Exhibit 10
MERGER AGREEMENT AND PLAN OF REORGANIZATION
This Merger Agreement and Plan of Reorganization (the "Agreement"), is
entered into this 10th.. day of December, 2003, by and among Tugboat
International, Inc., a corporation organized and existing under the laws of the
State of Delaware ("TUGBOAT"), Tugboat Acquisition Corp., a corporation
organized and existing under the laws of the State of Nevada ("TAC"), and
MidNet, Inc., a corporation organized and existing under the laws of the State
of Nevada ("MIDNET").
RECITALS:
WHEREAS, TAC is a wholly owned subsidiary of Tugboat;
WHEREAS, MIDNET desires to merge with and into TAC, and TUGBOAT desires to
merge TAC with MIDNET, so that MIDNET will be the surviving corporation, all
upon the terms and subject to the conditions of this Merger Agreement and in
accordance with the laws of the State of Nevada ("Merger");
WHEREAS, the terms and conditions of the Merger, the mode of carrying the
same into effect, the manner of converting the capital stock of MIDNET into the
right to receive common stock of TUGBOAT and such other terms and conditions as
may be required or permitted to be stated in this Merger Agreement are set forth
below; and
WHEREAS, for federal income tax purposes, it is intended by the parties
hereto that the Merger shall qualify as a reorganization within the meaning of
Sections 368(a)(l)(A) and (a)(2)(D) of the Internal Revenue Code of 1986, as
amended (the "Code"), and that this Merger Agreement shall constitute a "Plan of
Reorganization" for purposes of Section 368 of the Code;
NOW, THEREFORE, based upon the stated premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants and
agreements set forth herein, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, TUGBOAT, TAC, and MIDNET approve and adopt this
Agreement and Plan of Reorganization and mutually covenant and agree with each
other as follows:
1. Merger of MIDNET into TAC.
1.1 General. At the Closing (as defined in Section 9 hereof) of the Merger
and pursuant to the provisions of this Agreement, the corporate existence of TAC
will be merged with and into MIDNET (hereinafter referred to as the "Surviving
Corporation" whenever reference is made to it as of the Closing or thereafter)
and continued in the Surviving Corporation, and the Surviving Corporation shall
be deemed to be a continuation of the entities and identities of TUGBOAT and
MIDNET. TUGBOAT, TAC, and MIDNET agree to take such action to execute and
deliver such further instruments as may be necessary to carry out the terms of
said agreement of merger, including compliance with all federal and state
securities laws, rules and regulations.
1
1.2 Shares to be Issued. On the closing date of the merger, 7,506,000
shares of TUGBOAT's restricted common stock shall be delivered to the
shareholders of MIDNET in exchange and as full consideration for 6,132,300
shares of MIDNET common stock. The 7,506,000 shares shall be issued to the
MIDNET shareholders on a pro rata basis, that is, each share of MIDNET Common
Stock shall be exchanged for 1.2240105 shares of TUGBOAT Common Stock. Any
fractional shares shall be rounded up to the next whole number. In addition, the
holders of the 300,000 shares of Preferred Stock of MIDNET shall exchange their
shares for 300,000 shares of TUGBOAT Preferred Stock, $.0001 per share par
value. The 300,000 TUGBOAT Preferred Shares shall have the identical rights and
preferences as the 300,000 Preferred Shares issued by MIDNET. In addition, the
options for members of the Advisory Board and consultants of MIDNET to acquire
1,260,000 restricted shares of MIDNET, at an exercise price of $.50 per share,
shall be exchanged for options to acquire 1,260,000 restricted shares of
TUGBOAT, at an exercise price of $.50 per share, on the same terms and
conditions of the MIDNET options.
1.3 Registration Rights. As soon as practicable after the closing date, and
within sixty (60) days thereafter, TUGBOAT shall, at its sole expense, including
all legal and accounting fees, file and prosecute through to S.E.C. "effective
date" a Form SB-2 with the S.E.C. to register the following shares of restricted
Common Stock issued in connection with this transaction: 161,937 shares of the
TUGBOAT shares of Common Stock issued to the MIDNET shareholders in exchange for
132,300 shares of MIDNET Common Stock. These 161,937 shares represent the
aggregate number of shares to be held by all of the shareholders of MIDNET, each
of whom owns less than 5% of the total outstanding shares of MIDNET. The holders
of such shares shall cooperate fully in the preparation and prosecution of said
Form SB-2.
2.0 Representations and Warranties of MIDNET
MIDNET represents and warrants to TUGBOAT and TAC as set forth below. These
representations and warranties are made as an inducement for TUGBOAT and TAC to
enter into this Agreement and, but for the making of such representations and
warranties and their accuracy, such entities would not be parties hereto.
