AGREEMENT AND PLAN OF EXCHANGE
This Agreement and Plan of Exchange ("Agreement") is executed on the 28th
day of June, 2000, to be effective as of the Effective Date, by and between
Internet Venture Group, Inc. ("iVG") of 0000 Xxxx Xxx Xxxxxxx Xxxxxxx, Xxxxxxx,
XX, 00000, and Swan Magnetics, Inc., (hereinafter "Swan"), of 0000 Xxxxx Xxxx.,
Xxxxx Xxxxx, XX, 00000, pursuant to the provisions of section 1200 et. seq. of
the California Corporations Code (the "Code").
RECITALS
WHEREAS, iVG is an internet holding and development company organized
to acquire, develop and capitalize e-commerce suitable companies into an iVG
e-commerce network of businesses; and
WHEREAS, Swan has developed certain products and technology for an
ultra high capacity ("UHC") flexible disk drive and possesses cash and other
assets of value and interest to iVG; and
WHEREAS, Swan has recently entered into a settlement agreement with
Mitsumi Electric Co., Ltd. to dismiss a lawsuit filed in the United States
District Court in San Jose, California whereby Swan received certain cash
payments and important rights to the UHC disk drive products and technology; and
WHEREAS, Swan is in discussions with certain parties to transfer the
UHC technology and products as part of a spin off of Swan for future royalty
revenue streams, and
WHEREAS, iVG and Swan desire to complete a tax free reorganization
pursuant to Section 368 of the Internal Revenue Code, in which iVG shall acquire
control of Swan in a share exchange pursuant to Section 1200 ET. SEQ. of the
Code;
NOW THEREFORE, the parties hereby enter into this Agreement for the
acquisition of Swan by iVG through an exchange of stock as of the effective date
described below.
1.0 DEFINITIONS
1.1 ACQUISITION AGREEMENT. Acquisition Agreement shall refer to a
definitive agreement executed by the parties that embodies the
terms and conditions set forth in this Agreement which through
its terms effects the transfer of shares contemplated in the
stock exchange transaction.
1.2 IVG. iVG shall refer to Internet Venture Group, Inc., a Florida
corporation with its principal place of business at 0000 Xxxx Xxx
Xxxxxxx Xxxxxxx, Xxxxxxx, XX, 00000.
1.3 SWAN. Swan shall refer to Swan Magnetics, Inc., a California
corporation dba Swan Magnetics, Swan Instruments, Scotts Valley
Instruments and SVI with its principal place of business at 0000
Xxxxx Xxxx., Xxxxx Xxxxx, XX, 00000.
1.4 CAPITAL STOCK. Capital Stock shall refer to the total issued and
outstanding capital stock of either iVG or Swan and shall be
calculated on a fully diluted basis that shall include all issued
and outstanding options or warrants to purchase the capital stock
of the parties.
1.5 CONVERTIBLE DEBT. Convertible debt shall refer to any debt
instrument or loan obligation of either party which has a right
to convert any portion of the debt principal or interest into the
Capital Sock or into warrants or options to purchase the Capital
Stock of either of the parties.
1.6 CASH. Cash shall refer to any cash or cash equivalent in monies
of the United States of America.
1.7 TRADING PRICE. Trading price shall refer to the price at which
publicly traded stock of iVG is listed on the NASDAQ OTC BB
exchange, or any other automated quotation system or national
exchange on which such stock is listed as of the Pricing Date,
and shall be determined as the average closing bid price (if the
stock is listed on the NASDAQ OTC BB) or the closing sales price
(in any other instance) of the stock for the twenty (20)
consecutive trading days prior to the Pricing Date.
1.8 PRICING DATE. Pricing Date shall refer to the date at which the
price of iVG stock shall be set in determining the twenty day
average trading price of the stock of iVG.
1.9 EFFECTIVE DATE. The date that Articles of Exchange are filed by
the parties with the Secretary of State of the State of Florida
and the California Corporations Commissioner.
2.0 PLAN OF EXCHANGE
The parties agree that their respective Boards of Directors have
approved a Plan of Exchange including the following material terms, and have
authorized such Plan of Exchange to be submitted to their respective
shareholders (if necessary to comply with the law of their respective states of
incorporation):
2.1 PARTIES. The parties to the exchange shall be iVG, Swan and the
shareholders of Swan (to the extent required by the terms of the
Code).
