects.
(C) Satisfactory Form of Legal Matters.
The form, scope and substance of all legal and accounting matters
contemplated hereby and all documents and other papers delivered
hereunder prior to and on the Closing Date will be reasonably
acceptable to counsel to NetWorth.
(D) Legal Opinion.
NetWorth will have received a legal opinion from legal counsel to
Colmena, attached as Exhibit 6.2(D) hereto.
(E) No Material Adverse Changes.
There will not have occurred any event, fact or condition that has had
or reasonably would be expected to have a Material adverse effect on
Colmena.
(F) Tax Opinion.
In Lieu of a written opinion from their legal counsel or tax advisors
to the effect that the Reorganization will constitute a reorganization
within the meaning of Section 368(a)(1)(B) of the Code, NetWorth and
the NetWorth Stockholders agree to indemnify and hold harmless Colmena
and its directors from any tax liability that may arise if this
Reorganization does not qualify as a reorganization within the meaning
of Section 368(a)(1)(B) of the Code.
(G) Agreement of Certain Colmena Affiliates.
As a further condition precedent to Closing, Colemena will secure a
written agreement from the Xxxxxx Family Spendthrift Trust and the
Xxxxx Family Spendthrift Trust, which will provide in part that despite
each trust's potential status as a non-affiliate, for a period of two
years following Closing, each trust agrees to be governed by the volume
limitations of Rule 144 as applicable for affiliates of an issuer,
provided that within 120 days of closing, NetWorth raises at least
$1,000,000 in capital at a price of at least $0.05 per share.
6.3 Additional Conditions to the Obligations of Colmena.
The obligations of Colmena to consummate and effect this Agreement and
the transactions contemplated hereby will be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Colmena:
(A) Representations, Warranties and Covenants.
(1) The representations and warranties of NetWorth in this
Agreement will be true and correct in all Material respects on
and as of the Closing Date as though such representations and
warranties were made on and as of such time and NetWorth will
have performed and complied in all Material respects with all
covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the
Closing Date.
(2) Colmena will have no remedy against the Undisclosed
Liabilities Escrow Fund with respect to an untrue
representation or warranty if prior to the Closing Date
NetWorth delivers to Colmena in accordance with Section 9.2 a
written statement:
(a) Advising Colmena that an event (a "Post-Execution
Event") has occurred (specifying in reasonable detail
such event) subsequent to the date of execution of
this Agreement that would render any representation
or warranty made by NetWorth in this Agreement untrue
if such representation or warranty were made as of
the Closing; and
(b) Confirming that such representation or warranty was
true as of the date of execution of this Agreement,
and
(c) Colmena subsequently waives the failure to satisfy
the condition set forth in Section 6.3(A) with
respect to such representation or warranty, in
writing.
(B) Certificate of NetWorth.
Colmena will have been provided with a certificate executed on behalf
of NetWorth by its President and Chief Financial Officer to the effect
that, as of the Closing Date, all:
(1) Representations and warranties made by NetWorth under this
Agreement are true and complete in all Material respects; and
(2) Covenants, obligations and conditions of this Agreement to be
performed by NetWorth on or before such date have been so
performed in all Material respects.
(C) Third Party Consents.
Any and all consents, waivers and approvals required from third parties
relating to the contracts and agreements of NetWorth so that the
Reorganization and other transactions contemplated hereby do not
adversely affect the rights of, and benefits to, NetWorth thereunder
will have been obtained.
(D) Satisfactory Form of Legal and Accounting Matters.
The form, scope and substance of all legal and accounting matters
contemplated hereby and all documents and other papers delivered
hereunder prior to and on the Closing Date will be reasonably
acceptable to Colmena's counsel (provided that the condition subsequent
concerning the compliance of information provided by NetWorth with the
requirements of Commission Regulation S-B, on a timely basis, will
survive the Closing).
(E) Legal Opinion.
Colmena will have received a legal opinion from legal counsel to
NetWorth, attached as Exhibit 6.3(E) hereto.
(F) No Material Adverse Changes.
There will not have occurred any event, fact or condition that has had
or reasonably would be expected to have a Material adverse effect on
NetWorth.
(G) Affiliate Agreements.
Colmena will have received from each of the Affiliates of NetWorth an
executed Affiliate Agreement which will be in full force and effect.
(H) Employment Agreements.
The Employment Agreements will have been duly executed and delivered
and will be in full force and effect.
