Agreement of Merger
Agreement of Merger, dated as of January 6, 2003, among MetaSource Group, a
Nevada company, hereinafter called "MSGR"; XXX.xxx, Inc. (ON-LINE BUSINESS), a
New York corporation, hereinafter called the "Acquired Company."
1. Agreement of Merger. 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, as listed in Appendix A, on a pro rata basis of share
ownership of the Acquired Company.
Exchange of Shares. MSGR and the Acquired Company agree that all of the
shares of the Acquired Company shall be exchanged with MSGR for shares of MSGR
common stock based on the following formula: the average of 5 times calendar
year 2003 earnings of the Acquired Company plus 5 times and calendar year 2004
earnings of the Acquired Company, where earnings are calculated in a method
acceptable to the MSGR auditor, based on the average trading price (defined
hereinafter) of MSGR common stock. The average trading price of MSGR shares will
be calculated as the sum of high and low prices of each day as reported on
xxxxxxx.xxxxx.xxx during the last twenty business days of trading prior to the
first anniversary of this agreement and high and low prices of each day as
reported on xxxxxxx.xxxxx.xxx during the last twenty business days of trading
prior to the second anniversary of this agreement divided by eighty. MSGR will
issue 376,064 shares to the Acquired Company's stockholders on a pro rata basis
of share ownership of the Acquired Company on the Closing Date as listed in
Appendix A. Within 60 days of January 1, 2004, additional shares will be added
if consideration for calendar year 2003 Acquired Company earnings, according to
the formula above, is greater than 376,064 shares of MSGR. If consideration for
calendar year 2003 Acquired Company earnings, according to the formula above, is
less than 376,064 shares of MSGR the appropriate shares will be subtracted
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according to the formula above.Within 60 days of January 1, 2005, additional
shares will be added according to the formula above if calendar year 2004
Acquired Company earnings are greater than calendar year 2003 Acquired Company
earnings. If calendar year 2004 Acquired Company earnings are less than calendar
year 2003 Acquired Company earnings, the appropriate shares will be subtracted
according to the formula above.
Such shares will be held in escrow by MSGR for a period of one year from
the Closing Date. Shares held in escrow by MSGR will secure and indemnify MSGR
against a breach of warranties detailed hereinafter in Article three of this
agreement. In the event of an alleged breach of the warranties detailed in
Article three, MSGR and the Acquired Company 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 Acquired Company
agree to submit the dispute to the American Arbitration Association (AAA) no
later than one year from the date the breach was discovered. 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.
2. Delivery of Shares. On the Closing Date, the Acquired Company will deliver
to MSGR certificates representing their Acquired Company shares duly
endorsed with signatures guaranteed and with documentary stamps affixed at
the Acquired Company's 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, Xxxxx 0000, Xxx Xxxx, XX, 00000.
3. Representations of the Acquired Company. 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.
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c) As of the Closing Date, there will be 3,760,641 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") other than those listed in Appendix A. All options
and warrants listed in Appendix A to purchase or otherwise acquire
(whether directly or indirectly) any of the Acquired Company's
share capital or convertible into or exchangeable for any shares
of the Acquired Company's capital stock will forfeit rights of
purchase, exchange or convertibility into the Acquired Company's
capital stock and maintain purchase, exchange or convertibility
into shares of MSGR under those terms specified in Appendix A. 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 of September
30, 2002, which will be delivered to MSGR prior to the Closing
Date, 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.
e) Since September 30, 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.
f) 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
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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.
g) The Acquired Company is not involved in any pending litigation
that is over $50,000 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.
h) As of the Closing Date, the Acquired Company will be in good
standing as a New York Company.
i) As of the Closing Date, the Acquired Company will have in effect
all key man, fire, casualty and liability and other relevant
insurance policies. Key man insurance will include approximate
coverage of $5,000,000 and will name the Stockholders as
beneficiaries for a period not to exceed January 1, 2005.
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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 will make its best efforts to raise money for
MSGR via private placement in the amount of $250,000 - $1,000,000.
m) The Acquired Company is 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 Acquired
Company.
d) As of the Closing Date, MSGR will be in good standing as a Nevada
corporation.
e) MSGR will front certain development costs for the Acquired
Company's product, hereinafter called "ShopFast", including such
items as software content development and the Oracle Licensing
fees.
f) MSGR will handle technical software design and implementation of
ShopFast.
5. Closing Date. The Closing Date of this transaction will be no later than 30
days from the execution of this contract and is contingent on completion of
the Transactions To Close, defined hereafter. Until such date shares will
not be exchanged.
The Transactions To Close are defined as:
1. Delivery of documents attesting to the restructuring of existing
Acquired Company liabilities as listed in Appendix B to an amount
no greater than $1,000,000 in equity.
2. Delivery to MSGR of Acquired Company Board of Director's
Resolution and Shareholder approval authorizing the merger with
MSGR.
3. Delivery to MSGR of a contract between the Acquired Company and
TELE-V Media, a company incorporated under the laws of Delaware,
having its principal office at 11 West 42nd Street, New York, NY
USA, in regards the marketing, production, distribution and
selling of ShopFast under the conditions listed in Appendix C.
4. Delivery to MSGR of an employment contract between MSGR and the
Acquired Company's Chief Executive Officer.
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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 Acquired Company 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 acknowledges 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.
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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:
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"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
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Stockholders: c/o
XXX.xxx, Inc.
Xxxxx Xxxxx
00 xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
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.
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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 /s/ Xxxxxxxx Xxxxx
Attest: by: -------------------------------
Xxxxxxxx Xxxxx
/s/(illegible)
----------------------------
Secretary
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XXX.xxx, Inc.
Corporate seal
Attest: by: /s/ Xxxxx Xxxxx
----------------------------
Xxxxx Xxxxx
/s/(illegible)
----------------------------
Secretary
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