EXHIBIT 7.4
Plan of Reorganization and Exchange Agreement
This Plan of Reorganization and Exchange Agreement (the "Agreement") is
made and entered into as of the 1st day of July 1999 by and between Commercial
Labor Management, Inc., a Nevada corporation ("CLMI"), Zeros & Ones, Inc., a
Delaware corporation ("ZOI"), Xxxxx Xxxxxxxx, an individual ("Schklair"), and
Quantum Arts, Inc., a California corporation ("QA"), with respect to the
following facts:
RECITALS
A. This Agreement hereby supercedes and replaces the Plan of
Reorganization and Exchange Agreement made and entered into as
of April 30, 1999 by and between Zeros & Ones, Inc. ("ZOI"),
Schklair, and QA.
X. Xxxxxxxx owns 100% of the total issued and outstanding capital
stock of QA.
C. QA is engaged in the business of producing CD-ROM titles,
providing other multimedia consulting services, and conducting
research on three dimensional digital television.
D. CLMI is a public reporting company trading on the OTC Bulletin
Board. CLMI was incorporated for the purpose of engaging in
any lawful business.
E. CLMI desires to acquire 100% of the total issued and
outstanding stock of QA in exchange for 850,000 shares of the
common stock of CLMI, to be issued to Schklair in accordance
with this Agreement, and reimbursement by CLMI of Schklair's
costs.
F. The parties to this Agreement intend that the transactions
contemplated by this Agreement be a tax free reorganization
pursuant to Section 368 of the Internal Revenue Code of 1986,
as amended. It is part of an overall tax free plan of
reorganization pursuant to which CLMI is also acquiring 100%
of the assets of ZOI and 100% of the total issued and
outstanding stock of Wood Ranch Technology Group, Inc.,
Polygonal Research Corporation, EKO Corporation, Pillar West
Entertainment, Inc. and Kidvision, Inc.
-1-
NOW, THEREFORE, for good and valuable consideration the receipt and
sufficiency to which are hereby acknowledged by the parties to this Agreement,
and in light of the above recitals to this Agreement, the parties to this
Agreement hereby agree as follows:
1. Exchange of Equity Interests
----------------------------
In consideration for the issuance of a total of 850,000 shares of the
Common Stock, par value $.001 per share, of CLMI to Schklair and the other
covenants of CLMI in this Agreement, Schklair hereby agrees to convey to CLMI
all of Schklair's capital stock and right, title and interest in and to QA,
effective as of the date first above written.
2. Closing and Further Acts
------------------------
The closing of the exchange (the "Closing") will occur as soon
practicable after the execution of this Agreement by all parties hereto, but not
later than July 1, 1999 (the "Closing Date"). At the Closing, Schklair will
tender to CLMI certificates and any other documents evidencing 100% of
Schklair's ownership in QA, and CLMI will deliver to Schklair a stock
certificate evidencing 850,000 shares of the Common Stock, par value $.01 per
share, of CLMI being issued to Schklair pursuant to this Agreement. All parties
to this Agreement hereby agree to execute all other documents and take all other
action which are reasonably necessary or appropriate in order to effect all of
the transactions contemplated by this Agreement.
3. Covenants of CLMI
-----------------
3.1. Reimbursement of Expenses to Schklair.
-------------------------------------
CLMI agrees to pay Schklair $300,000 in cash as reimbursement of
expenses personally incurred by Schklair for QA from the inception of QA until
the Closing. CLMI will pay the reimbursement amount to Schklair as follows:
$100,000 on or before July 31, 1999, $100,000 on or before September 30, 1999
and $100,000 on or before December 31, 1999.
3.2 Management of CLMI and QA After Closing.
---------------------------------------
After the Closing, Schklair will be a director and the President of CLMI,
and the Chairman of the Board of Directors and Chief Executive Officer of QA.
Xxxxxx Xxxxx will be the Chairman of the Board of Directors and Chief Executive
Officer of CLMI. CLMI agrees that for the first year after the Closing, QA will
have a Board of Directors consisting of three to five members, one of which will
be Schklair, one of which will be designated by CLMI, and the other one or more
of whom will be mutually agreed upon by Xxxxxx Xxxxx and Xxxxxxxx.
