EXHIBIT 10.1
EXECUTION COPY
MERGER AGREEMENT
MERGER AGREEMENT ("Agreement"), dated November 14, 2005, by and among
XXXXX INDUSTRIES INCORPORATED, a Delaware corporation (the "COMPANY"), XXXXX
INDUSTRIES MERGER SUB, INC., a Delaware corporation ("MERGER SUB" and, following
the Merger, sometimes referred to herein as the "SURVIVING CORPORATION"), XXXXXX
DEVELOPMENT CORPORATION, a Florida corporation (the "ISSUER"), and those
stockholders of the Company who have executed this Agreement (collectively, the
"STOCKHOLDERS").
WITNESSETH:
WHEREAS, the Stockholders own a majority of the issued and outstanding
capital stock of the Company and the Issuer owns all of the issued and
outstanding capital stock of Merger Sub;
WHEREAS, the respective Boards of Directors of the Issuer, Merger Sub
and the Company and the Stockholders have concluded that it is to their mutual
advantage and benefit to effect a reorganization whereby the Company will be
merged into Merger Sub in accordance with the Delaware General Corporation Law
on the terms and conditions as set forth in this Agreement; and
WHEREAS, the Company intends to complete the Financing and the Closing
Transactions contemporaneously with the closing of the Merger.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties, each intending to be legally bound hereby, agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. As used herein, the terms below shall have the
following meanings. Any of such terms, unless the context otherwise requires,
may be used in the singular or plural, depending upon the reference.
"Affiliate" shall have the meaning set forth in the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder.
"Agreement" shall mean this Merger Agreement, all Exhibits and
Schedules hereto.
"AIM" shall mean Air Industries Machining, Corp., a New York
corporation.
"Books and Records" shall mean (a) all records and lists pertaining
to the business, customers, suppliers or personnel of the Company, (b) all
product, business and marketing plans of the Company and (c) all books, ledgers,
files, reports, plans, drawings and operating records of every kind maintained
by the Company.
"Closing Date" shall mean as soon as possible after satisfaction of
the conditions set forth in Articles VIII and IX but not later than the 60th day
following the execution and delivery of this Agreement, or such other date as
the Company, the Stockholders and the Issuer shall mutually agree in writing.
"Closing Transactions" shall mean the Acquisition (as defined in
the PPM) and the Real Estate Acquisition (as defined in the PPM).
"Code" shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations thereunder.
"Constituent Corporations" shall mean the Company and Merger Sub.
"Contract" shall mean any agreement, contract, lease, note, loan,
evidence of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation or commitment to which the Company or the Issuer, as the context may
require, is a party or by which it is bound, whether oral or written.
"Delaware GCL" shall mean the General Corporation Law of the State
of Delaware.
"Florida BCA" shall mean the Business Corporation Act of the State
of Florida.
"Encumbrance" shall mean any claim, lien, pledge, option, charge,
easement, security interest, deed of trust, mortgage, right-of-way,
encroachment, building or use restriction, conditional sales agreement,
encumbrance or other right of third parties, whether voluntarily incurred or
arising by operation of law, and includes, without limitation, any agreement to
give any of the foregoing in the future, and any contingent sale or other title
retention agreement or lease in the nature thereof.
"Financing" shall mean the completion of the Minimum Offering (as
defined in the PPM).
"Issuer Common Stock" shall mean the Issuer's common stock, $.001
par value, as authorized on the date of this Agreement and any other securities
into which or for which such common stock may be converted or exchanged pursuant
to a plan of recapitalization, reorganization, merger, sale of assets or
otherwise.
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"Issuer Preferred Stock" shall mean the Issuer's Series A
Convertible Preferred Stock, $.001 par value, as authorized on the date of this
Agreement or to be authorized as of the Closing Date.
"Issuer Shares" shall mean the total number of shares of Issuer
Common Stock and Issuer Preferred Stock to be issued and delivered to the
stockholders of the Company pursuant to Sections 3.1 and 4.1.
"Merger" shall mean the merger of the Company with and into Merger
Sub in accordance with the Delaware GCL and on the terms and conditions set
forth in this Agreement.
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, any governmental
authority, whether foreign, federal, state or local, or any other person,
necessary or desirable for the present or anticipated conduct of, or relating to
the operation of, the Company's business.
"Person" shall mean any natural person, corporation, limited
liability company, partnership, firm, joint venture, joint-stock company, trust,
association, governmental authority, unincorporated entity or organization of
any kind.
"PPM" shall mean the Company's Confidential Private Placement
Memorandum as of the date of this Agreement (and all exhibits and supplements
thereto up to the date hereof) relating to the sale of units of the Company's
convertible preferred stock, a copy of which PPM has been delivered to the
Issuer.
"Reverse Split" shall mean a combination of the Issuer's Common
Stock, effected through an amendment to the Issuer's Articles of Incorporation,
which results in total outstanding shares of the Issuer's Common Stock
(including shares underlying any outstanding options or other derivative
securities) of no more than 3,768,000 and total authorized Issuer Common Stock
of 120,000,000 shares.
"Subsidiaries" shall mean all corporations, partnerships, joint
ventures or other entities in which the specified party either owns capital
stock or is a partner or is in some other manner affiliated through an
investment or participation in the equity of such entity.
"Surviving Corporation" is defined in the preamble of this
Agreement.
"Tax" shall mean any federal, state, local, foreign or other tax,
levy, impost, fee, assessment or other government charge, including without
limitation, income, estimated income, business, occupation, franchise, property,
payroll, personal property, sales, transfer, use, employment, commercial rent,
occupancy, franchise or withholding taxes, and any premium, including without
limitation, interest, penalties and additions in connection therewith.
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ARTICLE II
MERGER
2.1 Merger. At the Effective Time (as defined in Section 2.3), in
accordance with the provisions of this Agreement and the Delaware GCL, the
Company shall be merged with and into Merger Sub, the separate existence of the
Company shall cease, and Merger Sub shall be the surviving corporation and shall
continue its corporate existence.
2.2 Effect of Merger. Except as herein specifically set forth, at the
Effective Time, the identity, existence, corporate organization, purposes,
powers, objects, franchises, privileges, rights and immunities of Surviving
Corporation shall continue in effect and be unimpaired by the Merger and the
Surviving Corporation shall succeed, without other transfer, to all the rights
and property of the Company and shall be subject to all the debts and
liabilities of the Company in the same manner as if the Surviving Corporation
had itself incurred them. All rights of creditors and all liens upon the
property of each of the Constituent Corporations shall be preserved unimpaired
by the Merger.
2.3 Effective Time of Merger. The Merger shall not become effective
until, and shall become effective immediately upon, the filing of a certificate
of merger (the "CERTIFICATE OF MERGER"), as required by Section 251 of the
Delaware GCL, which filing shall be made as soon as practicable after all other
conditions to the consummation of the Merger have been satisfied. The time at
which the Merger becomes effective is sometimes herein referred to as the
"EFFECTIVE TIME."
2.4 Certificate of Incorporation and By-Laws. At the Effective Time,
the Certificate of Incorporation and the By-Laws, as currently constituted, of
Merger Sub shall be the Certificate of Incorporation and By-Laws of the
Surviving Corporation until the same shall be amended and changed.