(I) Minimum Net Worth.
NetWorth will on the Closing Date have net tangible assets (tangible
assets in excess of liabilities) based on replacement cost valuation of
not less than $(134,673); no net current payables (excess of current
payables over current receivables), and a total of not more than
$115,000 in long term payables.
(J) Reserved.
(K) Confidentiality Agreements.
Each current employee, consultant or other person having access to
NetWorth's confidential information will have executed a
confidentiality agreement in the form annexed hereto as Exhibit 6.3(K).
(L) Non-accredited Investors.
Except as disclosed in the NetWorth Warranty Exceptions listed in
Schedule 2, there will be no stockholders of NetWorth who are not
Accredited Investors.
(M) Obligations to NetWorth Personnel
All obligations by NetWorth to its employees, consultants and
independent contractors involving payments due for services rendered
will have been fully discharged, as of the Closing date.
ARTICLE VII
SURVIVAL OF CONDITION SUBSEQUENT, REPRESENTATIONS AND WARRANTIES,
COVENANTS & UNDISCLOSED LIABILITIES ESCROW
7.1 Survival of Condition Subsequent, Representations and Warranties &
Covenant.
All conditions subsequent to the Reorganization and covenants to be
performed after the Closing, and all representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement will survive
the Closing and continue until the date the audit of Colmena's financial
statements for the year ending December 31, 2004 has been completed and Colmena
has received a signed opinion from its independent auditors certifying such
financial statements (the "2004 Audit Date").
7.2 Escrow Arrangements.
(A) Undisclosed Liabilities Escrow Fund.
(1) As soon as practicable after the Closing Date, 20% of the
shares of Colmena's common stock to be issued in the
Reorganization equal to the Undisclosed Liabilities Escrow
Number, plus any additional New Shares (as defined below) as
may be issued with respect thereto after the Closing Date)
(collectively, the "Undisclosed Liabilities Escrow Shares"),
without any act of any stockholder, will be registered in the
name of Xxxxxx Xxxxx, Esq., Escrow Agent, or such other person
or legal entity as may otherwise be selected by Colmena prior
to the Closing as escrow agent (the "Undisclosed Liabilities
Escrow Agent"), and will be deposited with a financial
institution acceptable to Colmena and the Agent [as defined in
Section 7.2(H) below)], such deposit to constitute an escrow
fund (the "Undisclosed Liabilities Escrow Fund") to be
governed by the terms set forth herein and at Colmena's sole
cost and expense.
(2) (a) The portion of Colmena's common stock in the Undisclosed
Liabilities Escrow Fund contributed on behalf of each
stockholder of NetWorth is listed opposite such stockholders'
name on Exhibit 7.2.
(b) The Undisclosed Liabilities Escrow Fund will be available
to compensate Colmena and its affiliates for any claim, loss,
expense, liability or other damage, including reasonable
attorneys' fees, that such person has incurred or reasonably
anticipates incurring by reason of the successful assertion by
a third party of any claims for liabilities of NetWorth that
were not disclosed as required pursuant to this Agreement
("Undisclosed Liabilities"), but only to the extent that such
Undisclosed Liabilities exceed $20,000 in the aggregate.
(c) Colmena and NetWorth each acknowledge that such
Undisclosed Liabilities, if any, would relate to unresolved
contingencies existing at the Time of Closing which if
resolved at the Closing would have led to a reduction in the
total number of shares of Colmena's common stock Colmena would
have agreed to issue in connection with the Reorganization or
to Colmena's decision not to acquire NetWorth.
(3) Nothing herein will limit the liability of NetWorth for any
misrepresentation or breach of warranty except that resort to
the Undisclosed Liabilities Escrow Fund will be the exclusive
contractual remedy of Colmena for recovery of monetary damages
resulting from any such undisclosed liability; provided,
however, that nothing herein will limit any non-contractual
remedy for fraud or relief in the form of remedies other than
recovery of monetary damages.
