AGREEMENT AND PLAN OF MERGER
BY AND AMONG
IN STORE MEDIA SYSTEMS, INC.,
IN STORE ACQUISITION CORP.
AND
THE E. SCHULZE CORPORATION
March 30, 2001
TABLE OF CONTENTS
PAGE
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ARTICLE I THE MERGER..........................................................1
1.1 The Merger.......................................................1
1.2 Effect on Capital Stock..........................................2
1.3 Surrender of Certificates........................................4
1.4 No Further Ownership Rights in Seller Capital Stock..............5
1.5 Lost, Stolen or Destroyed Certificates...........................5
1.6 Subsequent Transactions Contemplated.............................5
1.7 Tax Consequences.................................................6
1.8 Taking of Necessary Action: Further Action......................6
ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER AND THE
Seller SHAREHOLDERS..............................................6
2.1 Organization And Related Matters.................................6
2.2 Capitalization...................................................6
2.3 Taxes ...........................................................7
2.4 Title To Property................................................8
2.5 Intellectual Property............................................8
2.6 Corporate Authorization..........................................8
2.7 Non-contravention................................................9
2.8 Legal Proceedings................................................9
2.9 Compliance With Law..............................................9
2.10 Debts, Obligations and Liabilities..............................10
2.11 Investment Representations......................................10
2.12 Due Diligence Materials.........................................10
2.13 Disclosure......................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF BUYER..........................10
3.1 Corporate Authorization.........................................10
3.2 Non-contravention...............................................11
ARTICLE IV ADDITIONAL AGREEMENTS.............................................11
4.1 Permits and Approvals...........................................11
4.2 Blue Sky Laws...................................................11
4.3 Reorganization..................................................11
4.4 Reasonable Efforts..............................................12
4.5 Additional Documents and Further Assurances.....................12
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ARTICLE V RIGHT OF FIRST REFUSAL AND RELATED COVENANTS.......................12
5.1 Restrictions on Transfer of Buyer Common Stock..................12
5.2 Buyer's Rights of First Refusal.................................12
5.3 Limitations to Rights of Refusal................................13
5.4 Prohibited Transfers............................................14
5.5 Assignments and Transfers.......................................14
5.6 Effect of Change in Buyer's Capital Structure...................14
5.7 Covenant to Coordinate Sales....................................14
ARTICLE VI CONDITIONS TO CLOSING.............................................14
6.1 General Conditions..............................................14
6.2 Conditions to Obligations of Buyer..............................15
6.3 Conditions to Obligations of Seller.............................16
ARTICLE VII TERMINATION OF OBLIGATIONS.......................................16
7.1 Termination of Agreement........................................16
7.2 Effect of Termination...........................................17
ARTICLE VIII INDEMNIFICATION.................................................17
8.1 Obligations of Seller and Seller Shareholders...................17
8.2 Obligations of Buyer............................................17
8.3 Procedure.......................................................18
ARTICLE IX MISCELLANEOUS.....................................................19
9.1 Survival of Representations and Warranties......................19
9.2 Public Announcements............................................19
9.3 Confidentiality.................................................19
9.4 Expenses........................................................19
9.5 Notices.........................................................19
9.6 Further Assurances..............................................20
9.7 Sections and Other Headings.....................................20
9.8 Integrated Agreement............................................20
9.9 Assignment......................................................20
9.10 Amendments; Waivers.............................................21
9.11 Interpretation..................................................21
9.12 Counterparts....................................................21
9.13 Headings; Exhibits..............................................21
9.14 Severability....................................................21
9.15 Governing Law...................................................21
9.16 Specific Performance............................................21
9.17 Consent to Jurisdiction; Venue..................................22
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AGREEMENT AND PLAN OF MERGER
This Agreement is entered into on March 30, 2001 among IN STORE MEDIA
SYSTEMS, INC., a Nevada corporation ("BUYER"), IN STORE ACQUISITION CORP., a
Colorado corporation ("ACQUISITION CORP."), and THE E. SCHULZE CORP., a Colorado
corporation ("SELLER"). Certain capitalized terms used in this Agreement are
defined in the text or on EXHIBIT A.
RECITALS
A. The Boards of Directors of Seller, Buyer and Acquisition Corp.
believe it is in the best interests of their respective companies and the
shareholders of their respective companies that Seller and Acquisition Corp.
combine into a single company through the merger of Acquisition Corp. with and
into Seller (the "MERGER") and, in furtherance thereof, have approved the
Merger.
B. Pursuant to the Merger, among other things, and subject to the terms
and conditions hereof, all of the outstanding shares of Seller's capital stock
(collectively "SELLER CAPITAL STOCK") will be exchanged for shares of Buyer's
Common Stock ("BUYER COMMON STOCK"), as set forth herein.
C. Seller, Buyer and Acquisition Corp. desire to make certain
representations and warranties and other agreements in connection with the
Merger.
D. The parties intend, by executing this Agreement, to adopt a plan of
reorganization within the meaning of Section 368 of the Code, and to cause the
Merger to qualify as a reorganization under the provisions of Sections
368(a)(1)(A) and 368(a)(2)(E) of the Code.
NOW, THEREFORE, as consideration for the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
intending to be legally bound hereby the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER.
(a) THE MERGER. At the Effective Time (as defined below) and subject to
and upon the terms and conditions of this Agreement, the Articles of Merger and
the Plan of Merger attached hereto as EXHIBIT B-1 and EXHIBIT B-2 (collectively,
the "ARTICLES OF MERGER") and the applicable provisions of the Colorado Business
Corporations Act ("COLORADO CODE"), Acquisition Corp. will be merged with and
into Seller, the separate corporate existence of Acquisition Corp. will cease
and Seller will continue as the surviving corporation. Seller as the surviving
corporation after the Merger is sometimes referred to in this Agreement as the
"SURVIVING CORPORATION."
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(b) CLOSING EFFECTIVE TIME. The closing of the transactions
contemplated by this Agreement (the "CLOSING") will take place as soon as
practicable after the satisfaction or waiver of each of the conditions set forth
in Article VI, but no later than March 30, 2001 (the "CLOSING DATE"). The
Closing will take place at the offices of In Store Media Systems, Inc., 15423 E.
Batavia Drive, Aurora, Colorado, or at such other location as the parties agree.
In connection with the Closing, the parties will cause the Merger to be
consummated by filing the Articles of Merger, together with the required
officers' certificates (if any), with the Secretary of State of the State of
Colorado, in accordance with the relevant provisions of the Colorado Code (the
time of such filing being the "EFFECTIVE TIME").
(c) EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger will be as provided in this Agreement, the Articles of Merger and the
applicable provisions of the Colorado Code. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property,
rights, privileges, powers and franchises of Seller and Acquisition Corp. will
vest in the Surviving Corporation, and all debts, liabilities, obligations,
restrictions, disabilities and duties of Seller and Acquisition Corp. will
become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.
(d) ARTICLES OF INCORPORATION; BYLAWS. The Articles of Incorporation
and bylaws of Acquisition Corp. in effect at the Effective Time will be the
Articles of Incorporation and bylaws of the Surviving Corporation until amended
in accordance with applicable Law.
(e) DIRECTORS AND OFFICERS. The directors of Acquisition Corp.
immediately before the Effective Time shall be the directors of the Surviving
Corporation, in each case until such director's successor is duly elected and
qualified. The officers of Acquisition Corp. immediately before the Effective
Time shall be the officers of the Surviving Corporation, in each case until such
officer's successor is duly elected and qualified.
1.2 EFFECT ON CAPITAL STOCK. By virtue of the Merger and without any action on
the part of Acquisition Corp., Seller or the holders of any of the following
securities at the Effective Time:
(a) CONVERSION OF SELLER CAPITAL STOCK. Except as otherwise provided
herein and subject to the terms and conditions of this Agreement, each Seller
Shareholder will receive in exchange for all of their respective shares of
Seller Capital Stock that number of shares of Buyer Common Stock and/or cash sum
indicated opposite the name of each such Seller Shareholder on the Distribution
Schedule attached to this Agreement as EXHIBIT C (such shares and cash to be
issued and paid to the Seller Shareholders under this SECTION 1.2(a), shall be
referred to as the "MERGER CONSIDERATION").
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(b) CAPITAL STOCK OF ACQUISITION CORP. At the Effective Time, each
share of capital stock of Acquisition Corp. ("ACQUISITION CORP. COMMON STOCK")
issued and outstanding immediately before the Effective Time will be converted
into and exchanged for one validly issued, fully paid and nonassessable share of
common stock of the Surviving Corporation.
(c) CANCELLATION AND RETIREMENT OF SELLER STOCK. As of the Effective
Time, all shares of Seller Capital Stock issued and outstanding immediately
before the Effective Time shall cease to be outstanding and automatically shall
be canceled and retired and shall cease to exist, and each holder of any
certificate representing or evidencing any share or shares of Seller Capital
Stock shall cease to have any right with respect thereto, except the right to
receive the applicable Merger Consideration (as provided under SECTION 1.2(a)
and set forth in EXHIBIT C).
