MERGER AGREEMENT AND
PLAN OF REORGANIZATION
This MERGER AGREEMENT and PLAN OF REORGANIZATION (the "Agreement")
dated as of June 21, 1999 is by and among MEMBER NET, INC. (" MNI"), a
California corporation whose principal office is located at 0000 Xxxxxxxx
Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000 and the Shareholders of MNI set forth
on the signature page hereto, and XXXXXXXXXXXX.XXX, INC. ("NACT"), an Idaho
corporation whose principal office is located at 0000 X. Xxxxxx Xxxxxx,
Xxxxx 0, Xxxx Xxxxx, Xxxxxxx 00000, and Xxxxxxxxxxxx.xxx ("SUB"), a Florida
corporation, and a wholly-owned subsidiary of NACT.
RECITALS
A. NACT is scheduled to launch an Internet website with the domain name
xxx.xxxxxxxxxxxx.xxx, by August of 1999. The site is intended to be commerce
enabled merchant community and portal website, specifically targeted to a
demographic audience sometimes collectively referred to as "New Age." NACT
is authorized to issue 45,000,000 shares of Common Stock, par value $0.02
(the "NACT Shares") of which 3,599,749 shares is issued and outstanding.
B. MNI owns an Internet website with the domain name
xxx.xxxxxxxxxxxx.xxx, which is marketed to the "New Age" demographic
audience. MNI owns licenses for the use of a variety of Internet tools such
as web-based e-mail, a search engine and an Internet guide.
C. NACT desires to acquire ownership of MNI by causing MNI to be
merged with and into SUB and SUB shall be the surviving corporation. NACT
will issue two million five hundred thousand (2,500,000) shares of Common
Stock, par value $.02 (the "NACT Common Stock"), to be issued to the MNI
shareholders in exchange for all of the MNI Common Stock issued and
outstanding (the "MNI Stock"), at a ratio as herein set forth. In addition,
NACT will issue one million (1,000,000) warrants to purchase up to one
million (1,000,000) shares of NACT common stock at the exercise price of
$2.25 per share, to be issued to the shareholders
of MNI, at the same ratio as herein set forth for the MNI
Stock.
D. The respective Boards of Directors of MNI, NACT and SUB deem it
desirable and in the best interests of their respective corporations, and of
their respective stockholders, that MNI be merged into and with SUB in
accordance with the Florida Business Corporation Act ("FBCA") and the
California General Corporation Law ("CGCL"), as a result of which SUB, the
surviving corporation, and the holders of the outstanding capital stock of
MNI will receive the consideration hereinafter set forth.
E. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue
Code of 1986, as amended (the "Code").
F. The parties have executed a Letter of Intent dated May 25, 1999 (the
"LOI") providing for the aforesaid merger.
NOW, THEREFORE, in consideration of the terms,
conditions, agreements and covenants contained herein, and
in reliance upon the representations and warranties contained in this
Agreement, the parties hereto agree as follows:
I.
MERGER OF MNI WITH AND INTO SUB
1.1 Merger and Survival of NACT: In the manner and subject to the
terms and conditions set forth herein, MNI shall be merged with and into SUB
(the "Merger") in accordance with the provisions of, and with the effect
provided in the respective corporate laws of the parties. SUB shall be the
surviving corporation after the Merger and shall continue to exist as a
corporation created and governed by the laws of the State of Florida.
1.2 Effective Date: If all of the conditions precedent to
the obligations of each of the parties hereto as hereinafter
set forth shall have been satisfied or shall have been
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waived, the Merger shall become effective on the date (the "Effective Date")
the certificate of merger, in the form set forth as Exhibit 1 hereto, will
be presented for filing with the Secretary of State of Florida and the
Secretary of State of California (the "Merger Filings"). This shall take
place on or as soon as practical after, the Closing Date as defined herein.
1.3 Shares of the Constituent and Surviving Corporations: The
manner and basis of converting the shares of MNI Stock into shares of NACT
Common Stock shall be as follows:
(a) Conversion Ratio:
(1) Each share of MNI Stock shall, by virtue of the
Merger and without any action on the part of the holder thereof, or any other
action whatsoever, be converted into two hundred and fifty (250) shares of
validly issued, fully paid and nonassessable shares of NACT Common Stock
(sometimes referred to as "NACT Merger Stock");
(2) Each issued share of SUB shall remain unchanged,
(3) NACT shall issue a maximum of 2,500,000 shares of
common stock,
(4) Each share of MNI Stock shall, by virtue of the
Merger and without any action on the part of the holder thereof, or any other
action whatsoever, be issued one hundred (100) warrants to purchase shares of
NACT common stock at the exercise price of $2.25 per share,
(5) NACT shall issue a maximum of 1,000,000 warrants.
(6) If, within the first 24 months following the Closing,
the shares of NACT common stock should fall to an average publicly traded
price of $2.25 or less, for 10 consecutive days, MNI and the Selling
Shareholders are hereby granted, pro rata, the right to receive an additional
500,000 warrants to purchase NACT common stock at the lowest publicly traded
price in that 10 day period.
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1.4 No Liability: Except as specifically provided in Section 9.3, it
is the intention of the parties, that MNI shall be debt free after giving
effect to application of MNI assets provided in Section 9.3.
1.5 Effect of Merger: As of the Effective Date, all of the following
shall occur:
(a) The separate existence and corporate organization of MNI (except
insofar as they may be continued by statute) shall cease and SUB, as the
corporation surviving the Merger, shall possess the rights, privileges,
powers and franchises, and be subject to all the restrictions, disabilities
and duties of, the constituent corporations in the manner specified in the
respective corporate laws of NACT and MNI.
(b) The Certificate of Incorporation of SUB, as in effect on the
Effective Date, shall continue in effect without change or amendment.
(c) The by-laws of SUB, as in effect on the Effective Date, shall
continue in effect without change or amendment.
(d) Upon the Effective Date, the Board of Directors of SUB and NACT
shall consist of 3 members appointed by NACT, 3 members appointed by MNI and
1 "neutral" member appointed by mutual consent of MNI and NACT. The
compensation committee of the Board of Directors shall consist of 1 Board
member appointed by MNI, 1 Board member appointed by NACT and the "neutral"
Board member.
1.6 Disclosure Schedules: Simultaneously with the execution of this
Agreement, (a) MNI shall deliver a schedule relating to MNI (the "MNI
Disclosure Schedule"), and (b) NACT shall deliver a schedule relating to
NACT (the "NACT Disclosure Schedule" and collectively with the MNI
Disclosure Schedule, the "Disclosure Schedules") setting forth the matters
required to be set forth in the Disclosure Schedules as described elsewhere
in this Agreement. The Disclosure Schedules shall be deemed to be part of
this Agreement.
II
CONDUCT OF BUSINESS PENDING CLOSING; STOCKHOLDER APPROVAL
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MNI and NACT covenant that between the date hereof and the Closing
Date (as hereinafter defined):
2.1 Access by NACT: MNI shall afford to NACT and to NACT's counsel,
accountants and other representatives full access, during normal business
hours, throughout the period prior to the Closing Date, (a) to all of the
books, contracts and records of MNI and shall furnish NACT during such
period with all information concerning MNI that NACT may reasonably request
and (b) to the properties of MNI in order to conduct inspections at NACT's
expense to determine that MNI is operating in material compliance with all
applicable federal, state and local and foreign statutes, rules and
regulations, and that MNI's assets are substantially in the condition and of
the capacities represented and warranted in this Agreement. Any such
investigation or inspection by NACT shall not be deemed a waiver of, or
otherwise limit, the representations, warranties and covenants contained
herein.
