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EXHIBIT 2
A G R E E M E N T A N D P L A N O F R E O R G A N I Z A T I O N
This Agreement ("Agreement") is made and entered into on September 10,
2001, by and among XXXXXXXX.XXX INCORPORATED, a Nevada corporation, as buyer
(the "Company"); DIGITAL MICRO DISTRIBUTION CANADA, INC., an Ontario
corporation, as the acquired company ("DMD"); and the person executing this
Agreement in his capacity as the sole shareholder of DMD (the "DMD Holder").
R E C I T A L S:
A. The DMD Holder owns of record and beneficially the sole issued and
outstanding share of capital stock of DMD (the "DMD Share");
B. The DMD Holder desires to sell to the Company, and the Company
desires to purchase from the DMD Holder, the DMD Share, on the terms and subject
to the conditions of this Agreement; and
C. The respective boards of directors of DMD and the Company have
approved the execution of this Agreement and performance of the parties'
respective obligations herein.
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises and undertakings contained herein, and for other good and valuable
consideration, and subject to the terms and conditions of this Agreement, the
parties hereto agree as follows:
1. THE EXCHANGE.
1.1 Sale and Purchase of the DMD Share. On the terms and subject to
conditions of this Agreement, at the Closing (defined below), the DMD Holder
shall sell, transfer, assign, convey and deliver to the Company, free and clear
of all adverse claims, security interests, liens, claims and encumbrances (other
than restrictions under applicable securities laws or as expressly agreed to
herein by the Company), and the Company shall purchase, accept and acquire all
of the DMD Share from the DMD Holder, such purchase and sale being herein
sometimes referred to as the "Exchange." The Company shall receive good and
merchantable title to the DMD Share. It is intended among all the parties that
the Exchange shall constitute a tax-free reorganization within the meaning of
Sections 351 and 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended
("Code").
1.2 Issuance of Exchange Shares. In full payment for the DMD Share, the
Company shall ratably issue and deliver to the DMD Holder, an aggregate of
67,000,000 common shares of the Company, the terms, preferences and designations
of which are set forth on EXHIBIT A to this Agreement (the "Exchange Shares").
The Exchange Shares, will, when issued, be validly issued, fully paid, and
nonassessable; the sale, issuance and delivery of the Exchange Shares on the
terms herein contemplated has been authorized by all requisite corporate action
of the Company; and the Exchange Shares will not be subject to any preemptive
rights, options or similar rights on the part of any shareholder or creditor of
the Company or any other person.
1.3 Restricted Status of Exchange Shares. The Exchange Shares have not
been registered under the Securities Act of 1933, as amended ("Act"), in
reliance upon exemptions from registration provided by Section 4(2) of the Act
and Rule 506 under the Act and under the securities or blue sky laws of
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applicable states or any rules or regulations promulgated thereunder, on the
grounds that the transactions contemplated in this Agreement do not involve any
public offering. The Exchange Shares are "restricted securities" as that term is
defined in Rule 144(a) of the General Rules and Regulations under the Act and
must be held indefinitely, unless they are subsequently registered under the Act
or an exemption from such registration requirements is available for their
resale. The prior written consent of the Company will be necessary for any
transfer of any or all of the Exchange Shares, unless the shares have been duly
registered under the Act or the transfer is made in accordance with Rule 144 or
other available exemption under the Act. Further, any and all certificates
evidencing the Exchange Shares shall, unless and until removed in accordance
with law, bear a restrictive legend substantially in the following form:
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), and are
"restricted securities" as that term is defined in Rule 144 under the Act. These
shares may not be offered for sale, sold or otherwise transferred except
pursuant to an effective registration statement under the Act, or pursuant to an
exemption from registration under the Act."
1.4 Closing. Subject to the conditions precedent set forth herein, the
closing of all transactions herein contemplated ("Closing") shall take place at
a place and time mutually agreed by DMD and the Company ("Closing Date"). This
Agreement shall be effective and binding when signed by all parties.
1.5 Resignation of Officers and Directors of the Company. At the
Closing, the current officers and directors of the Company shall resign and the
appropriate persons shall be elected as the directors and executive officers of
the Company.
1.6 Further Assurances. DMD and the DMD Holder agree to execute all
documents and instruments and to take or to cause to be taken all actions which
the Company deems necessary or appropriate to complete the transactions
contemplated by this Agreement, whether before or after the Closing.
2. OTHER AGREEMENTS OF THE PARTIES.
2.1 Prohibited Recapitalizations. The parties acknowledge that,
following the Closing, the DMD Holder when acting as a group will hold the
majority of the Company's voting power. It is expressly agreed among the parties
that during the two year period following the Closing (the "Period"), the
Company shall not effect any "prohibited recapitalization," defined as any
reverse split or combination of its common shares, or any reorganization,
recapitalization or other action whatsoever which has the effect of changing the
number of outstanding common shares of the Company into a smaller number of
common shares, exceeding a ratio of one to fifteen (1:15). The term "prohibited
recapitalization" does not include a merger, exchange, consolidation or similar
transaction with an entity then unaffiliated with the Company or any DMD Holder.
2.2 Excessive Compensation Prohibited. During the first twelve months of
the Period, the DMD Holder shall not receive annual compensation from the
Company in cash or cash equivalents or in any other form with a cash value
exceeding US$100,000 in amount, including fees, salaries, bonuses, perquisites
and the like, but excluding commissions, overrides and bonuses on sales
generated by DMD Holder. The term "compensation" as used above shall expressly
not include the issuance to the DMD Holder of additional shares of the Company's
stock. The full board of directors may by unanimous vote award extra
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compensation to DMD Holder based on extraordinary effort or results benefiting
the Company.
2.3 The Company and DMD to Obtain Financial Statements. The Company and
DMD each shall by September 30, 2001, provide financial statements, including a
balance sheet as of July 31, 2001, and statements of cash flows, operations and
changes in stockholders' or members' equity for the period from inception
through July 31, 2001, together with all required footnotes and schedules,
audited by certified public accountants who are members of the SEC Practice
Section of the AICPA. Such statements shall be prepared in accordance with Item
310 of Regulation S-B of the Securities and Exchange Commission and with
generally accepted accounting principles, applied on a consistent basis.