(d) DISSENTERS' RIGHTS. Shares held by persons exercising dissenter's
rights ("DISSENTING SHARES"), if any, will not be converted into Buyer Common
Stock but will instead be converted into the right to receive such consideration
as may be determined to be due with respect to such Dissenting Shares (if any)
pursuant to applicable Law. Seller will give Buyer prompt notice of any demand
received by Seller to require Seller to purchase shares of Seller Capital Stock,
and Buyer will have the right to direct and participate in all negotiations and
proceedings with respect to such demand. Except with the prior written consent
of Buyer, or as required under applicable Law, Seller will not voluntarily make
any payment with respect to, or settle or offer to settle, any such purchase
demand. Each holder (if any) of Dissenting Shares ("DISSENTING SHAREHOLDER")
who, pursuant to applicable Law, becomes entitled to payment of the fair value
for shares of Seller Capital Stock will receive payment therefor (but only after
the value therefor has been agreed upon or finally determined pursuant to such
provisions). If, after the Effective Time, Dissenting Shares (if any) lose their
status as Dissenting Shares, Buyer will issue and deliver, upon surrender by
such shareholder of certificate or certificates representing shares of Seller
Capital Stock, the applicable Merger Consideration to which such shareholder
would otherwise be entitled under this Article I and the Articles of Merger.
(e) CERTIFICATE LEGENDS. The shares of Buyer Common Stock to be issued
under this ARTICLE I will not be registered and will be characterized as
"restricted securities" under the federal securities laws, and under such laws
such shares may be resold without registration under the Securities Act only in
certain limited circumstances. Each certificate evidencing shares of Buyer
Common Stock to be issued under this ARTICLE I will bear one or more of the
following legend (along with all other legends that may be required under state
or federal securities laws of the United States):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. SUCH SHARES MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
WITHOUT AN EXEMPTION UNDER THE SECURITIES ACT OR AN OPINION OF
LEGAL COUNSEL REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED."
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"THE SALE, PLEDGE, HYPOTHECATION, ASSIGNMENT OR TRANSFER OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
THE TERMS AND CONDITIONS OF A CERTAIN AGREEMENT AND PLAN OF
MERGER BY AND BETWEEN THE SHAREHOLDER, THE CORPORATION AND
CERTAIN OTHER HOLDERS OF STOCK OF THE CORPORATION. COPIES OF
SUCH AGREEMENT MAY BE OBTAINED UPON WRITTEN REQUEST TO THE
SECRETARY OF THE CORPORATION."
1.3 SURRENDER OF CERTIFICATES.
(a) EXCHANGE AGENT. Buyer will act as exchange agent (the "EXCHANGE
AGENT") in the Merger.
(b) BUYER TO PROVIDE COMMON STOCK AND CASH. Promptly after the
Effective Time, Buyer will make available to the Exchange Agent for exchange, in
accordance with this Article I through such reasonable procedures as Buyer may
adopt, all cash and certificates evidencing shares of Buyer Common Stock, which
holders of shares of Seller Capital Stock are entitled to receive as Merger
Consideration under this Agreement, for the benefit of such holders and for
exchange in accordance with this Article I.
(c) CLOSING AND EXCHANGE PROCEDURES. At the Closing, each of the Seller
Shareholders shall surrender for cancellation to the Exchange Agent their
respective certificates (the "CERTIFICATES") that immediately before the
Effective Time represented outstanding shares of Seller Capital Stock. As soon
as practicable (but in no event later than five (5) business days) after the
surrender of Certificates evidencing all of the shares of the Seller Capital
Stock, Buyer shall deliver by wire transfer to a bank account designated by
Seller the sum of One Million Eight Hundred Thousand Dollars ($1,800,000) for
distribution to the Seller Shareholders, as provided under SECTION 1.2(a) and
according to the allocations specified on EXHIBIT C. Within five (5) days after
the surrender of all of the Certificates, Buyer shall deliver to each of the
Seller Shareholders a certificate (in each case, the "NEW CERTIFICATE")
evidencing the number of whole shares of Buyer Common Stock to which such holder
is entitled as Merger Consideration under SECTION 1.2(a) of this Agreement. Each
Certificate surrendered to the Exchange Agent under this SECTION 1.3(c) shall be
canceled forthwith upon delivery of the New Certificate.
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(d) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions with respect to Buyer Common Stock with a record date after
the Effective Time will be paid to the holder of any unsurrendered Certificate
with respect to the shares of Buyer Common Stock represented thereby until the
holder of record of such Certificate has surrendered such Certificate. Subject
to applicable Law, following surrender of any such Certificate, there will be
paid (without interest) to the record holder of the certificates representing
whole shares of Buyer Common Stock issued in exchange therefor, (i) at the time
of such surrender, the amount of such dividends or other distributions (if any)
with a record date after the Effective Time theretofore paid (but for the
provisions of this SECTION 1.3(d)) with respect to such shares of Buyer Common
Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions with respect to such shares of Buyer Common Stock having (A)
a record date after the Effective Time but before such surrender and (B) a
payment date after such surrender.
(e) DISSENTING SHARES. The provisions of this SECTION 1.3 also will
apply to Dissenting Shares that lose their status as such, except that the
obligations of Buyer under this SECTION 1.3 will commence on the date of loss of
such status, and the holder of such shares will be entitled to receive in
exchange for such shares the number of shares of Buyer Common Stock and cash to
which such holder is entitled as the applicable Merger Consideration under
SECTION 1.2(a).
1.4 NO FURTHER OWNERSHIP RIGHTS IN SELLER CAPITAL STOCK. Notwithstanding
anything in this Agreement to the contrary, the Merger Consideration paid and
delivered upon the surrender for exchange of shares of Seller Capital Stock in
accordance with the terms of this Agreement will be deemed to have been paid and
delivered in full satisfaction of all rights pertaining to such shares of Seller
Capital Stock, and there will be no further registration of transfers on the
records of the Surviving Corporation of shares of Seller Capital Stock that were
outstanding immediately before the Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving Corporation for any reason, they
will be canceled and exchanged as provided in this ARTICLE I.
1.5 LOST, STOLEN OR DESTROYED CERTIFICATES. If any of the Certificates have been
lost, stolen or destroyed, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed Certificates, upon the making of an affidavit of that
fact by the holder thereof, such cash and shares of Buyer Common Stock as may be
required under SECTION 1.3; PROVIDED, HOWEVER, that Buyer may, in its discretion
and as a condition precedent to the delivery thereof, require the owner of such
lost, stolen or destroyed Certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made against Buyer,
the Surviving Corporation or the Exchange Agent with respect to the Certificates
alleged to have been lost stolen or destroyed.
1.6 SUBSEQUENT TRANSACTIONS CONTEMPLATED. The parties acknowledge that, as soon
as practicable (but in no event later than 180 days) after the Effective Time,
the parties intend for Buyer to cause the Surviving Corporation and Buyer to
combine into a single entity through the merger of the Surviving Corporation
with and into Buyer.
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1.7 TAX CONSEQUENCES. The parties intend that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code.
1.8 TAKING OF NECESSARY ACTION: FURTHER ACTION. If, at any time after the
Effective Time, any further action is necessary or desirable to carry out the
purposes of this Agreement and to vest the Surviving Corporation with full
right, title and possession to all assets, property, rights, privileges, powers
and franchises of Seller and Acquisition Corp., the officers and directors of
Seller and Acquisition Corp. are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all such lawful and
necessary action, so long as such action is not inconsistent with this
Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF SELLER
AND THE SELLER SHAREHOLDERS
Each of the Seller and the Seller Shareholders hereby represents and
warrants to Buyer and Acquisition Corp., subject to such exceptions as are
specifically disclosed in the disclosure schedule (referencing the appropriate
section and paragraph numbers) supplied by the Seller to Buyer and dated as of
the date hereof, that on the date hereof and as of the Effective Time, as though
made at the Effective Time as follows; provided, that the representations and
warranties made as of a specified date will be true and correct as of such date:
2.1 ORGANIZATION AND RELATED MATTERS. Seller is a corporation duly organized,
validly existing and in good standing under the laws of the State of Colorado.
Seller has no subsidiaries. Seller has all corporate power, Permits and
Approvals necessary to own its properties and assets and to carry on its
business as now conducted. Seller is not qualified or licensed to do business as
a foreign corporation in any jurisdiction. Neither the ownership of its
properties and assets, nor the conduct of its business requires Seller to be
qualified or licensed to do business in any other jurisdiction. SECTION 2.1 of
the Seller Disclosure Schedule correctly lists the current directors and
executive officers of Seller. True, correct and complete copies of the charter
documents of Seller as in effect on the date hereof have been delivered to
Buyer. Seller is not a registered or reporting company under the Exchange Act.
Except as set forth on SECTION 2.1 of the Seller Disclosure Schedule, Seller has
no interest in any partnership, joint venture, limited liability company or
other entity.
