Agreement and Plan of Reorganization - Netgateway, Infobahn Technologies LLC d/b/a Digital Genesis, Video Calling Card Inc.
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made and entered into
effective as of the 2nd day of June, 1998, by and among NETGATEWAY, a Nevada
corporation ("NetGateway"), INFOBAHN TECHNOLOGIES, LLC, a California limited
liability company d/b/a Digital Genesis ("Digital Genesis"), VIDEO CALLING CARD,
INC., a Nevada corporation ("Video"), the NETGATEWAY SHAREHOLDERS and the VIDEO
MAJORITY SHAREHOLDER. Certain capitalized terms herein shall have the meanings
given to such terms in Article I.
Recitals
This Agreement provides for the acquisition by Video of all of the issued
and outstanding capital stock of NetGateway and all of the assets of Digital
Genesis in exchange for common voting stock of Video. All transactions set forth
herein are intended to qualify as a tax-free transaction pursuant to Section
351(a) of the Internal Revenue Code of 1986, as amended. This Agreement has been
adopted and approved by the respective boards of directors of NetGateway and
Video and by the members of Digital Genesis.
Agreement
NOW, THEREFORE, based upon the recitals above and for and in consideration
of the mutual covenants and agreements hereinafter set forth and the mutual
benefits to the parties to be derived here from, the parties hereto, intending
to be legally bound, hereby agree as follows:
ARTICLE I
DEFINITIONS
For purposes of this Agreement:
Adverse Consequences means all actions, suits, proceedings, hearings,
investigations, charges, complaints, claims, demands,
injunctions, judgments, orders, decrees, rulings,
damages, dues, penalties, fines, costs, reasonable
amounts paid in settlement, liabilities, obligations,
taxes, liens, losses, expenses, and fees, including
court costs and reasonable attorneys' fees and expenses.
Affiliate has the meaning set forth in Rule 12b-2 of the
regulations promulgated under the Securities Exchange
Act.
Agreement means this Agreement and Plan of Reorganization dated
effective June 2, 1998.
Business Party means any one or more of NetGateway, Digital
Genesis or Video, as the context indicates.
Closing means the consummation of the transactions contemplated
hereby, which shall occur on June 2, 1998, or at such
other time and date as the parties may designate, but in
no event later than two business days after all of
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the conditions set forth in Articles X and XI.
Code means the Internal Revenue Code of 1986, as amended.
Digital Genesis is Infobahn Technologies, LLC, a California limited
liability company d/b/a/ Digital Genesis, and a Party to
this Agreement.
Digital Genesis means the disclosure schedule prepared by Digital
Disclosure Schedule Genesis in accordance with the requirements of Section
12.11.
Digital Genesis Assets means all of the assets of Digital Genesis as of the
date hereof, including without limitation the assets set
forth on Schedule A attached hereto and made a part of
this Agreement by this reference.
Exchanged Video Shares means the common stock, par value $0.001, of Video to be
issued to the NetGateway Shareholders, and to Digital
Genesis.
Indemnified Party has the meaning set forth in Section 8.05.
Indemnifying Party has the meaning set forth in Section 8.05.
Indemnification Notice has the meaning set forth in Section 8.05.
GAAP means generally accepted accounting principles in the
United States as in effect on the date hereof.
Knowledge means actual knowledge after reasonable investigation.
Material means, when used as an adjective in conjunction with an
event, condition, circumstance, effect, or other item,
that there is a substantial likelihood that a reasonable
person would attach importance to the event, condition,
circumstance, effect, or item in evaluating the Party to
which it relates and the transactions herein
contemplated.
NetGateway is NetGateway, a Nevada corporation and a Party to this
Agreement.
NetGateway Disclosure
Schedule means the disclosure schedule prepared by NetGateway in
accordance with the requirements of Section 12.11.
NetGateway means Keith D. Freadhoff, Donald M. Corliss, Jr., Robert
Shareholders D. Geringer, Anna T. Brannon, T. Jason Mayo, Robert C.
Frojen, Eric DeCastro, Mark Gallegly, Eric Richardson,
Steps, Inc. David Basset-Parkins, Vision Holdings (a
Cayman corporation), Mike Khalad, and Hahn Ngo.
NetGateway Shares means all of the issued and outstanding capital stock of
NetGateway.
Ordinary Course of means the ordinary course of business consistent with
Business past custom and practice (including with respect to
quantity and frequency).
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Party or Parties means any one or more of NetGateway, Digital Genesis,
Search Video and the NetGateway Shareholders, as the context
indicates.
Person means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint
venture, an unincorporated organization, or a
governmental entity (or any department, agency, or
political subdivision thereof).
Reorganization means the transactions contemplated by this Agreement
taken as a whole.
Retained Liabilities shall have the meaning set forth in Section 7.02.
SEC means the Securities and Exchange Commission.
Securities Act means the Securities Act of 1933, as amended.
Securities Exchange means the Securities Exchange Act of 1934, as amended.
Act
Security Interest means any mortgage, pledge, lien, encumbrance,
charge, or other security interest, other than: (a)
mechanic's, materialmen's, and similar liens; (b)
liens for taxes not yet due and payable or for taxes
that the taxpayer is contesting in good faith through
appropriate proceedings; (c) purchase money liens and
liens securing rental payments under capital lease
arrangements; and (d) other liens arising in the
Ordinary Course of Business and not incurred in
connection with the borrowing of money.
Stockholder Approval means the required affirmative vote of the holders of
capital stock of a corporation or members of a limited
liability company to approve the Reorganization or any
other matter contemplated by this Agreement which
requires approval of the stockholders of the applicable
corporation or members of the applicable limited
liability company.
Subsidiary or means any corporation with respect to which a specified
Subsidiaries Person (or a Subsidiary thereof) owns a majority of the
common stock or has the power to vote or direct the
voting of sufficient securities to elect a majority of
the directors.
Tax or Taxes means any federal, state, local, or foreign income,
gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, windfall profits,
environmental (including taxes under Section 59A of the
Code), customs duties, capital stock, franchise,
profits, withholding, social security (or similar),
unemployment, disability, real property, personal
property, sales, use, transfer, registration, value
added, alternative or add-on minimum, estimated, or
other tax of any kind whatsoever, including any
interest, penalty, or addition thereto, whether disputed
or not.
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Third Party Claim has the meaning set forth in Section 8.05.
Tax Return means any return, declaration, report, claim for refund,
or information return or statement relating to Taxes,
including any schedule or attachment thereto, and
including any amendment thereof.
Video Shares means common stock of Video, $0.001 par value per share.
Video Majority means Steve Utley.
Shareholder
Video Disclosure means the disclosure schedule prepared by Video in
Schedule accordance with the requirements of Section 12.11.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF VIDEO
As an inducement to, and to obtain the reliance of, NetGateway, Digital
Genesis and the NetGateway Shareholders, Video and the Video Majority
Shareholder, jointly and severally, represent and warrant to NetGateway, Digital
Genesis and the NetGateway Shareholders as follows:
Section 2.01 Organization. Video is a corporation duly organized, validly
existing, and in good standing under the laws of the state of Nevada. Video has
the corporate power and is duly authorized, qualified, franchised, and licensed
under all applicable laws, regulations, ordinances, and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification, except in such jurisdictions, if any, where the
failure to be so qualified would not, either individually or in the aggregate,
have a material adverse effect on the business, properties, or assets of Video.
Section 2.02 Articles of Incorporation and Bylaws; Records. Video has
delivered or otherwise made available to the other Parties accurate and complete
copies of: (a) Video's articles of incorporation and bylaws as currently in
effect, including all amendments thereto; (b) the stock records of Video and (c)
the minutes and other records of the meetings and other proceedings (including
any actions taken by written consent or otherwise without a meeting) of the
shareholders of Video, the Board of Directors of Video and all committees of the
Board of Directors of Video. Video is not in violation of any of the provisions
of its articles of incorporation or bylaws The books of account, stock records,
minute books and other records of Video are accurate and complete in all
material respects, and have been maintained in accordance with prudent business
practices.
Section 2.03 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: (a) violate any
provision of the articles of incorporation, charter, or bylaws of Video; (b)
result in the breach of, constitute a default under, result in the acceleration
of, create in any Person the right to accelerate, terminate, modify, cancel, or
require any notice under, any material agreement, contract, lease, license,
instrument, or other arrangement to which Video is a party or by which it is
bound or to which any of its assets is subject; or, (c) violate any
constitution, statute, regulation, rule, injunction, judgment, order, decree,
ruling, charge, or other restriction of any government, governmental agency, or
court to which Video is subject.
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Section 2.04 Authorization of Transaction. Video has full power and
authority, and has taken all action required by law, its articles of
incorporation and bylaws, and otherwise to execute and deliver this Agreement
and to perform its obligations hereunder. Without limiting the generality of the
foregoing, the Board of Directors of Video has duly authorized the execution,
delivery, and performance of this Agreement by Video. This Agreement represents
the valid and binding obligation of Video enforceable in accordance with its
terms, except as limited by bankruptcy and insolvency laws and by other laws
affecting the rights of creditors generally.
Section 2.05 Subsidiaries. Video has no Subsidiaries.
Section 2.06 Capitalization. The authorized capitalization of Video
consists of 25,000,000 shares of common stock, $0.001 par value per share, of
which 900,000 shares are currently issued and outstanding. All issued and
outstanding shares are legally issued, fully paid, and non-assessable and not
issued in violation of the pre-emptive or other rights of any Person. There are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Video. There are no existing
options, warrants, calls, convertible securities, or commitments of any
character relating to the authorized and unissued Video common stock. All
outstanding shares of Video's capital stock have been issued in compliance with
applicable federal and state securities laws and other applicable laws and all
requirements set forth in any contract to which Video is or was a party. Except
as contemplated in Section 7.01, Video has never repurchased, redeemed or
otherwise reacquired any shares of capital stock or other securities.
