EXHIBIT 99.1
AGREEMENT AND PLAN OF EXCHANGE
BY AND AMONG
A.M.S. MARKETING, INC.
ADVANCED IMAGING SYSTEMS, LLC
AND
THE MEMBERS OF ADVANCED IMAGING SYSTEMS, LLC
JULY 28, 2003
AGREEMENT AND PLAN OF EXCHANGE
AGREEMENT (the "Agreement"), dated as of July 28, 2003, by and among
A.M.S. Marketing, Inc., a Delaware corporation ("AMS"), Advanced Imaging
Systems, LLC, a Delaware limited liability company (the "Company"), Xxxxx Xxxxxx
Xxxxxx ("Xxxxxx"), Xxxx Xxxxxx Xxxxxxxxxx ("Xxxxxxxxxx"), Xxxxx Xxxxxxxx
("Xxxxxxxx") and Xxxxxxx X'Xxxxxx ("X'Xxxxxx"; Mujica, Sarafianos, Cinnante and
D'Angelo are hereinafter sometimes referred to individually as a "Member" and
collectively as the "Members").
W I T N E S S E T H:
WHEREAS, the Members own of record and beneficially all of the issued
and outstanding limited liability company interests of the Company on the date
hereof (individually, an "Interest" and collectively, the "Interests"), having
the rights, preferences and privileges set forth in Exhibit A attached hereto:
and
WHEREAS, the Company has elected to be taxed as a corporation for
Federal income tax purposes and, accordingly, the Interests have been treated
for Federal income tax purposes as shares of voting common stock; and
WHEREAS, the Company is engaged in the business of designing,
manufacturing and marketing of plastic and paper credit cards, pre-paid
telephone cards, value storage cards, access entry cards, identity cards and
business cards (the "Business"); and
WHEREAS, AMS, a reporting company under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), is engaged in the business of marketing
pre-owned, brand name photocopy machines for an unrelated third party; and
WHEREAS, the parties to this Agreement intend the transactions
contemplated hereunder to be treated as tax free under Section 351 of the
Internal Revenue Code of 1986, as amended (the "Code"), and to constitute a
reorganization of AMS and the Company as provided under Section 368(a) (1) (B)
of the Code by an exchange of shares of voting common stock pursuant to the
following plan (hereinafter, the "Plan"):
PLAN OF REORGANIZATION. It is intended that the terms and conditions of
this Agreement comply in all respects with Section 368(a) (1) (B) of the Code
and the regulations corresponding thereto, so that the reorganization
contemplated hereby shall qualify as a tax free reorganization under the Code.
Accordingly, it is the intention of the parties hereto that, as a result of this
Agreement, the transactions contemplated hereby shall be accomplished solely by
an exchange of voting common stock of AMS for the Interests and that no gain or
loss shall be recognized by the Members or by AMS as a result of such exchange;
and
WHEREAS, pursuant to the Plan, the Members are desirous of exchanging
the Interests for shares of AMS's voting common stock, par value $.001 per share
(the "AMS Common Stock"), on the basis of each Member receiving an aggregate of
300,000 shares of AMS Common Stock for such Member's Interest. The aggregate
shares of AMS Common Stock to be issued to the Members (1,200,000) are
hereinafter collectively referred to as the "AMS Shares".
2
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained, the parties hereby agree as follows:
ARTICLE 1.
EXCHANGE OF INTERESTS
SECTION 1.1 Exchange of Interests. Subject to the terms and
conditions of this Agreement, the Members hereby convey to AMS good and
marketable title to the Interests, free and clear of all liens, claims, debts,
obligations or other encumbrances except such restrictions as are imposed by
Federal or state securities laws; and AMS hereby conveys to the Members good and
marketable title to their proportionate share of the AMS Shares as set forth on
Schedule 1.3 annexed hereto, free and clear of all liens, claims, debts,
obligations or other encumbrances, except such restrictions as are imposed by
Federal or state securities laws. The exchange herein provided shall be the sole
consideration for the acquisition of the Interests.
SECTION 1.2 Restriction on Transfer. Neither the AMS Shares nor the
Interests exchanged as provided under Section 1.1 are being registered under the
Securities Act of 1933, as amended (the "Act"), and are being exchanged
hereunder pursuant to an exemption that requires that the further transfer of
such shares/interests be restricted under the Act. Each of AMS and the Members
are delivering to the other simultaneous with the execution of this Agreement an
investment letter acknowledging the foregoing and agreeing to comply with the
requirements of such exemption. In order to further evidence such restriction on
transferability, each of AMS and the Members hereby agrees to the imposition of
a customary restrictive legend on the face or back of each certificate
representing the AMS Shares and the Interests to be exchanged.
SECTION 1.3 Delivery of Shares. Simultaneous with the execution of
this Agreement by the parties hereto, (a) the Members are transferring to AMS
the Interests by delivering the certificates evidencing the Interests,
accompanied by duly endorsed stock powers, with signatures medallion guaranteed,
in form and substance satisfactory to AMS, permitting the transfer of the
Interests to AMS or are delivering assignments of the Interests, duly notarized,
in form and substance acceptable to AMS, as the case may be; and (b) AMS is
delivering to each Member a stock certificate(s) registered in the name of such
Member representing his, her or its proportionate share of the AMS Shares based
on Schedule 1.3 annexed hereto.
SECTION 1.4 Supplemental Action. If at any time after the date
hereof, AMS or the Members shall determine that any further conveyances,
agreements, documents, instruments, and assurances or any further action is
necessary or desirable to carry out the provisions of this Article 1, AMS or the
Members, as the case may be, shall execute and deliver any and all proper
conveyances, agreements, documents, instruments, and assurances and perform all
necessary or proper acts to carry out the provisions of this Article 1.
ARTICLE 2.
REPRESENTATIONS AND WARRANTIES OF MEMBERS
Each of the Members severally, but not jointly, represents and warrants
to AMS as follows:
3
SECTION 2.1 Authority to Execute and Perform Agreements. Such Member
has full power and capacity to execute and deliver this Agreement and any other
agreement or instrument contemplated by this Agreement (such other agreements
and instruments are hereinafter collectively referred to as the "Transaction
Documents") and to consummate the Transactions. This Agreement has been duly
executed and delivered and is the valid and binding obligation of such Member
enforceable in accordance with its terms. Other than any filings that may be
required pursuant to Section 13 and/or Section 16 of the Exchange Act, the
execution and delivery of this Agreement and the Transaction Documents, the
consummation of the transactions contemplated hereunder (the "Transactions") and
the performance by such Member of this Agreement and each of the Transaction
Documents in accordance with its respective terms and conditions will not
require the approval, consent of, waiver, order or authorization of,
notification to, or registration, declaration or filing with, any Federal,
state, county, local or other governmental or regulatory body or the approval or
consent of any other person.
SECTION 2.2 Ownership of Interests. (a) Such Member owns,
beneficially and of record, his, her or its respective Interest being sold
hereunder to AMS as shown on Schedule 1.3 annexed hereto, free and clear of any
and all liens, charges or encumbrances of any kind or nature whatsoever; (b)
such Member is not bound by or subject to any voting trust arrangement, proxy,
voting agreement, operating agreement, purchase agreement or other agreement or
understanding (i) granting any option, warrant or other right to purchase all or
any of his, her or its Interest to any person, (ii) restricting his, her or its
right to sell or convey his, her or its Interest, or (iii) otherwise restricting
any rights with respect to his, her or its Interest (including restrictions as
to the voting or disposition of such Interest); (c) such Member has the absolute
and unrestricted right, power and capacity to assign and transfer his, her or
its Interest; and (d) upon transfer by such Member to AMS of his, her or its
Interest hereunder, AMS will acquire good and valid title to Interest, free and
clear of any liens, charges or encumbrances.
SECTION 2.3 Finders and Investment Bankers. Such Member has not
employed any broker or finder or incurred any liability for any brokerage fees,
commissions or finders' fees or incurred any liability for any brokerage fees,
commissions or finders' fees in connection with the Transactions.
SECTION 2.4 Litigation and Claims. Except as otherwise set forth in
Schedule 2.4 annexed hereto, there is no suit, action, proceeding, claim or
investigation pending or to the best knowledge of such Member, threatened
against or affecting such Member that would have a material adverse effect on
the assets, business or financial condition of such Member or the Company or the
ability of such Member to perform his, her or its obligations under this
Agreement.
SECTION 2.5 Certain Payments. Such Member, directly or indirectly,
has not given or agreed to give or solicited or received any gift, rebate or
similar benefit to any customer, supplier, governmental employee or other person
or entity that might subject the Company or AMS to any damage or penalty in any
civil, criminal or governmental litigation or proceeding or if not given in the
past might have had an adverse effect on the assets, Business, operations or
prospects of the Company.
