Exhibit 10.11
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
FARADAY FINANCIAL, INC.,
HOMENET UTAH, INC.
AND
VIDEO INTERNET BROADCASTING CORPORATION
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into
effective as of this 2nd day of August, 2004, by and among Faraday Financial,
Inc., a Delaware corporation (hereinafter "Faraday"); Homenet Utah, Inc., a Utah
corporation and wholly-owned subsidiary of Faraday (hereinafter "Homenet"); and
Video Internet Broadcasting Corporation, a Washington corporation (hereinafter
"VIB"). Homenet and VIB are sometimes hereinafter collectively referred to as
the "Constituent Corporations."
RECITALS
WHEREAS, the boards of directors of Faraday, Homenet and VIB,
respectively, deem it advisable and in the best interests of such corporations
and their respective stockholders that Homenet merge with and into VIB pursuant
to this Agreement and the Plan, Articles and Certificate of Merger in the form
attached hereto as Exhibit "A" and pursuant to applicable provisions of law
(such transaction hereafter referred to as the "Merger").
WHEREAS, Faraday has an authorized capitalization of 21,000,000 shares
of stock of which 20,000,000 shares, par value $.001 per share, are common stock
(the "Faraday Common Stock") and 1,000,000 shares, par value $.001 per share,
are preferred stock. Faraday has 2,318,000 shares of common stock outstanding
and no shares of preferred stock outstanding; Homenet has an authorized
capitalization consisting of 25,000,000 shares of common stock, $.001 par value,
of which 5,000,000 shares are issued and outstanding (the "Homenet Common
Stock") and are owned by Faraday as of the date hereof; and VIB has an
authorized capitalization consisting of 600,000 shares of Series A Preferred
Stock, $0.001 par value, of which 350,555 shares are outstanding (the "VIB A
Preferred"), 30,000,000 shares of common stock, $.001 par value, of which
2,184,939 shares are issued and outstanding (the "VIB Common Stock") and the
possible future authorization and issuance of Series B Preferred Stock (the "VIB
B Preferred"). The VIB A Preferred and VIB B Preferred are sometimes hereinafter
referred to individually and collectively as the "VIB Preferred Stock" and the
VIB Common Stock and the VIB Preferred Stock are sometimes hereinafter referred
to individually and collectively as the "VIB Stock." All of said shares of VIB
Common Stock, VIB Preferred Stock and other securities of VIB are owned by the
holders of VIB as set forth on the attached Exhibit "B" (hereafter "VIB
Stockholders").
NOW THEREFORE, for the mutual consideration set out herein, and other
good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties agree as follows:
AGREEMENT
1. Plan of Reorganization. The parties hereto hereby agree that Homenet
shall be merged with and into VIB upon the terms and conditions set forth
herein. It is the intention of the parties hereto that this transaction qualify
as a tax-free reorganization under Section 368(a)(2)(E) of the Internal Revenue
Code of 1986, as amended, and related sections thereunder (the "Code").
2. Terms of Merger. In accordance with the provisions of this Agreement
and the requirements of applicable law, Homenet shall be merged with and into
VIB as of the Effective Date (the terms "Closing" and "Effective Date" are
defined in Section 6 hereof), VIB shall be the surviving corporation ("Surviving
Corporation") and the separate existence of Homenet shall cease when the Merger
shall become effective. Consummation of the Merger shall be upon the following
terms and subject to the following conditions:
(a) Co rporate Existence.
(1) At the Effective Date, the Surviving Corporation
shall continue its corporate existence as a Washington corporation and (i) it
shall thereupon and thereafter possess all rights, privileges, powers,
franchises and property (real, personal and mixed) of each of the Constituent
Corporations; (ii) all debts due to either of the Constituent Corporations, on
whatever account, all causes in action and all other things belonging to either
of the Constituent Corporations shall be taken and deemed to be transferred to
and shall be vested in the Surviving Corporation by virtue of the Merger without
further act or deed; and (iii) all rights of creditors and all liens upon any
property of either of the Constituent Corporations shall be preserved
unimpaired, limited in lien to the property affected by such liens immediately
prior to the Effective Date, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving Corporation.
(2) At the Effective Date, (i) the Articles of
Incorporation of VIB, as existing immediately prior to the Effective Date, shall
be and become the Articles of Incorporation of the Surviving Corporation, except
that, effective as of the Effective Date, the Articles of Incorporation of VIB
shall be amended to change VIB's name to HomeNet Communications, Inc.; (ii) the
Bylaws of VIB, as existing immediately prior to the Effective Date shall be and
become the Bylaws of the Surviving Corporation; (iii) the members of the Board
of Directors of VIB holding office immediately prior to the Effective Date shall
remain as the members of the Board of Directors of the Surviving Corporation (if
on or after the Effective Date a vacancy exists on the Board of Directors of the
Surviving Corporation, such vacancy may thereafter be filled in a manner
provided by law and the Bylaws of the Surviving Corporation); and (iv) until the
Board of Directors of the Surviving Corporation shall otherwise determine, all
persons who hold offices of VIB at the Effective Date shall hold the same
offices of the Surviving Corporation.
(b) Pre-Merger Events.
(1) VIB shall have completed its shareholder meeting
and received the consent of its shareholders for the consummation of the
transactions contemplated hereby.
(2) VIB shall have entered into settlement
arrangements that are satisfactory to Faraday, in its sole and absolute
discretion, with respect to the four holders of VIB convertible promissory notes
who claim that they are owed twice the principal amount actually loaned to VIB
in addition to a like amount of VIB capital stock.
