Exhibit 2
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of the 23rd day of July, 2003
AMONG:
X-XXXXXXXXX.XXX, INC., a corporation formed pursuant to the laws of the
State of Florida and having an office for business located at 000 Xxxxx
Xxxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx 00000
("I-Incubator")
AND:
AMERICAN AUTOMOTIVE GROUP ACQUISITION CORP., a body corporate formed
pursuant to the laws of the State of California and a wholly owned
subsidiary of I-Incubator
(the "Acquirer")
AND:
AMERICAN AUTOMOTIVE GROUP, INC, a body corporate formed pursuant to the
laws of the State of California and having an office for business
located at 0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx, Xxxxxxxxxx
00000
("American Automotive")
AND:
The American Automotive shareholders on the attached signature page
(the "American Automotive Shareholders")
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WHEREAS:
A. American Automotive is a California corporation engaged in the business of
selling new and used automobiles to the general public;
B. The American Automotive Shareholders own 68,350,000 shares of common stock of
American Automotive, such shares represent 100% of the presently issued and
outstanding shares of American Automotive ("American Automotive Shares");
C. I-Incubator is a reporting company whose common stock is quoted on the pink
sheets and is in the business of providing software, engineering, and expert
consulting services;
D. The respective Boards of Directors of I-Incubator, American Automotive and
the Acquirer deem it advisable and in the best interests of I-Incubator,
American Automotive and the Acquirer that the Acquirer merge with and into
American Automotive (the "Merger") pursuant to this Agreement and the
Certificate of Merger, and the applicable provisions of the laws of the State of
Delaware; and
E. It is intended that the Merger shall qualify for United States federal income
tax purposes as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
Definitions
1.1 In this Agreement the following terms will have the following meanings:
(a) "Acquisition Shares" means the 68,350,000 I-Incubator Common
Shares to be issued to the American Automotive Shareholders;
(b) "Agreement" means this agreement and plan of merger among
I-Incubator, the Acquirer, American Automotive, and the
American Automotive Shareholders;
(c) "I-Incubator Accounts Payable and Liabilities" means all
accounts payable and liabilities of I-Incubator, on a
consolidated basis, due and owing or otherwise constituting a
binding obligation of I-Incubator and its subsidiaries (other
than a I-Incubator Material Contract) as of May 31, 2003 as
set forth on Schedule "B" hereto;
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(d) "I-Incubator Accounts Receivable" means all accounts
receivable and other debts owing to I-Incubator, on a
consolidated basis, as of May 31, 2003 as set forth on
Schedule "C";
(e) "I-Incubator Assets" means the undertaking and all the
property and assets of the I-Incubator Business of every kind
and description wheresoever situated including, without
limitation, I-Incubator Equipment, I-Incubator Inventory,
I-Incubator Material Contracts, I-Incubator Accounts
Receivable, I-Incubator Cash, I-Incubator Intangible Assets
and I-Incubator Goodwill, and all credit cards, charge cards
and banking cards issued to I-Incubator as of May 31, 2003 as
set forth on Schedule "D";
(f) "I-Incubator Bank Accounts" means all of the bank accounts,
lock boxes and safety deposit boxes of I-Incubator and its
subsidiaries or relating to the I-Incubator Business as set
forth in Schedule "E" hereto;
(g) "I-Incubator Business" means all aspects of any business
conducted by I-Incubator and its subsidiaries;
(h) "I-Incubator Cash" means all cash on hand or on deposit to the
credit of I-Incubator and its subsidiaries on the Closing
Date;
(i) "I-Incubator Common Shares" means the shares of common stock
in the capital of I-Incubator;
(j) "I-Incubator Debt to Related Parties" means the debts owed by
I-Incubator and its subsidiaries to any affiliate, director or
officer of I-Incubator as described in Schedule "F" hereto;
(k) "I-Incubator Equipment" means all machinery, equipment,
furniture, and furnishings used in the I-Incubator Business as
of May 31, 2003, as set forth on Schedule "G";
(l) "I-Incubator Financial Statements" means, collectively, the
audited consolidated financial statements of I-Incubator for
the fiscal year ended December 31, 2001, and the unaudited
financial statement for the period ending September 31, 2002;
(m) "I-Incubator Goodwill" means the goodwill of the I-Incubator
Business including the right to all corporate, operating and
trade names associated with the I-Incubator Business, or any
variations of such names as part of or in connection with the
I-Incubator Business, all books and records and other
information relating to the I-Incubator Business, all
necessary licenses and authorizations and any other rights
used in connection with the I-Incubator Business as of May 31,
2003, as set forth on Schedule "H";
(n) "I-Incubator Insurance Policies" means the public liability
insurance and insurance against loss or damage to the
I-Incubator Assets and the I-Incubator Business as described
in Schedule "I" hereto;
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(o) "I-Incubator Intangible Assets" means all of the intangible
assets of I-Incubator and its subsidiaries, including, without
limitation, I-Incubator Goodwill, all trademarks, logos,
copyrights, designs, and other intellectual and industrial
property of I-Incubator and its subsidiaries as of May 31,
2003, as set forth on Schedule "J";
(p) "I-Incubator Inventory" means all inventory and supplies of
the I-Incubator Business as of May 31, 2003, as set forth on
Schedule "K";
(q) "I-Incubator Material Contracts" means the burden and benefit
of and the right, title and interest of I-Incubator and its
subsidiaries in, to and under all trade and non-trade
contracts, engagements or commitments, whether written or
oral, to which I-Incubator or its subsidiaries are entitled
whereunder I-Incubator or its subsidiaries are obligated to
pay or entitled to receive the sum of $10,000 or more
including, without limitation, any pension plans, profit
sharing plans, bonus plans, loan agreements, security
agreements, indemnities and guarantees, any agreements with
employees, lessees, licensees, managers, accountants,
suppliers, agents, distributors, officers, directors,
attorneys or others which cannot be terminated without
liability on not more than one month's notice, and those
contracts listed in Schedule "L" hereto;
(r) "Closing" means the completion, on the Closing Date, of the
transactions contemplated hereby in accordance with Article 9
hereof;
(s) "Closing Date" means the day on which all conditions precedent
to the completion of the transaction as contemplated hereby
have been satisfied or waived;
(t) "Effective Time" means the date of the filing of an
appropriate Certificate of Merger in the form required by the
State of California, which certificate shall provide that the
Merger shall become effective upon such filing;
(u) "Merger" means the merger, at the Effective Time, of American
Automotive and the Acquirer pursuant to this Agreement and
Plan of Merger;
(v) "Merger Consideration" means the Acquisition Shares;
(w) "Place of Closing" means the offices of Sichenzia Xxxx
Xxxxxxxx Xxxxxxx LLP, or such other place as I-Incubator and
American Automotive may mutually agree upon;
(x) "State Corporation Law" means the Corporation Code of the
State of California;
(y) "Surviving Company" means American Automotive following the
merger with the Acquirer;
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(z) "American Automotive Accounts Payable and Liabilities" means
all accounts payable and liabilities of American Automotive,
due and owing or otherwise constituting a binding obligation
of American Automotive (other than a American Automotive
Material Contract) as of May 31, 2003 as set forth on Schedule
"M";
(aa) "American Automotive Accounts Receivable" means all accounts
receivable and other debts owing to American Automotive as of
May 31, 2003 as set forth on Schedule "N";
(bb) "American Automotive Assets" means the undertaking and all the
property and assets of the American Automotive Business of
every kind and description wheresoever situated including,
without limitation, American Automotive Equipment, American
Automotive Inventory, American Automotive Material Contracts,
American Automotive Accounts Receivable, American Automotive
Cash, American Automotive Intangible Assets and American
Automotive Goodwill, and all credit cards, charge cards and
banking cards issued to American Automotive as of May 31, 2003
as set forth on Schedule "O";
(cc) "American Automotive Bank Accounts" means all of the bank
accounts, lock boxes and safety deposit boxes of American
Automotive or relating to the American Automotive Business as
set forth on Schedule "P";
(dd) "American Automotive Business" means all aspects of the
business conducted by American Automotive;
(ee) "American Automotive Cash" means all cash on hand or on
deposit to the credit of American Automotive on the Closing
Date;
(ff) "American Automotive Debt to Related Parties" means the debts
owed by American Automotive and its subsidiaries to the
American Automotive Shareholders or to any family member
thereof, or to any affiliate, director or officer of American
Automotive or the American Automotive Shareholders as of May
31, 2003 as set forth on Schedule "Q";
(gg) "American Automotive Equipment" means all machinery,
equipment, furniture, and furnishings used in the American
Automotive Business as of May 31, 2003 as set forth on
Schedule "R";
(hh) "American Automotive Financial Statements" means collectively,
the consolidated financial statements of American Automotive
for the fiscal year ended December 31, 2002 and the quarter
ending March 31, 2003;
(ii) "American Automotive Goodwill" means the goodwill of the
American Automotive Business together with the exclusive right
of I-Incubator to represent itself as carrying on the American
Automotive Business in succession of American Automotive
subject to the terms hereof, and the right to use any words
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indicating that the American Automotive Business is so carried
on including the right to use the name "American Automotive"
or "American Automotive Group" or any variation thereof as
part of the name of or in connection with the American
Automotive Business or any part thereof carried on or to be
carried on by American Automotive, the right to all corporate,
operating and trade names associated with the American
Automotive Business, or any variations of such names as part
of or in connection with the American Automotive Business, all
telephone listings and telephone advertising contracts, all
lists of customers, books and records and other information
relating to the American Automotive Business, all necessary
licenses and authorizations and any other rights used in
connection with the American Automotive Business as of May 31,
2003 as set forth on Schedule "S";
(jj) "American Automotive Insurance Policies" means the public
liability insurance and insurance against loss or damage to
American Automotive Assets and the American Automotive
Business as described in Schedule "T" hereto;
(kk) "American Automotive Intangible Assets" means all of the
intangible assets of American Automotive, including, without
limitation, American Automotive Goodwill, all trademarks,
logos, copyrights, designs, and other intellectual and
industrial property of American Automotive and its
subsidiaries as of May 31, 2003 as set forth on Schedule "U";
(ll) "American Automotive Inventory" means all inventory and
supplies of the American Automotive Business as of May 31,
2003 as set forth on Schedule "V";
(mm) "American Automotive Material Contracts" means the burden and
benefit of and the right, title and interest of American
Automotive in, to and under all trade and non-trade contracts,
engagements or commitments, whether written or oral, to which
American Automotive is entitled in connection with the
American Automotive Business whereunder American Automotive is
obligated to pay or entitled to receive the sum of $10,000 or
more including, without limitation, any pension plans, profit
sharing plans, bonus plans, loan agreements, security
agreements, indemnities and guarantees, any agreements with
employees, lessees, licensees, managers, accountants,
suppliers, agents, distributors, officers, directors,
attorneys or others which cannot be terminated without
liability on not more than one month's notice, and those
contracts as set forth on Schedule "W"; and
(nn) "American Automotive Shares" means all of the issued and
outstanding shares of American Automotive's equity stock.