4
SECTION 2.6 Company Representations. To the best knowledge of such
Member, the representations and warranties of the Company contained in Article 3
hereof are true and correct in all respects.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to AMS as follows:
SECTION 3.1 Due Formation and Qualification. The Company is a
limited liability company duly formed, validly existing and in good standing
under the laws of Delaware, has all requisite power and authority to own, lease
and operate its assets, properties and Business and to conduct the Business as
now being and as heretofore conducted. The Company is qualified to do business
as a foreign limited liability company in the jurisdictions listed on Schedule
3.1 annexed hereto, and is not doing business in any other jurisdiction where
qualification is required or the failure to qualify would have a material
adverse effect on the Business or operations of the Company.
SECTION 3.2 Subsidiaries and Affiliates. The Company does not,
directly or indirectly, own any shares of stock or other equity interest
(including any form of profit participation) in, has not made any investment in,
and does not control or have any proprietary interest in, any corporation,
partnership, joint venture or other business association or entity other than as
set forth in Schedule 3.2 annexed hereto (all such entities are hereinafter
referred to collectively as the "Company Subsidiaries") which also sets forth
the percentage ownership of the Company, directly or indirectly, in each of the
Company Subsidiaries. All of the capital stock and other interests so held by
the Company (directly or indirectly) as indicated on Schedule 3.2 are owned by
the Company (directly or indirectly) free and clear of any claim, lien,
encumbrance, security interest or agreement with respect thereto. All of the
outstanding shares of capital stock in each of the Company Subsidiaries are duly
authorized, validly issued, fully paid and non-assessable and were issued free
of preemptive rights and in compliance with applicable corporate and securities
laws. Except as indicated on Schedule 3.2, there are no irrevocable proxies,
voting agreements or similar obligations with respect to such capital stock of
the Company Subsidiaries, and no equity securities or similar obligations with
respect to such capital stock of the Company Subsidiaries are or may become
required to be issued or purchased by reason of any options, warrants, rights to
subscribe to, puts calls, reservation of shares or commitments of any character
whatsoever relating to, or securities or rights convertible into or exchangeable
for, shares of any capital stock of any Company Subsidiary, and there are no
contracts, commitments, understandings or arrangements by which any Company
Subsidiary is bound to issue additional shares of its capital stock, or options,
warrants or rights to purchase or acquire any additional shares of its capital
stock or securities convertible into or exchangeable for such shares. Each of
the Company Subsidiaries is in good standing and qualified to do business in
every jurisdiction in which the failure to qualify could have a material adverse
effect upon the Subsidiary or the Company. Schedule 3.2 also sets forth the name
of each of the Company's affiliates (other than the Company Subsidiaries),
including joint venture affiliates (incorporated and unincorporated), and the
nature of the affiliation.
5
SECTION 3.3 Certificate of Formation, Operating Agreement and
By-Laws. The Company has delivered to AMS true and complete copies of its
Certificate of Formation, Operating Agreement (if any) and By-Laws (if any) and
Certificate of Incorporation and By-Laws each of the Company Subsidiaries as in
effect on the date hereof.
SECTION 3.4 Capitalization. The Memberships are the only limited
liability company interests issued and outstanding. The Memberships have been
validly issued and are, fully paid and non-assessable. Except for the
Transactions and as set forth in Schedule 3.4 annexed hereto, there are no
authorized or outstanding options, warrants, subscription calls, rights
(including preemptive rights and rights to demand registration under the Act,
commitments, conversion rights, plans or other agreements of any character
obligating the Company to authorize, issue, deliver, sell or redeem any limited
liability company interests therein or any securities convertible into or
evidencing the right to purchase any limited liability company interests of the
Company.
SECTION 3.5 Manager(s) and Officers. Annexed hereto as Schedule 3.5
is a true and correct list of the manager(s) and officers of the Company as of
the date of this Agreement.
SECTION 3.6 Financial Statements; Financial Matters.
---------------------------------------
(a) Annexed hereto as Schedule 3.6 (a) is the audited balance
sheet of the Company as at December 31, 2002, and the related audited statements
of operations, retained earnings (or members deficit) and changes in financial
position (cash flow) as at and for each of the two years then ended or for such
shorter period for which the Company has been in existence, together with the
unqualified opinion thereon of a firm of independent certified public
accountants authorized to practice before the Securities and Exchange Commission
(collectively, the "Company Audited Financials").
(b) Annexed hereto as Schedule 3.6 (b) is the unaudited
balance sheet of the Company as at March 31, 2003, and the related unaudited
statements of operations and retained earnings (or members deficit) and changes
in financial position (cash flow) as at and for each of the two years then ended
or for such shorter period for which the Company has been in existence
(collectively the "Company Unaudited Financials"; the unaudited balance sheet as
at March 31, 2003 included therein is sometimes referred to as the "Company
Balance Sheet").
(c) The Company Audited Financials and the Company Unaudited
Financials are (i) in accordance with the books and records of the Company, (ii)
correct and complete, (iii) fairly present the financial position and results of
operations of the Company as of the dates indicated, and (iv) prepared in
accordance with generally accepted accounting principles applied on a consistent
basis ("GAAP") (except that (x) unaudited financial statements may not be in
accordance with GAAP because of the absence of footnotes normally contained
therein and (y) interim (unaudited financials) are subject to normal year-end
audit adjustments that in the aggregate will not have a material adverse effect
on the Business, properties, assets, operations, liabilities, financial
condition or prospects of the Company).
SECTION 3.7 Liabilities. Except as set forth on Schedule 3.7 annexed
hereto, as of the date hereof, the Company has no direct or indirect
indebtedness, liability, claim, loss, damage, deficiency, obligation or
6
responsibility, known, or unknown, fixed or unfixed, liquidated or unliquidated,
secured or unsecured, accrued, absolute, contingent or otherwise, including,
without limitation, liabilities on account of taxes, other governmental charges
or lawsuits brought ("Liabilities"), other than (i) Liabilities fully and
adequately reflected or reserved against on the Company Balance Sheet, and (ii)
Liabilities incurred since March 31, 2003 in the ordinary course of business.
The Company has no knowledge of any past or existing circumstance, condition,
event or arrangement that may hereafter give rise to any Liabilities of the
Company or any successor to its business except in the ordinary course of
business or as otherwise set forth on Schedule 3.7.
SECTION 3.8 Absence of Certain Changes. Since March 31, 2003, there
has been no material adverse change in the condition, financial or otherwise, of
the Company, other than changes occurring in the ordinary course of business
which changes have not, individually or in the aggregate, had a material adverse
effect on the Business, properties, assets, operations, liabilities, financial
condition or prospects of the Company.
SECTION 3.9 Tax Matters. The Company has filed all Federal, state,
county and local income tax, franchise tax, real and personal property tax,
payroll tax, occupation tax, sales tax, excise tax, and other tax returns which
it is required to file, the failure to file which would materially adversely
affect the assets, properties, Business, operations or financial condition or
prospects of the Company, taken as a whole, and has paid, reserved or provided
for all taxes shown on such returns, and all deficiencies or other assessments
of tax, interest or penalties which have been served on or delivered to the
Company. For Federal income tax purposes, the Company has elected to be taxed as
a corporation. There are no claims with respect to Federal, state, county,
local, foreign or other taxes. The Federal income tax returns of the Company
have never been audited by the Internal Revenue Service. To the best knowledge
of the Company, there is no unassessed tax deficiency proposed or threatened
against the Company. No audit of any tax return of the Company is in progress.
There are not in force any extensions of time with respect to the date on which
any tax return was or is due to be filed by the Company or any waivers or
agreements by the Company for an extension of time for the assessment or payment
of any tax.
SECTION 3.10 Real and Personal Property - Leased to the Company. Set
forth on Schedule 3.10(a) annexed hereto is a description of each lease under
which the Company is the lessee of any real property, and on Schedule 3.10 (b)
annexed hereto is a description of each lease under which the Company is the
lessee of any personal property. The premises or property described in said
leases are presently occupied or used by the Company as lessee under the terms
of such leases. All rentals due under such leases have been paid and there exist
no defaults under the terms of such leases and no event has occurred which, upon
passage of time or the giving of notice, or both, would result in any events of
default or prevent the Company from exercising and obtaining the benefits of any
rights or options contained therein. The Company has the full right, title and
interest of the lessee under the terms of said leases, free of all liens, claims
or encumbrances and all such leases are valid and in full force and effect.
SECTION 3.11 Title. The Company Balance Sheet reflects all of the
material assets and properties of the Company, except to the extent the Company
has acquired or disposed of any assets and properties, in the ordinary course of
its business since March 31, 2003. The Company owns outright and has good and
marketable title to all of its assets and properties, in each case free and
clear of any lien or other encumbrance except for (i) immaterial assets and
7
properties; (ii) liens or other encumbrances securing taxes, assessments,
governmental charges or levies, or the claims of materialmen, carriers,
landlords and like persons, all of which are not yet due and payable and
purchase money interests and similar security interests for goods purchased by
the Company since March 31, 2003 in the ordinary course of business; (iii)
defects of title, liens or other encumbrances of a character that do not
materially impair the assets or properties of the Company or detract materially
from the Business, or (iv) liens, claims, encumbrances or security interests
reflected in the Company Balance Sheet. The assets and properties owned by the
Company, as reflected on the Company Balance Sheet, are adequate to permit the
Company to conduct the Business as presently conducted and to continue to
conduct the Business after the date of this Agreement.
