EXHIBIT 2.1
AGREEMENT AND PLAN OF REORGANIZATION
by and among
New World Publishing, Inc.
a Colorado corporation
and
Communications Television, Inc., a California corporation
effective as of May 18, 1999
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, is made and entered into this
18th day of May 1999, by and between New World Publishing, Inc., a Colorado
corporation ("New World") and Communications Television, Inc., a California
corporation ("CTV"), and certain shareholders of CTV listed on the attached
Schedule I ("CTV Shareholders"), and specifically incorporated herein by
reference (CTV and CTV Shareholders shall be hereinafter jointly referred to as
"CTV Parties").
PREMISES
A. This Agreement provides for the reorganization of CTV with and into New
World, with CTV becoming a wholly-owned subsidiary of New World, and in
connection therewith, the exchange of the outstanding common stock of CTV into
shares of common voting stock of New World, all for the purpose of effecting a
tax-free reorganization pursuant to sections 351, 354 and 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended ("IRC"). On the terms and conditions
set forth herein, the parties hereby adopt the Plan of Reorganization embodied
in this Agreement.
B. The boards of directors of CTV and New World have determined, subject to
the terms and conditions set forth in this Agreement, that the exchange
contemplated hereby, as a result of which CTV would become a wholly owned
subsidiary of New World is desirable and in the best interests of their
stockholders. This Agreement is being entered into for the purpose of setting
forth the terms and conditions of the proposed exchange.
AGREEMENT
NOW, THEREFORE, on the stated premises and for and in consideration of the
mutual covenants and agreements hereinafter set forth and the mutual benefits to
the parties to be derived herefrom, it is hereby agreed as follows:
ARTICLE I
REPRESENTATIONS, COVENANTS AND WARRANTIES OF
CTV AND CTV SHAREHOLDERS
CTV and each of CTV Shareholders, individually and neither jointly nor
severally, represents and warrants to New World, except as disclosed in this
Agreement or in the case of any representation qualified by its terms to a
particular Schedule, as hereinafter defined, of CTV attached hereto, that the
statements made in this Article I will be correct and complete at the Effective
Date, as hereinafter defined, provided, however, if there is no Effective Date,
then no party shall be liable for any inaccuracy.
SECTION 1.1 SHAREHOLDERS. Each of the CTV Shareholders is the owner of all
of the issued and outstanding shares of the capital stock of CTV attributed to
such Shareholder on Schedule I; each CTV Shareholder has full legal title to all
CTV Shares described in Schedule I as being owned by such CTV Shareholder free
from any and all claims, liens or other encumbrances. CTV Shareholders have the
unqualified right to sell, transfer, and dispose of their respective CTV Shares
subject to the applicable securities laws and the laws of bankruptcy, insolvency
and general creditors' rights. Each CTV Shareholder represents and warrants
that, in regards to such CTV Shareholder's shares of CTV, such CTV Shareholder
has full right and authority to execute this Agreement and to transfer his
shares of CTV to New World.
SECTION 1.2 ORGANIZATION. CTV is a corporation duly organized, validly
existing, and in good standing under the laws of California and has the
corporate power and is duly authorized, qualified, franchised and licensed under
all applicable laws, regulations, ordinances and orders of public authorities to
own all of its properties and assets and to carry on its business in all
material respects as it is now being conducted, including qualification to do
business as a foreign corporation in the jurisdiction in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the CTV Schedules (as hereinafter
defined) are complete and correct copies of the articles of incorporation,
bylaws and amendments thereto of CTV as in effect on the date
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hereof. The execution and delivery of this Agreement does not and the
consummation of the transactions contemplated by this Agreement in accordance
with the terms hereof will not violate any provision of CTV's articles of
incorporation or bylaws. CTV has full power, authority and legal right and has
taken all action required by law, its articles of incorporation, its bylaws or
otherwise to authorize the execution and delivery of this Agreement.
SECTION 1.3 CAPITALIZATION. The authorized capitalization of CTV consists
of 20 million common stock shares, $0.001 par value per share (the "CTV Common
Shares"), and 5 million preferred stock shares (the "CTV Preferred Shares"),
$0.001 par value per share. As of the date of this Agreement, 7,498,700 of the
authorized common shares are issued and outstanding, and 699,000 of the
preferred shares are issued and outstanding. Each share of CTV Preferred Shares
is convertible into 1 share of CTV Common Shares. All issued and outstanding
shares are legally issued, fully paid and nonassessable and are not issued in
violation of the preemptive or other rights of any person. Except as may be
disclosed in CTV Schedules, CTV has no other securities, warrants or options
authorized or issued.
SECTION 1.4 SUBSIDIARIES AND PREDECESSOR CORPORATIONS. Except as otherwise
set forth in the CTV Schedules, CTV does not have any other subsidiaries and
does not own, beneficially or of record, any shares of any other corporation.
For purposes herein, all references to CTV shall include CTV and all of its
subsidiaries.
SECTION 1.5 FINANCIAL INFORMATION.
(a) Attached hereto as Schedule 1.5 are unaudited financial
statements from the inception of CTV until March 31, 1999 (the "CTV
Financial Statements").
(b) CTV has no liabilities with respect to the payment of any
federal, state, county, local or other taxes (including any
deficiencies, interest or penalties), except for taxes accrued but not
yet due and payable;
(c) CTV has filed all state, federal and local income tax
returns, including extensions of such tax returns, if any, required to
be filed by it from inception to the date hereof, if any;
(d) The books and records, financial and others, of CTV are in
all material respects complete and correct and have been maintained in
accordance with good business accounting practices; and
(e) except as and to the extent disclosed herein and the CTV
Schedules, CTV has no material contingent liabilities, direct or
indirect, matured or unmatured.
SECTION 1.6 INFORMATION. The information concerning CTV set forth in this
Agreement and in the CTV Schedules to the best of CTV's knowledge, is complete
and accurate in all material respects and does not contain any untrue statement
of a material fact or omit to state a material fact required to make the
statements made, in light of the circumstances under which they were made, not
misleading.
SECTION 1.7 OPTIONS AND WARRANTS. Except as may otherwise be disclosed
herein on Schedule 1.7, there are no existing options, warrants, calls or
commitments of any character to which CTV is a party and by which it is bound.
Pursuant to the existing option agreements (see Schedule 1.7 Options),
appropriate adjustments shall be made in the number of shares for which such
options may be exercised based upon the exchange rate at which each share of
common stock CTV shall be exchanged for certain number of shares of New World
(see Section 3.2 of this Agreement).
SECTION 1.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in
this Agreement, the CTV Schedules, or as otherwise disclosed to New World, since
April 1, 1999:
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(a) there has not been: (i) any material adverse change in the
business, operations, properties, assets or condition of CTV; or (ii)
any damage, destruction or loss to CTV (whether or not covered by
insurance) materially and adversely affecting the business, operations,
properties, assets or condition of CTV;
(b) CTV has not: (i) amended its articles of incorporation or
bylaws; (ii) declared or made, or agreed to declare or make, any
payment of dividends or distributions of any assets of any kind
whatsoever to stockholders or purchased or redeemed or agreed to
purchase or redeem any of its capital stock; (iii) waived any rights of
value which in the aggregate are extraordinary or material considering
the business of CTV; (iv) made any material change in its method of
management, operation or accounting other than in its ordinary course
of business; (v) entered into any other material transaction; (vi) made
any accrual or arrangement for or payment of bonuses or special
compensation of any kind or any severance or termination pay to any
present or former officer or employee; (vii) increased the rate of
compensation; or (viii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for, or with its
officers, directors or employees.
(c) CTV has not: (i) granted or agreed to grant any options,
warrants or other rights for its stocks, bonds or other corporate
securities calling for the issuance thereof; (ii) borrowed or agreed to
borrow any funds or incurred or become subject to, any material
obligation or liability (absolute or contingent) except liabilities
incurred in the ordinary course of business; (iii) paid any material
obligation or liability (absolute or contingent) other than current
liabilities reflected in or shown on the most recent CTV balance sheet
and current liabilities incurred since that date in the ordinary course
of business; (iv) sold or transferred, or agreed to sell or transfer,
any of its assets, properties or rights (except assets, properties or
rights not used or useful in its business which, in the aggregate have
a value of less than $10,000); (v) made or permitted any amendment or
termination of any contract, agreement or license to which it is a
party if such amendment or termination is material, considering the
business of CTV; or (vi) issued, delivered or agreed to issue or
deliver any stock, bonds or other corporate securities, including
debentures (whether authorized and unissued or held as treasury stock);
and
(d) to the best knowledge of CTV, it has not become subject to
any law or regulation which materially and adversely affects, or in the
future may adversely affect, the business, operations, properties,
assets or condition of CTV.
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SECTION 1.9 TITLE AND RELATED MATTERS. Except as provided herein or in the
CTV Schedules, CTV has good and marketable title to and is the sole and
exclusive owner of all of its properties, inventory, interests in properties and
assets, real and personal including technical information, copyrights,
trademarks, service marks and tradenames (collectively, the "Assets") which are
reflected in the CTV Schedules or acquired after that date (except properties,
interests in properties and assets sold or otherwise disposed of since such date
in the ordinary course of business), free and clear of all liens, pledges,
charges or encumbrances except: (a) statutory liens or claims not yet
delinquent; (b) such imperfections of title and easements as do not and will
not, materially detract from or interfere with the present or proposed use of
the properties subject thereto or affected thereby or otherwise materially
impair present business operations on such properties; and (c) as described in
the CTV Schedules. Except as set forth in the CTV Schedules, CTV owns free and
clear of any liens, claims, encumbrances, royalty interests or other
restrictions or limitations of any nature whatsoever, any and all products it is
currently manufacturing, including the underlying technology and data, and all
procedures, techniques, marketing plans, business plans, methods of management
or other information utilized in connection with CTV's business. Except as set
forth in the CTV Schedules, no third party has any right to, and CTV has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any product, technology, data, trade secrets, know-how,
proprietary techniques, trademarks, service marks, trade names or copyrights
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would have a materially adverse affect on the business,
operations, financial conditions or income of CTV or any material portion of its
properties, assets or rights.
SECTION 1.10 LITIGATION AND PROCEEDINGS. To the best of CTV's knowledge and
belief, there are no actions, suits, proceedings or investigations pending or
threatened by or against CTV or affecting CTV or its properties, at law or in
equity, before any court or other governmental agency or instrumentality,
domestic or foreign or before any arbitrator of any kind that would have a
material adverse affect on the business, operations, financial condition or
income of CTV. CTV does not have any knowledge of any default on its part with
respect to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental agency or instrumentality or
of any circumstances which, after reasonable investigation, would result in the
discovery of such a default.
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SECTION 1.11 CONTRACTS.
