PACIFIC MULTIMEDIA, INC.
SHAREHOLDERS OF PEARL FINANCIAL SERVICES,
INC.
AGREEMENT AND PLAN OF EXCHANGE
Dated as of _________, 1997
AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange, dated _______, 1997 (this "AGREEMENT")
is between Pacific MultiMedia, Inc., a Washington corporation ("COMPANY"), and
each of the shareholders of Pearl Financial Services, Inc., a Washington
corporation ("PEARL") (collectively, "SHAREHOLDERS").
RECITALS
A. The board of directors and shareholders of PEARL have consented to a
transaction whereby all of the shares of common stock of PEARL, no par value per
share (the "PEARL SHARES"), will be exchanged for shares of common stock of the
COMPANY, no par value per share (the "COMPANY SHARES"), and up to One Million
Dollars ($1,000,000.00) in cash, as provided for in this Agreement;
B. The board of directors and shareholders of the COMPANY have consented
to the transactions contemplated by Recital A, as further described in this
Agreement.
INTENDING TO BE LEGALLY BOUND, and in consideration of the promises and the
mutual representations, warranties, covenants and agreements contained herein,
COMPANY and the Shareholders hereby agree as follows:
AGREEMENT
ARTICLE 1
THE EXCHANGE
1.1 EFFECTIVE TIME OF THE EXCHANGE. Subject to the provisions of this
Agreement, shareholders of PEARL will exchange all of their PEARL Shares for
COMPANY Shares (the "EXCHANGE"). The Exchange shall become effective pursuant
to Section 23B.01.230 of the Washington Business Corporation Act as of
5:00 p.m., Pacific time on the date (the "EFFECTIVE TIME") the requisite
Articles of Exchange pursuant to RCW 23B.11.050 and a Plan of Exchange are filed
with the Secretary of State of the State of Washington.
1.2 EFFECTS OF THE EXCHANGE. At the Effective Time: (i) all issued and
outstanding PEARL Shares shall become the property of the COMPANY, and all PEARL
shareholders shall become shareholders of the COMPANY. The Exchange shall have
the effects set forth in RCW 23B.11.060 and all other applicable laws.
1.3 CONVERSION OF PEARL SHARES. At the Effective Time: holders of common
stock of PEARL will be entitled to receive either (i) one share of Common Stock
of COMPANY for every 3.4274 shares of common stock of PEARL so exchanged, or
(ii) One Dollar ($1.00) in
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cash for each share of common stock of PEARL so exchanged up to a maximum
aggregate cash payment by COMPANY of One Million Dollars ($1,000,000.00), or
(iii) a combination of cash and shares of Common Stock of COMPANY based on the
foregoing exchange rates (collectively referred to herein as the "Exchange
Consideration"). Based on the number of shares of common stock of PEARL
currently outstanding and assuming holders of such stock elect to receive the
maximum cash consideration in connection with the Exchange, the COMPANY will
issue 3,350,000 shares of its Common Stock as Exchange Consideration (in
addition to One Million Dollars ($1,000,000.00) cash consideration). In the
event that holders of more than one million (1,000,000) shares of PEARL elect to
receive cash rather than shares of Common Stock of the COMPANY, such holders
will receive a pro rata allocation of the maximum One Million Dollars
($1,000,000.00) cash proceeds based on their relative ownership interest in
PEARL
1.4 DISSENTER'S RIGHTS. Any holder of PEARL Shares that are outstanding
on the record date for the determination of the PEARL shareholders entitled to
vote for or against the Exchange who did not vote such shares in favor of the
Exchange, or sign and deliver a written consent thereto with respect to such
shares (the PEARL Shares then outstanding that are not thus voted or as to which
such consents are not signed and delivered are referred to as "ELIGIBLE
DISSENTING SHARES"), will be entitled to exercise dissenters' rights pursuant to
RCW 23B.13.010 through 23B.13.280 ("CHAPTER 13") with respect to such Eligible
Dissenting Shares, provided that such holder meets all the requirements of
Chapter 13 with respect to such shares.
1.5 FRACTIONAL SHARES. No fractional COMPANY Shares will be issued in the
Exchange. In lieu of such issuance, all COMPANY Shares issued to the PEARL
shareholders pursuant to the terms of this Agreement shall be rounded to the
closest whole COMPANY Share.
1.6 DELIVERY OF CERTIFICATES. Each holder of a certificate or
certificates representing PEARL Shares shall surrender such certificates to
COMPANY together with such duly executed documentation as may be reasonably
required by COMPANY to effect a transfer of such shares, and upon such surrender
each holder shall be entitled to receive a certificate or certificates for the
applicable number of COMPANY Shares calculated pursuant to Section 1.3.
1.7 TAX-FREE REORGANIZATION. The Exchange is intended to be a
"REORGANIZATION" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "CODE"), and this Agreement is intended to constitute a
"PLAN OF REORGANIZATION" within the meaning of the regulations promulgated under
Section 368 of the Code.