-2-
3.3 Percentage Ownership in CLMI.
----------------------------
After the Closing and after the acquisition by CLMI of the assets or
outstanding stock of ZOI, Polygonal Research Corporation, EKO Corporation,
Kidvision, Inc., Wood Ranch Technology Group, Inc., and Pillar West
Entertainment, Inc., CLMI will have a total of 7,000,000 shares of its Common
Stock outstanding, and 320,000 warrants to purchase an additional 320,000 shares
of CLMI's Common Stock for a purchase price of $3.00 per share for a period of
three years from the date of issue of the Warrants, which is expected to occur
on or about July 1, 1999. CLMI will have no other equity securities or
securities convertible into equity securities of CLMI outstanding on the Closing
Date.
3.4 Research and Development Projects.
---------------------------------
Any material research and development projects to be undertaken by QA
will be subject to approval of CLMI's Board of Directors.
4. Representations and Warranties of QA and Schklair.
-------------------------------------------------
QA and Schklair represent and warrant to CLMI as follows:
4.1 Power and Authority; Binding Nature of Agreement.
------------------------------------------------
QA and Schklair have full power and authority to enter into this
Agreement and to perform their obligations hereunder. The execution, delivery
and performance of this Agreement by them has been duly authorized by all
necessary action on their part. Assuming that this Agreement is a valid and
binding obligation of each of the other parties hereto, this Agreement is a
valid and binding obligation of QA and Schklair.
4.2 Subsidiaries.
------------
There is no corporation, general partnership, limited partnership,
joint venture, association, trust or other entity or organization which QA
directly or indirectly controls or in which QA directly or indirectly owns any
equity or other interest.
4.3 Good Standing.
-------------
QA (i) is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated, (ii) has all necessary
power and authority to own its assets and to conduct its business as it is
-3-
currently being conducted, and (iii) is duly qualified or licensed to do
business and is in good standing in every jurisdiction (both domestic and
foreign) where such qualification or licensing is required.
4.4 Charter Documents and Corporate Records.
---------------------------------------
QA has delivered or will deliver to CLMI complete and correct copies of
(i) the articles of incorporation, bylaws and other charter or organizational
documents of QA, including all amendments thereto, (ii) the stock records of QA,
and (iii) the minutes and other records of the meetings and other proceedings of
the shareholders and directors of QA. QA is not in violation or breach of (i)
any of the provisions of its articles of incorporation, bylaws or other charter
or organizational documents, or (ii) any resolution adopted by its shareholders
or directors. There have been no meetings or other proceedings of the
shareholders or directors of QA that are not fully reflected in the appropriate
minute books or other written records of QA.
4.5 Capitalization.
--------------
The authorized capital stock of QA consists of one hundred thousand
(100,000) shares of common stock, no par value, of which 1,500 shares are issued
and outstanding. All of the outstanding shares of the capital stock of QA are
validly issued, fully paid and nonassessable, and have been issued in full
compliance with all applicable federal, state, local and foreign securities laws
and other laws. Except as disclosed in Exhibit A to this Agreement, there are no
(i) outstanding options, warrants or rights to acquire any shares of the capital
stock or other securities of QA, (ii) outstanding securities or obligations
which are convertible into or exchangeable for any shares of the capital stock
or other securities of QA, or (iii) contracts or arrangements under which QA is
or may become bound to sell or otherwise issue any shares of its capital stock
or any other securities.
4.6 Financial Statements.
--------------------
QA has delivered or will deliver to CLMI the following financial
statements (the "QA Financial Statements"): the audited balance sheet of QA's
unincorporated predecessor-in-interest as of December 31, 1998, along with an
income and expense statement. Except as stated therein or in the notes thereto,
-4-
the QA Financial Statements: (a) present fairly the financial position of QA as
of the respective dates thereof and the results of operations and changes in
financial position of QA for the respective periods covered thereby; and (b)
have been prepared in accordance with generally accepted accounting principles
applied on a consistent basis throughout the periods covered.
4.7 Absence of Changes.
------------------
Except as otherwise disclosed to CLMI in writing in Exhibit A to this
Agreement, since the date of QA's incorporation on April 13, 1999:
(a) There has not been any material adverse change in the
business, condition, assets, operations or prospects of QA and no event
has occurred that might have an adverse effect on the business,
condition, assets, operations or prospects of QA.
