Exhibit 2.1
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AGREEMENT AND PLAN OF MERGER
AMONG
SZM DISTRIBUTORS, INC.,
A NEVADA CORPORATION,
SZMD ACQUISITION II, INC.,
A DELAWARE CORPORATION
AND
TNX TELEVISION, INC.,
A DELAWARE CORPORATION
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LIST OF SCHEDULES AND EXHIBITS
TO
AGREEMENT AND PLAN OF MERGER
SCHEDULES
Schedule 4.1(a) Company and Acquisition Subsidiaries
Schedule 4.1(b) Company and Acquisition Conflicts
Schedule 4.1(c) Company Capitalization
Schedule 4.1(d) Company Financial Statements
Schedule 4.1(g) Issuance of Company Securities
Schedule 4.1(i) Company Taxes
Schedule 4.1(l) Company and Acquisition Legal Proceedings
Schedule 4.1(m) Company and Acquisition Changes or Events
Schedule 4.2(d) TNX Financial Statements
Schedule 4.2(i) TNX Legal Proceedings
Schedule 4.2(g) TNX Liabilities
Schedule 4.2(m) TNX Compliance with Law
EXHIBITS
Exhibit 6.1(a) Company Certified Resolutions
Exhibit 6.1(a2) Acquisition Certified Resolutions
Exhibit 6.1(b) Opinion of Counsel to the Company and Acquisition
Exhibit 6.1(d) Company Officer's Certificate
Exhibit 6.1(d2) Acquisition Officer's Certificate
Exhibit 6.2(a) TNX Certified Resolutions
Exhibit 6.2(b) Opinion of TNX counsel
Exhibit 6.2(d) TNX Officer's Certificate
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of November
12, 2003, by and between SZM Distributors, Inc., a Nevada corporation (the
"Company"), SZMD Acquisition II, Inc., a Delaware corporation ("Acquisition")
and TNX Television, Inc., a Delaware corporation ("TNX").
RECITALS
WHEREAS, the Company and TNX desire to merge Acquisition with and into
TNX whereby TNX shall be the surviving entity pursuant to the terms and
conditions set forth herein and whereby the transaction shall qualify as a tax
free exchange pursuant to Section 351 of the Internal Revenue Code (the "IRC");
WHEREAS, in furtherance of such combination, the Boards of Directors of
the Company, Acquisition, and TNX have each approved the merger of Acquisition
with and into TNX (the "Merger"), upon the terms and subject to the conditions
set forth herein, in accordance with the applicable provisions of the Delaware
General Corporation Law (the "DGCL"); and
WHEREAS, the shareholder of TNX desire to exchange all of its shares of
the capital stock of TNX (the "TNX Capital Stock") for shares of the capital
stock of the Company (the "Company Capital Stock") as a tax free exchange
pursuant to Section 351 of the IRC.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as hereinafter defined) and
subject to and upon the terms and conditions of this Agreement and the DGCL
Acquisition shall be merged with and into TNX pursuant to the Merger. Following
the Merger, TNX shall continue as the surviving corporation (the "Surviving
Corporation") and the separate corporate existence of Acquisition shall cease.
As part of the Merger and as more fully described in Section 2.1, (i) the
25,136,709 issued and outstanding shares of the TNX Common Stock shall be
exchanged for Company Common Stock at the Exchange Ratio and (ii) each share of
Acquisition's issued and outstanding of common stock, par value $.001 per share
(the "Acquisition Common Stock"), shall be converted into one validly issued,
fully paid and non-assessable share of common stock, $.001, of the Surviving
Corporation (the "Surviving Corporation Common Stock").
1.2 EFFECTIVE TIME. The Merger shall be consummated as promptly as
practicable after satisfaction of all conditions to the Merger set forth herein,
by filing with the Secretary of State of the State of Delaware a certificate of
merger (the "Certificate of Merger"), and all other appropriate documents,
executed in accordance with the relevant provisions of the DGCL. The Merger
shall become effective upon the filing of the Certificate of Merger. The time of
such filing shall be referred to herein as the "Effective Time."
1.3 EFFECTS OF THE MERGER. At the Effective Time, all the rights,
privileges, immunities, powers and franchises of Acquisition and TNX and all
property, real, personal and mixed, and every other interest of, or belonging to
or due to each of Acquisition and TNX shall vest in the Surviving Corporation,
and all debts, liabilities, obligations and duties of Acquisition and TNX, shall
become the debts, liabilities, obligations and duties of the Surviving
Corporation without further act or deed, all in the manner and to the full
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extent provided by the DGCL. Whenever a conveyance, assignment, transfer, deed
or other instrument or act is necessary to vest any property or right in the
Surviving Corporation, the directors and officers of the respective constituent
corporations shall execute, acknowledge and deliver such instruments and perform
such acts, for which purpose the separate existence of the constituent
corporations and the authority of their respective directors and officers shall
continue, notwithstanding the Merger.
1.4 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
TNX, as in effect immediately prior to the Effective Time, shall be the
Certificate of Incorporation of the Surviving Corporation and thereafter may be
amended or repealed in accordance with its terms and applicable law.
1.5 BY-LAWS. At the Effective Time and without any further action on
the part of Acquisition and TNX, the By-laws of TNX shall be the By-laws of the
Surviving Corporation and thereafter may be amended or repealed in accordance
with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
1.6 DIRECTORS. The directors of TNX at the Effective Time shall be the
directors of the Surviving Corporation, until the earlier of their resignation
or removal or until their respective successors are duly elected and qualified,
as the case may be.
1.7 OFFICERS. The officers of TNX at the Effective Time shall be the
officers of the Surviving Corporation, until the earlier of their resignation or
removal or until their respective successors are duly appointed and qualified,
as the case may be.
1.8 TAX-FREE REORGANIZATION. The parties intend that the Merger shall
be treated as a tax-free exchange pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"). No party shall take any action or
fail to take any action that would adversely affect the treatment of the Merger
as a tax-free exchange.
ARTICLE II
CONVERSION OF TNX SHARES
2.1 EXCHANGE AND CANCELLATION OF TNX COMMON STOCK.
(a) Subject to the provisions of Sections 2.2 and 2.3, each
share of TNX Common Stock (the "TNX Common Stock Shares") issued and outstanding
immediately prior to the Effective Time (other than shares canceled in
accordance with Section 2.1(b), shall, be converted equal into one (the
"Exchange Ratio") validly issued, fully paid and nonassessable shares of Company
Common Stock (the "Company Common Stock Shares"). As of the Effective Time, each
TNX Common Stock Share shall no longer be outstanding and shall automatically be
canceled and retired, and each holder of a certificate representing any TNX
Common Stock Share shall cease to have any rights with respect thereto other
than the right to receive Company Common Stock Shares to be issued in
consideration therefor upon the surrender of such certificate.
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(b) Each share of TNX Capital Stock held in the treasury of
TNX and each share of TNX Capital Stock owned by Acquisition or Company shall be
canceled without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Each issued and outstanding share of Acquisition Common
Stock shall be converted into one validly issued, fully paid and nonassessable
share of Surviving Corporation Common Stock.
2.2 ADJUSTMENT OF THE EXCHANGE RATIO. In the event that, prior to the
Effective Time, any stock split, combination, reclassification or stock dividend
with respect to the Company Common Stock, any change or conversion of Company
Common Stock into other securities or any other dividend or distribution with
respect to the Company Common Stock (other than regular quarterly dividends)
should occur or, if a record date with respect to any of the foregoing should
occur, appropriate and proportionate adjustments shall be made to the Exchange
Ratio, and thereafter all references to an Exchange Ratio shall be deemed to be
to such Exchange Ratio as so adjusted.
2.3 NO FRACTIONAL SHARES. No certificates or script representing
fractional shares of Company Common Stock shall be issued upon the surrender for
exchange of certificates and such fractional share shall not entitle the record
or beneficial owner thereof to vote or to any other rights as a stockholder of
the Company. The number of shares of Company Common Stock to be issued shall be
rounded up to the nearest whole share.