(3) VIB shall have entered into settlement
arrangements that are satisfactory to Faraday, in its sole and absolute
discretion, settling all claims with respect to placement agent or finders fee
arrangements relating to this transaction and all prior transactions of VIB in
which claims for placement agent and/or finders fees have been asserted.
(c) Conversion of Securities. As of the Effective Date and
without any action on the part of Faraday, Homenet, VIB or the holders of any of
the securities of any of these corporations each of the following shall occur:
(1) Each share of VIB Stock issued and outstanding
immediately prior to the Effective Date shall be converted into 1.0903 shares of
Faraday Common Stock. All such shares of VIB Stock shall no longer be
outstanding and shall automatically be canceled and shall cease to exist, and
each certificate previously evidencing any such shares shall thereafter
represent the right to receive, upon the surrender of such certificate in
accordance with the provisions of Section 3 hereof, certificates evidencing such
number of shares of Faraday Common Stock into which such shares of VIB Stock
were converted. The holders of such certificates previously evidencing shares of
VIB Stock outstanding immediately prior to the Effective Date shall cease to
have any rights with respect to such shares of VIB Stock except as otherwise
provided herein or by law;
(2) Any shares of VIB Stock held in the treasury of
VIB immediately prior to the Effective Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto;
(3) Each share of capital stock of Homenet issued and
outstanding immediately prior to the Effective Date
shall be converted into one share of common stock of
the Surviving Corporation and thereafter each stock certificate of Homenet shall
evidence ownership of shares of common stock of the Surviving Corporation;
(4) The shares of Faraday Common Stock issued and
outstanding prior to the Merger will remain outstanding;
(5) All other securities convertible into or
exercisable for shares of VIB Stock (other than notes convertible into or
warrants exercisable for VIB Preferred), including but not limited to stock
options and warrants issued by VIB prior to the Effective Date, as set forth on
Exhibit "B" hereto (the "Assumed Securities"), shall become, without further
action, convertible into or exercisable for shares of Faraday Common Stock at
the rate of 1.0903 shares of Faraday Common Stock for each share of VIB Stock
into which the Assumed Securities were convertible or exercisable immediately
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prior to the Merger. The terms of the Assumed Securities shall otherwise be as
described in Section 2(d) below.
(6) All notes convertible into or warrants
exercisable for VIB Preferred ("Convertible Preferred Securities") shall become,
without further action, convertible into or exercisable for shares of Faraday
Common Stock at the rate of 1.0903 shares of Faraday Common Stock for each share
of VIB Preferred into which the Convertible Preferred Securities were
convertible or exercisable immediately prior to the Merger.
(d) Post-Merger Securities Issuance; Assumption of
Obligations. Immediately after the Effective Date:
(1) Faraday shall assume all of VIB's obligations
relating to the Assumed Securities, so that such securities shall become
convertible at the rate of 1.0903 shares of Faraday Common Stock for each share
of VIB Stock into which the Assumed Securities were convertible or exercisable
immediately prior to the merger. Each Assumed Security shall continue to have,
and be subject to, the same terms and conditions (including, without limitation,
the applicable vesting schedule in the case of stock options) as set forth in
such security (as in effect immediately prior to the Effective Date) pursuant to
which such security was issued, except that all references to VIB shall be
deemed to be references to Faraday. The adjustment provided herein with respect
to any existing stock options issued by VIB that are "incentive stock options"
(as defined in Section 422 of the Code) shall be and is intended to be effected
in a manner that is consistent with Section 424(a) of the Code. Faraday shall
reserve for issuance the number of share of Faraday Common Stock that will
become issuable upon the exercise of such Assumed Securities pursuant to this
Section 2(d);
(2) Faraday shall assume all of VIB's obligations to
issue securities on the conversion or exercise, as the case may be, of the
Convertible Preferred Securities so that such Convertible Preferred Securities
shall become convertible or exercisable, as the case may be, at the rate of
1.0903 shares of Faraday Common Stock for each share of VIB Preferred into which
the Convertible Preferred Securities were converted into or exercisable
immediately prior to the Merger.
(e) Other Matters.
(1) There shall be no stock dividend, stock split,
recapitalization, or exchange of shares with respect to or rights issued in
respect of, Faraday' capital stock after the date hereof and there shall be no
dividends paid on Faraday' capital stock after the date hereof, in each case
through and including the Effective Date, except for certain options to purchase
a maximum of 2,000,000 shares of Faraday Common Stock which Faraday expects to
grant to certain senior management personnel of VIB.
(2) There shall be no stock dividend, stock split,
recapitalization, or exchange of shares with respect to or rights issued in
respect of, VIB's capital stock after the date hereof and there shall be no
dividends paid on VIB's capital stock after the date hereof, in each case
through and including the Effective Date.
(3) VIB shall have received all requisite director
and stockholder approval of all matters set forth herein and no stockholder of
VIB shall have exercised any dissenters rights under applicable corporate law.
(4) Homenet and Faraday shall have received all
requisite director and stockholder approval of the matters set forth herein.
3. Delivery of Shares; Exchange of Other Securities. On or as soon as
practicable after the Effective Date:
(a) VIB will cause the VIB Stockholders to surrender for
cancellation certificates representing their shares of VIB Stock, against
delivery of certificates representing the shares of Faraday Common Stock for
which the shares of VIB Stock are to be converted in the Merger. Until
surrendered and exchanged as herein provided, each outstanding certificate
which, prior to the Effective Date, represented a VIB certificate shall be
deemed for all corporate purposes to evidence ownership of the same number of
shares of Faraday Common Stock into which the VIB certificate shall have been so
converted.
