Acquisition Agreement
Agreement dated as of March 17, 2000 between Fon
Digital Network, Inc, a Colorado corporation
("FDNI"), and Mercury Capital Corporation, a
Colorado corporation ("Mercury").
The parties agree as follows:
1.The Acquisition
1.1 Purchase and Sale Subject to the Terms and
Conditions of this Agreement. At the Closing to
be held as provided in Section 2, FDNI shall sell
the FDNI Shares (defined below) to the shareholders
of Mercury, and the shareholders of Mercury shall
purchase the FDNI Shares from FDNI free and clear
of all Encumbrances other than restrictions imposed
by Federal and State laws.
1.2 Purchase Price. FDNI will exchange one million two
hundred and fifty thousand (1,250,000) shares of
its restricted common stock (the "FDNI Shares") for
four million (4,000,000) shares of Mercury, representing
all of the outstanding common shares and preferred
shares of Mercury (the "Mercury Shares"). The FDNI
Shares shall be issued and delivered to the Shareholders
of Mercury as set forth in Exhibit "A" attached hereto.
2. The Closing
2.1 Place and Timing. The closing of the sale and
exchange of the FDNI Shares for the Mercury Shares
(the "Closing") shall take place at the law
offices of Xxxxxx X. Xxxxxxx, 00000 X. Xxxxxxx Xxxx.,
Xxxxx 000, Xxx Xxxxxxx, XX 00000, no later than
the close of business (Los Angeles, California time)
on March 21, 2000 or at such other place, date and
time as the parties may agree in writing.
2.2 Deliveries by Mercury. At the Closing, Mercury
shall deliver the following to FDNI:
a. Certificates representing the Mercury Shares,
duly endorsed for transfer to FDNI and accompanied
by appropriate medallion guaranteed stock powers;
Mercury shall immediately change those certificates
for, and to deliver to FDNI at the Closing a
certificate representing the Mercury Shares registered
in the name of FDNI (without any legend or other
reference to any Encumbrance other than appropriate
federal securities law limitations).
b. The documents contemplated by Section 3.
c. All other documents, instruments and writings
required by this Agreement to be delivered by Mercury
at the Closing and any other documents or records
relating to Mercury's business reasonably requested by
FDNI in connection with this Agreement.
2.3 Deliveries by FDNI. At the Closing, FDNI shall
deliver the following to Mercury.
a. The FDNI Shares for further delivery to the Mercury
shareholders as contemplated by Section 1.
b. The documents contemplated by Section 4.
c. All other documents, instruments and writings
required by this Agreement to be delivered by
FDNI at the Closing.
3. Conditions to FDNI Obligations.
The obligations of FDNI to effect the Closing
shall be subject to the satisfaction at or prior
to the Closing of the following conditions, any
one or more of which may be waived by FDNI:
3.1 No Injunction. There shall not be in effect
any injunction, order or decree of a court of
competent jurisdiction that prevents the
consummation of the transactions contemplated
by this Agreement, that prohibits, FDNI's
acquisition of the Mercury Shares or the FDNI
Shares or that will require any divestiture as
a result of FDNI's acquisition of the Mercury
Shares or that will require all or any part of
the business of FDNI to be held separate and no
litigation or proceedings seeking the issuance
of such an injunction, order or decree or seeking
to impose substantial penalties on FDNI or Mercury
if this Agreement is consummated shall be pending.
3.2 Representations, Warranties and Agreements.
(a) The representations and warranties of Mercury
set forth in this Agreement shall be true and complete
in all material respects as of the closing Dates as
though made at such time, (b) Mercury shall have
preformed and complied in all material respects with
the agreements contained in this Agreement required
to be performed and complied with by it at or prior
to the Closing and, (c) FDNI shall have received a
certificate to that effect signed by an authorized
representative of Mercury.
3.3 Regulatory Approvals. All licenses, authorizations,
consents, orders and regulatory approvals of
Governmental Bodies necessary for the consummation
of FDNI's acquisition of the Mercury Shares shall
have been obtained and shall be in full force
and effect.
3.4 Resignation of Director. All directors of Mercury
whose resignations shall have been requested by
FDNI shall have submitted their resignations or
been removed effective as of the Closing Dates.
4. Conditions to Mercury's Obligations
The obligations of Mercury to effect the Closing
shall be subject to the satisfaction at or prior
to the Closing of the following conditions, any
one or more of which may be waived by Mercury.
4.1 No Injunction. There shall not be in effect
any injunction, order or decree of a court of
competent jurisdiction that prevents the
consummation of the transactions contemplated
by this Agreement, that prohibits FDNI's
acquisition of the Mercury Shares or Mercury's
acquisition of the FDNI Shares or that will
require any divestiture as a result of FDNI's
acquisition of the Shares or Mercury's acquisition
of the FDNI Shares or that will require all or
any part of the business of FDNI or Mercury to
be held separate and no litigation or proceedings
seeking the issuance of such an injunction,
order or decree or seeking to impose substantial
penalties on FDNI or Mercury if this Agreement
is consummated shall be pending.
4.2 Representations, Warranties and Agreement.
(a) The representations and warranties of FDNI
set forth in this Agreement shall be true
and complete in all material respects as of
the Closing Date as though made at such time,
(b) FDNI shall have performed and complied in
all material respects with the agreements
contained in this Agreement required to be
performed and complied with by it at or prior
to the Closing and (c) Mercury shall have received
a certificate to that effect signed by an authorized
representative of FDNI.
