AGREEMENT AND PLAN OF REORGANIZATION
AMONG
RESCON TECHNOLOGY CORPORATION,
XXXXX ACQUISITION CORP.,
XXXXXXXXX XXXXXXXXXXX,
AND
XXXXX NETWORKS, INC.
TABLE OF CONTENTS
-----------------
1. Plan of Reorganization. . . . . . . . . . . . . . . . . . . . . . 2
2. Terms of Merger . . . . . . . . . . . . . . . . . . . . . . . . . 2
3. Delivery of Shares. . . . . . . . . . . . . . . . . . . . . . . . 4
4. Representations of the Company. . . . . . . . . . . . . . . . . . 5
5. Representations of Parent, Merger Sub and the Shareholder
Representative. . . . . . . . . . . . . . . . . . . . . . . . . . 6
6. Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12
7. Actions Prior to Closing. . . . . . . . . . . . . . . . . . . . .12
8. Conditions Precedent to the Obligations of the Company. . . . . .13
9. Conditions Precedent to the Obligations of Parent and Merger Sub.15
10. Survival and Indemnification. . . . . . . . . . . . . . . . . . .16
11. Nature of Representations . . . . . . . . . . . . . . . . . . . .19
12. Documents at Closing. . . . . . . . . . . . . . . . . . . . . . .19
13. Finder's Fees . . . . . . . . . . . . . . . . . . . . . . . . . .20
14. Miscellaneous.. . . . . . . . . . . . . . . . . . . . . . . . . .21
Signature Page . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Exhibit A - Certificate of Merger
i
AGREEMENT AND PLAN OF REORGANIZATION
-------------------------------------
This Agreement and Plan of Reorganization (hereinafter the
"Agreement") is entered into effective as of this 15th day of October,
2004, by and among Rescon Technology Corporation., a Nevada corporation
(hereinafter "Parent"); Xxxxx Acquisition Corp., a newly-formed Delaware
corporation and wholly-owned subsidiary of Parent (hereinafter "Merger
Sub"); Xxxxxxxxx Xxxxxxxxxx, a shareholder of Parent (hereinafter the
"Shareholder Representative"); and Xxxxx Networks, Inc., a Delaware
corporation (hereinafter the "Company").
RECITALS
---------
WHEREAS, Parent desires to acquire the Company as a wholly-owned
subsidiary and to issue thirty-two million five hundred thousand
(32,500,000) shares of Parent Common Stock (as defined below) (on a post-
reverse split basis as described below) to certain stockholders of the
Company upon the terms and conditions set forth herein. Merger Sub is a
wholly-owned subsidiary corporation of Parent that shall be merged into the
Company, whereupon the Company shall be the surviving corporation of said
merger and shall become a wholly-owned subsidiary of Parent (Merger Sub and
the Company are sometimes collectively hereinafter referred to as the
"Constituent Corporations").
WHEREAS, the boards of directors of each of Parent, Merger Sub and the
Company deem it advisable and in the best interests of such corporations
and their respective stockholders that Merger Sub merge with and into the
Company pursuant to this Agreement and the Delaware Certificate of Merger
(in the form attached hereto as Exhibit A) and pursuant to applicable
provisions of law (such transaction hereafter referred to as the "Merger").
WHEREAS, Merger Sub has an authorized capitalization consisting of
1,000 shares of common stock, par value $0.001 per share, of which 100
shares shall be issued and outstanding and owned by Parent as of the
closing of the Merger.
WHEREAS, as of August 11, 2004 Parent has an authorized capitalization
consisting of 100,000,000 shares of common stock, par value $0.0001 per
share ("Parent Common Stock"), of which, 24,591,091 shares of Parent Common
Stock were issued and outstanding and no shares of Parent Common Stock were
reserved for issuance pursuant to options, warrants or other securities
that are convertible into or exchangeable for Parent Common Stock, in each
case as of the date hereof.
WHEREAS, Parent intends to affect a reverse split of all outstanding
shares of Parent Common Stock resulting in a total of three million five
hundred fifty thousand (3,550,000) shares of Parent Common Stock
outstanding following the split.
WHEREAS, the Company has an authorized capitalization consisting of
one hundred twenty-five million (125,000,000) shares of common stock, par
value $0.001 per share ("Company Common Stock"), and sixty-seven million
five hundred thousand (67,500,000) shares of preferred stock, par value
$0.001 per share ("Company Preferred Stock"), of which fifteen million
(15,000,000) are designated "Series CC" and fifty-two million five hundred
thousand (52,500,000) are designated "Series D", one hundred three million
three hundred eight-five thousand one hundred and sixty-four (103,385,164)
shares of Company Common Stock fifteen million (15,000,000) shares of
Series C Preferred Stock and nineteen million five hundred thirty-one
thousand two hundred forty-six (19,531,246) shares of Series D Preferred
Stock are currently issued and outstanding, seventy one million four
hundred twenty thousand seven hundred and five shares of Company Common
Stock are reserved for issuance pursuant to currently issued and
outstanding options and warrants and conversion of preferred stock into
common shares, in each case as of the date hereof.
NOW THEREFORE, for the mutual consideration set out herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
----------
1. Plan of Reorganization. The parties to this Agreement do hereby
agree that Merger Sub shall be merged with and into the Company upon the
terms and conditions set forth herein and in accordance with the provisions
of the Delaware General Corporation Law. It is the intention of the
parties hereto that this transaction qualify as a tax-free reorganization
under Section 368(a)(2)(E) of the Internal Revenue Code of 1986, as
amended, and related sections thereunder.
2. Terms of Merger. In accordance with the provisions of this
Agreement and the requirements of applicable law, Merger Sub shall be
merged with and into the Company as of the Effective Date (the terms
"Closing" and "Effective Date" are defined in Section 6 hereof). The
Company shall be the surviving corporation (hereinafter the "Surviving
Corporation") and the separate existence of Merger Sub shall cease when the
Merger shall become effective. Consummation of the Merger shall be upon
the following terms and subject to the conditions set forth herein:
(a) Corporate Existence.
(1) Commencing with the Effective Date, the Surviving
Corporation shall continue its corporate existence as a Delaware
corporation and (i) it shall thereupon and thereafter possess all rights,
privileges, powers, franchises and property (real, personal and mixed) of
each of the Constituent Corporations; (ii) all debts due to either of the
Constituent Corporations, on whatever account, all causes in action and all
other things belonging to either of the Constituent Corporations shall be
taken and deemed to be transferred to and shall be vested in the Surviving
Corporation by virtue of the Merger without further act or deed; and (iii)
all rights of creditors and all liens, if any, upon any property of any of
the Constituent Corporations shall be preserved unimpaired, limited in lien
to the property affected by such liens immediately prior to the Effective
Date, and all debts, liabilities and duties of the Constituent Corporations
shall thenceforth attach to the Surviving Corporation.
