Exhibit 10.04
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is
dated as of August 27, 1999 by and between XXxxxx.Xxxxxxx Inc., a Delaware
corporation ("GTrade") and Xxxx X. Xxxxxx, Xxxx X. Xxxx and Xxxxxxx X.
Xxxxxxxx (the "Principal Shareholders") of NetSafety Corporation USA, Inc.,
a California corporation ("NetSafety"). The Principal Shareholders are
acting on their own behalf, and as "Trustees" for the minority shareholders
of NetSafety pursuant to a Preferred Stock Trust Agreement dated as of
August 27, 1999 (the "Trust Agreement"), attached hereto as Exhibit "A,"
which is incorporated herein by this reference. References hereinafter to
"Principal Shareholders" shall also include within it the capacity of
"Trustee" for the minority shareholders ("Minority Shareholders") of
NetSafety under the Trust Agreement, except as may otherwise be
distinguished therefrom in the context of the subject matter.
1. Plan of Reorganization. The Principal Shareholders are
the owners of 8,080,000 shares of the 10,002,000 issued and outstanding
shares (the "NetSafety Shares") of Common Stock of NetSafety; and hold
1,922,000 NetSafety Shares in their capacity as "Trustees" under the Trust
Agreement for the Minority Shareholders. It is the intention of the
parties hereto that the NetSafety Shares shall be conveyed to GTrade in
exchange for 100,002 shares of GTrade Series C Preferred Stock, $.05 par
value (the "GTrade Shares"), which are authorized, but have not yet been
issued by GTrade. The terms of the GTrade Series C Preferred Stock are
encompassed within Appendix I hereto. On the Closing Date, as hereinafter
defined, the Principal Shareholders will deliver all the NetSafety Shares
to GTrade and GTrade will deliver to the Principal Shareholders
certificates representing the GTrade Shares, free and clear of all claims,
liens, and encumbrances. On the Closing Date, NetSafety will be a
wholly-owned subsidiary of GTrade.
The GTrade Shares shall be issued in certificates in form and
substance satisfactory to counsel for GTrade. Each of the Principal
Shareholders represents and warrants that he will receive and hold the
GTrade Shares for investment and not with a view to the distribution
thereof, and that he understands that the GTrade Shares to be received by
him will bear a legend acknowledging that such shares are "restricted
securities" as that term is defined in Rule 144 promulgated by the
Securities and Exchange Commission ("Rule 144") pursuant to the Securities
Act of 1933 (the "Act"). Each of the Principal Shareholders understands
and agrees that the GTrade Shares may not be publicly offered or sold by
him for a period of one year from the Closing Date and thereafter may be
publicly offered or sold by him only pursuant to (a) Rule 144 or some other
exemption from registration under the federal securities laws, as
determined by counsel to GTrade or (b) a Registration Statement which has
been declared effective by the Securities and Exchange Commission. There
can be no assurance that GTrade will then satisfy the requirements for such
a sale pursuant to Rule 144, and GTrade has not, nor will it have, any
obligation to either the Principal Shareholders or the Minority
Shareholders whatsoever to file a Registration Statement covering the
GTrade Shares. Each of the Principal Shareholders further agrees that the
transfer agent for the Common Stock of GTrade will be instructed to place a
"stop transfer" order against all of the GTrade Shares to be issued to the
Principal Shareholders hereunder prohibiting the transfer of the GTrade
Shares on the books and records of GTrade until the conditions set forth
above have been satisfied.
2. Delivery of Shares. On the Closing Date, the Principal
Shareholders will deliver certificates for the NetSafety Shares, duly
endorsed, so as to make GTrade the sole owner thereof, free and clear of
all claims, liens and encumbrances; and on such Closing Date delivery of
the certificates representing the GTrade Shares will be made to the
Principal Shareholders as set forth above. Delivery will be made at such
place as may be determined by the parties.