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(b) Without limiting the effect of Section 2(c)(5) hereof, any
Assumed Security, may upon submission for cancellation at the election of the
holder of such Assumed Security, be reissued by Faraday as an otherwise
identical security convertible or exercisable for the same number of shares of
Faraday Common Stock as provided for in Section 2(d)(1) hereof.
4. Representations of VIB. VIB hereby represents and warrants as
follows, which warranties and representations shall also be true as of the
Effective Date:
(a) Except as noted on Exhibit "B", the VIB Stockholders
listed on the attached Exhibit "B" are the sole owners of record and
beneficially of the issued and outstanding securities of VIB.
(b) VIB has the corporate power to enter into this Agreement
and to perform its obligations hereunder. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of VIB. The execution and performance
of this Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to which VIB is a
party and will not violate any judgment, decree, order, writ, rule, statute, or
regulation applicable to VIB or its properties. The execution and performance of
this Agreement will not violate or conflict with any provision of the respective
Articles of Incorporation or Bylaws of VIB.
(c) The current unaudited financial statements as of June 30,
2004, and the audited consolidated financial statements as of December 31, 2004
and 2003, of VIB which have been or are hereafter delivered to Faraday
(hereinafter collectively referred to as the "VIB Financial Statements") are or
will be, as the case may be, complete, accurate and fairly present the financial
condition of VIB as of the dates thereof and the results of its operations for
the periods covered, subject, in the case of the unaudited interim statements,
to normal year-end audit adjustments. There are no material liabilities or
obligations, either fixed or contingent, not disclosed in the VIB Financial
Statements or in any exhibit thereto or notes thereto other than contracts or
obligations in the ordinary course of business; and no such contracts or
obligations in the ordinary course of business constitute liens or other
liabilities which materially alter the financial condition of VIB as reflected
in the VIB Financial Statements. VIB has good title to all assets shown on the
VIB Financial Statements subject only to dispositions and other transactions in
the ordinary course of business, the disclosures set forth therein and liens and
encumbrances of record. The year end audited financial statement of VIB have
been prepared in accordance with generally accepted accounting principles
consistently applied (except as may be indicated therein or in the notes
thereto).
(d) Since June 30, 2004, there have not been any material
adverse changes in the financial position of VIB except changes arising in the
ordinary course of business, which changes will in no event materially and
adversely affect the financial position of VIB.
(e) VIB is not a party to any material pending litigation or,
to its best knowledge, any governmental investigation or proceeding, not
reflected in the VIB Financial Statements, and to its best knowledge, no
material litigation, claims, assessments or any governmental proceedings are
threatened against VIB except as described in Section 2(b) hereof.
(f) VIB is in good standing in its state of incorporation, and
is in good standing and duly qualified to do business in each state where
required to be so qualified except where the failure to so qualify would have no
material negative impact on VIB.
(g) VIB has (or, by the Effective Date, will have) filed all
material tax, governmental and/or related forms and reports (or extensions
thereof) due or required to be filed and has (or will have) paid or made
adequate provisions for all taxes or assessments which have become due as of the
Effective Date.
(h) VIB's authorized capital stock consists of (i) 600,000
shares of VIB A Preferred Stock, $.001 par value, of which 350,555 shares are
presently issued and outstanding and (ii) 30,000,000 shares of common stock, par
value $0.001 per share, of which 2,184,939 shares are presently issued and
outstanding. The Company also has outstanding securities that are convertible
into up to 486,259 shares of a Series B Preferred Stock which the Board of
Directors has not yet authorized, but the Company does not have any authorized
VIB B Preferred and no VIB B Preferred shares currently outstanding. All
outstanding shares of capital stock of VIB are validly issued, fully paid and
nonassessable. There are no existing options, calls, warrants, preemptive rights
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or commitments of any character relating to the issued or unissued capital stock
or other securities of VIB that are not disclosed in Exhibit "B."
(i) VIB has not materially breached any material agreement to
which it is a party. VIB has previously given Faraday copies or access thereto
of all material contracts, commitments and/or agreements to which VIB is a party
including all relationships or dealings with related parties or affiliates.
(j) VIB has no subsidiary corporations except as described in
writing and delivered to Faraday.
(k) VIB has made its corporate financial records, minute
books, and other corporate documents and records available for review to present
management of Faraday prior to the Effective Date, during reasonable business
hours and on reasonable notice.
(l) All information regarding VIB which has been delivered to
Faraday in connection with the Merger is true, complete and accurate in all
material respects.
5. Representations of Faraday and Homenet. Faraday and Homenet hereby
jointly and severally represent and warrant as follows, each of which
representations and warranties shall continue to be true as of the Effective
Date:
(a) As of the Effective Date, the shares of Faraday Common
Stock, to be issued and delivered to the VIB Stockholders hereunder will, when
so issued and delivered, constitute, duly authorized, validly and legally issued
shares of Faraday capital stock, fully-paid and nonassessable.
(b) Faraday and Homenet have the corporate power to enter into
this Agreement and to perform their respective obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by the respective
Boards of Directors of Faraday and Homenet. The execution and performance of
this Agreement will not constitute a material breach of any agreement,
indenture, mortgage, license or other instrument or document to which Faraday or
Homenet is a party and will not violate any judgment, decree, order, writ, rule,
statute, or regulation applicable to Faraday, Homenet or their properties. The
execution and performance of this Agreement will not violate or conflict with
any provision of the respective Articles of Incorporation or Bylaws of Faraday
or Homenet.