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
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Captions and Section Numbers
1.2 The headings and section references in this Agreement are for convenience of
reference only and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision thereof.
Section References and Schedules
1.3 Any reference to a particular "Article", "section", "paragraph", "clause" or
other subdivision is to the particular Article, section, clause or other
subdivision of this Agreement and any reference to a Schedule by letter will
mean the appropriate Schedule attached to this Agreement and by such reference
the appropriate Schedule is incorporated into and made part of this Agreement.
The Schedules to this Agreement are as follows:
Information concerning I-Incubator
Schedule "A" I-Incubator Pending Litigation
Schedule "B" I-Incubator Accounts Payable and Liabilities
Schedule "C" I-Incubator Accounts Receivable
Schedule "D" I-Incubator Assets
Schedule "E" I-Incubator Bank Accounts
Schedule "F" I-Incubator Debts to Related Parties
Schedule "G" I-Incubator Equipment
Schedule "H" I-Incubator Goodwill
Schedule "I" I-Incubator Insurance Policies
Schedule "J" I-Incubator Intangible Assets
Schedule "K" I-Incubator Inventory
Schedule "L" I-Incubator Material Contracts
Schedule "X" I-Incubator Adverse Effects
Schedule "Y" I-Incubator Payments to Officers, Directors,
Shareholders, or Employees
Schedule "Z" I-Incubator Pension Plans
Schedule "AA" I-Incubator Material Contract Defaults
Information concerning American Automotive
Schedule "M" American Automotive Accounts Payable and Liabilities
Schedule "N" American Automotive Accounts Receivable
Schedule "O" American Automotive Assets
Schedule "P" American Automotive Bank Accounts
Schedule "Q" American Automotive Debts to Related Parties
Schedule "R" American Automotive Equipment
Schedule "S" American Automotive Goodwill
Schedule "T" American Automotive Insurance Policies
Schedule "U" American Automotive Intangible Assets
Schedule "V" American Automotive Inventory
Schedule "W" American Automotive Material Contracts
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Severability of Clauses
1.4 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
ARTICLE 2
THE MERGER
The Merger
2.1 At Closing, the Acquirer shall be merged with and into American Automotive
pursuant to this Agreement and Plan of Merger and the separate corporate
existence of the Acquirer shall cease and American Automotive, as it exists from
and after the Closing, shall be the Surviving Company.
Effect of the Merger
2.2 The Merger shall have the effect provided therefor by the State Corporation
Law. Without limiting the generality of the foregoing, and subject thereto, at
Closing (i) all the rights, privileges, immunities, powers and franchises, of a
public as well as of a private nature, and all property, real, personal and
mixed, and all debts due on whatever account, including without limitation
subscriptions to shares, and all other choices in action, and all and every
other interest of or belonging to or due to American Automotive or the Acquirer,
as a group, subject to the terms hereof, shall be taken and deemed to be
transferred to, and vested in, the Surviving Company without further act or
deed; and all property, rights and privileges, immunities, powers and franchises
and all and every other interest shall be thereafter as effectually the property
of the Surviving Company, as they were of American Automotive and the Acquirer,
as a group, and (ii) all debts, liabilities, duties and obligations of American
Automotive and the Acquirer, as a group, subject to the terms hereof, shall
become the debts, liabilities and duties of the Surviving Company and the
Surviving Company shall thenceforth be responsible and liable for all debts,
liabilities, duties and obligations of American Automotive and the Acquirer, as
a group, and neither the rights of creditors nor any liens upon the property of
American Automotive or the Acquirer, as a group, shall be impaired by the
Merger, and may be enforced against the Surviving Company.
Certificate of Incorporation; Bylaws; Directors and Officers
2.3 The Certificate of Incorporation of the Surviving Company from and after the
Closing shall be the Certificate of Incorporation of American Automotive until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the State
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Corporation Law. The Bylaws of the Surviving Company from and after the Closing
shall be the Bylaws of American Automotive as in effect immediately prior to the
Closing, continuing until thereafter amended in accordance with their terms, the
Certificate of Incorporation of the Surviving Company and as provided by the
State Corporation Law. The Directors and Officers of American Automotive at the
Effective Time shall continue to be the Directors and Officers of American
Automotive.
Conversion of Securities
2.4 At the Effective Time, by virtue of the Merger and without any action on the
part of the Acquirer, American Automotive or the American Automotive
Shareholders, the shares of capital stock of each of American Automotive and the
Acquirer shall be converted as follows:
(a) Capital Stock of the Acquirer. Each issued and outstanding
share of the Acquirer's capital stock shall continue to be
issued and outstanding and shall be converted into one share
of validly issued, fully paid, and non-assessable common stock
of the Surviving Company. Each stock certificate of the
Acquirer evidencing ownership of any such shares shall
continue to evidence ownership of such shares of capital stock
of the Surviving Company.
(b) Conversion of American Automotive Shares. Each American
Automotive Share that is issued and outstanding at the
Effective Time shall automatically be cancelled and
extinguished and converted, without any action on the part of
the holder thereof, into the right to receive at the time and
in the amounts described in this Agreement an amount of
Acquisition Shares equal to the number of Acquisition Shares
divided by the number of American Automotive Shares
outstanding immediately prior to Closing. The Acquisition
Shares will represent approximately 68.4% of approximately
100,000,000 shares issued and outstanding. All such American
Automotive Shares, when so converted, shall no longer be
outstanding and shall automatically be cancelled and retired
and shall cease to exist, and each holder of a certificate
representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the
Acquisition Shares paid in consideration therefor upon the
surrender of such certificate in accordance with this
Agreement.
Adherence with Applicable Securities Laws
2.5 The American Automotive Shareholders agree that they are acquiring the
Acquisition Shares for investment purposes and will not offer, sell or otherwise
transfer, pledge or hypothecate any of the Acquisition Shares issued to them
(other than pursuant to an effective Registration Statement under the Securities
Act of 1933, as amended) directly or indirectly unless:
(a) the sale is to I-Incubator;
(b) the sale is made pursuant to the exemption from registration
under the Securities Act of 1933, as amended, provided by Rule
144 thereunder; or
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(c) the Acquisition Shares are sold in a transaction that does not
require registration under the Securities Act of 1933, as
amended, or any applicable United States state laws and
regulations governing the offer and sale of securities, and
the vendor has furnished to I-Incubator an opinion of counsel
to that effect or such other written opinion as may be
reasonably required by I-Incubator.
