PLAN AND AGREEMENT OF MERGER
This is a Plan and Agreement of Merger ("Agreement") among FIDELITY HOLDINGS,
INC., a Nevada corporation ("Fidelity"), MAJOR AUTOMOTIVE GROUP, INC., a New
York corporation (the "Merging Corporation") MAJOR ACQUISITION CORP., a New York
corporation (the "Surviving Corporation"), and XXXXX XXXXXXX (the "Shareholder
of the Merging Corporation").
BACKGROUND
A. Fidelity is the parent corporation of the Surviving Corporation.
B. The Shareholder of the Merging Corporation is the sole shareholder of the
Merging Corporation and he desires to merge that entity with the Surviving
Corporation pursuant to the terms and conditions of this Agreement.
C. Fidelity desires to merge the Surviving Corporation with the Merging
Corporation in accordance with the terms and conditions of this Agreement.
NOW, THEREFORE, with the foregoing recital paragraphs incorporated herein by
this reference, and for other good and valuable consideration acknowledged to
have been exchanged and received, the parties hereto, intending to be legally
bound, hereby agree as follows:
ARTICLE 1
PLAN OF MERGER
1.1 Plan Adopted. A plan of merger of the Merging Corporation and the
Surviving Corporation, pursuant to the provisions of Article 9 of the N.Y.C.L.S.
Bus. Corp. SYMBOL 255 F "Symbol" 901 et seq., and Sections 368(a)(1)(A) and/or
368(a)(1)(C) of the Internal Revenue Code, is adopted as follows:
1.1.1 The MergingCorporation shall be merged with and into the Surviving
Corporation, to exist and be governed by the laws of the State of New York.
1.1.2 The name of the Surviving Corporation shall be Major Acquisition
Corp., t/a Major Automotive Group, Inc. Upon completion of the transactions set
forth herein, the Surviving Corporation (with the consent of the Merging
Corporation, if necessary) may, at its option, change its name to Major
Automotive Group, Inc.
1.1.3 When thisAgreement shall become effective, the separate corporate
existence of the Merging Corporation shall cease, and the Surviving Corporation
shall succeed, without other transfer, to all of the rights and property of the
Merging Corporation, and shall be subject to all the debts and liabilities of
the Merging Corporation in the same manner as if the Surviving Corporation had
itself incurred them. All rights of creditors and all liens on the property of
each constituent corporation shall be preserved unimpaired, limited in lien to
the property affected by the liens immediately prior to the merger.
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1.1.4 The Surviving Corporation will carry on business with the assets of
the Merging Corporation, as well as the assets of the Surviving Corporation.
1.1.5 The shareholder of the Merging Corporation will surrender all of
their shares in the manner hereinafter set forth.
1.1.6 In exchange for the shares of the Merging Corporation surrendered
by the shareholders of the Merging Corporation, Fidelity will issue and transfer
to the shareholders of the Merging Corporation on the basis set forth in Article
4 below, shares of its voting convertible preferred stock.
1.1.7 Fidelity, the sole shareholder of the Surviving Corporation, will
retain its shares in the Surviving Corporation.
1.1.8 No change in the Certificate of Incorporation of the Surviving
Corporation is necessary, except insofar as the Surviving Corporation may change
its name to Major Automotive Group, Inc. or it may file a fictitious/alternate
name certificate for the use of such name.
1.2 Closing: Closing Date: Effective Date. The closing of this transaction
(the "Closing") shall occur on a mutually agreed upon date at the offices of
Fidelity, which date shall not be more than one hundred twenty (1 20) days from
the execution hereof, unless mutually extended (the "Closing Date"). In the
event the one hundred twenty days expires and the parties do not agree to
extend, this Agreement shall be deemed null and void, ab initio. The effective
date of the merger ("Effective Date") shall be the date on which the Certificate
of Merger is filed with the Secretary of State of New York pursuant to Article 9
of N.Y.C.L.S. Bus. Corp. SYMBOL 255 \f "Symbol" 906. The foregoing
notwithstanding, the Closing shall not occur
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and the Cetificate of Merger shall not be executed and/or filed until all of
conditions set forth in this Agreement have been satisfied to the satisfaction
of the Board of Directors of the Merging Corporation and Fidelity.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF CONSTITUENT CORPORATIONS
2.1 Representations and Warranties. For purposes of this Agreement, "Material
Adverse Effect" means, with respect to Fidelity, the Merging Corporation, the
Surviving Corporation, and any of those corporations set forth on the attached
Exhibit "A", which is made a part hereof by this reference (the "Owned
Corporations"), a material adverse effect on the business, operations, or
financial condition of any such entity. For purposes of this Agreement, 'Taxes"
shall mean all taxes, fees, levies, duties, charges or other assessments imposed
by any federal, state, county, local or foreign government, taxing authority,
subdivision or agency thereof, including interest, penalties, additions to tax
or additional amounts thereto.
2.2 Merging Corporation and Owned Corporations. As a material inducement to
Fidelity and to the Surviving Corporation to execute this Agreement and perform
their obligations under this Agreement, the Merging Corporation and the Owned
Corporations represents and warrants to Fidelity and to the Surviving
Corporation to the best of its
2.2.1 Good Standing. They are corporations duly organized, validly
existing and in good standing under the laws of the State of New York, with
corporate
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power and authority to own property and carry on their respective businesses as
they are now being conducted.
2.2.2 Assets Owned. The Merging Corporation shall own on or before the
Closing Date those number of shares, as set forth on the aforementioned Exhibit
"A," which represent the percentage ownership set opposite each number of
shares, of the Owned Corporations for which Factory Approvals, as hereinafter
defined, shall have been obtained. The Owned Corporations own those assets set
forth on Exhibit "B" attached hereto and made a part hereof by this reference,
subject to the liabilities disclosed on the Financial Statements, including but
not limited to any and all "LIFO" debt which shall be adjusted as of the Closing
Date and assumed by the Surviving Corporation, which assets are used in an
automobile dealership business. The parties expressly acknowledge and agree that
the Owned Corporations are all Subchapter S corporations for federal and state
purposes and as such, have built up cash reserves ("Cash Reserves") which have
been previously taxed to the Shareholder of the Merging Corporation. The
Shareholder of the Merging Corporation reserves the right, in his sole
discretion, to withdraw the Cash Reserves, any paid in Capital and any
Shareholder loans prior to the Closing Date.
2.2.3 Consents and Approvals-, No Violations: Change in Control.
(i) Except for applicable requirements of New York securities law,
no filing with, and no permit, authorization, consent or approval of any public
body or authority is necessary for the consummation by the Merging Corporation
or any of the Owned Corporations of the transactions contemplated by this
Agreement.
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(ii) Neither the execution and delivery of this Agreement by the
Merging Corporation, the consummation by the Merging Corporation of the
transactions contemplated hereby, nor compliance by the Merging Corporation with
any of the provisions hereof will (i) conflict with or result in any breach of
any provision of the Articles of Incorporation or Bylaws of the Merging
Corporation or those of any of the Owned Corporations; (ii) result in a
violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or result in the creation of any lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which the Merging
Corporation or any of the Owned Corporations is a party or by which any of them
or any of their properties or assets may be bound; or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Merging
Corporation or to any of the Owned Corporations or any of their properties or
assets.
(iii) Neither the Merging Corporation nor any of the Owned
Corporations is a party to any contract, agreement or understanding which
contains a "change in control," "potential change in control" or similar
provision. The Merger will not (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or
otherwise) becoming due from the Merging Corporation or from any of the Owned
Corporations to any person.