2.2 CAPITALIZATION. The authorized capital stock of Seller consists of fifty
thousand (50,000) shares of no par value voting common stock. At the Closing
Date, there will be outstanding forty nine thousand nine hundred eighty nine
(49,989) shares of Seller's no par value voting common stock, which collectively
comprise the entire Seller Capital Stock. All outstanding shares of Seller
Capital Stock have been duly authorized and validly issued and are fully paid
and non-assessable. Except as set forth in this Section, there are no
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outstanding (i) shares of capital stock or voting securities of Seller, (ii)
securities of Seller convertible into or exchangeable for shares of capital
stock or voting securities of Seller or (iii) options, warrants, restricted
stock, other stock-based compensation awards or other rights to acquire from
Seller or other obligation of Seller to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of Seller. There are no outstanding obligations of Seller to
repurchase, redeem or otherwise acquire any security referred to in clauses (i),
(ii) or (iii) above.
2.3 TAXES.
(a) All Tax Returns required to be filed by or with respect to Seller
have been timely filed, and all such Tax Returns are complete and correct in all
material respects. Seller has paid all Taxes that are due from or with respect
to it for all periods before the Closing Date and has made all required
estimated Tax payments sufficient to avoid penalties if any, for underpayment.
(b) (i) The Tax Returns referred to in clause (a) have not been
examined by any Governmental Entity or the period for assessment of the Taxes in
respect of which such Tax Returns were required to be filed has expired, (ii)
there is no audit, examination, suit, investigation or similar proceeding
pending, or proposed or threatened with respect to Taxes of Seller, and no basis
exists therefor, and (iii) there are no outstanding waivers extending the
statutory period of limitation relating to the payment of Taxes due from Seller.
(c) Seller has not entered into any agreement that could reasonably be
expected to have an effect on Seller's liability for or reporting of Taxes in
any period ending after the Closing Date.
(d) All Taxes that Seller has been required by Law to withhold or to
collect for payment have been duly withheld and collected, and have been paid or
accrued, reserved against and added on the books of Seller. Seller has complied
in all material respects with all information reporting and backup withholding
requirements, including (without limitation) maintenance of required records
with respect thereto, in connection with amounts paid or owing to any employee,
independent contractor, creditor, shareholder or other third party.
(e) Seller is not liable for the Taxes of any Person, including as a
transferee, pursuant to any provision of applicable Law, or as a result of any
contractual arrangement with any third party or any taxing authority.
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(f) There is no Contract by or with Seller covering any Person as to
which payment or vesting thereunder (including any payment or vesting as a
result of the Merger) could result in a nondeductible expense to Seller under
any provision of applicable Law or an excise tax or other taxes to the recipient
of such payment.
(g) There are no liens for Taxes upon the assets of Seller, except for
liens relating to current Taxes not yet due and payable.
(h) Seller has never been a member of any group of corporations that
files or has filed Tax Returns on a combined, consolidated or unitary basis.
2.4 TITLE TO PROPERTY. Seller has good and marketable title to all of its assets
(including the Previously Issued Shares and the Intellectual Property) free of
Encumbrances. Seller is the owner, beneficially and of record, of all the
Previously Issued Shares free and clear of all Encumbrances and has full power
to transfer the Previously Issued Shares without obtaining the consent or
approval of any other Person.
2.5 INTELLECTUAL PROPERTY. SECTION 2.5 of the Seller Disclosure Schedule
contains a complete and correct list of all Intellectual Property that is owned
by Seller. Seller has never licensed Intellectual Property to any Person, or
permitted the use of Intellectual Property by any other Person. There are no
Contracts under which Seller has had Intellectual Property licensed to it or has
otherwise been permitted to use Intellectual Property. Unless specifically
described in this Agreement, (a) Seller has not assigned, hypothecated or
otherwise encumbered any Intellectual Property and (b) none of the licenses
included in the Intellectual Property of Seller purport to grant sole or
exclusive licenses to another Person, including (without limitation) sole or
exclusive licenses limited to specific fields of use. The patents owned by
Seller are valid and enforceable, and any patent issuing from patent
applications of Seller will be valid and enforceable. Seller has no Knowledge of
any infringement by any other Person of any Intellectual Property of Seller, and
Seller has not entered into any agreement to indemnify any other party against
any charge of infringement of any Intellectual Property. Seller has not violated
and does not violate or infringe any Intellectual Property of any other Person,
and Seller has not received any communication alleging that it violates or
infringes the Intellectual Property of any other Person. Seller has not been
sued for infringing any Intellectual Property of another Person.
2.6 CORPORATE AUTHORIZATION. Each of Seller and the Seller Shareholders has all
requisite corporate power and authority to execute, deliver and perform each
Transaction Document to which it is a party. The execution, delivery and
performance of the Transaction Documents to which either the Seller or any of
the Seller Shareholders is a party have been duly authorized by all necessary
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corporate action on the part of Seller and the Seller Shareholders. This
Agreement constitutes, and the other Transaction Documents to which each of
Seller and the Seller Shareholders is a party, when executed by each of Seller
and the Seller Shareholders (as the case may be) will constitute, the valid and
binding obligations of Seller and the Seller Shareholders, enforceable against
Seller and the Seller Shareholders, respectively, in accordance with their
respective terms. Each of the Seller Shareholders has approved and adopted this
Agreement and the Merger and each of the transactions contemplated by this
Agreement. Seller's Board of Directors has (i) unanimously approved and adopted
this Agreement and the Merger, (ii) determined that in its opinion the Merger is
in the best interests of the shareholders of Seller and is on terms that are
fair to such shareholders and (iii) recommended that the Seller Shareholders
approve this Agreement and the Merger.
2.7 NON-CONTRAVENTION. The execution, delivery and performance by Seller and the
Seller Shareholders of the Transaction Documents to which Seller is a party and
the consummation by Seller of the transactions contemplated thereby do not and
will not (i) violate the Articles of Incorporation or bylaws of Seller, (ii)
assuming compliance with the matters referred to in SECTION 2.7 of the Seller
Disclosure Schedule, violate any applicable Law, (iii) require any consent or
other action by any Person under, constitute a default under, or give rise to
any right of termination, cancellation or acceleration of any right or
obligation of Seller or to a loss of any benefit to which Seller is entitled
under any provision of any Contract or any Permit or Approval affecting, or
relating in any way to, the business of Seller or (iv) result in the creation or
imposition of any Encumbrance on any asset of Seller.
2.8 LEGAL PROCEEDINGS. No Order has been issued and no Action is pending or
threatened against or affecting Seller or any of its properties or assets that
individually or when aggregated with one or more other Orders or Actions has or
might reasonably be expected to have a material adverse effect on (a) Seller,
(b) the Business or (c) Seller's ability to perform its obligations under the
Transaction Documents or any aspect of the transactions contemplated thereby.
SECTION 2.9 of the Seller Disclosure Schedule lists each Order or Action that
involves a claim or potential claim against, or that enjoins or compels or seeks
to enjoin or to compel any activity by, Seller. There is no matter as to which
Seller has received any notice, claim or assertion, or, to the Knowledge of
Seller, which otherwise has been threatened or is reasonably expected to be
threatened or initiated, against or affecting any director, officer, employee,
agent or representative of Seller or any other Person, nor to the Knowledge of
Seller is there any reasonable basis therefor, in connection with which any such
Person has or may reasonably be expected to have, any right to indemnification
by Seller.
2.9 COMPLIANCE WITH LAW. Seller is and has been in compliance with and is not
under investigation with respect to and has not been threatened to be charged
with or given notice of any violation of, any applicable Law.
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2.10 DEBTS, OBLIGATIONS AND LIABILITIES. Section 2.10 of the Buyer Disclosure
Schedule contains a complete and accurate schedule of all liabilities and
obligations of Seller. Seller has no debts, liabilities or obligations of any
nature, whether accrued, absolute, contingent, or otherwise, and whether due or
to become due, that are not set forth in Section 2.10 of the Buyer Disclosure
Schedule.
2.11 INVESTMENT REPRESENTATIONS. Each of the acknowledgments, representations
and covenants set forth in the Investment Representations attached hereto as
Exhibit D and delivered under this Agreement are incorporated herein by
reference and made a part hereof in their entirety as if fully set forth herein.
2.12 DUE DILIGENCE MATERIALS. All documents, agreements, other materials, and
information provided by Seller to Buyer or any representative of Buyer in
connection with the due diligence conducted in connection with the transactions
contemplated by this Agreement have been true, correct and complete originals or
copies of the documents, agreements and other materials purported to be provided
or to which access has been given.