(b) QA has not (i) declared, set aside or paid any dividend or
made any other contribution in respect of any shares of capital stock,
nor (ii) repurchased, redeemed or otherwise reacquired any shares of
capital stock or other securities.
(c) QA has not sold or otherwise issued any shares of capital
stock or any other securities, otherwise than in connection with its
organization.
(d) QA has not amended its articles of incorporation, bylaws
or other charter or organizational documents, nor has it effected or
been a party to any merger, recapitalization, reclassification of
shares, stock split, reverse stock split, reorganization or similar
transaction.
(e) QA has not formed any subsidiary or contributed any funds
or other assets to any subsidiary.
(f) QA has not purchased or otherwise acquired any assets, nor
has it leased any assets from any other person, except in the ordinary
course of business consistent with past practice.
(g) QA has not made any capital expenditure outside the
ordinary course of business or inconsistent with past practice, or in
-5-
an amount exceeding five thousand dollars ($5,000), and the total
amount of the capital expenditures made by QA has not exceeded ten
thousand dollars ($10,000).
(h) QA has not sold or otherwise transferred any assets to any
other person, except in the ordinary course of business consistent with
past practice and at a price equal to the fair market value of the
assets transferred.
(i) There has not been any loss, damage or destruction to any
of the properties or assets of QA (whether or not covered by
insurance).
(j) QA has not written off as uncollectible any indebtedness
or accounts receivable, except for write-offs that were made in the
ordinary course of business consistent with past practice and that
involved less than one hundred dollars ($100) singly and less than one
thousand dollars ($1,000) in the aggregate.
(k) QA has not leased any assets to any other person except in
the ordinary course of business consistent with past practice and at a
rental rate equal to the fair rental value of the leased assets.
(l) QA has not mortgaged, pledged, hypothecated or otherwise
encumbered any assets, except in the ordinary course of business
consistent with past practice.
(m) QA has not entered into any contract or incurred any debt,
liability or other obligation (whether absolute, accrued, contingent or
otherwise), except for (i) contracts that were entered into in the
ordinary course of business consistent with past practice and that have
terms of less than six months and do not contemplate payments by or to
QA which will exceed, over the term of the contract, three thousand
dollars ($3,000) in the aggregate, and (ii) current liabilities
incurred in the ordinary course of business consistent with the past
practice.
(n) QA has not made any loan or advance to any other person,
except for advances that have been made to customers in the ordinary
-6-
course of business consistent with past practice and that have been
properly reflected as "accounts receivables."
(o) QA has not paid any bonus to, or increased the amount of
the salary, fringe benefits or other compensation or remuneration
payable to, any of the directors, officers or employees of QA.
(p) No contract or other instrument to which QA is or was a
party or by which QA or any of QA's assets are or were bound has been
amended or terminated, except in the ordinary course of business
consistent with past practice.
(q) QA has not discharged any lien or discharged or paid any
indebtedness, liability or other obligation, except for current
liabilities that (i) have been assumed from QA's
predecessor-in-interest or incurred since April 13, 1999 in the
ordinary course of business consistent with past practice, and (ii)
have been discharged or paid in the ordinary course of business
consistent with past practice.
(r) QA has not forgiven any debt or otherwise released or
waived any right or claim, except in the ordinary course of business
consistent with past practice.
(s) QA has not changed its methods of accounting or its
accounting practices in any respect.
(t) QA has not entered into any transaction outside the
ordinary course of business or inconsistent with past practice.
(u) QA has not agreed or committed (orally or in writing) to
do any of the things described in clauses (b) through (t) of this
Section 4.7.
4.8 Absence of Undisclosed Liabilities.
----------------------------------
QA has no debt, liability or other obligation of any nature (whether
due or to become due and whether absolute, accrued, contingent or otherwise)
except for obligations incurred since December 31, 1998 in the ordinary course
of business consistent with past practice.
-7-
4.9 Contracts.
---------
QA has delivered or will deliver to CLMI complete and correct copies of
all of the contracts and other instruments including all amendment hereto. All
of such contracts and other instruments are valid and in full force and effect,
and are enforceable in accordance with their terms. There is no existing default
by any person under any of said contracts or other instruments, and there exists
no condition or set of circumstance which, with notice or lapse of time or both,
would constitute such a default.