3. CAPITALIZATION.
3.1 The Company's Capitalization at Closing. Immediately prior to the
Closing, the Company shall have issued and outstanding common stock and options
to purchase its common stock (the "Standing Options") totaling in the aggregate
not more than 33,000,000 shares of its common stock. Other than such shares and
shares underlying the Standing Options, at the Closing the Company will not
without the prior written consent of DMD had and received have issued or
outstanding any other shares of common or preferred stock, nor any options or
other rights to purchase its stock, nor any instrument convertible into or
exchangeable for its stock. No shareholder of the Company will have any
preemptive right or similar right to purchase the Exchange Shares or other stock
of the Company.
4. DMD's REPRESENTATIONS AND WARRANTIES. DMD hereby represents and
warrants that the following are true and correct as of the date hereof and will
be true and correct through the Closing Date as if made on that date:
(a) Organization and Standing. DMD is a provincially chartered
corporation duly organized, validly existing and in good standing under the laws
of Canada, with all requisite power and authority to carry on the business in
which it is engaged, to own the properties and assets it owns, and is duly
qualified and licensed to do business and is in good standing in all
jurisdictions where the nature of its business makes such qualification
necessary.
(b) Capitalization. Other than the DMD Share, no other shares of
capital stock are authorized or have been issued. All of the one (1) issued and
outstanding share of capital stock of DMD (the DMD Share) has been duly
authorized, validly issued, and is fully paid and nonassessable. DMD does not
have outstanding any option, warrant or similar instrument and is not a party to
or bound by any agreement, instrument, arrangement, contract, obligation,
commitment or understanding of any character, whether written or oral, express
or implied, whereby DMD is bound to issue shares of its capital stock or any
instrument or right convertible into or exchangeable for shares of its capital
stock, nor relating to the sale, assignment, encumbrance, conveyance, transfer
or delivery of any capital stock of DMD of any type or class. DMD has provided
to the Company a shareholder list, which sets forth the names and addresses of
the DMD Holder, which is the same as, reflected on the signature page hereto.
(c) Litigation. There are no claims, actions, suits, proceedings
or investigations pending or threatened against or affecting DMD or any of its
properties or assets in any court or by or before any federal, state, municipal
or other governmental department, commission, board, bureau, agency or other
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instrumentality, domestic or foreign, or arbitration tribunal or other forum
which, if determined adversely to DMD, would materially affect its business,
prospects, properties or financial condition or DMD's right to conduct its
business as being conducted or expected to be conducted, except as disclosed on
SCHEDULE 4(c). There are no judgments, decrees, injunctions, writs, orders or
other mandates outstanding to which DMD is a party or by which it is bound or
affected, except as disclosed on SCHEDULE 4(c). Copies of material pleadings of
any matter disclosed on Schedule 4(c) shall accompany such schedule.
(d) Estoppel. All statements made in this Agreement, or in any
Exhibit or Schedule hereto, or in any document or certificate executed and
delivered herewith, by DMD are true, correct and complete as of the date of this
Agreement and will be so as of the Closing Date. All statements contained in any
certificate made by any official of DMD and delivered to the Company shall be
deemed representations and warranties of DMD.
(e) Compliance with Laws and Permits. To the best of its
knowledge, DMD has complied in all material respects with its articles of
incorporation and bylaws (each as amended to date), all applicable laws,
regulations and rules, all applicable orders, judgments, writs, decrees or
injunctions of federal, state and municipal governments or any department,
agency or other instrumentality thereof, domestic or foreign, applicable to its
business or properties, and has not done or omitted to do any act or acts which
singly or in the aggregate are in violation of any of the foregoing. To the best
of its knowledge, DMD has obtained all federal, state and municipal licenses and
permits necessary to its properties and operations, is not in violation of any
such license or permit and has not received any notification that any revocation
or limitation thereof is pending or threatened.
(f) No Undisclosed Material Liabilities. DMD has not incurred
any liabilities or obligations whatever (whether direct, indirect, accrued,
contingent, absolute, secured or unsecured or otherwise) affecting or related to
the Assets, including liabilities as guarantor or surety or otherwise for the
obligations of others and tax liabilities due or to become due, except as
described in SCHEDULE 4(f). There is no basis for any material claim against
DMD's assets which involves an amount in excess of $50,000, except as disclosed
in writing to the Company. DMD has no creditors whose prior consent might be
required by law to the sale of the Assets.
(g) Material Transactions and Adverse Changes. Except as has
been disclosed in writing to the Company, DMD has not and as of the Closing Date
will not have: (i) suffered any materially adverse change in its assets taken as
a whole; (ii) suffered any damage or destruction in the nature of a casualty
loss to any one or more of its assets, whether or not covered by insurance,
which singly or in the aggregate are materially adverse to the properties or
business of DMD; (iii) made any change in any method of accounting or accounting
practice, including the revaluation of any of its assets; or (iv) agreed in
writing or otherwise to take any action prohibited in this Section.
(h) Taxes. All income, excise, unemployment, social security,
occupational, franchise, ad valorem and other taxes, duties, assessments or
charges levied, assessed or imposed upon DMD by any federal, state or municipal
government or subdivision or instrumentality thereof have been duly paid or
adequately provided for, and all required tax returns or reports concerning any
such items have been duly filed. DMD has not waived any statute of limitations
with respect to any tax liability whatever for any period prior to the date of
this Agreement or agreed to any extension of time with respect to a tax
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assessment or liability. No consents have been filed by DMD pursuant to
Paragraph 341(f) of the Internal Revenue Code of 1986, as amended.
(i) Contracts. Attached to this Agreement as SCHEDULE 4(i) is a
listing of all material contracts to which DMD is a party. With respect to each
such contract, except as disclosed in writing to the Company, DMD is not in
default, the contract is legal, valid, binding, in full force and effect and
enforceable in accordance with its terms, and the contract will continue after
the Closing to be legal, valid, binding, in full force and effect in accordance
with its terms. Contracts or commitments described in any other Schedule need
not be disclosed in SCHEDULE 4(i).
(j) Indebtedness to and from Affiliates. Except as disclosed on
SCHEDULE 4(j), DMD is not indebted to any officer, director, employee or
shareholder thereof as of the date of this Agreement, and no money or property
is owed to DMD by any officer, director, employee or shareholder thereof, and
none will be owed as of the Closing Date.