(2) At the Effective Date, (i) the Certificate of
Incorporation and the By-laws of the Company, as existing immediately prior
to the Effective Date, shall be and remain the Certificate of Incorporation
and By-laws of the Surviving Corporation; (ii) the members of the Board of
Directors of the Surviving Corporation holding office immediately prior to
the Effective Date shall remain as the members of the Board of Directors of
the Surviving Corporation (if on or after the Effective Date a vacancy
exists on the Board of Directors of the Surviving Corporation, such vacancy
may thereafter be filled in a manner provided by applicable law and the By-
laws of the Surviving Corporation); and (iii) until the Board of Directors
of the Surviving Corporation shall otherwise determine, all persons who
hold offices of the Surviving Corporation at the Effective Date shall
continue to hold the same offices of the Surviving Corporation.
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(b) Conversion of Securities.
As of the Effective Date and without any action on the part of Parent,
Merger Sub, the Company or the holders of any of the securities of any of
these corporations, each of the following shall occur:
(1) Each share of Company Common Stock and Series D
Preferred Stock issued and outstanding immediately prior to the Effective
Date shall be converted into the right to receive pro rata on an as
converted to Common Stock basis a portion of the thirty-two million five
hundred thousand shares of Parent to be issued to the holders of Company
Common Stock and Series D Preferred Stock. (The fraction of a share of
Parent Common Stock into which each shares of Company Common Stock shall
convert will hereinafter be referred to as the "Common Exchange Ratio")
Each share of Series CC Preferred Stock outstanding immediately prior to
the Effective Date shall be cancelled. All such shares of Company Common
Stock, Series D Preferred Stock and Series CC Preferred Stock shall no
longer be outstanding and shall automatically be canceled and shall cease
to exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive, upon the surrender of such
certificate in accordance with the provisions of Section 3 hereof,
certificates evidencing such number of shares of Parent Common Stock,
respectively, into which such shares of Company Common Stock were
converted. The holders of such certificates previously evidencing shares
of Company Common Stock outstanding immediately prior to the Effective Date
shall cease to have any rights with respect to such shares of Company
Common Stock except as otherwise provided herein or by law;
(2) Any shares of capital stock of the Company held in the
treasury of the Company immediately prior to the Effective Date shall
automatically be canceled and extinguished without any conversion thereof
and no payment shall be made with respect thereto;
(3) Each share of capital stock of Merger Sub issued and
outstanding immediately prior to the Effective Date shall remain in
existence as one share of common stock of the Surviving Corporation, which
shall be owned by Parent;
(c) Other Matters.
(1) Upon the effectiveness of the Merger, each outstanding
option or warrant to purchase Company Common Stock, whether or not then
exercisable, shall be converted into an option or warrant to purchase (in
substitution for each share of Company Common Stock subject to an option or
warrant to purchase Company Common Stock) a number of shares of Parent
Common Stock equal to (i) the number of shares currently subject to such
option or warrant multiplied by (ii) the Common Exchange Ratio (rounded to
the nearest whole share) at an exercise price equal to (i) the exercise
price in effect immediately prior to the Merger multiplied by (ii) the
Common Exchange Ratio (rounded to the nearest whole cent). All other terms
and conditions of each option or warrant to purchase Company Common Stock
shall remain the same.
3
(2) At the Closing, the Board of Directors of Parent shall
increase the size of the Board of Directors of Parent to consist of seven
(7) directors and the existing directors of Parent shall nominate and
elect to the Board of Directors of Parent the persons designated by the
Company, and all of the persons serving as directors and officers of Parent
immediately prior to the Closing shall thereafter resign from all of their
positions with Parent, all subject to compliance with Rule 14f-1
promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
3. Delivery of Shares. On or as soon as practicable after the
Effective Date, the Company will use reasonable efforts to cause all
holders of Company Common Stock (collectively, the "Company Stockholders")
to surrender to Parent for cancellation certificates representing their
shares of Company Common Stock against delivery of certificates
representing the shares of Parent Common Stock for which the shares of
Company Common Stock are to be converted in the Merger. Until surrendered
and exchanged as herein provided, each outstanding certificate which, prior
to the Effective Date, represented Company Common Stock shall be deemed for
all corporate purposes to evidence ownership of the same number of shares
of Parent Common Stock into which the shares of Company Common Stock
represented by such the Company certificate shall have been so converted.
No dividends or other distributions declared or made with respect to Parent
Common Stock after the Effective Date will be paid to the holder of any
certificate that prior to the Effective Date evidenced shares of Company
Common Stock until the holder of such certificate surrenders or exchanges
such certificate as herein provided. Subject to the effect of any
applicable abandoned property, escheat or similar laws, following surrender
of any such certificate, there will be paid to the holder of the
certificates evidencing shares of Parent Common Stock issued in exchange
therefor, without interest, (i) the amount of dividends or other
distributions with a record date after the Effective Date theretofore paid
with respect to such shares of Parent Common Stock and (ii) at the
appropriate payment date, the amount of dividends or other distributions,
with a record date after the Effective Date but prior to the surrender and
a payment date occurring after surrender, payable with respect to such
shares of Parent Common Stock less any withholding taxes which are required
thereon. No party hereto will be liable to any former holder of Company
Common Stock for any Parent Common Stock or dividends or distributions
thereon in each case delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law. In the event any
certificate representing Company Common Stock shall have been lost, stolen
or destroyed, upon the making of an affidavit of that fact by the holder of
Company Common Stock claiming such certificate to be lost, stolen or
destroyed and an agreement by such holder to indemnify and hold harmless
Parent and the Surviving Corporation against any claim that may be made
against them with respect to such certificate, Parent will issue in
exchange for such lost, stolen or destroyed certificate Parent Common Stock
to which such holder is entitled pursuant to this Agreement.
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4. Representations of the Company. The Company hereby represents
and warrants as follows, which warranties and representations shall also be
true as of the Closing:
(a) As of the date hereof 96,320,574 shares of Company Common
Stock 15,000,000 shares of the Series CC Preferred Stock and 19,531,247
shares of the Series D Preferred Stock are issued and outstanding. Other
than the exercise or conversion of outstanding options or warrants to
purchase Company Common Stock, the foregoing shares represent all of the
shares of the Company's capital stock that will be issued and outstanding
as of the Closing.
(b) The issued and outstanding shares of Company Common Stock
and Company Preferred Stock constitute duly authorized, validly issued
shares of capital stock of the Company. All issued and outstanding shares
of Company Common Stock and Company Preferred Stock are fully paid and
nonassessable.
(c) The Company audited financial statements as of and for the
years ended December 31, 2001, 2002 and 2003 and the unaudited financial
statements for the nine months ended September 30, 2004, all of which have
been made available to Parent (hereinafter referred to as the "Company
Financial Statements"), fairly present the financial condition of the
Company as of the date thereof and the results of its operations for the
period covered. Other than as set forth in any schedule or Exhibit
attached hereto, and except as may otherwise be set forth or referenced
herein, there are no material liabilities or obligations, either fixed or
contingent, not disclosed or referenced in the Company Financial Statements
or in any exhibit thereto or notes thereto other than contracts or
obligations occurring in the ordinary course of business since September
30, 2004; and no such contracts or obligations occurring in the ordinary
course of business constitute liens or other liabilities which materially
alter the financial condition of the Company as reflected in the Company
Financial Statements. The Company has or will have at the Closing, good
title to all assets shown on the Company Financial Statements subject only
to dispositions and other transactions in the ordinary course of business,
the disclosures set forth therein and liens and encumbrances of record.