2.4 FURTHER ASSURANCES. If at any time after the Effective Time the
Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments or assurances or any other acts or things are necessary,
desirable or proper (a) to vest, perfect or confirm, of record or otherwise, in
the Surviving Corporation, its right, title or interest in, to or under any of
the rights, privileges, powers, franchises, properties or assets of either TNX
or Acquisition or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Corporation and its proper officers and directors or their designees
shall be authorized to execute and deliver, in the name and on behalf of either
TNX or Acquisition, all such deeds, bills of sale, assignments and assurances
and do, in the name and on behalf of TNX or Acquisition, all such other acts and
things necessary, desirable or proper to vest, perfect or confirm its right,
title or interest in, to or under any of the rights, privileges, powers,
franchises, properties or assets of TNX or Acquisition, as applicable, and
otherwise to carry out the purposes of this Agreement.
ARTICLE III
CLOSING
Subject to satisfaction of the conditions to closing set forth in this
Agreement and unless this Agreement is otherwise terminated in accordance with
the provisions contained herein, the closing of the Merger and the Contemplated
Transactions (the "Closing") shall take place at the offices of Gottbetter &
Partners, LLP, 000 Xxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx as promptly as practicable
after satisfaction of the conditions set forth in this Agreement, which in no
event shall be more than ten days from the date of (the "Closing Date").
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND ACQUISITION. Each
of Acquisition and the Company hereby make the following representations and
warranties to TNX, all of which shall survive the Closing:
(a) ORGANIZATION AND GOOD STANDING. Acquisition is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, with full corporate power and authority to conduct its business as it
is now being conducted, to own or use the properties and assets that it owns or
uses, and to perform all its obligations under this Agreement and the Applicable
Contracts. The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it owns or uses, and to perform all its
obligations under this Agreement. Company has no subsidiaries other than
Acquisition and as set forth on Schedule 4.1(a) hereto (individually, a
"SUBSIDIARY" and collectively, the "SUBSIDIARIES"). Acquisition has no
Subsidiaries. Each of the Subsidiaries is a corporation, duly incorporated,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation, with the full corporate power and authority to own and use its
properties and assets and to carry on its business as currently conducted. Each
of the Company and Acquisition is duly qualified to do business and is in good
standing as a foreign corporation in each jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) AUTHORITY; NO CONFLICT.
i. This Agreement and any agreement executed in connection
herewith constitute the legal, valid and binding obligations of the Company and
Acquisition, enforceable against the Company and Acquisition in accordance with
their respective terms, except as such enforceability is limited by bankruptcy,
insolvency and other laws affecting the rights of creditors and by general
equitable principles. The Company has the absolute and unrestricted right,
power, authority and capacity to execute and deliver this Agreement and any
agreement executed in connection herewith and to perform its obligations
hereunder and thereunder.
ii. Except as set forth in Schedule 4.1(b) hereto, neither the
execution and delivery of this Agreement by each of the Company and Acquisition,
nor the consummation or performance by each of any of its respective obligations
contained in this Agreement or in connection with the Contemplated Transactions
will directly or indirectly (with or without notice or lapse of time):
a. contravene, conflict with or result in a violation
of (x) any provision of the Organizational Documents of the Company or
Acquisition, as the case may be, or (y) any resolution adopted by the board of
directors or the shareholders of the Company or Acquisition, as the case may be;
b. contravene, conflict with or result in a violation
of, or give any governmental body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or Acquisition or
any of the assets owned or used by the Company or Acquisition may be subject;
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c. contravene, conflict with or result in a violation
or breach of any provision of, or give any Person the right to declare a default
or exercise any remedy under, or to accelerate the maturity or performance of,
or to cancel, terminate or modify, this Agreement, or any Applicable Contract;
d. result in the imposition or creation of any
material encumbrance upon or with respect to any of the material assets owned or
used by the Company or Acquisition;
e. cause the Company or Acquisition to become subject
to, or to become liable for the payment of, any tax; or
f. cause any of the assets owned by the Company or
Acquisition to be reassessed or revalued by any taxing authority or other
governmental body, except in connection with the transfer of real estate
pursuant to this Agreement or the Contemplated Transactions.
(c) CAPITALIZATION. The entire authorized Company Capital Stock
consists of 50,000,000 shares of Company Common Stock, of which 10,000,000
shares are issued and outstanding and 5,000,000 shares of preferred stock, par
value $.001 per share, of which no shares are issued and outstanding. There are
no other outstanding equity securities of the Company. No legend or other
reference to any purported encumbrance appears upon any certificate representing
the Company Capital Stock other than a standard Securities Act legend. All of
the issued and outstanding shares of the Company Capital Stock have been duly
authorized and validly issued and are fully paid and non-assessable. Except for
this Agreement and as disclosed in Schedule 4.1(c) hereto, there are no
outstanding options, warrants, script, rights to subscribe to, registration
rights, calls or commitments of any character whatsoever relating to, or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of the
Company Common Stock, or contracts, commitments, understandings, or arrangements
by which the Company or any Subsidiary is or may become bound to issue
additional shares of the Company Common Stock, or securities or rights
convertible or exchangeable into shares of the Company Common Stock. None of the
outstanding Company Capital Stock was issued in violation of the Securities Act
or any other legal requirement.
(d) FINANCIAL STATEMENTS. The Company has delivered to TNX a balance
sheet of the Company as at June 30, 2003 (the "Company Balance Sheet"), and a
statement of operations for the period from inception to June 30, 2003. Such
financial statements are set forth in Schedule 4.1(d) hereto and fairly present
the financial condition and the results of the operations of the Company as at
June 30, 2003 of and for the period then ended.
(e) SEC FILINGS. The Company has filed all reports required to be filed
with the SEC under the rules and regulations of the SEC.
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(f) ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the Company
Balance Sheet, there have been no events, changes or occurrences which have had
or are reasonably likely to have, individually or in the aggregate, a material
adverse effect on the Company's business or financial condition.
(g) ISSUANCE OF COMPANY SECURITIES. The Company Common Stock Shares
when issued in accordance with this Agreement shall be duly authorized, validly
issued, fully-paid and nonassessable. Except as set forth in Schedule 4.1(g)
hereto, there is no equity line of credit or convertible security or instrument
outstanding of the Company; PROVIDED, HOWEVER, that nothing contained in this
Section 4.1(g) shall be deemed to permit any equity line of credit or
convertible security or instrument of the Company.
(h) UNDISCLOSED LIABILITIES. Except as disclosed in any Schedule to
this Agreement, none of the Company, Acquisition or the Subsidiaries has any
obligations or liabilities (contingent or otherwise) in an amount in excess of
Fifty Thousand Dollars ($50,000) in the aggregate.
(i) TAXES.
i. The Company has filed or caused to be filed on a timely
basis all tax returns that are or were required to be filed by it pursuant to
applicable Legal Requirements. The Company has paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by the Company,
except such taxes, if any, as are listed in Schedule 4.1(i) hereto and are being
contested in good faith as to which adequate reserves have been provided in the
Company Balance Sheet.
ii. All tax returns filed by the Company are true, correct and
complete in all material respects.
(j) EMPLOYEE BENEFITS. The Company does not sponsor or otherwise
maintain a "pension plan" within the meaning of Section 3(2) of ERISA or any
other retirement plan other than the Company Profit Sharing and 401(k) Plan and
Trust that is intended to qualify under Section 401 of the Code, nor do any
unfunded liabilities exist with respect to any employee benefit plan, past or
present. No employee benefit plan, any trust created thereunder or any trustee
or administrator thereof has engaged in a "prohibited transaction," as defined
in Section 4975 of the Code, which may have a material adverse effect on the
condition, financial or otherwise, of the Company.
(k) GOVERNMENTAL AUTHORIZATIONS. The Company, Acquisition and the
Subsidiaries have all permits that are or will be legally required to enable
them to conduct their business in all material respects as now conducted.
