BETWEEN
DIGIMEDIA USA, INC., a Nevada Corporation
AND
NITROS FRANCHISE CORPORATION., a Nevada Corporation
May 14, 1997
TABLE OF CONTENTS
1. Definitions
2. Basic Transaction
(a) The Merger
(b) The Closing
(c) Actions at the Closing
(d) Effect of Merger
(e) Procedure for Payment
3. Representations and Warranties of the Target
(a) Organization, Qualification, and Corporate Power
(b) Capitalization
(c) Authorization of Transaction
(d) Noncontravention
(e) Filings with the SEC
(f) Financial Statements
(g) Events Subsequent to Most Recent Available Financial Statement
(h) Undisclosed Liabilities
(i) Brokers' Fees
(j) Continuity of Business Enterprise
(k) Disclosure
4. Representations and Warranties of the Buyer
(a) Organization
(b) Capitalization
(c) Authorization of Transaction
(d) Noncontravention
(e) Brokers' Fees
(f) Continuity of Business Enterprise
(g) Disclosure
(h) Buyer's Financial Statements
(i) Subsequent Events
(j) Title To Assets
(k) Undisclosed Liabilities
(l) Legal Compliance
(m) Intellectual Property
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5. Covenants
(a) General
(b) Notices and Consents
(c) Regulatory Matters and Approvals
(d) Fairness Opinion and Comfort Letters
(e) Listing of Buyer Shares
(f) Operation of Business
(g) Full Access
(h) Notice of Developments
(i) Exclusivity
(j) Indemnification
(k) Continuity of Business Enterprise
6. Conditions to Obligation to Close
(a) Conditions to Obligation of the Buyer
(b) Conditions to Obligation of the Target
7. Miscellaneous
(a) Survival
(a) Press Releases and Public Announcements
(b) No Third Party Beneficiaries
(c) Entire Agreement
(d) Succession and Assignment
(e) Counterparts
(f) Headings
(g) Notices
(h) Governing Law
(i) Amendments and Waivers
(j) Severability
(k) Expenses
(l) Construction
(m) Incorporation of Exhibits and Schedules
Exhibit A - Articles of Merger
Exhibit B - Parties' Financial Statements
Disclosure Schedules - Exceptions to Representations and Warranties
AGREEMENT AND PLAN OF MERGER
This agreement is entered into on this 30 day of April, 1997 by and
between DigiMedia USA, Inc., a Nevada corporation (the "BUYER"), and
Nitros Franchise Corporation a Nevada corporation (the "TARGET"). The
Buyer and the Target are referred to collectively herein as the "PARTIES,"
and either individually as "PARTY".
This Agreement contemplates a tax-free merger of the Target with and into
the Buyer in a reorganization pursuant to ss.368(a)(1)(A) of the Internal
Revenue Code of 1986 as amended. The Target Stockholders will receive capital
stock in the Buyer in exchange for their capital stock in the Target. The
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Parties expect that the Merger will further certain of their business objectives
including, without limitation, 1) to bring a diversified food customer base with
ancillary high tech capabilities to the Buyer for its existing business plans,
and 2) to allow Target to become a public company and gain access to the public
capital markets to finance Target's expansion plans.
Now, therefore, in consideration of the premises and the mutual promises
herein made, and in consideration of the representations, warranties, and
covenants herein contained, the Parties agree as follows:
1. DEFINITIONS.
"AFFILIATE" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Securities Exchange Act.
"BUYER" has the meaning set forth in the preface above.
"BUYER SHARE" means any share of the Common Stock, $.00467 cents par value
per share, of the Buyer.
"ARTICLES OF MERGER" has the meaning set forth in ss.2(c) below.
"CLOSING" has the meaning set forth in ss.2(b) below.
"CLOSING DATE" has the meaning set forth in ss.2(b) below.
"CONFIDENTIAL INFORMATION" means any information concerning the businesses
and affairs of the Parties that is not already generally available to the
public.
"CONVERSION RATIO" has the meaning set forth in ss.2(d)(v) below.
"NEVADA GENERAL CORPORATION LAW" means the General Corporation Law of the
State of Nevada, as amended.
"DISCLOSURE SCHEDULE" has the meaning set forth in ss.3 below.
"EFFECTIVE TIME" has the meaning set forth in ss.2(d)(i) below.
"EXISTING BUYER STOCKHOLDERS" means those persons who own common stock of
the Buyer and are common stockholders of record immediately prior to the
effective time.
"EXISTING TARGET SHAREHOLDERS" means those persons who owns common stock
of the Target and is a stockholder of record immediately prior to the effective
time.
"GAAP" means United States generally accepted accounting principles as in
effect from time to time.
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"INCOME TAX BASIS OF ACCOUNTING" means the accounting method used by the
Party to prepare its Annual Corporate Income Tax Returns on either IRS Form 1120
or 1120S.
"IRS" means the Internal Revenue Service.
"KNOWLEDGE" means actual knowledge without independent investigation.
"MERGER" has the meaning set forth in ss.2(a) below.
"NOTICE OF ACTION" means the notice required to be given to all Buyer's
shareholders under applicable Nevada Corporation law to consummate this merger.
"ORDINARY COURSE OF BUSINESS" means the ordinary course of business
consistent with past custom and practice (including with respect to quantity and
frequency).
"PARTY" has the meaning set forth in the preface above.
"PERSON" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization, or a governmental entity (or any department, agency, or political
subdivision thereof).
