AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Plan") is made this 31st day
of July, 1997, among Winners Internet Network, Inc., a Nevada corporation
("WIN"); The Davki Agency Ltd., Inc., a Delaware corporation, any and all of
its subsidiaries and fictitious names (hereinafter collectively referred to as
"Davki") and its shareholders (hereinafter "Shareholders").
WIN wishes to acquire all the issued and outstanding stock of Davki for
and in exchange for stock of WIN, in a stock for stock transaction intending
to qualify as a tax-free exchange pursuant to Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended. The parties intend for this Plan
to represent the terms and conditions of such tax-free reorganization, which
Plan the parties hereby adopt.
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, IT IS AGREED:
Section 1
Terms of Exchange
1.1 Number of Shares. Upon the execution hereof, the Shareholders of
Davki agree to assign, transfer, and deliver to WIN, free and clear of all
liens, pledges, encumbrances, charges, restrictions or known claims of any
kind, nature or description, all of their shares of Davki stock, and WIN
agrees to acquire such shares on the date thereof, or as soon as practicable
thereafter, by issuing and delivering in exchange therefore solely common
shares of WIN's stock, par value $0.001, in the aggregate of 8,000,000 shares,
subject to the provisions of this Plan. Subsequent to the date hereof, the
Shareholders shall, upon the surrender of the Davki certificates representing
their respective beneficial and record ownership of all of the issued and
outstanding shares of Davki to WIN, as soon as practicable hereafter, and
further provided an exemption from the registration provisions of Section 5 of
the Securities Act of 1933 is available for the issuance thereof, the
Shareholders shall be entitled to receive a certificate(s) evidencing shares
of the exchanged WIN stock as provided for herein. Upon the consummation of
the transaction contemplated herein, WIN shall be the beneficial and record
owner of all of the issued and outstanding stock of Davki.
1.2 Anti-Dilution. For all relevant purposes of this Plan, the number
of WIN shares to be issued and delivered pursuant to this Plan shall be
appropriately adjusted to take into account any stock split, stock dividend,
reverse stock split, recapitalization, or similar change in WIN common stock,
which may occur between the date of the execution of this Plan and the date of
the delivery of such shares.
1.3 Delivery of Certificates. The Shareholders shall transfer to WIN at
the closing provided for in Section 2 (the "Closing") the shares of common
stock of Davki listed opposite their respective names on Exhibit A hereto (the
"Davki shares") in exchange for shares of the common stock of WIN as outlined
above in Section 1.1 hereof (the "WIN Stock"). All of such shares of
WIN common stock shall be issued at the closing to the Shareholders, in the
numbers shown opposite their respective names in Exhibit "A." The transfer of
Davki shares by the Shareholders shall be effected by the delivery to WIN at
the Closing of certificates representing the transferred shares endorsed in
blank or accompanied by stock powers executed in blank, with all signatures
guaranteed by a national bank and with all necessary transfer taxes and other
revenue stamps affixed and acquired at the Shareholders' expense.
1.4 Further Assurances. Subsequent to the execution hereof, and from
time to time thereafter, the Shareholders shall execute such additional
instruments and take such other action as WIN may request in order to more
effectively sell, transfer and assign clear title and ownership in the Davki
shares to WIN.
Section 2
Closing
2.1 Closing. The Closing contemplated by Section 1.3 shall be held at
the law offices of Xxxxxx X. Xxxxxxx, Esq. on July 31, 1997 or at such other
time or place as may be mutually agreed upon in writing by the parties. The
Closing may also be accomplished by wire, express mail or other courier
service, conference telephone communications or as otherwise agreed by the
respective parties or their duly authorized representatives. In any event,
the closing of the transactions contemplated by this Plan shall be effected as
soon as practicable after all of the conditions contained herein have been
satisfied.
2.2 Closing Events. At the Closing, each of the respective parties
hereto shall execute, acknowledge and deliver (or shall cause to be executed,
acknowledged, and delivered) any agreements, resolutions, rulings, or other
instruments required by this Plan to be so delivered at or prior to Closing,
together with such other items as may be reasonably requested by the parties
hereto and their respective legal counsel in order to effectuate or evidence
the transaction contemplated hereby.
Section 3
Representations, Warranties and Covenants of WIN
WIN represents and warrants to, and covenants with, the Shareholders and
Davki as follows:
3.1 Corporate Status. WIN is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada. WIN has
full corporate power and is duly authorized, qualified, franchised, and
licensed under all applicable laws, regulations, ordinances, and orders of
public authorities to own all of its properties and assets and to carry on its
business on all material respects as it is now being conducted, and there is
no jurisdiction in which the character and location of the assets owned by it,
or the nature of the business transacted by it, requires qualification.
Included in the WIN schedules (defined below) are complete and correct
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copies of its Articles of Incorporation and Bylaws as in effect on the date
hereof. The execution and delivery of this Plan does not, and the
consummation of the transactions contemplated hereby will not, violate any
provision of WIN's Articles of Incorporation or Bylaws. WIN has taken all
action required by law, its Articles of Incorporation, its Bylaws, or
otherwise, to authorize the execution and delivery of this Plan.