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(l) LEGAL PROCEEDINGS; ORDERS.
i. Except as set forth in Schedule 4.1(l) hereto, there is no
material pending Proceeding:
a. that has been commenced by or against the Company,
Acquisition or the Subsidiaries, or any of the assets owned or used by, the
Company, Acquisition or the Subsidiaries; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transactions.
ii. Except as set forth in Schedule 4.1(l) hereto:
a. there is no material Order to which the
Company or the Subsidiaries, or any of the assets
owned or used by the Company, Acquisition or the Subsidiaries, is subject; and
b. no officer, director, agent, or employee
of the Company or Acquisition is subject to any material Order that prohibits
such offer, director, agent or employee from engaging in or continuing any
conduct, activity or practice relating to the business of the Company or
Acquisition, as the case may be.
(m) ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 4.1(m) hereto, since the date of the Company Balance Sheet, the Company
and the Subsidiaries and Acquisition, since the date of its inception, have
conducted their business only in the Ordinary Course of Business, there has not
been any material adverse effect on the Company's, Acquisition's or the
Subsidiaries' business or operations, and there has not been any:
i. change in the authorized or issued Company Capital Stock or
the authorized or issued capital stock of Acquisition and the Subsidiaries;
grant of any stock option or right to purchase shares of capital stock of the
Company; issuance of any equity lines of credit, security convertible into such
capital stock; grant of any registration rights; purchase, redemption,
retirement, or other acquisition or payment of any dividend or other
distribution or payment in respect of shares of capital stock;
ii. amendment to the Organizational Documents of the Company,
Acquisition or the Subsidiaries;
iii. damage to or destruction or loss of any material asset or
property of the Company, Acquisition or the Subsidiaries, whether or not covered
by insurance, materially and adversely affecting the properties, assets,
business, financial condition, or prospects of the Company, Acquisition or the
Subsidiaries;
iv. receipt of notice that any of their substantial customers
have terminated or intends to terminate their relationship, which termination
would have a material adverse effect on their financial condition, results or
operations, business assets or properties;
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v. entry into any transaction other than in the Ordinary
Course of Business;
vi. entry into, termination of, or receipt of written notice
of termination of any material (i) license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) contract or
transaction;
vii. sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of the
Company, Acquisition or the Subsidiaries or mortgage, pledge, or imposition of
any lien or other encumbrance on any material asset or property of the Company,
Acquisition or the Subsidiaries;
viii. cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
ix. material change in the accounting methods used by the
Company, Acquisition or the Subsidiaries; or
x. agreement, whether oral or written, by the Company,
Acquisition or the Subsidiaries to do any of the foregoing.
(n) NO DEFAULT OR VIOLATION. The Company, Acquisition and the
Subsidiaries (i) are in material compliance with all applicable terms and
requirements of each material contract under which they have or had any
obligation or liability or by which they or any of the assets owned or used by
them is or was bound and (ii) is not in material violation of any Legal
Requirement.
(o) CERTAIN PAYMENTS. Since the date of the Company Balance Sheet,
neither the Company, Acquisition or the Subsidiaries, nor any director, officer,
agent or employee of the Company or the Subsidiaries has directly or indirectly
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback or other payment to any Person, private or public, regardless of form,
whether in money, property or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company, Acquisition or the Subsidiaries or (iv) in
violation of any Legal Requirement, or (b) established or maintained any fund or
asset that has not been recorded in the books and records of the Company,
Acquisition or the Subsidiaries.
(p) BROKERS OR FINDERS. Except for the fees referenced in the Advisory
Agreement, the Company and Acquisition have not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
4.2 REPRESENTATIONS AND WARRANTIES OF TNX. TNX hereby makes the
following representations and warranties to the Company, all of which shall
survive the Closing:
(a) ORGANIZATION AND GOOD STANDING. TNX is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware with full power and authority to conduct its businesses as it is now
being conducted, to own or use the properties and assets that it owns or uses,
and to perform all of its obligations under this Agreement. TNCI UK Ltd., a
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corporation registered under the laws of England and Wales and a wholly owned
subsidiary of TNX ("TNCI"), is a corporation duly incorporated and validly
existing under the laws of the country of England, with full corporate power and
authority to conduct its business as it is now being conducted and to own or use
the properties and assets that it owns or uses. TNX has no other Subsidiaries
other than TNX Limited, a corporation registered under the laws of England and
Wales (which is a wholly-owned dormant subsidiary of TNCI) and TNCI. The entire
issued share capital in TNCI is beneficially owned by TNX and, subject to UK
stamp duty being paid on the transfers of the shares in TNCI to TNX, TNX is
entitled, without requiring the consent of any other person, to be registered in
the statutory books of TNCI as the holder of all of TNCI's issued shares. Each
of the Company and TNCI is duly qualified to do business and is in good standing
as a foreign corporation in each jurisdiction in which either the ownership or
use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification.
(b) AUTHORITY; NO CONFLICT.
i. This Agreement and any agreement executed in connection
herewith have been duly authorized by all required action of TNX and constitute
the legal, valid and binding obligations of TNX, enforceable against TNX in
accordance with their respective terms. TNX has the absolute and unrestricted
right, power and authority to execute and deliver this Agreement and such other
agreements and to perform its obligations hereunder and thereunder.
ii Neither the execution and delivery of this Agreement by
TNX, nor the consummation or performance by TNX or TNCI of any of TNX's
obligations contained in this Agreement or in connection with the Contemplated
Transactions by the Company will, directly or indirectly (with or without notice
or lapse of time):
a. contravene, conflict with or result in a violation of (x)
any provision of the Organizational Documents of TNX or TNCI or (y) any
resolution adopted by the board of directors or the shareholders of TNX or TNCI;
b. contravene, conflict with or result in a violation of, or
give any governmental body or other Person the right to challenge any of the
Contemplated Transactions or to exercise any remedy or obtain any relief under,
any Legal Requirement or any Order to which TNX or TNCI or any of the assets
owned or used by TNX or TNCI may be subject;
c. contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, this Agreement or any Applicable Contract;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the material assets owned or used by
TNX or TNCI;
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e. cause TNX or TNCI to become subject to, or to become liable
for the payment of, any tax; or
f. cause any of the assets owned by TNX or TNCI to be
reassessed or revalued by any taxing authority or other governmental body,
except in connection with the transfer of real estate pursuant to this Agreement
or the Contemplated Transactions.
iii. neither TNX nor TNCI is required to obtain any consent
from any Person in connection with the execution and delivery of this Agreement
or the consummation or performance of any of the Contemplated Transactions.
(c) CAPITALIZATION. The entire authorized TNX Capital Stock consists of
80,000,000 shares of TNX Common Stock, of which 25,136,709 shares are issued and
outstanding and 30,000,000 shares of preferred stock of which no shares are
outstanding. With the exception of the TNX Common Stock Shares, there are no
other outstanding equity securities of the Company. No legend or other reference
to any purported encumbrance appears upon any certificate representing the TNX
Common Stock Shares. The TNX Common Stock Shares have been duly authorized and
validly issued and are fully paid and non-assessable. Except as disclosed in
schedule 4.2(c), there are no outstanding options, warrants, script, rights to
subscribe to, registration rights, calls or commitments of any character
whatsoever relating to, or, securities, rights or obligations convertible into
or exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of TNX Common Stock, or contracts, commitments, understandings, or
arrangements by which TNX, TNCI or any subsidiaries is or may become bound to
issue additional shares of TNX Common Stock, or securities or rights convertible
or exchangeable into shares of TNX Common Stock. None of the outstanding TNX
Common Stock Shares or ordinary shares of TNCI par value of (pound)0.0002 (TNCI
Common Stock) were issued in violation of the Securities Act or any other legal
requirement. Neither TNX nor TNCI owns, and both have no contracts to acquire,
any equity securities or other securities of any Person or any direct or
indirect equity or ownership interest in any other business.
(d) FINANCIAL STATEMENTS. TNX has delivered to the Company a balance
sheet of TNCI as at June 30, 2003 (the "TNCI Balance Sheet"), and a statement of
operations for the period from June 1, 1999 to June 30, 2003. Such financial
statements are set forth in Schedule 4.2(d) hereto and fairly present the
financial condition and the results of operations of TNCI as at June 30, 2003 of
and for the period then ended.
