AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), dated as of the
19th day of September, 2003, by and between Woodland Hatchery, Inc., a Nevada
corporation ("WOODLAND") Xxxx X. Xxxxxxxxx, the principal shareholder of
WOODLAND (the "Woodland Shareholder"), Dwango North America, Inc., a Texas
corporation ("DWANGO"), and those certain shareholders, noteholders and
warrantholders of DWANGO ("Securityholders") identified on Exhibit A, with
reference to the following:
A. WOODLAND is a Nevada corporation organized on May 15, 1997. WOODLAND has
authorized capital stock of 50,000,000 shares of common stock, par value
$.001 per share ("Woodland Common Stock"), and 5,000,000 shares of
preferred stock, par value $.001 per share ("Woodland Preferred Stock"), of
which 11,470,000 shares of Woodland Common Stock and no shares of Woodland
Preferred Stock are issued and outstanding as of the date hereof;
B. DWANGO is a privately held corporation organized under the laws of the
State of Texas on November 20, 2000. DWANGO has authorized capital stock of
10,000,000 shares of common stock, par value $.001 per share ("Dwango
Common Stock"), and 2,000,000 shares of preferred stock, par value $.001
per share ("Dwango Preferred Stock"), of which 3,561,696 shares of Dwango
Common Stock and no shares of Dwango Preferred Stock are issued and
outstanding as of the date hereof;
C. The respective Boards of Directors of WOODLAND and DWANGO have deemed it
advisable and in the best interests of WOODLAND and DWANGO and their
respective shareholders that DWANGO be acquired by WOODLAND pursuant to the
terms and conditions set forth in this Agreement;
D. WOODLAND and DWANGO propose to enter into this Agreement which provides,
among other things, that up to 100% of the outstanding securities of
DWANGO, including outstanding convertible notes, warrants and options, be
acquired by WOODLAND in exchange for securities of WOODLAND on the terms
set forth herein; and
E. The parties desire the transaction to qualify as a tax-free reorganization
under Section 368 (a)(1)(B) of the Internal Revenue Code of 1986, as
amended.
NOW, THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
THE ACQUISITION
1.1 At the Closing, (i) each outstanding share of Dwango Common Stock that
a shareholder of DWANGO elects to exchange shall be acquired by
WOODLAND in exchange for 1.3934814 (the "Exchange Ratio") shares of
Woodland Common Stock (all such shares of Woodland Common Stock so
issued being referred to as the "Shares"), and (ii) each outstanding
warrant, option and convertible note of DWANGO that a holder thereof
elects to exchange shall be acquired by WOODLAND in exchange for a
comparable convertible note, warrant or option, as applicable, of
WOODLAND, provided that the number of shares of Woodland Common Stock
for which such WOODLAND note, warrant or option shall be exercisable or
convertible shall be the number of shares for which the exchanged
DWANGO note, option or warrant was exercisable or convertible
multiplied by the Exchange Ratio, and the conversion or exercise price
of the WOODLAND convertible note, option or warrant issued shall be the
conversion or exercise price of the DWANGO convertible note, option or
warrant divided by the Exchange Ratio. The securities of DWANGO to be
exchanged and the securities of WOODLAND to be issued in this
transaction shall be exchanged and issued as set forth in Exhibits A
and A-1 to this Agreement, which Exhibits shall be supplemented prior
to Closing in respect of securities issued by DWANGO after the date
hereof.
1.2 At the Closing, (i) WOODLAND shall deliver a transmittal letter
directed to the transfer agent of WOODLAND directing the issuance of
the Shares to the shareholders of DWANGO as set forth on Exhibit A to
this Agreement, or alternatively deliver some or all of the Shares at
the Closing, in either case upon delivery by the DWANGO shareholders of
certificates for the shares of Dwango Common Stock listed on Exhibit A,
and (ii) the holders of convertible notes, warrants and options of
DWANGO shall deliver such securities to WOODLAND for cancellation, and
WOODLAND shall issue a comparable convertible note, warrant or option,
as applicable, in accordance with Section 1.1 hereof. In the event that
a holder of Dwango Common Stock or notes, options or warrants
convertible into Dwango Common Stock who elects to exchange such
securities pursuant to this Agreement does not deliver such securities
at Closing, such securities shall after the Closing represent only the
right to receive the WOODLAND securities into which the DWANGO
securities are exchangeable, subject to delivery of the DWANGO
securities to WOODLAND. After Closing, WOODLAND shall for all purposes
be deemed to be the owner of such DWANGO securities agreed to be
exchanged pursuant to this Agreement.
1.3 Following the reorganization, assuming no exercise or conversion of any
derivative securities of DWANGO and the exchange by each DWANGO
shareholder pursuant hereto of all shares of Dwango Common Stock held
by them, there will be a total of 5,623,157 shares of Woodland Common
Stock issued and outstanding, after giving effect to the reverse stock
split contemplated by Section 2.2(d) hereof and the surrender of shares
of Woodland Common Stock by the Woodland Stockholder as described in
Section 2.2(e), of which 4,963,157 shall be owned by current holders of
Dwango Common Stock and 660,000 shall be owned by the current holders
of Woodland Common Stock, and no shares of Woodland Preferred Stock
will be issued and outstanding.
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ARTICLE 2
THE CLOSING
2.1 The consummation of the transactions contemplated by this Agreement (the
"Closing") shall take place at such place as agreed to by the parties on or
before September 30, 2003 (the "Closing Date") or on such other date and
time as may be agreed to by the parties hereto.
2.2 The following conditions are a part of this Agreement and must be completed
on or prior to the Closing Date, or such other date agreed by the parties:
(a) The current directors of WOODLAND shall resign as directors of
WOODLAND and nominees of DWANGO will be appointed to, and shall be the
sole members of, the Board of Directors of WOODLAND.
(b) The current officers of WOODLAND shall resign as officers of WOODLAND
and persons to be determined by DWANGO shall be appointed as officers
of WOODLAND.
(c) WOODLAND will obtain the necessary board and shareholder approval and
amend its Articles of Incorporation to change its name to "Dwango,
Inc." or such name as is available in the State of Nevada and approved
by DWANGO and to increase the number of authorized shares of Woodland
Preferred Stock from 5,000,000 shares to 10,000,000 shares with rights
and preferences to be determined by the board of directors.
(d) Prior to Closing, WOODLAND is to effect a one for 4.5 reverse stock
split of the 11,470,000 current issued and outstanding shares of
Woodland Common Stock, with rounding up for any fractional shares.
(e) At Closing, the Woodland Shareholder will surrender for cancellation
8,500,000 pre reverse split shares of Woodland Common Stock and will
pay all outstanding liabilities of WOODLAND and assume all liabilities
of WOODLAND arising after the Closing Date relating to periods prior
to the Closing Date in exchange for $50,000 from DWANGO and all of the
pre-closing assets of WOODLAND.
(f) DWANGO agrees to pay incurred legal fees of WOODLAND up to $10,000
related to the preparation of this Agreement and related documents and
filings, which the parties acknowledge has previously been paid.
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(g) DWANGO agrees to submit the appropriate application and fees to have
WOODLAND listed in Standard & Poors or Xxxxx'x promptly following the
Closing.
(h) From May 21, 2003 through the Closing Date, DWANGO shall have raised a
minimum of $1,000,000 and a maximum of $2,750,000 in current
financing.
(i) WOODLAND shall adopt a stock option plan in form and substance
reasonably satisfactory to DWANGO which shall provide for the issuance
of up to 3,000,000 shares of Woodland Common Stock.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF WOODLAND
3.1 WOODLAND and the Woodland Shareholder hereby jointly and severally
represent and warrant to DWANGO as follows:
(a) WOODLAND has delivered to DWANGO on or before the date hereof, and
shall provide supplements to DWANGO of any changes thereto on or
before Closing, each of the following:
(1) FINANCIAL STATEMENTS. Audited (in the case of the fiscal year
periods) and unaudited (for the quarterly period) financial
statements of WOODLAND including, but not limited to, balance
sheets, income statements, statements of stockholders' equity and
statements of cash flows as at and for the fiscal years ended
December 31, 2001 and 2002, and the quarter ended June 30, 2003,
prepared in accordance with generally accepted accounting
principles, consistently applied, and which fairly present the
financial condition and results of operations of WOODLAND at the
dates thereof and for the periods presented. (Schedule A)
(2) PROPERTY. An accurate list and description of all property, real
or personal, owned by WOODLAND of a value equal to or greater
than $1,000. (Schedule B.)
(3) LIENS AND LIABILITIES. A complete and accurate list of all
material liens, encumbrances, easements, security interests or
similar interests in or affecting any of the assets listed on
Schedule B (Schedule C.) together with a complete and accurate
list of all debts, liabilities and obligations of WOODLAND,
whether contingent or fixed, incurred or owing as of the date of
this Agreement. (Schedule C.1.)
(4) LEASES AND CONTRACTS. A complete and accurate list of all
material leases (whether of real or personal property) and each
contract, promissory note, mortgage, license, franchise, or other
written or oral agreement to which WOODLAND is a party. (Schedule
D.)