2.1 Organization and Authority. MIDNET is a corporation duly organized,
validly existing and in good standing under the laws of Nevada with full power
and authority to enter into and perform the transactions contemplated by this
Agreement. MidNet further warrants that its total authorized capital is
100,000,000 common shares, with a total of 6,132,300 issued and outstanding
common shares, par value $.001 per share, and has no commitments to issue
additional shares, warrants or options, except for options for members of the
Advisory Board and consultants of MidNet to acquire 1,260,000 shares at an
exercise price of $.50 per share. MidNet also has authorized 10,000,000 shares
of Preferred Stock, par value $.001 per share, and 300,000 shares are issued and
outstanding.
2.2 Capitalization. As of the date of the closing, MIDNET will have a total
of no more than 6,132,300 shares of common stock issued and outstanding. All of
the shares will have been duly authorized and validly issued and will be fully
paid and non-assessable. There are no options, warrants, conversion privileges,
2
or other rights presently outstanding for the purchase of any authorized but
unissued stock of MIDNET. The total authorized capital of MIDNET consists of
100,000,000 shares of Common Stock, par value $.001 per share.
2.3 Performance of This Agreement. The execution and performance of this
Agreement and the transaction contemplated hereby have been authorized by the
board of directors of MIDNET.
2.4 Financials. The financial statements of MIDNET, consisting of the
balance sheets as of the fiscal year ended December 31, 2002, and statements of
operations and cash flow for the fiscal year ended December 31, 2002, and
statement of changes in stockholder's equity from inception to December 31,
2002, together with the financial information as of September 30, 2003, will be
prepared and delivered by MIDNET to TUGBOAT and TAC as soon as possible after
Closing, recognizing TUGBOAT's need to make timely filings under Form 8-K, as
well as other applicable laws rules and regulations promulgated under the
Securities Act of 1933, as amended, and the Securities Exchange Act of 1934, as
amended. Said financial statements will be true and correct in all material
respects and present an accurate and complete disclosure of the financial
condition of MIDNET as of December 31, 2002, and September 30, 2003, and the
earnings for the periods covered, in accordance with generally accepted
accounting principles applied on a consistent basis. TUGBOAT has had an
opportunity to review the subject financial information for MIDNET.
2.5 Liabilities. There are no material liabilities of MIDNET, whether
accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of MIDNET, its agents or servants occurring prior to December 31,
2002, which will not be disclosed by or reflected in said financial statements.
As of the date hereof, there are no known circumstances, conditions, happenings,
events or arrangements, contractual or otherwise, which may hereafter give rise
to liabilities, except in the normal course of business of MIDNET.
2.6 Absence of Certain Changes or Events. Except as set forth in this
Agreement, since inception of MIDNET, there has not been (i) any material
adverse change in the business, operations, properties, assets, or condition of
MIDNET, or (ii) any damage, destruction, or loss to MIDNET (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets, or conditions of MIDNET.
2.7 Litigation. There are no legal, administrative or other proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions, either threatened, pending, or outstanding against
or involving MIDNET or its subsidiaries, if any, or their assets, properties, or
business, nor does MIDNET or its subsidiaries know, or have reasonable grounds
to know, of any basis for any such proceedings, investigations or inquiries,
product liability or other claims, judgments, injunctions or restrictions. In
addition, there are no material proceedings existing, pending or reasonably
contemplated to which any officer, director, or affiliate of MIDNET is a party
adverse to MIDNET or any of its subsidiaries or has a material interest adverse
to MIDNET or any of its subsidiaries.
2.8 Taxes. All federal, state, foreign, county and local income, profits,
franchise, occupation, property, sales, use, gross receipts and other taxes
(including any interest or penalties relating thereto) and assessments which are
3
due and payable have been duly reported, fully paid and discharged as reported
by MIDNET, and there are no unpaid taxes which are, or could become a lien on
the properties and assets of MIDNET, except as provided for in the financial
statements of MIDNET. All tax returns of any kind required to be filed have been
filed and the taxes paid or accrued.
2.9 Accuracy of All Statements Made by MIDNET. No representation or
warranty by MIDNET in this Agreement, nor any statement, certificate, schedule,
or exhibit hereto furnished or to be furnished by or on behalf of MIDNET
pursuant to this Agreement, nor any document or certificate delivered to TUGBOAT
and TAC by MIDNET pursuant to this Agreement or in connection with actions
contemplated hereby, contains or shall contain any untrue statement of material
fact or omits or shall omit a material fact necessary to make the statement
contained therein not misleading.
3. Representations and Warranties of TUGBOAT and TAC
TUGBOAT and TAC, jointly and severally, represent and warrant to MIDNET as
set forth below.. These representations and warranties are made as an inducement
for MIDNET to enter into this Agreement and, but for the making of such
representations and warranties and their accuracy, MIDNET would not be a party
hereto.
3.1 Organization and Good Standing.
a. TUGBOAT is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware with full power and authority
to enter into and perform the transactions contemplated by this Agreement.
b. TAC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Nevada with full power and authority to
enter into and perform the transactions contemplated by this Agreement.