(e) ABSENCE OF MATERIAL ADVERSE CHANGE. Since the date of the most
recent TNCI Balance Sheet provided under Section 4.2(d) hereof, except as set
forth in Schedule 4.1(e) hereto, there have been no events, changes or
occurrences which have had or are reasonably likely to have, individually or in
the aggregate, a material adverse effect on TNX or TNCI.
(f) BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of TNX and TNCI, all of which have been made available
to the Company, are complete and correct and have been maintained in accordance
with sound business practices, including the maintenance of an adequate system
of internal controls. The minute books of each of TNX and TNCI contain accurate
and complete records of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors, and any committees of the Board of
Directors of each of TNX and TNCI.
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(g) NO UNDISCLOSED LIABILITIES. There are no material liabilities of
either TNX or TNCI, whether absolute, accrued, contingent, or otherwise, other
than:
i. Liabilities set forth on, reserved against or reflected in
the TNCI Balance Sheet;
ii. Liabilities disclosed in this Agreement, the Exhibits
attached hereto, and in Schedule 4.2(g) or lists furnished pursuant hereto; or
iii. Liabilities incurred in the Ordinary Course of Business
since the TNCI Balance Sheet date, none of which had or is likely to have a
material adverse effect on the business, financial condition or results of
operations of either TNX or TNCI, and none of which is required to be recorded
under GAAP in respect of any period prior to the TNCI Balance Sheet date, and
none of which is in respect of a material claim for damages, fines or other
legal relief.
(h) TITLE TO PROPERTIES; ENCUMBRANCES. Each of TNX and TNCI has good
and marketable title to all the properties, interest in such properties and
assets, real and personal, reflected in the TNCI Balance Sheet or acquired after
the date of such balance sheet (except properties, interests and assets sold or
otherwise disposed of since such date, in the Ordinary Course of Business), free
and clear of all mortgages, liens, pledges, charges or encumbrances except (i)
mortgages and other encumbrances referred to in such balance sheet, (ii) liens
for current taxes not yet due and payable and (iii) such imperfections of title
and easements as do not materially detract from or interfere with the present
use of the properties subject thereto or affected thereby, or otherwise
materially impair the value of such properties or the present business
operations at such properties.
(i) LEGAL PROCEEDINGS; ORDERS.
i. Except as set forth in Schedule 4.2(i) hereto, there is no
material pending Proceeding:
a. that has been commenced or threatened by or
against TNX or TNCI or any of its officers and directors as such or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, TNX or TNCI; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transactions.
ii. Except as set forth in Schedule 4.2(i) hereto:
a. there is no material Order to which TNX or TNCI,
or any of the assets owned or used by TNX or TNCI, is subject; and
b. no officer, director, agent, or employee of TNX or
TNCI is subject to any material Order that prohibits such officer, director,
agent or employee from engaging in or continuing any conduct, activity or
practice relating to the business of TNX or TNCI.
16
(j) BROKERS OR FINDERS. Neither TNX nor TNCI have incurred liability,
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
(k) NO DEFAULT OR VIOLATION. TNX and TNCI (i) are in material
compliance with all applicable terms and requirements of each contract under
which TNX and TNCI, respectively, has or had any obligation or liability or by
which TNX and TNCI, respectively, or any of the assets owned or used by TNX and
TNCI, respectively, are or were bound and (ii) are not in violation of any Legal
Requirement.
(l) TAXES.
i. TNX and TNCI have filed or caused to be filed on a timely
basis all tax returns that are or were required to be filed by it pursuant to
applicable Legal Requirements. TNX and TNCI have paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by TNX or TNCI,
except such taxes, if any, as are listed in Schedule 4.2(l) hereto and are being
contested in good faith as to which adequate reserves have been provided in the
TNCI Balance Sheets.
ii. All tax returns filed by TNX and TNCI are true, correct
and complete in all material respects.
(m) ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Schedule 4.2(m) hereto, since the date of the TNCI Balance Sheet, TNX and TNCI
have conducted their business only in the Ordinary Course of Business, there has
not been any material adverse effect on either TNX's or TNCI's business or
operations, and there has not been any:
i. change in the authorized or issued capital stock of TNX;
grant of any stock option or right to purchase shares of capital stock of TNX or
TNCI; issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition or
payment of any dividend or other distribution or payment in respect of shares of
capital stock;
ii. amendment to the Organizational Documents of TNX or TNCI;
iii. damage to or destruction or loss of any asset or property
of TNX or TNCI, whether or not covered by insurance or any other event or
circumstance, materially and adversely affecting the properties, assets,
business, financial condition, or prospects of TNX or TNCI;
iv. receipt of notice that any of its substantial customers
have terminated or intends to terminate their relationship, which termination
would have a material adverse effect on its financial condition, results or
operations, business assets or properties;
v. entry into any transaction other than in the Ordinary
Course of Business;
17
vi. entry into, termination of, or receipt of written notice
of termination of any material (i) license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) contract or
transaction;
vii. sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of
either TNX or TNCI or mortgage, pledge, or imposition of any lien or other
encumbrance on any material asset or property of either TNX or TNCI;
viii. cancellation or waiver of any claims or rights with a
value to TNX or TNCI in excess of $10,000;
ix. material change in the accounting methods used by TNX or
TNCI;
x. increase in salaries or bonuses or retention of any new
consultant, or executive; or
xi. agreement, whether oral or written, by TNX or TNCI to do
any of the foregoing.
(n) COMPLIANCE WITH LAW. Except as set forth in Schedule 4.2(n) hereto:
(a) Each of TNX and TNCI has complied in all material respects with,
and is not in violation of, in any material respect, any Law to which it or its
business is subject; and
(b) Each of TNX and TNCI has obtained all licenses, permits,
certificates or other governmental authorizations (collectively
"Authorizations") necessary for the ownership or use of its assets and
properties or the conduct of its business other than Authorizations (i) which
are ministerial in nature and which neither TNX nor TNCI, as the case may be,
have reason to believe would not be issued in due course and (ii) which, the
failure of TNX or TNCI, as the case may be, to possess, would not subject TNX or
TNCI, as the case may be, to penalties other than fines not to exceed $20,000 in
the aggregate ("Immaterial Authorizations"); and
(c) Each of TNX and TNCI has not received written notice of violation
of, or knows of any material violation of, any Laws to which it or its business
is subject or any Authorization necessary for the ownership or use of its assets
and properties or the conduct of its business (other than Immaterial
Authorizations).
(d) ENVIRONMENTAL LAWS. Each of TNX and TNCI has not received any
notice or claim (and is not aware of any facts that would form a reasonable
basis for any claim), or entered into any negotiations or agreements with any
other Person, and, to the best knowledge of each of TNX and TNCI, neither TNX
nor TNCI is the subject of any investigation by any governmental or regulatory
authority, domestic or foreign, relating to any material or potentially material
liability or remedial action under any Environmental Laws. There are no pending
or threatened actions, suits or proceedings against either TNX or TNCI or any of
its respective properties, assets or operations asserting any such material
liability or seeking any material remedial action in connection with any
Environmental Laws.
18
(e) INTELLECTUAL PROPERTY. (i) Each of TNX and TNCI owns, or is validly
licensed or otherwise has the right to use, all patents, and patent rights
("Patents") and all trademarks, trade secrets, trademark rights, trade names,
trade name rights, service marks, service xxxx rights, copyrights and other
proprietary intellectual property rights and computer programs (the
"Intellectual Property Rights"), in each case, which are material to the conduct
of the business of TNX and TNCI, respectively.
(ii) To the best knowledge of TNX, each of TNX and TNCI has not
interfered with, infringed upon (without license to infringe), misappropriated
or otherwise come into conflict with any Patent of any other Person. Each of TNX
and TNCI has not interfered with, infringed upon, misappropriated or otherwise
come into conflict with any Intellectual Property Rights of any other Person.
Each of TNX and TNCI has not received any written charge, complaint, claim,
demand or notice alleging any such interference, infringement, is appropriation
or violation (including any claim that TNX and TNCI, as the case may be, must
license or refrain from using any Patents or Intellectual Property Rights of any
other Person) which has not been settled or otherwise fully resolved. To the
best knowledge of TNX, no other Person has interfered with, infringed upon
(without license to infringe), misappropriated or otherwise come into conflict
with any Patents or Intellectual Property Rights of TNX and TNCI.