2.13 DISCLOSURE. No representation or warranty by Seller or any of the Seller
Shareholders in this Agreement and no statement by Seller or any of the Seller
Shareholders (or by any representative of Seller or the Seller Shareholders)
contained in any document, certificate, or other writing furnished by or on
behalf of Seller or the Seller Shareholders to Buyer in connection with this
Agreement or the transactions contemplated hereby, contains or will contain any
untrue statement of material fact, or omits or will omit to state any material
fact necessary to make it not misleading or to fully provide the information
required to be provided in the document, certificate or other writing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller, subject to such
exceptions as are specifically disclosed in the disclosure schedule (referencing
the appropriate section and paragraph numbers) supplied by Buyer to Seller and
dated as of the date hereof, that on the date hereof and as of the Effective
Time as though made at the Effective Time as follows; provided, that the
representations and warranties made as of a specified date will be true and
correct as of such date:
3.1 CORPORATE AUTHORIZATION. Each of Buyer and Acquisition Corp. has all
necessary corporate power and authority to execute, deliver and perform each
Transaction Document to which it is a party. The execution, delivery and
performance of the Transaction Documents to which Buyer or Acquisition Corp. is
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a party have been duly authorized by all necessary corporate action on the part
of Buyer. This Agreement constitutes, and the other Transaction Documents to
which Buyer or Acquisition Corp. is a party, when executed by Buyer, will
constitute the valid and binding obligations of Buyer, enforceable against Buyer
in accordance with their respective terms. The Buyer's Board of Directors has
(i) unanimously approved and adopted this Agreement and the Merger, which
approval satisfies in full any applicable requirements of the Nevada Business
Corporations Act, and (ii) determined that in its opinion the Merger is in the
best interests of the stockholders of Buyer.
3.2 NON-CONTRAVENTION. The execution, delivery and performance by Buyer or by
Acquisition Corp. of each of the Transaction Documents to which Buyer or
Acquisition Corp. is a party and the consummation by Buyer or Acquisition Corp.
of the transactions contemplated thereby do not and will not (i) violate the
Articles of Incorporation or bylaws of Buyer, (ii) violate any applicable Law,
(iii) require any consent or other action by any Person under, constitute a
default under, or give rise to any right of termination, cancellation or
acceleration of any right or obligation of Buyer or Acquisition Corp. or to a
loss of any benefit to which Buyer or Acquisition Corp. is entitled under any
provision of any Contract binding on Buyer or Acquisition Corp or any Permit or
Approval affecting, or relating in any way to, the assets or business of Buyer
or Acquisition Corp. or (iv) result in the creation or imposition of any
Encumbrance on any material asset of Buyer or any subsidiary of Buyer except, in
the case of clauses (ii), (iii) and (iv), for such matters as would not,
individually or in the aggregate, have a material adverse effect on Buyer or
materially impair the ability of Buyer to consummate the transactions
contemplated by this Agreement.
ARTICLE IV
ADDITIONAL AGREEMENTS
4.1 PERMITS AND APPROVALS. Seller and Buyer will cooperate with each other and
use their best efforts to obtain (and will immediately prepare all
registrations, filings and applications, requests and notices preliminary to)
all Approvals and Permits that may be necessary or that may be reasonably
requested by the other party to consummate the transactions contemplated by this
Agreement, including under the Securities Act and state Blue Sky laws.
4.2 BLUE SKY LAWS. Seller will use its best efforts to assist Buyer as may be
necessary to comply with the securities and Blue Sky laws of all jurisdictions
that are applicable in connection with the issuance of Buyer Common Stock in
connection with the Merger.
4.3 REORGANIZATION. Seller and Buyer will each use its best efforts to cause the
business combination to be effected by the Merger to be qualified as a
"reorganization" described in Section 368(a) of the Code.
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4.4 REASONABLE EFFORTS. Subject to the terms and conditions provided in this
Agreement, each of the parties hereto shall use its reasonable efforts to take
promptly, or cause to be taken, all actions, and to do promptly, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated
hereby to obtain all necessary waivers, consents and approvals and to effect all
necessary registrations and filings and to remove any injunctions or other
impediments or delays, legal or otherwise, in order to consummate and make
effective the transactions contemplated by this Agreement for the purpose of
securing to the parties hereto the benefits contemplated by this Agreement.
4.5 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto, at the
request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
ARTICLE V
RIGHT OF FIRST REFUSAL AND RELATED COVENANTS
5.1 RESTRICTIONS ON TRANSFER OF BUYER COMMON STOCK. Except as otherwise provided
in this Article V, until the date that is five years after the Closing Date (the
"Expiration Date"), the Seller Shareholders shall not sell, assign, transfer,
pledge, hypothecate or otherwise encumber or dispose of in any way all or any
part of or any interest in the shares of Buyer Common Stock issued to the Seller
Shareholders as part of the Merger Consideration under this Agreement. Any sale,
assignment, transfer, pledge, hypothecation or other encumbrance or disposition
of such shares of Buyer Common Stock not made in accordance with the terms and
provisions of this Article V and the other provisions of this Agreement shall be
null and void, shall not be recorded on the books of the Company and shall not
be recognized by the Company.
5.2 BUYER'S RIGHTS OF FIRST REFUSAL. As further consideration and inducement for
Buyer to enter into this Agreement, each of the Seller Shareholders agrees to
the following:
(a) TRANSFER NOTICE. If at any time before the Expiration Date, the
Seller Shareholder proposes to transfer shares of Buyer Common Stock received
under this Agreement to one or more third parties pursuant to an understanding
with such third parties (a "TRANSFER"), then such Seller Shareholder (the
"TRANSFERRING SHAREHOLDER") shall give Buyer (or its designated assignee)
written notice of the Transferring Shareholder's intention to make the Transfer
(the "TRANSFER NOTICE"), which Transfer Notice shall include (i) a description
of the shares of Buyer Common Stock to be transferred ("OFFERED SHARES"), (ii)
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the identity of the prospective transferee(s) and (iii) the consideration and
the material terms and conditions on which the proposed Transfer is to be made.
The Transfer Notice shall certify that the Transferring Shareholder has received
a firm offer from the prospective transferee(s) and that Transferring
Shareholder in good faith believes that a binding agreement for the Transfer is
obtainable under the terms set forth in the Transfer Notice. The Transfer Notice
also shall include a copy of any written proposal, term sheet or letter of
intent or other agreement relating to the proposed Transfer.
(b) BUYER'S OPTION. Buyer (or its assignee) shall have an option for a
period of Fourteen (14) days from receipt of the Transfer Notice to elect to
purchase the Offered Shares at a price per share equal to ninety percent of the
average closing bid price of the Buyer Common Stock for the thirty calendar day
period before receipt of the Transfer Notice (and otherwise subject to the same
material terms and conditions as described in the Transfer Notice). Buyer may
exercise such purchase option and thereby purchase all or a portion of the
Offered Shares by notifying the Transferring Shareholder in writing before
expiration of such Fourteen (14) day period as to the number of Offered Shares
that Buyer desires to purchase. If Buyer gives the Transferring Shareholder
notice that Buyer desires to purchase Offered Shares, then payment for the
Offered Shares shall be by check or wire transfer, against delivery of the
Offered Shares to be purchased at a place agreed on between the parties and at
the time of the scheduled closing therefor, which shall be no later than Forty
Five (45) days after Buyer's receipt of the Transfer Notice, unless the Transfer
Notice contemplated a later closing with the prospective third party
transferee(s) or unless the value of the purchase price has not yet been
established under SECTION 5.2(C) of this Agreement.
(c) NON-EXERCISE OF RIGHTS. Subject to the terms and conditions of this
Agreement and the obligations set forth under SECTION 5.7 hereof, to the extent
that Buyer has not exercised its rights to purchase all of the Offered Shares
within the time periods specified herein, the Transferring Shareholder shall
have a period of Thirty (30) days from the expiration of such rights in which to
sell any such remaining Offered Shares (the "REMAINING SHARES"), as the case may
be, under terms and conditions (including the purchase price) no more favorable
than those specified in the Transfer Notice to the third-party transferee(s)
identified in the Transfer Notice. The third-party transferee(s) shall acquire
the Remaining Shares free and clear of subsequent rights of first refusal under
this Agreement. If the Transferring Shareholder does not consummate the sale or
disposition of the Remaining Shares within the Thirty (30) day period from the
expiration of these rights, then the Buyer's first refusal rights shall continue
to be applicable to any subsequent disposition of the Remaining Shares by the
Transferring Shareholder until such rights lapse in accordance with the terms of
this Agreement. The exercise or non-exercise of the rights of Buyer to purchase
any of the Offered Shares or to participate in sales of Buyer Common Stock by
the Transferring Shareholder shall not adversely affect Buyer's rights to make
subsequent purchases from any Transferring Shareholder or to participate
subsequently in sales of Buyer Common Stock by the Transferring Shareholder.
5.3 LIMITATIONS TO RIGHTS OF REFUSAL. Notwithstanding the provisions of Section
5.2, any Seller Shareholder may sell or otherwise assign, with or without
consideration, to any spouse or member of Seller Shareholder's immediate family,
or to a custodian, trustee (including a trustee of a voting trust), executor or
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other fiduciary for the account of Seller Shareholder's spouse or members of
Seller Shareholder's immediate family, or to a trust for Seller Shareholder's
own self, or to a charitable remainder trust, provided that each such transferee
or assignee, before the completion of the sale, transfer or assignment, shall
have executed documents assuming the obligations of the Seller Shareholder under
this Agreement with respect to the transferred securities.