(iv) The foregoing provisions of this Article 2.2.3
notwithstanding, the Owned Corporations and the Merging Corporation shall have
thirty (30) days from the
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execution hereof to conduct a review of all information and/or documentation for
the purpose of determining (i) if a default or violation as set forth in this
subparagraph exists or (ii) if any consents and/or approvals are necessary to
consummate this transaction. In the event that it is determined that a default
or violation exists or may exist, or a consent or approval is necessary, the
Owned Corporations and the Merging Corporation shall notify Fidelity of such and
provide Fidelity with the information, documentation and records discovered, and
make a good faith effort using due diligence to obtain any such consents and
approvals or to remedy any such defaults or violations. In the event the
Shareholder of the Merging Corporation, the Merging Corporation and the Owned
Corporations are unable to obtain such consents or approvals or to remedy such
defaults or violations, they and Fidelity shall work towards obtaining
replacements for the defaulted/violated Agreements or Fidelity may waive same.
If Fidelity does not so waive, the parties may decide to terminate this
Agreement, in which event this Agreement shall be deemed null and void ab
initio. In addition, the Shareholder of the Merging Corporation agrees to
consent to extend under reas onable terms, any and all real property leases
between ____________________ and the Owned Companies for no less than 5 years
from the Closing Date. Theforegoing notwithstanding, this Agreement shall not be
so terminated if the default/violation does not have a Material Adverse Effect.
2.2.4 Reports. The balance sheets of the Owned Corporations for the year
ended December 31, 1995, attached hereto and made a part hereof as Exhibit "C",
including any notes or schedules thereto (the "Merging Companies' Balance
Sheets") and the related statements of profits and losses for the year then
ended do not contain any
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untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements therein not
misleading and fairly present the financial positions of the Owned Corporations
as of the respective dates thereof. Except as and to the extent provided in the
Merging Companies' Balance Sheets, the Owned Corporations did not have at
December 31, 1995, any liabilities required by generally accepted accounting
principals to be reflected on a balance sheet. The Owned Corporations shall
provide balance sheets for the year ended December 31, 1996 as soon as
available, but in no event later than the Closing Date. The representations and
warranties contained herein shall apply to any subsequently provided financial
documents.
2.2.5 Absence of Certain Changes. Since December 31, 1996, the Merging
Corporation or any of the Owned Corporations (i) have not suffered a Material
Adverse Effect, (ii) have not entered into any transaction, or conducted their
businesses or operations, other than in the ordinary course of business and
consistent with past practice, and (iii) have not taken or agreed to take any of
the following actions ("Material Action"):
(i) (a) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, (b) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (c) amend the terms of, repurchase, redeem or otherwise
acquire any of its securities or any securities of its subsidiaries, or propose
to do any of the foregoing;
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(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (including indebtedness having
the right to vote) or equity equivalents (including, without limitation, stock
appreciation rights), except as required pursuant to the agreements and
instruments outstanding on the date hereof, or amend in any material respect any
of the terms of any such securities or agreements outstanding on the day hereof;
(iii) amend or propose to amend the Articles or Certificate of
Incorporation or Bylaws of the Merging Corporation or those of any of the Owned
Corporations;
(iv) acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business, consistent with past practice,
or any assets which are material to Fidelity, the Merging Corporation, any of
the Owned Corporations, or the Surviving Corporation, as applicable, taken as a
whole or make any capital expenditures aggregating over Twenty Thousand
($20,000.00) Dollars, except in each case pursuant to obligations in effect on
the date hereof, or enter into any contract, commitment or transaction outside
the ordinary course of business, consistent with past practice;
(v) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of the Merging Corporation or of any of the Owned
Corporations or guarantee (or become liable for) any debt of others or make any
loans, advances or capital
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contributions or mortgage, pledge or otherwise encumber any material assets or
create or suffer any material lien thereupon other than in each case in the
ordinary course of business consistent with past practice or for fair
consideration;
(vi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of the Merging Corporation or of any
of the Owned Corporations, as applicable, incurred in the course of business
consistent with past practice or settle any lawsuits relating to intellectual
property;
(vii) change any of the accounting principals or practices used by
it (except as required by generally accepted accounting principals);
(viii) except as required by law, (a) enter into, amend or
terminate any Benefit Plan (as hereinafter defined) or any agreement,
arrangement, plan, or policy between the Merging Corporation or any of the Owned
Corporations and one or more of their respective directors or executive
officers, or (b) increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any plan
and arrangement as in effect as of the date hereof, except in the case of
non-officer employees for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
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(ix) take any action that would tend not to preserve intact any of
the present business organization of the Merging Corporation or of any of the
Owned Corporations, keep available the services of their respective present
officers and employees and preserve their respective relationships with
customers, suppliers, licensors, licensees, contractors, distributors and others
having business dealings with them; or (x) (a) agree to take any of the
foregoing actions, or (b) take any action that would or is reasonably likely to
result in any of the representations and warranties of the Merging Corporation
or of any of the Owned Corporations set forth in this Agreement being untrue.
2.2.6 No Undisclosed Liabilities. Since December 31, 1996, neither the
Merging Corporation nor any of the Owned Corporations have incurred any
liabilities (absolute, accrued, contingent or otherwise) that are material, in
the aggregate, to the business, operations or financial condition of any such
entity, except for liabilities incurred in the ordinary course of business, and
consistent with past practices and liabilities incurred in connection with this
Agreement.
2.2.7 No Default. Neither the Merging Corporation nor any of the Owned
Corporations is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) the Articles of Incorporation or the
By-laws of any such entity, (ii) any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which any such entity
is a party or by which any such entity or any of its properties or assets may be
bound, or (iii) any order, writ, injunction, decree, statute, rule or regulation
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applicable to any such entity, except in the case of (ii) or (iii) for defaults
or violations which would not, in the aggregate, have a Material Adverse Effect
and which would not prevent or materially delay the consummation of the
transactions contemplated hereby.
2.2.8 Litigation. There are no actions, suits, proceedings or, to the
best knowledge of the Merging Corporation or of any of the Owned Corporations,
investigations pending or, to the best knowledge of the Merging Corporation or
of any of the Owned Corporations, threatened involving the Merging Corporation
or any of the Owned Corporations, at law or in equity, or before any
governmental entity which, in the aggregate, are reasonably likely to have a
Material Adverse Effect.
2.2.9 Compliance with Applicable Law. The businesses of the Merging
Corporation and the Owned Corporations are not being conducted in violation of
any applicable law, ordinance, rule, regulation, decree or order of any
governmental entity, except for violations which, in the aggregate, do not and
would not have a Material Adverse Effect. The Merging Corporation and the Owned
Corporations hold all permits, licenses, variances, exemptions, orders and
approvals of all governmental entities necessary for the lawful conduct of their
businesses (the "Corporations' Permits"), except for failures to hold such
Corporations' Permits which would not, in the aggregate, have a Material Adverse
Effect. The Merging Corporation and the Owned Corporations are in compliance
with the terms of the Corporations' Permits, except where the failure to do so
would not, in the aggregate, have a Material Adverse Effect.
2.2.10 Taxes. The Merging Corporation and the Owned Corporations have
duly filed all material federal, state, local and foreign tax returns required
to be filed
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by them, and the Merging Corporation and the Owned Corporations have each duly
paid, caused to be paid or made adequate provision for the payment of all Taxes
required to be paid in respect of the periods covered by such returns and have
made adequate provision for payment of all Taxes anticipated to be payable in
respect of all calendar periods since the periods covered by such returns. All
deficiencies and assessments asserted as a result of any examinations or other
audits by federal, state, local or foreign taxing authorities have been paid,
fully settled or adequately provided for in the financial statements of the
Merging Corporation and the Owned Corporations and no issue or claim has been
asserted for Taxes by any taxing authority for any prior period, the adverse
determination of which would result in a deficiency which would have a Material
Adverse Effect, other than those heretofore paid or provided for. There are no
outstanding agreements or waivers extending the statutory period of limitation
applicable to any federal, state or local income tax return of either the
Merging Corporation or of any of the Owned Corporations. The foregoing
notwithstanding, Fidelity and the Merging Corporation acknowledge that some
and/or all of the Owned Corporations are currently under Internal Revenue
Service Audit for their 1992 and 1993 tax years.