3.2 Capitalization. The authorized capital stock of WIN as of the date
hereof consists of 20,000,000 common shares, par value $0.001. The common
shares of WIN issued and outstanding are fully paid, non-assessable shares.
There are no outstanding options, warrants, or calls or any understanding,
agreements, commitments, contracts or promises with respect to the issuance of
WIN's common stock or with regard to any options, warrants or other
contractual rights to acquire any of WIN's authorized but unissued common
shares.
3.3 Financial Statements.
(a) WIN hereby warrants and covenants to Davki that the audited
financial statements for its year ended December 31, 1996 and December 31,
1995, fairly and accurately represent the financial condition of WIN and that
the same will be prepared along with the period ended as of the date of
Closing, for consolidation by an independent public accountant, which shall be
prepared in accordance with generally accepted accounting principles
consistently applied, on or before the expiration of forty-five days from the
date of Closing.
(b) WIN hereby warrants and represents that the audited financial
statements for the periods set forth in subparagraph (a), supra, fairly and
accurately represent the financial condition of WIN as submitted heretofore to
Davki for examination and review.
3.4 Subsidiaries. WIN has no subsidiaries.
3.5 Conduct of Business. WIN has not been engaged in any significant
business operations since its inception. WIN will use its best efforts to
maintain and preserve its business organization, employee relationships and
goodwill intact, and will not, without the prior written consent of Davki,
enter into any material commitments except in the ordinary course of business.
3.6 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of WIN, threatened by or against or
effecting WIN at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
WIN does not have any knowledge of any default on its part with respect to any
judgment, order, writ, injunction, decree, warrant, rule, or regulation of any
court, arbitrator, or governmental agency or instrumentality.
3.7 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, WIN and its present management will (i) give to the
Shareholders and Davki, or their duly authorized representatives, full access,
during normal business hours, to all of its books, records, contracts and
other corporate documents and properties so that the Shareholders and Davki,
or their duly authorized representatives, may inspect them; and (ii) furnish
such
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information concerning the properties and affairs of WIN as the Shareholders
and Davki, or their duly authorized representatives, may reasonably request.
Any such request to inspect WIN's books shall be directed to WIN' counsel,
Xxxxxx X. Xxxxxxx, at the address set forth herein under Section 10.4 Notices.
3.8 Confidentiality. Until the Closing (and thereafter if there is no
Closing), WIN and its representatives will keep confidential any information
which they obtain from the Shareholders or from Davki concerning its
properties, assets and the proposed business operations of Davki. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on July 31, 1997 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto, WIN
will return to Davki all written matter with regard to Davki obtained in
connection with the negotiations or consummation of this Plan.
3.9 Conflict with Other Instruments. The transactions contemplated by
this Plan will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or there
material agreements or instrument to which WIN was or is a party, or to which
any of its assets or operations are subject, and will not conflict with any
provision of the Articles of Incorporation or Bylaws of WIN.
3.10 Corporate Authority. WIN has full corporate power and authority to
enter into this Plan and to carry out its obligations hereunder and will
deliver to the Shareholders and Davki, or their respective representatives, at
the Closing, a certified copy of resolutions of its Board of Directors
authorizing execution of this Plan by its officers and performance thereunder.
3.11 Consent of Shareholders. WIN hereby warrants and represents that
the Shareholders of WIN, being the owners of a majority of the issued and
outstanding stock of the Corporation consented in writing to the authorization
to execute an Agreement and Plan of Reorganization as between WIN and Davki
pursuant to a stock-for-stock transaction in which WIN would acquire all of
the issued and outstanding shares of Davki in exchange for the issuance of a
total of 8,000,000 common shares of WIN.
3.12 Special Covenants and Representations Regarding the Exchanged WIN
Stock. The consummation of this Plan and the transactions herein contemplated
include the issuance of the exchanged WIN shares to the Shareholders, which
constitutes an offer and sale of securities under the Securities Act of 1933,
as amended, and applicable states' securities laws. Such transaction shall be
consummated in reliance on exemptions from the registration and prospectus
requirements of such statutes which depend interlace on the circumstances
under which the Shareholders acquire such securities. In connection with the
reliance upon exemptions from the registration and prospectus delivery
requirements for such transactions, at the Closing, Shareholders shall cause
to be delivered to WIN a Letter(s) of Investment Intent in the form attached
hereto as Exhibit B and incorporated herein by reference.
3.13 Undisclosed or Contingent Liabilities. WIN hereby represents and
warrants that it has no undisclosed or contingent liabilities which have not
been disclosed to Davki.
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3.14 Information. The information concerning WIN set forth in this
Plan, and the WIN schedules attached hereto, are complete and accurate in all
material respects and do not contain, or will not contain, when delivered, any
untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to Davki in connection with this Plan.
3.15 Title and Related Matters. WIN has good and marketable title to
all of its properties, interests in properties, and assets, real and personal,
which are reflected, or will be reflected, in the WIN balance sheets, free and
clear of any and all liens and encumbrances.