2.2 Conduct of Business: During the period from the date hereof to the
Closing Date, the business of MNI shall be operated by MNI in the usual and
ordinary course of such business and in material compliance with the terms
of this Agreement. Without limiting the generality of the foregoing:
(a) MNI shall use its reasonable efforts to (i) keep available the
services of the present agents of MNI; (ii) complete or maintain all
existing arrangements including but not limited to filings, licensing,
affiliate arrangements, transferals, leases and other arrangements referred
to in Sections 3.6(a) through 3.6(d) in full force and effect in accordance
with their existing terms; (iii) maintain the integrity of all confidential
information of MNI; (iv) comply in all material respects with all applicable
laws; and (vi) preserve the goodwill of, and MNI's business and contractual
relationship with, suppliers, customers and others having business relations
with MNI; and
(b) MNI shall not (i) sell or transfer any of its assets or property; (ii)
shall not make any distribution, whether by dividend or otherwise, to any of
its stockholders or employees except for compensation to employees and
payments to associated companies for goods and services, in the usual and
ordinary course of business; (iii) not declare any
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dividend or other distribution; (iv) redeem or otherwise acquire any shares
of its capital stock or other securities; (v) issue or grant rights to
acquire shares of its capital stock or other securities; or (vi) agree to do
any of the foregoing.
2.3 Exclusivity to NACT: MNI and its officers, directors,
representatives and agents, from the date hereof until the Closing (unless
this Agreement shall be earlier terminated as hereinafter provided), shall
not hold discussions with any person or entity, other than NACT, concerning
the Merger, or solicit, negotiate or entertain any inquiries, proposals or
offers to purchase the business of MNI or the shares of capital stock of MNI
from any person other than NACT, or, except in connection with the normal
operation of MNI's business, disclose any confidential information
concerning MNI to any person other than NACT and NACT's representatives or
agents. MNI shall promptly notify NACT of any such Third Party Inquiry.
2.4 Stockholder Approval: The Board of Directors of MNI has determined
that the Merger is fair to and in the best interests of their stockholders
and have approved and adopted this Agreement and the Merger. The approval of
MNI'S shareholders shall be sought as soon as possible. This Agreement
constitutes, and all other agreements contemplated hereby will constitute,
when executed and delivered by MNI the valid and binding obligations of MNI,
enforceable in accordance with their respective terms.
III
REPRESENTATIONS AND WARRANTIES of MNI
Except as set forth in the MNI Disclosure Schedule, MNI represents and
warrants to NACT as follows, with the knowledge and understanding that NACT
is relying materially upon such representations and warranties:
The term "Knowledge" as used in this Agreement with respect to a
party's awareness of the presence or absence of a fact, event or condition
shall mean (a) actual knowledge or, (b) the knowledge that would be obtained
if such party conducted itself faithfully and exercised a sound discretion
in the management of his own affairs.
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3.1 Organization and Standing: MNI is a corporation duly organized,
validly existing and in good standing under the laws of the State of
California. MNI has all requisite corporate power to carry on its business
as it is now being conducted and is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary under applicable law except where the failure to
qualify (individually or in the aggregate) will not have any material
adverse effect on the business or prospects of MNI. The copies of the
Articles of Incorporation, By-laws and minute books of MNI, as amended to
date and delivered to NACT, are true and complete copies of these documents
as now in effect. The minute books of MNI are accurate in all material
respects.
3.2 Capitalization: The authorized capital stock of MNI, the number of
shares of capital stock, which are issued and outstanding, the par value
thereof and the record and beneficial holders thereof are as set forth in
the MNI Disclosure Schedule. All of such shares of capital stock that are
issued and outstanding are duly authorized, validly issued and outstanding,
fully paid and nonassessable, and were not issued in violation of the
preemptive rights of any person. There are no subscriptions, options,
warrants, rights or calls or other commitments or agreements to which MNI is
a party or by which it is bound, calling for any issuance, transfer, sale or
other disposition of any class of securities of MNI. There are no
outstanding securities convertible or exchangeable, actually or
contingently, into common stock or any other securities of MNI.
3.3 Subsidiaries: MNI owns no subsidiaries nor does it own or have an
interest in any other corporation partnership, joint venture or other
entity.
3.4 Authority: MNI's Board of Directors has determined that the Merger
is fair to and in the best interests of MNI's stockholders and has approved
and adopted this Agreement and the Merger and has adopted a resolution
recommending approval and adoption of this Agreement and the Merger by MNI's
stockholders. This Agreement constitutes, and all other agreements
contemplated hereby will constitute, when executed and delivered by MNI in
accordance herewith, the valid and binding obligations of MNI, enforceable
in accordance with their respective terms.
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3.5 Assets: MNI has good and marketable title to or licenses to all of
the assets and properties, which it purports to own as reflected on the most
recent balance sheet comprising a portion of the MNI Financial Statements
(as hereinafter defined), or thereafter acquired, or are otherwise useful in
the business of MNI. No material portion of the assets of MNI is subject to
any governmental decree or order to be sold or is being condemned,
expropriated or otherwise taken by any public authority with or without
payment of compensation therefor, nor, to their knowledge, has any such
condemnation, expropriation or taking been proposed. None of the material
assets of MNI is subject to any restriction that would prevent continuation
of the use currently made thereof or materially adversely affect the value
thereof.
3.6 Contracts and Other Commitments:
(a) Schedule A of MNI Disclosure Schedule consists of a true and
complete list of all contracts, agreements, licenses, commitments and other
instruments (whether oral or written) to which MNI is a party that (i)
involve a receipt or an expenditure by MNI or a company subsidiary or
require the performance of services or delivery of goods to, by, through, on
behalf of or for the benefit of MNI, which in each case, relates to a
contract, agreement, commitment or instrument that either (A) requires
payments or receipts in excess of $10,000 per year or (B) is not terminable
by MNI on notice of thirty (30) days or less without penalty or MNI being
liable for damages, or (ii) involve an obligation for the performance of
services or delivery of goods by MNI that involves an amount in excess of
$7,500 that cannot or in reasonable probability will not, be performed
within thirty (30) days from the dates as of which these representations are
made.
(b) All of the contracts, agreements, commitments and other
instruments described in Schedule A of MNI Disclosure Schedule
(individually, "Contract and collectively, the "Contracts") are valid and
binding upon MNI, as applicable, and to its knowledge, the other parties
thereto and are in full force and effect and enforceable, in accordance with
their terms, and neither MNI, nor to its knowledge, any other party to any
Contract has breached any provision of, and no event has occurred which,
with the lapse of time or
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action by a third party, could result in a material default under, the terms
thereof. To its knowledge, no stockholder of MNI has received any payment
from any contracting party in connection with or as an inducement for
causing MNI to enter into any Contract.
3.7 Litigation: There is no claim, action, proceeding, or
investigation pending or, to its knowledge, threatened against or affecting
MNI before or by any court, arbitrator or governmental agency or authority
which, in its reasonable judgment, could have a material adverse effect on
the operations or prospects of MNI. There is no strike or unresolved labor
dispute relating to MNI's employees who, in its judgment, could have a
material adverse effect on the business or prospects of MNI. There are no
decrees, injunctions or orders of any court, governmental department, agency
or arbitration outstanding against MNI or asserted against MNI that has not
been paid. There are no Tax liens upon the assets of MNI. There is no valid
basis, to the knowledge of MNI, except as set forth in the MNI Disclosure
Schedule, for any assessment, deficiency, notice, 30-day letter or similar
intention to assess any Tax to be issued to MNI by any governmental
authority.