2.5 Directors. At the Effective Time, Xxxxx Xxxxxxxxxx or his designee
shall be the sole director of the Surviving Corporation. Subject to the By-Laws
of the Surviving Corporation and the Delaware GCL, the sole director shall serve
until his successor is elected or appointed and qualified or until his earlier
death, resignation or removal. In addition, as of the Effective Time, the Issuer
shall cause the following individuals, unless they notify the Issuer otherwise,
to be elected to the Board of Directors of the Issuer: Xxxxxxx X. Xxxxx, Xxxxx
X. Xxxxxx, Xxxxx Xxxxxxxxxx, Xxxxx Xxxxxxxxx, Xxxxxxx Xxxxxx, Xxxxxxx X. Xxxxxx,
Rounsvelle X. Xxxxxx, Xxx X. Xxxx, Xx. and Xxxxx X. Xxxxx.
2.6 Taking of Necessary Action. The Company, Stockholders, Issuer and
Merger Sub shall take all such lawful action as may be necessary or appropriate
in order to effectuate the transactions contemplated hereby. In case 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 title to all assets, rights, approvals, immunities and franchises of either
of the Constituent Corporations, the former officers and directors of such
corporations shall take all such lawful and necessary action.
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ARTICLE III
CONVERSION OF SHARES
3.1 The manner and basis of converting the outstanding shares of each
of the Constituent Corporations, and the effect of the Merger on the capital
structure of the Issuer and the Merger Sub, will be as follows:
a) The Company's Currently Outstanding Common Stock. All of the
shares of the Company's Common Stock, $.0001 par value per share (the "Company
Common Stock"), outstanding as of the date hereof and held by the stockholders
of the Company as of the date hereof (as set forth on SCHEDULE I-A hereto),
shall be extinguished and cancelled and automatically converted, by virtue of
the Merger and without any action on the part of such stockholders, into
newly-issued shares of Issuer Common Stock, in the amounts set forth on SCHEDULE
I-A, and the Issuer hereby agrees to issue such shares as of the Closing Date to
such stockholders of the Company.
b) Common Stock of the Company To Be Outstanding. All other shares
of Company Common Stock to be or deemed to be outstanding as of the initial
closing of the Financing (as set forth on SCHEDULE I-B hereto), shall be
extinguished and cancelled and automatically converted, by virtue of the Merger
and without any action on the part of the holders of such shares, into
newly-issued shares of Issuer Common Stock, in the amounts set forth on SCHEDULE
I-B, and the Issuer hereby agrees to issue as of the Closing Date shares of
Issuer Common Stock in such amounts in accordance with instructions from the
Company.
c) Preferred Stock of the Company To Be Outstanding As of Closing
Date. All shares of the Company's Series A Convertible Preferred Stock to be (or
deemed to be) outstanding as of the Closing Date (as set forth on SCHEDULE I-C
hereto), shall be extinguished and cancelled and automatically converted, by
virtue of the Merger and without any action on the part of the holders of such
shares, on a one-for-one basis into newly-issued shares of Issuer Preferred
Stock; and the Issuer hereby agrees that (i) it will authorize, create and
designate, prior to the Closing Date, 1,000 shares of its Series A Convertible
Preferred Stock which shall have terms, rights and preferences which are the
same as the terms, rights and preferences of the Company's Series A Convertible
Preferred Stock (which terms, rights and preferences are set forth in Exhibit A
to the PPM), and (ii) the Issuer will issue as of the Closing Date shares of
Issuer Preferred Stock in such amounts in accordance with instructions from the
Company.
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d) Preferred Stock To Be Outstanding After the Closing Date. All
shares of Series A Convertible Preferred Stock to be (or deemed to be) issued in
connection with the Financing after the Closing Date (as contemplated by the
PPM), shall automatically, without any action on the part of the holders of such
shares, be converted into (or be issued as) newly-issued shares of Issuer
Preferred Stock on the same terms as described in SCHEDULE I-C and subparagraph
c, above.
e) Derivative or Convertible Securities of the Company. By virtue
of the Merger, each option and warrant to purchase shares of Company Common
Stock, and each convertible security (including the Company's Series A
Convertible Preferred Stock) which is convertible into shares of Company Common
Stock (all of which are set forth in SCHEDULE I-C), shall, in accordance with
the terms of such option, warrant or convertible security, become an option,
warrant or convertible security exercisable or convertible into shares of the
Issuer Common Stock at the same exercise or conversion price.
f) Capital Stock of the Issuer. The completion of the Merger will
not affect or change the number of shares of the Issuer's capital stock
authorized in the Issuer's Certificate of Incorporation and, except pursuant to
the Reverse Split or as otherwise provided in this Agreement, will not affect or
change the shares of Issuer Common Stock which are outstanding as of the date of
this Agreement; provided, however, that the Issuer shall not issue any
additional shares of its capital stock, or rights to purchase its capital stock,
prior to the Merger, the maximum number of shares of Common Stock which the
Issuer will have outstanding immediately prior to the Merger after giving effect
to the Reverse Split (and not taking into account the additional shares which
will result from rounding up to the nearest whole the fractional shares which
will result from the Reverse Split) will be 3,723,980 shares, the Issuer will
have, immediately prior to the Merger, no options, warrants or other rights to
purchase its capital stock other than stock options to purchase 44,020 shares of
Issuer Common Stock after giving effect to the Reverse Split, and, except as
provided in this Agreement, the Issuer will have no other class of capital stock
outstanding immediately prior to the Merger.
g) Capital Stock of Merger Sub. The completion of the Merger will
not change the number of shares of the Merger Sub's capital stock authorized or
outstanding and the Merger Sub will remain a wholly-owned subsidiary of the
Issuer.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
4.1 Representations and Warranties of the Stockholders. The
Stockholders severally (and not jointly) represent and warrant to Issuer and
Merger Sub as follows:
a) Title to Shares; Residency. Immediately prior to the Effective
Time, each of the Stockholders of the Company will be the record and beneficial
owner, with good and marketable title thereto free and clear of all
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Encumbrances, of the respective number of shares of Company Common Stock set
forth opposite the name of such Stockholder in SCHEDULE I-A hereto. The correct
State of residence of each such Stockholder is set forth in SCHEDULE I-A.
b) Authority. The Stockholders have full power, right and authority
to enter into this Agreement, to perform his obligations hereunder, and to
consummate the transactions contemplated hereby to be consummated by him. The
Stockholders own a majority of the voting shares of the Company outstanding as
of the date of this Agreement.
c) The Stockholders hereby approve and consent to the consummation
of the transactions contemplated herein and will reflect such consent by
executing any and all documentation reasonably requested by the Merger Sub or
Issuer, or the Company.
d) Investment Intent. Each of the Stockholders will acquire the
Issuer Shares for his own account for investment and not with a view to
distribution or resale of any of the Issuer Shares. Each Stockholder is an
Accredited Investor as that Term is defined in Regulation D of the Securities
Act of 1933, as amended (the "SECURITIES ACT").
4.2 Legend. The certificate representing the Issuer Shares to be issued
to the stockholder of the Company hereunder shall bear the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE LAWS. THE SECURITIES MAY
NOT BE SOLD OR TRANSFERRED UNLESS REGISTERED UNDER SUCH ACT AND APPLICABLE STATE
LAWS OR EXEMPT FROM SUCH REGISTRATION IN THE OPINION OF COUNSEL TO THE ISSUER."
