EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
DATED AS OF MAY 16, 2002
BY AND AMONG
NETSTAFF, INC.,
NSI ACQUISITION CORPORATION
AND
MAT TRADING CORP.
TABLE OF CONTENTS
PAGE
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ARTICLE 1 THE MERGER....................................................................................2
1.1 The Merger....................................................................................2
1.2 Effective Time................................................................................2
1.3 Closing.......................................................................................3
1.4 Certificate of Incorporation and Bylaws of the Surviving Corporation..........................3
1.5 Directors and Officers of the Surviving Corporation...........................................4
1.6 Effects of the Merger.........................................................................4
1.7 Further Assurances............................................................................4
1.8 Tax Treatment.................................................................................4
ARTICLE 2 EXCHANGE OF SHARES............................................................................5
2.1 Exchange of Shares............................................................................5
2.2 Dissenting Shares.............................................................................5
2.3 Fractional Shares.............................................................................5
2.4 Treatment of MAT Preferred Stock and Options..................................................6
2.5 Exchange of Certificates......................................................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF MAT.........................................................8
3.1 Organization and Qualification................................................................8
3.2 Subsidiaries..................................................................................9
3.3 Authority Relative to this Agreement..........................................................9
3.4 Capital Stock of MAT.........................................................................10
3.5 Non-Contravention; Approvals and Consents....................................................11
3.6 Financial Statements.........................................................................13
3.7 Absence of Changes...........................................................................13
3.8 Absence of Undisclosed Liabilities...........................................................14
3.9 Legal Proceedings............................................................................14
3.10 Contracts and Commitments....................................................................15
3.11 Taxes........................................................................................16
3.12 Employee Benefit Plans.......................................................................16
3.13 Title to Assets..............................................................................17
3.14 Permits, Etc.................................................................................18
3.15 Compliance with Laws.........................................................................18
3.16 No Liens on Shares...........................................................................19
3.17 Intellectual Property Rights.................................................................19
3.18 Labor Controversies..........................................................................20
3.19 Insurance....................................................................................20
3.20 Guaranties...................................................................................21
3.21 Tax-Free Reorganization......................................................................21
3.22 Board of Directors and Stockholder Approval..................................................21
3.23 Brokers and Finders..........................................................................21
3.24 Real and Other Property Interests............................................................21
3.25 No Termination of Business Relationship......................................................22
3.26 Absence of Certain Payments..................................................................22
3.27 Investment Representation....................................................................23
3.28 Full Disclosure..............................................................................24
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PAGE
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF NETSTAFF AND SUB...........................................24
4.1 Organization of NetStaff and Sub.............................................................25
4.2 Authorization................................................................................25
4.3 Capital Stock of NetStaff and Sub............................................................26
4.4 Non-Contravention; Approvals and Consents....................................................27
4.5 No Litigation or Regulatory Action...........................................................28
4.6 SEC Documents................................................................................29
4.7 Brokers and Finders..........................................................................30
4.8 Taxes........................................................................................30
4.9 Absence of Changes...........................................................................30
4.10 Title to Assets..............................................................................31
4.11 Permits, Etc.................................................................................31
4.12 Compliance with Laws.........................................................................32
4.13 Labor Controversies..........................................................................32
4.14 NetStaff Stock Issued in Merger..............................................................32
4.15 Subsidiaries.................................................................................33
4.16 Financial Statements.........................................................................33
4.17 Legal Proceedings............................................................................34
4.18 Employee Benefit Plans.......................................................................34
4.19 No Contingent Liabilities....................................................................34
4.20 Full Disclosure..............................................................................34
ARTICLE 5 ADDITIONAL AGREEMENTS........................................................................35
5.1 Regulatory and Other Approvals...............................................................35
5.2 Board of Directors and Officers of NetStaff..................................................35
5.3 Expenses.....................................................................................36
5.4 Indemnification of Officers and Directors....................................................36
5.5 SEC Filings..................................................................................38
5.6 Investment Representation of Other MAT Shareholders..........................................39
ARTICLE 6 GENERAL PROVISIONS...........................................................................39
6.1 Survival of Representations, Warranties, Covenants and Agreements............................39
6.2 Indemnification..............................................................................39
6.3 Notices......................................................................................40
6.4 Entire Agreement.............................................................................41
6.5 Public Announcements.........................................................................42
6.6 No Third Party Beneficiary...................................................................42
6.7 No Assignment; Binding Effect................................................................42
6.8 Headings.....................................................................................42
6.9 Invalid Provisions...........................................................................43
6.10 Governing Law................................................................................43
6.11 Counterparts.................................................................................43
6.12 Arbitration..................................................................................43
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of May 16, 2002 (this
"AGREEMENT") is made and entered into by and among NetStaff, Inc., an Indiana
corporation ("NETSTAFF"), NSI Acquisition Corporation, a Delaware corporation
and wholly-owned subsidiary of NetStaff ("SUB"), MAT Trading Corp., a New York
corporation ("MAT"), and Xxxx X. Xxxxxxx, Xxxxxxxx Xxxxxx, Asi Xxxx, Xxxxx Xxxx
and Xxxxxx Xxxxx (each a "SELLING SHAREHOLDER" and collectively, the "SELLING
SHAREHOLDERS").
R E C I T A L S
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A. The Selling Shareholders collectively own a majority of the issued
and outstanding shares of capital stock of MAT and each desires to enter into
this Agreement. The number of shares of MAT capital stock owned by the Selling
Shareholders and the shareholders of MAT other than the Selling Shareholders
(the "OTHER MAT SHAREHOLDERS") are listed on Section 3.4(b)(ii) of the MAT
Disclosure Schedule.
B. The Board of Directors of each of NetStaff, Sub and MAT believes it
to be desirable and in the best interests of NetStaff, Sub and MAT and each of
their respective stockholders to merge MAT with and into Sub (the "MERGER").
C. NetStaff, Sub and MAT desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
various conditions to the Merger.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE 1
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2), upon
the terms and subject to the conditions set forth in this Agreement, MAT shall
be merged with and into Sub in accordance with the provisions of the Delaware
General Corporation Law (the "DGCL") and New York Business Corporation Law
("NYBCL"). Sub shall be the surviving corporation in the Merger (the "SURVIVING
CORPORATION"). Sub and MAT are sometimes referred to herein as the "CONSTITUENT
CORPORATIONS". As a result of the Merger, each outstanding share of capital
stock of MAT shall be canceled and converted into the right to receive the
Merger Consideration, in the manner provided in Article 2 hereof.
1.2 EFFECTIVE TIME. At the Closing (as defined in Section 1.3), a
certificate of merger (the "CERTIFICATE OF MERGER") shall be executed by the
parties hereto and filed with the Secretary of State of the States of Delaware
and New York (collectively, the "SECRETARY OF STATE"). The Merger shall become
effective at the time of filing of the Certificate of Merger (the "EFFECTIVE
TIME").
1.3 CLOSING. The closing of the Merger (the "CLOSING") shall take place
at the offices of Xxxxx & Xxxxxx, LLP, 000 Xxxxx Xxxxxxxxx, Xxxxx 0000, Xxxxx
Xxxx, Xxxxxxxxxx 00000, at 10:00 a.m. on the date hereof (the "CLOSING DATE").
(a) DELIVERY BY MAT AND THE SELLING SHAREHOLDERS AT THE
CLOSING. At the Closing, MAT and the Selling Shareholders shall deliver to
NetStaff and Sub (i) an opinion of Sichenzia Xxxx Xxxxxxxx Xxxxxxx, LLP, counsel
to MAT and the Selling Shareholders ("MAT COUNSEL"), in a form reasonably
acceptable to NetStaff, (ii) executed copies of the Certificate of Merger
referred to in Section 1.2 above, (iii) stock certificates evidencing all the
currently outstanding shares of MAT capital stock as contemplated in Article 2
of this Agreement, duly endorsed for transfer and (iv) Certificate of Good
Standing from the Secretary of State of the State of New York that MAT is in
good standing in such state.
(b) DELIVERIES BY NETSTAFF AND SUB. At the Closing NetStaff
and Sub shall deliver to MAT and the Selling Shareholders (i) an opinion of
Xxxxx & Xxxxxx, LLP, counsel to NetStaff and Sub ("NETSTAFF COUNSEL"), in a form
reasonably acceptable to MAT, (ii) executed copies of the Certificate of Merger
referred to in Section 1.2 above, (iii) stock certificates evidencing 80,000,000
shares of common stock of NetStaff as set forth under Article 2 of this
Agreement, (iv) Certificate of Good Standing from the Secretary of State of the
State of Indiana that NetStaff is in good standing in such state and (v)
Certificate of Good Standing from the Secretary of State of the State of
Delaware that Sub is in good standing in such state.
