PLAN AND AGREEMENT OF MERGER AND REORGANIZATION
This Plan and Agreement of Merger and Reorganization (this
"Agreement"), dated as of February 27, 2004 is entered into by and among
CONVERSION SERVICES INTERNATIONAL, INC., a Delaware corporation ("CSI"), XXXXXXX
CONVERSION LLC, a Delaware limited liability company and a wholly-owned
subsidiary of CSI ("Merger Sub"), each with an office at 000 Xxxxx Xxxx Xxxxxx,
Xxxx Xxxxxxx, Xxx Xxxxxx 00000, and XXXXXXX ASSOCIATES, INC., a New Jersey
corporation, with an office at 0000 Xxxxx 00 X, Xxxxx 000, Xxxxx, Xxx Xxxxxx
00000 ("XxXxxxx").
RECITALS:
WHEREAS, the Board of Directors of each of CSI and XxXxxxx have
determined that it is in the best interests of CSI and XxXxxxx and their
shareholders to effect a business combination pursuant to which XxXxxxx will
merge with and into Merger Sub on the terms and subject to the conditions set
forth herein (the "Merger");
WHEREAS, the manager of Merger Sub has determined that it is in the
best interests of Merger Sub and its sole member to effect the Merger;
WHEREAS, the Board of Directors of each of CSI and XxXxxxx and the sole
shareholder of XxXxxxx have approved this Agreement and the Merger pursuant to
the terms and conditions herein set forth as of the date hereof;
WHEREAS, the manager of Merger Sub and the sole member of Merger Sub
have approved this Agreement and the Merger pursuant to the terms and conditions
herein set forth as of the date hereof;
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify to the extent possible as a tax-free reorganization within
the meaning of Section 368(a)(1)(A) of the Internal Revenue Code of 1986, as
amended (the "Code");
NOW, THEREFORE, in consideration of the above premises and the mutual
promises set forth in this Agreement, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows.
THE MERGER
Section 1. The Merger. At the Effective Time (as hereinafter defined) and upon
the terms and subject to the conditions of this Agreement and in accordance with
the Delaware Limited Liability Company Act (the "DLLCA") and the New Jersey
Business Corporation Act (the "NJBCA"), XxXxxxx shall be merged with and into
Merger Sub. Following the Merger, Merger Sub shall continue as the surviving
limited liability company (the "Surviving Entity"), and the separate corporate
existence of XxXxxxx shall cease.
Section 2. Effective Time. The parties hereto will file with the Secretary of
State of the State of Delaware and the Department of Treasury of the State of
New Jersey or other governmental agencies as required under applicable law
certificates of merger in such form as required by, and executed in accordance
with, the relevant provisions of the law of each such state. The later of (i)
the effective time of the filing of the certificate of merger with the
Department of Treasury of the State of New Jersey or (ii) the effective time of
the filing of the certificate of merger with the Secretary of State of the State
of Delaware is the "Effective Time."
Section 3. Effects of the Merger. The Merger shall have the effects set forth in
the DLLCA and the NJBCA. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the properties, rights, privileges,
powers and franchises of Merger Sub and XxXxxxx shall vest in the Surviving
Entity, and all debts, liabilities and duties of Merger Sub and XxXxxxx shall
become the debts, liabilities and duties of the Surviving Entity.
Section 4. Certificate of Formation and Operating Agreement. The Certificate of
Formation of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Certificate of Formation of the Surviving Entity until amended in
accordance with applicable law. The Operating Agreement, in substantially the
form of Exhibit A hereto, as in effect immediately prior to the Effective Time,
shall be the Operating Agreement of the Surviving Entity until amended in
accordance with applicable law.
Section 5. Manager and Officers. As of the Effective Time, the manager and
officers of the Surviving Entity shall be comprised of the individuals listed in
Exhibit B hereto who shall hold office in accordance with the Certificate of
Formation and Operating Agreement of the Surviving Entity until their successors
are duly elected or appointed and qualified or until their earlier death,
resignation or removal.
Section 6. Merger Sub Membership Interests and XxXxxxx Securities.
