1
Exhibit A
================================================================================
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
XXXX.XXX, INC.,
ISNI ACQUISITIONS, INC.,
XXXXXX XXXXX,
J. XXXXX XXXXXX, XX.,
WORLDWIDE INTERNET, INC.,
AND
XXX X. XXXXXXX,
AS OF __________, 2001
================================================================================
2
TABLE OF CONTENTS
ARTICLE I......................................................................2
THE MERGER.....................................................................2
1.1 The Merger.......................................................2
1.2 The Closing......................................................2
1.3 Actions at the Closing...........................................2
1.4 Additional Action................................................3
1.5 Effect on Capital Stock..........................................3
1.6 Exchange of Shares...............................................4
1.7 Dividends........................................................4
1.8 Certificate of Incorporation.....................................5
1.9 By-laws..........................................................5
1.10 Directors and Officers...........................................5
1.11 No Further Rights................................................5
1.12 Closing of Transfer Books........................................5
1.13 Tax and Accounting Consequences..................................5
1.14 Taking of Necessary Action; Further Action.......................6
1.15 Adjustment.......................................................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND
XXX X. XXXXXXX...............................................................6
2.1 Organization, Qualification and Corporate Power..................6
2.2 Capitalization...................................................6
2.3 Authorization of Transaction.....................................7
2.4 Noncontravention.................................................7
2.5 Subsidiaries.....................................................7
2.6 Absence of Certain Changes.......................................7
2.7 Undisclosed Liabilities..........................................8
2.8 Tax Matters......................................................8
2.9 Intellectual Property............................................8
2.10 Contracts........................................................8
2.11 Insurance........................................................8
2.12 Litigation.......................................................8
2.13 Permits..........................................................9
2.14 Books and Records................................................9
-i-
3
ARTICLE III(A) REPRESENTATIONS AND WARRANTIES OF XXXXXX XXXXX..................9
3A.1 Authority........................................................9
3A.2 Investment Intent...............................................10
3A.3 Other Matters...................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER THE MERGER SUB,
Xxxxxx Xxxxx and J. Xxxxx Xxxxxx, Xx........................................11
3.1 Organization....................................................11
3.2 Capitalization..................................................11
3.3 Authorization of Transaction....................................11
3.4 Noncontravention................................................12
3.5 Reports and Financial Statements................................12
3.6 Tax Matters.....................................................12
3.7 Absence of Material Adverse Changes.............................13
3.7a Undisclosed Liabilities.........................................13
3.8 Litigation......................................................14
3.9 Legal Compliance; Restrictions on Business Activities...........14
3.9a Intellectual Property...........................................14
3.10 Company Action..................................................15
3.11 Qualification as a Reorganization...............................15
3.12 Information Supplied by the Buyer...............................15
3.13 Brokers' Fees...................................................15
ARTICLE IV COVENANTS..........................................................15
4.1 Best Efforts....................................................15
4.2 Notices and Consents............................................16
4.3 Information Statement...........................................16
4.4 Operation of Business...........................................17
4.5 Full Access; Confidentiality....................................17
4.6 Notice of Breaches..............................................17
4.7 Exclusivity.....................................................18
4.8 Reorganization..................................................18
4.9 Reasonable Commercial Efforts and Further Assurances............18
4.10 Buyer Interim Operations........................................18
4.11 Board Seat......................................................19
4.12 Recapitalization of Shares......................................19
-ii-
4
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER................................19
5.1 Conditions to Each Party's Obligations..........................19
5.2 Conditions to Obligations of Buyer and Merger Sub...............20
5.3 Conditions to Obligations of the Company........................20
ARTICLE VI TERMINATION........................................................21
6.1 Termination of Agreement........................................21
6.2 Amendment.......................................................21
6.3 Extension; Waiver...............................................22
6.4 Effect of Termination...........................................22
ARTICLE VII INDEMNIFICATION...................................................22
7.1 Indemnification.................................................22
ARTICLE VIII..................................................................23
CERTAIN DEFINITIONS...........................................................23
ARTICLE IX MISCELLANEOUS......................................................23
9.1 Press Releases and Announcements................................23
9.2 No Third Party Beneficiaries....................................24
9.3 Entire Agreement................................................24
9.4 Succession and Assignment.......................................24
9.5 Counterparts....................................................24
9.6 Headings........................................................24
9.7 Notices.........................................................24
9.8 Governing Law...................................................26
9.9 Waivers.........................................................26
9.10 Severability....................................................26
9.11 Expenses........................................................27
9.12 Other Remedies..................................................27
9.13 Specific Performance............................................27
9.14 Construction....................................................27
9.15 Incorporation of Exhibits and Schedules.........................27
-iii-
5
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") entered into as of
____________, 2001, by and among XXXX.XXX, INC., a Delaware corporation (the
"BUYER"), ISNI AQUISITIONS, INC., a Delaware corporation and a wholly-owned
subsidiary of Buyer (the "Merger Sub"), XXXXXX XXXXX, the majority stockholder
of Buyer (the "MAJORITY STOCKHOLDER"), J. XXXXX XXXXXX, XX. (together with the
Majority Stockholder, the "OFFICERS"), and WORLDWIDE INTERNET, INC., a Delaware
corporation (the "COMPANY") and XXX X. XXXXXXX, the sole stockholder of the
Company (the "COMPANY STOCKHOLDER"). The Buyer, Merger Sub, Officers, Company
and Company Stockholder are referred to herein individually as a "Party" and
collectively as the "Parties."
RECITALS
A. The respective boards of directors of Buyer and Company have
independently approved this Agreement which contemplates a statutory merger of
Merger Sub with and into Company (the "MERGER") on the terms and subject to the
conditions contained herein and in accordance with the terms of the Delaware
General Corporation Law (the "DGCL").
B. Buyer, as the sole shareholder of Merger Sub, has approved and
consented to the merger of Merger Sub and Company on the terms and subject to
the conditions contained herein.
C. The Majority Stockholder owns [23,008,000] shares of the outstanding
class of common stock, par value $0.0001 per share of Buyer (the "BUYER COMMON
STOCK"), and has consented to the merger of Merger Sub and Company on the terms
and subject to the conditions contained herein.
D. In connection with the Merger, the Majority Stockholder will receive
shares of a newly created class of capital stock of Buyer (the "CLASS B COMMON
STOCK") in exchange for all of his shares of Buyer Common Stock. The Class B
Common Stock will be identical in all respects to the Buyer Common Stock, except
that it shall include a re-load feature providing for a minimum valuation of
$1,000,000 after [eight months], as set forth in the Certificate of Designations
(the "CERTIFICATE OF DESIGNATIONS") attached hereto as EXHIBIT A.
E. Pursuant to the Merger, the Company Stockholder will receive shares
of Buyer Common Stock in exchange for all of his capital stock of Company.
F. The Buyer, Merger Sub, Officers, Company and Company Stockholder
make certain representations, warranties, covenants and agreements in connection
with the Merger and to various prescribed conditions to the Merger.
G. The Parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Internal Revenue Code of
1986, (as amended, the "Code"), and to cause the Merger to qualify as a
reorganization under the provisions of Section 368(a) of the Code.
-1-
6
NOW, THEREFORE, in consideration of the representations,
warranties, agreements and covenants herein contained, the Parties agree as
follows.