(c) Faraday has delivered to VIB a true and complete copy of
its Annual Report on Form 10-KSB for the year ended March 31, 2004, as filed
with the Commission. As of its date, such report did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstance under which they were made, not misleading. The audited financial
statements included in such report have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis and
fairly present the financial position of Faraday as of the date thereof and the
results of its operations and changes in financial position for the period then
ended subject, in the case of the unaudited interim financial statements, to
normal year-end audit adjustments. Homenet has no financial statements because
it is newly formed for the purpose of effectuating this Merger and it has no
material assets, liabilities, contracts or obligations of any kind. Faraday has
no subsidiaries except for Homenet and Homenet Marketing Group, Inc.
(d) Since March 31, 2004, there have not been any material
adverse changes in the financial condition of Faraday.
(e) Neither Faraday nor Homenet is a party to or the subject
of any pending litigation, claims, or governmental investigation or proceeding
not reflected in the Faraday financial statements or otherwise disclosed herein,
and there are no lawsuits, claims, assessments, investigations, or similar
matters, to the best of their knowledge, threatened or contemplated against or
affecting Faraday, its management or its properties.
(f) Faraday and Homenet are each duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation; each has the corporate power to own its property and to carry on
its business as now being conducted and is duly qualified to do business in any
jurisdiction where so required except where the failure to so qualify would have
no material negative impact.
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(g) Faraday and Homenet have each filed all federal, state,
county and local income, excise, property and other tax, governmental and/or
related returns, forms, or reports, which are due or required to be filed by it
prior to the date hereof and has paid or made adequate provision in the Faraday
financial statements for the payment of all taxes, fees, or assessments which
have or may become due pursuant to such returns or pursuant to any assessments
received. Neither Faraday nor Homenet is delinquent or obligated for any tax,
penalty, interest, delinquency or charge.
(h) Faraday' authorized capital stock consists of 21,000,000
shares of stock of which 20,000,000 shares, par value $.001 per share, are
common stock and 1,000,000 shares, par value $.001 per share, are preferred
stock. Faraday has 2,318,000 shares of common stock outstanding and no shares of
preferred stock outstanding. All outstanding shares of capital stock of Faraday
are validly issued, fully paid and nonassessable. Faraday also has outstanding
warrants that are exercisable for 576,500 shares of Faraday common stock. These
warrants exercisable at $1.50 per share through February 2006. The Company also
has outstanding convertible notes in the principal amount of $765,000 that
become due and payable beginning in August 2004. The loans accrue interest at
12% per annum and were issued earlier in 2004. Principal and interest not paid
when due bear interest at the rate of 18% per annum. The notes are convertible
at any time at the option of the holder into shares of the Company's common
stock at the rate of one share of common stock for every $1.00 in principal and
accrued interest that is converted.
(i) The corporate financial records, minute books, and other
documents and records of Faraday and Homenet have been made available to VIB
prior to the Closing.
(j) Faraday has not breached, nor is there any pending, or to
the knowledge of management, any threatened claim that Faraday has breached, any
of the terms or conditions of any agreements, contracts or commitments to which
it is a party or by which it or its properties is bound. The execution and
performance hereof will not violate any provisions of applicable law or any
agreement to which Faraday is subject. Faraday hereby represents that it is not
a party to any material contract or commitment other than appointment documents
with its transfer agent and the retention of its professional advisors and that
it has disclosed to VIB all relationships or dealings with related parties or
affiliates.
(k) All information regarding Faraday which is set forth
herein or otherwise delivered to VIB in connection with the Merger is true,
complete and accurate in all material respects.
6. Closing. The Closing of the transactions contemplated herein shall
take place on such date (the "Closing") as mutually determined by the parties
hereto when all conditions precedent have been met and all required documents
have been delivered, which Closing shall be no later than August 31, 2004,
unless extended by mutual consent of all parties hereto. The "Effective Date" of
the Merger shall be that date on which executed copies of the attached Plan,
Articles and Certificate of Merger are filed in the states of Washington and
Delaware.
7. Conditions Precedent to the Obligations of VIB. All obligations of
VIB under this Agreement are subject to the fulfillment, prior to or as of the
Closing and/or the Effective Date, as indicated below, of each of the following
conditions:
(a) The representations and warranties by or on behalf of
Faraday and Homenet contained in this Agreement or in any certificate or
document delivered pursuant to the provisions hereof shall be true in all
material respects at and as of the Closing and Effective Date as though such
representations and warranties were made at and as of such time.
(b) Faraday and Homenet shall have performed and complied with
all covenants, agreements, and conditions set forth in, and shall have executed
and delivered all documents required by this Agreement to be performed or
complied with or executed and delivered by them prior to or at the Closing.
(c) On or before the Closing, the directors of Faraday and
Homenet, and Faraday as sole stockholder of Homenet, shall have approved in
accordance with applicable state corporation law the execution and delivery of
this Agreement and the consummation of the transactions contemplated herein.
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(d) On or before the Closing Date, Faraday and Homenet shall
have delivered certified copies of resolutions of the sole stockholder and
directors of Homenet and of the directors of Faraday approving and authorizing
the execution, delivery and performance of this Agreement and authorizing all of
the necessary and proper action to enable Faraday and Homenet to comply with the
terms of this Agreement including the election of VIB's nominees to the Board of
Directors of Faraday and all matters outlined herein.
(e) The Merger shall be permitted by applicable state law and
Faraday shall have sufficient shares of its capital stock authorized to complete
the Merger.
(f) At Closing, the officers and directors of Faraday shall
have resigned in writing from their positions as directors and officers of
Faraday upon the election and appointment of the VIB nominees.