The Company Financial Statements have been prepared in accordance with
generally accepted accounting principles (except as may be indicated
therein or in the notes thereto and except for the absence of footnotes).
(d) Except as set forth in Schedule 4(d), since September 30,
2004 there have not been any material adverse changes in the financial
position of the Company except changes arising in the ordinary course of
business, which changes will not materially and adversely affect the
financial position of the Company.
(e) The Company is not a party to any material pending
litigation or, to the knowledge, after due investigation (herein,
"Knowledge"), of its executive officers, any governmental investigation or
proceeding, not reflected in the Company Financial Statements, and, to its
Knowledge, no material litigation, claims, assessments or any governmental
proceedings are threatened against the Company.
(f) The Company is duly organized, validly existing and in good
standing in the State of Delaware, and has the corporate power to own,
lease and operate its property and to carry on its business as now being
conducted and is duly qualified to do business and in good standing in each
state where required to be so qualified except where the failure to so
qualify would have no material negative impact on the Company.
5
(g) The Company has, or by the Closing will have, filed all
material tax, governmental and/or related forms and reports (or extensions
thereof) due or required to be filed in the ordinary course of business and
has (or will have) paid or made adequate provisions for all taxes or
assessments which have become due as of the Closing, except where the
failure to do so would not have a material adverse effect on the Company.
The Company is not delinquent or obligated for any tax, penalty, interest,
delinquency or charge and there are no tax liens or encumbrances applicable
to the Company.
(h) The Company has not materially breached any material
agreement to which it is a party. The Company has made available to Parent
copies of or access to all material contracts, commitments and/or
agreements to which the Company is a party, including all contracts
covering relationships or dealings with related parties or affiliates.
(i) The Company has no subsidiary corporations.
(j) The Company has made its corporate financial records, minute
books, and other corporate documents and records available for review to
present management of Parent prior to the Closing, during reasonable
business hours and on reasonable notice.
(k) The Company has the corporate power to enter into this
Agreement and to perform its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been or will prior to the Closing be duly
authorized by the Board of Directors of the Company and by the stockholders
of the Company. The execution of this Agreement does not materially
violate or breach any material agreement or contract to which the Company
is a party, and the Company, to the extent required, has (or will have by
Closing) obtained all necessary approvals or consents required by any
agreement to which the Company is a party. The execution and performance
of this Agreement will not violate or conflict with any provision of the
Certificate of Incorporation or By-laws of the Company.
(l) Information regarding the Company which has been delivered
by the Company to Parent for use in connection with the Merger, is true and
accurate in all material respects.
5. Representations of Parent, Merger Sub and the Shareholder
Representative. Parent, Merger Sub and the Shareholder Representative
hereby jointly and severally represent and warrant as follows, each of
which representations and warranties shall also be true as of the Closing:
(For purposes of this Section 5, "material" means payment or performance of
a contract, commitment, arrangement or understanding which is expected to
involve payments in excess of $2,000.)
(a) As of the Closing, the shares of Parent Common Stock to be
issued and delivered to the Company Stockholders hereunder and in
connection herewith will, when so issued and delivered, constitute duly
authorized, validly and legally issued, fully-paid, nonassessable shares of
Parent capital stock, will not be issued in violation of any preemptive or
similar rights and will be issued free and clear of all liens and
encumbrances. As of the Closing, the shares of Parent Common Stock to be
reserved for issuance to the holders of options and warrants to purchase
Company Common Stock, when so issued and delivered in accordance with such
options, warrants, will constitute duly authorized, validly and legally
issued, fully-paid, nonassessable shares of Parent capital stock, will not
be issued in violation of any preemptive or similar rights and will be
issued free and clear of all liens and encumbrances. The shares issued
hereunder, however, will be "restricted" in accordance with the provisions
of Rule 144 and, unless subsequently registered will be subject to the
resale provisions of the same Rule.
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(b) Parent and Merger Sub each have the corporate power to enter
into this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by (i) the
respective Boards of Directors of Parent and Merger Sub and by Parent as
the sole stockholder of Merger Sub and (ii) the majority stockholders of
Parent. This Agreement has been duly executed and delivered by each of
Parent and Merger Sub and constitutes a legal, valid and binding obligation
of Parent and Merger Sub, enforceable against Parent and Merger Sub in
accordance with its terms except as enforcement may be limited by
applicable bankruptcy, insolvency or other laws affecting creditor's rights
generally or by legal principles of general applicability governing the
availability of equitable remedies. The execution and performance of this
Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to which
Parent, Merger Sub or the Shareholder Representative is a party or to which
it is otherwise subject and will not violate any judgment, decree, order,
writ, law, rule, statute, or regulation applicable to Parent, Merger Sub,
the Shareholder Representative or their respective properties. The
execution and performance of this Agreement will not violate or conflict
with any provision of the respective Articles of Incorporation or
Certificate of Incorporation or by-laws of either Parent or Merger Sub.
(c) Parent has delivered to the Company a true and complete copy
of its audited financial statements for the fiscal years ended August 31,
2001, 2002 and 2003, and the unaudited financial statements for the six
months ended May 31, 2004 (the "Parent Financial Statements"). The Parent
Financial Statements are complete, accurate and fairly present the
financial condition of Parent as of the dates thereof and the results of
its operations for the periods then ended. There are no material
liabilities or obligations either fixed or contingent not reflected
therein. The Parent Financial Statements have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated therein or in the notes thereto) and fairly
present the financial position of Parent as of the dates thereof and the
results of its operations and changes in financial position for the periods
then ended. Merger Sub has no financial statements because it was recently
formed solely for the purpose of effectuating the Merger and it has been,
is and will remain inactive except for purposes of the Merger, and it has
no assets, liabilities, contracts or obligations of any kind other than as
incurred in the ordinary course of business in connection with its
incorporation in Delaware. Other than has been previously disclosed to the
Company in writing, Parent has no subsidiaries or affiliates and does not
have any direct or indirect equity participation or similar interest in any
corporation, partnership, limited liability company, joint venture, trust
or other business. Merger Sub has no subsidiaries or affiliates (other
than Parent) and does not have any direct or indirect equity participation
or similar interest in any corporation, partnership, limited liability
company, joint venture, trust or other business.
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(d) Since May 31, 2004 there have not been any material adverse
changes in the financial condition of Parent. At the Closing, neither
Parent nor Merger Sub shall have any material assets other than those
reflected in the Parent Financial Statements. At Closing, Parent shall
have entered into agreements effective as of the Effective Time to convert
all liabilities of Parent into shares of Parent Common Stock or to
otherwise resolve the liabilities of Parent such that at the Effective Time
Parent shall not have any liabilities of any kind. Merger Sub now has, and
at Closing shall not have, any liabilities of any kind.
(e) Neither Parent nor Merger Sub is a party to, or the subject
of, any pending litigation, claims, or governmental investigation or
proceeding not reflected in the Parent Financial Statements, and to the
Knowledge of the Shareholder Representative, Parent and Merger Sub, there
are no lawsuits, claims, assessments, investigations, or similar matters,
threatened or contemplated against or affecting Merger Sub, Parent, or the
management or properties of Parent or Merger Sub.