ARTICLE I
THE MERGER
1.1 THE MERGER.
Upon the terms and subject to the conditions of this Agreement, Merger
Sub shall merge with and into the Company (with such merger referred to herein
as the "MERGER") at the Effective Time. From and after the Effective Time, the
separate corporate existence of Merger Sub shall cease and the Company shall
continue as the surviving corporation in the Merger (the "SURVIVING
CORPORATION"). The "EFFECTIVE TIME" shall be the time at which the Surviving
Corporation files a certificate of merger executed in accordance with the
relevant provisions of the DGCL (the "CERTIFICATE OF MERGER") with the Secretary
of State of the State of Delaware. The Merger shall have the effects specified
in this Agreement, the Certificate of Merger and the applicable provisions of
the DGCL. Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time, all the property, rights, privileges, powers and
franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
1.2 THE CLOSING.
The closing of the transactions contemplated by this Agreement (the
"CLOSING") shall take place at the offices of Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP,
0000 Xxxxxxxxxx Xxxxxx, Xxxxxxxxxx, X.X., 00000, as promptly as practicable, but
in no event later than 1:00 p.m. local time on the second business day after the
satisfaction or waiver of the conditions set forth in Article V (other than
conditions which by their nature are to be satisfied at closing, but subject to
those conditions) or at such other time, date and location as the Parties
specify (the "CLOSING DATE"). If the Closing is consummated, Buyer and Merger
Sub will be deemed to have waived any of the conditions set forth in Article V
to the extent not satisfied at or prior to the Closing.
1.3 ACTIONS AT THE CLOSING.
At the Closing: (a) the Company shall deliver to Buyer and Merger Sub
the various certificates, instruments and documents referred to in Section 5.2;
(b) Buyer and Merger Sub shall deliver to the Company the various certificates,
instruments and documents referred to in
-2-
7
Section 5.3; (c) the Company and Merger Sub shall file with the Secretary of
State of the State of Delaware the Certificate of Merger; and (d) Buyer shall
deliver certificates for the Merger Shares and the Majority Stockholder Merger
Shares to the Company Stockholder and the Majority Stockholder, respectively.
1.4 ADDITIONAL ACTION.
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 Company or Merger Sub, necessary to consummate the
transactions contemplated by this Agreement.
1.5 EFFECT ON CAPITAL STOCK.
(a) Definitions.
"BUYER COMMON STOCK" shall mean the class of common stock, par
value $0.0001 per share, of Buyer.
"COMPANY COMMON STOCK" shall mean the class of common stock,
$0.01 value per share, of the Company.
"COMPANY STOCKHOLDER" shall mean Xx. Xxx X. Xxxxxxx.
"MAJORITY STOCKHOLDER COMMON STOCK" shall mean all of the
outstanding shares of Buyer Common Stock beneficially owned, directly or
indirectly, by the Majority Stockholder.
"MAJORITY STOCKHOLDER MERGER SHARES" shall mean 3,900,000
shares of Class B Common Stock.
"MERGER SHARES" shall mean 19,500,000 shares of Buyer Common
Stock [to be issued to ________][held of record by].
"MERGER SUB COMMON STOCK" shall mean the class of common
stock, par value $0.0001 per share, of the Merger Sub.
(b) At the Effective Time, each share of Company Common Stock
shall, by virtue of the Merger and without any action on the part of any Party
or the Company Stockholder, automatically be canceled and extinguished and
converted into a right to receive the Merger Shares.
(c) At the Effective Time, each share of Merger Sub Common
Stock issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged
-3-
8
for one (1) validly issued, fully paid and nonassessable share of the common
stock of the Surviving Corporation.
(d) At the Effective Time, the Majority Stockholder Common
Stock shall, without any action on the part of any Party or the Majority
Stockholder, automatically be exchanged and converted into a right to receive
the Majority Stockholder Merger Shares.
(e) Notwithstanding the foregoing, no fractional shares of
Buyer Common Stock shall be issued. Such fractional shares shall be rounded down
to the nearest whole share.
1.6 EXCHANGE OF SHARES.
(a) At Closing, Buyer shall issue the Merger Shares, issuable
pursuant to Section 1.5 in exchange for all of the outstanding shares of Company
Common Stock and the Company Stockholder shall surrender the Company Common
Stock in exchange for the Merger Shares.
(b) At Closing, the Majority Stockholder shall surrender the
Majority Stockholder Common Stock and the Buyer shall issue the Majority
Stockholder Merger Shares issuable pursuant to Section 1.5 in exchange for all
of the Majority Stockholder Common Stock.
(c) If any Buyer Common Stock or Majority Stockholder Merger
Shares are to be issued in the name of a person other than the holder, it shall
be a condition to the issuance of such Merger Shares or Majority Stockholder
Merger Shares that: (i) the certificate so surrendered shall be properly
assigned, endorsed or accompanied by appropriate stock powers; (ii) such
transfer shall otherwise be proper; and (iii) the holder thereof shall pay to
the Buyer any transfer or other taxes payable by reason of the foregoing or
establish to the satisfaction of the Buyer that such taxes have been paid or are
not required to be paid.
(d) In the event any Company Common Stock or Majority
Stockholder Common Stock shall have been lost, stolen or destroyed, only upon
the making of an affidavit of that fact by the person claiming such to be lost,
stolen or destroyed, shall the Buyer issue in exchange for such lost, stolen or
destroyed Company Common Stock, Buyer Common Stock, Majority Stockholder Common
Stock or Majority Stockholder Merger Shares (whichever the case may be) issuable
in exchange therefor pursuant to Section 1.5. The board of directors of Buyer
may, in its discretion and as a condition precedent to the issuance thereof,
require the Company Stockholder or Majority Stockholder to submit to the Buyer
an affidavit and to give to the Buyer an indemnity against any claim that may be
made against the Buyer with respect to the Company Common Stock or Majority
Stockholder Common Stock alleged to have been lost, stolen or destroyed. In
addition, the Company Stockholder or Majority Stockholder may be required by
Buyer to post a bond in connection therewith.
-4-
9
1.7 DIVIDENDS.
No dividends or other distributions that are payable to the holders of
record of Buyer Common Stock as of a date on or after the Closing Date shall be
paid to the Company Stockholder entitled by reason of the Merger to receive
Buyer Common Stock until the Company Stockholder surrenders his Company Common
Stock in accordance with Section 1.6. Upon such surrender, the Buyer shall pay
or deliver to the Company Stockholder any dividends or other distributions that
are payable to the holders of record of Buyer Common Stock as of a date on or
after the Closing Date and that were paid or delivered between the Effective
Time and the time of such surrender; PROVIDED, however, that the Company
Stockholder shall not be entitled to receive any interest on such dividends or
other distributions.
1.8 CERTIFICATE OF INCORPORATION.
At the Effective Time, the Certificate of Incorporation of Merger Sub,
as in effect immediately prior the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by DGCL; provided, however, that Section 1 of the Certificate of Incorporation
of the Surviving Corporation shall be amended to read as follows: "The name of
the Corporation is WORLDWIDE INTERNET, INC.
1.9 BY-LAWS.
The By-laws of the Surviving Corporation shall be the same as the
By-laws of the Merger Sub immediately prior to the Effective Time.
1.10 DIRECTORS AND OFFICERS.
The directors of the Merger Sub shall become the directors of the
Surviving Corporation after the Effective Time. The officers of the Merger Sub
shall become the officers of the Surviving Corporation after the Effective Time,
retaining their respective positions.
1.11 NO FURTHER RIGHTS.
All shares of Buyer Common Stock issued upon the surrender for exchange
of shares of Company Common Stock in accordance with the terms hereof shall be
deemed to have been issued in full satisfaction of all rights pertaining to such
Company Common Stock.
