AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") made and
entered into as of February __, 2001, is by and among D.W. Industries, Inc., a
Delaware corporation ("Acquiror"), Stuart Katz, an officer, director and
principal stockholder of Acquiror ("Katz"), David Pomerantz, an officer,
director and principal stockholder of Acquiror ("Pomerantz," and together with
Katz, the "Stockholders"), Third Wave Media Ltd., a California corporation
("Company"), and Andrew Melzer, the sole stockholder of Company ("Melzer").
RECITALS
WHEREAS, Melzer owns a total of ten (10) shares of common stock of
Company (the "Company Shares") which constitutes all of the issued and
outstanding capital stock of Company.
WHEREAS, Acquiror desires to acquire all of the Company Shares, making
Company a wholly-owned subsidiary of Acquiror, and Melzer desires to exchange
his Company Shares solely for shares of Acquiror's Common Stock, as described
herein.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and in reliance upon the representations and warranties
hereinafter set forth, the parties agree as follows:
AGREEMENT
1. Plan of Reorganization. It is the intention of the parties hereto
that all of the Company Shares shall be acquired by Acquiror in exchange solely
for Acquiror's voting common stock, and that this transaction qualify as a
tax-free reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended.
2. Exchange of Shares.
2.1 Shares Being Exchanged. Subject to the terms and conditions of this
Agreement, at the closing provided for in Section 3 hereof (the "Closing"),
Melzer shall assign, transfer and deliver to Acquiror the Company Shares, which
constitutes all of the issued and outstanding capital stock of Company.
2.2 Consideration. Subject to the terms and conditions of this
Agreement and in consideration of the exchange, assignment, transfer and
delivery of the Company Shares to Acquiror, at the Closing, Acquiror shall issue
and deliver a total of thirty million (30,000,000) shares of common stock of
Acquiror (the "Acquiror Shares") to Melzer.
3. The Closing.
3.1 Time and Place. The closing of the transactions contemplated by
this Agreement shall be held not more than five (5) business days following the
date on which the Acquiror has been advised by the Securities and Exchange
Commission ("SEC") that the SEC has no further comments on the registration
statement on Form SB-2 filed by Acquiror with the SEC in accordance with Section
9.3 and that such registration statement will be declared effective by the SEC
upon receipt of a request for acceleration from Acquiror, provided that all
other conditions precedent to the obligations of the parties specified in this
Agreement, unless duly waived by the party entitled to satisfaction thereof,
have been satisfied. In any event, if the Closing has not occurred on or before
June 30, 2001, this Agreement may be terminated as provided in Section 14 below,
or on such other date as the parties may agree upon in writing. The date on
which the Closing is to be held is referred to herein as the "Closing Date". The
Closing shall be held at the offices of Tressler, Soderstrom, Maloney & Priess,
3070 Bristol Street, Suite 450, Costa Mesa, CA 92626 at 10:00 a.m. on the
Closing Date, or at such other time and place as the parties may agree upon in
writing.
3.2 Deliveries by Melzer. At the Closing, Melzer shall deliver to
Acquiror the following: (a) stock certificates representing the Company Shares,
duly endorsed or accompanied by stock powers duly executed in blank and
otherwise in form acceptable for transfer on the books of Company, and (b) an
investment letter in the form attached hereto as Exhibit A executed by Melzer.
3.3 Deliveries by Company. At the Closing, Company shall deliver to
Acquiror the documents referred to in Section 11 hereof.
3.4 Deliveries by Acquiror. At the Closing, in addition to the
documents referred to in Section 10 hereof, Acquiror shall deliver to Melzer the
following: (a) a stock certificate issued in the name of Melzer representing the
Acquiror Shares, and (b) Acquiror's minute books, corporate seal and copies of
all corporate and financial books and records.
4. Individual Representations and Warranties of Melzer. Melzer
represents and warrants to Acquiror that:
4.1 Title. Melzer owns the Company Shares, and shall transfer to
Acquiror at the Closing, good and valid title to the Company Shares free and
clear of all liens, claims, options, charges, pledges, security interests, and
encumbrances of every kind, character or description.
4.2 Valid and Binding Agreement. Melzer has full power and authority to
execute and deliver this Agreement and consummate the transactions contemplated
hereby, and this Agreement is binding on him and enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, and (b) general principles of equity that
restrict the availability of equitable remedies. The execution and delivery of
this Agreement and consummation of the transactions contemplated hereby do not
violate or conflict with or constitute a default under any contract, commitment,
agreement, understanding, arrangement or restriction of any kind to which Melzer
is a party or by which Melzer or Melzer's property is bound, or to the knowledge
of Melzer any existing applicable law, rule, regulation, judgment, order or
decree of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over Melzer or any of Melzer's property. Melzer is
not and will not be required to give any notice to or obtain any consent from
any person in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby.
4.3 Investment Representations. Melzer intends to hold the Acquiror
Shares for investment and not with a view to the public distribution or resale
thereof, and Melzer shall confirm such intention to Acquiror by delivering to
Acquiror at the Closing an investment letter in the form attached as Exhibit A
hereto executed by Melzer. Melzer agrees that Acquiror may endorse on any stock
certificate for the Acquiror Shares to be delivered pursuant to this Agreement
an appropriate legend referring to the provisions of the investment letter
attached as Exhibit A hereto, and that Acquiror may instruct its transfer agent
not to transfer any Acquiror Shares unless advised by Acquiror that such
provisions have been complied with.
5. Representations and Warranties of Company and Melzer. Company and
Melzer hereby represent and warrant to Acquiror that:
5.1 Organization.
(a) Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of California. Company has all
requisite corporate power and authority to carry on its business as presently
conducted and to own or lease its properties and assets, possesses all licenses,
rights and privileges material to the conduct of its business, and is duly
qualified to conduct business as a foreign corporation and is in good standing
under the laws of every jurisdiction where the nature of the activities
conducted by it or the character of the properties owned, leased or operated by
it require such qualification, except where the failure to be so qualified could
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect on Company or its business.
(b) The copies of the Articles of Incorporation of Company and all
amendments thereto, as certified by the Secretary of State of California, and
the Bylaws of Company and all amendments thereto, as certified by the Secretary
of Company, which have heretofore been delivered to Acquiror, are complete and
correct copies of the Articles of Incorporation and Bylaws of Company as amended
and in effect on the date hereof.
5.2 Authority. Company has all requisite corporate power and authority
to enter into this Agreement and to consummate the transactions contemplated
herein. All corporate action on the part of Company, its officers, directors and
stockholders necessary for the authorization and approval of this Agreement and
the performance of all obligations of Company hereunder at the Closing has been
duly and validly taken. The Agreement has been duly executed and delivered by
Company and constitutes the valid and binding obligation of Company enforceable
in accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
affecting enforcement of creditors' rights, and (b) general principles of equity
that restrict the availability of equitable remedies.
5.3 Financial Statements.
(a) The audited balance sheet of Company as of December 31, 1999 (the
"Company Balance Sheet") and the related statements of operations, cash flows
and shareholders' equity for the two years ended December 31, 1999 and 1998,
including the notes thereto and the accompanying report of Singer Lewak
Greenbaum & Goldstein LLP, certified public accountants, and the unaudited
balance sheet of Company as of September 30, 2000, and the related statement of
operations, cash flows and shareholders' equity for the nine months then ended
(collectively the "Company Financial Statements") have been delivered to
Acquiror. The Company Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods indicated and fairly present the financial condition of Company as of
their respective dates and the results of its operations for the periods covered
thereby. To the best knowledge of Company and Melzer, the unaudited financial
statements include all adjustments (all of which are normal recurring
adjustments) necessary for such fair presentation.
(b) Company did not have, as of the date of the Company Balance Sheet,
except as and to the extent reflected or reserved against therein, any material
liabilities or material obligations (absolute or contingent) of a nature
customarily reflected in financial statements or the notes thereto prepared in
accordance with generally accepted accounting principles.