The American Automotive Shareholders acknowledge that the certificates
representing the Acquisition Shares shall bear the following legend:
NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES REPRESENTED
BY THIS CERTIFICATE SHALL BE MADE UNLESS A REGISTRATION
STATEMENT UNDER THE FEDERAL SECURITIES ACT OF 1933, AS
AMENDED, IN RESPECT OF SUCH SHARES IS THEN IN EFFECT OR AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SAID ACT IS
THEN IN FACT APPLICABLE TO SAID SHARES.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF I-INCUBATOR
Representations and Warranties
3.1 I-Incubator represents and warrants in all material respects to American
Automotive, with the intent that American Automotive will rely thereon in
entering into this Agreement and in approving and completing the transactions
contemplated hereby, that:
I-Incubator - Corporate Status and Capacity
(a) Incorporation. I-Incubator is a corporation duly incorporated
and validly subsisting under the laws of the State of Florida,
and is in good standing with the office of the Secretary of
State for the State of Florida;
(b) Carrying on Business. I-Incubator does not currently conduct
businessand does not carry on any other material business
activity in any other jurisdictions. I-Incubator is duly
authorized to carry on such business in Florida. The nature of
the I-Incubator Business does not require I-Incubator to
register or otherwise be qualified to carry on business in any
other jurisdictions;
(c) Corporate Capacity. I-Incubator has the corporate power,
capacity and authority to own the I-Incubator Assets and to
enter into and complete this Agreement;
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(d) Reporting Status; Listing. I-Incubator is required to file
current reports with the Securities and Exchange Commission
pursuant to section 12(g) of the Securities Exchange Act of
1934, the I-Incubator Common Shares are quoted on the Pink
Sheets and all reports required to be filed by I-Incubator
with the Securities and Exchange Commission or NASD have been
timely filed with the exception for the following:
i. Form 10KSB for the period ending December 31, 2002;
ii. Form 10QSB for the period ending March 31, 2003;
iii. Form 8-K regarding a change in accountants; and
iv. Form 8-K/A regarding Planet Intra and Flypaper
acquisitions (respond to SEC comments).
Acquirer - Corporate Status and Capacity
(e) Incorporation. The Acquirer is a corporation duly incorporated
and validly subsisting under the laws of the State of
California, and is in good standing with the office of the
Secretary of State for the State of California;
(f) Carrying on Business. Other than corporate formation and
organization, the Acquirer has not carried on business
activities to date.
(g) Corporate Capacity. The Acquirer has the corporate power,
capacity and authority to enter into and complete this
Agreement;
I-Incubator - Capitalization
(h) Authorized Capital. The authorized capital of I-Incubator
consists of 100,000,000 I-Incubator Common Shares, $0.0001 par
value and 10,000,000 shares of preferred stock. $0.001 par
value, of which 11,650,000 I-Incubator Common Shares, and 0
shares of Preferred Stock are presently issued and
outstanding;
(i) No Option. Except as disclosed on the attached schedules, no
person, firm or corporation has any agreement or option or any
right capable of becoming an agreement or option for the
acquisition of I-Incubator Common Shares or for the purchase,
subscription or issuance of any of the unissued shares in the
capital of I-Incubator;
(j) Capacity. I-Incubator has the full right, power and authority
to enter into this Agreement on the terms and conditions
contained herein;
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Acquirer Capitalization
(k) Authorized Capital. The authorized capital of the Acquirer
consists of 200 shares of common stock, $0.001 par value, of
which one share of common stock is presently issued and
outstanding;
(l) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option
for the acquisition of any common or preferred shares in
Acquirer or for the purchase, subscription or issuance of any
of the unissued shares in the capital of Acquirer;
(m) Capacity. The Acquirer has the full right, power and authority
to enter into this Agreement on the terms and conditions
contained herein;
I-Incubator - Records and Financial Statements
(n) Charter Documents. The charter documents of I-Incubator and
the Acquirer have not been altered since the incorporation of
each, respectively, except as filed in the record books of
I-Incubator or the Acquirer, as the case may be;
(o) Corporate Minute Books. The corporate minute books of
I-Incubator and its subsidiaries are complete, or will be
complete by Closing, and each of the minutes contained therein
accurately reflect the actions that were taken at a duly
called and held meeting or by consent without a meeting. All
actions by I-Incubator and its subsidiaries which required
director or shareholder approval are reflected on the
corporate minute books of I-Incubator and its subsidiaries.
I-Incubator and its subsidiaries are not in violation or
breach of, or in default with respect to, any term of their
respective Certificates of Incorporation (or other charter
documents) or by-laws.
(p) I-Incubator Financial Statements. The I-Incubator Financial
Statements present fairly, in all material respects, the
assets and liabilities (whether accrued, absolute, contingent
or otherwise) of I-Incubator, on a consolidated basis, as of
the respective dates thereof, and the sales and earnings of
the I-Incubator Business during the periods covered thereby,
in all material respects and have been prepared in substantial
accordance with generally accepted accounting principles
consistently applied;
(q) Internal Accounting Controls. I-Incubator and its subsidiaries
maintain a system of internal accounting controls sufficient
to provide reasonable assurance that (i) transactions are
executed in accordance with management's general or specific
authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with
generally accepted accounting principles and to maintain asset
accountability, (iii) access to assets is permitted only in
accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable
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intervals and appropriate action is taken with respect to any
differences. There are no disagreements of any kind presently
existing, or reasonably anticipated by I-Incubator to arise,
between the accountants and lawyers formerly or presently
employed by I-Incubator, which could reasonably be expected to
delay the transactions contemplated hereby, including the
filing of Form 8-K following the Effective Date, and
I-Incubator will be current with respect to any fees owed to
its accountants and lawyers upon Closing. I-Incubator has
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for I-Incubator and
designed such disclosure controls and procedures to ensure
that material information relating to I-Incubator, including
its subsidiaries, is made known to the certifying officers by
others within those entities, particularly during the period
in which I-Incubator's Form 10-K (or 10-KSB) or 10-Q (or
10-QSB), as the case may be, is being prepared. The
I-Incubator's certifying officers have evaluated the
effectiveness of I-Incubator's controls and procedures as of a
date within 90 days prior to the filing date of the Form
10-QSB for the quarter ended June 30, 2002 (such date, the
"Evaluation Date"). I-Incubator presented in the Form 10-QSB
for the quarter ended June 30, 2002 the conclusions of the
certifying officers about the effectiveness of the disclosure
controls and procedures based on their evaluations as of the
Evaluation Date. Since the Evaluation Date, there have been no
significant changes in I-Incubator's internal controls (as
such term is defined in Item 307(b) of Regulation S-K under
the Exchange Act) or, to I-Incubator's knowledge, in other
factors that could significantly affect the I-Incubator's
internal controls.
(r) I-Incubator Accounts Payable and Liabilities. There are no
material liabilities, contingent or otherwise, of I-Incubator
or its subsidiaries which are not disclosed in Schedule "B"
hereto or reflected in the I-Incubator Financial Statements
except those incurred in the ordinary course of business since
the date of the said schedule and the I-Incubator Financial
Statements, and neither I-Incubator nor its subsidiaries have
guaranteed or agreed to guarantee any debt, liability or other
obligation of any person, firm or corporation. Without
limiting the generality of the foregoing, all accounts payable
and liabilities of I-Incubator and its subsidiaries as of May
31, 2003 are described in Schedule "B" hereto;
(s) I-Incubator Accounts Receivable. All the I-Incubator Accounts
Receivable, as set forth on Schedule "C" hereto, result from
bona fide business transactions and services actually rendered
without, to the knowledge and belief of I-Incubator, any claim
by the obligor for set-off or counterclaim;
(t) I-Incubator Bank Accounts. All of the I-Incubator Bank
Accounts, their location, numbers and the authorized
signatories thereto are as set forth in Schedule "E" hereto;
(u) No Debt to Related Parties. Except as disclosed in Schedule
"F" hereto, neither I-Incubator nor its subsidiaries are, and
on Closing will not be, materially indebted to any affiliate,
director or officer of I-Incubator except accounts payable on
account of bona fide business transactions of I-Incubator
incurred in normal course of the I-Incubator Business,
including employment agreements, none of which are more than
30 days in arrears;
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(v) No Related Party Debt to I-Incubator. No director or officer
or affiliate of I-Incubator is now indebted to or under any
financial obligation to I-Incubator or its subsidiaries on any
account whatsoever, except for advances on account of travel
and other expenses not exceeding $5,000 in total;
(w) No Dividends. No dividends or other distributions on any
shares in the capital of I-Incubator have been made, declared
or authorized since the date of I-Incubator Financial
Statements;
(x) No Payments. Except as set forth on Schedule "Y" hereto, no
payments of any kind have been made or authorized since the
date of the I-Incubator Financial Statements to or on behalf
of officers, directors, shareholders or employees of
I-Incubator or its subsidiaries or under any management
agreements with I-Incubator or its subsidiaries, except
payments made in the ordinary course of business and at the
regular rates of salary or other remuneration payable to them;
(y) Pension Plans. Except as set forth on Schedule "Z" hereto,
there are no pension, profit sharing, group insurance or
similar plans or other deferred compensation plans affecting
I-Incubator or its subsidiaries;
(z) No Adverse Events. Except as set forth on Schedule "X" hereto,
since the date of the I-Incubator Financial Statements,
(i) there has not been any material adverse change in the
financial position or condition of I-Incubator, its
subsidiaries, its liabilities or the I-Incubator Assets or any
damage, loss or other change in circumstances materially
affecting I-Incubator, the I-Incubator Business or the
I-Incubator Assets or I-Incubator' right to carry on the
I-Incubator Business, other than changes in the ordinary
course of business,
(ii) there has not been any damage, destruction, loss or other
event (whether or not covered by insurance) materially and
adversely affecting I-Incubator, its subsidiaries, the
I-Incubator Business or the I-Incubator Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by I-Incubator to any of
I-Incubator' officers, employees or agents or any bonus,
payment or arrangement made to or with any of them,
(iv) I-Incubator has not waived or surrendered any right of
material value,
(v) Neither I-Incubator nor its subsidiaries have discharged or
satisfied or paid any lien or encumbrance or obligation or
liability other than current liabilities in the ordinary
course of business, and
23
(vi) no capital expenditures in excess of $10,000 individually or
$30,000 in total have been authorized or made.