(a) Except as included or described in the CTV Schedules,
there are no material contracts, agreements, franchises, license
agreements or other commitments to which CTV is a party or by which it
or any of its assets, products, technology or properties are bound;
(b) Except as included or described in the CTV Schedules or
reflected in the most recent CTV balance sheet, CTV is not a party to
any oral or written: (i) contract for the employment of any officer or
employee which is not terminable on thirty (30) days or less notice;
(ii) profit sharing, bonus, deferred compensation, stock option,
severance pay, pension benefit or retirement plan, agreement or
arrangement covered by Title IV of the Employee Retirement Income
Security Act, as amended; (iii) agreement, contract or indenture
relating to the borrowing of money; (iv) guaranty of any obligation,
other than one on which CTV is a primary obligor, for collection and
other guaranties of obligations, which, in the aggregate do not exceed
more than one year or providing for payments in excess of $10,000 in
the aggregate; (v) consulting or other similar contracts with an
unexpired term of more than one year or providing for payments in
excess of $10,000 in the aggregate; (vi) collective bargaining
agreements; (vii) agreement with any present or former officer or
director of CTV; or (viii) contract, agreement or other commitment
involving payments by it of more than $10,000 in the aggregate; and
(c) To CTV's knowledge, all contracts, agreements, franchises,
license agreements and other commitments to which CTV is a party or by
which its properties are bound and which are material to the operations
of CTV taken as a whole, are valid and enforceable by CTV in all
respects, except as limited by bankruptcy and insolvency laws and by
other laws affecting the rights of creditors generally.
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SECTION 1.12 MATERIAL CONTRACT DEFAULTS. Except as set forth in the CTV
Schedules, to the best of CTV's knowledge and belief, CTV is not in default in
any material respect under the terms of any outstanding contract, agreement,
lease or other commitment which is material to the business, operations,
properties, assets or condition of CTV, and there is no event of default in any
material respect under any such contract, agreement, lease or other commitment
in respect of which CTV has not taken adequate steps to prevent such a default
from occurring.
SECTION 1.13 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which CTV is a
party or to which any of its properties or operations are subject.
SECTION 1.14 GOVERNMENTAL AUTHORIZATIONS. To the best of CTV's knowledge
and except as provided herein or in the CTV Schedules, CTV has all licenses,
franchises, permits or other governmental authorizations legally required to
enable CTV to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities and
corporation laws, as hereinafter provided, no authorization, approval, consent
or order of, or registration, declaration or filing with, any court or other
governmental body is required in connection with the execution and delivery by
CTV of this Agreement and the consummation by CTV of the transactions
contemplated hereby.
SECTION 1.15 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of CTV's
knowledge, except as disclosed in the CTV Schedules, CTV has complied with all
applicable statutes and regulations of any federal, state or other governmental
entity or agency thereof, except to the extent that noncompliance would not
materially and adversely affect the business, operations, properties, assets or
condition of CTV or would not result in CTV's incurring any material liability.
SECTION 1.16 INSURANCE. Except as disclosed on Schedule 1.16, CTV has no
insurable properties and no insurance policies will be in effect at the Closing
Date, as hereinafter defined.
SECTION 1.17 APPROVAL OF AGREEMENT. The board of directors of CTV has
authorized the execution and delivery of this Agreement by CTV and has approved
the transactions contemplated hereby. The majority of CTV's shareholders
approved the transactions contemplated hereby by the written consent action.
SECTION 1.18 MATERIAL TRANSACTIONS OR AFFILIATIONS. Except as disclosed
herein and in the CTV Schedules, there exists no material contract, agreement or
arrangement between CTV and any predecessor and any person who was at the time
of such contract, agreement or arrangement an officer, director or person owning
of record, or known by CTV to own beneficially, ten percent (10%) or more of the
issued and outstanding CTV Common Shares and which is to be performed in whole
or in part after the date hereof. In all of such transactions, the amount paid
or received, whether in cash, in services or in kind, has been during the full
term thereof, and is required to be during the unexpired portion of the term
thereof, no less favorable to CTV than terms available from otherwise unrelated
parties in arms length transactions. There are no commitments by CTV, whether
written or oral, to lend any funds to, borrow any money from or enter into any
other material transactions with, any such affiliated person.
SECTION 1.19 LABOR RELATIONS. CTV has never had a work stoppage resulting
from labor problems. To the best knowledge of CTV, no union or other collective
bargaining organization is organizing or attempting to organize any employee of
CTV.
SECTION 1.20 PREVIOUS SALES AND ISSUANCE OF SECURITIES. Since inception,
CTV has issued CTV Common Shares and Preferred Shares in reliance upon
applicable exemptions from the registration requirements under the laws of the
jurisdiction of California and other applicable state and federal securities
laws, to the shareholders listed on Schedule I. The shares of CTV Common Stock
and Preferred Stock issued to the CTV Shareholders are legally issued, fully
paid and nonassessable and are not issued in violation of the preemptive or
other rights of any person.
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SECTION 1.21 REORGANIZATION RELATED REPRESENTATIONS.
(a) following the Effective Date, CTV will continue its
historic business or use a significant portion of its historic business
assets in its business;
(b) CTV is not an investment company as defined in section
368(a)(2)(F)(iii) and (iv) of IRC;
(c) CTV is not under the jurisdiction of a court in a Title 11
or similar case within the meaning of Section 368(a)(3)(A) of the IRC.
SECTION 1.22 CTV SCHEDULES. Upon execution hereof, CTV will deliver to New
World the following schedules, which are collectively referred to as the "CTV
Schedules" and which consist of separate schedules dated as of the date of this
Agreement and instruments and data as of such date, complete, true and correct
in all material respects:
(a) copies of the articles of incorporation, bylaws and all
minutes of shareholders' and directors' meetings of CTV;
(b) the financial information of CTV referenced hereinabove in
Section 1.4;
(c) a list indicating the name and address of the stockholders
of CTV, together with the number of shares owned by them;
(d) the CTV Business Plan which includes, among other matters,
information concerning all of CTV's material licenses, permits and
other governmental authorizations, requests or applications therefor,
pursuant to which CTV carries on or proposes to carry on its business
(except those which in the aggregate, are immaterial to the present or
proposed business of CTV), as well as a description of any material
adverse change in the business operations, property, inventory, assets
or condition of CTV since the most recent CTV balance sheet required to
be provided pursuant to Section 1.7; and
CTV shall cause the CTV Schedules and the instruments and data delivered to
New World hereunder to be updated after the date hereof up to and including the
Closing Date, as hereinafter defined.
SECTION 1.23 TAXES. CTV has complied with applicable tax filing
requirements, if any.
SECTION 1.24 ADDITIONAL INFORMATION AVAILABLE. CTV will make available to
New World the opportunity to ask questions and receive answers concerning
acquisition of CTV shares in this transaction, and to obtain any additional
information related thereto which CTV possesses or can acquire without
unreasonable effort or expense.
SECTION 1.25 LIMITATION ON LIABILITY. Notwithstanding anything to the
contrary contained in this Agreement, CTV shall not have any liability for any
misrepresentation or breach of any representation or warranty contained in this
Article I, if New World has actual knowledge of such misrepresentation or
breach.
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ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
OF NEW WORLD
As an inducement to, and to obtain the reliance of CTV, New World
represents and warrants as follows:
SECTION 2.1 ORGANIZATION. New World is a corporation duly organized,
validly existing and in good standing under the laws of the state of Colorado
and has the corporate power and is duly authorized, qualified, franchised and
licensed under all applicable laws, regulations, ordinances and orders of public
authorities to own all of its properties and assets and to carry on its business
in all material respects as it is now being conducted, including qualification
to do business as a foreign corporation in the states in which the character and
location of the assets owned by it or the nature of the business transacted by
it requires qualification. Included in the New World Schedules (as hereinafter
defined) are complete and correct copies of the articles of incorporation,
amended articles of incorporation (collectively, hereinafter referred to as the
"articles of incorporation"), bylaws of New World as in effect on the date
hereof and a certificate of Good Standing. The execution and delivery of this
Agreement does not and the consummation of the transactions contemplated by this
Agreement in accordance with the terms hereof will not, violate any provision of
New World's articles of incorporation or bylaws. New World has taken all action
required by law, its articles of incorporation, its bylaws or otherwise to
authorize the execution and delivery of this Agreement. New World has full
power, authority and legal right and has taken all action required by law, its
articles of incorporation, bylaws or otherwise to consummate the transactions
herein contemplate.
SECTION 2.2 CAPITALIZATION. The authorized capitalization of New World
consists of 100 million shares of Common Stock, par value $0.0001 per share, of
which 10,781,500 shares are issued and outstanding, and 10 million shares of
Preferred Stock, $0.10 par value, of which no shares are issued nor outstanding.
All issued and outstanding shares are legally issued, fully paid and
nonassessable and are not issued in violation of the preemptive or other rights
of any person. Except as may be disclosed in New World Schedules, New World has
no other securities, warrants or options authorized or issued.
SECTION 2.3 SUBSIDIARIES. At the Closing, other than as disclosed herein,
New World shall own no securities or have any interest in any corporation,
partnership, or other form of business organization, including its current
subsidiaries.
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SECTION 2.4 FINANCIAL STATEMENTS.
(a) Attached hereto as Schedule 2.4 are audited financial
statements for the years ended January 31, 1999 and January 31, 1998,
together with the related footnotes and report thereon of the auditors
rendering such reports (the "New World Financial Statements"). The New
World Financial Statements are correct and complete in all respects and
fairly present, in accordance with generally accepted accounting
principles ("GAAP"), consistently applied, the consolidated financial
position of New World as of such dates and the results of operations
and changes in financial position for such periods all in accordance
with GAAP. The New World Financial Statements comply with the
requirements of Regulation S-X of the Securities and Exchange
Commission and the provisions of the Securities Act of 1933 (the "1933
Act") and will be suitable for inclusion in any subsequent filing with
any state or federal regulatory agency under the Securities Exchange
Act of 1934 (the "1934 Act"). As of the date of this Agreement, New
World does not have any source of revenues. Accordingly, New World's
independent public accountant, issued an opinion in its Independent
Auditor's Report dated February 8, 1999 questioning the ability of New
World to continue as a going concern. AN INVESTMENT IN NEW WORLD SHARES
INVOLVES A HIGH DEGREE OF RISK. CTV SHAREHOLDERS SHOULD REVIEW AND
CAREFULLY CONSIDER THE DISCLOSURE MATERIALS ATTACHED HERETO AS EXHIBIT
"A", INCLUDING THE RISK FACTORS CONTAINED THEREIN, PRIOR TO EXECUTING
THIS AGREEMENT;
(b) The books and records, financial and others, of New World
are in all material respects complete and correct and have been
maintained in accordance with good business accounting practices;
(c) New World has no liabilities with respect to the payment
of any federal, state, county, local or other taxes, current or accrued
(including any deficiencies, interest or penalties);
(d) New World has filed all state, federal and local income
tax returns, including extensions of such tax returns, if any, required
to be filed by it from inception to the date hereof, if any;
(e) except as and to the extent disclosed herein and the New
World Schedules, New World has no material contingent liabilities,
direct or indirect, matured or unmatured.
SECTION 2.5 INFORMATION. The information concerning New World as set forth
in this Agreement and in the New World Schedules, to the best of New World's
knowledge, is complete and accurate in all material respects and does not
contain any untrue statement of a material fact or omit to state a material fact
required to make the statements made, in light of the circumstances under which
they were made, not misleading.
SECTION 2.6 OPTIONS AND WARRANTS. Except as may otherwise be disclosed
herein on Schedule 2.6, there are no existing options, warrants, calls or
commitments of any character to which New World is a party and by which it is
bound.