1.12 CLOSING OF TRANSFER BOOKS.
At the Effective Time, the stock transfer books of the Company shall be
closed and no transfer of Company Common Stock shall thereafter be made. If,
after the Effective Time, Company Common Stock are presented to the Surviving
Corporation, they shall be canceled and exchanged for Merger Shares in
accordance with Section 1.6.
-5-
10
1.13 TAX AND ACCOUNTING CONSEQUENCES.
It is intended by the parties hereto that (a) the Merger shall
constitute a reorganization within the meaning of Section 368 of the Code and
(b) this Agreement shall constitute a plan of reorganization within the meaning
of Section 368 of the Code.
1.14 TAKING OF NECESSARY ACTION; FURTHER ACTION.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement and to vest
the Surviving Corporation with full right, title and possession to all assets,
property, rights, privileges, powers and franchises of the Buyer and Merger Sub,
the officers and directors of the Company and Merger Sub are fully authorized in
the name of their respective corporations or otherwise to take, and will take,
all such lawful and necessary action, so long as such action is not inconsistent
with this Agreement.
1.15 ADJUSTMENT.
In the event that, subsequent to the date of this Agreement but prior
to the Effective Time, Buyer or the Company shall effect a stock split, reverse
stock split, stock dividend, subdivision, reclassification, combination, merger,
exchange, recapitalization or other similar transaction (or a record date shall
have been set for such purpose), the provisions of this Article I shall be
appropriately adjusted.
ARTICLE II REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND XXX X. XXXXXXX
The Company and the Company Stockholder represent and warrant to Buyer
and Merger Sub that, as of the date hereof, the statements contained in this
Article II are true and correct, except as scheduled by the Company (the
"DISCLOSURE SCHEDULE").
2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
The Company is a corporation duly organized, validly existing and in
corporate good standing under the laws of the State of Delaware. The Company is
duly qualified to conduct business and is in corporate good standing under the
laws of each jurisdiction in which the nature of its businesses or the ownership
or leasing of its properties requires such qualification, except where the
failure to be so qualified or in good standing would not have a Material Adverse
Effect on the Company. The Company has the 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. The Company has furnished to the Buyer true and complete
copies of its Certificate of Incorporation and By-laws, each as amended and as
in effect on the date hereof (hereinafter "Charter" and "By-laws,"
-6-
11
respectively). The Company is not in default under or in violation of any
provision of its Charter or By-laws, each as amended to date.
2.2 CAPITALIZATION.
The Company's authorized capital stock consists of ____________ shares
of common stock, $.01 par value ____________ of which is currently issued and
outstanding. All outstanding capital stock of the Company has been duly
authorized, validly issued, fully paid, is non-assessable and is free of
preemptive rights.
2.3 AUTHORIZATION OF TRANSACTION.
The Company has full corporate power and authority to execute and
deliver this Agreement. This Agreement constitutes the valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
subject to bankruptcy, insolvency and other laws affecting creditors' rights
generally. The execution and delivery of this Agreement by the Company and the
consummation of the transactions contemplated hereby have been duly authorized
by the Board of Directors of the Company, and other than approval by the Company
Stockholder, such execution and delivery does not require the consent, approval
or authorization of any person, public authority or entity.
2.4 NONCONTRAVENTION.
The execution and delivery of this Agreement by the Company and the
performance of its obligations hereunder, (a) are not in violation or breach of,
and will not conflict with or constitute a default under, any of the terms of
the charter documents or bylaws of the Company or any note, debt instrument,
security agreement, lease, deed of trust or mortgage, license, franchise, permit
or any other contract, agreement or commitment binding upon the Company or any
of its assets or properties; (b) will not result in the creation or imposition
of any lien, encumbrance, equity or restriction in favor of any third party upon
any of the capital stock of the Company or any of the assets or properties of
the Company; and (c) will not conflict with or violate any applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality, self-regulatory authority or court having jurisdiction over the
Company, any of the capital stock of the Company, or any of the assets or
properties of Company.
2.5 SUBSIDIARIES.
Except as set forth in the Disclosure Schedule, the Company does not
have any direct or indirect subsidiaries or any other equity interest in any
other firm, corporation, partnership, joint venture, association or other
business organization.
-7-
12
2.6 ABSENCE OF CERTAIN CHANGES.
Since June 30, 2001, the Company has conducted its business in the
ordinary course consistent with past practice and there has not occurred any
change, event or condition (whether or not covered by insurance) that has
resulted in, or might reasonably be expected to result in any Material Adverse
Effect on the Company.
2.7 UNDISCLOSED LIABILITIES.
The Company has no liability (whether known or unknown, whether
absolute or contingent, whether liquidated or unliquidated and whether due or to
become due) which individually or in the aggregate would result in a Material
Adverse Effect on the Company, except as set forth in the Disclosure Schedule.
2.8 TAX MATTERS.
The Company has filed all tax returns that it was required to file and
all such tax returns were correct and complete in all material respects. The
Company has paid or will pay all taxes due by it on or before the Closing Date,
regardless of whether shown on any such tax returns, except such as are being
contested in good faith by appropriate proceedings (to the extent any such
proceedings are required) and with respect to which the Company is maintaining
reserves adequate for their payment.
2.9 INTELLECTUAL PROPERTY.
The Disclosure Schedule contains a full and complete list of all
material trademarks, trade names, service marks, copyrights and patents, or
applications therefor, or other intellectual property owned or used by the
Company (collectively, the "INTELLECTUAL PROPERTY"). The operations of the
Company do not now conflict with or infringe, and have not in the past
conflicted with or infringed, any Intellectual Property owned, possessed or used
by any third party. There are no third parties whose operations conflict with or
infringe, nor has anyone asserted that such operations conflict with or
infringe, any Intellectual Property.
2.10 CONTRACTS.
The Disclosure Schedule constitutes a full and complete list of each
material contract or agreement to which the Company is a party, or by which the
Company is bound in any respect. All material contracts or agreements to which
the Company is a party or by which the Company is bound (whether or not
disclosed) are in full force and effect, and the Company is not in default
thereunder nor has any event occurred which with the passage of time or giving
notice or both would result in the Company being in default under any of the
terms thereof.
-8-
13
2.11 INSURANCE.
The Company has in full force and effect, with all premiums due thereon
paid, the policies of insurance set forth therein, all insurance necessary to
operate its business. No notice of cancellation or termination has been received
with respect to any such insurance policy described in this Section.
2.12 LITIGATION.
Except as set forth in the Disclosure Schedule, there is no claim,
dispute, action, proceeding, suit or appeal or investigation or inquiry, at law
or in equity, involving the Company before any court, agency, authority,
self-regulatory authority, arbitration panel or other tribunal and, to the
knowledge of the Company, none have been threatened or are in prospect against
the Company. The Company is not subject to any order, writ, injunction or decree
of any court, agency, authority, arbitration panel or other tribunal.
2.13 PERMITS.
The Disclosure Schedule sets forth a list of all permits, licenses,
registrations, certificates, orders or approvals from any Governmental Entity
(including without limitation those issued or required under applicable export
laws or regulations) ("PERMITS") issued to or held by the Company. Such listed
Permits are the only Permits that are required for the Company to conduct its
business as presently conducted, except for those the absence of which would not
have a Material Adverse Effect on the Company. Each such Permit is in full force
and effect and, to the knowledge of the Company, no suspension or cancellation
of such Permit is threatened and there is no basis for believing that such
Permit will not be renewable upon expiration. Each such Permit will continue in
full force and effect following the Closing.
2.14 BOOKS AND RECORDS.
The minute books and other similar records of the Company contain true
and complete records of all material actions taken at any meetings thereof and
of all written consents executed in lieu of the holding of any such meeting. The
books and records of the Company accurately reflect in all material respects the
assets, liabilities, business, financial condition and results of operations of
the Company and have been maintained in accordance with good business and
bookkeeping practices.