2.2 SHAREHOLDER APPROVAL. Swan shall obtain the approval of the Swan
shareholders pursuant to the provisions of section 1201 of the
Code. The notice of the transaction to be supplied to its
shareholders by Swan shall comply in all respects with the
provisions of the Code. iVG shall obtain the approval of the iVG
shareholders, as required, pursuant to the provisions of the
Florida Business Corporations Act.
2.3 SHARE EXCHANGE. The share exchange shall take place in two steps,
as follows:
a. First, the holders of all classes of Swan preferred stock
shall convert their respective shares to shares of Swan's
Common Stock in accordance with the Certificates of
Designation and other terms and conditions that are
applicable to their classes of preferred stock.
b. Second, iVG shall issue to each Swan shareholder who agrees
to become a party to the exchange such shareholder's pro
rata portion of the Exchange Shares (as defined below).
2.4 NO AMENDMENT OF ARTICLES. No amendment to the Articles of
Incorporation of Swan or iVG shall be required as a result of the
share exchange.
2.5 RESPONSIBILITY TO DISSENTING SHAREHOLDERS. Swan shall be
responsible for tendering the fair market value of any shares of
Swan Capital Stock owned by any Swan shareholders who dissent to
the share exchange transaction pursuant to the provisions of
Section 1300 of the Code.
3.0 DETERMINATION OF EXCHANGE SHARES
The number of shares of iVG Common Stock to be delivered to the Swan
shareholders in exchange for their shares of Swan Common Stock (the "Exchange
Shares") shall be determined by reference to the amount of cash owned by Swan as
of the Pricing Date
3.1 SWAN CASH OF $6 MILLION. If, on the Pricing Date, Swan has Six
Million Dollars ($6,000,000.00) in cash and cash equivalents on
its balance sheet, the total number Exchange Shares shall be
seventeen million, five hundred thousand (17,500,000) shares.
3.2 SWAN CASH OF $2 MILLION. If, on the Pricing Date, Swan has two
Million Dollars ($2,000,000.00) in cash and cash equivalents on
its balance sheet, the total number of Exchange Shares shall be
twelve million, five hundred thousand (12,500,000) shares.
3.3 PROPORTIONATE ADJUSTMENT FOR CASH AMOUNTS. The total number of
Exchange Shares shall be adjusted proportionately for the amount
of cash and cash equivalents on Swan's balance sheet between $2
Million and $6 Million. The total number of iVG shares exchanged
for Swan shares shall not be less than twelve million five
hundred thousand (12,500,000) nor more than seventeen million
five hundred thousand (17,500,000) unless adjusted pursuant to
section 3.4 below.
3.4 PROPORTIONATE ADJUSTMENT FOR IVG CAPITAL STOCK. The total number
of IVG shares to be exchanged is based on iVG's capital structure
as set forth in Exhibit A: iVG Capital Structure, and shall be
adjusted proportionately for any increased dilution in iVG
capital stock from the date of this Agreement until execution of
the Acquisition Agreement.
3.5 CLASS OF IVG STOCK TO BE EXCHANGED. Payment of iVG shares as set
forth in this section shall consist of shares of common stock of
iVG that bears a restriction legend under rule 144 of the
Securities Act of 1933 preventing the sale of the underlying
securities for a period of twelve (12) months from the date of
issue.
4. CONFIDENTIALITY.
iVG and Swan agree that, throughout the term of this Agreement and for two
years thereafter, they shall strictly maintain the confidentiality of (i) all
information that is disclosed to them relating to the non-disclosing party's
business, financial condition, personnel, products, customers, strategic and
business plans; (ii) the terms of this Agreement; and (iii) either party's
proprietary, trade secret information, including, without limitation,
information relating to either party's technology, patents, intellectual
property, and product designs.
5. CONDITIONS TO CLOSING.
The parties agree that the following conditions must be satisfied prior to
the closing of the share exchange transaction:
5.1 The parties shall have executed an Acquisition and Exchange
Agreement satisfactory in form and content to Swan and iVG.
5.2 The parties shall have had the opportunity to perform all due
diligence activities that their respective officers deem
necessary and appropriate.
5.3 All governmental and third party consents necessary to authorize
the execution and delivery of the Acquisition and Exchange
Agreement shall have been obtained.
5.4 Both parties shall be in good standing in the states of their
respective incorporations, and both shall be qualified to do
business in the jurisdictions in which their respective business
operations and assets require them to be so qualified.