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SECTION 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as described
herein or in the New World Schedules, since January 31, 1999:
(a) there has not been: (i) any material adverse change in the
business, operations, properties, assets or condition of New World; or
(ii) any damage, destruction or loss to New World (whether or not
covered by insurance) materially and adversely affecting the business,
operations, properties, assets or condition of New World;
(b) New World has not: (i) amended its articles of
incorporation or bylaws; (ii) declared or made, or agreed to declare or
make, any payment of dividends or distributions of any assets of any
kind whatsoever to stockholders or purchased or redeemed or agreed to
purchase or redeem any of its capital stock; (iii) waived any rights of
value which in the aggregate are extraordinary or material considering
the business of New World; (iv) made any material change in its method
of management, operation or accounting other than in its ordinary
course of business; (v) entered into any other material transaction;
(vi) made any accrual or arrangement for or payment of bonuses or
special compensation of any kind or any severance or termination pay to
any present or former officer or employee; (vii) increased the rate of
compensation; or (viii) made any increase in any profit sharing, bonus,
deferred compensation, insurance, pension, retirement or other employee
benefit plan, payment or arrangement made to, for, or with its
officers, directors or employees.
(c) Except as disclosed to CTV or as included in the New World
Schedules, New World has not: (i) granted or agreed to grant any
options, warrants or other rights for its stocks, bonds or other
corporate securities calling for the issuance thereof; (ii) borrowed or
agreed to borrow any funds or incurred or become subject to, any
material obligation or liability (absolute or contingent) except
liabilities incurred in the ordinary course of business; (iii) paid any
material obligation or liability (absolute or contingent) other than
current liabilities reflected in or shown on the most recent New World
balance sheet and current liabilities incurred since that date in the
ordinary course of business; (iv) sold or transferred, or agreed to
sell or transfer, any of its assets, properties or rights (except
assets, properties or rights not used or useful in its business which,
in the aggregate have a value of less than $10,000); (v) made or
permitted any amendment or termination of any contract, agreement or
license to which it is a party if such amendment or termination is
material, considering the business of New World; or (vi) issued,
delivered or agreed to issue or deliver any stock, bonds or other
corporate securities, including debentures (whether authorized and
unissued or held as treasury stock); and
(d) to the best knowledge of New World, it has not become
subject to any law or regulation which materially and adversely
affects, or in the future may adversely affect, the business,
operations, properties, assets or condition of New World.
SECTION 2.8 TITLE AND RELATED MATTERS. As of the Closing Date, New World
will own no real, personal or intangible property, other than as disclosed
herein.
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SECTION 2.9 LITIGATION AND PROCEEDINGS. There are no actions, suits or
proceedings pending or, to the best of New World's knowledge and belief,
threatened by or against or affecting New World, at law or in equity, before any
court or other governmental agency or instrumentality, domestic or foreign, or
before any arbitrator of any kind that would have a material adverse effect on
the business, operations, financial condition, income or business prospects of
New World. New World does not have any knowledge of any default on its part with
respect to any judgment, order, writ, injunction, decree, award, rule or
regulation of any court, arbitrator or governmental agency or instrumentality.
SECTION 2.10 CONTRACTS. On the Closing Date and other than as disclosed
herein in Schedule 2.9 or otherwise:
(a) There are no material contracts, agreements, franchises,
license agreements, or other commitments to which New World is a party
or by which it or any of its properties are bound;
(b) New World is not a party to any contract, agreement,
commitment or instrument or subject to any charter or other corporate
restriction or any judgment, order, writ, injunction, decree or award
which materially and adversely affects, or in the future may (as far as
New World can now foresee) materially and adversely affect, the
business, operations, properties, assets or conditions of New World;
and
(c) New World is not a party to any material oral or written:
(i) contract for the employment of any officer or employee; (ii) profit
sharing, bonus, deferred compensation, stock option, severance pay,
pension, benefit or retirement plan, agreement or arrangement covered
by Title IV of the Employee Retirement Income Security Act, as amended;
(iii) agreement, contract or indenture relating to the borrowing of
money; (iv) guaranty of any obligation for the borrowing of money or
otherwise, excluding endorsements made for collection and other
guaranties of obligations, which, in the aggregate exceeds $1,000; (v)
consulting or other similar contract with an unexpired term of more
than one year or providing for payments in excess of $10,000 in the
aggregate; (vi) collective bargaining agreement; (vii) agreement with
any present or former officer or director of New World; or (viii)
contract, agreement, or other commitment involving payments by it of
more than $10,000 in the aggregate.
11
SECTION 2.11 NO CONFLICT WITH OTHER INSTRUMENTS. The execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement will not result in the breach of any term or provision of, or
constitute an event of default under, any material indenture, mortgage, deed of
trust or other material contract, agreement or instrument to which New World is
a party or to which any of its properties or operations are subject.
SECTION 2.12 MATERIAL CONTRACT DEFAULTS. To the best of New World's
knowledge and belief, New World is not in default in any material respect under
the terms of any outstanding contract, agreement, lease or other commitment
which is material to the business, operations, properties, assets or condition
of New World, and there is no event of default in any material respect under any
such contract, agreement, lease or other commitment in respect of which New
World has not taken adequate steps to prevent such a default from occurring.
SECTION 2.13 GOVERNMENTAL AUTHORIZATIONS. To the best of New World's
knowledge, New World has all licenses, franchises, permits and other
governmental authorizations that are legally required to enable it to conduct
its business operations in all material respects as conducted on the date
hereof. Except for compliance with federal and state securities or corporation
laws, no authorization, approval, consent or order of, or registration,
declaration or filing with, any court or other governmental body is required in
connection with the execution and delivery by New World of the transactions
contemplated hereby.
SECTION 2.14 COMPLIANCE WITH LAWS AND REGULATIONS. To the best of New
World's knowledge and belief, New World has complied with all applicable
statutes and regulations of any federal, state or other governmental entity or
agency thereof, except to the extent that noncompliance would not materially and
adversely affect the business, operations, properties, assets or condition of
New World or would not result in New World's incurring any material liability.
SECTION 2.15 INSURANCE. New World has no insurable properties and no
insurance policies will be in effect at the Closing Date, as hereinafter
defined.
SECTION 2.16 APPROVAL OF AGREEMENT. The board of directors of New World has
authorized the execution and delivery of this Agreement by New World and has
approved the transactions contemplated hereby. The approval of this Agreement by
New World's shareholders is not required.
SECTION 2.17 MATERIAL TRANSACTIONS OR AFFILIATIONS. Except as stated herein
or in the New World Schedules, as of the Closing Date there will exist no
material contract, agreement or arrangement between New World and any person who
was at the time of such contract, agreement or arrangement an officer, director
or person owning of record, or known by New World to own beneficially, ten
percent (10%) or more of the issued and outstanding common stock of New World
and which is to be performed in whole or in part after the date hereof. New
World has no commitment, whether written or oral, to lend any funds to, borrow
any money from or enter into any other material transactions with, any such
affiliated person.
SECTION 2.18 LABOR RELATIONS. New World has never had a work stoppage
resulting from labor problems. New World has no employees other than its
officers and directors.
12
SECTION 2.19 TAXES. (a) Except as provided in Schedule 2.19, New World has
timely filed (within the applicable extension periods) with the appropriate
governmental agencies all governmental tax returns, information returns, tax
reports and declarations which are monetary liabilities. All governmental tax
returns, information returns, tax reports and declarations filed by New World
for years for which the statute of limitations has not run (the "Tax Returns")
are correct in all material respects. New World has timely paid (or has
collected and paid over in the case of sales, use or similar taxes) all taxes,
additions to tax, penalties, interest, assessments, deposits, and other
governmental charges imposed by law upon it or any of its properties, tangible
or intangible assets, income, receipts, payrolls, transactions, capital, net
worth and franchises, or upon the sale, use or delivery of any item sold by the
Company, other than as may be disclosed in the Schedule of Taxes. Except as set
forth in the Schedule of Taxes, no tax returns have been examined by the
Internal Revenue Service or any other governmental authority. Except as may be
disclosed in the Schedule of Taxes or in any document delivered to New World
therewith, New World (i) is not currently being audited with respect to any tax,
assessment or other governmental charge; (ii) has not received formal or
informal notice from any governmental agency that an audit or investigation with
respect to any tax, assessment or other governmental charge is to be initiated;
(iii) is not formally or informally discussing material pending ruling requests
or other material tax or assessment issues with the Internal Revenue Service or
any other governmental taxing authority in connection with any matter concerning
any member of New World's group; or (iv) has not been formally or informally
notified of any potential tax or assessment issue which the Internal Revenue
Service or any other governmental taxing authority intends to raise in
connection with any matter concerning any member of New World's group. Except
(i) as may be disclosed in the Schedule of Taxes, or (ii) in connection with any
pending audit or investigation, New World has not granted or proposed any waiver
of any statute of limitations with respect to, or any extension of a period for
the assessment or collection of, or any offer in compromise of any governmental
tax. The accruals and reserves for taxes reflected in the financial statements
are adequate to cover substantially all taxes (including additions to tax,
interest, penalties, and other charges or assessments, if any) which become due
and payable or accruable by reason of the business conducted by New World
through the Closing Date herein. New World is not now or has it ever been a
corporation which meets the tests of Section 542(b)(2) of the Internal Revenue
Code. New World has not participated in, or is required to participate in, for
any period prior to the date of this Agreement the filing of any consolidated
tax return other than (i) as set forth in the Schedule of Taxes, or (ii) as a
member of an affiliated group of which New World is the common parent.
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SECTION 2.20 REPORTING ACT DOCUMENTS. Except as set forth in New World's
Schedules, New World has, in all reporting act documents, complied in all
material respects with the reporting requirements of the Exchange Act and the
rules and regulations of the Securities and Exchange Commission promulgated
thereunder. The information contained in each reporting act document of New
World, to the best of New World's knowledge, is true and correct in all material
respects as of the date thereof, and no reporting act document contains any
untrue statement of a material fact or omits to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
as of the date thereof. To the best knowledge of current management of New
World, there is no negative matters, such as pending investigation or formal
inquiry, which are outstanding concerning Exchange Act reports filed by New
World prior to the Closing.
SECTION 2.21 NEW WORLD SCHEDULES. Upon execution hereof, New World shall
deliver to CTV the following schedules, which are collectively referred to as
the "New World Schedules" which are dated the date of this Agreement, all
complete, true and accurate in all material respects:
(a) complete and correct copies of the articles of
incorporation, bylaws and Certificate of Good Standing of New World as
in effect as of the date of this Agreement;
(b) copies of all financial statements of New World identified
in Section 2.4(a);
(c) the description of any material adverse change in the
business, operations, property, assets, or condition of New World since
January 31, 1999 required to be provided pursuant to Section 2.6; and
(d) any other information, together with any required copies
of documents, required to be disclosed in the New World Schedules under
this Agreement.
New World shall cause the New World Schedules and the instruments to be
delivered to CTV hereunder to be updated after the date hereof up to and
including the Closing Date.
SECTION 2.22 LISTING OF NEW WORLD'S COMMON STOCK. New World's Common Stock
is listed and trading on the over-the-counter market of National Association of
Securities' Dealers ("NASD") ("Bulletin Board").