2.2.11 ERISA.
(i) With respect to each employee benefit plan (including, without
limitation, any "employee benefit plan,' as defined in SYMBOL 255 \f "Symbol"
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), and any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
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benefit, hospitalization, insurance or other plan, arrangement or understanding
(whether or not legally binding) (all the foregoing being herein called "Benefit
Plans"), maintained or contributed to by the Merging Corporation or by any of
the Owned Corporations, the Merging Corporation and the Owned Corporations have
made available to Fidelity and the Surviving Corporation a true and correct copy
of, where applicable, (i) the most recent annual report (Form 5500) filed with
the Internal Revenue Service (the "IRS"), (ii) such Benefit Plan, (iii) each
trust agreement, insurance contract, and third-party administration agreement,
if any, relating to such Benefit Plan, (iv) the most recent actuarial report or
valuation relating to any Benefit Plan subject to Title IV of ERISA, (v) the
most recent IRS determination letter, and (vi) the summary plan description. No
amendments or promises have been made with respect to any Benefit Plan which
would increase after the date of this Agreement the expense of maintaining such
Benefit Plan.
(ii) No Benefit Plans of the Merging Corporation or of any of the
Owned Corporations nor benefit plans of any entity which would be treated as a
"single employer" with the Merging Corporation or any of the Owned Corporations
under SYMBOL 000 \x "Xxxxxx" 0000 (x) of ERISA are subject to Title IV of ERISA.
(iii) With respect to Benefit Plans of the Merging Corporation or
of any of the Owned Corporations, in the aggregate, no event has occurred, and
to the knowledge of the Merging Corporation or of any of the Owned Corporations,
there exists no condition or set of circumstances which are reasonably likely to
occur in connection with which the Merging Corporation or any of the Owned
Corporations would be subject to any liability that would have a Material
Adverse Effect (except liability for benefit claims
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and funding obligations payable in the ordinary course), under ERISA, the
Internal Revenue Code of 1986, as amended (the "Code") or any other applicable
law.
(iv) With respect to Benefit Plans of the Merginc Corporation or
any of the Owned Corporations, in the aggregate, there are no funded benefit
obligations for which contributions have not been made or properly accrued and
there are no unfunded benefit obligations which have not been accounted for by
reserves, or otherwise properly footnoted in accordance with generally accepted
accounting principals, on the consolidated financial statements of the Merging
Corporation or of any of the Owned Corporations, except for obligations which
would not, in the aggregate, have a Material Adverse Effect.
(v) Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
(vi) Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of SYMBOL 255 F "Symbol" 401 (a) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified status.
(vii) The Merging Corporation and the Owned Corporations have no
obligations for retiree health, medical or life insurance benefits under any
plan referred to in this Paragraph 2.2.11 other than (i) coverage mandated by
applicable law, (ii) deferred compensation benefits accrued as liabilities on
the financial statements of the Merging Corporation or of any of the Owned
Corporations, (iii) benefits the full cost of
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which are bome by the current or former employee (or his or her beneficiary), or
Coverage provided under any applicable employee union agreement.
2.2.12 Intellectual Prooerty. No claim is pending, or, to the knowledge
of the Merging Corporation or of any of the Owned Corporations, threatened to
the effect that the present or past operations of the Merging Corporation or of
any of the Owned Corporations infringe upon or conflict with the rights of
others with respect to any intellectual property (including, without limitation,
licenses, copyrights, drawings, trade secrets, know-how and computer software)
necessary to permit the Merging Corporation and the Owned Corporations to
conduct their business as now operated (the "Corporations' Intellectual
Property") and no claim is pending or, to the best knowledge of the Merging
Corporation and of the Owned Corporations, threatened to the effect that the
Corporations' Intellectual Property is invalid or unenforceable. The Merging
Corporation and the Owned Corporations have provided Fidelity and the Surviving
Corporation with a list of all licenses, patents, patent rights, patent
applications, trademarks, trademark applications, trade names, copyrights and
service marks. No contract, agreement or understanding between the Merging
Corporation or any of the Owned Corporations and any other party exists which
would impede or prevent the continued use by the Merging Corporation or by any
of the Owned Corporations of the entire right, title and interest of the said
corporation to the said Corporations' Intellectual Property.
2.2.13 Employee Relations. The Merging Corporation and the Owned
Corporations have provided Fidelity and the Surviving Corporation with a
complete and correct list of all employment, compensation, severance, consulting
or indemnification
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contracts between them and their respective present or former employees,
officers, directors, and consultants to the extent that each of them have any
continuing obligations thereunder.
2.2.14 Material Contracts. The Merging Corporation and the Owned
Corporations have made available to Fidelity and the Surviving Corporation a
complete and accurate list of all contracts, agreements and instruments to which
any of them are a party or by which any of them or any of their properties or
assets may be bound that (i) relate to the leasing of real property or (ii)
provide for payments in any one year in excess of Twenty Thousand ($20,000.00)
Dollars. Each of such contracts, agreements and instruments is valid and binding
and in full force and effect and, to the best knowledge of the Merging
Corporation and the Owned Corporations, there has not occurred any default by
any party thereto which remains unremedied as of the date hereof.
2.3 Surviving Corocration. As a material inducement to the Merging
Corporation to execute this Agreement and perform its obligations under this
Agreement, the Surviving Corporation to the best of its knowledge and belief,
represents and warrants to the Merging Corporation as follows:
2.3.1 Good Standinq. The Surviving Corporation is a, corporation duly
organized, validly existing and in good standing under the laws of the State of
New York, with corporate power and authority to own,property and carry on its
business as it is now being conducted.
2.3.2 Subsidiary. The Surviving Corporation is a wholly owned subsidiary
of Fidelity.
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2.3.3 Consents and Aoprovals: No Violations. Except for applicable
requirements of New York securities law, no filing with, and no permit,
authorization, consent or approval of any public body or authority is necessary
for the consummation by the Surviving Corporation of the transactions
contemplated by this Agreement. Neither the execution and delivery of this
Agreement by the Surviving Corporation, the consummation by the Surviving
Corporation of the transactions contemplated hereby, nor compliance by the
Surviving Corporation with any of the provisions hereof will (i) conflict with
or result in any breach of any provision of the Surviving Corporation's Articles
of Incorpor2tion or Bylaws; (ii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or result in
the creation of any lien) under any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, license, contract, agreement or other
instrument or obligation to which the Surviving Corporation is a party or by
which it or any of its properties or assets may be bound; or (iii) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Surviving Corporation or any of its properties or assets.
2.3.4 Reports. The balance sheets of the Surviving Corporation for the
year ended December 31, 1996, including any notes or schedules thereto (the
"Survivor's Balance Sheets") and the related statement of profits and losses for
the year then ended do not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein not misleading and fairly present the
financial positions of the Surviving Corporation as of the
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respective dates thereof. Excect as and to the extent provided in the Survivor's
Balance Sheets, the Surviving Corporation did not have at December 31, 19c-.6,
any liabilities required by generally accepted accounting principals to be
reflected on a balance sheet.
2.3.5 Absence of Certain Changes. Since December 31, 1996, the Surviving
Corporation (i) has not suffered a Material Adverse Effect, (ii) has not entered
into any transaction, or conducted its businesses or operations, other than in
the ordinary course of business and consistent with past practice, or (iii) has
not taken or agreed to take any Material Action (as previously defined).