Section 2.07 Financial Statements.
(a) Video has delivered to the other Parties hereto the audited
financial statements of Video as of December 31, 1995, 1996 and 1997.
(b) All such financial statements present fairly the financial
position of the Company as of the respective dates thereof and the results
of operations and cash flows of the Company for the periods covered
thereby, and have been prepared in accordance with GAAP applied on a
consistent basis throughout the periods covered, present fairly as of
their respective dates the financial condition of Video and the results of
operations of Video, are correct and complete, and are consistent with the
books and records of Video (which books and records are correct and
complete).
(c) Video did not have as of the date of its most recent balance
sheet any liabilities or obligations (whether known or unknown, asserted
or unasserted, absolute or contingent, accrued or unaccrued, liquidated or
unliquidated, and due or to become due), including any liability for
Taxes, except for (i) liabilities set forth on the most recent balance
sheet of Video, (ii) expenses incurred in connection with the transactions
contemplated by this Agreement, and (iii) liabilities disclosed in this
Agreement.
Section 2.08 Absence of Certain Changes or Events. Except as described
herein or in the Video Disclosure Schedule, since December 31, 1997:
(a) There has not been any material adverse change in the financial
condition of Video.
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(b) Video has not (i) amended its articles of incorporation,
charter, or bylaws; (ii) declared or made, or agreed to declare or make,
any payment of dividends or distributions of any assets of any kind
whatsoever to stockholders, or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights of
value which in the aggregate are extraordinary or material considering its
business; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material transaction;
(vi) made any accrual or arrangement for payment of bonuses or special
compensation of any kind or any severance or termination pay to any
Person; or (vii) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement made to, for, or with its officers,
directors, Affiliates, or employees.
(c) Video has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate
securities calling for the issuance thereof; or (ii) issued, authorized,
delivered, or agreed to issue or deliver any stock, bonds, or other
corporate securities including debentures (whether authorized and unissued
or held as treasury stock).
(d) Video has not declared, accrued, set aside or paid any dividend
or made any other distribution in respect to any shares of capital stock
and has not repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities
(e) Video has not effected or been a party to any acquisition
transaction, recapitalization, reclassification of shares, stock split,
reverse stock split or similar transaction;
(f) Video has not incurred or guaranteed any indebtedness for
borrowed money in excess of $10,000 individually or in the aggregate;
(g) Video has not changed any of its methods of accounting or
accounting practices in any respect;
(h) Video has not entered into any material transaction or taken any
other material action; and
(i) Video has not agreed or committed to take any of the actions
referred to in clauses "(a)" through "(i)" above.
Section 2.09 Tax Matters.
(a) Video has filed, or will have filed prior to the Closing, all
Tax Returns that it was required to file as of the date of Closing. All
such Tax Returns were correct and complete in all respects. All Taxes owed
by Video (whether or not shown on any Tax Return) have been paid. Video is
not currently the beneficiary of any extension of time within which to
file any Tax Return. No claim has ever been made by an authority in a
jurisdiction where Video does not file Tax Returns that it is or may be
subject to taxation by that jurisdiction. There are no Security Interests
on any of the assets of Video that arose in connection with any failure
(or alleged failure) to pay any Tax.
(b) Video has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
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(c) No Video director or officer (or employee responsible for Tax
matters) of Video reasonably expects any authority to assess against Video
any additional Taxes for any period for which Tax Returns have been filed.
There is no dispute or claim concerning any Tax liability of Video either
(i) claimed or raised by an authority in writing or, (ii) as to which any
of the directors and officers (and employees responsible for Tax matters)
of Video has knowledge based upon personal contact with any agent of such
authority. The Video Disclosure Schedule includes a list of all federal,
state, local, and foreign income Tax Returns filed with respect to Video
for taxable periods ended on or after December 31, 1997, indicates those
Tax Returns that have been audited, and indicates those Tax Returns that
currently are the subject of audit. Video has delivered to the other
Parties hereto correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed
against or agreed to by Video since December 31, 1997.
(d) Video has not waived any statute of limitations in respect of
Taxes or agreed to any extension of time with respect to a Tax assessment
or deficiency.
(e) The unpaid Taxes of Video (i) did not, as of the most recent
balance sheet of Video, exceed the reserve for Tax liability (rather than
any reserve for deferred Taxes established to reflect timing differences
between book and Tax income) set forth on the face of said balance sheet,
and (ii) do not exceed that reserve as adjusted for the passage of time
through the date of Closing in accordance with the past custom and
practice of Video in filing its Tax Returns.
Section 2.10 Litigation and Proceedings. There are no actions, suits,
proceedings, or investigations pending or, to the knowledge of Video, threatened
by or against it or affecting its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind. Video has no knowledge of any material
default on its part with respect to any judgment, order, writ, injunction,
decree, award, or ruling of any court, arbitrator, or governmental agency or
instrumentality.
Section 2.11 Contracts.
(a) Except as included or described in the Video Disclosure
Schedule, there are no material contracts, agreements, franchises, license
agreements, or other commitments to which Video is a party or by which its
properties are bound.
(b) Except as included or described in the Video Disclosure Schedule
or reflected in the most recent Video balance sheet, Video is not a party
to any oral or written: (i) contract for the employment of any officer or
employee; (ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit, or retirement plan, agreement, or
arrangement covered by Title IV of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA"); (iii) agreement, contract, or indenture
relating to the borrowing of money; (iv) guaranty of any obligation; (v)
consulting or other similar contracts; (vi) collective bargaining
agreement; (vii) agreement with any present or former officer or director;
or (viii) contract, agreement, or other commitment involving payments by
it of more than $1,000 in the aggregate.
Section 2.12 Material Contract Defaults. Video is not in default in any
respect under the terms of any outstanding contract, agreement, lease, or other
commitment, and there is no event of default or other event which, with notice
or lapse of time or both, would constitute a default in any material
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respect under any such contract, agreement, lease, or other commitment in
respect of which it has not taken adequate steps to prevent such a default from
occurring.
Section 2.13 Governmental Authorizations. Video has all licenses,
franchises, permits, and other governmental authorizations, whether state or
federal that are legally required to enable it to conduct its business in all
material respects as conducted on the date hereof. Except for compliance with
the Securities Act and the Securities Exchange Act, as hereinafter provided, no
authorization, approval, consent, or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection with
the execution and delivery by Video of this Agreement and the consummation by
Video of the transactions contemplated hereby.
Section 2.14 Continuity of Business Enterprise. It is the present
intention of Video to continue at least one significant historic business of
NetGateway and Digital Genesis or to use at least a significant portion of its
respective historic business assets in a business within the meaning of Treasury
Regulation Section 1.368-1(d).
Section 2.15 Compliance With Laws and Regulations. Video has complied with
all applicable statutes and regulations of any country, state, provincial,
municipal, or local governmental entity or agency thereof, including the
Securities Act and the Securities Exchange Act, except to the extent that
noncompliance would not materially and adversely affect its business,
operations, properties, assets, or business condition, and except to the extent
non-compliance would not result in any material liability.
Section 2.16 Information. The information concerning Video set forth in
this Agreement and in the Video Disclosure Schedule is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they are made, not misleading.
Section 2.17 Title to Assets. Video owns, and has good and valid title to,
all assets purported to be owned by it, including all of the assets reflected in
the financial statements and all other assets reflected in Video's books and
records as being owned by Video. All of said assets are owned by Video free and
clear of any liens or other encumbrances.
Section 2.18 No Undisclosed Liabilities. Except as set forth in the
financial statements, Video has no accrued, contingent or other liabilities of
any nature, either matured or unmatured.
Section 2.19 Employee and Labor Matters; Benefit Plans.
(a) Video has no employees and is not a party to any collective
bargaining contract or other contract with a labor union involving any of its
employees.
(b) Video does not maintain, sponsor or contribute to, and, has not
at any time in the past maintained, sponsored or contributed to, any employee
pension benefit plan (as defined in Section 3(2) of ERISA, whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of employees or former employees of Video.
(c) Video does not maintain, sponsor or contribute to any employee
welfare benefit plan (as defined in Section 3(1) of ERISA, whether or not
excluded from coverage under specific Titles or Merger Subtitles of ERISA) for
the benefit of employees or former employees of Video
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Section 2.20 Insurance. The business and properties of Video are insured
for the benefit of Video in commercially reasonable amounts against risks
usually insured against by persons operating businesses similar to those of
Video in the localities where such properties are located. All such policies
have been delivered by Video to the other Parties.
Section 2.21 Nevada Merger Statues. The consummation of the transaction
contemplated hereby shall not subject Video or any other party hereto to Nevada
Revised Statutes Sections 78-378 - 78-3793 (acquisition of Controlling
Interest), or Nevada Revised Statues Sections 78-411 - 78-444 (interested
Stockholder Combinations).
Section 2.22 No Registration. Based on the information provided, the
consummation of the transactions contemplated hereby do not require registration
under and are in full compliance with the Securities Act and the Securities
Exchange Act; provided, however, that the Video Majority Shareholder shall not
be deemed to have made the representation and warranty set forth in this Section
2.22.
Section 2.23. No Adverse Knowledge. Video is not aware of any reason that
this transaction will not qualify under Section 351 of the Internal Revenue Code
of 1986, as amended.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
NETGATEWAY
As an inducement to, and to obtain the reliance of Video, NetGateway
represents and warrants to Video as follows:
Section 3.01 Organization. NetGateway is a corporation duly organized,
validly existing, and in good standing under the laws of the state of Nevada.