4.3 As of the Closing Date, the Issuer shall issue in the name of each
stockholder of the Company a certificate registered in the name of such
stockholder representing the number of the Issuer Shares to which such
stockholder is entitled, pursuant to Section 3.1. All stock certificates
representing the Issuer Shares issued in connection with the Merger shall be
delivered to Xxxxxxx Xxxxx, or at his direction, for distribution to appropriate
parties.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Merger Sub and the Issuer as
follows (provided, however, that the representations relating to AIM contained
in Section 5.5 to 5.15 are hereby qualified as being to the best of the
Company's knowledge):
5.1 Authorization. The execution, delivery and performance of this
Agreement, and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by the Company's Board of
Directors and shareholders. The Company has all necessary corporate power and
authority to enter into this Agreement, to perform its obligations hereunder and
to consummate the transactions contemplated hereby. This Agreement has been duly
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executed and delivered by, and is the valid and binding obligation of, the
Company, enforceable against the Company in accordance with its terms except as
enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium
or similar laws affecting the enforcement of creditors' rights or remedies and
by general principles of equity (whether such enforcement is considered in a
proceeding at law or in equity).
5.2 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, has the
corporate power and authority to own and lease its properties and assets and to
carry on its business as now being conducted. The Company is duly qualified to
do business as a foreign corporation in each jurisdiction where it conducts
business except where the failure to be so qualified would not have a material
adverse effect on the Company. The copies of the Company's Certificate of
Incorporation and By-Laws heretofore delivered by the Company to Merger Sub are
true and correct.
5.3 No Conflicts. The execution, delivery and performance of this
Agreement, and the consummation by the Company of the transactions contemplated
hereby and thereby, will not (i) conflict with or result in violation of any
provision of the Company's Certificate of Incorporation or By-laws,
respectively, or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both could become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any agreement,
indenture, patent, patent license or instrument to which the Company is a party,
or (iii) result in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations and
regulations of any self-regulatory organizations to which the Company or its
securities are subject) applicable to the Company or by which any property or
assets of the Company is bound or affected (except for such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as would
not, individually or in the aggregate, have a material adverse effect on the
Company).
5.4 Financing. The Financing is an offering to "accredited investors"
only and is exempt from registration under Regulation D promulgated under the
Securities Act of 1933, as amended.
5.5 PPM. All information contained in the PPM is true and correct in
all material respects and the Company has not omitted to state any material fact
necessary in order to make the statements made therein, in light of the
circumstances in which they were made, not misleading.
5.6 Financial Statements. The financial statements of AIM for the
fiscal year ended December 31, 2004 and the interim period commencing January 1,
2005 and ending June 30, 2005, included in the PPM have been prepared in
accordance with United States generally accepted accounting principles,
consistently applied, during the periods involved and fairly present in all
material respects the financial position of AIM as of the dates thereof and the
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the PPM, AIM has no liabilities, contingent or otherwise, other
than (i) non-material liabilities incurred in the ordinary course of business
subsequent to June 30, 2005, and (ii) obligations under contracts and
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commitments incurred in the ordinary course of business and not required, under
generally accepted accounting principles, to be reflected in such balance sheet,
which, individually or in the aggregate, are not material to the financial
condition or operating results of AIM.
5.7 Absence of Certain Changes. Other than as described in the PPM,
since June 30, 2005, there has been no material adverse change and no material
adverse development in the assets, liabilities, business, properties,
operations, financial condition or results of operations of AIM and the Company,
except that the Company has incurred expenses in connection with the
transactions contemplated in the PPM.
5.8 Absence of Litigation. Except as disclosed in the PPM, there is no
material action, suit, claim, proceeding, inquiry or investigation before or by
any court, public board, government agency, self-regulatory organization or body
pending or threatened against or affecting AIM or the Company, or their officers
or directors in their capacity as such. There are no facts which, if known by a
potential claimant or governmental authority, could give rise to a claim or
proceeding materially unfavorable to AIM or the Company.
5.9 Tax Status. Except as disclosed in the PPM, each of AIM and the
Company has made or filed all federal, state and foreign income and all other
tax returns, reports and declarations required by any jurisdiction to which it
is subject (and has set aside on its books provisions reasonably adequate for
the payment of all unpaid and unreported taxes relating to periods for which
such tax returns are not yet due) and has paid all taxes and other governmental
assessments and charges shown or determined to be due on such returns, reports
and declarations, and has set aside on its books provisions reasonably adequate
for the payment of all taxes for periods subsequent to the periods to which such
returns, reports or declarations apply. Except as disclosed in the PPM, there
are no unpaid taxes in any amount claimed to be due by the taxing authority of
any jurisdiction, and the officers of the Company know of no basis for any such
claim. Except as disclosed in the PPM, neither the Company nor AIM has executed
a waiver with respect to the statute of limitations relating to the assessment
or collection of any foreign, federal, state or local tax and none of AIM's and
the Company's tax returns is presently being audited by any taxing authority.
5.10 Certain Transactions. Except as disclosed in the PPM, none of the
officers, directors, or employees of AIM or the Company is presently a party to
any transaction with AIM or the Company (other than for services as employees,
officers and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
officer, director or employee or any corporation, partnership, trust or other
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner.
5.11 Disclosure. Except as disclosed in the PPM, all information
relating to or concerning the Company and AIM set forth in this Agreement and
provided to the Issuer in connection with the transactions contemplated hereby
is true and correct in all material respects and the Company has not omitted to
state any material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
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5.12 Permits; Compliance. Except as disclosed in the PPM, AIM is in
possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted (collectively, the "AIM PERMITS"), and there is no
action pending or threatened, regarding suspension or cancellation of any of the
AIM Permits. AIM is not in conflict with, or in default or violation of, any of
the AIM Permits except as may be disclosed in the PPM. AIM has not received any
notification with respect to possible conflicts, defaults or violations of
applicable laws except as may be disclosed in the PPM.
5.13 Environmental Matters. Except as disclosed in the PPM, there are
no past or present violations of Environmental Laws (as defined below), releases
of any material into the environment, actions, activities, circumstances,
conditions, events, incidents, or contractual obligations which may give rise to
any common law environmental liability to AIM or any liability to AIM under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 or
similar federal, state, local or foreign laws and neither AIM nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or threatened in connection with any of the foregoing. The
term "ENVIRONMENTAL LAWS" means all federal, state, local or foreign laws
relating to pollution or protection of human health or the environment
(including, without limitation, ambient air, surface water, groundwater, land
surface or subsurface strata), including, without limitation, laws relating to
emissions, discharges, releases or threatened releases of chemicals, pollutants
contaminants, or toxic or hazardous substances or wastes (collectively,
"HAZARDOUS MATERIALS") into the environment, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials, as well as all authorizations,
codes, decrees, demands or demand letters, injunctions, judgments, licenses,
notices or notice letters, orders, permits, plans or regulations issued,
entered, promulgated or approved thereunder.