(k) Documents Genuine. All originals and/or copies of DMD's
articles of incorporation and bylaws, each as amended to date, and all minutes
of meetings and written consents in lieu of meetings of directors and
shareholders of DMD, financial data, and any and all other documents, material,
data, files, or information which have been or will be furnished to the Company,
are and will be true, complete, correct and unmodified originals and/or copies
of such documents, information, data, files or material.
(l) Financial Statements and Records. DMD will provide to the
Company copies of its financial statements back to inception, and all such
statements shall fairly present the assets, liabilities and financial condition
of DMD as of the respective dates thereof, and all shall have been prepared in
conformity with generally accepted accounting principles, consistently applied
during the periods covered. For purposes of this Agreement, such statements
shall include all notes thereto. DMD also will furnish to the Company copies of
its other books, accounts and records.
(m) Employees and Salaries. DMD will provide to the Company a
list of all its officers and employees, reflecting the job description and
salary of each person.
(n) Insurance. Attached hereto as SCHEDULE 4(n) is a list of all
insurance policies of DMD presently in effect.
(o) Authorization and Validity. The execution, delivery and
performance by DMD of this Agreement and any other agreements contemplated
hereby, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized by DMD and all necessary approvals of the
shareholder(s) of DMD will have been obtained by the Closing Date. This
Agreement and any other agreement contemplated hereby have been or will be as of
the Closing Date duly executed and delivered by DMD and constitutes and will
constitute legal, valid and binding obligations of DMD, enforceable against it
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
(p) Consents; Approvals; Conflict. Except for compliance with
applicable federal and state securities laws, no consent, approval,
authorization or order of any court or governmental agency or other body is
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required for the DMD Holder to consummate the Exchange. Neither the execution,
delivery, consummation or performance of this Agreement shall conflict with, or
constitute a breach of, and no prior approval is necessary by or under, DMD's
articles of incorporation, bylaws or any note, mortgage, indenture, deed of
trust, lease, obligation, or other agreement or instrument to which DMD is a
party.
(q) Intellectual Property. Attached to this Agreement as
SCHEDULE 5(q) is a description of all registered trademarks, trademarks, service
marks, copyrights, trade names and licenses, owned or held by DMD or any
shareholder or affiliate of DMD intended to be used in DMD's business, and
applications pending therefor. Copies of each such right or application shall be
furnished to the Company upon request. To its knowledge, DMD has not interfered
with, infringed upon, misappropriated, or otherwise come into conflict with any
patent, trademark, trade name, service xxxx or copyright belonging to any third
person, and DMD has never received any charge, complaint, claim, demand or
notice alleging any such interference, infringement or misappropriation. DMD
owns or holds adequate licenses or other rights to use all patents, trademarks,
trade names, service marks and copyrights used in its business as now conducted,
and has received no notice of claim that any such use conflicts with, infringes
upon or violates the rights of any third party in a manner which might have a
materially adverse effect upon DMD.
(r) Restrictive Covenants. Prior to the consummation of the
Exchange, DMD shall conduct its business in the ordinary and usual course
without unusual commitments and in compliance with all applicable laws, rules,
and regulations. Furthermore, DMD will not, without the prior written consent of
the Company, (i) make any changes in its capital structure, (ii) incur any
liability or obligation other than current liabilities incurred in the ordinary
and usual course of business, (iii) incur any material indebtedness for borrowed
money, (iv) make any loans or advances other than in the ordinary and usual
course of business, (v) declare or pay any dividend or make any other
distribution with respect to its capital stock, (vi) issue, sell, or deliver or
purchase or otherwise acquire for value any of its stock or other securities, or
(vii) mortgage, pledge, or subject to encumbrance any of its assets or
properties or sell or transfer any of its assets or properties, except in the
ordinary and usual course of business.
(s) Disclaimer of Further Warranties; Etc. Except as expressly
set forth in this Agreement and the Schedules and Exhibits hereto, the Company
has made no other representation or warranty to DMD or the DMD Holder in
connection with the Exchange. DMD's decision to enter into the Exchange is based
upon its own independent judgment and investigation and not on any
representations and warranties of the Company other than those expressly stated
in this Agreement and in the Schedules and Exhibits hereto.
(t) Environmental Matters.
(1) DMD has not (A) generated, used, transported,
treated, stored, released or disposed of any hazardous substance in violation of
any applicable laws; or (B) engaged in any generation, use, transportation,
treatment, storage, release or disposal of any hazardous substance in connection
with the conduct of its business or the use of any property or facility which
has created or might reasonably be expected to create any liability under any
applicable laws or which would require reporting to or notification of any
governmental entity.
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(2) DMD has not (A) received notice that DMD or the DMD
Holder is a potentially responsible party for an environmental cleanup site or
for corrective action under any applicable law; (B) submitted or been required
to submit any environmental notice pursuant to any applicable law; (C) received
any written request for information in connection with any environmental cleanup
site; or (D) been required to undertake any prospective or remedial action or
clean-up action of any kind at the request of any governmental entity, or at the
request of any other person, relating to any applicable environmental law.
(3) The Business has been and is being conducted in
material compliance with all applicable environmental laws.
5. REPRESENTATIONS AND WARRANTIES OF THE DMD HOLDER. The DMD Holder
represents and warrants to the Company that the following are true and correct
as of the date hereof and will be true and correct through the Closing Date as
if made on that date:
(a) The DMD Holder owns of record and beneficially the DMD Share
shown next to his name on the signature page to this Agreement; and his DMD
Share is free and clear of all liens, claims, rights or other encumbrances
whatever and of all options and similar rights of third persons; and no person
has or will have any right in and to such share except as is created by force of
any applicable law. No third party has or at Closing will have any right of
first refusal, pre-emptive right, option or similar right to acquire the DMD
Share except as disclosed to the Company in writing prior to the Closing.
(b) The DMD Holder has the full right, power and legal capacity
to enter into this Agreement and sell and deliver the DMD Share to the Company.