NetGateway has the corporate power and is duly authorized, qualified,
franchised, and licensed under all applicable laws, regulations, ordinances, and
orders of public authorities to own all of its properties and assets and to
carry on its business in all material respects as it is now being conducted,
including qualification to do business as a foreign corporation in the states in
which the character and location of the assets owned by it or the nature of the
business transacted by it requires qualification, except in such jurisdictions,
if any, where the failure to be so qualified would not, either individually or
in the aggregate, have a material adverse effect on the business, properties, or
assets of NetGateway. NetGateway has previously delivered complete and correct
copies of the articles of incorporation, as amended, and bylaws of NetGateway.
Section 3.02 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: (a) violate any
provision of the articles of incorporation, charter, or bylaws of NetGateway;
(b) result in the breach of, constitute a default under, result in the
acceleration of, create in any Person the right to accelerate, terminate,
modify, cancel, or require any notice under, any material agreement, contract,
lease, license, instrument, or other arrangement to which NetGateway is a party
or by which it is bound or to which any of its assets is subject; or, (c)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which NetGateway is subject.
Section 3.03 Authorization of Transaction. NetGateway has full power and
authority, and has taken all action required by law, its articles of
incorporation and bylaws, and otherwise to execute and deliver this Agreement
and to perform its obligations hereunder. Without limiting the generality of the
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foregoing, the Board of Directors of NetGateway has duly authorized the
execution, delivery, and performance of this Agreement by NetGateway. This
Agreement represents the valid and binding obligation of NetGateway enforceable
in accordance with its terms, except as limited by bankruptcy and insolvency
laws and by other laws affecting the rights of creditors generally.
Section 3.04 Subsidiaries. NetGateway has no Subsidiaries.
Section 3.05 Capitalization. The authorized capitalization of NetGateway
consists of 1,000,000 shares of stock, no par value, of which 590,000 shares are
currently issued and outstanding. All issued and outstanding shares are legally
issued, fully paid, and non-assessable and not issued in violation of the
pre-emptive or other rights of any Person. Except as set forth in the NetGateway
Disclosure Schedule, there are no existing options, warrants, calls, or
commitments of any character relating to the authorized and unissued NetGateway
stock.
Section 3.06 Title. Each of the NetGateway Shareholders has full right and
title to the number of the NetGateway Shares set forth opposite his or her name
in Part 3.06 of the NetGateway Disclosure Schedule; such NetGateway Shares
constitute all of the NetGateway Shares which are owned, directly or indirectly,
by the NetGateway Shareholders; and at the time of transfer thereof to Video,
all of NetGateway Shares to be transferred by the NetGateway Shareholders will
be free of all liens, claims or encumbrances of any kind.
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Section 3.07 Compliance With Laws and Regulations. NetGateway has complied
with all applicable statutes and regulations of any country, state, provincial,
municipal, or local governmental entity or agency thereof, except to the extent
that noncompliance would not materially and adversely affect its business,
operations, properties, assets, or business condition, and except to the extent
non-compliance would not result in any material liability.
Section 3.08 Insurance. All the insurable properties of NetGateway are or
will be insured in accordance with industry standards against all risks
customarily insured against by persons operating similar properties in
localities where such properties are located and under valid and enforceable
policies by insurers of recognized responsibility.
Section 3.09 Articles of Incorporation and Bylaws; Records. NetGateway has
delivered or otherwise made available to the other Parties accurate and complete
copies of: (a) NetGateway's articles of incorporation and bylaws as currently in
effect, including all amendments thereto; (b) the stock records of NetGateway
and (c) the minutes and other records of the meetings and other proceedings
(including any actions taken by written consent or otherwise without a meeting)
of the shareholders of NetGateway, the Board of Directors of NetGateway and all
committees of the Board of Directors of NetGateway. NetGateway is not in
violation of any of the provisions of its articles of incorporation or bylaws
The books of account, stock records, minute books and other records of
NetGateway are accurate and complete in all material respects, and have been
maintained in accordance with prudent business practices.
Section 3.10 Absence of Certain Changes or Events. Except as described
herein or in the NetGateway Schedules:
(a) There has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of NetGateway; or
(ii) any damage, destruction, or loss to
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NetGateway (whether or not covered by insurance) materially and adversely
affecting its business, operations, properties, assets, or financial
condition.
(b) NetGateway has not (i) amended its articles of incorporation,
charter, or bylaws; (ii) declared or made, or agreed to declare or make,
any payment of dividends or distributions of any assets of any kind
whatsoever to stockholders, or purchased or redeemed, or agreed to
purchase or redeem, any of its capital stock; (iii) waived any rights of
value which in the aggregate are extraordinary or material considering its
business; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material transaction;
(vi) made any accrual or arrangement for payment of bonuses or special
compensation of any kind or any severance or termination pay to any
Person; or (vii) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement made to, for, or with its officers,
directors, Affiliates, or employees, except in the Ordinary Course of
Business.
(c) NetGateway has not (i) granted or agreed to grant any options,
warrants, or other rights for its stocks, bonds, or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred, or become subject to, any material
obligation or liability (absolute or contingent), except liabilities
incurred in the Ordinary Course of Business; (iii) paid any material
obligation or liability (absolute or contingent), and current liabilities
incurred since that date in the Ordinary Course of Business; (iv) except
in the Ordinary Course of Business, sold or transferred, or agreed to sell
or transfer, any of its assets, properties, or rights (except assets,
properties, or rights not used or useful in its business which, in the
aggregate, have a value of less than $10,000), or canceled, or agreed to
cancel, any debts or claims (except debts or claims which, in the
aggregate, are of a value of less than $10,000); or (v) made or permitted
any amendment or termination of any contract, agreement, or license to
which it is a party if such amendment or termination is material,
considering its business.
(d) To the knowledge of NetGateway, has not become subject to any
law or regulation which materially and adversely effects, or in the future
may adversely effect its business as conducted on the date hereof.
Section 3.11 Title and Related Matters. NetGateway has good and marketable
title to all of its properties, interests in properties, and assets, real and
personal, (except properties, interests in properties, and assets sold or
otherwise disposed of in the Ordinary Course of Business or as provided in this
Agreement or the NetGateway Schedules), free and clear of all Security
Interests, except as disclosed in the NetGateway Schedules. Except as set forth
in the NetGateway Schedules, NetGateway owns free and clear of any Security
Interests any and all trademarks, service marks, trade names, copyrights,
procedures, techniques, marketing plans, business plans, methods of management,
intellectual property, and other information utilized in connection with its
business and necessary to conduct its business in an efficient manner. Except as
set forth in the NetGateway Schedules, no Person has any right to, and
NetGateway has not received any notice of, infringement of, or conflict with,
asserted rights of others with respect to any marketing rights, trade secrets,
know-how, proprietary techniques, trademarks, service marks, trade names,
copyrights, or intellectual property, which, if the subject of an unfavorable
decision, ruling, or finding, would have a materially adverse effect on its
business, operations, financial condition, income, or business, or any material
portion of its properties, assets, or rights.
Section 3.12 Tax Matters.
<PAGE>
(a) NetGateway has filed, or will have filed prior to the Closing,
all Tax Returns that it was required to file as of the date of Closing.
All such Tax Returns were correct and complete in all material respects.
All Taxes owed by any of NetGateway (whether or not shown on any Tax
Return) have been paid. NetGateway is not currently the beneficiary of any
extension of time within which to file any Tax Return, except as disclosed
in the NetGateway Schedules. No claim has ever been made by an authority
in a jurisdiction where NetGateway does not file Tax Returns that it is or
may be subject to taxation by that jurisdiction. There are no Security
Interests on any of the assets of NetGateway that arose in connection with
any failure (or alleged failure) to pay any Tax.
(b) NetGateway has withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(c) No NetGateway director or officer (or employee responsible for
Tax matters) of NetGateway reasonably expects any authority to assess
against NetGateway any additional Taxes for any period for which Tax
Returns have been filed. There is no dispute or claim concerning any Tax
liability of NetGateway either (i) claimed or raised by an authority in
writing or, (ii) as to which any of the NetGateway directors and officers
(and employees responsible for Tax matters) of NetGateway has knowledge
based upon personal contact with any agent of such authority.
(d) NetGateway has not waived any statute of limitations in respect
of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
Section 3.13 Litigation and Proceedings. Except as set forth in the
NetGateway Schedules, there are no actions, suits, proceedings, or
investigations pending or, to the Knowledge of NetGateway, threatened by or
against NetGateway or affecting its properties, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind. To the Knowledge of NetGateway, there is no
material default on the part of NetGateway with respect to any judgment, order,
writ, injunction, decree, award, or ruling of any court, arbitrator, or
governmental agency or instrumentality.
Section 3.14 Contracts.
(a) Except as included or described herein or in the NetGateway
Schedules or contracts incurred in the Ordinary Course of Business, there
are no material contracts, agreements, franchises, license agreements, or
other commitments to which NetGateway is a party or by which its
properties are bound.
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which NetGateway is a party or by which its
properties are bound and which are material to its operations are, to the
knowledge of NetGateway, valid and enforceable by NetGateway in all
respects, except as limited by bankruptcy and insolvency laws and by other
laws affecting the rights of creditors generally.