(4) (a) Subject to the following requirements, the Undisclosed
Liabilities Escrow Fund will remain in existence until the
2004 Audit Date (the "Undisclosed Liabilities Escrow Period").
(b) Upon the expiration of such Undisclosed Liabilities Escrow
Period, the Undisclosed Liabilities Escrow Fund will terminate
with respect to all Undisclosed Liabilities Escrow Shares;
provided, however, that the number of Undisclosed Liabilities
Escrow Shares which, in the reasonable judgment of Colmena,
subject to the objection of the Agent and the subsequent
arbitration of the matter in the manner provided in Section
7.2(G) hereof, are necessary to satisfy any unsatisfied claims
specified in any Officer's Certificate delivered to the
Undisclosed Liabilities Escrow Agent prior to the expiration
of the Undisclosed Liabilities Escrow Period with respect to
facts and circumstances existing on or prior to the 2004 Audit
Date will remain in the Undisclosed Liabilities Escrow Fund
(and the Undisclosed Liabilities Escrow Fund will remain in
existence) until such claims have been resolved.
(c) As soon as all such claims have been resolved, the
Undisclosed Liabilities Escrow Agent will deliver to the
NetWorth Stockholders all Colmena's common stock and other
property remaining in the Undisclosed Liabilities Escrow Fund
and not required to satisfy such claims.
(d) Deliveries of Colmena's common stock and other property to
the NetWorth Stockholders pursuant to this Section 7.2(A) will
be made in proportion to their respective original
contributions to the Undisclosed Liabilities Escrow Fund.
(B) Reserved.
(C) Protection of Escrow Shares.
The Escrow Agents will hold and safeguard the Escrow Shares during the
Escrow Terms, will treat the Escrow Shares as a trust fund in
accordance with the terms of this Agreement and not as the property of
the Parties and will hold and dispose of the Escrow Shares only in
accordance with the terms hereof.
(D) Distributions; Voting.
(1) (a) Any shares of Colmena's common stock or other equity
securities issued or distributed by Colmena, including shares
issued upon a stock split or any stock dividend or
distribution ("New Shares") with respect to Colmena's common
stock in the Escrow Funds which have not been released from
the Escrow Funds will be added to the Escrow Funds and become
a part thereof.
(b) New Shares issued with respect to Colmena's common stock
that have been released from the Escrow Funds will not be
added to the Escrow Funds, but will be distributed to the
holders thereof.
(c) When and if cash dividends on Colmena's common stock in
the Escrow Funds will be declared and paid, they will be added
to the Escrow Funds and become a part thereof.
(2) Each stockholder of NetWorth will have full voting rights with
respect to the shares of Colmena's common stock contributed to
the Escrow Funds on behalf of such stockholder (and on any
voting securities added to the Escrow Funds with respect to
such shares of Colmena's common stock) so long as such shares
of Colmena's common stock or other voting securities are held
in the Escrow Funds.
(E) Claims Upon Escrow Funds.
Subject to the objection procedure established below, the Undisclosed
Liabilities Escrow Agent will deliver to Colmena out of the Undisclosed
Liabilities Escrow Fund, as promptly as practicable, shares of Colmena's common
stock or other assets held in the Undisclosed Liabilities Escrow Fund in an
amount equal to the funds required to recover the monetary damages resulting
from such Undisclosed Liabilities, provided that
(1) A written claim of loss has been provided by Colmena to the
Undisclosed Liabilities Escrow Agent at any time on or before
the last day of the Undisclosed Liabilities Escrow Period in
the form of a certificate signed by any officer of Colmena (an
"Officer's Certificate"), with a copy to NetWorth:
(a) Stating that Colmena has paid or properly accrued or
reasonably anticipates that it will have to pay or
accrue as a result of such Undisclosed Liabilities,
and
(b) Specifying in reasonable detail the individual items
of included in the amount so stated, the date each
such item was paid or properly accrued, or the basis
for such anticipated liability, and the nature of the
misrepresentation, breach of warranty or claim to
which such item is related.
(2) For the purposes of determining the number of shares of
Colmena's common stock to be delivered to Colmena out of the
Undisclosed Liabilities Escrow Fund pursuant to Section
7.2(E)(1), the shares of Colmena's common stock will be valued
at the average closing transaction price therefor during the
preceding ten trading days, as reported on the highest rated
securities market or securities exchange on which Colmena's
common stock is actually traded.
(F) Objections to Undisclosed Liabilities Escrow Claims.
(1) At the time of delivery of any Officer's Certificate to the
Undisclosed Liabilities Escrow Agent, a duplicate copy of such
certificate will be delivered to the Agent [as defined in
Section 7.2(H)] and for a period of thirty (30) days after
such delivery, the Undisclosed Liabilities Escrow Agent will
make no delivery to Colmena of shares of Colmena's common
stock, pursuant to Section 7.2(E)(1) hereof unless the
Undisclosed Liabilities Escrow Agent will have received
written authorization from the Agent to make such delivery.