SECTION 3.12 Intellectual Property.
(a) For purposes of this Agreement, the following terms have the
following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising out of, or associated therewith: (i) all United States
and foreign patents and applications therefor and all reissues, divisions,
renewals, extensions, provisionals, continuations and continuations-in-part
thereof, (ii) all inventions (whether patentable or not), invention
disclosures, improvements, trade secrets (whether currently existing or in
development), proprietary information, know how, technology, technical data
and customer lists, and all documentation relating to any of the foregoing;
(iii) all copyrights, copyrights registrations and applications therefor,
and all other rights corresponding thereto throughout the world; (iv) all
maskworks, mask work registrations and applications therefor, and all other
rights corresponding thereto throughout the world; (v) all industrial
designs and any registrations and applications therefor throughout the
world; (vi) all trade names, trade dress, logos, common law trademarks and
service marks; trademark and service xxxx registrations and applications
therefor throughout the world; (vii) all databases and data collections and
all rights therein throughout the world; and (viii) all computer software
including all source code, object code, firmware, development tools, files,
records and data, all media on which any of the foregoing is recorded and
all documentation related to any of the foregoing throughout the world.
"Company Intellectual Property" shall mean any Intellectual Property
that: (i) is owned by or exclusively licensed to the Company or any Company
Subsidiary, or (ii) is necessary to the operation of the Company or the
Company Subsidiaries, including the design, manufacture, sale and use of
the products or performance of the services of the Company and the Company
Subsidiaries, as it currently is operated or is reasonably anticipated to
be operated in the future.
(b) Schedule 3.12 (a) annexed hereto sets forth all of the Company's
and the Company Subsidiaries' United States and foreign (i) patents, patent
applications (including provisional applications); (ii) registered
trademarks, applications to register trademarks, intent-to-use
applications, or other registrations related to trademarks; (iii)
registered copyrights and applications for copyright registration; (iv)
maskwork registrations and applications to register mask works; and (v)
other Company Intellectual Property that is the subject of an application,
certificate or registration issued by or recorded by any state, government
or other public legal authority, all of the foregoing, the "Registered
Intellectual Property."
8
(c) Schedule 3.12 (c) annexed hereto sets forth any proceeding or
actions before any court, tribunal (including the United States Patent
Office ("PTO") or equivalent authority anywhere in the world) related to
any of the Registered Intellectual Property.
(d) The Company or the Company Subsidiaries have complied with all
applicable disclosure requirements and, to the best knowledge of the
Company, have not committed any fraudulent act in the application for and
maintenance of any patent, trademark or copyright of the Company or the
Company Subsidiaries.
(e) Each item of Registered Intellectual Property is valid and
subsisting, all necessary registration, maintenance and renewal fees in
connection with such Registered Intellectual Property have been made and
all necessary documents and certificates in connection with such Registered
Intellectual Property have been filed with the relevant patent, copyright,
trademark or other authorities in the United States or foreign
jurisdictions, as the case may be, for the purposes of maintaining,
renewing or extending the registration of such Registered Intellectual
Property. Schedule 3.12 (e) annexed hereto sets forth all actions and
payments that must be made in the twelve month period following the date of
this Agreement in connection with the preservation or maintenance of the
Registered Intellectual Property.
(f) The Company and the Company Subsidiaries are not barred from
seeking patents on any patentable inventions of the Company or the Company
Subsidiaries that in the reasonable judgment of the Company would have been
necessary to the operation of the Company or the Company Subsidiaries by
"on-sale" or similar bars to, patentability or by failure to apply for a
patent on such inventions within the time required.
(g) The contracts, licenses and agreements set forth on Schedule 3.12
(g) annexed hereto include all contracts, licenses and agreements to which
the Company and the Company Subsidiaries are a party with respect to any
Company Intellectual Property.
(h) The contracts, licenses and agreements set forth on Schedule 3.12
(g) are in full force and effect. The consummation of the Transactions will
neither violate nor result in the breach, modification, cancellation,
termination or suspension of the contracts, licenses and agreements set
forth on Schedule 3.12 (g). Other than those matters that would not have a
material adverse effect on the Company, and the Company Subsidiaries, the
Company and the Company Subsidiaries are in compliance with, and have not
breached any term of the contracts, licenses and agreements set forth on
Schedule 3.12 (g), and, to the best knowledge of the Company, all other
parties to the contracts, licenses and agreements set forth on Schedule
3.12 (g) are in compliance with, and have not breached any material term
of, such contracts, licenses and agreements. Following the Closing Date,
the Company and the Company Subsidiaries will be permitted to exercise all
of their respective rights under the contracts, licenses and agreements set
forth on Schedule 3.12 (g) without the payment of any additional amounts or
consideration other than ongoing fees, royalties or payments which the
Company or the Company Subsidiaries would otherwise be required to pay.
9
(i) Except as set forth on Schedule 3.12 (i) annexed hereto, (i) no
person or entity has any rights to use any of the Company Intellectual
Property; and (ii) the Company and the Company Subsidiaries have not
granted to any person or entity, nor authorized any person or entity to
retain, any rights in the Company Intellectual Property.
(j) Except as set forth on Schedule 3.12 (j) annexed hereto, (i) the
Company or the Company Subsidiaries own and have good, valid and exclusive
title to, and have the unrestricted right to license and use, each item of
the Intellectual Property of the Company or the Company Subsidiaries,
including all Registered Intellectual Property set forth on Schedule 3.12
(b), free and clear of any Lien; (ii) the Company or the Company
Subsidiaries own, or have the right, pursuant to a valid contract, to use
or operate all other Intellectual Property of the Company or the Company
Subsidiaries, and (iii) the Company or one of its Company Subsidiaries is
the exclusive owner of all trademarks and trade names used in connection
with the operation or conduct of the business of the Company and the
Company Subsidiaries, including the sale of any products or the provision
of any services by the Company and the Company Subsidiaries.
(k) To the Company's best knowledge, the operation of the Business of
the Company and the Company Subsidiaries, taken as a whole, as such
Business currently is conducted, or as reasonably contemplated to be
conducted, including the Company and the Company Subsidiaries design,
development, manufacture, marketing and sale of the products or services of
the Company and the Company Subsidiaries has not, does not and will not
infringe or misappropriate the Intellectual Property of any other person or
entity.
(l) Except as set forth on Schedule 3.12 (l), attached hereto, the
Company has not received any written notice from any person or entity that
the design, development, manufacture and sale of the Company or the Company
Subsidiaries' products and provision of their respective services,
infringes or misappropriates the Intellectual Property of any person or
entity.
(m) The Company and the Company Subsidiaries own or have the right to
use all Intellectual Property necessary to the conduct their respective
business as currently is conducted or is reasonably contemplated to be
conducted, including , without limitation. the design, development,
manufacture and sale of all products currently manufactured or sold by the
Company and the Company Subsidiaries and the performance of all services
provided by the Company or the Company Subsidiaries.
(n) Except as set forth on Schedule 3.12 (n), annexed hereto, to the
Company's best knowledge, no person or entity has or is infringing or
misappropriating any Company Intellectual Property.
(o) Except as set forth on Schedule 3.12 (o) attached hereto, no
Company Intellectual Property, or product or service of the Company
Subsidiaries is subject to any proceeding or outstanding decree, order
judgment, or stipulation restricting in any manner the use or licensing
thereof by the Company or the Company Subsidiaries, or which may affect the
validity, use licensing or enforceability of such Company Intellectual
Property.
(p) The Company and the Company Subsidiaries own exclusively and have
good title to all copyrighted works that are the Company's and the Company
10
Subsidiaries' products or which the Company or the Company Subsidiaries
otherwise purport to own, except for those copyrighted works licensed to
the Company and the Company Subsidiaries set forth on Schedule 3.12 (p)
annexed hereto.
(q) Except as set forth on Schedule 3.12 (q) annexed hereto, and
except for work, inventions or material created by advertising or other
marketing firms on behalf of the Company and the Company Subsidiaries to
which any such firm has retained all rights, to the extent that any work,
invention, or material has been developed or created by a third party for
the Company or the Company Subsidiaries, the Company or the Company
Subsidiaries have a written agreement with such third party with respect
thereto and the Company or the Company Subsidiaries thereby have obtained
ownership of, and are the exclusive owners of, all Intellectual Property in
such work, material or invention by operation of law or valid assignment.