I-Incubator - Income Tax Matters
(aa) Tax Returns. Except for fiscal year 2002, all tax returns and
reports of I-Incubator and its subsidiaries required by law to
be filed have been filed and are true, complete and correct,
and any taxes payable in accordance with any return filed by
I-Incubator and its subsidiaries or in accordance with any
notice of assessment or reassessment issued by any taxing
authority have been so paid;
(bb) Current Taxes. Except for fiscal year 2002, adequate
provisions have been made for taxes payable for the current
period for which tax returns are not yet required to be filed
and there are no agreements, waivers, or other arrangements
providing for an extension of time with respect to the filing
of any tax return by, or payment of, any tax, governmental
charge or deficiency by I-Incubator or its subsidiaries.
I-Incubator is not aware of any contingent tax liabilities or
any grounds which would prompt a reassessment including
aggressive treatment of income and expenses in filing earlier
tax returns;
I-Incubator - Securities and Exchange Commission Filings
(cc) SEC Reports. Except as set forth in Section 3.1(d) herein,
I-Incubator has timely filed all SEC Reports with the
Commission under the Exchange Act. The SEC Reports, at the
time filed, complied as to form in all material respects with
the requirements of the Exchange Act. None of the SEC Reports,
including without limitation any financial statements or
schedules included therein, contains any untrue statements of
a material fact or omits to state a material fact necessary in
order to make the statements made, in light of the
circumstances under which they were made, not misleading. SEC
Reports means all forms, reports and documents filed and
required to be filed by I-Incubator with the Securities and
Exchange Commission under the 1934 Securities Exchange Act.
I-Incubator - Applicable Laws and Legal Matters
(dd) Licenses. I-Incubator and its subsidiaries hold all licenses
and permits as may be requisite for carrying on the
I-Incubator Business in the manner in which it has heretofore
been carried on, which licenses and permits have been
maintained and continue to be in good standing except where
the failure to obtain or maintain such licenses or permits
would not have a material adverse effect on the I-Incubator
Business;
(ee) Applicable Laws. Neither I-Incubator nor its subsidiaries have
been charged with or received notice of breach of any laws,
ordinances, statutes, regulations, by-laws, orders or decrees
to which they are subject or which apply to them the violation
of which would have a material adverse effect on the
I-Incubator Business, and to I-Incubator' knowledge, neither
I-Incubator nor its subsidiaries are in breach of any laws,
ordinances, statutes, regulations, bylaws, orders or decrees
the contravention of which would result in a material adverse
impact on the I-Incubator Business;
24
(ff) Pending or Threatened Litigation. Except as set forth on
Schedule "A" hereto, there is no material litigation or
administrative or governmental proceeding pending or
threatened against or relating to I-Incubator, its
subsidiaries, the I-Incubator Business, or any of the
I-Incubator Assets nor does I-Incubator have any knowledge of
any deliberate act or omission of I-Incubator or its
subsidiaries that would form any material basis for any such
action or proceeding;
(gg) No Bankruptcy. Neither I-Incubator nor its subsidiaries have
made any voluntary assignment or proposal under applicable
laws relating to insolvency and bankruptcy and no bankruptcy
petition has been filed or presented against I-Incubator or
its subsidiaries and no order has been made or a resolution
passed for the winding-up, dissolution or liquidation of
I-Incubator or its subsidiaries;
(hh) Labor Matters. Neither I-Incubator nor its subsidiaries are
party to any collective agreement relating to the I-Incubator
Business with any labor union or other association of
employees and no part of the I-Incubator Business has been
certified as a unit appropriate for collective bargaining or,
to the knowledge of I-Incubator, has made any attempt in that
regard;
(ii) Finder's Fees. Neither I-Incubator nor its subsidiaries are
party to any agreement which provides for the payment of
finder's fees, brokerage fees, commissions or other fees or
amounts which are or may become payable to any third party in
connection with the execution and delivery of this Agreement
and the transactions contemplated herein;
Execution and Performance of Agreement
(jj) Authorization and Enforceability. The execution and delivery
of this Agreement, and the completion of the transactions
contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of I-Incubator and
the Acquirer;
(kk) No Violation or Breach. The execution and performance of this
Agreement will not:
(i) violate the charter documents of I-Incubator or the Acquirer
or result in any breach of, or default under, any loan
agreement, mortgage, deed of trust, or any other agreement to
which I-Incubator or its subsidiaries are party,
(ii) give any person any right to terminate or cancel any agreement
including, without limitation, the I-Incubator Material
Contracts, or any right or rights enjoyed by I-Incubator or
its subsidiaries,
25
(iii) result in any alteration of I-Incubator' or its subsidiaries'
obligations under any agreement to which I-Incubator or its
subsidiaries are party including, without limitation, the
I-Incubator Material Contracts,
(iv) result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favor of a third
party upon or against the I-Incubator Assets,
(v) result in the imposition of any tax liability to I-Incubator
or its subsidiaries relating to the I-Incubator Assets, or
(vi) violate any court order or decree to which either I-Incubator
or its subsidiaries are subject;
The I-Incubator Assets - Ownership and Condition
(ll) Business Assets. The I-Incubator Assets, as set forth on
Schedule "D" hereto, comprise all of the property and assets
of the I-Incubator Business, and no other person, firm or
corporation owns any assets used by I-Incubator or its
subsidiaries in operating the I-Incubator Business, whether
under a lease, rental agreement or other arrangement;
(mm) Title. Except for liens held by AJW Partners, LLC, AJW
Qualified Partners, LLC and AJW Offshore, Ltd., I-Incubator or
its subsidiaries are the legal and beneficial owner of the
I-Incubator Assets, free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances or other
claims whatsoever;
(nn) No Option. No person, firm or corporation has any agreement or
option or a right capable of becoming an agreement for the
purchase of any of the I-Incubator Assets;
(oo) I-Incubator Insurance Policies. I-Incubator and its
subsidiaries maintain the public liability insurance and
insurance against loss or damage to the I-Incubator Assets and
the I-Incubator Business as described in Schedule "I" hereto;
(pp) I-Incubator Material Contracts. The I-Incubator Material
Contracts listed in Schedule "L" constitute all of the
material contracts of I-Incubator and its subsidiaries;
(qq) No Default. Except as set forth on Schedule "AA", there has
not been any default in any material obligation of I-Incubator
or any other party to be performed under any of the
I-Incubator Material Contracts, each of which is in good
standing and in full force and effect and unamended (except as
disclosed in Schedule "I" hereto), and I-Incubator is not
aware of any default in the obligations of any other party to
any of the I-Incubator Material Contracts;
26
(rr) No Compensation on Termination. There are no agreements,
commitments or understandings relating to severance pay or
separation allowances on termination of employment of any
employee of I-Incubator or its subsidiaries. Neither
I-Incubator nor its subsidiaries are obliged to pay benefits
or share profits with any employee after termination of
employment except as required by law;
(ss) Assets and Liabilities Upon Closing. Immediately after Closing
and the sale of Inclusion, Inc. to Xxxxxx Xxxxxxx, and except
for 1) the assets and liabilities of American Automotive, 2)
the outstanding convertible debt to AJW Partners, LLC, AJW
Offshore, Ltd., and AJW Qualified Partners, LLC, and 3) the
outstanding debt to Atlas Equity Group, Inc., I-Incubator
shall have no other assets or liabilities.