(c) The DMD Holder represents and warrants that he is not now
insolvent and will not be insolvent after selling and delivering the DMD Share
to the Company on the terms of this Agreement, and in exchange for the DMD Share
being sold hereby the DMD Holder is receiving new consideration at least equal
to the full and fair value of the DMD Share being sold.
(d) DMD and the DMD Holder understand and acknowledge that the
Company is a public shell with no current operations, revenues or assets, that
the Company does not have full-time or professional management, and that the
officers and directors of the Company after the Closing will be the current
officers and directors of DMD. Each DMD Holder recognizes that the Exchange
Shares are speculative and involve a high degree of risk, and that the prospects
and future success of the Company depend principally upon the DMD Holder and
current DMD management.
(e) The DMD Holder acknowledges and agrees that he or his
representatives have been furnished with substantially the same kind of
information regarding the Company and its business, assets, financial condition
and plan of operation as would be contained in a registration statement and
included prospectus prepared in connection with a public offering of the
Exchange Shares. The DMD Holder further represents that he has had an
opportunity to ask questions of and receive answers from the Company regarding
the Company and its business, assets, results of operations, financial condition
and plan of operation and the terms and conditions of the issuance of the
Exchange Shares.
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(f) In connection with the issuance and delivery of the Exchange
Shares, DMD Holder understands and acknowledges that the Exchange Shares have
not been and will not be registered under the Act in reliance upon exemptions
from registration provided by Section 4(2) of the Act and Rule 506 under the Act
and under the securities or blue sky laws of any state or any rules or
regulations promulgated thereunder, on the grounds that the transactions
contemplated in this Agreement do not involve any public offering. The DMD
Holder is acquiring the Exchange Shares for his own account, and not for the
account of any other person, and not for distribution, assignment or resale to
others, or for pledge or hypothecation, and no other person has or is intended
to have a direct or indirect ownership or contractual interest in the Exchange
Shares except as may exist or arise by operation of law. The DMD Holder
acknowledges that the Exchange Shares are "restricted securities" as that term
is defined in Rule 144(a) of the General Rules and Regulations under the Act and
understands that the Exchange Shares must be held indefinitely, unless they are
subsequently registered under the Act or an exemption from such registration
requirements is available for their resale. The DMD Holder understands and
agrees that the prior written consent of the Company will be necessary for any
transfer of the Exchange Shares, unless the shares have been duly registered
under the Act or the transfer is made in accordance with Rule 144 or other
available exemption under the Act. The DMD Holder further understands that every
certificate issued by the Company evidencing Exchange Shares will bear a legend
restricting transfer as provided in this Agreement.
(g) The DMD Holder, alone or together with the DMD Holder's
adviser(s), has such knowledge and experience in financial, tax and business
matters as to enable DMD Holder to utilize the information made available by the
Company, in connection with the Exchange and issuance of the Exchange Shares, to
evaluate the merits and risks of acquiring the Exchange Shares and to make an
informed investment decision with respect thereto.
(h) All information which the DMD Holder has provided or will
provide to the Company is or will be correct and complete as of the date
furnished to the Company, and, if there should be any material change in such
information prior to the Closing as to DMD Holder, will immediately provide the
Company with such information.
(i) DMD Holder was not solicited by the Company by any form of
general solicitation or general advertising, including but not limited to any
advertisement, article, notice or other communication published in any
newspaper, magazine or similar media or broadcast over television or radio, or
made available over telephone lines by any information service, or any seminar
or meeting whose attendees had been invited by any means of general solicitation
or general advertising.
(j) Except as expressly set forth in this Agreement and the
Schedules and Exhibits hereto, the Company has not made any representation or
warranty to the DMD Holder in connection with this Agreement. The DMD Holder's
decision to enter into the Exchange is based upon his own independent judgment
and investigation and not on any representations and warranties of the Company
other than those expressly stated in this Agreement and in the Schedules and
Exhibits hereto.
(k) To the best of the knowledge of the DMD Holder, all of the
representations and warranties of DMD set forth in this Agreement are accurate
and true.
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6. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Unless specifically
stated otherwise, the Company represents and warrants to the other parties that
the following are true and correct as of the date hereof and will be true and
correct through the Closing Date as if made on that date.
(a) Organization and Good Standing. The Company is and on the
Closing Date will be duly organized, validly existing and in good standing under
the laws of the State of Nevada. The Company has no assets or liabilities and
currently conducts no business in any state.
(b) Authorized Capitalization. As provided in its Articles of
Incorporation, the authorized capital stock of the Company consists of
105,000,000 shares, of which 100,000,000 shares, par value $.001 per share, are
designated as common stock, and 5,000,000 shares, par value $.001 per share, are
designated as preferred stock, none of which are issued or outstanding.
(c) Outstanding Options, Warrants or Other Rights. Other than
the Standing Options, the Company does not have outstanding any option, warrant
or similar instrument and is not a party to or bound by any agreement,
instrument, arrangement, contract, obligation, commitment or understanding of
any character, whether written or oral, express or implied, whereby the Company
is bound to issue shares of its capital stock or any instrument or right
convertible into or exchangeable for shares of its capital stock, nor relating
to the sale, assignment, encumbrance, conveyance, transfer or delivery of any
capital stock of the Company of any type or class. The Company shall provide to
DMD a list of all Holder of the Company's capital stock and of the Standing
Options, the number of shares held by each or subject to option and the number
of each certificate held, duly certified by the Secretary of the Company.
(d) Subsidiaries. The Company has and immediately prior to the
Closing will have no subsidiaries.
(e) Documents Genuine. All originals and/or copies of the
Company's articles of incorporation and bylaws, each as amended to date, and all
minutes of meetings and written consents in lieu of meetings of shareholders,
directors and committees of directors of the Company, financial data, and any
and all other documents, material, data, files, or information which have been
or will be furnished to DMD, are and will be true, complete, correct and
unmodified originals and/or copies of such documents, information, data, files
or material and will be the only such documents, information, data, files and
material.