SECTION 3.13 Contracts and Other Agreements. Schedule 3.13 annexed
hereto sets forth, as of the date of this Agreement, all contracts, commitments,
understandings, arrangements and other agreements to which the Company is a
party or by or to which any of the Company's properties are bound or subject
(collectively, the "Contracts"), except (i) Contracts made in the ordinary
course of business of the Company and involving the payment to or by the Company
of less than $10,000 with respect to any one contract or $10,000 with respect to
any related Contracts and (ii) any Contract that is terminable by the Company
upon not more than 30 days notice and with the payment of a termination penalty,
if any, not exceeding $10,000. There have been delivered or made available to
AMS true and complete copies of all the Contracts and other agreements set forth
on Schedule 3.13 or on any other Schedule. All of the Contracts are valid,
subsisting, in full force and effect and binding upon the parties thereto in
accordance with their terms, and the Company has paid in full or accrued all
amounts due thereunder and has satisfied in full or provided for all of its
liabilities and obligations thereunder, and is not in default in any material
respect under any of them, nor, to the Company's best knowledge, is any other
party to any Contract in default thereunder, nor, to the Company's best
knowledge, does any condition exist that with notice or lapse of time or both
would constitute a default thereunder that would give the other party thereto
the right to terminate such Contract. Except as separately identified on
Schedule 3.13, no approval or consent of any person is needed in order that the
Contracts set forth on Schedule 3.13 or on any other Schedule continue in full
force and effect following the consummation of the Transactions.
SECTION 3.14 Insurance. Annexed hereto as Schedule 3.14 is a list of
all policies of insurance covering the Company (specifying the insurer, amount
of coverage, type of insurance, policy number and any pending claims
thereunder). True copies of all such policies have been made available by the
Company to AMS. To the best knowledge of the Company, the Company has not failed
to give any notice or present any material claim under any insurance policy in
due and timely fashion.
SECTION 3.15 Litigation; Actions and Proceedings. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental, administrative or regulatory body or arbitration or mediation
tribunal against or involving the Company. Except as set forth in Schedule 3.15
annexed hereto, there are no actions, suits or claims or legal, administrative,
regulatory, governmental or arbitral proceedings or investigations (whether or
not the defense thereof or liabilities in respect thereof are covered by
insurance) pending or, to the Company's best knowledge, threatened against or
involving the Company or any of its properties or assets, nor, to the best
11
knowledge of the Company, are there any grounds therefor, that individually or
in the aggregate, could have a material adverse effect upon the transactions
contemplated hereby or upon the assets, properties, Business, operations, or
condition (financial or otherwise) of the Company. There are no actions, suits
or claims or legal, administrative, regulatory, governmental or arbitral
proceedings pending or, to the Company's best knowledge, threatened that would
give rise to any right of indemnification on the part of any director or officer
of the Company, or the heirs, executors or administrators of such director or
officer, against the Company or any successor to the Business.
SECTION 3.16 Operations of the Company. (a) Except as set forth on
Schedule 3.16 annexed hereto, since March 31, 2003, the Company has not:
(i) amended its Certificate of Formation, Operating Agreement or
By-Laws or merged with or into or consolidated with any other person, subdivided
or in any way reclassified any shares of its capital stock or changed or agreed
to change in any manner the rights of its outstanding capital stock or the
character of its business;
(ii) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(iii) entered into or amended any employment agreement (other than
employment agreements or at will employment arrangements entered into or amended
in the ordinary course of the Company's business), entered into or amended any
agreement with any labor union or association representing any employee,
adopted, entered into, or amended any employee benefit plan;
(iv) except in the ordinary course of business and not in excess of
$10,000 (individually or in the aggregate), incurred any indebtedness for
borrowed money;
(v) declared or paid any dividends or declared or made any other
distributions of any kind to the Members (other than salaries for services paid
in the ordinary and consistent with past practice), or made any direct or
indirect redemption, retirement, purchase or other acquisition of any of its
limited liability company interests;
(vi) materially reduced its cash or short term investments or their
equivalent;
(vii) waived any right of material value to its business;
(viii) made any change in its accounting methods or practices or made
any change in depreciation or amortization policies or rates adopted by it;
(ix) materially changed any of its business policies;
(x) granted or paid any wage or salary increase in excess of $5,000 per
annum, or any bonus in excess of $5,000, or any increase in any other direct or
indirect compensation, for or to any of its officers, directors, employees,
consultants, agents, brokers, independent contractors or other representatives,
or any accrual for or commitment or agreement to make or pay the same;
(xi) made any loan or advance to any of the Members, its, officers,
managers, employees, consultants, agents, brokers, independent contractors or
other representatives (other than travel, entertainment or business expense
advances made in the ordinary course of business), or made any other loan or
advance otherwise than consistently with past practice in the ordinary course of
business;
12
(xii) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, consultants, agents, brokers,
independent contractors or other representatives, other than payments or
commitments to pay persons other than its officers, managers or the Members made
in the ordinary course of business;
(xiii) entered into any lease (as lessor or lessee); sold, abandoned or
made any other disposition of any of its assets or properties (except in the
ordinary course of business); granted or suffered any lien or other encumbrance
on any of its assets or properties; entered into (except in the ordinary course
of business) or amended any contract or other agreement to which it is a party,
or by or to which it or its assets or properties are bound or subject, or
pursuant to which it agrees to indemnify any party or to refrain from competing
with any party;
(xiv) except in the ordinary course of business and in amounts less
than $5,000 in each case, incurred or assumed any Liability;
(xv) made any acquisition of or entered into any agreement to acquire
all or any part of the assets, properties, capital stock or business of any
other person;
(xvi) failed to pay timely any of its material liabilities in
accordance with their terms; and
(xvii) except in the ordinary course of business, entered into any
other material contract or other agreement or other material transaction.
SECTION 3.17 Compliance with Laws. The Company is not in default
under or in violation of any applicable order, judgment, injunction, award or
decree, any material applicable federal, state, or local statute, law,
ordinance, rule or regulation, including without limitation, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA",) or the provisions
of any franchise or license, or of any other material requirement of any
governmental, regulatory, administrative or industry body, court or arbitrator
applicable to the Company or the Business. The Company is not in default under
or in violation of any provisions of its Certificate of Formation, Operating
Agreement or its By-Laws, or any material instrument, contract, mortgage,
indebtedness, indenture or other agreement to which the Company is a party or by
or to which the Company or any of its assets or properties may be bound or
subject.
SECTION 3.18 Licenses, Permits and Certificates. The Company and the
Company Subsidiaries have all material licenses, permits, certificates,
authorizations, approvals and consents required by any governmental authority to
legally operate the Business as now operated and as contemplated and such
licenses, permits, certificates, authorizations, approvals and consents are
listed on Schedule 3.18 annexed hereto. No governmental, regulatory or industry
permits, consents, waivers, approvals or authorizations are necessary in
connection with the consummation of the Transactions or to permit the Company to
conduct the Business after the date hereof in the manner and to the extent
presently conducted and contemplated to be conducted.
SECTION 3.19 No Conflicts. The execution, delivery and performance of
the Transaction Documents by the Company and the consummation of the
Transactions will not (a) result in a violation of the Company's Certificate of
Formation, Operating Agreement or By-Laws, (b) conflict with, or constitute a
default (or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any material agreement, indenture or instrument
to which the Company is a party, or (c) result in a violation of any law, rule,
13
regulation, by-law, directive, order, judgment or decree (including federal,
state, provincial and municipal securities laws and regulations) applicable to
the Company or by which any of its property or assets is bound or affected,
except to the extent that matters within clauses (b) and (c) immediately above
would not have a material adverse effect on the Business, properties, assets,
operations, liabilities, financial condition or prospects of the Company, or the
ability of the Company to perform this Agreement and the other Transaction
Documents.
SECTION 3.20 Labor Agreements, Employee Benefit Plans, and Employment
Agreements. Except as set forth on Schedule 3.20 annexed hereto, neither the
Company nor any of the Company Subsidiaries is a party to (a) any union
collective bargaining, works council, or similar agreement or arrangement, (b)
any qualified or non-qualified pension, retirement, severance, profit-sharing,
deferred compensation, bonus, stock option, stock purchase, retainer,
consulting, health, welfare or incentive plan or agreement, (c) any plan or
policy providing for employee benefits, including but not limited to vacation,
disability, sick leave, medical, hospitalization, life and other insurance
plans, and related benefits, or (d) any employment agreement. Neither the
Company nor any of the Company Subsidiaries is presently a party to any
"employee leasing" agreement or arrangement and neither the Company nor any of
the Company Subsidiaries have any liability in respect of any such agreement or
arrangement to which it was, at any time, a party, but which is no longer in
effect.
SECTION 3.21 Books and Records. The books of account and other
corporate records of the Company and the Company Subsidiaries made or to be made
available to AMS in connection with the Transactions and the due diligence
inquiries made by AMS in connection herewith, are in all respects complete and
correct, have been maintained in accordance with good business practices and the
matters contained therein are accurately reflected on the financial statements
of the Company furnished hereunder by the Company to AMS.