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1.4 CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. At the Effective Time:
(a) the Certificate of Incorporation of Sub as in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended.
(b) the Bylaws of Sub as in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation until thereafter
amended, except that the Bylaws shall be amended to provide for between four (4)
and seven (7) directors.
1.5 DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The directors
of Sub immediately after the Effective Time shall be Xxxx X. Xxxxxxx, Xxxxxx
Xxxxxx, Xxxxxx Xxxxx, Asi Xxxx and Xxxxx Xxxx, with Xxxx X. Xxxxxxx serving as
Chairman of the Board. The officers of Sub immediately after the Effective Time
shall be: Xxxx X. Xxxxxxx, as Chief Executive Officer and President; Xxxxxx
Xxxxxx, as Chief Financial Officer and Secretary; and Xxxxxx Xxxxx, as Chief
Informational Officer.
1.6 EFFECTS OF THE MERGER. Subject to the foregoing, the effects of the
Merger shall be as provided in the applicable provisions of the DGCL and NYBCL.
1.7 FURTHER ASSURANCES. Each party hereto shall execute such further
documents and instruments and take such further actions as may reasonably be
requested by one or more of the others to consummate the Merger, to vest the
Surviving Corporation with full title to all assets, properties, rights,
approvals, immunities and franchises of either of the Constituent Corporations
or to effect the other purposes of this Agreement.
1.8 TAX TREATMENT. The parties intend that the Merger be treated as a
reorganization described in Section 368(a) of the Internal Revenue Code of 1986,
as amended (the "CODE"). The parties shall not take a position on any tax
returns inconsistent with such treatment unless otherwise required by law.
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ARTICLE 2
EXCHANGE OF SHARES
2.1 EXCHANGE OF SHARES. At the Effective Time, by virtue of the Merger
and without any action on the part of the holders of the capital stock of Sub or
MAT:
(a) CANCELLATION OF TREASURY STOCK. All shares of capital
stock owned by MAT as treasury stock shall be canceled and retired and shall
cease to exist and no stock of NetStaff or other consideration shall be
delivered in exchange therefor.
(b) DETERMINATION OF MERGER CONSIDERATION. Each of the
10,000,000 shares of MAT common stock, $0.01 par value ("MAT COMMON STOCK"),
which are issued and outstanding immediately prior to the Effective Time, shall
be converted into and exchanged for the right to receive 8.00 shares of NetStaff
common stock, par value $0.001 per share ("NETSTAFF COMMON STOCK")
(collectively, the "MERGER CONSIDERATION").
2.2 DISSENTING SHARES. There are no dissenting shares. All shares of
MAT Common Stock issued and outstanding immediately prior to the Effective Time
have been voted in favor of the Merger.
2.3 FRACTIONAL SHARES. No fractional shares of NetStaff Common Stock
shall be issued in connection with the transactions contemplated by this
Agreement. The number of shares of NetStaff Common Stock to be issued to a
holder of MAT Common Stock pursuant to Section 2.1 of this Agreement (after
aggregating all fractional shares of NetStaff Common Stock to be received by
such holder) shall be reduced down to the nearest whole number of shares of
NetStaff Common Stock otherwise issuable pursuant to Section 2.1 of this
Agreement.
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2.4 TREATMENT OF MAT PREFERRED STOCK AND OPTIONS. Each share of MAT
Preferred Stock shall be converted into MAT Common Stock immediately prior to
the Closing. Each MAT Option shall accelerate and vest immediately prior to the
Closing and, to the extent not exercised at the Closing, shall terminate.
2.5 EXCHANGE OF CERTIFICATES.
(a) MAT STOCK EXCHANGE PROCEDURES. At the Closing or as soon
as practicable thereafter, each Selling Shareholder shall deliver to NetStaff
Counsel, to hold in trust on behalf of the Selling Shareholders and the Other
MAT Shareholders until the Effective Time, a certificate or certificates which,
immediately prior to the Effective Time, represented all the outstanding shares
of MAT Common Stock (individually, a "CERTIFICATE" and collectively, the
"CERTIFICATES"), and whose shares are to be exchanged pursuant to Section 2.1
into the right to receive the Merger Consideration. At or as soon as practicable
after the Closing, NetStaff shall deliver to MAT Counsel to hold in trust on
behalf of NetStaff certificates representing shares of NetStaff Common Stock
constituting the Merger Consideration to be delivered to each Selling
Shareholder and each Other MAT Shareholder pursuant to Section 2.1. Immediately
upon or as soon as is practicable after the Effective Time, (i) NetStaff shall
(or shall cause NetStaff Counsel to) instruct MAT Counsel in writing to release
the Merger Consideration to the Selling Shareholders and Other MAT Shareholders
in accordance with Section 2.1, and (ii) MAT shall (or shall cause MAT Counsel
to) instruct NetStaff Counsel to release each Certificate exchanged for the
Merger Consideration to NetStaff for cancellation. The Certificates so
surrendered shall forthwith be canceled. If the Merger contemplated by this
Agreement does not become effective, the parties hereto shall cause MAT Counsel
and NetStaff Counsel to release the Merger Consideration and Certificate being
held by MAT Counsel and NetStaff Counsel, respectively, back to the parties
delivering such pursuant to this Section 2.5(a).
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(b) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No
dividends or other distributions declared or made after the Effective Time with
respect to NetStaff Common Stock with a record date on or after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of NetStaff Common Stock represented thereby until the holder of
record of such Certificate shall surrender such Certificate in accordance with
this Section 2.5. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid to the record holder of the
certificates representing whole shares of NetStaff Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions, if any, with a record date on or
after the Effective Time which theretofore became payable, but which were not
paid by reason of the immediately preceding sentence, with respect to such whole
shares of NetStaff Common Stock, and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date on or after the
Effective Time but prior to surrender and a payment date subsequent to surrender
payable with respect to such whole shares of NetStaff Common Stock.
(c) NO FURTHER OWNERSHIP RIGHTS IN MAT STOCK. As of the
Effective Time the MAT Common Stock shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to exist, and each holder
of Certificates previously representing any such MAT Common Stock shall cease to
have any rights with respect thereto, except the right to receive the Merger
Consideration, as contemplated hereby. From and after the Effective Time, the
stock transfer books of MAT shall be closed and there shall be no further
registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of MAT Common Stock which were outstanding immediately
prior to the Effective Time. If, after the Effective Time, Certificates are
presented to the Surviving Corporation for any reason, they shall be canceled
and exchanged as provided in this Section 2.5.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF MAT
MAT and the Selling Shareholders, jointly and severally, represent and
warrant to NetStaff and Sub that:
3.1 ORGANIZATION AND QUALIFICATION. MAT is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. MAT (i) has all requisite corporate power and authority and possesses
all governmental and other authorizations, licenses or permits to carry on its
business as now conducted and as proposed to be conducted, and (ii) has
delivered to NetStaff complete and correct copies of its certificate or articles
of incorporation and bylaws as currently in effect and has not operated contrary
to the provisions of either. MAT is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such qualification or
licensing necessary, other than in such jurisdictions where the failure to be so
qualified or licensed or to be in good standing (individually or in the
aggregate) would not have a materially adverse effect on the business, condition
(financial or otherwise), properties, assets (including intangible assets),
liabilities (including contingent liabilities), prospects, or results of
operations of MAT (a "MATERIAL ADVERSE EFFECT"). MAT has all requisite corporate
power and authority to execute and deliver this Agreement.
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3.2 SUBSIDIARIES. MAT does not own, directly or indirectly, any capital
stock or other ownership interest in any corporation, partnership, joint
venture, or other entity.
3.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) None of the Other MAT Shareholders has or will exercise
any dissenters', appraisal or similar rights under the NYBCL or other applicable
law in connection with the transactions contemplated by this Agreement.
(b) Each of MAT and the Selling Shareholders has full
corporate or other applicable power and authority to enter into this Agreement,
to perform its or his obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
by MAT and the consummation by MAT of the transactions contemplated hereby have
been duly authorized and approved by the Board of Directors and stockholders of
MAT, and no other corporate proceedings on the part of MAT or its stockholders
are necessary to authorize the execution, delivery and performance of this
Agreement by MAT and the consummation by MAT of the transactions contemplated
hereby. This Agreement has been duly authorized and validly executed by each of
MAT and the Selling Shareholders and constitutes a valid and legally binding
obligation of each of MAT and the Selling Shareholders, enforceable in
accordance with its terms except (i) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, and other laws of general application
affecting enforcement of creditors' rights generally, and (ii) as limited by
laws relating to the availability of specific performance, injunctive relief, or
other equitable remedies (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
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3.4 CAPITAL STOCK OF MAT.