SECTION 2.23 ADDITIONAL INFORMATION AVAILABLE. New World will make
available to each CTV Shareholder the opportunity to ask questions and receive
answers concerning the acquisition of New World Common Stock in the transaction,
and to obtain any additional information which New World possesses or can
acquire without unreasonable effort or expense.
SECTION 2.24 LIMITATION ON LIABILITY. Notwithstanding anything to the
contrary contained in this Agreement, New World shall not have any liability for
any misrepresentation or breach of any representation or warranty contained in
this Article II, if CTV or any of the CTV Shareholders has actual knowledge of
such misrepresentation or breach.
ARTICLE III
EXCHANGE PROCEDURE
SECTION 3.1 DELIVERY OF CTV SECURITIES. On the Closing Date, the holders of
the CTV Common Shares and Preferred Shares shall deliver to New World (i)
certificates or other documents evidencing all of the issued and outstanding CTV
Common and Preferred Shares, duly endorsed in blank or with executed stock power
attached thereto in transferrable form; and (ii) Investment Letters, the form of
which is attached hereto as Exhibit "B".
SECTION 3.2 ISSUANCE OF NEW WORLD COMMON SHARES. (a) In exchange for all of
the CTV Common and Preferred Shares tendered pursuant to Section 3.1, New World
shall instruct its Transfer Agent to issue an aggregate of 19,020,167
"restricted" New World Common Shares to the CTV shareholders on a pro rata basis
and shall cause such shares to be delivered to CTV. Each share of CTV (whether
Common or Preferred) shall be exchanged for 2.3201833 shares of New World (based
on the total issuance of 19,020,167 New World Common Shares).
(b) No fractional New World Common Shares shall be issued pursuant to this
Section 3.2. In lieu of such fractional shares, all shares to be issued shall be
rounded up or down to the nearest whole share.
14
(c) The total of 19,020,167 shares to be issued to the CTV shareholders by
New World (the "CTV Shares") are not being registered under the Securities Act
of 1933, as amended (the "Act") and are issued in reliance on the exemptions
from the registration requirements provided by Regulation D, and are to be
issued as "restricted securities", as that term is defined in Rule 144
promulgated under the Act, and that the certificates representing the CTV Shares
will bear a legend to that effect, substantially in the form set forth below:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF CERTAIN STATES,
AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND ANY APPLICABLE STATE LAWS, (II) TO THE
EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (III) AN OPINION
OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO COUNSEL
TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE LAW IS AVAILABLE.
SECTION 3.3 UNDERTAKINGS.
(a) Upon execution hereof or as soon thereafter as practical,
management of New World and CTV shall execute, acknowledge and deliver
(or shall cause to be executed, acknowledged and delivered) any and all
certificates, opinions, financial statements, schedules, agreements,
resolutions, rulings or other instruments required by this Agreement to
be so delivered, together with such other items as may be reasonably
requested by the parties hereto and their respective legal counsel in
order to effectuate or evidence the transactions contemplated hereby,
subject only to the conditions to Closing referenced hereinbelow.
(b) CTV hereby undertakes and provides assurances to New World
that it will file a current report on Form 8-K within 15 days of the
Closing in compliance with the Exchange Act, with the audited financial
statements of CTV and the pro forma statements required by the Exchange
Act and by Regulation S-B by amendment of the Form 8-K within the time
parameters established by the Exchange Act, and will otherwise comply
with the reporting requirements of the Exchange Act.
SECTION 3.4 CLOSING. The closing ("Closing") of the
transactions contemplated by this Agreement shall be as of the date in
which all of the shareholders of CTV have approved the terms of this
Agreement, all conditions to Closing referenced in this Agreement have
been satisfied or waived by CTV and all documentation referenced herein
is delivered to the respective party herein, which shall be the date of
May 18, 1999, unless a different date is mutually agreed to in writing
by the parties hereto ("Closing Date").
SECTION 3.5 TERMINATION.
(a) This Agreement may be terminated by the board of directors
of either New World or CTV at any time prior to the Closing Date if:
(i) there shall be any action or proceeding before
any court or any governmental body which shall seek to
restrain, prohibit or invalidate the transactions contemplated
by this Agreement and which, in the judgment of such board of
directors, made in good faith and based on the advice of its
legal counsel, makes it inadvisable to proceed with the
exchange contemplated by this Agreement; or
15
(ii) any of the transactions contemplated hereby are
disapproved by any regulatory authority whose approval is
required to consummate such transactions; or
(iii) the conditions described in Article VI below
have not been satisfied in full; or
In the event of termination pursuant to this paragraph (a) of this
Section 3.5, no obligation, right, or liability shall arise hereunder
and each party shall bear all of the expenses incurred by it in
connection with the negotiation, drafting and execution of this
Agreement and the transactions herein contemplated;
(b) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of New World if CTV
shall fail to comply in any material respect with any of its covenants
or agreements contained in this Agreement or if any of the
representations or warranties of CTV contained herein shall be
inaccurate in any material respect, which noncompliance or inaccuracy
is not cured after 20 days' written notice thereof is given to CTV. If
this Agreement is terminated pursuant to this paragraph (b) of this
Section 3.5, this Agreement shall be of no further force or effect and
no obligation, right or liability shall arise hereunder; and
(c) This Agreement may be terminated at any time prior to the
Closing Date by action of the board of directors of CTV if New World
shall fail to comply in any material respect with any of its covenants
or agreements contained in this Agreement or if any of the
representations or warranties of New World contained herein shall be
inaccurate in any material respect, which noncompliance or inaccuracy
is not cured after 20 days written notice thereof is given to New
World. If this Agreement is terminated pursuant to this paragraph (c)
of Section 3.5, this Agreement shall be of no further force or effect
and no obligation, right or liability shall arise hereunder.
(d) This Agreement shall be terminated if the Closing of the
transactions contemplated in this Agreement have not occurred by the
Closing Date as that term is defined in Section 3.4.
SECTION 3.6 DIRECTORS OF NEW WORLD. Upon the Closing, the
present members of New World's Board of Directors shall tender their
resignations SERIATIM so that the following persons are appointed
directors of New World in accordance with procedures set forth in the
New World bylaws: Xxxxx Xxxxx, Xxxxxxx Xxxxxx and Xxxx Xxxxxx. Each
director shall hold office until his successor shall have been duly
elected and shall have qualified or until his or her earlier death,
resignation or removal.
SECTION 3.7 OFFICERS OF NEW WORLD. Upon the Closing, the
present officers of New World shall tender their resignations and
provide New World with applicable releases concerning their respective
employment agreements. Simultaneous therewith, the following persons
shall be elected as officers of New World in accordance with procedures
set forth in the New World bylaws:
NAME OFFICE
Xxxxxxx Xxxxxx Chairman
Xxxxx Xxxxx Chief Executive Officer and President
Xxxxxxx X. Xxxxxx Chief Financial Officer and Secretary
SECTION 3.8 EFFECTIVE DATE. The parties hereto hereby agree
that the Effective Date of the transaction proposed herein shall be
5:00 P.M. Pacific Standard Time on May 18, 1999, unless the parties
agree otherwise, in writing.
16
ARTICLE IV
SPECIAL COVENANTS
SECTION 4.1 ACCESS TO PROPERTIES AND RECORDS. New World and
CTV will each afford to the officers and authorized representatives of
the other full access to the properties, books and records of New World
and CTV, as the case may be, in order that each may have full
opportunity to make such reasonable investigation as it shall desire to
make of the affairs of the other and each will furnish the other with
such additional financial and operating data and other information as
to the business and properties of New World and CTV, as the case may
be, as the other shall from time to time prior to Closing reasonably
request. In addition, New World shall provide to CTV subsequent to
Closing all information necessary to allow CTV to properly prepare and
file all reports required to be filed pursuant to the Exchange Act,
including all information concerning New World's subsidiaries which
existed prior to Closing.
SECTION 4.2 INFORMATION FOR NEW WORLD PUBLIC REPORTS. CTV will
furnish New World with all information concerning CTV and the CTV
Stockholders, including all financial statements, required for
inclusion in any public report to be filed by New World pursuant to the
Securities Act, the Exchange Act, or any other applicable federal or
state law. CTV covenants that all information so furnished to New
World, including the financial statements described in Section 1.4,
shall be true and correct in all material respects without omission of
any material fact required to make the information stated not
misleading. Similarly, New World will provide all information
concerning its history and operations reasonably requested by CTV.
SECTION 4.3 SPECIAL COVENANTS AND REPRESENTATIONS REGARDING
THE NEW WORLD COMMON SHARES TO BE ISSUED IN THE EXCHANGE. The
consummation of this Agreement, including the issuance of the New World
Common Shares to the stockholders of CTV as contemplated hereby,
constitutes the offer and sale of securities under the Securities Act,
and applicable state statutes. Such transaction shall be consummated in
reliance on exemptions from the registration and prospectus delivery
requirements of such statutes which depend, INTER ALIA, upon the
circumstances under which the CTV stockholders acquire such securities.
In connection with reliance upon exemptions from the registration and
prospectus delivery requirements for such transactions, at the Closing,
CTV shall cause to be delivered, and the CTV stockholders shall deliver
to New World, the Investment Letters and Purchasers' Questionnaires
referenced in Section 3.1. The shareholders of CTV shall receive
disclosure materials attached hereto as Exhibit "A".
SECTION 4.4 THIRD PARTY CONSENTS. New World and CTV agree to
cooperate with each other in order to obtain any required third party
consents to this Agreement and the transactions herein contemplated.
SECTION 4.5 ACTIONS PRIOR TO CLOSING.
(a) From and after the date of this Agreement until the
Closing Date and except as set forth in the New World or CTV Schedules
or as permitted or contemplated by this Agreement, CTV and New World,
to the extent applicable, will each use its best efforts to:
(i) carry on its business in substantially the same
manner as it has heretofore;
(ii) maintain and keep its properties in states of
good repair and condition as at present, except for
depreciation due to ordinary wear and tear and damage due to
casualty;
17
(iii) maintain in full force and effect insurance
comparable in amount and in scope of coverage to that now
maintained by it;
(iv) perform in all material respects all of its
obligations under material contracts, leases and instruments
relating to or affecting its assets, properties and business;
(v) maintain and preserve its business organization
intact, to retain its key employees and to maintain its
relationship with its material suppliers and customers; and
(vi) fully comply with and perform in all material
respects all obligations and duties imposed on it by all
federal and state laws and all rules, regulations and orders
imposed by federal or state governmental authorities.
(b) From and after the date of this Agreement until the
Closing Date, neither New World nor CTV will, without the prior consent
of the other party:
(i) except as otherwise specifically set forth
herein, make any change in their respective certificates or
articles of incorporation or bylaws;
(ii) declare or pay any dividend on its outstanding
shares of capital stock, except as may otherwise be required
by law, or effect any stock split or otherwise change its
capitalization, except as provided herein;
(iii) enter into or amend any employment, severance
or similar agreements or arrangements with any directors or
officers;
(iv) grant, confer or award any options, warrants,
conversion rights or other rights not existing on the date
hereof to acquire any shares of its capital stock; or
(v) purchase or redeem any shares of its capital
stock, except as disclosed herein.
SECTION 4.6 INDEMNIFICATION.