-9-
14
ARTICLE III(A) REPRESENTATIONS AND WARRANTIES OF XXXXXX XXXXX
3A.1 AUTHORITY.
The Majority Stockholder is and will be on the Closing Date will be the
record and beneficial owner and holder of the Majority Stockholder Common Stock
free and clear of any charge, claim, lien, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer, receipt of income, or exercise of any other attributable ownership.
The Majority Stockholder has all requisite power, authority and legal right to
execute, deliver, enter into, consummate and perform this Agreement. Upon
execution and delivery of this Agreement by the Majority Stockholder, this
Agreement will constitute the legal, valid and binding obligation of the
Majority Stockholder and shall be enforceable against the Majority Stockholder
in accordance with its terms, subject to bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to the rights of creditors generally.
3A.2 INVESTMENT INTENT.
(a) Buyer and Merger Sub have made available to the Majority
Stockholder, during the course of this transaction and prior to the delivery of
the Majority Stockholder Merger Shares, the opportunity to ask questions of and
receive answers from any of the officers of Buyer or Merger Sub concerning the
terms and conditions of the issuance, and to obtain any documents or additional
information necessary to verify the information provided to the Majority
Stockholder or otherwise relative to the financial data and business of Buyer or
Merger Sub, to the extent that such parties possessed such information or could
acquire it without unreasonable effort or expense, and all such questions, if
asked, have been answered satisfactorily and all such documents, if examined,
have been found to be fully satisfactory.
(b) The Majority Stockholder understand and acknowledge that
(i) the Majority Stockholder must bear the economic risk of the Majority
Stockholder Merger Shares, (ii) the Majority Stockholder Merger Shares have not
been registered under the Securities Act of 1933 (as amended, the "SECURITIES
ACT") or any state securities laws and the Majority Stockholder Merger Shares
will bear a legend to such effect.
(c) The Majority Stockholder is knowledgeable and experienced
in evaluating investments and experienced in financial and business matters, and
is capable of evaluating the merits and risks of the Majority Stockholder Merger
Shares.
(f) The Majority Stockholder represents that at no time was
the Majority Stockholder presented with or solicited by or through any leaflet,
public promotional meeting, advertisement or any other form of general or public
advertising or solicitation in connection herewith. In addition, the Majority
Stockholder acknowledges that there has never been any representation, guaranty
or warranty made by Buyer or Merger Sub or any agent or representative of the
Buyer or Merger Sub as to the amount of or type of consideration or profit, if
any, to be realized by the Majority Stockholder in the Majority Stockholder
Merger Shares.
-10-
15
3A.3 OTHER MATTERS.
(a) The Majority Stockholder acknowledges that he has no right
to have the Majority Stockholder Merger Shares redeemed or otherwise reacquired
by Buyer, nor does the Majority Stockholder know of any plans or intentions of
the Buyer to redeem or otherwise reacquire the Majority Stockholder Merger
Shares.
(b) To the knowledge of the Majority Stockholder, at the
Effective Time, the Company Stockholder will be in control of the Surviving
Corporation and the Buyer within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended and the regulations adopted pursuant thereto.
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE BUYER THE
MERGER SUB, XXXXXX XXXXX AND J. XXXXX XXXXXX, XX.
Each of the Buyer, the Merger Sub, Xxxxxx Xxxxx and J. Xxxxx Xxxxxx,
Xx. represents and warrants to the Company as follows:
3.1 ORGANIZATION.
Each of Buyer and Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the state of its incorporation.
Each of Buyer and Merger Sub is duly qualified to conduct business and is in
corporate good standing under the laws of each jurisdiction in which the nature
of its businesses or the ownership or leasing of its properties requires such
qualification. Each of Buyer and Merger Sub has the corporate power and
authority to carry on the business in which it is engaged and to own and use the
properties owned and used by it. Neither Buyer nor Merger Sub is in default
under or in violation of any provisions of its Charter or By-laws, each as
amended to date. Merger Sub is a newly formed wholly owned first tier subsidiary
of Buyer and has conducted no business or activity unrelated to the Merger.
3.2 CAPITALIZATION.
The authorized capital stock of Buyer consists of 100,000,000 shares of
common stock, $.0001 par value ("BUYER COMMON STOCK"), 26,661,000 of shares is
currently issued and outstanding. All outstanding capital stock of the Buyer has
been duly authorized, validly issued, fully paid, is nonassessable and is free
of preemptive rights. All outstanding capital stock of the Buyer and rights to
acquire capital stock of the Buyer have been issued in accordance with all
applicable federal and state securities laws.
3.3 AUTHORIZATION OF TRANSACTION.
Each of Buyer and Merger Sub has full corporate power and authority to
execute and deliver this Agreement. This Agreement constitutes the valid and
binding obligation of each of
-11-
16
Buyer and Merger Sub, enforceable against them in accordance with its terms,
subject to bankruptcy, insolvency and other laws affecting creditors' rights
generally. The execution and delivery of this Agreement by each of Buyer and
Merger Sub and the consummation of the transactions contemplated hereby have
been duly authorized by the board of directors of Buyer, and other than approval
by the stockholders of Buyer and Merger Sub, such execution and delivery does
not require the consent, approval or authorization of any person, public
authority or entity.
3.4 NONCONTRAVENTION.
Subject to (a) compliance with the applicable requirements of the
Securities Act, any applicable state securities laws and the Exchange Act, (b)
the filing of the Certificate of Merger as required by the DGCL, and (c) except
as otherwise provided in this Agreement, neither the execution and delivery of
this Agreement, nor the consummation by Buyer or Merger Sub of the transactions
contemplated hereby or thereby, will: (1) conflict with or violate any provision
of the Charter or By-laws of Buyer or Merger Sub; (2) require on the part of
Buyer or Merger Sub any filing with, or permit, authorization, consent or
approval of, any Governmental Entity; (3) conflict with, result in breach of,
constitute (with or without due notice or lapse of time or both) a default
under, result in the acceleration of, create in any party any right to
accelerate, terminate, modify or cancel, or require any notice, consent or
waiver under, any contract, lease, sublease, license, sublicense, franchise,
permit, indenture, agreement or mortgage for borrowed money, instrument of
indebtedness, security interest or other arrangement to which Buyer or Merger
Sub is a party or by which either is bound or to which any of their assets are
subject; or (4) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Buyer or Merger Sub or any of their properties or
assets.
3.5 REPORTS AND FINANCIAL STATEMENTS.
Buyer has previously furnished or made available to the Company
complete and accurate copies, as amended or supplemented, of all reports filed
by Buyer under Section 13(a) or 15(d) of the Exchange Act with the SEC since
__________ (such reports are collectively referred to herein as the "BUYER
REPORTS"). The Buyer Reports constitute all of the documents required to be
filed by Buyer under Section 13(a) or 15(d) of the Exchange Act with the SEC
since such date and complied at the time of filing in all material respects with
the applicable requirements of the Exchange Act. As of their respective dates,
the Buyer Reports did not contain any untrue statement of a material fact or
omit to state 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. The audited financial statements and unaudited interim
financial statements of Buyer included in the Buyer Reports: (a) comply as to
form in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto; (b) have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods covered thereby (except as may be indicated therein or in the notes
thereto, and in the case of quarterly financial statements, as permitted by Form
-12-
17
10-QSB under the Exchange Act); (c) fairly present the consolidated financial
condition, results of operations and cash flows of Buyer as of the respective
dates thereof and for the periods referred to therein; and (d) are consistent
with the books and records of Buyer.