(c) The books and records, financial and otherwise, of Company are in
all material respects complete and correct and have been maintained in
accordance with sound business and bookkeeping practices so as to accurately and
fairly reflect, in reasonable detail, the transactions and dispositions of the
assets of Company.
5.4 Absence of Certain Changes or Events. Except as described in
Schedule 5.4 attached hereto, since the date of the Company Balance Sheet
through the date hereof, there has not been:
(a) Any material adverse change in the assets, liabilities or financial
condition of Company;
(b) Any material change in the contingent obligations of Company by way
of guaranty, endorsement, indemnity, warranty or otherwise;
(c) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
financial condition of Company;
(d) Any waiver by the Company of a valuable right or of a material debt
owed to it;
(e) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(f) Any material change in any compensation arrangement or agreement
with any employee, officer, director or stockholder;
(g) Any declaration or payment of any dividend;
(h) Any debt, obligation or liability incurred, assumed or guaranteed
by the Company, except those for immaterial amounts and for current liabilities
incurred in the ordinary course of business;
(i) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other proprietary rights;
(j) Any change in any material agreement to which the Company is a
party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition or operations of the Company;
or
(k) Any arrangement or commitment by the Company to do any of the acts
described in subsections (a) through (j) above.
5.5 Capitalization.
(a) The authorized capital stock of Company consists of 100 shares of
common stock, no par value, of which 10 shares are issued and outstanding. All
of the issued and outstanding shares of common stock of Company were offered and
sold in compliance with applicable state and federal securities laws, are duly
authorized, validly issued, fully paid and nonassessable, and are not subject to
preemptive rights created by statute, Company's Articles of Incorporation or
Bylaws or any agreement to which Company is a party or by which it is bound.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character to which Company is a party or by which it is bound
obligating Company to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of Company or obligating Company to
grant, extend or enter into any such option, warrant, call, right, commitment or
agreement.
5.6 Title to Properties and Assets; Liens, Etc. Company has good and
marketable title to its properties and assets, including the properties and
assets reflected in the Company Balance Sheet, and good title to its leasehold
estates, in each case, except as set forth in Schedule 5.6, subject to no
mortgage, pledge, lien, lease, encumbrance or charge, other than (a) those
resulting from taxes which have not yet become delinquent, (b) minor liens and
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of Company, and (c) those
that have otherwise arisen in the ordinary course of business. All facilities,
machinery, equipment, fixtures, vehicles and other properties owned, leased or
used by Company are in good operating condition and repair and are reasonably
fit and usable for the purposes for which they are being used. Company is in
compliance with all material terms of each lease to which it is a party or is
otherwise bound.
5.7 Intellectual Property.
(a) Company owns or possesses all of the Proprietary Rights and
licenses or rights to the foregoing necessary for its business as now conducted
and as presently proposed to be conducted, without any known infringement of the
rights of others. For purposes of this Agreement, "Proprietary Rights" means all
patents, patent applications, trademarks, service marks, trademark and service
mark applications, trade names, copyrights, Internet Web sites, domain names and
registrations or applications for registration thereof. There are no outstanding
options, licenses or agreements of any kind relating to the Proprietary Rights,
nor is Company bound by or a party to any options, licenses or agreements of any
kind with respect to the patents, trademarks, service marks, trade names,
copyrights, licenses, information and other proprietary rights and processes of
any other person or entity other than such licenses or agreements arising from
the purchase of "off the shelf" or standard products.
(b) The Company has not received any communications alleging that the
Company has violated any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity, nor is Company aware of any basis therefor.
5.8 Litigation. There is no claim, action, suit, proceeding or
investigation pending or, to the knowledge of Company or Melzer, currently
threatened in writing against Company that questions the validity of this
Agreement or the right of Company to enter into the Agreement, or to consummate
the transactions contemplated hereby, or which might result, either individually
or in the aggregate, in any material adverse change in the assets, condition or
affairs of Company, financially or otherwise, or any change in the current
equity ownership of the Company, nor is Company or Melzer aware that there is
any basis for any of the foregoing. Company is not a party or subject to the
provisions of any order, writ, injunction, judgment or decree of any court or
government agency or instrumentality. There is no action, suit, proceeding or
investigation by Company currently pending or which Company intends to initiate.
5.9 Tax Returns and Payments. Company has filed all tax returns
(federal, state, county and local) which are required to be filed by it and has
paid in full all taxes, including, without limitation, all net income, gross
receipts, sales, use, withholding, payroll, employment, social security,
unemployment, excise and property taxes, plus applicable interest and penalties
thereon due to or claimed to be due by, any governmental authority. Company has
not been advised (a) that any of its returns, federal, state or other, have been
or are being audited as of the date hereof, or (b) of any deficiency in
assessment or proposed adjustment to its federal, state or other taxes, and no
controversy with respect to taxes of any type is pending or, to the knowledge of
Company, threatened.
5.10 Equity Investments. Company has no subsidiaries and does not own
any capital stock, security, partnership interest, or other interest of any kind
in any corporation, partnership, joint venture, association, or other entity.
5.11 No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
conflict with, or result in a breach of any term or provision of, or constitute
a default under or result in a violation of (i) the Articles of Incorporation or
Bylaws of Company as amended, (ii) any agreement, contract, lease, license or
instrument to which Company is a party or by which Company or any of its
properties or assets are bound or (iii) any judgment, decree, order, or writ by
which Company is bound or to which it or any of its properties or assets are
subject.
5.12 Compliance. Company has, in all material respects, complied with
all laws, regulations and orders applicable to its business and has all permits
and licenses required thereby. There is no term or provision of any agreement or
instrument to which Company is a party or by which it is bound, or, to the
knowledge of Company, any provision of any state or federal judgment, decree,
order, statute, rule or regulation applicable to or binding upon Company, which
materially adversely affects or, so far as Company may now foresee, in the
future is reasonably likely to materially adversely affect, the business,
condition or operations of Company or any of its properties or assets.
5.13 Contracts. Schedule 5.13 lists all material contracts, agreements,
instruments, licenses, leases, commitments and other arrangements to which
Company is a party or otherwise relating to or affecting any of its assets,
properties or operations (the "Contracts"). Each Contract is valid, binding and
in full force and effect on the date hereof. Company has performed all material
obligations required to be performed by it under, and is not in material default
or breach of, any Contract, and, to the knowledge of Company, no event has
occurred which, with due notice or lapse of time or both, would constitute such
a material default or breach.
5.14 Employees. Schedule 5.14 lists all employees of the Company as of
the date hereof, including current title and compensation. There is no
collective bargaining agreement or other labor agreement to which the Company is
a party or by which it is bound.
5.15 Employee Plans. Schedule 5.15 lists all pension, profit sharing,
deferred compensation, bonus, incentive, retainer, consulting, stock bonus,
stock purchase, stock option, severance, benefit, retirement, welfare,
disability, hospitalization, insurance, vacation and other similar fringe or
employee benefit plans, funds, programs, agreements or arrangements as of the
date hereof which cover, are maintained for the benefit of, or relate to any or
all current or former employees, officers or directors of the Company (the
"Employee Plans"). Each of the Employee Plans, and the administration thereof,
is and has been in material compliance with the requirements of any and all
applicable statutes, orders or governmental rules or regulations currently in
effect, including, without limitation, the Employee Retirement Income Security
Act of 1974, as amended ("ERISA").
5.16 Brokers or Finders. Except as set forth on Schedule 5.16, the
Company has not (a) dealt with any broker or finder in connection with the
transactions contemplated by this Agreement, or (b) incurred, directly or
indirectly, any disability for any brokerage or finders' fees or agents'
commissions or any similar charges in connection with this Agreement or any
transaction contemplated herein.