(a) The authorized capital stock of MAT consists of 10,000,000
shares of MAT Common Stock. As of the date hereof, 9,999,999 shares of Common
Stock are issued and outstanding and 1 share of MAT Common Stock is held by MAT
in its treasury. As of the date hereof, there are no outstanding options,
warrants and other securities convertible or exercisable into shares of MAT
Common Stock. All outstanding shares of capital stock of MAT are duly
authorized, validly issued, fully paid, and nonassessable and not subject to
preemptive rights. There are no bonds, debentures, notes, or other indebtedness
of MAT having the right to vote (or convertible into securities having the right
to vote) on any matters on which stockholders of MAT may vote. As of the date
hereof, there are no securities, options, warrants, calls, rights, commitments,
agreements, arrangements, or undertakings of any kind to which MAT is a party or
by which it is bound obligating MAT to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting
securities of MAT or obligating MAT to issue, grant, extend or enter into any
such security, option, warrant, call, right, commitment, agreement, arrangement
or undertaking (collectively, the "DERIVATIVE SECURITIES"). As of the date
hereof, there are no outstanding contractual obligations of MAT to repurchase,
redeem, or otherwise acquire any shares of capital stock of MAT. The offers and
sales of all of the outstanding shares of capital stock of MAT were at all
relevant times either registered under the Securities Act of 1933, as amended
(the "SECURITIES ACT"), and applicable state securities laws or exempt from such
requirements.
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(b) Each of MAT and the Selling Shareholders acknowledges that
the offering and sale of the NetStaff Common Stock to be issued in exchange for
all the outstanding shares of capital stock of MAT have not been registered with
the Securities and Exchange Commission (the "SEC") or any state securities laws
and is intended to be exempt from registration under the Securities Act by
virtue of Section 4(2) of the Securities Act and the provisions of Regulation D
promulgated thereunder ("REGULATION D"). The holders of all the outstanding
shares will fulfill as of the Effective Time, the investor suitability
requirements under Section 4(2) of the Securities Act and Regulation D. Set
forth in Section 3.4(b)(ii) of the MAT Disclosure Schedule is a list of holders
of MAT capital stock, together with the number of shares held by each such
holder.
(c) There are no voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person.
3.5 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
(a) Except for the filing of the Agreement of Merger and other
appropriate merger documents required by the DGCL and NYBCL with the Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Constituent Corporations are qualified to do business, the
execution and delivery of this Agreement by each of MAT and the Selling
Shareholders does not, and the performance by each of MAT and the Selling
Shareholders of its or his obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any pledges, claims, liens, charges,
encumbrances, and security interests of any kind or nature whatsoever
(collectively, "LIENS") upon any of the assets or properties of MAT or such
Selling Shareholder or an Other MAT Shareholder under, any of the terms,
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conditions or provisions of (i) the certificate or articles of incorporation or
bylaws of MAT, or (ii) (x) any statute, law, rule, regulation or ordinance
(together, "LAWS"), or any judgment, decree, order, writ, permit or license
(together, "ORDERS"), of any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United States or any state,
county, city or other political subdivision (a "GOVERNMENTAL OR REGULATORY
AUTHORITY"), applicable to MAT or such Selling Shareholder or any Other MAT
Shareholder or any of its or his assets or properties, or (y) any note, bond,
mortgage, security agreement, indenture, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of any kind
(together, "CONTRACTS") to which MAT or such Selling Shareholder or an Other MAT
Sharholder is a party or by which MAT or such Selling Shareholder or Other MAT
Shareholder or any of its or his assets or properties is bound.
(b) No consent, approval or action of, filing with or notice
to any Governmental or Regulatory Authority or other public or private third
party is necessary or required under any of the terms, conditions or provisions
of any Law or Order of any Governmental or Regulatory Authority or any contract
to which MAT or a Selling Shareholder or an Other MAT Shareholder is a party or
by which MAT or a Selling Shareholder or an Other MAT Shareholder or any of its
or his assets or properties is bound for the execution and delivery of this
Agreement by MAT or the Selling Shareholders, the performance by MAT or each
Selling Shareholder of its or his obligations hereunder or the consummation of
the transactions contemplated hereby.
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3.6 FINANCIAL STATEMENTS. MAT has delivered to NetStaff a true and
complete copy of the following financial statements: (i) the audited balance
sheets of MAT as of December 31, 2001 and the related audited statement of
operations for the fiscal year then ended. As of and for the period ended
December 31, 2001, the audited financial statements (A) are complete and correct
in all respects, (B) were prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods involved
and (C) fairly present the financial position of MAT as at December 31, 2001 and
the results of its operations and cash flows for the respective periods then
ended.
3.7 ABSENCE OF CHANGES. Except as disclosed in Section 3.7 of the MAT Disclosure
Schedule, since December 31, 2001:
(a) There has been no adverse change in the financial
condition, results of operations, assets, liabilities, prospects or business of
MAT, and no event or condition has occurred which any of MAT or the Selling
Shareholders believes has adversely affected or shall adversely affect the
financial condition, results of operations, prospects, assets, liabilities or
business of MAT;
(b) There have been no short term or long term liabilities or
obligations incurred by or on behalf of MAT, except in the normal course of
business, and no such liability in the ordinary course exceeds Twenty Five
Thousand Dollars ($25,000) in any one instance or in the aggregate;
(c) There have been no dividends, redemptions, share dividends
or other distributions in respect of shares to shareholders of MAT declared, set
aside or paid;
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(d) There has been no sale, transfer or distribution of any
asset of MAT or any other transaction with respect to MAT entered into other
than in the regular and customary course of business, and there has been no
forgiveness, waiver or compromise of debt;
(e) There has been no loss, damage, or destruction of property
or assets of MAT not fully covered by insurance and no waiver of any rights of
value;
(f) There have been no increases in salaries, bonuses, fringe
benefits or incentive or other compensation payable, or to become payable, to
any officer, director, employee or any other person with respect to MAT; and
(g) No capital expenditure with respect to MAT or any of the
properties or assets of either has been made in excess of Five Thousand Dollars
($5,000) in the aggregate.
3.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities that are
disclosed in the MAT Disclosure Schedule and except for matters reflected or
reserved against in the balance sheet for the period ended December 31, 2001 MAT
balance sheet for the period ended December 31, 2001 included in MAT Financial
Statements, MAT did not have at such date, nor has MAT incurred since that date,
any liabilities or obligations (whether absolute, accrued, contingent, fixed or
otherwise, or whether due or to become due) of any nature that would be required
by generally accepted accounting principles to be reflected on a balance sheet
of MAT (including the notes thereto), except liabilities or obligations which
were incurred in the ordinary course of business consistent with past practice.
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3.9 LEGAL PROCEEDINGS. Except as disclosed in Section 3.9 of MAT
Disclosure Schedule: (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of MAT or the Selling Shareholders,
threatened against, relating to or affecting, nor to the knowledge of MAT or the
Selling Shareholders are there any Governmental or Regulatory Authority
investigations or audits pending or threatened against, relating to or
affecting, MAT or any of its assets and properties; (ii) MAT is not subject to
any Order of any Governmental or Regulatory Authority; and (iii) there are no
material actions, suits, arbitrations or proceedings that MAT currently intends
to initiate.
3.10 CONTRACTS AND COMMITMENTS. Section 3.10 of MAT Disclosure Schedule
contains a true and complete list of each of the following written or oral
contracts (the "MATERIAL CONTRACTS") to which MAT is a party: (i) all Contracts
(excluding MAT Employee Benefit Plans which can be terminated at will without
subjecting MAT to cost or penalty) providing for a commitment for employment or
consultation services for a specified or unspecified term to, or otherwise
relating to employment or the termination of employment of, any employee; (ii)
all Contracts with any Person containing any provision or covenant prohibiting
or limiting the ability of MAT to engage in any business activity or compete
with any Person in connection with its business or prohibiting or limiting the
ability of any Person to compete with MAT in connection with its business; (iii)
all partnership, joint venture, stockholders' or other similar Contracts with
any Person in connection with MAT's business; (iv) all Contracts relating to the
future disposition or acquisition of assets of MAT; (v) all other Contracts with
respect to MAT that (A) involve the payment or potential payment, pursuant to
the terms of any such Contract, by or to MAT of more than $20,000 annually and
(B) cannot be terminated within thirty (30) days after giving notice of
termination. There is no default or event that with notice or lapse of time, or
both, would constitute a default by MAT under any of the Material Contracts to
which it is a party. MAT has not received notice of a default under any Material
Contract by any party thereto. Each of the Material Contracts is enforceable
against MAT in accordance with its terms, except as such enforceability may be
limited by general principles of equity or by bankruptcy, insolvency or other
similar laws relating to rights of creditors. MAT has not received notice that
any party to any of the Material Contracts intends to cancel or terminate any of
the Material Contracts or to exercise or not exercise any options under any of
the Material Contracts.
