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EXHIBIT 2
MERGER AGREEMENT
AND
PLAN OF REORGANIZATION
THIS MERGER AGREEMENT AND PLAN OF REORGANIZATION ("AGREEMENT") is made and
entered into as of December 15, 2000, by and among: NATIONAL AUTO CREDIT, INC.
("NAC" or the "PARENT"), a Delaware corporation; ZLT ACQUISITION CORP. ("ZLT" or
"MERGER SUB"), a Delaware corporation and a wholly owned subsidiary of Parent;
ZOOMLOT CORPORATION ("ZOOMLOT" or the "ACQUIRED COMPANY"), a Delaware
corporation; and (each of the following, a "SHAREHOLDER" and all of the
following together, collectively, the "SHAREHOLDERS") Xxxxxx X. Xxxxxx XX, Verde
Reinsurance Company, Ltd., a Nevis Island corporation, Xxxxx Xxxxxx III 2000
Trust, Xxxxx Xxxxxx 2000 Trust, Xxx Xxxxx, Xxxxxx Xxxxxxx, Xxxx Xxxxxx, EJMS
Investors Limited Partnership, an Arizona limited partnership, Xxxxx Xxxxxxxxx,
Xxxxx Xxxxxxx, Xxxxx Xxxxxxx, Xxxx Xxxxxx, and Xxxxx Xxxxxx.
RECITALS
A. NAC wishes to acquire all of the outstanding capital stock of
ZoomLot from the Shareholders.
B. NAC, Merger Sub, ZoomLot, and the Shareholders intend to effect a
merger of ZoomLot with and into Merger Sub (the "MERGER") in
accordance with this Agreement and the Delaware General Corporation
Law (the "DELAWARE CORPORATE LAW"). Upon consummation of the Merger,
ZoomLot will have been merged into Merger Sub, which, as the
surviving corporation of the Merger, will succeed to all of the
assets and liabilities of ZoomLot, will change its name to ZoomLot
Corporation and, subject to the terms of this Agreement, will
continue to carry on the business of ZoomLot.
C. It is intended that the Merger qualify as a tax-free reorganization
within the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "CODE").
D. NAC has caused the formation of Merger Sub for the purpose of
accomplishing a tax-free triangular merger with ZoomLot.
E. This Agreement has been approved by the respective boards of
directors of NAC, Merger Sub and ZoomLot and has been adopted by
NAC, as the sole stockholder of Merger Sub.
F. In connection with the execution and delivery of this Agreement,
some or all of the Shareholders are executing and delivering to
Parent (i) a Registration Rights Agreement dated as of even date
herewith, (ii) a certain Lockup, Standstill and Voting Agreement,
dated as of even date herewith, wherein such Shareholders have
agreed, inter alia, to certain restrictions on the transfer of the
shares of capital stock of NAC to be received by them in the Merger
and to certain other restrictions and, under certain circumstances,
to vote their shares in NAC in a prescribed manner and (iii) certain
Employment Agreements,.
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NOW, THEREFORE, in consideration of the premises and mutual covenants set
forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto, intending to
be bound hereby, do mutually agree as follows:
ARTICLE 1
THE MERGER
In connection with the Merger, the respective boards of directors of NAC,
ZLT and ZoomLot have, by resolutions duly adopted, approved the following
provisions of this Article 1 as the plan of merger required by the applicable
provisions of the Delaware Corporate Law:
1.1 THE MERGER. At the Effective Time (as defined in SECTION 1.3), in
accordance with this Agreement and the Delaware Corporate Law, ZoomLot shall be
merged with and into Merger Sub, the separate existence of ZoomLot (except as
such existence may be continued by operation of law) shall cease, and Merger Sub
shall continue as the surviving corporation under the corporate name of "ZoomLot
Corporation." Merger Sub, in its capacity as the corporation surviving the
Merger, sometimes is referred to herein as the "SURVIVING CORPORATION."
1.2 EFFECT OF THE MERGER. The Surviving Corporation shall possess all the
rights, privileges, immunities and franchises, of a public as well as of a
private nature, of each of Merger Sub and ZoomLot (collectively, the
"CONSTITUENT CORPORATIONS"); all property, real, personal and mixed, and all
accounts payable arising in the ordinary course of business and accrued expenses
due on whatever account, and all debts, liabilities and duties due to each of
the Constituent Corporations shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; and the
Surviving Corporation shall be responsible and liable for all liabilities and
obligations of each of the Constituent Corporations, in each case in accordance
with Delaware Corporate Law and, to the extent applicable, Arizona Law.
1.3 CONSUMMATION OF THE MERGER. The parties hereto will cause a
certificate of merger relating to the Merger to be delivered to the Secretary of
State of the State of Delaware in accordance with Delaware Corporate Law. The
Merger shall be effective at such time as such certificate of merger is duly
filed with the Secretary of State of the State of Delaware. The date and time
when the Merger shall become effective is referred to herein as the "EFFECTIVE
TIME." It is the intention of the parties to cause such certificate of merger to
be filed with the Secretary of State of the State of Delaware during the Closing
(as defined in SECTION 1.7 below).
1.4 CERTIFICATE OF INCORPORATION AND BYLAWS: DIRECTORS AND OFFICERS.
(a) The Certificate of Incorporation and Bylaws of Merger Sub, as in
effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation
immediately after the Effective Time and shall thereafter continue to
be its Certificate of Incorporation and Bylaws
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until amended or otherwise changed as provided therein and under the
Delaware Corporate Law.
(b) NAC, as the sole shareholder of the Surviving Corporation, shall
vote its shares in the Surviving Corporation so as to cause the Board
of Directors of the Surviving Corporation immediately after the
Effective Time to consist of three (3) directors, two (2) of which are
to be nominated by NAC and one (1) of which (the "SHAREHOLDER'S
DIRECTOR") is to be nominated by the Shareholders' Representative (as
defined in SECTION 9.11 below). The initial Shareholders' Director
shall be Xxx Xxxxx. The Board of Directors of the Surviving
Corporation shall continue to consist of three (3) directors until the
end of the Forfeiture Period (as defined in SECTION 1.8(b) below), and
the Shareholders shall retain the right to nominate the Shareholders'
Director until the end of the Forfeiture Period. If at any time, while
the Shareholders are entitled to nominate the Shareholders' Director,
it becomes necessary or the Shareholders desire to replace the
incumbent Shareholders' Director, the Shareholders' Representative, on
behalf of the Shareholders, shall notify NAC (and NAC shall notify any
other shareholders, if any, of the Surviving Corporation) of their
intentions and shall specify the Shareholders' new nominee. If at such
time NAC is the sole shareholder of the Surviving Corporation, NAC
shall cause the board of directors of the Surviving Corporation to
include the Shareholders' new nominee; but if at such time NAC is not
the sole shareholder of the Surviving Corporation, NAC shall vote its
shares in the Surviving Corporation in favor of causing the Board of
Directors of the Surviving Corporation to include the Shareholders'
new nominee. Following the end of the Forfeiture Period, the
shareholders of the Surviving Corporation shall have full control over
the composition of the Board of Directors of the Surviving Corporation
(c) The officers of ZoomLot holding office immediately prior to the
Effective Time shall be the officers of the Surviving Corporation
immediately after the Effective Time, holding the same offices as they
held with ZoomLot prior thereto.
1.5 CONVERSION OF SECURITIES. At the Effective Time, by virtue of the
Merger and without any action on the part of Merger Sub, ZoomLot or the holders
of any of the outstanding securities will be treated as follows:
(a) All 100,000 shares of common stock (the "ZOOMLOT COMMON STOCK"),
par value $.01 per share, of ZoomLot issued and outstanding
immediately prior to the Effective Time shall automatically be
canceled and extinguished and shall be converted into and become (i)
270,953 validly issued, fully-paid and nonassessable shares of NAC's
Series B preferred stock ("SERIES B PREFERRED STOCK"), par value $.50
per share and with the rights and preferences therefor as designated
pursuant to the Certificate of Designations in the form attached
hereto as EXHIBIT J (the "CERTIFICATE OF DESIGNATIONS") and (ii)
729,047 validly issued, fully-paid and nonassessable shares of NAC's
Series C preferred stock ("SERIES C PREFERRED STOCK"), par value $.50
per share and with the rights and preferences therefor as designated
pursuant to the Certificate of Designations, all of which
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shares of Series B Preferred Stock and Series C Preferred Stock
(collectively, the "NAC MERGER SHARES") shall be issuable to and among
the Shareholders pro rata; provided, however, that no fractional
shares of Series B or Series C Preferred Stock shall be issued to any
Shareholder, but any fractional share of Series B or Series C
Preferred Stock shall be rounded up or down to the nearest whole
number share of Series B or Series C Preferred Stock.
(b) Each share of common stock, par value $.01 per share, of Merger
Sub issued and outstanding immediately prior to the Effective Time
shall continue to constitute one validly issued, fully-paid and
nonassessable share of common stock, par value $.01 per share, of the
Merger Sub as the Surviving Corporation.
(c) The number of NAC Merger Shares set forth in subsection (a) above
shall be adjusted to reflect fully the effect of any stock split,
reverse split, stock dividend (including any dividend or distribution
of securities convertible into NAC common stock, $.05 par value per
share (the "NAC COMMON STOCK")), reorganization, recapitalization or
other like change with respect to NAC Common Stock occurring after the
date hereof and prior to the Effective Time.
1.6 REORGANIZATION. The parties hereby adopt this Agreement as a "plan of
reorganization" and shall consummate the Merger in accordance with Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code. None of the parties shall take a
reporting position inconsistent with the treatment of the Merger as a
reorganization pursuant to Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code.
Further, none of the parties shall take a reporting position reflecting the NAC
Merger Shares as either (i) "nonqualified preferred stock" (as defined in
Section 351(g)(2) of the Code) or (ii) "Section 306 stock" (as defined in
Section 306(c) of the Code).
1.7 CLOSING. The closing (the "CLOSING") of the transactions contemplated
by this Agreement shall occur immediately upon the due execution hereof by all
of the parties hereto at such place and at such time as the parties may mutually
agree upon. It is the intention of the parties to cause the certificate of
merger to be filed with the Secretary of State of the State of Delaware during
the Closing. If necessary to accomplish all of the transactions provided for
herein or contemplated hereby, the Closing may occur over more than one day, but
in any event no later than December 31, 2000. Notwithstanding anything contained
herein to the contrary, immediately upon the execution and delivery of this
Agreement by or on behalf of all of the parties hereto, the Shareholders shall
be entitled to have two individuals, as designated by the Shareholders'
Representative (as hereinafter defined), appointed to fill vacancies, and to
serve, on the board of directors of NAC pending completion of the Closing, any
such appointment to be effective until such time as the registered holders of
shares of the Series B Preferred Stock (voting as a class) are entitled,
pursuant to the Certificate of Designations, for the first time to elect one or
more members to the board of directors of NAC or, if earlier, until the passage
of December 31, 2000 without the completion or consummation of the Closing.
1.8 DELIVERY OF CERTIFICATES, POSSIBILITY OF FORFEITURE.
(a) DELIVERY. At the Closing, NAC shall deliver to each Shareholder a
stock certificate or certificates registered in his, her or its name
representing 100% of
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such Shareholder's pro rata portion (based upon his, her or its
percentage ownership of the outstanding ZoomLot Common Stock
immediately prior to the Effective Time) of the NAC Merger Shares,
certain of which certificates will be subject to the possibility of
forfeiture as set forth in SECTION 1.8(b) below. The shares of Series
C Preferred Stock to be issued to each Shareholder shall be
represented by two stock certificates, each representing one-half
(1/2) of the total number of shares of Series C Preferred Stock to be
issued to such Shareholder.
(b) POSSIBILITY OF FORFEITURE, OBJECTIVES. The shares of Series B
Preferred Stock and 62,380 shares of the Series C Preferred Stock to
be issued in the Merger shall not be subject to forfeiture (the Series
B Preferred Stock and such shares of Series C Preferred Stock are
hereinafter referred to collectively as the "NONFORFEITABLE SHARES").
Prior to December 31, 2003 (such date being referred to as the
"EXPIRATION DATE" and the period between the Closing and the
Expiration Date being referred to as the "FORFEITURE PERIOD"), the
remainder of the shares of the Series C Preferred Stock issued in the
Merger as contemplated under SECTION 1.5(a) above (such shares
collectively the "FORFEITABLE SHARES") shall be subject to forfeiture
and return to NAC in the event that the Surviving Corporation does not
meet certain objectives (the "FIRST OBJECTIVE" and the "SECOND
OBJECTIVE," respectively, and collectively the "OBJECTIVES") that are
set forth in the attached EXHIBIT A. Upon the issuance of any stock
certificate representing those shares of Series C Preferred Stock that
are Nonforfeitable Shares, a designation shall be made on such stock
certificate that the shares represented thereby are Nonforfeitable
Shares; and upon the issuance of any stock certificate representing
those shares of Series C Preferred Stock that are Forfeitable Shares,
a designation shall be made on such stock certificate that the shares
represented thereby are Forfeitable Share
In the event the Surviving Corporation (together with its consolidated
subsidiaries, if any) meets the First Objective on or before the
Expiration Date, one-half (1/2) of the Forfeitable Shares will cease
to be subject to forfeiture. In the event the Surviving Corporation
(together with its consolidated subsidiaries, if any) meets the Second
Objective on or before the Expiration Date, the remaining one-half
(1/2) of the Forfeitable Shares will cease to be subject to
forfeiture. Notwithstanding the foregoing, if by the Expiration Date
the Surviving Corporation (together with its consolidated
subsidiaries, if any) has met the Second Objective but not the First
Objective, none of the Forfeitable Shares shall be forfeited.