<PAGE>
(c) Except as included or described in the NetGateway Schedules,
NetGateway is not a party to any oral or written: (i) contract for the
employment of any officer or employee which is not terminable on 30 days
or less notice; (ii) profit sharing, bonus, deferred compensation, stock
option, severance pay, pension benefit or retirement plan, agreement, or
arrangement; (iii) agreement, contract, or indenture relating to the
borrowing of money; (iv) guaranty of any obligation, other than one on
which it is a primary obligor, for the borrowing of money or otherwise,
excluding endorsements made for collection and other guaranties of
obligations which, in the aggregate, do not exceed $10,000; (v) consulting
or other similar contracts with an unexpired term of more than one year or
providing for payments in excess of $5,000 in the aggregate; (vi)
collective bargaining agreement; (vii) agreement with any present or
former officer or director; or (viii) contract, agreement, or other
commitment involving payments by it of more than $5,000 in the aggregate.
Section 3.15 Material Contract Defaults. Except as disclosed in the
NetGateway Schedules, to its knowledge, NetGateway is not in default in any
material respect under the terms of any outstanding contract, agreement, Lease,
or other commitment which is material to its business, operations, properties,
assets, or business condition, and there is no event of default or other event
which, with notice or lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, Lease, or other commitment
in respect of which it has not taken adequate steps to prevent such a default
from occurring.
Section 3.16 Governmental Authorizations. Except as set forth in the
NetGateway Schedules, NetGateway has all licenses, franchises, permits, and
other governmental authorizations, whether state or federal that are legally
required to enable it to conduct its business in all material respects as
conducted on the date hereof. Except for compliance with the Securities Act and
the Corporation Act, as hereinafter provided, no authorization, approval,
consent, or order of, or registration, declaration, or filing with, any court or
other governmental body is required in connection with the execution and
delivery by NetGateway of this Agreement and the consummation by NetGateway of
the transactions contemplated hereby.
Section 3.17 Information. The information concerning NetGateway set forth
in this Agreement and in the NetGateway Schedules is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made, in
light of the circumstances under which they are made, not misleading.
Section 3.18 Assets and Liabilities. Notwithstanding the foregoing, as of
the date hereof, NetGateway does not own any significant assets or have any
significant liabilities, except as set forth in the NetGateway Schedules or as
otherwise disclosed in writing by NetGateway.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NETGATEWAY SHAREHOLDERS
Section 4.01 Representations and Warranties of NetGateway Shareholders.
Each
<PAGE>
NetGateway Shareholder with respect to himself only represents and warrants that
he has full right and title to the number of the NetGateway Shares set forth
opposite his name on Part 3.06 of the NetGateway Disclosure Schedule and at the
time of transfer thereof to Video, all of such NetGateway Shares will be free of
all security interests.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF DIGITAL GENESIS
As an inducement to, and to obtain the reliance of Video and NetGateway,
Digital Genesis represents and warrants to Video and NetGateway as follows:
Section 5.01 Organization. Digital Genesis is a limited liability company
duly organized, validly existing, and in good standing under the laws of the
state of California. Digital Genesis has the power and is duly authorized,
qualified, franchised, and licensed under all applicable laws, regulations,
ordinances, and orders of public authorities to own all of its properties and
assets and to carry on its business in all material respects as it is now being
conducted, including qualification to do business in the states in which the
character and location of the assets owned by it or the nature of the business
transacted by it requires qualification, except in such jurisdictions, if any,
where the failure to be so qualified would not, either individually or in the
aggregate, have a material adverse effect on the business, properties, or assets
of Digital Genesis. Digital Genesis has previously provided complete and correct
copies of its articles of organization, as amended, and the Operating Agreement
of Digital Genesis as in effect on the date hereof.
Section 5.02 Non-contravention. The execution and delivery of this
Agreement does not, and the consummation of the transactions contemplated by
this Agreement in accordance with the terms hereof will not: (a) violate any
provision of the articles of organization, charter, or the operating agreement
of Digital Genesis; result in the breach of, constitute a default under, result
in the acceleration of, create in any Person the right to accelerate, terminate,
modify, cancel, or require any notice under; (b) any material agreement,
contract, lease, license, instrument, or other arrangement to which Digital
Genesis is a party or by which it is bound or to which any of its assets is
subject; or, (c) violate any constitution, statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Digital Genesis is subject.
Section 5.03 Authorization of Transaction. Digital Genesis has full power
and authority, and has taken all action required by law, its articles of
organization and operating agreement, and otherwise to execute and deliver this
Agreement and to perform its obligations hereunder. Without limiting the
generality of the foregoing, the members of Digital Genesis have duly authorized
the execution, delivery, and performance of this Agreement by Digital Genesis.
This Agreement represents the valid and binding obligation of Digital Genesis
enforceable in accordance with its terms, except as limited by bankruptcy and
insolvency laws and by other laws affecting the rights of creditors generally.
Section 5.04 Subsidiaries. Digital Genesis has no Subsidiaries.
Section 5.05 Title. Digital Genesis has full right and title to the
Digital Genesis Assets, and at the time of transfer thereof to Video, all of the
Digital Genesis Assets will be free of all Security Interests except as
reflected in Part 5.05 of the Digital Genesis Disclosure Schedule, and will be
fully transferable
<PAGE>
to Video.
Section 5.06 Financial Statements.
(a) Digital Genesis has provided to the other Parties unaudited
financial statements of Digital Genesis for the twelve-month period ended
April 30, 1998.
(b) All such financial statements have been kept on an accrual basis
in accordance with GAAP, on a consistent basis throughout the periods
covered, present fairly as of their respective dates the financial
condition of Digital Genesis and its results of operations, and are
consistent with the books and records of Digital Genesis.
(c) Digital Genesis did not have as of the date of its most recent
balance sheet any material liabilities or obligations (whether known or
unknown, asserted or unasserted, absolute or contingent, accrued or
unaccrued, liquidated or unliquidated, and due or to become due),
including any liability for Taxes, except for (i) liabilities set forth on
its most recent balance sheet, and (ii) liabilities disclosed in this
Agreement.
(d) All accounts receivable of Digital Genesis are reflected
properly on its books and records and, to the knowledge of Digital
Genesis, are valid receivables subject to no material setoffs or
counterclaims, are current and collectible, and will be collected in
accordance with their terms at their recorded amounts, subject only to the
reserve for bad debts, if any, set forth on the balance sheet of Digital
Genesis at April 30, 1998, as adjusted for the passage of time through the
date of this Agreement in accordance with the past custom and practice of
Digital Genesis.
Section 5.07 Absence of Certain Changes or Events. Except as described
herein, since April 30, 1998, the date of the most recent balance sheet of
Digital Genesis:
(a) There has not been (i) any material adverse change in the
business, operations, properties, assets, or condition of Digital Genesis;
or (ii) any damage, destruction, or loss to Digital Genesis (whether or
not covered by insurance) materially and adversely affecting its business,
operations, properties, assets, or financial condition.
(b) Digital Genesis has not (i) amended its articles of
organization, charter, or operating agreement; (ii) declared or made, or
agreed to declare or make, any payment or distributions of any assets of
any kind whatsoever to members, or purchased or redeemed, or agreed to
purchase or redeem, any membership interest; (iii) waived any rights of
value which in the aggregate are extraordinary or material considering its
business; (iv) made any material change in its method of management,
operation, or accounting; (v) entered into any other material transaction;
(vi) made any accrual or arrangement for payment of bonuses or special
compensation of any kind or any severance or termination pay to any
Person; or (vii) made any increase in any profit sharing, bonus, deferred
compensation, insurance, pension, retirement, or other employee benefit
plan, payment, or arrangement made to, for, or with its officers, members,
managers, Affiliates, or employees.
(c) Digital Genesis has not (i) borrowed or agreed to borrow any
funds or incurred,
<PAGE>
or become subject to, any material obligation or liability (absolute or
contingent), except liabilities incurred in the Ordinary Course of
Business; (ii) paid any material obligation or liability (absolute or
contingent) other than current liabilities reflected in or shown on the
April 30, 1998 balance sheet of Digital Genesis, and current liabilities
incurred since that date in the Ordinary Course of Business; (iii) except
in the ordinary course of business, sold or transferred, or agreed to sell
or transfer, any of its assets, properties, or rights (except assets,
properties, or rights not used or useful in its business which, in the
aggregate, have a value of less than $5,000), or canceled, or agreed to
cancel, any debts or claims in excess of reserves reflected on its balance
sheet at April 30, 1998 (except debts or claims which, in the aggregate,
are of a value of less than $5,000); or (iv) made or permitted any
amendment or termination of any contract, agreement, or license to which
it is a party if such amendment or termination is material, considering
its business.
(d) To the knowledge of Digital Genesis, has not become subject to
any law or regulation which materially and adversely effects, or in the
future may adversely effect its business as conducted on the date hereof.
Section 5.08 Title and Related Matters. Digital Genesis has good and
marketable title to all of its properties, interests in properties, and assets,
real and personal, which are reflected in its April 30, 1998 balance sheet or
acquired after that date (except properties, interests in properties, and assets
sold or otherwise disposed of since such date in the Ordinary Course of Business
or as provided in this Agreement or the Digital Genesis Schedules), free and
clear of all Security Interests, except as disclosed in the Digital Genesis
Schedules. Except as set forth in Part 5.08 of the Digital Genesis Disclosure
Schedule, Digital Genesis owns free and clear of any Security Interests any and
all trademarks, service marks, trade names, copyrights, procedures, techniques,
marketing plans, business plans, methods of management, intellectual property,
and other information utilized in connection with its business and necessary to
conduct its business in an efficient manner. Except as set forth in the Digital
Genesis Schedules, no Person has any right to, and Digital Genesis has not
received any notice of, infringement of, or conflict with, asserted rights of
others with respect to any marketing rights, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names, copyrights, or
intellectual property, which, if the subject of an unfavorable decision, ruling,
or finding, would have a materially adverse effect on its business, operations,
financial condition, income, or business, or any material portion of its
properties, assets, or rights. Notwithstanding the foregoing, no trademarks and
service marks, including "Digital Genesis" are registered on either a federal or
state level, no trademark searches have been performed, and there is no
assurance that any of the marks are capable of being registered.