SECTION 3.22 Accounts Receivable. All accounts receivable of the
Company reflected on the Company Balance Sheet or on the accounting records of
the Company as of the date hereof Date (collectively, the "Accounts
Receivable"), represent valid obligations arising from sales actually made or
services actually performed in the ordinary course of business. The reserves
shown on the Company Balance Sheet or on the accounting records of the Company
as of the date hereof with respect to the Accounts Receivable are adequate and
consistent with past practice. There is no contest, claim, or right of set-off
in any agreement with any maker of an Account Receivable relating to the amount
or validity of such Account Receivable.
SECTION 3.23 Certain Payments. Neither the Company nor, to the
Company's best knowledge, any officer, employee, manager, agent or affiliate of
the Company, has, directly or indirectly, given or agreed to give or solicited
or received any gift, rebate or similar benefit to any customer, supplier,
governmental employee or other person or entity which (i) might subject the
Company or AMS to any damage or penalty in any civil, criminal or governmental
litigation or proceeding, (ii) if not given in the past might have had an
adverse effect on the assets, business or operations of the Company or (iii) if
not continued in the future might adversely affect the assets, business,
operations or prospects of the Company.
14
SECTION 3.24 Full Disclosure All documents and other papers delivered
by or on behalf of the Company in connection with this Agreement and the
Transactions are, to the best of the Company's knowledge, authentic and true and
complete in all material respects. No representation or warranty of the Company,
and no document or other paper furnished by or on behalf of the Company pursuant
to this Agreement or in connection with the Transactions, contains an untrue
statement of a material fact or omits to state a material fact required to be
stated therein or necessary to make the statements made in the context in which
made, not false or misleading. To the Company's best knowledge, there is no fact
that the Company has not disclosed to AMS that materially adversely affects, or
so far as the Company can now foresee, will materially adversely affect, the
Business or the assets, properties, operations or condition (financial or
otherwise) of the Company or the ability of the Members to perform this
Agreement.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF AMS
AMS represents and warrants to the Members as follows:
SECTION 4.1 Due Incorporation and Qualification. AMS is a
corporation duly incorporated, validly existing and in good standing under the
laws of Delaware, and has all requisite power and authority to own, lease and
operate its assets, properties and business and to conduct its business as now
being and as heretofore conducted. AMS is not qualified to do business as a
foreign corporation in any jurisdiction, and is not doing business in any
jurisdiction, where qualification is required or the failure to qualify would
have a material adverse effect on the business or operations of AMS, except for
Florida in which AMS is duly qualified to do business as a foreign corporation.
SECTION 4.2 Authority to Execute and Perform Agreements. AMS has
full authority to execute and deliver this Agreement and the other Transaction
Documents, and the consummation of the Transactions have been duly authorized by
all necessary corporate action of AMS. This Agreement has been duly executed and
delivered and is the valid and binding obligation of AMS. Other than the filing
of a current report on Form 8-K with the Securities and Exchange Commission (the
"SEC") following the consummation of the Transactions, the execution and
delivery of this Agreement, the consummation of the Transactions and the
performance by AMS of this Agreement in accordance with its terms and conditions
will not require the approval, consent of, waiver, order or authorization of,
notification to, or registration, declaration or filing with, any Federal,
state, county, local or other governmental or regulatory body or the approval or
consent of any other person.
SECTION 4.3 Subsidiaries and Affiliates. AMS does not, directly or
indirectly, own any shares of stock or other equity interest (including any form
of profit participation) in, has not made any investment in, and does not
control or have any proprietary interest in any corporation, partnership, joint
venture or other business association or entity. Schedule 4.3 annexed hereto
sets forth the name of each of AMS's affiliates (other than subsidiaries),
including joint venture affiliates (incorporated and unincorporated), and the
nature of the affiliation.
SECTION 4.4 Officers and Directors. Annexed hereto as Schedule 4.4
is a true and correct list of the officers and directors of AMS.
15
SECTION 4.5 Articles of Incorporation and By-Laws. AMS has delivered
to the Members true and complete copies of its Certificate of Incorporation and
By-Laws as in effect on the date hereof.
SECTION 4.6 Capitalization. (a) The total authorized capital stock
of AMS consists of (i) 20,000,000 shares of AMS Common Stock, of which 4,656,200
shares are validly issued and outstanding, fully paid and non-assessable. Except
as set forth in Section 4.23 hereof and except for 5,000,000 shares of AMS
Common Stock reserved for issuance under the AMS 2003 Incentive Program (a true
and correct copy of which has been furnished to the Members), there are no
authorized or outstanding options, warrants, subscription calls, rights
(including preemptive rights and rights to demand registration under the Act),
commitments, conversion rights, plans or other agreements of any character
obligating AMS to authorize, issue, deliver, sell or redeem any shares of its
capital stock or any securities convertible into or evidencing the right to
purchase any shares of such stock.
(b) The AMS Shares to be issued to the Members pursuant to this
Agreement, will, when issued in accordance with the terms of this Agreement, be
validly issued, fully paid and nonassessable.
SECTION 4.7 SEC Reports. AMS has delivered to the Members a true and
correct copy of each of the following documents (the "SEC Reports"): (a) Annual
Report on Form 10-KSB for each of the fiscal year ended December 31, 2002 and
December 31, 2001, in each case as filed with the SEC, (b) Quarterly Report on
Form 10-QSB for the three months ended June 30, 2003 as filed with the SEC, and
(c) all other reports and registration statements filed with the Commission
since June 30, 2000. The SEC Reports constitute all of the documents and reports
that AMS was required to file with the SEC pursuant to the Exchange Act and the
rules and regulations promulgated thereunder by the SEC since June 30, 2001. As
of their respective dates, the SEC Reports comply in all material respects with
the requirements of the Exchange Act and the rules and regulations promulgated
thereunder and none of the SEC Reports contained an untrue statement of a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
SECTION 4.8 Financial Statements.
--------------------
(a) Included in the SEC Reports are the audited balance sheets of the
AMS as at December 31, 2002 and 2001, and the related statements of income,
stockholders' equity and cash flows for the two years then ended, together with
the unqualified report thereon (except with respect to continuation as a going
concern) of Xxxxxx X. Xxxxx ("Klash"), certified public accountant
(collectively, "AMS's Audited Financials").
(b) Included in the SEC Reports is the unaudited balance sheet of AMS
as at June 30, 2003, and the related statements of operations and cash flows for
the three months ended June 30, 2003 and 2002, as reviewed by Klash ("AMS's
Interim Financials"). The unaudited balance sheet included in AMS's Interim
Financials is hereinafter referred to as AMS's Interim Balance Sheet.
(c) AMS's Audited Financials and AMS's Interim Financials are (i) in
accordance with the books and records of AMS, (ii) correct and complete, (iii)
fairly present the financial position and results of operations of AMS as of the
dates indicated, and (iv) prepared in accordance with GAAP (except that (x)
16
unaudited financial statements may not be in accordance with GAAP because of the
absence of footnotes normally contained therein, and (y) interim (unaudited)
financials are subject to normal year-end audit adjustments that in the
aggregate will not have a material adverse effect on the business, properties,
assets, operations, liabilities, financial condition or prospects of AMS).
SECTION 4.9 Liabilities. Except as set forth on Schedule 4.9 annexed
hereto, as of the date hereof, AMS has no direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known,
or unknown, fixed or unfixed, liquidated or unliquidated, secured or unsecured,
accrued, absolute, contingent or otherwise, including, without limitation,
liabilities on account of taxes, other governmental charges or lawsuits brought
("Liabilities"), other than (i) Liabilities fully and adequately reflected or
reserved against on the AMS's Interim Balance Sheet, (ii) Liabilities incurred
since June 30, 2003 in the ordinary course of business and (iii) Liabilities
incurred in connection with the preparation and execution of this Agreement and
the consummation of the Transactions. AMS has no knowledge of any past or
existing circumstance, condition, event or arrangement that may hereafter give
rise to any Liabilities of AMS, or any successor to its business except in the
ordinary course of business or as otherwise set forth on Schedule 4.9.
SECTION 4.10 Tax Matters. AMS has filed all Federal, state, county
and local income tax, franchise tax, real and personal property tax, payroll
tax, occupation tax, sales tax, excise tax, and other tax returns which it is
required to file, the failure to file which would materially adversely affect
the assets, properties, business, operations or financial condition or prospects
of AMS, and has paid, reserved or provided for all taxes shown on such returns,
and all deficiencies or other assessments of tax, interest or penalties which
have been served on or delivered to AMS. There are no claims against AMS with
respect to Federal, state, county, local, foreign or other taxes. The Federal
income tax returns of AMS have never been audited by the Internal Revenue
Service. To the best knowledge of AMS, there is no unassessed tax deficiency
proposed or threatened against AMS. No audit of any tax return of AMS is in
progress. There are not in force any extensions of time with respect to the date
on which any tax return was or is due to be filed by AMS or any waivers or
agreements by AMS for an extension of time for the assessment or payment of any
tax.