(c) PROCEDURE. For purposes of determining whether either or both of
the Objectives have been achieved and/or the performance and
development criteria set forth in EXHIBIT E attached hereto have been,
or are being, complied with, the parties shall use the following
procedure. Promptly after the preparation of financial statements for
each fiscal quarter, NAC shall deliver to the Shareholders'
Representative (as hereinafter defined) the consolidated balance sheet
and income statements for the Surviving Corporation and its
subsidiaries for such fiscal quarter and for the fiscal year-to-date
through the end of such fiscal quarter (the
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"FINANCIAL STATEMENTS"), which statements shall have been prepared in
accordance with generally accepted accounting principles ("GAAP") (but
excluding footnotes and other disclosures required by GAAP). NAC shall
also calculate the earnings before interest, taxes, depreciation and
amortization of the Surviving Corporation and its consolidated
subsidiaries (the "SURVIVING CORPORATION EBITDA"), which shall be
adjusted as necessary to exclude any corporate overhead, management
fee or similar expenses, if any, of NAC, and any other financial or
operating results referred to on EXHIBIT A hereto and shall provide to
the Shareholders' Representative a statement setting forth in
reasonable detail the computation thereof. The foregoing calculation
of the Surviving Corporation EBITDA and such other financial or
operating results shall be used in determining whether any shares
continue to be subject to forfeiture under SECTION 1.8(b) hereof
unless, within fifteen (15) days after the initial determination
thereof has been given to the Shareholders' Representative, the
Shareholders' Representative has given NAC notice (the "EBITDA DISPUTE
NOTICE") that the Shareholders' Representative disputes the
calculation of the Surviving Corporation EBITDA or other financial or
operating results, which notice shall set forth in reasonable detail
the exclusions or calculations being disputed in good faith. In the
event an EBITDA Dispute Notice is timely given by the Shareholders'
Representative, NAC and the Shareholders' Representative shall attempt
in good faith to resolve the dispute. Each party shall cooperate fully
with the other in connection with the foregoing calculation and shall
permit access to all information reasonably necessary to make or
verify such calculation.
(d) ARBITRATION. If NAC and the Shareholders' Representative are
unable to resolve a dispute as to the satisfaction of the First
Objective or the Second Objective or as to whether the performance and
development criteria set forth in EXHIBIT E have been, or are being,
met in all material respects, such dispute will be resolved by binding
arbitration before a single, independent arbitrator who is or has been
a Certified Public Accountant actively engaged in accounting practice.
In the event that NAC and the Shareholders' Representative are unable
to agree upon an arbitrator, the arbitrator will be selected by the
American Arbitration Association ("AAA") located in New York City in
accordance with the commercial arbitration rules of the AAA. Any
arbitration proceeding contemplated hereunder (whether pursuant to
this SECTION 1.8(d) or any other provision of this Agreement) shall be
conducted in New York City. Each of NAC and the Shareholders shall
bear their own costs in connection with any arbitration. The
resolution of disputes by such arbitrator shall be set forth in
writing and shall be conclusive and binding upon, and non-appealable
by, the parties, and the determination of (A)(i) the Surviving
Corporation EBITDA and/or such other financial or operating results
used in determining whether any shares continue to be subject to
forfeiture and (ii) whether or not an Objective has been satisfied and
(B) whether the performance and development criteria set forth in
EXHIBIT E have been, or are being, met in all material respects, or
with respect to any other matter contemplated hereunder to be
determined or resolved by arbitration, shall become final upon the
date of such resolution, and may be entered as a final judgment in any
court of proper jurisdiction
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(e) VALUATION EVENT. The Forfeitable Shares shall also cease to be
subject to forfeiture upon the occurrence of any of the following
events (each a "VALUATION EVENT") at any time on or before the
Expiration Date: (i) the execution by the Surviving Corporation or one
of its subsidiaries, during the Forfeiture Period, of an agreement
that provides for a private cash equity investment in the Surviving
Corporation or such subsidiary of not less than $10 million and
pursuant to which the pre-money valuation of the Surviving Corporation
and its subsidiaries is $30 million or more, provided that the
transaction contemplated by such agreement closes prior to or within
120 days following the Expiration Date; (ii) the execution, during the
Forfeiture Period, of an agreement for the sale by NAC of all or
substantially all of the equity or assets of the Surviving Corporation
in a transaction in which the Surviving Corporation and/or its
subsidiaries are valued at $30 million or more, provided that the
transaction contemplated by such agreement closes prior to or within
120 days following the Expiration Date; (iii) the execution, during
the Forfeiture Period, of an agreement or plan that provides for (A) a
firm commitment underwritten initial public offering by the Surviving
Corporation, (B) a reverse merger pursuant to which the Surviving
Corporation or any of its subsidiaries is to become a reporting
company under the Securities Exchange Act of 1934 (the "EXCHANGE
ACT"), (C) a spin off in whole or in part of the capital stock of the
Surviving Corporation or any of its subsidiaries to the shareholders
of NAC, or (D) any event similar to the events in (A), (B) and (C), in
each such case in which the Surviving Corporation or any of its
subsidiaries is valued at $30 million or more pre-money and, in the
case of an initial public offering, the proceeds are not less than $10
million, provided in each of the foregoing cases that the transaction
contemplated by such agreement or plan closes prior to or within 120
days following the Expiration Date; (iv) the execution, during the
Forfeiture Period, of an agreement to provide a private cash equity
investment in NAC or any of its subsidiaries of not less than $10
million and pursuant to which the pre-money valuation of the Surviving
Corporation and its subsidiaries is $30 million, wherein $10 million
or more of the proceeds of such investment is intended for the
Surviving Corporation or any of the Surviving Corporation's
subsidiaries, provided that the transaction contemplated by such
agreement closes prior to or within 120 days following the Expiration
Date; (v) the termination by the Surviving Corporation of the
employment of Xxx Xxxxx and Xxxx Xxxxxx, other than for "cause" (as
such term is defined or understood under New York law) or on account
of their disability, if the Surviving Corporation is, at the time of
each of such terminations, in compliance in all material respects with
the performance and development criteria set forth in EXHIBIT E; or
(vi) NAC undergoes a Change in Control, where "CHANGE OF CONTROL"
means any of the following: (A) any merger of NAC in which NAC is not
the continuing or surviving entity or pursuant to which capital stock
of NAC would be converted into cash, securities or other property,
other than a merger of NAC in which the holders of NAC's capital stock
immediately prior to such merger have the same proportionate ownership
of beneficial interest of common stock or other voting securities of
the surviving entity immediately after such merger or (B) the failure
of the individuals who either constituted the Board of Directors of
NAC at the
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conclusion of the first meeting of shareholders of NAC following the
Closing, were elected by the Holders of shares of Series B Preferred
Stock or by a director who was elected by the Holders of shares of
Series B Preferred Stock or were elected or approved by any director
who was elected by the Holders of shares of Series B Preferred Stock
or by a director who was elected by the Holders of shares of Series B
Preferred Stock to constitute a majority of the Board of Directors of
NAC, excluding, however, the election, or the nomination for election
by NAC's shareholders, of any new director approved by a vote of at
least two-thirds of the directors then still in office who were
directors at the conclusion of the first meeting of shareholders of
NAC following the Closing or by vote of the Holders of shares of
Series B Preferred Stock or by a director who was elected by vote of
the Holders of shares of Series B Preferred Stock; or (C) any person
(other than any Shareholder or affiliate of any Shareholder) acquiring
more than 50% of NAC's issued and outstanding capital stock unless
such acquisition, or the transaction pursuant to which such
acquisition was made, was approved or consented to by the Board or
Directors of NAC. For each Valuation Event described in clause (i)
through (iv) of this section, the minimum investment and pre-money
valuation criteria shall each be increased dollar-for-dollar for any
amount in excess of $6.5 million (or, if less, such lesser amount of
funding as may be required to be provided to the Surviving Corporation
pursuant to SECTION 1.11(b) hereof) in funding provided to the
Surviving Corporation by NAC. Whenever this paragraph provides that a
transaction is required to close within a specified period of time in
order to constitute a Valuation Event, NAC agrees that it shall use
commercially reasonable efforts to satisfy all conditions to such
closing that are within NAC's control to permit such transaction to
close within such time period.
(f) LEGEND. In addition to the legend provided in SECTION 4.8 of this
Agreement and any legend that may be required under the Standstill
Agreement, the certificates representing the Forfeitable Shares shall
bear the following legend:
THESE SHARES ARE TAKEN SUBJECT TO A POSSIBILITY OF
FORFEITURE AS SET FORTH IN THE MERGER AGREEMENT AND PLAN OF
REORGANIZATION AMONG NATIONAL AUTO CREDIT INC., ZLT
ACQUISITION CORP., ZOOMLOT CORPORATION, AND XXXXXX X. XXXXXX
XX, VERDE REINSURANCE COMPANY, LTD., XXXXX XXXXXX III 2000
TRUST, XXXXX XXXXXX 2000 TRUST, XXX XXXXX, XXXXXX XXXXXXX,
XXXX XXXXXX, EJMS INVESTORS LIMITED PARTNERSHIP, XXXXX
XXXXXXXXX, XXXXX XXXXXXX, XXXXX XXXXXXX, XXXX XXXXXX, AND
XXXXX XXXXXX. STOP TRANSFER INSTRUCTIONS HAVE BEEN PLACED
AGAINST THESE SHARES TO RESTRICT THEIR TRANSFER, EXCEPT AS
PERMITTED UNDER SUCH MERGER AGREEMENT."
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(g) OTHER MATTERS RELATING TO FORFEITABLE SHARES. During the
Forfeiture Period, the Shareholders will be entitled to all dividends
paid with respect to the Forfeitable Shares and the Forfeitable Shares
shall be treated for all purposes as outstanding stock of NAC. Each of
the parties agrees that inclusion of the forfeiture provisions arises
because of difficulties in determining the current value of either or
both of ZoomLot and NAC. Consistent with the foregoing, none of the
parties shall take a position that the Forfeitable Shares do not
constitute shares received in the reorganization described in SECTION
1.6; provided, however, that, if any of the Forfeitable Shares is
forfeited in accordance with the provisions of this Agreement, such
shares shall be treated as an adjustment in the number of shares
issued in connection with the reorganization. In the event any
Forfeitable Shares shall be forfeited as provided herein, upon the
forfeiture of such Shares any and all dividends or other distributions
theretofore paid or made with respect to such Shares shall forthwith
be returned to NAC.
(h) STOP TRANSFER. Each Shareholder consents to the placing of stop
transfer instructions on the books and records of NAC and its transfer
agent against such Shareholder's NAC Merger Shares (and against any
other of NAC issued as a dividend or other distribution upon, or
issued in exchange for, upon the conversion of or in full or partial
payment or consideration for any NAC Merger Shares) to restrict their
transfer, except as permitted under this Agreement and the Standstill
Agreement.
(i) FORFEITURE MECHANICS.
(i) NAC shall be entitled to immediate return of any Forfeitable
Shares forfeited hereunder from any one or more Shareholders,
individually or jointly, at NAC's discretion, without being required
to seek a proportionate return from all Shareholders.
(ii) If Forfeitable Shares are required to be returned and
the number of Forfeitable Shares that are to be returned has been
determined, the Shareholders' Representative shall have seven (7)
business days from the date of notice sent to the Shareholders'
Representative to return and deliver to NAC the stock certificate(s)
representing such Shares, properly endorsed for transfer to NAC. If
the Shareholders' Representative fails to deliver to NAC the stock
certificate(s) representing such Shares to NAC within such time
period, the Shareholders shall be jointly and severally liable for all
costs and expenses (including legal fees) incurred by NAC in
connection with the return and/or cancellation of such Shares.
(iii) In addition to any other remedy available to NAC hereunder
or at law, upon forfeiture of any Forfeitable Shares, such Shares
shall be deemed cancelled and shall be deemed to no longer be
outstanding, and NAC shall be entitled to treat them as such,
regardless of whether the stock certificate(s) representing such
Forfeitable Shares have been delivered to NAC.
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1.9 NON-TRANSFERABILITY OF SHARES SUBJECT TO FORFEITURE. During the
Forfeiture Period, the Forfeitable Shares shall be non-transferable, except if
the intended transferee agrees, in a writing delivered to, in form and substance
satisfactory to, and for the benefit of, NAC, to be bound by this Agreement.
1.10 SEAT ON NAC BOARD. The Certificate of Designations shall provide
that, subject to the terms and conditions set forth therein, the registered
holders of the outstanding shares of the Series B Preferred Stock shall be
entitled, voting as a class, to elect one or more members to the board of
directors of NAC. At the point in time at which the holders of shares of the
Series B Preferred Stock are no longer entitled, as a class, to elect any member
to the board of directors of NAC, the Shareholders' Representative, on behalf of
the Shareholders, shall be entitled to nominate one person for election to the
board of directors of NAC, provided the nominee is reasonably satisfactory to
NAC. NAC shall take action to cause such nominee to be elected to NAC's board of
directors promptly thereafter. NAC shall include such nominee as may have been
designated by the Shareholders' Representative in management's slate of nominees
for election at each annual meeting of NAC's shareholders and shall take all
other actions necessary or appropriate to cause such nominee to be elected to
the Board, including the solicitation of proxies in support thereof. All rights
of the Shareholders or of the Shareholders' Representative under this SECTION
1.10 shall expire upon the earlier of (a) the date as of which the
Nonforfeitable Shares are no longer subject to lockup under the Standstill
Agreement or (b) such time as the Shareholders own of record, in the aggregate,
less than five million (5,000,000) shares of NAC Common Stock (it being agreed
and understood that for the purposes of determining the whether the Shareholders
own of record such number of shares of NAC Common Stock, each Shareholder shall
be deemed to own of record, in addition to the number of shares of NAC Common
Stock owned of record by such Shareholder, ten (10) shares of NAC Common Stock
for each outstanding share of Series B Preferred Stock or Series C Preferred
Stock owned of record by such Shareholder), as adjusted for any stock splits,
reorganizations or recapitalizations, whether or not any of such shares of NAC
Common Stock (or the shares of Series B Preferred Stock or Series C Preferred
Stock referred to in the preceding parenthetical clause) is subject to
forfeiture but has not yet been forfeited as provided above.
1.11 FUNDING; PROTECTIVE PROVISIONS.
(a) NAC and each Shareholder acknowledge and agree that, during the
Forfeiture Period (or, if earlier, until such time as the Forfeitable
Shares are no longer subject to forfeiture under the terms of this
Agreement) and subject to the terms of their respective employment
agreements, Xxx Xxxxx, Xxxx Xxxxxx and Xxxx Xxxxxxx shall have authority
and responsibility for the day-to-day management and operation of the
Surviving Corporation's business, and shall assist NAC in setting mutually
acceptable goals and budgets to maximize the productivity, efficiency and
profitability of the Surviving Corporation. Notwithstanding the foregoing,
the authority and responsibility for the day-to-day management of the
Surviving Corporation's business shall not be deemed to authorize or
permit management, except with the prior approval or consent of the
Surviving Corporation's Board of Directors, to take any action
traditionally or under applicable law requiring the approval or
authorization of the Surviving Corporation's Board of Directors, which
action would include, without limitation, any of the following:
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(i) To sell or otherwise dispose of any property or assets of
the Surviving Corporation or of any subsidiary of the Surviving
Corporation, other than in the ordinary course of business of the
Surviving Corporation or such subsidiary, or collaterally assign,
mortgage, pledge or otherwise encumber any of the property or assets
of the Surviving Corporation or of any subsidiary of the Surviving
Corporation;
(ii) To incur, or allow or permit any subsidiary to incur, any
indebtedness, other than normal trade payables, equipment leases and
similar items incurred in the ordinary course of business;
(iii) To incur, or allow or permit any subsidiary to incur,
any obligation in excess of $100,000 or any series of obligations,
or group of similar obligations, that together exceed $250,000 in
the aggregate;
(iv) To change the terms of any employment agreement or other
compensation arrangement with any Shareholder;
(v) To change the business of the Surviving Corporation;
(vi) To engage any accounting or law firm or consultant or
consulting firm not currently retained by ZoomLot;
(vii) To hire any employee whose total compensation exceeds
$100,000 in any year;
(viii) To declare or pay any bonus to any employee; or
(ix) To enter into (including by way of renewal or extension)
any related party transaction.