4.3 Regulatory Approvals. All licenses,
authorizations, consents, orders and regulatory
approvals of Governmental Bodies necessary for
the consummation of FDNI's acquisition of the
Mercury Shares and Mercury's acquisition of the
FDNI Shares shall have been obtained and shall
be in full force and effect.
5. Representations and Warranties of Mercury.
Mercury represents and warrants to FDNI that,
to the Knowledge of Mercury (which limitations
shall not apply to Section 5.1), and except as
set forth in the Mercury Disclosures Letter:
5.1 Organization of Mercury: Authorization. Mercury
is a corporation duly organized, validly existing
and in good standing under the laws of the state
of Colorado with full corporate power and authority
to execute and deliver this Agreement and to
perform its obligations hereunder. The execution,
delivery, and performance of this Agreement have
been duly authorized by all necessary corporate
action of Mercury and this Agreement constitutes
a valid and binding obligation of Mercury;
enforceable against it in accordance with its terms.
5.2 Capitalization. The authorized capital stock
of Mercury consists of 100,000,000 shares of
common stock, no par value, and 5,000,000 preferred
shares, no par value, of which 4,000,000 common
shares and no preferred shares are presently
issued and outstanding. No shares have been
registered under state or federal securities
law. As of the Closing Date, all of the issued
and outstanding shares of common stock of Mercury
are validly issued, fully paid and non-assessable.
As of the Closing Date there will not be
outstanding any warrants, options or other
agreements on the part of Mercury obligating
Mercury to issue any additional shares of
common or preferred stock or any of its securities
of any kind. Except as otherwise set forth herein,
Mercury will not issue any shares of capital
stock from the date of this Agreement though the
Closing Date.
5.3 No Conflict as to Mercury. Neither the execution
and delivery of this Agreement nor the consummation
of the sale of the Mercury Shares to FDNI will
(a) violate any provision of the certificate of
incorporation or by-laws of Mercury or (b) violate,
be in conflict with, or constitute a default
(or an event which, with notice or lapse of time
or both, would constitute a default) under any
agreement to which Mercury is a party or
(c) violate any statute or law or any judgment,
decree, order, regulation or rule of any court
or other Governmental Body applicable to Mercury.
5.4 Ownership of Mercury Shares. The delivery of
certificates to FDNI provided in section 2.2
will result in FDNI's immediate acquisition
of record and beneficial ownership of the
Mercury Shares, free and clear of all Encumbrances
subject to applicable, State and Federal
securities laws. There are no outstanding options,
rights, conversion rights, agreements or commitments
or any kind relating to the issuance, value or
transfer of any Equity Securities or other
securities of Mercury.
5.5 No Conflict as to Mercury and Subsidiaries.
Neither the execution and delivery of this
Agreement nor the consummation of the sale of
the Mercury Shares to FDNI will (a) violate
any provision of the certificate of incorporation
or by-laws (of other governing instrument) of
Mercury or any of its Subsidiaries or (b) violate,
or be in conflict with, or constitute a default
(or an event which, with notice or lapse of time
or both, would constitute a default) under, or
result in the termination of, or acceleration
of the maturity of any debt of obligation pursuant
to, or result in the creation or imposition of any
Encumbrance upon any property or assets of Mercury
or any of its Subsidiaries is a party or by which
any of their respective property or assets is
bound, or to which any of the property or assets
of Mercury or any of its Subsidiaries is subject,
or (c) violate any statute of law or any judgment,
decree, order, regulation or rule of any court or
other Governmental Body applicable to Mercury of
any of its Subsidiaries except, in the case of
violations, conflicts, defaults, terminations,
accelerations or Encumbrances described in clause
(b) of this Section 5.5, for such matters which
are not likely to have a material adverse effect
on the business or financial condition of Mercury
and its Subsidiaries, taken as a whole.
5.6 Consents and Approvals of Governmental Authorities.
Except with respect to applicable State and
Federal securities law, no consent approval or
authorization of, or declaration, filing or
registration with, and Governmental Body is
required to be made or obtained by Mercury or
FDNI or any of its Subsidiaries in connection
with the execution, delivery and performance
of this Agreement by Mercury or the consummation
of the sale of the Mercury Shares to FDNI.
5.7 Other Consents. No consent of any Person is
required to be obtained by Mercury or FDNI to
the execution, delivery and performance of this
Agreement or the consummation of the sale of the
Mercury Shares to FDNI including but not limited
to, consents from parties to leases or other
agreements or commitments, except for any
consent which the failure to obtain would not
be likely to have a material adverse affect on
the business and financial condition of Mercury
or FDNI.
5.8 Financial Statements. Mercury has delivered to
FDNI consolidated balance sheets of Mercury and
its Subsidiaries as at December 31, 1999, and
statements of income and changes in financial
position for the period from inception to the
period then ended, together with the report
thereon of Mercury's independent accountant
(the "Mercury Financial Statements"). Such
Mercury Financial Statements are internally
prepared and unaudited but fairly present the
consolidated financial condition and results
of operation of Mercury and its Subsidiaries
as at the respective dates thereof and for the
periods therein referred to, all in accordance
with generally accepted United States accounting
principles consistently applied throughout the
periods involved, except as set forth in the
notes thereto.
5.9 Title to Properties. Either Mercury or
one of its Subsidiaries owns all the material
properties and assets that they purport to own
(real, personal, and mixed tangible and intangible),
including, without limitations, all the material
properties and assets reflected in the Mercury
Financial Statements, and all the material
properties and assets purchased or otherwise
acquired by Mercury or any of its Subsidiaries
since the date of the Mercury Financial Statements.