(f) EMPLOYEES. (a) TNX and TNCI have complied in all respects with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, wages and hours, other than instances of
non-compliance which, individually or in the aggregate, could not reasonably be
expected to result in penalties other than fines in an amount not exceeding
$50,000 in the aggregate, and neither TNX nor TNCI is liable for any arrears of
wages or any taxes or penalties for failure to comply with any such Laws; (b)
TNX believes that TNX's and TNCI's relations with its employees is satisfactory;
(c) there are no controversies pending or, to the best knowledge of TNX,
threatened between TNX or TNCI and any of its employees, which controversies
have or could reasonably be expected to have a material adverse effect; (d)
neither TNX nor TNCI is a party to any collective bargaining agreement or other
labor union contract applicable to persons employed by TNX or TNCI, nor, to the
best knowledge of TNX, are there any activities or proceedings of any labor
union to organize any such employees; (e) there are no unfair labor practice
complaints pending against TNX or TNCI before the National Labor Relations Board
or any current union representation questions involving employees of TNX or
TNCI; (f) there is no strike, slowdown, work stoppage or lockout existing, or,
to the best knowledge of TNX, threatened, by or with respect to any employees of
TNX or TNCI; (g) no charges are pending before the Equal Employment Opportunity
Commission or any state, local or foreign agency responsible for the prevention
of unlawful employment practices with respect to TNX or TNCI; (h) there are no
claims pending against TNX before any workers' compensation board; and (i) each
of TNX and TNCI has not received notice that any Federal, state, local or
foreign agency responsible for the enforcement of labor or employment laws
intends to conduct an investigation of or relating to TNX or TNCI and, to the
best knowledge of TNX, no such investigation is in progress.
(g) EMPLOYEE BENEFIT PLANS. There are no "employee pension benefit
plans" (as defined in Section 3(2) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) or "employee welfare benefit plans" (as
defined in Section 3(1)of ERISA) maintained, or contributed to, by TNX or TNCI
for the benefit of any current or any former employees, officers or directors of
TNX or TNCI.
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ARTICLE V
COVENANTS
5.1 COVENANTS OF THE COMPANY AND ACQUISITION.
(a) CONDUCT OF BUSINESS. Prior to and through the Closing Date, each of
the Company and Acquisition shall:
i. conduct its business only in the Ordinary Course of
Business;
ii. use its commercially reasonable efforts to preserve intact
the current business organization of the Company and Acquisition, as the case
may be, keep available the services of the current officers, employees and
agents of the Company and Acquisition, as the case may be, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with the Company and
Acquisition, as the case may be;
iii. not pay, incur or declare any dividends or distributions
with respect to its shareholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of TNX;
iv. not authorize, issue, sell, purchase or redeem any shares
of its capital stock or any options or other rights to acquire ownerships
interests without the prior written consent of TNX;
v. not incur any indebtedness for money borrowed or issue and
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, except those incurred in the Ordinary Course of
Business, or cause or permit any material lien, encumbrance or security interest
to be created or arise on or in respect of any material portion of its
properties or assets;
vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause representation or
warranty of the Company in this Agreement to be or become untrue in any material
respect or that is not in the ordinary course of business consistent with past
practice;
viii. report periodically to TNX concerning the status of the
business and operations of the Company; and
ix. confer with TNX concerning operational matters of a
material nature.
20
(b) PROPOSALS; OTHER OFFERS. Commencing on the date of execution of
this Agreement through the Closing Date, each of the Company and Acquisition
shall not, directly or indirectly (whether through an employee, a
representative, an agent or otherwise), solicit or encourage any inquiries or
proposals, engage in negotiations for or consent to or enter into any agreement
providing for the acquisition of its business. Each of the Company and
Acquisition shall not, directly or indirectly (whether through an employee, a
representative, an agent or otherwise) disclose any nonpublic information
relating to the Company and Acquisition or afford access to any of the books,
records or other properties of the Company and Acquisition to any person or
entity that is considering, has considered or is making any such acquisition
inquiry or proposal relating to the Company's and Acquisition's business.
(c) FURTHER ASSURANCES. Prior to the Closing Date, with the cooperation
of TNX where appropriate, each of the Company and Acquisition shall use
commercially reasonable efforts to:
i. promptly comply with all filing requirements which federal,
state or local law may impose on the Company or Acquisition, as the case may be,
with respect to the Contemplated Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing
and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by the Company or
Acquisition in connection with the Contemplated Transactions by this Agreement.
(d) ACCESS TO ADDITIONAL AGREEMENTS AND INFORMATION. Prior to the
Closing Date, the Company and Acquisition shall make available to TNX (as well
as its shareholders, counsel, accountants and other representatives) any and all
agreements, contracts, documents, other instruments and personnel material of
the Company's and Acquisition's business, including without limitation, those
contracts to which the Company or Acquisition is a party and those by which each
of its business or any of the Company's or Acquisition's assets are bound.
(e) ACTIONS BY THE COMPANY AND ACQUISITION. Neither the Company nor
Acquisition shall take any action or enter into any agreements or arrangements
except in the Ordinary Course of Business and as may be required by this
Agreement.
(f) NO CHANGE IN CAPITAL STOCK. Prior to the Effective Time, no change
will be made in the authorized, issued or outstanding capital stock of the
Company, and no subscriptions, options, rights, warrants, calls, commitments or
agreements relating to the authorized, issued or outstanding capital stock of
the Company will be entered into, issued, granted or created.
5.2 COVENANTS OF TNX.
(a) CONDUCT OF BUSINESS. Prior to and through the Closing Date, TNX
shall:
i. conduct its business only in the Ordinary Course of
Business;
21
ii. use its commercially reasonable efforts to preserve intact
the current business organization of TNX and TNCI, keep available the services
of the current officers, employees and agents of TNX and TNCI, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents and others having business relationships with TNX and TNCI;
iii. not pay, incur or declare any dividends or distributions
with respect to its shareholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of the Company;
iv. not authorize, issue, sell, purchase or redeem any shares
of its capital stock or any options or other rights to acquire ownerships
interests without the prior written consent of the Company;
v. not incur any indebtedness for money borrowed or issue and
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, except those incurred in the Ordinary Course of
Business, or cause or permit any material lien, encumbrance or security interest
to be created or arise on or in respect of any material portion of its
properties or assets;
vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause representation or
warranty of TNX in this Agreement to be or become untrue in any material respect
or that is not in the Ordinary Course of Business consistent with past practice;
viii. report periodically to the Company concerning the status
of the business and operations of TNX and TNCI; and
ix. confer with the Company concerning operational matters of
a material nature.
(b) PROPOSALS; OTHER OFFERS. Commencing on the date of execution of
this Agreement through the Closing Date, TNX shall not, directly or indirectly
(whether through TNCI, an employee, a representative, an agent or otherwise),
solicit or encourage any inquiries or proposals, engage in negotiations for or
consent to or enter into any agreement providing for the acquisition of its
business. Each of TNX and TNCI shall not, directly or indirectly (whether
through an employee, a representative, an agent or otherwise) disclose any
nonpublic information relating to TNX or TNCI or afford access to any of the
books, records or other properties of TNX or TNCI to any person or entity that
is considering, has considered or is making any such acquisition inquiry or
proposal relating to TNX's or TNCI's business.
(c) FURTHER ASSURANCES. Prior to the Closing Date, with the cooperation
of the Company where appropriate, TNX shall:
22
i. promptly comply with all filing requirements which federal,
state or local law may impose on TNX and TNCI with respect to the Contemplated
Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing
and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by TNX and TNCI in
connection with the Contemplated Transactions by this Agreement.
(d) ACTIONS BY TNX AND TNCI. Neither TNX nor TNCI shall take any action
or enter into any agreements or arrangements except in the Ordinary Course of
Business and as may be required by this Agreement.