(g) At the Closing, all instruments and documents delivered to
VIB Stockholders pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for VIB.
(h) At the Closing, upon consummation of the Merger, Faraday
shall have the same authorized capital as at present.
(i) The shares of restricted Faraday capital stock to be
issued to VIB Stockholders at Closing will be validly issued, nonassessable and
fully-paid under Delaware law and will be issued in a nonpublic offering and
isolated transaction in compliance with all federal, state and applicable
securities laws.
(j) VIB shall have received the advice of its tax advisor that
this transaction is a tax free reorganization as to the exchanging VIB
Stockholders.
(k) VIB shall have received all necessary and required
approvals and consents from required parties and its stockholders.
8. Conditions Precedent to the Obligations of Faraday and Homenet. All
obligations of Faraday and Homenet under this Agreement are subject to the
fulfillment, prior to or at the Closing, of each of the following conditions:
(a) The representations and warranties by VIB contained in
this Agreement or in any certificate or document delivered pursuant to the
provisions hereof shall be true in all material respects at and as of the
Closing as though such representations and warranties were made at and as of
such time.
(b) VIB shall have performed and complied with, in all
material respects, all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by them prior to or at the Closing;
(c) VIB shall deliver on behalf of its stockholders (including
holders of options, warrants and other convertible securities), a letter
commonly known as an "Investment Letter," in substantially the form attached
hereto as Exhibit "C", acknowledging that the shares of Faraday Common Stock are
being acquired for investment purposes.
(d) On or before the Closing Date, VIB shall have delivered
certified copies of resolutions of its stockholders and directors approving and
authorizing the execution, delivery and performance of this Agreement and
authorizing all of the necessary and proper action to enable VIB to comply with
the terms of this Agreement.
(e) At the Closing, all instruments and documents delivered to
Faraday and Homenet pursuant to the provisions hereof shall be reasonably
satisfactory to legal counsel for Faraday.
(f) Immediately prior to the consummation of the Merger,
Faraday shall have the same authorized capital as at present.
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(g) Faraday and Homenet shall have received all necessary and
required approvals and consents from required parties.
9. Indemnification. For a period of two years from the Closing, Faraday
and Homenet agree to jointly and severally indemnify and hold harmless VIB, and
VIB agrees to indemnify and hold harmless Faraday and Homenet, at all times
after the date of this Agreement against and in respect of any liability, damage
or deficiency, all actions, suits, proceedings, demands, assessments, judgments,
costs and expenses including attorneys' fees incident to any of the foregoing,
resulting from any material misrepresentations made by an indemnifying party to
an indemnified party, an indemnifying party's breach of covenant or warranty or
an indemnifying party's nonfulfillment of any agreement hereunder, or from any
material misrepresentation in or omission from any certificate furnished or to
be furnished hereunder.
10. Nature and Survival of Representations. All representations,
warranties and covenants made by any party in this Agreement shall survive the
Closing and the consummation of the transactions contemplated hereby for two
years from the Closing. All of the parties hereto are executing and carrying out
the provisions of this Agreement in reliance solely on the representations,
warranties and covenants and agreements contained in this Agreement and not upon
any investigation upon which it might have made or any representation, warranty,
agreement, promise or information, written or oral, made by the other party or
any other person other than as specifically set forth herein.
11. Documents at Closing. At the Closing, the following documents shall
be delivered:
(a) VIB will deliver, or will cause to be delivered, to
Faraday the following:
(i) a certificate executed by the President and
Secretary of VIB to the effect that all representations and warranties made by
VIB under this Agreement are true and correct as of the Closing, the same as
though originally given to Faraday or Homenet on said date;
(ii) a certificate from the state of VIB's
incorporation dated at or about the Closing to the effect that VIB is in good
standing under the laws of said state;
(iii) certified copies of resolutions adopted by
VIB's Board of Directors and stockholders authorizing the Merger and all related
matters;
(iv) Investment Letters in the form attached hereto
as Exhibit "C" executed by each VIB Stockholder (including holders of
outstanding options, warrants and other convertible securities);
(v) such other instruments, documents and
certificates, if any, as are required to be delivered pursuant to the provisions
of this Agreement;
(vi) executed copies of the Plan, Articles and
Certificate of Merger for filing; and
(vii) all other items, the delivery of which is a
condition precedent to the obligations of Faraday and Homenet, as set forth
herein.
(b) Faraday and Homenet will deliver or cause to be delivered
to VIB:
(i) stock certificates representing those securities
of Faraday to be issued as a part of the exchange as described in Section 2
hereof;
(ii) a certificate of the President/Secretary of
Faraday and Homenet, respectively, to the effect that all representations and
warranties of Faraday and Homenet made under this Agreement are true and correct
as of the Closing, the same as though originally given to VIB on said date;
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(iii) certified copies of resolutions adopted by
Faraday' and Homenet's Board of Directors and Homenet's stockholders authorizing
the Merger and all related matters;
(iv) certificates from the jurisdiction of
incorporation of Faraday and Homenet dated at or about the Closing Date that
each of said companies is in good standing under the laws of said state;
(v) such other instruments and documents as are
required to be delivered pursuant to the provisions of this Agreement;
(vi) resignation of the sole officer and director of
Faraday and Homenet; and
(vii) all other items, the delivery of which is a
condition precedent to the obligations of VIB, as set forth in herein.