3.8 Taxes: For purposes of this Agreement, (A) "Tax" (and, with
correlative meaning, "Taxes") shall mean any federal, state, local or
foreign income, alternative or add-on minimum, business, employment,
franchise, occupancy, payroll, property, sales, transfer, use, value added,
withholding or other tax, levy, impost, fee, imposition, assessment or
similar charge together with any related addition to tax, interest, penalty
or fine thereon; and (B) "Returns" shall mean all returns (including,
without limitation, information returns and other material information),
reports and forms relating to Taxes.
(a) MNI has duly filed all Returns required to be filed by it other
than Returns (individually and in the aggregate) where the failure to file
would have no material adverse effect on the business or prospects of MNI.
All such Returns were, when filed, and, to the best of MNI's knowledge, are
accurate and complete in all material respects and were prepared in
conformity with applicable laws and regulations. MNI has paid or will pay in
full or has adequately reserved against all Taxes otherwise assessed against
it through the Closing Date.
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(b) MNI is not a party to any pending action or proceeding by any
governmental authority for the assessment of any Tax, and, to the knowledge
of MNI, no claim for assessment or collection of any Tax related to MNI has
been asserted against MNI that has not been paid. There are no Tax liens
upon the assets of MNI. There is no valid basis, to the knowledge of MNI,
except as set forth in the MNI Disclosure Schedule, for any assessment,
deficiency, notice, 30-day letter or similar intention to assess any Tax to
be issued to MNI by any governmental authority.
3.9 Compliance with Laws and Regulations: To the best of its
knowledge, MNI has complied and is presently complying, in all material
respects, with all laws, rules, regulations, orders and requirements
(federal, state and local and foreign) applicable to it in all jurisdictions
where the business of MNI is conducted or to which MNI is subject,
including, without limitation, all applicable federal and state securities
laws, civil rights and equal opportunity employment laws and regulations,
and all federal, antitrust, antimonopoly and fair trade practice laws. They
do not know of any assertion by any party that MNI is in violation in any
material respect of any such laws, rules, regulations, orders, restrictions
or requirements with respect to its operations and no notice in that regard
has been received by MNI.
3.10 Hazardous Materials: To its knowledge MNI has not violated, or
received any written notice from any governmental authority with respect to
the violation of any law, rule, regulation or ordinance pertaining to the
use, maintenance, storage, transportation or disposal of "Hazardous
Materials." As used herein, the term 'Hazardous Materials` means any
substance now or hereafter designated pursuant to Section 307(a) and 311
(b)(2)(A) of the Federal Clean Water Act, 33 USC Section 1317(a),
1321(b)(2)(A), Section 112 of the Federal Clean Air Act, 42 USC Section
3412, Section 3001 of the Federal Resource Conservation and Recovery Act, 42
USC Section 6921, Section 7 of the Federal Toxic Substances Control Act, 15
USC Section 2606, or Section 101(14) and Section 102 of the Comprehensive
Environmental Response, Compensation and Liability Act, 42 USC Section
9601(14), 9602.
3.11 Regulation: MNI is not required to obtain any licenses, permits,
approvals or authorizations or make any
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filings with any federal or state regulatory agency or authority to conduct
its business as presently conducted or as presently proposed to be
conducted.
3.12 No Breaches: The making and performance of this Agreement and the
transactions contemplated hereby will not (i) conflict with or violate the
Certificate of Incorporation or the by-laws of MNI, (ii) violate any laws,
ordinances, rules, or regulations, or any order, writ, injunction or decree
to which MNI is a party or by which MNI or any of its businesses, or
operations may be bound or affected or (iii) result in any breach or
termination of, or constitute a default under, or constitute an event which,
with notice or lapse of time, or both, would become a default under, or
result in the creation of any encumbrance upon any material asset of MNI
under, or create any rights of termination, cancellation or acceleration in
any person under, any Contract.
3.13 Employees: MNI has no employees that are represented by any labor
union or collective bargaining unit.
3.14 Financial Statements: The MNI Disclosure Schedule contains
unaudited balance sheets of MNI as of June 30, 1999 and related unaudited
statements of operations, cash flows and stockholders' equity of MNI for the
periods ended at such date (collectively the "Financial Statements"). The
Financial Statements present fairly, in all material respects, the financial
position on the dates thereof and results of operations of MNI for the
periods indicated, prepared in accordance with generally accepted accounting
principles ("GAAP") consistently applied. MNI's Financial Statements are
capable of being audited in accordance with Regulation S-X, promulgated by
the Securities and Exchange Commission. There are no assets of MNI, the
value of which is materially overstated in said balance sheets.
3.15 Absence of Certain Changes or Events: Except, as set forth in the
MNI Disclosure Schedule, since June 30, 1999 (the "Balance Sheet Dates"),
there has not been:
(a) any material adverse change in the financial
condition, properties, assets, liabilities or business of MNI;
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(b) any material damage, destruction or loss of any
material properties of MNI, whether or not covered by insurance;
(c) any material adverse change in the manner in which
the business of MNI has been conducted;
(d) any material adverse change in the treatment and
protection of trade secrets or other confidential information of MNI;
and
(e) any occurrence not included in paragraph (a) through
(d) of this Section 3.15 which has resulted, or which MNI has reason
to believe, might be expected to result in a material adverse change
in the business or prospects of MNI.
3.16 Government Licenses, Permits, Authorizations: MNI has all
material governmental licenses, permits, authorizations and approvals
necessary for the conduct of its business as currently conducted ("Licenses
and Permits").
3.17 Employee Benefit Plans: MNI has no employee benefit plans.
3.18 Business Locations: MNI does not own or lease any real or
personal property in any state or country.
3.19 Intellectual Property: Schedule B of the MNI Disclosure
Schedule sets forth a complete and correct list and summary description of
all intellectual property, including computer software, trademarks, trade
names, service marks, service names, brand names, copyrights and patents,
registrations thereof and applications therefore, applicable to or used in
the business of MNI, together with a complete list of all licenses granted
by or to MNI with respect to any of the above. All such trademarks, trade
names, service marks, service names, brand names, copyrights and patents or
licenses pertaining thereto are owned by MNI, free and clear of all liens,
claims, security interests and encumbrances of any nature whatsoever. MNI is
not in violation or
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infringing, and MNI is not knowingly violating or infringing, the rights of
others in any trademark, trade name, service xxxx, copyright, patent, trade
secret, know-how or other intangible asset. Such Intellectual Property as
described in Schedule B, is sufficient for MNI's operations as presently and
as proposed to be conducted.
3.20 Existing Arrangements: Except as set forth in the MNI
Disclosure Schedule, MNI has no knowledge that, either as a result of the
actions contemplated hereby or for any other reason (exclusive of expiration
of a contract upon the passage of time), any entity having an arrangement
with MNI identified in Schedule A will not continue to conduct business with
NACT after the Closing Date in substantially the same manner as it has
conducted business with MNI in the past.
3.21 Governmental Approvals: Except as set forth in Section 1.2 as
to the Merger Filing, no authorization, license, permit, franchise,
approval, order or consent of, and no registration, declaration or filing by
MNI with, any governmental authority, domestic or foreign, federal, state or
local, is required in connection with MNI's execution, delivery and
Performance of this Agreement.