(e) NO CHANGE IN CAPITAL STOCK. Prior to the Effective Time,
no change will be made in the authorized, issued or outstanding capital stock of
TNX, and no subscriptions, options, rights, warrants, calls, commitments or
agreements relating to the authorized, issued or outstanding capital stock of
TNX will be entered into, issued, granted or created.
(f) ACCESS TO ADDITIONAL AGREEMENTS AND INFORMATION. Prior to the
Closing Date, TNX shall make available to the Company (as well as its
shareholders, counsel, accountants and other representatives) any and all
agreements, contracts, documents, other instruments and personnel material of
TNX's and TNCI's business, including without limitation, those contracts to
which TNX or TNCI is a party and those by which its business or any of TNX's or
TNCI's assets are bound.
5.3 GOVERNMENTAL FILINGS AND CONSENTS. The Company, Acquisition and TNX
shall cooperate with one another in filing any necessary applications, reports
or other documents with any federal or state agencies, authorities or bodies
having jurisdiction with respect to the business of the Company or Acquisition
or this Agreement and in seeking any necessary approval, consultation or prompt
favorable action of, with or by any of such agencies, authorities or bodies.
5.4 PUBLICITY. Any public announcement or press release relating to
this Agreement or the Contemplated Transactions must be approved by TNX and the
Company in writing before being made or released.
ARTICLE VI
CONDITIONS
6.1 CONDITIONS TO OBLIGATIONS OF TNX. The obligation of TNX to
consummate the Contemplated Transactions is subject to the fulfillment of each
of the following conditions:
(a) COPIES OF RESOLUTIONS. At the Closing (i) the Company shall have
furnished TNX with a certificate of its Chief Executive Officer in the form of
EXHIBIT 6.1(A) annexed hereto, certifying that attached thereto are copies of
resolutions duly adopted by the board of directors of the Company authorizing
23
the execution, delivery and performance of this Agreement and all other
necessary or proper corporate action to enable the Company to comply with the
terms of this Agreement and (ii) Acquisition shall have furnished TNX with a
certificate of its Chief Executive Officer in the form of EXHIBIT 6.1(A2)
annexed hereto, certifying that attached thereto are copies of resolutions duly
adopted by the board of directors of Acquisition authorizing the execution,
delivery and performance of this Agreement and all other necessary or proper
corporate action to enable Acquisition to comply with the terms of this
Agreement.
(b) OPINION OF COMPANY'S COUNSEL. The Company shall have furnished to
TNX, at the Closing, with an opinion of its legal counsel, dated as of the
Closing Date, substantially in the form of EXHIBIT 6.1(B) annexed hereto.
(c) ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
COVENANTS. Each of the representations and warranties of the Company and
Acquisition set forth in this Agreement was true, correct and complete in all
material respects when made and shall also be true, correct and complete in all
material respects at and as of the Closing Date, with the same force and effect
as if made at and as of the Closing Date. The Company shall have performed and
complied in all material respects with all agreements and covenants required by
this Agreement to be performed by the Company and Acquisition at or prior to the
Closing Date.
(d) DELIVERY OF CERTIFICATE. (A) The Company shall have delivered to
TNX a certificate, in the form of EXHIBIT 6.1(D) annexed hereto, dated the
Closing Date, and signed by the Chief Executive Officer of the Company affirming
that the representations and warranties as set forth in Section 4.1 were and are
true, correct and complete as required by Section 6.1(c) and (B) Acquisition
shall have delivered to TNX a certificate, in the form of EXHIBIT 6.1(D2)
annexed hereto, dated the Closing Date, and signed by the Chief Executive
Officer of Acquisition affirming that the representations and warranties as set
forth in Section 4.1 were and are true, correct and complete as required by
Section 6.1(c).
(e) CONSENTS AND WAIVERS. At the Closing, any and all necessary
consents, authorizations, orders or approvals shall have been obtained, except
as the same shall have been waived by TNX.
(f) LITIGATION. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company issued by a court or governmental agency
(or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making consummation thereof unduly burdensome to TNX. On the Closing Date and
immediately prior to consummation of the Contemplated Transactions, no
proceeding or lawsuit shall have been commenced, be pending or have been
threatened by any governmental or regulatory agency or authority or any other
Person with respect to the Contemplated Transactions.
(g) DELIVERY OF DOCUMENTS AND OTHER INFORMATION. Prior to the Closing
Date, the Company and Acquisition shall have made available or delivered to TNX
all of the agreements, contracts, documents and other instruments required to be
delivered pursuant to the provisions of this Agreement.
24
6.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY AND ACQUISITION. The
obligations of the Company and Acquisition to consummate the Contemplated
Transactions are subject to the fulfillment of each of the following conditions:
(a) COPIES OF RESOLUTIONS. At the Closing, TNX shall have furnished the
Company with a certificate of its Chief Executive Officer, in the form of
EXHIBIT 6.2(A) annexed hereto, certifying that attached thereto are copies of
resolutions duly adopted by the board of directors of TNX authorizing the
execution, delivery and performance of the terms of this Agreement and all other
necessary or proper corporate action to enable TNX to comply with the terms of
this Agreement.
(b) OPINION OF TNX'S COUNSEL. TNX shall have furnished to the Company,
at the Closing, with an opinion of counsel to TNX, dated as of the Closing Date,
substantially in the form of EXHIBIT 6.2(B) annexed hereto.
(c) ACCURACY OF REPRESENTATIONS AND WARRANTIES; PERFORMANCE OF
COVENANTS. Each of the representations and warranties of TNX was true, correct
and complete in all material respects when made and shall also be true, correct
and complete in all material respects at and as of the Closing Date, with the
same force and effect as if made at and as of the Closing Date. TNX shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by TNX at or prior to the
Closing Date.
(d) DELIVERY OF CERTIFICATE. TNX shall have delivered to the Company a
certificate, in the form of EXHIBIT 6.2(D) annexed hereto, dated the Closing
Date and signed by the Chief Executive Officer of TNX, affirming that the
representations and warranties of TNX as set forth in Section 4.2 were and are
true, correct and complete and TNX's agreements and covenants have been
performed as required by Section 6.2(d).
(e) CONSENTS AND WAIVERS. On or prior to the Closing Date, any and all
necessary consents, authorizations, orders or approvals shall have been
obtained, except as the same shall have been waived by the Company.
(f) LITIGATION. On the Closing Date, there shall be no effective
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to TNX issued by a court or governmental agency (or
other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making the consummation thereof unduly burdensome to the Company or TNX. On the
Closing Date, no proceeding or lawsuit shall have been commenced, threatened or
be pending or by any governmental or regulatory agency or authority or any other
person with respect to the Contemplated Transactions.
(g) DELIVERY OF DOCUMENTS AND OTHER INFORMATION. Prior to the Closing
Date, TNX shall have made available or delivered to the Company all of the
agreements, contracts, documents and other instruments required to be delivered
pursuant to the provisions of this Agreement.
25
ARTICLE VII
TERMINATION
7.1 TERMINATION BY MUTUAL AGREEMENT. This Agreement may be terminated
at any time by mutual consent of the parties hereto, provided that such consent
to terminate is in writing and is signed by each of the parties hereto.
7.2 TERMINATION FOR FAILURE TO CLOSE. This Agreement shall be
automatically terminated if the Closing shall not have occurred within ten (10)
days of the date hereof (except if such 10th day is not a Business Day, then the
next Business Day).
7.3 TERMINATION BY OPERATION OF LAW. This Agreement may be terminated
by any party hereto if there shall be any statute, rule or regulation that
renders consummation of the Contemplated Transactions illegal or otherwise
prohibited, or a court of competent jurisdiction or any government (or
governmental authority) shall have issued an order, decree or ruling, or has
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of such transactions and such order, decree, ruling or other action
shall have become final and nonappealable.