Section 5.09 Tax Matters.
(a) Digital Genesis has filed, or will have filed prior to the
Closing, all Tax Returns that it was required to file as of the date of
Closing. All such Tax Returns were correct and complete in all material
respects. All Taxes owed by any of Digital Genesis (whether or not shown
on any Tax Return) have been paid. Digital Genesis is not currently the
beneficiary of any extension of time within which to file any Tax Return,
except as disclosed in the Digital Genesis Schedules. No claim has ever
been made by an authority in a jurisdiction where Digital Genesis does not
file Tax Returns that it is or may be subject to taxation by that
jurisdiction. There are no Security Interests on any of the assets of
Digital Genesis that arose in connection with any failure (or alleged
failure) to pay any Tax.
<PAGE>
(b) Digital Genesis has withheld and paid all Taxes required to have
been withheld and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or other Person.
(c) No Digital Genesis manager, member or officer (or employee
responsible for Tax matters) of Digital Genesis reasonably expects any
authority to assess against Digital Genesis any additional Taxes for any
period for which Tax Returns have been filed. There is no dispute or claim
concerning any Tax liability of Digital Genesis either (i) claimed or
raised by an authority in writing or, (ii) as to which any of the Digital
Genesis managers, members and officers (and employees responsible for Tax
matters) of Digital Genesis have knowledge.
(d) Digital Genesis has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to a Tax
assessment or deficiency.
(e) The unpaid Taxes of Digital Genesis (i) did not, as of the most
recent balance sheet of Digital Genesis, exceed the reserve for Tax
liability (rather than any reserve for deferred Taxes established to
reflect timing differences between book and Tax income) set forth on the
face of said balance sheet, and (ii) do not exceed that reserve as
adjusted for the passage of time through the date of Closing in accordance
with the past custom and practice of Digital Genesis in filing its Tax
Returns.
Section 5.10 Litigation and Proceedings. Except as set forth in the
Digital Genesis Disclosure Schedule, there are no actions, suits, proceedings,
or investigations pending or, to the knowledge of Digital Genesis, threatened by
or against Digital Genesis or affecting its properties, at law or in equity,
before any court or other governmental agency or instrumentality, domestic or
foreign, or before any arbitrator of any kind. To the knowledge of Digital
Genesis, there is no material default on the part of Digital Genesis with
respect to any judgment, order, writ, injunction, decree, award, or ruling of
any court, arbitrator, or governmental agency or instrumentality.
Section 5.11 Contracts.
(a) Except as included or described herein or in Part 5.11 of the
Digital Genesis Disclosure Schedule, there are no material contracts,
agreements, franchises, license agreements, or other commitments to which
Digital Genesis is a party or by which its properties are bound.
(b) All contracts, agreements, franchises, license agreements, and
other commitments to which Digital Genesis is a party or by which its
properties are bound and which are material to its operations are, to the
knowledge of Digital Genesis, valid and enforceable by Digital Genesis in
all respects, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally.
(c) Except as included or described in the Digital Genesis
Disclosure Schedule or reflected in the April 30, 1998, balance sheet,
Digital Genesis is not a party to any oral or written: (i) contract for
the employment of any officer or employee which is not terminable on 30
days or less notice; (ii) profit sharing, bonus, deferred compensation,
stock option, severance pay, pension benefit or retirement plan,
agreement, or arrangement; (iii) agreement, contract, or
<PAGE>
indenture relating to the borrowing of money; (iv) guaranty of any
obligation, other than one on which it is a primary obligor, for the
borrowing of money or otherwise, excluding endorsements made for
collection and other guaranties of obligations which, in the aggregate, do
not exceed $10,000; (v) consulting or other similar contracts with an
unexpired term of more than one year or providing for payments in excess
of $5,000 in the aggregate; (vi) collective bargaining agreement; (vii)
agreement with any present or former officer or director; or (viii)
contract, agreement, or other commitment involving payments by it of more
than $5,000 in the aggregate.
Section 5.12 Material Contract Defaults. Except as disclosed in Part 5.12
of the Digital Genesis Disclosure Schedule, to its knowledge, Digital Genesis is
not in default in any material respect under the terms of any outstanding
contract, agreement, lease, or other commitment which is material to its
business, operations, properties, assets, or business condition, and there is no
event of default or other event which, with notice or lapse of time or both,
would constitute a default in any material respect under any such contract,
agreement, lease, or other commitment in respect of which it has not taken
adequate Digital Genesis to prevent such a default from occurring.
Section 5.13 Governmental Authorizations. Except as set forth in Part 5.13
of the Digital Genesis Disclosure Schedule, Digital Genesis has all licenses,
franchises, permits, and other governmental authorizations, whether state or
federal that are legally required to enable it to conduct its business in all
material respects as conducted on the date hereof. Except for compliance with
the Securities Act and the Limited Liability Company Act, as hereinafter
provided, no authorization, approval, consent, or order of, or registration,
declaration, or filing with, any court or other governmental body is required in
connection with the execution and delivery by Digital Genesis of this Agreement
and the consummation by Digital Genesis of the transactions contemplated hereby.
Section 5.14 Compliance With Laws and Regulations. Digital Genesis has
complied with all applicable statutes and regulations of any country, state,
provincial, municipal, or local governmental entity or agency thereof, except to
the extent that noncompliance would not materially and adversely affect its
business, operations, properties, assets, or business condition, and except to
the extent non-compliance would not result in any material liability.
Section 5.15 Insurance. All the insurable properties of Digital Genesis
are insured in accordance with industry standards against all risks customarily
insured against by persons operating similar properties in localities where such
properties are located and under valid and enforceable policies by insurers of
recognized responsibility. Notwithstanding the foregoing, Digital Genesis has
not increased its insurance since its last renewal to reflect additional
equipment acquired, and all of the property of Digital Genesis may not be
covered under its existing policy.
Section 5.16 Information. The information concerning Digital Genesis set
forth in this Agreement and in the Digital Genesis Disclosure Schedule is
complete and accurate in all material respects and does not contain any untrue
statement of a material fact or omit to state a material fact required to make
the statements made, in light of the circumstances under which they are made,
not misleading.
Section 5.17 Assets. The Digital Genesis Assets constitute all of the
assets that Digital Genesis has used to conduct its business operations.
ARTICLE VI
<PAGE>
DIGITAL GENESIS ASSETS
Section 6.01 Acquisition of Assets from Digital Genesis. Subject to the
terms and conditions of this Agreement, and in reliance on the representations,
warranties and agreements set forth herein, on the Closing Digital Genesis shall
sell, convey, transfer, assign and put Video into possession of, and Video shall
purchase from Digital Genesis, effective as of the Closing, all of Digital
Genesis' right, title and interest in and to all of the Digital Genesis Assets
as of the date hereof, including without limitation all assets used in
connection with the operation of its business as listed on Schedule A attached
hereto including without limitation:
(a) the office furniture, equipment, computers and fixtures of
Digital Genesis;
(b) all computer software, programs and databases owned by Digital
Genesis and any transferable computer software licensed by Digital Genesis
from others;
(c) all office supplies owned by Digital Genesis;
(d) all client agreements and arrangements of Digital Genesis;
(e) the equipment leases and other agreements, contracts and
instruments of Digital Genesis;
(f) all rights of Digital Genesis with respect to any of the
temporary, permanent, leased or payrolled personnel;
(g) all prepayments and deposits of Digital Genesis, including
without limitation, security deposits under leases;
(h) the name "Digital Genesis", all assumed names, logos,
trademarks, service marks, domain names, trade names and copyrights and
registrations and applications for registration of any of them, and any
other intellectual property rights of Digital Genesis;
(i) originals or true copies of all books and records of Digital
Genesis pertaining to the assets referred to on Schedule A and in
subparagraphs (a) through (h) above, as appropriate, including customer
lists and credit files, and all those pertaining to the employees of
Digital Genesis;
(j) all permits, licenses, approvals and other governmental
authorizations relating to the Digital Genesis and its business which are
transferable to Video; and
(k) any other assets that are used by Digital Genesis in connection
with the operation of its business and that are not referred to in this
Section 6.01 or on Schedule A, without limitation, telephone and facsimile
numbers, internet and e-mail addresses, and the good will related to the
business of Digital Genesis.
ARTICLE VII
PLAN OF REORGANIZATION
<PAGE>
Section 7.01 Redemption of Video Shares. Prior to and as a condition to
the Closing, Video shall redeem and cancel 450,000 restricted Video Shares.
After giving effect to the redemption, Video shall have issued and outstanding
150,000 restricted Video Shares and 300,000 freely tradeable Video Shares.
Section 7.02 Closing; Reorganization. Upon the terms and subject to the
conditions set forth in this Agreement, at the Closing:
(a) (i) Digital Genesis will sell, transfer, convey, assign and
deliver to Video, clear of all Security Interests, except as disclosed in
Part 5.05 and Part 5.08 of the Digital Genesis Disclosure Schedule, all of
Digital Genesis's right, title and interest in, to and under the Digital
Genesis Assets and (ii) Video will issue to Digital Genesis 400,000 duly
authorized, validly issued, fully paid and non-assessable Video Shares. At
or subsequent to the Closing, Digital Genesis agrees to execute and
deliver such bills of sale, assignments and other documents as are
reasonably requested by Video to ensure the transfer of the Acquired
Assets as contemplated hereby. Video shall not assume by virtue of this
Agreement or the transactions contemplated hereby, and shall have no
liability for, any liabilities of Digital Genesis whatsoever of any kind,
character or description whatsoever (the "Retained Liabilities"). Digital
Genesis shall discharge in a timely manner or shall make adequate
provision for all of the Retained Liabilities, provided that Digital
Genesis shall have the ability to contest, in good faith, any such claim
of liability asserted in respect thereof by any Person other than Video
and its Affiliates.