All properties and estates reflected in the
Mercury Financial Statements are free and clear
of all materiel Encumbrances and are not, in
the case of real property, subject to any material
rights of way, building use restrictions,
exemptions, variances, reservations or limitations
or any nature whatsoever, except, with respect
to all such properties and assets, (a) mortgages
or security interests shown on the Mercury
Financial Statements as securing specified
liabilities or obligations, with respect to which
one default (or event which, with notice or lapse
of time or both, would constitute a default) exist,
and all of which are listed in the Mercury Disclosure
Letter, (b) mortgages or security interest incurred
in connection with the purchase of property or assets
after the date of the Mercury Financial Statements
(such mortgages or security interests being limited
too the property or assets so acquired), with respect
to which no default (or event which, with notice
or lapse of time or both, would constitute a default)
exists, (c) as to real property, (i) imperfections of
title, if any, none of which materially detracts from
the value or impairs the use of the property subject
thereto, or impairs the operations of Mercury or any
of its Subsidiaries and (ii) zoning laws that do not
Impair the present or anticipated use of the property
subject thereto, and (d) liens for current taxes not
yet due. The properties and assets of Mercury and
its Subsidiaries include rights, properties and other
assets necessary to permit Mercury and its Subsidiaries
to conduct. Mercury's business in all material respects
in the same manner as it is conducted on the date of this
Agreement.
5.10 Building, Plants and Equipment. The buildings,
plants, structures and material items of equipment
and other personal property owned or leased by Mercury
or its Subsidiaries, taken as a whole, in good
operating condition and repair (ordinary wear and
tear excepted) and are adequate in all such respects
for the purposes for which there are being used.
Mercury has not received notification that it or any
of its Subsidiaries are in violation of any applicable
building, zoning, anti-pollution, health, safety, or
other law, ordinance or regulation in respect of its
buildings, plants or structures or their operations,
which violation is likely to have a material adverse
effect on the business or financial condition of Mercury
and its Subsidiaries, taken as a whole or which would
require a payment by Mercury or FDNI or any other their
subsidiaries in excess of $2,000 in the aggregate, and
which has not been cured.
5.11 No condemnation or Expropriation. Neither
the whole nor any portion of the property or
leaseholds owned or held by Mercury or any of its
Subsidiaries is subject to any government decree
or order to be sold or is being condemned,
expropriated or otherwise taken by any Governmental
body or other Person with or without payment of
compensation therefor, which action is likely to have
a material adverse effect on the business or
financial condition of FDNI and its Subsidiaries,
taken as a whole.
5.12 Litigation. There is no action, suit,
inquiry, proceeding, or investigation by or before
any court of Governmental Body pending or threatened
in writing against or involving Mercury or any of
its Subsidiaries which is likely to have a material
adverse effect on the business or financial condition
of Mercury, FDNI and any of their Subsidiaries, taken
as a whole, or which would require a payment by
Mercury or its subsidiaries in excess of $2,000
in the aggregate of which questions or challenges
the validity of this Agreement. Neither Mercury nor
any of its Subsidiaries are subject to any judgment,
order or decree that is likely to have a material
adverse effect on the business or financial condition
of Mercury, FDNI or any of their Subsidiaries, taken
as a whole, or which would require a payment by Mercury
or its subsidiaries in excess of $2,000 in the aggregate.
5.13 Absence of Certain Changes. Since the date of the
Mercury Financial Statements, neither Mercury nor any of
its Subsidiaries has:
a. suffered the damage or destruction of any
of its properties or assets (whether or not covered
by insurance) which is materially adverse to the
business or financial condition of Mercury and
its Subsidiaries, taken as a whole, or made any
disposition of any of its material properties or
assets other than in the ordinary course of business;
b. made any changes or amendments in its
certification of incorporation or by-laws, or
other governing instruments;
c. issued or sold any Equity Securities or other
securities, acquired, directly or indirectly, by
redemption or otherwise, any such Equity Security,
or granted or entered into any options, warrants,
calls or commitments or any kind with respect thereto;
d. organized any new Subsidiary or acquired
any Equity Securities of any Person or any equity
or ownership interest in any business
e. borrowed any funds or incurred, or assumed
or become subject to, whether directly or by way
of guarantee or otherwise, any obligation or
liability with respect to any such indebtedness
for borrowed money;
f. paid, discharged or satisfied any material
claim, liability, or obligation (absolute,
accrued, contingent or otherwise), other than
in the ordinary course of business;
g. prepaid any material obligation having a
maturity of more than 90 days form the date
such obligations was issued or incurred;
h. cancelled any material debts or waived
any material claims or rights, except in the
ordinary course of business;
i. disposed of or permitted to lapse any
rights to the use of any material patent or
registered trademark or copyright or other
intellectual property owned or used by it;
j. granted any general increase in the
compensation of officers or employees (including
any such increase pursuant to any employee benefit
plan);
k. purchased or entered into any contract
or commitment to purchase any material quantity
or raw materials or supplies, or sold or
entered into any contracts or commitments to
sell any material quantity of property or assets,
except (i)normal contracts or commitments for
the purchase of, and normal purchases of, raw
materials or supplies, made in the ordinary
course of business (ii) normal contracts or
commitments for the sale of, and normal sales
of, inventory in the ordinary course of business,
and (iii) other contracts, commitments, purchases
or sales in the ordinary course of business;
l. made any capital expenditures or additional
to property, plant or equipment or acquired any
other property or assets (other than raw materials
and supplies) at a cost in excess of $100,000 in
the aggregate.
m. written off or been required to write off
any notes or accounts receivable in an aggregate
amount in excess of $2,000;
n. written down or been required to write
down any inventory in an aggregate amount in
excess of $2,000;
o. entered into any collective bargaining or
union contracts or agreements;
p. other than the ordinary course of business,
incurred any liability required by generally
accepted accounting principles to be reflected
on a balance sheet and material to the business
or financial condition of Mercury and its subsidiaries
taken as a whole.