5.17 Environmental Matters. The Company and its operations complies and
has at all times complied in all material respects with all applicable laws,
regulations and other requirements of governmental entities relating to toxic or
hazardous substances, wastes, pollution or to the protection of health, safety
or the environment and has obtained and maintained in effect all permits,
licenses and other authorizations or registrations required under all
environmental laws and is in material compliance with all such environmental
permits.
5.18 Company Documents. Company has delivered to Acquiror the following
documents:
(a) Complete and correct copies of the Articles of Incorporation and
Bylaws of Company in effect as of the date of this Agreement;
(b) The Company Financial Statements;
(c) Copies of all material contracts, agreements, instruments,
licenses, leases, commitments and other arrangements to which Company is a party
or otherwise relating to or affecting any of its assets, properties or
operations; and
(d) A description of all governmental licenses, permits, and other
governmental authorizations (or requests or applications therefor) pursuant to
which Company carries on its business (except those which, in the aggregate, are
immaterial to the business of Company).
5.19 Information. The information concerning Company set forth in this
Agreement and in Company's Schedules attached hereto is complete and accurate in
all material respects and does not contain any untrue statement of a material
fact or omit to state a material fact required to make the statements made in
light of the circumstances under which they were made not misleading.
6. Representations and Warranties of Acquiror and Stockholders.
Acquiror and Stockholders, jointly and severally, hereby represent and warrant
to Company and Melzer that:
6.1 Organization.
(a) Acquiror is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Acquiror has all
requisite corporate power and authority to carry on its business as presently
conducted and to own or lease its properties and assets, possesses all licenses,
rights and privileges material to the conduct of its business, and is duly
qualified to conduct business as a foreign corporation and is in good standing
under the laws of every jurisdiction where the nature of the activities
conducted by it or the character of the properties owned, leased or operated by
it require such qualification, except where the failure to be so qualified could
not reasonably be expected to have, individually or in the aggregate, a material
adverse effect on Acquiror or its business.
(b) The copies of the Articles of Incorporation of Acquiror and all
amendments thereto, as certified by the Secretary of State of Delaware, and the
Bylaws of Acquiror and all amendments thereto, as certified by the Secretary of
Acquiror, which have heretofore been delivered to Company, are complete and
correct copies of the Articles of Incorporation and Bylaws of Acquiror as
amended and in effect on the date hereof.
6.2 Authorization. Acquiror and the Stockholders have all requisite
power and authority to enter into this Agreement and to consummate the
transactions contemplated herein. All corporate action on the part of Acquiror,
its officers, directors and stockholders necessary for the authorization and
approval of this Agreement, the issuance of the Acquiror Shares and the
performance of all obligations of Acquiror hereunder at the Closing has been
taken. The Agreement has been duly executed and delivered by Acquiror and the
Stockholders and constitutes the valid and binding obligation of Acquiror and
each Stockholder enforceable in accordance with its terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors' rights, and (b)
general principles of equity that restrict the availability of equitable
remedies.
6.3 Financial Statements.
(a) The audited balance sheet of Acquiror as of December 31, 1999 (the
"Acquiror Balance Sheet"), and the related statements of operations, cash flows,
and stockholders' equity for the period March 19, 1999 (inception) through
December 31, 1999, including the notes thereto and the accompanying report of
Weiss and Company, certified public accountants, and the unaudited balance sheet
of Acquiror as of September 30, 2000, and the related statements of operations,
cash flows and stockholders' equity for the nine months then ended
(collectively, the "Acquiror Financial Statements") have been delivered to
Company and made available to Melzer. The Acquiror Financial Statements have
been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods indicated and fairly present the
financial condition of Acquiror as of their respective dates and the results of
its operations for the periods covered thereby. To the best knowledge of
Acquiror and the Stockholders, the unaudited financial statements include all
adjustments (all of which are normal recurring adjustments) necessary for such
fair presentation.
(b) Acquiror did not have, as of the date of the Acquiror Balance
Sheet, except as and to the extent reflected or reserved against therein, any
liabilities or obligations (absolute or contingent) of a nature customarily
reflected in financial statements or the notes thereto prepared in accordance
with generally accepted accounting principles.
(c) As of the Closing Date, Acquiror will not have any debts,
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due. For purposes of this Agreement,
the term "liabilities" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
(d) The books and records, financial and otherwise, of Acquiror are in
all material respects complete and correct and have been maintained in
accordance with sound business and bookkeeping practices so as to accurately and
fairly reflect, in reasonable detail, the transactions and dispositions of the
assets of Acquiror.
6.4 Absence of Certain Changes or Events. Except as described in
Schedule 6.4 attached hereto, since the date of the Acquiror Balance Sheet
Acquiror has not:
(a) Conducted any business or engaged in any activities other than
activities related to the negotiation and execution of this Agreement and the
preparation of a Registration Statement on Form SB-2 pursuant to Section 9.3
hereof;
(b) Incurred or agreed to incur any debt, guaranteed or agreed to
guarantee the obligations of others, indemnified or agreed to indemnify others,
incurred or agreed to incur any obligation or liability, absolute, accrued,
contingent or otherwise, or subjected or agreed to subject any of the assets of
the Company to any lien, security interest, charge, interest or other
encumbrance or suffered such to be imposed;
(c) Entered into or agreed to enter into any transaction, contract,
instrument, agreement, commitment or other understanding or arrangement, or paid
or agreed to pay any legal fees, accounting fees, finder's fees or other
expenses in connection with this Agreement or the transactions contemplated
hereby;
(d) Issued or sold or agreed to issue or sell any shares of its capital
stock or other securities, or issued, granted or sold any options, rights or
warrants with respect thereto, or acquired any capital stock or other securities
of any corporation or any interest in any business enterprise, or made or agreed
to make any loan or advance to or investment in any person, firm or corporation;
(e) Declared or made any payment of dividends or other distributions to
its stockholders or upon or in respect of any shares of its capital stock, or
purchased retired or redeemed, or obligated itself to purchase, retire or
redeem, any of its shares of capital stock or other securities;
(f) Paid or made any accrual or arrangement for payment of compensation
of any kind to any of its past or present directors, officers, or employees;
(g) Suffered any change, event or condition or become subject to any
law, regulation or rule which, in any case or in the aggregate, has had or may
have a materially adverse effect on Acquiror's condition (financial or
otherwise), business, properties, assets or liabilities; or
(h) Amended its Certificate of Incorporation or Bylaws.
6.5 Capitalization.
(a) The authorized capital stock of Acquiror as of the date hereof
consists of 30,000,000 shares of common stock, $.00001 par value. There are
5,000,000 shares of common stock of Acquiror issued and outstanding. All of the
issued and outstanding shares of common stock of Acquiror were offered and sold
in compliance with applicable state and federal securities laws, are duly
authorized, validly issued, fully paid and nonassessable, and are not subject to
preemptive rights created by statute, Acquiror's Articles of Incorporation or
Bylaws or any agreement to which Acquiror is a party or by which it is bound.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character to which Acquiror is a party or by which it is bound
obligating Acquiror to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of Acquiror or obligating Acquiror
to grant, extend or enter into any such option, warrant, call, right, commitment
or agreement.
(c) The Acquiror Shares to be issued and sold to Melzer, when issued
and delivered in accordance with the terms of this Agreement, will be duly
authorized, validly issued, fully paid and non-assessable.
6.6 Litigation. There is no claim, action, suit, proceeding or
investigation pending or, to the knowledge of Acquiror or Stockholders,
currently threatened in writing against Acquiror that questions the validity of
this Agreement or the right of Acquiror to enter into the Agreement, or to
consummate the transactions contemplated hereby, or which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition or affairs of Acquiror, financially or otherwise, or any change in the
current equity ownership of Acquiror, nor is Acquiror or Stockholders aware that
there is any basis for any of the foregoing. Acquiror is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by Acquiror currently pending or which Acquiror
intends to initiate.