4.10 Title to Personal Property.
--------------------------
QA has good, valid and marketable title to all of its personal property
(both tangible and intangible) and interests therein. All of such personal
property and interests therein are owned free and clear of any liens, pledges,
security interests, claims, equities, options, charges, encumbrances or
restrictions.
4.11 Tax Matters.
-----------
All federal, state, local and foreign tax returns required to be filed by
QA have been properly prepared and duly filed, and all taxes required to be paid
by, or claimed by any federal, state, local or foreign taxing authority to be
payable by, the Company have been paid in full. There is no (i) pending audit or
examination of QA (or of any of the tax returns thereof) being conducted by any
federal, state, local or foreign taxing authority, (ii) pending or threatened
claim or dispute relating to the payment of any taxes by QA, (iii) basis upon
which any federal, state, local or foreign taxing authority may make any claim
for the payment of additional taxes by QA, or (iv) outstanding agreement or
waiver extending the statutory limitations period applicable to the payment of
any taxes by QA.
4.12. Compliance With Laws; Licenses and Permits.
------------------------------------------
QA, to its knowledge, is not in violation of, nor has it failed to
conduct its business in full compliance with, any applicable federal, state,
local or foreign laws, regulations, rules, treaties, rulings, orders, directives
or decrees. QA has delivered to CLMI complete and correct copies of all of the
licenses, permits, authorizations and franchises to which QA is subject and all
-8-
said licenses, permits, authorizations and franchises are valid and in full
force and effect. Said licenses, permits, authorizations and franchises
constitute all of the licenses, permits, authorizations and franchises necessary
to permit QA to conduct its business in the manner in which it is now being
conducted, and QA is not in violation or breach of any of the terms,
requirements or conditions of any of said licenses, permits, authorizations or
franchises.
4.13. Title to Schklair's Stock.
-------------------------
Schklair has good, valid and marketable title to all of Schklair's
stock in QA, and can convey good title to said stock to CLMI free and clear of
any liens, claims, encumbrances or security interests.
4.14. Litigation.
----------
There is no action, suit, proceeding, dispute, litigation, claim,
complaint or investigation by or before any court, tribunal, governmental body,
governmental agency or arbitrator pending or, to QA's knowledge, threatened
against or with respect to QA which (i) if adversely determined would have an
adverse effect on the business, condition, assets, operations or prospects of
QA, or (ii) challenges or would challenge any of the actions required to be
taken by the QA under this Agreement. There exists no basis for any such action,
suit, proceeding, dispute, litigation, claim, complaint or investigation.
4.15 Non-Contravention.
-----------------
Neither (a) the execution and delivery of this Agreement, nor (b) the
performance of this Agreement will: (i) contravene or result in a violation of
any of the provisions of the articles of incorporation, bylaws or other charter
or organizational documents of QA; (ii) contravene or result in a violation of
any resolution adopted by the shareholders or directors of QA; (iii) result in a
violation or breach of, or give any person the right to declare (whether with or
without notice or lapse of time) a default under or to terminate, any agreement
or other instrument to which QA or Schklair are a party or by which QA or any of
its assets or Schklair are bound; (iv) give any person the right to accelerate
the maturity of any indebtedness or other obligation of QA; (v) result in the
-9-
loss of any license or other contractual right of QA; (vi) result in the loss
of, or in a violation of any of the terms, provisions or conditions of, any
governmental license, permit, authorization or franchise of QA; (vii) result in
the creation or imposition of any lien, charge, encumbrance or restriction on
any of the assets of QA or on Schklair's stock in QA; (viii) result in the
reassessment or revaluation of any property of QA or by any taxing authority or
other governmental authority; (ix) result in the imposition of, or subject QA to
any liability for, any conveyance or transfer tax or any similar tax; or (x)
result in a violation of any law, rule, regulation, treaty, ruling, directive,
order, arbitration award, judgment or decree to which QA or any of its assets or
any of Schklair's stock in QA is subject.
4.16. Approvals.
---------
No authorization, consent or approval of, or registration or filing
with, any governmental authority or any other person is required to be obtained
or made by QA or Schklair in connection with the execution, delivery or
performance of this Agreement, including the sale to CLMI of the shares of
Schklair's stock in QA being acquired by CLMI hereunder.