(b) During the Forfeiture Period, unless otherwise agreed to by the
Shareholders' Representative, NAC agrees (i) subject to the reduction
described below, to make additional working capital of up to six million
five hundred thousand dollars ($6500,000) available to the Surviving
Corporation in order to facilitate the continued development of the
Surviving Corporation, two million dollars ($2,000,000) of which shall be
funded within 10 days following the Closing; (ii) to maintain separate
books and records for the Surviving Corporation and its subsidiaries on a
consolidated basis (it being agreed and understood that the foregoing
provisions of this clause (ii) shall not be deemed to restrict NAC in
consolidating (for tax, accounting or other purposes) the Surviving
Corporation and its subsidiaries with NAC and such other direct or
indirect subsidiaries as NAC may from time to time have); (iii) to
maintain the Surviving Corporation as a separate entity and not to
combine, merge, consolidate or liquidate the Surviving Corporation or sell
or otherwise dispose of any of its assets except in the ordinary course of
its business or sell or otherwise dispose of any of its stock; (iv) not
unreasonably to change, except in the ordinary course of its business, (A)
the prices charged for the Surviving Corporation's products and services,
(B) the level of compensation of the Surviving Corporation's consultants
and full-time corporate employees or (C) the level of the Surviving
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Corporation's general and administrative expenses; and (v) calculate the
Surviving Corporation EBITDA in accordance with GAAP, consistently
applied. NAC shall not change the name of the Surviving Corporation during
the Forfeiture Period without the prior written consent of the
Shareholders' Representative. NAC may withhold from the funds required to
be provided pursuant to clause (i) above an amount equal to the amount of
any damages or other expenses incurred by the Surviving Corporation or NAC
as a result of a breach of any representation, warranty or other covenant
or agreement of ZoomLot or the Shareholders (or any of them) set forth in
this Agreement until the amount of such damages or other expenses (less
any applicable basket as contemplated by SECTION 8.5(b) hereof) has been
paid to NAC; and if NAC withholds any such funds pursuant to the foregoing
right, but it is subsequently determined that there was no such breach,
appropriate revisions to EXHIBITS A and E shall be made retroactively.
(c) Notwithstanding anything in this Agreement to the contrary, the
obligations of NAC to provide funding to the Surviving Corporation or to
act or refrain from taking action (including, without limitation, any of
the actions or restrictions set forth in paragraph (a) above) shall be
expressly conditioned upon the Surviving Corporation and its management
meeting in all material respects the agreed-upon performance and
development criteria set forth in EXHIBIT E other than on account of the
material breach by NAC of its covenants hereunder.
(d) Provided that the Surviving Corporation is meeting in all
material respects the performance and development criteria set forth in
EXHIBIT E, NAC shall not take any action, except with the consent of the
Shareholders' Representative, to remove or replace the officers of the
Surviving Corporation or any member of the Board of Directors of the
Surviving Corporation who has been nominated by the Shareholders pursuant
to SECTION 1.4(b) above; PROVIDED, HOWEVER, that, notwithstanding the
foregoing, any Employment Agreement with any Shareholder shall be subject
to termination by the Surviving Corporation for "cause" or on account of
the disability of such Shareholder in accordance with the terms of such
Employment Agreement regardless of whether the performance and development
criteria set forth in EXHIBIT E have been, or are being, met. The
foregoing provisions of this clause (d) shall not affect or limit the
occurrence of any Valuation Event pursuant to clause (v) of SECTION 1.8(e)
above.
(e) If at any time the agreed-upon performance and development
criteria set forth in EXHIBIT E are not being met in any material respect
(regardless of the reason(s) therefor, other than on account of the
material breach by NAC of its covenants hereunder), NAC shall be entitled
to replace (or cause the Surviving Corporation to replace) any or all of
the then-existing management without any liability therefor (other than
liability, if any, for any severance benefits to be paid under the
respective officer's employment agreement). In the event NAC wishes to
exercise the above entitlement, NAC shall have the right, but not the
obligation, (prior to and in anticipation of the exercise of such
entitlement) to submit to arbitration, before the AAA in the City, County
and State of New York, under the rules thereof, the question of whether
such performance and development criteria have been or are being met in
all material respects. Such arbitration shall be submitted for
determination before a single arbitrator selected mutually by NAC and the
Shareholders' Representative; provided, however, that, if
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within ten (10) days following receipt by the Shareholders' Representative
of a demand for arbitration from NAC, NAC and the Shareholders'
Representative cannot agree upon an arbitrator, such arbitration shall be
submitted for determination before a single arbitrator selected by the
AAA. The determination rendered in any such arbitration shall be
conclusive and binding on all of the parties hereto.
1.12 CYGNET PAYABLE AND TRANSFER OF ASSETS. Prior to the Closing, ZoomLot
shall transfer the Finance System Plus dealer management system and all of the
assets acquired from Xxxxxx Software Corp. and Xxxxxx X. Xxxxxx (such dealer
management system and such assets, collectively, the "DMS ASSETS") to Cygnet
Capital Corporation ("CYGNET") and shall assign to Cygnet the related contract
with Xxxxxx Software Corp. (which contract shall be assumed by Cygnet), and, in
consideration thereof, the current obligation of ZoomLot to Cygnet of
approximately five million dollars ($5,000,000), shall be reduced to _________
dollars ($________), and contemporaneously with the Closing, the outstanding
amount of such current obligation of ZoomLot to Cygnet shall be satisfied upon
the payment out of funds contributed to ZoomLot by NAC at the Closing in an
amount not to exceed $4,562,567.56 (the "CYGNET PAYABLE"). The Surviving
Corporation shall have the right to repurchase the DMS Assets pursuant to a
Right of Repurchase in the form attached hereto as EXHIBIT K. Cygnet and the
Xxxxxx Shareholders (as defined below) jointly and severally agree that if both
the First Objective and Second Objective are not met by the Expiration Date, or
a Valuation Event does not occur prior to the Expiration Date, then an amount
equal to the Cygnet Payable, plus interest thereon from the Closing Date at nine
percent (9%) per annum, shall immediately be due and payable from Cygnet and the
Xxxxxx Shareholders to NAC. The Xxxxxx Shareholders (jointly and severally) and
Cygnet agree that they shall be jointly and severally liable for any payment to
NAC as a result of the previous sentence. Without limiting the foregoing, the
Xxxxxx Shareholders (jointly and severally) and Cygnet, jointly and severally,
agree that NAC shall be entitled to seek repayment from all or any one of the
Xxxxxx Shareholders and/or from Cygnet, individually or jointly, at NAC's
discretion, without being required to seek a proportionate return from all or
any of the Xxxxxx Shareholders and Cygnet. For purposes of this SECTION 1.12,
the term "XXXXXX SHAREHOLDERS" shall mean, collectively, Xxxxxx X. Xxxxxx, XX
and Verde Reinsurance Company, Ltd.
1.13 TAKING OF NECESSARY ACTION; FURTHER ACTION. NAC and Merger Sub, on
the one hand, and ZoomLot and the Shareholders, on the other hand, shall use all
reasonable efforts to take all such actions as may be necessary or appropriate
in order to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full possession of all the rights, privileges, immunities and
franchises of the Constituent Corporations or to subject the Surviving
Corporation fully to all debts and obligations of the Constituent Corporations.
The officers and directors of the Surviving Corporation are fully authorized in
the name of the Constituent Corporations, or otherwise, to take, and shall take,
all such actions.
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ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF NAC
AND MERGER SUB
NAC and Merger Sub hereby represent and warrant to ZoomLot and the
Shareholders that, as of the date hereof, and (except as otherwise specified
below) again at and as of the Effective Time, except as set forth in the section
corresponding with the section below of a letter, dated as of the date hereof,
furnished by NAC or the Merger Sub to ZoomLot and the Shareholders or the
Shareholders' Representative (the "NAC DISCLOSURE LETTER"), that:
2.1 ORGANIZATION AND QUALIFICATION. Each of NAC and Merger Sub is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the requisite corporate power and authority to
own and operate its properties and to carry on its business as now conducted in
every jurisdiction where the failure to do so would have a materially adverse
effect on its assets, financial condition, operating results, customer,
employee, supplier or franchise relations, business condition or financing
arrangements. The copies of the Certificate of Incorporation and Bylaws of NAC
and the Certificate of Incorporation and Bylaws of Merger Sub previously
furnished to ZoomLot and the Shareholders or the Shareholders' Representative
reflect all amendments thereto and are correct and complete and, except for and
as contemplated by the Certificate of Designations, will not be amended prior to
Closing. Notwithstanding anything contained herein to the contrary, no
representation is made in this Article 2 with respect the Merger Sub after it
has become the Surviving Corporation.
2.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of NAC and Merger Sub has
the requisite corporate power and authority to enter into this Agreement and to
carry out its obligations hereunder. The execution and delivery of this
Agreement by NAC and Merger Sub and the consummation by NAC and Merger Sub of
the transactions contemplated hereby to be performed by NAC and Merger Sub,
respectively, have been duly authorized by NAC and the Merger Sub, respectively,
and no other corporate proceedings on the part of NAC or the Merger Sub are
necessary to authorize this Agreement and such transactions. This Agreement has
been duly executed and delivered by NAC and Merger Sub and constitutes a valid
and binding obligation of each, enforceable against each in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency, reorganization or other similar laws relating to the enforcement of
creditors' rights generally and by general principles of equity. Neither NAC nor
Merger Sub is subject to, or obligated under, any provision of (a) its
Certificate of Incorporation or its Bylaws, (b) any agreement, arrangement or
understanding, (c) any license, franchise or permit or (d) any law, regulation,
order, judgment or decree, that would be breached or violated, or in respect of
which a right of termination or acceleration would arise or any encumbrance on
any of its or any of its subsidiaries' assets would be created, by its
execution, delivery and performance of this Agreement and the consummation by it
of the transactions contemplated hereby. Except for such filings as are required
to be made pursuant to Delaware Corporate Law in order to create, authorize or
authorize the issuance of the shares of Series B Preferred Stock and the Series
C Preferred Stock and effect the Merger or pursuant to federal and state
securities laws in order to comply with such laws in connection with the
registration for resale by the Shareholders of shares of the NAC Common Stock as
contemplated under the Registration Rights Agreement, which filings NAC agrees
to make as and to the extent provided
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in the Registration Rights Agreement, no authorization, consent or approval of,
or filing with, any public body, court or authority is necessary on the part of
NAC or Merger Sub for the consummation by NAC and Merger Sub of the transactions
contemplated by this Agreement to be performed by NAC and Merger Sub.
2.3 NO MATERIALLY ADVERSE CHANGES. Except as set forth in one or more of
the NAC Business Reports (as defined in SECTION 2.6 hereof), there has not been
any materially adverse change in the assets, financial condition, operating
results, customer, employee, supplier or franchise relations, business condition
or prospects, or financing arrangements of NAC since September 13, 2000.
2.4 VALIDITY OF STOCK. The NAC Merger Shares shall, when issued: (i) be
duly authorized, validly issued, fully paid and nonassessable and free of liens
and encumbrances created by any person other than the Shareholders, subject,
however to forfeiture as provided for in this Agreement and to such restrictions
as are provided for under the Standstill Agreement, and (ii) be free and clear
of any transfer restrictions, liens and encumbrances, except for restrictions on
transfer under applicable federal securities laws, including Rule 144
promulgated under the Securities Act of 1933, as amended, (the "SECURITIES
ACT"), except as provided for in this Agreement and except for such restrictions
as are provided for under the Standstill Agreement.
2.5 CAPITALIZATION. The authorized equity capitalization of NAC consists
of 40,000,000 shares of NAC Common Stock and 2,000,000 shares of preferred
stock, of which 100 shares have been designated as Series A Convertible
Preferred Stock, 275,000 shares have been (or upon the filing of the Certificate
of Designations will be) designated as Series B Preferred Stock and 735,000
shares have been (or upon the filing of the Certificate of Designations will be)
designated as Series C Preferred Stock. As of the date of this Agreement,
13,615,723 shares of NAC Common Stock are issued and outstanding, all of which
shares are validly issued, fully paid and nonassessable, and no shares of
preferred stock are outstanding. Except as disclosed in one or more of the NAC
Business Reports or provided for in this Agreement or the Certificate of
Designations, there are no options, warrants, conversion privileges or other
rights, agreements, arrangements or commitments obligating NAC to issue or sell
any shares of capital stock of NAC or securities or obligations of any kind
convertible into or exchangeable for any shares of capital stock of NAC or of
any other corporation, nor are there any stock appreciation, phantom stock or
similar rights outstanding based upon the book value or any other attribute of
NAC. No holders of outstanding shares of NAC Common Stock are entitled to any
preemptive or other similar rights.
2.6 FINANCIAL STATEMENTS AND SEC FILINGS. NAC has made available to the
Shareholders (or the Shareholders' Representative) true and correct copies of
each report, registration statement (on a form other than Form S-8) and
definitive proxy statement filed by NAC with the U.S. Securities and Exchange
Commission (the "SEC") between January 1, 2000 and the date of this Agreement.
NAC will also deliver to the Shareholders' Representative, on or before the
Effective Time, any reports that are filed with the SEC after the date hereof,
and any other reports sent generally to its shareholders after the date hereof,
but not required to be filed with the SEC. All such reports are collectively
referred to herein as the "NAC BUSINESS REPORTS"; and the financial statements,
including the notes thereto, contained in the NAC
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Business Reports are collectively referred to hereinafter as the "NAC FINANCIAL
STATEMENTS." NAC has duly filed all reports required to be filed by it with the
SEC under the Securities Act and the Securities Exchange Act of 1934, as
amended, and no such report, nor any report sent to NAC's shareholders
generally, contains any untrue statement of material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
in such report, in light of the circumstances under which they were made, not
misleading. The NAC Financial Statements included in the NAC Business Reports
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods involved and present fairly
the consolidated financial position, results of operations and cash flows of NAC
and its consolidated subsidiaries as of the dates and for the periods indicated
therein, subject, in the case of unaudited interim statements, to normal
year-end accounting adjustments and the absence of complete footnote disclosure.