3.16 Contracts or Agreements. WIN is not bound by any material
contracts, agreements or obligations which it has not already disclosed to
Davki.
3.17 Governmental Authorizations. WIN has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state securities laws, no
authorization, approval, consent or order of, or registration, declaration, or
filing with, any court or other governmental body is required in connection
with the execution and delivery by WIN of this Plan and the consummation by
Davki of the transactions contemplated hereby.
3.18 Compliance with Laws and Regulations. WIN has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of WIN or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to Davki.
3.19 Approval of Plan. The Board of Directors of WIN has authorized the
execution and delivery of this Plan by WIN and have approved the Plan and the
transactions contemplated hereby. WIN has full power, authority, and legal
right to enter into this Plan and to consummate the transactions contemplated
hereby.
3.20 Investment Intent. WIN is acquiring the Davki shares to be
transferred to it under this Plan for investment and no with a view to the
sale or distribution thereof, and WIN has no commitment or present intention
to liquidate Davki or to sell or otherwise dispose of the Davki shares.
3.21 Unregistered Shares and Access to Information. WIN understands
that the offer and sale of the Davki shares have not been registered with or
reviewed by the Securities and Exchange Commission under the Securities Act of
1933, as amended, or with or by any state securities law administrator, and no
federal, state securities law administrator has reviewed or approved any
disclosure or other material concerning Davki or the Davki shares. WIN has
been provided with and reviewed all information concerning Davki, the Davki
shares as it has considered necessary or appropriate as a prudent and
knowledgeable investor to enable it to make
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an informed investment decision concerning the Davki shares. WIN has made an
investigation as to the merits and risks of its acquisition of the Davki
Shares and has had the opportunity to ask questions of, and has received
satisfactory answers from, the officers and directors of Davki concerning
Davki, the Davki shares and related matters, and has had an opportunity to
obtain additional information necessary to verify the accuracy of such
information and to evaluate the merits and risks of the proposed acquisition
of the Davki shares.
3.22 WIN Schedules. WIN has delivered to Davki the following items
listed below, hereafter referred to as the "WIN Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of WIN on or about the date within the Plan is
executed to certify that the WIN Schedules are true and correct.
(a) Copy of Articles of Incorporation, as amended, and Bylaws;
(b) Financial statements;
(c) Shareholder list;
(d) Resolution of Directors approving Plan;
(e) Officer's Certificate as required under Section 6.2 of the
Plan;
(f) Opinion of counsel as required under Section 6.4 of the Plan;
(g) Certificate of Good Standing;
(h) Consent of Shareholders approving Plan;
Section 4
Representations, Warranties and Covenants of Davki
Davki represents and warrants to, and covenants with, the Shareholders
and WIN as follows:
4.1 Corporate Status. Davki is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
incorporated on June 16, 1997. Davki has full corporate power and is duly
authorized, qualified, franchised, and licensed under all applicable laws,
regulations, ordinances, and orders of public authorities to own all of its
properties and assets and to carry on its business on all material respects as
it is now being conducted, and there is no jurisdiction in which the character
and location of the assets owned by it, or the nature of the business
transacted by it, requires qualification. Included in the Davki schedules
(defined below) are complete and correct copies of its Articles of
Incorporation and Bylaws as in effect on the date hereof. The execution and
delivery of this Plan does not, and the consummation of the transactions
contemplated hereby will not, violate any provision of Davki's
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Articles of Incorporation or Bylaws. Davki has taken all action required by
law, its Articles of Incorporation, its Bylaws, or otherwise, to authorize the
execution and delivery of this Plan.
4.2 Capitalization. The authorized capital stock of Davki as of the
date hereof consists of 1,500 common shares. As of the date hereof all common
shares of Davki issued and outstanding are fully paid, non-assessable shares.
There are no outstanding options, warrants, or calls or any understanding,
agreements, commitments, contracts or promises with respect to the issuance of
Davki's common stock or with regard to any options, warrants or other
contractual rights to acquire any of Davki's authorized but unissued common
shares.
4.3 Subsidiaries. Davki has no subsidiaries.
4.4 Conduct of Business. Davki will use its best efforts to maintain
and preserve its business organization, employee relationships and goodwill
intact, and will not, without the prior written consent of WIN, enter into any
material commitments except in the ordinary course of business.
Davki agrees that Davki will conduct itself in the following manner
pending the Closing:
(a) Certificate of Incorporation and Bylaws. No change will be
made in the Certificate of Incorporation or Bylaws of Davki.
(b) Capitalization, etc. Davki will not make any change in its
authorized or issued shares of any class, declare or pay any dividend or other
distribution, or issue, encumber, purchase or otherwise acquire any of its
shares of any class.
4.6 Options, Warrants and Rights. Although Davki intends to enact and
put into effect various management and employee benefit plans in the near
future, as of the date hereof, Davki has no options, warrants or stock
appreciation rights related to the authorized but unissued Davki common stock.
There are no existing options, warrants, calls, or commitments of any
character relating to the authorized and unissued Davki common stock, except
options, warrants, calls, or commitments, if any, to which Davki is not a
party and by which it is not bound.