3.22 Transactions with Affiliates: MNI is not indebted for money
borrowed, either directly or indirectly, from any of its officers,
directors, or any Affiliate (as defined below), in any amount whatsoever;
nor are any of its officers, directors, or Affiliates indebted for money
borrowed from MNI; nor are there any transactions of a continuing nature
between MNI and any of its officers, directors, or Affiliates not subject to
cancellation which will continue beyond the Effective Date, including,
without limitation, use of the assets of MNI for personal benefit with or
without adequate compensation. For purposes of this Agreement, the term
"Affiliate" shall mean any person that, directly or indirectly, through one
or more intermediaries, controls or is controlled by, or is under common
control with, the person specified. As used in the foregoing definition, the
term (i) "control" shall mean the power through the ownership of voting
securities, contract or otherwise to direct the affairs of another person
and (ii) "person" shall mean an individual, firm, trust, association,
corporation, partnership, government (whether federal,
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state, local or other political subdivision, or any agency or bureau of any
of them) or other entity.
3.23 No Distributions: MNI has not made nor has any intention of
making any distribution or payment to any Shareholder with respect to the
MNI Stock.
3.24 Liabilities: To the best of its knowledge MNI has no material
direct or indirect indebtedness, liability, claim, loss, damage, deficiency,
obligation or responsibility, fixed or unfixed, xxxxxx or inchoate,
liquidated or unliquidated, secured or unsecured, accrued, absolute,
contingent or otherwise ("Liabilities"), whether or not of a kind required
by generally accepted accounting principles to be set forth on a financial
statement, other than (i) Liabilities fully and adequately reflected or
reserved against on the MNI Balance Sheet, (ii) Liabilities incurred since
the Balance Sheet Date in the ordinary course of the business of MNI, or
(iii) Liabilities otherwise disclosed in this Agreement, including the
exhibits hereto and Disclosure Schedule.
3.25 Employee Compensation Plans: MNI is not party to, or bound by
any currently effective employment contracts, deferred compensation
agreements, bonus plans, incentive plans, profit sharing plans, stock option
or equity incentive plans, retirement agreements or other employee
compensation agreements. Subject to applicable law, the employment of each
officer and employee of the Company is terminable at the will of the
Company.
3.26 Accounts Receivable: All accounts receivable of MNI reflected
on the Balance Sheet are valid receivables subject to no material setoffs or
counterclaims and are current and collectible (within 90 days after the date
on which it first became due and payable), net of the applicable reserve for
bad debts reflected in the Balance reflected in the financial or accounting
records of the Company that Sheet. To MNI'S knowledge, all accounts
receivable have arisen since June 30, 1999 are valid receivables subject to
no material setoffs or counterclaims and are collectible, net of a reserve
for bad debts in an amount proportionate to the reserve reflected in the
Balance Sheet.
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3.27 No Omissions or Untrue Statements: To the best of its
knowledge no representation or warranty made by MNI to NACT or in this
Agreement, the MNI Disclosure Schedule or in any certificate of a MNI
officer required to be delivered to NACT pursuant to the terms of this
Agreement contains or will contain any untrue statement of a material fact,
or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading as of the date hereof
and as of the Closing Date.
3.28 Title. Each MNI Shareholder hereby represents and warrants
the following for himself, herself or itself to NACT and as of the date
hereof and the Closing Date: Each Shareholder has and as of the Closing Date
shall have good and marketable title to the MNI Stock set forth opposite
such Shareholder's name on the MNI Disclosure Schedule free and clear of all
liens, security interests, claims, options, charges or encumbrances. None of
the MNI Stock is subject to any outstanding agreements of sale or rights of
third parties to acquire any interest therein. Each Shareholder has the
right and authority to execute, deliver, and perform this Agreement and all
agreements delivered in connection herewith and to sell and transfer the MNI
Stock to NACT. This Agreement and any agreements executed in connection with
this transaction constitute legal, binding and valid obligations of the
Shareholder, enforceable in accordance with their respective terms.
IV
REPRESENTATIONS AND WARRANTIES OF NACT AND SUB
Except as set forth in the NACT Disclosure Schedule, NACT and SUB
represents and warrants to, and agrees with, MNI as follows as of the date
hereof and as of the Closing Date:
4.1 Organization and Standing of NACT and SUB: NACT is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Idaho, and has the corporate power to carry on its business as now
conducted and to own its assets and is duly qualified to transact business
as a foreign corporation in each state where such qualification is necessary
except where the failure to qualify will not have a material adverse effect
on the
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business or prospects of NACT. The copies of the Certificate of
Incorporation and By-laws of NACT, as amended to date, and delivered to MNI,
are true and complete copies of those documents as now in effect. SUB is a
corporation duly organized and existing and in good standing under the laws
of the State of Florida, and has the corporate power to carry on its
businesses now conducted and to own its assets and is duly qualified to
transact business as a foreign corporation in each state where such
qualification is necessary except where the failure to qualify will not have
a materially adverse effect on the business or properties of SUB. The copies
of the certificate of incorporation and by-laws of SUB as amended to date
and delivered to MNI, are true and complete copies of those documents as now
in effect.
4.2 Stockholder Approval: The Board of Directors of NACT has
determined that the Merger is advisable and in the best interests of the
stockholders of NACT and SUB, NACT's wholly owned subsidiary. Subject to its
fiduciary obligations as advised in writing by counsel, SUB shall approve
and adopt this Agreement and the Merger and any other matters to be
submitted to SUB in connection therewith.
4.3 No Conflict: The making and performance of this Agreement will not
(i) conflict with the Certificate of Incorporation or the By-laws of NACT or
SUB, (ii) violate any laws, ordinances, rules, or regulations, or any order,
writ, injunction or decree to which NACT or SUB is a party or by which NACT
or SUB or any of their material assets, business, or operations may be bound
or affected or (iii) result in any breach or termination of, or constitute a
default under, or constitute an event which, with notice or lapse of time,
or both, would become a default under, or result in the creation of any
encumbrance upon any material asset of NACT or SUB, or create any rights of
termination, cancellation, or acceleration in any person under, any material
agreement, arrangement, or commitment, or violate any provisions of any
laws, ordinances, rules or regulations or any order, writ, injunction, or
decree to which NACT is a party or by which NACT, or any of their material
assets may be bound.
4.4 Properties: Except as set forth in the NACT Disclosure
Schedule, NACT or SUB have good and marketable title to all of the
respective partys' assets and properties
16
which it purports to own as reflected on the balance sheet included in the
NACT Financial Statements (as hereinafter defined), or thereafter acquired.
4.5 Capitalization: The Authorized capital stock of NACT consists
of 45,000,000 shares of Common Stock, par value $0.02 (the "NACT Shares") of
which 3,599,749 shares is issued. Such outstanding shares of Common Stock
are duly authorized, validly issued, fully paid, and non-assessable. The
NACT Common Stock to be issued pursuant to this Agreement, when issued in
accordance with the terms of this Agreement, will be duly authorized,
validly issued, fully paid and non assessable. With the exception of 800,000
options to purchase NACT common stock referenced in the NACT Due Diligence
statement, there were no outstanding options, warrants or rights of
conversion or other rights, agreements, arrangements or commitments relating
to the capital stock of NACT or obligating NACT to issue or sell an
aggregate number of shares of Common Stock. The authorized capital stock of
SUB consists of 100,000 shares of common stock par value $.002 (the "SUB
Shares") of which no shares are issued. All such shares are owned by NACT.
Such outstanding shares of common stock are duly authorized, validly issued,
fully paid and non-assessable. As of the day hereof, there were no
outstanding options, warrants or rights of conversion or other rights,
agreements, arrangements or commitments relating to the capital stock of SUB
or obligating SUB to issue or sell an aggregate number of shares of common
stock.