(f) Parent and Merger Sub are each duly organized, validly
existing and in good standing under the laws of the jurisdiction of their
incorporation; each has the corporate power to own, lease and operate its
property and to carry on its business as now being conducted and is duly
qualified to do business and in good standing to do business in any
jurisdiction where so required except where the failure to so qualify would
have no material negative impact. Neither corporation is required to be
qualified to do business in any state other than the States of Nevada and
Utah.
(g) Parent and Merger Sub have filed all federal, state, county
and local income, excise, property and other tax, governmental and/or other
returns, forms, filings, or reports, which are due or required to be filed
by it prior to the date hereof and have paid or made adequate provision in
the Parent Financial Statements for the payment of all taxes, fees, or
assessments which have or may become due pursuant to such returns, filings
or reports or pursuant to any assessments received. Neither Parent nor
Merger Sub is delinquent or obligated for any tax, penalty, interest,
delinquency or charge and there are no tax liens or encumbrances applicable
to either corporation.
(h) As of August 11, 2004, Parent's authorized capital stock
consisted of 100,000,000 shares of Parent Common Stock, of which 24,591,091
shares of Parent Common Stock are presently issued and outstanding. At the
Effective Time (without giving effect to the issuance of Parent Common
Stock pursuant to the Merger), Parent's authorized capital stock will
consist of 100,000,000 shares of Parent Common Stock, of which 3,550,000
shares of Parent Common Stock will be issued and outstanding. Merger Sub's
capitalization consists solely of 1,000 authorized shares of common stock,
par value $0.001 per share, of which 100 shares are outstanding, all of
which are owned by Parent, free and clear of all liens, claims and
encumbrances. All outstanding shares of capital stock of Parent and Merger
Sub are, and shall be at Closing, validly issued, fully paid and
nonassessable. There are no existing options, convertible or exchangeable
securities, calls, claims, warrants, preemptive rights, registration rights
or commitments of any character relating to the issued or unissued capital
stock or other securities of either Parent or Merger Sub. There are no
voting trusts, proxies or other agreements, commitments or understandings
of any character to which Parent or Merger Sub is a party or by which
Parent or Merger Sub is bound with respect to the voting of any capital
stock of Parent or Merger Sub. There are no outstanding stock
appreciation, phantom stock or similar rights with respect to any capital
stock of Parent or Merger Sub. There are no outstanding obligations to
repurchase, redeem or otherwise acquire any shares of capital stock of
Parent or Merger Sub.
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(i) Parent and Merger Sub have (and at the Closing they will
have) disclosed in writing to the Company all events, conditions and facts
materially affecting the business, financial conditions (including any
liabilities, contingent or otherwise) or results of operations of either
Parent or Merger Sub of which they have Knowledge.
(j) The financial records, minute books, and other documents and
records of Parent and Merger Sub have been made available to the Company
prior to the Closing. To the Knowledge of Parent, Merger Sub and the
Shareholder Representative, the records and documents of Parent and Merger
Sub that have been delivered to the Company constitute all of the records
and documents of Parent and Merger Sub.
(k) Neither Parent nor Merger Sub has breached, nor is there any
pending, or to the Knowledge of the Shareholder Representative, any
existing or threatened claim, that has not been disclosed to the Company in
writing, that Parent or Merger Sub has breached, any of the terms or
conditions of any agreements, contracts, commitments or other documents to
which it is a party or by which it is, or its properties are bound. The
execution and performance of this Agreement will not violate any provisions
of applicable law or any agreement to which Parent or Merger Sub is
subject. Each of Parent and Merger Sub hereby represent and warrant that,
other than as has been disclosed to the Company in writing, it is not a
party to any material contract or commitment, and that it has disclosed to
the Company in writing all previous or existing relationships or dealings
with related or controlling parties or affiliates of Parent, Merger Sub or
the Shareholder Representative. Each of Parent and Merger Sub hereby
represent and warrant that there are no currently existing agreements with
any affiliates, related or controlling persons or entities of Parent,
Merger Sub or the Shareholder Representative.
(l) Parent has complied with all of the provisions relating to
the issuance of securities, and for the registration thereof, under the
Securities Act of 1933, as amended (the "Securities Act"), other applicable
securities laws, and all applicable blue sky laws in connection with any
and all of its stock issuances. Parent has no Knowledge of any
outstanding, pending or threatened stop orders or other actions or
investigations relating thereto involving federal and state securities
laws. All issued and outstanding shares of Parent's capital stock were
offered and sold in compliance with federal and state securities laws and
were not offered, sold or issued in violation of any preemptive right,
right of first refusal or right of first offer and are not subject to any
right of rescission.
(m) Parent was organized for the purpose of commencing the
business of manufacturing and selling chemicals and was not formed for the
purpose of engaging in a merger or acquisition with an unidentified company
and is not a blank check company.
9
(n) All information regarding Parent which has been provided to
the Company by Parent or set forth in any document or other communication
prepared and disseminated by the Parent to the public or filed with The
National Association of Securities Dealers, Inc. ("NASD") or the Securities
and Exchange Commission ("SEC") or any state securities regulators or
authorities prior to the Closing of this Agreement is true, complete,
accurate in all material respects, not misleading, and was and is in full
compliance with all securities laws and regulations.
(o) Parent is and has been in compliance with, and Parent has
conducted any business currently and previously owned or operated by it in
compliance with, all applicable laws, orders, rules and regulations of all
governmental bodies and agencies, including applicable securities laws and
regulations (including, without limitation, the Sarbanes Oxley Act of 2002)
and environmental laws and regulations then in effect, except where such
noncompliance has and will have, in the aggregate, no material adverse
effect. Parent has not received notice of any noncompliance with the
foregoing, nor does it or the Shareholder Representative have Knowledge of
any claims or threatened claims in connection therewith. Parent has never
conducted any operations or engaged in any business transactions whatsoever
other than as set forth in the reports Parent has previously filed with the
SEC.
(p) Without limiting the foregoing, (i) Parent and any other
person or entity for whose conduct Parent is legally held responsible are
and have been in material compliance with all applicable federal, state,
regional, and local laws, statutes, ordinances, judgments, rulings and
regulations relating to any matters of pollution, protection of the
environment, health or safety, or environmental regulation or control, and
(ii) neither Parent nor any other person for whose conduct Parent is
legally held responsible has manufactured, generated, treated, stored,
handled, processed, released, transported or disposed of any hazardous
substance on, under, from or at any of Parent's properties or in connection
with Parent's operations.
(q) As of their respective dates, the documents, reports and
schedules filed with the SEC, the NASD and any applicable state or regional
securities regulators or authorities (collectively, the "Parent SEC
Documents") complied in all material respects with the requirements of the
Securities Act, the Exchange Act, the NASD rules and regulations and state
and regional securities laws and regulations, as the case may be, and, at
the respective times they were filed, none of the Parent SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements (including, in each case,
any notes thereto) of Parent included in the Parent SEC Documents complied
as to form and substance in all material respects with applicable
accounting requirements and the rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted
accounting principles (except as may be indicated therein or in the notes
thereto) applied on a consistent basis during the periods involved (except
as may be indicated therein or in the notes thereto) and fairly presented
in all material respects the financial position of Parent as of the
respective dates thereof and the results of its operations and its cash
flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to any other
adjustments described therein).