2.3.6 No Undisclosed Liabilities. Since December 31, 1996, the Surviving
Corporation has not incurred any liabilities (absolute, accrued, contingent or
otherwise) that are material, in the aggregate, to the business, operations or
financial condition of the Surviving Corporation, except for liabilities
incurred in the ordinary course of business, and consistent with past practices
and liabilities incurred in connection with this Agreement.
2.3.7 No Default. The Surviving Corporation is not in default or
violation (and no event has occurred which with notice or the lapse of time or
both would constitute a default or violation) of any term, condition or
provision of (i) its Articles of Incorporation or Bylaws, (ii) any note, bond,
mortgage, indenture, license, contract, agreement or other instrument or
obligation to which the Surviving Corporation is a party or by which the
Surviving Corporation or any of its properties or assets may be bound, or (iii)
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Surviving Corporation, except in the case of (ii) or (iii) for defaults or
violations which would not, in the aggregate,
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have a Material Adverse Effect and which would not prevent or materially delay
the consummation of the transactions contemplated hereby.
2.3.8 Litigation. There are no actions, suits, proceedings or, to the
best knowledge of the Surviving Corporation, investigations pending or, to the
best knowledge of the Surviving Corporation, threatened involving the Surviving
Corporation, at law or in equity, or before any governmental entity which, in
the aggregate, are reasonably likely to have a Material Adverse Effect.
2.3.9 Compliance with Applicable Law. The business of the Surviving
Corporation is not being conducted in violation of any applicable law,
ordinance, rule, regulation, decree or order of any governmental entity, except
for violations which, in the aggregate, do not and would not have a Material
Adverse Effect. The Surviving Corporation hold all permits, licenses, variances,
exemptions, orders and approvals of all governmental entities necessary for the
lawful conduct of its business (the "Survivoes Permits"), except for failures to
hold such Survivors Permits which would not, in the aggregate, have a Material
Adverse Effect. The Surviving Corporation is in compliance with the terms of the
Survivoes Permits, except where the failure to do so would not, in the
aggregate, have a Material Adverse Effect.
2.3.10 Taxes. The Surviving Corporation has duly filed all material
federal, state, local and foreign tax returns required to be filed by them, and
the Surviving Corporation has duly paid, caused to be paid or made adequate
provision for the payment of all Taxes required to be paid in respect of the
periods covered by such returns and have made adequate provision for payment of
all Taxes anticipated to be payable in respect of
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all calendar periods since the periods covered by such returns. All deficiencies
and assessments asserted as a result of any examinations or other audits by
federal, state, local or foreign taxing authorities have been paid, fully
settled or adequately provided for in the financial statements of the Surviving
Corporation and no issue or claim has been asserted for Taxes by any taxing
authority for any prior period, the adverse determination of which would result
in a deficiency which would have a Material Adverse Effect, other than those
heretofore paid or provided for. There are no outstanding agreements or waivers
extending the statutory period of limitation applicable to any federal, state or
local income tax return of the Surviving Corporation.
2.3.11 ERISA.
(i) With respect to each Benefit Plan maintained or contributed to
by the Surviving Corporation, the Surviving Corporation has made available to
the Merging Corporation a true and correct copy of, where applicable, (i) the
most recent annual report (Form 5500) filed with the IRS, (ii) such Benefit
Plan, (iii) each trust agreement, insurance contract, and third-party
administration agreement, if any, relating to such Benefit Plan, (iv) the most
recent actuarial report or valuation relating to any Benefit Plan subject to
Title IV of ERISA, (v) the most recent IRS determination letter, and (vi) the
summary plan description. No amendments or promises have been made with respect
to any Benefit Plan which would increase after the date of this Agreement the
expense of maintaining such Benefit Plan.
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(ii) No Benefit Plans of the Surviving Corporation nor benefit
plans of any entity which would be treated as a "single employe@' with the
Surviving Corporation under SYMBOL 000 \x "Xxxxxx" 0000 (x) of ERISA are subject
to Title IV of ERISA.
(iii) With respect to Benefit Plans of the Surviving Corporation,
in the aggregate, no event has occurred, and to the knowledge of the Surviving
Corporation, there exists no condition or set of circumstances which are
reasonably likely to occur in connection with which the Surviving Corporation
would be subject to any liability that would have a Material Adverse Effect
(except liability for benefit claims and funding obligations payable in the
ordinary course), under ERISA, the Internal Revenue Code of 1986, as amended
(the "Code") or any other applicable law.
(iv) With respect to Benefit Plans of the Surviving Corporation, in
the aggregate, there are no funded benefit obligations for which contributions
have not been made or properly accrued and there are no unfunded benefit
obligations which have not been accounted for by reserves, or otherwise properly
footnoted in accordance with generally accepted accounting principals, on the
consolidated financial statements of the Surviving Corporation, except for
obligations which would not, in the aggregate, have a Material Adverse Effect.
(v) Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
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(vi) Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of SYMBOL 000 \x "Xxxxxx" 000 (x) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified status.
(vii) The Surviving Corporation is not a party to any collective
bargaining agreement and the Surviving Corporation has no employees who are
subject to a collective bargaining agreement.
(viii) The Surviving Corporation has no obligations for retiree
health, medical or life insurance benefits under any plan referred to in this
Paragraph 2.3.1 1 other than (i) coverage mandated by applicable law, (ii)
deferred compensation benefits accrued as liabilities on the financial
statements of the Surviving Corporation, or (iii) benefits the full cost of
which are borne by the current or former employee (or his or her beneficiary).
2.3.12 Intellectual Property. No claim is pending, or, to the knowledge
of the Surviving Corporation, threatened to the effect that the present or past
operations of the Surviving Corporation infringe upon or conflict with the
rights of others with respect to any intellectual property (including, without
limitation, licenses, copyrights, drawings, trade secrets, know-how and computer
software) necessary to permit the Surviving Corporation to conduct its business
as now operated (the Survivor's Intellectual Property") and no claim is pending
or, to the best knowledge of the Surviving Corporation, threatened to the effect
that any of the Survivoes Intellectual Property is invalid or unenforceable. The
Surviving Corporation has provided the Merging Corporation with a list of all
licenses, patents, patent rights, patent applications, trademarks, trademark
applications, trade names, copyrights and service marks. No contract, agreement
or understanding between
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the Surviving Corporation and any other party exists which would impede or
prevent the continued use by the Surviving Corporation of the entire right,
title and interest of the Surviving Corporation to the Survivor's Intellectual
Property.
2.3.13 Change in Control. The Surviving Corporation is not a party to any
contract, agreement or understanding which contains a "change in control,"
Upotential change in control" or similar provision. The Merger will not (either
alone or upon the occurrence of any additional acts or events) result in any
payment (whether of severance pay or otherwise) becoming due from the Surviving
Corporation to any person.
2.3.14 Employee Relations. The Surviving Corporation has provided the
Merging Corporation with a complete and correct list of all employment,
compensation, severance, consulting or indemnification contracts between the
Surviving Corporation and its present or former employees, officers, directors,
and consultants to the extent that the Surviving Corporation has any continuing
obligations thereunder.
2.3.15 Material Contracts. The Surviving Corporation has provided the
Merging Corporation with a complete and accurate list of all contracts,
agreements and instruments to which the Surviving Corporation is a party or by
which the Surviving Corporation or any of its properties or assets may be bound
that (i) relate to the leasing of real property or (ii) provide for payments in
any one year in excess of Twenty Thousand ($20,000.00) Dollars. Each of such
contracts, agreements and instruments is valid and binding and in full force and
effect and, to the best knowledge of the Surviving Corporation, there has not
occurred any default by any party thereto which remains unremedied as of the
date hereof.