2.7 ABSENCE OF UNDISCLOSED LIABILITIES. Except as and to the extent stated
in the NAC Financial Statements or in one or more of the NAC Business Reports,
NAC does not have any material liabilities or obligations (whether accrued,
absolute, contingent, unliquidated, known, unknown or otherwise), other than (i)
liabilities incurred in the ordinary course of business and (ii) obligations
under contracts and commitments incurred in the ordinary course of business,
that, in both clauses (i) and (ii), individually or in the aggregate, are not
material to the financial condition or operating results of NAC.
2.8 LITIGATION. Except as set forth in one or more of the NAC Business
Reports, there are no actions, suits, proceedings, orders or investigations
pending or threatened against NAC, at law or in equity, in any court or before
or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, and
there is no basis known to NAC for any of the foregoing.
2.9 NO COMMISSIONS. NAC has not incurred any obligation for any finder's
or broker's or agent's fees or commissions or similar compensation in connection
with the transactions contemplated hereby.
2.10 NO LIABILITIES OF MERGER SUB. Except for its obligations under this
Agreement, Merger Sub is not subject to any liabilities, obligations or claims,
whether absolute or contingent, liquidated or unliquidated, known or unknown.
Merger Sub was formed solely for the purpose of consummating the transactions
contemplated by this Agreement and has not engaged in any business or other
activities for any other purpose.
2.11 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of NAC or Merger Sub
is required in connection with the consummation of the transactions contemplated
by this Agreement except the filing of the Certificate of Merger and the
Certificate of Designations with the Secretary of State of Delaware and the
filing and registration with the SEC and/or state securities or "blue sky"
commissions or other authorities as contemplated under the Registration Rights
Agreement.
2.12 DISCLOSURE. Neither this Agreement nor any of the exhibits hereto
contains any untrue statement of a material fact or omits a material fact
necessary to make the statements
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contained herein or therein, in light of the circumstances in which they were
made, not misleading, and there is no fact known to NAC that has not been
disclosed to the Shareholders (or the Shareholders' Representative) that
materially affects adversely or could reasonably be anticipated to materially
affect adversely the business, including the operating results, assets,
customer, supplier or employee relations and business prospects, of NAC.
2.13 TAX MATTERS.
(a) NAC has, and at the Effective Time will have, no plan or
intention to:
(i) Liquidate Merger Sub;
(ii) Merge Merger Sub with or into any other corporation
other than ZoomLot;
(iii) Sell or otherwise dispose of the stock of Merger Sub
except for transfers of stock to corporations
"controlled" (within the meaning of Section 368(c) of
the Code) by NAC;
(iv) Cause Merger Sub to sell or otherwise dispose of any of
its assets or assets acquired in the Merger except for
(i) sales or other dispositions made in the ordinary
course of business, (ii) transfers described in Section
368(a)(2)(C) of the Code; (iii) transfers to members of
the "qualified group" (within the meaning of Treasury
Regulations Section 1.368-1(d)(4)(ii)) encompassing NAC
(the "NAC GROUP") following the Effective Time, or (iv)
transfers to a partnership if either (x) members of the
NAC Group, in the aggregate, own a significant interest
in that partnership or (y) one or more members of the
NAC Group have active and substantial management
functions as a partner with respect to that partnership;
(v) Cause Merger Sub to issue additional shares of stock
that would result in NAC losing "control" (within the
meaning of Section 368(c) of the Code) of Merger Sub
following the Effective Time;
(vi) Cause Merger Sub or the NAC Group following the
Effective Time to discontinue the historic business
conducted by ZoomLot preceding the Effective Time or
fail to use in the Surviving Corporation's business a
significant portion of the assets held by ZoomLot
immediately preceding the Effective Time;
(vii) Take any action that might otherwise cause the Merger
not to be treated as a "reorganization" within the
meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Code.
(b) Prior to the Effective Time, neither NAC nor any person
"related" to NAC will, "in connection with" the Merger,
acquire (directly or indirectly) any shares of ZoomLot capital
stock. For purposes hereof, the term "related" has the meaning
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in Treasury Regulations Section 1.368-1(e)(3) and the term "in
connection with" has the meaning in Treasury Regulations
Section 1.368-1(e)(2).
(c) At the Effective Time:
(i) NAC will own all of the outstanding stock of Merger Sub;
(ii) Merger Sub will own all of the assets ever owned by
Merger Sub; and
2.14 DIRECTORS AND OFFICERS INSURANCE. NAC has furnished to ZoomLot a true
and complete copy of its Director and Officer Insurance policy as in effect on
the date hereof.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ZOOMLOT
ZoomLot and the Principal Shareholders (being those Shareholders that
directly or indirectly, beneficially or of record, individually or together with
any member of such Shareholder's immediate family and/or other affiliates of
such Shareholder, as of the date of this Agreement own five percent (5%) of more
of any class of capital stock of ZoomLot), jointly and severally, represent and
warrant to NAC and Merger Sub that, as of the date hereof and again at and as of
the Effective Time, except as set forth in the section corresponding with the
section below of a letter, dated as of the date hereof, furnished by ZoomLot to
NAC and Merger Sub (the "ZOOMLOT DISCLOSURE LETTER"), that:
3.1 ORGANIZATION AND QUALIFICATION. ZoomLot is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own and operate
its properties and to carry on its business as now conducted. ZoomLot is duly
qualified to do business in every jurisdiction where the failure to do so would
have a materially adverse effect on its assets, financial condition, operating
results, customer, employee, supplier or franchise relations, business
condition, prospects, or financing arrangements. The copies of ZoomLot's
Certificate of Incorporation and Bylaws, which have been furnished by ZoomLot to
NAC prior to the date of this Agreement, reflect all amendments made thereto and
are correct and complete. ZoomLot does not own any capital stock or other equity
interest in any corporation or other entity except that it owns all of the
issued and outstanding capital stock of each of the corporations (each, a
"ZOOMLOT SUBSIDIARY" and collectively the "ZOOMLOT SUBSIDIARIES") listed in
Section 3.1 of the ZoomLot Disclosure Letter. Each of the ZoomLot Subsidiaries
(a) is a corporation duly organized, validly existing and in good standing under
the laws of the State specified after its name in such Section 3.1, and has the
requisite corporate power and authority to own and operate its properties and to
carry on its business as now conducted and (b) is duly qualified to do business
in every jurisdiction where the failure to do so would have a materially adverse
effect on its assets, financial condition, operating results, customer,
employee, supplier or franchise relations, business condition, prospects, or
financing arrangements. The copies of the Certificate of Incorporation (or other
charter document) and Bylaws of each of the ZoomLot Subsidiaries, which have
been furnished by ZoomLot to NAC prior to the date of this Agreement, reflect
all amendments made thereto and are correct and complete
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3.2 AUTHORITY RELATIVE TO THIS AGREEMENT. ZoomLot has the requisite
corporate power and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement by ZoomLot
and the consummation by ZoomLot of the transactions contemplated hereby have
been duly authorized by the Board of Directors of ZoomLot and have been duly
approved by the Shareholders, and no other corporate proceedings on the part of
ZoomLot are necessary to authorize this Agreement and such transactions. This
Agreement has been duly executed and delivered by ZoomLot, and constitutes a
valid and binding obligation of ZoomLot, enforceable against ZoomLot in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
ZoomLot is not subject to, or obligated under, any provision of (a) its
Certificate of Incorporation or Bylaws, (b) any agreement, arrangement or
understanding, (c) any license, franchise or permit or (d) any law, regulation,
order, judgment or decree, that would be breached or violated, or in respect of
which a right of termination or acceleration would arise or any encumbrance on
any of its assets would be created, by its execution, delivery and performance
of this Agreement or the consummation by it of the transactions contemplated
hereby. Except for such filings as are required to be made pursuant to Delaware
Corporate Law and Arizona Law in order to effect the Merger, no authorization,
consent or approval of, or filing with, any public body, court or authority is
necessary on the part of ZoomLot for the consummation by ZoomLot of the
transactions contemplated by this Agreement. None of the ZoomLot Subsidiaries is
subject to, or obligated under, any provision of (a) its Certificate of
Incorporation (or other charter document) or Bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or permit or (d) any
law, regulation, order, judgment or decree, that would be breached or violated,
or in respect of which a right of termination or acceleration would arise or any
encumbrance on any of its assets would be created, by the execution, delivery
and performance of this Agreement by ZoomLot or the consummation by ZoomLot of
the transactions contemplated hereby.
3.3 CAPITALIZATION AND VOTING RIGHTS. The authorized capital stock of
ZoomLot consists of:
(a) Capital Stock. 1,000,000 shares of common stock, par value $0.001
per share, of which only 100,000 shares are, and immediately prior to
the Closing will be, issued and outstanding, and 1,000,000 shares of
preferred stock, par value $0.001 per share, of which no shares are,
and immediately prior to the Closing will be, issued and outstanding.
(b) The outstanding shares of ZoomLot Common stock are, and
immediately prior to the Closing will be, owned by the Shareholders
and in the respective numbers for each Shareholder as specified in
EXHIBIT G attached hereto.
(c) The outstanding shares of ZoomLot Common Stock are all duly and
validly authorized and issued, fully paid and nonassessable and were
issued in accordance with the registration or qualification provisions
of the Securities Act and any relevant state securities laws, or
pursuant to valid exemptions therefrom.
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(d) There are no outstanding options, warrants, rights (including
conversion or preemptive rights) or agreements for the purchase or
acquisition from ZoomLot or any ZoomLot Subsidiary of any shares of
its capital stock. Neither ZoomLot nor any ZoomLot Subsidiary is a
party or subject to any agreement or understanding, and there is no
agreement or understanding between any persons or entities, that
affects or relates to the voting or giving of written consents with
respect to any security, or by a director, of ZoomLot or any ZoomLot
Subsidiary.
3.4 BALANCE SHEET.
(a) ZoomLot has provided NAC with an unaudited consolidated balance
sheet, dated as of September 30, 2000 (the "BALANCE SHEET"), a
consolidated statement of profit and loss from January 1, 2000 through
September 30, 2000, and a consolidated statement of cash flows from
January 1, 2000 through September 30, 2000 (collectively, the "CASH
STATEMENTS"). The Balance Sheet presents fairly in all material
respects the assets and liabilities of ZoomLot (on a consolidated
basis) as of the date thereof, subject to normal year-end accounting
adjustments and the absence of footnote disclosure. Except as and to
the extent stated in the Balance Sheet, neither ZoomLot nor any of the
ZoomLot Subsidiaries has any material liabilities or obligations
(whether accrued, absolute, contingent, unliquidated, known, unknown
or otherwise), other than (i) liabilities incurred in the ordinary
course of business and (ii) obligations under contracts and
commitments incurred in the ordinary course of business, that, in both
clauses (i) and (ii), individually or in the aggregate, are not
material to the financial condition or operating results of ZoomLot
(on a consolidated basis). The Cash Statements present fairly (on a
consolidated basis) in all material respects the information purported
to be presented therein.
(b) FINANCIALS AUDITED IN DUE COURSE. The Balance Sheet and Cash
Statements of ZoomLot and the ZoomLot Subsidiaries are capable of
being audited (on a consolidated basis) in accordance with GAAP and
SEC Regulation S-X, and SEC Regulation S-B (if applicable) within
sixty (60) days of the Closing, although no guaranty is made that this
will be done. In addition, ZoomLot will provide NAC with any and all
statements for the relevant periods required for the filing of Form
8-K and registration statements as necessitated by or related to this
Agreement.
3.5 NO MATERIALLY ADVERSE CHANGES. Since September 30, 2000, there has not
been a materially adverse change in the assets, financial condition, operating
results, customer, employee, supplier or franchise relations, business condition
or prospects of ZoomLot or any ZoomLot Subsidiary. Without limiting the
foregoing, since September 30, 2000, there has not been:
(a) any change in the assets, liabilities, financial condition or
operating results of the ZoomLot or any ZoomLot Subsidiary from that
reflected in the Balance Sheet, except changes in the ordinary course
of business of the respective entity that have not been, in the
aggregate, materially adverse;
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(b) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the assets, properties,
financial condition, operating results or business of ZoomLot or any
ZoomLot Subsidiary (as such business is presently conducted);
(c) any waiver by ZoomLot or any ZoomLot Subsidiary of a material
right or of a material debt owed to it;
(d) any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by ZoomLot or any ZoomLot Subsidiary, except
(i) in the ordinary course of business and (ii) that is not material
to the assets, properties, financial condition, operating results or
business (as such business is presently conducted) of ZoomLot or any
ZoomLot Subsidiary;
(e) any material change or amendment to a material contract or
arrangement by which ZoomLot or any ZoomLot Subsidiary or any of its
assets or properties is bound or subject;
(f) any material change in any compensation arrangement or agreement
with any employee of ZoomLot or any ZoomLot Subsidiary;
(g) except as contemplated in SECTION 1.12 above, any sale, assignment
or transfer of any patents, trademarks, copyrights, trade secrets or
other intangible assets of ZoomLot or any ZoomLot Subsidiary;
(h) any resignation or termination of employment of any key officer of
ZoomLot or any ZoomLot Subsidiary; and neither ZoomLot nor any ZoomLot
Subsidiary, to the best of its knowledge, knows of the impending
resignation or termination of employment of any such officer, except
that it is expected that Xxxxxx X. Xxxxxx, XX will resign as the Chief
Executive Officer of ZoomLot at the Closing;
(i) any receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of ZoomLot or any ZoomLot
Subsidiary; and neither ZoomLot nor any ZoomLot Subsidiary, to the
best of its knowledge, knows of any such loss or cancellation;
(j) any mortgage, pledge, transfer of a security interest in, or lien,
whether or not created by ZoomLot or any ZoomLot Subsidiary, with
respect to any of its material properties or assets, except liens for
taxes not yet due or payable;
(k) any loans or guarantees or indemnities made by ZoomLot or any
ZoomLot Subsidiary to or for the benefit of its employees, officers or
directors, or any members of their immediate families, other than
travel advances and other advances made in the ordinary course of its
business;
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(l) any declaration, setting aside or payment or other distribution in
respect of any of ZoomLot's capital stock, or any direct or indirect
redemption, purchase or other acquisition by ZoomLot of any of such
stock;
(m) to the best of ZoomLot's knowledge, any other event or condition
of any character that might be reasonably expected materially and
adversely to affect the assets, properties, financial condition,
operating results or business (as such business is presently
conducted) of ZoomLot or any ZoomLot Subsidiary; or
(n) any agreement or commitment by ZoomLot or any ZoomLot Subsidiary
to do any of the things described in this SECTION 3.5.