6.7 Tax Returns and Payments. Acquiror has filed all tax returns
(federal, state, county and local) which are required to be filed by it and has
paid in full all taxes, including, without limitation, all net income, gross
receipts, sales, use, withholding, payroll, employment, social security,
unemployment, excise and property taxes, plus applicable interest and penalties
thereon due to or claimed to be due by, any governmental authority. Acquiror has
not been advised (a) that any of its returns, federal, state or other, have been
or are being audited as of the date hereof, or (b) of any deficiency in
assessment or proposed adjustment to its federal, state or other taxes, and no
controversy with respect to taxes of any type is pending or, to the knowledge of
Acquiror, threatened.
6.8 Compliance. Acquiror has, in all material respects, complied with
all laws, regulations and orders applicable to its business and has all permits
and licenses required thereby. There is no term or provision of any agreement or
instrument to which Acquiror is a party or by which it is bound, or, to the
knowledge of Acquiror, any provision of any state or federal judgment, decree,
order, statute, rule or regulation applicable to or binding upon Acquiror, which
materially adversely affects or, so far as Acquiror may now foresee, in the
future is reasonably likely to materially adversely affect, the business,
condition or operations of Acquiror or any of its properties or assets.
6.9 Contracts. Schedule 6.9 lists all contracts, agreements,
instruments, licenses, leases, commitments and other arrangements to which
Acquiror is a party or otherwise relating to or affecting any of its assets,
properties or operations (the "Contracts"). Each Contract is valid, binding and
in full force and effect on the date hereto. Acquiror has performed all material
obligations required to be performed by it under, and is not in material default
or breach of, any Contract, and, to the knowledge of Acquiror, no event has
occurred which, with due notice or lapse of time or both, would constitute such
a material default or breach.
6.10 Employees. Acquiror does not have any employees, consultants or
advisors and is not a party to or bound by any employment, consulting, retainer
or similar agreement.
6.11 Employee Plans. Acquiror is not a party to or bound by any
pension, profit sharing, deferred compensation, bonus, incentive, retainer,
consulting, stock bonus, stock purchase, stock option, severance, benefit,
retirement, welfare, disability, hospitalization, insurance, vacation or any
other similar fringe or employee benefit plans, funds, programs, agreements or
arrangements which cover, are maintained for the benefit of, or relate to any or
all current or former employees, officers or directors of Acquiror.
6.12 Equity Investments. Acquiror has no subsidiaries and does not own
any capital stock, security, partnership interest, or other interest of any kind
in any corporation, partnership, joint venture, association, or other entity.
6.13 No Conflict. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby do not and will not
conflict with, or result in a breach of any term or provision of, or constitute
a default under or result in a violation of (i) the Certificate of Incorporation
or Bylaws of Acquiror as amended, (ii) any agreement, contract, lease, license
or instrument to which Acquiror is a party or by which Acquiror or any of its
properties or assets are bound or (iii) any judgment, decree, order, or writ by
which Acquiror is bound or to which it or any of its properties or assets are
subject.
6.14 Consent. No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality is required by or
with respect to Acquiror in connection with the execution and delivery of this
Agreement or the consummation by Acquiror of the transactions contemplated
herein, except for (a) such filings as may be required under federal and
applicable state securities laws, and (b) such other consents, approvals,
orders, authorizations, registrations, declarations and filings which if not
obtained or made would not have a material adverse effect on Acquiror. No
consent, waiver or approval of third parties material to the business or
operations of Acquiror is required to be obtained by Acquiror in connection with
the execution and delivery of this Agreement and the performance of Acquiror's
obligations hereunder.
6.15 Brokers or Finders. Acquiror has not dealt with any broker or
finder in connection with the transactions contemplated by this Agreement.
Acquiror has not incurred, and shall not incur, directly or indirectly, any
liability for any brokerage or finders' fees or agents commissions or any
similar charges in connection with this Agreement or any transaction
contemplated herein.
6.16 Securities Laws.
(a) The Registration Statement prepared by Acquiror and filed with the
SEC pursuant to Section 9.3 hereof will not, as of the date it is declared
effective by the SEC, contain any untrue statement of a material fact, or omit
to state a material fact required to be stated therein or necessary to make the
statements made, in light of the circumstances under which they were made, not
misleading, except insofar as any untrue statements or omissions were made in
reliance upon and in conformity with written information furnished by the
Company for use in the preparation thereof.
(b) No formal or informal investigation or examination by the SEC or by
the securities administrator of any state is pending or, to the knowledge of
Acquiror or Stockholders, threatened against Acquiror, any present or former
officer or director of Acquiror or any of Acquiror's stockholders.
(c) Neither Acquiror nor any of its officers, directors, promoters or
beneficial owners of more than 10% of its Common Stock have been convicted of
any felony or misdemeanor in connection with the purchase and sale of any
security or involving the making of any false filing with the SEC.
(d) Neither Acquiror nor any of its officers, directors, promoters or
beneficial owners of more than 10% of its Common Stock are subject to any order,
judgment or decree of any court of competent jurisdiction, temporarily or
preliminarily restraining or enjoining, or subject to any order, judgment or
decree of any court of competent jurisdiction, permanently restraining or
enjoining, such person from engaging in or continuing any conduct or practice in
connection with the purchase or sale of any security or involving the making of
any false filing with the SEC.
(e) No individual, corporation, partnership, joint venture or other
business enterprise or entity has demand or other rights to cause Acquiror to
file any registration statement under the Securities Act of 1933 relating to any
shares of common stock or other securities of Acquiror or any rights to
participate in any such registration statement.
(f) Acquiror is not required to be registered as an investment company
under the Investment Company Act of 1940, as amended, and neither Acquiror nor
any of its officers or directors are required to be registered as investment
advisors under the Investment Advisor Act of 1940, as amended.
(g) The issuance and sale of the Acquiror Shares pursuant to this
Agreement is not required to be registered under the Securities Act of 1933, as
amended, or under the securities laws of any state.
6.17 Compliance With Laws and Regulations. Acquiror has complied with
all applicable statutes and regulations of any federal, state, or other
applicable governmental entity or agency thereof, including, without limitation,
federal and state securities laws and regulations applicable to the issuance and
sale of the Acquiror Shares to Melzer.
6.18 Acquiror Documents. Acquiror has delivered to Company and Melzer
the following documents:
(a) Complete and correct copies of the Certificate of Incorporation and
Bylaws of Acquiror as in effect as of the date of this Agreement and copies of
all resolutions, minutes and consents of Acquiror's Board of Directors and
stockholders.
(b) The Acquiror Financial Statements;
(c) A complete and accurate list of the stockholders of Acquiror as of
December 31, 2000 which accurately reflects the outstanding shares of Acquiror's
Common Stock and the number of such shares which bear a restrictive legend or
are subject to stop transfer orders or other restrictions on transfer;
(d) Copies of all contracts, agreements, instruments, licenses, leases,
commitments or undertakings to which Acquiror is a party or by which it or any
of its properties are bound.
6.19 Information. The information concerning Acquiror and Stockholders
set forth in this Agreement, in Acquiror's Schedules attached hereto and in the
Registration Statement is complete and accurate in all material respects and
does not or, in the case of the Registration Statement, will not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made, in light of the
circumstances under which they were made, not misleading.
7. Covenants Relating to Conduct of Business of Company. During the
period from the date of this Agreement and continuing until the Closing, Company
and Melzer agree (except as expressly contemplated by this Agreement or to the
extent that Acquiror shall otherwise consent in writing) that:
7.1 Ordinary Course. Company shall carry on its business in the usual
and ordinary course, in substantially the same manner as heretofore conducted.
7.2 Issuance of Securities. Company shall not issue, deliver or sell or
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
7.3 Governing Documents. Company shall not amend its Articles of
Incorporation or Bylaws.