4.6 Governmental Approval; Consents: Except for the reports
required to be filed in the future by NACT and those set forth in the
Disclosure Schedule, and under the Securities Act, no authorization,
license, permit, franchise, approval, order or consent of, and no
registration, declaration or filing by NACT with any governmental authority,
domestic or foreign, federal, state or local, is required in connection with
NACT's execution, delivery and performance of this Agreement. No consents of
any other parties are required to be received by or on the part of NACT to
enable NACT to enter into and carry out this Agreement.
4.7 NACT Financial Statements: The consolidated financial
statements of NACT (the "NACT Financial Statements") present fairly, in all
material respects, the
17
financial position of NACT as of the respective date thereof and the results
of its operations and other information for the periods covered in
accordance with GAAP and in accordance with Regulation S-X of the SEC
(subject, in the case of unaudited interim period financial statements, to
normal and recurring year-end adjustments which, individually or
collectively, are not material).
4.8 Adverse Developments: Since June 30, 1999 there have been no
material adverse changes in the assets, liabilities, properties, operations
or financial condition of NACT, and no event has occurred other than in the
ordinary and usual course of business or as set forth in or in the NACT
Financial Statements which could be reasonably expected to have a materially
adverse effect upon NACT.
4.9 Taxes: NACT has duly filed all returns required to be filed by
it other than Returns which the failure to file would have no material
adverse effect on the business of NACT. All such returns were, when filed,
and to NACT's knowledge are, accurate and complete in all material respects
and were prepared in conformity with applicable laws and regulations. NACT
has paid or will pay in full or have adequately reserved against all Taxes
otherwise assessed against it through the Closing Date. NACT is not a party
to any pending action or proceeding by any governmental authority for the
assessment of any Tax, and, to the knowledge of NACT, no claim for
assessment or collection of any Tax has been asserted against NACT that have
not been paid. There are no Tax liens upon the assets of NACT (other than
the lien of personal property taxes not yet due and payable). There is no
valid basis, to NACT's knowledge, for any assessment, deficiency, notice,
30-day letter or similar intention to assess any Tax to be issued to NACT by
any governmental authority.
4.10 Litigation: Except as set forth on NACT Disclosure Schedule,
there is no material claim, action, proceeding, or investigation pending or,
to their knowledge, threatened against or affecting NACT before or by any
court, arbitrator or governmental agency or authority. There are no material
decrees, injunctions or orders of any court, governmental department, agency
or arbitration outstanding against NACT.
18
4.11 Compliance with Laws and Regulations: To the best of their
knowledge, NACT has complied and is presently complying, in all material
respects, with all laws, rules, regulations, orders and requirements
applicable to them in all jurisdictions in which their operations are
currently conducted or to which they are currently subject.
4.12 Governmental Licenses, Permits and Authorizations: NACT has
all governmental licenses, permits, authorizations and approvals necessary
for the conduct of its business as currently conducted. All such licenses,
permits, authorizations and approvals are in full force and effect, and no
proceedings for the suspension or cancellation of any thereof is pending or
threatened.
4.13 Liabilities: To the best of its' knowledge NACT does not have
any material direct or indirect liabilities, as that term is defined in
Section 3.25 ("NACT Liabilities"), whether or not of a kind required by
generally accepted accounting principles to be set forth on a financial
statement, other than (i) NACT Liabilities fully and adequately reflected or
reserved against on the NACT Balance Sheet, (ii) NACT Liabilities incurred
in the ordinary course of the business of NACT, and (iii) NACT Liabilities
otherwise disclosed in this Agreement, including the Exhibits hereto.
4.14 No Omission or Untrue Statement: To the best of their
knowledge no representation or warranty made by NACT to MNI in this
Agreement, in the NACT Disclosure Schedule or in any certificate of a NACT
officer required to be delivered to MNI pursuant to the terms of this
Agreement contains or will contain any untrue statement of a material fact,
or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading as of the date hereof
and as of the Closing Date.
4.15 Restricted Transactions: NACT represents that it has not and
warrants that it shall not: (i) declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
of its capital stock, or split, split-off, spin-off, combine or reclassify
any of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of NACT
capital stock, or
19
repurchase or otherwise acquire, directly or indirectly, any
shares of its capital stock;
V
STOCKHOLDER APPROVALS AND CLOSING DELIVERIES
5.1 Stockholder Approvals: Subject to this Agreement and the
Merger receiving all requisite stockholder approvals and subject to the
other provisions of this Agreement, the parties shall hold a closing (the
"Closing") on the next business day (or such later date as the parties
hereto may agree) following the later of (a) receipt by MNI of consent
approving the Merger, or (b) the business day on which the last of the
conditions set forth in Articles VII and VIII hereof is fulfilled or waived
(such later date, the Closing Date), simultaneously at the offices of NACT
at 0000 X. Xxxxxx Xxxxxx, Xxxxx 0, Xxxx Xxxxx, Xxxxxxx 00000 and those of
MNI at 0000 Xxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxxxx 00000, or such other
time and place as the parties may agree upon.
5.2 MNI's Closing Deliveries: At the Closing, in addition to
documents referred elsewhere, MNI shall deliver, or cause to be delivered,
to NACT:
(a) a certificate, dated as of the Closing Date, executed by
the Secretary of MNI, to the effect that representations and warranties
contained in this Agreement are true and correct in all material
respects at and as of the Closing Date and that MNI has complied with
or performed in all material respects all terms, covenants and
conditions to be complied with or performed by MNI on or prior to the
Closing Date;
(b) an opinion of MNI's counsel, in a form to be mutually
agreed to prior to the Closing;
(c) certificates representing MNI Stock owned by all of the
MNI Stockholders;
(d) Certified Resolutions of the Board of Directors
& a majority of the Shareholders of MNI approving the transactions set
forth herein;
20
(e) The MNI Disclosure Schedule;
(f) Such other documents as NACT or its counsel may reasonably
require.
5.3 Closing Deliveries to MNI: At the Closing, in addition to
documents referred to elsewhere, NACT shall deliver to MNI:
(a) a certificate of NACT, dated as of the Closing Date,
executed by the President or Chief Executive Officer of NACT to the
effect that the representations and warranties of NACT contained in
this Agreement are true and correct in all material respects and that
NACT has complied with or performed in all material respects all terms,
covenants, and conditions to be complied with or performed by NACT or
prior to the Closing Date;
(b) an opinion of NACT's counsel, in a form to be mutually
agreed to prior to the Closing;
(c) certificates representing the NACT Merger Stock issuable
upon consummation of the Merger;
(a) the NACT Disclosure Schedule; and
(e) such other documents as MNI or it's counsel may reasonably
require.
VI
CONDITIONS TO OBLIGATIONS OF MNI
The obligation of MNI to consummate the Closing is subject to the
following conditions, any of which may be waived by it in its sole
discretion:
6.1 Compliance by NACT or SUB: NACT or SUB shall have performed and
complied in all material respects with all agreements and conditions
required by this Agreement to be performed or complied with by NACT prior to
or on the Closing Date;
6.2 Accuracy of NACT's Representations: NACT's and SUB's
representations and warranties contained in this Agreement (including the
Disclosure Schedule) or any schedule,
21
certificate, or other instrument delivered pursuant to the provisions hereof
or in connection with the transactions contemplated hereby shall be true and
correct in all material respects at and as of the Closing Date (except for
such changes permitted by this Agreement) and shall be deemed to be made
again as of the Closing Date.
6.3 Documents: All documents and instruments required hereunder to be
delivered by NACT to MNI at the Closing shall be delivered in form and
substance reasonably satisfactory to MNI and its counsel.