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3.11 TAXES. MAT has filed all tax returns that are required to have
been filed by it in any jurisdiction for all periods ending on or prior to the
date hereof and such tax returns are true, correct and complete in all material
respects, and MAT has paid all taxes shown to be due and payable on such returns
and all other taxes and assessments payable by it to the extent the same have
become due and payable and before they have become delinquent, except for any
taxes and assessments the amount, applicability or validity of which is
currently being contested in good faith by appropriate proceedings and with
respect to which MAT has set aside on its books adequate reserves (segregated to
the extent required by generally accepted accounting principles, consistently
applied throughout the specified period and in the immediately comparable
period). Neither MAT nor any Selling Shareholder has any knowledge, after due
inquiry, of any proposed material tax assessment, obligation or other claim
against MAT. There are no material liens for taxes upon any property or assets
of MAT, except for liens for taxes not yet due. There are no unresolved issues
of law or fact arising out of a notice of deficiency, proposed deficiency or
assessment from the Internal Revenue Service ("IRS") or any other governmental
taxing authority with respect to taxes of MAT. MAT is not a party to any
agreement providing for the allocation or sharing of taxes with any entity.
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3.12 EMPLOYEE BENEFIT PLANS.
(a) Except as set forth in Section 3.12 of MAT Disclosure
Schedule, MAT has no Employee Benefit Plan or other Plan.
(b) As used herein:
(i) "EMPLOYEE BENEFIT PLAN" means any Plan entered
into, established, maintained, contributed to or required to be contributed to
by MAT and existing on the date of this Agreement or at any time subsequent
thereto and on or prior to the Effective Time and, in the case of a Plan which
is subject to Part 3 of Title I of ERISA, Section 412 of the Code or Title IV of
ERISA, at any time during the five-year period preceding the date of this
Agreement; and
(ii) "PLAN" means any employment, bonus, incentive
compensation, deferred compensation, pension, profit sharing, retirement, stock
purchase, stock option, stock ownership, stock appreciation rights, phantom
stock, leave of absence, layoff, vacation, day or dependent care, legal
services, cafeteria, life, health, medical, accident, disability, workers'
compensation or other insurance, severance, separation, termination, change of
control or other benefit plan, agreement, practice, policy or arrangement of any
kind, whether written or oral, including, but not limited to any "employee
benefit plan" within the meaning of Section 3(3) of ERISA.
3.13 TITLE TO ASSETS. MAT is in possession of and has good title to, or
has valid leasehold interests in or valid rights under contract to use, all of
its properties and assets primarily used in its business and material to the
condition (financial or other) of such business, free and clear of all Liens,
except (i) the lien for current taxes, payments of which are not yet delinquent,
(ii) as set forth in Section 3.13 of MAT Disclosure Schedule. All leases under
which MAT leases any substantial amount of real or personal property have been
made available to NetStaff and are in good standing, valid and effective in
accordance with their respective terms, and there is not, under any of such
leases, any existing default by MAT or any event which with notice or lapse of
time or both would become a default by MAT.
-17-
3.14 PERMITS, ETC. MAT owns or validly holds all material licenses,
permits, certificates of authority, registrations, franchises and similar
consents granted or issued by any applicable Governmental or Regulatory
Authority, used or held for use which are required to conduct its business.
3.15 COMPLIANCE WITH LAWS. MAT is not in violation of, nor has it
violated, any applicable provisions of any Laws or any term of any Order binding
against it. Section 3.15 of MAT Disclosure Schedule sets forth a complete list
of MAT's licenses, permits and authorizations ("PERMITS"). Since December 31,
1998, no state or federal governmental entity has revoked or materially limited
any license or certificate of authority of MAT material to its business, and no
investigation or proceeding is pending or, to MAT's knowledge, threatened, which
involves the revocation or material limitation of any of such licenses or
certificates. MAT has no knowledge of any information which would lead MAT to
believe that any licenses or permits necessary to the conduct of the business of
MAT as presently conducted will not remain in full force and effect for the
complete duration of their terms. MAT has made available to NetStaff all filings
made to, and all inspection or compliance reports or correspondence received
from, Governmental Entities for the last three years and will make available to
NetStaff all other Permits as requested by NetStaff. Each of such filings was in
compliance with all applicable laws and regulations.
-18-
3.16 NO LIENS ON SHARES. Each of the shares of
MAT Common Stock being converted into and exchanged for Merger Consideration
pursuant to this Agreement is owned beneficially and of record by a Selling
Shareholder or an Other MAT Shareholder, as the case may be, and is free and
clear of pledges, liens, claims, limitations on voting rights, options, charges,
security interests and other encumbrances of any nature whatsoever.
3.17 INTELLECTUAL PROPERTY RIGHTS. Schedule 3.17 of the MAT Disclosure
Schedule contains a true and correct list of all patents and patent
applications, including reissues, divisions, continuations,
continuations-in-part and extensions thereof and reexamination certificates
therefor and all trademarks, service marks and trade names owned or controlled
by MAT.
(a) (i) no third party is infringing or misappropriating any
of MAT's intellectual property rights; and (ii) MAT's current intellectual
property does not infringe any valid claim of a third party patent.
(b) There are no outstanding claims asserted or, to the
knowledge of MAT or the Selling Shareholders, threatened against MAT alleging
that the development, manufacture, marketing, distribution, sale or use of MAT's
intellectual property infringes or misappropriates any intellectual property or
other proprietary rights of any third party.
(c) (i) all of the patents listed in Schedule 3.17 of the MAT
Disclosure Schedule are valid and in full force and effect, and are not the
current subject of any interference or opposition proceeding; and (ii) neither
MAT nor any Selling Shareholder is aware of any publications or activities
including, without limitation, patents, articles, and public uses or sales, by
it or others, which would or might invalidate any claim(s) of any such patent.
Neither MAT nor any Selling Shareholder has conducted, or has commissioned the
conducting of, any written infringement or validity studies regarding any such
patent or patent application that has not been provided to NetStaff for
inspection prior to the date hereof.
-19-
3.18 LABOR CONTROVERSIES.
(a) There are no controversies pending or, to the knowledge of
MAT, threatened between MAT and any representatives of any of MAT's employees.
(b) There are no organizational efforts presently being made
involving any of the presently unorganized employees of MAT.
(c) MAT has complied with all laws relating to the employment
of labor, including without limitation, any provisions thereof relating to
wages, hours, collective bargaining, and the payment of social security and
similar taxes, with respect to its employees on the MAT payroll.
(d) No person has asserted that MAT is liable for any arrears
of wages or any taxes or penalties for failure to comply with any of the
foregoing.
3.19 INSURANCE. Section 3.19 of MAT Disclosure Schedule lists all
policies of fire, liability, life and employee health, environmental, errors and
omissions, workers' compensation and other forms of insurance currently held and
maintained by MAT (the "INSURANCE POLICIES"). Such Insurance Policies are
commercially reasonable and adequate in amount and coverage. All of the
Insurance Policies are in full force and effect, all billed premiums with
respect thereto covering all periods up to and including the Closing Date have
been paid or will have been paid on or prior to the Closing Date and no written
notice of cancellation or termination has been received with respect to any such
Policy.
-20-
3.20 GUARANTIES. Except as set forth on Section 3.20 of the MAT
Disclosure Schedule, MAT has not guaranteed, endorsed or indemnified, and no
assets of MAT have collateralized, the presently outstanding or future
obligations of any person, firm or corporation. No Selling Shareholder nor any
other person or entity has guaranteed, endorsed or indemnified the presently
outstanding or future obligations of MAT.
3.21 TAX-FREE REORGANIZATION. MAT has not taken and has not agreed to
take any action that would interfere with the ability of NetStaff to treat the
Merger as a tax-free reorganization within the meaning of Section 368(a) of the
Code.
3.22 BOARD OF DIRECTORS AND STOCKHOLDER APPROVAL. The Board of
Directors and stockholders of MAT have approved and adopted this Agreement.
3.23 BROKERS AND FINDERS. Neither MAT nor any Selling Shareholder nor
any Other MAT Shareholder has employed any broker, finder, consultant or
intermediary in connection with the transactions contemplated by this Agreement
who would be entitled to a broker's, finder's or similar fee or commission in
connection therewith or upon the consummation thereof.