8. Covenants Relating to Conduct of Business of Acquiror. During the
period from the date of this Agreement and continuing until the Closing,
Acquiror agrees (except as expressly contemplated by this Agreement or to the
extent that Company shall otherwise consent in writing) that:
8.1 Ordinary Course. Acquiror shall not conduct any business or engage
in any activities other than activities related to the closing of the
transactions contemplated by this Agreement and the preparation of a
Registration Statement on Form SB-2 and amendments thereto pursuant to Section
9.3 hereof.
8.2 No Debt or Obligations. Acquiror shall not incur or agree to incur
any debt, guarantee or agree to guarantee the obligations of others, indemnify
or agree to indemnify others, incur or agree to incur any obligation or
liability, absolute, accrued, contingent or otherwise or subject or agree to
subject any of the assets of the Company to any lien, security interest, charge,
interest or other encumbrance or suffer such to be imposed;
8.3 No Contracts or Commitments. Acquiror shall not enter into or agree
to enter into any transaction, contract, instrument, agreement, commitment or
other understanding or arrangement, or incur any obligations that are not fully
paid prior to Closing for any legal fees, accounting fees, or other expenses in
connection with this Agreement or the preparation, filing and processing of the
Registration Statement;
8.4 Issuance of Securities. Acquiror shall not issue or sell or agree
to issue or sell any shares of its capital stock or other securities, or issue,
grant or sell any options, rights or warrants with respect thereto, or acquire
any capital stock or other securities of any corporation or any interest in any
business enterprise, or make or agree to make any loan or advance to or
investment in any person, firm or corporation;
8.5 Dividends; Changes in Stock. Acquiror shall not declare or make any
payment of dividends or other distributions to its stockholders or upon or in
respect of any shares of its capital stock, or purchase, retire or redeem, or
obligate itself to purchase, retire or redeem, any of its shares of capital
stock or other securities;
8.6 Compensation. Acquiror shall not pay or make any accrual or
arrangement for payment of compensation of any kind to any of its past or
present directors, officers, or employees;
8.7 Changes. Acquiror shall not suffer any change, event or condition
or become subject to any law, regulation or rule, other than the periodic
reporting requirements of a registrant under rules and regulations of the
Securities Act of 1934, which, in any case or in the aggregate, has had or may
have a materially adverse effect on Acquiror's condition (financial or
otherwise) business, properties, assets or liabilities; and
8.8 Governing Documents. Acquiror shall not amend its Certificate of
Incorporation, except to change its name to Third Wave Media Ltd. or to increase
the authorized number of shares of Acquiror's Common Stock to 100,000,000
shares, or amend its Bylaws.
9. Certain Understandings and Agreements of the Parties.
9.1 Access to Information.
(a) Company shall afford to Acquiror and shall cause its independent
accountants to afford to Acquiror, and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing Date to all of Company's properties, books,
contracts, commitments and records and to the audit work papers and other
records of Company's independent accountants. During such period, Company shall
use reasonable efforts to furnish promptly to Acquiror all information
concerning the business, properties and personnel of Company as Acquiror may
reasonably request, provided that Company shall not be required to disclose any
information which it is legally required to keep confidential. Acquiror will not
use such information for purposes other than this Agreement and will otherwise
hold such information in confidence (and Acquiror will cause its consultants and
advisors also to hold such information in confidence) until such time as such
information otherwise becomes publicly available, and in the event of
termination of this Agreement for any reason Acquiror shall promptly return, or
cause to be returned, to Company all documents obtained from Company, and any
copies made of such documents, extracts and copies thereof.
(b) Acquiror shall afford to Company and shall cause its independent
accountants to afford to Company, and its accountants, counsel and other
representatives, reasonable access during normal business hours during the
period prior to the Closing Date to all of Acquiror's properties, books,
contracts, commitments and records and to the audit work papers and other
records of Acquiror's independent accountants. During such period, Acquiror
shall use reasonable efforts to furnish promptly to Company such information
concerning Acquiror as Company may reasonably request, provided that Acquiror
shall not be required to disclose any information which it is legally required
to keep confidential. Company will not use such information for purposes other
than this Agreement and will otherwise hold such information in confidence (and
Company will cause Company's consultants and advisors also to hold such
information in confidence) until such time as such information otherwise becomes
publicly available, and in the event of termination of this Agreement for any
reason Company shall promptly return, or cause to be returned, to Acquiror all
documents obtained from Acquiror, and any copies made of such documents,
extracts and copies thereof.
9.2 Securities Law Matters.
(a) Acquiror shall take all such actions as may be necessary to comply
with the federal securities laws and the securities laws of all states which are
applicable in connection with the issuance of the Acquiror Shares pursuant to
this Agreement.
(b) The Acquiror Shares shall be issued and sold without registration
or qualification under the Securities Act of 1933, as amended, (the "Act") or
any state securities or "Blue Sky" laws, on the ground that the issuance and
sale of the Acquiror Shares is exempt from registration and qualification under
Rule 506 of Regulation D and Section 18 of the Act. Accordingly, the Acquiror
Shares may not be resold by the holders thereof without registration under the
Act unless a further exemption from the registration requirements of the Act is
available for such resale. All certificates representing the Acquiror Shares
shall bear the following legend or a legend of similar import:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER
CERTAIN STATE SECURITIES LAWS. NO SALE OR TRANSFER OF THESE SHARES MAY
BE MADE IN THE ABSENCE OF (1) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE ACT OR (2) AN OPINION OF COUNSEL THAT REGISTRATION UNDER THE
ACT OR UNDER APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED IN
CONNECTION WITH SUCH PROPOSED SALE OR TRANSFER."
9.3 Registration Statement. Acquiror shall, at its own expense, prepare
and file with the SEC a Registration Statement on Form SB-2, and all amendments
thereto, for the purpose of registering 5,000,000 shares of the Company's
presently outstanding Common Stock for resale to the public (the "Registration
Statement"). Acquiror shall file the Registration Statement with the SEC within
five business days after receipt of the Company's unaudited financial statements
as at and for the nine months ended September 30, 2000 and shall use its best
efforts to cause the Registration Statement to become effective as soon as
possible thereafter. Acquiror shall, prior to filing, furnish a copy of the
Registration Statement and each amendment thereto to Company together with a
copy of all correspondence to or from the SEC with respect to each filing.
Acquiror and/or Stockholders shall, at or prior to the Closing, pay or cause to
be paid all expenses, costs and fees, including all legal and accounting fees
and printing costs, incurred by Acquiror in connection with the preparation,
filing and processing of the Registration Statement to effectiveness.
9.4 Amendments to Articles of Incorporation. Acquiror shall prior to
Closing, (a) obtain all necessary corporate approval of amendments to its
Articles of Incorporation to (i) increase the authorized number of shares of
Acquiror's common stock to 100,000,000 shares, and (ii) change Acquiror's name
to Third Wave Media Ltd., and (b) at or prior to Closing, file a Certificate of
Amendment effecting the change of Acquiror's name and the increase in the
authorized number of shares of Acquiror's common stock to 100,000,000 with the
office of the Delaware Secretary of State.
9.5 Fiscal Year 2000 Company Financial Statements.
(a) On or before April 15, 2001, Company shall deliver to Acquiror the
audited balance sheet of Company as of December 31, 2000 and the related
statements of operations, cash flows and shareholders' equity for the two years
ended December 31, 2000 and 1999, including the notes thereto and the
accompanying report of Singer Lewak Greenbaum & Goldstein LLP, certified public
accountants (the "Company Fiscal Year 2000 Financial Statements"). The Company
Fiscal Year 2000 Financial Statements shall be prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods indicated and shall fairly present the financial condition of Company as
of December 31, 2000 and the results of its operations for the periods covered
thereby.
(b) The Company will not have, as of December 31, 2000, except as and
to the extent reflected or reserved against in the Company's balance sheet as of
such date included in the Company Fiscal Year 2000 Financial Statements, any
material liabilities or material obligations (absolute or contingent) of a
nature customarily reflected in financial statements or the notes thereto
prepared in accordance with generally accepted accounting principles.