5.14 No Material Adverse Change. Since the
date of the Mercury Financial Statements, there
has not been any material adverse change in the
business or financial condition of Mercury and
its Subsidiaries taken as a whole, other than
changes resulting from economic conditions
prevailing in the United States precious coins,
collectibles and metals industry.
5.15 Contracts and Commitments. Neither Mercury
nor any of its Subsidiaries is a party to any:
a. Contract or agreement (other than purchase
or sales orders entered into in the ordinary
course of business) involving any liability on
the part of Mercury or one of its subsidiaries
or more than $25,000 and not cancelable by Mercury
or the relevant Subsidiary (without liability
to Mercury or such Subsidiary) within 60 days;
b. Except with respect to the lease on its
business location, lease of personal property
involving annual rental payments in excess of
$25,000 and not cancelable by Mercury or the
relevant Subsidiary (without liability to Mercury
or such Subsidiary) within 90 days;
c. Except with respect to the options
referenced above, Employee bonus, stock option
or stock purchase, performance unit, profit-sharing,
pension, savings, retirement, health, deferred
or incentive compensation, insurance or other
material employee benefit plan (as defined in
Section 2(3) for ERISA) or program for any of
the employees, former employees or retired
employees of Mercury or any of its Subsidiaries;
d. commitment, contract or agreement that
is currently expected by the management of
Mercury to result in any material loss upon
completion or performance thereof;
e. Contract, agreement or commitment that is
material to the business of Mercury, and its
Subsidiaries, taken as a whole, with any officer,
employee, agent, consultant, advisor salesman,
sales representative, value added reseller,
distributor, or dealer; or
f. Employment agreement or other similar
agreement that contains any severance or
terminates pay, liabilities or obligations.
All such contracts and agreements are in
full force and effect. Neither Mercury
nor any of its Subsidiaries is in breach
of, in violation of or in default under,
any agreement, instrument, indenture, deed
or trust, commitment, contract or other
obligation of any type to which Mercury
or any of its Subsidiaries is party or is
or may be bound that relates to the business
of Mercury or any of its Subsidiaries or to
which any of the assets or properties of
Mercury of any of its Subsidiaries is subject,
the effect of which breach, violation or
default is likely to materially and adversely
affect the business or financial condition of
Mercury and its Subsidiaries, taken as a
whole. FDNI has not guaranteed or assumed
and specifically does not guarantee or assume
any obligations of Mercury or any of its
Subsidiaries.
5.16 Labor Relations. Neither Mercury nor any
of its Subsidiaries is a party to any collective
bargaining agreement. Except for any matter,
which is not likely to have a material adverse
effect on the business or financial condition
of Mercury or any of its Subsidiaries, taken as
a whole, (a) Mercury or each of its Subsidiaries
is in compliance with all applicable laws respecting
employment and employment practices, terms
and conditions of employment and wages and hours,
and is not engaged in any unfair labor practices,
(b) there is no unfair labor practice complaint
against Mercury or any of its Subsidiaries pending
before the National Labor Relations Board,
(c) there is no labor strike, dispute, slowdown
or stoppage actually pending or threatened against
Mercury or any of its Subsidiaries, (d) no
representation question exits respecting the employees
of Mercury or any of its Subsidiaries, (e) neither
Mercury or any of its Subsidiaries has experienced
any strike, work stoppage, or other labor difficulty,
and (f) no collective bargaining agreement relating
to employees of Mercury or any of its Subsidiaries
is currently being negotiated.
5.17 Employee Benefit Plans. No material employee
pension and welfare benefit plans covering employees
of Mercury is (1) a multi-employee plan as defined
in Section 3(37) of ERISA, or (2) a defined benefit
plan as defined in Section 3(35) of ERISA, any listed
individual account pension plan is duly qualified as
tax exempt under the applicable sections of the Code,
each listed benefit plan and related funding
arrangements, if any, has been maintained in all
material respects in compliance with its terms and
the provisions of ERISA and the Code.
5.18 Compliance with Law. The operations of
Mercury or any of its Subsidiaries have been
conducted in accordance with all applicable
laws and regulations of all Governmental Bodies
having jurisdiction over them, except for
violations thereof which are not likely to
have a material adverse effect on the business
or financial condition of Mercury or any of
its Subsidiaries, taken as a whole, or which
would not require a payment by Mercury nor
any of its Subsidiaries in excess of $2,000
in the aggregate, or which have been cured.
Neither Mercury or any of its Subsidiaries
has received any notification of any asserted
present or past failure by it to comply with
any such applicable laws or regulations.
Mercury or any of its Subsidiaries have all
material licenses, permits, orders or
approvals from the Governmental Bodies required
for the conduct of their business and are not
in material violation of any such licenses,
permits, orders and approvals. All such licenses,
permits, orders and approvals are in full force
and effect, and not suspension or cancellation
of any thereof has been threatened.