3.2 Capitalization.
a. The authorized capital stock of TUGBOAT consists of 80,000,000 shares of
common stock, $.0001 per share par value, and 20,000,000 shares of Preferred
Stock, $.0001 per share par value. As of the date of this Agreement, TUGBOAT has
a total of 5,544,000 shares of common stock outstanding, and no shares of
Preferred Stock outstanding. As of the date of the closing, TUGBOAT will have a
total of no more than 5,544,000 shares of common stock issued and outstanding.
All of the shares will have been duly authorized and validly issued and are
fully paid and non-assessable. Except for TUGBOAT's obligations hereunder with
respect to the shares to be issued pursuant to subsection 1.2 hereof, there are
no options, warrants, conversion privileges, or other rights presently
outstanding for the purchase of any authorized but unissued stock of TUGBOAT.
b. The authorized capital stock of TAC consists of 25,000,000 shares of
common stock, $0.001 per share par value. As of the date of this Agreement, TAC
has a total of 10 shares of common stock outstanding, all of which is owned by
TUGBOAT. All of the outstanding shares have been duly authorized and validly
4
issued and are fully paid and non-assessable. There are no options, warrants,
conversion privileges, or other rights presently outstanding for the purchase of
any authorized but unissued stock of TAC.
3.3 Performance of This Agreement. The execution and performance of this
Agreement and the transaction contemplated hereby have been authorized by the
boards of directors of TUGBOAT and TAC.
3.4 Financials. True copies of the financial statements of TUGBOAT
consisting of the balance sheets as of the fiscal years ended December 31, 2001
and 2002, and the nine months ended September 30, 2003, and statements of
operations and cash flow for each of the fiscal years ended December 31, 2001
and 2002, and the nine months ended September 30, 2003, and statement of changes
in stockholder's equity from inception to September 30, 2003, have been
delivered by TUGBOAT to MIDNET. The financial statements have been examined and
certified by Xxxxxxx X. Xxxxxx, Certified Public Accountants. Said financial
statements are true and correct in all material respects and present an accurate
and complete disclosure of the financial condition of TUGBOAT as of September
30, 2003, and the earnings for the periods covered, in accordance with generally
accepted accounting principles applied on a consistent basis.
3.5 Liabilities.
a. There are no material liabilities of TUGBOAT, whether accrued, absolute,
contingent or otherwise, which arose or relate to any transaction of TUGBOAT,
its agents or servants which are not disclosed by or reflected in said financial
statements. As of the date hereof, there are no known circumstances, conditions,
happenings, events or arrangements, contractual or otherwise, which may
hereafter give rise to liabilities, except in the normal course of business of
TUGBOAT.
b. TAC has no liabilities in the aggregate in excess of $500.00.
3.6 Litigation. There are no legal, administrative or other proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions, either threatened, pending, or outstanding against
or involving TUGBOAT or TAC, or their subsidiaries, if any, or their assets,
properties, or business, nor does TUGBOAT or TAC or their subsidiaries know, or
have reasonable grounds to know, of any basis for any such proceedings,
investigations or inquiries, product liability or other claims, judgments,
injunctions or restrictions. In addition, there are no material proceedings
existing, pending or reasonably contemplated to which any officer, director, or
affiliate of TUGBOAT or TAC is a party adverse to either entity or any of their
subsidiaries or has a material interest adverse to such entities or any of their
subsidiaries.
3.7 Taxes. All federal, state, foreign, county and local income, profits,
franchise, occupation, property, sales, use, gross receipts and other taxes
(including any interest or penalties relating thereto) and assessments which are
due and payable have been duly reported, fully paid and discharged as reported
by TUGBOAT and TAC, and there are no unpaid taxes which are, or could become a
lien on the properties and assets of TUGBOAT or TAC, except as provided for in
the financial statements of TUGBOAT , or have been incurred in the normal course
5
of business of TUGBOAT or TAC since that date. All tax returns of any kind
required to be filed have been filed and the taxes paid or accrued.
3.8 Legality of Shares to be Issued. The shares of common stock of TUGBOAT
to be issued by TUGBOAT pursuant to this Agreement, when so issued and
delivered, will have been duly and validly authorized and issued by TUGBOAT and
will be fully paid and non-assessable.
3.9 Accuracy of All Statements Made by TUGBOAT and TAC. No representation
or warranty by TUGBOAT or TAC in this Agreement, nor any statement, certificate,
schedule, or exhibit hereto furnished or to be furnished by TUGBOAT or TAC
pursuant to this Agreement, nor any document or certificate delivered to MIDNET
pursuant to this Agreement or in connection with actions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits to
state or shall omit to state a material fact necessary to make the statement
contained therein not misleading.
4. Covenants of the Parties.
4.1 Corporate Records.
a. Simultaneous with the execution of this Agreement by MIDNET, such entity
shall deliver to TUGBOAT and TAC copies of the articles of incorporation, as
amended, and the current by-laws of MIDNET, and copies of the resolutions duly
adopted by the board of directors of MIDNET approving this Agreement and the
transactions herein contemplated.
b. Simultaneous with the execution of this Agreement by TUGBOAT and TAC,
such entities shall deliver to MIDNET copies of the articles of incorporation,
as amended, and the current by-laws of TUGBOAT and TAC, and copies of the
resolutions duly adopted by the boards of directors of TUGBOAT and TAC approving
this Agreement and the transactions herein contemplated.