(2) After the expiration of such thirty (30) day period, the
Undisclosed Liabilities Escrow Agent will make delivery of the
shares of Colmena's common stock or other property in the
Undisclosed Liabilities Escrow Fund in accordance with Section
7.2(F) hereof, provided that no such payment or delivery may
be made if the Agent will object in a written statement to the
claim made in the Officer's Certificate, and such statement
will have been delivered to the Undisclosed Liabilities Escrow
Agent prior to the expiration of such thirty day period.
(G) Resolution of Undisclosed Liabilities Escrow Conflicts; Arbitration.
(1) (a) In case the Agent will so object in writing to any claim
or claims made in any Officer's Certificate, the Agent and
Colmena will attempt in good faith to agree upon the rights of
the respective parties with respect to each of such claims.
(b) If the Agent and Colmena should so agree, a memorandum
setting forth such agreement will be prepared and signed by
both Parties and will be furnished to the Undisclosed
Liabilities Escrow Agent.
(c) The Undisclosed Liabilities Escrow Agent will be entitled
to rely on any such memorandum and distribute shares of
Colmena's common stock or other property from the Undisclosed
Liabilities Escrow Fund in accordance with the terms thereof.
(2) (a) If no such agreement can be reached after good faith
negotiation, either Colmena or the Agent may demand
arbitration of the matter unless the amount of the damage or
loss is at issue in pending litigation with a third party, in
which event arbitration will not be commenced until such
amount is ascertained or both Parties agree to arbitration;
and in either such event the matter will be settled by
arbitration conducted by three arbitrators.
(b) Colmena and the Agent will each select one arbitrator, and
the two arbitrators so selected will select a third
arbitrator.
(c) The arbitrators will set a limited time period and
establish procedures designed to reduce the cost and time for
discovery while allowing the Parties an opportunity, adequate
in the sole judgment of the arbitrators, to discover relevant
information from the opposing Parties about the subject matter
of the dispute.
(d) The arbitrators will rule upon motions to compel or limit
discovery and will have the authority to impose sanctions,
including attorneys' fees and costs, to the extent as a court
of competent law or equity, should the arbitrators determine
that discovery was sought without substantial justification or
that discovery was refused or objected to without substantial
justification.
(e) The decision of a majority of the three arbitrators as to
the validity and amount of any claim in such Officer's
Certificate will be binding and conclusive upon the Parties to
this Agreement, and notwithstanding anything in Section
7.2(E)(1) hereof, the Undisclosed Liabilities Escrow Agent
will be entitled to act in accordance with such decision and
make or withhold payments out of the Undisclosed Liabilities
Escrow Fund in accordance therewith.
(f) Such decision will be written and will be supported by
written findings of fact and conclusions of law, which will
set forth the award, judgment, decree or order awarded by the
arbitrators.
(3) (a) (i) Judgment upon any award rendered by the arbitrators
may be entered in any court having jurisdiction.
(ii) Any such arbitration will be held in Palm Beach
County, Florida, under the rules then in effect of
the American Arbitration Association to the extent
such rules are not inconsistent with this Section
7.2(G).
(b) For purposes of this Section 7.2(G), in any arbitration
hereunder in which any claim or the amount thereof stated in
the Officer's Certificate is at issue, Colmena will be deemed
to be the Non-Prevailing Party in the event that the
arbitrators award Colmena less than the sum of 50% of the
disputed amount plus any amounts not in dispute; otherwise,
the NetWorth Stockholders as represented by the Agent will be
deemed to be the Non-Prevailing Party.
(c) The Non-Prevailing Party to the arbitration will pay its
own expenses, the fees of each arbitrator, the administrative
fee of the American Arbitration Association, and the expenses,
including without limitation, reasonable attorneys' fees and
costs, incurred by the other party to the arbitration.
(H) Agent of the Stockholders: Power of Attorney.
(1) (a) (i) Xxxxxx Xxxxx is hereby irrevocably appointed as the
agent and attorney-in-fact (the "Agent") for each
stockholder of NetWorth, for and on behalf of the
NetWorth Stockholders, to give and receive notices
and communications, to authorize delivery to Colmena
of Colmena's common stock or other property from the
Escrow Funds in satisfaction of claims by Colmena, to
object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand
arbitration and comply with orders of courts and
awards of arbitrators with respect to such claims,
and to take all actions necessary or appropriate in
the judgment of Agent for the accomplishment of the
foregoing.