3.24 REAL AND OTHER PROPERTY INTERESTS. MAT owns no real property. Set
forth on Section 3.24 of the MAT Disclosure Schedule is a summary of all real
estate interests and leaseholds, equipment, machinery, vehicles, improvements
and other tangible properties and assets owned or leased by MAT or otherwise
used in, or required for, the business of MAT. Except as set forth on Section
3.24 of the MAT Disclosure Schedule, MAT owns (beneficially and of record) and
has good and marketable title to the properties and assets and none of the
listed properties or assets is subject to any mortgage, pledge, lien, security
interest, lease, charge, encumbrance or joint ownership. The properties and
assets listed on Section 3.24 of the MAT Disclosure Schedule and their use
conform in all material respects to all applicable building, zoning, fire,
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health and other laws, ordinances or regulations and no notice of any violation
with respect thereto has been received by any of MAT or a Selling Shareholder.
All the schedules properties and assets are in good condition, fit for the
purpose for which they are being used. MAT has valid and enforceable leasehold
interests in all such properties and assets which it purports to lease. MAT is,
or shall be prior to the Closing, the party-lessee on all real and personal
property leases covering all or any portion of the premises or any personal
property used by MAT in the operation of its business. Except as set forth on
Section 3.24 of the MAT Disclosure Schedule, all leases to which MAT is a
party-lessee are in full force and effect and no party is in default thereunder,
and the transactions contemplated by this Agreement shall not in any way affect
their validity or enforceability.
3.25 NO TERMINATION OF BUSINESS RELATIONSHIP. Except as disclosed on
Section 3.25 of the MAT Disclosure Schedule, no supplier of MAT, and none of the
present customers or groups of customers of MAT, has given MAT or any of the
Selling Shareholders any indication of a desire to cancel or otherwise terminate
a material business relationship and no key employee of MAT has given MAT or any
of the Selling Shareholders notice of a desire or intent to terminate
employment.
3.26 ABSENCE OF CERTAIN PAYMENTS. Other than for services legitimately
and openly performed under applicable law and nominal non-cash gifts (with a
total per donee retail value of less than $100.00 in any year), neither MAT nor
any agent, employee or representative of MAT, has made or tendered to any
present or prospective customer, supplier, government official, insurance
carrier, employee or agent or any other person, any payment, gratuity, gift or
thing of value. Neither MAT nor any agent, employee or representative of MAT has
established or maintained any unlawful or unrecorded funds (or been asserted in
any investigation or proceeding to have actually or possibly received) from any
such person any payment, gratuity, gift or thing of value whatsoever.
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3.27 INVESTMENT REPRESENTATION. Each of the Selling Shareholders and
the Other MAT Shareholders is an "accredited investor," as such term is defined
in the Securities Act. Each of the Selling Shareholders acknowledges that, upon
issuance, the shares of NetStaff Common Stock to be issued hereunder as Merger
Consideration will not have been "REGISTERED" and therefore will be "RESTRICTED
SECURITIES," as those terms are used under the Securities Act. By his execution
of this Agreement, each Selling Shareholder agrees, represents, and warrants
that his purchase of the shares of NetStaff Common Stock to be issued to him
hereunder as Merger Consideration is for investment only, for his own account
(both of record and beneficially) and not with a view to "DISTRIBUTION" as that
term is used under the Securities Act. He agrees that he shall not at any time
make any sale, mortgage, pledge, hypothecation, gift or other transfer of the
shares of NetStaff Common Stock to be issued to him hereunder, except pursuant
to an effective registration statement under the Securities Act or pursuant to
the provisions of Rule 144 under the Securities Act or another exemption from
the registration requirements under the Securities Act and in accordance with
any applicable state "BLUE SKY" or securities law; and that prior to making any
sale or other disposition of the shares of NetStaff Common Stock to be issued to
him hereunder pursuant to any such exemption, he shall, if reasonably requested
by NetStaff, obtain an opinion of counsel, satisfactory to counsel designated by
NetStaff, that such sale complies with applicable federal and state securities
laws. Each Selling Shareholder agrees that he has been informed that the shares
of NetStaff Common Stock to be issued to him hereunder must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available and he understands that any sale of the
shares of NetStaff Common Stock to be issued to him hereunder made in reliance
upon Rule 144, or any other like rule, can be made only in limited amounts in
accordance with the terms and conditions of those rules and, if those rules are
not applicable, any resale may require compliance with another available
exemption under the Securities Act or, in the alternative, may require
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registration of the shares of NetStaff Common Stock to be issued to him
hereunder. The Selling Shareholders acknowledge that NetStaff expressly makes no
representation or covenant that it shall conduct its affairs so as to permit
sales under Rule 144, and that NetStaff is under no obligation to register or
repurchase the shares of NetStaff Common Stock to be issued as Merger
Consideration hereunder. The Selling Shareholders acknowledge that NetStaff
shall cause a legend to be placed on the certificates representing the shares of
NetStaff Common Stock to be issued as Merger Consideration hereunder to reflect
the foregoing.
3.28 FULL DISCLOSURE. No information furnished by or on behalf of MAT
or any Selling Shareholder to NetStaff pursuant to this Agreement and any
information contained in the MAT Disclosure Schedule and other Schedules to this
Agreement, at any time prior to the Closing Date, contains nor will contain any
untrue statement of a material fact and does not and will not omit to state any
material fact necessary to make any statement, in light of the circumstances
under which such statement is made, not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF NETSTAFF AND SUB
NetStaff and Sub jointly and severally represent and warrant to MAT and
the Selling Shareholders as follows:
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4.1 ORGANIZATION OF NETSTAFF AND SUB. Each of NetStaff and Sub is an
entity duly organized, validly existing and in good standing under the laws of
its respective jurisdiction. NetStaff and Sub has full corporate power and
authority to own or lease and to operate and use its properties and assets and
to carry on its business as now conducted and as proposed to be conducted
pursuant to this Agreement. NetStaff is duly qualified or licensed to do
business and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make such qualification
or licensing necessary, other than in such jurisdictions where the failure to be
so qualified or licensed or to be in good standing (individually or in the
aggregate) would not have a Material Adverse Effect. Except for Sub and as
disclosed in Section 4.1 of the disclosure schedule attached hereto (the
"NETSTAFF DISCLOSURE SCHEDULE") or in the NetStaff Reports (as that term is
defined in Section 4.6), NetStaff does not own, directly or indirectly, any
capital stock or other ownership interest in any corporation, partnership, joint
venture or other entity.
4.2 AUTHORIZATION. Each of NetStaff and Sub has full corporate power
and authority to execute, deliver and perform this Agreement and the Related
Agreements and to consummate the transactions contemplated hereby and thereby.
The execution, delivery and performance of this Agreement and the Related
Agreements by NetStaff have been duly authorized and approved by the Board of
Directors of NetStaff and does not require any further authorization or consent
of NetStaff. This Agreement has been duly authorized, validly executed and
delivered by NetStaff and constitutes the legal, valid and binding obligations
of NetStaff enforceable in accordance with its terms, except as the
enforceability thereof may be subject to or limited by (i) bankruptcy,
insolvency, reorganization, arrangement, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights, and (ii) general
equitable principles, regardless of whether the issue of enforceability is
considered in a proceeding in equity or at law.
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4.3 CAPITAL STOCK OF NETSTAFF AND SUB.
(a) The authorized capital stock of NetStaff consists of
100,000,000 shares of NetStaff Common Stock and 20,000,000 shares of preferred
stock. As of May 15, 2002, 13,700,000 shares of Common Stock and no shares of
preferred stock, were issued and outstanding. All outstanding shares of capital
stock of NetStaff are duly authorized, validly issued, fully paid, and
nonassessable and not subject to preemptive rights and such capital stock has
been issued in full compliance with all applicable federal and state securities
laws. Except as set forth in Section 4.3 of the NetStaff Disclosure Schedule or
in the NetStaff Reports, there are no bonds, debentures, notes, or other
indebtedness of NetStaff having the right to vote (or convertible into
securities having the right to vote) on any matters on which stockholders of
NetStaff may vote. Except as set forth above and except as set forth in Section
4.3 of the NetStaff Disclosure Schedule, as of the date hereof, there are no
Derivative Securities of NetStaff. As of the date hereof, except as set forth in
Section 4.3 of the NetStaff Disclosure Schedule, there are no outstanding
contractual obligations of NetStaff to repurchase, redeem, or otherwise acquire
any shares of capital stock of NetStaff. NetStaff has furnished to MAT true and
correct copies of NetStaff's Articles of Incorporation and Bylaws as in effect
as of the date hereof. The authorized capital stock of Sub consists of 100
shares of common stock, $0.001 par value, of which 100 shares are issued and
outstanding and owned of record by NetStaff. Except as contemplated by this
Agreement, there are no outstanding options, warrants, or other rights to
subscribe for or purchase from NetStaff any capital stock of Sub, or securities
convertible into Sub, and there are no commitments, agreements, arrangements or
undertakings of any kind to which Sub is a party or by which it is bound
obligating Sub to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of capital stock or other voting securities of Sub or
obligating Sub to issue, grant, extend or enter into any Derivative Securities.