5.14 Title to Property. Except as disclosed in the PPM, AIM has good
and marketable title in fee simple to all real property and good and marketable
title to all personal property owned by it which is material to the business of
AIM, in each case free and clear of all liens, Encumbrances and defects. Except
as disclosed in the PPM, any real property and facilities held under lease by
AIM is held under valid, subsisting and enforceable leases. Except as disclosed
in the PPM, AIM owns its internet domain names absolutely and unconditionally,
free and clear of all liens, encumbrances and claims of any other party of any
type whatsoever.
5.15 Internal Accounting Controls. Commencing as of the Closing Date,
AIM will be prepared to promptly implement a system of internal accounting
controls sufficient to comply with the Xxxxxxxx - Xxxxx Act of 2002.
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ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF ISSUER AND MERGER SUB
Merger Sub and the Issuer jointly and severally represent and warrant
to the Company as follows:
6.1 Authorization. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby and
thereby, have been duly authorized and approved by the requisite Boards of
Directors of Merger Sub and the Issuer. Merger Sub and the Issuer have all
necessary corporate power and authority to enter into this Agreement, to perform
their obligations hereunder and to consummate the transactions contemplated
hereby. The Issuer, as the sole stockholder of Merger Sub, has duly adopted this
Agreement as required by the Florida BCA. The approval of the Issuer's
stockholders is not required under Florida law in order for the Issuer to enter
into this Agreement and to perform all of its obligations hereunder. This
Agreement has been duly executed and delivered by, and is the valid and binding
obligation of, Merger Sub and the Issuer enforceable in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws affecting the enforcement of
creditors' rights or remedies and by general principles of equity (whether such
enforcement is considered in a proceeding at law or in equity). Other than the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware, the amendment of the Issuer's Articles of Incorporation to effect the
Reverse Split and the designation of the Issuer's Preferred Stock, no consent or
authorization of any third party is required to be obtained, and no filing with
any government body is required to be made, in order to consummation the
transactions contemplated by this Agreement.
6.2 Organization. Each of Merger Sub and the Issuer is a corporation
duly organized, validly existing and in good standing under the laws of their
respective states of organization, has the corporate power and authority to own
or lease its properties and assets and to carry on its business as now being
conducted and is duly qualified to do business as a foreign corporation in each
jurisdiction where the failure to so qualify would have a material adverse
effect on it. The copies of the Certificate of Incorporation and By-Laws of
Merger Sub and the Issuer heretofore delivered to the Company are true and
correct.
6.3 Capitalization. As of the date hereof, the authorized capital stock
of the Issuer consists of 150,000,000 shares of Common Stock, $.001 par value
per share, of which 4,652,813 shares are issued and outstanding as of the date
of this Agreement, and 10,000,000 shares of Preferred Stock, $.001 par value per
share, of which no shares are outstanding as of the date of this Agreement;
provided, however, that the Issuer will designate prior to the Closing Date
1,000 shares of its Preferred Stock as Series A Convertible Preferred Stock and
Issuer Preferred Stock will be issued in accordance with Article III. As of the
date of this Agreement, there are outstanding options to purchase an aggregate
of 55,000 shares of Issuer Common Stock. Except for such options, immediately
prior to the Closing Date, there will be outstanding no options, warrants,
convertible securities, or other rights to subscribe for, to purchase, or
contracts or other obligations to issue or grant any rights to acquire, any
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equity securities of the Issuer, or to restructure or recapitalize the Issuer.
There are no outstanding contracts of the Issuer to repurchase, redeem or
otherwise acquire any equity securities of the Issuer. All outstanding equity
securities of the Issuer are duly authorized, validly issued, fully paid and
non-assessable, were issued in conformity with applicable securities laws and
are not subject to any preemptive rights. Except for the Merger Sub, the Issuer
has no Subsidiaries. Issuer shall not issue any additional shares of capital
stock prior to the Merger. Giving effect to the Reverse Split and not taking
into account the additional shares which will result from rounding up to the
nearest whole the fractional shares which will result from the Reverse Split,
the maximum number of shares of Common Stock which the Issuer will have
outstanding immediately prior to the Merger (including stock options to purchase
44,020 shares) will be 3,768,000 shares and the Issuer will have no other class
of capital stock outstanding immediately prior to the Merger.
6.4 No Conflict or Violation. Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby, nor compliance by the Merger Sub and Issuer with any of the
provisions hereof, will result in (a) a violation of or a conflict with any
provision of the Certificate of Incorporation or By-laws of Merger Sub or
Issuer, (b) a breach of, or a default under, any term or provision of any
Contract, Encumbrance, or Permit, to which Merger Sub or Issuer is a party or by
which its assets are bound, or (c) a violation by Merger Sub or Issuer of any
statute, rule, regulation, ordinance, code, order, judgment, ruling, writ,
injunction, decree or award.
6.5 No Brokers. Neither Merger Sub nor Issuer or any of their officers,
directors, employees, shareholders or affiliates has employed or made any
Contract with any Person which obligates the Company or the Stockholders or any
of their respective affiliates to pay any finder's fee, brokerage fees or
commission or similar payment in connection with the transactions contemplated
hereby.
6.6 Status of Issuer Shares. The Issuer Shares issued and delivered
pursuant to Article III, upon their issuance and delivery, will be duly
authorized and validly issued, fully paid and non-assessable and will have been
issued in conformity with all applicable laws.
6.7 Control; Plans and Intentions; Etc.
a) The Issuer has been the sole stockholder and controlling party
of the Merger Sub since the formation of the Merger Sub and the Issuer will be
the sole stockholder and controlling party of the Merger Sub immediately prior
to and as of the time of the Merger.
b) Following the Merger, the Surviving Corporation has no plan or
intention to issue additional shares of its stock or to take any action that
would result in the Issuer's losing control of the Surviving Corporation.
c) The Issuer has no plan or intention to reacquire any of its
stock to be issued in the Merger.
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d) The Issuer has no present plan or intention to liquidate the
Surviving Corporation, to merge the Surviving Corporation with or into another
corporation (other than the Company pursuant to the Merger); to sell or
otherwise dispose of the stock of the Surviving Corporation; or to cause the
Surviving Corporation to sell or otherwise dispose of any of its assets or of
any of the assets acquired from the Company, except for dispositions made in the
ordinary course of business or transfers of assets to a corporation controlled
by the Surviving Corporation.
e) Neither the Issuer nor Merger Sub is an investment company, as
defined in Section 368(a)(2)(F)(iii) and (iv) of the Code.
6.8 Public Filings. All information contained in the Issuer's filings
with the Securities and Exchange Commission (the "SEC Filings") is true and
correct in all material respects and the Issuer has not omitted to state any
material fact necessary in order to make the statements made therein, in light
of the circumstances in which they were made, not misleading.
6.9 Financial Statements. The financial statements of the Issuer for
the fiscal year ended December 31, 2004 and the interim period commencing
January 1, 2005 and ending June 30, 2005, included in the SEC Filings (the
"FINANCIAL STATEMENTS") have been prepared in accordance with United States
generally accepted accounting principles, consistently applied, during the
periods involved and fairly present in all material respects the consolidated
financial position of the Issuer as of the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended (subject, in
the case of unaudited statements, to normal year-end audit adjustments). Except
as set forth in the SEC Filings, the Issuer has no liabilities, contingent or
otherwise, other than (i) non-material liabilities incurred in the ordinary
course of business subsequent to June 30, 2005, and (ii) obligations under
contracts and commitments incurred in the ordinary course of business and not
required, under generally accepted accounting principles, to be reflected in
such balance sheet, which, individually or in the aggregate, are not material to
the financial condition or operating results of the Issuer.