5.4 PROHIBITED TRANSFERS. Any attempt by any Seller Shareholder to transfer
Buyer Common Stock in violation of Section 5.2 hereof shall be void, and Buyer
shall not be required to effect such a transfer or treat any alleged transferee
as the holder of such securities.
5.5 ASSIGNMENTS AND TRANSFERS. Buyer may assign or transfer all or any portion
of its rights under this Section 5 of this Agreement.
5.6 EFFECT OF CHANGE IN BUYER'S CAPITAL STRUCTURE. Appropriate adjustments shall
be made in the number and class of shares of securities subject to this
Agreement in the event of a stock dividend, stock split, reverse stock split,
combination, reclassification or like change in the capital structure of Buyer.
5.7 COVENANT TO COORDINATE SALES. Notwithstanding Buyer's failure to exercise
its right of first refusal under Section 5.2 of this Agreement and
notwithstanding the provisions of Section 5.2(d), any Seller Shareholder
proposing to sell shares of Buyer Common Stock acquired under this Agreement to
any third party at any time before the Expiration Date shall coordinate with
Buyer with respect to the sale of such shares to the extent that Buyer deems
such coordination will be necessary to avoid a disorderly market for Buyer
Common Stock.
ARTICLE VI
CONDITIONS TO CLOSING
6.1 GENERAL CONDITIONS. The obligations of the parties to consummate the Merger
are subject to satisfaction of the following conditions:
(a) SHAREHOLDER APPROVAL. This Agreement must have been approved and
adopted by the requisite affirmative vote of the holders of Common Stock in
accordance with Seller's Articles of Incorporation and bylaws and applicable
Law.
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(b) GOVERNMENT APPROVALS. The parties shall have timely obtained from
each Governmental Entity all Permits and Approvals, if any, necessary for
consummation of, or in connection with, the Merger and the several transactions
contemplated hereby, including such approvals, waivers and consents as may be
required under applicable Law.
(c) NO RESTRAINING ACTION. No Action will have been instituted or
threatened against Buyer, any Buyer Subsidiary, Acquisition Corp. or Seller
before any Governmental Entity, seeking to restrain or prohibit the consummation
of the transactions contemplated hereby.
(d) MERGER. The Articles of Merger shall have been filed with the
Secretary of State of the State of Colorado.
6.2 CONDITIONS TO OBLIGATIONS OF BUYER. Unless waived, in whole or part, in
writing by Buyer, Buyer's obligations hereunder are subject, before or at the
Closing, to satisfaction of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Seller contained in Article II will be true at the Closing Date with the same
effect as though made at such time. Seller will have performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or before the Closing Date, and Seller will
have delivered to Buyer a certificate of Seller in form and substance
satisfactory to Buyer, dated the Closing Date and signed by its Chief Executive
Officer and Chief Financial Officer to such effect.
(b) NO DISSENTERS' RIGHTS; SHAREHOLDER APPROVAL. The Merger and all of
the transactions contemplated hereby shall have been approved by each of the
Seller Shareholders and none of the Seller Shareholders shall have exercised any
dissenter's right under applicable Law.
(c) CORPORATE PROCEEDINGS. True and complete copies of all corporate
proceedings and documents effecting the authorization and approval of the
Transaction Documents and the transactions contemplated thereunder by Seller,
certified by the Chief Executive Officer and the Secretary of Seller will have
been furnished to Buyer.
(d) TRANSACTION DOCUMENTS. Seller will have executed and delivered the
Transaction Documents to which it is a party other than this Agreement.
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(e) APPROVALS AND PERMITS. Seller must have obtained all Approvals and
Permits necessary to consummate the transactions contemplated hereby.
(f) INVESTMENT REPRESENTATION. Buyer shall have received the Investment
Representations in the form attached hereto as EXHIBIT D from each of the Seller
Shareholders.
(g) SECURITIES LAW COMPLIANCE. Buyer shall be satisfied that the
transaction is exempt under Section 4(2) or Regulation D of the Securities Act.
6.3 CONDITIONS TO OBLIGATIONS OF SELLER. Unless waived, in whole or part, in
writing by Seller, Seller's obligations hereunder are subject, before or at the
Closing, to satisfaction of each of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Buyer contained in Article III will be true at the Closing Date with the same
effect as though made at such time. Buyer will have performed all obligations
and complied with all covenants and conditions required by this Agreement to be
performed or complied with by it at or before the Closing Date, and Buyer will
have delivered to Seller a certificate of Buyer in form and substance
satisfactory to Seller, dated the Closing Date and signed by its Chief Executive
Officer and Chief Financial Officer to such effect.
(b) TRANSACTION DOCUMENTS. Buyer must have executed and delivered the
Transaction Documents to which it is a party other than this Agreement.
(c) CORPORATE PROCEEDINGS. True and complete copies of all corporate
proceedings and documents effecting the authorization and approval of the
Transaction Documents and the transactions contemplated thereunder by Buyer,
certified by the Chief Executive Officer and the Secretary of Buyer, shall have
been furnished to Seller.
ARTICLE VII
TERMINATION OF OBLIGATIONS
7.1 TERMINATION OF AGREEMENT. Notwithstanding anything herein to the contrary,
this Agreement and the transactions contemplated by this Agreement will
terminate if the Closing does not occur on or before the close of business on
March 30, 2001, unless extended by mutual consent in writing of Buyer and
Seller, and otherwise may be terminated at any time before the Closing as
follows and in no other manner:
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(a) MUTUAL CONSENT. By mutual consent in writing of Buyer and Seller.
(b) CONDITIONS TO BUYER'S PERFORMANCE NOT MET. By Buyer by written
notice to Seller if any event occurs or condition exists that would render
impossible the satisfaction of one or more conditions to the obligations of
Buyer to consummate the transactions contemplated by this Agreement as set forth
in SECTION 6.1 or 6.2.
(c) CONDITIONS TO SELLER'S PERFORMANCE NOT MET. By Seller by written
notice to Buyer if any event occurs or condition exists that would render
impossible the satisfaction of one or more conditions to the obligation of
Seller to consummate the transactions contemplated by this Agreement as set
forth in SECTION 6.1 or 6.3.
7.2 EFFECT OF TERMINATION. If this Agreement is terminated under SECTION 7.1,
all further obligations of the parties under this Agreement will terminate
without further liability of any party to another; provided that the obligations
of the parties contemplated by or contained in SECTION 9.1 and SECTION 9.3 will
survive any such termination. A termination under SECTION 7.1 will not relieve
any party of any liability for a breach of, or for any misrepresentation under
this Agreement, or be deemed to constitute a waiver of any available remedy
(including specific performance if available) for any such breach or
misrepresentation.
ARTICLE VIII
INDEMNIFICATION
8.1 OBLIGATIONS OF SELLER AND SELLER SHAREHOLDERS. The Seller and each of the
Seller Shareholders, jointly and severally, shall indemnify and hold harmless
Buyer and each Buyer Subsidiary, and their respective directors, officers,
employees, Affiliates, Associates, agents and assigns from and against all
Losses of Buyer or any Buyer Subsidiary, directly or indirectly, as a result of,
or based on or arising from (a) any inaccuracy in or breach or nonperformance of
any of the representations, warranties, covenants or agreements made by Seller
in or pursuant to this Agreement; or (b) any third party claim or demand
regarding the conduct of the Business before the Closing, whether asserted
before or after the Closing. The Seller Shareholders shall not have any right of
contribution from the Surviving Corporation with respect to Losses (if any) that
the Buyer claims after the Closing.
8.2 OBLIGATIONS OF BUYER. Buyer will indemnify and hold harmless the
Shareholders from and against Losses (if any) of the Shareholders, directly or
indirectly, as a result of, or based upon or arising from, any inaccuracy in or
breach or nonperformance of any of the representations, warranties, covenants or
agreements made by Buyer in or pursuant to this Agreement.
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8.3 PROCEDURE.
(a) Any party seeking indemnification with respect to any Loss will
give notice to the party required to provide indemnity hereunder.
(b) Any Indemnifying Party may satisfy its indemnification obligations
by, at such party's option, either making payment to the Indemnified Party in
cash by wire transfer of the amount owed or delivering shares of Buyer Common
Stock, duly endorsed or with stock powers attached that have been endorsed in
blank.
(c) For the purposes of determining the number of Buyer Common Stock to
be delivered in satisfaction of an indemnification obligation under this SECTION
8 (to the extent payment is made in Buyer Common Stock), the price per share
shall be equal to the Fair Market Value at the Effective Time.