3.6 LITIGATION. There are no actions, suits, proceedings, orders or
investigations pending or threatened against ZoomLot or any ZoomLot Subsidiary,
at law or in equity, before or by any federal, state, municipal or other
governmental department, commission, board, bureau, agency or instrumentality,
domestic or foreign, and there is no basis known to ZoomLot for any of the
foregoing.
3.7 SUBSIDIARIES. Except for its ownership of all of the outstanding
capital stock of each of the ZoomLot Subsidiaries, ZoomLot does not presently
own or control, directly or indirectly, any interest in any other corporation,
association or other business entity. Neither ZoomLot nor any ZoomLot Subsidiary
is a participant in any joint venture, partnership or similar arrangement.
3.8 PATENTS AND TRADEMARKS. ZoomLot and each of the ZoomLot Subsidiaries
has sufficient ownership or rights to all patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information, proprietary
rights and processes necessary for its business (collectively, the "INTELLECTUAL
Property") as now conducted without any conflict with or infringement of the
rights of others. There are no outstanding options, licenses or agreements of
any kind relating to the foregoing, and except pursuant to software licenses
obtained in the ordinary course of business, neither ZoomLot nor any ZoomLot
Subsidiary is bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information, proprietary rights and
processes of any other person or entity. Neither ZoomLot nor any of the ZoomLot
Subsidiaries has violated, or by conducting its business as proposed will
violate, any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets, licenses, processes, or other proprietary rights of any other
person or entity. To the best knowledge of ZoomLot and the ZoomLot Subsidiaries,
none of the employees of ZoomLot or any ZoomLot Subsidiary is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with his or her duties to ZoomLot or
the respective ZoomLot Subsidiary, as the case may be, or that would conflict
with the business of ZoomLot or the respective ZoomLot Subsidiary, as the case
may be, as now conducted. Neither the execution nor delivery of this Agreement,
nor the carrying on of the business of ZoomLot or any ZoomLot Subsidiary by any
employee of ZoomLot or any ZoomLot Subsidiary, nor the conduct of the business
of ZoomLot or any ZoomLot Subsidiary as now conducted, will conflict with or
result in a breach of the terms, conditions or provisions of, or constitute a
default under, any contract,
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covenant or instrument under which any such employee is now obligated. There is
no Intellectual Property or other rights that have been or are being used by
ZoomLot or any ZoomLot Subsidiary (or are reasonably expected to be used by
ZoomLot or any ZoomLot Subsidiary in the conduct of its business as currently
contemplated) in which any employee of ZoomLot or any ZoomLot Subsidiary or any
Shareholder has retained any rights. ZoomLot does not believe it is or will be
necessary to utilize any inventions of any employee of ZoomLot or any ZoomLot
Subsidiary (or people ZoomLot or any ZoomLot Subsidiary currently intends to
hire) made prior to or outside the scope of his or her employment by ZoomLot or
any ZoomLot Subsidiary. ZoomLot has taken all commercially reasonable action
necessary to protect all of the Intellectual Property.
3.9 COMPLIANCE WITH OTHER INSTRUMENTS. Neither ZoomLot nor any ZoomLot
Subsidiary is in violation or default of any provision of its Certificate of
Incorporation (or other charter document) or Bylaws, or of any instrument,
judgment, order, writ, decree or contract to which it is a party or by which it
is bound, or of any provision of any federal or state statute, rule of
regulation applicable to ZoomLot or such ZoomLot Subsidiary. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby will not result in any such violation or be in
conflict with or constitute, with or without the passage of time and giving of
notice or both, either a default under any such provision, instrument, judgment,
order, writ, decree or contract or an event that results in the creation of any
lien, charge or encumbrance upon any assets of ZoomLot or any ZoomLot Subsidiary
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to ZoomLot or any ZoomLot
Subsidiary, that adversely affects its business as now conducted or proposed to
be conducted immediately following the Closing, or its properties or its
financial condition.
3.10 AGREEMENTS; ACTION. There are no agreements, understandings or
proposed transactions between ZoomLot, or any ZoomLot Subsidiary, and any of its
officers, directors or affiliates or any officer or director of any affiliate of
ZoomLot.
(a) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which
ZoomLot or any ZoomLot Subsidiary is a party or by which it is bound
that may involve (i) obligations (contingent or otherwise) of, or
payments to, ZoomLot or any ZoomLot Subsidiary in excess of $40,000
or in excess of $250,000 in the aggregate; or (ii) the license of any
patent, copyright, trade secret or other proprietary right or
intellectual property to or from ZoomLot or any ZoomLot Subsidiary
(other than the license of software and products in the ordinary
course of business); or (iii) provisions restricting or affecting the
development, manufacture or distribution of the products or services
of ZoomLot or any ZoomLot Subsidiary; or (iv) indemnification by
ZoomLot or any ZoomLot Subsidiary with respect to infringements of
proprietary or similar rights.
(b) Neither ZoomLot nor any ZoomLot Subsidiary has (i) declared or
paid any dividends or authorized or made any distribution upon or
with respect to any class or series of its capital stock, (ii)
incurred any indebtedness for money borrowed or any other liabilities
individually in excess of $20,000 or, in the case
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of indebtedness and/or liabilities individually less than $20,000, in
excess of $50,000 in the aggregate, (iii) made any loans or advances
to any person, other than ordinary advances for travel expenses, or
(iv) sold, exchanged or otherwise disposed of any of its assets or
rights, other than (A) the transfer of DMS Assets to Cygnet as
contemplated by SECTION 1.12 above or (B) the sale of its inventory
in the ordinary course of business.
(c) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments,
contracts and proposed transactions involving the same person or
entity (including persons or entities ZoomLot or any ZoomLot
Subsidiary has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar
amounts of such subsections.
(d) Neither ZoomLot nor any ZoomLot Subsidiary is a party to or
otherwise bound by any contract, agreement or instrument, or subject
to any restriction under its Certificate of Incorporation (or other
charter document) or Bylaws, that adversely affects its business as
now conducted or proposed to be conducted immediately following the
Closing, or its properties or its financial condition.
3.11 RELATED PARTY TRANSACTIONS. No employee, officer or director of
ZoomLot or any ZoomLot Subsidiary or member of his or her immediate family is
indebted to ZoomLot or any ZoomLot Subsidiary, nor is ZoomLot or any ZoomLot
Subsidiary indebted (or committed to make loans or extend any guarantee credit)
to any of them. To the best knowledge of ZoomLot and the ZoomLot Subsidiaries,
except as set forth in Section 1.12, none of such persons has any direct or
indirect ownership interest in any firm or corporation with which ZoomLot or any
ZoomLot Subsidiary is affiliated or with which ZoomLot or any ZoomLot Subsidiary
has a business relationship, or any firm or corporation that competes with
ZoomLot or any ZoomLot Subsidiary, except that employees, officers or directors
of ZoomLot or any ZoomLot Subsidiary and members of their immediate families may
own, in the aggregate, up to five percent (5%) of the stock in each publicly
traded company that may compete with ZoomLot or any ZoomLot Subsidiary. No
officer or director of ZoomLot or any ZoomLot Subsidiary nor any member of the
immediate family of any such officer or director is directly or indirectly
interested in any material contract with ZoomLot or any ZoomLot Subsidiary,
excluding, however, any employment agreement between any such officer and
ZoomLot or any ZoomLot Subsidiary.
3.12 PERMITS. ZoomLot and each ZoomLot Subsidiary has all franchises,
permits, licenses and any similar authority necessary for the conduct of its
business as now being conducted by it, except for any franchise, permit, license
or any similar authority the lack of which could not materially and adversely
affect the business, properties or financial condition of ZoomLot or such
ZoomLot Subsidiary, as the case may be. Neither ZoomLot nor any ZoomLot
Subsidiary is in default in any material respect under any of such franchise,
permit, license or other similar authority.
3.13 EMPLOYEE BENEFIT PLANS. Neither ZoomLot nor any ZoomLot Subsidiary
has any Employee Benefit Plan as defined in the Employee Retirement Income
Security Act of 1974,
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except for those plans that NAC has elected to continue (which continued plans
are listed in the ZoomLot Disclosure Letter).
3.14 TAX RETURNS, PAYMENTS AND ELECTIONS. Each of ZoomLot and the ZoomLot
Subsidiaries has filed all tax returns and reports (including information
returns and reports) that are required by law to have been filed by it on or
prior to the date hereof or, as of the Effective Time, the Effective Time. These
returns and reports are true and correct in all material respects. ZoomLot or
the respective ZoomLot Subsidiary has paid, or will pay prior to the same
becoming delinquent, all taxes shown to be due and payable on such returns and
reports, and any assessments imposed, except those contested by ZoomLot or the
respective ZoomLot Subsidiary in good faith and disclosed in writing to NAC.
There are no tax deficiencies proposed or assessed against ZoomLot or any
ZoomLot Subsidiary, and neither ZoomLot nor any ZoomLot Subsidiary has executed
any waiver of any statute of limitations on the assessment or collection of any
tax or governmental charge, nor has any of the federal income tax returns and
state income or franchise tax or sales or use tax returns of ZoomLot or any
ZoomLot Subsidiary ever been audited by any governmental authority. Since the
date of the Balance Sheet, neither ZoomLot nor any ZoomLot Subsidiary has
incurred any taxes, assessments or governmental charges other than in the
ordinary course of business, and ZoomLot and each applicable ZoomLot Subsidiary
has made adequate provisions on its books of account for all taxes, assessments
and governmental charges with respect to its business, properties and operations
for such period. ZoomLot or the applicable ZoomLot Subsidiary has withheld or
collected from each payment made to each of its employees the amount of all
taxes (including, but not limited to, federal income taxes, Federal Insurance
Contribution Act taxes and Federal Unemployment Tax Act taxes) required to be
withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.
3.15 MINUTE BOOKS. The minute books of ZoomLot and each of the ZoomLot
Subsidiaries as provided to NAC contains a complete summary of all meetings of
directors and stockholders of the respective corporation since the time of
incorporation and reflect all transactions referred to in such minutes
accurately in all material respects.
3.16 LABOR AGREEMENTS AND ACTIONS; EMPLOYEE COMPENSATION. Neither ZoomLot
nor any ZoomLot Subsidiary is bound by or subject to (and none of its assets or
properties is bound by or subject to) any contract, commitment or arrangement
with any labor union, and no labor union has requested or, to the best knowledge
of ZoomLot and the ZoomLot Subsidiaries, has sought to represent any of the
employees, representatives or agents of ZoomLot or any ZoomLot Subsidiary. There
is no strike or other labor dispute involving ZoomLot or any ZoomLot Subsidiary
pending, or to the best knowledge of ZoomLot and the ZoomLot Subsidiaries,
threatened, that could have a materially adverse effect on the assets, financial
condition, operating results, customer, employee, supplier or franchise
relations, business condition or prospects, or financing arrangements of ZoomLot
or any ZoomLot Subsidiary, nor, to the best knowledge of ZoomLot and the ZoomLot
Subsidiaries, is there any labor organization activity involving any employees
of ZoomLot or any ZoomLot Subsidiary. To the best knowledge of ZoomLot and the
ZoomLot Subsidiaries, no officer or key employee, nor any group of key
employees, intends to terminate his/her or their employment with ZoomLot or any
ZoomLot Subsidiary, nor does ZoomLot or any ZoomLot Subsidiary have a present
intention to terminate his/her or their employment with ZoomLot or any ZoomLot
Subsidiary, except that it is expected
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that Xxxxxx X. Xxxxxx, XX will resign his position as Chief Executive Officer of
ZoomLot at the Closing. The employment of each officer and other employee of
ZoomLot or any ZoomLot Subsidiary is terminable at the will of ZoomLot or such
ZoomLot Subsidiary without any penalty or other obligation on account thereof.
ZoomLot and each ZoomLot Subsidiary have complied in all material respects with
all applicable state and federal equal employment opportunity and other laws
related to employment. Neither ZoomLot nor any ZoomLot Subsidiary is a party to
or bound by any currently effective employment contract, deferred compensation
agreement, bonus incentive plan, profit sharing plan, retirement agreement or
other employee compensation agreement.
3.17 GOVERNMENTAL CONSENTS. No consent, approval, order or authorization
of, or registration, qualification, designation, declaration or filing with, any
federal, state or local governmental authority on the part of ZoomLot or any
ZoomLot Subsidiary is required in connection with the consummation of the
transactions contemplated by this Agreement, except the filing of the
Certificate of Merger with the Secretary of State of Delaware and the Arizona
Corporation Commission.
3.18 TITLE TO PROPERTY AND ASSETS. Each of ZoomLot and the ZoomLot
Subsidiaries owns its property and assets free and clear of all mortgages,
liens, loans and encumbrances, except such encumbrances and liens that arise in
the ordinary course of business or do not materially impair ZoomLot's or the
respective ZoomLot Subsidiary's ownership or use of such property or assets.
With respect to the property and assets that it leases, each of ZoomLot and the
ZoomLot Subsidiaries is in compliance with such leases and holds a valid
leasehold interest free of any liens, claims or encumbrances. Neither this
Agreement nor the consummation of the transactions contemplated hereby shall
cause or result in (a) any new encumbrance or lien on any of the property or
assets of ZoomLot or any ZoomLot Subsidiary or (b) any lease or leasehold with
ZoomLot or any ZoomLot Subsidiary being terminated or otherwise becoming
ineffective or unenforceable.
3.19 INSURANCE. Each of ZoomLot and the ZoomLot Subsidiaries has in full
force and effect fire and casualty insurance policies, with extended coverage,
sufficient in amount (subject to reasonable deductibles) to allow it to replace
any of its properties that might be damaged or destroyed. Each of ZoomLot and
the ZoomLot Subsidiaries has in full force and effect product liability and
errors and omissions insurance in amounts customary for companies similarly
situated, and the policies providing such insurance will not be cancelled or
terminated or otherwise become ineffective or unenforceable as a consequence of
this Agreement or the consummation of the transactions contemplated hereby.
3.20 DISCLOSURE. Neither this Agreement nor any of the exhibits hereto,
including the ZoomLot Disclosure Letter, contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained herein or therein, in light of the circumstances in which they were
made, not misleading, and there is no fact known to ZoomLot or any ZoomLot
Subsidiary or any of the Shareholders that that has not been disclosed to NAC
that materially affects adversely or could reasonably be anticipated to
materially affect adversely the business, including the operating results,
assets, customer, supplier or employee relations and business prospects, of
ZoomLot or any ZoomLot Subsidiary.