(f) Litigation. Except as set forth in schedule "A," there are
no claims, actions, suits, proceedings or investigations pending or threatened
against or affecting the Company in any court or by or before any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or other instrumentality, domestic or foreign, or arbitration tribunal or
other forum. There are no judgments, decrees, injunctions, writs, orders or
other mandates outstanding to which the Company is a party or by which it is
bound or affected. The following sets forth all outstanding claims against the
Company and the manner in which same shall be discharged: Xxxxxx & Xxxxxx,
Berns& Xxxxx, CCN Newswire, Xxxxxxxxxx Xxxxxxxx, Global Financial Press,
Interwest Transfer Co., KPMG, Xxxxxxx Corp, Virtual Web Systems, Xxxxxx Xxxxx,
Xxxxx Xxxx, Xxxxxxx Xxxxxxx; the foregoing have agreed that their respective
claims shall be satisfied in full exclusively from the proceeds the Company
receives as payment in certain bankruptcy proceedings in Canada. It is
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understood that the said proceeds in their entirety shall not be used for the
general purposes of the Company save to satisfy the above noted claims.
(g) Compensation Plans. Except as described below, the Company
has not authorized and does not have in effect any stock option or stock
purchase plan, dividend reinvestment plan or similar plan pursuant to which any
person is entitled to acquire capital stock of the Company or any securities
convertible into or exchangeable for its capital stock. The Company has
delivered to DMD a copy of each plan described below. No shares will be awarded
or issued pursuant to either such plan without the prior written authorization
of DMD.
(i) The Company has in effect a 1997 Compensatory Stock
Option Plan, covering 1,000,000 shares of the Company's common stock. No options
have been granted or shares issued pursuant to this plan, and none will be
granted or issued prior to Closing. No shares of the Company are required to be
held in reserve under this plan.
(ii) The Company has in effect a 1997 Employee Stock
Compensation Plan covering 1,500,000 of the Company's common shares, pursuant to
which the Company may award shares of common stock to persons defined therein as
employees. No shares have been awarded pursuant to such plan or will be awarded
prior to Closing. No shares of the Company are required to be held in reserve
under this plan.
(h) Authorization and Validity. The execution, delivery and
performance by the Company of this Agreement and any other agreements
contemplated hereby, and the consummation of the transactions contemplated
hereby and thereby, have been duly authorized by the Company. This Agreement and
any other agreement contemplated hereby have been or will be as of the Closing
Date duly executed and delivered by the Company and constitute and will
constitute legal, valid and binding obligations of the Company, enforceable
against it in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies.
(i) Financial Statements. The Company will provide to DMD the
Company's financial books and records such audited and unaudited financial
statements of the Company, back to inception, as exist and as DMD requests. All
such statements shall fairly present the assets, liabilities and financial
condition of the Company as of the respective dates thereof, and all shall have
been prepared in conformity with generally accepted accounting principles,
consistently applied during the periods covered. For purposes of this Agreement,
such statements shall include all notes thereto.
(j) No Undisclosed Material Liabilities. The Company has not
incurred any liabilities or obligations whatever (whether direct, indirect,
accrued, contingent, absolute, secured or unsecured or otherwise), which singly
or in the aggregate are material to it, except as disclosed in the Company's
financial statements or otherwise disclosed in writing to DMD.
(k) Taxes. All income, excise, unemployment, social security,
occupational, franchise and other taxes, duties, assessments or charges levied,
assessed or imposed upon the Company by the United States or by any state or
municipal government or subdivision or instrumentality thereof have been duly
paid or adequately provided for, and all required tax returns or reports
concerning any such items have been duly filed or will be so filed.
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(l) Indebtedness to or from Affiliates. Except as set forth in
Section 6(f) hereinbefore, the Company is not and will not be indebted to any
officer, director, employee or shareholder thereof as of the Closing Date. No
money or property is owed to the Company by any officer, director, employee or
shareholder thereof, and none will be owed as of the Closing.
(m) Salaries. Except as set forth in Section 6(f) hereinbefore,
no person currently receives a salary or other cash compensation from the
Company, and no person will receive a salary or other cash compensation from the
Company prior to Closing.
(n) Insurance. The Company does not now have any insurance
policy in effect and will not obtain any insurance policy prior to Closing.
(o) Books, Records and Accounts. Except for the minute book and
accounting and corporate records of the Company furnished to DMD, there are no
other books, records or accounts of the Company. DMD shall have the right to
review and obtain the records, books and accounts of the Company, all and
sundry.
(p) Estoppel. All statements made herein, or in any Exhibit or
Schedule hereto, or in any document or certificate executed and delivered
herewith by the Company are true, correct and complete as of the date of this
Agreement and will be so as of the Closing. All statements contained in any
certificate made by any officer or director of the Company and delivered to DMD
shall be deemed representations and warranties of the Company.
(q) Consents; Approvals; Conflict. No consent, approval,
authorization or order of any court or governmental agency or other body is
required for the Company to execute and perform its obligations under this
Agreement. Neither the execution, delivery, consummation nor performance of this
Agreement shall conflict with, constitute a breach of the Company's articles of
incorporation and bylaws, as amended to date, or any note, mortgage, indenture,
deed of trust or other agreement of instrument to which the Company is a party
or by which it is bound nor, to the best of the Company's knowledge and belief,
any existing law, rule, regulation, or any decree of any court or governmental
department, agency, commission, board or bureau, domestic or foreign, having
jurisdiction over the Company. The Company has timely, accurately, and
completely filed all reports, statements and schedules required under applicable
federal and state securities laws with the U.S. Securities and Exchange
Commission and all governing securities authorities, if any.
(r) Restrictive Covenants. Prior to the consummation of the
proposed Exchange, the Company shall not engage in any business or activity
other than attempting to consummate the Exchange and offer and sell the Units.
Furthermore, the Company will not, without the prior written authorization of
DMD, (i) make any changes in its capital structure, (ii) incur any liability or
obligation other than current liabilities incurred in the ordinary and usual
course, (iii) declare or pay any dividend or make any other distribution with
respect to its capital stock, (iv) issue, sell, or deliver or purchase or
otherwise acquire for value any of its stock or other securities, (v) make any
investment of a capital nature, or (vi) enter into any contract, agreement, or
other commitment which is material to the Company.
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12
(s) Disclaimer of Further Warranties; Etc. Except as expressly
set forth in this Agreement and the Schedules and Exhibits hereto, neither DMD
nor the DMD Holder has made any other representation or warranty to the Company
in connection with the Exchange. The Company's decision to enter into the
Exchange is based upon the Company's own independent judgment and investigation
and not on any representations and warranties of DMD or the DMD Holder other
than those expressly stated in this Agreement and in the Schedules and Exhibits
hereto.