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2.4 Fidelity. As a material inducement to the Merging Corporation to execute
this Agreement and perform its obligations under this Agreement, Fidelity
represents and warrants to the Merging Corporation as follows:
2.4.1 Good Standing. Fidelity is a corporation duly organized, validly
existing and in good standing under the laws of the State of Nevada, with
corporate power and authority to own property and carry on its business as it is
now being conducted. Fidelity is qualified to transact business as a foreign
corporation and is in good standing in all jurisdictions in which its principal
properties are located and business is transacted.
2.4.2 Shares Authorized and Issued. Fidelity, by its Nevada Certificate
of Incorporation, which was issued on November 7, 1995, is authorized to issue
Fifty Million (50,000,000) shares of common stock, each of $0.01 par value, of
which Five Million Seven Hundred Fifty Thousand (5,750,000) shares are validly
issued and outstanding, fully paid, and non-assessable on the date of this
Agreement, and Two Million (2,000,000) shares of undesignated preferred stock,
each of $0.01 par value, of which Two Hundred Fifty Thousand (250,000) shares,
designated as xxxx 1996-MAJOR Series of Convertible Preferred Stock, are validly
issued and outstanding, fully paid.
2.4.3 Financial Statements. Fidelity has furnished the Merging
Corporation with the consolidated audited balance sheet of Fidelity as of
December 31, 1995, and the related audited statement of income for the twelve
months then ended, and an interim unaudited balance sheet (the "Balance Sheet")
as of September 30, 1996 (the "Balance Sheet Date") and the related consolidated
statement of income for the nine (9)
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Months then ended. These financial statements (i) are in accordance with the
books and records of Fidelity; (ii) fairly present the financial condition of
Fidelity as of those dates and the results of its operations as of and for the
periods specified, all prepared in accordance with generally accepted accounting
principles applied on the basis consistent with prior accounting periods; and
(iii) contain and reflect, in accordance with generally accepted accounting
principles consistently applied, reserves for all liabilities, losses and costs
in excess of expected receipts and all discounts and refunds for services and
products already rendered or sold that are reasonably anticipated and based on
events or circumstances in existence or likely to occur in the future with
respect to any of the contracts or commitments of Fidelity. Specifically, but
not by way of limitation, the Balance Sheet (i) discloses, in accordance with
generally accepted accounting principles, all of the debts, liabilities and
obligations of any nature (whether absolute, accrued, contingent, or otherwise,
and whether due or to become due) of Fidelity at the Balance Sheet Date, and
includes appropriate reserves for all taxes and other liabilities accrued or due
at that date but not yet payable, and (ii) does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading and
fairly present the financial positions of Fidelity as of the respective dates
thereof.
2.4.4 Consents and Approvals: No Violations. Except for applicable
requirements of New York securities law, no filing with, and no permit,
authorization, consent or approval of any public body or authority is necessary
for the consummation by Fidelity of the transactions contemplated by this
Agreement. Neither the execution and
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2.4.5 Absence of Certain Changes. Since December 31, 1996, Fidelity (i)
has not suffered a Material Adverse Effect, (ii) has not entered into any
transaction, or conducted its business or operations, other than in the ordinary
course of business and consistent with past practice, and (iii) has not taken or
agreed to take any of the following actions :
(i) (a) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof) in
respect of any of its capital stock, (b) split, combine or reclassify any of its
capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock; or (c) amend the terms of, repurchase, redeem or otherwise
acquire any of its securities or any securities of its subsidiaries, or propose
to do any of the foregoing;
(ii) authorize for issuance, issue, sell, deliver or agree or
commit to issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise)
any stock of any class or any other securities (including indebtedness having
the right to vote) or equity equivalents (including, without limitation, stock
appreciation rights), except as required pursuant to the agreements and
instruments outstanding on the date hereof, or amend in any material respect any
of the terms of any such securities or agreements outstanding on the day hereof;
(iii) Incorporation or Bylaws; amend or propose to amend its
Articles or Certificate of
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(iv) acquire, sell, lease, encumber, transfer or dispose of any
assets outside the ordinary course of business, consistent with past practice,
or any assets which are material to Fidelity, the Merging Corporation, any of
the Owned Corporations, or the Surviving Corporation, as applicable, taken as a
whole or make any capital expenditures aggregating over Twenty Thousand
($20,000.00) Dollars, except in each case pursuant to obligations in effect on
the date hereof, or enter into any contract, commitment or transaction outside
the ordinary course of business, consistent with past practice;
(v) incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities or warrants or rights to
acquire any debt securities of Fidelity or guarantee (or become liable for) any
debt of others or make any loans, advances or capital contributions or mortgage,
pledge or otherwise encumber any material assets or create or suffer any
material lien thereupon other than in each case in the ordinary course of
business consistent with past practice;
(vi) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
financial statements (or the notes thereto) of Fidelity, as applicable, incurred
in the course of business consistent with past practice or settle any lawsuits
relating to intellectual property;
(vii) change any of the accounting principals or practices used by
it (except as required by generally accepted accounting principals);
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delivery of this Agreement by Fidelity, the consummation by Fidelity of the
transactions contemplated hereby, nor compliance by Fidelity with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the Articles of Incorporation or Bylaws of Fidelity; (ii) result in
a violation or breach of, or constitute (with or without due notice or lapse of
time or both) a default (or give rise to any right of termination, cancellation
or acceleration or result in the creation of any lien) under any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, license,
contract, agreement or other instrument or obligation to which Fidelity is a
party or by which any of them or any of its properties or assets may be bound;
or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Fidelity or any of its properties or assets. The
foregoing notwithstanding, Fidelity shall have thirty (30) days from the
execution hereof to conduct a review of all information and/or documentation for
the purpose of determining (i) if a default or violation as set forth in this
subparagraph exists or (ii) if any consents and/or approvals are necessary to
consummate this transaction. In the event that it is determined that a default
or violation exists or may exist, or a consent or approval is necessary,
Fidelity shall notify the Merging Corporation of such and provide the Merging
Corporation with the information, documentation and records discovered, at which
time the Merging Corporation may decide, in its sole and absolute discretion,
whether to waive such default or violation and/or require Fidelity to remedy the
same and obtain any and all necessary consents and/or approvals. In the
alternative, the Merging Corporation may decide in its sole and absolute
discretion, to terminate this Agreement, in which event this Agreement shall be
deemed null and void ab,initio.
(viii) except as required by law, (a) enter into, amend or
terminate any Benefit Plan (as hereinafter defined) or any agreement,
arrangement, plan, or policy between Fidelity and one or more of its directors
or executive officers, or (b) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of the date hereof, except in the case
of ncn-officer employees for normal increases in the ordinary course of business
consistent with past practice that, in the aggregate, do not result in a
material increase in benefits or compensation expense, or enter into any
contract, agreement, commitment or arrangement to do any of the foregoing;
(ix) take any action that would tend not to preserve intact any of
the present business organization of Fidelity, keep available the services of
its present officers and employees and preserve its relationships with
customers, suppliers, licensors, licensees, contractors, distributors and others
having business dealings with it; or
(x) (a) agree to take any of the foregoing actions, or (b) take any
action that would or is reasonably likely to result in any of the
representations and warranties of Fidelity set forth in this Agreement being
untrue.
2.4.6 No Undisclosed Liabilities. Since December 31, 1996, Fidelity has
not incurred any liabilities (absolute, accrued, contingent or otherwise) that
are material, in the aggregate, to the business, operations or financial
condition of any such entity, except for liabilities incurred in the ordinary
course of business, and consistent with past practices and liabilities incurred
in connection with this Agreement.