4.17. Brokers.
-------
QA has not agreed to pay any brokerage fees, finder's fees or other
fees or commissions with respect to the transactions contemplated by this
Agreement, and, to QA's knowledge, no person is entitled, or intends to claim
that it is entitled, to receive any such fees or commissions in connection with
such transaction.
4.18. Full Disclosure.
---------------
Neither this Agreement (including the exhibits hereto) nor any
statement, certificate or other document delivered to CLMI by or on behalf of QA
or Schklair contains any untrue statement of a material fact or omits to state a
material fact necessary to make the representations and other statements
contained herein and therein not misleading.
-10-
4.19. Representations True on Closing Date.
------------------------------------
The representations and warranties of QA and Schklair set forth in this
Agreement are true and correct on the date hereof.
4.20 Non-Distributive Intent.
-----------------------
The shares of CLMI stock being acquired by Schklair pursuant to this
Agreement are not being acquired by Schklair with a view to the public
distribution of them. Schklair acknowledges and agrees that the CLMI stock
acquired by him pursuant to this Agreement has not been registered or qualified
under federal or state securities laws, and may not be sold, conveyed,
transferred, assigned or hypothecated without being registered under the
Securities Act of 1933, as amended, and applicable state law, or in the
alternative submission of evidence reasonably satisfactory to CLMI that an
exemption from registration is available.
5. Representations and Warranties of CLMI.
--------------------------------------
CLMI represents and warrants to QA and Schklair as follows:
5.1 Power and Authority; Binding Nature of Agreement.
------------------------------------------------
CLMI has full power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance of
this Agreement by CLMI has been duly authorized by all necessary action on its
part. Assuming that this Agreement is a valid and binding obligation of each of
the other parties hereto, this Agreement is a valid and binding obligation of
CLMI.
5.2 Good Standing.
-------------
CLMI (i) is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is incorporated, (ii) has all necessary
power and authority to own its assets and to conduct its business as it is
currently being conducted, and (iii) is duly qualified or licensed to do
business and is in good standing in every jurisdiction (both domestic and
foreign) where such qualification or licensing is required.
-11-
5.3 Charter Documents and Corporate Records.
---------------------------------------
CLMI has delivered to Schklair and QA complete and correct copies of
(i) the articles of incorporation, bylaws and other charter or organizational
documents of CLMI, including all amendments thereto, (ii) the stock records of
CLMI, and (iii) the minutes and other records of the meetings and other
proceedings of the shareholders and directors of CLMI. CLMI is not in violation
or breach of (i) any of the provisions of its articles of incorporation, bylaws
or other charter or organizational documents, or (ii) any resolution adopted by
its shareholders or directors. There have been no meetings or other proceedings
of the shareholders or directors of CLMI that are not fully reflected in the
appropriate minute books or other written records of the Company.
5.4 Capitalization.
--------------
The authorized capital stock of CLMI consists of 50,000,000 shares of
common stock, par value $.001 per share, of which 7,000,000 shares will be
issued and outstanding as indicated in Section 3.2 of this Agreement, and
2,000,000 shares of preferred stock par value $.001 per share, none of which is
issued and outstanding. All of the outstanding shares of the capital stock of
CLMI are validly issued, fully paid and nonassessable, and have been issued in
full compliance with all applicable federal, state, local and foreign securities
laws and other laws. Except as disclosed in Section 3.2 or pursuant to Section
5.5 or elsewhere in this Agreement, there are no (i) outstanding options,
warrants or rights to acquire any shares of the capital stock or other
securities of CLMI, (ii) outstanding securities or obligations which are
convertible into or exchangeable for any shares of the capital stock or other
securities of CLMI, or (iii) contracts or arrangements under which CLMI is or
may become bound to sell or otherwise issue any shares of its capital stock or
any other securities.