6.10 Absence of Certain Changes. Since June 30, 2005, there has been no
material adverse change and no material adverse development in the assets,
liabilities, business, properties, operations, financial condition or results of
operations of the Issuer or the Merger Sub.
6.11 Absence of Litigation. There is no action, suit, claim,
proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or threatened
against or affecting the Merger Sub, the Issuer, or its officers or directors in
their capacity as such. There are no facts which, if known by a potential
claimant or governmental authority, could give rise to a claim or proceeding
unfavorable to the Issuer or the Merger Sub.
6.12 No Materially Adverse Contracts, Etc. SCHEDULE 6.12 lists each
material contract to which the Issuer or the Merger Sub is a party, stating the
amounts of each contract, and the Issuer and the Merger Sub are not parties to
any other contract. The Issuer and the Merger Sub are not subject to any
charter, corporate or other legal restriction, or any judgment, decree, order,
rule or regulation which in the future could have a material adverse effect on
either of them. The Issuer and the Merger Sub have no employment or other
contracts with any employee or consultant.
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6.13 Tax Status. The Issuer has made or filed all federal, state and
foreign income and all other tax returns, reports and declarations required by
any jurisdiction to which it is subject (and has set aside on its books
provisions reasonably adequate for the payment of all unpaid and unreported
taxes relating to periods for which such tax returns are not yet due) and has
paid all taxes and other governmental assessments and charges shown or
determined to be due on such returns, reports and declarations, and has set
aside on its books provisions reasonably adequate for the payment of all taxes
for periods subsequent to the periods to which such returns, reports or
declarations apply. There are no unpaid taxes in any amount claimed to be due by
the taxing authority of any jurisdiction, and the officers of the Issuer know of
no basis for any such claim. The Issuer has not executed a waiver with respect
to the statute of limitations relating to the assessment or collection of any
foreign, federal, state or local tax. None of the Issuer's tax returns is
presently being audited by any taxing authority.
6.14 Certain Transactions. None of the officers, directors, or
employees of the Issuer is presently a party to any transaction with the Issuer
(other than for services as employees, officers and directors), including any
contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from,
or otherwise requiring payments to or from any officer, director or employee or
any corporation, partnership, trust or other entity in which any officer,
director, or any such employee has a substantial interest or is an officer,
director, trustee or partner.
6.15 Disclosure. All information relating to or concerning the Issuer
and the Merger Sub set forth in this Agreement and provided to the Company and
the Stockholders in connection with the transactions contemplated hereby is true
and correct in all material respects and the Issuer and the Merger Sub have not
omitted to state any material fact necessary in order to make the statements
made herein or therein, in light of the circumstances under which they were
made, not misleading.
6.16 Permits; Compliance. The Issuer is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary to own, lease
and operate its properties and to carry on its business as it is now being
conducted (collectively, the "ISSUER PERMITS"), and there is no action pending
or threatened, regarding suspension or cancellation of any of the Issuer
Permits. The Issuer is not in conflict with, or in default or violation of, any
of the Issuer Permits. The Issuer has not received any notification with respect
to possible conflicts, defaults or violations of applicable laws.
6.17 Environmental Matters. There are no past or present violations of
Environmental Laws (as defined below), releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law environmental
liability to the Issuer or any liability to the Issuer under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 or similar
federal, state, local or foreign laws and neither the Issuer nor any of its
Subsidiaries has received any notice with respect to any of the foregoing, nor
is any action pending or threatened in connection with any of the foregoing.
14
6.18 Title to Property. The Issuer has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it which is material to the business of the Issuer, in each
case free and clear of all liens, Encumbrances and defects. Any real property
and facilities held under lease by the Issuer is held under valid, subsisting
and enforceable leases. The Issuer owns its internet domain names absolutely and
unconditionally, free and clear of all liens, encumbrances and claims of any
other party of any type whatsoever.
6.19 Internal Accounting Controls. The Issuer maintains a system of
internal accounting controls sufficient, in the judgment of the Issuer's Board
of Directors, to provide reasonable assurance that (i) transactions are executed
in accordance with management's general or specific authorizations, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability, (iii) access to assets is permitted only in
accordance with management's general or specific authorization and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
6.20 Personnel. SCHEDULE 6.20 lists the personnel employed by the
Issuer on the date hereof, and their annual compensation for services rendered
to the Issuer.
6.21 Employee Benefit Plans. The Issuer does not now contribute to, or
participate in, and have not in the past had, or otherwise contributed to, any
employee benefit plan subject to the Employee Retirement Income Security Act of
1974, as amended.
6.22 PPM. The Issuer has received a copy of the PPM.
6.23 Shareholders. As of December 2004, the Issuer had no fewer than
250 shareholders.
6.24 Listing. The Issuer's common stock is quoted on the OTC Bulletin
Board and the Issuer has no knowledge of any action to remove such common stock
from the OTC Bulletin Board. The Issuer is current in making all required
filings under the Securities Exchange Act of 1934.
ARTICLE VII
COVENANTS
Each of the Company, Stockholders, Issuer and Merger Sub covenant and
agree:
7.1 Notification. The Company or the Stockholders shall give prompt
notice to Issuer and Merger Sub and Issuer or Merger Sub shall give prompt
notice to the Company and the Stockholders of (a) the occurrence, or failure to
15
occur, of any event that becomes known to them which would be likely to cause
any of their respective representations or warranties contained in this
Agreement or in any Exhibit or Schedule, to be untrue or inaccurate in any
material respect and (b) any material failure that becomes known to them of the
party required to give such notice or its representatives to comply with or
satisfy any covenant, conditions or agreement to be complied with or satisfied
by it under this Agreement or any Exhibit or Schedule; provided, however, that
such disclosure shall not be deemed to cure any breach of a representation,
warranty, covenant or agreement or to satisfy any condition.