10
(r) Except as and to the extent specifically disclosed in this
Agreement and as may be specifically disclosed or reserved against as to
amount in the latest balance sheet contained in the Parent Financial
Statements, there is no basis for any assertion against Parent of any
material liabilities or obligations of any nature, whether absolute,
accrued, contingent or otherwise and whether due or to become due, known or
unknown, including, without limitation, any liability for taxes (including
e-commerce sales or other taxes), interest, penalties and other charges
payable with respect thereto. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated hereby will
(a) result in any payment (whether severance pay, unemployment compensation
or otherwise) becoming due from Parent to any person or entity, including
without limitation any employee, director, officer or affiliate or former
employee, director, officer or affiliate of Parent, (b) increase any
benefits otherwise payable to any person or entity, including without
limitation any employee, director, officer or affiliate or former employee,
director, officer or affiliate of Parent, or (c) result in the acceleration
of the time of payment or vesting of any such benefits.
(s) No aspect of Parent's past or present business, operations
or assets is of such a character as would restrict or otherwise hinder or
impair Parent from carrying on the business of Parent as it is presently
being conducted by Parent.
(t) Parent has no material contracts, commitments, arrangements,
or understandings relating to its business, operations, financial
condition, prospects or otherwise.
(u) Other than this Agreement and the transactions contemplated
hereby, there are no outstanding contracts, commitments or bids, or
services, development, sales or other proposals of either Parent or Merger
Sub.
(v) There are no outstanding lease commitments that cannot be
terminated without penalty upon 30-days notice, or any purchase
commitments, in each case of either Parent or Merger Sub.
(w) No representation or warranty by Parent or Merger Sub
contained in this Agreement and no statement contained in any certificate,
schedule or other communication furnished pursuant to or in connection with
the provisions hereof contains or shall contain any untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein not misleading. There is no current or prior event
or condition of any kind or character pertaining to Parent that may
reasonably be expected to have a material adverse effect on Parent or its
subsidiaries. Except as specifically indicated elsewhere in this
Agreement, all documents delivered by Parent in connection herewith have
been and will be complete originals, or exact copies thereof.
(x) Assuming all corporate consents and approvals have been
obtained and assuming the appropriate filings and mailings are made by
Parent under the Securities Act, the Exchange Act, with the NASD, and with
the Secretary of State of Nevada, the execution and delivery by Parent of
this Agreement and the closing documents and the consummation by Parent of
the transactions contemplated hereby do not and will not (i) require the
consent, approval or action of, or any filing or notice to, any
corporation, firm, person or other entity or any public, governmental or
judicial authority (except for such consents, approvals, actions, filing or
notices the failure of which to make or obtain will not in the aggregate
have a material adverse effect); or (ii) violate any order, writ,
injunction, decree, judgment, ruling, law, rule or regulation of any
federal, state, county, municipal, or foreign court or governmental
authority applicable to Parent, or its business or assets. Parent is not
subject to, or a party to, any mortgage, lien, lease, agreement, contract,
instrument, order, judgment or decree or any other material restriction of
any kind or character which would prevent, hinder, restrict or impair the
continued operation of the business of Parent (or to the Knowledge of
Parent, the continued operation of the business of the Company) after the
Closing.
11
(y) Parent currently has no employees, consultants or
independent contractors other than its attorneys and accountants. The
Shareholder Representative is the sole director and sole executive officer
of each of Parent and Merger Sub.
6. Closing. The Closing of the transactions contemplated herein
shall take place at the offices of Xxxxx Networks, Inc. on such date (the
"Closing") as mutually determined by the parties hereto when all conditions
precedent have been met and all required documents have been delivered,
which Closing shall occur on or before February 15, 2005. The "Effective
Date" of the Merger shall be that date and time specified in the
Certificate of Merger as the date on which the Merger shall become
effective.
7. Actions Prior to Closing.
(a) Prior to the Closing, the Company on the one hand, and
Parent and Merger Sub on the other hand, shall be entitled to make such
investigations of the assets, properties, business and operations of the
other party, and to examine the books, records, tax returns, financial
statements and other materials of the other party as such investigating
party deems necessary in connection with this Agreement and the
transactions contemplated hereby. Any such investigation and examination
shall be conducted at reasonable times and under reasonable circumstances,
and the parties hereto shall cooperate fully therein. Until the Closing,
and if the Closing shall not occur, thereafter, each party shall keep
confidential and shall not use in any manner inconsistent with the
transactions contemplated by this Agreement, and shall not disclose, nor
use for their own benefit, any information or documents obtained from the
other party concerning the assets, properties, business and operations of
such party, unless such information (i) is readily ascertainable from
public or published information, (ii) is received from a third party not
under any obligation to keep such information confidential, or (iii) is
required to be disclosed by any law or order (in which case the disclosing
party shall promptly provide notice thereof to the other party in order to
enable the other party to seek a protective order or to otherwise prevent
such disclosure). If this transaction is not consummated for any reason,
each party shall return to the other all such confidential information,
including notes and compilations thereof, promptly after the date of such
termination. The representations and warranties contained in this
Agreement shall not be affected or deemed waived by reason of the fact that
either party hereto discovered or should have discovered any representation
or warranty is or might be inaccurate in any respect.
(b) Prior to the Closing, the Company, Parent, Merger Sub, and
the Shareholder Representative agree not to issue any statement or
communications to the public or the press regarding the transactions
contemplated by this Agreement without the prior written consent of the
other parties. In the event that Parent is required under federal
securities law either to (i) file any document with the SEC that discloses
this Agreement or the transactions contemplated hereby, or (ii) make a
public announcement regarding this Agreement or the transactions
contemplated hereby, Parent shall provide the Company with a copy of the
proposed disclosure no less than 48 hours before such disclosure is made,
unless otherwise agreed by the Company, and shall incorporate into such
disclosure any reasonable comments or changes that the Company may request.
12
(c) Prior to the Closing, except as contemplated by this
Agreement, there shall be no stock dividend, stock split, recapitalization,
or exchange of shares with respect to or rights, options or warrants issued
in respect of Parent Common Stock after the date hereof and there shall be
no dividends or other distributions paid on Parent Common Stock after the
date hereof, in each case through and including the Closing. Parent and
Merger Sub shall conduct no business, prior to the Closing, other than in
the ordinary course of business or as may be necessary in order to
consummate the transactions contemplated hereby. Prior to the Closing,
except as contemplated by this Agreement, Parent and Merger Sub shall not
take any action or enter into any agreement to issue or sell any shares of
capital stock of Parent or Merger Sub or any securities convertible into or
exchangeable for any shares of capital stock of Parent or Merger Sub or to
repurchase, redeem or otherwise acquire any of the issued and outstanding
capital stock of Parent or Merger Sub without the prior written consent of
the Company.
(d) Prior to the Closing, Parent and Merger Sub shall conduct
their business only in the usual and ordinary course and the character of
such business shall not be changed nor shall any different business be
undertaken. Prior to the Closing, except as contemplated hereby, Parent
and Merger Sub shall not incur any liabilities or obligations without the
prior written consent of the Company.