(d) If any claim, demand or liability is asserted by any third party
against any Indemnified Party, the Indemnifying Party will upon the written
request of the Indemnified Party, defend Actions (if any) brought against the
Indemnified Party in respect of matters embraced by the indemnity with counsel
satisfactory to the Indemnified Party, but the Indemnified Party will have the
right to conduct and control the defense, compromise or settlement of any
Indemnifiable Claim if the Indemnified Party chooses to do so, on behalf of and
for the account and risk of the Indemnifying Party who will be bound by the
result so obtained to the extent provided herein; PROVIDED, HOWEVER, that no
Indemnifiable Claim shall be settled by an Indemnified Party unless the
Indemnifying Party shall consent thereto, which consent shall not be
unreasonably withheld or delayed. If, after a request to defend any Action, the
Indemnifying Party neglects to defend the Indemnified Party, a recovery against
the latter suffered by it in good faith, is conclusive in its favor against the
Indemnifying Party; PROVIDED, HOWEVER, that, if the Indemnifying Party has not
received reasonable notice of the Action against the Indemnified Party, or is
not allowed to control its defense, judgment against the Indemnified Party is
only presumptive evidence against the Indemnifying Party. Each party hereto, to
the extent that it is or becomes an Indemnifying Party, hereby stipulates that a
judgment against the Indemnified Party will be conclusive upon the Indemnifying
Party. The parties will cooperate in the defense of all third party claims,
which may give rise to Indemnifiable Claims hereunder. In connection with the
defense of any claim, each party will make available to the party controlling
such defense, any books, records or other documents within its control that are
reasonably requested in the course of such defense.
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ARTICLE IX
MISCELLANEOUS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations, warranties
and agreements contained in this Agreement will survive the Closing.
9.2 PUBLIC ANNOUNCEMENTS. Seller will consult with Buyer before issuing any
press release or making any public statement with respect to this Agreement or
the transactions contemplated hereby. The substance of any such press release or
public statement must be approved in advance by Buyer.
9.3 CONFIDENTIALITY. All information disclosed by any party (or its
representatives) whether before or after the date hereof, in connection with the
transactions contemplated by, or the discussions and negotiations preceding,
this Agreement to any other party (or its representatives) will be kept
confidential by such other party and its representatives and will not be used by
any such Persons other than as contemplated by this Agreement, except to the
extent that such information (i) was known by the recipient when received, (ii)
is or hereafter becomes lawfully obtainable from other sources, (iii) is
necessary or appropriate to disclose to a Governmental Entity having
jurisdiction over the parties, or as may otherwise be required by Law or (iv) to
the extent such duty as to confidentiality is waived in writing by the other
party. If this Agreement is terminated, each party will use all reasonable
efforts to return upon written request from the other party all documents (and
reproductions thereof) received by it or its representatives from such other
party (and, in the case of reproductions, all such reproductions made by the
receiving party) that include information not within the exceptions contained in
the first sentence of this SECTION 9.3, unless the recipients provide assurances
reasonably satisfactory to the requesting party that such documents have been
destroyed.
9.4 EXPENSES. Except as otherwise provided herein, each of the parties will bear
all expenses incurred by it in connection with this Agreement and in the
consummation of the transactions contemplated hereby and in preparation
therefor.
9.5 NOTICES. All notices (including other communications required or permitted)
under this Agreement must be in writing and must be delivered: (a) in person;
(b) by registered, express or certified mail, postage prepaid, return receipt
requested; (c) by a generally recognized courier or messenger service that
provides written acknowledgement of receipt by the addressee; or (d) by
facsimile or other generally accepted means of electronic transmission with a
verification of delivery. Notices are deemed delivered at the earlier of the
date such notice is actually received by a party or two days after such notice
is given. Notices to Seller must be given at the addresses below, but any party
may furnish, from time to time, other addresses for notices to it.
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If to Buyer, at: with a copy to:
In Store Media Systems, Inc. Pillsbury Winthrop, LLP
15423 E. Batavia Drive 650 Town Center Drive, 7th Floor
Aurora, Colorado 80011 Costa Mesa, California 92626
Telephone: (303) 364-6550 Telephone: (714) 436-6800
Telecopier: (303) 364-6564 Telecopier: (714) 436-2800
Attn: Robert Cohen Attn: Albert P. Asatoorian, Esq.
If to Seller, at:
The E. Schulze Corporation with a copy to:
c/o Louis J. Davis, P.C.
5600 South Quebec, Suite 1485 Louis J. Davis, P.C.
Englewood, Colorado 80111 5600 South Quebec, Suite 1485
Telephone: (303) 741-0909 Englewood, Colorado 80111
Telecopier: (303) 741-2235 Telephone: (303) 741-0909
Attn: Melissa Schulze Telecopier: (303) 741-2235
The addresses to which notices or demands are to be given may be
changed from time to time by notice served as provided above. Delivery of notice
to the copied parties above is not notice to Buyer or Seller, as the case may
be.
9.6 FURTHER ASSURANCES. Seller will, upon the request of Buyer, from time to
time execute and deliver such additional certificates, agreements and other
documents and take such other actions as Buyer reasonably requests, to render
effective the transactions contemplated hereby.
9.7 SECTIONS AND OTHER HEADINGS. Sections or other headings contained in this
Agreement are for reference purposes only and will not affect in any way the
meaning or interpretation of this Agreement.
9.8 INTEGRATED AGREEMENT. This Agreement and the exhibits and schedules hereto
constitute the entire agreement between the parties hereto, and no agreements,
understandings, restrictions, warranties or representations exist between the
parties other than those set forth herein or provided for herein.
9.9 ASSIGNMENT. No party to this Agreement may assign this Agreement without the
prior consent of the other parties to this Agreement, except that Buyer can
assign this Agreement without the prior written consent of any other party in
connection with the sale of all or substantially all of the assets or stock of
Buyer or in connection with the merger, consolidation or similar reorganization
of Buyer.
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9.10 AMENDMENTS; WAIVERS. All parties must approve any amendment to this
Agreement. Any waiver of any right or remedy requires the consent of the party
waiving it. Every amendment or waiver must be in writing and designated as an
amendment or waiver, as appropriate. No failure by any party to insist on the
strict performance of any provision of this Agreement, or to exercise any right
or remedy, will be deemed a waiver of such performance, right or remedy, or of
any other provision of this Agreement.
9.11 INTERPRETATION. If any claim is made by a party relating to any conflict,
omission or ambiguity in the provisions of this Agreement, no presumption or
burden of proof or persuasion will be implied because this Agreement was
prepared by or at the request of any party or its counsel. The parties waive any
statute or rule of Law to the contrary. Unless the context otherwise requires:
(i) a term has the meaning assigned to it; (ii) "or" is not exclusive; (iii)
words in the singular include the plural, and words in the plural include the
singular; (iv) "herein," "hereof" and other words of similar import refer to
this Agreement as a whole and not to any particular Section, Subsection,
paragraph, clause, or other subdivision; (v) all references to "Section,"
"Schedule" or "Exhibit" refer to the particular Section, Schedule or Exhibit in
or attached to this Agreement; and (vi) "including" and "includes," when
following any general provision, sentence, clause, statement, term or matter,
will be deemed to be followed by ", but not limited to," and ", but is not
limited to," respectively.
9.12 COUNTERPARTS. This Agreement is being signed in several counterparts. Each
of them is an original, and all of them constitute one agreement.
9.13 HEADINGS; EXHIBITS. The headings in this Agreement are only for convenience
and ease of reference and are not to be considered in construction or
interpretation. All exhibits, schedules and appendices attached to this
Agreement are incorporated herein.
9.14 SEVERABILITY. If any provision of this Agreement is held to be
unenforceable for any reason, it will be adjusted rather than voided, if
possible, to achieve the intent of the parties to the extent possible. In any
event, all other provisions of this Agreement will be deemed valid and
enforceable to the extent possible.
9.15 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the internal Laws of the State of Colorado (without reference to
its rules as to conflicts of Law).
9.16 SPECIFIC PERFORMANCE. The parties agree that irreparable damage would occur
if any provision of this Agreement was not performed in accordance with the
terms hereof and that the parties will be entitled to specific performance of
the terms hereof in addition to any other remedy to which they are entitled at
law or equity.
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9.17 CONSENT TO JURISDICTION; VENUE.
(a) All disputes of any nature (whether sounding in contract or in
tort) arising out of or relating to this Agreement must be initiated, maintained
and determined in the County of Arapahoe, State of Colorado. Each party agrees
irrevocably to submit itself to the jurisdiction of the United States District
Court for the State of Colorado and the jurisdiction of any court of the State
of Colorado located in Arapahoe County and waives all objections (if any) to
jurisdiction that it may have under the laws of the State of Colorado or the
United States.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed by its duly authorized officers on the day and year
first above written.
IN STORE MEDIA SYSTEMS, INC.
By: /S/ Robert Cohen
--------------------------------
Robert Cohen, Vice President and
Chief Financial Officer
IN STORE ACQUISITION CORP.
By: /S/ Robert Cohen
--------------------------------
Robert Cohen, Vice President and
Chief Financial Officer
THE E. SCHULZE CORPORATION
By: /S/ Melissa Schulze
--------------------------------
Melissa Schulze, President
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[SIGNATURE PAGE TO AGREEMENT AND PLAN OF MERGER]
SELLER SHAREHOLDERS
/S/ Melissa Schulze
---------------------------
Melissa Schulze
/S/ Everett E. Schulze III
---------------------------
Everett E. Schulze III
/S/ William E. Schulze
---------------------------
William E. Schulze
/S/ Charles A. Schulze
---------------------------
Charles A. Schulze
/S/ James D. Schulze
---------------------------
James D. Schulze
/S/ Eva Marie Schulze Jr.