(5) LOAN AGREEMENTS. Complete and accurate copies of all loan
agreements and other documents with respect to obligations of
WOODLAND for the repayment of borrowed money, including a listing
thereof. (Schedule E.)
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(6) CONSENTS REQUIRED. A complete list of all agreements wherein
consent to any transaction herein contemplated is required or
where notice of any such transaction is required at or subsequent
to Closing. (Schedule F.)
(7) ARTICLES AND BYLAWS. Complete and accurate copies of the Articles
of Incorporation and Bylaws of WOODLAND together with all
amendments thereto to the date hereof. (Schedule G.)
(8) SHAREHOLDERS. A complete list of all persons or entities holding
capital stock of WOODLAND (as certified by WOODLAND's transfer
agent) or any rights to subscribe for, acquire, or receive shares
of the capital stock of WOODLAND (whether warrants, calls,
options, or conversion rights), including copies of all stock
option plans whether qualified or nonqualified, and other similar
agreements. (Schedule H.)
(9) OFFICERS AND DIRECTORS. A complete and current list of all
officers and directors of WOODLAND, each of whom shall resign
effective as of the Closing Date. (Schedule I.)
(10) SALARY SCHEDULE. A complete and accurate list (in all material
respects) of the names and the current salary for each present
employee of WOODLAND, including in each case the amount of
compensation received or scheduled to be received, and a schedule
of the hourly rates of all other employees listed according to
departments. All such employees are "at will" employees of
WOODLAND. (Schedule J.)
(11) LITIGATION. A complete and accurate list (in all material
respects) of all civil, criminal, administrative, arbitration or
other such proceedings or investigations (including without
limitation unfair labor practice matters, labor organization
activities, environmental matters and civil rights violations)
pending or, to the knowledge of WOODLAND threatened, which may
materially and adversely affect WOODLAND. (Schedule K.)
(12) TAX RETURNS. Accurate copies of all Federal and State tax returns
for WOODLAND for the last five fiscal years. (Schedule L.)
(13) AGENCY REPORTS. Copies of all material reports or filings (and a
list of the categories of reports or filings made on a regular
basis) made by WOODLAND under ERISA, EEOC, FDA and all other
governmental agencies (federal, state or local) during the last
two fiscal years. (Schedule M.)
(14) BANKS. A true and complete list, as of the date of this
Agreement, showing (1) the name of each bank in which WOODLAND
has an account or safe deposit box, and (2) the names and
addresses of all signatories. (Schedule N.) All such bank
accounts shall be closed on or prior to the Closing Date.
(15) JURISDICTIONS WHERE QUALIFIED. A list of all jurisdictions
wherein WOODLAND is qualified to do business and is in good
standing, including a copy of all certificates of good standing
or existence, as applicable, that such jurisdictions shall have
issued no later than 10 days prior to the Closing Date. (Schedule
O.)
(16) SUBSIDIARIES. A complete list of all Subsidiaries of WOODLAND.
(Schedule P.) As used in this Agreement, a "Subsidiary" of a
party means a corporation, unincorporated association,
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partnership, limited liability company, joint venture, or similar
entity in which such party has an equity interest, direct or
indirect, of 10% or more.
(17) UNION MATTERS. An accurate list and description (in all material
respects) of all union contracts and collective bargaining
agreements of WOODLAND, if any. (Schedule Q.)
(18) EMPLOYEE AND CONSULTANT CONTRACTS. A complete and accurate list
of all employee and consultant contracts which WOODLAND may have,
other than those listed in Schedule Q. (Schedule R.)
(19) EMPLOYEE BENEFIT PLANS. Complete and accurate copies of all
salary, stock options, bonus, incentive compensation, deferred
compensation, profit sharing, retirement, pension, group
insurance, disability, death benefit or other benefit plans,
trust agreements or arrangements of WOODLAND in effect on the
date hereof or to become effective after the date hereof,
together with copies of any determination letters issued by the
Internal Revenue Service with respect thereto. (Schedule S.)
(20) INSURANCE POLICIES. A complete and accurate list and a
description of all material insurance policies naming WOODLAND as
an insured or beneficiary or as a loss payable payee or for which
WOODLAND has paid all or part of the premium in force on the date
hereof, specifying any notice or other information possessed by
WOODLAND regarding possible claims thereunder, cancellation
thereof or premium increases thereon, including any policies now
in effect naming WOODLAND as beneficiary covering the business
activities of WOODLAND. (Schedule T.)
(21) CUSTOMERS. A complete and accurate list (in all material
respects) of the customers of WOODLAND, including presently
effective contracts of WOODLAND accounting for the principal
revenues of WOODLAND, indicating the dollar amount of gross
revenue from each such customer for the period ended December 31,
2002 (including but not limited to subscribers to the services or
materials or publications of WOODLAND for the previous two
calendar years). (Schedule U.)
(22) LICENSES AND PERMITS. A complete list of all licenses, permits
and other authorizations of WOODLAND. (Schedule V.)
(b) ORGANIZATION, STANDING AND POWER. WOODLAND is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada with all requisite corporate power to own or lease its
properties and carry on its businesses as are now being conducted.
(c) QUALIFICATION. WOODLAND is duly qualified and is licensed as a foreign
corporation authorized to do business in each jurisdiction wherein it
conducts its business operations where in each jurisdiction the
failure to qualify would have a material adverse effect on WOODLAND or
its business operations.
(d) CAPITALIZATION OF WOODLAND. The authorized capital stock of WOODLAND
consists of 50,000,000 shares of Woodland Common Stock and 5,000,000
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shares of Woodland Preferred Stock of which the only shares issued and
outstanding are the shares of Woodland Common Stock issued to the
shareholders of Woodland in the amounts listed on Schedule H, which
shares were duly authorized and validly issued, are fully paid and
nonassessable, and were issued in accordance with the registration
provisions of the Securities Act of 1933, as amended (the "Securities
Act") and any relevant registration or qualification provisions of
state securities laws or pursuant to valid exemptions therefrom. There
are no preemptive rights with respect to the Woodland Common Stock.
There is no agreement or understanding between any persons and/or
entities which affects or relates to the voting or giving of written
consents with respect to any security or by a director of WOODLAND.
(e) AUTHORITY. WOODLAND has the corporate power to enter into this
Agreement and consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and consummation of the
transactions contemplated hereby have been duly authorized by all
necessary corporate actions, including but not limited to duly and
validly authorized action and approval by the Board of Directors, on
the part of WOODLAND. This Agreement constitutes the valid and binding
obligation of WOODLAND enforceable against it in accordance with its
terms, subject to bankruptcy, insolvency, reorganization, moratorium
or similar laws now or hereafter in effect relating to creditors'
rights generally and to general principles of equity. This Agreement
has been duly executed by WOODLAND and the execution and delivery of
this Agreement and the consummation of the transactions contemplated
by this Agreement shall not result in any breach of any terms or
provisions of WOODLAND's Articles of Incorporation or Bylaws or of any
other agreement, contract, indenture, mortgage, license, note, bond,
court order or instrument to which WOODLAND is a party or by which it
is bound.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. WOODLAND has no material
liabilities of any nature, whether fixed, absolute, contingent or
accrued, which were not reflected on the financial statements set
forth in Schedule A or otherwise disclosed in this Agreement or any of
the Schedules or Exhibits attached hereto. As of the Closing, WOODLAND
shall have no assets or liabilities other than those resulting from
the acquisition of DWANGO.
(g) ABSENCE OF CHANGES. Since December 31, 2002 there has not been any
material adverse change in the condition (financial or otherwise),
assets, liabilities, properties, earnings, business or prospects of
WOODLAND, except for changes resulting from completion of those
transactions described in Section 2.2(e).
(h) TAX MATTERS. All taxes and other assessments and levies which WOODLAND
is required by law to withhold or to collect have been duly withheld
and collected, and have been paid over to the proper government
authorities or are held by WOODLAND in separate bank accounts for such
payment or are represented by depository receipts, and all such
withholdings and collections and all other payments due in connection
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therewith (including, without limitation, employment taxes, both the
employee's and employer's share) have been paid over to the government
or placed in a separate and segregated bank account for such purpose.
There are no known deficiencies in income taxes for any periods and
further, the representations and warranties as to absence of
undisclosed liabilities contained in Section 3.1(f) include any and
all tax liabilities of whatsoever kind or nature (including, without
limitation, all federal, state, local and foreign income, profit,
franchise, sales, use and property taxes) due or to become due,
incurred in respect of or measured by WOODLAND income or business
prior to the Closing Date. Further, WOODLAND has timely filed all
federal, state and local tax returns it is required to file. Each such
return is complete and accurate.
(i) OPTIONS, WARRANTS, ETC. Except as otherwise described in Schedule H,
there are no outstanding options, warrants, calls, convertible
securities, commitments or agreements of any character to which
WOODLAND or its shareholders are a party or by which WOODLAND or its
shareholders are bound, or are a party, calling for the issuance of
shares of capital stock of WOODLAND or any securities representing the
right to purchase or otherwise receive any such capital stock of
WOODLAND. WOODLAND has not declared and is not otherwise obligated to
pay, any dividends, whether in cash, stock or other property.