12. Finder's Fees. Faraday and Homenet, jointly and severally,
represent and warrant to VIB, and VIB represents and warrants to each of Faraday
and Homenet, that, except as described in the Memorandum from VIB to Faraday
dated August 2, 2004 none of them, or any party acting on their behalf, has
incurred any liabilities, either express or implied, to any "broker" of "finder"
or similar person in connection with this Agreement or any of the transactions
contemplated hereby. In this regard, Faraday and Homenet, jointly and severally,
on the one hand, and VIB on the other hand, will indemnify and hold the other
harmless from any claim, loss, cost or expense whatsoever (including reasonable
fees and disbursements of counsel) from or relating to any such express or
implied liability.
13. Miscellaneous.
(a) Further Assurances. At any time, and from time to time,
after the Effective Date, each party will execute such additional instruments
and take such action as may be reasonably requested by the other party to
confirm or perfect title to any property transferred hereunder or otherwise to
carry out the intent and purposes of this Agreement.
(b) Waiver. Any failure on the part of any party hereto to
comply with any of its obligations, agreements or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
(c) Termination. All obligations hereunder may be terminated
at the discretion of either party's Board of Directors if (i) the closing
conditions specified in Sections 7 and 8 are not met by August 31, 2004, unless
unanimously extended, or (ii) any of the representations and warranties made
herein have been materially breached.
(d) Amendment. This Agreement may be amended only in writing
as agreed to by all parties hereto.
(e) Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been given if delivered in
person or sent by prepaid first class registered or certified mail, return
receipt requested.
(f) Headings. The section and subsection headings in this
Agreement are inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(g) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(h) Binding Effect. This Agreement shall be binding upon the
parties hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
(i) Entire Agreement. This Agreement and the attached Exhibits
is the entire agreement of the parties covering everything agreed upon or
understood in the transaction. There are no oral promises, conditions,
representations, understandings, interpretations or terms of any kind as
conditions or inducements to the execution hereof.
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(j) Time. Time is of the essence.
(k) Severability. If any part of this Agreement is deemed to
be unenforceable the balance of the Agreement shall remain in full force and
effect.
(l) Responsibility and Costs. If the Merger is consummated,
all fees, expenses and out-of-pocket costs and expenses shall be borne by VIB.
If the Merger is terminated prior to the Effective Date all fees, expenses and
out-of-pocket costs and expenses, including, without limitation, fees and
disbursements of counsel, financial advisors and accountants, incurred by the
parties hereto shall be borne solely and entirely by the party that has incurred
such costs and expenses unless such party has agreed otherwise with any such
person.
Remainder of Page Intentionally Left Blank
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IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
VIDEO INTERNET BROADCASTING CORPORATION FARADAY FINANCIAL, INC.
By /s/ Xxxxxxx Xxxxxx By /s/ Xxxxx X. Xxxxxx
--------------------------- ----------------------------
Its: President Xxxxx X. Xxxxxx, President
HOMENET UTAH, INC.
By /s/ Xxxxx X. Xxxxxx
----------------------------
Xxxxx X. Xxxxxx, President
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EXHIBIT A
PLAN, ARTICLES AND CERTIFICATE OF MERGER
OF
HOMENET UTAH, INC.
A UTAH CORPORATION
INTO
VIDEO INTERNET BROADCASTING CORPORATION
A WASHINGTON CORPORATION
THE UNDERSIGNED CORPORATIONS DO HEREBY CERTIFY:
FIRST: That the name and state of incorporation of each of the
constituent corporations (the "Constituent Corporations") of the merger
("Merger") are as follows:
Name State of Incorporation
---- ----------------------
Homenet Utah, Inc. Utah
Video Internet Broadcasting Corporation Washington
SECOND: That an agreement and plan of merger between the parties to the
Merger has been approved and adopted, by each of the Constituent Corporations in
accordance with the requirements of Utah and Washington law and that upon filing
this document with the Utah Department of Commerce and the Washington Secretary
of State, the Merger shall be effective (the "Effective Date").
THIRD: The name of the surviving corporation of the Merger is Video
Internet Broadcasting Corporation ("VIB" or the "Surviving Corporation"), a
Washington corporation.
FOURTH: Homenet Utah, Inc. ("Homenet") is a wholly-owned subsidiary of
Faraday Financial, Inc. ("Faraday"), a Delaware corporation. In the Merger of
Homenet into VIB, the outstanding securities of Homenet will be converted into
outstanding securities of Faraday as set forth below. Homenet and VIB are
sometimes referred to herein as the "Constituent Corporations."
FIFTH: The terms and conditions of the merger and the manner and basis
of converting the shares of the Constituent Corporations are as follows:
(a) Corporate Existence
(1) At the Effective Date, the Surviving Corporation shall
continue its corporate existence as a Washington corporation and (i) it shall
thereupon and thereafter possess all rights, privileges, powers, franchises and
property (real, personal and mixed) of each of the Constituent Corporations;
(ii) all debts due to either of the Constituent Corporations, on whatever
account, all causes in action and all other things belonging to either of the
Constituent Corporations shall be taken and deemed to be transferred to and
shall be vested in the Surviving Corporation by virtue of the Merger without
further act or deed; and (iii) all rights of creditors and all liens upon any
property of any of the Constituent Corporations shall be preserved unimpaired,
limited in lien to the property affected by such liens immediately prior to the
Effective Date, and all debts, liabilities and duties of the Constituent
Corporations shall thenceforth attach to the Surviving Corporation.