4.7 Title to Property. Davki has good and marketable title to all of
its properties and assets, real and personal, proprietary or otherwise, as
will be reflected in the balance sheets of Davki, and the properties and
assets of Davki are subject to no mortgage, pledge, lien or encumbrance,
unless as otherwise disclosed in its financial statements.
4.8 Litigation. There are no material actions, suits, or proceedings,
pending, or, to the best knowledge of Davki, threatened by or against or
effecting Davki at law or in equity, or before any governmental agency or
instrumentality, domestic or foreign, or before any arbitrator of any kind;
Davki does not have any knowledge of any default on its part with respect to
any judgment, order, writ, injunction, decree, warrant, rule, or regulation of
any court, arbitrator, or governmental agency or instrumentality.
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4.9 Books and Records. From the date hereof, and for any reasonable
period subsequent thereto, Davki and its present management will (i) give to
the Shareholders and Davki, or their duly authorized representatives, full
access, during normal business hours, to all of its books, records, contracts
and other corporate documents and properties so that the Shareholders and
Davki, or their duly authorized representatives, may inspect them; and (ii)
furnish such information concerning the properties and affairs of Davki as the
Shareholders and Davki, or their duly authorized representatives, may
reasonably request. Any such request to inspect Davki's books shall be
directed to Davki's representative, at the address set forth herein under
Section 10.4 Notices.
4.10 Confidentiality. Until the Closing (and thereafter if there is no
Closing), Davki and its representatives will keep confidential any information
which they obtain from the Shareholders or from Davki concerning its
properties, assets and the proposed business operations of Davki. If the
terms and conditions of this Plan imposed on the parties hereto are not
consummated on or before 5:00 p.m. MST on July 31, 1997 or otherwise waived or
extended in writing to a date mutually agreeable to the parties hereto, Davki
will return to WIN all written matter with regard to WIN obtained in
connection with the negotiations or consummation of this Plan.
4.11 Investment Intent. The Shareholders represent and covenant that
they are acquiring the unregistered and restricted common shares of WIN to be
delivered to them under this Plan for investment purposes and not with a view
to the subsequent sale or distribution thereof, and as agreed, supra, the
Shareholders, their successors and assigns agree to execute and deliver to WIN
on the date of Closing or no later than the date on which the restricted
shares are issued and delivered to the Shareholders, their assigns, or
designees, an Investment Letter similar in form to that attached hereto as
Exhibit B.
4.12 Unregistered Shares and Access to Information. Davki and the
Shareholders understand that the offer and sale of WIN shares to be exchanged
for the Davki shares have not been registered with or reviewed by the
securities and Exchange Commission under the Securities Act of 1933, as
amended, or with or by any state securities law administrator, and no federal
or state securities law administrator has reviewed or approved any disclosure
or other material facts concerning WIN or WIN stock. Davki and the
Shareholders have been provided with and reviewed all information concerning
WIN and WIN shares, to be exchanged for the Davki shares as they have
considered necessary or appropriate as prudent and knowledgeable investors to
enable them to make informed investment decisions concerning the WIN shares,
to be exchanged for the Davki shares. Davki and the Shareholders have made an
investigation as to the merits and risks of their acquisition of the WIN
shares, to be exchanged for the Davki shares and have had the opportunity to
ask questions of, and have received satisfactory answers from, the officers
and directors of WIN concerning WIN post-split shares to be exchanged for the
Davki shares and related matters, and have had an opportunity to obtain
additional information necessary to verify the accuracy of such information
and to evaluate the merits and risks of the proposed acquisition of the WIN
shares to be exchanged for the Davki shares.
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4.13 Title to Shares. The Shareholders are the beneficial and record
owners, free and clear of any liens and encumbrances, of whatever kind or
nature, of all of the shares of Davki of whatever class or series, which the
Shareholders have contracted to exchange.
4.14 Contracts.
(a) Set forth in the Davki Schedules are copies or descriptions of
all material contracts which written or oral, all agreements, franchises,
licenses, or other commitments to which Davki is a party or by which Davki or
its properties are bound.
(b) Except as may be set forth in the Davki Schedules, Davki is not
a party to any contract, agreement, corporate restriction, or subject to any
judgment, order, writ, injunction, decree, or award, which materially and
adversely effect the business, operations, properties, assets, or conditions
of Davki.
(c) Except as set forth in the Davki Schedules, Davki is not a
party to any material oral or written (i) contract for employment of any
officer which is not terminable on 30 days (or less) notice; (ii) profit
sharing, bonus, deferred compensation, stock option, severance, or any other
retirement plan of arrangement covered by Title IV of the Employee Retirement
Income Security Act, as amended, or otherwise covered; (iii) agreement
providing for the sale, assignment or transfer of any of its rights, assets or
properties, whether tangible or intangible, except sales of its property in
the ordinary course of business with a value of less than $2,000; or (iv)
waiver of any right of any value which in the aggregate is extraordinary or
material concerning the assets or properties scheduled by Davki, except for
adequate value and pursuant to contract. Davki has not entered into any
material transaction which is not listed in the Davki Schedules or reflected
in the Davki financial statements.