(a) CTV and its officers and directors hereby agree to
indemnify New World and each of the officers, agents and directors of
New World as of the date of execution of this Agreement against any
loss, liability, claim, damage or expense (including, but not limited
to, any and all expense whatsoever reasonably incurred in
investigating, preparing or defending against any litigation, commenced
or threatened or any claim whatsoever), to which it or they may become
subject incurred as a result of CTV's breach of any representation,
warranty or covenant made by CTV in this Agreement. The indemnification
provided for in this paragraph shall survive the Closing and
consummation of the transactions contemplated hereby and termination of
this Agreement for a period of 18 months; and
(b) New World and its officers and directors hereby agrees to
indemnify CTV and each of the officers, agents, directors and current
shareholders of CTV as of the Closing Date against any loss, liability,
claim, damage or expense (including, but not limited to, any and all
expense whatsoever reasonably incurred in investigating, preparing or
defending against any litigation, commenced or threatened or any claim
whatsoever), to which it or they may become subject incurred as a
result of New World's breach of any representation, warranty or
covenant made by New World in this Agreement and particularly the
representation regarding no liabilities referred to in Section 2.4(b).
The indemnification provided for in this Section shall survive the
Closing and consummation of the transactions contemplated hereby and
termination of this Agreement for a period of 18 months.
18
SECTION 4.7 REVERSE STOCK SPLIT. New World and CTV agree that for a period
of one (1) year from the Closing Date, there will be no reverse stock split of
New World's common stock.
ARTICLE V
CONDITIONS PRECEDENT TO OBLIGATIONS
OF NEW WORLD
The obligations of New World under this Agreement are subject to the
satisfaction, at or before the Closing Date, of the following conditions:
SECTION 5.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by CTV in this Agreement were true when made and shall be true at the
Closing Date with the same force and effect as if such representations and
warranties were made at the Closing Date (except for changes therein permitted
by this Agreement), and CTV shall have performed or complied with all covenants
and conditions required by this Agreement to be performed or complied with by
CTV prior to or at the Closing. New World shall be furnished with a certificate,
signed by a duly authorized officer of CTV and dated the Closing Date, to the
foregoing effect.
SECTION 5.2 CTV'S APPROVAL OF AGREEMENT. The Board of Directors and
stockholders of CTV, if such stockholders' approval is so required under
California law, shall have approved this Agreement and the transactions
contemplated thereby as described in Section 4.1.
SECTION 5.3 OFFICER'S CERTIFICATE. New World shall have been furnished with
a certificate dated the Closing Date and signed by a duly authorized officer of
CTV to the effect that no litigation, proceeding, investigation or inquiry is
pending or, to the best knowledge of CTV, threatened, which might result in an
action to enjoin or prevent the consummation of the transactions contemplated by
this Agreement or, to the extent not disclosed in the CTV Schedules, by or
against CTV which might result in any material adverse change in any of the
assets, properties, business or operations of CTV.
SECTION 5.4 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of nor shall any event have occurred which, with the
lapse of time or the giving of notice, may cause or create any material adverse
change in the financial condition, business or operations of CTV.
SECTION 5.5 OTHER ITEMS. New World shall have received such further
documents, certificates or instruments relating to the transactions contemplated
hereby as New World may reasonably request.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF CTV
The obligations of CTV under this Agreement are subject to the
satisfaction, at or before the Closing Date (unless otherwise indicated herein),
of the following conditions:
SECTION 6.1 ACCURACY OF REPRESENTATIONS. The representations and warranties
made by New World in this Agreement were true when made and shall be true as of
the Closing Date (except for changes therein permitted by this Agreement) with
the same force and effect as if such representations and warranties were made at
and as of the Closing Date, and New World shall have performed and complied with
all covenants and conditions required by this Agreement to be performed or
complied with by New World prior to or at the Closing. CTV shall have been
furnished with a certificate, signed by a duly authorized executive officer of
New World and dated the Closing Date, to the foregoing effect.
19
SECTION 6.2 OFFICER'S CERTIFICATE. CTV shall be furnished with a
certificate dated the Closing Date and signed by a duly authorized officer of
New World to the effect that no litigation, proceeding, investigation or inquiry
is pending or, to the best knowledge of New World, threatened, which might
result in an action to enjoin or prevent the consummation of the transactions
contemplated by this Agreement or, to the extent not disclosed in the New World
Schedules, by or against New World which might result in any material adverse
change in any of the assets, properties, business or operations of New World.
SECTION 6.3 NO MATERIAL ADVERSE CHANGE. Prior to the Closing Date, there
shall not have occurred any material adverse change in the financial condition,
business or operations of nor shall any event have occurred which, with the
lapse of time or the giving of notice, may cause or create any material adverse
change in the financial condition, business or operations of New World.
SECTION 6.5 COMPLIANCE WITH REPORTING REQUIREMENTS. As of the Closing Date,
New World shall be current in, and in compliance with all requirements of, all
filings required to be tendered to the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934, as amended.
SECTION 6.6 CANCELLATION. Simultaneous with the Closing of this Agreement,
New World shall have received for cancellation an aggregate of 7,425,000 shares
of its previously issued and outstanding common stock. As a result and on
Closing Date, as defined herein, there will be no more than 3,356,500 common
shares issued and outstanding
SECTION 6.7 ADDITIONAL EQUITY INFUSION INTO CTV. At the Closing, CTV shall
have received at least $500,000 in gross proceeds from the equity financing
under the terms and conditions acceptable to CTV. The proceeds of such financing
shall be deposited in the designated escrow account and released to CTV upon the
Closing of the transaction contemplated hereby. CTV may, at its sole discretion,
waive this condition at the Closing.
SECTION 6.8 LOCK-UP AGREEMENTS. At the Closing, CTV shall receive Lock-up
Agreements from certain New World shareholders.
SECTION 6.9 NEW WORLD'S TRADING STATUS. As of the Closing Date, as defined
herein, New World's Common Stock shall continue to be trading on NASD's Bulletin
Board and New World shall comply in all respects with the New World's reporting,
filing and other obligations under the by-laws or rules of the NASD.
SECTION 6.10 NO LIABILITIES. As of the Closing Date, as defined herein the
New World balance sheet and the notes thereto, shall reflect that New World has:
(i) no receivables; (ii) no accounts payable; (iii) except as stated herein or
in the New World Schedules, no liabilities, whether absolute, accrued, known or
unknown, contingent or otherwise, whether due or to become due, including,
without limitation, liabilities as guarantor under any guaranty or other
governmental charges. In the event New World is bound by or otherwise liable for
any contract, lease or other agreement or any other liability at the date of
Closing, New World's existing "inside" officers and directors shall execute and
deliver a binding Indemnification and Hold Harmless Agreement at Closing
relevant to such obligations.
SECTION 6.11 OTHER ITEMS. CTV shall have received such further documents,
certificates, or instruments relating to the transactions contemplated hereby as
CTV may reasonably request.
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ARTICLE VII
MISCELLANEOUS
SECTION 7.1 BROKERS AND FINDERS. Except as set forth in Schedule 7.1, each
party hereto hereby represents and warrants that it is under no obligation,
express or implied, to pay certain finders in connection with the bringing of
the parties together in the negotiation, execution, or consummation of this
Agreement. The parties each agree to indemnify the other against any claim by
any third person not listed in Schedule 7.1 for any commission, brokerage or
finder's fee or other payment with respect to this Agreement or the transactions
contemplated hereby based on any alleged agreement or understanding between the
indemnifying party and such third person, whether express or implied from the
actions of the indemnifying party.
SECTION 7.2 LAW. FORUM AND JURISDICTION. This Agreement shall be construed
and interpreted in accordance with the laws of the State of California.
SECTION 7.3 NOTICES. Any notices or other communications required or
permitted hereunder shall be sufficiently given if personally delivered to it or
sent by registered mail or certified mail, postage prepaid, or by prepaid
telegram addressed as follows:
If to New World: New World Publishing, Inc.
0000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
With copies to: Xxxxxxx Xxxxxxxxx, Esq.
---------------
Xxxxx XxXxxxxxxx P.C.
0000 X. Xxxxxx Xx., Xxxxx 000
Xxxxxx, XX 00000
If to CTV: Communications Television, Inc.
00000 Xx Xxxxxx Xxx., 0xx Xxxxx
Xxx Xxxxxxx, XX 00000
With copies to: Xxxxxxx Xxxxxxx, Esq. (Corporate Counsel)
Xxxxxxx, Mesereau & Leids, LLP
0000 Xxxxxx xx Xxxxx, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Xxxxx Xxxxx, Esq. (Special Securities Counsel)
Law Offices of Xxxxx X. Xxxxx
000 Xxxxxxx Xxxxxx Xx., Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
or such other addresses as shall be furnished in writing by any party in the
manner for giving notices hereunder, and any such notice or communication shall
be deemed to have been given as of the date so delivered, mailed, or
telegraphed.
SECTION 7.4 ATTORNEYS' FEES. The prevailing party in any proceeding
brought to enforce or interpret any provision of this Agreement shall be
entitled to recover its reasonable attorney's fees, costs and disbursements
incurred in connection with such proceeding, including but not limited to the
costs of experts, accountants and consultants and all other costs and services
reasonably related to the proceeding, including those incurred in any bankruptcy
or appeal, from the non-prevailing party or parties.
21
SECTION 7.5 CONFIDENTIALITY. Each party hereto agrees with the other
parties that, unless and until the reorganization contemplated by this Agreement
has been consummated, they and their representatives will hold in strict
confidence all data and information obtained with respect to another party or
any subsidiary thereof from any representative, officer, director or employee,
or from any books or records or from personal inspection, of such other party,
and shall not use such data or information or disclose the same to others,
except: (i) to the extent such data is a matter of public knowledge or is
required by law to be published; and (ii) to the extent that such data or
information must be used or disclosed in order to consummate the transactions
contemplated by this Agreement.
SECTION 7.6 SCHEDULES; KNOWLEDGE. Each party is presumed to have full
knowledge of all information set forth in the other party's schedules delivered
pursuant to this Agreement.
SECTION 7.7 THIRD PARTY BENEFICIARIES. This contract is solely between
New World and CTV and, except for the CTV shareholders or as otherwise
specifically provided herein, no director, officer, stockholder, employee,
agent, independent contractor or any other person or entity shall be deemed to
be a third party beneficiary of this Agreement.
SECTION 7.8 ENTIRE AGREEMENT. This Agreement represents the entire
agreement between the parties relating to the subject matter hereof. This
Agreement alone fully and completely expresses the agreement of the parties
relating to the subject matter hereof. There are no other courses of dealing,
understandings, agreements, representations or warranties, written or oral,
except as set forth herein. This Agreement may not be amended or modified,
except by a written agreement signed by all parties hereto.
SECTION 7.9 SURVIVAL; TERMINATION. The representations, warranties and
covenants of the respective parties shall survive the Closing Date and the
consummation of the transactions herein contemplated for three years.
SECTION 7.10 COUNTERPARTS; FACSIMILE SIGNATURES. This Agreement may be
executed in multiple counterparts, each of which shall be deemed an original and
all of which taken together shall be but a single instrument. This Agreement may
be executed by providing facsimile signatures by the parties hereto, however,
the original signatures shall be delivered within five (5) business days from
the date of execution of this Agreement.