(ii) Such agency may be changed by the NetWorth
Stockholders from time to time upon not less than
thirty (30) days' prior written notice to Colmena;
provided that the Agent may not be removed unless
holders of a two-thirds interest of the common stock
comprising the subject Escrow Fund agree to such
removal and to the identity of the substituted agent.
(iii) No bond will be required of the Agent, and the Agent
will not receive compensation for his or her
services.
(iv) Notices or communications to or from the Agent will
constitute notice to or from each of the NetWorth
Stockholders.
(b) The Agent will be entitled to submit a claim and receive
reimbursement from the Escrow Funds for all reasonable,
documented out-of-pocket expenses incurred by the Agent as a
result of serving as the Agent; provided, however, that such
right to reimbursement will be subordinate to Colmena's claims
on the Escrow Funds, if any, and will be paid only after all
such claims have been satisfied.
(c) Any such reimbursement will be paid in shares of Colmena's
common stock out of the Escrow Fund.
(d) For purposes of such reimbursement of the Agent only, such
shares will be valued at the average of the closing prices of
Colmena's common stock for the ten trading days ending on the
day prior to the date the Undisclosed Liabilities Escrow Agent
pays such reimbursement amount.
(2) (a) The Agent will not be liable for any act done or omitted
hereunder as Agent while acting in good faith and in the
exercise of reasonable judgment.
(b) The NetWorth Stockholders on whose behalf shares of
Colmena's common stock were contributed to the subject Escrow
Fund will severally indemnify the Agent and hold the Agent
harmless against any loss, liability or expense incurred
without negligence or bad faith on the part of the Agent and
arising out of or in connection with the acceptance or
administration of the Agent's duties hereunder, including the
reasonable fees and expenses of any legal counsel retained by
the Agent.
(I) Actions of the Agent.
(1) A decision, act, consent or instruction of the Agent will
constitute a decision of all the stockholders for whom shares
of Colmena's common stock otherwise issuable to them are
deposited in the Escrow Funds and will be final, binding and
conclusive upon each of such stockholders, and the Escrow
Agents and Colmena may rely upon any such decision, act,
consent or instruction of the Agent as being the decision,
act, consent or instruction of every such stockholder.
(2) The Escrow Agents and Colmena are hereby relieved from any
liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of
the Agent.
(J) Third-Party Claims.
(1) In the event Colmena becomes aware of a third-party claim
which Colmena believes may result in a demand against the
Undisclosed Liabilities Escrow Fund, Colmena will notify the
Agent of such claim, and the Agent and the NetWorth
Stockholders will be entitled, at their expense, to
participate in any defense of such claim.
(2) Colmena will have the right in its sole discretion to settle
any such claim; provided, however, that except with the
consent of the Agent, no settlement of any such claim with
third-party claimants will alone be determinative of the
validity of any claim against the Undisclosed Liabilities
Escrow Fund.
(3) In the event that the Agent has consented to any such
settlement, the Agent will have no power or authority to
object under any provision of this Article VII to the amount
of any claim by Colmena against the Undisclosed Liabilities
Escrow Fund with respect to such settlement.
(K) Escrow Agents' Duties.
(1) (a) The Escrow Agents will be obligated only for the
performance of such duties as are specifically set forth
herein, and as set forth in any additional written escrow
instructions which the Escrow Agents may receive after the
date of this Agreement which are signed by an officer of
Colmena and the Agent, and may rely and will be protected in
relying or refraining from acting on any instrument reasonably
believed to be genuine and to have been signed or presented by
the proper party or parties.
(b) The Escrow Agents will not be liable for any act done or
omitted hereunder as Escrow Agents while acting in good faith
and in the exercise of reasonable judgment, and any act done
or omitted pursuant to the advice of counsel will be
conclusive evidence of such good faith.
(2) (a) The Escrow Agents are hereby expressly authorized to
disregard any and all warnings given by any of the Parties or
by any other person, excepting only orders or process of
courts of law, and is hereby expressly authorized to comply
with and obey orders, judgments or decrees of any court.
(b) In case the Escrow Agents obey or comply with any order,
judgment or decree of any court, the Escrow Agents will not be
liable to any of the Parties or to any other person by reason
of such compliance, notwithstanding any such order, judgment
or decree being subsequently reversed, modified, annulled, set
aside, vacated or found to have been entered without
jurisdiction.