4.15 Material Contract Defaults. Davki is not in default in any
material respect under the terms of any contract, agreement, lease or other
commitment which is material to the business, operations, properties or
assets, or condition of Davki, and there is no event of default or event
which, with notice of lapse of time or both, would constitute a default in any
material respect under any such contract, agreement, lease, or other
commitment in respect of which Davki has not taken adequate steps to prevent
such default from occurring, or otherwise compromised, reached a satisfaction
of, or provided for extensions of time in which to perform under any one or
more contract obligations, among others.
4.16 Conflict with Other Instruments. The consummation of the within
transactions will not result in the breach of any term or provision of, or
constitute a default under any indenture, mortgage, deed of trust, or material
agreement or instrument to which Davki was or is a party, or to which any of
its assets or operations are subject, and will not conflict with any provision
of the Articles of Incorporation or Bylaws of Davki.
4.17 Governmental Authorizations. Davki has all licenses, franchises,
permits and other government authorizations that are legally required to
enable it to conduct its business in all material respects as conducted on the
date hereof. Except for compliance with federal and state
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securities laws, no authorization, approval, consent or order of, or
registration, declaration, or filing with, any court or other governmental
body is required in connection with the execution and delivery by Davki of
this Plan and the consummation by Davki of the transactions contemplated
hereby.
4.18 Compliance with Laws and Regulations. Davki has complied with all
applicable statutes and regulations of any federal, state, or other applicable
jurisdiction or agency thereof, except to the extent that noncompliance would
not materially and adversely effect the business, operations, properties,
assets, or condition of Davki or except to the extent that noncompliance would
not result in the occurrence of any material liability, not otherwise
disclosed to WIN.
4.19 Approval of Plan. The Board of Directors of Davki have authorized
the execution and delivery of this Plan by Davki and have approved the Plan
and the transactions contemplated hereby. Davki has full power, authority,
and legal right to enter into this Plan and to consummate the transactions
contemplated hereby.
4.20 Information. The information concerning Davki set forth in this
Plan, and the Davki Schedules attached hereto, are complete and accurate in
all material respects and do not contain, or will not contain, when delivered,
any untrue statement or a material fact or omit to state a material fact the
omission of which would be misleading to WIN in connection with this Plan.
4.21 Davki Schedules. Davki has delivered to WIN the following items
listed below, hereafter referred to as the "Davki Schedules", which is hereby
incorporated by reference and made a part hereof. A certification executed by
a duly authorized officer of Davki on or about the date within the Plan is
executed to certify that the Davki Schedules are true and correct.
(a) Copy of Articles of Incorporation and Bylaws;
(b) Financial Statements
(c) Resolution of Board of Directors approving Plan;
(d) Consent of Shareholders approving Plan;
(e) A list of key employees, including current compensation,
with notation as to job description and whether or not such employee is
subject to written contract, and if subject to a contract or employment
agreement, a copy of the same;
(f) A schedule showing the name and location of each bank or
other institution with which Davki has an account and the names of the
authorized persons to draw thereon or having access thereto;
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(g) A schedule setting forth the shareholders, together with the
number of shares owned beneficially or of record by each (also attached as
Exhibit A);
(h) Officer's Certificate as required by Section 7.2 of the
Plan;
(i) Certificate of Good Standing.
Section 5
Special Covenants
5.1 Davki Information Incorporated in WIN's Reports. Davki represents
and warrants to WIN that all the information furnished under this Plan shall
be true and correct in all material respects and that there is no omission of
any material fact required to make the information stated not misleading.
Davki agrees to indemnify and hold WIN harmless, including each of its
Directors and Officers, a and each person, if any, who controls such party,
under any applicable law from and against any and all losses, claims, damages,
expenses or liabilities to which any of them may become subject under
applicable law, or reimburse them for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such
actions, whether or not resulting in liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are based on
any untrue statement, alleged untrue statement, or omission of a material fact
contained in such information delivered hereunder.
5.2 Special Covenants and Representations Regarding the Exchanged WIN
Stock. The consummation of this Plan and the transactions herein
contemplated, including the issuance of the WIN shares in exchange for all of
the issued and outstanding shares of Davki to the Shareholders constitutes the
offer and sale of securities under the Securities Act and the applicable state
statutes, which depend, inter alia, on the circumstances under which the
Shareholders acquire such securities. WIN intends to rely on the exemption of
the registration provision of Section 5 of the Securities Act as provided for
under Section 4.2 of the Securities Act of 1933, which states "transactions
not involving a public offering", among others. Each Shareholder upon
submission of his Davki shares and the receipt of the WIN post-split shares
exchanged therefor, shall execute and deliver to WIN a letter of investment
invent to indicate, among other representations, that the Shareholder is
exchanging the Davki shares for WIN post-split shares for investment purposes
and not with a view to the subsequent distribution thereof. A proposed
Investment Letter is attached hereto as Exhibit B and incorporated herein by
reference for the general use by the Shareholders, as they may determine.