(j) TITLE TO ASSETS. Except for liens set forth in Schedule C, WOODLAND is
the sole unconditional owner of, with good and marketable title to,
all assets listed in the schedules as owned by it and all other
property and assets are free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever.
(k) AGREEMENTS IN FORCE AND EFFECT. Except as set forth in Schedules D and
E, all material contracts, agreements, plans, promissory notes, bonds,
indentures, mortgages, leases, policies, licenses, franchises or
similar instruments to which WOODLAND is a party are valid and in full
force and effect on the date hereof, and WOODLAND has not breached any
material provision of, and is not in default in any material respect
under the terms of, any such contract, agreement, plan, promissory
note, bond, indenture, mortgage, lease, policy, license, franchise or
similar instrument which breach or default would have a material
adverse effect upon the business, operations, properties or financial
condition of WOODLAND.
(l) LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule K, there are
no civil, criminal, administrative, arbitration or other such
proceedings or investigations pending or, to the knowledge of either
WOODLAND or the shareholders thereof, threatened, in which,
individually or in the aggregate, an adverse determination would
materially and adversely affect the assets, properties, business or
operations of WOODLAND. WOODLAND has substantially complied with, and
is not in default in any material respect under, any laws, ordinances,
requirements, regulations or orders applicable to its businesses,
including environmental laws.
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(m) GOVERNMENTAL REGULATION. To the knowledge of WOODLAND and except as
set forth in Schedule K, WOODLAND is not in violation of or in default
with respect to any applicable law or any applicable rule, regulation,
order, writ or decree of any court or any governmental commission,
board, bureau, agency or instrumentality, or delinquent with respect
to any report required to be filed with any governmental commission,
board, bureau, agency or instrumentality which violation or default
could have a material adverse effect upon the business, properties,
operations or financial condition of WOODLAND.
(n) BROKERS AND FINDERS. WOODLAND has not agreed to pay any brokerage
fees, commissions or finders' fees in connection with the transactions
contemplated herein.
(o) ACCURACY OF INFORMATION. No representation or warranty by WOODLAND
contained in this Agreement and no statement contained in any
certificate or other instrument delivered or to be delivered to DWANGO
pursuant hereto or in connection with the transactions contemplated
hereby (including without limitation all Schedules and Exhibits
hereto) contains or will contain any untrue statement of material fact
or omits or will omit to state any material fact necessary in order to
make the statements contained herein or therein not misleading.
(p) SUBSIDIARIES. Except as listed in Schedule P, WOODLAND does not (i)
have any Subsidiaries, (ii) own capital stock of any other
corporation, (iii) own any interest in any partnership or joint
venture, or (iv) own any membership interests in any limited liability
company.
(q) CONSENTS. Except as listed in Schedule F, no consent or approval of,
or registration, qualification or filing with, any governmental
authority or other person is required to be obtained or accomplished
by WOODLAND or any shareholder thereof in connection with the
consummation of the transactions contemplated hereby.
(r) IMPROPER PAYMENTS. Neither WOODLAND nor any person acting on behalf of
WOODLAND has made any payment or otherwise transmitted anything of
value, directly or indirectly, to (i) any official or any government
or agency or political subdivision thereof for the purpose of
influencing any decision affecting the business of WOODLAND, (ii) any
customer, supplier or competitor of WOODLAND or employee of such
customer, supplier or competitor, for the purpose of obtaining,
retaining or directing business for WOODLAND, or (iii) any political
party or any candidate for elective political office for the purpose
of influencing any decision affecting the business of WOODLAND, nor
has any fund or other asset of WOODLAND been maintained that was not
fully and accurately recorded on the books of account of WOODLAND.
(s) COPIES OF DOCUMENTS. WOODLAND has made available for inspection and
copying by DWANGO and its duly authorized representatives, and will
continue to do so at all times, true and correct copies of all
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documents that it has filed with the Securities and Exchange
Commission and all other governmental agencies which are material to
the terms and conditions contained in this Agreement. WOODLAND has
timely filed all reports, notices, forms and other documents,
including registration statements, required by it to be filed with the
Securities and Exchange Commission. WOODLAND is in compliance with the
Xxxxxxxx-Xxxxx Act of 2002 and the regulations promulgated thereunder.
Furthermore, all filings by WOODLAND with the Securities and Exchange
Commission, and all other governmental agencies, including but not
limited to the Internal Revenue Service, have contained information
which is true and correct in all material respects, and did not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements made therein not
misleading or which could have any material adverse effect upon the
assets, properties, financial condition or operations of WOODLAND or
adversely affect the objectives of this Agreement with respect to
DWANGO including, but not limited to, the issuance and subsequent
trading of the shares of Woodland Common Stock to be received hereby,
subject to compliance by the shareholders of DWANGO with applicable
law. No business has been conducted by WOODLAND other than as
disclosed in its Form 10-KSB/A for the year ended December 31, 2002 as
filed with the Securities and Exchange Commission on June 3, 2003.
(t) VALID ISSUANCE OF SECURITIES. The Shares, when issued, sold and
delivered in accordance with the terms of this Agreement for the
consideration expressed herein, will be duly and validly issued, fully
paid and non-assessable, and will be free of restrictions on transfer
other than restrictions on transfer under this Agreement and
applicable state and federal securities laws. The convertible notes,
options and warrants issuable by WOODLAND pursuant to Article 1 hereof
have been duly authorized and when issued, will constitute the legal,
valid and binding obligations of WOODLAND, enforceable against
WOODLAND in accordance with their respective terms. The shares of
Woodland Common Stock issuable upon exercise or conversion of such
convertible notes, options, and warrants, when issued in accordance
with the terms thereof, will be duly and validly issued, fully paid
and non-assessable, and will be free of restrictions on transfer other
than restrictions on transfer under this Agreement and applicable
state and federal securities laws. WOODLAND has reserved for issuance
such number of shares of WOODLAND Common Stock as is necessary for the
exercise and conversion in full of such convertible notes, options and
warrants.
(u) RELATED PARTY TRANSACTIONS. No employee, officer or director of
WOODLAND or member of his or her immediate family is indebted to
WOODLAND, nor is WOODLAND indebted (or committed to make loans or
extend or guarantee credit) to any of them. Except as set forth in
Schedule W, no member of the immediate family of any officer or
director of WOODLAND is directly or indirectly interested in any
material contract with WOODLAND.
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(v) FOREIGN ASSETS CONTROL REGULATIONS. The issuance of the Shares,
convertible notes, options and warrants by WOODLAND will not violate
the Trading with the Enemy Act, as amended, or any of the foreign
assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling
legislation or executive order relating thereto. Without limiting the
foregoing, WOODLAND (i) is not or will not become a blocked person
described in Section 1 of Executive Order 13224 of September 23, 2001
Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49049
(2001)) and (ii) does not knowingly engage and will not engage in any
dealings or transactions, or be otherwise associated, with any such
person.
(w) PRIVATE OFFERING BY WOODLAND. Neither WOODLAND nor anyone acting on
its behalf has offered the Shares, or securities convertible into or
exercisable for Shares, or any similar securities for sale to, or
solicited any offer to buy any of the same from, or otherwise
approached or negotiated in respect thereof with, any person other
than the Securityholders, each of whom has been offered the Shares, or
securities convertible into or exercisable for Shares, in a private
sale for investment. Neither WOODLAND nor anyone acting on its behalf
has taken, or will take, any action that would subject the issuance of
the Shares, or securities convertible into or exercisable for Shares,
to the registration requirements of Section 5 of the Securities Act.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF DWANGO
4.1 DWANGO hereby represents and warrants to WOODLAND as follows:
(a) DWANGO has delivered to WOODLAND on or before the date hereof, and
shall provide supplements to WOODLAND of any changes thereto on or
before Closing, the following:
(1) FINANCIAL STATEMENTS. Audited (in the case of the fiscal year
periods) and unaudited (for the quarterly period) financial
statements of DWANGO including, but not limited to, balance
sheets, statements of operations, statements of stockholders'
equity and statements of cash flows as at and for the periods
ended December 31, 2001 (provided that no balance sheet is
provided as of December 31, 2001) and 2002, and the six months
ended June 30, 2003, prepared in accordance with generally
accepted accounting principles, consistently applied, and which
fairly present the financial condition and results of operations
of DWANGO at the dates thereof and for the periods presented.
(Schedule AA)
(2) PROPERTY. An accurate list and description of all property, real
or personal owned by DWANGO of a value equal to or greater than
$5,000. (Schedule BB)
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(3) LIENS AND LIABILITIES. A complete and accurate list of all
material liens, encumbrances, easements, security interests or
similar interests in or affecting any of the assets listed on
Schedule BB (Schedule CC.), together with a complete and accurate
list of all debts, liabilities and obligations of DWANGO, whether
contingent or fixed, incurred or owing as of the date of this
Agreement that are not reflected on the financial statements
included in Schedule AA or incurred in the ordinary course of
business since the date of such financial statements or pursuant
to the financing referred to in Section 2.2(h). (Schedule CC.1.)