5.19 Tax Matters
a. Mercury and each of its Subsidiaries
(1) has filed all non-consolidated and non-combined
Tax Returns and all consolidated or combined Tax
Returns that include only Mercury or any of its
Subsidiaries and not Sellers or its other
Affiliates (for the purposes of this Section 5.19,
such tax returns shall be considered non-consolidated
and non-combined Tax Returns) required to be filed
through the date hereof with respect to the time periods
covered by such non-consolidated and non-combined Tax
Returns and shall timely pay any such Taxes required
to be paid by it after the dates hereof with response
to such Tax Returns and (2) shall prepare and timely
file all such non-consolidated and non-combined Tax
Returns required to be filed after the date hereof
and through the Closing Date and pay all Taxes required
to be paid by it with respect to the periods covered
by such Tax Returns, (3) all such Tax Returns filed
pursuant to clause (a) after the date hereof shall,
in each case, be prepared and filed in a manner
consistent in all material respects (including elections
and accounting methods and conventions) with such
Tax Return most recently filed in the relevant
jurisdiction prior to the date hereof, except as
otherwise required by law or regulation. Any such
Tax Return filed or required to be filed after the
date hereof shall not reflect any new elections or
the adoption of any new accounting methods or
conventions or other similar items, except to the
extent such particular reflection or adoption is
required to comply with any law or regulation.
b. All consolidated or combined Tax Returns
(except those described in subparagraph (a) above)
required to be filed by any person through the date
hereof that are required or permitted to include
the income, or reflect the activities, operations
and transactions, of Mercury or any of its
Subsidiaries for any taxable period have been
timely filed, and the income, activities, operations
and transactions, of Mercury or any of its Subsidiaries
have been properly included and reflected thereon.
Mercury shall prepare and file, or cause to be
prepared and filed, all such consolidated or
combined Tax Returns that are required or permitted
to include the income, or reflect the activities,
operations and transactions, of Mercury or any of
its Subsidiaries, with respect to any taxable
year or the portion thereof ending on or prior
to the Closing Date, including, without limitation,
Mercury's consolidated federal income tax return
for such taxable years. Mercury will timely
file a consolidated federal income tax return
for the taxable year ended December 31 and such
return shall include and reflect the income,
activities, operations and transactions of Mercury
or any of its Subsidiaries for the taxable
period then ended, and hereby expressly covenants
and agrees to file a consolidated federal income
tax return, and to include and reflect thereon
the income, activities, operations and transactions
of Mercury or any of its Subsidiaries for the
taxable period through the Closing Date. All
Tax Returns filed pursuant to this subparagraph
() after the date hereof shall, in each case,
to the extent that such Tax Returns specifically
relate to Mercury or any of its Subsidiaries and
do not generally relate to matters affecting other
members of Mercury's consolidated group, be
prepared and filed in a manner consistent in
all material respects (including elections and
accounting methods and conventions) with the Tax
Return most recently filed in the relevant
jurisdictions prior to the date hereof, except
as otherwise required by law or regulation.
Mercury has paid or will pay all Taxes that may
now or hereafter be due with respect to the
taxable periods covered by such consolidated or
combined Tax Returns.
c. Neither Mercury or any of its Subsidiaries
has agreed, or is required, to make any adjustment
(x) under Section 481(a) of the Code by reason
of a change in accounting method or otherwise or
(y) pursuant to any provision of the Tax Reform
Act of 1986, the Revenue Act of 1987 of the Technical
and Miscellaneous Act of 1988.
d. Neither Mercury or any of its Subsidiaries
or any predecessor or Affiliate of the foregoing
has, at any time, filed a consistent under
Section 341 (f)(1) of the Code, or agreed under
Section 341(f)(3) of the Code, to have the
provisions of Section 341(f)(2) of the Code apply
to any sale of its stock.
e. There is no (nor has there been any request
for an) agreement, waiver or consent providing for
an extension of time with respect to the assessment
of any Taxes attributable to Mercury or any of its
Subsidiaries, or their assets or operations and
no power of attorney granted by Mercury or any of
its Subsidiaries with respect to any Tax matter
is currently in force.
f. There is no action, suit, proceeding,
investigation, audit, claim, demand, deficiency or
additional assessment in progress, pending or
threatened against or with respect to any Tax
attributable to Mercury, its Subsidiaries or their
assets or operations.
g. All amounts required to be withheld as of
the Closing Date for Taxes or otherwise have been
withheld and paid when due to the appropriate
agency or authority.
h. No property of Mercury is "tax-exempt use
property" within the meaning of Section 168(h)
of the Code nor property that Mercury or any of
its Subsidiaries will be required to treat as
being owned by another person pursuant to Section
168(f)(8) of the Internal Revenue Code of 1954,
as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986.
i. There have been delivered or made available
to FDNI true and complete copies of all income
Tax Returns (or with respect to consolidated or
combined returns, the portion thereof) and any
other Tax Returns requested by FDNI as may be
relevant to Mercury, its Subsidiaries, or their
assets or operations of any and all periods
ending after December 31, 1998, or for any Tax
years which are subject to audit, or investigation
by any taxing authority or entity.
j. There is no contract, agreement, plan or
arrangement, including but not limited to the
provisions of this Agreement, covering any employee
of former employee of Mercury or any of its
Subsidiaries that, individually or collectively,
could give rise to the payment of any amount
that would not be deductible pursuant to Section
280G or 162 of the Code.