(2) At the Effective Date, (i) the Bylaws of VIB, as existing
immediately prior to the Effective Date, shall be and become the Bylaws of the
Surviving Corporation; (ii) the members of the Board of Directors of VIB holding
office immediately prior to the Effective Date shall remain as the members of
the Board of Directors of the surviving Corporation (if on or after the
Effective Date a vacancy exists on the Board of Directors of the surviving
corporation, such vacancy may thereafter be filled in a manner provided by law
and the by-laws of the Surviving Corporation); and (iii) until the Board of
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Directors of the Surviving Corporation shall otherwise determine, all persons
who hold offices of VIB at the Effective Date shall hold the same offices of the
surviving Corporation.
(3) At the Effective Date, the Articles of Incorporation of
VIB as existing immediately prior to the Effective Date shall be and become the
Articles of Incorporation of the Surviving Corporation except that such Articles
of Incorporation shall be amended to change the name of the Surviving
Corporation to HomeNet Communications, Inc.
(b) Conversion of Securities.
As of the Effective Date and without any action on the part of Faraday,
Homenet, VIB or the holders of any of the securities of any of these
corporations each of the following shall occur:
(1) Each share of VIB capital stock (the "VIB Stock") issued
and outstanding immediately prior to the Effective Date shall be converted into
1.0903 shares of Faraday common stock. All such shares of VIB Stock shall no
longer be outstanding and shall automatically be canceled and shall cease to
exist, and each certificate previously evidencing any such shares shall
thereafter represent the right to receive, upon the surrender of such
certificate, certificates evidencing such number of shares of Faraday common
stock into which such shares of VIB Stock were converted. The holders of such
certificates previously evidencing shares of VIB Stock outstanding immediately
prior to the Effective Date shall cease to have any rights with respect to such
shares of VIB Stock except as otherwise provided herein or by law;
(2) Any shares of VIB Stock held in the treasury of VIB
immediately prior to the Effective Date shall automatically be canceled and
extinguished without any conversion thereof and no payment shall be made with
respect thereto;
(3) Each share of capital stock of Homenet issued and
outstanding immediately prior to the Effective Date shall be converted into one
share of common stock of the Surviving Corporation and thereafter each stock
certificate of Homenet shall evidence ownership of shares of common stock of the
Surviving Corporation; and
(4) All other securities convertible into or exercisable for
shares of VIB Stock (other than notes convertible into or warrants to purchase
VIB Preferred), including but not limited to stock options and warrants and
issued by VIB prior to the Effective Date, as set forth on Exhibit "B" hereto
(the "Assumed Securities"), shall become, without further action, convertible
into or exercisable for shares of Faraday Common Stock at the rate of 1.0903
shares of Faraday Common Stock for each share of VIB Stock into which the
Assumed Securities were convertible or exercisable immediately prior to the
Merger. Each Assumed Security shall continue to have, and be subject to, the
same terms and conditions (including, without limitation, the applicable vesting
schedule in the case of stock options) as set forth in such security (as in
effect immediately prior to the Effective Date) pursuant to which such security
was issued, except that all references to VIB shall be deemed to be references
to Faraday. The adjustment provided herein with respect to any existing stock
options issued by VIB that are "incentive stock options" (as defined in Section
422 of the Code) shall be and is intended to be effected in a manner that is
consistent with Section 424(a) of the Code. Faraday shall reserve for issuance
the number of share of Faraday Common Stock that will become issuable upon the
exercise of such Assumed Securities pursuant hereto.
(5) All notes convertible into or warrants exercisable for VIB
Preferred ("Convertible Preferred Securities") shall become, without further
action, convertible into or exercisable for shares of Faraday Common Stock at
the rate of 1.0903 shares of Faraday Common Stock for each share of VIB
Preferred into which the Convertible Preferred Securities were convertible or
exercisable immediately prior to the Merger.
SIXTH: VIB has 2,184,939 shares of common stock outstanding, of which
____________ shares voted in favor of the Merger and _________ shares voted
against the Merger. Homenet has 5,000,000 shares of common stock outstanding all
of which were voted in favor of the Merger. The number of votes cast for the
Plan of Merger by each group was sufficient under applicable law for approval by
that voting group.
SEVENTH: A copy of the agreement and plan of merger is on file at the
principal business offices of VIB, located at 000 Xxxxx Xxxxxx XX, Xxxxxxx, XX
00000. A copy of the Agreement and Plan of Merger will be furnished by VIB, on
request and without cost, to any stockholder of the Constituent Corporations.
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IN WITNESS WHEREOF, the parties have executed this Plan, Articles and
Certificate of Merger the day and year first above written.
VIDEO INTERNET BROADCASTING CORPORATION HOMENET UTAH, INC.
By _____________________________ By ____________________________
Its: Xxxxx X. Xxxxxx, President
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EXHIBIT B
(VIB STOCKHOLDERS/ASSUMED SECURITIES)
EXHIBIT C
INVESTMENT LETTER
In connection with the Agreement and Plan of Merger dated August ___,
2004 (the "Agreement"), between Faraday Financial, Inc. ("Faraday"), Homenet
Utah, Inc. ("Homenet") and Video Internet Broadcasting Corporation ("VIB"), the
undersigned hereby represents and warrants as follows:
(a) The undersigned's representations in this letter are
complete and accurate to the best of the undersigned's knowledge, and Faraday,
Homenet and VIB may rely upon them.
(b) The undersigned is able to bear the economic risk of an
investment in the Faraday common stock (the "Securities") for an indefinite
period of time, can afford the loss of the entire investment in the Securities,
and will, after making an investment in the Securities, have sufficient means of
providing for the undersigned's current needs and possible future contingencies.
Additionally, the undersigned's overall commitment to investments that are not
readily marketable is not disproportionate to the undersigned's net worth and
the merger described in the Agreement will not cause such overall commitment to
become excessive.