9.6 Acquiror Fiscal Year 2000 Financial Statements.
(a) On or before April 15, 2001, Acquiror shall deliver to Company and
make available to Melzer the audited balance sheet of Acquiror as of December
31, 2000 and the related statements of operations, cash flows and stockholders'
equity for the two years ended December 31, 2000 and 1999, including the notes
thereto and the accompanying report of Weiss and Company, certified public
accountants (the "Acquiror Fiscal Year 2000 Financial Statements"). The Acquiror
Fiscal Year 2000 Financial Statements shall be prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods indicated and shall fairly present the financial condition of Acquiror
as of December 31, 2000 and the results of its operations for the periods
covered thereby.
(b) The Acquiror will not have, as of December 31, 2000, except as and
to the extent reflected or reserved against in the Acquiror's balance sheet as
of such date included in the Acquiror Fiscal Year 2000 Financial Statements, any
liabilities or obligations (absolute or contingent) of a nature customarily
reflected in financial statements or the notes thereto prepared in accordance
with generally accepted accounting principles.
(c) As of the Closing Date, Acquiror will not have any debts,
liabilities or obligations of any nature, whether accrued, absolute, contingent
or otherwise, and whether due or to become due. For purposes of this Agreement,
the term "liabilities" shall include, without limitation, any direct or indirect
indebtedness, guaranty, endorsement, claim, loss, damage, deficiency, cost,
expense, obligation or responsibility, fixed or unfixed, known or unknown,
asserted or unasserted, choate or inchoate, liquidated or unliquidated, secured
or unsecured.
10. Conditions Precedent to the Obligations of Company and Melzer. All
obligations of Company and Melzer under this Agreement are subject to the
fulfillment by Acquiror and Stockholders, prior to or as of the Closing Date, of
each of the following conditions:
10.1 Representations and Warranties. The representations and warranties
of Acquiror and the Stockholders contained in this Agreement or in any
certificate or documents delivered to Company and Melzer pursuant to the
provisions hereof shall be true and correct at and as of the Closing Date as
though such representations and warranties were made at and as of such time, and
Company and Melzer shall have received a certificate to such effect signed by
the chief executive officer of Acquiror and by the Stockholders.
10.2 Performance of Obligations of Acquiror. Acquiror and the
Stockholders shall have performed and complied with all covenants, agreements,
and obligations required by this Agreement to be performed by them prior to or
at the Closing on the Closing Date, and Company and Melzer shall have received a
certificate to such effect signed by the chief executive officer of Acquiror and
by the Stockholders.
10.3 Resignations. Company shall have received written resignations of
the officers and directors of Acquiror as of the Closing Date in form
satisfactory to Company.
10.4 Election of Directors and Officers. The Board of Directors of
Acquiror shall have elected persons nominated by the management of Company to
serve as directors and officers of Acquiror effective as of the Closing Date.
10.5 Stockholder Approval. Acquiror's stockholders shall have approved,
in accordance with Delaware law, (a) this Agreement and Acquiror's performance
hereof, (b) an amendment to Acquiror's Certificate of Incorporation to increase
the authorized number of shares of Acquiror's common stock to 100,000,000
shares, and (c) an amendment to Acquiror's Certificate of Incorporation to
change Acquiror's name to Third Wave Media Ltd.
10.6 Opinion of Counsel. Acquiror shall have delivered to Company and
Melzer an opinion of its counsel dated the Closing Date on the matters set forth
in Schedule 10.6 attached hereto.
10.7 Investment Banking Agreement. Company and Adevam Investments Inc.
("Adevam") shall have entered into an investment banking agreement, in form and
substance satisfactory to Company, pursuant to which Adevam agrees to raise up
to $1,500,000 of equity capital for the benefit of Company after the Closing in
a private offering of up to 5,000,000 shares of common stock.
10.8 Registration Statement to be Declared Effective. The SEC shall
have advised Acquiror that it has no further comments on the Registration
Statement and that upon receipt of a request for acceleration from Acquiror, the
SEC will declare such Registration Statement effective under the Securities Act
of 1933, as amended (the "Act").
10.9 Additional Closing Documents. Company and Melzer shall have
received the following documents and instruments:
(1) Certified resolutions of Acquiror's Board of Directors (a)
authorizing the execution and delivery of this Agreement and the performance by
Acquiror of its obligations hereunder, (b) electing the persons designated by
Company as officers and directors of Acquiror effective as of the Closing Date,
and (c) authorizing an amendment to Acquiror's Certificate of Incorporation to
(i) increase the authorized number of shares of Acquiror's common stock to
100,000,000 shares and (ii) change the name of Acquiror to Third Wave Media
Ltd.;
(2) Certified resolutions of Acquiror's stockholders approving (a) the
Agreement and the performance by Acquiror of its obligations thereunder, and (b)
an amendment to Acquiror's Certificate of Incorporation to (i) increase the
authorized number of shares of Acquiror's common stock to 100,000,000 shares and
(ii) change the name of Acquiror to Third Wave Media Ltd.;
(3) A certificate of good standing of Acquiror from the Secretary of
State of Delaware dated as of the most recent practicable date;
(4) A list of stockholders as of the most recent practicable date
certified by Acquiror's transfer agent;
(5) A certified copy of a Certificate of Amendment to Acquiror's
Certificate of Incorporation effecting the change of Acquiror's name to Third
Wave Media Ltd. and the increase in the authorized number of shares of
Acquiror's common stock to 100,000,000 shares;
(6) A certificate signed by the chief executive officer of Acquiror and
by the Stockholders that as of the Closing Date, Acquiror does not have any
debts, liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due; and
(7) Such other documents and instruments as are required to be
delivered pursuant to the provisions of this Agreement or otherwise reasonably
requested by Company and Melzer.
10.10 Due Diligence. Company and Melzer shall be satisfied with the
results of their due diligence review of the business, operations, properties,
assets, financial condition and prospects of Acquiror.
11. Conditions Precedent to the Obligations of Acquiror. All
obligations of Acquiror under this Agreement are subject to the fulfillment, by
Company and Melzer, prior to or as of the Closing Date, of each of the following
conditions:
11.1 Representations and Warranties of Melzer. The representations and
warranties by Melzer contained in Article 4 of this Agreement shall be true and
correct at and as of the Closing Date as though such representations and
warranties were made at and as of such time.
11.2 Representations and Warranties of Company and Melzer. The
representations and warranties of Company and Melzer contained in this Agreement
or in any certificate or document delivered to Acquiror pursuant to the
provisions hereof shall be true and correct in all material respects as of the
date of this Agreement and as if made at and as of the Closing Date, and
Acquiror shall have received a certificate to such effect signed by the chief
executive officer of Company and Melzer.
11.3 Performance of Obligations of Company. Company shall have
performed and complied with all covenants, agreements, and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing, and Acquiror shall have received a certificate to such effect signed by
the chief executive officer of Company.
11.4 Opinion of Counsel. Company shall have delivered to Acquiror an
opinion of counsel dated the Closing Date on the matters set forth on Schedule
11.4 attached hereto.
11.5 Additional Closing Documents. Acquiror shall have received the
following documents and instruments:
(1) Resolutions of the Board of Directors of Company authorizing the
execution and delivery of this Agreement and the performance by Company of its
obligations hereunder;
(2) A certificate of good standing of Company from the California
Secretary of State dated as of the most recent practicable date; and
(3) Such other documents and instruments as are required to be
delivered pursuant to the provisions of this Agreement as otherwise reasonably
requested by Acquiror.