5.20 Environmental Matters
a. At all times prior to the date hereof,
Mercury and its Subsidiaries have complied
in all material respects with applicable
environmental laws, orders, regulations, rules
and ordinances relating to the Properties (as
hereinafter defined), the violations of which
would have a material adverse effect on the
business or financial conditions of Mercury or
any of its Subsidiaries, taken as a whole, or
which would require a payment by Mercury and
its Subsidiaries in excess of $2,000 in the
aggregate, and which have been duly adopted,
imposed or promulgated by any legislative,
executive, administrative or judicial body or
officer of any Governmental body.
b. The environmental licenses, permits and
authorizations that are material to the
operations of Mercury and its Subsidiaries,
taken as a whole, are in full force and effect.
c. Neither Mercury or any of its Subsidiaries
has released or caused to be released on or
about the properties currently owned or leased
by Mercury or any of its Subsidiaries (the
"Properties") any (i) pollutants, (ii) contaminants
(iii) "Hazardous Substances," as that term is
defined in Section 101(14) of the Comprehensive
Environmental Response Act, as amended or
(iv) "Regulated Substances," as that term is
defined in Section 9001 of the Resource Conservation
and Recovery Act, 42 U.S.C. Section 6901, et seq.,
as amended, which would be required to be remediated
by any governmental agency with jurisdiction over
the Properties under the authority of laws,
regulations and ordinances as in effect and
currently interpreted on the date hereof, which
remediation would have a material adverse effect
on the business or financial condition of Mercury
or any of its Subsidiaries, take as a whole.
5.21 Mercury has not employed any broker or finder
or incurred any liability for any brokerage or
finder's fee or commissions or similar payments
in connection with the sale of the Mercury
Shares to FDNI.
5.22 Absence of Certain Commercial Practices.
Neither Mercury nor any of its Subsidiaries
has, directly or indirectly, paid or delivered
any fee, commission, or other sum of money or
item of property, however characterized, to any
finder, agent, government official, or other
party in the United States or any other country,
which is in any manner related to the business
or operations of Mercury or any of its
Subsidiaries, which Mercury or one of its Subsidiaries
knows or has reason to believe to have been
illegal under any federal, state or local laws
of the United States or any other country having
jurisdiction; and neither Mercury nor any of its
Subsidiaries has participated, directly or
indirectly, in any boycotts or other similar
practices affecting any of its actual or potential
customers in violation of any applicable law or
regulation.
5.23 Transactions with Directors or Officers.
Mercury and its Subsidiaries do not engage in
business with any Person in which any of
Mercury's directors or officers has a material
equity interest. No director or officer of
Mercury owns any property, asset or right which
is material to the business of Mercury and its
Subsidiaries, taken as a whole.
5.24. Borrowing and Guarantees. Mercury and its
Subsidiaries (a) do not have any indebtedness
for borrowed money, (b) are not lending or
committed to lend any money (except for advances
to employees in the ordinary course of business),
and (c) are not guarantors or sureties with
respect to the obligations of any Person.
6. Representations and Warranties of FDNI.
FDNI represents and warrants to Mercury that,
to the Knowledge of FDNI (which limitation
shall not apply to Section 6.3), and except
as set forth in the FDNI Disclosure letter:
6.1 Organization of FDNI: Authorization.
FDNI is a corporation duly organized, validly
existing and in good standing under the laws
of the state of Colorado with full corporate
power and authority to execute and deliver
this Agreement and to perform its obligations
hereunder. The execution, delivery, and
performance of this Agreement have been duly
authorized by all necessary corporate action
of FDNI and this Agreement constitutes a valid
and binding obligation of FDNI; enforceable
against it in accordance with its terms.
6.2 Capitalization. The authorized capital
stock of FDNI consists of 100,000,000 shares
of common stock, par value $.001 per share.
As of March 13, 2000 FDNI had 38,108,087 shares
of common stock issued and outstanding. As
of the Closing Date, all of the issued and
outstanding shares of common stock of FDNI are
validly issued, fully paid and non-assessable.
The Common Stock of FDNI is presently listed
and trading on the Nasdaq Over-the Counter
Bulletin board under the symbol FDNI.
6.3 Ownership of FDNI Shares. The delivery
of certificates to Mercury provided in section
2.3 will result in Shareholder's of Mercury
immediate acquisition of record and beneficial
ownership of the FDNI Shares, free and clear of
all Encumbrances other than as required by State
and Federal securities laws.
6.4 No Conflicts as to FDNI and Subsidiaries.
Neither the execution and delivery of this
greement nor the consummation of the sale of the
FDNI Shares to Mercury will (a) violate any provision
of the certificate of incorporation or by-laws (of
other governing instrument) of FDNI or any of its
Subsidiaries or (b) violate, or be in conflict
with, or constitute a default (or an event which,
with notice or lapse of time or both, would
constitute a default) under, or result in the
termination of, or accelerate the performance
required by, or excuse performance by any Person
of any of its obligations under, or cause the
acceleration of the maturity of any debt of obligation
pursuant to, or result in the creation or imposition
of any Encumbrance upon any property or assets of FDNI
or any of its Subsidiaries is a party or by which any
of their respective property or assets is bound, or to
which any of the property or assets of FDNI or any of
its Subsidiaries is subject, or (c) violate any statute
of law or any judgment, decree, order, regulation or
rule of any court of other Governmental Body
applicable to FDNI of any of its Subsidiaries
except, in the case of violations, conflicts,
defaults, terminations, accelerations or Encumbrances
described in clause (b) of this Section 6.4, for
such matters which are not likely to have a
material adverse effect on the business or financial
condition of FDNI and its Subsidiaries, taken as a
whole.
6.5 Consents and Approvals of Governmental
Authorities. No consent approval or
authorization of, or declaration, filing or
registration with, any Governmental Body is
required to be made or obtained by Mercury or
FDNI or any of its Subsidiaries in connection
with the execution, delivery and performance of
this Agreement by FDNI or the consummation of
the sale of the FDNI Shares to Mercury.