(4) LEASES AND CONTRACTS. A complete and accurate list of all
material leases (whether of real or personal property) and each
contract, promissory note, mortgage, license, franchise, or other
written or oral agreement to which DWANGO is a party which
involves or can reasonably be expected to involve aggregate
future payments or receipts by DWANGO (whether by the terms of
such lease, contract, promissory note, license, franchise or
other written or oral agreement or as a result of a guarantee of
the payment of or indemnity against the failure to pay same) of
$10,000 or more annually during the twelve-month period ended
December 31, 2002 or any consecutive twelve-month period
thereafter, except any of said instruments which terminate or are
cancelable without penalty during such twelve-month period.
(Schedule DD.)
(5) LOAN AGREEMENTS. Complete and accurate copies of all loan
agreements and other documents with respect to obligations of
DWANGO for the repayment of borrowed money, including a listing
thereof. (Schedule EE.)
(6) CONSENTS REQUIRED. A complete list of all agreements wherein
consent to any transaction herein contemplated is required or
where notice of any such transaction is required at or subsequent
to Closing. (Schedule FF.)
(7) ARTICLES AND BYLAWS. Complete and accurate copies of the Articles
of Incorporation and Bylaws of DWANGO, together with all
amendments thereto to the date hereof. (Schedule GG.)
(8) SHAREHOLDERS. A complete list of all persons or entities holding
capital stock of DWANGO or any rights to subscribe for, acquire,
or receive shares of the capital stock of DWANGO (whether
warrants, calls, options, or conversion rights), including copies
of all stock option plans whether qualified or nonqualified, and
other similar agreements. (Schedule HH.)
(9) OFFICERS AND DIRECTORS. A complete and current list of all
officers and directors of DWANGO. (Schedule II.)
(10) SALARY SCHEDULE. A complete and accurate list (in all material
respects) of the names and the current salary for each present
employee of DWANGO who received $20,000 or more in aggregate
compensation from DWANGO whether in salary, bonus or otherwise,
who is presently scheduled to receive from DWANGO a salary in
excess of $20,000 during the year ending December 31, 2003,
including in each case the amount of compensation received or
scheduled to be received, and a schedule of the hourly rates of
all other employees listed according to departments. (Schedule
JJ.)
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(11) LITIGATION. A complete and accurate list (in all material
respects) of all civil, criminal, administrative, arbitration or
other such proceedings or investigations (including without
limitation unfair labor practice matters, labor organization
activities, environmental matters and civil rights violations)
pending or, to the knowledge of DWANGO threatened, which may
materially and adversely affect DWANGO. (Schedule KK.)
(12) TAX RETURNS. Accurate copies of all Federal and State tax returns
for DWANGO for the last five fiscal years, if any. (Schedule LL.)
(13) AGENCY REPORTS. Copies of all material reports or filings (and a
list of the categories of reports or filings made on a regular
basis) made by DWANGO under ERISA, EEOC, FDA and all other
governmental agencies (federal, state or local) for the last five
fiscal years. (Schedule MM.)
(14) JURISDICTIONS WHERE QUALIFIED. A list of all jurisdictions
wherein DWANGO is qualified to do business and is in good
standing. (Schedule OO.)
(15) SUBSIDIARIES. A complete list of all Subsidiaries (as defined in
Section 3.1(a)(16) hereof) of DWANGO. (Schedule PP.)
(16) UNION MATTERS. An accurate list and description (in all material
respects) of union contracts and collective bargaining agreements
of DWANGO, if any. (Schedule QQ.)
(17) EMPLOYEE AND CONSULTANT CONTRACTS. A complete and accurate list
of all employee and consultant contracts which DWANGO may have,
other than those listed in Schedule QQ. (Schedule RR.)
(18) EMPLOYEE BENEFIT PLANS. Complete and accurate copies of all
salary, stock option, bonus, incentive compensation, deferred
compensation, profit sharing, retirement, pension, group
insurance, disability, death benefit or other benefit plans,
trust agreements or arrangements of DWANGO in effect on the date
hereof or to become effective after the date hereof, together
with copies of any determination letters issued by the Internal
Revenue Service with respect thereto. (Schedule SS.)
(19) INSURANCE POLICIES. A complete and accurate list (in all material
respects) and description of all material insurance policies
naming DWANGO as an insured or beneficiary or as a loss payable
payee or for which DWANGO has paid all or part of the premium in
force on the date hereof, specifying any notice or other
information possessed by DWANGO regarding possible claims
thereunder, cancellation thereof or premium increases thereon,
including any policies now in effect naming DWANGO as beneficiary
covering the business activities of DWANGO. (Schedule TT.)
(20) CUSTOMERS. A complete and accurate list (in all material
respects) of the customers of DWANGO, excluding individuals who
download DWANGO'S applications for a fee, including all presently
effective contracts of DWANGO accounting for the principal
revenues of DWANGO, indicating the dollar amount from gross
revenues from each such customer for the period ended December
31, 2002. (Schedule UU.)
(21) LICENSES AND PERMITS. A complete list of all licenses, permits
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and other authorizations of DWANGO. (Schedule VV)
(b) ORGANIZATION, STANDING AND POWER. DWANGO is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Texas with all requisite corporate power to own or lease its
properties and carry on its business as is now being conducted.
(c) QUALIFICATION. DWANGO is duly qualified and licensed as a foreign
corporation authorized to do business in each jurisdiction wherein it
conducts business operations where in each jurisdiction the failure to
qualify would have a material adverse effect on DWANGO or its business
operations.
(d) CAPITALIZATION OF DWANGO. The authorized capital stock of DWANGO
consists of 10,000,000 shares of Dwango Common Stock and 2,000,000
shares of Dwango Preferred Stock of which the only shares issued and
outstanding are the shares of Dwango Common Stock issued to the
shareholders of Dwango in the amounts listed on Schedule HH, which
shares were duly authorized and validly issued and are fully paid and
nonassessable. There are no preemptive rights with respect to the
DWANGO Common Stock.
(e) AUTHORITY. DWANGO has the corporate power to enter into this Agreement
and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action, including but not limited to duly and validly
authorized action and approval by the Board of Directors, on the part
of DWANGO. This Agreement constitutes the valid and binding obligation
of DWANGO, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to creditors' rights
generally and to general principles of equity. This Agreement has been
duly executed by DWANGO and the execution and delivery of this
Agreement and the consummation of the transactions contemplated by
this Agreement shall not result in any breach of any terms or
provisions of DWANGO's Articles of Incorporation or Bylaws or of any
other agreement, contract, indenture, mortgage, license, note, bond,
court order or instrument to which DWANGO is a party or by which it is
bound.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. DWANGO has no material liabilities
of any nature, whether fixed, absolute, contingent or accrued, which
were not reflected on the financial statements set forth in Schedule
AA or otherwise disclosed in this Agreement or any of the Schedules or
Exhibits attached hereto or incurred since June 30, 2003 in the
ordinary course of business or pursuant to the financing referred to
in Section 2.2(h).
(g) ABSENCE OF CHANGES. Since December 31, 2002, there has not been any
material adverse change in the condition (financial or otherwise),
assets, properties, liabilities, earnings or business of DWANGO,
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except for changes incurred in the ordinary course of business or
resulting from completion of those transactions described in Section
2.2.
(h) TAX MATTERS. All taxes and other assessments and levies which DWANGO
is required by law to withhold or to collect have been duly withheld
and collected, and have been paid over to the proper government
authorities or are held by DWANGO in separate bank accounts for such
payment or are represented by depository receipts, and all such
withholdings and collections and all other payments due in connection
therewith (including, without limitation, employment taxes, both the
employee's and employer's share) have been paid over to the government
or placed in a separate and segregated bank account for such purpose.
There are no known deficiencies in income taxes for any periods and
further, the representations and warranties as to absence of
undisclosed liabilities contained in Section 4.1(f) include any and
all tax liabilities of whatsoever kind or nature (including, without
limitation, all federal, state, local and foreign income, profit,
franchise, sales, use and property taxes) due or to become due,
incurred in respect of or measured by DWANGO's income or business
prior to the Closing Date. Further, DWANGO has timely filed all
federal, state and local tax returns it is required to file. Each such
return is complete and accurate.
(i) OPTIONS, WARRANTS, ETC. Except as otherwise described in Schedule HH,
there are no outstanding options, warrants, calls, convertible
securities, commitments or agreements of any character to which DWANGO
or its shareholders are a party or by which DWANGO or its shareholders
are bound, or are a party, calling for the issuance of shares of
capital stock of DWANGO or any securities representing the right to
purchase or otherwise receive any such capital stock of DWANGO. DWANGO
has not declared and is not otherwise obligated to pay, any dividends
whether in cash, stock or other property.
(j) TITLE TO ASSETS. Except for liens set forth in Schedule CC, DWANGO is
the sole and unconditional owner of, with good and marketable title
to, all the assets listed in the schedules as owned by it and all
other property and assets are free and clear of all mortgages, liens,
pledges, charges or encumbrances of any nature whatsoever.