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3.21 ENFORCEABILITY AGAINST CYGNET. Cygnet has the requisite corporate
power and authority to enter into this Agreement to the extent provided for
herein and to carry out its obligations hereunder. The execution and delivery of
this Agreement by Cygnet and the consummation by Cygnet of the transactions
contemplated hereby have been duly authorized by the Board of Directors of
Cygnet, and no other corporate proceedings on the part of Cygnet are necessary
to authorize this Agreement and such transactions. This Agreement has been duly
executed and delivered by Cygnet, and constitutes a valid and binding obligation
of Cygnet, enforceable against it in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency, reorganization
or other similar laws relating to the enforcement of creditors' rights generally
and by general principles of equity. Except as set forth in the ZoomLot
Disclosure Letter, Cygnet is not subject to, or obligated under, any provision
of (a) its Certificate of Incorporation or Bylaws, (b) any agreement,
arrangement or understanding, (c) any license, franchise or permit or (d) any
law, regulation, order, judgment or decree, that would be breached or violated,
or in respect of which a right of termination or acceleration would arise or any
encumbrance on any of its assets would be created, by its execution, delivery
and performance of this Agreement and the consummation by it of the transactions
contemplated hereby. No authorization, consent or approval of, or filing with,
any public body, court or authority is necessary on the part of Cygnet for the
consummation by Cygnet of the transactions contemplated by this Agreement.
ARTICLE 4
ADDITIONAL REPRESENTATIONS
AND WARRANTIES OF THE SHAREHOLDERS
Each Shareholder represents and warrants to NAC and Merger Sub as of the
date hereof and again at and as of the Effective Time, the following:
4.1 AUTHORITY. Such Shareholder has the power and authority to enter into
this Agreement and to carry out its/his/her obligations hereunder. This
Agreement has been duly executed by such Shareholder and constitutes a valid and
binding obligation of such Shareholder, enforceable against such Shareholder in
accordance with its terms, except as the enforceability thereof may be limited
by bankruptcy, insolvency, reorganization or other similar laws relating to the
enforcement of creditors' rights generally and by general principles of equity.
Such Shareholder is not subject to, or obligated under, any agreement,
arrangement or understanding, or any law, regulation, order, judgment or decree,
that would be breached or violated, or in respect of which a right of
termination or acceleration would arise or any encumbrance on any of its/his/her
assets would be created, by its/his/her execution, delivery and performance of
this Agreement and the consummation by it/him/her of the transactions
contemplated hereby. No authorization, consent or approval of, or filing with,
any public body, court or authority is necessary on the part of such Shareholder
for the consummation by it/him/her of the transactions contemplated by this
Agreement.
4.2 STOCK OWNERSHIP. Such Shareholder represents that it/him/her is the
legal and beneficial owner of the number of shares of ZoomLot Common Stock set
forth opposite its/his/her name in the ZoomLot Disclosure Letter, free and clear
of all restrictions, liens and encumbrances other than restrictions under
federal and state securities laws and as set forth in this Agreement.
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4.3 PURCHASE ENTIRELY FOR OWN ACCOUNT. The NAC Merger Shares to be
received by such Shareholder will be acquired for investment for such
Shareholder's own account, not as a nominee or agent, and not with a view to the
resale or distribution of any part thereof, and such Shareholder has no present
intention of selling, granting any participation in or otherwise distributing
the same. By executing this Agreement, such Shareholder further represents that
it/he/she does not have any contract, undertaking, agreement or arrangement with
any person to sell, transfer or grant participations to such person or to any
third person with respect to any of the NAC Merger Shares.
4.4 DISCLOSURE OF INFORMATION. Such Shareholder believes it/he/she has
received all the information it/he/she considers necessary or appropriate for
deciding whether to receive the NAC Merger Shares. Such Shareholder further
represents that it/he/she has had an opportunity to ask questions and receive
answers from NAC and its management regarding the business, properties,
prospects and financial condition of NAC. The foregoing, however, does not limit
or modify the representations and warranties of NAC in ARTICLE 2 of this
Agreement or the right of such Shareholder to rely thereon.
4.5 INVESTMENT EXPERIENCE. Such Shareholder is an investor in securities
of companies in the development stage and acknowledges that it/he/she is able to
fend for itself/himself/herself, can bear the economic risk of its/his/her
investment and has such knowledge and experience in financial or business
matters that it/he/she is capable of evaluating the merits and risks of the
investment of owning the NAC Merger Shares.
4.6 RESTRICTED SECURITIES. Such Shareholder understands that the NAC
Merger Shares it/he/she is acquiring are characterized as "restricted
securities" under the federal securities laws inasmuch as such Shares are being
acquired from NAC in a transaction not involving a public offering, and that
under such laws and applicable regulations such securities may be resold without
registration under the Securities Act only in certain limited circumstances. In
this connection, such Shareholder represents that it/he/she is familiar with SEC
Rule 144, as presently in effect, and understands the resale limitations imposed
thereby and by the Securities Act.
4.7 HOLDING PERIOD. Such Shareholder agrees that, for a period of one year
from the Effective Time, it/he/she will not transfer or otherwise dispose of any
of the NAC Merger Shares being issued to such Shareholder pursuant to the terms
of this Agreement.
4.8 LEGENDS. It is understood that the Securities Act restricts the
transferability of securities, such as the NAC Merger Shares, issued in reliance
upon the exemption from the registration requirements of the Securities Act
provided by Section 4(2) thereunder, and that the certificates evidencing the
NAC Merger Shares will bear, in addition to the legend provided in SECTION 4.8
above and any legend that may be required under the Standstill Agreement, the
following legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY OTHER APPLICABLE SECURITIES LAWS AND HAVE
BEEN ISSUED IN RELIANCE UPON AN EXEMPTION FROM THE
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REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH SECURITIES
LAWS. THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD,
OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR OTHERWISE TRANSFERRED
OTHER THAN TO: (A) NATIONAL AUTO CREDIT, INC. (THE "COMPANY") OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO RULE 144 UNDER THE SECURITIES
ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO
ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
THE SECURITIES ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT. THE HOLDER OF THIS CERTIFICATE
AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS
TRANSFERRED (UNLESS SUCH SECURITY IS TRANSFERRED PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT) A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
PROPOSED TRANSFER PURSUANT TO CLAUSE (B), (C) OR (D) ABOVE, THE
COMPANY MAY REQUIRE THAT THE TRANSFEROR FURNISH IT WITH AN OPINION OF
COUNSEL CONFIRMING THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT.
4.9 SHAREHOLDINGS OF NAC. Prior to the date hereof, such Shareholder owns
beneficially and of record the number of shares of NAC Common Stock set forth in
the column across from his/her/its name on EXHIBIT G.
4.10 DISCLAIMER OF BENEFICIAL OWNERSHIP. Each Shareholder represents that,
except as provided in the Standstill Agreement, it/he/she does not, directly or
indirectly, through any contract, arrangement, understanding, relationship or
otherwise, have, or share, voting or investment power with respect to the NAC
Merger Shares being issued to any other Shareholder pursuant to this Agreement.
ARTICLE 5
ADDITIONAL AGREEMENTS
6.1 REGISTRATION RIGHTS. At the Effective Time, NAC and the Shareholders
shall enter into a Registration Rights Agreement in the form attached hereto as
EXHIBIT B (the "REGISTRATION RIGHTS AGREEMENT").
6.2 STANDSTILL AGREEMENT. At the Effective Time, the Shareholders shall
enter into a Standstill Agreement in the form attached hereto as EXHIBIT C.
6.3 EMPLOYMENT AGREEMENTS. At the Effective Time, the Surviving
Corporation shall have entered into employment agreements substantially in the
form attached hereto as EXHIBIT D with those persons designated by NAC on the
date hereof.
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6.4 EXPENSES. Each party to this Agreement shall bear it/he/she own
expenses in connection with this Agreement and the transactions contemplated
hereby, subject, however, to Section 1.8(i) above and ARTICLE 8 below.
6.5 TAX RETURNS. NAC shall prepare and file any and all tax returns with
respect to ZoomLot that were not required to be filed by ZoomLot prior to the
Effective Time. The Shareholders' Representative, or one of more of his
designees reasonably acceptable to NAC, shall assist NAC in the preparation of
such tax returns.
6.6 NOTIFICATION OF CERTAIN MATTERS. Each party shall give prompt notice
to the others of (a) the occurrence or failure to occur of any event, which
occurrence or failure would be likely to cause any representation or warranty on
its/his/her part contained in this Agreement to be untrue or inaccurate at, or
at any time prior to, the Effective Time, and (b) any material failure of such
party, or any officer, director, shareholder, employee or agent thereof, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by it/him/her hereunder.
6.7 ACCESS TO INFORMATION; CONFIDENTIALITY.
(a) NAC and ZoomLot shall each have the opportunity to make a complete
due diligence review of the books, records, business and affairs of
the other.
(b) To facilitate the due diligence review, NAC and ZoomLot shall
provide to each other and each other's agents complete access to all
of each other's records and documents, shall provide each other with
personal, bank and professional references, and shall use reasonable
efforts to make available for consultation customers and suppliers.
(c) Each party agrees that all non-public information provided to the
other will be treated as confidential, and if this Agreement is
terminated, will return to the other party all confidential documents
(and all copies thereof) in its possession, or will certify to the
other that all such documents not returned have been destroyed.
Further, regardless of whether this Agreement is terminated, each
party shall continue to hold all confidential information of the other
in strictest confidence; provided, however, that, if the Merger is
consummated, NAC shall have no obligation hereunder to hold in
confidence any confidential or non-public information related to, or
belonging to, ZoomLot or the Surviving Corporation. Non-public
information shall not include any information that a party can
demonstrate: (i) was already in such party's possession prior to
negotiations related to this transaction; (ii) is or becomes publicly
and openly known and in the public domain through no fault of such
party; or (iii) is received by such party in a non-confidential manner
from a third party having the right to disclose such information.
6.8 ZOOMLOT DIRECTORS AND OFFICERS LIABILITY. NAC shall use commercially
reasonable efforts to include the directors and officers of the Surviving
Corporation and all of its
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subsidiaries in all agreements or covenants of indemnity and all policies of
insurance applicable to the directors and officers of NAC.
6.9 ANTITAKEOVER PROVISIONS. If (i) any "moratorium," "control share,"
"fair price," "affiliate transaction," "business combination" or other
antitakeover laws and regulations of any state or (ii) the restriction on
business combinations with interested persons contained in NAC's Certificate of
Incorporation (collectively an "ANTITAKEOVER PROVISION") is or may become
applicable to the Merger or any subsequent transactions with Xxxxxx X. Xxxxxx,
XX or any of his affiliates or associates, NAC shall take all necessary actions
to permit the transactions contemplated by this Agreement to be consummated as
promptly as practicable on the terms contemplated hereby and otherwise act to
eliminate the effects of any Antitakeover Provision on the Merger or any
subsequent transactions with Xxxxxx X. Xxxxxx, XX or any of his affiliates or
associates.
6.10 TECHNOLOGY AND MARKETING REVIEW. Lightyear Partners, LLC and Columbia
Process Partners, Inc. are to commence a 3-week evaluation of the Surviving
Corporation's technological platform and marketing strategy within 10 days
following the Closing. The management of the Surviving Corporation shall accept
and implement the reasonable recommendations of such consultants. To the extent
such recommendations are implemented, appropriate changes shall be made to
Exhibit A and Exhibit E to take into account any delays or expenses required by
the implementation of such recommendations, except to the extent that the delays
and expenses required by the implementation of such recommendations have already
been taken into account in the preparation of Exhibit A or E. If such
recommendations are implemented but NAC and the Shareholders' Representative
cannot agree upon what changes, if any, are appropriate to be made to Exhibit A
and Exhibit E to take into account any delays or expenses required by the
implementation of such recommendations, except to the extent that the delays and
expenses required by the implementation of such recommendations have already
been taken into account in the preparation of Exhibit A or E, the determination
of any such changes will be resolved by binding arbitration before a single,
independent arbitrator who is or has been a Certified Public Accountant actively
engaged in accounting practice. In the event that NAC and the Shareholders'
Representative are unable to agree upon an arbitrator, the arbitrator will be
selected by the American Arbitration Association AAA located in New York City in
accordance with the commercial arbitration rules of the AAA.
ARTICLE 7
CONDITIONS
7.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment at or prior to the Effective Time of the following conditions:
(a) there shall not be pending by or before any court or other
governmental body an order or injunction restraining or prohibiting
the transactions contemplated hereby; and
(b) no party hereto shall have terminated this Agreement as permitted
herein.
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7.2 ADDITIONAL CONDITIONS TO OBLIGATION OF ZOOMLOT AND THE SHAREHOLDERS.
The obligation of ZoomLot and the Shareholders to effect the Merger is also
subject to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) the representations and warranties of NAC and Merger Sub set forth
in ARTICLE 2 above that are qualified by materiality shall be true and
correct, and the representations and warranties of NAC and Merger Sub
that are not so qualified shall be true and correct in all material
respects, on and as of the Effective Time with the same force and
effect as if made on and as of the Effective Time, and each of the NAC
and the Merger Sub shall in all material respects have performed each
obligation and agreement and complied with each covenant to be
performed and complied with it hereunder at or prior to the Effective
Time;
(b) NAC shall have furnished to ZoomLot a certificate in which NAC and
Merger Sub shall certify that neither NAC nor Merger Sub has any
reason to believe that the conditions set forth in SECTION 7.2(a), (d)
AND (e) have not been fulfilled.