(3) The Escrow Agents will not be liable in any respect on account
of the identity, authority or rights of the Parties executing
or delivering or purporting to execute or deliver this
Agreement or any documents or papers deposited or called for
hereunder.
(4) The Escrow Agents will not be liable for the expiration of any
rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agents.
(5) The Escrow Agents may resign at any time upon giving at least
thirty (30) day's written notice to Colmena and the Agent to
this Agreement; provided, however, that no such resignation
will become effective until the appointment of a successor
escrow agent, which will be accomplished as follows:
(a) Colmena and the Agent will use their best efforts to
mutually agree upon a successor agent within thirty
(30) days after receiving such notice.
(b) If the Parties fail to agree upon a successor escrow
agent within such time, Colmena will have the right
to appoint a successor escrow agent authorized to do
business in Florida.
(c) The successor escrow agent selected in the preceding
manner will execute and deliver an instrument
accepting such appointment and it will thereupon be
deemed the subject Escrow Agent hereunder and it will
without further acts be vested with all the estates,
properties, rights, powers, and duties of the
predecessor Escrow Agent as if originally named as
Escrow Agent.
(d) Thereafter, the predecessor Escrow Agent will be
discharged for any further duties and liabilities
under this Agreement.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination.
This Agreement may be terminated and the Reorganization abandoned at
any time prior to the Closing Date, as follows:
(A) By mutual consent of NetWorth and Colmena.
(B) By Colmena if it is not in Material breach of its obligations under
this Agreement and there has been a Material breach of any representation,
warranty, covenant or agreement contained in this Agreement on the part of
NetWorth and such breach has not been cured within fifteen days after notice to
NetWorth.
(C) By NetWorth if it is not in Material breach of its respective
obligations under this Agreement and there has been a Material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Colmena and such breach has not been cured within 15 days after
notice to Colmena;
(D) By any Party if:
(1) The Reorganization has not occurred by September 30, 2004 ;
(2) There is a final non-appealable order of a federal or state
court in effect preventing consummation of the Reorganization;
(3) There will be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Reorganization by any Governmental Entity
which would make consummation of the Reorganization illegal;
or
(4) There will be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Reorganization by any Governmental Entity,
which would:
(a) Prohibit Colmena's or NetWorth's ownership or
operation of all or a Material portion of the
business of NetWorth, or compel Colmena or NetWorth
to dispose of or hold separate all or a Material
portion of the business or assets of NetWorth or
Colmena as a result of the Reorganization; or
(b) Render Colmena or NetWorth unable to consummate the
Reorganization, except for any waiting period
provisions.
(E) Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it will be sufficient for such action to be authorized by the board
of directors (as applicable) of the Party taking such action.
8.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section
8.1, this Agreement will immediately become void and there will be no liability
or obligation on the part of Colmena or NetWorth or their respective officers,
directors or stockholders, except if such termination results from the breach by
a Party of any of its representations, warranties, covenants or agreements set
forth in this Agreement (it being understood that termination of this Agreement
because of failure of NetWorth to satisfy the condition set forth in Section
6.3(A) as a result of the occurrence of a Post-Execution Event will not be
deemed to be a termination resulting from such a breach of representation or
warranty.)
8.3 Amendment.
(A) This Agreement may be amended by the Parties at any time before or
after approval of matters presented in connection with the Closing by the
stockholders of those Parties required by applicable law to so approve but,
after any such stockholder approval, no amendment will be made which by law
requires the further approval of stockholders of a party without obtaining such
further approval.
(B) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties.
8.4 Extension & Waiver.
(A) At any time prior to the Closing any Party may, to the extent legally
allowed:
(1) Extend the time for the performance of any of the obligations
or other acts of the other Parties;
(2) Waive any inaccuracies in the representations and warranties
made to such party contained herein or in any document
delivered pursuant hereto; or
(3) Waive compliance with any of the agreements or conditions for
the benefit of such Party contained herein.
(B) Any agreement on the part of a Party to any such extension or waiver
will be valid only if set forth in an instrument in writing signed on behalf of
such Party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Interpretation.
(A) When a reference is made in this Agreement to Schedules or Exhibits,
such reference will be to a Schedule or Exhibit to this Agreement unless
otherwise indicated.