"INFORMATION STATEMENT" has the meaning set forth in ss.5(c)(i) below.
"REQUISITE BUYER STOCKHOLDER APPROVAL" means the affirmative vote of the
holders of a majority of the Buyer Shares in favor of this Agreement and the
Merger.
"REQUISITE TARGET STOCKHOLDER APPROVAL" means the affirmative vote of the
holders of a majority of the Target Shares in favor of this Agreement and the
Merger.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"SECURITY INTEREST" means any mortgage, pledge, lien, encumbrance, charge,
or other security interest, OTHER THAN (a) mechanic's, materialmen's, and
similar liens, (b) liens for taxes not yet due and payable or for taxes that the
taxpayer is contesting in good faith through appropriate proceedings, (c)
purchase money liens and liens securing rental payments under capital lease
arrangements, and (d) other liens arising in the Ordinary Course of Business and
not incurred in connection with the borrowing of money. "SPECIAL TARGET MEETING"
has the meaning set forth in ss.5(c)(ii) below.
"SURVIVING CORPORATION" has the meaning set forth in ss.2(a) below.
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"TARGET" has the meaning set forth in the preface above.
"TARGET SHARE" means any share of the Common Stock, $0.10 (ten cents) par
value per share, of the Target.
"TARGET STOCKHOLDER" means any Person who or which holds any Target
Shares.
2. BASIC TRANSACTION.
(a) THE MERGER. On and subject to the terms and conditions of this
Agreement, the Target will merge with and into the Buyer (the
"MERGER") at the Effective Time. The Buyer shall be the corporation
surviving the Merger (the "SURVIVING CORPORATION").
(b) THE CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING) shall take place at the offices of Xxxxx
Xxxxxxxx, President, Nitros Franchising Corp. (the Target's Offices)
at 0000 Xxxx Xxxxxxx Xxxx Xxxx., Xxxx Xxxxxxxxxx, Xxxxxxx 00000,
commencing at 11:00 a.m local time on the first business day
following the satisfaction or waiver of all conditions to the
obligations of the Parties to consummate the transactions
contemplated hereby (other than conditions with respect to actions
the respective Parties will take at the Closing itself) or such
other date as the Parties may mutually determine.
(c) ACTIONS AT THE CLOSING. At the Closing, (i) the Target will deliver
to the Buyer the various certificates, instruments, and documents
referred to in ss.6(a) below, (ii) the Buyer will deliver to the
Target the various certificates, instruments, and documents referred
to in ss.6(b) below, (iii) the Buyer and the Target will file with
the Secretary of State of Nevada Articles of Merger in the form
attached hereto as Exhibit A (the "ARTICLES OF MERGER").
(d) EFFECT OF MERGER.
(i) GENERAL. The Merger shall become effective at the time (the
"EFFECTIVE TIME") the Buyer and the Target file the Articles
of Merger with the Secretary of the State of Nevada. The
Merger shall have the effect set forth in the Nevada General
Corporation Law. The Surviving Corporation may, at any time
after the Effective Time, take any action (including executing
and delivering any document) in the name and on behalf of
either the Buyer or the Target in order to carry out and
effectuate the transactions contemplated by this Agreement.
(ii) ARTICLES OF INCORPORATION. The Articles of Incorporation of
the Buyer in effect at and as of the Effective Time will
remain the Articles of Incorporation of the Surviving
Corporation without any amendment in the Merger except as
provided in this agreement.
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(iii) BYLAWS. The Bylaws of the Buyer in effect at and as of the
Effective Time will remain the Bylaws of the Surviving
Corporation without any modification or amendment in the
Merger.
(iv) NAME OF SURVIVING CORPORATION. The name of the Buyer as of the
Effective Time will be changed from DigiMedia USA, Inc. to
Nitros Franchise Corporation.
(v) DIRECTORS AND OFFICERS. The directors and officers of the
Buyer in office at and as of the Effective Time will resign.
As of the Effective Time, Xxxxx Xxxxxxxx shall become
President k Secretary of the Buyer and a member of the Board
of Directors.
(vi) CONVERSION OF TARGET SHARES. At and as of the Effective Time,
(A) each Target Share shall be converted into the right to
receive an estimated 12,905 shares of Common Stock of the
Buyer (the ratio of 12,905 shares of Buyer Common Stock to one
Target Share is referred to herein as the "CONVERSION RATIO"),
and (B) each converted Target share shall be canceled by the
Buyer; PROVIDED, however, that the Conversion Ratio shall be
subject to equitable adjustment in the event of any additional
pre-merger issuance of common stock, or a stock split, stock
dividend, reverse stock split, or other change in the number
of Target or Buyer Shares outstanding prior to closing. No
Target Share shall be deemed to be outstanding or to have any
rights other than those set forth above in this ss.2(d)(v)
after the Effective Time. It is understood that the above
conversion ratio is merely an estimate based on the estimated
number of shares anticipated to be outstanding on the closing
date after taking into account all possible dilution from any
new stock issuance, convertible security, option, warrant, or
any other instrument or contract (excluding this merger
agreement) that is convertible into, or could result in the
issuance of addition common stock of the Buyer. It is the
express intent of the parties that EXISTING TARGET
SHAREHOLDERS shall own immediately after the closing date 75%
(seventy-five) of the outstanding common stock of the Buyer
after taking into account all possible dilution from any
pre-merger stock issuance, convertible security, option,
warrant, right, or any other instrument or contract (excluding
this merger agreement) that is convertible into, or could
result in the issuance of, additional common stock of the
Buyer; and the estimated "Conversion Ratio" stated above shall
be adjusted, if necessary, to effectuate that express intent.