5.3 Action Prior to Closing. Upon the execution hereof until the
Closing date, and the completion of the consolidated audited financials,
(a) Davki and WIN will (i) perform all of its obligations under
material contracts, leases, insurance policies and/or documents relating to
its assets and business; (ii) use its best efforts to maintain and preserve
its business organization intact, to retain its key employees, and to maintain
its relationship with existing potential customers and clients; and (iii)
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fully comply with and perform in all material respects all duties and
obligations imposed on it by all federal and state laws and all rules,
regulations, and orders imposed by all federal or state governmental
authorities.
(b) Neither Davki nor WIN will (i) make any change in its Articles
of Incorporation or Bylaws except and unless as contemplated pursuant to
Section 3 of this Plan; (ii) enter into or amend any contract, agreement, or
other instrument of the types described in the parties' schedules, except that
a party may enter into or amend any contract or other instrument in the
ordinary course of business involving the sale of goods or services, provided
that such contract does not involve obligations in excess of $5,000.
Section 6
Conditions Precedent to Obligations of
Davki and the Shareholders
All obligations of Davki and the Shareholders under this Plan are subject
to the satisfaction, on or before the Closing date, except as otherwise
provided for herein, or waived or extended in writing by the parties hereto,
of the following conditions:
6.1 Accuracy of Representations. The representations and warranties
made by WIN in this Plan were true when made and shall be true as of the
Closing date (except for changes therein permitted by this Plan) with the same
force and effect as if such representations and warranties were made at and as
of the Closing date; and, WIN shall have performed and complied with by WIN
prior to the Closing, unless waived or extended in writing by the parties
hereto. Davki shall have been furnished with a certificate, signed by a duly
authorized executive officer of WIN and dated the Closing date, to the
foregoing effect.
6.2 Officers' Certificate. Davki and the Shareholders shall have been
furnished with a certificate dated the Closing date and signed by a duly
authorized executive officer of WIN, to the effect that no litigation,
proceeding, investigation, or inquiry is pending, or to the best knowledge of
WIN, threatened, which might result in an action to enjoin or prevent the
consummation of the transactions contemplated by this Plan, or which might
result in any material adverse change in the assets, properties, business, or
operations of WIN.
6.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of WIN, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of WIN, except as
otherwise disclosed to Davki.
6.4 Opinion of Counsel of WIN. WIN shall furnish to Davki and the
Shareholders an opinion dated as of the Closing date and in form and substance
satisfactory to Davki and the Shareholders to the effect that:
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(a) WIN is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Nevada, and with all requisite
corporate power to perform its obligations under this Plan.
(b) The business of WIN, as presently conducted, including, upon
the consummation hereof, the ownership of all of the issued and outstanding
shares of Davki, does not require it to register it to do business as a
foreign corporation on any jurisdiction other than under the jurisdiction of
its Articles of Incorporation or Bylaws and WIN has complied to the best of
its knowledge in all material respects with all the laws, regulations,
licensing requirements and orders applicable to its business activities and
has filed with the proper authorities, including the Department of Commerce,
Division of Corporations, and Secretary of State for the State of Nevada, all
statements and reports required to be filed.
(c) The authorized and outstanding capital stock of WIN as set
forth in Section 3.2 above, and all issued and outstanding shares have been
duly and validly authorized and issued and are fully paid and non-assessable.
(d) There are no material claims, suits or other legal proceedings
pending or threatened against WIN of any court or before or by any
governmental body which might materially effect the business of WIN or the
financial condition of WIN as a whole and no such claims, suits or legal
proceedings are contemplated by governmental authorities against WIN.
(e) To the best knowledge of such counsel, the consummation of the
transactions contemplated by this Plan will not violate or contravene the
provisions of the Certificate of Incorporation or Bylaws of WIN, or any
contract, agreement, indenture, mortgage, or order by which WIN is bound.
(f) This Plan constitutes a legal, valid and binding obligation of
WIN enforceable in accordance with its terms, subject to the effect of any
bankruptcy, insolvency, reorganization, moratorium, or similar law effecting
creditors' rights generally and general principles of equity (regardless of
whether such principles are considered in a proceeding in equity or law).
(g) The execution and delivery of this Plan and the consummation of
the transactions contemplated hereby have been ratified by a majority of the
Shareholders of WIN and have been duly authorized by its Board of Directors.
6.5 Good Standing. Davki shall have received a Certificate of Good
Standing from the State of Nevada, dated within ninety (90) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that WIN is in good standing as a corporation in the State
of Nevada.
6.6 Other Items. Davki and the Shareholders shall have received such
further documents, certifications or instruments relating to the transactions
contemplated hereby as Davki and the Shareholders may reasonably request.