(e) Prior to the Closing, Parent will file all required Parent
SEC Documents and comply in all material respects with the requirements of
the Securities Act, the Exchange Act, the NASD rules and regulations and
state and regional securities laws and regulations.
(f) Prior to the Closing, Parent and the Shareholder
Representative shall take such actions as shall be necessary to cancel
shares of Parent Common Stock and any liabilities of Parent so that the
capital stock of Parent issued and outstanding at the Effective Time
(without giving effect to the issuance of Parent Common Stock pursuant to
the Merger) shall be 3,550,000 shares of Parent Common Stock and so that
Parent shall have no liabilities at the Effective Time.
8. Conditions Precedent to the Obligations of the Company. All
obligations of the Company under this Agreement are subject to the
fulfillment, prior to or as of the Closing, of each of the following
conditions, any of which may be waived by the Company:
(a) The representations and warranties by or on behalf of
Parent, Merger Sub and the Shareholder Representative contained in this
Agreement or in any certificate or document delivered pursuant to the
provisions hereof or in connection herewith shall be true and correct in
all material respects at and as of the Closing as though such
representations and warranties were made at and as of such time.
13
(b) Parent and Merger Sub shall have performed and complied
with, in all material respects, all covenants, agreements, and conditions
set forth or otherwise contemplated in, and shall have executed and
delivered all documents required by, this Agreement to be performed or
complied with or executed and delivered by them prior to or at the Closing.
(c) The directors of Parent and the directors and sole
stockholder of Merger Sub shall have approved in accordance with applicable
state corporation law the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein.
(d) The Company in its sole discretion, shall be satisfied with
the results of its business, legal and financial due diligence review of
the Parent.
(e) On or before the Closing Date, Parent and Merger Sub shall
have delivered to the Company certified copies of resolutions of the
stockholders and the directors of Merger Sub and Parent approving and
authorizing the execution, delivery and performance of this Agreement and
authorizing all of the necessary and proper action to enable Parent and
Merger Sub to comply with the terms of this Agreement, including the
election of the Company's nominees to the Board of Directors of Parent and
all matters outlined or contemplated herein.
(f) The Merger shall be permitted by applicable state law and
otherwise and Parent shall have sufficient shares of its capital stock
authorized to complete the Merger and the transactions contemplated hereby.
(g) At Closing, all of the directors and officers of Parent
shall have resigned in writing from their positions as directors and
officers of Parent effective upon the election and appointment of the
Company nominees, and the directors of Parent shall take such action as may
be necessary or desirable regarding such election and appointment of the
Company nominees.
(h) At the Closing, all instruments and documents delivered by
Parent or Merger Sub, including to the Company Stockholders pursuant to the
provisions hereof shall be reasonably satisfactory to legal counsel for the
Company.
(i) The shares of restricted Parent capital stock to be issued
to the Company Stockholders at Closing will be validly issued,
nonassessable and fully paid under Nevada corporation law and will be
issued in a nonpublic offering in compliance with all applicable federal
and state and applicable securities laws.
(j) The Company shall have received all necessary and required
approvals and consents from required parties and from its stockholders.
(k) The capital stock of Parent issued and outstanding
immediately at the Effective Time (without giving effect to the issuance of
Parent Common Stock pursuant to the Merger) shall be 3,550,000 shares of
Parent Common Stock. Parent and Merger Sub shall have no liabilities,
whether or not accrued, and there shall be no pending actions, proceedings
or claims made or, to the Knowledge of Parent or the Shareholder
Representative, threatened against Parent at the Effective Time.
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(l) At the Closing, Parent and Merger Sub shall have delivered
to the Company an opinion of Parent's legal counsel dated as of the Closing
to the effect that:
(1) Each of Parent and Merger Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation;
(2) Parent and Merger Sub have all requisite corporate
power and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. This Agreement has been duly authorized,
executed and delivered by Parent and Merger Sub and is a valid and binding
obligation of Parent and Merger Sub enforceable in accordance with its
terms, except as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
the enforcement of creditors' rights;
(3) The Merger, this Agreement, the related Certificate of
Merger, the execution and delivery of this Agreement and the related
Certificate of Merger and the consummation of the transactions contemplated
thereby, have been duly authorized and approved by Parent's Board of
Directors and stockholders;
(4) The shares of Parent capital stock when issued will be
duly and validly issued, fully paid and nonassessable; and
(5) Legal counsel for Parent and Merger Sub is not aware of
any liabilities, claims or lawsuits involving Parent or Merger Sub.
9. Conditions Precedent to the Obligations of Parent and Merger Sub.
All obligations of Parent and Merger Sub under this Agreement are subject
to the fulfillment, prior to or at the Closing, of each of the following
conditions, any of which may be waived by Parent and Merger Sub:
(a) The representations and warranties by the Company contained
in this Agreement or in any certificate or document delivered pursuant to
the provisions hereof shall be true and correct in all material respects at
and as of the Closing as though such representations and warranties were
made at and as of such times.
(b) The Company shall have performed and complied with, in all
material respects, all covenants, agreements, and conditions required by
this Agreement to be performed or complied with by it prior to or at the
Closing;
(c) On or before the Closing Date, the Company shall have
delivered to Parent certified copies of resolutions of the directors of the
Company approving and authorizing the execution, delivery and performance
of this Agreement and authorizing all of the necessary and proper actions
to enable the Company to comply with the terms of this Agreement.
(d) At the Closing, all instruments and documents delivered by
the Company pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for the Company.
15
(e) The Company shall have received all necessary and required
approvals and consents from all required parties, including, if necessary,
its stockholders.
(f) The Company shall deliver an opinion of its legal counsel to
the effect that:
(1) The Company is a corporation duly incorporated, validly
existing and in good standing under the laws of the state of its
incorporation;
(2) The Company has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly authorized, executed and
delivered by the Company and is a valid and binding obligation of the
Company enforceable in accordance with its terms, except as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting the enforcement of creditors' rights;
(3) The Merger, this Agreement, the related Certificate of
Merger, the execution and delivery of this Agreement and the related
Certificate of Merger and the consummation of the transactions contemplated
thereby, have been duly authorized and approved by the Company's Board of
Directors and stockholders; and
(4) Legal counsel for the Company is not aware of any
liabilities, claims or lawsuits involving the Company.
10. Survival and Indemnification. All representations, warranties,
covenants and agreements contained in this Agreement, or in any schedule,
certificate, document or statement delivered pursuant hereto, shall survive
(and not be affected in any respect by) the Closing, any investigation
conducted by any party hereto and any information which any party may
receive. Notwithstanding the foregoing, the representations and warranties
contained in or made pursuant to this Agreement shall terminate on, and no
claim or action with respect thereto may be brought after, the third
anniversary of the Effective Date (the "Indemnification Termination Date"),
except that the representations and warranties contained in Section 5(h) of
this Agreement shall survive indefinitely. The representations and
warranties which terminate on the Indemnification Termination Date, and the
liability of any party with respect thereto pursuant to this Section 10,
shall not terminate with respect to any claim, whether or not fixed as to
liability or liquidated as to amount, with respect to which the appropriate
party has been given written notice setting forth the facts upon which the
claim for indemnification is based prior to the Indemnification Termination
Date, as the case may be.