It is the express intent of the parties that EXISTING BUYER
SHAREHOLDERS shall own immediately after the closing date 25%
(twenty-five) of the outstanding common stock of the Buyer
after taking into account all possible dilution from any
pre-merger stock issuance, convertible security, option,
warrant, right, or any other instrument or contract (excluding
this merger agreement) that is convertible into, or could
result in the issuance of, additional common stock of the
Buyer; and the estimated "Conversion Ratio" stated above shall
be adjusted, if necessary, to effectuate that express intent.
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(vii) BUYER'S PRE-EXISTING COMMON SHARES. Each share of Buyer's
Common Stock issued and outstanding at and as of the Effective
Time will remain issued and outstanding.
(e) PROCEDURE FOR PAYMENT.
(i) Immediately after the Effective Time, (A) the Buyer will
arrange to deliver to XXXXX XXXXXXXX ("EXCHANGE AGENT") a
stock certificate (issued in the name of the Exchange Agent or
its nominee) representing the number of Buyer Shares equal to
the product of (1) the Conversion Ratio times (II) the number
of outstanding Target Shares with the understanding that the
conversion ratio enumerated above may be adjusted in
accordance with ss.2(d)(v) of this agreement to take into
account any changes in the actual number of shares of the
Buyer outstanding just prior to the closing date, and (B) Upon
the Target shareholders surrendering their stock certificates
to the Exchange Agent, the Buyer shall cause the Exchange
Agent to mail to each record holder of outstanding Target
Shares a certificate representing the number of shares of
Buyer's common stock to which he, she. or it is entitled.
(ii) The Buyer will not pay any dividend or make any distribution
on Buyer Shares (with a record date at or after the Effective
Time) to any record holder of outstanding Target Shares until
the holder surrenders for exchange his, her, or its
certificates which represented Target Shares.
(iii) The Target shall pay all reasonable charges and expenses of
the Exchange Agent.
3. REPRESENTATIONS AND WARRANTIES OF THE TARGET. The Target represents
and warrants to Buyer that the statements contained in this ss.3 are
correct and complete as of the date of this agreement and will be
correct and complete as of the Closing Date (as though made then and
as of the Closing Date were substituted for the date of this
Agreement throughout this ss.3), except as set forth in the
disclosure schedule accompanying this Agreement and initialed by the
parties (the "DISCLOSURE SCHEDULE"). The Disclosure Schedule will be
arranged in paragraphs corresponding to the numbered and lettered
paragraphs contained in this ss.3
(a) ORGANIZATION, QUALIFICATION, AND CORPORATE POWER, The Target is a
corporation duly organized, validly existing, and in good standing
under the laws of the State of Nevada (the jurisdiction of its
incorporation). The Target is duly authorized to conduct business
and is in good standing under the laws of the State of Nevada where
such qualification is required. The Target has full corporate power
and authority to carry on the businesses in which it is engaged and
to own and use the properties owned and used by it.
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(b) CAPITALIZATION. The entire authorized capital stock of the Target
consists of 500 Target Shares with a par value of $.10 cents, of
which 500 Target Shares are issued and outstanding and none are held
in treasury. All of the issued and outstanding Target Shares have
been duly authorized and are validly issued, fully paid, and
nonassessable. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could
require the Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation,
or similar rights with respect to the Target. Target has no
preferred stock outstanding nor any other class of stock other than
the above described common shares.
(c) AUTHORIZATION OF TRANSACTION. The Target has full power and
authority (including full corporate power and authority) to execute
and deliver this Agreement and to perform its obligations hereunder;
PROVIDED, HOWEVER, that the Target cannot consummate the Merger
unless and until it receives the Requisite Target Stockholder
Approval. This Agreement constitutes the valid and legally binding
obligation of the Target. enforceable in accordance with its terms
and conditions.
(d) NONCONTRAVENTION, To the Knowledge of any director or officer of the
Target, neither the execution and the delivery of this Agreement.
nor the consummation of the transactions contemplated hereby, will
(i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which the Target is
subject or any provision of the charter or bylaws of the Target or
(ii) conflict with, result in a breach of, constitute a default
under, result in the acceleration of, create in any party the right
to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other
arrangement to which the Target is a party or by which it is bound
or to which any of its assets is subject (or result in the
imposition of any Security Interest upon any of its assets) except
where the violation. conflict, breach, default, acceleration,
termination, modification, cancellation, failure to give notice, or
Security Interest would not have a material adverse effect on the
financial condition of the Target taken as a whole or on the ability
of the Parties to consummate the transactions contemplated by this
Agreement. To the Knowledge of any director or officer of the
Target, and, other than in connection with the provisions of the
Nevada General Corporation Law, the Securities Exchange Act, the
Securities Act, and the state securities laws if applicable, the
Target doesn't need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement, except where the
failure to give notice, to file, or to obtain any authorization,
consent, or approval would not have a material adverse effect on the
Target taken as a whole or on the ability of the Parties to
consummate the transactions contemplated by this Agreement.
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(e) FILINGS WITH THE SEC. The Target, prior to entering into this
merger, was not a Public Company, did not have its shares traded on
a public stock exchange, and was not required to make any filings
with the SEC. The Target has & will take all reasonable steps to
enable itself to comply with any applicable securities laws that
will be required to effectuate this agreement.