4.2 Access to Information.
a. TUGBOAT and TAC and their authorized representatives shall have full
access during normal business hours to all properties, books, records,
contracts, and documents of MIDNET, and MIDNET shall furnish or cause to be
furnished to TUGBOAT and TUGBOAT Acquisitions and their authorized
representatives all information with respect to its affairs and business as
TUGBOAT and TAC may reasonably request. TUGBOAT and TAC shall hold, and shall
cause their representatives to hold confidential, all such information and
documents, other than information that (i) is in the public domain at the time
of its disclosure to TUGBOAT and TAC; (ii) becomes part of the public domain
after disclosure through no fault of TUGBOAT or TAC; (iii) is known to TUGBOAT
or TAC or any of its officers or directors prior to disclosure; or (iv) is
disclosed in accordance with the written consent of MIDNET. In the event this
Agreement is terminated prior to closing, TUGBOAT and TAC shall, upon the
written request of MIDNET, promptly return all copies of all documentation and
information provided by MIDNET hereunder.
6
b. MIDNET and its authorized representatives shall have full access during
normal business hours to all properties, books, records, contracts, and
documents of TUGBOAT and TAC, and TUGBOAT and TAC shall furnish or cause to be
furnished to MIDNET and its authorized representatives all information with
respect to their affairs and business as MIDNET may reasonably request. MIDNET
shall hold, and shall cause its representatives to hold confidential, all such
information and documents, other than information that (i) is in the public
domain at the time of its disclosure to MIDNET; (ii) becomes part of the public
domain after disclosure through no fault of MIDNET; (iii) is known to MIDNET or
any of its officers or directors prior to disclosure; or (iv) is disclosed in
accordance with the written consent of TUGBOAT and TAC. In the event this
Agreement is terminated prior to closing, MIDNET shall, upon the written request
of TUGBOAT or TAC, promptly return all copies of all documentation and
information provided by TUGBOAT or TAC hereunder.
4.3 Actions Prior to Closing. From and after the date of this Agreement and
until the closing date:
a. TUGBOAT and TAC and MIDNET shall each carry on its business diligently
and substantially in the same manner as heretofore, and neither party shall make
or institute any unusual or novel methods of purchase, sale, management,
accounting or operation.
b. Neither TUGBOAT or TAC nor MIDNET shall enter into any contract or
commitment, or engage in any transaction not in the usual and ordinary course of
business and consistent with its business practices.
c. Neither TUGBOAT or TAC nor MIDNET shall amend its articles of
incorporation and by-laws or make any changes in authorized or issued capital
stock, except as provided in this Agreement.
d. TUGBOAT and TAC and MIDNET shall each use its best efforts (without
making any commitments on behalf of the company) to preserve its business
organization intact.
e. Neither TUGBOAT or TAC nor MIDNET shall do any act or omit to do any
act, or permit any act or omission to act, which will cause a material breach of
any material contract, commitment, or obligation of such party.
f. TUGBOAT and TAC and MIDNET shall each duly comply with all applicable
laws as may be required for the valid and effective issuance or transfer of
stock contemplated by this Agreement.
g. Neither TUGBOAT or TAC nor MIDNET shall sell or dispose of any property
or assets, except products sold in the ordinary course of business.
h. TUGBOAT and TAC and MIDNET shall each promptly notify the other of any
lawsuits, claims, proceedings, or investigations that may be threatened,
brought, asserted, or commenced against it, its officers or directors involving
in any way the business, properties, or assets of such party.
7
4.4 Shareholders' Consent. TAC and MIDNET shall promptly submit this
Agreement and the transactions contemplated hereby for the approval of their
respective stockholders by written consent and, subject to the fiduciary duties
of the Boards of Directors of TAC and MIDNET under applicable law, shall use
their best efforts to obtain stockholder approval and adoption of this Agreement
and the transactions contemplated hereby.
4.5 No Covenant as to Tax or Accounting Consequences. It is expressly
understood and agreed that neither TUGBOAT or TAC nor its officers or agents has
made any warranty or agreement, expressed or implied, as to the tax or
accounting consequences of the transactions contemplated by this Agreement or
the tax or accounting consequences of any action pursuant to or growing out of
this Agreement.
4.6 Indemnification. MIDNET shall indemnify TUGBOAT and TAC for any loss,
cost, expense, or other damage (including, without limitation, attorneys' fees
and expenses) suffered by TUGBOAT and TAC resulting from, arising out of, or
incurred with respect to the falsity or the breach of any representation,
warranty, or covenant made by MIDNET herein, and any claims arising from the
operations of MIDNET prior to the closing date. TUGBOAT and TAC, jointly and
severally, shall indemnify and hold MIDNET harmless from and against any loss,
cost, expense, or other damage (including, without limitation, attorneys' fees
and expenses) resulting from, arising out of, or incurred with respect to, or
alleged to result from, arise out of or have been incurred with respect to, the
falsity or the breach of any representation, covenant, warranty, or agreement
made by TUGBOAT or TAC herein, and any claims arising from the operations of
TUGBOAT or TAC prior to the closing date. The indemnity agreement contained
herein shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any party and shall survive the
consummation of the transactions contemplated by this Agreement.