7.2 Prohibited Actions. From and after the execution and delivery of
this Agreement and until the Effective Time, each of the Issuer and the Company
will not, without other party's written consent (except as otherwise provided
for or contemplated in the PPM or this Agreement):
a) amend its Certificate of Incorporation or By-Laws, except in
connection with the Reverse Split and the designation of the Issuer Preferred
Stock;
b) issue any stock options, warrants or other rights calling for or
permitting the issue, transfer, sale or delivery of its capital stock;
c) pay or declare any cash dividend or other dividend or
distribution with respect to its capital stock;
d) issue, transfer, sell or deliver any shares of its capital stock
(or securities exercisable or exchangeable for or convertible into with or
without additional consideration, such capital stock);
e) redeem, purchase or otherwise acquire for any consideration any
outstanding shares of its capital stock or securities carrying the right to
acquire, or convertible into or exchangeable, with or without additional
consideration for, such stock;
f) merge or consolidate with any corporation;
g) borrow money from any party or pledge assets for any purpose;
h) sell, lease, trade, exchange or otherwise dispose of any capital
assets;
i) authorize, incur or commit to any single obligation in excess of
$15,000, other than the purchase of inventory in the ordinary course of
business;
j) authorize, incur or commit to capital expenditures exceeding
$10,000 in the aggregate in any fiscal quarter;
k) increase the compensation, whether salary, bonus, fee, fringe
benefit or other, payable by it to any of its officers or directors;
l) effect any sale, lease, transfer, pledge or disposition of
assets outside of the ordinary course of business;
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m) liquidate, dissolve or terminate its corporate existence;
n) enter into any Contract (including, without limitation, any
purchase or supply agreement, lease, or employment agreement) outside the
ordinary course of business;
o) enter into any employment or consulting contract;
p) adopt (i) any bonus or employee benefit plan or program, or (ii)
any amendment to or change in any such plan or program;
q) make any investment in, advance to, loan to, or guarantee of any
debt or other obligation of any Person, except advances in the ordinary course
of business for travel and entertainment, such advances not to exceed $15,000
per fiscal quarter;
r) make any material change in the method of accounting except as
may be required by generally accepted accounting principles;
s) take any significant action relating its financial statements or
to tax returns;
t) discontinue any substantial part of its business;
u) make any material changes in its business;
v) institute, settle or concede to any lawsuits or claims involving
over $25,000 in the aggregate or which could have a material adverse effect on
it; or
w) engage in any other transaction not in the ordinary course of
business; or
x) enter into any Contract with respect to any of the foregoing.
7.3 Consents. The Company, Merger Sub and Issuer shall use their
respective best efforts to obtain any consent, agreement, authorization or
exemption required to be obtained by them, respectively, in connection with the
consummation of the transactions contemplated by this Agreement.
7.4 Governmental Filings. The Company, Merger Sub and Issuer shall
cooperate with each other in filing any necessary applications, reports or other
documents with any federal, state or other authorities having jurisdiction with
respect to the Merger and in seeking necessary consultation with and prompt
favorable action by any such agencies, authorities or bodies; provided, however,
that the Issuer will be solely responsible for filings, if any, required to be
made with federal agencies under the Xxxx Xxxxx Xxxxxx Antitrust Improvements
Act.
7.5 Publicity. The Company, Merger Sub and Issuer will consult with
each other before making any public announcements with respect to the Merger or
the transactions contemplated hereby, and any public announcements shall be made
only at such time and in such manner as the Company, Merger Sub and Issuer shall
mutually agree.
17
7.6 Right to Investigate. Each of the Company and Issuer shall afford
to the officers and authorized representatives of the other (and the Issuer
shall afford to the Stockholders) full access, during normal business hours and
upon reasonable prior notice, to their facilities and Books and Records in order
that the Company and Issuer may have full opportunity to make such
investigations as they shall desire of the affairs of the other, and the
officers of each of the Company and Issuer (and the Stockholders) shall furnish
the other with such additional financial and operating data and other
information as to its assets, property and business as the other shall from time
to time reasonably request. Prior to the Effective Time or at all times if the
Merger shall be terminated, the Company, the Stockholders and Issuer shall,
except as may be otherwise required by applicable law, hold confidential all
information obtained, including without limitation, pursuant to this Section 7.6
with respect to the other and, if the Merger shall be terminated as provided in
this Agreement, shall return to the other all of such information requested as
shall be in documentary form and shall destroy all electronic versions of such
information. The representations, warranties and agreements of each of the
parties shall be effective regardless of any investigation that any party has
undertaken or failed to undertake.
7.7 Following the Merger, the Surviving Corporation will continue the
historic business of the Company and/or use at least a significant portion of
the Company's historic business assets in a business.
ARTICLE VII A
The Issuer and Merger Sub covenant and agree as follows:
7A.1 Assistance with 8-K Filing. The Issuer will provide the Company
with all necessary information and reasonable assistance in order for the
Company to prepare, on behalf of the Issuer, a Form 8-K relating to the Merger
and the transactions relating thereto, to be filed by the Company with the
Securities and Exchange Commission promptly after completion of the Merger.
7A.2 As of the Closing Date, the Issuer will have a negative net worth
of no more than $105,000.
ARTICLE VIII
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to consummate the transactions provided
for hereby are subject to the satisfaction, on or prior to the Closing Date, of
each of the following conditions, any of which may be waived by the Company;
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8.1 Representations, Warranties and Covenants. All representations and
warranties of Issuer and Merger Sub contained in this Agreement shall be true
and correct in all material respects at and as of the date of this Agreement and
at and as of the Closing Date, except as and to the extent that the facts and
conditions upon which such representations and warranties are based are
expressly required or permitted to be changed by the terms hereof; and the
Issuer and Merger Sub shall have performed and satisfied all material agreements
and covenants required hereby to be performed by it on or prior to the Closing
Date.
8.2 Consents. All Permits and waivers necessary to the consummation of
the transactions contemplated hereby, including all required third party
consents (to the extent not waived) shall have been obtained.
8.3 No Proceedings, Litigation or Laws. No Action by any Person shall
have been instituted or threatened which questions the validity or legality of
the transactions contemplated hereby and which could reasonably be expected to
materially affect the right or ability of the Surviving Corporation to own its
assets and the assets of the Company and conduct the Company's business after
the Closing. There shall not be any statute, rule or regulation that makes the
Merger illegal or otherwise prohibited.
8.4 Certificates. Issuer and Merger Sub shall furnish the Company with
such certificates of its officers and others to evidence compliance with the
conditions set forth in this Article VIII as may be reasonably requested by the
Company (including with respect to the adoption of resolutions by the Board of
Directors and Issuer as the sole stockholder of Merger Sub).
8.5 Financing and Closing Transactions. The Financing and the Closing
Transactions and the New Loan Facility (as defined in the PPM) shall have been
completed or will be completed contemporaneously with the Merger.
8.6 Capital Structure. The Issuer will have authorized, created and
designated, prior to the Closing Date, 1,000 shares of its Series A Convertible
Preferred Stock which shall have terms, rights and preferences which are the
same as the terms, rights and preferences of the Company's Series A Convertible
Preferred Stock (which terms, rights and preferences are set forth in Exhibit A
to the PPM).
8.7 Opinion of Counsel. The Company shall have received an opinion of
counsel, in form and substance satisfactory to the Company, from counsel to the
Issuer and the Merger Sub as to matters as the Company or its counsel may
reasonably request.
8.8 Resignations. The Company shall have received the resignations of
all officers and directors of the Issuer and the Merger Sub as of the Closing
Date; provided, however, that Xxxxx X. Xxxxx will not be required to resign as a
member of the Issuer's Board of Directors.
19
8.9 Employment Agreement. The Issuer's employment agreement with the
Issuer's Chief Executive Officer shall have been terminated and the Issuer's
Chief Executive Officer shall have waived all of his rights under such
employment agreement.
8.10 Debt. As of the Closing Date, the Issuer will have a negative net
worth of no more than $105,000.
8.11 Reverse Split. The Issuer shall have completed the Reverse Split.
ARTICLE IX
CONDITIONS TO ISSUER'S AND MERGER SUB'S OBLIGATIONS
The obligations of Issuer and Merger Sub to consummate the transactions
provided for hereby are subject to the satisfaction, on or prior to the Closing
Date, of each of the following conditions, any of which may be waived by Issuer
or Merger Sub.