---------------------------
Eva Marie Schulze Jr.
/S/ Rebecca E. Schulze
---------------------------
Rebecca E. Schulze
/S/ Donald P. Uhl
---------------------------
Donald P. Uhl
/S/ Michael T. Mozer
---------------------------
Michael T. Mozer
/S/ Elizabeth Schulze
---------------------------
Elizabeth Schulze
/S/ Louis J. Davis
---------------------------
Louis J. Davis
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EXHIBIT A
---------
DEFINITIONS
"ACQUISITION CORP." has the meaning set forth in the introduction to
this Agreement.
"ACQUISITION CORP. COMMON STOCK" has the meaning set forth in SECTION
1.2(b).
"ACTION" means any action, complaint, petition, investigation, suit or
other proceeding, whether civil or criminal, in law or in equity, or before any
arbitrator or Governmental Entity.
"AFFILIATE" means a Person that directly, or indirectly through one or
more intermediaries, controls, or is controlled by, or is under common control
with, a specified Person.
"AGREEMENT" means this Agreement by and among Buyer, Acquisition Corp.
and Seller as it may be amended, supplemented or modified from time to time.
"APPROVAL" means any approval, authorization, consent, qualification or
registration, or any waiver of any of the foregoing, required to be obtained
from, or any notice, statement or other communication required to be filed with
or delivered to, any Governmental Entity or any other Person.
"ARTICLES OF MERGER" has the meaning set forth in SECTION 1.1(a).
"ASSOCIATE" of a Person means:
(i) a corporation or organization (other than a party to this
Agreement) of which such Person is an officer or partner or, directly or
indirectly, beneficially owns 10.0% or more of any class of equity securities;
(ii) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such person serves as trustee or
in a similar capacity; and
(iii) any relative or spouse of such Person or any relative of
such spouse who has the same home as such person or who is a director or officer
of Seller or any of its Affiliates.
"BUYER COMMON STOCK" has the meaning set forth in the recitals.
"BUYER DISCLOSURE SCHEDULE" means the disclosure schedule dated, and
delivered by Seller to Buyer on, the date of this Agreement. The Sections of the
Disclosure Schedule will be numbered to correspond to the applicable Section of
this Agreement and, together with all matters under such heading, will be deemed
to qualify only that section unless it is manifestly evident from such
disclosure that it qualifies another section, in which case it will be deemed to
qualify such other section.
"CERTIFICATES" has the meaning set forth in SECTION 1.3(c).
"CLOSING" has the meaning set forth in SECTION 1.1(b).
A-1
"CLOSING DATE" has the meaning set forth in SECTION 1.1(b).
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONTRACT" means any agreement, arrangement, bond, commitment,
franchise, indemnity, indenture, instrument, lease, license or understanding,
whether or not in writing, to which Seller is a party.
"COLORADO CODE" has the meaning set forth in SECTION 1.1(a).
"DISSENTING SHARES" has the meaning set forth in SECTION 1.2(a).
"DISSENTING SHAREHOLDER" has the meaning set forth in SECTION 1.2(d).
"EFFECTIVE TIME" has the meaning set forth in SECTION 1.1(B).
"ENCUMBRANCE" means any claim, charge, easement, encumbrance, lease,
covenant, security interest, lien, option, pledge, rights of others, or
restriction (whether on voting, sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"EXCHANGE AGENT" has the meaning set forth in SECTION 1.3(a).
"EXCHANGE FUND" means the shares of Buyer Common Stock and cash
delivered to the Exchange Agent under SECTION 1.3(b).
"EXCHANGE RATE" has the meaning set forth in SECTION 1.2(a).
"EXPIRATION DATE" has the meaning set forth in SECTION 5.1.
"FAIR MARKET VALUE" means (as to any share of Buyer Common Stock): (i)
the average of the closing prices over the ten (10) day period ending
immediately before the applicable date of valuation, if the Buyer Common Stock
is traded in the over-the-counter market (including trading on the Nasdaq
Electronic (OTC) Bulletin Board); (ii) the average of the closing prices of the
Buyer Common Stock over the five (5) business days ending immediately before the
applicable date of valuation, if the Buyer Common Stock is traded on a
securities exchange or the Nasdaq National Market or Nasdaq SmallCap Market; and
(iii) as determined in good faith by the Buyer's Board of Directors, if no
market exists for the Buyer Common Stock.
"GOVERNMENTAL ENTITY" means any government or any agency, bureau,
board, commission, court, department, official, political subdivision, tribunal
or other instrumentality of any government, whether federal, state or local,
domestic or foreign.
"INDEMNIFIABLE CLAIM" means any Loss for or against which any party is
entitled to indemnification under this Agreement.
"INDEMNIFIED PARTY" means the party entitled to indemnity under this
Agreement.
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"INDEMNIFYING PARTY" means the party obligated to provide
indemnification under this Agreement.
"INTELLECTUAL PROPERTY" means any trade secret, secret process or other
confidential information or know-how and any brand name, copyright, patent,
service mark, trademark, tradename, and all registrations or applications for
registration of any of the foregoing.
"INVESTOR" has the meaning set forth in the introductory paragraph of
EXHIBIT D hereto.
"KNOWLEDGE" with respect to Seller means the actual knowledge of each
of the Seller Shareholders after conducting a reasonable investigation of the
subject matter thereof, and "Knowledge" with respect to Buyer means the actual
knowledge of Donald P. Uhl after conducting a reasonable investigation of the
subject matter thereof.
"LAW" means any constitutional provision, statute or other law, rule,
regulation, or interpretation of any Governmental Entity and any Order.
"LOSS" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value, obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including interest or other carrying costs, penalties, legal, accounting and
other professional fees and expenses incurred in the investigation, collection,
prosecution and defense of claims and amounts paid in settlement, that may be
imposed on or otherwise incurred or suffered by the specified person.
"MERGER" has the meaning set forth in the recitals.
"MERGER CONSIDERATION" has the meaning set forth in SECTION 1.2(a).
"NASDAQ" means the National Association of Securities Dealers, Inc.
Automated Quotations System.
"NEW CERTIFICATE" has the meaning set forth in SECTION 1.3(c).
"OFFERED SHARES" has the meaning set forth in SECTION 5.2(a).
"ORDER" means any decree, injunction, judgment, order, ruling,
assessment or writ.
"PERMIT" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"PERSON" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"PREVIOUSLY ISSUED STOCK" means the twenty million one hundred forty
four thousand one hundred ninety eight (20,144,198) shares of Buyer Common Stock
that were issued previously and held by Seller immediately before the Effective
Time.
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"REMAINING SHARES" has the meaning set forth in SECTION 5.2(d).
"SEC DOCUMENTS" has the meaning set forth in PARAGRAPH 4(b) of EXHIBIT
D hereto.
"SECURITIES" has the meaning set forth in PARAGRAPH 1 of EXHIBIT D
hereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SELLER" is defined in the introduction to this Agreement.
"SELLER CAPITAL STOCK" has the meaning set forth in the recitals.
"SELLER DISCLOSURE SCHEDULE" means the disclosure schedule dated, and
delivered by Seller to Buyer on, the date of this Agreement. The Sections of the
Seller Disclosure Schedule will be numbered to correspond to the applicable
Section of this Agreement and, together with all matter under such heading, will
be deemed to qualify only to that section unless it is manifestly evident from
such disclosure that it qualifies another section, in which case it will be
deemed to qualify such other section.
"SELLER SHAREHOLDERS" means the holders of the Seller Capital Stock at
the Effective Time, each of whom is a signatory to the Agreement and identified
on EXHIBIT C hereto.
"SURVIVING CORPORATION" has the meaning set forth in SECTION 1.1(a).
"TAX" means any foreign, federal, state, county or local income, sales
and use, excise, franchise, real and personal property, transfer, gross receipt,
capital stock, production, business and occupation, disability, employment,
payroll, severance or withholding tax or charge imposed by any Governmental
Entity, any interest and penalties (civil or criminal) related thereto or to the
nonpayment thereof, and any Loss in connection with the determination,
settlement or litigation of any Tax liability.
"TAX RETURN" means a report, return or other information required to be
supplied to a Governmental Entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any group of
entities that includes Seller.
"TRANSACTION DOCUMENTS" means this Agreement and the ancillary
agreements (if any) described or referenced in this Agreement.
"TRANSFER" has the meaning set forth in SECTION 5.2(a).
"TRANSFER NOTICE" has the meaning set forth in SECTION 5.2(a).
"TRANSFERRING SHAREHOLDER" has the meaning set forth in SECTION 5.2(a).