SECTION 4.11 Real and Personal Property - Leased to AMS. AMS is not a
party to or otherwise bound by any lease of real or personal property.
SECTION 4.12 Title. AMS does not own any assets other than cash or
cash equivalents.
SECTION 4.13 Intangible Property.
-------------------
(a) AMS does not own any patents, patent applications, trademark and
service xxxx registrations or registration applications, U.S. copyright
registrations or registration applications. AMS is not a party to or otherwise
bound by any confidentiality, nondisclosure or license agreements granting
rights under one or more patents, patent applications, trademark or service
registrations and registration applications, U.S. copyright registrations or
registration applications by or to AMS.
(b) (i) AMS does not infringe a patent, U.S. trademark registration,
U.S. service xxxx registration or copyright of a third party and (ii) no party
has asserted a claim against AMS that AMS infringes a patent, trademark,
copyright, trade name or trade secret of a third party.
17
SECTION 4.14 Contracts and Other Agreements. Schedule 4.14 annexed
hereto sets forth, as of the date of this Agreement, all contracts, commitments,
understandings, arrangements and other agreements to which AMS is a party or by
or to which any of AMS's properties are bound or subject (collectively also
referred to herein as the "Contracts"). There have been delivered or made
available to the Members true and complete copies of all the Contracts and other
agreements set forth on Schedule 4.14 or on any other Schedule. All of the
Contracts are valid, subsisting, in full force and effect and binding upon the
parties thereto in accordance with their terms, and AMS has paid in full or
accrued all amounts due thereunder and has satisfied in full or provided for all
of its liabilities and obligations thereunder, and is not in default in any
material respect under any of them, nor, to AMS's best knowledge, is any other
party to any Contract in default thereunder, nor, to AMS's best knowledge, does
any condition exist that with notice or lapse of time or both would constitute a
default thereunder that would give the other party thereto the right to
terminate such Contract. Except as separately identified on Schedule 4.14, no
approval or consent of any person is needed in order that the Contracts set
forth on Schedule 4.14 or on any other Schedule continue in full force and
effect following the consummation of the Transactions.
SECTION 4.15 Litigation; Actions and Proceedings. There are no
outstanding orders, judgments, injunctions, awards or decrees of any court,
governmental, administrative or regulatory body or arbitration or mediation
tribunal against or involving AMS. There are no actions, suits or claims or
legal, administrative, regulatory, governmental or arbitral proceedings or
investigations (whether or not the defense thereof or liabilities in respect
thereof are covered by insurance) pending or, to AMS's best knowledge,
threatened against or involving AMS or any of its properties or assets, nor, to
the best knowledge of AMS, are there any grounds therefor, that individually or
in the aggregate, could have a material adverse effect upon the transactions
contemplated hereby or upon the assets, properties, business, operations, or
condition (financial or otherwise) of AMS. There are no actions, suits or claims
or legal, administrative, regulatory, governmental or arbitral proceedings
pending or, to AMS's best knowledge, threatened that would give rise to any
right of indemnification on the part of any director or officer of AMS, or the
heirs, executors or administrators of such director or officer, against AMS or
any successor to its business.
SECTION 4.16 Operations of AMS. (a) Except as set forth on Schedule
4.16 hereto, since June 30, 2003, AMS has not:
(i) amended its Certificate of Incorporation or By-Laws or merged with
or into or consolidated with any other person, subdivided or in any way
reclassified any shares of its capital stock or changed or agreed to change in
any manner the rights of its outstanding capital stock or the character of its
business;
(ii) issued or sold or purchased, or issued options or rights to
subscribe to, or entered into any contracts or commitments to issue or sell or
purchase, any shares of its capital stock;
(iii) entered into or amended any employment agreement (other than
employment agreements or at will employment arrangements entered into or amended
in the ordinary course of AMS's business), entered into or amended any agreement
with any labor union or association representing any employee, adopted, entered
into, or amended any employee benefit plan;
18
(iv) incurred any indebtedness for borrowed money;
(v) declared or paid any dividends or declared or made any other
distributions of any kind to its stockholders, or made any direct or indirect
redemption, retirement, purchase or other acquisition of any shares of its
capital stock;
(vi) materially reduced its cash or short term investments or their
equivalent;
(vii) waived any right of material value to its business;
(viii) made any change in its accounting methods or practices or made
any change in depreciation or amortization policies or rates adopted by it;
(ix) materially changed any of its business policies;
(x) approved, granted or paid any wage or salary increase in excess of
$5,000 per annum, or any bonus in excess of $5,000, or any increase in any other
direct or indirect compensation, for or to any of its officers, directors,
employees, consultants, agents, brokers, independent contractors or other
representatives, or any accrual for or commitment or agreement to make or pay
the same;
(xi) made any loan or advance to any of its stockholders, officers,
directors, employees, consultants, agents, brokers, independent contractors or
other representatives (other than travel, entertainment or business expense
advances made in the ordinary course of business), or made any other loan or
advance otherwise than consistently with past practice in the ordinary course of
business;
(xii) made any payment or commitment to pay any severance or
termination pay to any of its officers, directors, consultants, agents, brokers,
independent contractors or other representatives, other than payments or
commitments to pay persons other than its officers, directors or stockholders
made in the ordinary course of business;
(xiii) entered into any lease (as lessor or lessee); sold, abandoned or
made any other disposition of any of its assets or properties (except in the
ordinary course of business); granted or suffered any lien or other encumbrance
on any of its assets or properties; entered into (except in the ordinary course
of business) or amended any contract or other agreement to which it is a party,
or by or to which it or its assets or properties are bound or subject, or
pursuant to which it agrees to indemnify any party or to refrain from competing
with any party;
(xiv) except in the ordinary course of business and in amounts less
than $5,000 in each case and except in connection with the preparation and
execution of this Agreement and the consummation of the Transactions, incurred
or assumed any Liability;
(xv) made any acquisition of or entered into any agreement to acquire
all or any part of the assets, properties, capital stock or business of any
other person;
(xvi) failed to pay timely any of its material liabilities in
accordance with their terms or otherwise in the ordinary course of business; and
(xvii) except in the ordinary course of business, entered into any
other material contract or other agreement or other material transaction.
SECTION 4.17 Compliance with Laws. AMS is not in default under or in
violation of any applicable order, judgment, injunction, award or decree, of any
material applicable Federal, state, or local statute, law, ordinance, rule or
19
regulation including, without limitation, ERISA or the provisions of any
franchise or license, or of any other material requirement of any governmental,
regulatory, administrative or industry body, court or arbitrator applicable to
AMS. AMS is not in default under or in violation of any provisions of its
Certificate of Incorporation or its By-Laws, or any material instrument,
contract, mortgage, indebtedness, indenture or other agreement to which AMS is a
party or by or to which AMS or any of its assets or properties may be bound or
subject.
SECTION 4.18 Licenses, Permits and Certificates. AMS does not have
any material licenses, permits, certificates, authorizations, approvals and
consents from any governmental authority and none are required to legally
operate its business. No governmental, regulatory or industry permits, consents,
waivers, approvals or authorizations are necessary in connection with the
consummation of the Transactions.
SECTION 4.19 No Conflicts. The execution, delivery and performance of
the Transaction Documents by AMS and the consummation by AMS of the Transactions
will not (a) result in a violation of AMS's Certificate of Incorporation or
By-Laws, (b) conflict with, or constitute a default (or an event which with
notice or lapse of time or both would become a default) under, or give to others
any rights of termination, amendment, acceleration or cancellation of, any
material agreement, indenture or instrument to which AMS is a party, or (c)
result in a violation of any law, rule, regulation, by-law, directive, order,
judgment or decree (including Federal, state, provincial and municipal
securities laws and regulations) applicable to AMS or by which any of its
property or assets is bound or affected, except to the extent that matters
within clauses (b) and (c) immediately above would not have a material adverse
effect on the business, properties, assets, operations, liabilities, financial
condition or prospects of AMS, or the ability of AMS to perform this Agreement
and the other Transaction Documents.
SECTION 4.20 Labor Agreements, Employee Benefit Plans and Employment
Agreements. Except as set forth in Schedule 4.20 annexed hereto, AMS is not a
party to (a) any union collective bargaining, works council, or similar
agreement or arrangement, (b) any qualified or non-qualified pension,
retirement, severance, profit-sharing, deferred compensation, bonus, stock
option, stock purchase, retainer, consulting, health, welfare or incentive plan
or agreement, oral or written, whether legally binding or not, (c) any plan or
policy providing for employee benefits, including but not limited to vacation,
disability, sick leave, medical, hospitalization, life and other insurance
plans, and related benefits, or (d) any employment agreement. AMS is not
presently a party to any "employee leasing" agreement or arrangement, nor does
AMS have any liability in respect of any such agreement or arrangement to which
it was, at any time, a party, but which is no longer in effect.