3. Representations of Shareholders. Each of the Principal
Shareholders represents and warrants as follows:
(a) As of the Closing Date, the Principal Shareholders will
be the sole owners of the NetSafety Shares appearing of record in his name;
such NetSafety shares will be free from claims, liens or other
encumbrances; and the Principal Shareholders will have the unqualified
right to transfer such NetSafety Shares, including the shares attributable
to the Minority Shareholders, to GTrade, free from claims, liens or other
encumbrances;
(b) The NetSafety Shares constitute duly and validly issued
shares of NetSafety, and are fully-paid and nonassessable;
(c) NetSafety was incorporated on March 31, 1999 in the State
of California, and has been pursuing the development of "XxxXxxxxx.Xxx," a
system to screen objectionable materials on the internet from access to
children. Unaudited financial statements of NetSafety are attached hereto
as Exhibit "B," and incorporated herein by this reference (the "Interim
Period Financials"), and include a Balance Sheet, Statement of Operations,
Statement of Stockholder's Equity, and Statement of Cash Flows, for the
period from inception to June 30, 1999. All such financial statements have
been prepared in conformity with generally accepted accounting principles,
consistently applied, and present fairly the financial condition of
NetSafety as at the date(s) indicated thereon and the results of its
operations for the period(s) ended thereon. At August 27, 1999, NetSafety
had no material liabilities, contingent or otherwise, not reflected or
reserved against it in its audited Balance Sheet and Statement of
Operations for the period ended June 30, 1999. The date of August 27, 1999
is hereinafter sometimes referred to as the Warranty Date with respect to
NetSafety.
(d) Since March 31, 1999 and on the Closing Date, there will
not be any material adverse changes in the financial position of NetSafety
not reflected in the Interim Period Financials;
(e) NetSafety is not and as of the Closing Date will not be
involved in any pending litigation or governmental investigation or
proceeding not disclosed in writing to GTrade, and to the knowledge of the
Principal Shareholders no litigation or governmental investigation or
proceeding is threatened against NetSafety;
(f) As of the Closing Date, NetSafety will be in good
standing as a California corporation;
(g) The authorized capital stock of NetSafety consists of
15,000,000 shares of Common Stock; as of the Closing Date 10,002,000 shares
of NetSafety Common Stock will be issued and outstanding, all of which
shares will be validly issued, fully-paid and nonassessable and there is
not, and as of the Closing Date there will not be, outstanding any
warrants, options or other agreements on the part of NetSafety obligating
NetSafety to issue any additional shares of its Common Stock or any of its
securities of any kind;
(h) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will violate any
provision of the Articles of Incorporation or By-laws of NetSafety; will
violate, conflict with or result in the breach or termination of or
otherwise any contracting party the right to terminate or constitute a
default under the terms of any agreement or instrument to which NetSafety
is a party or by which any of its property or assets may be bound; or
result in the creation of any lien, charge or encumbrance upon the
properties or assets of NetSafety; violate any judgment, order, injunction,
decree or award against or binding upon NetSafety or upon its securities,
property or business;
(i) Except as set forth on Exhibit "C" (if required) hereto
NetSafety is not now nor prior to the Closing Date will it become (without
the consent of GTrade) a party to or be bound by any written or oral; (i)
contract not made in the ordinary course of business; (ii) employment,
advisory or consulting contract; (iii) contract with any labor or trade
union or association; (iv) bonus, pension, profit-sharing, retirement,
stock purchase, hospitalization insurance or any other plan providing for
employee benefits; (v) lease with respect to any property, real, personal
or mixed, whether as lessor or lessee; (vi) continuing contract for the
future purchase of material supplies, equipment or services in excess of
$25,000 per contract; or (vii) single contract for expenditures or
commitment for expenditures in excess of $100,000 or extending beyond
December 31, 1999.
(j) Each of the Principal Shareholders acknowledges that
from the Closing Date until August 30, 2000, the net cash flow of NetSafety
will be held 70% at the NetSafety level as a subsidiary of GTrade, and 30%
will be transferred to GTrade for use in its operations after GTrade has
infused an aggregate of U.S.$250,000.00 into NetSafety. Net cash flow is
defined as net cash derived from operations, including payment therefrom of
all salaries and bonuses to officers, and specifically excludes cash
derived from financing activities.
(k) Each of the Principal Shareholders will take such
action(s) as are required to appoint the President of GTrade, or such other
nominee as GTrade might designate, to serve on the Board of Directors of
NetSafety through September 1, 2000.
4. Representations of GTrade. GTrade represents and
warrants to the Principal Shareholders as follows:
(a) GTrade is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
(b) GTrade has all requisite power and authority to carry
on its business as presently conducted, to enter into this Agreement and to
perform its obligations under this Agreement. The consummation of the
transactions contemplated by this Agreement will not violate, nor be in
conflict with, any provision of GTrade's Certificate of Incorporation,
By-laws, or any agreement or instrument to which GTrade is a party or is
bound, or any judgment, decree, order, statute, rule or regulation
applicable to GTrade.