ARTICLE 2
CLOSING
The closing of the Exchange (the "CLOSING") will take place at 10:00 a.m.,
Pacific time, as soon as practicable after satisfaction or waiver of the last to
be fulfilled of the conditions set forth in Article 5 that by their terms are
not to occur at the Closing (the "CLOSING DATE"), at the offices of Xxxxxxx
Xxxxx & Xxxxx LLP, Seattle, Washington, unless another date or place is agreed
to by the parties to this Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF COMPANY. COMPANY represents and
warrants to the Shareholders as follows:
3.1.1 ORGANIZATION, STANDING AND POWER. COMPANY is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington, has all requisite power and authority to own, lease and
operate its properties and to carry on its businesses as now being conducted,
and is duly qualified and in good standing to do business in the State of
Washington and each jurisdiction in which a failure to so qualify would have a
material adverse effect on COMPANY.
3.1.2 CAPITAL STRUCTURE. The authorized capital stock of COMPANY
consists of twenty-five million (25,000,000) COMPANY Shares. As of the date
hereof: five million (5,000,000) COMPANY Shares are issued and outstanding.
All outstanding COMPANY Shares are validly issued, fully paid, nonassessable and
not subject to any preemptive rights, or to any agreement to which COMPANY is a
party or by which COMPANY may be bound. There are not any options, warrants,
calls, conversion rights, commitments, agreements, contracts, understandings,
restrictions, arrangements or rights of any character to which COMPANY is a
party or by which COMPANY may be bound obligating COMPANY to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of COMPANY, or obligating COMPANY to grant, extend or enter into any such
option, warrant, call, conversion right, commitment, agreement, contract,
understanding, restriction, arrangement or right. COMPANY does not have
outstanding indebtedness the holders of which have the right to vote (or
convertible or exercisable into securities having the right to vote) with
holders of COMPANY Shares on any matter.
3.1.3 AUTHORITY. The execution, delivery, and performance of this
Agreement by COMPANY has been duly authorized by all necessary corporate action
on the part of COMPANY and no other corporate proceedings on the part of COMPANY
are necessary to authorize this Agreement or to consummate the transactions so
contemplated.
3.1.4 COMPLIANCE WITH LAWS AND OTHER INSTRUMENTS. COMPANY holds all
licenses, permits, and authorizations from all governmental entities (as defined
below) necessary for the lawful conduct of its business pursuant to, and COMPANY
is in compliance with all applicable statutes, laws, ordinances, rules, and
regulations of all such authorities having jurisdiction over it or any part of
its assets and operations, excepting, however, when such failure to hold would
not have a material adverse effect on COMPANY. There are no violations or
claimed violations known by COMPANY of any such license, permit, or
authorization or any such statute, law, ordinance, rule or regulation that would
have a material adverse effect on COMPANY. Neither the execution and delivery
of this Agreement by COMPANY nor the performance by COMPANY of its obligations
under this Agreement will violate any provision of laws applicable to COMPANY,
or will conflict with, result in the breach of any of the terms or conditions
of, constitute a breach of any of the terms or conditions of, constitute a
default under, permit any party to accelerate any right under, renegotiate, or
terminate, require consent,
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approval, or waiver by any party under, or result in the creation of any lien,
charge, encumbrance, or restriction upon any of the properties or assets of
COMPANY pursuant to any agreement, indenture, mortgage, license, permit, or
other instrument of any kind to which COMPANY is a party or by which COMPANY or
any of its assets is bound or affected.
3.1.5 RELIANCE. The foregoing representations and warranties are
made by COMPANY with the knowledge and expectation that the Shareholders are
placing reliance thereon.
3.2 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS. Each of the
Shareholders represents and warrants to COMPANY as follows:
3.2.1 AUTHORITY. The execution, delivery, and performance of this
Agreement by the Shareholders has been duly authorized by all necessary action
on the part of PEARL and, pursuant to the Articles of Incorporation and Bylaws
of PEARL and Washington law, no other proceedings on the part of PEARL are
necessary to authorize this Agreement or to consummate the transactions
contemplated herein. Each of the Shareholders has duly and validly executed and
delivered this Agreement, and, assuming the due authorization, execution and
delivery by COMPANY, this Agreement constitutes a valid, binding, and
enforceable obligation of each of the Shareholders in accordance with its terms.
Each of the Shareholders has the full power and authority to enter into this
Agreement and the transactions contemplated herein.
3.2.2 OWNERSHIP OF INTEREST. Each of the Shareholders owns his
shareholder interest in PEARL, and such ownership is not subject to any lien,
pledge, encumbrance or other restriction on ownership under applicable laws.
3.2.3 RELIANCE. The foregoing representations and warranties are
made by the Shareholders with the knowledge and expectation that COMPANY is
placing reliance thereon.