(B) The words "include," "includes" and "including" when used herein will
be deemed in each case to be followed by the words "without limitation."
(C) The table of contents and headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
(D) The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
(E) All pronouns and any variations thereof will be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
(F) The Parties agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction providing
that ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
9.2 Notice.
(A) All notices, demands or other communications given hereunder will be in
writing and will be deemed to have been duly given on the first business day
after mailing by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(1) TO COLMENA:
Colmena Corp.
000 XX 00xx Xxxxxx; Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxx, Chairman of the Board & President
Telephone (000) 000-0000, Fax (000) 000-0000; and, e-mail xxxxx@xxxxxxxxx.xxx
(2) TO NETWORTH:
NetWorth Systems, Inc.
0000 XX 0xx Xxxxxx, Xxxxx 000; Ft. Xxxxxxxxxx, XX 00000
Attention: Xxxx Xxxxx, President
Telephone (000) 000-0000; Fax (000) 000-0000; e-mail xxxxxx@xxxxxxxxxx.xxx;
with a copy to
Xxxxxxx Xxxxx, Esquire
Xxxxxx, Xxxxxxx & Xxxxx
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000; Xxxx Xxxxx, XX 00000
Telephone (000) 000-0000; Fax (000) 000-0000 and, e-mail xxxxxx@xxx-xxx.xxx
(3) TO XX. XXXXX, AS AGENT FOR NETWORTH STOCKHOLDERS:
0000 XX 0xx Xxxxxx, Xxxxx 000; Ft. Xxxxxxxxxx, XX 00000
Telephone (000) 000-0000; Fax (000) 000-0000; e-mail xxxxxx@xxxxxxxxxx.xxx;
(4) TO THE UNDISCLOSED LIABILITIES ESCROW AGENT:
Xxxxxxx Xxxxx, Esquire
Xxxxxx, Xxxxxxx & Xxxxx
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000; Xxxx Xxxxx, XX 00000
Telephone (000) 000-0000; Fax (000) 000-0000; and, e-mail xxxxxx@xxx-xxx.xxx
or to such other address or to such other person as any Party will designate to
the other for such purpose in the manner hereinafter set forth.
(B) At the request of any Party, notice will also be provided by overnight
delivery, facsimile transmission or e-mail, provided that a transmission receipt
is retained.
(C) (1) All of the Parties acknowledge that they should retain
independent legal and accounting counsel to review this
Agreement and its exhibits and incorporated materials on their
behalf.
(2) The decision by any Party not to use the services of legal
counsel in conjunction with this transaction will be solely at
its own risk, each Party acknowledging that applicable rules
of the Florida Bar prevent Colmena's counsel, who has
reviewed, approved and caused modifications to this Agreement
on behalf of Colmena, from representing anyone other than
Colmena in this transaction.
9.3 Merger of All Prior Agreements Herein.
(A) This instrument, together with the instruments referred to herein,
contains all of the understandings and agreements of the Parties with respect to
the subject matter discussed herein.
(B) All prior agreements whether written or oral are merged herein and will
be of no force or effect.
9.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein will survive the execution hereof and the Closing and will be
effective regardless of any investigation that may have been made or may be made
by or on behalf of any Party.
9.5 Severability.
If any provision or any portion of any provision of this Agreement,
other than one of the conditions precedent or subsequent, or the application of
such provision or any portion thereof to any person or circumstance will be held
invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
will not be affected thereby.
9.6 Governing Law.
This Agreement will be construed in accordance with the substantive and
procedural laws of the State of Delaware (other than those regulating Taxation
and choice of law).
9.7 Indemnification.
(A) Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
they or any one of them may become subject as a direct, indirect or incidental
consequence of any action by the indemnifying Party or as a consequence of the
failure of the indemnifying Party to act, whether pursuant to requirements of
this Agreement or otherwise.
(B) In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party will be entitled to
recover from the indemnifying Party, all costs incurred including reasonable
attorneys' fees throughout any negotiations, trials or appeals, whether or not
any suit is instituted.
9.8 Dispute Resolution.
(A) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement any proceedings
pertaining directly or indirectly to the rights or obligations of the Parties
hereunder will, to the extent legally permitted, be held in Palm Beach County,
Florida, and the prevailing Party will be entitled to recover its costs and
expenses, including reasonable attorneys' fees up to and including all
negotiations, alternative dispute resolution proceedings, trials and appeals,
whether or not any formal proceedings are initiated.