(k) AGREEMENTS IN FORCE AND EFFECT. Except as set forth in Schedules DD
and EE, all material contracts, agreements, plans, promissory notes,
bonds, indentures, mortgages, leases, policies, licenses, franchises
or similar instruments to which DWANGO is a party are valid and in
full force and effect on the date hereof, and DWANGO has not breached
any material provision of, and is not in default in any material
respect under the terms of, any such contract, agreement, plan,
promissory note, bond, indenture, mortgage, lease, policy, license,
franchise or similar instrument which breach or default would have a
material adverse effect upon the business, operations, properties or
financial condition of DWANGO.
(l) LEGAL PROCEEDINGS, ETC. Except as set forth in Schedule KK, there are
no civil, criminal, administrative, arbitration or other such
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proceedings or investigations pending or to the knowledge of DWANGO,
threatened, in which, individually or in the aggregate, an adverse
determination would materially and adversely affect the assets,
properties, business or operations of DWANGO. DWANGO has substantially
complied with, and is not in default in any material respect under,
any laws, ordinances, requirements, regulations or orders applicable
to its businesses.
(m) GOVERNMENTAL REGULATION. To the knowledge of DWANGO and except as set
forth in Schedule KK, DWANGO is not in violation of or in default with
respect to any applicable law or any applicable rule, regulation,
order, writ or decree of any court or any governmental commission,
board, bureau, agency or instrumentality, or delinquent with respect
to any report required to be filed with any governmental commission,
board, bureau, agency or instrumentality which violation or default
could have a material adverse effect upon the business, properties,
operations or financial condition of DWANGO.
(n) BROKER AND FINDERS. DWANGO shall be solely responsible for payment to
any broker or finder retained by DWANGO for any brokerage fees,
commissions or finders' fees in connection with the transactions
contemplated herein. Except for HCFP/Xxxxxxx Securities, LLC and RG
Securities, LLC, DWANGO has not agreed to pay any such fees or
commissions to any such party.
(o) ACCURACY OF INFORMATION. No representation or warranty by DWANGO
contained in this Agreement and no statement contained in any
certificate or other instrument delivered or to be delivered to
WOODLAND pursuant hereto or in connection with the transactions
contemplated hereby (including without limitation all Schedules and
Exhibits hereto) contains or will contain any untrue statement of a
material fact or omits or will omit to state any material fact
necessary in order to make the statements contained herein or therein
not misleading.
(p) SUBSIDIARIES. Except as listed in Schedule PP, DWANGO does not (i)
have any Subsidiaries, (ii) own any capital stock of any other
corporation, (iii) own any interest in any partnership or joint
venture, or (iii) own any membership interests in any limited
liability company.
(q) CONSENTS. Except as listed in Schedule FF, no consent or approval of,
or registration, qualification or filing with, any governmental
authority or other person is required to be obtained or accomplished
by DWANGO or any shareholder thereof in connection with the
consummation of the transactions contemplated hereby.
(r) IMPROPER PAYMENTS. No person acting on behalf of DWANGO has made any
payment or otherwise transmitted anything of value, directly or
indirectly, to (i) any official or any government or agency or
political subdivision thereof for the purpose of influencing any
16
decision affecting the business of DWANGO, or (ii) any political party
or any candidate for elective political office, for the purpose of
influencing any decision affecting the business of DWANGO, nor has any
fund or other asset of DWANGO been maintained that was not fully and
accurately recorded on the books of account of DWANGO.
(s) COPIES OF DOCUMENTS. DWANGO has made available for inspection and
copying by WOODLAND and its duly authorized representatives, and will
continue to do so at all times, true and correct copies of all
documents that it has filed with the Securities and Exchange
Commission and all other governmental agencies which are material to
the terms and conditions contained in this Agreement. Dwango has
timely filed all reports, notices, forms and other documents,
including registration statements, required by it to be filed with the
Securities and Exchange Commission. Furthermore, all filings by DWANGO
with the Securities and Exchange Commission, and all other
governmental agencies, including but not limited to the Internal
Revenue Service, have contained information which is true and correct
in all material respects, and did not contain any untrue statement of
a material fact or omit to state any material fact necessary to make
the statements made therein not misleading or which could have any
material adverse effect upon the assets, properties, financial
condition or operations of DWANGO or adversely affect the objectives
of this Agreement with respect to WOODLAND.
(t) INVESTMENT INTENT OF SECURITYHOLDERS. Each Securityholder of DWANGO
represents and warrants to WOODLAND that the securities of WOODLAND
being acquired pursuant to this Agreement are being acquired for his
own account and for investment and not with a view to the public
resale or distribution of such securities and further acknowledges
that the securities being issued have not been registered under the
Securities Act and are "restricted securities" as that term is defined
in Rule 144 promulgated under the Securities Act and must be held
indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO THE EFFECTIVE TIME OF THE ACQUISITION
5.1 CONDUCT AND TRANSACTIONS OF WOODLAND. During the period from the date
hereof to the date of Closing, WOODLAND and the Woodland Shareholder shall:
(a) Except as contemplated by this Agreement, conduct its operations in
the ordinary course of business, including but not limited to, paying
all obligations as they mature, complying with all applicable tax
laws, filing all tax returns (which shall be complete and accurate)
required to be filed and paying all taxes due;
17
(b) Maintain its records and books of account in a manner that fairly and
correctly reflects its income, expenses, assets and liabilities.
(c) Take such action as is necessary to cause the conditions referred to
in Section 2.2(c), (d) and (e) to be satisfied.
(d) WOODLAND shall not during such period, except in the ordinary course
of business, without the prior written consent of DWANGO:
(1) Except as otherwise contemplated or required by this Agreement,
sell, dispose of or encumber any of its properties or assets;
(2) Except as otherwise contemplated or required by this Agreement,
declare or pay any dividends on shares of its capital stock or
make any other distribution of assets to the holders thereof;
(3) Except as otherwise contemplated or required by this Agreement,
issue, reissue or sell, or issue options or rights to subscribe
to, or enter into any contract or commitment to issue, reissue or
sell, any shares of its capital stock or acquire or agree to
acquire any shares of its capital stock;
(4) Except as otherwise contemplated and required by this Agreement,
amend its Articles of Incorporation or merge or consolidate with
or into any other corporation or sell all or substantially all of
its assets or change in any manner the rights of its capital
stock or other securities;
(5) Except as contemplated or required by this Agreement, pay or
incur any obligation or liability, direct or contingent, of more
than $1,000;
(6) Incur any indebtedness for borrowed money, assume, guarantee,
endorse or otherwise become responsible for obligations of any
other party, or make loans or advances to any other party;
(7) Make any material change in its insurance coverage;
(8) Increase in any manner the compensation, direct or indirect, of
any of its officers or executive employees;
(9) Except in accordance with existing employment contracts, enter
into any agreement or make any commitment to any labor union or
organization;
(10) Make any capital expenditures.
5.2 CONDUCT AND TRANSACTIONS OF DWANGO. During the period from the date hereof
to the date of Closing, DWANGO shall:
(a) Obtain an investment letter from each Securityholder of DWANGO in a
form substantially similar to the one attached hereto as Exhibit B and
an exchange agreement from each holder of options in a form
substantially similar to the one attached hereto as Exhibit B-1.
(b) Conduct the operations of DWANGO in the ordinary course of business.
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(c) DWANGO shall not during such period, except in the ordinary course of
business, without the prior written consent of WOODLAND:
(1) Except as otherwise contemplated or required by this Agreement,
sell, dispose of or encumber any of the properties or assets of
DWANGO;
(2) Declare or pay any dividends on shares of its capital stock or
make any other distribution of assets to the holders thereof;
(3) Except in connection with the financing referred to in Section
2.2(h) hereof, or in connection with the exercise or conversion
of derivative securities or the grant of stock, options or
warrants to officers, directors, employees or consultants of
DWANGO in the normal course of business, issue, reissue or sell,
or issue options or rights to subscribe to, or enter into any
contract or commitment to issue, reissue or sell, any shares of
its capital stock or acquire or agree to acquire any shares of
its capital stock;
(4) Except as otherwise contemplated and required by this Agreement,
amend its Articles of Incorporation or merge or consolidate with
or into any other corporation or sell all or substantially all of
its assets or change in any manner the rights of its capital
stock or other securities;
(5) Except as otherwise contemplated or required by this Agreement or
in the ordinary course of business, pay or incur any obligation
or liability, direct or contingent, of more than $10,000;
(6) Except in connection with the financing referred to in Section
2.2(h) hereof , incur any indebtedness for borrowed money,
assume, guarantee, endorse or otherwise become responsible for
obligations of any other party, or make loans or advances to any
other party;
(7) Make any material change in its insurance coverage, except for
obtaining directors and officers liability coverage;
(8) Increase in any manner the compensation, direct or indirect, of
any of its officers or executive employees;
(9) Except in accordance with existing employment contracts, enter
into any agreement or make any commitment to any labor union or
organization;
(10) Make any material capital expenditures in excess of $10,000
except in the ordinary course of business.
(11) Allow any of the foregoing actions to be taken by any Subsidiary
of DWANGO.