4.7 Publicity. The parties agree that no publicity, release, or other
public announcement concerning this Agreement or the transactions contemplated
by this Agreement shall be issued by any party hereto without the advance
approval of both the form and substance of the same by the other parties and
their counsel, which approval, in the case of any publicity, release, or other
public announcement required by applicable law, shall not be unreasonably
withheld or delayed.
4.8 Expenses. Except as otherwise expressly provided herein, each party to
this Agreement shall bear its own respective expenses incurred in connection
with the negotiation and preparation of this Agreement, in the consummation of
the transactions contemplated hereby, and in connection with all duties and
obligations required to be performed by each of them under this Agreement.
4.9 Further Actions. Each of the parties hereto shall take all such further
action, and execute and deliver such further documents, as may be necessary to
carry out the transactions contemplated by this Agreement.
4.10 Change of Domicile. Prior to the closing date, TUGBOAT shall not
change the domicile of TUGBOAT from the State of Delaware.
8
5. Conditions Precedent to TUGBOAT and TAC's Obligations
Each and every obligation of TUGBOAT and TAC to be performed on the closing
date shall be subject to the satisfaction prior thereto of the following
conditions:
5.1 Truth of Representations and Warranties. The representations and
warranties made by MIDNET in this Agreement or given on its behalf hereunder
shall be substantially accurate in all material respects on and as of the
closing date with the same effect as though such representations and warranties
had been made or given on and as of the closing date.
5.2 Performance of Obligations and Covenants. MIDNET shall have performed
and complied with all obligations and covenants required by this Agreement to be
performed or complied with by it prior to or at the closing.
5.3 Officer's Certificate. TUGBOAT and TAC shall have been furnished with a
certificate (dated as of the closing date and in form and substance reasonably
satisfactory to TUGBOAT and TAC), executed by an executive officer of MIDNET,
certifying to the fulfillment of the conditions specified in subsections 5.1 and
5.2 hereof.
5.4 No Litigation or Proceedings. There shall be no litigation or any
proceeding by or before any governmental agency or instrumentality pending or
threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
5.5 No Material Adverse Change. As of the closing date there shall not have
occurred any material adverse change, financially or otherwise, which materially
impairs the ability of MIDNET to conduct its business or the earning power
thereof on the same basis as in the past.
6. Conditions Precedent to Obligations of MIDNET.
Each and every obligation of MIDNET to be performed on the closing date
shall be subject to the satisfaction prior thereto of the following conditions:
6.1 Truth of Representations and Warranties. The representations and
warranties made by TUGBOAT and TAC in this Agreement or given on their behalf
hereunder shall be substantially accurate in all material respects on and as of
the closing date with the same effect as though such representations and
warranties had been made or given on and as of the closing date.
6.2 Performance of Obligations and Covenants. TUGBOAT and TAC shall have
performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by them prior to or at the closing.
9
6.3 Officer's Certificate. MIDNET shall have been furnished with a
certificate (dated as of the closing date and in form and substance reasonably
satisfactory to MIDNET), executed by an executive officer of TUGBOAT and TAC,
certifying to the fulfillment of the conditions specified in subsections 6.1 and
6.2 hereof.
6.4 No Litigation or Other Legal Proceedings. There shall be no litigation
or any other legal proceeding by or before any governmental agency or
instrumentality pending or threatened against any party hereto that seeks to
restrain or enjoin or otherwise questions the legality or validity of the
transactions contemplated by this Agreement or which seeks substantial damages
in respect thereof.
6.5 No Material Adverse Change. As of the closing date there shall not have
occurred any material adverse change, financially or otherwise, which materially
impairs the ability of TUGBOAT or TAC to conduct its business.
7. Securities Law Provisions.
At closing MIDNET shall deliver to TUGBOAT a representation form from the
shareholders of MIDNET (the "Shareholders") and option holders ("Option
Holders") providing representations essentially as follows:
7.1 Restricted Securities. Each of the Shareholders and Option Holders
represents that he is aware that the shares issued to him will not have been
registered pursuant to the Securities Act of 1933, as amended (the "1933 Act"),
or any state securities act, and thus will be restricted securities as defined
in Rule 144 promulgated by the Securities and Exchange Commission (the "SEC").
Therefore, under current interpretations and applicable rules, he will probably
have to retain such shares for a period of at least one year and at the
expiration of such one year period his sales may be confined to brokerage
transactions of limited amounts requiring certain notification filings with the
SEC and such disposition may be available only if the issuer is current in its
filings with the SEC under the Securities Exchange Act of 1934, as amended, or
other public disclosure requirements.