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EXHIBIT B-1
-----------
ARTICLES OF MERGER
B-1
EXHIBIT B-1
-----------
PLAN OF MERGER
B-2
EXHIBIT C
---------
DISTRIBUTION LIST
MERGER CONSIDERATION
Shares of Seller Shares of Buyer
NAME Capital Stock Common Stock CASH
- ---- ------------- ------------ ----
Melissa Schulze 14,395 3,700,000 $ 1,260,000
Everett E. Schulze, III 4,963 1,883,333 70,000
William E. Schulze 4,963 1,883,333 70,000
Charles A. Schulze 4,963 1,883,333 70,000
James D. Schulze 4,963 1,883,333 70,000
Eva Marie Schulze Jr. 4,963 1,883,333 70,000
Rebecca E. Schulze 4,963 1,883,333 70,000
Donald P. Uhl 2,481 1,000,000 -0-
Michael T. Mozer 2,481 1,000,000 -0-
Elizabeth Schulze 496 -0- 120,000
Louis J. Davis 358 144,198 -0-
TOTAL 49,989 17,144,196 $ 1,800,000
C-1
EXHIBIT D
---------
INVESTMENT REPRESENTATIONS
Unless otherwise indicated, certain terms used below but not defined
herein have the meanings ascribed to them in the Agreement. As used in this
EXHIBIT D, the term "INVESTOR" means any Seller Shareholder. Each Investor
hereby represents and warrants, and hereby covenants and agrees to, all of the
following:
1. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Agreement is made with each
Investor in reliance on such Investor's representation to Buyer, which by such
Investor's execution of this Agreement such Investor hereby confirms, that the
shares of Buyer Common Stock to be acquired by such Investor (the "SECURITIES")
in exchange for shares of Seller Capital Stock, as contemplated under the
Agreement, will be acquired for investment for such Investor's own account, not
as a nominee or agent, and not with a view to the resale or distribution of any
part thereof, and that such Investor has no present intention of selling,
granting any participation in, or otherwise distributing the same in any
transaction other than a transaction exempt from the registration requirements
of the Securities Act. By executing this Agreement, each Investor further
represents that such Investor does not have any contract, undertaking, agreement
or arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Securities. Investor
is experienced in making investments in the unregistered and restricted
securities of developing and emerging growth companies such as Buyer. Investor
understands that such investments (including Investor's investment in the
Securities) involve a high degree of speculation and risk. Investor has such
knowledge and experience in financial and business matters that Investor is
capable of evaluating the merits and risks of the investment in Buyer
represented by the Securities and, by reason of Investor's financial and
business experience and/or its pre-existing substantive relationship with the
Buyer, Investor has the capacity to protect Investor's interests in connection
with the Securities. Investor is financially able to bear the economic risk of
the investment represented by the Securities, including a total loss of such
investment. The entire legal and beneficial interest in the Securities is being
purchased by Investor and shall be held only for Investor's account and neither
in whole nor in part for any other Person.
2. NO ADVERTISING OR GENERAL SOLICITATION. Investor represents and
warrants to Buyer all of the following: (i) that, the sale of the Securities to
Investor was not accomplished by the publication of any written or printed
communication, any pre-recorded telephone communication or any communication
spoken on radio, television or similar communication media; and (ii) that
Investor has not seen or received any advertisement or general solicitation with
respect to the sale of any of the securities of Buyer, including, without
limitation, the Securities.
3. RELIANCE ON INVESTOR'S REPRESENTATIONS. Investor understands that
the Securities are not registered under the Securities Act on the ground that
their issuance and sale in connection with the Offer (and as contemplated under
the Agreement) is (and will be) exempt from registration under the Securities
D-1
Act pursuant to exemptions available thereunder (including, without limitation,
the exemptions available under Section 4(2) of the Securities Act and Regulation
D promulgated under the Securities Act), and that the Buyer's reliance on such
exemption is predicated on each Investor's representations set forth in the
Agreement. Each Investor realizes that the basis for the exemption may not be
present if, notwithstanding such representations, the Investor has in mind
merely acquiring any of the Securities for a fixed or determinable period in the
future, or for a market rise, or for sale if the market does not rise. No
Investor has any such intention.
4. INFORMATION CONCERNING BUYER. Without limiting the terms of the
investment representations set forth herein, Investor represents that Investor:
(a) has had an opportunity to ask questions and receive
answers from Buyer and its officers and directors
regarding matters relevant to Buyer and an investment
therein (e.g., as represented by the Securities);
(b) has had an opportunity to review all forms, reports
and schedules, proxy statements (collectively, in
each case including all exhibits and schedules
thereto and documents incorporated by reference
therein and including all registration statements and
prospectuses, the "SEC DOCUMENTS") filed by Buyer
with the U.S. Securities and Exchange Commission;
(c) has had the opportunity to obtain any and all
information that Investor deemed or deems necessary
to evaluate Buyer and Investor's acquisition of the
Securities, as well as to verify the accuracy of the
information provided to Investor; and
(d) has received all such information Investor deems
necessary and appropriate to evaluate the financial
risks inherent in, and the merits of, an investment
in the Securities.
Without limiting the generality of the representations and
acknowledgments set forth in the Agreement, investor understands and has had the
opportunity to review carefully each of the following: (1) the terms and
conditions of the Securities, (2) Buyer's intended business plan, (3) Buyer's
capitalization and charter documents, (4) the status and nature of the Buyer's
assets, (5) the status and nature of Buyer's liabilities (including amounts and
other obligations owed to third parties), (6) Buyer's current third party
arrangements, (7) the early-stage, developing and/or emerging nature of Buyer's
business, (8) the business prospects and financial affairs of Buyer, (9) the
competitive environment that Buyer and its proposed products and services face
and (10) Buyer's imminent need for substantial amounts of additional financing;
5. SOPHISTICATED INVESTOR. By reason of Investor's (i) pre-existing
substantive relationship with Buyer and one or more of its officers, directors
or control persons and/or (ii) by reason of Investor's business or financial
experience, Investor is capable of evaluating the merits and risks of the
investment represented by the Securities and the merits and risks of protecting
Investor's own interests in connection with such investment.
D-2
6. ECONOMIC RISK. Investor understands that the purchase of the
Securities will be highly speculative investment and involves a high degree of
risk, and Investor is able, without impairing Investor's financial condition, to
hold the Securities for an indefinite time and to suffer a complete loss of
Investor's investment.
7. RESTRICTED SECURITIES. Investor understands and acknowledges that:
(a) The sale of the Securities has not been (and will not
be) registered under the Securities Act, the
Securities must be held indefinitely unless
subsequently registered under the Securities Act or
an exemption from the registration requirements of
the Securities Act is available (such as Rule 144
under the Securities Act), and Buyer is under no
obligation to register any sale or transfer of the
Securities;
(b) The Securities are "restricted" securities within the
meaning of Rule 144 and will be stamped with the
legends specified in the Agreement.
(c) The Buyer will make a notation in its records of the
aforementioned restrictions on transfer and legends;
and
(d) The Buyer has no obligation to register the transfer
of any of the Securities and shall refuse to register
any such transfer not in compliance with applicable
Law.
8. LIMITATIONS ON DISPOSITION. Without in any way limiting the
representations set forth above and the representations and obligations set
forth in the Agreement, Investor further agrees that Investor shall in no event
make any disposition of all or any portion of the Securities unless and until:
(a) (i) There is then in effect a Registration Statement under
the Securities Act covering such proposed disposition, and such disposition is
made in accordance with such Registration Statement; (ii) the resale provisions
of Rule 144 are available and the proposed disposition would comply with the
requirements of the Securities Act in the opinion of counsel to Buyer; or
(iii)(A) Investor shall have notified Buyer of the circumstances surrounding the
proposed disposition, (B) Investor shall have furnished the Investor with an
opinion of Investor's counsel to the effect that such disposition will not
require registration of any of such Securities under the Securities Act, (C) the
proposed disposition would comply with all applicable requirements of the
Securities Act, and (D) counsel for Buyer shall have concurred with such opinion
of Investor's counsel, and Buyer shall have advised Investor of such
concurrence; and
D-3
(b) Investor shall have complied with all other
applicable restrictions and limitations on transfer
and each transferee of the Securities agrees in
writing to be bound by all terms of the Agreement.
9. NO GOVERNMENT RECOMMENDATION OR APPROVAL. Investor understands that
no United States federal or state agency, or similar agency of any other
country, has passed on or made any recommendation or endorsement of Buyer, this
transaction or the purchase of any of the Securities.
10. RELIANCE ON OWN INVESTIGATION. Investor has performed a thorough
independent due diligence review of Buyer, its business enterprise and
operations. In connection with its due diligence review of Buyer, Investor has
reviewed the SEC Documents, including (without limitation) information relating
to the Buyer's operations, facilities, finances, management, employees and other
aspects of the Buyer's business enterprise. Notwithstanding anything contained
in this Agreement to the contrary and notwithstanding the representations set
forth in the Agreement, in making an investment decision with respect to the
Securities under the Agreement, Investor is relying entirely on its own
investigation and examination of Buyer and its business and has not based any
investment decision on statements from Buyer or any of its officers, directors,
employees, agents or other representatives.
D-4