(a) At the Effective Time, all of the shares of Common Stock, par value
$0.01 per share, of XxXxxxx issued and outstanding immediately prior to the
Effective Time ("XxXxxxx Common Stock") shall, by virtue of the Merger and
without any action on the part of XxXxxxx, Merger Sub or CSI, be converted into
and be exchangeable for (i) an aggregate of Eighty Million (80,000,000) newly
issued, fully paid and non-assessable shares of common stock, par value $0.001
per share, of CSI (the "CSI Common Stock"), and (ii) the cash consideration
payable and other shares of CSI Common Stock issuable to Xxxxxx X. XxXxxxx, in
his capacity as sole shareholder of XxXxxxx, pursuant to the terms of that
certain Acquisition Agreement to which CSI, XxXxxxx and Xxxxxx X. XxXxxxx are
parties (the "Acquisition Agreement"), including the Cash Acquisition Price, the
Additional Buyer Shares and the Additional Cash Payment (as such initially
capitalized terms are defined in the Acquisition Agreement) (collectively, the
items described in clauses (i) and (ii) of this Section 6(a) are hereinafter
referred to as the "Conversion Consideration");
(b) At the Effective Time, all membership interests of Merger Sub issued
and outstanding immediately prior to the Effective Time shall, by virtue of the
Merger and without any action on the part of XxXxxxx, Merger Sub or CSI, be
converted into One Hundred Percent (100%) of the membership interests of the
Surviving Entity;
(c) At the Effective Time, all options, warrants, convertible notes and
other rights, entitling the holders thereof to purchase or otherwise acquire any
shares of XxXxxxx capital stock shall be canceled, retired and cease to exist at
and as of the Effective Time.
Section 7. Tax Consequences. It is intended by the parties hereto that the
Merger shall constitute a tax-free reorganization within the meaning of Section
368(a)(1)(A) of the Code. Each party hereto shall use its commercially
reasonable efforts to cause the Merger to be so qualified, shall report the
transactions contemplated by this Agreement in a manner consistent with such
reorganization treatment and will not take any position inconsistent therewith
in any tax return, refund claim, litigation or otherwise unless required to do
so by law. The Merger shall be treated as a purchase for accounting purposes.
Section 8. No Further Ownership Rights in XxXxxxx Common Stock. The Conversion
Consideration issued or paid upon the conversion of XxXxxxx Common Stock in
accordance with the terms of Section 6 above shall be deemed to have been issued
in full satisfaction of all rights pertaining to XxXxxxx Common Stock. At the
Effective Time and subject to and after giving effect to the provisions of
Section 6(a) hereof, each share of XxXxxxx Common Stock owned prior to the
Effective Time shall be canceled and extinguished.
Section 9. Stock Certificates. At or after the Effective Time, certificates
representing XxXxxxx Common Stock presented to the Surviving Entity or CSI for
any reason shall be exchanged for certificates representing CSI Common Stock and
the other Conversion Consideration with respect to XxXxxxx Common Stock formerly
represented thereby.
Section 10. Shareholders' and Members' Approval. This Agreement and the Merger
provided for herein have been submitted for approval to, and approved by, the
sole shareholder of XxXxxxx in the manner prescribed by the provisions of the
NJBCA. This Agreement and the Merger provided for herein have been submitted for
approval to, and approved by, the sole member of Merger Sub in the manner
prescribed by the provisions of the DLLCA.
Section 11. Commercially Reasonable Efforts. Subject to the terms and conditions
of this Agreement, each party will use commercially reasonable efforts to take,
or cause to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws to consummate the Merger
and the other transactions contemplated by this Agreement. Neither CSI, XxXxxxx
nor Merger Sub will take, agree to take or knowingly permit to be taken any
action or do or knowingly permit to be done anything in the conduct of the
business of the companies, or otherwise, which would be contrary to or in breach
of any of the terms or provisions of this Agreement.
Section 12. Termination. This Agreement may be terminated and the Merger and the
other transactions contemplated herein may be abandoned at any time prior to the
Effective Time by mutual consents of XxXxxxx, CSI and Merger Sub.
Section 13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, excluding any choice of law
rules that may direct the application of the laws of another jurisdiction.
Section 14. Counterparts. This Agreement may be executed in counterparts, each
of which shall be an original, but all of which together shall constitute one
and the same agreement.
[signature page follows]
IN WITNESS WHEREOF, the parties hereto caused this Agreement to be
executed on their behalf by their respective officers thereunto duly authorized
all as of the date first above written.
CONVERSION SERVICES INTERNATIONAL, INC.
By: /s/ Xxxxx Xxxxxx
---------------------------------------
Name: Xxxxx Xxxxxx
Title: President
XXXXXXX CONVERSION LLC
By: /s/ Xxxxx Xxxxxx
---------------------------------------
Name: Xxxxx Xxxxxx
Title: Manager
XXXXXXX ASSOCIATES, INC.