(a) The parties shall indemnify each other as set forth below:
(1) Subject to the provisions of this Section 10, each of
the Shareholder Representative, Parent and Merger Sub (individually and
collectively, the "Parent Group") shall jointly and severally indemnify and
hold harmless the Company and the Company's present and future officers,
directors, employees and attorneys (and after the Closing, the Shareholder
Representative shall also indemnify Parent) (collectively, the "Company
Indemnified Parties") from and against any Losses (as defined below)
including, without limitation, any reasonable legal expenses to the extent
arising from, relating to or otherwise in respect of (i) any inaccuracy or
breach of any representation or warranty of the Parent Group contained in
Sections 5 or 13 of this Agreement (as of the date hereof, or as of the
Closing) or of any representation, warranty or statement made in any
schedule, certificate, document or instrument delivered by the Parent Group
or any officer or any of them at or in connection with the Closing, which
such Company Indemnified Party did not know or have reason to know was an
inaccuracy or breach of said representation of warranty), or (ii) the
breach by the Parent Group, of or failure by the Parent Group to perform
16
any of its covenants or agreements contained in this Agreement; provided,
however, that (A) no member of the Parent Group shall be responsible for
any Losses with respect to the matters referred to in clauses (i) or (ii)
of this Section 10(a), until the cumulative aggregate amount of all such
Losses exceeds $10,000, in which event the Parent Group shall then be
liable for all such cumulative aggregate Losses, including the first
$10,000. Each member of the Parent Group specifically acknowledges and
agrees that any member of the Company Indemnified Party may proceed against
any member of the Parent Group under this Section 10 without
contemporaneously, or at any time, proceeding against any other member of
the Parent Group. As used herein, "Losses" shall mean any and all demands,
claims, complaints, actions or causes of action, suits, proceedings,
investigations, arbitrations, assessments, losses, damages, payments,
liabilities or obligations (including those arising out of any action, such
as any settlement or compromise thereof or judgment or award therein) and
any reasonable fees, costs and expenses related thereto, and the term
"legal expenses" shall mean the reasonable fees, costs and expenses of any
kind incurred by any party indemnified herein and its counsel in
investigating, preparing for, defending against or providing evidence,
producing documents or taking other action with respect to any threatened
or asserted claim.
(2) Subject to the provisions of this Section 10, the
Company shall indemnify and hold harmless each member of the Parent Group
and their respective attorneys (collectively, the "Parent Group Indemnified
Parties") from and against any Losses (including, without limitation, any
reasonable legal expenses) to the extent arising from, relating to or
otherwise in respect of (i) the inaccuracy or breach of any representation
or warranty of the Company contained in Sections 4 or 13 of this Agreement
(as of the date hereof, or as of the Closing) or of any representation,
warranty or statement made in any schedule, certificate document or
instrument delivered by the Company or an officer of the Company at or in
connection with the Closing, which the Parent Group Indemnified Party did
not know or have reason to know was an inaccuracy or breach of said
representation of warranty , or (ii) the breach by the Company of or
failure by the Company to perform any of its covenants or agreements
contained in this Agreement; provided, however, that the Company shall not
be responsible for any Losses with respect to the matters until the
cumulative aggregate amount of such Losses exceeds $10,000, in which event
the Company shall then be liable for all such cumulative aggregate Losses,
including the first $10,000.
(3) In order for a Company Indemnified Party or Parent
Group Indemnified Party (an "Indemnified Party") to be entitled to any
indemnification provided for under this Agreement, the Indemnified Party
shall deliver notice of its claim for indemnification ("Notice") with
reasonable promptness after determining to make such claim, to the Parent
Group or any member thereof (in the case of any indemnification claim under
Section 10(a)(1)) or to the Company (in the case of any indemnification
claim under Section 10(a)(2)). The failure by any Indemnified Party so to
notify the Parent Group (or any member thereof) or the Company, as the case
may be, shall not relieve any relevant indemnifying party (each relevant
member of the Parent Group, or the Company, as the case may be, being
referred to herein as an "Indemnifying Party") from any liability which he
or it may have to such Indemnified Party under this Agreement, except to
the extent that such claim for indemnification involves the claim of a
third party against the Indemnified Party and the Indemnifying Party shall
have been actually prejudiced by such failure or the Notice is received
after the Indemnification Termination Date. If an Indemnifying Party does
not notify the Indemnified Party within 30 calendar days following receipt
by it of such notice that such Indemnifying Party disputes its liability to
the Indemnified Party under this Agreement, such claim specified by the
Indemnified Party in such notice shall be conclusively deemed a liability
of such Indemnifying Party under this Agreement and such Indemnifying Party
shall pay the amount of such liability to the Indemnified Party on demand
or, in the case of any notice in which the amount of the claim (or any
portion thereof) is estimated, on such later date when the amount of such
claim (or such portion thereof) becomes finally determined. If an
Indemnifying Party has disputed its liability with respect to such claim
within thirty (30) days following receipt of the Notice, such Indemnifying
Party and the Indemnified Party shall proceed in good faith to negotiate a
resolution of such dispute and, if not resolved through negotiations, such
dispute shall be resolved by litigation in accordance with the terms of
this Agreement.
17
(4) (i) If the claim involves a third party claim (a
"Third Party Claim"), then the Indemnifying Party shall have the right, at
its sole cost, expense and ultimate liability regardless of the outcome,
and through counsel of its choice (which counsel shall be reasonably
satisfactory to the Indemnified Party), to litigate, defend, settle or
otherwise attempt to resolve such Third Party Claim; provided, however,
that if in the Indemnified Party's reasonable judgment a conflict of
interest may exist between the Indemnified Party and the Indemnifying Party
with respect to such Third Party Claim, then the Indemnified Party shall be
entitled to select counsel of its own choosing, reasonably satisfactory to
the Indemnifying Party, in which event the Indemnifying Party shall be
obligated to pay the fees and expenses of such counsel.
(ii) Notwithstanding the preceding paragraph, if in the
Indemnified Party's reasonable judgment no such conflict exists, the
Indemnified Party may, but will not be obligated to, participate at its own
expense in a defense of such Third Party Claim by counsel of its own
choosing, but the Indemnifying Party shall be entitled to control the
defense unless (A) in the case where only money damages are sought, the
Indemnified Party has relieved the Indemnifying Party from liability with
respect to the particular matter or (B) in the case where equitable relief
is sought, the Indemnified Party elects to participate in and jointly
control the defense thereof.
(iii) Whenever the Indemnifying Party controls the
defense of a Third Party Claim, the Indemnifying Party may only settle or
compromise the matter subject to indemnification without the consent of the
Indemnified Party if such settlement includes a complete release of all
Indemnified Parties as to the matters in dispute and relates solely to
money damages. The Indemnified Party will not unreasonably withhold
consent to any settlement or compromise that requires its consent.
(iv) In the event the Indemnifying Party fails to timely
defend, contest, or otherwise protect the Indemnified Party against any
such claim or suit, the Indemnified Party may, but will not be obligated
to, defend, contest, or otherwise protect against the same, and make any
compromise or settlement thereof, and in such event, or in the case where
the Indemnified Party jointly controls such claim or suit, the Indemnified
Party shall be entitled to recover its costs thereof from the Indemnifying
Party, including attorneys' fees, disbursements and all amounts paid as a
result of such claim or suit or the compromise or settlement thereof.