(c) GTrade's execution, delivery, and performance of this
Agreement and the transactions contemplated hereby have been duly and
validly authorized by all action, corporate, shareholder, and otherwise,
required under GTrade's Certificate of Incorporation or By-laws, or under
the Delaware General Corporation Law, or under any other statute, ruling,
law, or agreement affecting the business operations of GTrade.
(d) This Agreement has been duly executed and delivered on
behalf of GTrade, and at the Closing all documents and instruments required
hereunder to be executed and delivered by GTrade shall have been duly
executed and delivered. This Agreement does, and such documents and
instruments shall, constitute legal, valid and binding obligations of
GTrade enforceable in accordance with their terms.
(e) The total authorized capitalization of GTrade consists
of 50,000,000 shares of Common Stock, $.001 par value and 700,000 shares of
Preferred Stock, $.05 par value. The number of shares of each category to
be outstanding on the Closing Date before the issuance of the GTrade Shares
to the Shareholders is as follows:
Common Stock 10,555,800.06
Preferred Stock 110,000
(f) As of the Closing Date, the GTrade Shares to be
delivered to the Principal Shareholders will constitute valid and legally
issued, fully-paid and nonassessable shares of GTrade.
(g) The Officers and Directors of GTrade are set forth on
Exhibit "D"; GTrade has taken all necessary corporate action to authorize
the execution of this Agreement and the issuance of the GTrade Shares
contemplated hereby and the officer of GTrade is duly authorized to execute
this Agreement;
(h) Since December 31, 1998 there have not been and prior
to the Closing Date there will not be any material changes in the financial
position of GTrade except those otherwise disclosed to the Principal
Shareholders.
(i) GTrade is not involved in any pending litigation or
governmental investigation or proceeding, except as disclosed to the
Principal Shareholders;
(j) As of the Closing Date GTrade will be in good standing
as a Delaware Corporation.
(k) GTrade shall make available to NetSafety, as its
subsidiary, 170,000 shares of restricted GTrade Common Stock for use by
NetSafety in its financing activities with the understanding that 120,000
of such shares shall be returned to GTrade on August 30, 2000 or cash equal
to the fair market value for that number of shares of GTrade Common Stock
on that date shall be paid to GTrade.
(l) At Closing, GTrade will grant to the Principal
Shareholders an irrevocable proxy, coupled with an interest to vote all
NetSafety shares held by GTrade for a period of one year, subject, however,
to the Principal Shareholders appointing to the Board of Directors of
NetSafety for a like period one person selected by GTrade to represent the
interests of GTrade in the operations of NetSafety.
5. Prohibited Acts. GTrade agrees not to do any of the
following things prior to the Closing Date, and each of the Shareholders
agrees that prior to the Closing Date he will not request or permit
NetSafety to do any of the following things:
(a) Declare or pay any dividends or other distributions on
its stock or purchase or redeem any of its stock;
(b) Issue any stock or other securities, including any
rights or options to purchase or otherwise acquire any of its stock, or
issue any notes or other evidences of indebtedness not in the usual course
of business; or
(c) Make capital expenditures in excess of an aggregate of
Two Hundred Fifty Thousand Dollars ($250,000).
6. Delivery of Records. Each of the Principal Shareholders
agrees that on or before the Closing Date he will cause to be delivered to
GTrade such corporate records or other documents of NetSafety as GTrade may
reasonably request.
7. Conditions to the Obligations of GTrade and the
Shareholders.
(a) The obligations of GTrade to consummate the transactions
contemplated by this Agreement are subject to the fulfillment, at or before
the Closing Date of the following further conditions; (i) each of the
representations and warranties of the Principal Shareholders contained in
this Agreement or in any written statement exhibit, financial statement or
schedule or other document delivered pursuant hereto or in connection with
the transactions contemplated hereby shall be true in all respects as the
Closing Date as if then made (except to the extent waived hereunder or as
affected by the transactions contemplated hereby); (ii) each of the
Principal Shareholders shall have performed and complied with all
covenants, agreements and conditions required by this Agreement to be
performed or complied with by him prior to or at the Closing Date and
GTrade shall have been furnished with a certificate of the President of
NetSafety dated the Closing Date certifying in such detail as GTrade may
reasonably request to the fulfillment of such conditions; (iii) all
documents and proceedings of the Shareholders and NetSafety in connection
with the transactions contemplated hereby shall have been approved as to
form and substance by GTrade and its counsel, Xxxxxxx X. Xxxxx, whose
approval will not unreasonably be withheld.