5.5 There shall be no default under the terms of this Agreement.
5.6 There shall have been no material detrimental change in the
financial condition or assets of either party as reflected in the
balance sheets of each company attached hereto and marked as
Exhibit B: iVG Balance Sheet March 2000 and Exhibit C: Swan
Magnetics, Inc. Pro Forma Consolidated Balance Sheet June 2000.
6. BINDING NATURE OF AGREEMENT
This Agreement shall remain binding on the parties hereto throughout its
term. During the terms of this Agreement, Swan shall not communicate or
negotiate with any person for the sale of Swan or any of its material assets.
7. TERM, GOVERNING LAW, INTERPRETATION, ARBITRATION, SEVERABILITY, MISC.
The term of this Agreement shall be for six (6) months from the date
written above unless otherwise extended by the mutual written agreement of the
parties. The interpretation and enforcement of this Agreement shall be governed
by the internal laws of the State of Texas. The headings are provided for
convenience only and are not to be used in construing the meaning of any section
of this Agreement. Section 1.0 in its entirety is provided solely for
informational purposes only and does not create any legal duties or obligations
on the parties unless otherwise stated in a separate section of this Agreement.
If a court of competent jurisdiction shall find any section of this Agreement
unenforceable, all other sections shall remain in effect. The parties agree to
submit to binding arbitration in the event a dispute shall arise from this
Agreement. If the parties shall subsequently agree to litigation, the prevailing
party shall be awarded reasonable attorney's fees and costs.
8. FINAL DOCUMENTATION
The terms set forth herein shall be subject to the execution of final
documentation, including full and final execution of the Acquisition Agreement.
EXECUTED, on the date first above written by and between:
IVG BY: SWAN MAGNETICS, INC. BY:
/s/Xxxxxxx Xxxxxxx /s/Xxxx Xxx
------------------------------ ---------------------------
XXXXXXX XXXXXXX, PRESIDENT XXXX XXX, PRESIDENT
EXHIBIT A: IVG CAPITAL STRUCTURE
1. Total number of shares of common stock authorized to be issued: 300,000,000
2. Total number of shares of common stock issued and outstanding: 33,872,347
3. Total number of shares of common stock reserved for issuance upon exercise
of existing stock options (including 10,000,000 reserved for incentive
stock option plan): 19,652,125
EXHIBIT B: IVG CONSOLIDATED BALANCE SHEET MARCH 2000
INTERNET VENTURE GROUP, INC.
(A Development Stage Company)
BALANCE SHEET
(unaudited)
Three Months Ending Year Ending
March 31, 2000 December 31,1999
Current Assets:
Checking/Savings $ (214.18) $ 6,006.00
Accounts Receivable - Net 3,732.86 14,145.00
Inventory 73,905.78 79,588.00
---------- -----------
TOTAL Current Assets 69,958.74 99,739.00
Fixed Assets
Fixed Assets - Net 55,546.80 59,546.00
---------- -----------
TOTAL Fixed Assets 55,546.80 59,546.00
Other Assets
Other Assets - Net 295,973.00 301,972.00
---------- -----------
TOTAL Other Assets 295,973.00 301,972.00
TOTAL Assets $421,477.74 461,257.00
========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable $215,292.16 206,057.00
Other Payables 60,415.13 35,370.00
Notes Payable 346,753.70 329,656.00
---------- -----------
TOTAL Current Liabilities 622,460.99 571,083.00
Long-Term Liabilities
Notes Payable - -
TOTAL Long-Term Liabilities - -
---------- -----------
TOTAL Liabilities 622,460.99 -
Equity
Common Stock 3,030.00 3,030.00
Additional Paid In Capital 1,961,059.00 1,961,059.00
RETAINED EARNINGS - PRIOR (2,073,915.00) (2,073,915.00)
Retained Earnings-Current Year (81,157.25) -
----------- -----------
TOTAL Equity (190,983.25) (109,826.00)
----------- -----------
TOTAL Liabilities and Equity $421,477.74 $461,257.00
=========== ===========
EXHIBIT C: SWAN MAGNETICS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 2000
The following consolidated balance sheet presents the assets, liabilities and
shareholders' equity of Swan Magnetics, Inc. ("Swan") on an unaudited basis. The
information presented as of 12/31/99 and as of 6/30/00 represents Swan's
financial condition as of such dates. The information presented as of 7/30/00
representes the pro forma financial condition of Swan following the completion
of certain transactions that are anticipated to be completed prior to such date
and the occurrence of certain events described in the footnotes hereof.