8. CONDITIONS TO OBLIGATIONS OF THE PARTIES; DELIVERIES. All obligations
of the parties under this Agreement are subject to the fulfillment, prior to the
Closing, of all conditions precedent and to performance of all covenants and
agreements and completion of all deliveries contemplated herein, unless
specifically waived in writing by the party entitled to performance or to demand
fulfillment of the covenant or delivery of the documents.
8.1 Documents to be delivered to the Company. At the Closing, the
following documents shall be delivered to the Company by DMD or the DMD Holder,
as the case may be, which documents shall be reasonably satisfactory in form and
content to the Company's counsel:
(a) Certificates executed by the chief executive officer and the
chief financial or accounting officer of DMD, dated as of the Closing Date,
certifying that the representations and warranties of DMD, contained in this
Agreement and the information set forth in all Schedules and Exhibits of DMD
hereto are then true and correct and that DMD has complied with all agreements
and conditions required by this Agreement and all related agreements to be
performed or complied with by DMD.
(b) A copy of the directors' resolution or the minutes of the
meeting of the directors of DMD approving the execution and performance of this
Agreement.
(c) The certificate evidencing the DMD Share, indorsed on the
reverse side for transfer or accompanied by a signed stock power in form
reasonably satisfactory to the Company.
(d) All completed Schedules, and all Exhibits called for in this
Agreement.
8.2 Documents to be delivered to DMD and the DMD Holder. At the Closing
the following documents shall be delivered to DMD and the DMD Holder by the
Company, which documents shall be reasonably satisfactory in form and content to
DMD's counsel:
(a) To the DMD Holder, a stock certificate evidencing the
Exchange Shares.
(b) To DMD, a certificate executed by the Company dated as of
the Closing Date, certifying that the representations and warranties of the
Company contained in this Agreement and the information set forth in all
Schedules and Exhibits of the Company are then true and correct and that the
Company has complied with all agreements and conditions required by this
Agreement to be performed or complied with by it.
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(c) To DMD, a copy of the directors' resolution or the minutes
of the meeting of the directors of the Company approving the execution and
performance of this Agreement.
(d) All completed Schedules and all Exhibits called for in this
Agreement.
8.3 Conditions Precedent. The obligations of the parties under this
Agreement are subject to the satisfaction of the following conditions (in
addition to other conditions and terms of this Agreement), unless waived in
writing, on or prior to the Closing:
(a) Representations and Warranties Correct. The representations
and warranties of every party contained in this Agreement shall be in all
material respects true and correct on and as of the Closing Date as if made on
such date.
(b) Compliance. The Company, DMD and the DMD Holder each shall
have performed all covenants and agreements, satisfied all conditions and
complied with all other terms and provisions of this Agreement to be
respectively performed, satisfied or complied with by it as of the Closing Date.
(c) No Errors or Misrepresentations. The Company shall not have
discovered any material error, misstatement or omission in or failure of any
representation or warranty made by any of the other parties, and DMD shall not
have discovered any material error, misstatement or omission in or failure of
any representation or warranty made by the Company.
(d) Due Diligence Examination. The Company shall have completed
a due diligence examination of DMD satisfactory to the Company covering all
books, records, contracts and other documents and all financial affairs of DMD.
DMD shall have completed a due diligence examination of the Company satisfactory
to DMD covering all books, records, contracts and other documents and all
financial affairs of the Company.
(e) Legal Matters. All legal matters in connection with this
Agreement and the consummation of all transactions herein contemplated, and all
documents and instruments delivered in connection herewith shall be reasonably
satisfactory in form to each party.
(f) No Litigation or Proceedings. No injunction or restraining
order of any federal or state court shall be in effect which prevents the
purchase of the Assets or issuance and delivery of the Exchange Shares, and no
lawsuit or other proceeding shall have been filed by any person by the Closing
Date contesting or attempting to enjoin either action, and no action taken and
no law shall have been passed after the date of this Agreement which prevents
the Exchange.
9. OTHER COVENANTS OF THE PARTIES. The parties agree that, prior to the
Closing:
(a) Effectuation of this Agreement. The parties hereto each will
use their best efforts to cause this Agreement and all related agreements to
become effective, and all transactions herein and therein contemplated to be
consummated, in accordance with its and their terms, to obtain all required
consents, waivers and authorizations of governmental entities and other third
parties, to make all filings and give all notices to those regulatory
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14
authorities or other third parties which may be necessary or reasonably required
in order to effect the transactions contemplated in this Agreement, and to
comply with all federal, local and state laws, rules and regulations as may be
applicable to the contemplated transactions.
(b) Restriction on Action. The parties each agree that he or it
will not do any thing or act prohibited by this Agreement or any related
agreement, or fail to do any thing or act which he or it has undertaken to do in
this Agreement or any related agreement.
(c) Access and Information. To the extent each party deems
necessary for purposes of this Agreement and the transactions contemplated
hereby, DMD and the Company each shall permit the other, its counsel,
accountants and other representatives to have full access, upon reasonable
notice and during regular business hours, throughout the period prior to
Closing, to its equipment, assets, properties, books and records, and will cause
to be furnished to the requesting party and its representatives during such
period all information it or its representatives may reasonably request.
(d) No-Shop Provision. DMD and the DMD Holder agree that, from
the date hereof until Closing or termination of this Agreement, neither will
take any action, directly or indirectly, to solicit indications of interest in,
or offers for, any transaction similar to the Exchange or any investment into
DMD from anyone other than the Company. DMD agrees promptly to inform the
Company of any offers or solicitations for a similar transaction, including the
terms thereof, made by any third party, provided, that the foregoing shall not
include casual oral offers or solicitations not formally considered by DMD.
Violation by DMD of any of the requirements of this paragraph shall constitute a
material breach of this Agreement.