SECTION 7.11 AMENDMENT OR WAIVER. Every right and remedy provided herein
shall be cumulative with every other right and remedy, whether conferred herein,
at law, or in equity, and may be enforced concurrently herewith, and no waiver
by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, theretofore, or
thereafter occurring or existing. At any time prior to the Closing Date, this
Agreement may be amended by a writing signed by all parties hereto, with respect
to any of the terms contained herein, and any term or condition of this
Agreement may be waived or the time for performance hereof may be extended by a
writing signed by the party or parties for whose benefit the provision is
intended.
SECTION 7.12 INCORPORATION OF RECITALS. All of the recitals hereof are
incorporated by this reference and are made a part hereof as though set forth at
length herein.
SECTION 7.13 EXPENSES. Each party herein shall bear all of their
respective costs and expenses incurred in connection with the negotiation of
this Agreement and in the consummation of the transactions provided for herein
and the preparation therefor.
SECTION 7.14 HEADINGS; CONTEXT. The headings of the sections and paragraphs
contained in this Agreement are for convenience of reference only and do not
form a part hereof and in no way modify, interpret or construe the meaning of
this Agreement.
22
SECTION 7.15 BENEFIT. This Agreement shall be binding upon and shall
inure only to the benefit of the parties hereto, and their permitted assigns
hereunder. This Agreement shall not be assigned by any party without the prior
written consent of the other party.
SECTION 7.16 PUBLIC ANNOUNCEMENTS. Except as may be required by law,
neither party shall make any public announcement or filing with respect to the
transactions provided for herein without the prior consent of the other party
hereto.
SECTION 7.17 SEVERABILITY. In the event that any particular provision or
provisions of this Agreement or the other agreements contained herein shall for
any reason hereafter be determined to be unenforceable, or in violation of any
law, governmental order or regulation, such unenforceability or violation shall
not affect the remaining provisions of such agreements, which shall continue in
full force and effect and be binding upon the respective parties hereto.
SECTION 7.18 FAILURE OF CONDITIONS; TERMINATION. In the event any of the
conditions specified in this Agreement shall not be fulfilled on or before the
Closing Date, either of the parties have the right either to proceed or, upon
prompt written notice to the other, to terminate and rescind this Agreement
without liability to any other party. The election to proceed shall not affect
the right of such electing party reasonably to require the other party to
continue to use its efforts to fulfill the unmet conditions.
SECTION 7.19 NO STRICT CONSTRUCTION. The language of this Agreement shall
be construed as a whole, according to its fair meaning and intendment, and not
strictly for or against either party hereto, regardless of who drafted or was
principally responsible for drafting the Agreement or terms or conditions
hereof.
SECTION 7.20 EXECUTION KNOWING AND VOLUNTARY. In executing this
Agreement, the parties severally acknowledge and represent that each: (a) has
fully and carefully read and considered this Agreement; (b) has been or has had
the opportunity to be fully apprized of its attorneys of the legal effect and
meaning of this document and all terms and conditions hereof; and (c) is
executing this Agreement voluntarily, free from any influence, coercion or
duress of any kind.
SECTION 7.21 JOINT PREPARATION. This Agreement is to be deemed to have
been prepared jointly by the parties hereto and any uncertainty or ambiguity
existing herein, if any, shall not be interpreted against any party, but shall
be interpreted according to the application of the rules of interpretation for
arm's length agreements.
SECTION 7.22 ARBITRATION AND VENUE. Any controversy arising out of or
relating to this Agreement or any modification or extension thereof, including
any claim for damages and/or rescission, shall be settled by arbitration in Los
Angeles, California in accordance with the Commercial Arbitration Rules of the
American Arbitration Association before one arbitrator. The arbitrator sitting
in any such controversy shall have no power to alter or modify any express
provisions of this Agreement or to render any award which by its terms effects
any such alteration, or modification. The parties consent to the jurisdiction of
the Superior Court of California, and of the United States District Court for
the Central District of California for all purposes in connection with such
arbitration including the entry of judgment on any award. The parties consent
that any process or notice of motion or other application to either of said
courts, and any paper in connection with arbitration, may be served by certified
mail or the equivalent, return receipt requested, or by personal service or in
such manner as may be permissible under the rules of the applicable court or
arbitration tribunal, provided a reasonable time for appearance is allowed. Each
of the parties shall, subject to the award of the arbitrators, pay an equal
share of the arbitrators' fees except the arbitrators shall have the power to
award recovery of all costs (including the attorneys' fees, administrative fees,
arbitrators' fees and court fees) to the prevailing party, as determined by the
arbitrators. This section shall survive the termination of this Agreement.
23
IN WITNESS WHEREOF, the corporate parties hereto have caused
this Agreement to be executed by their respective officers, hereunto duly
authorized, and entered into as of the date first above written.
NEW WORLD PUBLISHING, INC.
ATTEST:
/s/ Xxxxxx X. Xxxxxxx By: /s/ Xxxx X. Xxxx
-------------------------- --------------------------------
Secretary or President
Assistant Secretary
ATTEST: COMMUNICATIONS TELEVISION, INC.
/s/ Xxxxxxx Xxxxxx By: /s/ Xxxxx Xxxxx
-------------------------- --------------------------------
Secretary or President
Assistant Secretary
24
CTV SHAREHOLDERS:
Name:____________________________
By:____________________________
Its:____________________________
25
SCHEDULE I
LIST OF CTV SHAREHOLDERS
ON FILE WITH CTV'S CORPORATE RECORDS
26
List of CTV Shareholders
# of CTV Shares # of New World Shares
Name to be Exchanged to be Issued
TOTAL _______ 19,020,167
27
EXHIBIT "A"
DISCLOSURE MATERIALS
28
THIS DISCLOSURE INFORMATION IS NOT TO BE REPRODUCED OR DISTRIBUTED AND IS FOR
THE CONFIDENTIAL USE OF THE NAMED INDIVIDUAL AND HIS OR HER ADVISORS ONLY. YOU
SHOULD CAREFULLY REVIEW ALL THE INFORMATION, ESPECIALLY THE SECTION ENTITLED
"RISK FACTORS." THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), IN RELIANCE UPON
CERTAIN EXEMPTIONS FROM REGISTRATION SET FORTH IN THE SECURITIES ACT. THE
SECURITIES HAVE NOT BEEN REGISTERED WITH ANY STATE SECURITIES AUTHORITIES IN
RELIANCE ON EXEMPTIONS FROM SUCH REGISTRATION. IN MAKING AN INVESTMENT DECISION,
INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE
OFFERING, INCLUDING THE RISKS INVOLVED. THE SECURITIES HAVE NOT BEEN RECOMMENDED
BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY.
FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR
ADEQUACY OF THIS INFORMATION. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE. THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED PURSUANT TO
REGISTRATION THEREUNDER OR EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISK OF AN INVESTMENT IN THE
SECURITIES FOR AN INDEFINITE PERIOD OF TIME.
NEW WORLD PUBLISHING, INC.
REORGANIZATION
On April 20, 1999, New World Publishing, Inc., a Colorado corporation
("New World"), and Communications Television, Inc., a California corporation
("CTV") (collectively the "Company"), entered into a Letter of Intent providing
for the reorganization of CTV with and into New World (the "Reorganization"),
with CTV becoming a wholly-owned subsidiary of New World. In connection with the
Reorganization, all of the outstanding common and preferred stock of CTV are to
be exchanged for 19,020,167 newly issued shares of common voting stock of New
World, for the purpose of effecting a tax-free reorganization pursuant to
sections 351, 354 and 368(a)(1)(B) of the Internal Revenue Code of 1986, as
amended ("IRC").
In exchange for all of CTV Common Shares issued and outstanding, New
World shall issue under the Agreement and Plan of Reorganization (the
"Reorganization Agreement") to which this Disclosure Information is attached as
Exhibit "A", and incorporated therein by reference, an aggregate of 19,020,167
shares ("Securities") to the CTV shareholders on a pro rata basis pursuant to
the exemption from the registration requirements of the Securities Act of 1933
(the "Act") promulgated under Regulation D. The parties believe that the share
exchange transaction shall be consummated on or before May __, 1999. As a
condition of the closing of the share exchange transaction, certain shareholders
of New World agreed to cancel 7,425,000 shares of common stock.
NEW WORLD
New World Publishing, Inc. (the "Company" or "New World") is a Colorado
corporation which was formed as JLQ, Inc. on December 28, 1994 to buy, sell, and
to generally deal in the wholesale distribution of picture frames and to provide
associated services. Since its inception New World has been in the development
stage. Currently, New World has no revenues. See audited financial statements of
the New World which are a part of Form 10-KSB of the New World for the fiscal
year ended January 31, 1999, and which has been incorporated herein and made a
part of this Disclosure Information ("Form 10-KSB").
29
From New World's inception in 1994 to the date hereof, the New World
has had minimal activities. During this period, New World has carried no
substantial inventories or accounts receivable. No independent market surveys
have ever been conducted to determine demand for the New World's products and
services, since New World has never provided substantial products or services.
During this period, New World has carried on no material operations and
generated no revenues. No operations currently are being carried on by New
World. In 1997, New World has investigated certain possibilities and has decided
to focus its future operations primarily in the area of publishing art works. To
that end, in October, 1997, the New World changed its name from JLQ, Inc. to New
World Publishing, Inc. After the share exchange, New World expects to focus its
business on CTV's business.
On October 15, 1997, New World approved a five hundred-for-one forward
split of its common stock. Since October 31, 1997, New World has had a total of
10,781,500 common shares issued and outstanding. New World has not been subject
to any bankruptcy, receivership or similar proceeding.
New World's common stock is listed and trading on the NASD's OTC
Bulletin Board.
CTV
The copy of CTV's Summary of Business Plan has been enclosed with this
Disclosure Statement.
PRIVATE PLACEMENT
Simultaneous with the share exchange transaction, it is anticipated
that the Company shall complete a private offering of the Company's convertible
equity securities in the amount of $500,000 (excluding expenses, if any). No
assurances can be given that such private offering will be completed or that the
anticipated amount of proceeds will be received by the Company.
NEW WORLD SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK, AND CONSEQUENTLY
ARE SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL MEANS WHO HAVE NO NEED FOR
LIQUIDITY, WHO CAN AFFORD A TOTAL LOSS OF THEIR INVESTMENT, AND WHO UNDERSTAND,
OR HAVE BEEN ADVISED AS TO, THE LONG TERM NATURE OF, AND RISK FACTORS ASSOCIATED
WITH, THIS INVESTMENT. SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT, OR UNDER THE
SECURITIES LAWS OF ANY STATE, NOR HAS THE U.S. SECURITIES AND EXCHANGE
COMMISSION THE ("SEC") OR ANY STATE SECURITIES COMMISSION APPROVED OR
DISAPPROVED OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THERE IS PRESENTLY A LIMITED PUBLIC TRADING MARKET FOR THE COMPANY'S COMMON
STOCK. THE SHARES ISSUABLE HEREUNDER ARE NOT IMMEDIATELY TRADEABLE IN SUCH
PUBLIC SECURITIES MARKET. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO
BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
THE CONTENTS OF THIS DISCLOSURE INFORMATION SHOULD NOT BE CONSTRUED BY
PROSPECTIVE INVESTORS AS LEGAL OR TAX ADVICE, AND NO REPRESENTATIONS OR
WARRANTIES OF ANY KIND ARE INTENDED OR SHOULD BE INFERRED REGARDING THE ECONOMIC
RETURN OR THE TAX CONSEQUENCES TO INVESTORS WHO ACQUIRE THE SECURITIES.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN ATTORNEYS, ACCOUNTANTS AND
FINANCIAL ADVISORS ABOUT THE LEGAL AND TAX CONSEQUENCES AND THE FINANCIAL RISKS
AND MERITS OF AN INVESTMENT IN THE SECURITIES. NO ADVISORS TO THE COMPANY,
INCLUDING WITHOUT LIMITATION ATTORNEYS, ACCOUNTANTS AND FINANCIAL ADVISORS SHALL
BE LIABLE TO INVESTORS IN THIS OFFERING WITH RESPECT TO THE COMPANY OR THE
INFORMATION DISCLOSED HEREIN.