6.4 Tax Free Reorganization: The Merger shall qualify as a tax-free
reorganization under the Internal Revenue Code.
6.5 Litigation: No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall
be pending or be threatened.
6.6 Material Adverse Change: No material adverse change shall have
occurred subsequent to June 30, 1999 in the financial position, results of
operations, assets, liabilities or prospects of NACT nor shall any event or
circumstance have occurred which would result in a material adverse change
in the financial position, results of operations, assets, liabilities or
prospects of NACT.
VII
CONDITIONS TO NACT'S OBLIGATIONS
NACT's obligation to consummate the Closing is subject to the
following conditions, any of which may be waived by it in its sole
discretion:
7.1 Compliance by MNI: MNI shall have performed and complied in all
material respects with all agreements and conditions required by this
Agreement to be performed or complied with by MNI prior to or on the Closing
Date.
7.2 Accuracy of Representations of MNI: The representations and
warranties of MNI contained in this Agreement (including the exhibits hereto
and the Disclosure Schedule) or any schedule, certificate, or other
instrument delivered pursuant to the provisions hereof or in connection with
the transactions contemplated hereby shall be true and
22
correct in all material respects at and as of the Closing Date (except for
changes permitted by this Agreement) and shall be deemed to be made again as
of the Closing Date.
7.3 Material Adverse Change: No material adverse change shall have
occurred subsequent to May 31, 1998 in the financial position, results of
operations, assets, liabilities, or prospects of MNI, nor shall any event or
circumstance have occurred which would result in a material adverse change
in the financial position, results of operations, assets, liabilities, or
prospects of MNI.
7.4 Litigation: No litigation seeking to enjoin the transactions
contemplated by this Agreement or to obtain damages on account hereof shall
be pending or to NACT's knowledge be threatened.
7.5 Tax Free Reorganization: The Merger shall qualify as a
tax-free reorganization under the Code.
7.6 Documents: All documents and instruments required hereunder to be
delivered by MNI to NACT at the Closing shall be delivered in form and
substance reasonably satisfactory to NACT and its counsel.
7.7 Conversion of Debt: Except to the extent provided in Section 1.4,
MNI shall have no liabilities on the Closing Date.
7.8 Additional Agreements: NACT shall have received certificates from
all MNI Shareholders substantially in the form of Exhibit 1.
VIII
TERMINATION
8.1 Termination Prior to Closing:
(a) If the Closing has not occurred by July 31, 1999, any
party may terminate this Agreement at any time thereafter by giving
written notice of termination to the other, provided, however, that no
party may terminate this Agreement if such party has willfully or
materially breached any of the terms and conditions hereof.
23
(b) Prior to August 15, 1999, any party may terminate this
Agreement following the insolvency or bankruptcy of the other party
hereto, or if any one or more of the conditions to Closing set forth in
Article VI or Article VII shall become incapable of fulfillment or
there shall have occurred a material breach of the LOI and either such
condition of breach shall not have been waived by the party for whose
benefit the condition was established, then either MNI (in the case of
a condition in Article VI) or NACT (in the case of a condition
specified in Article VII may terminate this Agreement.
8.2 Consequences of Termination: Upon termination of this Agreement
pursuant to this Article VIII or any other express right of termination
provided elsewhere in this Agreement, the parties shall be relieved of any
further obligation to the others except as specified in Section 12.4;
provided, however, that no termination of this Agreement, pursuant to this
Article VIII hereof or under any other express right of termination provided
elsewhere in this Agreement shall operate to release any party from any
liability to any other party incurred before the date of such termination or
from any liability resulting from any willful misrepresentation made in
connection with this Agreement or willful breach hereof.
IX
ADDITIONAL COVENANTS
9.1 Mutual Cooperation: The parties hereto will cooperate with each
other, and will use all reasonable efforts to cause the fulfillment of the
conditions to the parties' obligations hereunder and to obtain as promptly as
possible all consents, authorizations, orders or approvals from each and every
third party, whether private or governmental, required in connection with the
transactions contemplated by this Agreement.
9.2 Changes in Representations and Warranties of a Party: Between the
date of this Agreement and the Closing Date, neither party shall directly or
indirectly, enter into any transaction, take any action, or by inaction permit
an event to occur, which would result in any of the representations and
warranties of any party herein contained not being true and correct at and as of
(i) the time
24
immediately following the occurrence of such transaction or event or (ii) the
Closing Date. A party shall promptly give written notice to the other party upon
becoming aware of (A) any fact which, if known on the date hereof, would have
been required to be set forth or disclosed pursuant to this Agreement and (B)
any impending or threatened breach in any material respect of any of the
representations and warranties contained in this Agreement and with respect to
the latter shall use all reasonable efforts to remedy same.
9.3 Payment Obligations:
(a) As used herein:
(i) "Pre-Transaction Liquid Assets" shall refer to an amount
equal to the sum of MNI's cash and cash equivalent and prepaid assets, such as
deposits, as of June 30,1999, plus accounts receivable (revenues due for any
service period prior to June 30, 1999 but not collected as of such date).
(ii) "Pre-Transaction Liabilities" shall include all accounts payable
and other third party liabilities of any description of MNI arising in the
ordinary course of business prior to June 30, 1999.
(b) After the Closing all Pre-Transaction Liquid Assets shall first be
applied to the payment of the pre-Transaction Liabilities and the liability
referred to in Section 9.3(d).
(c) After the Merger, the Pre-Transaction Liquid Assets shall not be
utilized for the payment of any liabilities arising in the ordinary course of
business subsequent to June 30, 1999 nor shall proceeds arising and accounts
receivables due for service periods subsequent to June 30, 1999 be applied in
connection with payment of Pre-Transaction Liabilities. The debts and
liabilities of MNI arising in the ordinary course of business subsequent to June
30, 1999 shall, after the Merger, be deemed NACT debts and shall be payable by
NACT from NACT funds.
(d) Notwithstanding anything herein to the contrary, "Pre-Transaction
Liquid Assets" shall be applied to the liability of MNI not arising in the
ordinary course of business, including expenses of this transaction, whether
incurred prior or subsequent to June 30, 1999.
25
(e) Nothing herein shall be deemed a waiver of the obligations of MNI
to satisfy all debts of MNI as provided in Section 9.4.
9.4 Covenant of MNI: Except as specifically provided in Section 9.3
above, MNI covenants that MNI shall be debt free after giving effect to
application of MNI assets provided in Section 9.3 and the contribution to
capital referred to therein.
X
BROKERS
10.1 Brokers: NACT represents to MNI, and MNI represents to NACT, that
there is no broker or finder entitled to a fee or other compensation for
bringing the parties together to effect the Merger.
XI
SECURITIES
11.1 Definitions: As used in this Article, the following terms shall
have the following respective meanings:
(a) "Commission" shall mean the Securities and
Exchange Commission other Federal agency at the time administering the
Securities Act.
(b) "Person" shall mean and include an individual
corporation, a partnership, a trust, an unincorporated
organization and a government or any department, agency or
political subdivision thereof.
(c) "Holder" shall mean a MNI Stockholder or the MNI
Stockholder's permitted successors or assigns (other than pursuant to a
permitted public sale).
(d) "Restricted Securities" shall mean the shares of
NACT Merger Stock issued hereunder.
(e) "Securities Act" shall mean the Securities Act
26
of 1933, as amended or any similar Federal statute, and the rules and
regulations of the Commission thereunder, all as the same shall be in effect at
the time.
(f) "Transfer" shall include any disposition of any Restricted
Securities or of any interest therein which would constitute a sale thereof
within the meaning of the Securities Act.