ARTICLE 6
COVENANTS
6.1 During the period from the date of this Agreement to the Closing Date,
WOODLAND and DWANGO agree to use their best efforts to give the other
party, including its representatives and agents, full access to the
premises, books and records of each of the entities, and to furnish the
19
other with such financial and operating data and other information
including, but not limited to, copies of all legal documents and
instruments referred to on any schedule or exhibit hereto, with respect to
the business and properties of WOODLAND or DWANGO, as the case may be, as
the other shall from time to time request; provided, however, if there are
any such investigations: (1) they shall be conducted in such manner as not
to unreasonably interfere with the operation of the business of the other
parties and (2) such right of inspection shall not affect in any way
whatsoever any of the representations or warranties given by the respective
parties hereunder; provided, that if either party becomes aware of
information that would make any of the other party's representations or
warranties made herein incorrect in any material respect, the party
becoming aware of such information shall promptly inform the other party
thereof. In the event of termination of this Agreement, WOODLAND and DWANGO
will each return to the other all documents, work papers and other
materials obtained from the other party in connection with the transactions
contemplated hereby, and will take such other steps necessary to protect
the confidentiality of such material in accordance with Section 6.2.
6.2 Each of the parties understand and hereby acknowledge that they have access
to Confidential Information (as defined in below) of the other, and that
any such Confidential Information, is the exclusive property of the other.
Each party agrees that they shall not, and shall not cause others to, use,
reveal, report, publish, transfer or otherwise disclose to any person any
such Confidential Information. Notwithstanding the foregoing, the
prohibitions of this paragraph shall not apply to any Confidential
Information that becomes available to the general public other than through
the party with the confidentiality obligation or which is required to be
divulged by court order or administrative process. Upon termination of this
Agreement for any reason, the parties shall promptly return to the other
all plans, drawings, manuals, letters, notes, notebooks, reports, data,
recorded media, computer programs and copies thereof and all other
materials, including without limitation those of a secret or confidential
nature, relating to the other's business that are then in his possession or
control. For purposes hereof, "Confidential Information" means information
about a party not generally available to the public, including, without
limitation, all computer software and database information, personnel
information, financial information, customer lists, supplier lists, trade
secrets, patented proprietary information, forms, information regarding
operations, systems, services, know how, computer and any other processed
or collated data, computer programs, pricing, marketing and advertising
data, methods, forms, systems, services, designs, marketing ideas, products
or processes (whether or not capable of being trademarked, copyrighted or
patented).
6.3 At the Closing, WOODLAND's new management shall cause WOODLAND to assume
the obligations of DWANGO to register, under the Securities Act of 1933,
securities held by the Securityholders with respect to the securities
issued pursuant to this Agreement.
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ARTICLE 7
CONDITIONS TO CLOSING
7.1 CONDITIONS TO OBLIGATIONS OF DWANGO. The obligation of DWANGO to consummate
the transactions contemplated by this Agreement on the Closing Date is
subject to the satisfaction of the following conditions on or before the
Closing Date unless waived in writing by DWANGO.
(a) REPRESENTATIONS AND WARRANTIES. There shall be no information
disclosed in the schedules delivered by WOODLAND which in the
reasonable opinion of DWANGO would materially adversely affect the
proposed transaction and intent of the parties as set forth in this
Agreement. The representations and warranties of WOODLAND set forth in
Article 3 hereof shall be true and correct in all material respects as
of the date of this Agreement and as of the Closing Date as though
made on and as of the Closing Date, except as otherwise permitted by
this Agreement.
(b) PERFORMANCE OF OBLIGATIONS. WOODLAND shall have on or prior to the
Closing Date performed all agreements required to be performed by it
under this Agreement and shall have performed any actions contemplated
by this Agreement to be performed prior to or on the Closing Date and
WOODLAND shall have complied with the course of conduct required by
this Agreement.
(c) CORPORATE ACTION. WOODLAND shall have furnished minutes, certified
copies of corporate resolutions and/or other documentary evidence
satisfactory to counsel for DWANGO that WOODLAND has submitted this
Agreement and any other documents required hereby to the board of
directors and shareholders of WOODLAND for approval as provided by
applicable law and such approval has been obtained.
(d) CONSENTS. Exhibit B to this Agreement shall have been executed by each
Securityholder of DWANGO, Exhibit B-1 shall have been executed by each
optionholder of DWANGO, and any necessary consents or approvals of any
party listed on any Schedule delivered by WOODLAND whose consent or
approval is required pursuant thereto shall have been obtained.
(e) FINANCIAL STATEMENTS. DWANGO shall have been furnished with audited
(in the case of the fiscal year periods) and unaudited (for the
quarterly period) financial statements of WOODLAND including, but not
limited to, balance sheets, income statements, statements of
stockholders' equity and statements of cash flow as at and for the
years ended December 31, 2001 and 2002 and the quarter ended June 30,
2003. Such financial statements shall have been prepared in conformity
with generally accepted accounting principles on a basis consistent
with those of prior periods and fairly present the financial position
and results of operations of WOODLAND as at and for the periods
presented.
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(f) STATUTORY REQUIREMENTS. All statutory requirements for the valid
consummation by WOODLAND of the transactions contemplated by this
Agreement shall have been fulfilled.
(g) GOVERNMENTAL APPROVAL. All authorizations, consents, approvals,
permits and orders of all federal and state governmental agencies
required to be obtained by WOODLAND for consummation of the
transactions contemplated by this Agreement shall have been obtained.
All filings, including filings with the Securities and Exchange
Commission, to be made prior to the Closing shall have been made.
(h) CHANGES IN FINANCIAL CONDITION OF WOODLAND. There shall not have
occurred any material adverse change in the financial condition or in
the operations of the business of WOODLAND, except as contemplated by
this Agreement.
(i) ABSENCE OF PENDING LITIGATION. WOODLAND shall not be engaged in or
threatened with any suit, action, or legal, administrative or other
proceedings or governmental investigations pertaining to this
Agreement or the consummation of the transactions contemplated hereby
or that could have a material adverse effect on WOODLAND.
(j) AUTHORIZATION FOR ISSUANCE OF STOCK; DERIVATIVE SECURITIES IN PROPER
FORM. DWANGO shall have received in form and substance satisfactory to
counsel for DWANGO a letter instructing and authorizing the Registrar
and Transfer Agent for the Woodland Common Stock to issue stock
certificates with the appropriate legend relating to the restricted
nature of the shares under the Securities Act and representing
ownership of Woodland Common Stock to DWANGO shareholders in
accordance with the terms of this Agreement and a letter from said
Registrar and Transfer Agent acknowledging receipt of the letter of
instruction and stating to the effect that the Registrar and Transfer
Agent holds adequate supplies of stock certificates necessary to
comply with the letter of instruction and the terms and conditions of
this Agreement. In addition, the convertible notes, warrants and
options to be issued in accordance with Article 1 hereof shall have
been prepared and be in such form as is reasonably acceptable to
counsel to DWANGO.
(k) BLUE SKY. All state "blue sky" filings required to be made prior to
the Closing shall have been made.
(l) EXECUTION BY SECURITYHOLDERS. Securityholders owning at least 80% of
the value of the outstanding securities of DWANGO shall have executed
and delivered this Agreement.
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7.2 CONDITIONS TO OBLIGATIONS OF WOODLAND. The obligation of WOODLAND to
consummate the transactions contemplated by this Agreement on the Closing
Date is subject to the satisfaction of the following conditions on or
before the Closing Date unless waived in writing by WOODLAND.
(a) REPRESENTATIONS AND WARRANTIES. There shall be no information
disclosed in the schedules delivered by DWANGO which in the reasonable
opinion of WOODLAND would materially adversely affect the proposed
transaction and intent of the parties as set forth in this Agreement.
The representations and warranties of DWANGO set forth in Article 4
hereof shall be true and correct in all material respects as of the
date of this Agreement and as of the Closing Date as though made on
and as of the Closing Date, except as otherwise permitted by this
Agreement.
(b) PERFORMANCE OF OBLIGATIONS. DWANGO shall have performed all agreements
required to be performed by it under this Agreement on or prior to the
Closing Date and shall have performed any actions contemplated by this
Agreement to be preformed prior to or on the Closing Date and DWANGO
shall have complied with the course of conduct required by this
Agreement.
(c) CORPORATE ACTION. DWANGO shall have furnished minutes, certified
copies of corporate resolutions and/or other documentary evidence
satisfactory to counsel for WOODLAND that DWANGO has submitted for
approval this Agreement and any other documents required hereby to
such parties as provided by applicable law and such approval has been
obtained.
(d) CONSENTS. Any necessary consents or approvals of any party listed on
any Schedule delivered by DWANGO, whose consent or approval is
required pursuant thereto, shall have been obtained.
(e) FINANCIAL STATEMENTS. WOODLAND shall have been furnished with audited
(in the case of the fiscal year periods) and unaudited (for the
quarterly period) financial statements of DWANGO including, but not
limited to, balance sheets, statements of operations, statements of
stockholders' equity and statements of cash flows as at and for the
years ended Decmber 31, 2001 (provided that no balance sheet is
provided as of December 31, 2001) and 2002 and the six months ended
June 30, 2003, prepared in accordance with generally accepted
accounting principles, consistently applied, and which fairly present
the financial condition and results of operations of DWANGO as at and
for the periods presented.