(b) Each NetGateway Share issued and outstanding immediately prior
to the Closing shall be exchanged for ten (10) duly authorized, validly
issued, fully paid and nonassessable Video Shares.
(c) Upon consummation of the transactions contemplated herein at the
Closing, NetGateway shall become a wholly-owned subsidiary of Video.
7.03 Directors and Officers. Unless otherwise agreed to in writing by the
Parties hereto prior to the Closing, the directors and officers of Video
immediately after the Closing shall be the individuals identified on Schedule B.
7.04 Exchange of Certificates. At the Closing, the NetGateway Shareholders
shall deliver to Video their respective and valid certificates representing all
of their NetGateway Shares and Video shall issue and deliver to the NetGateway
Shareholders in exchange therefor a certificate registered in the name of such
holder representing the number of Video Shares that such holder has the right to
receive pursuant to Section 7.02(b). Until surrendered as contemplated by this
Section, each certificate for NetGateway Shares shall be deemed, from and after
the Closing, to represent only the right to receive Video Shares hereunder. If
any certificate for NetGateway Shares shall have been lost, stolen or destroyed,
Video may, in its discretion and as a condition precedent to the issuance of any
certificate representing Video Shares, require the owner of such lost, stolen or
destroyed certificate to provide an appropriate affidavit of loss and indemnity
agreement against any claim that may be made against Video with respect to such
certificate. At the Closing, Video shall issue and deliver a certificate to
Digital Genesis registered in its name representing the right to receive Video
Shares pursuant to Section 7.02(a).
<PAGE>
ARTICLE VIII
SPECIAL COVENANTS
Section 8.01 Stockholder Approval. Promptly following the execution of
this Agreement, Video shall take all steps required to obtain Stockholder
Approval of this Agreement and all transactions contemplated hereby. The
execution of this Agreement by the NetGateway Shareholders, by the members of
Digital Genesis shall constitute Stockholder Approval for NetGateway and for
Digital Genesis of this Agreement and all transactions contemplated hereby.
Section 8.02 Access to Properties and Records. Video, NetGateway and
Digital Genesis will each afford to the officers and authorized representatives
of the other(s) full access to its properties, books, and records in order that
each may have full opportunity to make such reasonable investigation as it shall
desire to make of the affairs of the other, and each will furnish the other with
such additional financial and operating data and other information as to its
business and properties as the other shall from time to time reasonably request.
Section 8.03 Actions Prior to Closing.
(a) From and after the date of this Agreement until the date of
Closing and except as set forth in the Video Disclosure Schedule, the
NetGateway Disclosure Schedule, or the Digital Genesis Disclosure
Schedule, or as permitted or contemplated by this Agreement, the Parties
hereto will each: (i) carry on its business in substantially the same
manner as it has heretofore; (ii) maintain and keep its properties in
states of good repair and condition as at present, except for depreciation
due to ordinary wear and tear and damage due to casualty; (iii) maintain
in full force and effect insurance comparable in amount and in scope of
coverage to that now maintained by it; (iv) perform in all material
respects all of its obligation under material contracts, leases, and
instruments relating to or affecting its assets, properties, and business;
(v) use its best efforts to maintain and preserve its business
organization intact, to retain its key employees, and to maintain its
relationship with its material suppliers and customers; and (vi) fully
comply with and perform in all material respects all obligations and
duties imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by federal or state governmental
authorities.
(b) From and after the date of this Agreement until the date of
Closing, none of the Parties hereto will: (i) make any change in its
articles of incorporation, bylaws, articles of organization, or operating
agreement as the case may be; (ii) take any action described in Section
2.08 in the case of Video or Section 5.07 in the case of Digital Genesis
(all except as permitted therein or as disclosed in Video Disclosure
Schedule or Digital Genesis Disclosure Schedule); or (iii) enter into or
amend any material contract, agreement, or other instrument of any of the
types described in such Party's disclosure schedule.
Section 8.04 Special Covenants and Representations Regarding Video Shares.
The consummation of this Agreement and the transactions herein contemplated,
including the issuance of Video Shares to the NetGateway Shareholders and
Digital Genesis, constitutes the offer and sale of securities under the
Securities Act and applicable state securities statutes. Such transactions shall
be consummated in reliance on exemptions from the registration and prospectus
delivery requirements of
<PAGE>
such statutes which depend, inter alia, upon the circumstances under which the
NetGateway and and Digital Genesis acquires such securities. In connection with
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, Video shall cause to be delivered to the
NetGateway Shareholders and to Digital Genesis prior to the Closing disclosure
documentation in form and substance satisfactory to Video regarding the terms of
the Reorganization, the Parties, to ensure compliance with the applicable
provisions of the Securities Act and applicable state law.
Section 8.05 Indemnification.
(a) Video and Video Majority Shareholder hereby agree to indemnify
and hold harmless the other Parties and each of their respective officers,
directors, managers and members from and after the date of this Agreement
against any loss, liability, claim, damage, or expense (including, but not
limited to, any and all expense whatsoever reasonably incurred in
investigating, preparing, or defending against any litigation, commenced
or threatened, or any claim whatsoever), to which it or they may become
subject arising out of or based on any inaccuracy appearing in or
misrepresentation made under Article II of this Agreement or any breach of
any covenants set forth in this Agreement. The indemnification provided
for in this Section 8.05(a) shall survive the Closing and consummation of
the transactions contemplated hereby and termination of this Agreement.
(b) NetGateway and Digital Genesis each agree to indemnify the other
Parties and each of their respective officers, directors, managers and
members as of the date of this Agreement against any loss, liability,
claim, damage, or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or
based on any inaccuracy appearing in or misrepresentation made under
Article III of this Agreement in the case of NetGateway and Article V in
the case of Digital Genesis or because of any breach by them of any
covenants set forth in this Agreement. The indemnification provided for in
this Section 8.05(b) shall survive the Closing and consummation of the
transactions contemplated hereby and termination of this Agreement.
(c) The NetGateway Shareholders each agree to indemnify the other
Parties and each of their respective officers, directors, managers and
members as of the date of this Agreement against any loss, liability,
claim, damage, or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing, or
defending against any litigation, commenced or threatened, or any claim
whatsoever), to which it or they may become subject arising out of or
based on any inaccuracy appearing in or misrepresentation made under
Article IV of this Agreement provided, however, that in no event shall the
liability of the NetGateway Shareholders hereunder exceed the dollar value
of the Video Shares received by each of them as a result of the
transactions contemplated by this Agreement. The indemnification provided
for in this Section 8.05(c) shall survive the Closing and consummation of
the transactions contemplated hereby and termination of this Agreement.
(d) If any party entitled to indemnification under this Section 8.05
(the "Indemnified Party") shall receive notice or otherwise learn of the
assertion by any other Person of any claim or of the commencement by any
such Person or any action (a "Third Party Claim") with respect to which a
party may be obligated to provide indemnification pursuant to this Section
8.05 (the
<PAGE>
"Indemnifying Party"), such Indemnified Party shall give written notice
thereof to the Indemnifying Party within ten (10) business days after
becoming aware of such Third Party Claim (the "Indemnification Notice");
provided, however, that the failure of any Indemnified Party to give
notice as provided in this Section 8.05 shall not relieve the Indemnifying
Party of its obligations under this Section 8.05, as the case may be,
except to the extent that the Indemnifying Party actually is prejudiced by
such failure to give notice. Such notice shall describe the Third Party
Claim in reasonable detail, and shall indicate the amount of the Damages
that has been paid or reasonably expects to pay or incur (in accordance
with GAAP) by such Indemnified Party. Thereafter, such Indemnified Party
shall deliver to the Indemnifying Party within five (5) business days
after the Indemnified Party's receipt thereof, copies of all notices and
documents received by the Indemnified Party relating to the Third Party
Claim (including court papers).
(e) If, promptly after receipt by the Indemnifying Party of notice
of any Third Party Claim as provided in Section 8.05(d), the Indemnifying
Party shall give written notice to the Indemnified Party stating that it
intends to assume the defense thereof, at its own cost, then the defense
of such Third Party Claim, including selection of counsel reasonably
satisfactory to the Indemnified Party, shall be by the Indemnifying Party
and the Indemnified Party shall make no payment on such Third Party Claim
as long as the Indemnifying Party is conducting a good faith and diligent
defense. The Indemnified Party shall make available all information and
assistance that the Indemnifying Party may reasonably request and shall
cooperate with the Indemnifying Party in such defense. Notwithstanding the
foregoing, the Indemnified Party shall at all times have the right to
fully participate in such defense at its own expense directly or through
counsel. If no such notice to assume the defense against a Third Party
Claim is received by the Indemnified Party from the Indemnifying Party,
the Indemnified Party shall, at the expense of the Indemnifying Party,
undertake the defense of such Third Party Claim, with counsel selected by
the Indemnified Party, and shall have the right to compromise or settle
the same exercising reasonable judgment.
(f) No Third Party Claim made against any Indemnified Party shall be
settled without the prior written consent of the Indemnifying Party.
Section 8.06 Third Person Consents and Agreements. The Parties agree to
cooperate with each other in order to obtain any required third Person consents
to this Agreement and the transactions herein contemplated.
Section 8.07 Compliance with Section 351. Video agrees and covenants that
it will take no action, including but not limited to issuance of additional
shares of common stock of Video, which would cause the transactions contemplated
by this Agreement to not qualify under Section 351 of the Internal Revenue Code.