7.2 Non-distributive Intent. Each of the Shareholders and Option Holders
covenants and warrants that the shares/options received are acquired for his/her
own account and not with the present view towards the distribution thereof and
he/she will not dispose of such shares/options except (i) pursuant to an
effective registration statement under the 1933 Act, or (ii) in any other
transaction which, in the opinion of counsel acceptable to the issuer, is exempt
from registration under the 1933 Act, or the rules and regulations of the SEC
thereunder. In order to effectuate the covenants of this subsection 7.2, an
appropriate legend will be placed upon each of the certificates of common stock
of issued pursuant to this Agreement, and upon exercise of any option, and stop
transfer instructions shall be placed with the transfer agent for the
securities.
Each Shareholder and/or Option Holder understands that each certificate for
TUGBOAT Shares issued to the Shareholder or Option Holder, upon exercise of any
option, or to any subsequent transferee, shall be stamped or otherwise imprinted
10
with the legend set forth below summarizing the restrictions described in this
Section 7 and that TUGBOAT shall refuse to transfer the TUGBOAT Shares except in
accordance with such restrictions:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF A CURRENT AND EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT WITH
RESPECT TO SUCH SHARES, OR AN OPINION OF THE
ISSUER'S COUNSEL TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED UNDER THE 1933 ACT.
The Shareholders and Option Holders acknowledge they have respectively had
an opportunity to receive and review TUGBOAT's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2002 and the subsequently filed Quarterly
Reports on Form 10-QSB (collectively, the "SEC Reports") through and including
the date of this Agreement. The Shareholders and Option Holders further
respectively acknowledge that TUGBOAT has given to the Shareholders and Option
Holders, and their respective counsel, accountants and other advisors, agents,
consultants and representatives, if any, full access to all of the properties,
books, contracts, commitments and records of TUGBOAT and has furnished or will
furnish all such information concerning TUGBOAT (including its operations,
financial condition and business plan) as the Shareholders or Option Holders
have requested or may request.
7.3 Evidence of Compliance with Private Offering Exemption. Each of the
Shareholders and Option Holders hereby represents and warrants that he/she,
either individually or together with his/her representative, has such knowledge
and experience in business and financial matters that he/she is capable of
evaluating the risks of this Agreement and the transactions contemplated hereby,
and that the financial capacity of such party is of such proportion that the
total cost of such person's commitment in the shares/options would not be
material when compared with his/her total financial capacity. Upon the written
request of the issuer of the securities issued or transferred pursuant to this
Agreement, and upon exercise of any option, the Shareholder/Option Holder shall
provide such issuer with evidence of compliance with the requirements of any
federal or state exemption from registration. TUGBOAT, TAC and MIDNET shall each
file, with the assistance of the other and its respective legal counsel, such
notices, applications, reports, or other instruments as may be deemed by each of
them to be necessary or appropriate in an effort to document reliance on such
exemptions, unless an exemption requiring no filing is available in the
particular jurisdiction, all to the extent and in the manner as may be deemed by
such parties to be appropriate.
11
8. Change of Management.
Upon and as a condition of closing this Agreement:
8.1 TUGBOAT shall appoint the following as Directors of TUGBOAT: Xxxxx
Xxxxxxxxxx, Xxxx Xxxx and Xxxxx Xxxxxxxx. Prior to closing, MIDNET will furnish
material information regarding such Directors for filing with applicable
regulatory authorities.
8.2 MIDNET reserves the right to terminate this Agreement if the nominee(s)
selected by it is not elected or appointed as set forth above.
9. Closing
9.1 Time and Place. The closing of this transaction ("closing") shall take
place at 0000 Xxxxxxxxx Xxxxx, Xxxxx 000, Xxxx, Xxxxxx, at 1:00 p.m., December
___, 2003, or at such other time and place as the parties hereto shall agree
upon. Such date is referred to in this Agreement as the "closing date".
9.2 Documents to Be Delivered by MIDNET. At the closing MIDNET shall
deliver to TUGBOAT and TAC the following documents:
a. A duly executed copy of this Agreement.
b. The representation forms of the Shareholders and Option Holders
described in Section 7 hereof.
c. The certificate required pursuant to subsection 5.3 hereof.
d. A signature page from the MIDNET shareholders and option holders
authorizing this Agreement and the transactions contemplated hereby.
e. Such other documents of transfer, certificates of authority, and other
documents as TUGBOAT and TAC may reasonably request.
9.3 Documents to be Delivered by TUGBOAT and TAC. At the closing, TUGBOAT
and TAC shall deliver to MIDNET the following documents:
a. A duly executed copy of this Agreement.
b. Certificates for 7,506,000 restricted shares of common stock of TUGBOAT;
Certificates for 300,000 restricted shares of common stock of TUGBOAT; and
options for members of the Advisory Board and consultants of MIDNET to acquire
1,260,000 shares of TUGBOAT restricted Common Stock at an exercise price of $.50
per share, all as described in sub-section 1.2 hereof.
c. The certificate required pursuant to subsection 6.3 hereof.