(c) NAC shall have furnished to the Shareholders (i) a copy of the
text of the resolutions by which the corporate action on the part of
NAC and Merger Sub necessary to approve this Agreement, the Merger and
the issuance of the NAC Merger Shares were taken and (ii) certificates
executed on behalf of NAC certifying, in each case, that such copy is
a true, correct and complete copy of such resolutions and that such
resolutions were duly adopted and have not been amended or rescinded;
(d) NAC shall have obtained each consent and approval necessary in
order that the Merger and the transactions contemplated herein not
constitute a breach or violation of, or result in a right of
termination or acceleration or any encumbrance on any of NAC's assets
pursuant to the provisions of, any agreement, arrangement or
understanding or any license, franchise or permit; provided, however,
that no such consent need be obtained with respect to (i) the
Settlement Agreement and Release (the "XXXXXXXX SETTLEMENT"), dated
November 3, 2000, between NAC and Xxxxxx X. Xxxxxxxx and certain of
his affiliates (Xxxxxx X. Xxxxxxxx and such affiliates, collectively,
the "XXXXXXXX ENTITIES") or (ii) the Stock Purchase and Standstill
Agreement (the "READING SETTLEMENT"), dated November 3, 2000, between
NAC and Reading Entertainment, Inc. and certain of its affiliates
(collectively, the "READING ENTITIES"), and, notwithstanding anything
contained herein to the contrary, no representation or warranty is
made hereunder by NAC or the Merger Sub that the execution and
delivery of this Agreement and/or the consummation of the transactions
contemplated hereby will not constitute a breach or violation of, or
result in a right of termination or acceleration under, either such
agreement (it being agreed and understood, however, that this proviso
shall not limit the obligations of NAC to provide any indemnification
under the last sentence of SECTION 8.3(a) below);
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(e) Between the date hereof and the Effective Time, (i) there shall
have been no materially adverse change in the assets, financial
condition, operating results, customer employee, supplier or franchise
relations, business condition or prospects, or financing arrangements
of NAC, (ii) there shall have been no adverse federal, state or local
legislative or regulatory change affecting in any material respect the
services, products or business of NAC and (iii) none of the properties
and assets of NAC shall have been damaged by fire, flood, casualty,
act of God or the public enemy or other cause (regardless of insurance
coverage for such damage) which damages would have a material and
adverse effect on the assets, financial condition, operating results,
customer, employee, supplier or franchise relations, business
condition or prospects, or financing arrangements of NAC, and NAC
shall have delivered to the Shareholders' Representative a
certificate, dated as of the Effective Time, to that effect; and
(f) All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to
ZoomLot's counsel, and ZoomLot and its counsel shall have received all
such counterpart original and certified or other copies of such
documents as they may have reasonably requested.
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF NAC AND MERGER SUB. The
obligations of NAC and Merger Sub to effect the Merger are also subject to the
fulfillment at or prior to the Effective Time of the following conditions:
(a) the representations and warranties of ZoomLot and the Shareholders
set forth in ARTICLES 3 and 4 above that are qualified by materiality
shall be true and correct, and the representations and warranties of
ZoomLot and the Shareholders set forth in ARTICLES 3 and 4 above that
are not so qualified shall be true and correct in all material
respects, on and as of the Effective Time with the same force and
effect as if made on and as of the Effective Time, and each of ZoomLot
and the Shareholders shall in all material respects have performed
each obligation and agreement and complied with each covenant to be
performed and complied with by it and/or them hereunder at or prior to
the Effective Time;
(b) ZoomLot shall have furnished to NAC a certificate in which ZoomLot
and the Shareholders shall certify that they have no reason to believe
that the conditions set forth in SECTION 7.3(a), (f), (g) and (h) have
not been fulfilled;
(c) ZoomLot shall have furnished to NAC (i) a copy of the text of the
resolutions by which the Board of Directors of ZoomLot and the board
of directors or other governing body of each Shareholder that is not
an individual approved this Agreement (including, without limitation,
the plan of merger contained herein) and the Merger; and (ii) a
certificate executed on behalf of ZoomLot by its corporate secretary
certifying to NAC that such copy is a true, correct and complete copy
of such resolutions of the Board of Directors of
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ZoomLot and that such resolutions were duly adopted and have not been
amended or rescinded;
(d) The Shareholders shall have delivered to NAC the original
certificate(s) for the shares of ZoomLot Common Stock, duly endorsed
to the Surviving Corporation for cancellation;
(e) The Shareholders shall have delivered stock powers executed in
favor of NAC for each certificate representing Forfeitable Shares, and
a limited power of attorney, in substantially the form of EXHIBIT H
hereto, directing the persons named therein to deliver the executed
stock power to NAC in the event such shares are required to be
returned to NAC upon forfeiture.
(f) ZoomLot and each of the Shareholders shall have obtained each
consent and approval necessary in order that the Merger and the
transactions contemplated herein not constitute a breach or violation
of, or result in a right of termination or acceleration or any
encumbrance on any of assets of ZoomLot or any ZoomLot Subsidiary
pursuant to the provisions of, any agreement, arrangement or
understanding or any license, franchise or permit;
(g) Between the date hereof and the Effective Time, (i) there shall
have been no materially adverse change in the assets, financial
condition, operating results, customer, employee, supplier or
franchise relations, business condition or prospects, or financing
arrangements of ZoomLot or any ZoomLot Subsidiary, (ii) there shall
have been no adverse federal, state or local legislative or regulatory
change affecting in any material respect the services, products or
business of ZoomLot or any ZoomLot Subsidiary and (iii) none of the
properties and assets of ZoomLot or any ZoomLot Subsidiary shall have
been damaged by fire, flood, casualty, act of God or the public enemy
or other cause (regardless of insurance coverage for such damage)
which damages may have a material and adverse effect on the assets,
financial condition, operating results, customer, employee, supplier
or franchise relations, business condition or prospects, or financing
arrangements of ZoomLot or any ZoomLot Subsidiary, and ZoomLot and the
Shareholders shall have delivered to NAC a certificate, dated as of
the Effective Time, to that effect;
(h) ZoomLot shall have delivered to NAC an agreement, substantially in
the form attached hereto as EXHIBIT K and signed by each employee of
ZoomLot or any ZoomLot Subsidiary who is listed on EXHIBIT L (the
"TECHNOLOGY EMPLOYEES"), pursuant to which agreement such employee
shall have confirmed the transfer to ZoomLot or such ZoomLot
Subsidiary of all of such employee's right, title and interest in and
to all inventions, ideas, know-how, patents, trademarks, service
marks, trade names, copyrights, trade secrets, licenses, information,
software programs, proprietary rights and processes that (i) were
developed, created or otherwise derived during the period of such
employee's employment with ZoomLot or any ZoomLot Subsidiary (whether
or not during business time) or (ii) are used or useable in the
business or operations of ZoomLot
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or any ZoomLot Subsidiary as conducted at, or at any time prior to the
Effective Time, regardless of when the same was developed, created or
otherwise derived (all of the foregoing, collectively, the
"PROPRIETARY MATERIAL"). The Technology Employees are the only
employees of ZoomLot or any ZoomLot Subsidiary that are reasonably
likely to possess any Proprietary Material or any right or interest in
any Proprietary Material or to develop or create any Proprietary
Material.
(i) All corporate and other proceedings in connection with the
transactions contemplated at the Closing and all documents incident
thereto shall be reasonably satisfactory in form and substance to
NAC's counsel, and NAC and its counsel shall have received all such
counterpart original and certified or other copies of such documents
as they may reasonably have requested.
ARTICLE 8
INDEMNITIES
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties made by NAC, Merger Sub, ZoomLot and the Shareholders in this
Agreement shall survive until December 31, 2004, and no claim for any breach
thereof may be made unless notice thereof is given to the other parties prior to
such date; provided, however, that the representations and warranties contained
in SECTION 2.13 and SECTION 3.14 shall survive until the end of the applicable
statute of limitations, if longer, and the representations and warranties
contained in SECTION 4.2 shall survive for ten (10) years; and provided,
further, however, that the limitations on survival shall not apply to any breach
of this Agreement constituting fraud.
8.2 ZOOMLOT AND THE SHAREHOLDERS AGREEMENT TO INDEMNIFY.
(a) Subject to the limitations in this ARTICLE 8, ZoomLot and each of
the Shareholders, severally and jointly, agree to indemnify, defend
and hold harmless NAC and Merger Sub and their respective affiliates,
directors, officers, employees and agents from and against all
proceedings, judgments, decrees, demands, claims, actions, losses,
damages, liabilities, costs and expenses, including, without
limitation, reasonable attorneys' fees and costs, (collectively
referred to as "LOSSES") asserted against or incurred by NAC, Merger
Sub or their respective directors, officers, employees or agents
resulting from a breach of any covenant, agreement, representation or
warranty of ZoomLot or the Shareholders contained in this Agreement or
the exhibits hereto or in any certificate, document or instrument
delivered hereunder by or on behalf of ZoomLot or any Shareholder
pursuant hereto other than the Registration Rights Agreement, the
Employment Agreements and the Standstill Agreement. Notwithstanding
anything contained in the foregoing to the contrary, no Shareholder
shall have any obligation hereunder with respect to the breach by any
other Shareholder of such other Shareholder's representations and
warranties in SECTION 4 above or such other Shareholder's covenant
under the last sentence of SECTION 1.8(g) above.
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(b) TAX MATTERS. Subject to the limitations in this ARTICLE 8, ZoomLot
and the Shareholders also agree to indemnify, hold harmless and defend
NAC and Merger Sub from and against any and all assessments, claims
and liability relating to (i) any failure to file federal, state or
local tax returns or amended returns for ZoomLot or any ZoomLot
Subsidiary for any period, including short periods, for which a return
was due, including any extensions, prior to or ending on the Effective
Time; (ii) for any non-payment by ZoomLot or any ZoomLot Subsidiary of
federal, state or local taxes due prior to or ending on the Effective
Time; or (iii) for any errors or omissions related to any federal,
state, or local tax returns, filed by ZoomLot or any ZoomLot
Subsidiary prior to or ending on the Effective Time; provided,
however, that in no event shall ZoomLot or the Shareholders be
obligated to indemnify NAC or Merger Sub to the extent that any net
operating loss carryover or separate return limitation year reflected
in one or more tax returns of ZoomLot or any ZoomLot Subsidiary is
subject to limitation or restrictions arising as a result of the
Merger.
(c) LIMITED EXCLUSION FOR ZOOMLOT. Notwithstanding anything contained
herein to the contrary, in the event the Merger shall be consummated
and ZoomLot shall be merged with and into the Merger Sub to become the
Surviving Corporation, any liability contemplated hereunder to be born
by ZoomLot shall be borne jointly and severally by the Shareholders
and the Shareholders shall not have any right of contribution against,
or otherwise have any claim against or right to recover from, ZoomLot
or the Surviving Corporation on account of any breach or violation by
ZoomLot of any of its representations, warranties, covenants or other
agreements set forth in this Agreement or any of the exhibits hereto
or any certificate, document or instrument delivered hereunder by or
on behalf of ZoomLot.
8.3 NAC AND MERGER SUB'S AGREEMENT TO INDEMNIFY.
(a) NAC and Merger Sub hereby agree to indemnify, defend and hold
harmless ZoomLot and/or the Shareholders and their agents from and
against all Losses asserted against or incurred by ZoomLot and/or the
Shareholders and their respective affiliates, directors, officers,
employees and agents resulting from a breach of any covenant,
agreement, representation or warranty of NAC or Merger Sub contained
in this Agreement or the exhibits hereto or in any certificate,
document or instrument delivered hereunder by or on behalf of NAC or
Merger Sub pursuant hereto other than the Registration Rights
Agreement, the Employment Agreements and the Standstill Agreement. In
addition, in the event (i) any third party should assert any action in
the name of or on behalf of NAC against ZoomLot and/or the
Shareholders on account of any actual or alleged illegality or
impropriety of this Agreement or of the consummation of the
transactions contemplated hereby, other than on account of any
misrepresentation or breach by ZoomLot and/or any Shareholder
hereunder, or (ii) any Xxxxxxxx Entity shall assert any claim
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against ZoomLot and/or the Shareholders on account of any breach of
the Xxxxxxxx Settlement resulting from the execution, delivery or
performance of this Agreement, or (iii) any Reading Entity shall
assert any claim against ZoomLot and/or the Shareholders on account of
any breach of the Reading Settlement resulting from the execution,
delivery or performance of this Agreement, NAC shall indemnify, defend
and hold harmless ZoomLot and the Shareholders with respect to any and
all Losses resulting from such claim.
(b) In addition to the foregoing indemnity, NAC hereby agrees to
indemnify, defend and hold harmless the Shareholders from and against
all Losses asserted against or incurred by the Shareholders and their
respective affiliates, directors, officers, employees and agents as a
result of NAC's failure to make a filing determined to be required
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as
amended.
8.4 NOTICE OF CLAIM. Any party who has a claim that would give rise to
liability pursuant to this ARTICLE 8 shall give prompt notice to all other
parties of such claim, together with a reasonable description thereof. With
respect to any claim by a third party that is covered by the indemnifications
contained hereunder, the party obligated to indemnify shall be afforded the
opportunity, at its expense, to defend or settle such claim if, within ten (10)
business days of notice thereof, it acknowledges in writing its indemnification
obligation hereunder, utilizes counsel reasonably satisfactory to the
indemnified party, commences such defense promptly and pursues such defense with
diligence; provided, however, that such indemnifying party shall secure the
consent of the indemnified party to any settlement, which consent shall not be
unreasonably withheld or delayed. If any indemnified party defends any claim
hereunder, such party shall use reasonable efforts in such defense and to
mitigate Losses arising thereunder and shall not settle any claim without the
consent of the indemnifying party, which shall not be unreasonably withheld or
delayed.
8.5 CERTAIN LIMITATIONS.
(a) CAP FOR BREACH AND SOLE REMEDY. The liability of ZoomLot and the
Shareholders for indemnification under SECTION 8.2 above shall be
limited, subject to subsection (d) below, to the value (as determined
in SECTION 8.6 below) of the NAC Merger Shares that have not been
forfeited pursuant to Section 1.8 herein (such value, the "ZOOMLOT
CAP"), and, subject to subsection (d) below, the return of such shares
(or payment of the value thereof) shall be the exclusive remedy of NAC
(or any person acting or purporting to act by or in right of NAC) or
affiliate, director, officer, shareholder, employee or agent of NAC in
any claim or cause of action based thereon (subject to the exception
in SECTION 8.5(d)) against ZoomLot and the Shareholders (or their
related parties) for any inaccuracy, misrepresentation, breach of, or
default in any of the representations, warranties or covenants given
or made by ZoomLot or the Shareholders under this Agreement or any
exhibit hereto or in any certificate, document or instrument delivered
by or on behalf of ZoomLot or any Shareholder pursuant hereto other
than the Registration Rights Agreement, the Employment Agreements and
the Standstill Agreement The liability of NAC and Merger Sub for
indemnification under SECTION 8.3 above shall be limited, subject to
subsection (d) below, to fifteen million dollars ($15,000,000) (the
"NAC CAP") and the payment of such amount (or the appropriate portion
thereof) shall be the exclusive remedy of
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ZoomLot and the Shareholders (and any person acting or purporting to
act by or in right of ZoomLot and/or any one or more of the
Shareholders) or affiliate, director, officer, shareholder, employee
or agent of ZoomLot or any Shareholder in any claim or cause of action
based thereon (subject to the exception in SECTION 8.5(d)) against NAC
and/or Merger Sub (or their related parties) for any inaccuracy,
misrepresentation, breach of, or default in any of the
representations, warranties or covenants given or made by NAC and/or
Merger Sub under this Agreement or any exhibit hereto or in any
certificate, document or instrument delivered by or on behalf of NAC
or Merger Sub pursuant hereto other than the Registration Rights
Agreement, the Employment Agreements and the Standstill Agreement.