(e) Confidentiality. DMD and the Company covenant that they each
will not disclose any confidential information of the other parties, except to
its officers, directors, attorneys, accountants, and employees involved in these
transactions, and only then on the condition that such individuals not disclose
the information disclosed to them. Notwithstanding the foregoing, the terms of
this Agreement, or of any of the transactions contemplated hereby, may be
disclosed following execution hereof, provided that each party will provide at
least twenty-four hours' notice to the other party prior to making the initial
public announcement regarding the transaction. In addition, either party may
disclose this Agreement or any part hereof to any third party at any time if
required to do so by law, this Agreement or other contractual obligation.
10. SURVIVAL OF COVENANTS AND WARRANTIES.
10.1 Indemnification by DMD. DMD agrees to defend, indemnify and hold
the Company, any subsidiary or affiliate thereof, and its respective successors,
officers, directors and controlling persons (the "Indemnified Company Group")
harmless from and against any and all losses, liabilities, damages, costs or
expenses (including reasonable attorney's fees, penalties and interest) payable
to or for the benefit of, or asserted by, any party resulting from, arising out
of, or incurred as a result of(a) the breach of any representation made by DMD
or the DMD Holder herein or in accordance herewith; (b) the breach of any
warranty or covenant made by DMD or the DMD Holder herein or in accordance
herewith; or (c) any claim, whether made before or after the date of this
Agreement, or any litigation, proceeding or governmental investigation, whether
commenced before or after the date of this Agreement, arising out of the
-14-
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business of DMD, or arising out of any act or occurrence, prior to, or any state
of facts existing as of the Closing.
10.2 Survival of Covenants and Warranties. The representations,
warranties, covenants and agreements made by DMD on the one hand, and the
Company on the other hand, shall survive the Closing and shall be fully
enforceable at law or in equity against such other party and its successors and
assigns for a period of one year after the Closing Date. Any investigation at
any time made by or on behalf of (or any disclosure to) any party hereto shall
not diminish in any respect whatsoever its right to rely on the representations
and warranties of the other party hereto.
10.3 Notice of Claims. The Company and DMD each agree to give prompt
written notice to the other of any claim against the party giving notice which
might give rise to a claim by it against the other party hereto, stating the
nature and basis of the claim and the actual or estimated amount thereof.
11. TERMINATION OF THIS AGREEMENT.
11.1 Grounds for Termination. This Agreement shall terminate:
(a) By mutual written consent of the Company and DMD; or
(b) By DMD or the Company, if:
(i) all the conditions precedent to its respective
obligations hereunder have not been satisfied or waived prior to the Closing
Date, as it may be accelerated or extended, or if DMD Holder refuses to execute
this Agreement;
(ii) any party shall have defaulted or refused to
perform in any material respect under this Agreement, or if the Company or DMD
should have reasonable cause to believe there has been a material representation
concerning, or failure or breach of, any representation or warranty by the other
party, or if it appears that either DMD or the Company has committed any
unlawful acts affecting the other party;
(iii) the transactions contemplated in this Agreement
and related agreements have not been consummated on the Closing Date, as it may
be accelerated or extended, OR
(iv) either the Company or DMD shall reasonably
determine that the transactions contemplated in this Agreement have become
inadvisable by reason of the institution or threat by any federal, state or
municipal governmental authorities or by other person whatever of a formal
investigation or of any action, suit or proceeding of any kind against either or
both parties which in one party's reasonable belief is material in light of the
other party's business, prospects, properties or financial condition;
11.2 Manner of Termination. Any termination of this Agreement (other
than an automatic termination) shall be made in accordance with the above listed
grounds and, if terminated by DMD or the Company, shall be accompanied by a copy
of the resolution of the terminating party's board of directors. Written notice
of termination shall be given to the other party as required in this Agreement
as promptly as is practical under the circumstances. Upon a party's receipt of
such termination notice, this Agreement shall terminate and the transactions
herein contemplated shall be abandoned without further action by the parties.
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11.3 Survival of Confidentiality Provisions. Upon termination of this
Agreement for any reason, (i) the covenants of the parties concerning the
confidentiality and proprietary nature of all documents and other information
furnished hereunder shall remain in force except as to information which has
otherwise become public knowledge, and (ii) each party shall promptly return all
documents received from the other party in connection with this Agreement. This
Paragraph constitutes a mutual covenant of the parties, and either may
judicially enforce it.
12. MISCELLANEOUS PROVISIONS.
(a) Assignment. Neither this Agreement nor any right created
hereby or in any agreement entered into in connection with the transactions
contemplated hereby shall be assignable by any party hereto without the prior
written consent of the party not seeking assignment, and any purported
assignment without such consent shall be null and void and of no force or
effect. No such assignment shall relieve the assignor of any obligations created
under this Agreement.
(b) Parties in Interest; No Third Party Beneficiaries. Except as
otherwise provided herein, the terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the parties and their respective
heirs, legal representatives, successors and permitted assigns. Neither this
Agreement nor any other agreement contemplated hereby shall be deemed to confer
upon any person not a party hereto or thereto any rights or remedies hereunder
or thereunder, except as expressly set forth in this Agreement.
(c) Entire Agreement. This Agreement and the agreements
contemplated hereby constitute the entire agreement of the parties regarding the
subject matter hereof, and supersede all prior agreements and understandings,
both written and oral, among the parties, or any of them, with respect to the
subject matter hereof.
(d) Severability. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under present or future laws effective
during the term hereof, such provision shall be fully severable and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect and shall not be
affected by the illegal, invalid or unenforceable provision or by its severance
herefrom. Further, in lieu of such illegal, invalid or unenforceable provision,
there shall be added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid, or unenforceable provision as may be
possible and be legal, valid and enforceable.
(e) Survival of Representations, Warranties and Covenants. The
representations, warranties and covenants of all parties contained herein shall
survive the Closing, and all statements contained in any certificate, exhibit or
other instrument delivered by or on behalf of the Company or DMD, as the case
may be, and, notwithstanding any provision in this Agreement to the contrary,
shall survive the Closing.
(f) Interpretation. This Agreement shall be governed by and
construed under the laws of the State of Colorado and shall be interpreted as if
both parties participated equally in its drafting. The captions in this
Agreement are for convenience of reference only and shall not limit or otherwise
affect any of the terms or provisions hereof. Whenever the context requires,
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the gender of all words used herein shall include the masculine, feminine and
neuter, and the number of all words shall include the singular and plural. Use
of the words "herein", "hereof", "hereto" and the like in this Agreement shall
be construed as references to this Agreement as a whole and not to any
particular provision in this Agreement, unless otherwise noted.