7.4 TERMINATION FOR FAILURE TO PERFORM COVENANTS OR CONDITIONS. This
Agreement may be terminated prior to the Closing Date:
(a) by TNX if: (i) any of the representations and warranties made in
this Agreement by the Company or Acquisition shall not be materially true and
correct, when made or at any time prior to consummation of the Contemplated
Transactions as if made at and as of such time; (ii) any of the conditions set
forth in Section 6.1 hereof have not been fulfilled in all material respects by
the Closing Date; (iii) the Company or Acquisition shall have failed to observe
or perform any of its material obligations under this Agreement; or (iv) as
otherwise set forth herein; or
(b) by the Company or Acquisition if: (i) any of the representations
and warranties of TNX shall not be materially true and correct when made or at
any time prior to consummation of the Contemplated Transactions as if made at
and as of such time; (ii) any of the conditions set forth in Section 6.2 hereof
have not been fulfilled in all material respects by the Closing Date; (iii) TNX
shall have failed to observe or perform any of their material respective
obligations under this Agreement; or (iv) as otherwise set forth herein.
7.5 EFFECT OF TERMINATION OR DEFAULT; REMEDIES. In the event of
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
provided that such party is a Non-Defaulting Party (as defined below). The
foregoing shall not relieve any party from liability for damages actually
incurred as a result of such party's breach of any term or provision of this
Agreement.
7.6 REMEDIES; SPECIFIC PERFORMANCE. In the event that any party shall
fail or refuse to consummate the Contemplated Transactions or if any default
under or beach of any representation, warranty, covenant or condition of this
Agreement on the part of any party (the "Defaulting Party") shall have occurred
that results in the failure to consummate the Contemplated Transactions, then in
addition to the other remedies provided herein, the non-defaulting party (the
"Non-Defaulting Party") shall be entitled to seek and obtain money damages from
26
the Defaulting Party, or may seek to obtain an order of specific performance
thereof against the Defaulting Party from a court of competent jurisdiction,
provided that the Non-Defaulting Party seeking such protection must file its
request with such court within forty-five (45) days after it becomes aware of
the Defaulting Party's failure, refusal, default or breach. In addition, the
Non-Defaulting Party shall be entitled to obtain from the Defaulting Party court
costs and reasonable attorneys' fees incurred in connection with or in pursuit
of enforcing the rights and remedies provided hereunder.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF THE COMPANY. All
representations and warranties of the Company shall survive the execution and
delivery of this Agreement and the Closing hereunder and shall thereafter
continue in full force and effect until the the second anniversary of the
Closing Date and shall then terminate except to the extent that notice of the
Company's or Acquisition liability in respect of any inaccuracy in or breach of
any representation or warranty shall have been given on or prior to such second
anniversary.
8.2 SURVIVAL OF REPRESENTATIONS AND WARRANTIES OF TNX. All
representations and warranties of TNX shall terminate upon the Closing except to
the extent that notice of TNX's liability in respect of any inaccuracy in or
breach of any representation or warranty shall have been given on or prior to
Closing.
8.3 OBLIGATION OF THE COMPANY TO INDEMNIFY. The Company agrees to
indemnify, defend and hold harmless TNX (and its directors, officers, employees,
affiliates, shareholders, debenture holders, agents, attorneys, successors and
assigns) from and against all losses, liabilities, damages, deficiencies, costs
or expenses (including interest, penalties and reasonable attorneys' and
consultants' fees and disbursements) (collectively, "Losses") based upon,
arising out of or otherwise in respect of any (i) inaccuracy in any
representation or warranty of the Company contained in this Agreement or in the
Schedules and Exhibits hereto or (ii) breach by the Company of any covenant or
agreement contained in this Agreement. Losses specifically does not include
economic loss from the decrease in the per Share Market Value of the Company
Common Stock.
8.4 OBLIGATION OF TNX TO INDEMNIFY. TNX agrees to indemnify, defend and
hold harmless the Company (and its directors, officers, employees, affiliates,
shareholders, agents, attorneys, successors and assigns) from and against any
Losses based upon, arising out of or otherwise in respect of any (i) inaccuracy
in any representation or warranty of TNX contained in this Agreement or in the
schedules and or (ii) breach by TNX of any covenant or agreement contained in
this Agreement.
8.5 NOTICE AND OPPORTUNITY TO DEFEND. (a) Promptly after receipt by any
Person entitled to indemnity under this Agreement (an "Indemnitee") of notice of
any demand, claim or circumstances which, with the lapse of time, would or might
give rise to a claim or the commencement (or threatened commencement) of any
action, proceeding or investigation (an "Asserted Liability") that may result in
a Loss, the Indemnitee shall give notice thereof (the "Claims Notice") to any
other party (or parties) who is or may be obligated to provide indemnification
pursuant to Section 8.3 or 8.4 (the "Indemnifying Party"). The Claims Notice
shall describe the Asserted Liability in reasonable detail and shall indicate
the amount (estimated, if necessary and to the extent feasible) of the Loss that
has been or may be suffered by the Indemnitee.
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(b) The Indemnifying Party may elect to compromise or defend, at its
own expense and by its own counsel, any Asserted Liability. If the Indemnifying
Party elects to compromise or defend such Asserted Liability, it shall within 30
days after the date the Claims Notice is given (or sooner, if the nature of the
Asserted Liability so requires) notify the Indemnitee of its intent to do so,
and the Indemnitee shall cooperate, at the expense of the Indemnifying Party, in
the compromise of, or defense against, such Asserted Liability. If the
Indemnifying Party elects not to compromise or defend the Asserted Liability,
fails to notify the Indemnitee of its election as herein provided or contests
its obligation to indemnify under this Agreement, the Indemnitee may pay,
compromise or defend such Asserted Liability and all reasonable expenses
incurred by the Indemnitee in defending or compromising such Asserted Liability,
all amounts required to be paid in connection with any such Asserted Liability
pursuant to the determination of any court, governmental or regulatory body or
arbitrator, and amounts required to be paid in connection with any compromise or
settlement consented to by the Indemnitee, shall be borne by the Indemnifying
Party. Except as otherwise provided in the immediately preceding sentence, the
Indemnitee may not settle or compromise any claim over the objection of the
Indemnifying Party. In any event, the Indemnitee and the Indemnifying Party may
participate, at their own expense, in (but the Indemnitee may not control) the
defense of such Asserted Liability. If the Indemnifying Party chooses to defend
any claim, the Indemnitee shall make available to the Indemnifying Party any
books, records or other documents within its control that are necessary or
appropriate for such defense.
ARTICLE IX
DEFINITIONS
The following terms, which are capitalized in this Agreement, shall
have the meanings set forth below for the purpose of this Agreement.
"APPLICABLE CONTRACT" means any Contract (a) under which the Company
has or may acquire any rights, (b) under which the Company, TNX or TNCI, as the
case may be, has or may become subject to any obligation or liability or (c) by
which the Company, TNX or TNCI, as the case may be, or any of the assets owned
or used by it is or may become bound.
"CONTEMPLATED TRANSACTIONS" means all of the transactions contemplated
by this Agreement, including, without limitation:
(1) the Merger; and
(2) the performance by the parties of their respective covenants and
obligations under this Agreement.
"ENVIRONMENTAL LAWS" means all applicable federal, state, local or
foreign laws, rules and regulations, orders, decrees, judgments, permits,
filings and licenses relating (i) to protection and clean-up of the environment
and activities or conditions related thereto, including those relating to the
generation, handling, disposal, transportation or release of hazardous
substances and (ii) the health or safety of employees in the workplace
environment, all as amended from time to time, and shall also include any common
law theory based on nuisance, trespass, negligence or other tortious conduct.
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"ERISA" means the Employee Retirement Income Security Act of 1974 or
any successor law, and regulations and rules issued pursuant to such law or any
successor law.
"LAW" means all applicable laws, statutes, ordinances, rules,
regulations, orders, writs, injunctions, judgments or decrees entered, enacted,
promulgated, enforced or issued by any court or other governmental or regulatory
authority, domestic or foreign.
"LEGAL REQUIREMENT" means any federal, state, local, municipal,
foreign, international, multinational or other administrative law, ordinance,
principle of common law, regulation, statute, treaty, court or arbitrator.