SECTION 4.21 Books and Records. The books of account and other
corporate records of AMS made or to be made available to the Members in
connection with the Transactions and the due diligence inquiries made by the
Members in connection herewith, are in all respects complete and correct and
have been maintained in accordance with good business practices and the matters
contained therein are accurately reflected in all material respects on the
financial statements of AMS furnished or to be furnished hereunder by AMS to the
Members.
SECTION 4.22 Ownership of the AMS Shares. (a) AMS is not bound by or
subject to any voting trust arrangement, proxy, voting agreement, stockholder
agreement, purchase agreement or other agreement or understanding, except as
contemplated hereunder, (i) granting any option, warrant or other right to
20
purchase all or any of the AMS Shares to any person, (ii) restricting the right
of AMS to issue the AMS Shares, or (iii) otherwise restricting any rights of AMS
with respect to the AMS Shares (including restrictions as to the voting or
disposition of the AMS Shares); (b) AMS has the absolute and unrestricted right,
power and capacity to issue the AMS Shares, and (c) upon issuance to the Members
of the AMS Shares hereunder, the Members will acquire good and valid title to
the AMS Shares, free and clear of any liens, charges or encumbrances except as
contemplated hereunder.
SECTION 4.23 Finders and Investment Bankers. AMS has not employed any
broker or finder or incurred any liability for any brokerage fees, commissions
or finders' fees in connection with the Transactions except that AMS may be
obligated to pay a finders` fee to Xxxxxx Xxxxxxxxxxx of C.D.L. Financial
Solutions up to a maximum of 150,000 shares of AMS Common Stock. upon
consummation of the Transactions.
SECTION 4.24 Absence of Certain Changes. Since March 31, 2003, there
has been no material adverse change in the condition, financial or otherwise, of
AMS, other than changes occurring in the ordinary course of business which
changes have not, individually or in the aggregate, had a material adverse
effect on the business, properties, assets, operations, liabilities, financial
condition or prospects of AMS and other than as set forth in Schedule 4.24
annexed hereto.
SECTION 4.25 Insurance. AMS does not maintain any insurance.
SECTION 4.26 Full Disclosure. All documents and other papers
delivered by or on behalf of AMS in connection with this Agreement and the
Transactions are, to the best of AMS's knowledge, authentic and true and
complete in all material respects. No representation or warranty of AMS
contained in this Agreement, and no document or other paper furnished by or on
behalf of AMS pursuant to this Agreement or in connection with the Transactions,
contains an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements made in
the context in which made, not false or misleading. To AMS's best knowledge,
there is no fact that AMS has not disclosed to the Members that materially
adversely affects, or so far as AMS can now foresee, will materially adversely
affect, the assets, properties, business, operations or condition (financial or
otherwise) of AMS or the ability of AMS to perform this Agreement.
ARTICLE 5
OTHER MATTERS
As an additional inducement to each of the parties hereto to execute
this Agreement and consummate the Transactions, the parties hereto agree as
follows:
SECTION 5.1 Employment Agreements. Simultaneous with or prior to the
execution of this Agreement by the parties hereto, the Company shall have
entered into an employment agreement (and delivered a true and correct copy
thereof to AMS) with each of C. Xxx Xxxxx, Xxxxxx Xxxxxxxx, Xxxxxx Xxxxxxxxxx,
Xxxxx Xxxxxx and Xxxxxxx X'Xxxxxx, substantially in the form of Exhibits B, C,
D, E and F attached hereto, respectively.
SECTION 5.2 Schiffrin Stock Purchase and Sale Agreements. Prior to
the execution of this Agreement by the parties hereto, Xxxxxx X. Xxxxxxxxx
("Schiffrin") shall have entered into an agreement with each of the Members
21
pursuant to which Schiffrin shall have sold to each an aggregate of 900, 000 of
his shares of AMS Common Stock for a consideration of $.05 per share.
SECTION 5.3 Xxxxxxx Stock Purchase and Sale Agreement. Prior to or
simultaneous with the execution of this Agreement by the parties hereto, Xxxxxxx
Xxxxxxx ("Xxxxxxx"), a shareholder of AMS, shall have entered into an agreement
with Xxxxx Xxxxxx pursuant to which Xxxxxxx shall have sold to an aggregate of
100,000 of his shares of AMS Common Stock to Xxxxx Xxxxxx for a consideration of
$.05 per share.
SECTION 5.4 Directors and Officers. Simultaneous with or prior to
the execution of this Agreement by the parties hereto, Schiffrin shall have
elected the persons set forth in Schedule 5.4 annexed hereto as directors and
officers of AMS and shall have tendered his resignation as a director and
officer of AMS, all subject to compliance with Rule 14f-1 promulgated under the
Exchange Act.
SECTION 5.5 Consent to Jurisdiction. Any legal action, suit or
proceeding arising out of or relating to this Agreement or the Transactions
shall be instituted in any state or Federal court of competent jurisdiction
located in Broward County, State of Florida, and each party agrees not to
assert, by way of motion, as a defense, or otherwise, in any such action, suit
or proceeding, any claim that it is not subject personally to the jurisdiction
of such court, that its property is exempt or immune from attachment or
execution, that the action, suit or proceeding is brought in an inconvenient
forum, that the venue of the action, suit or proceeding is improper or that this
Agreement or the subject matter hereof may not be enforced in or by such court.
Each party further irrevocably submits to the exclusive jurisdiction of any such
court in any such action, suit or proceeding.
SECTION 5.6 Expenses. The Company agrees to bear all of AMS's
expenses incurred in connection with the preparation, execution and performance
of this Agreement and the Transactions, including without limitation, all fees
and expenses of agents, representatives, counsel and accountants.
SECTION 5.7 Series A Exchangeable Notes. AMS agrees to honor the
provisions of the Series A Exchangeable Notes issued by the Company as disclosed
in Schedule 3.7 with respect to exercise of the Exchange Right (as defined in
such notes) and to have authorized and in reserve, and to keep available, solely
for delivery upon the exchange of such notes, shares of AMS Common Stock as from
time to time shall be receivable upon the exchange of such notes, subject,
however, to the provisions of the Act.
ARTICLE 6
INDEMNIFICATION; SURVIVAL
SECTION 6.1 Obligation of the Members to Indemnify. Each of the
Members, severally and not jointly, agrees to indemnify, defend and hold
harmless AMS and its stockholders as of the date of this Agreement and their
respective directors, officers, heirs, legal representatives, successors and
assigns, from and against all losses, liabilities, damages, deficiencies,
actions, suits, proceedings, claims, demands, orders, assessments, amounts paid
in settlement, fines, and reasonable costs and expenses (including interest,
penalties and reasonable attorneys' fees and disbursements and reasonable
investigative costs) (collectively, "Losses") based upon, arising out of or
otherwise in respect of (i) any breach in any of the representations and
22
warranties of such Member in this Agreement and (ii) any breach or
non-fulfillment of any of the covenants or agreements of such Member contained
in this Agreement.
SECTION 6.2 Obligations of Xxxxxx, Xxxxxxxxxx and Xxxxxxxx to
Indemnify. Xxxxxx, Xxxxxxxxxx and Xxxxxxxx, jointly and severally, agree to
indemnify, defend and hold harmless AMS, and its stockholders as of the date of
this Agreement and their respective directors, officers, heirs, legal
representatives, successors and assigns, from and against any Losses based upon,
arising out of or otherwise in respect of (i) any breach in any of the
representations and warranties of the Company set forth in this Agreement and
(ii) any breach or nonfulfillment of any covenant or agreement of the Company
contained in this Agreement.
SECTION 6.3 Obligations of AMS to Indemnify. AMS agrees to
indemnify, defend and hold harmless the Members, and their respective directors,
officers, heirs, legal representatives, successors and assigns, from and against
any Losses based upon, arising out of or otherwise in respect of (i) any breach
in any of the representations and warranties of AMS set forth in this Agreement
and (ii) any breach or nonfulfillment of any covenant or agreement of AMS
contained in this Agreement.
