Agreement of Acquisition
Agreement of Acquisition, dated as of December 3, 2002, among MetaSource Group,
a Nevada company, hereinafter called "MSGR"; Sitaro Group, a Delaware
corporation, hereinafter called the "Acquired Company"; and the Acquired
Company's stockholders, hereinafter called the "Stockholders", as listed in
Appendix A.
1. Agreement of Acquisition. All of the Acquired Company's shares shall be
acquired by MSGR in exchange solely for an amount of common stock of MSGR
as hereinafter defined. As of the Closing Date, hereinafter defined in
Article five, the shares of MSGR will be issued to the Acquired Company's
stockholders on a pro rata basis of share ownership of the Company.
Exchange of Shares. MSGR and the Stockholders agree that all of the
shares of the Acquired Company shall be exchanged with MSGR for shares of MSGR
common stock based on the Formula, defined hereinafter, based on the average
trading price (defined hereinafter) of MSGR common stock on the day this
Agreement is executed. The Formula shall be the average of the following: 5
times prior year earnings of the Acquired Company, as listed in Schedule A
attached to this Agreement, and 5 times forward year earnings (defined
hereinafter) of the Acquired Company. Forward year earnings shall be defined as
earnings calculated in a method acceptable to the MSGR auditor for the period of
twelve calendar months following the date of this Agreement. The average trading
price of MSGR shares will be calculated as the sum of high and low prices as
reported on xxxxxxx.xxxxx.xxx on the day this Agreement is executed divided by
two. Such shares will be held in escrow by MSGR for a period of one year from
the date of this Agreement. On the first anniversary of the Closing Date,
additional shares will be added according to the formula above if forward year
Acquired Company earnings are greater than prior year Acquired Company earnings.
If forward year Acquired Company earnings are less than prior year Acquired
Company earnings, the appropriate shares will be subtracted according to the
formula above.
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Shares held in escrow by MSGR will secure and indemnify MSGR against a breach of
warranties detailed hereinafter in Article three, sections (f) through (l) of
this agreement. In the event of an alleged breach of the warranties in sections
(f) through (l) detailed in Article three, MSGR and the Stockholders will
negotiate in a timely manner a reduction in the number of shares which are to be
issued to Stockholders as compensation for such breach. In the event such
negotiations do not produce an agreed upon reduction in the number of shares,
MSGR and the Stockholders agree to submit the dispute to the American
Arbitration Association (AAA) no later than one year from the date the breach
was discovered. In the event of a breach of warranties in Article three,
sections (a) through (e), MSGR will have the option to terminate this agreement.
At the end of one year from the Closing Date, the Stockholders will be fully
vested in the MSGR shares less any amount forfeited, disputed, agreed upon or
resolved by the AAA for forfeiture due to alleged breach of warranties described
in Article three. Resolution of claims by the AAA will be binding on MSGR, the
Acquired Company and the Stockholders.
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2. Delivery of Shares. On the Closing Date, the Stockholders will deliver to
MSGR certificates representing their Acquired Company shares duly endorsed
with signatures guaranteed and with documentary stamps affixed at the
Stockholders' expense so as to make MSGR the sole owner thereof, free and
clear of all claims and encumbrances. Delivery will be made at
00 Xxxxxxxx Xxxxx, #0000, XX, XX 00000.
3. Representations of Stockholders and the Acquired Company. The Stockholders
and the Acquired Company represent and warrant as follows:
a) As of the Closing Date the Stockholders will be the sole owners of the
Acquired Company shares appearing of record in their names; such shares
will be free from claims, liens or other encumbrances.
b) The Acquired Company shares will constitute validly issued shares of
the Acquired Company which are fully paid and nonassessable.
c) As of the Closing Date, there will be ______________ shares of Acquired
Company's stock issued and outstanding. There are no options, warrants,
convertible or other securities, calls, commitments, conversion
privileges, preemptive rights or other rights or agreements outstanding
to purchase or otherwise acquire (whether directly or indirectly) any
of the Acquired Company's share capital or any security convertible
into or exchangeable for any shares of the Acquired Company's capital
stock or obligating the Acquired Company to grant, issue, extend, or
enter into, any such option, warrant, convertible or other security,
call, commitment, conversion privilege, preemptive right or other right
or agreement ("Interests"). The Company has no liability for any
dividends accrued but unpaid. No Acquired Company shares are reserved
for issuance under any stock purchase, stock option or other benefit
plan.
d) The financial statements of the Acquired Company, as listed in Schedule
A, are true and complete statements of the financial condition of the
Acquired Company as of that date; there are no material liabilities,
either fixed or contingent, not reflected in such financial statements
other than contracts of obligations in the usual course of business;
and no such contracts or obligations in the usual course of business
are liens or other liabilities which, if disclosed, would alter
substantially the financial condition of the Acquired Company as
reflected in such financial statements.