I-Incubator Assets - I-Incubator Equipment
(tt) I-Incubator Equipment. The I-Incubator Equipment, as set forth
on Schedule "G" hereto, has been maintained in a manner
consistent with that of a reasonably prudent owner and such
equipment is in good working condition;
I-Incubator Assets - I-Incubator Goodwill and Other Assets
(uu) I-Incubator Goodwill. Except as set forth on Schedule "H"
hereto, I-Incubator and its subsidiaries do not carry on the
I-Incubator Business under any other business or trade names.
I-Incubator does not have any knowledge of any infringement by
I-Incubator or its subsidiaries of any patent, trademarks,
copyright or trade secret;
The I-Incubator Business
(vv) Maintenance of Business. Since the date of the I-Incubator
Financial Statements, I-Incubator and its subsidiaries have
not entered into any material agreement or commitment except
in the ordinary course and except as disclosed herein;
(ww) Subsidiaries. Except for the Acquirer, I-Incubator does not
own any subsidiaries and does not otherwise own, directly or
indirectly, any shares or interest in any other corporation,
partnership, joint venture or firm; and
I-Incubator - Acquisition Shares
(xx) Acquisition Shares. The Acquisition Shares when delivered to
the holders of American Automotive Shares pursuant to the
Merger shall be validly issued and outstanding as fully paid
and non-assessable shares and the Acquisition Shares shall be
transferable upon the books of I-Incubator, in all cases
subject to the provisions and restrictions of all applicable
securities laws.
Non-Merger and Survival
27
3.2 The representations and warranties of I-Incubator contained herein will be
true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by American Automotive or
the American Automotive Shareholders, the representations and warranties of
I-Incubator shall survive the Closing.
Indemnity
3.3 I-Incubator agrees to indemnify and save harmless American Automotive
and the American Automotive Shareholders from and against any and all
claims, demands, actions, suits, proceedings, assessments, judgments,
damages, costs, losses and expenses, including any payment made in good
faith in settlement of any claim (subject to the right of I-Incubator
to defend any such claim), resulting from the breach by it of any
representation or warranty made under this Agreement or from any
misrepresentation in or omission from any certificate or other
instrument furnished or to be furnished by I-Incubator to American
Automotive or the American Automotive Shareholders hereunder.
ARTICLE 4
COVENANTS OF I-INCUBATOR
Covenants
4.1 I-Incubator covenants and agrees with American Automotive that it will:
(a) Conduct of Business. Until the Closing, conduct its business
diligently and in the ordinary course consistent with the
manner in which it generally has been operated up to the date
of execution of this Agreement;
(b) Preservation of Business. Until the Closing, use its best
efforts to preserve the I-Incubator Business and the
I-Incubator Assets and, without limitation, preserve for
American Automotive I-Incubator' and its subsidiaries'
relationships with any third party having business relations
with them;
(c) Access. Until the Closing, give American Automotive, the
American Automotive Shareholders, and their representatives
full access to all of the properties, books, contracts,
commitments and records of I-Incubator, and furnish to
American Automotive, the American Automotive Shareholders and
their representatives all such information as they may
reasonably request;
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party
consents required to permit the Merger and to preserve and
maintain the I-Incubator Assets notwithstanding the change in
control of American Automotive arising from the Merger; and
28
Authorization
4.2 I-Incubator hereby agrees to authorize and direct any and all federal,
state, municipal, foreign and international governments and regulatory
authorities having jurisdiction respecting I-Incubator and its subsidiaries to
release any and all information in their possession respecting I-Incubator and
its subsidiaries to American Automotive. I-Incubator shall promptly execute and
deliver to American Automotive any and all consents to the release of
information and specific authorizations which American Automotive reasonably
requires to gain access to any and all such information.
Survival
4.3 The covenants set forth in this Article shall survive the Closing for the
benefit of American Automotive and the American Automotive Shareholders.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
AMERICAN AUTOMOTIVE
Representations and Warranties
5.1 American Automotive represents and warrants in all material respects to
I-Incubator, with the intent that it will rely thereon in entering into this
Agreement and in approving and completing the transactions contemplated hereby,
that:
American Automotive - Corporate Status and Capacity
(a) Incorporation. American Automotive is a corporation duly
incorporated and validly subsisting under the laws of the
State of California, and is in good standing with the office
of the Secretary of State for the State of California;
(b) Carrying on Business. American Automotive carries on business
primarily in California and does not carry on any material
business activity in any other jurisdiction. American
Automotive has an office in California and in no other
locations. The nature of the American Automotive Business does
not require American Automotive to register or otherwise be
qualified to carry on business in any other jurisdiction;
(c) Corporate Capacity. American Automotive has the corporate
power, capacity and authority to own American Automotive
Assets, to carry on the Business of American Automotive and to
enter into and complete this Agreement;
American Automotive - Capitalization
29
(d) Authorized Capital. The authorized capital of American
Automotive consists of 100,000,000 shares of common stock,
$.001 par value per share;
(e) Ownership of American Automotive Shares. The issued and
outstanding share capital of American Automotive will on
Closing consist of 3,000,000 common shares (being the American
Automotive Shares), which shares on Closing shall be validly
issued and outstanding as fully paid and non-assessable
shares. The American Automotive Shareholders will be at
Closing the registered and beneficial owner of 3,000,000
American Automotive Shares. The American Automotive Shares
owned by the American Automotive Shareholders will on Closing
be free and clear of any and all liens, charges, pledges,
encumbrances, restrictions on transfer and adverse claims
whatsoever;
(f) No Option. No person, firm or corporation has any agreement,
option, warrant, preemptive right or any other right capable
of becoming an agreement or option for the acquisition of
American Automotive Shares held by the American Automotive
Shareholders or for the purchase, subscription or issuance of
any of the unissued shares in the capital of American
Automotive;
(g) No Restrictions. There are no restrictions on the transfer,
sale or other disposition of American Automotive Shares
contained in the charter documents of American Automotive or
under any agreement;
American Automotive - Records and Financial Statements
(h) Charter Documents. The charter documents of American
Automotive have not been altered since its incorporation date,
except as filed in the record books of American Automotive;
(i) Corporate Minute Books. The corporate minute books of American
Automotive are complete and each of the minutes contained
therein accurately reflect the actions that were taken at a
duly called and held meeting or by consent without a meeting.
All actions by American Automotive which required director or
shareholder approval are reflected on the corporate minute
books of American Automotive. American Automotive is not in
violation or breach of, or in default with respect to, any
term of its Certificates of Incorporation (or other charter
documents) or by-laws.