12
d. Certified copies of the duly adopted resolutions of TAC's shareholders
authorizing this Agreement and the transactions contemplated hereby.
e. Such other documents of transfer, certificates of authority, and other
documents as MIDNET may reasonably request.
10. Termination
This Agreement may be terminated by TUGBOAT and TAC or MIDNET by notice to the
other if, (i) at any time prior to the closing date any event shall have
occurred or any state of facts shall exist that renders any of the conditions to
its or their obligations to consummate the transactions contemplated by this
Agreement incapable of fulfillment, or (ii) on March 14, 2004, if the closing
shall not have occurred. Following termination of this Agreement no party shall
have liability to another party relating to such termination, other than any
liability resulting from the breach of this Agreement by a party prior to the
date of termination.
11. Miscellaneous
11.1 Notices. All communications provided for herein shall be in writing
and shall be deemed to be given or made when served personally or when deposited
in the United States mail, certified return receipt requested, addressed as
follows, or at such other address as shall be designated by any party hereto in
written notice to the other party hereto delivered pursuant to this subsection:
TUGBOAT and TAC: Tugboat International, Inc.
0000 Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Attn: President
MIDNET: MidNet, Inc.
0000 Xxxxxxxxx Xxxxx, #000
Xxxx, XX 00000
Attn: President
with copy to: Xxxxxxx X. Xxxxxxxx, Esq.
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxx, XX 00000
11.2 Default. Should any party to this Agreement default in any of the
covenants, conditions, or promises contained herein, the defaulting party shall
pay all costs and expenses, including a reasonable attorney's fees, which may
arise or accrue from enforcing this Agreement, or in pursuing any remedy
provided hereunder or by the statutes of the State of Nevada.
11.3 Assignment. This Agreement may not be assigned in whole or in part by
the parties hereto without the prior written consent of the other party or
parties, which consent shall not be unreasonably withheld.
13
11.4 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and assigns.
11.5 Partial Invalidity. If any term, covenant, condition, or provision of
this Agreement or the application thereof to any person or circumstance shall to
any extent be invalid or unenforceable, the remainder of this Agreement or
application of such term or provision to persons or circumstances other than
those as to which it is held to be invalid or unenforceable shall not be
affected thereby and each term, covenant, condition, or provision of this
Agreement shall be valid and shall be enforceable to the fullest extent
permitted by law.
11.6 Entire Agreement. This Agreement constitutes the entire understanding
between the parties hereto with respect to the subject matter hereof and
supersedes all negotiations, representations, prior discussions, and preliminary
agreements between the parties hereto relating to the subject matter of this
Agreement.
11.7 Interpretation of Agreement. This Agreement shall be interpreted and
construed as if equally drafted by all parties hereto.
11.8 Survival of Covenants, Etc. All covenants, representations, and
warranties made herein to any party, or in any statement or document delivered
to any party hereto, shall survive the making of this Agreement and shall remain
in full force and effect until the obligations of such party hereunder have been
fully satisfied.
11.9 Further Action. The parties hereto agree to execute and deliver such
additional documents and to take such other and further action as may be
required to carry out fully the transactions contemplated herein.
11.10 Amendment. This Agreement or any provision hereof may not be changed,
waived, terminated, or discharged except by means of a written supplemental
instrument signed by the party or parties against whom enforcement of the
change, waiver, termination, or discharge is sought.
11.11 Full Knowledge. By their signatures, the parties acknowledge that
they have carefully read and fully understand the terms and conditions of this
Agreement, that each party has had the benefit of counsel, or has been advised
to obtain counsel, and that each party has freely agreed to be bound by the
terms and conditions of this Agreement.
11.12 Headings. The descriptive headings of the various sections or parts
of this Agreement are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
11.13 Counterparts. This Agreement may be executed in two or more partially
or fully executed counterparts, each of which shall be deemed an original and
shall bind the signatory, but all of which together shall constitute but one and
the same instrument.
14
IN WITNESS WHEREOF, the parties hereto executed the foregoing Agreement and
Plan of Reorganization as of the day and year first above written.
TUGBOAT: Tugboat International, Inc.
By: ______________________________
Xxxxx X. Xxxxxxx, President
TAC: TUGBOAT Acquisition Corp.
By: ____________________________
Xxxxx X. Xxxxxxx, President
MIDNET: MidNet, Inc.
By: ____________________________
Xxxxx Xxxxxxxx, President
15
EXHIBIT "A"
REPRESENTATIONS OF MIDNET, INC., SHAREHOLDERS
AND OPTION HOLDERS
Pursuant to Section 7 of the Merger Agreement and Plan of Reorganization
(the "Agreement"), entered into by and among Tugboat International, Inc., a
corporation organized and existing under the laws of the State of Delaware
("TUGBOAT"), Tugboat Acquisition Corp., a corporation organized and existing
under the laws of the State of Nevada ("TAC"), and MidNet, Inc., a corporation
organized and existing under the laws of the State of Nevada ("MIDNET"), the
MIDNET Shareholders ("Shareholders") and Option Holders ("Option Holders")
jointly and severally expressly and unconditionally represent as follows:
Restricted Securities. Each of the Shareholders and Option Holders
represents that he/she is aware that the shares/options issued to him/her will
not have been registered pursuant to the Securities Act of 1933, as amended (the
"1933 Act"), or any state securities act, and thus will be "restricted"
securities, as defined in Rule 144 promulgated by the Securities and Exchange
Commission (the "SEC"). Therefore, under current interpretations and applicable
rules, he/she will probably have to retain such shares, and any shares issued
upon exercise of any option(s) for a period of at least one year and at the
expiration of such one year period his/her sales may be confined to brokerage
transactions of limited amounts requiring certain notification filings with the
SEC and such disposition may be available only if the issuer is current in its
filings with the SEC under the Securities Exchange Act of 1934, as amended, or
other public disclosure requirements.