30
RISK FACTORS
THIS OFFERING OF NEW WORLD SHARES INVOLVES A HIGH DEGREE OF RISK. IN ADDITION TO
THE OTHER INFORMATION SET FORTH HEREIN, THE FOLLOWING RISK FACTORS SHOULD BE
CONSIDERED CAREFULLY IN EVALUATING THE COMPANY AND ITS BUSINESS BEFORE
PURCHASING ANY OF THE SHARES OF COMMON STOCK OF THE COMPANY. THIS DISCLOSURE
STATEMENT CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES, SUCH AS STATEMENTS OF THE COMPANY'S PLANS, OBJECTIVES,
EXPECTATIONS AND INTENTIONS. WHEN USED HEREIN, THE WORDS "EXPECTS,"
"ANTICIPATES," "INTENDS" AND "PLANS" AND SIMILAR EXPRESSIONS ARE INTENDED TO
IDENTIFY CERTAIN OF THESE FORWARD-LOOKING STATEMENTS. THE CAUTIONARY STATEMENTS
MADE IN HEREIN SHOULD BE READ AS BEING APPLICABLE TO ALL RELATED FORWARD-LOOKING
STATEMENTS WHEREVER THEY APPEAR IN THIS DISCLOSURE STATEMENT. THE COMPANY'S
ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED HEREIN. FACTORS THAT
COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THOSE DISCUSSED BELOW, AS
WELL AS THOSE DISCUSSED ELSEWHERE HEREIN.
LIMITED OPERATING HISTORY
New World has no revenues and only limited operations. There can be no assurance
that following the share exchange transaction with CTV, New World (with CTV as
its wholly-owned subsidiary) will be successful in accomplishing CTV's business
goals, and the failure to do so could have a material adverse effect on New
World's business, results of operations and financial condition.
CHANGE IN CONTROL
New World's primary plan of operation is based upon the share exchange with CTV.
The issuance of 19,020,167 shares of common stock of New World to CTV
shareholders would result in reduction of percentage of ownership of present
shareholders of New World and in a change in control and management of New World
to nominees of CTV. It is anticipated that upon the completion of the share
exchange transaction, former shareholders of New World will own approximately
15% of New World's issued and outstanding common stock. Accordingly, the former
shareholders of CTV will own approximately 85% of New World's issued and
outstanding common stock. As provided in the Reorganization Agreement, of which
this Disclosure Information is incorporated as "Exhibit A", upon the closing of
the share exchange transaction, the members of CTV's Board of Directors will be
appointed to New World's Board of Directors and will control the management of
New World.
TAXATION
The Reorganization Agreement has been structured in such a way so as to result
in a tax- free treatment to the shareholders of CTV (Sections 351, 354 and
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended), however, there
can be no assurances that such business reorganization will meet the statutory
requirements of a tax-free reorganization or that the parties will obtain the
intended tax-free treatment upon a transfer of stock. A non-qualifying
reorganization could result in the imposition of both federal and state taxes
which may have an adverse effect on both parties to the transaction.
POTENTIAL DILUTIVE EFFECT OF FUTURE OFFERINGS
The Company expects to engage in future financings over the next several years.
Other than the private placement of $500,000, there are no specific plans to
complete any such financings and there can be no assurances that such financings
will ever be completed. However, any such financings could involve the issuance
of additional securities of the Company and result in the dilution of the
ownership interests of the present and prospective shareholders of the Company.
31
CONTROL BY PRINCIPAL STOCKHOLDERS, EXECUTIVE OFFICERS AND DIRECTORS
Upon completion of the share exchange, the CTV's executive officers and
directors (and their affiliates) will, in the aggregate, own more than 64.6% of
the Company's outstanding Common Stock. As a result, such persons, acting
together, will have the ability to control all matters submitted to stockholders
of the Company for approval (including the election and removal of directors and
any merger, consolidation or sale of all or substantially all of the Company's
assets) and to control the management and affairs of the Company. Accordingly,
such concentration of ownership may have the effect of delaying, deferring or
preventing a change in control of the Company, impede a merger, consolidation,
takeover or other business combination involving the Company or discourage a
potential acquirer from making a tender offer or otherwise attempting to obtain
control of the Company, which in turn could have an adverse effect on the market
price of the Company's Common Stock.
FUTURE CAPITAL NEEDS
The Company currently anticipates that the net proceeds of the anticipated
$500,000 private offering, together with its available funds, will be sufficient
to meet its anticipated needs for working capital, capital expenditures and
business expansion through at least the next three months. Thereafter, the
Company may need to, and indeed intends to, raise additional funds. The Company
intends to raise additional funds in order to fund its anticipated expansion, to
develop new or enhanced services or products, to respond to competitive
pressures and potentially to acquire complementary products, businesses or
technologies. If such additional funds are raised through the issuance of equity
securities, the percentage ownership of the stockholders of the Company will be
reduced, stockholders may experience additional dilution and such securities may
have rights, preferences and privileges senior to those of the Company's Common
Stock. There can be no assurance that additional financing will be available on
terms favorable to the Company or at all. If adequate funds are not available or
are not available on acceptable terms, the Company may not be able to fund its
expansion, take advantage of acquisition opportunities, develop or enhance
services or products or respond to competitive pressures. Such inability could
have a material adverse effect on the Company's business, results of operations
and financial condition.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial amounts of the Company's Common Stock in the public market
after this offering could adversely affect the market price of the Common Stock.
Such sales also might make it more difficult for the Company to sell equity or
equity-related securities in the future at a time and price that the Company
deems appropriate. There will be approximately 21,333,333 shares of Common Stock
outstanding, of which at least 19,020,167 will be restricted securities
("Restricted Securities") (including the shares offered hereby) under the
Securities Act . These Restricted Securities will be eligible for sale from time
to time upon expiration of applicable holding periods under Rule 144 under the
Securities Act. In addition, the holders of the securities issued in this
Offering are entitled to certain rights with respect to registration of such
shares for sale in the public market. If such holders sell in the public market,
such sales could have a material adverse effect on the market price of the
Company's Common Stock.
LIMITED MARKET FOR COMMON STOCK
The Company's Common Stock is not eligible for trading on any national or
regional exchange. The Company's common Stock is eligible for trading in the
NASD OTC Bulletin Board. There has been a limited public market for the
Company's Common Stock, and there can be no assurance that an active public
market will develop or be sustained after the Reorganization or that investors
will be able to sell the Common Stock should they desire to do so. The exchange
ratio was determined by negotiations between the Company and management of CTV
and may bear no relationship to the price at which the Common Stock will trade
after the closing of the Reorganization pursuant to the Reorganization
Agreement.
32
DIVIDEND POLICY
See Form 10-KSB.
BUSINESS OF THE COMPANY
See Form 10-KSB.
See CTV's Summary of Business Plan.
REORGANIZATION OF THE COMPANY
On April 20, 1999, New World and CTV (collectively the "Company"), entered into
a Letter of Intent providing for the reorganization of CTV with and into New
World, with CTV becoming a wholly-owned subsidiary of New World. In connection
with the Reorganization, all of the outstanding common stock of CTV was
exchanged for shares of common voting stock of New World, for the purpose of
effecting a tax-free reorganization pursuant to sections 351, 354 and
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended ("IRC").
In exchange for all of CTV Common Shares issued and outstanding, New World shall
issue under the Agreement and Plan of Reorganization an aggregate of 19,020,167
shares to the CTV shareholders on a pro rata basis. As a condition of the
closing of the share exchange transaction, certain shareholders of New World
agreed to cancel 7,425,000 shares of common stock.
MANAGEMENT OF THE COMPANY
See Form 10-KSB.
Upon the closing of the Reorganization, the present members of New World's Board
of Directors shall tender their resignations SERIATIM so that the following
persons are appointed directors of New World in accordance with procedures set
forth in the New World bylaws: Xxxxx Xxxxx, Xxxxxxx Xxxxxx and Xxxx Xxxxxx. Each
director shall hold office until his successor shall have been duly elected and
shall have qualified or until his or her earlier death, resignation or removal.
Also, upon the closing of the Reorganization, the present officers of New World
shall tender their resignations and provide New World with applicable releases
concerning their respective employment agreements, if any. Simultaneous
therewith, the following persons shall be elected as officers of New World in
accordance with procedures set forth in the New World bylaws:
NAME OFFICE
Xxxxxxx Xxxxxx Chairman
Xxxxx Xxxxx Chief Executive Officer and President
Xxxxxxx X. Xxxxxx Chief Financial Officer and Secretary
See Summary Business Plan of CTV for further information.
33
DESCRIPTION OF SECURITIES TO BE ISSUED
The Securities offered hereunder consist of shares "restricted stock" of the
Company's Common Stock. The following description is intended as a summary only.
Each CTV shareholder shall refer to the full text of the Reorganization
Agreement.
THE SECURITIES
The securities offered for the exchange under the Agreement consist of
19,020,167 shares of the Company's Common Stock (the "Securities"), issuable at
a ratio of 2.3201833 "new" shares for 1 "old" CTV share (whether Common or
Preferred).
The exchange ratio and terms of the Reorganization have been determined by the
Company and neither bears any relationship to the Company's assets, book value,
potential earnings or any other recognized criteria of value. There can be no
assurance that an investment in this Reorganization will ever be profitable.
RESTRICTIONS ON TRANSFER FOR U.S. PERSONS THAT WHO ARE ACQUIRING SECURITIES
PURSUANT TO REGULATION D
The shares of Common Stock issued pursuant to the Reorganization Agreement, will
be restricted under state and federal laws regulating securities. The shares of
Common Stock have not been registered under the Act, or any other similar state
statute, in reliance upon what the Company believes to be exemptions from the
registration requirements contained therein. Accordingly, the shares of Common
Stock will be "Restricted Securities" as defined in Rule 144 of the general
rules and regulations under the Securities Act, and will bear the following
legend:
THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF CERTAIN STATES, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO (I) AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ANY
APPLICABLE STATE LAWS, (II) TO THE EXTENT APPLICABLE, RULE 144 UNDER THE ACT (OR
ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR
(III) AN OPINION OF COUNSEL, IF SUCH OPINION SHALL BE REASONABLY SATISFACTORY TO
COUNSEL TO THE ISSUER, THAT AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND
APPLICABLE STATE LAW IS AVAILABLE.