(f) STATUTORY REQUIREMENTS. All statutory requirements for the valid
consummation by DWANGO of the transactions contemplated by this
Agreement shall have been fulfilled.
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(g) GOVERNMENTAL APPROVAL. All authorizations, consents, approvals,
permits and orders of all federal and state governmental agencies
required to be obtained by DWANGO for consummation of the transactions
contemplated by this Agreement shall have been obtained.
(h) CHANGES IN FINANCIAL CONDITION OF DWANGO. There shall not have
occurred any material adverse change in the financial condition or in
the operations of the business of DWANGO, except as contemplated by
this Agreement.
(i) ABSENCE OF PENDING LITIGATION. DWANGO is not engaged in or threatened
with any suit, action, or legal, administrative or other proceedings
or governmental investigations pertaining to this Agreement or the
consummation of the transactions contemplated hereby or that could
have a material adverse effect on DWANGO.
(k) BLUE SKY. All state "blue sky" filings required to be made prior to
the Closing shall have been made.
(l) EXECUTION BY SECURITYHOLDERS. Securityholders owning at least 80% of
the value of the outstanding securities of DWANGO shall have executed
and delivered this Agreement.
ARTICLE 8
MATTERS SUBSEQUENT TO CLOSING
8.1 COVENANT OF FURTHER ASSURANCE. The parties covenant and agree that they
shall, from time to time, execute and deliver or cause to be executed and
delivered all such further instruments of conveyance, transfer,
assignments, receipts and other instruments, and shall take or cause to be
taken such further or other actions as the other party or parties to this
Agreement may reasonably deem necessary in order to carry out the purposes
and intent of this Agreement. WOODLAND agrees to have filed with the
Securities and Exchange Commission a Form 8-K within the prescribed period
therein reflecting the terms of this transaction with a subsequent
24
amendment thereto to be filed within the prescribed period to contain the
required financial statements of DWANGO if the initial Form 8-K did not
include such financial statements.
ARTICLE 9
NATURE AND SURVIVAL OF REPRESENTATIONS
9.1 All statements contained in any written certificate, schedule, exhibit or
other written instrument delivered by WOODLAND or DWANGO pursuant hereto,
or otherwise adopted by WOODLAND, by its written approval, or by DWANGO by
its written approval, or in connection with the transactions contemplated
hereby, shall be deemed representations and warranties by WOODLAND or
DWANGO as the case may be. All representations, warranties and agreements
made by either party shall survive for the period of the applicable statute
of limitations and until the discovery of any claim, loss, liability or
other matter based on fraud, if longer.
ARTICLE 10
TERMINATION OF AGREEMENT AND ABANDONMENT OF REORGANIZATION
10.1 TERMINATION. Anything herein to the contrary notwithstanding, this
Agreement and any agreement executed as required hereunder and the
acquisition contemplated hereby may be terminated at any time before the
Closing as follows:
(a) By mutual written consent of WOODLAND and DWANGO duly authorized by
their respective board of directors.
(b) By either WOODLAND or DWANGO if the Closing shall not have occurred by
October 31, 2003; provided that the right to terminate this Agreement
pursuant to this Section 10.1(b) shall not be available to any party
whose action or failure to act has been a principal cause of or
resulted in the failure of the Closing to occur on or before such date
and such action or failure to act constitutes a breach of this
Agreement.
(c) By the Board of Directors of WOODLAND if any of the conditions set
forth in Section 7.02 shall not have been satisfied by October 15,
2003.
(d) By the Board of Directors of DWANGO if any of the conditions set forth
in Section 7.01 shall not have been satisfied by October 15, 2003.
10.2 TERMINATION OF OBLIGATIONS AND WAIVER OF CONDITIONS; PAYMENT OF EXPENSES.
In the event this Agreement and the acquisition are terminated and
abandoned pursuant to this Article 10, this Agreement shall become void and
of no force and effect and there shall be no liability on the part of any
of the parties hereto, or their respective directors, officers,
shareholders or controlling persons to each other except that the
obligations of the parties contained in Section 6.2 shall survive any such
termination and nothing herein shall relieve any party from liability for
any willful breach of this Agreement. Each party hereto will pay all costs
and expenses incident to its negotiation and preparation of this Agreement
and any of the documents evidencing the transactions contemplated hereby,
including fees, expenses and disbursements of counsel, except for the
$10,000 paid by DWANGO for legal fees incurred by WOODLAND relating to this
Agreement.
ARTICLE 11
EXCHANGE OF SECURITIES; FRACTIONAL SHARES
25
11.1 EXCHANGE OF SECURITIES. At the Closing, WOODLAND shall issue a letter to
the transfer agent of WOODLAND with a copy of the resolution of the Board
of Directors of WOODLAND authorizing and directing the issuance of WOODLAND
shares as set forth on Exhibit A to this Agreement. Any fractional shares
of WOODLAND issued as a result of this exchange shall be rounded up to the
next whole number of shares. At the Closing, WOODLAND shall issue
convertible notes, warrants and options of Woodland as provided in Section
1.2 and as set forth on Exhibits A and A-1 hereof.
11.2 RESTRICTIONS ON SECURITIES ISSUED TO DWANGO. Due to the fact that the
Securityholders will receive securities of WOODLAND in connection with the
acquisition which have not been registered under the Securities Act by
virtue of the exemption provided in Section 4(2) of such Act and Rule 506
promulgated thereunder, those securities of WOODLAND will contain a legend
in substantially the following form:
If on the Shares:
-----------------
The shares represented by this certificate have not been registered
under the Securities Act of 1933, as amended. The shares have been
acquired for investment and may not be sold or offered for sale in the
absence of an effective Registration Statement for the shares under
the Securities Act of 1933, as amended, or an opinion of counsel to
the Corporation that such registration is not required.
If on the warrants:
-------------------
The securities represented by this certificate and the shares issuable
upon exercise hereof have not been registered under the Securities Act
of 1933, as amended. The securities and the shares issuable upon
exercise hereof have been acquired for investment and may not be sold
or offered for sale in the absence of an effective registration
statement for the securities or the shares issuable upon exercise
hereof, as applicable, under the Securities Act of 1933, as amended,
or an opinion of counsel to the Corporation that such registration is
not required.
If on the convertible notes:
----------------------------
The securities represented by this certificate and the shares issuable
upon conversion hereof have not been registered under the Securities
Act of 1933, as amended. The securities and the shares issuable upon
conversion hereof have been acquired for investment and may not be
sold or offered for sale in the absence of an effective registration
statement for the securities or the shares issuable upon conversion
hereof, as applicable, under the Securities Act of 1933, as amended,
or an opinion of counsel to the Corporation that such registration is
not required.
26
ARTICLE 12
MISCELLANEOUS
12.1 CONSTRUCTION. This Agreement shall be construed and enforced in accordance
with the laws of the State of Texas excluding the conflicts of laws.
12.2 NOTICES. All notices necessary or appropriate under this Agreement shall be
effective if in writing and personally delivered or sent by the United
States mail, postage prepaid, certified or registered, return receipt
requested, recognized national overnight courier, or by facsimile
transmission electronically confirmed and addressed to the parties at the
address set forth below, or such other address as specified in writing to
the other party, which addresses are currently as follows:
If to "WOODLAND" If to "DWANGO"
Woodland Hatchery, Inc. Xxxxxx X. Xxxxxxx
0000 Xxxxx Xxxxx Xxxx Xxxxxx Xxxxx Xxxxxxx, Inc.
Xxxxxxxx, XX 00000 0000 Xxx Xxxxxx Xxxxxx
Fax: 000-000-0000 Xxxxx 0000
Xxxxxxx, XX
00000-0000
Fax:
000-000-0000
With copies to: With copies to:
Xxxxxx X. Xxxxxxxxx, Esq. Xxxx X. Xxxxxxxx, Esq.
000 Xxxxx Xxxxxxxx Xxxxxxxx & Xxxxx, XXX
0 Xxxx Xxxxxxxx 000 Xxxxx Xxxxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, XX 00000 Xxxxxxx, XX 00000
Fax: 000-000-0000 Fax: 000-000-0000
12.3 AMENDMENT AND WAIVER. The parties hereby may, by mutual agreement in
writing signed by each party, amend this Agreement in any respect. Any term
or provision of this Agreement may be waived in writing signed by an
authorized officer at any time by the party which is entitled to the
benefits thereof. Such waiver right shall include, but not be limited to,
the right of either party to:
(a) Extend the time for the performance of any of the obligations of the
other;
(b) Waive any inaccuracies in representations by the other contained in
this Agreement or in any document delivered pursuant hereto;
27
(c) Waive compliance by the other with any of the covenants contained in
this Agreement, and performance of any obligations by the other; and
(d) Waive the fulfillment of any condition that is precedent to the
performance by the party so waiving of any of its obligations under
this Agreement.
No waiver of any provision by a party shall be construed as a waiver of any
other provision by a party or a future waiver of any provision hereof.