(j) American Automotive Financial Statements. The American
Automotive Financial Statements present fairly, in all
material respects, the assets and liabilities (whether
accrued, absolute, contingent or otherwise) of American
Automotive, on consolidated basis, as of the respective dates
thereof, and the sales and earnings of the American Automotive
Business during the periods covered thereby, in all material
respects, and have been prepared in substantial accordance
with generally accepted accounting principles consistently
applied;
30
(k) American Automotive Accounts Payable and Liabilities. There
are no material liabilities, contingent or otherwise, of
American Automotive which are not disclosed in Schedule "M"
hereto or reflected in the American Automotive Financial
Statements except those incurred in the ordinary course of
business since the date of the said schedule and the American
Automotive Financial Statements, and American Automotive has
not guaranteed or agreed to guarantee any debt, liability or
other obligation of any person, firm or corporation. Without
limiting the generality of the foregoing, all accounts payable
and liabilities of American Automotive as of May 31, 2003;
(l) American Automotive Accounts Receivable. All American
Automotive Accounts Receivable, as set forth on Schedule "N"
hereto, result from bona fide business transactions and
services actually rendered without, to the knowledge and
belief of American Automotive, any claim by the obligor for
set-off or counterclaim;
(m) INTENTIONALLY OMITTED;
(n) No Debt to Related Parties. Except as disclosed in Schedule
"Q" hereto, American Automotive is not, and on Closing will
not be, materially indebted to the American Automotive
Shareholders nor to any family member thereof, nor to any
affiliate, director or officer of American Automotive or the
American Automotive Shareholders except accounts payable on
account of bona fide business transactions of American
Automotive incurred in normal course of American Automotive
Business, including employment agreements with the American
Automotive Shareholders, none of which are more than 30 days
in arrears;
(o) No Related Party Debt to American Automotive. Neither the
American Automotive Shareholders nor any director, officer or
affiliate of American Automotive are now indebted to or under
any financial obligation to American Automotive on any account
whatsoever, except for advances on account of travel and other
expenses not exceeding $5,000 in total;
(p) No Dividends. No dividends or other distributions on any
shares in the capital of American Automotive have been made,
declared or authorized since the date of the American
Automotive Financial Statements;
(q) No Payments. No payments of any kind have been made or
authorized since the date of the American Automotive Financial
Statements to or on behalf of the American Automotive
Shareholders or to or on behalf of officers, directors,
shareholders or employees of American Automotive or under any
management agreements with American Automotive, except
payments made in the ordinary course of business and at the
regular rates of salary or other remuneration payable to them;
(r) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation
plans affecting American Automotive;
31
(s) No Adverse Events. Since the date of the American Automotive
Financial Statements:
(i) there has not been any material adverse change in the
consolidated financial position or condition of American
Automotive, its liabilities or the American Automotive Assets
or any damage, loss or other change in circumstances
materially affecting American Automotive, the American
Automotive Business or the American Automotive Assets or
American Automotive's right to carry on the American
Automotive Business, other than changes in the ordinary course
of business,
(ii) there has not been any damage, destruction, loss or other
event (whether or not covered by insurance) materially and
adversely affecting American Automotive, the American
Automotive Business or the American Automotive Assets,
(iii) there has not been any material increase in the compensation
payable or to become payable by American Automotive to the
American Automotive Shareholders or to any of American
Automotive's officers, employees or agents or any bonus,
payment or arrangement made to or with any of them,
(iv) the American Automotive Business has been and continues to be
carried on in the ordinary course,
(v) American Automotive has not waived or surrendered any right of
material value,
(vi) American Automotive has not discharged or satisfied or paid
any lien or encumbrance or obligation or liability other than
current liabilities in the ordinary course of business, and
(vii) no capital expenditures in excess of $10,000 individually or
$30,000 in total have been authorized or made;
American Automotive - Income Tax Matters
(t) Tax Returns. All tax returns and reports of American
Automotive required by law to be filed have been filed and are
true, complete and correct, and any taxes payable in
accordance with any return filed by American Automotive or in
accordance with any notice of assessment or reassessment
issued by any taxing authority have been so paid;
(u) Current Taxes. Adequate provisions have been made for taxes
payable for the current period for which tax returns are not
yet required to be filed and there are no agreements, waivers,
or other arrangements providing for an extension of time with
respect to the filing of any tax return by, or payment of, any
tax, governmental charge or deficiency by American Automotive.
American Automotive is not aware of any contingent tax
liabilities or any grounds which would prompt a reassessment
including aggressive treatment of income and expenses in
filing earlier tax returns;
32
American Automotive - Applicable Laws and Legal Matters
(v) Licenses. American Automotive holds all licenses and permits
as may be requisite for carrying on the American Automotive
Business in the manner in which it has heretofore been carried
on, which licenses and permits have been maintained and
continue to be in good standing except where the failure to
obtain or maintain such licenses or permits would not have a
material adverse effect on the American Automotive Business;
(w) Applicable Laws. American Automotive has not been charged with
or received notice of breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which it
is subject or which applies to it the violation of which would
have a material adverse effect on the American Automotive
Business, and, to American Automotive's knowledge, American
Automotive is not in breach of any laws, ordinances, statutes,
regulations, by-laws, orders or decrees the contravention of
which would result in a material adverse impact on the
American Automotive Business;
(x) Pending or Threatened Litigation. There is no material
litigation or administrative or governmental proceeding
pending or threatened against or relating to American
Automotive, the American Automotive Business, or any of the
American Automotive Assets, nor does American Automotive have
any knowledge of any deliberate act or omission of American
Automotive that would form any material basis for any such
action or proceeding;
(y) No Bankruptcy. American Automotive has not made any voluntary
assignment or proposal under applicable laws relating to
insolvency and bankruptcy and no bankruptcy petition has been
filed or presented against American Automotive and no order
has been made or a resolution passed for the winding-up,
dissolution or liquidation of American Automotive;
(z) Labor Matters. American Automotive is not a party to any
collective agreement relating to the American Automotive
Business with any labor union or other association of
employees and no part of the American Automotive Business has
been certified as a unit appropriate for collective bargaining
or, to the knowledge of American Automotive, has made any
attempt in that regard and American Automotive has no reason
to believe that any current employees will leave American
Automotive's employ as a result of this Merger.
(aa) Finder's Fees. Except for an agreement with Ocean Avenue
Advisors, LLC, American Automotive is not a party to any
agreement which provides for the payment of finder's fees,
brokerage fees, commissions or other fees or amounts which are
or may become payable to any third party in connection with
the execution and delivery of this Agreement and the
transactions contemplated herein;
33
Execution and Performance of Agreement
(bb) Authorization and Enforceability. The execution and delivery
of this Agreement, and the completion of the transactions
contemplated hereby, have been duly and validly authorized by
all necessary corporate action on the part of American
Automotive;
(cc) No Violation or Breach. The execution and performance of this
Agreement will not
(i) violate the charter documents of American Automotive or result
in any breach of, or default under, any loan agreement,
mortgage, deed of trust, or any other agreement to which
American Automotive is a party,
(ii) give any person any right to terminate or cancel any agreement
including, without limitation, American Automotive Material
Contracts, or any right or rights enjoyed by American
Automotive,
(iii) result in any alteration of American Automotive's obligations
under any agreement to which American Automotive is a party
including, without limitation, the American Automotive
Material Contracts,
(iv) result in the creation or imposition of any lien, encumbrance
or restriction of any nature whatsoever in favor of a third
party upon or against the American Automotive Assets,
(v) result in the imposition of any tax liability to American
Automotive relating to American Automotive Assets or the
American Automotive Shares, or
(vi) violate any court order or decree to which either American
Automotive is subject;
American Automotive Assets - Ownership and Condition
(dd) Business Assets. The American Automotive Assets, as set forth
on Schedule "O" hereto, comprise all of the property and
assets of the American Automotive Business, and neither the
American Automotive Shareholders nor any other person, firm or
corporation owns any assets used by American Automotive in
operating the American Automotive Business;
(ee) Title. American Automotive is the legal and beneficial owner
of the American Automotive Assets, free and clear of all
mortgages, liens, charges, pledges, security interests,
encumbrances or other claims whatsoever;
(ff) No Option. No person, firm or corporation has any agreement or
option or a right capable of becoming an agreement for the
purchase of any of the American Automotive Assets;
34
(gg) American Automotive Insurance Policies. As set forth on
Schedule "T" hereto, American Automotive maintains the public
liability insurance and insurance against loss or damage to
the American Automotive Assets and the American Automotive
Business;
(hh) INTENTIONALLY OMITTED;
(ii) No Default. There has not been any default in any material
obligation of American Automotive or any other party to be
performed under any of American Automotive Material Contracts,
each of which is in good standing and in full force and effect
and unamended, and American Automotive is not aware of any
default in the obligations of any other party to any of the
American Automotive Material Contracts;
(jj) No Compensation on Termination. There are no agreements,
commitments or understandings relating to severance pay or
separation allowances on termination of employment of any
employee of American Automotive. American Automotive is not
obliged to pay benefits or share profits with any employee
after termination of employment except as required by law;
American Automotive Assets - American Automotive Equipment
(kk) American Automotive Equipment. The American Automotive
Equipment, as set forth on Schedule "R" hereto, has been
maintained in a manner consistent with that of a reasonably
prudent owner and such equipment is in good working condition;
American Automotive Assets - American Automotive Goodwill and Other Assets
(ll) American Automotive Goodwill. Except as disclosed on Schedule
"S" hereot, American Automotive carries on the American
Automotive Business only under the name "American Automotive
Group" and variations thereof and under no other business or
trade names. American Automotive does not have any knowledge
of any infringement by American Automotive of any patent,
trademark, copyright or trade secret;
The Business of American Automotive
(mm) Maintenance of Business. Since the date of the American
Automotive Financial Statements, the American Automotive
Business has been carried on in the ordinary course and
American Automotive has not entered into any material
agreement or commitment except in the ordinary course; and
(nn) Subsidiaries. American Automotive does not own any
subsidiaries and does not otherwise own, directly or
indirectly, any shares or interest in any other corporation,
partnership, joint venture or firm and American Automotive
does not own any subsidiary and does not otherwise own,
directly or indirectly, any shares or interest in any other
corporation, partnership, joint venture or firm.