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e) The Acquired Company is not involved in any pending litigation or
governmental investigation or proceeding not reflected in the Acquired
Company's financial statements or otherwise disclosed in writing to
MSGR, and to the knowledge of the Acquired Company or the Stockholders,
no litigation or governmental investigation or proceeding is threatened
against the Acquired Company.
f) Since October 31, 2002, there have not been, and prior to the Closing
Date there will not be, any material changes in the financial condition
of the Acquired Company, except changes arising in the ordinary course
of business.
g) Intellectual Property. The Acquired Company owns, or has the
irrevocable right to use, sell or license all of its Intellectual
Property Rights (as defined below, the "IP Rights"), necessary or
required for the conduct of its business as presently conducted, and
such rights to use, sell, or license are sufficient for such conduct of
its business. Further, the Acquired Company is the legal and beneficial
owner of all its IP Rights. Any and all intellectual property held by
the Acquired Company is owned outright, free and clear of any claims,
liens, security interests, mortgages, encumbrances or obligations by
the Acquired Company. The Acquired Company is currently taking
reasonable and practicable steps designed to protect, preserve, and
maintain the secrecy and confidentiality of all material Acquired
Company IP Rights and all of Acquired Company's proprietary rights
therein. All officers, employees, agents, and consultants of the
Acquired Company having access to proprietary information agree not to
disclose such information to any third parties. IP Rights, as used
herein, means, collectively, all worldwide industrial and intellectual
property rights, including but not limited to patents, patent
applications, patent rights, trademarks, trademark applications, trade
names, trade dress, service marks, service xxxx applications,
copyrights, copyright applications, franchises, licenses, inventions,
trade secrets, know-how, customer lists, proprietary processes and
formulae, manuals, memoranda and records.
h) As of the Closing Date, the Acquired Company will be in good standing
as a ___________________________ Company.
i) As of the Closing Date, the Acquired Company will have in effect all
fire, casualty and liability and other relevant insurance policies.
j) There will be no dividends of the Acquired Company declared and unpaid
on any shares of any class of capital stock as of the Closing Date.
k) Prior to the Closing Date, the Acquired Company warrants that it will
not make or become a party to any contract or commitment, or renew,
extend, amend or modify any contract or commitment, except in the
ordinary course of business.
l) The Acquired Company and the Stockholders are duly authorized to
execute this agreement.
4. Representations of MSGR. MSGR represents and warrants as follows:
a) As of the Closing Date, the MSGR shares to be delivered to the
Stockholders will constitute valid and legally issued shares of MSGR,
fully paid and nonassessable.
b) The officers of MSGR are duly authorized to execute this agreement.
c) MSGR is not involved in any pending litigation or governmental
investigation or proceeding not reflected in such financial statements
or otherwise disclosed in writing to the Stockholders.
d) As of the Closing Date, MSGR will be in good standing as a Nevada
corporation.
5. Closing Date. The Closing Date of this transaction will be no later than 60
days from the execution of this Agreement, subject to the Conditions to
Closing, defined hereinafter. Until such date shares will not be exchanged.
The Conditions to Closing shall be defined as:
1. Satisfactory reconciliation of Acquired Company bank statements and
other materials with Schedule A attached to this Agreement. The
Stockholders shall provide such materials no later than four weeks
prior to the Closing Date.
6. Prohibited Acts. From the date this agreement is executed to the Closing
Date, the Acquired Company agrees not to do any of the following:
a) Declare or pay any dividends or other distributions on its stock or
purchase or redeem any of its stock;
b) Issue any stock or other securities, including any right or option to
purchase or otherwise acquire any of its stock, or issue any notes or
other evidences of indebtedness not in the usual course of business.
c) Make capital expenditures in excess of that made in the normal course
of business, except with the consent of MSGR.
7. Delivery of Records. The Stockholders agree that on or before the Closing
Date they will cause to be delivered to MSGR such corporate records or
other documents as MSGR may request in order to effectuate the transaction
contemplated by this agreement.
8. Dilution of Shares. The Acquired Company consents and acknowledges that
MSGR may authorize and/or issue additional common shares, preferred shares,
or warrants to purchase common shares of MSGR prior to, at or subsequent to
the Closing Date. The Acquired Company and Stockholders acknowledge that
the MSGR common shares held by the Stockholders may experience a dilution
in their percentage of ownership in MSGR as a result of issuance by MSGR of
additional shares.
9. Tax-Free Reorganization. The transactions contemplated herein shall be
treated as a tax-free plan of reorganization under Section 368(a) of the
Internal Revenue Code, the MSGR shares issued in this transaction will be
issued solely in exchange for the shares held by the Stockholders, and no
other transaction shall be an adjustment to the consideration between the
parties to this agreement for the transactions contemplated hereby.
Further, no consideration which would constitute "other property" within
the meaning of Section 356(a) of the Internal Revenue Code is being
transferred by the parties as consideration pursuant to this agreement. The
parties shall not take a position on any tax return or before any taxing
authority that is inconsistent with this Article 9, unless otherwise
required by a final and binding judicial or governmental determination of
competent jurisdiction. Neither MSGR nor the Acquired Company represents or
warrants that the transactions contemplated herein will qualify as a
reorganization under the Internal Revenue Code.