(g) Notice. Any notice or communication hereunder or in any
agreement entered into in connection with the transactions contemplated hereby
must be in writing and given by depositing the same in the United States mail,
addressed to the party to be notified, postage prepaid and registered or
certified with return receipt requested, by telefax transmission or by delivery
by use of a messenger which regularly retains its delivery receipts. Such notice
shall be deemed received on the date on which it is delivered to the addressee.
For purposes of notice, the addresses of the parties shall be, if to an DMD
Holder, sent to DMD for forwarding, and:
If to DMD: 0000 Xxxxxxx Xx. with a copy to:
Burlington, Ontario Xxxxxxx X. Xxxxxxx, Esq.
Canada L7L 5R2 Xxxxxxxxx, Comden &
ATTN: Xxxxx Xxxxxxxx, President Casselman L.L.P.
0000 Xxxxxx Xxxx., #000
Xxxxxxx, XX 00000
If to Company: 000 Xxxxx Xxxx Xxxxxx Xx.
Xxxxxxxxxx XX 00000
ATTN: Xxxxx Xxxx, President
(h) No Finders. Each party represents and warrants to the others
and agrees that it has not employed or engaged, and will not employ or engage,
any person as a finder or broker in connection with the transactions
contemplated herein, and that no person is entitled to compensation as a finder
or broker. Each party hereby indemnifies the other parties and holds the other
parties harmless from and against any claims of any third persons claiming to
have acted as a finder or broker in connection with the transactions herein
contemplated, and such indemnity shall include all expenses, costs and damages
arising from or related to such claims, including reasonable attorneys' fees.
(i) Counterparts. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, and all of which
together shall constitute one and the same instrument. Execution and delivery of
this Agreement by exchange of facsimile copies bearing facsimile signature of a
party shall constitute a valid and binding execution and delivery of this
Agreement by such party. Such facsimile copies shall constitute enforceable
original documents.
(j) Prevailing Party (Attorneys' Fees) Clause. In the event of
any litigation or proceeding arising as a result of the breach of this Agreement
or the failure to perform hereunder, or failure or untruthfulness of any
representation or warranty herein, the party or parties prevailing in such
litigation or proceeding shall be entitled to collect the costs and expenses of
bringing or defending such litigation or proceeding, including reasonable
attorneys' fees, from the party or parties not prevailing.
(k) Relationship of the Parties. Nothing in this Agreement is
intended to be construed so as to suggest that the parties hereto are partners
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or joint venturers, or that any party or its employees is the employee or agent
of the other. Neither DMD nor the Company has any express or implied right or
authority under this Agreement to assume or create any obligations on behalf of
or in the name of the other party to any contract, agreement, arrangement,
understanding or undertaking with any third party.
(l) Schedules, etc. Each Schedule to this Agreement shall be
initialed by DMD and the Company, and if provided by DMD Holder then by the DMD
Holder. If a Schedule does not apply, it must nonetheless be furnished and
marked "not applicable." The information contained in every Schedule shall be
updated as necessary as of a date as close as possible to the Closing Date and
must be accurate and complete as of the Closing Date. Each party signing this
Agreement represents and warrants, to all other parties, by such signature that
he has carefully read this Agreement in its entirety and understands the
provisions of this Agreement.
(m) No Advice Given. DMD and the DMD Holder acknowledge and
agree that they have neither asked for nor received any legal or tax advice from
the Company or its Directors or any other person associated with the Company in
regard to this Agreement or the transactions herein contemplated, and have
instead relied on advice and counsel furnished by their own legal or other
advisers in order to satisfy themselves as to the tax and other legal
implications to them of the Exchange and issuance of the Exchange Shares.
(n) Expenses. Except as otherwise provided in this Agreement,
DMD shall bear the fees and expenses incurred in connection with its performance
of its obligations as part of the transactions contemplated herein.
(o) Acknowledgments by DMD Holder. The DMD Holder acknowledges
and agrees that his execution of this Agreement shall constitute a written
consent in lieu of a meeting of the shareholder of DMD, and that no meeting of
or written consent or other action by the shareholder of DMD is necessary to
ratify the valid execution and performance of this Agreement and consummation of
the Exchange by DMD.
(p) Condition. This agreement shall be conditional and subject
to the final approval of the Board of Directors of Xxxxxxxx.xxx Incorporated.
Upon execution by all parties of this agreement, Innofone will cause a board of
directors meeting to be held in accordance with its bylaws in order to obtain
the required approval. Innofone undertakes to use its best efforts to obtain the
decision of the board of directors prior to closing.
///
///
///
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IN WITNESS WHEREOF, all parties have executed this Agreement, and DMD
and the Company have initialed every preceding page hereof, as of the dates
respectively indicated below.
"DMD": "THE COMPANY":
DIGITAL MICRO DISTRIBUTION CANADA, INC. XXXXXXXX.XXX, INCORPORATED.
An Ontario Corporation A Nevada Corporation
By: /s/ Xxxxx Xxxxxxxx By: /s/ Xxxxx Xxxx
--------------------------- ----------------------------
Name: Xxxxx Xxxxxxxx Name: Xxxxx Xxxx
Title: President Title: President
DATED: September 10, 2001 DATED: September 10, 2001
"DMD HOLDER":
/s/ Xxxxx Xxxxxxxx
--------------------------------
Xxxxx Xxxxxxxx, 1 Share
DATED: September 10, 2001
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SCHEDULE 4(h)
DMD Taxes Owing
Payroll and source deduction taxes owing: $ 52,500
GST taxes owing $ 32,900
Anticipated federal and provincial
tax owing $ 239,348
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SCHEDULE 4(j)
DMD Indebtedness to and from Affiliates
Except as referred to in the liabilities discussion contained on the
balance sheet (unaudited) of DMD disclosed to the Company otherwise, the sole
indebtedness of DMD to and from affiliates are as follows:
Due sole shareholder of DMD
Xxxxx Xxxxxxxx $ 7,498
Due related party
Xx. X. Xxxxxxxx $ 42,741
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