"ORDER" means any award, decision, injunction, judgment, order, ruling,
subpoena or verdict entered, issued, made or rendered by any court,
administrative agency or other governmental body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" means an action taken by a Person where:
(1) such action is consistent with the past practices of such Person
and is taken in the ordinary course of the normal day-to-day operations of such
Person;
(2) such action is not required to be authorized by the board of
directors of such Person (or by any Person or group of Persons exercising
similar authority); and
(3) such action is similar in nature and magnitude to actions
customarily taken, without any authorization by the board of directors (or by
any Person or group of Persons exercising similar authority), in the ordinary
course of the normal day-to-day operations of other Persons that are in the same
line of business as such Person.
"ORGANIZATIONAL DOCUMENTS" means the articles or certificate of
incorporation and the by-laws of a corporation and any amendment thereto.
"PER SHARE MARKET VALUE" of the Company Common Stock means on any
particular date (a) the last sale price of shares of Company Common Stock on
such date or, if no such sale takes place on such date, the last sale price on
the most recent prior date, in each case as officially reported on the principal
national securities exchange on which the Company Common Stock is then listed or
admitted to trading, or (b) if the Company Common Stock is not then listed or
admitted to trading on any national securities exchange, the closing bid price
per share as reported by Nasdaq Stock Market, Inc. (the "Nasdaq"), or (c) if the
Company Common Stock is not then listed or admitted to trading on the Nasdaq,
the closing bid price per share of the Company Common Stock on such date as
reported on the National Association of Securities Dealers, Inc. over-the
counter Bulletin Board (the "OTCBB") or if there is no such price on such date,
then the last bid price on the date nearest preceding such date, or (d) if the
Company Common Stock is not quoted on the OTCBB, the closing bid price for a
share of Company Common Stock on such date in the over-the-counter market as
reported by the Pinksheets LLC (or similar organization or agency succeeding to
its functions of reporting prices) or if there is no such price on such date,
then the last bid price on the date nearest preceding such date, or (e) if the
Company Common Stock is not publicly traded, the fair market value of a share of
the Company Common Stock as determined by an appraiser selected in good faith by
TNX.
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"PERSON" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"PROCEEDING" means any action, arbitration, audit, hearing,
investigation, litigation or suit (whether civil, criminal, administrative,
investigative or informal) commenced, brought, conducted or heard by or before,
or otherwise involving, any governmental body or arbitrator.
"SEC" means the United States Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
ARTICLE X
MISCELLANEOUS
10.1 FEES AND EXPENSES. Except as otherwise provided in this Agreement,
each party hereto will bear its own legal, accounting and other fees and
expenses incident to the Contemplated Transactions herein. Any fees and expenses
required to be paid by any party hereunder shall be limited to reasonable and
necessary fees and expenses
10.2 MODIFICATION, AMENDMENTS AND WAIVER. The parties hereto may amend,
modify or otherwise waive any provision of this Agreement by mutual consent,
provided that such consent and any amendment, modification or waiver is in
writing and is signed by each of the parties hereto.
10.3 ASSIGNMENT. Neither the Company nor TNX shall have the authority
to assign its respective rights or obligations under this Agreement without the
prior written consent of the other party.
10.4 SUCCESSORS. 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.
10.5 ENTIRE AGREEMENT. This Agreement and the exhibits, schedules and
other documents referred to herein contain the entire agreement among the
parties hereto with respect to the Contemplated Transactions and supersede all
prior agreements with respect thereto, whether written or oral.
10.6 GOVERNING LAW. This Agreement and the exhibits hereto shall be
governed by and construed in accordance with the laws of the State of New York,
without giving effect to principles of conflicts or choice of laws thereof. Any
action to enforce the terms of this Agreement or any of its exhibits shall be
brought exclusively in the state and/or federal courts situated in the County of
New York in the State of New York. Service of process in any action by either
party to enforce the terms of this Agreement may be made by serving a copy of
the summons and complaint, in addition to any other relevant documents, by
commercial overnight courier to the other party at its principal address set
forth in this Agreement.
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10.7 NOTICES. Any notice, request, demand, waiver, consent, approval,
or other communication which is required or permitted to be given to any party
hereunder shall be in writing and shall be deemed given only if delivered to the
party personally or sent to the party by telecopy (promptly followed by a
hard-copy delivered in accordance with this Section 10.7) or by registered or
certified mail (return receipt requested), with postage and registration or
certification fees thereon prepaid, addressed to the party at its address set
forth below:
If to TNX: TNX Television, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxxxx, Xxxxxxxxxxxx
00000
Tel: (000) 000-0000
Fax: (000) 000-0000
If to Acquisition: SZMD Acquisition II, Inc.
0000 Xxxx Xxxxxx Xxxxx Xxxx.
Xxxx Xxxxx, Xxxxxxxxxx
00000
Attn.: Xxxxxx Xxxxxxx
Tel:
Fax:
If to the Company: SZM Distributors, Inc.
0000 Xxxx Xxxxxx Xxxxx Xxxx.
Xxxx Xxxxx, Xxxxxxxxxx
00000
Attn.: Xxxxxx Xxxxxxx
Tel:
Fax:
with copies to: Gottbetter & Partners, LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn.: Xxxx X. Xxxxxxxxxx, Esq.
Tel: (000) 000-0000
Fax: (000) 000-0000
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
10.8 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement. In the event that any signature is delivered by
facsimile transmission, such signature shall create a valid and binding
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obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original thereof.
10.9 RIGHTS CUMULATIVE. All rights, powers and privileges conferred
hereunder upon the parties, unless otherwise provided, shall be cumulative and
shall not be restricted to those given by law. Failure to exercise any power
given any party hereunder or to insist upon strict compliance by any other party
shall not constitute a waiver of any party's right to demand exact compliance
with any of the terms or provisions hereof.
10.10 SEVERABILITY OF PROVISIONS. The provisions of this Agreement
shall be considered severable in the event that any of such provisions are held
by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable. Such invalid, void or otherwise unenforceable provisions shall be
automatically replaced by other provisions which are valid and enforceable and
which are as similar as possible in term and intent to those provisions deemed
to be invalid, void or otherwise unenforceable. Notwithstanding the foregoing,
the remaining provisions hereof shall remain enforceable to the fullest extent
permitted by law.
10.11 HEADINGS. The headings set forth in the articles and sections of
this Agreement and in the exhibits and the schedules to this Agreement are
inserted for convenience of reference only and shall not be deemed to constitute
a part hereof.
10.12 CONFIDENTIAL INFORMATION. The Company and Acquisition each
represents to TNX that, at all times, they have maintained in confidence all
non-public information regarding TNX (including existence of the transactions
contemplated herein) received by them from TNX or its agents, and covenants that
it they will continue to maintain in confidence such information until such
information (a) becomes generally publicly available other than through a
violation of this provision by the Company or Acquisition, or any of their
respective agents or (b) is required to be disclosed in legal proceedings (such
as by deposition, interrogatory, request for documents, subpoena, civil
investigation demand, filing with any governmental authority or similar
process), provided, however, that before making any use or disclosure in
reliance on this subparagraph (b) the Company or Acquisition, as applicable,
shall give the TNX at least fifteen (15) days prior written notice (or such
shorter period as required by law) specifying the circumstances giving rise
thereto and will furnish only that portion of the non-public information which
is legally required and will exercise its best efforts to obtain reliable
assurance that confidential treatment will be accorded any non-public
information so furnished.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on the date and year first above written.
SZM DISTRIBUTORS, INC.
By: /S/ XXXXXX XXXXXXX
--------------------------
Xxxxxx Xxxxxxx, CEO
SZMD ACQUISITION II, INC.
By: /S/ XXXXXX XXXXXXX
--------------------------
Xxxxxx Xxxxxxx, CEO
TNX TELEVISION, INC.
By: /S/ XXXXX XXXXX
--------------------------
Xxxxx Xxxxx, CEO
The undersigned, Secretary of TNX Television, Inc., hereby certifies on
the date and year first above written that this Agreement and Plan of Merger has
been adopted pursuant to Section 251(c) of the Delaware General Corporation Law
and that the conditions specified in the first sentence of said section have
been satisfied.
TNX TELEVISION, INC.
By: /S/ XXXXX XXXXX
-------------------------------
Name: Xxxxx Xxxxx
Title: Secretary
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