Section 8.08 Cancellation of Confidentiality Agreement. On the 28th day of
May, 1998, NetGateway and Digital Genesis entered into a Confidentiality
Agreement (the "Confidentiality Agreement"). It is hereby agreed that upon
execution and delivery of this Agreement, the Confidentiality Agreement is
canceled and shall be of no further force and effect.
Section 8.09 Termination.
<PAGE>
(a) This Agreement may be terminated by the Board of Directors
stockholders or the members of any Business Party at any time prior to the
Closing if:
(i) there shall be any actual or threatened action or
proceeding before any court or any governmental body which shall
seek to restrain, prohibit, or invalidate the transactions
contemplated by this Agreement and which, in the judgment of such
Board of Directors, made in good faith and based on the advice of
its legal counsel, makes it inadvisable to proceed with the mergers
and reorganization contemplated by this Agreement;
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is required
to consummate such transactions or in the judgment of such Board of
Directors, made in good faith and based on the advice of counsel,
there is substantial likelihood that any such approval will not be
obtained or will be obtained only on a condition or conditions which
would be unduly burdensome, making it inadvisable to proceed with
the mergers and reorganization;
(iii) there shall have been any change after the date of the
latest balance sheet in the assets, properties, business, or
financial condition of any Party, which could have a materially
adverse affect on the value of the business of any Party, except any
changes disclosed in the Schedules of any Party; or
(iv) the Parties shall fail to obtain the consents or waivers
required of any third Person to consummate the transactions
contemplated by this Agreement.
In the event of termination pursuant to this Section 8.09(a) no
obligation, right, or liability shall arise hereunder, and each Party
shall bear all of the expenses incurred by it in connection with the
negotiation, drafting, and execution of this Agreement and the
transactions herein contemplated; or
(b) This Agreement may be terminated at any time prior to the
Closing by action of the Board of Directors or members of any Business
Party if any Party shall fail to comply in any material respect with any
of its covenants or agreements contained in this Agreement or if any of
the representations or warranties contained herein shall be inaccurate in
any material respect. If this Agreement is terminated pursuant to this
Section 8.09(b) this Agreement shall be of no further force or effect, and
no obligation, right, or liability shall arise hereunder, and each Party
shall bear all of the expenses incurred by it in connection with the
negotiation, drafting, and execution of this Agreement and the
transactions herein contemplated.
ARTICLE IX
CLOSING
Section 9.01 Closing. The Closing of the transactions contemplated by this
Agreement shall take place at the offices of NetGateway, 3780 Kilroy Airport
Center, 2nd Floor, Long Beach, CA 90806 on June 2, 1998, or at such other place
and on such other date as may be agreed to by the Parties.
<PAGE>
Section 9.02 Closing Events. At the Closing, each of the respective
Parties hereto shall execute, acknowledge, and deliver (or shall cause to be
executed, acknowledged, and delivered) any and all certificates, financial
statements, schedules, agreements, resolutions, rulings, or other instruments
required by this Agreement to be so delivered at or prior to the Closing,
together with such other items as may be reasonably requested by the Parties
hereto and their respective legal counsel in order to effectuate or evidence the
transactions contemplated hereby. Notwithstanding the foregoing, any party shall
have ten (10) business days from the date of Closing to supply any document
required to be supplied at the Closing.
ARTICLE X
CONDITIONS PRECEDENT TO OBLIGATIONS OF VIDEO
The obligations of Video under this Agreement are subject to the
satisfaction, at or before the date of Closing, of the following conditions:
Section 10.01 Accuracy of Representations. The representations and
warranties made by the other Parties in this Agreement were true when made and
shall be true as of the date of Closing with the same force and effect as if
such representations and warranties were made at and as of the date of Closing
(except for changes therein permitted by this Agreement), and the other Parties
shall have performed or complied with all covenants and conditions required by
this Agreement to be performed or complied with by them prior to or at the
Closing. Video shall be furnished with certificates, signed by duly authorized
officers of NetGateway and Digital Genesis dated the date of Closing, to the
foregoing effect.
Section 10.02 Performance of Covenants. Each covenant or obligation that
the Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
Section 10.03 No Restraints. No temporary restraining order, preliminary
or permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
Section 10.04 Stockholder Approval. The Video Stockholders, the NetGateway
Stockholders and the members of, as necessary, Digital Genesis shall have
approved, if necessary, this Agreement and the transactions contemplated hereby.
Section 10.05 Officer's Certificates. Video shall have been furnished with
certificates dated the date of Closing signed by duly authorized officers of
NetGateway and Digital Genesis to the effect that no litigation, proceeding,
investigation, or inquiry is pending which might result in an action to enjoin
or prevent the consummation of the transactions contemplated by this Agreement.
Section 10.06 No Material Adverse Change. Prior to the Closing, there
shall not have occurred any material adverse change in the financial condition,
business, or operations of NetGateway or Digital Genesis.
Section 10.07 Good Standing. Video shall have received certificates of
good standing from
<PAGE>
applicable states certifying that NetGateway and Digital Genesis are in good
standing as corporations in such states.
Section 10.08 Consents/ Agreements. Video, NetGateway and Digital Genesis
shall have obtained any necessary third Person consents and agreements.
Section 10.09 Dissenters' Rights. None of the holders of the outstanding
securities of the Parties shall be entitled to dissenters' rights under Nevada
Revised Statutes Sections 92A-300 - 92A-500.
Section 10.10 Articles of Exchange. Articles of Exchange shall have been
filed as required under Nevada Revised Statutes Sections 92A-200 and 92A-230.
Section 10.11 Other Items. Video shall have received such further
documents, certificates, or instruments relating to the transactions
contemplated hereby as Video may reasonably request.
ARTICLE XI
CONDITIONS PRECEDENT TO OBLIGATIONS OF
NETGATEWAY AND DIGITAL GENESIS
The obligations of NetGateway, NetGateway Shareholders and Digital Genesis
and their respective shareholders under this Agreement are subject to the
satisfaction, at or before the date of Closing, of the following conditions:
Section 11.01 Accuracy of Representations. The representations and
warranties made by Video in this Agreement were true when made and shall be true
as of the Closing with the same force and effect as if such representations and
warranties were made at and as of the date of Closing (except for changes
therein permitted by this Agreement), and Video shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed or complied with by Video prior to or at the Closing. NetGateway and
Digital Genesis shall have been furnished with a certificate, signed by a duly
authorized officer of Video and dated the date of Closing to the foregoing
effect.
Section 11.02 Performance of Covenants. Each covenant or obligation that
the Company is required to comply with or to perform at or prior to the Closing
shall have been complied with and performed in all respects.
Section 11.03 No Restraints. No temporary restraining order, preliminary
or permanent injunction or other order preventing the consummation of the Merger
shall have been issued by any court of competent jurisdiction and remain in
effect, and there shall not be any Legal Requirement enacted or deemed
applicable to the Merger that makes consummation of the Merger illegal.
Section 11.04 Stockholder Approval. The Video Stockholders, the NetGateway
Stockholders and the members of, as necessary, Digital Genesis shall have
approved, if necessary, this Agreement and the transactions contemplated hereby.
Section 11.05 Officer's Certificate. NetGateway and Digital Genesis shall
have been furnished with a certificate dated the date of Closing and signed by a
duly authorized officer of Video to
<PAGE>
the effect that no litigation, proceeding, investigation, or inquiry is pending
which might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Agreement.
Section 11.06 No Material Adverse Change. Prior to the Closing, there
shall not have occurred any material adverse change in the financial condition,
business, or operations of Video.
Section 11.07 Good Standing. NetGateway and Digital Genesis shall have
received a certificate of good standing from the state of Nevada with respect to
Video certifying that Video is in good standing as a corporation in the state of
Nevada.
Section 11.08 Consents. Video, NetGateway and Digital Genesis shall have
obtained any necessary third person consents and agreements.
Section 11.09 Dissenters' Rights. None of the holders of the outstanding
securities of the Parties shall be entitled to dissenters' rights under Nevada
Revised Statutes Sections 92A-300 - 92A-500.
Section 11.10 Articles of Exchange. Articles of Exchange shall have been
filed as required under Nevada Revised Statutes 92A-200 and 92A-230.
Section 11.11 Other Items. NetGateway and Digital Genesis shall have
received such further documents, certificates, or instruments relating to the
transactions contemplated hereby as NetGateway and Digital Genesis may
reasonably request.
ARTICLE XII
MISCELLANEOUS
Section 12.01 Brokers. The Parties agree that there were no finders or
brokers involved in bringing the Parties together or who were instrumental in
the negotiation, execution, or consummation of this Agreement. The Parties each
agree to indemnify the others against any claim by any Person other than those
described above for any commission, brokerage, or finders' fee arising from the
transactions contemplated hereby based on any alleged agreement or understanding
between the Indemnifying Party and such Person, whether express or implied from
the actions of the Indemnifying Party.
Section 12.02 Governing Law. This Agreement shall be governed by,
enforced, and construed under and in accordance with the laws of the United
States of America and, with respect to matters of state law, with the laws of
Nevada.
Section 12.03 Notices. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to Video, to: Video Calling Card, Inc.
Attn: Steve Utley
766 Keswick Drive
Sandy, Utah 94093
If to NetGateway, to: NetGateway
<PAGE>
Attn: Donald M. Corliss, Jr.