5.5 Financial Statements.
--------------------
CLMI has delivered to Schklair and QA the following financial
statements (the "CLMI Financial Statements"): (i) the audited balance sheet of
CLMI as of December 31, 1998; and (ii) the audited statements of income and
retained earnings, stockholders' equity and changes in financial position of
-12-
CLMI for the year ended December 31, 1998; and (iii) supporting supplemental
schedules. Except as stated therein or in the notes thereto, the CLMI Financial
Statements: (a) present fairly the financial position of CLMI as of the
respective dates thereof and the results of operations and changes in financial
position of CLMI for the respective periods covered thereby; and (b) have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis throughout the periods covered.
5.6 Absence of Changes.
------------------
Except as otherwise disclosed to Schklair or QA in writing in Exhibit A
to this Agreement, since December 31, 1998, there has not been any material
adverse change in the business, condition, assets, operations or prospects of
CLMI and no event has occurred that might have an adverse effect on the
business, condition, assets, operations or prospects of CLMI.
5.7 Absence of Undisclosed Liabilities.
----------------------------------
CLMI has no debt, liability or other obligation of any nature (whether
due or to become due and whether absolute, accrued, contingent or otherwise)
that is not reflected or reserved against in the December 31, 1998 Balance
Sheet, except for obligations incurred since December 31, 1998 in the ordinary
course of business consistent with past practice.
5.8 Litigation.
----------
There is no action, suit, proceeding, dispute, litigation, claim,
complaint or investigation by or before any court, tribunal, governmental body,
governmental agency or arbitrator pending or, to CLMI's knowledge, threatened
against or with respect to CLMI which (i) if adversely determined would have an
adverse effect on the business, condition, assets, operations or prospects of
CLMI, or (ii) challenges or would challenge any of the actions required to be
taken by CLMI under this Agreement. There exists no basis for any such action,
suit, proceeding, dispute, litigation, claim, complaint or investigation.
-13-
5.9 Non-Contravention.
-----------------
Neither (a) the execution and delivery of this Agreement, nor (b) the
performance of this Agreement will: (i) contravene or result in a violation of
any of the provisions of the articles of incorporation, bylaws or other charter
or organizational documents of CLMI; (ii) contravene or result in a violation of
any resolution adopted by the shareholders or directors of CLMI; (iii) result in
a violation or breach of, or give any person the right to declare (whether with
or without notice or lapse of time) a default under or to terminate, any
agreement or other instrument to which CLMI is a party or by which CLMI or any
of its assets are bound; (iv) give any person the right to accelerate the
maturity of any indebtedness or other obligation of CLMI; (v) result in the loss
of any license or other contractual right of CLMI; (vi) result in the loss of,
or in a violation of any of the terms, provisions or conditions of, any
governmental license, permit, authorization or franchise of CLMI; (vii) result
in the creation or imposition of any lien, charge, encumbrance or restriction on
any of the assets of CLMI; (viii) result in the reassessment or revaluation of
any property of CLMI by any taxing authority or other governmental authority;
(ix) result in the imposition of, or subject CLMI to any liability for, any
conveyance or transfer tax or any similar tax; or (x) result in a violation of
any law, rule, regulation, treaty, ruling, directive, order, arbitration award,
judgment or decree to which CLMI or any of its assets is subject.
5.10 Approvals.
---------
No authorization, consent or approval of, or registration or filing
with, any governmental authority or any other person is required to be obtained
or made by CLMI in connection with the execution, delivery or performance of
this Agreement.
5.11 Brokers.
-------
CLMI has not agreed to pay any brokerage fees, finder's fees or other
fees or commissions with respect to the transactions contemplated by this
Agreement, and, to CLMI's knowledge, no person is entitled, or intends to claim
that it is entitled, to receive any such fees or commissions in connection with
such transactions.
-14-
5.12 Full Disclosure.
---------------
Neither this Agreement (including the exhibits hereto) nor any
statement, certificate or other document delivered to Schklair or QA by or on
behalf of CLMI contains any untrue statement of a material fact or omits to
state a material fact necessary to make the representations and other statements
contained herein and therein not misleading.
5.13 Representations True on Closing Date.
------------------------------------
The representations and warranties of CLMI set forth in this Agreement
are true and correct on the date hereof, and will be true and correct on the
Closing Date as though such representations and warranties were made as of the
Closing Date.