(c) The Securities will not be sold by the undersigned without
registration under applicable securities acts or a proper exemption from such
registration.
(d) The Securities are being acquired for the undersigned's
own account and risk, for investment purposes, and not on behalf of any other
person or with a view to, or for resale in connection with, any distribution
thereof within the meaning of the Securities Act of 1933. The undersigned is
aware that there are substantial restrictions on the transferability of the
Securities.
(e) The undersigned has had access to any and all information
concerning Faraday that the undersigned and the undersigned's financial, tax and
legal advisors required or considered necessary to make a proper evaluation of
this investment. Specifically, the undersigned has had access to the Faraday
Financial Statements and to the Securities and Exchange Commission filings
referenced in Section 5(c) of the Agreement. In making the decisions relating
hereto, the undersigned and his or her advisers have relied solely upon their
own independent investigations, and fully understand that there are no
guarantees, assurances or promises in connection with any investment hereunder
and understand that the particular tax consequences arising from an investment
in Faraday will depend upon the individual circumstances of the undersigned. The
undersigned further understands that no opinion is being given as to any
securities or tax matters involving the transactions contemplated by the
Agreement.
(f) All of the representations and warranties of the
undersigned contained herein and all information furnished by the undersigned to
Faraday are true, correct and complete in all respects, and the undersigned
agrees to notify Faraday immediately of any change in any representation,
warranty or other information set forth herein.
(g) The undersigned also understands and agrees that stop
transfer instructions relating to the Securities will be placed in Faraday'
stock transfer ledger, and that the Securities sold will bear legends in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND
ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN RULE
144 UNDER THE ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF
WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE ISSUER.
(h) The undersigned knows that the Securities are offered and
sold pursuant to exemptions from registration under the Securities Act of 1933,
and state securities law based, in part, on these warranties and
representations, which are the very essence of this Agreement, and constitute a
material part of the bargained-for consideration without which this Agreement
would not have been executed.
(i) The undersigned has the capacity to protect the
undersigned's own interest in connection with this transaction or has a
pre-existing personal or business relationship with Faraday or one or more of
its officers, directors or controlling persons consisting of personal or
business contacts of a nature and duration such as would enable a reasonably
prudent purchaser to be aware of the character, business acumen and general
business and financial circumstances of such person with whom such relationship
exists.
(j) The Securities offered hereby were not offered to the
undersigned by way of general solicitation or general advertising and at no time
was the undersigned presented with or solicited by means of any leaflet, public
promotional meeting, circular, newspaper or magazine article, radio or
television advertisement.
(k) If initialed below, the undersigned represents that the
undersigned is an "accredited investor" as defined under Rule 501 of Regulation
D by reason of:
FOR INDIVIDUALS ONLY (INITIAL IF APPLICABLE):
_______ 1. I had individual income (exclusive of any income attributable
Initial to my spouse) in excess of $200,000 in each of the most recent
Here two years and I reasonably expect to have an individual income
in excess of $200,000 for the current year, or I had joint
income with my spouse in excess of $300,000 in each of those
years and I reasonably expect to have a joint income with my
spouse in excess of $300,000 for the current year.
_______ 2. I have an individual net worth, or my spouse and I have a
Initial combined individual net worth, in excess of $1,000,000. For
Here purposes of this Agreement, "individual net worth" means the
excess of total assets at fair market value, including home
and personal property, over total liabilities.
_______ 3. I am qualified as an "accredited investor" pursuant to Rule
Initial 501(a) of Regulation D of the 1933 Act for the following
Here reason:
______________________________________________________________
______________________________________________________________
FOR CORPORATIONS AND PARTNERSHIPS ONLY (INITIAL IF APPLICABLE):
_______ 1. The undersigned hereby certifies that the Partnership or
Initial Corporation that he/she represents possesses total assets in
Here excess of $5,000,000 and was not formed for the specific
purpose of acquiring the securities offered by Faraday.
_______ 2. The undersigned hereby certifies personally, and on behalf of
Initial the Partnership or Corporation that he/she represents, that
Here all of the beneficial owners of equity qualify individually as
accredited investors under the individual accredited investor
test set forth above.
FOR TRUSTS ONLY (INITIAL IF APPLICABLE):
_______ 1. The undersigned hereby certifies that the trust which he/she
Initial represents possesses total assets in excess of $5,000,000 and
Here was not formed for the specific purpose of acquiring the
securities offered by Faraday, and that the purchase of the
securities is directed by a sophisticated person as described
in Rule 506(b)(2)(ii) of the Act.
_______ 2. The undersigned hereby certifies personally, and on behalf of
Initial the trust that he/she represents, that such trust is a
Here revocable trust that may be amended or revoked at any time by
the grantors, and all the grantors are accredited individual
investors under the individual accredited investor test set
forth above.
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FOR TRUSTEES AND AGENTS (READ AND INITIAL BOTH STATEMENTS):
_______ 1. The undersigned hereby acknowledges that he/she is acting as
Initial an agent or trustee for the following person or entity:
Here
_______ 2. The undersigned hereby agrees to provide to Faraday, upon
Initial Faraday's request, the following documents:
Here
(a) a copy of the trust agreement, power of attorney or
other instrument granting the power and authority to
execute and deliver the Agreement, or
(b) an opinion of counsel verifying the undersigned's
power and authority to execute and deliver the
Agreement and this letter.
The representations and warranties contained herein shall survive the
closing of the transaction described in the Agreement. The undersigned may also
be asked to complete an Investor Questionnaire in connection with the
undersigned's status as an accredited investor.
Date: ________________ _____________________________
_____________________________
(print name)
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