9.1 Representations, Warranties and Covenants. All representations and
warranties of the Company and the Stockholders contained in this Agreement shall
be true and correct in all material respects at and as of the date of this
Agreement and at and as of the Closing Date, except as and to the extent the
facts and conditions upon which such representations and warranties are based
and expressly required or permitted to be changed by the terms hereof. In
addition, the Company and the Stockholders shall have performed and satisfied in
all material respects all material agreements and covenants required hereby to
be performed by them on or prior to the Closing Date.
9.2 Consents. All Permits and waivers necessary to the consummation of
the transactions contemplated hereby, including all required third party
consents (to the extent not waived) shall have been obtained.
9.3 No Proceedings or Litigation. No action by any Person shall have
been instituted or threatened which questions the validity or legality of the
transactions contemplated hereby and which could reasonably be expected to
damage Issuer and Merger Sub materially if the transactions contemplated hereby
are consummated, including, without limitation, any material adverse effect on
the right or ability of Issuer to own the Surviving Corporation or for the
Surviving Corporation to conduct its business. There shall not be any statute,
rule or regulation that makes the Merger illegal or otherwise prohibited.
9.4 Certificates. The Company shall furnish Issuer and Merger Sub with
such certificates of their officers and others to evidence compliance with the
conditions set forth in this Article IX as may be reasonably requested by Issuer
or Merger Sub (including with respect to the adoption of resolutions by its
Board of Directors).
9.5 8-K Report. The Company shall have furnished the Issuer and the
Merger Sub with a draft of a report on Form 8-K which includes pro forma and
audited financial statements all in compliance with applicable rules promulgated
by the Securities and Exchange Commission and shall deliver to the Issuer
20
reasonable assurances that, following the change in control of the Issuer, such
report will be filed in accordance with applicable regulations; and all
information in the Form 8-K report to be filed is true in all material respects
and the Company has not omitted to state any material fact necessary in order to
make the statements made therein, in light of the circumstances in which they
were made, not misleading.
9.6 Opinion of Counsel. The Issuer shall have received an opinion of
counsel, in form and substance satisfactory to the Issuer, from counsel to the
Company as to matters as the Issuer or its counsel may reasonably request.
9.7 Closing of Related Transactions. The Financing and the Closing
Transactions will be consummated in all material respects contemporaneously with
the completion of the Merger as provided for in the PPM.
ARTICLE X
CLOSING
10.1 Date and Time. The closing (the "CLOSING") of the transactions
required to effect the Merger shall occur commencing at 10:00 A.M. on the
Closing Date or at such other time and or such other date as the parties agree.
10.2 Place and Conduct. Representatives of the parties shall convene at
such place in New York, New York as the Company may designate, to exchange the
certificates, opinions, and other documents contemplated by this Agreement in
order to ascertain whether the conditions to the parties' obligations to
consummate the Merger have been satisfied or any right or condition exists that
would permit this Agreement to be terminated. The parties may extend the time
for the performance of any of the obligations or other acts of the parties
pursuant to an instrument in writing signed by all parties.
ARTICLE XI
JURISDICTION
11.1 Jurisdiction. Each of the parties hereto hereby irrevocably
consents and submits to the exclusive jurisdiction of the courts of the State of
New York and the United States District Court for the Southern District of New
York, as well as to the jurisdiction of all courts from which an appeal may be
taken from such courts, and expressly waives any and all objections it may have
as to venue in any of such courts, in connection with any action, suit or other
proceeding, at law or in equity (each, a "PROCEEDING"), either arising out of,
in connection with, or relating to this Agreement or the transactions
contemplated hereby, and agrees that service an any summons, complaint, notice
or other process relating to such Proceeding may be effected in the manner
provided in Section 12.12, addressed to such party at the address to which
notices are to be delivered hereunder.
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ARTICLE XII
MISCELLANEOUS
12.1 Termination. This Agreement may be terminated:
a) By mutual written consent of the parties at any time prior to
the Closing;
b) By Issuer and Merger Sub, at their sole option, if (i) there is
a material breach of any material representation or warranty set forth herein or
of any material covenant or agreement to be complied with or performed by the
Company or the Stockholders pursuant to the terms of this Agreement, (ii) there
is a material failure of a condition set forth in Article IX to be satisfied
(and such condition is not waived in writing by Issuer and Merger Sub) on or
prior to the Closing Date, or (iii) any event occurs or fails to occur which
results or would result in the failure of a condition set forth in Article IX to
be satisfied on or prior to the Closing Date; provided that Issuer and Merger
Sub may not terminate this Agreement pursuant to this clause (b) if the Company
and the Stockholders have not had a adequate notice and opportunity to cure such
a material breach or failure; or
c) By the Company and the Stockholders, at their sole option, if
(i) there is a material breach of any material representation or warranty set
forth herein or of any material covenant or agreement to be complied with or
performed by Issuer or Merger Sub pursuant to the terms of this Agreement, (ii)
there is a failure of a condition set forth in Article VIII to be satisfied (and
such condition is not waived in writing by Company) on or prior to the Closing
Date, or (iii) any event occurs or fails to occur which results or would result
in the failure of a condition set forth in Article VIII to be satisfied on or
prior to the Closing Date; provided that the Company and the Stockholders may
not terminate this Agreement pursuant to this clause (c) if Issuer and Merger
Sub have not had any adequate notice and opportunity to cure such material
breach or failure.
12.2 In the Event of Termination. In the event of termination of this
Agreement as permitted by Section 12.1:
a) Each party will redeliver all documents, work papers and other
material of any other party relating to the transactions contemplated hereby,
whether so obtained before or after the execution hereof, to the party
furnishing the same;
b) No party hereto shall be deemed to have waived any breach of
this Agreement.
12.3 Entire Agreement: Amendments and Waivers. This Agreement, together
with all exhibits and schedules hereto and thereto, constitutes the entire
agreement among the parties pertaining to the subject matter hereof and
supersedes all prior agreements, understandings, negotiations and discussions,
22
whether oral or written, of the parties. No amendment, supplement, modification
or waiver of this Agreement shall be binding unless executed in writing by the
party to be bound thereby. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar), nor shall waiver constitute a continuing waiver unless
otherwise expressly provided.
12.4 Multiple Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.5 Expenses. Issuer and Merger Sub shall pay their own, and the
Company shall pay its own, and the Stockholders', legal, accounting,
out-of-pocket and other expenses incident to this Agreement; provided, however,
that the Issuer shall be permitted to have a negative net worth of no more than
$105,000.
12.6 Employment Agreement. Xxxxx X. Xxxxx, by signing below, hereby
agrees that any and all employment agreements, between him and the Issuer shall
be deemed to be canceled and terminated as of the Closing Date and, upon such
termination, he agrees to waive all of his rights under such agreements. The
Issuer hereby agrees that any and all employment agreements between the Issuer
and Xxxxx X. Xxxxx shall be deemed to be canceled and terminated as of the
Closing Date.
12.7 Invalidity. In the event that any one or more of the provisions
contained in this Agreement shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, then to the maximum extent permitted by
law, such invalidity, illegality or unenforceability shall not affect any other
provision of this Agreement.
12.8 Titles. The titles, captions or headings of the Articles and
Sections herein are inserted for convenience of reference only and are not
intended to be a part of or to affect the meaning or interpretation of this
Agreement.
