SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of
the Securities Exchange Act of 1934 (Amendment No. )
Check the appropriate box:
/X/ Preliminary Information Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
/ / Definitive Information Statement
U.S.A. Growth Inc.
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(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required
/X/ Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11
(1) Title of each class of securities to which transaction applies:
Common Stock, par value $ .001 per share
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(2) Aggregate number of securities to which transaction applies:
4,294,927
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
$ 0.20 (twenty cents) per share
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(4) Proposed maximum aggregate value of transaction:
$858,986
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(5) Total fee paid:
$ 172
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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INFORMATION STATEMENT
U.S.A. Growth Inc.
1530 Brookhollow Dr., Suite C
Santa Ana, CA 92705
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE
REQUESTED NOT TO SEND US A PROXY
This Information Statement is furnished by the Board of Directors of
U.S.A. Growth Inc., a Delaware corporation (the "Company"), to the holders of
record at the close of business on August 16, 1999 (the "Record Date"), of the
Company's outstanding Common Stock, par value $0.001 per share (the "Common
Stock") pursuant to Rule 14c-2 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"). This Information Statement is being
furnished to such stockholders in connection with (i) the merger of World
Shopping Network, Inc., a Wyoming corporation ("WSN"), with and into the Company
(the "Merger"); (ii) a reverse split of the issued and outstanding shares of the
Common Stock on a one-for-twelve (1:12) basis, (the "Reverse Stock Split");
(iii) an amendment (the "Share Amendment") to the Certificate of Incorporation
of the Company to implement the Reverse Stock Split and to change the name of
the Company to World Shopping Network, Inc. ("Name Change'); and (iv) the
election of new directors of the Company.
The Company's Board of Directors unanimously approved the Merger, the
Reverse Stock Split, the Name Change and the Share Amendment at a meeting duly
held and called on August 17, 1999. Under applicable Delaware Law, approval of
the Merger and the Share Amendment requires an affirmative vote of a majority of
the outstanding shares of Common Stock. On August 17, 1999, holders of a
majority of the issued and outstanding shares of Common Stock approved the
Merger and the Share Amendment by written consent in accordance with and as
permitted by Section 228 of the General Corporation Law of the State of Delaware
("Delaware Law").
The Merger will be completed upon the terms and conditions provided
in the Agreement and Plan of Merger dated as of September 15, 1999 by and
among the Company, WSN and the principal stockholders of the Company (the
"Merger Agreement"), a true and correct copy of which is attached hereto as
Exhibit A. The Merger Agreement provides for WSN to be merged with and into
the Company, with the Company being the surviving corporation.
This Information Statement is being sent to the Company's stockholders
on or about September 15, 1999.
1
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
GENERAL
The following table presents certain information as to the beneficial
ownership of the Common Stock on the Record Date by (i) each person known by the
Company to own beneficially five percent or more of the Common Stock; (ii) each
director of the Company; and (iii) all executive officers and directors of the
Company as a group. All persons listed below have sole voting and investment
power with respect to their shares, unless otherwise indicated. There are no
family relationships among the executive officers and directors.
Name of Beneficial Owner Shares Beneficially Percent of Outstanding
or Identity of Group Owned Shares
- ------------------------ ------------------- ----------------------
TriStar Diversified Ventures, LLC (1)(2) 54,000,000 58.085%
John J. Anton (3) 15,000,000 16.135%
Nick Markulis (4) 10,950,000 11.778%
John Moore -0- -0-
Martin Bloomenstein -0- -0-
Executive officers and directors as a group (3) 15,000,000 16.135%
persons)
- ------------------------
1 TriStar's address is 1601 E. Flamingo Road, Suite 18, Las Vegas, Nevada
89119.
2 The managing member of the TriStar limited liability company is Charles
F. Woods, Jr. and, therefore, he may be deemed to be the beneficial
owner of all of the shares of Common Stock beneficially owned by
TriStar.
3 Mr. Anton's address is 1530 Brookhollow Drive, Suite C, Santa Ana, CA
92705.
4 Mr. Markulis' address is 1530 Brookhollow Drive, Suite C, Santa Ana, CA
92705.
2
CHANGE OF CONTROL
On August 16, 1999 pursuant to a Share Exchange Agreement dated as of
August 16, 1999, among the Company, TriStar, John J. Anton, and Nick Markulis,
TriStar and Messrs. Anton and Markulis exchanged all of their shares of common
stock of World Shopping Network, Inc., a Wyoming corporation ("WSN"), for an
aggregate of 79,950,000 newly issued shares of common stock of the Company (the
"Exchange"). As a result of the Exchange (a) TriStar holds 54,000,000 shares of
Common Stock, which represents approximately 58% of the issued and outstanding
Common Stock, (b) John J. Anton holds 15,000,000 shares of the Common Stock,
which represents approximately 16% of the issued and outstanding Common Stock,
and (c) Nick Markulis holds 10,950,000 shares of Common Stock, which represents
approximately 12% of the issued and outstanding Common Stock.