3.6 TAX MATTERS.
(a) Each of Buyer and Merger Sub has filed all tax returns
that it or they were required to file and all such tax returns were correct and
complete in all material respects. Each of Buyer and Merger Sub has paid or will
pay all taxes due by it on or before the Closing Date, regardless of whether
shown on any such tax returns, except such as are being contested in good faith
by appropriate proceedings (to the extent any such proceedings are required) and
with respect to which each of Buyer and Merger Sub is maintaining reserves
adequate for their payment. The accrued but unpaid taxes of Buyer and Merger Sub
for tax periods through December 31, 2000 do not exceed the accruals and
reserves for taxes (other than deferred taxes) set forth on the Most Recent
Buyer Balance Sheet, as defined below. All taxes attributable to the period
January 1, 2001 through the Closing Date are attributable to the conduct by
Buyer and Merger Sub of their respective operations in the ordinary course of
business. Buyer and Merger Sub have no actual or potential liability for any tax
obligation of any taxpayer (including without limitation any affiliated group of
corporations or other entities that included Buyer and Merger Sub during a prior
period) other than Buyer and Merger Sub. All taxes that each of Buyer and Merger
Sub is or was required by law to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Entity, except such as are being contested in good faith by appropriate
proceedings (to the extent any such proceedings are required) and with respect
to which the Buyer and the Merger Sub are maintaining reserves adequate for
their payment.
(b) Buyer and Merger Sub have each delivered to the Company
correct and complete copies of all federal income tax returns, examination
reports and statements of deficiencies assessed against or agreed by it since
__________. No examination or audit of any tax returns of Buyer and Merger Sub
by any Governmental Entity is currently in progress or, to the knowledge of
Buyer and Merger Sub, threatened or contemplated, except with respect to which,
if determined adversely to Buyer or Merger Sub would not reasonably be expected
to result in a Material Adverse Effect on Buyer. Neither Buyer nor Merger Sub
has waived any statute of limitations with respect to taxes or agreed to an
extension of time with respect to a tax assessment or deficiency.
3.7 ABSENCE OF MATERIAL ADVERSE CHANGES.
Since December 31, 2000, Buyer has conducted its business in the
ordinary course, consistent with past practice and there has not been any
material adverse change in the assets, business, financial condition or results
of operations of the Buyer, nor has there occurred any event or development that
could reasonably be foreseen to result in such a material adverse change in the
future.
-13-
18
3.7a UNDISCLOSED LIABILITIES.
Buyer has no liability (whether known or unknown, whether absolute or
contingent, whether liquidated or unliquidated and whether due or to become
due), except for; (a) liabilities accrued or reserved against on the December
31, 2000, unaudited consolidated balance sheet of the Buyer ("MOST RECENT BUYER
BALANCE SHEET"); (b) liabilities which have arisen since December 31, 2000, in
the ordinary course of business and which are similar in nature and amount to
the liabilities which arose during the comparable period of time in the
immediately preceding fiscal period; (c) liabilities incurred in the ordinary
course of business which are consistent with past practice and are not required
by GAAP to be reflected on a balance sheet; (d) liabilities incurred in
connection with the preparation and execution of the Agreement in anticipation
of the Merger and the transactions contemplated hereby for reasonable legal,
accounting and transaction costs (collectively, "BUYER TRANSACTION COSTS").
3.8 LITIGATION.
Except as set forth on Schedule 3.8, neither Buyer nor Merger Sub is a
party to, nor are its assets or properties subject to (i) any unsatisfied
judgment, order, decree, stipulation or injunction or (ii) any claim, complaint,
action, suit, proceeding, hearing or, to the Buyer's knowledge, investigation of
or in any Governmental Entity, other than judgments, orders, decrees,
stipulations, injunctions, claims, complaints, actions, suits, proceedings,
hearings or, to the Buyer's knowledge, investigations that, if determined
adversely to Buyer or Merger Sub would not reasonably be expected to have a
Material Adverse Effect on the Buyer.
3.9 LEGAL COMPLIANCE; RESTRICTIONS ON BUSINESS ACTIVITIES.
Buyer and Merger Sub and the conduct and operations of their respective
businesses are in compliance with each law (including rules and regulations
thereunder) of any federal, state, local or foreign government, or any
Governmental Entity, which (a) affects or relates to this Agreement or the
transactions contemplated hereby or (b) is applicable to Buyer and Merger Sub or
their respective businesses, except for any violation of or default which would
not reasonably be expected to have a Material Adverse Effect on Buyer. There is
no agreement, judgment, injunction, order or decree binding upon Buyer or Merger
Sub which has or would reasonably be expected to have the effect of prohibiting
or materially impairing any current or future business practice of Buyer and
Merger Sub as currently contemplated by Buyer and Merger Sub, any acquisition of
property of Buyer and Merger Sub or the conduct of business of Buyer and Merger
Sub as currently conducted or as proposed to be conducted by Buyer and Merger
Sub.
3.9a INTELLECTUAL PROPERTY.
With such exceptions as, individually or in the aggregate, have not had
and would not be reasonably expected to have a Material Adverse Effect on Buyer,
Buyer and its subsidiaries own or have a valid license to use all Intellectual
Property necessary to carry on Buyer's business
-14-
19
substantially as currently conducted. Buyer has received no notice of
infringement of or conflict with, and there are no infringements of or conflicts
with, the rights of any Person with respect to the use of such Intellectual
Property and, to Buyer's knowledge, there are no infringements of or conflicts
with the Intellectual Property of Buyer by any third party that, in any of the
foregoing cases, individually or in the aggregate, have had or would be
reasonably expected to have, a Material Adverse Effect on Buyer.
3.10 COMPANY ACTION.
The board of directors of Buyer and Merger Sub, at meetings duly called
and held, have by the unanimous vote of all directors: (a) determined that the
Merger is fair and in the best interests of Buyer and its stockholders; (b)
adopted this Agreement in accordance with the provisions of the DGCL; and (c) as
sole stockholder of Merger Sub adopt and approve this Agreement in accordance
with the provisions of the DGCL.
3.11 QUALIFICATION AS A REORGANIZATION.
To Buyer's knowledge, neither Buyer nor Merger Sub has taken or agreed
to take any action that could cause the Merger to fail to qualify as a tax-free
reorganization within the meaning of Section 368(a) of the Code, with respect to
which no income, gain or loss will be recognized by the Company Stockholder on
the exchange of Company Common Stock for Buyer Common Stock pursuant to the
Merger.
3.12 INFORMATION SUPPLIED BY THE BUYER.
The information supplied by Buyer for inclusion in any Information
Statement, as defined below, shall not at the time the Information Statement is
filed with the SEC, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. If at any time prior to the Effective Time, any event
relating to Buyer or any of its affiliates, officers or directors should be
discovered by Buyer which is required to be set forth in an amendment to the
Information Statement, Buyer shall promptly inform the Company Stockholder.
Notwithstanding the foregoing, Buyer makes no representation or warranty with
respect to any information supplied by Company which is contained in any of the
foregoing documents.
3.13 BROKERS' FEES.
Neither Buyer nor Merger Sub has 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.
-15-
20
ARTICLE IVCOVENANTS
4.1 BEST EFFORTS.
Each of the Parties shall use its best efforts, to the extent
commercially reasonable, to take all actions and to do all things necessary,
proper or advisable to consummate the transactions contemplated by this
Agreement as promptly as practicable.