ARTICLE 4
COVENANTS
4.1 COVENANTS OF COMPANY. During the period from the date of this
Agreement (except as otherwise indicated) and continuing until the earlier of
the termination of this Agreement or the Effective Time (or later where so
indicated), COMPANY agrees that:
4.1.1 ORDINARY COURSE. COMPANY will carry on its business in the
ordinary course and will use reasonable efforts consistent with past practice
and policies to: (i) preserve intact its business and (ii) keep available the
services of its present officers, consultants, and employees and preserve its
relationships with customers, suppliers, distributors and others having business
dealings with it.
4.1.2 BREACH OF REPRESENTATIONS AND WARRANTIES. COMPANY will not
take any action that would cause or constitute a breach of any of the
representations and warranties set forth in Section 3.1 or that would cause any
of such representations and warranties to be inaccurate in any material respect.
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4.1.3 CONSENTS. COMPANY will promptly apply for or otherwise seek,
and use its best efforts to obtain, all consents and approvals, and make all
filings, required with respect to the consummation of the Exchange.
4.1.4 BEST EFFORTS. COMPANY will use its best efforts to complete
the transactions contemplated by this Agreement and to fulfill and cause to be
fulfilled the conditions to Closing under this Agreement.
4.2 COVENANTS OF THE SHAREHOLDERS. During the period from the date of
this Agreement (except as otherwise indicated) and continuing until the earlier
of the termination of this Agreement or the Effective Time (or later where so
indicated), each of the Shareholders agrees that:
4.2.1 ORDINARY COURSE. The Shareholders will use best efforts to
cause PEARL to carry on its business in the ordinary course and use reasonable
efforts consistent with past practice and policies to: (i) preserve intact its
business and (ii) keep available the services of its present employees and
consultants and preserve its relationships with customers, suppliers,
distributors and others having business dealings with it.]
4.2.2 BREACH OF REPRESENTATIONS AND WARRANTIES. None of the
Shareholders will take any action that would cause or constitute a breach of any
of the representations and warranties set forth in Section 3.2 or that would
cause any of such representations and warranties to be inaccurate in any
material respect.
4.2.3 BEST EFFORTS. The Shareholders will use their best efforts to
complete the transactions contemplated by this Agreement and to fulfill and
cause to be fulfilled the conditions to Closing under this Agreement.
ARTICLE 5
CONDITIONS PRECEDENT
The respective obligation of each party to complete the Exchange shall be
subject to the satisfaction prior to the Closing Date of the following
conditions:
5.1 CONSENT OF BOARD OF DIRECTORS AND SHAREHOLDERS. The obligations of
the COMPANY and the Shareholders under this Agreement are subject to the
delivery by the COMPANY and PEARL of all necessary consents (or certified
minutes of meetings) of the Board of Directors and Shareholders of the COMPANY
and PEARL that authorize the transactions contemplated by this Agreement
("ENTITY CONSENTS"). A list of the required Entity Consents is set forth at
Schedule ____ attached.
5.2 NO RESTRAINTS. No statute, rule, regulation, executive order, decree
or injunction shall have been enacted, entered, promulgated or enforced by any
United States court or governmental entity of competent jurisdiction which
enjoins or prohibits the consummation of the Exchange shall be in effect.
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5.3 CONSENTS. The COMPANY shall have received duly executed copies of all
third-party consents, approvals, assignments, waivers, authorizations or other
certificates (collectively, the "THIRD PARTY CONSENTS")" reasonably deemed
necessary to provide for the continuation in full force and effect of any and
all material contracts and leases of PEARL and for the COMPANY to consummate the
transactions contemplated hereby in form and substance reasonably satisfactory
to the COMPANY, except for such thereof as the COMPANY and PEARL shall have
agreed in writing shall not be obtained. A list of the required Third-Party
Consents is set forth on Schedule ____ attached.
ARTICLE 6
MISCELLANEOUS
6.1 ENTIRE AGREEMENT; AMENDMENTS. This Agreement and the schedules and
exhibits attached and incorporated by reference herein collectively embody the
complete agreement and understanding among the parties hereto with respect to
the subject matter hereof and supersede and preempt any prior understandings,
agreements or representations by or among the parties, written or oral, than
may have related to the subject matter hereof in any way. This Agreement may be
amended only by an instrument executed by each of the parties.
6.2 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
6.3 SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
6.4 GOVERNING LAW. All questions concerning the construction, validity
and interpretation of this Agreement and the exhibits and schedules hereto shall
be governed by the internal law, and not the law of conflicts, of the State of
Washington.
6.5 CAPTIONS. The descriptive headings of this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.
6.6 COUNTERPARTS. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more than
one party, but all such counterparts taken together shall constitute one and the
same Agreement.
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SIGNATURE PAGE - AGREEMENT AND PLAN OF EXCHANGE
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
Pacific MultiMedia, Inc., a Washington
corporation
By
------------------------
Shareholders of Pearl Financial
Services, Inc., a Washington
corporation
Exhibits and Schedules:
Schedule ___List of Entity Consents
Schedule ___List of Third Party Consents
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