Non-distributive Intent. Each of the Shareholders and Option Holders
covenants and warrants that the shares/options received are acquired for his/her
own account and not with the present view towards the distribution thereof and
he/she will not dispose of such shares/options except (i) pursuant to an
effective registration statement under the 1933 Act, or (ii) in any other
transaction which, in the opinion of counsel acceptable to the issuer, is exempt
from registration under the 1933 Act, or the rules and regulations of the SEC
thereunder. In order to effectuate these covenants, an appropriate legend will
be placed upon each of the certificates of common stock of issued pursuant to
this Agreement, and upon shares issued on the exercise of any option, and stop
transfer instructions shall be placed with the transfer agent for the
securities.
Each Shareholder and/or Option Holder understands that each certificate for
TUGBOAT Shares issued to the Shareholder or Option Holder or to any subsequent
transferee shall be stamped or otherwise imprinted with the legend
16
set forth below summarizing the restrictions described herein and that TUGBOAT
shall refuse to transfer the TUGBOAT Shares except in accordance with such
restrictions:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 (THE "1933 ACT"). THE SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF A CURRENT AND EFFECTIVE
REGISTRATION STATEMENT UNDER THE 1933 ACT WITH
RESPECT TO SUCH SHARES, OR AN OPINION OF THE
ISSUER'S COUNSEL TO THE EFFECT THAT REGISTRATION
IS NOT REQUIRED UNDER THE 1933 ACT.
The Shareholders and Option Holders acknowledge they have respectively had
an opportunity to receive and review TUGBOAT's Annual Report on Form 10-KSB for
the fiscal year ended December 31, 2002 and the subsequently filed Quarterly
Reports on Form 10-QSB (collectively, the "SEC Reports") through and including
the date of this Agreement, and the financial books and records of MIDNET. The
Shareholders and Option Holders further respectively acknowledge that TUGBOAT
has given to the Shareholders and Option Holders, and their respective counsel,
accountants and other advisors, agents, consultants and representatives, if any,
full access to all of the properties, books, contracts, commitments and records
of TUGBOAT and has furnished or will furnish all such information concerning
TUGBOAT (including its operations, financial condition and business plan) as the
Shareholders or Option Holders have requested or may request.
Evidence of Compliance with Private Offering Exemption. Each of the
Shareholders and Option Holders hereby represents and warrants that he/she,
either individually or together with his/her representative, has such knowledge
and experience in business and financial matters that he/she is capable of
evaluating the risks of this Agreement and the transactions contemplated hereby,
and that the financial capacity of such party is of such proportion that the
total cost of such person's commitment in the shares/options would not be
material when compared with his/her total financial capacity. Upon the written
request of the issuer of the securities issued or transferred pursuant to this
Agreement, and upon exercise of any option, the Shareholder/Option Holder shall
provide such issuer with evidence of compliance with the requirements of any
federal or state exemption from registration. TUGBOAT, TAC and MIDNET shall each
file, with the assistance of the other and its respective legal counsel, such
notices, applications, reports, or other instruments as may be deemed by each of
them to be necessary or appropriate in an effort to document reliance on such
exemptions, unless an exemption requiring no filing is available in the
particular jurisdiction, all to the extent and in the manner as may be deemed by
such parties to be appropriate.
17
The signature of each MIDNET shareholder and Option Holder is set forth on
the attached page(s), which may be signed in counterpart.
The signature of each Shareholder further constitutes a consent resolution
by the MIDNET Shareholders, pursuant to NRS 78.320, approving the merger, as
proposed in the Agreement. Any Shareholder who does not approve the merger and
agree to exchange his/her shares, as provided in the Agreement, may exercise
dissenter's rights, as set forth in NRS Ch. 92A, and obtain payment for his/her
shares, all pursuant to the protocol set forth in NRS 92A.380-92A.500. A copy of
the Nevada statutes in this regard (NRS 92A.300-500) are being separately
provided to each Shareholder.
END OF EXHIBIT "A"
18
SIGNATURES OF SELLING SHAREHOLDERS AND OPTION HOLDERS
Number of MIDNET
Number of MIDNET
Name of Consent/ Shares/Options Owned by Selling
Selling Shareholder Dissent(1) Shareholder/Option Holder Signature
------------------- ---------- ------------------------- ---------
19