Pro Forma
12/31/99 06/30/00 07/30/00
-------- -------- --------
ASSETS
Current Assets:
Cash and cash equivalents 1,800 25,001,800 (1) 6,105,800 (2)
Short-term investments - - -
Trade accounts receivable, net - - -
Intercompany receivables - SVI - - -
Inventories, net - - -
Prepaid expenses and other current assets - - -
Employee advances - - -
Total current assets 1,800 25,001,800 6,105,800
Investments - - -
Property and equipment, net - - -
Deposits - - -
Goodwill - - -
Other long-term assets - - -
TOTAL ASSETS 1,800 25,001,800 6,105,800
LIABILITIES
Current Liabilities:
Accounts payable 1,995,148 2,394,178 - (3)
Accrued expenses 1,527,580 1,833,096 - (3)
Judgements 90,773 108,928 - (3)
Current portion of capital lease - - - (3)
Notes Payable 7,128,485 8,554,182 4,054,182 (4)
Accrued interest expenses 1,550,812 1,860,974 -
Legal Fund Payable - 5,400,000 (5) - (5)
Total current liabilities 12,292,798 20,151,358 (6) 4,054,182 (7)
Long-term capital lease obligations 400,000 480,000 - (8)
Bridge Loan 705,000 846,000 - (9)
Other long-term obligations 6,000,000 (10) 6,000,000 (10) - (11)
TOTAL LIABILITIES 19,397,798 27,477,358 4,054,182 (12)
SHAREHOLDERS' EQUITY
Preferred stock 17,851,386 17,851,386 17,851,386
Common stock 2,279,919 2,279,919 2,279,919
Additional paid-in capital 177,137 177,137 177,137
Shareholder notes receivable - - -
Retained earnings (37,692,919) (37,692,919) (37,692,919)
Current year earnings (2,011,521) 14,908,919 19,436,095 (13)
TOTAL SHAREHOLDERS' EQUITY (19,395,998) (2,475,558) 2,051,618 (14)
TOTAL LIABILITIES AND EQUITY 1,800 25,001,800 6,105,800 (14)
FOOTNOTES TO SWAN MAGNETICS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET JUNE 2000
(1) Represents cash settlement paid to Swan pursuant to a settlement and mutual
release agreement entered into between Swan and Mitsumi Electric Co., Ltd.
("Mitsumi").
(2) Represents the anticipated cash balance following payment of current due
and owing liabilities, attorneys fees and long term debt obligations.
(3) Represents the anticipated balance remaining after settlement and payment
of accounts payable, accrued expenses, judgements and capital lease
obligations.
(4) Represents the anticipated balance remaining after settlement and payment
of notes payable to major third party debt holders of Swan, the maturity of
which is anticipated to not be sooner than 36 months but which are listed
herein as current obligations with claim holders.
(5) Represents the anticipated balance remaining after settlement and payment
of debt obligation owed to the Swan Legal Defense Fund which financed the
litigation between Swan and Mitsumi that has been settled as describe in
footnote 1 above.
(6) Represents the total current liablities of Swan that includes obligations
owed to the Swan Legal Defense Fund to repay attorney's fees, costs and
return on investment to investors in the Swan Legal Defense Fund.
(7) Represents the anticipated balance remaining after settlement and payment
of the debt obligation set forth in footnotes 3, 4, 5 and 7 above based on
discussions with claim holders.
(8) Represents the anticipated balance remaining after settlement and payment
of Long term capital lease obligation of Swan.
(9) Represents the anticipated balance remaining after settlement and payment
of certain secured Bridge Loans made to the Company.
(10) Represents legal fees and costs associated with the litigation between Swan
and Mitsumi as described above.
(11) Represents the anticipated balance remaining after settlement and payment
of legal fees and costs associated with the litigation between Swan and
Mitsumi.
(12) Represents the anticipated balance remaining after settlement and payment
of the amonts set forth in footnotes 3, 4, 5, 7, 8, 9 and 11 above.
(13) Represents the anticipated addition of other income as a result of the
anticipated settlement and payment of debt obligations as set forth in the
footnotes set forth above.
(14) Represents the anticipated change in shareholders' equity and liabilities
as a result of the anticipated settlement and payment of debt obligations
as set forth in the footnotes set forth above.