12. Survival; Indemnification.
12.1 Survival. The representations and warranties made in this
Agreement or in any exhibit, schedule or certificate shall survive any
investigation made by any party hereto and the Closing of the transactions
contemplated hereby until the second anniversary of the Closing Date. As to any
matter or claim which is based upon fraud by the indemnifying party, the
representations and warranties set forth in this Agreement shall expire only
upon expiration of the applicable statute of limitations. No party will be
liable to another under any warranty or representation after the expiration of
such warranty or representation; provided however, if a claim or notice is given
under this Article 12 with respect to any representation or warranty prior to
the expiration date, such claim may be pursued to resolution notwithstanding
expiration of the representation or warranty under which the claim was brought.
Any investigations made by or on behalf of any of the parties prior to the date
hereof shall not affect any of the parties' obligations hereunder. Completion of
the transactions contemplated hereby shall not be deemed or construed to be a
waiver of any right or remedy of any of the parties.
12.2 Indemnification by Company. Company agrees to indemnify, defend,
reimburse and hold harmless Acquiror and its successors and assigns from and
against any and all demands, claims, actions or causes of action, assessments,
losses, damages, liabilities, costs and expenses, including interest, penalties
and reasonable attorneys' fees and expenses (collectively, "Damages") asserted
against, resulting to, imposed upon or incurred by Acquiror, directly or
indirectly, by reason of or resulting from (i) any breach by Company or Melzer
of this Agreement, or (ii) any inaccuracy in or breach of any of the
representations, warranties, covenants or agreements made by Company or Melzer
in this Agreement.
12.3 Indemnification by the Stockholders. The Stockholders, jointly and
severally, agree to indemnify, defend, reimburse and hold harmless Company,
Melzer and Acquiror and their successors, heirs and assigns from and against any
and all demands, claims, actions or causes of action, assessments, losses,
damages, liabilities, costs and expenses, including interest, penalties and
reasonable attorneys' fees and expenses (collectively, "Damages") asserted
against, resulting to, imposed upon or incurred by Company, Melzer or Acquiror,
directly or indirectly, by reason of or resulting from (i) any breach by
Acquiror of this Agreement, (ii) any inaccuracy in or breach of any of the
representations, warranties, covenants or agreements made by Acquiror and the
Stockholders in this Agreement, (iii) any claim or claims made against Acquiror
arising out of any debts, obligations and liabilities or asserted debts,
obligations and liabilities of Acquiror incurred prior to the Closing Date, (iv)
any claim or claims made against Acquiror by any Person who was a stockholder of
Acquiror on or prior to the Closing Date arising out of or related to any
business or activity engaged in or any action taken by Acquiror prior to the
Closing Date, including, without limitation, the issuance of any shares of
Acquiror's common stock prior to the Closing Date, (v) any claim or claims made
against Acquiror by any Person who was an officer, director or employee of, or a
consultant to, Acquiror on or prior to the Closing Date arising out of or
related to any contract, agreement, arrangement, understanding or commitment
between Acquiror and any such officer, director, employee or consultant prior to
the Closing Date, and (vi) any untrue statement or alleged untrue statement of
any material fact contained, on the effective date thereof, in the Registration
Statement, or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, except to the extent that any such untrue statements or omissions
were made in reliance upon and in conformity with written information furnished
by the Company for use in the preparation thereof. As used herein, "Person"
means any individual, corporation, partnership, joint venture, limited liability
company or other business enterprise or entity.
12.4 Indemnification Procedure.
(a) Whenever any claim shall arise for indemnification hereunder (a
"Claim"), the party entitled to indemnification (the "Indemnitee") shall
promptly give written notice to the party obligated to provide indemnity (the
"Indemnitor") with respect to the Claim after the receipt by the Indemnitee of
reliable information of the facts constituting the basis for the Claim; but the
failure to timely give such notice shall not relieve the Indemnitor from any
obligation under this Agreement, except to the extent, if any, that the
Indemnitor is materially prejudiced thereby.
(b) Upon receipt of written notice from the Indemnitee of a Claim, the
Indemnitor shall provide counsel (such counsel subject to the reasonable
approval of the Indemnitee) to defend the Indemnitee against the matter from
which the Claim arose, at the Indemnitor's sole cost, risk and expense. The
Indemnitee shall cooperate in all reasonable respects, at the Indemnitor's sole
cost, risk and expense, with the Indemnitor in the investigation, trial, defense
and any appeal arising from the matter from which the Claim arose; provided,
however, that the Indemnitee may (but shall not be obligated to) participate in
any such investigation, trial, defense and any appeal arising in connection with
the Claim. If the Indemnitee's participation in any such investigation, trial,
defense and any appeal arising from such Claim relates to a legal position or
defense that varies materially from the legal positions or defenses pursued by
the Indemnitor, and if the Indemnitee reasonably believes that the Indemnitee's
interests will be adversely and materially affected if such legal position or
defense is not pursued, the Indemnitor shall bear the expense of the
Indemnitee's separate participation, including all fees, costs and expenses of
one separate counsel for the Indemnitee (or multiple Indemnitees). If the
Indemnitee elects to so participate, the Indemnitor shall cooperate with the
Indemnitee, and the Indemnitor shall deliver to the Indemnitee or its counsel
copies of all pleadings and other information within the Indemnitor's knowledge
or possession reasonably requested by the Indemnitee or its counsel that is
relevant to the defense of such Claim and that will not prejudice the
Indemnitor's position, claims or defenses. The Indemnitee and its counsel shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder. The Indemnitor shall have the right to elect
to settle any claim for monetary damages without the Indemnitee's consent only
if the settlement includes a complete release of the Indemnitee. If the
settlement does not include such a release, it will be subject to the consent of
the Indemnitee, which will not be unreasonably withheld. The Indemnitor may not
admit any liability of the Indemnitee or waive any of the Indemnitee's rights
without the Indemnitee's prior written consent, which will not be unreasonably
withheld. If the subject of any Claim results in a judgment or settlement, the
Indemnitor shall promptly pay such judgment or settlement.
(c) If the Indemnitor fails to assume the defense of the subject of any
Claim in accordance with the terms of Section 12.4(b), if the Indemnitor fails
diligently to prosecute such defense, or if the Indemnitor has, in the
Indemnitee's good faith judgment, a conflict of interest, the Indemnitee may
defend against the subject of the Claim, at the Indemnitor's sole cost, risk and
expense, in such manner and on such terms as the Indemnitee deems appropriate,
including, without limitation, settling the subject of the Claim after giving
reasonable notice to the Indemnitor. If the Indemnitee defends the subject of a
Claim in accordance with this Section, the Indemnitor shall cooperate with the
Indemnitee and its counsel, at the Indemnitor's sole cost, risk and expense, in
all reasonable respects, and shall deliver to the Indemnitee or its counsel
copies of all pleadings and other information within the Indemnitor's knowledge
or possession reasonably requested by the Indemnitee or its counsel that are
relevant to the defense of the subject of any such Claim and that will not
prejudice the Indemnitor's position, claims or defense. The Indemnitee shall
maintain confidentiality with respect to all such information consistent with
the conduct of a defense hereunder.
(d) The obligation of the Indemnitor to indemnify the Indemnitee
against Damages arising under this Agreement shall be in addition to any other
obligations the Indemnitor might otherwise have and any other rights the
Indemnitee might otherwise have.
12.5 Payment. All payments owing under this Article 12 will be made
promptly as indemnifiable Damages are incurred. If the Indemnitee defends the
subject matter of any Claim in accordance with Section 12.4(c) or proceeds with
separate counsel in accordance with Section 12.4(b), the expenses (including
attorneys' fees) incurred by the Indemnitee shall be paid by the Indemnitor in
advance of the final disposition of such matter as incurred by the Indemnitee,
if the Indemnitee undertakes in writing to repay any such advances in the event
that it is ultimately determined that the Indemnitee is not entitled to
indemnification under the terms of this Agreement or applicable law.
13. Obligations After Closing.
13.1 Request for Acceleration. Acquiror shall deliver a request for
acceleration of the effectiveness of the Registration Statement to the SEC
within two business days after the Closing Date.