4.2 NOTICES AND CONSENTS.
Each of Buyer, Merger Sub and the Company shall use its respective best
efforts to obtain, at its expense, all such waivers, permits, consents,
approvals or other authorizations from third parties and Governmental Entities,
and to effect all such registrations, filings and notices with or to third
parties and Governmental Entities, as may be required by or with respect to
Buyer, Merger Sub or the Company, respectively, in connection with the
transactions contemplated by this Agreement.
4.3 INFORMATION STATEMENT.
(a) As promptly as practicable after the execution of this
Agreement, the Buyer shall prepare and file with the SEC an information
statement under Schedule 14C of the Exchange Act, which shall be in form and
substance reasonably satisfactory to the Company (the "INFORMATION STATEMENT").
The Buyer shall use its best efforts to have the Information Statement comply in
all material respects with the Securities Act, the Exchange Act and the
regulations thereunder.
(b) Buyer shall cause the Information Statement to be mailed
to its shareholders and filed with the SEC within ___ days of the execution
hereof. Buyer shall notify the Company immediately upon becoming aware of any
event or circumstance that should be described in an amendment to the
Information Statement. Buyer shall notify the Company immediately after the
receipt by Buyer of any written or oral comments by the SEC staff on, or of any
written or oral request by the SEC staff for amendments to, the Information
Statement, and Buyer shall promptly supply the Company with copies of all
correspondence between it or any of its representatives and the SEC with respect
to any of the foregoing.
(c) The Company shall supply Buyer with all information in its
possession reasonably necessary for Buyer to meet its obligations under this
Section 4.3, and shall otherwise reasonably cooperate with the actions
contemplated hereby. If at any time prior to the Closing Date any information
-16-
21
relating to Buyer, or any of its affiliates, officers or directors, should be
discovered by any Party which should be set forth in an amendment or supplement
to the Information Statement so that it would not include any misstatement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, the Party which discovers such information shall promptly notify
the other Parties hereto and an appropriate amendment or supplement describing
such information shall be promptly filed by Buyer with the SEC and, to the
extent required by law, disseminated to the shareholders of Buyer.
4.4 OPERATION OF BUSINESS.
Except as contemplated by this Agreement, during the period from the
date of this Agreement to the Effective Time, each of Buyer and the Company
shall conduct its operations in the ordinary course of business and in
compliance with all applicable laws and regulations and, to the extent
consistent therewith, use all reasonable efforts to preserve intact its current
business organization, keep its physical assets in good working condition, keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers and others having business dealings with
it to the end that its goodwill and ongoing business shall not be impaired in
any material respect.
4.5 FULL ACCESS; CONFIDENTIALITY.
Each Party shall permit representatives of the other Parties to have
full access (upon reasonable notice and at all reasonable times, and in a manner
so as not to interfere with the normal business operations of the Parties) to
all premises, properties, financial and accounting records, contracts, other
records and documents, and personnel. Buyer shall provide the Company with
reasonable access to the executive officers of Buyer during normal business
hours, and in a manner so as not to interfere with the normal business
operations of Buyer, for the purpose of responding to questions from the Company
with respect to Buyer.
4.6 NOTICE OF BREACHES.
The Company shall promptly deliver to Buyer written notice of any event
or development that would (a) render any statement, representation or warranty
of the Company in this Agreement (including the Disclosure Schedule) inaccurate
or incomplete in any material respect or (b) constitute or result in a breach by
the Company or any of its affiliates of, or a failure by the Company or any of
its affiliates to comply with, any agreement or covenant in this Agreement
applicable to such Party. Buyer or Merger Sub shall promptly deliver to the
Company written notice of any event or development that would (a) render any
statement, representation or warranty of Buyer or Merger Sub in this Agreement
inaccurate or incomplete in any material respect or (b) constitute or result in
a breach by Buyer or Merger Sub of, or a failure by Buyer or Merger Sub to
comply with, any agreement or covenant in this Agreement applicable to such
Party. No such disclosure shall be deemed to avoid or cure any such
-17-
22
misrepresentation or breach. The Officers shall promptly deliver to the Company
written notice of any event or development that would (a) render any statement,
representation or warranty of Officers in this Agreement inaccurate or
incomplete in any material respect or (b) constitute or result in a breach by
the officers of, or a failure by them to comply with, any agreement or covenant
in this Agreement applicable to such Party. No such disclosure shall be deemed
to avoid or cure any such misrepresentation or breach.
4.7 EXCLUSIVITY.
The Company shall not, and the Company shall use its best efforts to
cause its affiliates and each of its officers, directors, employees,
representatives and agents not to, directly or indirectly, (a) solicit,
initiate, engage or participate in or knowingly encourage discussions or
negotiations with any person or entity (other than Buyer) concerning any merger,
consolidation, sale of material assets, tender offer, recapitalization,
accumulation of Company Common Stock, proxy solicitation or other business
combination involving the Company or any division of the Company or (b) provide
any non-public information concerning the business, properties or assets of the
Company to any person or entity (other than Buyer). The Company shall
immediately notify Buyer of, and shall disclose to Buyer all details of, any
inquiries, discussions or negotiations of the nature described in the first
sentence of this Section 4.7.
4.8 REORGANIZATION.
The Buyer and Company shall take all necessary actions to cause the
business combination to be effected by the Merger to be qualified as a
"reorganization" described in Section 368(a) of the Code, with respect to which
no income, gain or loss will be recognized by Company Stockholder on the
exchange of Company Common Stock for Buyer Common Stock pursuant to the Merger.
4.9 REASONABLE COMMERCIAL EFFORTS AND FURTHER ASSURANCES.
Each of the Parties shall use reasonable commercial efforts to
effectuate the transactions contemplated hereby and to fill and cause to be
fulfilled the conditions to Closing under this Agreement. Each Party, at the
reasonable request of another Party, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
4.10 BUYER INTERIM OPERATIONS.
Except as contemplated by this Agreement, during the period from the
date of the Agreement to the Effective Time, the Buyer shall conduct its
operations in the ordinary course of business and in compliance with all
applicable laws and regulations and, to the extent consistent therewith, use all
reasonable efforts to preserve intact its current business organization, keep
-18-
23
its physical assets in good working condition, keep available the services of
its current officers and employees and preserve its relationships with
customers, suppliers and others having business dealings with it to the end that
its goodwill and ongoing business shall not be impaired in any material respect.
Without limiting the generality of the foregoing, prior to the Effective Time,
Buyer shall not, without the written consent of the Company (which consent will
not be unreasonably withheld or delayed), take any action or fail to take any
action permitted by this Agreement with the knowledge that such action or
failure to take action would result in (x) any of the representations and
warranties of Buyer set forth in Article III of this Agreement becoming untrue,
(y) any of the conditions to the Merger set forth in Article V not being
satisfied or (z) the transaction failing to qualify as a tax-free reorganization
within the meaning of Section 368(a) of the Code, with respect to which no
income, gain or loss will be recognized by the Company Stockholder on the
exchange of Company Common Stock for Buyer Common Stock pursuant to the Merger.
4.11 BOARD SEAT.
The Company Stockholder and designees appointed by him comprising a
majority of the board of directors of Buyer shall be appointed to the board of
directors of Buyer, effective as of the Closing Date.
4.12 RECAPITALIZATION OF SHARES.
In connection with the Merger and as consideration for receipt of the
Majority Stockholder Merger Shares, at the time of the Closing and immediately
prior to the Effective Time, the Majority Stockholder Common Stock held by the
Majority Stockholder will be exchanged for shares of Class B Common Stock. All
of the certificates evidencing shares of Majority Stockholder Common Stock must
be surrendered to Buyer at the Closing, and such certificates will, from and
after the Closing, be deemed to have been retired and canceled.