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2.4.7 No Default. Fidelity is not in default or violation (and no event
has occurred which with notice or the lapse of time or both would constitute a
default or violation) of any term, condition or provision of (i) the Articles of
Incorporation or the Bylaws of any such entity, (ii) any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation to
which any such entity is a party or by which any such entity or any of its
properties or assets may be bound, or (iii) any order, writ, injunction, decree,
statute, rule or regulation applicable to any such entity, except in the case of
(ii) or (iii) for defaults or violations which would not, in the aggregate, have
2 Material Adverse Effect and which would not prevent or materially delay the
consummation of the transactions contemplated hereby.
2.4.8 Litigation. With the exception of the previously disclosed M & M
Telecon litigation, there are no actions, suits, proceedings or, to the best
knowledge of Fidelity, investigations pending or, to the best knowledge of
Fidelity, threatened involving Fidelity, at law or in equity, or before any
governmental entity which, in the aggregate, are reasonably likely to have a
Material Adverse Effect.
2.4.9 Compliance with Applicable Law. The businesses of Fidelity is not
being conducted in violation of any applicable law, ordinance, rule, regulation,
decree or order of any governmental entity, except for violations which, in the
aggregate, do not and would not have a Material Adverse Effect.. Fidelity holds
all permits, licenses, variances, exemptions, orders and approvals of all
governmental entities necessary for the lawful conduct of their businesses (the
Corporations' Permits"), except for failures to hold such Corporations' Permits
which would not, in the aggregate, have a Material Adverse Effect.
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Fidelity is in compliance with the terms of the Corporations' Permits, except
where the failure to do so would not, in the aggregate, have a Material Adverse
Effect.
2.4.10 Taxes. Fidelity has duly filed all material federal, state, local
and foreign tax returns required to be filed by it, and has duly paid, caused to
be paid or made adequate provision for the payment of all Taxes required to be
paid in respect of the periods covered by such returns and have made adequate
provision for payment of all Taxes anticipated to be payable in respect of all
calendar periods since the periods covered by such returns. All deficiencies and
assessments asserted as a result of any examinations or other audits by federal,
state, local or foreign taxing authorities have been paid, fully settled or
adequately provided for in the financial statements of Fidelity and no issue or
claim has been asserted for Taxes by any taxing authority for any prior period,
the adverse determination of which would result in a deficiency which would have
a Material Adverse Effect, other than those heretofore paid or provided for.
There are no outstanding agreements or waivers extending the statutory period of
limitation applicable to any federal, state or local income tax return of
Fidelity.
2.4.11 ERISA.
(i) With respect to each employee benefit plan (including, without
limitation, any 'employee benefit plan," as defined in SYMBOL 255 F "Symbol"
3(3) of the Employee Retirement Income Security Act of 1974, as amended
('ERISA')), and any material bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan, arrangement or understanding
(whether
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or not legally binding) (all the foregoing being herein called "Benefit Plans"),
maintained or contributed to by Fidelity, Fidelity has made available to the
Merging Corporation a true and correct copy of, where applicable, (i) the most
recent annual report (Form 5500) filed with the Internal Revenue Service (the
"IRS"), (ii) such Benefit Plan, (iii) each trust agreement, insurance contract,
and third-party administration agreement, if any, relating to such Benefit Plan,
(iv) the most recent actuarial report or valuation relating to any Benefit Plan
subject to Title IV of ERISA, (v) the most recent IRS determination letter, and
(vi) the summary plan description. No amendments or promises have been made with
respect to any Benefit Plan which would increase after the date of this
Agreement the expense of maintaining such Benefit Plan.
(ii) No Benefit Plans of Fidelity nor benefit plans of any entity
which would be treated as a "single employee" with Fidelity under SYMBOL 000 \x
"Xxxxxx" 0000 (x) of ERISA are subject to Title IV of ERISA.
(iii) With respect to Benefit Plans of Fidelity, no event has
occurred, and to the knowledge of Fidelity, there exists no condition or set of
circumstances which are reasonably likely to occur in connection with which
Fidelity would be subject to any liability that would have a Material Adverse
Effect (except liability for benefit claims and funding obligations payable in
the ordinary course), under ERISA, the Internal Revenue Code of 1986, as amended
(the code) or any other applicable law.
(iv) With respect to Benefit Plans of Fidelity in the aggregate,
there are no funded benefit obligations for which contributions have not been
made or properly accrued and there are no unfunded benefit obligations which
have not been accounted for
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reserves, or otherwise prooeriv footnoted in accordance with generally acceoted
accounting principals, an the consolidated financial statements of Fidelity,
except for obligations which would not, in the aggregate, have a Material
Adverse Effect.
(v) Each of the Benefit Plans has been administered in compliance
with its terms in all material respects and is in compliance with applicable
laws and regulations, except for failures to comply which, in the aggregate,
would not have a Material Adverse Effect.
(vi) Each of the Benefit Plans which is intended to be a qualified
plan within the meaning of SYMBOL 000 \x "Xxxxxx" 000 (x) of the Code has been
determined by the IRS to be so qualified and nothing has occurred to cause the
loss of such qualified status.
(vii) Fidelity is not a party to any collective bargaining
agreement and Fidelity has no employees who are subject to a collective
bargaining agreement.
(viii) Fidelity has no obligations for retiree health, medical or
life insurance benefits under any plan referred to in this Paragraph 2.2.1 1
other than (i) coverage mandated by applicable law, (ii) deferred compensation
benefits accrued as liabilities on the financial statements of Fidelity, or
(iii) benefits the full cost of which are borne by the current or former
employee (or his or her beneficiary).
2.4.12 Intellectual Propertv. No claim is pending, or, to the knowledge
of Fidelity, threatened to the effect that the present or past operations of
Fidelity infringe upon or conflict with the rights of others with respect to any
intellectual property (including, without limitation, licenses, copyrights,
drawings, trade secrets, know-how and computer software) necessary to permit
Fidelity to conduct its business as now operated (the
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"Corporation's Intellectual Property") and no claim is pending or, to the best
knowledge of Fidelity, threatened to the effect that Corporation's Intellectual
Property is invalid or unenforceable. Fidelity has provided the Merging
Corporation with a list of all licenses, patents, patent rights, patent
applications, trademarks, trademark applications, trade names, copyrights and
service marks. No contract, agreement or understanding between Fidelity and any
other party exists which would impede or prevent the continued use by Fidelity
of the entire right, title and interest of the said corporation to the said
corporation's Intellectual Property.
2.4.13 Change in Control. Fidelity is not a party to any contract,
agreement or understanding which contains a "change in control," "potential
change in control" or similar provision. The Merger will not (either alone or
upon the occurrence of any additional acts or events) result in any payment
(whether of severance pay or otherwise) becoming due from Fidelity to any
person.
2.4.14 Employee Relations. Fidelity has provided the Merging Corporation
with a complete and correct list of all employment, compensation, severance,
consulting or indemnification contracts between them and their respective
present or former employees, officers, directors, and consultants to the extent
that each of them have any continuing obligations thereunder.
2.4.15 Material Contracts. Fidelity has provided the Merging Corporation
with a complete and accurate list of all contracts, agreements and instruments
to which it is a party or by which it to any of its properties or assets may be
bound that (i) relate to the leasing of real property or (ii) provide for
payments in any one year in excess
-35-
of TWENTY THOUSAND ($20,000.00) DOLLARS. Each of such contracts, agreements and
instruments is valid and binding and in full force and effect and, 'Lo the best
knowledge of the Fidelity, there has not occurred any default by any party
thereto which remains unremedied as of the date herecf.
2.5 Securities Law. The parties will mutually arrange for and manage all
necessary procedures under the requirements of federal and New York securities
laws, and the related supervisory commissions, to insure that this plan is
properly processed to comply with registration formalities, or to take full
advantage of any appropriate exemptions from registration, and to otherwise be
in accord with all anti-fraud restrictions in this area.