By: /s/ Xxxxxx X. XxXxxxx
---------------------------------------
Name: Xxxxxx X. XxXxxxx
Title: President
[SIGNATURE PAGE TO PLAN AND AGREEMENT OF MERGER AND REORGANZIATION]
EXHIBIT A
Form of Operating Agreement of Surviving Entity
LIMITED LIABILITY COMPANY
OPERATING AGREEMENT
OF
XXXXXXX CONVERSION LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
OPERATING AGREEMENT
OF
XXXXXXX CONVERSION LLC
(A DELAWARE LIMITED LIABILITY COMPANY)
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (this "Agreement"),
made as of February 27, 2004, by the party named as the member on Exhibit A
attached hereto and made a part hereof (the "Member").
W I T N E S S E T H:
WHEREAS, the Member desires to enter into this Agreement to provide
for, among other things, (i) the creation and management of a limited liability
company under the Limited Liability Company Act of the State of Delaware (the
"Act"); (ii) the respective rights, obligations and interests of the Member and
to XxXxxxx Conversion LLC (the "Company"), and (iii) certain other matters.
NOW, THEREFORE, in consideration of the mutual covenants herein
expressed, and for other good and valuable consideration, the receipt of which
is hereby acknowledged, it is hereby agreed as follows:
SECTION 1 - NAME AND PERCENTAGE INTEREST
The name of the limited liability company is XxXxxxx Conversion LLC.
The Member represents and warrants that the percentage of such Member
set forth opposite its name under the column "Percentage Interest" in Exhibit A
hereto constitutes all the interests owned by the Member after giving effect to
the transactions contemplated by this Agreement.
SECTION 2 - OFFICE
The address of the principal office of the Company shall be c/o
Conversion Services International, Inc., 000 Xxxxx Xxxx Xxxxxx, Xxxx Xxxxxxx,
Xxx Xxxxxx 00000. The address of the registered agent of the Company in the
State of Delaware is c/o National Registered Agents, Inc. 0 Xxxx Xxxxxxxxxx
Xxxxxx, Xxxxx 0X, Xxxxx, Xxxxxxxx 00000, County of Kent.
SECTION 3 - PURPOSES
The character and purposes for which the Company is formed, in general,
is to do any and all acts and things which may be necessary, incidental or
convenient to carry on the business of the Company as contemplated by this
Agreement.
SECTION 4 - CAPITAL CONTRIBUTIONS
The initial capital contribution is set forth on Exhibit A attached
hereto. If the Board of Managers agrees that additional funds are required to
pay the cost of operating the Company, or for any other purpose consistent with
the purpose of the Company, the Member shall be required to contribute such
additional funds. The Member shall not be entitled to withdraw any part of its
capital contribution.
SECTION 5 - ADMISSION OF ADDITIONAL MEMBERS
Additional Members may be admitted to the Company and will participate
in the profits, losses, distributions and ownership of the assets of the Company
on such terms as are determined by the Member.
SECTION 6 - ALLOCATIONS AND DISTRIBUTIONS
Profits and losses for any fiscal year shall be allocated to the Member
in proportion to its Percentage Interest. Distributions, if any, shall be
allocated to the Member in proportion to its Percentage Interest.
SECTION 7 - MANAGEMENT
7.1 Board of Managers. Management of the Company shall be vested in the
Board of Managers (the "Board of Managers"). The Board of Managers shall consist
of between one (1) and three (3) Managers, and the initial Board of Managers
shall consist of the Member. The Member agrees to take all action to cause Xxxxx
Xxxxxx to be the initial sole and managing Member of the Board of Managers (the
"Manager") and to take all other action and do or cause to be done all other
things as shall be necessary or appropriate to carry out the terms of this
Agreement. The Board of Managers shall, to the fullest extent permitted by law,
be authorized to act on behalf of and to bind the Company.
7.2 Officers. The Member may appoint officers of the Company who, to
the extent provided by the Member, may have and may exercise all the powers and
authority of the Member or Board of Managers in the conduct of the business and
affairs of the Company. The officers of the Company may consist of a Chairman of
the Board, Chief Executive Officer, President, Executive Vice President, Chief
Operating Officer, one or more Vice Presidents, a Treasurer, a Secretary or
other officers or agents as may be elected or appointed by the Member. The
Member may provide rules for the appointment, removal, supervision and
compensation of such officers, the scope of their authority, and any other
matters relevant to the positions. The officers shall act in the name of the
Company and shall supervise its operation, within the scope of their authority,
under the direction and management of the Member. Any action taken by a duly
authorized officer, pursuant to authority granted by the Member in accordance
with this Agreement, shall constitute the act of and serve to bind the Company.