As "Restricted Securities," an investor must hold them indefinitely and may not
dispose or otherwise sell them without registration under the Securities Act and
without registration under any applicable state securities laws or unless an
exemption from registration is available. The Company has the absolute right, in
its sole discretion, to approve or disapprove such transfer.
Absent registration, Rule 144 allows sales, without registration under the
Securities Act, on limited amounts of restricted securities that have been held
for at least one year in certain circumstances.
Any certificate or other document evidencing the shares of Common Stock will be
imprinted with a conspicuous legend stating that the shares of Common Stock have
not been registered under the Securities Act and referring to the restrictions
on transferability and sale of the shares of Common Stock. In addition, the
Company's records concerning the share of Common Stock will include "stop
transfer notations" with respect to such securities.
34
PRINCIPAL SHAREHOLDERS
See Form 10-KSB for Principal Shareholders of New World .
PRINCIPAL STOCKHOLDERS, DIRECTORS AND OFFICERS. The following table sets forth
the beneficial ownership of the Company's Common Stock, following the
Reorganization as of May __, 1999, by (i) each person known by the Company to
beneficially own 5% or more of the outstanding shares of Common Stock, (ii) each
current director and officer of the Company, and (iii) all directors and
executive officers of the Company as a group. The information set forth in the
table and accompanying footnotes has been furnished by the named beneficial
owners.
Amount of
Name and Beneficial Percent of
Address Ownership (1) Class (1)
Xxxxx Xxxxx (1) 7,392,684 (2) 33.03%
Chief Executive Officer, President and Director
Xxxxxxx Xxxxxx (1) 6,513,915 (3) 29.11%
Chairman
Xxxxxxx Xxxxxx (1) 551,044 (4) 2.46%
Chief Financial Officer,
Secretary and Director
Xxxx Xxxxxx (1) 0 0%
Xxxx and Xxxxxx Xxxx 1,200,000 5.63%
0000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
All Directors and Officers
as a Group (4 persons) 14,457,643 64.6%
-------------------------------
As used in this table, "beneficial ownership" is determined in accordance with
the rules of the Securities and Exchange Commission and generally includes
voting or investment power with respect to the shares shown. Except as indicated
by footnote and subject to community property laws where applicable, to the
Company's knowledge the stockholders named in the table have sole voting and
investment power with respect to all shares of Common Stock shown as
beneficially owned by them.
(1) C/o Communications Television, Inc. address: 00000 Xx Xxxxxx Xxxxxx, 0xx
Xxxxx, Xxx Xxxxxxx, XX 00000.
(2) Based on 3,186,250 shares of common stock of CTV held by Xx. Xxxxx, and the
exchange ratio of 2.3201833 shares of New World for each share of common or
preferred stock of CTV.
(3) Based on 2,807,500 shares of common stock of CTV held by Xx. Xxxxxx, and
the exchange ratio of 2.3201833 shares of New World for each share of
common or preferred stock of CTV.
(4) Based on 237,500 shares of common stock of CTV held by Xx. Xxxxxx, and the
exchange ratio of 2.3201833 shares of New World for each share of common or
preferred stock of CTV.
35
DESCRIPTION OF CAPITAL STOCK
See Form 10-KSB.
COMMON STOCK
After completion of the Reorganization, 21,333,333 shares will be issued
and outstanding, excluding any securities to be issued in the anticipated
$500,000 private placement.
EXCHANGE PROCEDURE
The shares of common stock of New World will be issued in exchange for CTV
shares of common or preferred stock to CTV shareholders who appropriately
complete and deliver a signed Agreement and Plan of Reorganization together with
the Investment Letter and Power of Attorney, which is provided as an Exhibit "B"
to the Reorganization Agreement, the CTV stock certificates with duly executed
stock powers, and such other documents as may be requested (collectively the
"Reorganization Documents"), pursuant to the instructions of CTV management.
The Reorganization Documents set forth certain terms and conditions
regarding an investment in the Securities. In addition, the Reorganization
Documents contain representations and warranties of the CTV shareholders that
will be relied upon by the Company in complying with its obligations under the
applicable securities laws. Therefore, care should be taken in reading and
completing the Reorganization Documents to insure accuracy and completeness.
36
EXHIBIT "B"
FORM OF INVESTMENT LETTER AND POWER OF ATTORNEY
37
INVESTMENT LETTER AND POWER OF ATTORNEY
May , 1999
New World Publishing, Inc.
0000 X. Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
Ladies & Gentlemen:
The undersigned herewith deposits certificate(s) for shares of common stock
and/or preferred stock of Communications Television, Inc., ("CTV"), as described
below (endorsed, or having executed stock powers attached) in acceptance of and
subject to the terms and conditions of that certain Agreement and Plan of
Reorganization (the "Agreement"), between CTV and New World Publishing, Inc.
("New World" or the "Company"), dated May , 1999, receipt of which is hereby
acknowledged, in exchange for shares of Common Stock of New World (the "Exchange
Shares"). If any condition precedent to the Agreement is not satisfied within
the relevant time parameters established in the Agreement (or any extension
thereof), the certificate(s) are to be returned to the undersigned.
The undersigned hereby represents, warrants, covenants and agrees with you
that, in connection with the undersigned's acceptance of the terms of the
Agreement and Exchange Shares and as of the date of this letter:
1. The undersigned has received and has read the Agreement, and hereby
agrees to and accepts the terms and conditions of the Agreement.
2. The undersigned does hereby appoint, Xxxxxxx Xxxxxx, CTV's Chief
Financial Officer ("Attorney") as its lawful attorney and agent with full power
to execute any amendments to the Agreement which may be agreed to after the date
hereof, which amendments would have been approved by the majority of the CTV's
shareholders, on behalf of the undersigned and further grants unto the Attorney,
full power and authority to do and perform each and every act necessary to be
done to complete the same, subject only to removal or substitution by the
undersigned upon written notification to the Attorney of the foregoing.
3. The undersigned is aware that his, her or its acceptance of the Exchange
Shares is irrevocable, absent an extension of the Expiration Date of any
material change to any of the terms and conditions of the Agreement.
4. The undersigned warrants full authority to deposit all shares referred
to above and that New World will acquire a good and unencumbered title thereto.
5. The undersigned has full power and authority to enter into this
agreement and that this agreement constitutes a valid and legally binding
obligation of the undersigned.
6. The undersigned represents that the undersigned is_____/ is not_____an
"Accredited Investor" as that term is defined in Section 501(a) of Regulation D
promulgated under the Securities Act of 1933, as amended (the "Act"), because
the undersigned meets one or more of the following requirements: PLEASE CHECK AS
MANY BOXES THAT APPLY ONLY IF YOU ARE ACCREDITED INVESTOR:
|_| He or she is a natural person whose individual net worth, or joint net worth
with such investor's spouse, exceeds $1,000,000 and either he or she is able to
bear the economic risk of investment in the proposed investments or the proposed
investments will not exceed 10% of his or her net worth or joint net worth with
such investor's spouse;
38
|_| He or she is a natural person who had individual income in excess of
$200,000 in each of the two most recent years, or (except in California) joint
income with such investor's spouse in excess of $300,000 in each of those years
and reasonably expects to reach the same income level in the current year, and
either such investor is able to bear the economic risk of investment in the
proposed investments or the proposed investments will not exceed 10% of his or
her net worth or joint net worth with such investor's spouse;
|_| It is an organization described in ss. 501(c)(3) of the Internal Revenue
Code of 1986 as amended, (i.e., tax exempt entities), corporation, Massachusetts
or similar business trust, or partnership, not formed for the specific purpose
of acquiring the proposed investments, with total assets in excess of
$5,000,000;
|_| It is a trust, with total assets in excess of $5,000,000, not formed for the
specific purpose of acquiring the proposed investments, whose purchases are
directed by a sophisticated person as described under the first alternative
above;
|_| It is a bank as defined in ss. 3(a)(2) of the Securities Act of 1933, or a
savings and loan association or other institution as defined in ss. 3(a)(5)(A)
of the Securities Act of 1933 whether acting in its individual or fiduciary
capacity;
|_| It is a broker registered pursuant toss. 15 of the Securities Exchange Act
of 1934;
|_| It is an insurance company as defined in ss. 2(13) of the Securities Act of
1933;
|_| It is an investment company registered under the Investment Company Act of
1940 or a business development company as defined in ss. 2(a)(48) of that Act;
|_| It is a Small Business Investment Company licensed by the U.S. Small
Business Administration under ss. 301 (c) or (d) of the Small Business
Investment Act of 1958;
|_| It is a private business development company as defined in ss. 202(a)(22) of
the Investment Advisers Act of 1940;
|_| It is an employee benefit plan within the meaning of Title I of the Employee
Retirement Income Security Act of 1974, if the investment decision is made by a
plan fiduciary, as defined in ss. 3(21) of such Act, which is either a bank,
savings and loan association, insurance company, or registered investment
adviser, or if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment decisions made solely by
persons that are Accredited Investors as described above;
|_| He or she is a director or executive officer of the Company;
|_| It is an entity in which all the equity owners are Accredited Investors
since they are all described above.
7. By execution hereof, the undersigned hereby confirms that the New World
common stock to be received in exchange for CTV common stock and/or preferred
stock (the "Securities"), will be acquired for investment for the undersigned's
own account, not as a nominee or agent, and not with a view to the resale or
distribution of any part thereof, and that the undersigned has no present
intention of selling, granting any participation in, or otherwise distributing
the same. By execution hereof, the undersigned further represents the
undersigned does not have any contract, undertaking, agreement or arrangement
with any third party, with respect to any of the Securities.
39
8. The undersigned understands that the Securities are being issued
pursuant to available exemption thereto and have not been registered under the
Securities Act of 1933, as amended (the "1933 Act"), or under any state
securities laws. The undersigned understands that no registration statement has
been filed with the United States Securities and Exchange Commission nor with
any other regulatory authority and that, as a result, any benefit which might
normally accrue to a holder such as me by an impartial review of such a
registration statement by the Securities and Exchange Commission or other
regulatory authority will not be forthcoming. The undersigned understands that
he/she/it cannot sell the Securities unless such sale is registered under the
1933 Act and applicable state securities laws or exemptions from such
registration become available. In this connection the undersigned understands
that the Company has advised the Transfer Agent for the Common Shares that the
Securities are "restricted securities" under the 1933 Act and that they may not
be transferred by the undersigned to any person without the prior consent of the
Company, which consent of the Company will require an opinion of my counsel to
the effect that, in the event the Securities are not registered under the 1933
Act, any transfer as may be proposed by the undersigned must be entitled to an
exemption from the registration provisions of the 1933 Act. To this end, the
undersigned acknowledges that a restrictive legend will be placed upon the
certificate representing the Securities and that the Transfer Agent has been
advised of such facts.
9. The undersigned represents that it is experienced in evaluation and
investing in securities of companies and acknowledges that he/she/it is able to
fend for itself, can bear the economic risk of this investment and has such
knowledge and experience in financial and business matters that it is capable of
evaluating the merits and risks of the investment in the Securities.
10. The undersigned represents that all information provided by the
undersigned herein is true and correct as of the date thereof.
IN WITNESS WHEREOF, the undersigned has duly executed this Investment
Letter as of the date indicated hereon.
Dated: , 1999
Very truly yours,
----------------------------
(signature)
----------------------------
(print name in full)
----------------------------
( address)
40