3780 Kilroy Airport Center, 2nd Floor
Long Beach, California 90806
If to Digital Genesis to: Infobahn Technologies, LLC
Attn: Jeff Crandell
201 Wilshire Boulevard, Suite A-1
Santa Monica, California 90401
or such other addresses as shall be furnished in writing by any Party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
Section 12.04 Expenses; Attorneys' Fees. Each party to this Agreement
shall bear and pay all fees, costs and expenses (including legal fees and
accounting fees) that have been incurred or that are incurred in the future by
such party in connection with the transactions contemplated by this Agreement,
including all fees, costs and expenses incurred by such party in connection with
or by virtue of (a) the investigation and review conducted by such party (or its
representatives) with respect to the other party's business (and the furnishing
of information to the other party and its representatives in connection with
such investigation and review), (b) the negotiation, preparation and review of
this Agreement and all agreements, certificates, opinions and other instruments
and documents delivered or to be delivered in connection with the transactions
contemplated by this Agreement, (c) the preparation and submission of any filing
or notice required to be made or given in connection with any of the
transactions contemplated by this Agreement, and the obtaining of all consents
and governmental authorizations required to be obtained in connection with any
of such transactions, and (d) the consummation of the transactions contemplated
hereby. In the event that any Party institutes any action or suit to enforce
this Agreement or to secure relief from any default hereunder or breach hereof,
the non-prevailing Party or Parties shall reimburse the prevailing Party or
Parties for all costs, including reasonable attorneys' fees, incurred in
connection therewith and in enforcing or collecting any judgment rendered
therein.
Section 12.05 Further Assurances. Each party hereto shall execute and
cause to be delivered to each other party hereto such instruments and other
documents, and shall take such other actions, as such other party may reasonably
request (prior to, at or after the Closing) for the purpose of carrying out or
evidencing any of the transactions contemplated by this Agreement.
Section 12.06 Time of Essence. Time is of the essence in this Agreement.
Section 12.07 Remedies Cumulative; Specific Performance. The rights and
remedies of the parties hereto shall be cumulative (and not alternative). The
parties to this Agreement agree that, in the event of any breach or threatened
breach by any party to this Agreement of any covenant, obligation or other
provision set forth in this Agreement for the benefit of any other party to this
Agreement, such other party shall be entitled (in addition to any other remedy
that may be available to it) to (a) a decree or order of specific performance or
mandamus to enforce the observance and performance of such covenant, obligation
or other provision, and (b) an injunction restraining such breach or threatened
breach.
Section 12.08 Waiver.
<PAGE>
(a) No failure on the part of any Person to exercise any power,
right, privilege or remedy under this Agreement, and no delay on the part
of any Person in exercising any power, right, privilege or remedy under
this Agreement, shall operate as a waiver of such power, right, privilege
or remedy; and no single or partial exercise of any such power, right,
privilege or remedy shall preclude any other or further exercise thereof
or of any other power, right, privilege or remedy.
(b) No Person shall be deemed to have waived any claim arising out
of this Agreement, or any power, right, privilege or remedy under this
Agreement, unless the waiver of such claim, power, right, privilege or
remedy is expressly set forth in a written instrument duly executed and
delivered on behalf of such Person; and any such waiver shall not be
applicable or have any effect except in the specific instance in which it
is given.
Section 12.09 Amendments. This Agreement may not be amended, modified,
altered or supplemented other than by means of a written instrument duly
executed and delivered on behalf of all the parties hereto.
Section 12.10 Severability. In the event that any provision of this
Agreement, or the application of any such provision to any Person or set of
circumstances, shall be determined to be invalid, unlawful, void or
unenforceable to any extent, the remainder of this Agreement, and the
application of such provision to Persons or circumstances other than those as to
which it is determined to be invalid, unlawful, void or unenforceable, shall not
be impaired or otherwise affected and shall continue to be valid and enforceable
to the fullest extent permitted by law.
Section 12.11 Disclosure Schedules. The disclosure schedules shall be
arranged in separate parts corresponding to the numbered and lettered sections
contained in Sections 2, 3, 4 or 5, as the case may be, and, unless otherwise
specificall provided in such disclosure schedules, the information disclosed in
any numbered or lettered part shall be deemed to relate to and to qualify only
the particular representation and warranty set forth in the corresponding
numbered or lettered section in Section 2, 3, 4 or 5, as the case may be, and
shall not be deemed to relate to or to qualify any other representation or
warranty.
Section 12.12 Construction.
(a) For purposes of this Agreement, whenever the context requires:
the singular number shall include the plural, and vice versa; the
masculine gender shall include the feminine and neuter genders; the
feminine gender shall include the masculine and neuter genders; and the
neuter gender shall include the masculine and feminine genders.
(b) The parties hereto agree that any rule of construction to the
effect that ambiguities are to be resolved against the drafting party
shall not be applied in the construction or interpretation of this
Agreement.
(c) As used in this Agreement, the words "include" and "including"
and variations thereof, shall not be deemed to be terms of limitation, but
rather shall be deemed to be followed by words "without limitation."
<PAGE>
(d) Except as otherwise indicated, all references in this Agreement
to "Sections" and "Exhibits" are intended to refer to Sections of this
Agreement and Exhibits to this Agreement.
Section 12.13 Headings. The bold-faced section headings contained in this
Agreement are for convenience of reference only, shall not be deemed to be a
part of this Agreement and shall not be referred to in connection with the
construction or interpretation of this Agreement.
Section 12.14 Counterparts. This Agreement may be executed in several
counterparts, each of which shall constitute an original and all of which, when
taken together, shall constitute one and the same instrument. Signatures may be
exchanged by telecopy, with original signatures to follow. Each of the parties
hereto agrees that it will be bound by its own telecopied signature and that it
accepts the telecopies signatures of the other parties to this Agreement. The
original signature pages shall be forwarded to NetGateway or its counsel and
NetGateway and its counsel will provide all of the parties hereto with a copy of
the entire Agreement.
Section 12.15 Third Party Beneficiaries. This Agreement is solely between
the Parties and except as specifically provided no director, officer,
stockholder, employee, agent, independent contractor, or any other Person shall
be deemed to be a third party beneficiary of this Agreement.
Section 12.16 Entire Agreement. This Agreement, including the exhibits and
schedules hereto, represents the entire agreement between the Parties relating
to the subject matter hereof. This Agreement alone fully and completely
expresses the agreement of the Parties. There are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their officers hereunto duly authorized, as of the date first
above-written.
VIDEO CALLING CARD, INC.,
a Nevada corporation
By: /s/ Stephen B. Utley
---------------------------------
Name: Stephen B. Utley
Title: Secretary
NETGATEWAY,
a Nevada corporation
By: /s/ Keith D. Freedhoff
---------------------------------
Name: Keith D. Freedhoff
Title: Chariman/CCO
<PAGE>
INFOBAHN TECHNOLOGIES, LLC,
a California limited liability company
By: James Miller
--------------------------------
Its: CEO
NETGATEWAY SHAREHOLDERS:
(for purposes of Section 4.01 only)
/s/ Keith D. Freedhoff
-------------------------------------
Keith D. Freadhoff
/s/ Donald M. Corliss, Jr.
-------------------------------------
Donald M. Corliss, Jr.
/s/ Robert D. Geringer
-------------------------------------
Robert D. Geringer
/s/ Anna T. Brannon
-------------------------------------
Anna T. Brannon
/s/ T. Jason Mayo
-------------------------------------
T. Jason Mayo
-------------------------------------
Frojen Advertising, Inc.
By: illegible
----------------------------------
Its: President
----------------------------------
/s/ Eric DeCastro
-------------------------------------
Eric DeCastro
/s/ Mark Gallegly
-------------------------------------
Mark Gallegly
<PAGE>
/s/ David Bassett-Parkins
-------------------------------------
David Bassett-Parkins
Vision Holding, a Cayman corporation
By: /s/ Michael Howard
-------------------------------------
Name: Michael Howard
Title: former nomineee as Director
Steps, Inc.
By: /s/ R. Scott Beebe
-------------------------------------
Name: R. Scott Beebe
Title: Vice-President
-------------------------------------
Mike Khaled
/s/ Eric Richardson
-------------------------------------
Eric Richardson
/s/ Hanh Ngo
-------------------------------------
Hanh Ngo
VIDEO MAJORITY SHAREHOLDER:
(for purposes of Articles II and IX only)
/s/ Stephen B. Utley
-------------------------------------
STEPHEN B. UTLEY
<PAGE>
Schedule A
Digital Genesis Assets
See attached spreadsheet listing Digital Genesis Assets.
<PAGE>
Schedule B
Directors and Officers of Video
Directors:
Keith D. Freadhoff
Donald M. Corliss, Jr.
Scott Beebe
Officers:
Chairman and CEO Keith D. Freadhoff
President Donald M. Corliss, Jr.
COO and CFO David Bassett-Parkins
Secretary Anna T. Brannon
<PAGE>
VIDEO DISCLOSURE SCHEDULES
2.08 Absence of Certain Changes: None
2.09(c) Tax Matters: None
2.11 Contracts: None
<PAGE>
NETGATEWAY DISCLOSURE SCHEDULES
3.05 Capitalization: None
3.06 Title: None
Keith D. Freadhoff 167,500
Donald M. Corliss, Jr. 15,000
Robert D. Geringer 15,000
Anna T. Brannon 10,000
T. Jason Mayo 10,000
Eric DeCastro 5,000
Mark Gallegly 2,500
Robert C. Frojen 10,000
Mike Khaled 40,000
Eric Richardson 10,000
Steps, Inc. 100,000
Vision Holdings 190,000
David Bassett-Parkins 10,000
Hanh Ngo 5,000
<PAGE>
DIGITAL GENESIS DISCLOSURE SCHEDULES
5.05 Title: None
5.08 Title and Related Matters: None
5.10 Litigation and Proceedings: None
5.11 Contracts: None
5.12 Material Contract Defaults: None
5.13 Governmental Authorizations: None