SECTION 6.4 Claims Notice. Each party hereto (an "Indemnified
Party") shall, promptly upon becoming aware of any event or circumstance (an
"Indemnifiable Event") which, in his, her or its reasonable judgment, may result
in a Loss for which the Indemnified Party could assert a right of
indemnification against any other party (or parties) hereto (the "Indemnifying
Party") under this Article 6, give notice thereof (the "Claims Notice") to the
Indemnifying Party (but the obligations of the Indemnifying Party under this
Article 9 shall not be impaired by the Indemnified Party's failure to give such
notice, except to the extent that said failure actually prejudices the rights of
the Indemnifying Party). The Claims Notice shall describe the Indemnifiable
Event in reasonable detail, shall indicate whether the Indemnifiable Event
involves a "Third Party Claim" (defined below), and shall indicate the amount
(estimated, if necessary) of the Loss that has been or may be suffered by the
Indemnified Party. In such event, the Indemnifying Party shall, within fifteen
(15) business days after receipt of the Claims Notice, give notice to the
Indemnified Party of whether he or it intends to dispute the claim described in
the Claims Notice (the "Response Notice"). If the Indemnifying Party timely
disputes the Claims Notice as provided above, the Indemnified Party shall, for a
period of not more than fifteen (15) business days after receipt of the Response
Notice (or less, if the nature of the Indemnifiable Event so requires), seek out
a negotiated settlement of the dispute with the Indemnifying Party and shall
refrain during that period from commencing any judicial proceeding or other
action to enforce this Article 6. If, despite their good faith negotiations, the
parties are unable to resolve the dispute within the aforesaid period (or if the
Indemnifying Party fails to timely give the Response Notice), the Indemnified
Party shall be free to exercise all rights and remedies available to him or it
hereunder, at law in equity or otherwise to enforce his or its rights under this
Article 6. As used herein, "Third Party Claim" means any demand, claim or
circumstance which, with the lapse of time or otherwise, would give rise to a
claim or the commencement (or threatened commencement) of any action, proceeding
or investigation against the Indemnified Party by any other person.
23
SECTION 6.5 Opportunity to Defend Against Third Party Claims. If the
Claims Notice relates to a Third Party Claim, the Indemnifying Party may elect
to compromise or defend, at its own expense and by its own counsel, such Third
Party Claim. If the Indemnifying Party elects to compromise or defend such Third
Party Claim, it shall within 30 business days (or sooner, if the nature of the
Third Party Claim so requires) after his or its receipt of the Claims Notice,
notify the Indemnified Party of its intent to do so, and the Indemnified Party
shall cooperate, at the expense of the Indemnifying Party, in the compromise of,
or defense against, such Third Party Claim. If the Indemnifying Party elects not
to compromise or defend such Third Party claim, fails to notify the Indemnified
Party of its election as herein provided or contests its obligation to indemnify
under this Agreement, the Indemnified Party may pay, compromise or defend such
Third Party Claim. Notwithstanding the foregoing, neither the Indemnifying Party
nor the Indemnified Party may settle or compromise any claim over the objection
of the other, provided, however, that consent to settlement or compromise shall
not be unreasonably withheld. In any event, the Indemnified Party and the
Indemnifying Party may participate, at their own expense, in the defense of such
Third Party Claim. If the Indemnifying Party chooses to defend any claim, the
Indemnified Party shall make available to the Indemnifying Party any books,
records or other documents within its control that are necessary or appropriate
for such defense. The Indemnifying Party shall be subrogated to all rights and
remedies of the Indemnified Party to the extent of any indemnification provided
by the Indemnifying Party to the Indemnified Party.
SECTION 6.6 Limitation on Indemnification. Notwithstanding anything
to the contrary in this Agreement, no Indemnified Party shall have any liability
for indemnification under this Article 6 until the total of all Losses of the
Indemnified Party exceeds $10,000; provided, however, that the foregoing
limitations on indemnification shall be inapplicable in the case of any Losses
resulting from any breach of the representations and warranties contained in
Sections 2.1, 2.2, 3.4, 3.9, 3.17, 4.2, 4.10 and 4.22 hereof.
SECTION 6.7 Survival. Notwithstanding the investigations by the
parties hereto of each other's affairs, and notwithstanding any knowledge of
facts determined or determinable by such parties pursuant to such investigation,
each of AMS and the Members shall have the right to rely fully upon the
representations, warranties, covenants and agreements of the other parties
contained in this Agreement. The representations and warranties of the parties
contained herein shall survive the consummation of the Transactions (i) to the
extent contained in Section 2.1, 2.2, 2.4, 3.4, 4.9, 3.17, 4.2, 4.10 and 4.22
hereof, for the duration of the applicable statute of limitations, (ii) to the
extent relating to any other matter, for twelve (12) months following the
consummation of the Transactions. A claim for indemnification hereunder must be
asserted by a party seeking indemnification within the respective period of
survival.
SECTION 6.8 Indemnification Exclusive Remedy. The parties hereto
acknowledge and confirm that, except in the event of fraud, the indemnification
procedures described in this Article 6 shall be the sole and exclusive remedies
available to them for any breach or non-fulfillment of the representations,
warranties, covenants, agreements and other provisions of this Agreement.
ARTICLE 7
MISCELLANEOUS
-------------
SECTION 7.1 Notices. Any notice or other communication required or
permitted hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or sent by certified,
registered or express mail, postage prepaid. Any such notice shall be deemed
24
given when so delivered personally, telegraphed, telexed or sent by facsimile
transmission or, if mailed, three (3) days after the date of deposit in the
mails, as follows:
(i) if to the Members, to:
the address provided by each Member under his, her or its
signature hereto
(ii) if to AMS, to:
A.M.S. Marketing, Inc.
c/o Xxxxxx X. Xxxxx, Esq.
Xxxxx Xxxxxxx Xxxxxxx Israels LLP
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, XX 00000
Any party may by notice given in accordance with this Section to the
other parties designate another address or person for receipt of notices
hereunder.
SECTION 7.2 Entire Agreement. This Agreement (including the
schedules and exhibits) and the agreements referred to herein and/or executed in
connection with the consummation of the Transactions contemplated herein contain
the entire agreement among the parties with respect to the exchange of the
Interests for the AMS Shares and the related transactions, and supersede all
prior agreements, written or oral, with respect thereto, including, without
limitation, the letter of intent dated April 3, 2003.
SECTION 7.3 Waivers and Amendments; Non-Contractual Remedies;
Preservation of Remedies. This Agreement may be amended, superseded, canceled,
renewed or extended, and the terms hereof may be waived, only by a written
instrument signed by the parties or, in the case of a waiver, by the parties
waiving compliance. No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof. Nor shall any
waiver on the part of any party of any such right, power or privilege, nor any
single or partial exercise of any such right, power or privilege. The rights and
remedies herein provided are cumulative and are not exclusive of any rights or
remedies that any party may otherwise have at law or in equity. The rights and
remedies of any party based upon, arising out of or otherwise in respect of any
inaccuracy in or breach of any representation, warranty, covenant or agreement
contained in this Agreement shall in no way be limited by the fact that the act,
omission, occurrence or other state of facts upon which any claim of any such
inaccuracy or breach is based may also be the subject of any other
representation, warranty, covenant or agreement contained in this Agreement (or
in any other agreement between the parties) as to which there is no inaccuracy
or breach.
SECTION 7.4 Governing Law. This Agreement shall be governed and
construed in accordance with the laws of the State of Florida, applicable to
agreements made and to be performed entirely within such State (without giving
effect to conflicts of law principles thereof).
SECTION 7.5 Binding Effect; No Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure to the benefit of
the parties and their respective successors and legal representatives. Nothing
contained herein is intended or shall be construed as creating third party
25
beneficiaries to this Agreement. This Agreement is not assignable except by
operation of law.
SECTION 7.6 Variations in Pronouns. All pronouns and any variations
thereof refer to the masculine, feminine or neuter, singular or plural, as the
context may require.
SECTION 7.7 Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a number
of copies hereof each signed by less than all, but together signed by all of the
parties hereto. Fascimile signatures shall be deemed originals for all purposes.
SECTION 7.8 Exhibits and Schedules. The Exhibits and Schedules are a
part of this Agreement as if fully set forth herein. All references herein to
Sections, subsections, clauses, Exhibits and Schedules shall be deemed
references to such parts of this Agreement, unless the context shall otherwise
require.
SECTION 7.9 Headings. The headings in this Agreement are for
reference only, and shall not affect the interpretation of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the date first above written.
AMS MARKETING, INC. ADVANCED IMAGING SYSTEMS, LLC
By: /s/ XXXXXX X. XXXXXXXXX By: /s/ C. XXX XXXXX
------------------------------ -------------------------------------
Name: Xxxxxx X. Xxxxxxxxx Name: C. Xxx Xxxxx
Title: President Title: Manager
THE MEMBERS
/s/ XXXXX XXXXXX XXXXXX /s/ LARA XXXXXX XXXXXXXXXX
---------------------------------- -----------------------------------------
Xxxxx Xxxxxx Xxxxxx Lara Xxxxxx Xxxxxxxxxx
000 X.X. 0xx Xxxxxx 0000 X.X. 00xx Xxxxxx
Xx. Xxxxxxxxxx, XX 00000 Xxxxxxxxxx Xxxxx, XX 00000
/s/ XXXXX XXXXXXXX /s/ XXXXXXX X'XXXXXX
---------------------------------- -----------------------------------------
Xxxxx Xxxxxxxx Xxxxxxx X'Xxxxxx
0000 Xxxxxxx Xxxxxxx 0000 X.X. 00xx Xxxxxxx
Xxxxxxxxxx, XX 00000 Ft. Xxxxxxxxxx, XX 00000
26