6.6 Other Consents. No consent of any Person
is required to be obtained by Mercury or FDNI to
the execution, delivery and performance of this
Agreement or the consummation of the sale of the
FDNI Shares to Mercury including but not limited
to, consents from parties to leases or other
agreements or commitments, except for any consent
which the failure to obtain would not be likely to
have a material adverse affect on the business
and financial condition of Mercury or FDNI.
6.7 Financial Statements. FDNI has delivered
to Mercury consolidated balance sheets of FDNI
and its Subsidiaries as at December 31, 1999 and
statements of income and changes in financial
position for the period then ended December 31,
1999, together with the report thereon of FDNI's
independent accountant (the "FDNI Financial
Statements"). Such FDNI Financial Statements
are internally prepared and unaudited but fairly
present the consolidated financial condition and
results of operation of FDNI and its Subsidiaries
as at the respective dates thereof and for the
periods therein referred to, all in accordance with
generally accepted United States accounting
principles consistently applied throughout the
periods involved, except as set forth in the notes
thereto, and shall be utilized in any SEC filing
in compliance with Rule 310 of Regulation S B
promulgated under the Securities Act.
6.8 Brokers or Finders. FDNI has not employed
any broker or finder or incurred any liability
for any brokerage or finder's fee or commissions
or similar payments in connection with the sale
of the FDNI Shares to Mercury.
6.9 Purchase for Investment. FDNI is
purchasing the Mercury Shares solely for its
own account for the purpose of investment and
not with a view to, or for sale, in connection
with, and distribution of any portion thereof
in violation of any applicable securities law.
7. Access and Reporting; Filing with
Governmental Authorities; Other Covenants.
7.1 Access Between the date of this Agreement
and the Closing Date. Each of Mercury and FDNI
shall (a) give to the other and its authorized
representatives reasonable access to all plants,
offices, warehouse and other facilities and
properties of Mercury of FDNI, as the case may be,
and to its books an records, (b) permit the other
to make inspections thereof, and (c) cause its
officers and its advisors to furnish the other
with such financial and operating data and other
information with respect to the business and
properties of such party and its Subsidiaries
and to discuss with such and its authorized
representatives its affairs and those of its
Subsidiaries, all as the other may from time
to time reasonably request.
7.2 Exclusivity. From the date hereof until
the earlier of the Closing or the termination of
this Agreement, Mercury shall not solicit or
negotiate or enter into any agreement with any
other Person with respect to or in furtherance
of any proposal for a merger or business
combination involving or acquisition of any
interest in, or (except in the ordinary course
of business) sale of assets by, Mercury, except
for the exchange of the FDNI Shares for the
Mercury Shares from Mercury's shareholders.
7.3 Regulatory Matters. Mercury and FDNI
shall (a) file with applicable regulatory
authorities any applications and related
documents required to be filed by them in
order to consummate the contemplated transaction
and (b) cooperate with each other as they may
reasonably request in connection with the
foregoing.
8. Conduct of Mercury's Business Prior to
the Closing.
8.1 Operation in Ordinary Course. Between
the date of this Agreement and the Closing
Date, Mercury shall cause conduct its business
in all material respects in the ordinary course.
8.2 Business Organization. Between the
dates of this Agreement and the Closing Date,
Mercury shall (a) preserve substantially intact
the business organization of Mercury; and
(b) preserve in all material respects the
present business relationships and good will
of Mercury and each of its Subsidiaries.
8.3 Corporate Organization. Between the
date of this Agreement and the Closing Date,
Mercury shall not cause or permit any
amendment of its certificate of incorporation
or by-laws (or other governing instrument)
and shall not:
a. issue, sell or otherwise dispose of
any of its Equity Securities, or create,
sell or otherwise dispose of any options,
rights, conversion rights or other agreements
or commitments of any kind relating to the
issuance, sale or disposition of any of its
Equity Securities;
b. create or suffer to be created any
Encumbrances thereon, or create, sell or
otherwise dispose of any options, rights,
conversion rights or other agreements or
commitments of any kind relating to the sale
or disposition of any Equity Securities;
c. reclassify, split up or otherwise change
any of its Equity Securities;
d. be party to any merger, consolidation
or other business combination;
e. sell, lease license or otherwise
dispose of any of its properties or assets
(including but not limited to rights with
respect to patents and registered trademarks
and copyrights or other proprietary rights),
in an amount which is material to the business
or financial condition of Mercury and its
Subsidiaries, taken as a whole except in the
ordinary course of business; or
f. organize any new Subsidiary or acquire
any Equity Securities of any Person or any equity
or ownership interest in any business.
8.4 Other Restrictions. Between the date
of this Agreement and the Closing Date,
Mercury shall not:
a. borrow any funds or otherwise become
subject to, whether directly or by way of
guarantee or otherwise, any indebtedness for
borrowed money;
b. create any material Encumbrance on any
of its material properties or assets.
c. increase in any manner the compensation
of any director or officer or increase in any
manner the compensation of any class of employees;
d. create or materially modify any material
bonus, deferred compensation, pension, profit
sharing, retirement, insurance, stock purchase,
stock option, or other fringe benefit plan,
arrangement or practice or any other employee
benefit plan (as defined in section 3(3) of ERISA);
e. make any capital expenditure or acquire
any property or assets;
f. enter into any agreement that materially
restricts FDNI or Mercury or any of their
Subsidiaries from carrying on business;
g. pay, discharge or satisfy any material
claim, liability or obligation, absolute, accrued,
contingent or otherwise, other than the payment,
discharge or satisfaction in the ordinary course
of business of Mercury or obligations reflected in the
Mercury Financial Statements or incurred in the
ordinary course of business and consistent with
past practice since the date of the Mercury
Financial Statements; or
h. cancel any material debts or waive any
material claims or rights.