SECTION 8 - TERM OF THE COMPANY
The Company's duration shall be perpetual.
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SECTION 9 - INDEMNIFICATION
The Member and Manager shall not be liable to the Company for any
liability, loss, damage, cost or expense which may arise out of or in connection
with any act or conduct on the part of the Member or Manager without fraud or
willful misconduct. The Company, but not the Member or Manager, shall indemnify
and hold harmless the Member or Manager against all liability, loss, damage,
cost and/or expense, including reasonable legal fees and costs of investigation
in connection with defense or settlement incurred or sustained by it by reason
of any of its acts or omissions or by reason of any threatened or pending claim,
suit, action or proceeding against the Member or Manager, or against the
Company, to which the Member or Manager are or are threatened to be made a
party, arising out of or in connection with the acts or conduct of the Member or
Manager and their management of the business of the Company, unless the Member
or Manager shall be adjudged by a final determination of a court of competent
jurisdiction to have acted in bad faith, with willful misconduct or fraud.
SECTION 10 - LIMITATION ON LIABILITY
Except as otherwise provided by the Act, the debts, obligations and
liabilities of the Company, whether arising in contract, tort or otherwise,
shall be solely the debts, obligations and liabilities of the Company; and the
Member, Manager, officer, employee or agent of the Company shall not be
obligated personally for any such debt, obligation or liability of the Company,
or for any debt, obligation or liability of the Member, Manager, officer,
employee or agent of the Company, by reason of being the Member, or acting as a
Manager, officer, employee or agent of the Company. The Member shall not be
required to loan any funds to the Company. Except as may be expressly provided
otherwise herein, the Member shall not be required to make any contribution to
the Company by reason of any negative balance in its capital account, nor shall
any negative balance in the Member's capital account create any liability on the
part of the Member to any third party.
SECTION 11 - AMENDMENT
This Agreement may only be amended by the Member.
SECTION 12 - MISCELLANEOUS
12.1 Organizational Fees. The Company shall pay all expenses incurred
in the organization of the Company.
12.2 Applicable Law. This Agreement shall be interpreted in accordance
with, and the rights of the parties hereunder shall be determined by, the
substantive laws of the State of Delaware (without regard to its conflicts of
laws provisions).
12.3 Severability. If any provision of this Agreement shall be declared
invalid, cause the Company not to be treated for income tax purposes as either a
disregarded entity or a partnership, then and in any of such events, such
provision(s) shall be deemed to be invalid, and notwithstanding any such
invalidity, the remaining provisions of this Agreement shall remain in full
force and effect as if such invalid provisions(s) had not been a part hereof.
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12.4 Benefit. This Agreement shall be binding upon, and shall inure to
the benefit of, the parties hereto, and to their respective heirs, executors,
administrators and assigns; provided however, that none of the provisions of
this Agreement shall be for the benefit of nor shall they be enforceable by any
creditor of the Company or the Member.
12.5 Partnership. It is the intent of the Member that the Company be
treated as a disregarded entity for all tax purposes. If, however, additional
Members are admitted, the Member intends that, for tax purposes, the Company be
treated as a partnership.
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IN WITNESS WHEREOF, the Member has hereunto set its hands and seals or
caused these presents to be signed and sealed by duly authorized persons as of
the day and year first above written.
MEMBER:
CONVERSION SERVICES INTERNATIONAL, INC.
By:______________________________________
Name: Xxxxx Xxxxxx
Title: President and Chief Executive Officer
[SIGNATURE PAGE TO THE LLC OPERATING AGREEMENT]
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EXHIBIT A
CAPITAL CONTRIBUTION AND PERCENTAGE INTEREST
Initial Capital
Percentage
Member Contribution Interest
1. Conversion Services International, Inc. $100 100%
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EXHIBIT B
The following persons shall be manager of the Surviving Entity as of the
Effective Time:
Xxxxx Xxxxxx
The following persons shall hold the offices of the Surviving Entity set forth
opposite their respective names as of the Effective Time:
Name Office
---- ------
Xxxxx Xxxxxx Sole Manager and Chief Executive Officer
Xxxxxx X. XxXxxxx President
Xxxxx Xxxxxxx Executive Vice President & Chief
Operating Officer
Xxxxxxxx Xxxxxxx Vice President, Chief Financial Officer
Secretary & Treasurer
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