ARTICLE 3
COVENANTS, ACTIONS AND OBLIGATIONS PRIOR TO THE EFFECTIVE DATE
3.1 Interim Conduct of Business-, Limitations. Except as limited by this
Paragraph 3.1, pending consummation of the merger, each of the constituent
corporations will carry on its business in substantially the same manner as
before, and will use its best efforts to maintain its business organization
intact, to retain its present employees, and to maintain its relationship with
suppliers and other business contacts. Except with the prior consent in writing
of the Surviving Corporation or the Merging Corporation, pending consummation of
the merger, the Merging Corporation, the Surviving Corporation and Fidelity
shall not:
3.1.1 Create or issue any in debtedness for borrowed money other than the
ordinary course of its business.
3.1.2 Enter into any transaction other than those involved in carrying on
its ordinary course of business.
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3.2 Submission to Shareholders and Filing. This Agreement shall be submitted
separately to the shareholders of each party to this Agreement in the manner
provided by the laws of the jurisdiction under which each party is incorporated
for approval.
3.3 Conditions Precedent to Obligations of the Merging Corporation. Except as
may be expressly waived in writing by the Merging Corporation, all of the
obligations of the Merging Corporation under this Agreement are subject to the
satisfaction, prior to or on the Closing Date of each of the following
conditions by the Surviving Corporation and/or Fidelity:
3.3.1 Representations and warranties made by the Surviving Corporation
and Fidelity to the Merging Corporation in Article 2 of this Agreement and in
any documents delivered pursuant to this Agreement shall be deemed to have been
made again on the Closing Date, and shall then be true and correct in all
material respects. If the Surviving Corporation shall have discovered any
material error, misstatement, or omission in those representations and
warranties on or before the Closing Date, it shall report that discovery
immediately to the Merging Corporation and shall either correct the error,
misstatement or omission or obtain a written waiver from the Merging
Corporation.
3.3.2 The Surviving Corporation and Fidelity shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed and complied with by it prior to or on the Closing Date.
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3.3.3 Fidelity shall not have issued any new shares from the date of
execution hereof through and including the Closing Date.
3.3.4 The Surviving Corporation and Fidelity shall have delivered to the
Merging Corporation a certificate dated the Closing Date executed in its
corporate name by the appropriate corporate officer, certifying to the
satisfaction of the conditions specified in Subparagraphs 3.3.1 and 3.3.2.
3.3.5 No action or proceeding by any governmental body or agency shall
have been threatened, asserted or instituted to restrain or prohibit the
carrying out of the transactions contemplated by this Agreement.
3.3.6 All corporate and other proceedings and actions taken in connection
with the transactions contemplated by this Agreement and all certificates,
opinions, instruments and documents shall be satisfactory in form and substance
to counsel for the Merging Corporation
3.3.7 That certain Stock Purchase Agreement between the Surviving
Corporation and Xxxxxx Xxxxxxx shall have been completed and all contingencies
therein contained shall have been satisfied to the satisfaction of the
Shareholder of the Merging Corporation.
3.4 Conditions Precedent to Obligations of Surviving Corporation. Except as
may be expressly waived in writing by the Surviving Corporation, all of the
obligations of the Surviving Corporation under this Agreement are subject to the
satisfaction, prior to or on the Closing Date, of each of the following
conditions by the Merging Corporation:
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3.4.1 Representations and warranties made by the Merging Corporation to
the Surviving Corporation in Article 2 of this Agreement and in any documents
delivered pursuant to this Agreement shall be deemed to have been made again on
the Closing Date, and shall then be true and correct in all material respects.
If the Merging Corporation shall have discovered any material error,
misstatement, or omission in those representations and warranties on or before
the Closing Date, it shall report that discovery immediately to the Surviving
Corporation and shall either correct the error, misstatement or omission or
obtain a written waiver from the Surviving Corporation.
3.4.2 The Merging Corporation shall have performed and complied with all
agreements and conditions required by the Agreement to be performed and complied
with by it prior to or on the Closing Date.
3.4.3 The Merging Corporation shall have delivered to the Surviving
Corporation a certificate dated the Closing Date executed in its corporate name
by the appropriate corporate officer, certifying to the satisfaction of the
conditions specified in Subparagraphs 3.4.1 and 3.4.2.
3.4.4 No action or proceeding by any governmental body or agency shall
have been threatened, asserted or instituted to restrain or prohibit the
carrying out of the transactions contemplated by this Agreement.
3.4.5 All corporate and other proceedings and actions taken in connection
with the transactions contemplated by this Agreement and all certificates,
opinions, instruments and documents shall be satisfactory in form and substance
to counsel for the Surviving Corporation.
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3.4.6 The Merging Corporation shall have obtained the approval of all
franchising manufacturers (the "Factory Approvals") which have franchise
agreements with the Owned Companies. The parties acknowledge and agree that in
the event some or all of the Factory Approvals are not obtained on or before the
Closing Date, the parties may either (i) extend the Closing Date in order to
provide the Merging Corporation with additional time to obtain the Factory
Approvals or (ii) the Surviving Corporation and Fidelity may close this
transaction with the Merging Corporation only owning those Owned Companies for
which Factory Approvals have been obtained in which event the Consideration, as
hereinafter defined, shall be adjusted in accordance with the allocations
referenced in Article 4.2. The Shareholder of the Merging Corporation, the
Merging Corporation and the Owned Corporations agree to make a good faith effort
using all due diligence to obtain the Factory Approvals prior to the Closing and
for any of the Owned Corporations for which the Factory Approvals could not be
obtained prior to the Closing, to continue in their efforts to obtain same until
the parties mutually agree to cease such effort, but in no event for a period in
excess of 90 days after the Closing Date.
ARTICLE 4
MANNER OF CONVERTING SHARES
4.1 Manner. The Shareholders of the Merging Corporation shall surrender their
shares to the secretary of the Surviving Corporation promptly after the Closing
Date in exchange for shares of Fidelity to which they are entitled under this
Article 4.
4.2 Shares. The shareholders of the Merging Corporation shall be entitled to
receive 1.8 million shares of The 1997-MAJOR Series of Convertible Preferred
Stock (the
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"Shares") of Fidelity. In the event the Shares do not have a value on the
Closing Date equal to SIX MILLION ($6,000,000.00) DOLLARS, the shareholders of
the Merging Corporation shall be entitled to that number of shares which have a
value on the Closing Date Of SIX MILLION ($6,000,000.00) DOLLARS (the
"Consideration"). The Consideration shall be allocated among the Owned
Corporation as set forth on the attached Exhibit "D" which is incorporated
herein by this reference.
ARTICLE 5
REMEDIES
5.1 Remedies of Merging Corporation.
5.1.1 Remedies of Merging Corporation against Fidelity. In the event
Fidelity is unable for any reason whatsoever to transfer the Shares, which
failure or refusal shall not relieve Fidelity of any obligation hereunder,
Merging Corporation may, at its option, and without prejudice to its rights
against Fidelity, pursue all rights and remedies that it may have as against
Fidelity including, without limitation, the right of specific performance.
5.1.2 Remedies of Merging Corporation against Surviving Corooration. In
the event Surviving Corporation is unable for any reason whatsoever to carry out
its obligations under this Agreement, which failure or refusal shall not relieve
Surviving Corporation of any obligation hereunder, Merging Corporation may, at
its option, and without prejudice to its rights against Surviving Corporation,
pursue all rights and remedies that it may have as against Surviving Corporation
including, without limitation, the right of specific performance.
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5.2 Remedies of Surviving Corocration. In the event Merging Corporation is
unable for any reason whatsoever to carry out its obligations under this
Agreement, which failure or refusal shall not relieve Merging Corporation of any
obligation hereunder, Surviving Corporation may, at its option, and without
prejudice to its rights against Merging Corporation, pursue all rights and
remedies that it may have as against Merging Corporation including, without
limitation, the right of specific performance.