(f) FINANCIAL STATEMENTS. The Target will present prior to the Effective
Time audited financial statements (including related footnote
disclosures and schedules) prepared in accordance with GAAP applied
on a consistent basis throughout the periods covered thereby. These
financial statements will present fairly the financial condition of
the Target from inception and the results of operations of the
Target for the years then ended. These financial statements do, to
the best knowledge and belief of Target's management present fairly
the financial condition of the Target in accordance with the
accounting basis on which they were prepared, provided, however,
that they are subject to what could be material audit adjustments
that the independent auditors may require management to make to
present them fairly in accordance with GAAP on a consistent basis.
(g) EVENTS SUBSEQUENT TO MOST RECENT AVAILABLE FINANCIAL STATEMENT.
Since inception (the date of the most recent compiled financial
statement of the Target), there has not been any material adverse
change in the financial condition of the Target taken as a whole.
(h) UNDISCLOSED LIABILITIES. Management of the Target has no knowledge
of any liability (whether asserted or unasserted, absolute or
contingent, accrued or unaccrued, liquidated or unliquidated, and
whether due or to become due), including any liability for taxes,
(i) which is not reflected in the Target's most recent compiled
financial statements except those listed on the accompanying
Disclosure Schedule; and (ii) except for liabilities which have
arisen in the Ordinary Course of Business (none of which results
from, arises out of, relates to, is in the nature of, or was caused
by any breach o f contract, breach of warranty, tort, infringement,
or violation of law). (i) BROKERS' FEES. The Target has no liability
or obligation to pay any fees or commissions to any broker, finder,
or agent with respect to the transactions contemplated by this
Agreement. (j)CONTINUITY OF BUSINESS ENTERPRISE. The Target operates
at least one significant historic business line, and owns a
significant portion of its historic business assets, within the
meaning of Treas. Reg. ss.1.368-1(d). It is the present intent of
Target's management not to take any action at, or after, the closing
date which would cause the merger not to qualify as a reorganization
within the meaning of ss.368 of the Internal Revenue Code. It is the
present intent of Target's management to satisfy the "continuity of
business enterprise requirement" by continuing after the merger
significant business operations that were conducted in the past by
Target prior to the merger. The Target's shareholders have no
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present intention, or arrangement to dispose of any of the Buyer's
stock received in the merger in a manner that would cause the merger
to violate the continuity of shareholder interest requirement set
forth in Reg. 1.368-1.
(k) DISCLOSURE. None of the information that the Target will supply
Buyer for any document Buyer will file with the SEC will contain any
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light
of the circumstances under which they will be made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF THE BUYER. The Buyer represents
and warrants to the Target that the statements contained in this
ss.4 are correct and complete as of the date of this Agreement and
will be correct and complete as of the Closing Date (as though made
then and as though the Closing Date were substituted for the date of
this Agreement throughout this ss.4), except as set forth in the
Disclosure Schedule herein. The Disclosure Schedule will be arranged
in paragraphs corresponding to the numbered and lettered paragraphs
contained in this ss.4.
(a) ORGANIZATION. The Buyer is a corporation duly organized, validly
existing, and in good standing under the laws of the jurisdiction of
its incorporation (Nevada). It is duly authorized to conduct
business and is in good standing in every jurisdiction where such
qualification is required (including, but not limited to, Florida).
(b) CAPITALIZATION. The authorized common stock of the Buyer at the time
of execution of this agreement consists of 10,714,285 authorized
common shares with a par value of $.00467 cents of which 2,150,889
Buyer shares are issued and outstanding and none of which are held
in treasury. All of the Buyer's shares to be issued in the Merger
have been duly authorized and, upon consummation of the Merger will
be validly issued, fully paid, and nonassessable. The Buyer has no
class of stock outstanding other than the above described shares.
(c) AUTHORIZATION OF TRANSACTION. The Buyer has full power and authority
(including full corporate power and authority) to execute and
deliver this Agreement and to perform its obligations hereunder;
PROVIDED, HOWEVER, that the Buyer cannot consummate the Merger
unless and until it receives the Requisite Buyer Stockholder
Approval. this Agreement constitutes the valid and legally binding
obligation of the Buyer, enforceable- in accordance with its terms
and conditions. Buyer will notify all of its shareholders in
accordance with ss.78.453 of Nevada Statutes of the shareholder vote
required to approve the plan of merger.
(d) NONCONTRAVENTION. To the Knowledge of any director or officer of the
Buyer after reasonable investigation, neither the execution and the
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling,
charge, or other restriction of any government, governmental agency,
or court to which the Buyer is subject or any provision of the
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charter or bylaws of the Buyer or (ii) conflict with, result in a
breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify,
or cancel, or require any notice under any agreement, contract,
lease, license, instrument or other arrangement to which the Buyer
is a party or by which it is bound or to which any of its assets is
subject. To the Knowledge of any director or officer of the Buyer
after reasonable investigation, and other than in connection with
the provisions of the Nevada General Corporation Law, the Securities
Exchange Act, the Securities Act, and the state securities laws, the
Buyer does not need to give any notice to, make any filing with, or
obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the
transactions contemplated by this Agreement.
(e) BROKERS' FEES. The Buyer does not have any liability or obligation
to pay any fees or commissions to any broker, finder, or agent with
respect to the transactions contemplated by this Agreement for which
the Target could become liable or obligated. (d)CONTINUITY OF
BUSINESS ENTERPRISE. It is the present intent of the Buyer to
continue operating after the merger at least one of the significant
lines of business that the Target conducted prior to the merger; or
to use at least a significant portion of the Target's historic
business assets in a business. The Buyer has no present intention to
take any action at, or after, the closing date which would cause the
merger to fail the "continuity of business requirement" for a
tax-free merger within the meaning of Treas. Reg. ss.1.368-1 (d). 5.