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Section 7
Conditions Precedent to Obligations of WIN
All obligations of WIN under this Plan are subject, at its option, to the
fulfillment, before the Closing, of each of the following conditions:
7.1 Accuracy of Representations. The representations and warranties
made by Davki and the Shareholders under this Plan were true when made and
shall be true as of the Closing date (except for changes therein permitted by
this Plan) with the same force and effect as if such representations and
warranties were made at and as of the Closing date; and, WIN shall have
performed and complied with by Davki prior to the Closing, unless waived or
extended in writing by the parties hereto. WIN shall have been furnished with
a certificate, signed by a duly authorized executive officer of Davki and
dated the Closing date, to the foregoing effect.
7.2 Officers' Certificate. WIN shall have been furnished with a
certificate dated the Closing date and signed by a duly authorized executive
officer of Davki, to the effect that no litigation, proceeding, investigation,
or inquiry is pending, or to the best knowledge of Davki, threatened, which
might result in an action to enjoin or prevent the consummation of the
transactions contemplated by this Plan, or which might result in any material
adverse change in the assets, properties, business, or operations of Davki.
7.3 No Material Adverse Change. Prior to the Closing date, there shall
have not occurred any material adverse change in the final condition, business
or operations of WIN, nor shall any event have occurred which, with lapse of
time or the giving of notice or both, may cause or create any material adverse
change in the financial condition, business or operations of Davki, except as
otherwise disclosed to WIN.
7.4 Good Standing. WIN shall have received a Certificate of Good
Standing from the State of Delaware, dated within ninety (90) days prior to
Closing, but in no event later than ten days subsequent to the execution
hereof certifying that Davki is in good standing as a corporation in the State
of Delaware.
7.5 Dissenters' Rights Waived. The Shareholders of Davki, and each of
them, have agreed and hereby waive any dissenters' rights, if any, under the
laws of the State of Delaware in regards to any objection to this Plan as
outlined herein and otherwise consent to and agree and authorize the execution
and consummation of the within Plan in accordance to the terms and conditions
of this Plan by the management of Davki.
7.6 Other Items. WIN shall have received such further documents,
certifications or instruments relating to the transactions contemplated hereby
as WIN may reasonably request.
7.7 Execution of Investment Letter. The Shareholders shall have
executed and delivered copies of Exhibit B to WIN.
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Section 8
Termination
8.1 Termination by Davki or the Shareholders. This Plan may be
terminated at any time prior to the Closing date by action of Davki or the
Shareholders, if WIN shall fail to comply in any material respect with any of
the covenants or agreements contained in this Plan, or if any of its
representations and warranties contained herein shall be inaccurate in any
material respect.
8.2 Termination by WIN. This Plan may be terminated at any time prior
to the Closing date by action of WIN if Davki shall fail to comply in any
material respect with any of the covenants or agreements contained in this
Plan, or if any of its representations or warranties contained herein shall be
inaccurate in any material respect.
8.3 Termination by Mutual Consent
(a) This Plan may be terminated at any time prior to the Closing
date by mutual consent of WIN, expressed by action of its Board of Directors,
Davki or the Shareholders.
(b) If this Plan is terminated pursuant to Section 8, this Plan
shall be of no further force and effect and no obligation, right or liability
shall arise hereunder. Each party shall bare its own costs in connection
herewith.
Section 9
Shareholders' Representative
The Shareholders hereby irrevocably designate and appoint Xxxxx X.
Xxxxxxx, Xx. as their agent and attorney in fact (the "Shareholders'
Representative") with full power and authority until the Closing to execute,
deliver and receive on their behalf all notices, requests and other
communications hereunder; to fix and alter on their behalf the date, time and
place of the Closing; to waive, amend or modify any provisions of this Plan
and to take such other action on their behalf in connection with this Plan,
the Closing and the transactions contemplated hereby as such agent deems
appropriate; provided, however, that no such waiver, amendment or modification
may be made if it would decrease the number of shares to be issued to the
Shareholders under Section 1 hereof or increase the extent of their obligation
to WIN hereunder, unless agreed in writing by the Shareholders.
Section 10
General Provisions
10.1 Further Assurances. At any time, and from time to time, after the
Closing date, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of the Plan.
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10.2 Payments of Estimated Costs and Fees. WIN and Davki mutually
determine and agree that Davki shall pay the estimated costs and fees incurred
in connection with the execution and consummation of the Plan.
10.3 Press Release and Shareholders' Communications. On the date of
Closing, or as soon thereafter as practicable, Davki and the Shareholders
shall cause to have promptly prepared and disseminated a news release
concerning the execution and consummation of the Plan, such press release and
communication to be released promptly and within the time required by the
laws, rules and regulations as promulgated by the United States Securities and
Exchange Commission, and concomitant therewith to cause to be prepared a full
and complete letter to WIN's shareholders which shall contain information
required by Regulation 240.14f-1 as promulgated under Section 14(f) as
mandated under the Securities and Exchange Act of 1934, as amended.
10.4 Notices. All notices and other communications required or
permitted hereunder shall be sufficiently given if personally delivered, sent
by registered mail, or certified mail, return receipt requested, postage
prepaid, or by facsimile transmission addressed to the following parties
hereto or at such other addresses as follows:
If to WIN: Winners Internet Network, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxx Xxxx Xxxx, Xxxx 00000
With a copy to: Xxxxxx X. Xxxxxxx, Esq.