As of the date hereof, there are no outstanding contractual obligations of Sub
to repurchase, redeem or otherwise acquire any shares of capital stock of Sub.
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(b) There are no voting trusts, proxies or other commitments,
understandings, restrictions or arrangements in favor of any person other than
NetStaff.
4.4 NON-CONTRAVENTION; APPROVALS AND CONSENTS.
(a) Except for the filing of the Agreement of Merger and other
appropriate merger documents required by the DGCL and NYBCL with the Secretary
of State and appropriate documents with the relevant authorities of other states
in which the Constituent Corporations are qualified to do business, the
execution and delivery of this Agreement by NetStaff does not, and the
performance by NetStaff of its obligations hereunder and the consummation of the
transactions contemplated hereby will not, conflict with, result in a violation
or breach of, constitute (with or without notice or lapse of time or both) a
default under, result in or give to any person any right of payment or
reimbursement, termination, cancellation, modification or acceleration of, or
result in the creation or imposition of any Liens upon any of the assets or
properties of NetStaff under, any of the terms, conditions or provisions of (i)
the Articles of Incorporation or Bylaws of NetStaff, or (ii) (x) any Laws,
Orders of any Governmental or Regulatory Authority applicable to NetStaff or any
of its assets or properties, or (y) any Contract to which NetStaff is a party or
by which NetStaff or any of its assets or properties is bound, excluding from
the foregoing clauses (x) and (y) conflicts, violations, breaches, defaults,
payments, reimbursements, terminations, cancellations, modifications,
accelerations and creations and impositions of Liens which, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on NetStaff or on the ability of NetStaff to consummate the transactions
contemplated by this Agreement.
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(b) Except as disclosed in Section 4.4 of NetStaff Disclosure
Schedule, no consent, approval or action of, filing with or notice to any
Governmental or Regulatory Authority or other public or private third party is
necessary or required under any of the terms, conditions or provisions of any
Law or Order of any Governmental or Regulatory Authority or any contract to
which NetStaff is a party or by which NetStaff or any of its assets or
properties is bound for the execution and delivery of this Agreement by
NetStaff, the performance by NetStaff of its obligations hereunder or the
consummation of the transactions contemplated hereby, other than such consents,
approvals, actions, filings and notices which the failure to make or obtain, as
the case may be, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on NetStaff or on the ability of
NetStaff to consummate the transactions contemplated by this Agreement.
4.5 NO LITIGATION OR REGULATORY ACTION. Except as disclosed in the
NetStaff Reports or in Section 4.5 of NetStaff Disclosure Schedule: (i) there
are no actions, suits, arbitrations or proceedings pending or, to the knowledge
of NetStaff, threatened against, relating to or affecting, nor to the knowledge
of NetStaff are there any Governmental or Regulatory Authority investigations or
audits pending or threatened against, relating to or affecting, NetStaff or any
of its assets and properties which could reasonably be expected to have a
Material Adverse Effect on NetStaff or on the ability of NetStaff to consummate
the transactions contemplated by this Agreement; (ii) NetStaff is not subject to
any Order of any Governmental or Regulatory Authority which is having or could
be reasonably expected to have a Material Adverse Effect on NetStaff, or on the
ability of NetStaff or Sub to consummate the transactions contemplated by this
Agreement; and (iii) there are no material actions, suits, arbitrations or
proceedings that NetStaff currently intends to intitate.
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4.6 SEC DOCUMENTS. NetStaff has delivered or made available to MAT true
and correct copies of each registration statement, report, definitive proxy
statement or definitive information statement and all exhibits thereto filed
(including exhibits and any amendments thereto) since January 1, 1999 with the
SEC under or pursuant to the Securities Act or the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), (collectively, the "NETSTAFF REPORTS").
As of their respective dates, or as subsequently amended prior to the Closing
Date, the NetStaff Reports complied in all material respects with the
requirements of the Exchange Act applicable to such NetStaff Reports, and none
of the NetStaff Reports contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of NetStaff included in
the NetStaff Reports comply in all material respects with applicable accounting
requirements in the published rules and regulations of the SEC with respect
thereto, have been prepared in accordance with GAAP applied on a consistent
basis (except as may be indicated in the notes thereto) and fairly present the
consolidated financial position of NetStaff and its consolidated subsidiaries as
of the dates thereof and the consolidated results of their operations and cash
flows for the periods then ended (subject, in the case of unaudited statements,
to normal year-end audit adjustments, the absence of notes and as permitted by
Form 10-Q of the Exchange Act). As of their respective dates, the NetStaff
Reports complied as to form in all material respects with the applicable
requirements of the Securities Act and/or the Exchange Act.
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4.7 BROKERS AND FINDERS. NetStaff has not employed any broker, finder,
consultant or intermediary in connection with the transactions contemplated by
this Agreement who would be entitled to a broker's, finder's or similar fee or
commission in connection therewith or upon the consummation thereof.
4.8 TAXES.
(a) Prior to the Merger, NetStaff will be in control of Sub
within the meaning of Section 368(c) of the Code. NetStaff will not cause or
permit Sub to issue additional shares of its stock that would result in NetStaff
losing control of Sub within the meaning of Section 368(c) of the Code. No stock
of Sub will be issued in the Merger.
(b) During its corporate existence, Sub has owned no assets,
and prior to the Merger shall not own any assets other than the shares of
NetStaff to be distributed in the Merger.
(c) As of the date hereof and as of the Effective Time,
NetStaff has no plan or intention to reacquire any of its stock to be
distributed in the Merger.
4.9 ABSENCE OF CHANGES. Except: (i) as disclosed in Section 4.9 of the
NetStaff Disclosure Schedule; (ii) for matters reflected or reserved against in
the financial statements included in the NetStaff Reports; and (iii) as
disclosed in the NetStaff Reports filed as of the date of this Agreement, since
June 30, 2001, NetStaff has conducted its business only in the ordinary course,
consistent with past practice and there has been no change and no development in
the business, properties, operations, condition (financial or otherwise), or
results of operations of NetStaff that had or could reasonably be expected to
have a Material Adverse Effect other than those occurring as a result of general
economic or financial conditions or other developments that are not unique to
NetStaff but also affect other persons who participate or are engaged in the
lines of business in which NetStaff participates or is engaged, or other than
those occurring as a result of this Agreement and the transactions contemplated
hereby.
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4.10 TITLE TO ASSETS. NetStaff is in possession of and has good title
to, or has valid leasehold interests in or valid rights under contract to use,
all of its properties and assets primarily used in its business and material to
the condition (financial or other) of such business, free and clear of all
Liens, except (i) the lien for current taxes, payments of which are not yet
delinquent, (ii) such imperfections in title and easements and encumbrances, if
any, as are not substantial in character, amount or extent and do not materially
detract from the value of or interfere with the present use of the property
subject thereto or affected thereby, or otherwise materially impair NetStaff's
business operations (in the manner presently carried on by NetStaff) or (iii) as
disclosed in the NetStaff Reports, and except for such matters which,
individually or in the aggregate, would not have a Material Adverse Effect on
NetStaff. All leases under which NetStaff leases any substantial amount of real
or personal property have been made available to MAT and are in good standing,
valid and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default by NetStaff or to the knowledge
of NetStaff any event which with notice or lapse of time or both would become a
default by NetStaff other than defaults under such leases which in the aggregate
would not have a Material Adverse Effect on NetStaff.
4.11 PERMITS, ETC. NetStaff owns or validly holds all material
licenses, permits, certificates of authority, registrations, franchises and
similar consents granted or issued by any applicable Governmental or Regulatory
Authority, used or held for use which are required to conduct and material to
the condition of its business.
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4.12 COMPLIANCE WITH LAWS. Except as set forth in the NetStaff Reports,
NetStaff is not in violation of, nor has it violated, any applicable provisions
of any Laws or any term of any Order binding against it except for violations
which do not have and would not have a Material Adverse Effect on NetStaff.
4.13 LABOR CONTROVERSIES.
(a) Except as set forth in Section 4.13 of the NetStaff
Disclosure Schedule, there are no controversies pending or, to the knowledge of
Netstaff and Sub, threatened between Netstaff or Sub and any representatives of
any of Netstaff or Sub's employees.
(b) There are no organizational efforts presently being made
involving any of the presently unorganized employees of Netstaff or Sub.
(c) Netstaff and Sub have complied with all laws relating to
the employment of labor, including without limitation, any provisions thereof
relating to wages, hours, collective bargaining, and the payment of social
security and similar taxes, with respect to its employees on the Netstaff or Sub
payroll.