No existing Target shareholder shall dispose of any of Buyer's stock
received in the merger in such a manner that such transfer would
violate the continuity of shareholder interest requirement of Treas.
Reg. ss.1.368-1. The Buyer will not purchase, redeem, or otherwise
re-acquire from existing Target shareholders any of the Buyer's
common stock received by them in the merger.
(g) DISCLOSURE. The Buyer represents that, at the "Closing Date," it
will be current, and in full compliance with all required filings
with the SEC.
(h) BUYER'S FINANCIAL STATEMENTS. Buyer will have prepared by an
independent firm of Certified Public Accountants prior to the
Closing Date an audited Balance Sheet for the year ended December
1996, said audit shall be made available to the Parties and their
legal counsel for perusal in sufficient time prior to the "closing
date." This financial statement, and any unaudited interim financial
statements prepared by Buyer which are available prior to the
closing date are to be used by the parties in negotiating this
agreement and in performing due diligence investigations. The Buyer
represents that all the above mentioned financial statements have
been prepared in accordance with GAAP applied on a consistent basis.
Buyer represents that these financial statements fairly present the
financial condition of the Buyer as of those dates and the results
of operations for such periods; provided, however, that the
unaudited quarterly interim financial statements, if any, are
subject to normal year-end adjustments which will not be material
individually or in the aggregate.
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(i) SUBSEQUENT EVENTS. Since the date of the audited balance sheet
prescribed in 4(h) above, there has not been any material adverse
change in the business, financial condition, operations, results of
operations, or future prospects of the Buyer taken as a whole.
Without limiting the generality of the foregoing, since that date:
(1) the Buyer has not sold, leased, transferred, or assigned any
material assets, tangible or intangible, outside the Ordinary
Course of Business;
(2) the Buyer has not entered into any material agreement,
contract, lease, or license outside the Ordinary Course of
Business;
(3) no party (including the Buyer) has accelerated, terminated,
made material modifications to, or canceled any material
agreement, contract, lease, or license to which the Buyer is a
party or by which any of them is bound except as required by
this agreement;
(4) the Buyer has not made any material capital expenditure or
investment in, or any material loan to, any Person outside the
Ordinary Course of Business (except as disclosed in the
Buyer's financial statements described in ss.4(h) above);
(5) the Buyer has not granted any license or sublicense of any
material rights with respect to any Intellectual Property;
(6) the Buyer has not issued, sold, or otherwise disposed of any
of its capital stock, or granted any options, warrants, or
other rights to purchase or obtain any of its capital stock
except as listed on Buyer's Disclosure Schedule.
(j) BUYER'S TITLE TO ITS ASSETS. The Buyer has good & marketable title
to, or a valid leasehold interest in, the properties and assets used
by Buyer, located on Buyer's premises, and as shown on Buyer's
initial audited balance sheet referred to in ss.4(h) & Buyer's most
recent interim unaudited Balance Sheet available prior to the
closing date, if any.
(k) BUYER'S UNDISCLOSED LIABILITIES. The Buyer has no liability (whether
known or unknown, asserted or unasserted, absolute or contingent,
accrued or unaccrued, liquidated or unliquidated, and whether due or
to become due), including any liability for taxes, except for (i)
liabilities set forth on the initial audited balance sheet referred
to in ss.4(h), if any, and (ii) liabilities which arose after that
Balance Sheet date in the Ordinary Course of Business. (Ordinary
Course of Business for this purpose does not include any breach of
contract, breach of warranty, tort, infringement, or violation of
law).
(1) LEGAL COMPLIANCE. The Buyer has complied with all applicable
laws (including rules, regulations, injunctions, judgments,
orders, decrees, and rulings thereunder) of federal, state,
local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge,
complaint, claim, demand, or notice has been filed or
commenced against Buyer alleging any failure to so comply.
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Buyer represents that it is not presently a party, nor has any
person threatened to make them a party, to any action suit,
proceeding, hearing, or investigation in, or before any court,
quasi-judicial or administrative agency of any federal, state,
local, or foreign jurisdiction, or before any arbitrator
except as listed on the attached Disclosure Schedule of Buyer.
(m) INTELLECTUAL PROPERTY. The Buyer has not interfered with. infringed
upon, misappropriated, or violated any material intellectual
property rights (i.e. such as but not limited to software,
copyrights, patents, trademarks, etc.) of third parties; nor has any
third party interfered with, infringed upon, misappropriated or
violated any material intellectual property rights of the Buyer.
5. COVENANTS. The Parties agree as follows with respect to the period from
and After the execution of this Agreement:
(a) GENERAL. Each of the Parties will use its reasonable best efforts to
take all action and to do all things necessary, proper, or advisable
in order to consummate and make effective the transactions
contemplated by this Agreement (including satisfaction, but not
waiver, of the closing conditions set forth in ss.6 below).
(b) NOTICES AND CONSENTS. Both Parties will give any notices to third
parties, and will use its reasonable best efforts to obtain any
third party consents, that either party reasonably may request in
connection with the matters referred to in ss.3(d) & ss.4(d) above.