11.2 Restriction on Transfer: Each Stockholder represents and warrants
that he is acquiring the Restricted Securities for investment and not for
distribution. Such Stockholders acknowledge that the Restricted Securities may
only be sold pursuant to an effective registration statement under the
Securities Act or an exemption therefrom. The Restricted Securities and any
shares of capital stock received in respect thereof, whether by reason of a
stock split or share reclassification thereof, a stock dividend thereon or
otherwise, shall not be transferable except upon the conditions specified
herein.
Based upon execution of the Shareholder Certificate, the
Representations herein and assuming no securities violations have occurred on
behalf of MNI or its Stockholders, NACT represents and warrants that the initial
issuance of the NACT Merger Stock to the MNI Stockholders is a private
transaction, exempt from SEC registration requirements.
11.3 Restrictive Legends: Each certificate for the Restricted
Securities and any shares of capital stock received in respect thereof, whether
by reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall contain a legend to the
effect that:
"The Restricted Securities covered by a certificate have not been
registered under the Securities Act of 1933, as amended, and may not be
sold, offered for sale, assigned, transferred or otherwise disposed of,
unless registered pursuant to the provisions of that Act or an opinion
of counsel to NACT is obtained stating that such disposition is in
compliance with an available exemption from such registration. "
27
11.4 Registration Rights NACT Warrants: NACT agrees to file the
appropriate registration statement, of the underlying shares of NACT Common
Stock represented by the one million warrants (1,000,000) payable under section
1.3 hereof, with the Securities and Exchange Commission within ninety (90) days
of the Closing.
11.5 Registration of NACT Common Stock:
(a) Except for an Excusable Delay as hereinafter defined, NACT
agrees to file, within ninety (90) days after the Closing, a "shelf"
Registration Statement under Rule 415 promulgated under the Act on Form
SB-2 (or such other form as counsel to NACT may reasonably determine is
appropriate) to register under Section 5 of the Act two million
(2,000,000) of the Restricted Shares. NACT shall use its reasonable
best efforts to cause such Registration Statement to become effective
six (6) months after the Closing (such date to be known as the "Outside
Date"). Thereafter, NACT will prepare and file with the SEC such
amendments and supplements to such Registration Statement and the
prospectus used in connection therewith as may be necessary to keep
such Registration Statement effective and current for at least one
hundred (120) days. If NACT fails to (1) file the Registration
Statement or (2) to keep the Registration Statement effective and
current (after it is declared effective), all as provided in this
paragraph, the Holders may pursue all available remedies at law or
equity against NACT for breach of such obligations.
(b) In connection with any Registration Statement to be filed
herein, NACT shall:
(i) furnish to each seller of the Restricted Securities
such number of copies of such registration statement and of each
such amendment or supplement thereto (in each case including all
exhibits), including a preliminary prospectus, in conformity with
the requirements of the Securities Act;
(ii) use its best efforts to register or qualify as
required the Restricted Securities covered by such registration
statement under the securities or blue sky laws of such
jurisdictions as the number of shares initially proposed to be
registered is qualified.
28
(iii) notify each seller of Restricted Securities covered
by such registration statement, at any time when a prospectus
relating thereto covered by such registration statement is
required to be delivered under the Securities Act within the
appropriate period mentioned in Section 11.4, of the happening of
any event as a result of which the Registration Statement, the
prospectus or any document incorporated therein by reference,
includes an untrue statement of a material fact or omits to state
a material fact required to be stated therein or necessary to make
the statements therein not misleading and at the request of such
seller, prepare and furnish to such seller a post-effective
amendment or supplement to the registration statement or the
related prospectus or any document incorporated therein by
reference or file any other required document so that, as
thereafter delivered to the purchasers of such shares, such
prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not
misleading;
(d) All expenses incurred by NACT in complying with its
obligations under this Section 11.5 and its subsections, including,
without limitation, all registration and filing fees, fees and expenses
of complying with securities and blue sky laws (to include California,
New York, Texas, Colorado and Florida), printing expenses and fees and
disbursements of counsel and of independent certified public
accountants of NACT shall be paid by NACT, provided, however, that all
underwriting discounts and selling commissions and stock transfer taxes
applicable to the Restricted Securities covered by the registration
effected hereof, and Holder's counsel fees, shall be borne by the
seller or sellers thereof.
10.6 NACT Stock Option Plan: Prior to or immediately following
the Closing, NACT will authorize the creation of a Stock Option Plan (the
"Plan"). The Plan will authorize the issuance of one million two hundred and
fifty thousand (1,250,000) options to purchase NACT Common Stock. The
compensation committee of the Board of Directors of NACT will determine the
distribution of the Plan. NACT agrees that two hundred thousand (200,000)
options will be issued to
29
consultants of MNI, designated by MNI in its' sole discretion. NACT will issue
one hundred thousand (100,000) options, in its sole discretion.
11.7 Indemnification By MNI: MNI and the Majority Shareholders shall
jointly and severally indemnify NACT, its officers, directors, employees, agents
and representatives, and hold NACT harmless against, any and all debts,
obligations and other liabilities (whether absolute, accrued, contingent, fixed
or otherwise, or whether known or unknown, or due or to become due or
otherwise), monetary damages, fines fees, penalties, interest obligations,
deficiencies, losses and expenses (including without limitation attorneys fees
and litigation costs) incurred or suffered by NACT:
(a) resulting from any misrepresentation, breach of
warranty or failure to perform any covenant or agreement of MNI contained in
this Agreement;
(b) resulting from any employment, excess or property
taxes owing or arising on account of or in connection with the operation of MNI
prior to the Closing; and
(c) resulting from any liability of MNI incurred or
resulting from activities that took place prior to the Closing not disclosed on
the June 30, 1999 Balance Sheet and not incurred in the ordinary course of
business between June 30, 1999 and the Closing
11.8 Indemnification by NACT: NACT shall indemnify and hold harmless,
MNI its officers, directors, employees, agents and representatives from and
against, any and all debts, obligations and other liabilities (whether absolute,
accrued, contingent, fixed or otherwise, or whether known or unknown, or due or
to become due or otherwise), monetary damages, fines fees, penalties, interest
obligations, deficiencies, losses and expenses (including without limitation
attorneys fees and litigation costs) incurred or suffered by MNI Shareholders:
(a) resulting from any misrepresentation, breach of
warranty or failure to perform any covenant or agreement of NACT contained in
this Agreement;
(b) resulting from any employment, excess or
30
property taxes owing or arising on account of or in connection with the
operation of NACT prior to the Closing; and
(c) resulting from any liability of NACT incurred or
resulting from activities that took place prior to the Closing not disclosed on
the June 30, 1999 Balance Sheet and not incurred in the ordinary course of
business between June 30, 1999 and the Closing.
XII
MISCELLANEOUS
12.1 Expenses: Except as otherwise provided herein, MNI and NACT shall
each pay its own expenses incident to the negotiation, preparation, and carrying
out of this Agreement, including legal and accounting and audit fees.
12.2 Survival of Representations, Warranties and Covenants: All
statements contained in this Agreement or in any certificate delivered by or on
behalf of MNI or NACT pursuant hereto, or in connection with the actions
contemplated hereby shall be deemed representations, warranties and covenants by
NACT or MNI, as the case may be, hereunder. All representations, warranties, and
covenants made by MNI or NACT in this Agreement, or pursuant hereto, shall
survive the Closing.