(d) No person has asserted that Netstaff or Sub are liable for
any arrears of wages or any taxes or penalties for failure to comply with any of
the foregoing.
4.14 NETSTAFF STOCK ISSUED IN MERGER. The shares of NetStaff Common
Stock to be issued in the Merger will, when issued and delivered to the
stockholders of MAT as a result of the Merger and pursuant to the terms of this
Agreement, be duly and validly authorized and issued, fully paid, non-assessable
and free of preemptive rights of any securityholder of NetStaff, and issued in
compliance with applicable federal and state securities laws.
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4.15 SUBSIDIARIES. Netstaff and Sub do not own, directly or indirectly,
any capital stock or other ownership interest in any corporation, partnership,
joint venture, or other entity, except that Netstaff owns all of the issued and
outstanding shares of common stock of Sub.
4.16 FINANCIAL STATEMENTS.
(a) Netstaff has delivered to MAT a true and complete copy of
the following financial statements: (i) the unaudited balance sheets of MAT as
of September 30, 2001 and the related unaudited statement of operations for the
quarter then ended. As of and for the period ended December 31, 2000, the
audited financial statements (A) are complete and correct in all respects, (B)
were prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved and (C) fairly present
the financial position of NetStaff as at December 31, 2000 thereof and the
results of its operations and cash flows for the respective periods then ended.
(b) Except for liabilities that are disclosed in the Netstaff
Disclosure Schedule and except for matters reflected or reserved against in the
balance sheet for the period ended September 30, 2001 included in Netstaff
Financial Statements, Netstaff did not have at such date, nor has Netstaff
incurred since that date, any liabilities or obligations (whether absolute,
accrued, contingent, fixed or otherwise, or whether due or to become due) of any
nature that would be required by generally accepted accounting principles to be
reflected on a balance sheet of Netstaff (including the notes thereto), except
liabilities or obligations which were incurred in the ordinary course of
business consistent with past practice.
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4.17 LEGAL PROCEEDINGS. Except as disclosed in Section 4.17 of the
Netstaff Disclosure Schedule: (i) there are no actions, suits, arbitrations or
proceedings pending or, to the knowledge of NetStaff, threatened against,
relating to or affecting, nor to the knowledge of Netstaff are there any
Governmental or Regulatory Authority investigations or audits pending or
threatened against, relating to or affecting, Netstaff or Sub or any of its
assets and properties; (ii) Netstaff nor Sub are not subject to any Order of any
Governmental or Regulatory Authority; and (iii) there are no actions, suits,
arbitrations or proceedings that Netstaff or Sub currently intends to initiate.
4.18 EMPLOYEE BENEFIT PLANS. Netstaff has no Employee Benefit Plan or
other Plan.
4.19 NO CONTINGENT LIABILITIES. Except as set forth in the NetStaff
financial statements described in Section 4.17 or otherwise as described in the
NetStaff Disclosure Schedules, at the Closing, Netstaff and Sub shall have no
material liabilities, whether related to tax or non-tax matters, known or
unknown, due or not yet due, liquidated or unliquidated, fixed or contingent,
determined or determinable in amount or otherwise, and to the knowledge of the
Netstaff, there is no existing condition, situation or set of circumstances
which could reasonably be expected to result in such a liability, except as and
to the extent reflected on this Agreement or any Schedule or Exhibit hereto or
which has been incurred in the ordinary course of business and as accurately
reflected on the books and records of Netstaff.
4.20 FULL DISCLOSURE. No information furnished by or on behalf of
NetStaff to MAT pursuant to this Agreement and any information contained in the
NetStaff Disclosure Schedule and other Schedules to this Agreement, at any time
prior to the Closing Date, contains nor will contain any untrue statement of a
material fact and does not and will not omit to state any material fact
necessary to make any statement, in light of the circumstances under which such
statement is made, not misleading.
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ARTICLE 5
ADDITIONAL AGREEMENTS
5.1 REGULATORY AND OTHER APPROVALS. Subject to the terms and conditions
of this Agreement, each of MAT and NetStaff will proceed diligently and in good
faith and will use all commercially reasonable efforts to do, or cause to be
done, all things necessary, proper or advisable to, as promptly as practicable,
(i) obtain all consents, approvals or actions of, make all filings with and give
all notices to Governmental or Regulatory Authorities or any other public or
private third parties required of NetStaff, MAT or any of their Subsidiaries to
consummate the Merger and the other matters contemplated hereby, and (ii)
provide such other information and communications to such Governmental or
Regulatory Authorities or other public or private third parties as the other
party or such Governmental or Regulatory Authorities or other public or private
third parties may reasonably request in connection therewith.
5.2 BOARD OF DIRECTORS AND OFFICERS OF NETSTAFF.
(a) NetStaff shall take all necessary action including,
without limitation, the filing of a Schedule 14f-1 with the SEC, so that as soon
as is practicable after the Effective Date of the Merger the directors of
NetStaff shall be Xxxx X. Xxxxxxx, Xxxxxx Xxxxxx, Xxxxxx Xxxxx, Asi Xxxx and
Xxxxx Xxxx, with Xxxx X. Xxxxxxx serving as Chairman of the Board. Xxxxxxx Xxxxx
shall remain the sole director of NetStaff until the above-named persons may
become directors of NetStaff in accordance with Section 14(f) of the Exchange
Act and applicable law.
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(b) Upon the Effective Time, the officers of NetStaff shall
be: Xxxx X. Xxxxxxx, as Chief Executive Officer and President; Xxxxxx Xxxxxx, as
Chief Financial Officer and Secretary; and Xxxxxx Xxxxx, as Chief Informational
Officer.
5.3 EXPENSES. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such cost or expense.
5.4 INDEMNIFICATION OF OFFICERS AND DIRECTORS.
(a) From and after the Effective Time, NetStaff shall, to the
fullest extent authorized by the DGCL, NYBCL or any other applicable law as the
same exists or may hereafter be amended (but, in the case of any such amendment,
only to the extent that such amendment permits NetStaff to provide broader
indemnification rights than such law permitted NetStaff to provide prior to such
amendment), indemnify all directors and officers of MAT as of the Closing
against any liability or losses (including reasonable attorney's fees and costs
for counsel who are reasonably acceptable to NetStaff) any of them may incur
from any action, proceeding or investigation brought against such individuals by
existing stockholders and option holders of MAT immediately prior to the Merger
as a result of the Merger, or any of the transactions contemplated by this
Agreement. The right to indemnification conferred in this Section shall be a
contract right and shall include the right to be paid by NetStaff any expenses
incurred in defending any such proceeding in advance of its final disposition;
provided, however, that, if so required by the DGCL, NYBCL or such other
applicable laws, such advance shall be made only upon delivery to NetStaff of an
undertaking, by or on behalf of such director or officer, to repay all amounts
so advanced if it shall ultimately be determined that such director or officer
is not entitled to be indemnified under this Section 5.4 or otherwise. NetStaff
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld). NetStaff shall not be
obligated pursuant to this Section 5.4 to pay the fees and disbursements of more
than one counsel for all officers and directors in any single action, except to
the extent that, in the opinion of counsel for the officers and directors, two
or more of such officers and directors have conflicting interests in the outcome
of such action, or one or more of such officers and directors and NetStaff have
conflicting interests in the outcome of such action.
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(b) Without in any way limiting the foregoing, NetStaff shall
use its best efforts to obtain directors' and officers' liability insurance
covering its obligations under this Section 5.4 and, in connection therewith,
hereby agrees to use its best efforts to determine whether Xxxxxxx Xxxxx and
Colin Childerley may be added to a director and officer tail insurance policy
(the "TAIL POLICY") covering their respective actions as directors and officers
of NetStaff before and, to the extent applicable, after the Effective Time of
the Merger. If a Tail Policy can be obtained by NetStaff without unreasonable
cost, NetStaff hereby covenants and agrees to pay for and obtain the Tail Policy
as soon as is practicable after the Closing and to keep the Tail Policy in
effect for a period of three years after the Effective Time.
(c) The provisions of this Section 5.4 are intended to be for
the benefit of, and shall be enforceable by, each officer and director of MAT as
of the Closing, and each of Xxxxxxx Xxxxx and Xxxxx Childerley with respect to
Section 5.4(b), and each of his or her heirs and legal representatives, and
shall be in addition to any other rights an officer and director of MAT and each
of Xxxxxxx Xxxxx and Colin Childerley may have under the Certificate of
Incorporation or Bylaws of the Surviving Corporation, under the DGCL, NYBCL or
otherwise.