10. Good and Marketable Title. After acquiring the Acquired Company, MSGR shall
have good and marketable title and/or licenses or rights to use all of the
Acquired Company's tangible and intangible assets including, but not
limited to, intellectual properties necessary or required to successfully
develop and commercially exploit the Acquired Company's business.
11. Acquisition Intent of Shareholders. Stockholders are acquiring the MSGR
shares for their own accounts and not with an intention of distribution
within the meaning of Section 2(11) of the Securities Act of 1933, as
amended ("Securities Act"). Each of the Stockholders represents and
confirms to MSGR that he or she (i) is an accredited investor within the
meaning of Rule 501(a) pursuant to the Securities Act or, if not such an
accredited investor, has, alone or together with a purchaser representative
within the meaning of Rule 501(h) pursuant to the Securities Act, such
knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of an investment in the Buyer's
securities; (ii) is aware of the limits on resale of the MSGR shares
imposed because of the nature of the transactions contemplated herein,
including, but not limited to, restrictions specified by Rule 144
promulgated by the Securities and Exchange Commission; and (iii) is
receiving the MSGR shares without registration pursuant to the Securities
Act, in reliance on the exemption from registration specified in Section
4(2) of the Securities Act for investment, and without any intent to sell,
resell, or otherwise distribute the MSGR shares in any manner that is in
violation of the Securities Act. The certificates representing the MSGR
shares, when delivered to the Stockholders, may have appropriate orders
restricting transfer placed against them on the records of the transfer
agent for such securities, and may have placed upon them the following
legend:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN A TRANSACTION EXEMPT
FROM REGISTRATION PURSUANT TO THE SECURITIES ACT OF 1933. THOSE SECURITIES
MAY NOT BE TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF,
UNLESS THE TRANSFEROR FIRST SATISFIES THE ISSUER AND ITS COUNSEL THAT THE
PROPOSED TRANSFER, IN THE MANNER PROPOSED, DOES NOT VIOLATE THE
REGISTRATION REQUIREMENTS OF THAT ACT."
Each Stockholder agrees not to attempt any transfer of any of the MSGR
shares without first complying with the substance of that legend and agrees
that the satisfaction of MSGR may, if MSGR so requests, depend in part upon
an opinion of counsel acceptable in form and substance to MSGR, a no-action
letter of the United States Securities and Exchange Commission, or
equivalent evidence. Each of the Stockholders acknowledges, without
limitation, that the foregoing agreement and representation shall apply to
the MSGR shares issued to such Stockholders.
12. Notices. Any notice which any of the parties hereto may desire to serve
upon any of the other parties hereto shall be in writing and shall be
conclusively deemed to have been received by the party to whom addressed,
if mailed, postage prepaid, united states certified mail, to the following
addresses:
MetaSource Group, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention of Xxxxxxxx Xxxxx, President
Stockholders: c/o ________________________________________,
-----------------------------------, -------------------------.
13. Successors. This agreement shall be binding upon and inure to the benefit
of the heirs, personal representatives, successors, and assigns of the
parties.
14. Indemnification. The Acquired Company shall save MSGR harmless from and
against and shall indemnify MSGR for any liability, loss, costs, expenses,
or damages howsoever caused by reason of any injury (whether to body,
property, or personal or business character or reputation) sustained by any
person or to property by reason of any act, neglect, default or omission of
Acquired Company or any of Acquired Company's agents, employees, or other
representatives, committed prior to the subject acquisition, and Acquired
Company shall pay all amounts to be paid or discharged in case of an action
or any such damages or injuries. If MSGR is sued in any court for damages
by reason of any of the acts of Acquired Company, Acquired Company or such
other party shall defend the resulting action (or cause same to be
defended) at Acquired Company's expense and shall pay and discharge any
judgment that may be rendered in any such action; if Acquired Company fails
or neglects to so defend in such action, MSGR may defend such action and
any expenses, including reasonable attorneys' fees, which MSGR may pay or
incur in defending such action and the amount of any judgment which MSGR
may be required to pay shall be promptly reimbursed by Acquired Company
upon demand by MSGR.
15. Governing Law. This agreement shall be construed and interpreted in
accordance with the laws of the State of New York without regard to its
provisions concerning choice of laws or choice of forum. The parties hereby
irrevocably submit themselves to the non-exclusive jurisdiction of the
state and federal courts sitting in New York and agree and consent that
services of process may be made upon it in any legal proceedings relating
hereto by any means allowed under state or federal law.
Executed in multiple counterparts, each of which shall be deemed a
duplicate original, as of the date first above written.
MetaSource Group, Inc.
Corporate seal
Attest: by: /s/ Xxxxxxxx Xxxxx
---------------------------
Xxxxxxxx Xxxxx
/s/ illegible
----------------------------
Secretary
Sitaro Group
Corporate seal
Attest: by: /s/ Xxxx Xxxxxxxx
---------------------------
Xxxx Xxxxxxxx
Bt: /s/ Xxxxx Xxxxxx
---------------------------
Xxxxx Xxxxxx
Appendix A
Shares Outstanding of Company: ______________
Shares Held in Treasury: _____________________
Stockholders of Record:
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
Name: ____________________________________ Shares Owned: __________