(c) REGULATORY MATTERS AND APPROVALS. Each of the Parties will give any
notices to, make any filings with, and use its reasonable best
efforts to obtain any authorizations, consents, and approvals of
governments and governmental agencies in connection with the matters
referred to in ss.3(d) and ss.4(d) above. Without limiting the
generality of the foregoing:
(i) SECURITIES ACT, SECURITIES EXCHANGE ACT, AND STATE SECURITIES LAWS.
The Buyer will take all actions that may be necessary, proper, or
advisable under state securities laws in connection with the
issuance of the Buyer's shares.
(ii) NEVADA CORPORATION LAW. The Target will call a special meeting of
its stockholders (the "SPECIAL TARGET MEETING") as soon as
practicable in order that the stockholders may consider and vote
upon the adoption of this Agreement and the approval of the Merger
in accordance with Nevada General Corporation Law. The Buyer will
issue a "notice of action" to all its stockholders as soon as
practicable in order that the stockholders may consider and vote
upon the adoption of this Agreement and the approval of the Merger
in accordance with the Nevada General Corporation Law.
13
(d) FAIRNESS OPINION and COMFORT LETTERS. Neither the Target nor the
Buyer will be required to deliver to the other any comfort letter
from an independent accounting firm or a fairness opinion from an
investment banker prior to the effective time.
(e) LISTING OF BUYER SHARES. The Buyer will use its best efforts to
cause the Buyer Shares that will be issued in the Merger to the
existing target shareholders to be validly issued, fully paid, and
nonassessable "Restricted Shares" as that term is defined under the
"Securities Act."
(f) OPERATION OF BUSINESS. The Buyer will not engage in any practice,
take any action, or enter into any transaction outside the Ordinary
Course of Business. Without limiting the generality of the
foregoing:
(i) the Buyer will not authorize or effect any change in its
articles or bylaws;
(ii) the Buyer will not grant any options, warrants, or other
rights to purchase or obtain any of its capital stock (except
as provided in this agreement) or issue, sell, or otherwise
dispose of any of its capital stock;
(iii) the Buyer will not declare, set aside, or pay any dividend or
distribution with respect to its capital stock (whether in
cash or in kind); nor shall the Buyer redeem, repurchase, or
otherwise acquire any of its capital stock outside the
Ordinary Course of Business;
(iv) the Buyer will not issue any note, bond, or other debt
security or create, incur, assume, or guarantee any
indebtedness for borrowed money or capitalized lease
obligation;
(v) the Buyer will not make any capital investment in, make any
loan to, or acquire the securities or assets of any other
Person outside the Ordinary Course of Business;
(vi) nor shall the Buyer commit to any of the foregoing.
(g) FULL ACCESS. The Parties will permit representatives of either Party
to have full access at all reasonable times, and in a manner so as
not to interfere with the normal business operations of either Party
to all premises, properties, personnel, books, records (including
tax records), contracts, and documents of or pertaining to each
Party. The Parties will treat and hold as such any Confidential
Information it receives from the other in the course of the reviews
contemplated by this ss.5(g), will not use any of the Confidential
Information except in connection with this Agreement, and, if this
Agreement is terminated for any reason whatsoever, agrees to return
to the other Party all tangible embodiments (and all copies) thereof
which are in its possession.
14
(h) NOTICE OF DEVELOPMENTS. Each Party will give prompt written notice
to the other of any material adverse development causing a breach of
any of its own representations and warranties in ss.3 and ss.4
above. No disclosure by any Party pursuant to this ss.5(h), however,
shall be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty, or breach
of covenant.
(i) EXCLUSIVITY. The Buyer will not solicit, initiate, or encourage the
submission of any proposal or offer from any Person relating to the
acquisition of all or substantially all of the capital stock or
assets of either Party (including any acquisition structured as a
merger, consolidation, or share exchange); The Buyer shall notify
the Target immediately if any Person makes any proposal, offer,
inquiry, or contact with respect to any of the foregoing.
(j) INDEMNIFICATION. The Parties will indemnify each individual who
served as a director or officer of the other Party at any time prior
to the Effective Time from and against any and all actions, suits,
proceedings, hearings, investigations, charges, complaints, claims,
demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement,
liabilities, obligations, taxes, liens, losses, expenses, and fees,
including all court costs and attorneys' fees and expenses,
resulting from, arising out of, relating to, in the nature of, or
caused by this Agreement or any of the transactions contemplated
herein.
(k) CONTINUE OF BUSINESS ENTERPRISE. It is the present intention of the
Parties to continue operating after the merger at least one of the
significant lines of business that the Target conducted prior to the
merger, and to use at least a significant portion of the Target's
historic business assets in a business. Neither Party has any
intention to take any action at, or after, the closing date which
would cause the merger to fail the "continuity of business
requirement" for a tax-free merger within the meaning of Treas. Reg.
ss.1.368-1(d). The Buyer will not purchase, redeem, or otherwise
reacquire from the shareholders of the Target any of the Buyer's
common stock to be received by them in the merger. No existing
Target shareholder will dispose of any of Buyer's stock received in
the merger until such Target shareholder obtains an opinion from tax
counsel reasonably satisfactory to Buyer that such a transfer will
not violate the continuity of shareholder interest requirement set
forth in Treas. Reg. ss.1.368-1. In addition, such Target
shareholder shall obtain an opinion from legal counsel satisfactory
to the Buyer that such shares can be transferred pursuant to the
Securities Act. Any Target shareholder wishing to dispose of any
shares of Buyer stock received in the merger shall provide Buyer
written notice not less than thirty days prior to the intended date
of disposition, specifying the number of shares which the Target
shareholder proposes to dispose.