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(d) In the event NetStaff or the Surviving Corporation, or any
of their respective successors or assigns, (i) consolidates with or merges into
any other person and shall not be the continuing or surviving corporation or
entity of such consolidation or merger or (ii) transfers all or substantially
all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of NetStaff or
the Surviving Corporation, as the case may be, or at NetStaff's option,
NetStaff, shall assume the obligations set forth in paragraph (a) of this
Section 5.4.
(e) In the event NetStaff or the, Surviving Corporation, or
any of their respective successors or assigns, obtains directors' and officers'
liability insurance covering any of their directors or officers, such insurance
shall also cover the directors and officers of MAT as of the date hereof with
respect to the obligations hereunder.
5.5 SEC FILINGS. MAT and the Selling Shareholders acknowledge and
understand that NetStaff has not yet filed certain reporting documents required
under the Exchange Act to have been filed prior to the Closing Date and agree
that such failures do not constitute a breach by NetStaff or Sub under this
Agreement. NetStaff hereby agrees to use commercially reasonable efforts to file
as soon as practicable after the Closing the reporting documents required to be
filed under the Exchange Act prior to the Closing, including the Forms 10-QSB
for the fiscal quarters ending September 30, 2001 and March 31, 2002 and the
Form 10-KSB for the fiscal year ending December 31, 2001.
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5.6 INVESTMENT REPRESENTATION OF OTHER MAT SHAREHOLDERS. The Selling
Shareholders hereby agree to use their best efforts to cause each of the Other
MAT Shareholders to make and deliver to NetStaff an executed investment
representation letter pursuant to which each Other MAT Shareholder makes
representations and warranties to NetStaff similar to those made by each of the
Selling Shareholders in Section 3.27 of the Agreement.
ARTICLE 6
GENERAL PROVISIONS
6.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS.
The representations, warranties, covenants and agreements contained in this
Agreement shall survive the Effective Time and shall continue in full force and
effect for a period of eighteen months following the Effective Time (the
"INDEMNIFICATION PERIOD").
6.2 INDEMNIFICATION. Each of the Selling Shareholders, jointly and
severally, shall indemnify NetStaff and its directors, officers, employees,
shareholders, agents and other representatives, and each of their respective
heirs and assigns (collectively, the "NETSTAFF INDEMNITEES") from and against
any and all damage, loss, liability and expense (including without limitation
reasonable expenses of investigation and reasonable attorneys' fees and
reasonable expenses in connection with any action, suit or proceeding) incurred
or suffered by the NetStaff Indemnitee arising out of any breach of the
representations, warranties, covenants or agreements of MAT and/or any Selling
Shareholder set forth in Section 3.3(a) of this Agreement (the "NETSTAFF
INDEMNIFIABLE DAMAGES"). Notwithstanding the foregoing, NetStaff Indemnitees may
obtain indemnification for any NetStaff Indemnifiable Damages to which this
Section 6.2(a) relates only if it makes a claim for indemnification within the
Indemnification Period defined in Section 6.1.
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6.3 NOTICES. All notices, requests and other communications hereunder
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or nationally recognized overnight
courier service (such as Federal Express) or mailed (first class postage
prepaid) to the parties at the following addresses or facsimile numbers:
If to NetStaff, Sub, to:
NetStaff, Inc.
000 Xx Xxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxx 00000
Attn: Chief Executive Officer
Facsimile No.: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx, LLP
000 Xxxxx Xxxx., Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Facsimile No.: (000) 000-0000
If to MAT, a Selling Shareholder or Surviving Corporation, to:
c/o MAT Trading Corp
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Sichenzia Xxxx Xxxxxxxx Xxxxxxx LLP
1065 Avenue of the Xxxxxxxx, 00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
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All such notices, requests and other communications will (i) if delivered
personally to the address as provided in this Section, be deemed given upon
delivery, (ii) if delivered by facsimile transmission to the facsimile number as
provided in this Section, be deemed given upon receipt, and (iii) if delivered
by nationally recognized overnight courier or by mail in the manner described
above to the address as provided in this Section 6.3, be deemed given upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other person to whom a copy of such notice,
request or other communication is to be delivered pursuant to this Section 6.3).
Any party from time to time may change its address, facsimile number or other
information for the purpose of notices to that party by giving notice specifying
such change to the other parties hereto.
6.4 ENTIRE AGREEMENT. This Agreement, together with the exhibits
hereto, supersedes all prior discussions and agreements among the parties hereto
with respect to the subject matter hereof and contains the sole and entire
agreement among the parties hereto with respect to the subject matter hereof.
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6.5 PUBLIC ANNOUNCEMENTS. NetStaff and MAT will cooperate with each
other in the development and distribution of all press releases and other public
announcements with respect to this Agreement and the transactions contemplated
hereby, and will furnish the other with drafts of any such releases and
announcements as far in advance as practicable.
6.6 NO THIRD PARTY BENEFICIARY. The terms and provisions of this
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and except as provided in Sections
2.1 to 2.5, 5.5, 6.1, 6.2, 6.6, 6.7 and 6.12 (which are intended to be for the
benefit of the persons entitled to therein, and may be enforced by any of such
persons), it is not the intention of the parties to confer third-party
beneficiary rights upon any other person.
6.7 NO ASSIGNMENT; BINDING EFFECT. Prior to Closing, neither this
Agreement nor any right, interest or obligation hereunder may be assigned by any
party hereto without the prior written consent of the other parties hereto and
any attempt to do so will be void, except that Sub may assign any or all of its
rights, interests and obligations hereunder to another direct or indirect
wholly-owned Subsidiary of NetStaff. Subject to the preceding sentence, this
Agreement is binding upon, inures to the benefit of and is enforceable by the
parties hereto and the third party beneficiaries to the extent set forth in
Section 6.6 and their respective successors and assigns.
6.8 HEADINGS. The headings used in this Agreement have been inserted
for convenience of reference only and do not define or limit the provisions
hereof.
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6.9 INVALID PROVISIONS. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (i) such provision will be fully
severable, (ii) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(iii) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
6.10 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to a contract
executed and performed in such State, without giving effect to the conflicts of
laws principles thereof.
6.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
6.12 ARBITRATION. All claims, controversies, differences or disputes between or
among any of the parties hereto arising from or relating to this Agreement shall
be determined solely and exclusively by arbitration in accordance with the rules
of commercial arbitration then in effect of the American Arbitration
Association, or any successors hereto ("AAA"), in Orange County, California,
unless the parties otherwise agree in writing. Each of the parties consents to
venue for such arbitrations in Orange County, California and to service of
process by certified or registered mail. Upon commencement of any arbitration
pursuant hereto, the parties shall jointly select an arbitrator. In the event
the parties fail to agree upon an arbitrator within twenty (20) days, then each
party shall select an arbitrator and such arbitrators shall then select a third
arbitrator to serve as the sole arbitrator; provided that if either party, in
such event, fails to select an arbitrator within seven (7) days, such arbitrator
shall be selected by the AAA upon application of either party. Judgment upon the
award of the agreed upon arbitrator or the so chosen third arbitrator, as the
case may be, shall be binding and shall be entered into by a court of competent
jurisdiction. The parties agree to abide by any decision rendered in any such
arbitration as final and binding and waive the right to submit the dispute to a
public tribunal for a jury or nonjury trial. The Civil Discovery Act of 1986
contained in Article 3 (commencing with Section 2016) of Chapter 3 of Title III
of Part IV of the California Code of Civil Procedure shall be applicable to such
arbitration proceedings, and all rights, remedies, obligations, liabilities and
procedures set forth in said Article 3 shall be available to the parties. Each
party shall be entitled to discovery which shall be conducted in accordance with
the provisions of Section 2020 and 2025 of the California Code of Civil
Procedures. The prevailing party shall be entitled to reasonable attorney fees
in connection with such arbitration.
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IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
signed by its officer thereunto duly authorized as of the date first above
written.
NETSTAFF, INC.
By: /S/ XXXXXXX XXXXX
-------------------------------------------
Xxxxxxx Xxxxx, President and CEO
NSI ACQUISITION CORPORATION
By: /S/ XXXXXXX XXXXX
-------------------------------------------
Xxxxxxx Xxxxx, President, CFO and Secretary
MAT TRADING CORP.
By: /S/ XXXX X. XXXXXXX
-------------------------------------------
Xxxx X. Xxxxxxx, President and CEO
SELLING SHAREHOLDERS
/S/ XXXX X. XXXXXXX
-------------------------------------------
Xxxx X. Xxxxxxx
/S/ XXXXXXXX XXXXXX
-------------------------------------------
Xxxxxxxx Xxxxxx
/S/ ASI LEVY
-------------------------------------------
Asi Levy
/S/ XXXXX XXXX
-------------------------------------------
Xxxxx Xxxx
/S/ XXXXXX XXXXX
-------------------------------------------
Xxxxxx Xxxxx
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