6. Conditions to Closing.
---------------------
6.1 Conditions Precedent to CLMI's Obligation To Close.
--------------------------------------------------
CLMI's obligation to close the plan of reorganization and exchange as
contemplated in this Agreement is conditioned upon the occurrence or waiver by
CLMI of the following:
(a) All representations and warranties of QA and Schklair made
in this Agreement or in any exhibit hereto delivered by QA and Schklair
shall be true and correct as of the Closing Date with the same force
and effect as if made on and as of that date.
(b) QA and Schklair shall have performed and complied with all
agreements, covenants and conditions required by this Agreement to be
performed or complied with by QA and Schklair prior to or at the
Closing Date.
(c) CLMI closes its Plan of Reorganization and Asset Purchase
Agreement, dated July 1, 1999, by and between ZOI, Commercial Labor
Management, Inc., Xxxx X. Xxxxxxxxxx and Xxxxxx X. Xxxxxx.
-15-
6.2 Conditions Precedent to QA's and Schklair's Obligation To Close.
---------------------------------------------------------------
QA's and Schklair's obligation to close the plan of reorganization and
exchange as contemplated in this Agreement is conditioned upon the occurrence or
waiver by QA or Schklair of the following:
(a) All representations and warranties of CLMI made in this
Agreement or in any exhibit hereto delivered by CLMI shall be true and
correct on and as of the Closing Date with the same force and effect as
if made on and as of that date.
(b) CLMI shall have performed and complied with all agreements
and conditions required by this Agreement to be performed or complied
with by CLMI prior to or at the Closing Date.
(c) CLMI closes its Plan of Reorganization and Asset Purchase
Agreement, dated July 1, 1999, by and between ZOI, Commercial Labor
Management, Inc., Xxxx X. Xxxxxxxxxx and Xxxxxx X. Xxxxxx.
7. Injunctive Relief
-----------------
7.1 Damages Inadequate.
------------------
Each party acknowledges that it would be impossible to measure in money
the damages to the other party if there is a failure to comply with any
covenants and provisions of this Agreement, and agrees that in the event of any
breach of any covenant or provision, the other party to this Agreement will not
have an adequate remedy at law.
7.2 Injunctive Relief.
-----------------
It is therefore agreed that the other party to this Agreement who is
entitled to the benefit of the covenants and provisions of this Agreement which
have been breached, in addition to any other rights or remedies which they may
have, shall be entitled to immediate injunctive relief to enforce such covenants
and provisions, and that in the event that any such action or proceeding is
brought in equity to enforce them, the defaulting or breaching party will not
urge a defense that there is an adequate remedy at law.
8. Waivers.
-------
If any party shall at any time waive any rights hereunder resulting
from any breach by the other party of any of the provisions of this Agreement,
such waiver is not to be construed as a continuing waiver of other breaches of
-16-
the same or other provisions of this Agreement. Resort to any remedies referred
to herein shall not be construed as a waiver of any other rights and remedies to
which such party is entitled under this Agreement or otherwise.
9. Successors and Assigns.
----------------------
This Agreement supercedes and replaces the Plan of Reorganization and
Exchange Agreement made and entered into on April 30, 1999 by and between ZOI,
Schklair, and QA. Each covenant and representation of this Agreement shall inure
to the benefit of and be binding upon each of the parties, their personal
representatives, assigns and other successors in interest.
10. Entire and Sole Agreement.
-------------------------
This Agreement constitutes the entire agreement between the parties and
supersedes all other agreements, representations, warranties, statements,
promises and undertakings, whether oral or written, with respect to the subject
matter of this Agreement. This Agreement may be modified or amended only by a
written agreement signed by the parties against whom the amendment is sought to
be enforced.
11. Governing Law.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of California, and the venue for any action hereunder
shall be in the appropriate forum in the County of Los Angeles, State of
California.
12. Counterparts.
------------
This Agreement may be executed simultaneously in any number of
counterparts, each of which counterparts shall be deemed to be an original, and
such counterparts shall constitute but one and the same instrument.
13. Attorneys' Fees and Costs.
-------------------------
In the event that either party must resort to legal action in order to
enforce the provisions of this Agreement or to defend such action, the
prevailing party shall be entitled to receive reimbursement from the
nonprevailing party for all reasonable attorneys' fees and all other costs
incurred in commencing or defending such action, or in enforcing this Agreement,
including but not limited to post judgment costs.