12.3 Publicity: NACT and MNI shall not issue any press release or make
any other public statement, in each case, relating to, in connection with or
arising out of this Agreement or the transactions contemplated hereby, without
obtaining the prior approval of the other, which shall not be unreasonably
withheld or delayed, except that prior approval shall not be required if, in the
reasonable judgment of NACT, prior approval by MNI would prevent the timely
dissemination of such release or statement in violation of applicable Federal
securities laws, rules or regulations or policies of NASDAQ OTC Bulletin Board.
12.4 Non Disclosure: MNI will not at any time after the date of this
Agreement, without NACT's consent, except in the ordinary operation of its
business, divulge, furnish to or make accessible to anyone any knowledge or
information with respect to confidential or secret processes, inventions,
discoveries, improvements, formulae, plans, material, devices or ideas or
know-how, whether patentable or not, with respect
31
to any confidential or secret aspects of MNI (including, without limitation,
customer lists, supplier lists and pricing arrangements with customers or
suppliers) ("Confidential Information"). NACT will not at any time after the
date of this Agreement use, divulge, furnish to or make accessible to anyone any
Confidential Information (other than to its representatives as part of its due
diligence or corporate investigation). Any information, which (i) at or prior to
the time of disclosure by either MNI or NACT was generally available to the
public through no breach of this covenant, (ii) was available to the public on a
nonconfidential basis prior to its disclosure by either MNI or NACT or (iii) was
made available to the public from a third party provided that such third party
did not obtain or disseminate such information in breach of any legal obligation
of MNI or NACT, shall not be deemed Confidential Information for purposes
hereof, and the undertakings in this covenant with respect to Confidential
Information shall not apply thereto. The undertakings of MNI and NACT set forth
above in this Section 12.4 shall terminate upon consummation of the Closing. If
this Agreement is terminated pursuant to the provisions of Article VIII or any
other express right of termination set forth in this Agreement, NACT shall
return to MNI all copies of all Confidential Information previously furnished to
it by MNI.
12.5 Succession and Assignments and Third Party Beneficiaries: This
Agreement may not be assigned (either voluntarily or involuntarily) by any party
hereto without the express written consent of the other party. Any attempted
assignment in violation of this Section shall be void and ineffective for all
purposes. In the event of an assignment permitted by this Section, this
Agreement shall be binding upon the heirs, successors and assigns of the parties
hereto. There shall be no third party beneficiaries of this Agreement.
12.6 Notices: All notices, requests, demands, or other communications
with respect to this Agreement shall be in writing and shall be (i) sent by
facsimile transmission, (ii) sent by the United States Postal Service,
registered or certified mail, return receipt requested, or (iii) personally
delivered by a nationally recognized express overnight courier service, charges
prepaid, to the following addresses (or such other addresses as the parties may
specify from time to time in accordance with this Section)
32
(a) To NACT:
xxxxxxxxxxxx.xxx, Inc.
0000 Xxxxx Xxxxxx Xxxxxx, Xxxxx 0
Xxxx Xxxxx, Xxxxxxx 00000
Phone No: (000) 000-0000
Fax No: (000) 000-0000
Principal Contact: X. Xxxxxx, Xx., CEO
(b) To SUB:
Xxxxxxxxxxxx.xxx, Inc.
0000 Xxxx Xxxx Xxxxx
0xx Xxxxx Xxxxxxxxx
Xxxx Xxxxx, Xxxxxxx 00000
(c) To MNI:
Member Net, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxxxxxxx 00000
Phone No: (000) 000-0000
Fax No: (000) 000-0000
Principal Contact: Xxxxxx Xxxxxxx, Secretary
Any such notice shall, when sent in accordance with the preceding
sentence, be deemed to have been given and received on the earliest of (i)
the day delivered to such address or sent by facsimile transmission, (ii)
the fifth business day following the date deposited with the United States
Postal Service, or (iii) 24 hours after shipment by such courier service.
12.7 Construction: This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Florida without giving
effect to the principles of conflicts of law thereof.
12.8 Counterparts: This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same Agreement.
33
12.9 No Implied Waiver; Remedies: No failure or delay on the part of
the parties hereto to exercise any right, power, or privilege hereunder or
under any instrument executed pursuant hereto shall operate as a waiver nor
shall any single or partial exercise of any right, power, or privilege
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. All rights, powers, and privileges granted
herein shall be in addition to other rights and remedies to which the
parties may be entitled at law or in equity.
12.10 Entire Agreement: This Agreement, including the Exhibits and
Disclosure Schedules attached hereto, sets forth the entire understandings
of the parties with respect to the subject matter hereof, and it
incorporates and merges any and all previous communications, understandings,
oral or written as to the subject matter hereof, and cannot be amended or
changed except in writing, signed by the parties.
12.11 Headings: The headings of the Sections of this Agreement, where
employed, are for the convenience of reference only and do not form a part
hereof and in no way modify, interpret or construe the meanings of the
parties.
12.12 Severability: To the extent that any provision of this Agreement
shall be invalid or unenforceable, it shall be considered deleted hereof and
the remainder of such provision and of this Agreement shall be unaffected
and shall continue in full force and effect.
12.13 Attorneys Fees: In the event any legal action is brought to
interpret or enforce this Agreement, the party prevailing in such action
shall be entitled to recover its attorneys' fees and costs in addition to
any other relief that it is entitled.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
the day and year first above written.
ATTEST: XXXXXXXXXXXX.XXX, INC.
(an Idaho corporation)
34
By:_________________________ By:_____________________
Name: Xxx Xxxxxxxx Name: X. Xxxxxx, Xx.
Title: President Title: CEO
ATTEST: XXXXXXXXXXXX.XXX, INC.
(a Florida corporation)
By:_________________________ By:_____________________
Name: Xxx Xxxxxxxx Name: X. Xxxxxx, Xx.
Title: President Title: CEO
ATTEST: MEMBER NET, INC.
By:_________________________ By:_____________________
Name: Xxxxxx Xxxxxxx Name: Xxxxxx Xxxxx
Title: Secretary Title: President
--------------------- ---------------------
Xxxx X. Xxxxxxxxx Xxxxx X. Xxxxxxxx
--------------------- ---------------------
Xxxxxx Xxxxx Xxxxx Xxxx
--------------------- ----------------------
Xxxxxx Xxxxxxx Xxxxxx Xxxxxx
35
DISCLOSURE SCHEDULE
-------------------
MEMBER NET, INC.
----------------
Schedule A:
-----------
Section III: Warranties and Representations.
3.6 Contracts and Commitments - Attached.
(i) Independent Consultant Agreement dated
June 1, 1999, between Xxxx Xxxx and
Member Net, Inc.
(ii) Independent Consultant Agreement dated
June 1, 1999, between Xxxxxx Xxxxxxxxxx
and Member Net, Inc.
(iii) Independent Consultant Agreement dated
June 1, 1999, between Xxxxx Xxxxxxxxx
(iv) Technology Licensing Agreement dated
January 26, 1999 between Go Hip, Inc.
and Member Net, Inc.
(v) Transfer of Ownership Agreement dated
January 26, 1999. Between Alchemy
Communications, Inc. and Member Net,
Inc.
3.14 Financial Statements - Attached.
1. Member Net, Inc. Financial Statement June 30, 1999.
Schedule B:
-----------
3.7 Intellectual Property - Attached.
1. Technology Licensing Agreement dated
January 26, 1999 between Go Hip, Inc. and
Member Net, Inc.
36
DISCLOSURE SCHEDULE
-------------------
XXXXXXXXXXXX.XXX, INC.
----------------------
Schedule A:
-----------
3.8 Financial Statements: Attached.
37