(b) ABSENCE OF REMEDY FOR FAILURE TO MEET OBJECTIVES. In addition, NAC
acknowledges and agrees that (i) NAC's sole remedy against ZoomLot or
the Shareholders for any failure by the Surviving Corporation to
achieve either or both of the Objectives shall be return of the
Forfeitable Shares, all as described in ARTICLE 1 above, (or, in the
event any Shareholder who is required to return to NAC any Forfeitable
Shares shall refuse or otherwise fail to do so, to pay NAC the value
of such Forfeitable Shares) and (ii) in no event shall ZoomLot or the
Shareholders have any liability under this Agreement for any failure
of the Surviving Corporation to achieve either or both of the
Objectives other than for the return of the Forfeitable Shares (or, in
the event any Shareholder who is required to return to NAC any
Forfeitable Shares shall refuse or otherwise fail to do so, to pay NAC
the value of such Forfeitable Shares); provided, however, that, if any
Shareholder shall refuse or otherwise fail to return to NAC any
Forfeitable Shares as required under Article 1 above, such Shareholder
shall also be liable for damages as provided in SECTION 1.8(i) above.
Nothing contained in this clause (b) shall be deemed to limit or
restrict in any respect any liability ZoomLot or any Shareholder may
have under or pursuant to Section 8.2 or otherwise with respect to any
breach or violation of any representation, warranty, covenant or other
agreement set forth in this Agreement or any exhibit hereto or in any
certificate, document or instrument delivered hereunder by or on
behalf of ZoomLot or any Shareholder pursuant hereto.
(c) BASKET. In no event shall ZoomLot and the Shareholders, as a party
on the one hand, or NAC, as a party on the other hand, be required to
indemnify the other party for any Losses relating to any matter
subject to indemnification under this ARTICLE 8 unless and until such
Losses exceed in the aggregate $150,000 (the "BASKET"), in which event
all such Losses in excess of the Basket shall be recoverable by the
indemnified party.
(d) INAPPLICABILITY OF CAP AND BASKET. The Basket and ZoomLot Cap or
NAC Cap (as applicable) shall not apply to (i) the obligation of
Cygnet and the Xxxxxx Shareholders to repay the Cygnet Payable, (ii)
any breach of this Agreement constituting fraud, (iii) NAC's
obligation of indemnification under clause of SECTION 8.3, (iv) NAC's
obligation of indemnification under the last sentence of SECTION
8.3(a), (v) ZoomLot's and the Shareholders' obligation of
indemnification
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under SECTION 8.2(b), (vi) the liability of any Shareholder pursuant
to SECTION 1.8(i) or any Shareholder's obligation of indemnification
under SECTION 8.2(a) with respect to any breach by it/him/her of
SECTION 1.8(i), (vii) NAC's obligation of indemnification under
SECTION 8.3(a) with respect to any breach by NAC of its
representations and warranties in SECTION 2.13 or (viii) any
Shareholder's obligation of indemnification under SECTION 8.2(a) with
respect to any breach by such Shareholder of SECTION 1.8(g).
8.6 SATISFACTION OF OBLIGATIONS. If any indemnifying party becomes
obligated to indemnify another party with respect to any claim for
indemnification hereunder and the amount of liability with respect thereto shall
have been finally determined, subject to the applicable limitations (if any) set
forth in SECTION 8.5, the indemnifying party shall pay or otherwise satisfy such
amount or obligation to the indemnified party within ten (10) days following
receipt by the indemnifying party of written demand from the indemnified party.
NAC and Merger Sub shall be obligated to satisfy any obligation pursuant to such
claims for indemnification against ZoomLot or the Shareholders by first
notifying the Shareholders' Representative of such finally determined
obligation, and the Shareholders shall, at their option, either (i) pay the
amount of such finally determined obligation in cash to NAC; or (ii) return to
NAC a number of NAC Merger Shares equal to the amount of such finally determined
obligation divided by $15.00 (subject to adjustment for any stock split,
reorganization or recapitalization). If the NAC Merger Shares are not
surrendered to NAC within such 10 days, the Shareholders waive their
right/option to satisfy any indemnification obligation by the use of NAC Merger
Shares. If a Shareholder elects to deliver NAC Merger Shares in satisfaction of
an obligation, the Shareholder must first surrender Nonforfeitable Shares and
may only deliver shares that remain subject to forfeiture to the extent that the
obligation is in excess of the value of all of such Shareholder's Nonforfeitable
Shares as determined by clause (ii) above and such Shareholder is surrendering,
or has previously surrendered, all of such Shareholder's Nonforfeitable Shares
in satisfaction of the current obligation or any prior obligation.
8.7 EXCLUSIVE REMEDY. The rights and remedies of NAC, Merger Sub, ZoomLot
and the Shareholders provided for in this Agreement (including the rights to
indemnification) shall be exclusive, and no other rights and remedies that may
exist at law or in equity may be asserted against a party. It is agreed and
understood that any party hereto may be separately liable, without application
of any limitation or exclusion provided for herein, on account of any breach by
such party of any of its/his/her representations, warranties, covenants and
other agreements set forth in any Employment Agreement, the Standstill Agreement
or the Registration Rights Agreement.
ARTICLE 9
GENERAL PROVISIONS
9.1 AMENDMENT. This Agreement may not be amended except by and as provided
in an instrument in writing approved by NAC, Merger Sub, ZoomLot and a
majority-in-interest of the Shareholders or the Shareholders' Representative
(who may agree to any amendment for and on behalf of any and all of the
Shareholders) and signed on behalf of each of the parties hereto;
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provided, however, that no amendment TO SECTION 1.12 hereof as it relates to
Cygnet may be amended except by and as provided in an instrument in writing
approved by NAC and Cygnet.
9.2 NON-WAIVER. Failure to insist upon strict compliance with any term,
covenant or condition hereof shall not be deemed a waiver of such term, covenant
or condition, nor shall any waiver or relinquishment of any right or power
hereunder at any one time or more times be deemed a waiver or relinquishment of
such right or power at any other time or times.
9.3 PUBLIC STATEMENTS. Except as required by applicable law, no party
shall make any public announcement or statement with respect to the Merger, this
Agreement or any related transaction without the approval of the other parties,
which approval will not be unreasonably withheld or delayed. Each party agrees
to consult with the other parties prior to issuing any such public announcement
or statement.
9.4 NOTICES. All notices and other communications hereunder shall be in
writing and shall be sufficiently given if made by hand delivery, by telecopier,
by recognized overnight courier service or by registered or certified mail
(postage prepaid and return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be specified by it by
like notice):
If to NAC or the Merger Sub: National Auto Credit, Inc.
00000 Xxxxxx Xxxx
Xxxxx, Xxxx 00000
Attn: _________________
FAX: ________________
With a copy to: Parker, Duryee, Xxxxxx & Xxxx, P.C.
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxx
FAX: 000-000-0000
If to ZoomLot: ZoomLot Corporation
0000 Xxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
FAX: 000-000-0000
With a copy to: Xxxxx & Xxxxxx, LLP
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx
FAX: 000-000-0000
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If to the Shareholders (or Xxxxxx X. Xxxxxx, XX
any of them): Verde Capital Partners, LLC
0000 Xxxx Xxxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
FAX: 000-000-0000
With a copy to: Xxxxx & Xxxxxx, LLP
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx
FAX: 000-000-0000
If to Cygnet: Cygnet Capital Corporation
0000 Xxxx Xxxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxxx X. Xxxxxxx
FAX: 000-000-0000
With a copy to: Xxxxx & Xxxxxx, LLP
Xxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxx X. Xxxxxxx
FAX: 000-000-0000
All such notices and other communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; three business days
after being deposited in the mail, postage prepaid, if delivered by mail; the
next business day, if by recognized overnight courier service; and when receipt
acknowledged, if telecopied; provided, however, notice to a party's attorney
shall not constitute notice to such party.
9.5 INTERPRETATION. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. References to Sections and Articles refer to
sections and articles of this Agreement unless otherwise stated. Words such as
"herein," "hereinafter," "hereof," "hereto," "hereby" and "hereunder," and words
of like import, unless the context requires otherwise, refer to this Agreement
(including the exhibits and attachments hereto). As used in this Agreement, the
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masculine, feminine and neuter genders shall be deemed to include the others if
the context requires. This Agreement is the product of mutual negotiation; and
no party shall be deemed the draftsperson hereof or of any portion or provision
hereof.
9.6 SEVERABILITY. This Agreement shall be deemed severable, and the
invalidity or unenforceability of any term or provision hereof shall not affect
the validity or enforceability of this Agreement or any of the other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
9.7 MISCELLANEOUS. This Agreement (together with all other documents and
instruments referred to herein or contemplated hereby): (a) constitutes the
entire agreement, and supersedes all other prior or contemporaneous agreements,
representations, warranties and undertakings, both written and oral, among the
parties, with respect to the subject matter hereof; (b) is not intended to
confer upon any other person any rights or remedies hereunder; and (c) shall not
be assigned by operation of law or otherwise, except that NAC and the Merger Sub
may assign all or any portion of their rights under this Agreement to any wholly
owned subsidiary, but no such assignment shall relieve NAC and the Merger Sub of
their obligations hereunder, and except that this Agreement may be assigned by
operation of law to any corporation with or into which NAC may be merged.
9.8 COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
9.9 GOVERNING LAW. This Agreement shall be governed by, interpreted under,
and construed in accordance with the internal laws of the State of New York
applicable to agreements made and to be performed within the State of New York
without giving effect to principles of conflicts of laws thereof.
9.10 WAIVER OF JURY TRIAL. Each of the parties hereto expressly waives its
right to a jury trial with respect to any such suit, litigation or other
judicial proceeding.
9.11 SHAREHOLDERS' REPRESENTATIVE. The Shareholders hereby irrevocably
constitute and appoint Xxxxxx X. Xxxxxx, XX to act as their true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him and in his name, place and xxxxx, in any and all capacities, solely to
execute any and all agreements and documents required or contemplated by this
Agreement, including any amendments hereto, on behalf of the Shareholders. If,
for any reason, Xxxxxx X. Xxxxxx, XX is incapacitated or unable to act or
submits to NAC and all of the other Shareholders his resignation as the
Shareholders' Representative, the Shareholder who then holds of record the
largest number of outstanding shares of NAC Common Stock is hereby appointed as
to act as the Shareholders' Representative. NAC shall be entitled to send all
notices to, and to rely upon all consents and approvals given, and all other
actions taken, by, the incumbent Shareholders' Representative until such time as
NAC receives actual notice of such Shareholders' Representative's resignation,
death or incapacity. NAC shall be entitled to rely upon the response of the
Shareholders' Representative in all matters pertaining to the subject
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matter hereof, including, without limitation, any consent or approval provided
or contemplated hereunder to be given by or on behalf of, or obtained from, the
Shareholders or any of them. Notice to or service upon the Shareholders'
Representative shall be deemed to constitute good and sufficient notice or
service upon all of the Shareholders for all matters, including without
limitation, all notices, demands for arbitration and legal process. As used in
this Agreement, "SHAREHOLDERS' REPRESENTATIVE" means Xxxxxx X. Xxxxxx, XX or
such other person who may, from time to time, be appointed or authorized to act
on behalf of the Shareholders as contemplated by this SECTION 9.11.
9.12 SUCCESSORS AND ASSIGNS; NO THIRD-PARTY BENEFICIARY. This Agreement
shall be binding upon and enforceable against the parties hereto and their
heirs, executors, legal representatives, successors and assigns and shall inure
to the benefit of the parties hereto and their heirs, executors, legal
representative, successors and permitted assigns. This Agreement and each of the
provisions hereof (including representations, warranties and covenants) are
solely for the benefit of the parties and their respective successors and
permitted assigns. No provisions of this Agreement or any of the documents and
certificates executed in connection herewith (including any representations,
warranties and covenants) shall be construed as creating any rights of any
nature whatsoever in any other person or entity other than the parties (and
their respective affiliates, directors, officers, employees and agents) and
their respective successors and permitted assigns.
[Balance of page intentionally left blank]
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MERGER AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, each of NAC, Merger Sub, ZoomLot and the Shareholders
has executed this Agreement, or caused it to be executed on its behalf by an
officer or other representative thereunto duly authorized, all as of the date
first written above.
NATIONAL AUTO CREDIT, INC., a Delaware
corporation
By:
--------------------------------------
Name: Xxxxx X. XxXxxxxx
Title: Chief Executive Officer
ZOOMLOT ACQUISITION CORP., a Delaware
corporation
By:
--------------------------------------
Name: Xxxxx X. XxXxxxxx
Title: President
ZOOMLOT CORPORATION, a Delaware
corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx, XX
Title: Chief Executive Officer
--------------------------------------
XXXXXX X. XXXXXX, XX
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MERGER AGREEMENT
SIGNATURE PAGE
VERDE REINSURANCE COMPANY, LTD., a Nevis
Island corporation
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxx, XX
Title: Managing Director
XXXXX XXXXXX III 2000 TRUST
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Trustee
XXXXX XXXXXX 2000 TRUST
By:
--------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Trustee
--------------------------------------
XXX XXXXX
--------------------------------------
XXXXXX X. XXXXXXX
--------------------------------------
XXXX XXXXXX
EJMS INVESTORS LIMITED PARTNERSHIP,
an Arizona limited partnership
By: SMJE INVESTORS, LLC, AN ARIZONA
LIMITED LIABILITY COMPANY, the
General Partner
By:
--------------------------------------
Name:
---------------------------------
Title:
--------------------------------
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MERGER AGREEMENT
SIGNATURE PAGE
-----------------------------------------
XXXXX XXXXXXXXX
-----------------------------------------
XXXXX XXXXXXX
-----------------------------------------
XXXXX XXXXXXX
-----------------------------------------
XXXX XXXXXX
-----------------------------------------
XXXXX XXXXXX
Agreement as to SECTION 1.12 and ARTICLE 9 of this
Agreement only, and for the purposes of those
provisions of this Agreement Cygnet shall be
deemed a party to this Agreement:
CYGNET CAPITAL CORPORATION, an Arizona corporation
By:
------------------------------------
Name: Xxxxxx X. Xxxxxxx
Title: Vice President and Secretary
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