12.4 REMEDIES NOT EXCLUSIVE. No remedy conferred by any of the specific
provisions of this Agreement is intended to be exclusive of any other
remedy, and each and every remedy shall be cumulative and shall be in
addition to every other remedy given hereunder or now or hereafter existing
at law or in equity or by statute or otherwise. The election of any one or
more remedies by WOODLAND or DWANGO shall not constitute a waiver of the
right to pursue other available remedies.
12.5 COUNTERPARTS. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
12.6 BENEFIT. This Agreement shall be binding upon, and inure to the benefit of,
the respective successors and assigns of WOODLAND and DWANGO and its
shareholders.
12.7 ENTIRE AGREEMENT. This Agreement and the Schedules and Exhibits attached
hereto, represent the entire agreement of the undersigned regarding the
subject matter hereof, and supersedes all prior written or oral
understandings or agreements between the parties.
12.8 EXPENSES. Each party hereto will pay all costs and expenses incident to its
negotiation and preparation of this Agreement and any of the documents
evidencing the transactions contemplated hereby, including fees, expenses
and disbursements of counsel, except for the $10,000 paid by DWANGO for
legal fees incurred by WOODLAND relating to this Agreement.
12.9 CAPTIONS AND SECTION HEADINGS. Captions and section headings used herein
are for convenience only and shall not control or affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
WOODLAND HATCHERY, INC. DWANGO NORTH AMERICA, INC.
28
By: /S/ Xxxx X. Xxxxxxxxx By:/S/ Xxxxxx X. Xxxxxxx
-------------------------------- --------------------------
Name: Xxxx X. Xxxxxxxxx Name: Xxxxxx X. Xxxxxxx
----------------- -----------------
Title: President Title: President
----------------------------- ---------------------------
/S/ Xxxx X. Xxxxxxxxx
------------------------------------
Xxxx X. Xxxxxxxxx
29
EXHIBIT A
SECURITYHOLDER DATA AND ACKNOWLEDGMENTS
OF
DWANGO NORTH AMERICA, INC. SECURITYHOLDERS
By execution below, each of the undersigned hereby approves the Agreement and
Plan of Reorganization with Woodland Hatchery, Inc., represents and warrants
that the undersigned has read the Agreement and Plan of Reorganization with
Woodland Hatchery, Inc. and understands its terms and conditions, and agrees to
be bound thereby. The undersigned understands that the Schedules referred to in
the Agreement and Plan of Reorganization are available upon request. By
execution below, each of the undersigned acknowledges and agrees to the
specified surrender of securities of Dwango North America, Inc. and directs that
securities of Woodland Hatchery, Inc. be issued as provided.
Securities to be Surrendered Securities to be Issued Recipient and Address
---------------------------- ------------------------ ---------------------
Approved By:
-------------------------------------------
----------------------------------------------------------------------------------------------------------
Approved By:
-------------------------------------------
----------------------------------------------------------------------------------------------------------
Approved By:
-------------------------------------------
----------------------------------------------------------------------------------------------------------
Approved By:
-------------------------------------------
----------------------------------------------------------------------------------------------------------
X-0
XXXXXXX X-0
OPTIONHOLDERS
NAME OPTIONS TO BE SURRENDERED OPTIONS TO BE ISSUED
---- ------------------------- --------------------
A-2
EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
PURCHASER:
ISSUER: WOODLAND HATCHERY, Inc. (Referred to hereinbelow as the "Company")
SECURITY: Common Stock, par value $.001
QUANTITY: _______________ Shares
_______________ Shares underlying Warrants
_______________ Shares underlying Convertible Notes
In connection with the purchase of the above-listed securities (the
"Securities") of the Company, I, the purchaser represent to the Company the
following:
1. Investment. (a) I am aware of the Company's business affairs and financial
condition. I am purchasing the Securities for investment for my own account
only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act of 1933, as
amended (the "Securities Act"). I understand that the Securities have not
been registered under the Securities Act by reason of a specific exemption
therefrom, which exemption depends on, among other things, the bona fide
nature of the investment intent as expressed herein. In this connection I
understand that, in view of the Securities and Exchange Commission ("SEC"),
the statutory basis for such exemption may be unavailable if my
representation was predicated solely upon a present intention to hold the
Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities or for the period of one year or any other
fixed period in the future.
(b) I have examined or have had an opportunity to examine, before the date
hereof, such documents and information relevant to this transaction as may
have been requested from the Company, and have received and reviewed the
Company's Confidential Term Sheet, dated September 16, 2003, which contains
a draft of the Company's Current Report on Form 8-K to be filed upon
closing of the offering, which includes, among other things, audited
financial statements of Dwango North America, Inc. In that connection, I
have taken all steps necessary to evaluate the merits and risks of this
offering. I have such knowledge and experience in financial and business
matters that I am capable of evaluating the merits and risks of this
investment, am aware of and have considered the financial risks and
financial hazards of this investment, and am able to bear the economic risk
of this investment, including the possibility of a complete loss with
respect thereto;
(c) I have had an opportunity to ask questions of and receive answers from
officers of the Company, or a person or persons acting on its behalf,
concerning the terms and conditions of this investment, and all such
questions have been answered to my full satisfaction.
B-1
2. Restrictions on Transfer Under Securities Act. I further acknowledge and
understand that the Securities must be held indefinitely unless they are
subsequently registered under the Securities Act and registered and/or
qualified under applicable state securities laws or unless an exemption
from such registration and/or qualification is available. In addition, I
understand that the certificate evidencing the Securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they
are registered or unless the Company receives an opinion of counsel
reasonably satisfactory to the Company that such registration is not
required.
3. Sales Under Rule 144. I am aware of the adoption of Rule 144 by the SEC
promulgated under the Securities Act, which in substance permits limited
public resale of securities acquired in a non- public offering subject to
the satisfaction of certain conditions, including: (i) the availability of
certain current public information about the Company, (ii) the resale being
made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a " market maker," and (iii) the amount of
securities sold during any three-month period not exceeding specified
limitations (generally 1% of the total shares outstanding).
4. Limitations on Rule 144. I further acknowledge and understand that the
Company is currently satisfying the public information requirement of Rule
144, but that, at the time that I wish to sell the Securities may not be so
satisfying the public information requirement of Rule 144, and, in such
case, I would be precluded from selling the Securities under Rule 144 even
if the minimum holding period under Rule 144 had been satisfied.
In Witness Whereof, the undersigned has executed this Investor Representation
Statement with knowledge that the Company will rely on the truth and
completeness of the representations and warranties contained herein.
DATE PURCHASER
-------------------------------------------
Name:
------------------------------------
(Printed)
B-2
EXHIBIT B-1
OPTION EXCHANGE AGREEMENT
OPTIONHOLDER:
ISSUER: WOODLAND HATCHERY, Inc. (Referred to hereinbelow as the "Company")
SECURITY: Options to Purchase Common Stock, par value $.001 per share
QUANTITY: _______________ Options
In connection with the issuance to me of the above-listed securities (the
"Securities") of the Company pursuant to the Company's 2003 Equity Incentive
Plan, I acknowledge and agree that the Securities are being issued in
replacement of all options ("Dwango Options") held by me to purchase shares of
Common Stock, par value $.001 per share, of Dwango North America, Inc. which
were issued pursuant to Dwango's 2002 Equity Incentive Plan. I agree to
surrender to the Company the Dwango Options held by me. I further acknowledge
and agree that:
1. Investment. I am acquiring the Securities for investment for my own
account only and not with a view to, or for resale in connection with,
any "distribution" thereof within the meaning of the Securities Act of
1933, as amended (the "Securities Act").
2. Restrictions on Transfer Under Securities Act. The Securities must be
held indefinitely unless they are subsequently registered under the
Securities Act and registered and/or qualified under applicable state
securities laws or unless an exemption from such registration and/or
qualification is available. In addition, I understand that the
certificate evidencing the Securities will be imprinted with a legend
which prohibits the transfer of the Securities unless they are
registered or unless the Company receives an opinion of counsel
reasonably satisfactory to the Company that such registration is not
required.
3. Sales Under Rule 144. I am aware of the adoption of Rule 144 by the SEC
promulgated under the Securities Act, which in substance permits
limited public resale of securities subject to the satisfaction of
certain conditions, including: (i) the availability of certain current
public information about the Company, (ii) the resale being made
through a broker in an unsolicited "broker's transaction" or in
transactions directly with a " market maker," and (iii) the amount of
securities sold during any three-month period not exceeding specified
limitations (generally 1% of the total shares outstanding).
4. Limitations on Rule 144. I further acknowledge and understand that the
Company is currently satisfying the public information requirement of
Rule 144, but that, at the time that I wish to sell the Securities may
not be so satisfying the public information requirement of Rule 144,
and, in such case, I would be precluded from selling the Securities
under Rule 144 even if the minimum holding period under Rule 144 had
been satisfied.
In Witness Whereof, the undersigned has executed this Option Exchange Agreement
B-3
with knowledge that the Company will rely on the truth and completeness of the
representations and warranties contained herein.
DATE OPTIONHOLDER
-----------------------------------------
Name:
-----------------------------------
(Printed)
B-4