35
Non-Merger and Survival
5.2 The representations and warranties of American Automotive contained herein
will be true at and as of Closing in all material respects as though such
representations and warranties were made as of such time. Notwithstanding the
completion of the transactions contemplated hereby, the waiver of any condition
contained herein (unless such waiver expressly releases a party from any such
representation or warranty) or any investigation made by I-Incubator, the
representations and warranties of American Automotive and the American
Automotive Shareholders shall survive the Closing.
Indemnity
5.3 American Automotive agrees to indemnify and save harmless I-Incubator from
and against any and all claims, demands, actions, suits, proceedings,
assessments, judgments, damages, costs, losses and expenses, including any
payment made in good faith in settlement of any claim (subject to the right of
American Automotive and the American Automotive Shareholders to defend any such
claim), resulting from the breach by any of them of any representation or
warranty of such party made under this Agreement or from any misrepresentation
in or omission from any certificate or other instrument furnished or to be
furnished by American Automotive or the American Automotive Shareholders to
I-Incubator hereunder.
ARTICLE 6
COVENANTS OF AMERICAN AUTOMOTIVE
Covenants
6.1 American Automotive covenants and agrees with I-Incubator that it will:
(a) Conduct of Business. Until the Closing, conduct the American
Automotive Business diligently and in the ordinary course
consistent with the manner in which the American Automotive
Business generally has been operated up to the date of
execution of this Agreement;
(b) Preservation of Business. Until the Closing, use their best
efforts to preserve the American Automotive Business and the
American Automotive Assets and, without limitation, preserve
for I-Incubator American Automotive's relationships with their
suppliers, customers and others having business relations with
them;
(c) Access. Until the Closing, give I-Incubator and its
representatives full access to all of the properties, books,
contracts, commitments and records of American Automotive
relating to American Automotive, the American Automotive
Business and the American Automotive Assets, and furnish to
I-Incubator and its representatives all such information as
they may reasonably request;
36
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party
consents required to permit the Merger and to preserve and
maintain the American Automotive Assets, including the
American Automotive Material Contracts, notwithstanding the
change in control of American Automotive arising from the
Merger;
(e) Reporting and Internal Controls. From and after the Effective
Time, the American Automotive Shareholders shall forthwith
take all required actions to implement internal controls on
the business of the Surviving Company to ensure that the
Surviving Company and I-Incubator comply with Section 13(b)(2)
of the Securities and Exchange Act of 1934;
Authorization
6.2 American Automotive hereby agrees to authorize and direct any and all
federal, state, municipal, foreign and international governments and regulatory
authorities having jurisdiction respecting American Automotive to release any
and all information in their possession respecting American Automotive to
I-Incubator. American Automotive shall promptly execute and deliver to
I-Incubator any and all consents to the release of information and specific
authorizations which I-Incubator reasonably require to gain access to any and
all such information.
Survival
6.3 The covenants set forth in this Article shall survive the Closing for the
benefit of I-Incubator.
ARTICLE 7
CONDITIONS PRECEDENT
Conditions Precedent in Favor of I-Incubator
7.1 I-Incubator's obligations to carry out the transactions contemplated hereby
are subject to the fulfillment of each of the following conditions precedent on
or before the Closing:
(a) all documents or copies of documents required to be executed
and delivered to I-Incubator hereunder will have been so
executed and delivered;
(b) all of the terms, covenants and conditions of this Agreement
to be complied with are performed by American Automotive or
the American Automotive Shareholders at or prior to the
Closing will have been complied with or performed;
(c) I-Incubator shall have completed its review and inspection of
the books and records of American Automotive and shall be
satisfied with same in all material respects;
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(d) title to the American Automotive Shares held by the American
Automotive Shareholders and to the American Automotive Assets
will be free and clear of all mortgages, liens, charges,
pledges, security interests, encumbrances or other claims
whatsoever, save and except as disclosed herein;
(e) the Certificate of Merger shall be executed by American
Automotive in form acceptable for filing with the Delaware
Secretary of State;
(f) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of American Automotive, its liabilities or the
American Automotive Assets or any damage, loss or other change
in circumstances materially and adversely affecting the
American Automotive Business or the American Automotive Assets
or American Automotive's right to carry on the American
Automotive Business, other than changes in the ordinary course
of business, none of which has been materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to American
Automotive or the American Automotive Business (whether or not
covered by insurance) materially and adversely affecting
American Automotive, the American Automotive Business or the
American Automotive Assets; and
(g) the transactions contemplated hereby shall have been approved
by all other regulatory authorities having jurisdiction over
the subject matter hereof, if any; an
Waiver by I-Incubator
7.2 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of I-Incubator and any such condition may be waived in
whole or in part by I-Incubator at or prior to Closing by delivering to American
Automotive a written waiver to that effect signed by I-Incubator. In the event
that the conditions precedent set out in the preceding section are not satisfied
on or before the Closing, I-Incubator shall be released from all obligations
under this Agreement.
Conditions Precedent in Favor of American Automotive and the American Automotive
Shareholders
7.3 The obligation of American Automotive and the American Automotive
Shareholders to carry out the transactions contemplated hereby is subject to the
fulfillment of each of the following conditions precedent on or before the
Closing:
(a) all documents or copies of documents required to be executed
and delivered to American Automotive hereunder will have been
so executed and delivered;
38
(b) all of the terms, covenants and conditions of this Agreement
to be complied with or performed by I-Incubator at or prior to
the Closing will have been complied with or performed;
(c) American Automotive shall have completed its review and
inspection of the books and records of I-Incubator and its
subsidiaries and shall be satisfied with same in all material
respects;
(d) I-Incubator will have delivered the Acquisition Shares to be
issued pursuant to the terms of the Merger to American
Automotive at the Closing and the Acquisition Shares will be
registered on the books of I-Incubator in the name of the
holder of American Automotive Shares at the Effective Time;
(e) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests,
encumbrances or other claims whatsoever;
(f) the Certificate of Merger shall be executed by the Acquirer in
form acceptable for filing with the Delaware Secretary of
State;
(g) subject to Article 8 hereof, there will not have occurred
(i) except as set forth on Schedule "X" hereto, any
material adverse change in the financial position or
condition of I-Incubator, its subsidiaries, their
liabilities or the I-Incubator Assets or any damage,
loss or other change in circumstances materially and
adversely affecting I-Incubator, the I-Incubator
Business or the I-Incubator Assets or I-Incubator'
right to carry on the I-Incubator Business, other
than changes in the ordinary course of business, none
of which has been materially adverse, or
(ii) any damage, destruction, loss or other event,
including changes to any laws or statutes applicable
to I-Incubator or the I-Incubator Business (whether
or not covered by insurance) materially and adversely
affecting I-Incubator, its subsidiaries, the
I-Incubator Business or the I-Incubator Assets;
(h) the transactions contemplated hereby shall have been approved
by all other regulatory authorities having jurisdiction over
the subject matter hereof, if any;
(i) the satisfaction of all liabilities of I-Incubator on or prior
to the Closing Date.
(j) The execution of a six month employment agreement with Xxxxxx
Xxxxxxx in order to file and execute all outstanding 1934 Act
reports and certifications with the Securities and Exchange
Commission.
39
Waiver by American Automotive and the American Automotive Shareholders
7.4 The conditions precedent set out in the preceding section are inserted for
the exclusive benefit of American Automotive and the American Automotive
Shareholders and any such condition may be waived in whole or in part by
American Automotive or the American Automotive Shareholders at or prior to the
Closing by delivering to I-Incubator a written waiver to that effect signed by
American Automotive and the American Automotive Shareholders. In the event that
the conditions precedent set out in the preceding section are not satisfied on
or before the Closing American Automotive and the American Automotive
Shareholders shall be released from all obligations under this Agreement.
Nature of Conditions Precedent
7.5 The conditions precedent set forth in this Article are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions of precedent in favor of the other party or parties set forth in this
Article.
Termination
7.6 Notwithstanding any provision herein to the contrary, if the Closing does
not occur on or before July 31, 2003, this Agreement will be at an end and will
have no further force or effect, unless otherwise agreed upon by the parties in
writing.
Confidentiality
7.7 Notwithstanding any provision herein to the contrary, the parties hereto
agree that the existence and terms of this Agreement are confidential and that
if this Agreement is terminated pursuant to the preceding section the parties
agree to return to one another any and all financial, technical and business
documents delivered to the other party or parties in connection with the
negotiation and execution of this Agreement and shall keep the terms of this
Agreement and all information and documents received from American Automotive
and I-Incubator and the contents thereof confidential and not utilize nor reveal
or release same, provided, however, that I-Incubator will be required to issue
news releases regarding the execution and consummation of this Agreement and
file a Current Report on Form 8-K with the Securities and Exchange Commission
respecting the proposed Merger contemplated hereby together with such other
documents as are required to maintain the currency of I-Incubator' filings with
the Securities and Exchange Commission.