ARTICLE V CONDITIONS TO CONSUMMATION OF MERGER
5.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS.
The respective obligations of each Party to consummate the Merger are
subject to the satisfaction of the following conditions:
(a) this Agreement and the Merger shall have received the
approval of the Company Stockholder, the Majority Stockholder and Buyer, as the
sole stockholder of Merger Sub;
(b) the Information Statement shall have been distributed in
accordance with Regulation 14C of the Exchange Act;
-19-
24
(c) no temporary restraining order, preliminary or permanent
injunction or other order issued by any court of competent jurisdiction or other
legal or regulatory restraint or prohibition preventing the consummation of the
Merger or limiting or restricting Buyer's conduct or operation of the business
of Buyer or the Surviving Corporation after the Merger shall have been issued,
nor shall any proceeding brought by any Governmental Entity, seeking any of the
foregoing be pending; nor shall there be any action taken, or any statute, rule,
regulation or order enacted, entered, enforced or deemed applicable to the
Merger which makes the consummation of the Merger illegal; and
(d) Buyer shall have received all permits and other
authorizations required under applicable state securities laws for the issuance
of the Buyer Common Stock.
5.2 CONDITIONS TO OBLIGATIONS OF BUYER AND MERGER SUB.
The obligation of each of Buyer and Merger Sub to consummate the Merger
is subject to the satisfaction of the following additional conditions:
(a) the Agreement and the Merger shall have been approved and
adopted by the Company and the Company Stockholder;
(b) the representations and warranties set forth in Article II
(without regard for any materiality qualifiers therein), and of the Majority
Stockholder set forth in Article IIIA (without regard for any materiality
qualifiers therein)shall be true and correct when made on the date hereof and
shall be true and correct in all respects as of the Effective Time as if made as
of the Effective Time, except where the failures to be true and correct shall
not, in the aggregate, have a Material Adverse Effect on the Company;
(c) each of the Company and the Majority Stockholder shall
have performed or complied with in all material respects its agreements and
covenants required to be performed or complied with under this Agreement as of
or prior to the Effective Time; and
(d) the Company shall have delivered to Buyer and Merger Sub a
certificate (without qualification as to knowledge or materiality or otherwise)
to the effect that each of the conditions specified in clauses (a) and (b) (to
the extent the Company is a party or is named therein) of Section 5.1 and
clauses (a) through (c) of this Section 5.2 is satisfied in all respects.
5.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY.
The obligation of the Company to consummate the Merger is subject to
the satisfaction of the following additional conditions:
-20-
25
(a) the representations and warranties set forth in Article
III (without regard for any materiality qualifiers therein), and of the Majority
Stockholder set forth in Article IIIA (without regard for any materiality
qualifiers therein), shall be true and correct when made on the date hereof and
shall be true and correct in all respects as of the Effective Time as if made as
of the Effective Time, except where the failures to be true and correct shall
not, in the aggregate, have a Material Adverse Effect on Buyer;
(b) Buyer and Merger Sub shall have obtained all of the
waivers, permits, consents, approvals or other authorizations, and effected all
of the registrations, filings and notices, referred to in Section 5.3, except
for any which if not obtained or effected would not have a Material Adverse
Effect on Buyer and Merger Sub or on the ability of the Parties to consummate
the transactions contemplated by this Agreement;
(c) each of the Majority Stockholder, Buyer and Merger Sub
shall have performed or complied with in all material respects its agreements
and covenants required to be performed or complied with under this Agreement as
of or prior to the Effective Time; and
(d) each of Buyer and Merger Sub shall have delivered to the
Company a certificate (without qualification as to knowledge or materiality or
otherwise) to the effect that each of the conditions specified in clauses (a),
(b), (c), (d) (to the extent Buyer or Merger Sub is a party or is named therein)
of Section 5.1 and clauses (a), (b), (c) of this Section 5.3 is satisfied in all
respects.
(e) each of Xxxxxx Xxxxx and J. Xxxxx Xxxxxx shall have
executed a Stockholders Agreement substantially in the form attached hereto as
EXHIBIT B.
ARTICLE VI TERMINATION
6.1 TERMINATION OF AGREEMENT.
The Parties may terminate this Agreement prior to the Effective Time as
provided below:
(a) the Parties may terminate this Agreement by mutual written
consent;
(b) the Buyer may terminate this Agreement by giving written
notice to the Company and the Company Shareholder in the event that the Company
is in breach, and the Company may terminate this Agreement by giving written
notice to the Majority Stockholder, Buyer and Merger Sub in the event that the
Majority Stockholder, Buyer or Merger Sub is in breach, of any material
representation, warranty or covenant contained in this Agreement, and (x) such
breach is not remedied within 10 days of delivery of written notice thereof, and
(y) such breach would violate a condition to closing; and
-21-
26
(c) by either Buyer or the Company if a court of competent
jurisdiction or other Governmental Entity shall have issued a final order,
decree or ruling, or taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger, and all appeals with
respect to such order, decree, ruling or action have been exhausted or the time
for appeal of such order, decree, ruling or action shall have expired.
6.2 AMENDMENT.
The board of directors of the Parties may cause this Agreement to be
amended at any time by execution of an instrument in writing signed on behalf of
each of the Parties; provided that an amendment made subsequent to the adoption
of the Agreement by the Company Stockholder or the Majority Stockholder shall
not: (a) alter or change the amount or kind of consideration to be received or
(b) alter or change any term of the Charter or By-laws of Buyer to be effected
by the Merger.
6.3 EXTENSION; WAIVER.
At any time prior the Effective Time, any Party may, to the extent
legally allowed: (a) extend the time for the performance of any of the
obligations or other acts of the other Parties; (b) waive any inaccuracies in
the representations and warranties made to such Party contained herein or in any
document delivered pursuant hereto; and (c) waive compliance with any of the
agreements or conditions for the benefit of such Party contained herein. Any
agreement on the part of a Party to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on behalf of such Party.
6.4 EFFECT OF TERMINATION.
If this Agreement is terminated as provided in Section 6.1, all
obligations and agreements of the Parties shall forthwith terminate and be of no
further force or effect, and there shall be no liability on the part of any
Party hereto, provided that no such termination shall relieve any Party for any
liability or damages resulting from any willful breach by that party of the
Agreement.
ARTICLE VII INDEMNIFICATION
7.1 INDEMNIFICATION.
(a) The Company Stockholder will indemnify and hold harmless
the Buyer and the Surviving Corporation and its respective officers, directors,
agents and employees, and each person, if any, who controls or may control Buyer
or the Surviving Corporation within the meaning of the Securities Act
(hereinafter referred to individually as an "INDEMNIFIED PERSON" and
collectively as "INDEMNIFIED PERSONS") from and against any and all losses,
costs, damages,
-22-
27
liabilities and expenses arising from claims, demands, actions, causes of
action, including, without limitation reasonable legal fees, net of any
recoveries under existing insurance policies, tax benefits received by Buyer as
a result of such damages, indemnities from third parties or in the case of third
party claims, by any amount actually recovered by Buyer pursuant to
counterclaims made by any of them directly relating to the facts giving rise to
such third party claims (collectively, "DAMAGES") arising out of any
misrepresentation or breach in connection with any of the representations and
warranties given or made by the Company in this Agreement, the Disclosure
Schedule or any Exhibit to this Agreement. The Buyer shall act in good faith and
in a commercially reasonable manner to mitigate any Damages they may suffer.