13.2 Rescission. The parties hereto agree that if the SEC has failed or
refused to declare the Registration Statement effective within seven (7)
business days after the Closing Date, the Company and Melzer shall have the
right and option (the "Option") to rescind this Agreement. The Option may be
exercised by giving written notice of exercise of the Option to Acquiror and the
Stockholders at the address and in the manner set forth in Section 15.5 below.
In the event the Option is exercised, this Agreement shall be of no further
force and effect, and the Company Shares shall be returned promptly to Melzer
and the Acquiror Shares shall be returned promptly to Acquiror. The parties
shall not have any further obligations or liabilities to each other under the
rescinded Agreement, except that Acquiror and the Stockholders shall pay the
reasonable legal fees and all accounting fees incurred by Company and Melzer in
connection with the negotiation, preparation, and execution of this Agreement
and the transactions herein contemplated.
14. Termination.
14.1 This Agreement may be terminated by action of any of the parties
hereto at any time prior to the Closing Date if:
(a) There shall be any actual or threatened action or proceeding by or
before any court or any other governmental body which shall seek to restrain,
prohibit, or invalidate the transactions contemplated by this Agreement and
which, in the judgment of such party made in good faith and based upon the
advice of legal counsel, makes it inadvisable to proceed with the transactions
contemplated by this Agreement; or
(b) The Closing shall not have occurred prior to June 30, 2001, or such
later date as shall have been approved by the parties hereto, other than for
reasons set forth in paragraph 14.2 or 14.3 below.
In the event of termination pursuant to this Section 14.1, no
obligation, right, or liability shall arise hereunder and each party shall bear
all of the expenses, costs and fees incurred by them in connection with the
negotiation, drafting, and execution of this Agreement and the transactions
herein contemplated.
14.2 This Agreement may be terminated by action of Acquiror at any time
prior to the Closing Date if:
(a) Company or Melzer shall fail to comply in any material respect with
any of its or his covenants or agreements contained in this Agreement or if any
of the representations or warranties of Company or Melzer contained herein shall
be inaccurate in any material respect.
In the event this Agreement is terminated pursuant to this Section
14.2, this Agreement shall be of no further force or effect, no obligation,
right, or liability shall arise hereunder, and Company and Stockholders shall
bear their own expenses, costs and fees, including, without limitation, all
legal fees, accounting fees and other costs incurred by them in connection with
the preparation, filing and processing of the Registration Statement, as well as
the reasonable legal fees incurred by Acquiror in connection with the
negotiation, preparation, and execution of this Agreement.
14.3 This Agreement may be terminated by action of the Board of
Directors of Company or by Melzer at any time prior to the Closing Date if:
(a) Acquiror shall fail to comply in any material respect with any of
its covenants or agreements contained in this Agreement or if any of the
representations or warranties of Acquiror or the Stockholders contained herein
shall be inaccurate in any material respect.
In the event this Agreement is terminated pursuant to this Section
14.3, this Agreement shall be of no further force or effect, no obligation,
right, or liability shall arise hereunder, and Acquiror and the Stockholders
shall bear their own expenses, costs and fees, including, without limitation,
all legal fees, accounting fees and other costs incurred by them in connection
with the preparation, filing and processing of the Registration Statement, as
well as the reasonable legal fees and all accounting fees incurred by Company
and Melzer in connection with the negotiation, preparation, and execution of
this Agreement and the transactions herein contemplated.
15. Miscellaneous
15.1 Tax Treatment. The transaction contemplated herein is intended to
qualify as a "tax-free" reorganization under the provisions of Section 368 of
the Internal Revenue Code. Company, Melzer and Acquiror acknowledge, however,
that they each have been advised to consult with their own tax advisors in
connection with this transaction; that no party hereto has made any
representation or warranty to the other with respect to the treatment of such
transaction or the effect thereof under applicable tax laws, regulations, or
interpretations; and that no attorney's opinion or private revenue ruling has
been obtained with respect to the effects thereof under the Internal Revenue
Code of 1986, as amended.
15.2 Further Assurances. At any time and from time to time after the
Closing Date, each party will execute such additional instruments and take such
action as may be reasonably requested by the other party in order to consummate
more effectively the transactions contemplated hereby or otherwise to carry out
the intent and purposes of this Agreement.
15.3 Waiver. Any failure on the part of any party hereto to comply with
any of its obligations, agreements, or conditions hereunder may be waived in
writing by the party to whom such compliance is owed.
15.4 Payment of Expenses. Acquiror shall, at or prior to the Closing,
pay for all of its own legal fees, accounting fees and other costs and expenses
incurred in connection with the consummation of the transactions contemplated
under this Agreement, including those legal fees, accounting fees and other
costs and expenses incurred in connection with the preparation, filing, and
processing of the Registration Statement. Company shall pay for all of its own
legal fees, accounting fees and other expenses associated with the consummation
of the transactions contemplated under this Agreement.
15.5 Notices. Any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing and
shall be validly given or made to another party if given by personal delivery,
telex, facsimile, telegram or if deposited in the United States mail, certified
or registered, postage prepaid, return receipt requested. If such notice, demand
or other communication is given by personal delivery, telex, facsimile or
telegram, service shall be conclusively deemed made at the time of receipt. If
such notice, demand or other communication is given by mail, such notice shall
be conclusively deemed given forty-eight (48) hours after the deposit thereof in
the United States mail addressed to the party to whom such notice, demand or
other communication is to be given as hereinafter set forth:
If to Company: Third Wave Media Ltd.
5225 Wilshire Boulevard, Suite 700
Los Angeles, CA 90036
Attention: Andrew A. Melzer
If to Melzer: 5225 Wilshire Boulevard, Suite 700
Los Angeles, CA 90036
If to Acquiror: D.W. Industries, Inc.
100 Cedarhurst Avenue, Suite 201
Cedarhurst, NY 11516
Attention: Stuart Katz
If to Stockholders: Stuart Katz
100 Cedarhurst Avenue, suite 201
Cedarhurst, NY 11516
David Pomerantz
100 Cedarhurst Avenue, Suite 201
Cedarhurst, NY 11516
15.6 Headings. The section and subsection headings in this Agreement
are inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
15.7 Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
15.8 Facsimile Transmission. Facsimile transmission of any signed
original document, and retransmission of any signed facsimile transmission,
shall be the same as delivery of an original. At the request of any party
hereto, the parties will confirm facsimile transmitted signatures by signing an
original document.
15.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California without reference to
conflicts of laws principles.
15.10 Binding Effect. This Agreement shall be binding upon the parties
hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors, and assigns.
15.11 Entire Agreement; Amendment. This Agreement contains the entire
agreement between the parties hereto and supersedes any and all prior
agreements, arrangements, or understandings between the parties relating to the
subject matter hereof. No oral understandings, statements, promises, or
inducements contrary to the terms of this Agreement exist. No representations,
warranties, covenants, or conditions, express or implied, other than as set
forth herein, have been made by any party. This Agreement may be amended only by
a written instrument duly executed by the parties or their respective successors
or assigns.
15.12 Attorneys Fees and Expenses. If any legal action or any
arbitration or other proceeding is brought for the enforcement of this
Agreement, or because of an alleged dispute, breach, default, or
misrepresentation in connection with any of the provisions of this Agreement,
the successful or prevailing party or parties shall be entitled to recover
reasonable attorneys' fees and other costs incurred in that action or
proceeding, in addition to any other relief to which it or they may be entitled.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above written.
ATTEST: D.W. Industries, Inc., a Delaware corporation
By______________________ By ________________________________
Secretary President
Stockholders
________________________________
Stuart Katz
________________________________
David Pomerantz
ATTEST: Third Wave Media Ltd., a California corporation
By ___________________________ By ________________________________
Secretary President
Melzer
__________________________________
Andrew Melzer