(b) The obligations of the Principal Shareholders to
consummate the transactions contemplated by this Agreement are subject to
the fulfillment, at or before the Closing Date of the following further
conditions; (i) each of the representations and warranties of GTrade
contained in this Agreement or in any written statement exhibit, financial
statement or schedule or other document delivered pursuant hereto or in
connection with the transactions contemplated hereby shall be true in all
respects as the Closing Date as if then made (except to the extent waived
hereunder or as affected by the transactions contemplated hereby); (ii)
GTrade shall have performed and complied with all covenants, agreements and
conditions required by this Agreement to be performed or complied with by
it prior to or at the Closing Date and the Principal Shareholders shall
have been furnished with a certificate of the President/Secretary of GTrade
dated the Closing Date certifying in such detail as the Principal
Shareholders may reasonably request to the fulfillment of such conditions;
(iii) all documents and proceedings of GTrade in connection with the
transactions contemplated hereby shall have been approved as to form and
substance by the Principal Shareholders.
(c) All of the representations and warranties of the
Shareholders contained in this Agreement or any exhibit thereto shall have
been acknowledged by NetSafety. All of the representations and warranties
of GTrade and the Principal Shareholders shall be true in all material
respects on the Closing Date as if then made. All such representations and
warranties shall survive the Closing Date of this transaction.
8. Notices. Any notice which any of the parties hereto may
desire to serve upon any of the other parties hereto shall be in writing
and shall be conclusively deemed to have been received by the party at its
address by FAX, or, if mailed, postage prepaid, United States mail,
registered, return receipt requested, to the following address:
If to the Principal Shareholders:
Xxxx X. Xxxxxx
c/o NetSafety Corporation USA, Inc.
000 Xxxxxx Xxxxxx, Xxx. X
Xxxxx Xxxxx, XX 00000
(000) 000-0000 (FAX)
If to GTrade:
XXxxxx.Xxxxxxx Inc.
000 Xxxxxxxxx Xxx., 00 Xxx.
Xxx Xxxx, XX 00000
(000) 000-0000 (FAX)
9. Successors. This Agreement shall be binding upon and
inure to the benefit of the heirs, personal representatives and successors
and assigns of the parties.
10. Closing Date. The Closing Date shall be August 27, 1999
at 1:00 p.m., or such later date as to which the parties shall agree.
11. Choice of Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of New York. Any action
arising out of or under this Agreement shall be brought in the Courts of
the State of New York.
12. Counterparts. This Agreement may be signed in one or
more counterparts, all of which taken together shall constitute an entire
agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
XXxxxx.Xxxxxxx Inc. Principal Shareholders
BY:/s/ Xxxx Xxxxx /s/ Xxxx X. Xxxxxx
------------------------- -------------------------
Xxxx Xxxxx, President Xxxx X. Xxxxxx
/s/ Xxxx X. Xxxx
------------------------
Xxxx X. Xxxx
/s/ Xxxxxxx X. Xxxxxxxx
-------------------------
Xxxxxxx X. Xxxxxxxx
Exhibit "D"
XXxxxx.Xxxxxxx Inc.
Officers and Directors
Name and Address Signature
----------------- -----------
Xxxx Xxxxx, Director & President
000 Xxxxxxxxx Xxx., 00xx Xxx.
Xxx Xxxx, XX 00000 _____________________________
(000) 000-0000
(000) 000-0000 (FAX)
Xxxx X. Xxxxxxx, Secretary/Treasurer & Director
c/o Xxxxx Xxxx & Co.
0000 Xxxxxxx Xxx
Xxxxxx Xxxx, XX 00000 _____________________________
Xxxxxx Xxxxxx, Director
00 Xxxxxxxxxxxxx Xxxx, Xxx. 0X
Xxxxx Xxxx, XX 00000 _____________________________
Xxxxx X. Xxxxxx
0 Xxxxxxx Xxxx
Xxxxx Xxxxx, XX 00000 _____________________________