(B) Except for the arbitration procedures outlined in paragraphs 7.2(G)(2)
and 7.2(G)(3) which will govern any arbitration proceeding described therein, in
the event of any dispute arising under this Agreement, or the negotiation
thereof or inducements to enter into the Agreement, the dispute will, at the
request of any Party, be exclusively resolved through the following procedures:
(1) (a) First, the issue will be submitted to mediation
before a mediation service in Palm Beach County,
Florida to be selected by lot from four alternatives
to be provided, two by Colmena and two by NetWorth.
(b) The mediation efforts will be concluded within ten
business days after their initiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties will
submit the dispute to binding arbitration before an
arbitration service located in Palm Beach County, Florida to
be selected by lot, from four alternatives to be provided, two
by Colmena and two by NetWorth.
(3) (a) Expenses of mediation will be borne equally by the
Parties, if successful.
(b) Expenses, including reasonable attorneys' fees, of
mediation, if unsuccessful, and of arbitration, will
be borne by the Party or Parties against whom the
arbitration decision is rendered.
(c) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration will be borne equally by
the Parties involved.
9.9 Benefit of Agreement.
The terms and provisions of this Agreement will be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees but are not intended to confer upon
any other person any rights or remedies hereunder.
9.10 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
9.11 Counterparts.
(A) This Agreement may be executed in any number of counterparts.
(B) All executed counterparts will constitute one Agreement notwithstanding
that all signatories are not signatories to the original or the same
counterpart.
(C) Execution by exchange of facsimile transmission will be deemed legally
sufficient to bind the signatory; however, the Parties will, for aesthetic
purposes, prepare a fully executed original version of this Agreement which will
be the document filed with the Commission.
9.12 License.
(A) This form of agreement is the property of Colmena and has been
customized for this transaction by Xxxxx X. Xxxxxx, Esquire, Colmena's counsel.
(B) The use of this form of agreement by the Parties is authorized hereby
solely for purposes of this transaction.
(C) The use of this form of agreement or of any derivation thereof for any
other purpose without Colmena's prior written permission is prohibited.
NETWORTH, LLC
FOOTNOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
IN WITNESS WHEREOF, Colmena, NetWorth, the NetWorth Stockholders and
the Escrow Agent (with respect to the Escrow Agent, as to matters set forth in
Section 1.2(A)(2)(a) and Article VII only) have caused this Agreement to be
executed by themselves or their duly authorized respective officers, all as of
the last date set forth below:
Signed, sealed and delivered
In Our Presence:
/s/ April X. Xxxxx
---------------------
April X. Xxxxx
/s/ Xxxxxxxx XxxXxxxx
---------------------
Xxxxxxxx XxxXxxxx COLMENA CORP.
(A Delaware corporation)
By: /s/Xxxxxxx X. Xxxxx
---------------------------
Xxxxxxx X. Xxxxx, President
Dated: August 20, 2004
(Corporate Seal)
/s/ April X. Xxxxx
---------------------
April X. Xxxxx
/s/ Xxxxxxxx XxxXxxxx
--------------------- NETWORTH SYSTEMS, INC.
Xxxxxxxx XxxXxxxx (a Florida corporation)
By: /s/L. Xxxxxx Xxxxx
-----------------------
Xxxxxx Xxxxx, President
Dated: August 20, 2004
(Corporate Seal)
/s/ April X. Xxxxx
---------------------
April X. Xxxxx
/s/ Xxxxxxxx XxxXxxxx
---------------------
Xxxxxxxx XxxXxxxx NETWORTH STOCKHOLDERS
/s/ L. Xxxxxx Xxxxx
-----------------------------------
Xxxxxx Xxxxx.
As the duly appointed and serving
agent for all of the securities
holders of NetWorth Systems, Inc.
Dated: August 20, 2004
NETWORTH, LLC
FOOTNOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 2003
THE ESCROW AGENT
Executing this Agreement solely with reference to the provisions
specifically pertaining to the performance of his duties as Escrow Agent:
/s/ April X. Xxxxx
---------------------
April X. Xxxxx
/s/ Xxxxxxxx XxxXxxxx
---------------------
Xxxxxxxx XxxXxxxx By: /s/Xxxxxxx Xxxxx
-------------------
Xxxxxxx Xxxxx, Esq.
Dated: August 20, 2004