12.9 Assignment. None of the parties shall have the authority to assign
its or his rights or obligations under this Agreement without the prior written
consent of the other parties.
12.10 Burden and Benefit. This Agreement shall be binding upon and, to
the extent permitted in this Agreement, shall inure to the benefit of, the
parties and their respective successors and permitted assigns.
12.11 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
12.12 Notices. All notices, requests, demands and other communications
which are required or may be given under this Agreement shall be in writing and
shall be deemed to have been duly given when received if personally delivered;
when transmitted if transmitted by telecopy, electronic or digital transmission
method; the day after it is sent, if sent for next day delivery to a domestic
23
address by recognized delivery service (e.g., Federal Express); and upon
receipt, if sent by certified or registered mail, return receipt requested. In
each case notice shall be sent to:
If to the Company or the
Stockholders: Xxxxx Industries Incorporated
000 Xxxx 00xx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx,
Executive Chairman
With a copy to: Xxxxx & Xxx Xxxxxx LLP
0 Xxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx XxXxxx, Esq.
If to Issuer and Merger Sub:
Xxxxxx Development Corporation
0000 Xxxxx Xxxxxxx Xxxxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxx X. Xxxxx
With a copy to: Xxxxxxxxx Xxxxxxx
000 Xxxxx Xxxxxxx Xxxxx, Xxxxx 000 Xxxx
Xxxx Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, Esq.
or to such other persons or addresses as may be designated in writing by the
party to receive such notice.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the date and year first above written.
XXXXX INDUSTRIES INCORPORATED
By:
---------------------------
Name:
Title:
XXXXX INDUSTRIES MERGER SUB, INC.
By: /s/ Xxxxx X. Xxxxx
---------------------------
Name: Xxxxx X. Xxxxx
Title: President
XXXXXX DEVELOPMENT CORPORATION
By: /s/ Xxxxx X. Xxxxx
---------------------------
Name: Xxxxx X. Xxxxx
Title: Chief Executive Officer
-------------------------------
XXXXXXX X. XXXXX
-------------------------------
XXXXX X. XXXXXX
AGREED AS TO SECTION 12.6:
-----------------------------
XXXXX X. XXXXX
25
STATE OF NEW YORK )
ss:
COUNTY OF NEW YORK )
On this ____ day of _____, 2005, before me personally came
_________________, to me known who, being duly sworn, deposes and says that he
is the _________________ of XXXXX INDUSTRIES INCORPRATED, the corporation
described in and which executed the above instrument, and that he signed his
name on behalf of such entity by order of its Board of Directors.
________________________________
Notary Public
STATE OF FLORIDA )
ss:
COUNTY OF __________ )
On this ____ day of _____, 2005, before me personally came
_________________, to me known who, being duly sworn, deposes and says that he
is the _________________ of XXXXX INDUSTRIES MERGER SUB, INC., the corporation
described in and which executed the above instrument, and that he signed his
name on behalf of such entity by order of its Board of Directors.
_________________________________
Notary Public
STATE OF FLORIDA )
ss:
COUNTY OF __________ )
On this ____ day of _____, 2005, before me personally came
_________________, to me known who, being duly sworn, deposes and says that he
is the _________________ of XXXXXX DEVLOPMENT CORPORATION, the corporation
described in and which executed the above instrument, and that he signed his
name on behalf of such entity by order of its Board of Directors.
___________________________________
Notary Public
00
XXXXX XX XXX XXXX )
ss:
COUNTY OF NEW YORK )
On this ___ day of ______, 2005, before me, the undersigned
notary public, personally appeared XXXXXXX X. XXXXX, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person on behalf of whom the individual acted, executed
the instrument.
________________________________
Notary Public
My commission expires on
STATE OF NEW YORK )
ss:
COUNTY OF NEW YORK )
On this ___ day of ______, 2005, before me, the undersigned
notary public, personally appeared XXXXX X. XXXXXX, personally known to me or
proved to me on the basis of satisfactory evidence to be the individual whose
name is subscribed to the within instrument and acknowledged to me that he
executed the same in his capacity, and that by his signature on the instrument,
the individual, or the person on behalf of whom the individual acted, executed
the instrument.
________________________________
Notary Public
My commission expires on
27
SCHEDULA I-A
COMPANY COMMON STOCK OUTSTANDING AS
OF THE DATE OF THE AGREEMENT
Number of Shares of
Company Common Number of Shares of
Stock Owned and to Issuer Common Stock
Name State of Residence be Canceled to be Issued
---------------------------------- -------------------------------------- --------------------- ----------------------
Xxxxxxx X. Xxxxx 4,401,219 4,401,219
New York
Xxxxx X. Xxxxxx New York 3,404,538 3,404,538
Xxxxxxx X. Xxxxxx New York 100,000 100,000
Rounsevelle X. Xxxxxx Rhode Island 100,000 100,000
Xxx X. Xxxx, Xx. Virginia 100,000 100,000
Xxxxxxx X. Xxxxxx New York 100,000 100,000
Xxxxx & Xxx Xxxxxx LLP New York 150,000 150,000
Xxxxxxxxx & XxXxxxx LLP New York 100,000 100,000
Xxxxxx X. Xxxxxxxxx Florida 250,000 250,000
---------------------------------- -------------------------------------- --------------------- ----------------------
TOTAL 8,705,757 8,705,757
SCHEDULE I-B
ADDITIONAL COMPANY COMMON STOCK TO BE OUTSTANDING AS OF THE CLOSING DATE
Name State of Residence Number of Shares of Number of Shares of Issuer
Company Common Stock Owned Common Stock to be Issued
and to be Canceled
----------------------------------- ------------------------ ---------------------------- ----------------------------
Xxxxx Xxxxxxxxxx New York 118,423 118,423
Xxxxx Xxxxxxxxx New York 118,423 118,423
Xxxx Xxxxxxxxx New York 253,214 253,214
Atlas Capital Services, LLC New York 1,450,000 1,450,000
----------------------------------- ------------------------ ---------------------------- ----------------------------
TOTAL 1,940,060 1,940,060
29
SCHEDULE I-C
PREFERRED STOCK AND OPTIONS,WARRANTS OR CONVERTIBLE SECURITIES TO BE OUTSTANDING
Name Per Share Exercise Underlying Number of Underlying Number of
or Conversion Price Shares of Company Common Shares of Issuer Common
Stock Stock
------------------------------------- ---------------------- ---------------------------- ----------------------------
Placement Agent Warrants $0.22 2,954,575 Minimum 2,954,575 Minimum
$0.22 4,090,950 Maximum 4,090,950 Maximum
Company Options $0.22 4,825,000 4,825,000
Bridge Notes $0.22 409,090 409,090
Bridge Warrants $0.22 1,090,909 1,090,909
Convertible Notes Held by AIM $0.40 1,663,154 1,663,154
Shareholders
Series A Convertible Preferred
Stock From Private Offering
(Financing):
650 Shares Minimum $0.22 29,545,750 29,545,750
(At Closing Date):
900 Shares Maximum $0.22 40,909,500 40,909,500
(Subsequent to
Closing Date):
------------------------------------- ---------------------- ---------------------------- ----------------------------
TOTAL 40,488,478 Minimum 40,488,478 Minimum
52,988,603 Maximum 52,988,603 Maximum