This covenant shall survive closing.
6. CONDITIONS TO OBLIGATION TO CLOSE.
15
(a) CONDITIONS TO OBLIGATION OF THE BUYER. The obligation of the Buyer
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following
conditions:
(i) this Agreement and the Merger shall have received the
Requisite Target Stockholder Approval and there shall be no
dissenting Target Shares;
(ii) the Target shall have procured all of the third party consents
specified in ss.5(b) above, if any;
(iii) the representations and warranties set forth in ss.3 above
shall be true and correct in all material respects at and as
of the Closing Date;
(iv) the Target shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(v) there shall not be any judgment, order, decree, stipulation,
injunction, or charge in effect preventing consummation of any
of the transactions contemplated by this Agreement;
(vi) the Target shall have delivered to the Buyer a certificate of
affidavit to the effect that each of the conditions specified
above in ss.6(a)(i)-(v) is satisfied in all material respects;
(vii) this Agreement and the Merger shall have received the
Requisite Buyer Stockholder Approval, and Buyer shall have
complied, in all respects, with the Securities Act, the
Securities Exchange Act, and applicable Nevada Law;
(viii)the Buyer Shares that will be issued in the Merger to the
existing Target shareholders shall be validly issued under
law, fully paid, non-assessable "restricted shares" as that
term is defined under the Securities Act;
(ix) that the Buyer has presented to Target a fully signed and
executed Option Agreement between the Buyer's President (Xxxx
X. Xxxxxxxx) and the Buyer requiring issuance to Xxxx X.
Xxxxxxxx 100,000 non-diluting shares of freely tradable stock
of Buyer at an exercise price of $0.15/share, exerciseable
immediately upon any dilution of Buyer, post-merger, during a
two year period, in exchange for consulting services;
(x) that the Buyer has presented to Target a fully signed and
executed Option Agreement between the Buyer's Executive Vice
President (Xxxx Xxxxxx) and the Buyer requiring issuance to
Xxxx Xxxxxx 100,000 non-diluting shares of freely tradable
stock of Buyer at an exercise price of $0.15/share,
exerciseable immediately upon any dilution of Buyer,
post-merger, during a two year period, in exchange for
consulting services;
(xi) that the Buyer has presented to Target a fully signed and
executed Option Agreement between the Xxxxxxx X. Xxxxxxxxx and
the Buyer requiring issuance to Xxxxxxx X. Xxxxxxxxx 100,000
non-diluting shares of freely tradable stock of Buyer at an
exercise price of $0.15/share, exerciseable immediately upon
any dilution of Buyer, post-merger, during a two year period,
in exchange for consulting services; and
(xii) all actions to be taken by the Target in connection with
consummation of the transactions contemplated hereby and all
certificates,
16
instruments, and other documents required to effect the
transactions contemplated hereby will be reasonably
satisfactory in form and substance to the Buyer.
The Buyer may waive any condition specified in this ss.6(a) if it executes
a writing so stating at or prior to the Closing.
(b) CONDITIONS TO OBLIGATION OF THE TARGET. The obligation of the Target
to consummate the transactions to be performed by it in connection
with the Closing is subject to satisfaction of the following
conditions:
(i) this Agreement and the Merger shall have received the
Requisite Buyer Stockholder Approval, and the Buyer shall have
complied, in all respects, with the Securities Act, the
Securities Exchange Act, and applicable Nevada Law in
acquiring such stockholder approval;
(ii) the Buyer's Information Statement shall have become efFective
under the Securities Act;
(iii) the Buyer Shares that will be issued in the Merger shall be
validly issued under law, fully paid, non-assessable
"restricted shares" as that term is de5ned under the
Securities Act;
(iv) all the representations and warranties set forth in ss.4 above
shall be true and correct in all respects at and as of the
Closing Date;
(v) the Buyer shall have performed and complied with all of its
covenants hereunder in all material respects through the
Closing;
(vi) no action, suit, or proceeding shall be pending or threatened
before any court or quasi-judicial or administrative agency of
any federal, state, local, or foreign jurisdiction or before
any arbitrator wherein an unfavorable injunction, judgment,
order, decree, ruling, or charge would (A) prevent
consummation of any of the transactions contemplated by this
Agreement, (B) cause any of the transactions contemplated by
this Agreement to be rescinded following consummation, (C)
afFect adversely the right of the Surviving Corporation to own
the Target's, or Buyer's assets, to operate their businesses
or to control the Target (and no such injunction, judgment,
order, decree, ruling, or charge shall be in effect);
(vii) the Buyer shall have delivered to the Target a certificate of
af5davit to the effect that each of the conditions specified
above in ss.6(b)(i)-(vi) is satisfied in all respects;
(viii)this Agreement and the Merger shall have received the
Requisite Target Stockholder Approval;
(ix) that the Buyer has presented to Target a fully signed and
executed Option Agreement between Target's President (Xxxxx
Xxxxxxxx) and the Buyer requiring issuance to Xxxxx Xxxxxxxx
300,000 non-diluting shares of &eely tradable stock of Buyer
at an exercise price of $0.15/share, exerciseable immediately
upon any dilution of Buyer, post-merger, during a two year
period, in exchange for consulting services
17
(x) All actions to be taken by the Buyer in connection with
consummation of the transactions contemplated hereby and all
certificates, instruments, and other documents required to
effect the transactions contemplated hereby will be
satisfactory in form and substance to the Target.