(b) The Buyer and Majority Stockholder will indemnify and hold
harmless the Company Stockholder (hereinafter referred to as an "COMPANY
INDEMNIFIED PERSON") from and against any and all losses, costs, damages,
liabilities and expenses arising from claims, demands, actions, causes of
action, including, without limitation reasonable legal fees, net of any
recoveries under existing insurance policies, tax benefits received by the
Company Stockholder as a result of such damages, indemnities from third parties
or in the case of third party claims, by any amount actually recovered by the
Company Stockholder pursuant to counterclaims made directly relating to the
facts giving rise to such third party claims (collectively, "COMPANY DAMAGES")
arising out of any misrepresentation or breach of or default in connection with
any of the representations, warranties, covenants and agreements given or made
by the Majority Stockholder, Buyer or Merger Sub in this Agreement or any
Exhibit to this Agreement. The Company Stockholder shall act in good faith and
in a commercially reasonable manner to mitigate any Company Damages he may
suffer.
ARTICLE VIII
CERTAIN DEFINITIONS
In this Agreement, any reference to any event, change, condition or
effect being "material" with respect to any entity or group of entities means
any material event, change, condition or effect related to the financial
condition, properties, assets (including intangible assets), liabilities,
business, operations or results of operations of such entity or group of
entities and its subsidiaries, taken as a whole. In this Agreement, any
reference to a "MATERIAL ADVERSE EFFECT" with respect to any entity or group of
entities means any event, change or effect that is materially adverse to the
financial condition, properties, assets, liabilities, business, operations or
results of operations of such entity and its subsidiaries taken as a whole;
PROVIDED, however, that Material Adverse Effect shall not include any event,
change or effect that primarily results from (i) the execution and delivery or
announcement of this Agreement, (ii) factors generally affecting the U.S.
economy or financial markets or (iii) factors generally affecting the industries
in which such entity operates. In this Agreement, any reference to a Party's
knowledge means such Party's actual knowledge after reasonable inquiry of
officers, directors and other employees of such Party reasonably believed to
have knowledge of such matters.
-23-
28
ARTICLE IX MISCELLANEOUS
9.1 PRESS RELEASES AND ANNOUNCEMENTS.
No Party shall issue any press release or make any public disclosure
relating to the subject matter of this Agreement without the prior approval of
the other Parties; PROVIDED, however, that any Party may make any public
disclosure it believes in good faith is required by law or regulation (in which
case the disclosing Party shall advise the other Parties and provide them with a
copy of the proposed disclosure prior to making the disclosure), or by GAAP.
9.2 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 the provisions in Article I concerning issuance of the
Buyer Common Stock and the Majority Stockholder Merger Shares is intended for
the benefit of the Company Stockholder and the Majority Stockholder
respectively, and the provisions of this Agreement with respect to
indemnification are intended for the benefit of the Persons indemnifying or to
be indemnified as contemplated therein.
9.3 ENTIRE AGREEMENT.
This Agreement, the Disclosure Schedule, Exhibits, the documents and
instruments and other agreements among the parties referred to herein and the
nondisclosure agreements signed by each of the Parties prior to the date hereof
constitute the entire agreement among the Parties and supersede any prior
understandings, agreements or representations by or among the Parties, written
or oral, with respect to the subject matter hereof.
9.4 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 Parties.
9.5 COUNTERPARTS.
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
-24-
29
9.6 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.
9.7 NOTICES.
All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim, or other
communication hereunder shall be deemed duly delivered two business days after
it is sent by registered or certified mail, return receipt requested, postage
prepaid, or one business day after it is sent via a reputable nationwide
overnight courier service or sent via facsimile (with acknowledgment of complete
transmission) with a confirmation copy by registered or certified mail, in each
case to the intended recipient as set forth below:
If to the Company:
Worldwide Internet, Inc.
0000 Xxxxx Xxxxxx Xxxxx
Xxxxx 000
XxXxxx, XX 00000
Attn: President
Fax: (000) 000-0000
Copy to (which shall not constitute notice):
Xxxxx Xxxxxxx Xxxxxxx & Xxxxx LLP
0000 00xx Xxxxxx
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
If to the Buyer:
XXXX.XXX, Inc.
000 X. XxXxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
-25-
30
Copy to (which shall not constitute notice):
If to the Merger Sub:
ISNI Acquisitions, Inc.
000 X. XxXxxxxx Xxxxxx
Xxxxx Xxxxx, XX 00000
Attn: President
Fax: (000) 000-0000
Copy to (which shall not constitute notice):
Any Party may give any notice, request, demand, claim, or other communication
hereunder 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 party for
whom it is intended. Any Party may change the address to which notices,
requests, demands, claims, and other communications hereunder are to be
delivered by giving the other Parties notice in the manner herein set forth.
9.8 GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with
the internal laws (and not the law of conflicts) of the State of Delaware.
9.9 WAIVERS.
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 default, misrepresentation, breach of such warranty
or covenant.
9.10 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
-26-
31
in any other jurisdiction; PROVIDED, THAT, this Agreement shall not then
substantially deprive any Party of the bargained-for performance of any other
Party. If the final judgment of a court of competent jurisdiction declares that
any term or provision hereof is invalid or unenforceable, the Parties agree that
the court making the determination of invalidity or unenforceability shall have
the power to reduce the scope, duration, or area of the term or provision, to
delete specific words or phrases, or to replace any invalid or unenforceable
term or provision with a term or provision that is valid and enforceable and
that comes closest to expressing the intention of the invalid or unenforceable
term or provision, and this Agreement shall be enforceable as so modified after
the expiration of the time within which the judgment may be appealed.
9.11 EXPENSES.
All fees and expenses (including all accounting, legal and investment
banking fees and expenses and all other expenses) incurred by Buyer and Merger
Sub in connection with this Agreement and the transactions contemplated hereby
shall be paid by Buyer and Merger Sub, as the case may be, whether or not the
Merger is consummated. All fees and expenses (including all accounting, legal
and investment banking fees and expenses and all other expenses) incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby shall be paid by the Company.
9.12 OTHER REMEDIES.
Except as otherwise provided herein, any and all remedies herein
expressly conferred upon a party will be deemed cumulative with, and not
exclusive of, any other remedy conferred hereby or by law or equity upon such
party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.13 SPECIFIC PERFORMANCE.
The Parties acknowledge and agree that damages would be an inadequate
remedy for any breach of the provisions of this Agreement and agree that the
obligations of the Parties hereunder shall be specifically enforced in
accordance with the terms of this Agreement. The prevailing party in any such
action shall be entitled to recover from the other party its attorneys' fees,
costs and expenses incurred in connection with regard to such action.
9.14 CONSTRUCTION.
The Parties agree that they have been represented by counsel during the
negotiation, preparation and execution of this Agreement and, therefore, waive
the application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be construed
against the party drafting such agreement or document.
-27-
32
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 requires otherwise.
9.15 INCORPORATION OF EXHIBITS AND SCHEDULES.
The Exhibits and Disclosure Schedule identified in this Agreement are
incorporated herein by reference and made a part hereof.
[SIGNATURES BEGIN ON FOLLOWING PAGE]
-28-
33
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the date first above written.
XXXX.XXX, INC.
By:
Name:
Title:
ISNI ACQUISITIONS, INC.
By:
Name:
Title:
WORLDWIDE INTERNET, INC.
By:
Name:
Title:
------------------------------------
Xxxxxx Xxxxx, as Majority
Stockholder, and only as to
provisions that reference the
Majority Stockholder.
------------------------------------
J. Xxxxx Xxxxxx, Xx., only as to the
provisions that reference
J. Xxxxx Xxxxxx, Xx.
------------------------------------
Xxx X. Xxxxxxx, as Company
Stockholder, and only as to the
provisions that reference the
Company Stockholder
-29-