40
ARTICLE 8
RISK
Material Change in the Business of American Automotive
8.1 If any material loss or damage to the American Automotive Business occurs
prior to Closing and such loss or damage, in I-Incubator' reasonable opinion,
cannot be substantially repaired or replaced within sixty (60) days, I-Incubator
shall, within two (2) days following any such loss or damage, by notice in
writing to American Automotive, at its option, either:
(a) terminate this Agreement, in which case no party will be under
any further obligation to any other party; or
(b) elect to complete the Merger and the other transactions
contemplated hereby, in which case the proceeds and the rights
to receive the proceeds of all insurance covering such loss or
damage will, as a condition precedent to I-Incubator'
obligations to carry out the transactions contemplated hereby,
be vested in American Automotive or otherwise adequately
secured to the satisfaction of I-Incubator on or before the
Closing Date.
Material Change in the I-Incubator Business
8.2 If any material loss or damage to the I-Incubator Business occurs prior to
Closing and such loss or damage, in American Automotive's reasonable opinion,
cannot be substantially repaired or replaced within sixty (60) days, American
Automotive shall, within two (2) days following any such loss or damage, by
notice in writing to I-Incubator, at its option, either:
(a) terminate this Agreement, in which case no party will be under
any further obligation to any other party; or
(b) elect to complete the Merger and the other transactions
contemplated hereby, in which case the proceeds and the rights
to receive the proceeds of all insurance covering such loss or
damage will, as a condition precedent to American Automotive's
obligations to carry out the transactions contemplated hereby,
be vested in I-Incubator or otherwise adequately secured to
the satisfaction of American Automotive on or before the
Closing Date.
ARTICLE 9
CLOSING
Closing
9.1 The Merger and the other transactions contemplated by this Agreement will be
closed at the Place of Closing in accordance with the closing procedure set out
in this Article.
Documents to be Delivered by American Automotive
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9.2 On or before the Closing, American Automotive and the American Automotive
Shareholders will deliver or cause to be delivered to I-Incubator:
(a) the original or certified copies of the charter documents of
American Automotive and all corporate records documents and
instruments of American Automotive, the corporate seal of
American Automotive and all books and accounts of American
Automotive;
(b) all reasonable consents or approvals required to be obtained
by American Automotive for the purposes of completing the
Merger and preserving and maintaining the interests of
American Automotive under any and all American Automotive
Material Contracts and in relation to American Automotive
Assets;
(c) resolutions of the shareholder and director of American
Automotive as are required to be passed to authorize the
execution, delivery and implementation of this Agreement;
(d) an acknowledgement from American Automotive and the American
Automotive Shareholders of the satisfaction of the conditions
precedent set forth in section 7.3 hereof;
(e) the Certificate of Merger, duly executed by American
Automotive; and
(f) such other documents as I-Incubator may reasonably require to
give effect to the terms and intention of this Agreement.
Documents to be Delivered by I-Incubator
9.3 On or before the Closing, I-Incubator shall deliver or cause to be delivered
to American Automotive and the American Automotive Shareholders:
(a) share certificates representing the Acquisition Shares duly
registered in the names of the holders of shares of American
Automotive Common Stock;
(b) resolutions of the directors of I-Incubator as are required to
be passed to authorize the execution, delivery and
implementation of this Agreement;
(c) resolution of the directors of I-Incubator dated as of the
Closing Date appointing the nominees of American Automotive as
officers of American Automotive;
(d) an acknowledgement from I-Incubator of the satisfaction of the
conditions precedent set forth in section 7.1 hereof;
(e) the Certificate of Merger, duly executed by the Acquirer;
42
(f) such other documents as American Automotive may reasonably
require to give effect to the terms and intention of this
Agreement.
(g) a six month employment agreement with Xxxxxx Xxxxxxx in order
to file and execute all outstanding 1934 Act reports and
certifications with the Securities and Exchange Commission.
ARTICLE 10
POST-CLOSING MATTERS
Forthwith after the Closing, I-Incubator, American Automotive and
the American Automotive Shareholders agree to use all their best efforts to:
(a) file the Certificate of Merger with Secretary of State of the
State of Delaware;
(b) issue a news release reporting the Closing;
(c) file with the Securities and Exchange Commission a report on
Form 14f disclosing the change in control of I-Incubator and,
10 days after such filing, to cause the directors of
I-Incubator to resign and the appointment of the directors
chosen by American Automotive;
(d) file a Form 8-K with the Securities and Exchange Commission
disclosing the terms of this Agreement and, not more than 60
days following the filing of such Form 8-K, to file and
amended Form 8-K which includes audited financial statements
of American Automotive as well as pro forma financial
information of American Automotive and I-Incubator as required
by Regulation SB as promulgated by the Securities and Exchange
Commission;
(e) take such steps that are required to (i) file a Form 8K
regarding a change in accountants; (ii) prepare and file a
Form 10KSB for the fiscal year ending December 31, 2002
containing the certifications required under the
Xxxxxxxx-Xxxxx Act of 2002 executed by the I-Incubator
Shareholders; and (iii) prepare and file a Form 10QSB for the
period ending March 31, 2003 containing the certifications
required under the Xxxxxxxx-Xxxxx Act of 2002 executed by the
I-Incubator Shareholders.
43
(e) file reports on Forms 13D and 3 with the Securities and
Exchange Commission disclosing the acquisition of the
Acquisition Shares by the American Automotive Shareholders.
ARTICLE 11
GENERAL PROVISIONS
Arbitration
11.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good negotiation fails to resolve such dispute,
controversy, difference or claim within fifteen (15) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration in the City of New York, New York.
Notice
11.2 Any notice required or permitted to be given by any party will be deemed to
be given when in writing and delivered to the address for notice of the intended
recipient by personal delivery, prepaid single certified or registered mail, or
telecopier. Any notice delivered by mail shall be deemed to have been received
on the fourth business day after and excluding the date of mailing, except in
the event of a disruption in regular postal service in which event such notice
shall be deemed to be delivered on the actual date of receipt. Any notice
delivered personally or by telecopier shall be deemed to have been received on
the actual date of delivery.
Addresses for Service
11.3 The address for service of notice of each of the parties hereto is as
follows:
(a) I-Incubator or the Acquirer:
X-Xxxxxxxxx.xxx,Inc. 000 Xxxxx Xxxxxx, Xxxxx 000 Xxx Xxxxx, XX
00000 Attn: Xxxxxx Xxxxxxx Phone: 000-000-0000
(b) American Automotive or the American Automotive Shareholders
American Automotive Group, Inc.
0000 Xxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxx
Phone: 000-000-0000
Change of Address
11.4 Any party may, by notice to the other parties change its address for notice
to some other address in North America and will so change its address for notice
whenever the existing address or notice ceases to be adequate for delivery by
hand. A post office box may not be used as an address for service.
44
Further Assurances
11.5 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
Time of the Essence
11.6 Time is expressly declared to be the essence of this Agreement.
Entire Agreement
11.7 The provisions contained herein constitute the entire agreement among
American Automotive, the American Automotive Shareholders, the Acquirer and
I-Incubator respecting the subject matter hereof and supersede all previous
communications, representations and agreements, whether verbal or written, among
American Automotive, the American Automotive Shareholders, the Acquirer and
I-Incubator with respect to the subject matter hereof.
Enurement
11.8 This Agreement will enure to the benefit of and be binding upon the parties
hereto and their respective heirs, executors, administrators, successors and
permitted assigns.
Assignment
11.9 This Agreement is not assignable without the prior written consent of
the parties hereto.
Counterparts
11.10 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement.
Delivery of executed copies of this Agreement by telecopier will
constitute proper delivery, provided that originally executed
counterparts are delivered to the parties within a reasonable time
thereafter.
Applicable Law
11.11 This Agreement is subject to the laws of the State of New York.
[Remainder of page intentionally left blank.]
45
IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
X-XXXXXXXXX.XXX, INC.
/s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx, President
AMERICAN AUTOMOTIVE GROUP ACQUISITION CORP.
/s/ Xxxxxx Xxxxxxx
-------------------------------------------
Xxxxxx Xxxxxxx, President
AMERICAN AUTOMOTIVE GROUP, INC.
/s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx, President
AMERICAN AUTOMOTIVE GROUP SHAREHOLDERS:
/s/ Xxxxxxx X. Xxxxxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxxxxx
/s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx
/s/ Xxxxx X. Xxxxxxx
-------------------------------------------
Xxxxx X. Xxxxxxx
Forward Area, Inc.
/s/ Xxxxxxx X. Xxxxx
-------------------------------------------
Xxxxxxx X. Xxxxx, President
46