000 Xxxxx Xxxxx #0000
Xxxx Xxxx Xxxx, Xxxx 00000
If to Davki: The Davki Agency Ltd., Inc.
00 0xx Xxxxxx
Xx. Xxxxxxxxx, Xxxxxxx 00000
If to the Shareholders: Xxxxx X. Xxxxxxx, Xx.
00 Xxxxxxxxx Xxxxxx
Xx. Xxxxxxxxx, Xxxxxxx 00000
or at such other addresses as shall be furnished in writing by any party in
the manner for giving notices hereunder, and any such notice or communication
shall be deemed to have been given as of the date so delivered, mailed, sent
by facsimile transmission, or telegraphed.
10.5 Entire Agreement. This Plan represents the entire agreement
between the parties relating to the subject matter hereof, including any
previous letters of intent, understandings, or agreements between WIN, Davki
and the Shareholders with respect to the subject matter hereof, all of which
are hereby merged into this Plan, which alone fully and completely expresses
the agreement of the parties relating to the subject matter hereof. Excepting
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the foregoing agreement, there are no other courses of dealing,
understandings, agreements, representations, or warranties, written or oral,
except as set forth herein.
10.6 Governing Law. This Plan shall be governed by and construed and
enforced in accordance with the laws of the State of Utah, except to the
extent preempted by federal law, in which event (and to that extent only)
federal law shall govern.
10.7 Tax Treatment. The transaction contemplated by this Plan is
intended to qualify as a "tax-free" reorganization under the provisions of
Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended. Davki
and WIN acknowledge, however, that each are being represented by their own tax
advisors in connection with this transaction, and neither has made any
representations or warranties to the other with respect to treatment of such
transaction or any part or effect thereof under applicable tax laws,
regulations or interpretations; and no attorney's opinion or tax revenue
ruling has been obtained with respect to the tax consequences of the
transactions contemplated by the within Plan.
10.8 Attorney Fees. In the event that any party prevails in any action
or suit to enforce this Plan, or secure relief from any default hereunder or
breach hereof, the nonprevailing party or parties shall reimburse the
prevailing party or parties for all costs, including reasonable attorney fees,
incurred in connection therewith.
10.9 Amendment of Waiver. Every right and remedy provided herein shall
be cumulative with every other right and remedy, whether conferred herein, at
law or in equity, and may be enforced concurrently or separately, and no
waiver by any party of the performance of any obligation by the other shall be
construed as a waiver of the same or any other default then, therefore, or
thereafter occurring or existing. Any time prior to the expiration of thirty
(30) days from the date hereof, this Plan may be amended by a writing signed
by all parties hereto, with respect to any of the terms contained herein, and
any term or condition of this Plan may be waived or the time for performance
thereof may be extended by a writing signed by the party or parties for whose
benefit the provision is intended.
10.10 Counterparts. This Plan may be executed in any number of
counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which together shall constitute one and the same
instruments.
10.11 Headings. The section and subsection headings in this Plan are
inserted for convenience only and shall not effect in any way the meaning or
interpretation of the Plan.
10.12 Parties in Interest. Except as may be otherwise expressly
provided herein, all terms and provisions of this Plan shall be binding upon
and inure to the benefit of the parties hereto and their respective heirs,
beneficiaries, personal and legal representatives, and assigns.
IN WITNESS WHEREOF, the parties have executed this Plan and Agreement of
Reorganization effective the day and year first set forth above.
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WINNERS INTERNET NETWORK, INC.
Attest:
/s/ Xxxx X. Xxxxxx
_____________________ By: _________________________________
Its President
THE DAVKI AGENCY LTD., INC.
Attest:
/s/ Xxxxx X. Xxxxxxx, Xx.
_____________________ By: __________________________________
Its President
SHAREHOLDERS:
Attest:
/s/ Xxxxx X. Xxxxxxx, Xx.
_____________________ By____________________________________
Xxxxx X. Xxxxxxx, Xx.
Attest:
/s/ Xxxxxxxx X. Xxxxx
_____________________ By______________________________________
Xxxxxxxx X. Xxxxx
Attest:
/s/ Xxxxxxx X. Xxxxx
_____________________ By______________________________________
Xxxxxxx X. Xxxxx
Attest:
/s/ Xxxxxx X. Xxxxxx
_____________________ By___________________________________
Xxxxxx X. Xxxxxx
Attest:
/s/ PHI Mutual Ventures, Inc.
_____________________ By______________________________________
PHI Mutual Ventures, Inc.
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Attest:
/s/ Harley Investments, Inc.
_____________________ By________________________________
Harley Investments, Inc.
Attest:
/s/ J.V.O. Consulting, Inc.
_____________________ By__________________________________
J.V.O. Consulting, Inc.
Attest:
/s/ Xxxxxxx Xxx
_____________________ By__________________________________
Xxxxxxx Xxx
Attest:
/s/ Xxxxx Xxx
_____________________ By___________________________________
Xxxxx Xxx