5.3 Remedies of Fidelity In the event Merging Corporation is unable for any
reason whatsoever to carry out its obligations under this Agreement, which
failure or refusal shall not relieve Merging Corporation of any obligation
hereunder, Fidelity may, at its option, and without prejudice to its rights
against Merging Corporation, pursue all rights and remedies that it may have as
against Merging Corporation including, without limitation, the right of specific
performance.
ARTICLE 6
DIRECTORS AND OFFICERS
6.1 Directors and Officers of the Surviving Corporation. The Board of
Directors and the Officers of the Surviving Corporation who are currently
serving in such positions and who will be serving in such positions after the
Closing Date are set forth on Exhibit 'E' which is attached hereto and made a
part hereof by this reference thereto.
ARTICLE 7
BY-LAWS
7.1 By-Laws of Surviving Corporation. The by-laws of the Surviving
Corporation as existing on the date of execution of this Agreement, shall
continue in full force and
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effect as the by-laws of the Surviving Corporation until altered, amended, or
repealed as provided in the by-laws or as provided by law.
7.2 By-Laws of the Merging Corporation. The by-laws of the Merging
Corporation as existing on the date of execution of this Agreement, shall
continue in full force and effect as the by-laws of the Merging Corporation
until altered, amended, or repealed as provided in the by-laws or as provided by
law.
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification. The Merging Corporation and the Surviving Corporation
agree that each shall obtain from their respective shareholders, agreements
wherein the respective shareholder shall indemnify the other for any loss,
damage or cost arising out of any material misrepresentations made by such
shareholders.
ARTICLE 9
TERMINATION
9.1 Circumstances. This Agreement may be terminated and the merger may be
abandoned at any time prior to the Closing Date notwithstanding the approval of
the shareholders of either of the constituent corporations:
9.1.1 By mutual consent of the Board of Directors of the constituent
corporations.
9.1.2 At the election of the Board of Directors of either constituent
corporation if:
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(i) The number of shareholders of either constituent corporation,
or of both, dissenting from the merger shall be so large as to make the merger
in the opinion of either Board of Directors, inadvisable or undesirable.
(ii) Any material litigation or proceeding shall be instituted or
threatened against either constituent corporation, or any of its assets, that,
in the opinion of either Board of Directors, renders the merger inadvisable or
undesirable.
(iii) Any legislation shall be enacted that, in the opinion of
either Board of Directors, renders the merger inadvisable or undesirable.
(iv) Between the date of this Agreement and the Closing Date, there
shall have been, in the opinion of either Board of Directors, any materially
adverse change in the business or condition, financial or otherwise of either
constituent corporation or Fidelity.
9.1.3 At the election of the Board of Directors of the Merging
Corporation, if the Commissioner of Internal Revenue shall not have ruled, in
substance, that for federal income tax purposes the merger will qualify as a
reorganization under Sections 368(a)(1)(A) and/or 368 (a)(1)(C) of the Internal
Revenue Code of 1986, as amended, and that no gain or loss will be recognized by
the shareholders of the Merging Corporation on the exchange of their stock for
stock of the Surviving Corporation.
9.2 Notice of and Liability for Termination. If an election is made to
terminate this Agreement and abandon the merger for any reason:
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9.2.1 The president or any vice president of the constituent corporation
whose Board of Directors has made the election shall give immediate written
notice of the election to the other constituent corporation.
9.2.2 On the giving of notice as provided in Subparagraph (a), this
Agreement shall terminate and the proposed merger shall be abandoned.
ARTICLE 10
FINANCIAL STATEMENTS
The parties hereto acknowledge that they have each received financial
statements from the other.
ARTICLE 1 1
MISCELLANEOUS
11.1 Entire Agreement. This Agreement represents the entire agreement between
the parties with respect to the subject matter hereof and may only be modified
by a written instrument executed by all parties.
11.2 Severability. If any term or provision of this Agreement, or the
application thereof to any person or circumstance shall, to any extent, be
deemed invalid or unenforceable, then, and in such event, the remainder of this
Agreement, or the application of such term or provision to persons or
circumstances other than those as to whom or to which it is held invalid or
unenforceable, shall not be affected thereby and each term and provision of this
Agreement shall be valid and enforceable thereto to the fullest extent permitted
by law.
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11.3 Jurisdiction. In any action or proceeding brought hereunder or in
respect hereof, the parties consent to the personal judicial jurisdiction of the
courts of the State of New York.
11.4 Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of New York, excluding choice
of law rules thereof.
11.5 Notices. All notices, requests, demands, or other communications to be
given hereunder shall be in writing and shall be deemed to have been duly given
if personally delivered or mailed by certified mail, return receipt requested:
If to the Merging Corporation and/or the Shareholder of the Merging
Corporation addressed to it at:
Major Automotive Group, Inc.
Xxxxx Xxxxxxx, President
00-00 Xxxxxxxx Xxxxxxxxx
Xxxx Xxxxxx Xxxx, XX 1 1 1 01
With a copy to:
Xxxxxxx Xxxxxxxx, Esquire
000 Xxxxxxxx, Xxxxx 000
0xx Xxxxx
Xxx Xxxx, XX 00000
If to the Surviving Corporation, addressed to it at:
Major Acquisition Corp.
c/o Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xxxx,
Xxxxx 0000
Xxx Xxxxxxx, XX 11 415
With a copy to:
Xxxxxx Xxxxxxx, Esquire
000 Xxxxx Xxxxxx, 00xx Xxxxx
Xxx Xxxx, XX 00000
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If to Fidelity to
Fidelity Holdings, Inc.
00-00 Xxx Xxxxxxx Xx.
Xxx Xxxxxxx, XX 00000
With a copy to.,
Xxxxxx Xxxxxxx
000 Xxxxx Xxxxxx, 0X Xxxxx
Xxx Xxxx, XX 00000
or to such other piece or place* as designated in writing.
11.6 Gender- All pronouns and any Nations thereof shall be deemed to refer to
the masculine, feminine, regular or plural, and the Identify of the person or
enmity may require.
11.7 This Agreement may be executed in several corporation, one of which
shall be deemed an original for all purposes hereof. All corporate reports,
however, shall constitute one
11.8 Faxsimile- A faxed signed copy of this Agreement shall constitute me
original for all purposex.
IN WITNESS WHEREOF, these have year first above written.
Attest:
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PLAN AND AGREEMENT OF MERGER
EXHIBIT "A"
NUMBER OF SHARES OWNED AND
PERCENTAGE OF THOSE SHARES
COMPANIES OWNED BY MERGING CORPORATION OUTSTANDING
--------------------------------------- ---------------------------
Major Chevrolet, Inc. 890 100%
Xxxxx Xxxxx, Inc. 10 50%
Major Subaru, Inc. 10 100%
Major Chrysler, Plymouth, Jeep, Eagle, Inc. 50 50%
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PLAN AND AGREEMENT OF MERGER
Exhibit "B"
Owned Corporations' Assets
PLAN AND AGREEMENT OF MERGER
Exhibit "C"
Owned Corporations' Balance Sheets
EXHIBIT
Major Chevrolet, Inc. 1,100,000 shares
Xxxxx Xxxxx, Inc. 300,000 shares*
Major Chrysler Plymouth Jeep Eagle, XAC 300,000 shares*
Major Subaru, Inc. 100,000 shares*
----------
TOTAL 1,800,000 shares
* as described in Paragraph 4.2 of the Plan and Agreement of Officers of Major
Acquisition Corp. prior to the Closing Date:
Directors of Major Acquisition Corp. after the Closing Date:
XXXXX XXXXXXX
XXXXXX XXXXXXX
Officers of Major Acquisition Corp. after the Closing Date:
XXXXX XXXXXXX
XXXXXX XXXXXXX
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