9. Definitions.
As used in this Agreement, the following terms
have the meanings specified or referred to in
this Section 9.
9.1 Business Day. Any day that is not a
Saturday or Sunday or a day on which banks
located in the City of New York are authorized
or required to be closed.
9.2 Code. The Internal Revenue
code of 1986, as amended.
9.3 Encumbrances. Any security interest,
mortgage, lien, charge, adverse claim or
restriction of any kind, including but not
limited to, any restriction on the use, voting,
transfer, receipt of income or other exercise
of any attributes of ownership, other than a
restriction on transfer arising under Federal
of State securities laws.
9.4 Equity Securities. See Rule 3a-11-1 under
the Securities Exchange Act of 1934.
9.5 ERISA. The Employee Retirement Income
Security Act of 1974, as amended.
9.6 Governmental Body. Any domestic or foreign
national, state or municipal or other local
government or multi-national body (including,
but not limited to, the European Economic
Community), and subdivision, agency, commission
or authority thereof.
9.7 Knowledge. Actual knowledge, after
reasonable investigation.
9.8 Person. Any individual, corporation,
partnership, joint venture, trust, association,
unincorporated organization, other entity, of
Governmental Body.
9.9 Subsidiary. With respect to any
Person, and corporation of which securities
having the power to elect a majority of that
corporation's Board of Directors (other than
securities having that power only upon the
happening of a contingency that has not occurred)
are held by such Person or one or more of its
Subsidiaries.
10. Termination.
10.1 Termination. This Agreement may be
terminated before the Closing Date occurs
only as follows:
a. by written agreement of
Mercury and FDNI at any time;
b. by FDNI, by notice to Mercury
at any time, if one or more of the conditions
specified in Section 4 is not satisfied at
the time at which the Closing (as it may be
deferred pursuant to Section 2.1) would
otherwise occur or if the satisfaction of
such a condition is or becomes impossible.
c. by Mercury, by notice to FDNI at
any time, if one or more of the conditions
specified in Section 3 is not satisfied at
the time at which the Closing (as it may be
deferred pursuant to Section 2.1), would
otherwise occur of if satisfaction of such a
condition is or becomes impossible;
d. by either Mercury or FDNI, by notice to
the other at any time after June 1, 2000.
10.2 Effect of Termination. If this Agreement
is terminated pursuant to Section 10.1, this
Agreement shall terminate without any liability
or further obligation of any party to another.
11 Notices. All notices, consents,
assignments and other communications under
this Agreement shall be in writing and shall
be deemed to have been duly given when
(a) delivered by hand, (b) sent by telex
or facsimile (with receipt confirmation),
provided that a copy is mailed by registered
mail, return receipt requested, or
(c) received by the delivery service
(receipt requested), in each case to the
appropriate address, telex numbers and
facsimile numbers set forth below (or to
such other address, telex number and facsimile
numbers as a party may designate as to itself
by notice to the other parties).
If to FDN, Inc.:
Xx. Xxxxx Xxxxxxx
FDN, Inc.
0000 Xxx Xxxx
Xxxxxx Xxxx, XX 00000
If to Mercury Capital Corp.:
Xx. Xxxx X. Xxxxxx
Mercury Capital Corp.
0000 X. Xxxxxx Xxx.
Xxxxx 000
Xxx Xxxxx, XX 00000
12. Miscellaneous.
12.1 Expenses. Each party shall bear its
own expenses incident to the preparation,
negotiation, execution and delivery of this
Agreement and the performance of its
obligations hereunder.
12.2. Captions. The captions in this
Agreement are for convenience of reference
only and shall nor be given any effect in
the interpretation of this Agreement.
12.3 No Waiver. the failure of a
party to insist upon strict adherence to
any term of this Agreement on any occasion
shall not be considered a waiver or deprive
that party of the right thereafter to insist
upon strict adherence to that term or any
other term of this Agreement. Any waiver
must be in writing.
12.4 Exclusive Agreement: Amendment.
This Agreement supercedes all prior Agreements
among the parties with respect to its subject
matter with respect thereto and cannot e changed
or terminated orally.
12.5 Counterparts. This Agreement may
be executed in two or more counterparts, each
of which shall be considered an original, but
all of which together shall constitute the
same instrument.
12.6 Governing Law. This Agreement
and (unless otherwise provided) all amendments
hereof and waivers and consents hereunder shall
be governed by the internal law of the State
of Colorado, without regard to the conflicts
of law principles thereof.
12.7 Binding Effect. This Agreement
Shall insure to benefit of and be binding upon
the parties hereto and their respective
successors and assigns, provided that neither
party may assign its rights hereunder without
the consent of the other, provided that, after
the Closing, no consent of Mercury shall be needed
in connection with any merger or consolidation
of FDNI with or into another entity.
IN WITNESS WHEREOF, the corporate parties hereto
have caused this Agreement to be executed by their
respective officers, hereunto duly authorized and
entered into as of the date first above written.
__/s/ Xxxxx Xxxxxxx/s/ ___/s/ Xxxx Xxxxxx /s/____
Xxxxx Xxxxxxx Xxxx X. Xxxxxx
On behalf of FDN, Inc. On behalf of Mercury Capital