The Target may waive any condition specified in this ss.6(b) if it executes a
writing so stating at or prior to the Closing.
7. MISCELLANEOUS.
(a) SURVIVAL. None of the representations, warranties, and covenants of
the Parties (other than the provisions listed below) will survive
the Effective Time:
1) ss.2 concerning issuance of the Buyer Shares,
2) ss.3(1) concerning Target's representations to satisfy
requirements for a tax-free reorganization,
3) ss.4(f) concerning Buyer's representations to satisfy
requirements for a tax-free merger, 4) ss.4(g) concerning
Disclosure,
5) ss.5(j) concerning indemnification,
6) ss.5(k) concerning covenants to continue to satisfy
requirements for a tax-free merger.
(b) PRESS RELEASES AND PUBLIC ANNOUNCEMENTS. No Party shall issue any
press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval
of the other Party; PROVIDED, HOWEVER, that any Party may make any
public disclosure it believes in good faith is required by
applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will
use its reasonable best efforts to advise the other Party prior to
making the disclosure).
(c) NO THIRD PARTY BENEFICIARIES. This Agreement shall not confer any
rights or remedies upon any Person other than the Parties and their
respective successors and permitted assigns; PROVIDED, HOWEVER, that
(i) the provisions in ss.2 above concerning issuance of the Buyer
Shares and the provisions in ss.5(k) above concerning certain
requirements for a tax-free reorganization are intended for the
benefit of the Target Stockholders and (ii) the provisions in
ss.5(j) above concerning indemnification are intended for the
benefit of the individuals specified therein and their respective
legal representatives, and (iii) the provisions in ss.7(c) are
intended for the benefit of the Target's President whose continued
employment is essential to the success of both Parties.
(d) ENTIRE AGREEMENT. This Agreement (including the documents referred
to herein) constitutes the entire agreement between the Parties and
supersedes any prior understandings, agreements, or representations
by or between the Parties, written or oral, to the extent they
related in any way to the subject matter hereof.
18
(e) SUCCESSION AND ASSIGNMENT. This Agreement shall be binding upon and
inure to the benefit of the Parties named herein and their
respective successors and permitted assigns. No Party may assign
either this Agreement or any of its rights, interests. or
obligations hereunder without the prior written approval of the
other Party.
(f) COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of
which together will constitute one and the same instrument.
(g) HEADINGS. The section headings contained in this Agreement are
inserted for convenience only and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) NOTICES. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request,
demand, claim, or other communication hereunder shall be deemed duly
given if (and then two business days after) it is sent by registered
or certified mail, return receipt requested, postage prepaid, and
addressed to the intended recipient as set forth below:
IF TO THE TARGET: COPY TO: Xxxxx Xxxxxxxx
0000 Xxxx Xxxxxxx Xxxx Xxxx.
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
IF TO THE BUYER: COPY TO: Xxxx Xxxxxx
0000 X.X. 00' Xxxxxx
Xxxx Xxxxxxxxxx, Xxxxxxx 00000
Any Party may send any notice, request, demand, claim, or
other communication hereunder to the intended recipient at the
address set forth above using any other means (including
personal delivery, expedited courier, messenger service,
telecopy, telex, ordinary mail, or electronic mail), but no
such notice, request, demand, claim, or other communication
shall be deemed to have been duly given unless and until it
actually is received by the intended recipient. Any Party may
change the address to which notices, requests, demands,
claims, and other communications hereunder are to be delivered
by giving the other Party notice in the manner herein set
forth.
(i) GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of Florida without
giving effect to any choice or conflict of law provision or rule
(whether of the State of Florida or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other
than the State of Florida. The Courts of the State of Florida shall
have exclusive jurisdiction regarding any dispute arising out of
this agreement.
19
(j) AMENDMENTS AND WAIVERS. The Parties may mutually amend any provision
of this Agreement at any time prior to the Effective Time with the
prior authorization of their respective boards of directors;
PROVIDED, HOWEVER, that any amendment effected subsequent to
stockholder approval will be subject to the restrictions contained
in the Nevada & Florida General Corporation Law. No amendment of any
provision of this Agreement shall be valid unless the same shall be
in writing and signed by both of the Parties. No waiver by any Party
of any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be deemed to extend to
any prior or subsequent default, misrepresentation, or breach of
warranty or covenant hereunder or affect in any way any rights
arising by virtue of any prior or subsequent occurrence.
(k) SEVERABILITY. Any term or provision of this Agreement that is
invalid or unenforceable in any situation in any jurisdiction shall
not affect the validity or enforceability of the remaining terms and
provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other
jurisdiction.
(l) EXPENSES. Each of the Parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this
Agreement and the transactions contemplated hereby.
(m) CONSTRUCTION. The Parties have participated jointly in the
negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or
disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state,
local, or foreign statute or law shall be deemed also to refer to
all rules and regulations promulgated thereunder, unless the context
otherwise requires. The word "including" shall mean including
without limitation.
(n) INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference
and made a part hereof.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the
date first above written.
[BUYER]
DigiMedia USA, Inc. (Nevada) By: /s/ Xxxx X. Xxxxxxxx
---------------------------
Xxxx X. Xxxxxxxx,
Title: President
20
[TARGET]
Nitros Franchise Corperation By: /s/ Xxxxx Xxxxxxxx
---------------------------
Xxxxx Xxxxxxxx,
Title: President