18
(v) The Indemnified Party shall cooperate and provide such
assistance as the Indemnifying Party may reasonably request in connection
with the defense of the matter subject to indemnification and in connection
with recovering from any third parties amounts that the Indemnifying Party
may pay or be required to pay by way of indemnification hereunder.
(b) The amount of Losses for which indemnification is provided
hereunder shall be computed without regard to any insurance recovery
related to such losses.
11. Nature of Representations. All of the parties hereto are
executing and carrying out the provisions of this Agreement in reliance
solely on the representations, warranties and covenants and agreements
contained in this Agreement and the other documents delivered at the
Closing and not upon any representation, warranty, agreement, promise or
information, written or oral, made by the other party or any other person
other than as specifically set forth herein.
12. Documents at Closing. At the Closing, the following documents
shall be delivered:
(a) The Company will deliver, or will cause to be delivered, to
Parent the following:
(1) a certificate executed by the President of the Company
to the effect that all representations and warranties made by the Company
under this Agreement are true and correct as of the Closing, the same as
though originally given to Parent or Merger Sub on said date;
(2) a certificate from the State of Delaware dated within
five business days of the Closing to the effect that the Company is in good
standing under the laws of Delaware;
(3) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement;
(4) executed copy of the Certificate of Merger for filing
in Delaware;
(5) certified copies of resolutions adopted by the
stockholders and directors of the Company authorizing the Merger;
(6) all other items, the delivery of which is a condition
precedent to the obligations of Parent and Merger Sub, as set forth herein;
and
(7) the legal opinion required by Section 9(c) hereof.
20
(b) Parent and Merger Sub will deliver or cause to be delivered
to the Company:
(1) stock certificates representing those securities of
Parent to be issued as a part of the Merger as described in Section 2
hereof;
(2) a certificate of the President of Parent and Merger
Sub, respectively, to the effect that all representations and warranties of
Parent and Merger Sub made under this Agreement are true and correct as of
the Closing, the same as though originally given to the Company on said
date;
(3) certified copies of resolutions adopted by the
stockholders and the Board of Directors of Merger Sub and the Board of
Directors of Parent authorizing the Merger and all related matters;
(4) certificates from the jurisdiction of incorporation of
Parent and Merger Sub dated within five business days of the Closing Date
that each of said corporations is in good standing under the laws of said
state;
(5) executed copy of the Certificate of Merger for filing
in Delaware;
(6) opinion of Parent's counsel as described in Section
8(k) above;
(7) such other instruments and documents as are required to
be delivered pursuant to the provisions of this Agreement;
(8) written resignation of all of the officers and
directors of Parent and Merger Sub and the written appointment of the
Company's nominees as directors and officers of Parent; and
(9) all other items, the delivery of which is a condition
precedent to the obligations of the Company, as set forth in Section 8
hereof.
13. Finder's Fees. The Shareholder Representative, Parent and Merger
Sub, jointly and severally, represent and warrant to the Company, and the
Company represents and warrants to each of the Shareholder Representative,
Parent and Merger Sub, that none of them, or any party acting on their
behalf, has incurred any liabilities, either express or implied, to any
"broker" or "finder" or similar person in connection with this Agreement or
any of the transactions contemplated hereby.
14. Miscellaneous.
(a) Further Assurances. At any time, and from time to time,
after the Effective Date, each party will execute such additional
instruments and take such action as may be reasonably requested by the
other party to confirm or perfect title to any property transferred
hereunder or otherwise to carry out the intent and purposes of this
Agreement.
20
(b) Waiver. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions hereunder may
be waived in writing by the party (in its sole discretion) to whom such
compliance is owed.
(c) Termination. This Agreement and all obligations hereunder
(other than those under Section 15(l)) may be terminated (i) after February
15, 2005 at the discretion of either party if the Closing has not occurred
by such time (unless the Closing date is extended with the consent of both
the Company and Parent) for any reason other than the default hereunder by
the terminating party, (ii) at any time by the non-breaching party if any
of the representations and warranties or other agreements made herein by
the other party have been materially breached, (iii) by mutual written
consent of Parent and the Company or (iv) by the Company if the Company
Stockholders do not approve the Merger.
(d) Amendment. This Agreement may be amended only in writing as
agreed to by all parties hereto.
(e) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first class registered or certified mail, return
receipt requested to the last known address of the noticed party.
(f) Confidentiality. The Shareholder Representative hereby
agrees that, after the Closing, he shall not publicly disclose any
confidential information of either Parent, Merger Sub or the Company, and
that he shall not make any public statement or announcement regarding the
Merger or the business, financial condition, prospects or operations of
Parent or the Company, without the prior written consent of the Company
(or, after the Effective Date, Parent).
(g) Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
(h) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same instrument.
(i) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective
heirs, administrators, executors, successors and assigns.
(j) Entire Agreement. This Agreement and the attached Exhibits,
including the Certificate of Merger, which is attached hereto as Exhibit
"A," is the entire agreement of the parties covering everything agreed upon
or understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
(k) Time. Time is of the essence.
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(l) Severability. If any part of this Agreement is deemed to be
unenforceable, the balance of the Agreement shall remain in full force and
effect.
(m) Responsibility and Costs. Whether the Merger is consummated
or not, all fees, expenses and out-of-pocket costs, including, without
limitation, fees and disbursements of counsel, financial advisors and
accountants, incurred by the parties hereto shall be borne solely and
entirely by the party that has incurred such costs and expenses, unless the
failure to consummate the Merger constitutes a breach of the terms hereof,
in which event the breaching party shall be responsible for all costs of
all parties hereto. Notwithstanding the foregoing, however, the
Shareholder Representative shall be responsible for all such costs and
expenses incurred by Parent and Merger Sub. The indemnification provisions
of Section 10 shall not apply in the event of the termination of this
Agreement prior to the Closing as a result of a breach hereof by either
party.
(n) Inapplicability of Indemnification Provisions. The
provisions contained in Parent's Articles of Incorporation and/or By-laws
for indemnifying officers and directors of that company shall not apply to
the representations and warranties made herein by the Shareholder
Representative or the other officers of Parent.
(o) Applicable Law. This Agreement shall be construed and
governed by the internal laws of the State of Nevada.
(p) Jurisdiction and Venue. Each party hereto irrevocably
consents to the jurisdiction and venue of the state or federal courts
located in Santa Xxxxx County, State of California, in connection with any
action, suit, proceeding or claim to enforce the provisions of this
Agreement, to recover damages for breach of or default under this
Agreement, or otherwise arising under or by reason of this Agreement.
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IN WITNESS WHEREOF, the parties have executed this Agreement the
day and year first above written.
RESCON TECHNOLOGY CORPORATION XXXXX NETWORKS, INC.:
By:___________________________ By:_______________________________
Henrik Klausgaard, CEO Xxxxxx Xxxxx, President & CEO
XXXXX ACQUISITION CORP.: XXXXXXXXX XXXXXXXXXXX:
By: __________________________ By: ________________________________
Henrik Klausgaard, CEO
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