-18-
14. Assignment.
----------
This Agreement shall not be assignable by any party without prior
written consent of the other parties.
15. Remedies.
--------
Except as otherwise expressly provided herein, none of the remedies set
forth in this Agreement are intended to be exclusive, and each party shall have
all other remedies now or hereafter existing at law, in equity, by statute or
otherwise. The election of any one or more remedies shall not constitute a
waiver of the right to pursue other available remedies.
16. Section Headings.
----------------
The section headings in this Agreement are included for convenience
only, are not a part of this Agreement and shall not be used in construing it.
17. Severability.
------------
In the event that any provision or any part of this Agreement is held
to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall not affect the validity or enforceability of any other
provision or part of this Agreement.
18. Notices.
-------
Each notice or other communication hereunder shall be in writing and
shall be deemed to have been duly given on the earlier of (i) the date on which
such notice or other communication is actually received by the intended
recipient thereof, or (ii) the date five (5) days after the date such notice or
other communication is mailed by registered or certified mail (postage prepaid)
to the intended recipient at the following address (or at such other address as
the intended recipient shall have specified in a written notice given to the
other parties hereto);
If to ZOI:
---------
Zeros & Ones, Inc.
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx Xxxxx, President
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
-18-
If to QA or Schklair:
--------------------
Xxxxx Xxxxxxxx
Quantum Arts, Inc.
00 Xxxx Xxxxxx Xxxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Xxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
If to CLMI:
----------
Commercial Labor Management, Inc.
c/o Richardson & Associates
0000 Xxxxx Xxxxxx, Xxxx 000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
19. Publicity.
---------
No press release, notice to any third party or other publicity
concerning the transactions contemplated by this Agreement shall be issued,
given or otherwise disseminated without the prior approval of each of the
parties hereto; provided, however, that such approval shall not be unreasonably
withheld.
-19-
IN WITNESS WHEREOF, this Agreement has been entered into as of the date
first above written.
CLMI: COMMERCIAL LABOR MANAGEMENT, INC.
By: --------------------------------
Xxxxxx X. Xxxxxx, President
ZOI: ZEROS & ONES, INC.
By: --------------------------------
Xxxxxx Xxxxx, President
SCHKLAIR: ------------------------------------
Xxxxx Xxxxxxxx
QA: QUANTUM ARTS, INC.
By: --------------------------------
Xxxxx Xxxxxxxx, President
-18-
EXHIBIT "A"
TO
PLAN OF REORGANIZATION AND EXCHANGE AGREEMENT
DATED AS OF JULY 1, 1999
BY AND BETWEEN
COMMERCIAL LABOR MANAGEMENT, INC., A NEVADA CORPORATION,
XXXXX XXXXXXXX, AN INDIVIDUAL
AND QUANTUM ARTS, INC., A CALIFORNIA CORPORATION
Section 4.7
-----------
1. Pursuant to agreements with certain key employees, QA's predecessor
in interest has agreed to pay 14% of total net revenues from the project
entitled "Secret Diary" to the producer (7%) and the lead programmer (7%) for
such project ("SD Project").
2. QA has assumed certain of the rights and obligations of its
predecessor in interest in connection with the SD Project.
3. QA has entered into negotiations with McGraw Hill for the
development of a new media project.
4. Pursuant to a contribution agreement between QA and Xxxxx Xxxxxxxx
in connection with the formation of QA, Xx. Xxxxxxxx retained a portion of the
total net revenues payable in connection with the SD Project as follows: Xx.
Xxxxxxxx retained 50% of such revenues (after payment of the participation to
the producer and lead programmer) until QA has received $250,000 in net revenues
from the SD Project at which point Xx. Xxxxxxxx is entitled to retain 80% of
such revenues.
Section 4.8
-----------
QA maintains a bank line of credit which it anticipates will be drawn
down in the amount of $20,000 during May 1999.
Section 4.10
------------
Certain of QA's personal property, including computer and related
equipment is leased.
Section 4.12
------------
As QA has recently relocated, QA is in the process of obtaining the
necessary permits and licenses, including any permits and licenses that may be
required by the City of Pasadena.
Section 4.14
------------
QA's predecessor in interest has received a claim relating to monies
owing to a former employee relating to the "Hot Wheels" project with Mattel,
Inc.