As a result of the Share Exchange Agreement the Company owns
approximately 59% of the issued and outstanding shares of WSN and WSN is a
majority owned subsidiary of the Company.
THE MERGER
GENERAL
Since its inception in August 1987 the Company has not generated any
operating revenues. The Company engages in research, either by itself and/or
through the use of independent consultants, to determine what types of business
can be established by a new venture which would have potentially high profits.
The Board of Directors has given careful consideration to the Merger, the
relative values of the Company and WSN and the potential benefits of the Merger.
Based on the foregoing considerations the Board of Directors believes that the
transactions contemplated by the Plan and Agreement of Reorganization ("Merger
Agreement") pursuant to which the Merger will be effected are fair and in the
best interest of the Company and its stockholders.
BUSINESS OF WSN
WSN is an early development stage company engaged in providing 24-hour,
seven-day worldwide Internet-based service on-line for the direct sale and
delivery of a wide variety of competitively priced consumer products and
services. WSN's objective is to become a dominant international electronics
retailer.
Formed in January 1994, WSN began operations in April 1994. To date, the
WSN's principal activities have focused on (A) the development and
implementation of an Internet shopping model, the WSN Mall; (B) the development
of proprietary technology to support such model; (C) an analysis of products and
services to be offered; (D) relationship development with providers of such
products and services; (E) the design, development and
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implementation of Proprietary merchandising and marketing techniques to support
the WSN Mall model, and (F) the identification and building of a management
team.
The WSN's primary marketing objective is to make it convenient for the
E-Commerce consumer to purchase a broad range of products and services at prices
that are highly competitive with traditional mail order and electronic retail
channels.
To accomplish this objective the WSN has developed a nontraditional retail
model, its WSN Mall Internet Department Store. WSN Mall differs from most other
shopping sites on the Internet because it is a true retail `store'. Most other
shopping sites on the Internet are `Malls'. When a consumer visits the `Malls',
they are in most cases actually reviewing a list of manufacturers and resellers
who have their own separate Web sites. The consumer must then link to one of
these other sites by actually leaving the `Mall' location.
Most of these manufacturers and resellers do not have the capability of
selling their products directly over the Internet, so once at the new site, the
consumer must call an 800 number to place an order separately by phone. In other
cases, the manufacturer or reseller will present a list of local `dealers' the
consumer can visit. As a result, most `Malls' on the Internet essentially become
electronic advertising agencies. Consequently, no unique advantage to the
telephone-mail order format is provided to the consumer.
WSN Mall, on the other hand, is a true retailer. When a consumer comes
`into' the WSN Mall store, they have the capability of purchasing any product
presented directly, without having to go to another site or call an 800 number.
By dealing directly with WSN Mall, the consumer is assured of the overall
satisfaction and convenience of purchasing from a `one stop' shopping source.
In addition, WSN Mall offers a value-added shopping experience by featuring
the ability to process the transaction conveniently, while presenting a broad
range of products at exceptional prices in a global format for any shopper who
can access the Internet.
The WSN Mall model is based on demand for convenient purchases of a broad
range of consumer products and services. Its revenues are primarily generated by
the sale of the products and services offered through its Web site.
Consequently, WSN Mall has a vested interest in ensuring those products and
services are purchased.
The Internet `Malls' have little or no such incentive to sell products and
services because their revenues are generated by `advertising' others' Web
sites.
In dealing directly with WSN Mall, manufacturers and other product
suppliers are assured of a low-cost distribution channel to a large potential
customer base by working with an organization that is highly motivated to sell
those suppliers' products and services. Other advantages to this supplier
include increasing market share without increasing personnel, administrative and
advertising costs. Products are promoted globally without increasing advertising
expenditures. By presenting products and services under the WSN Mall
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advertising umbrella, promotion of product is assured in each advertising
vehicle WSN Mall undertakes.
By increasing market share without additional associated costs (normally
15% to 40% of total product costs) the suppliers can offer their products and
services at a reduced cost to WSN Mall. In turn, WSN Mall intends to pass these
cost savings on to its customers. The Company also offers a Frequent Buyer
program that rewards customer loyalty by providing the opportunity to accrue
points for purchases. Such points are then redeemed for additional discounts and
sales incentives at later dates.
WSN Mall offers substantial savings to the consumer, as compared to
traditional retail storefront pricing and more modest savings from mail order
and catalog sales. Consequently, the WSN Mall customer will receive a broad
range of products and services on terms representing unprecedented value and
convenience.
THE MERGER
The Merger Agreement provides for WSN to be merged with and into the
Company, with the Company being the surviving corporation. All of the issued and
outstanding shares of common stock, $.001 par value per share, of WSN shall be
converted into an aggregate of 4,294,927 shares of Common Stock or approximately
2.5 shares of Common Stock (after the Reverse Stock Split) for each outstanding
share of WSN common stock. Upon the effectiveness of the Merger, the Company
will change its name to World Shopping Network, Inc. The Certificate of
Incorporation and Bylaws of the Company will continue to govern the operation of
the Company.
DISSENTERS' RIGHTS
Under Section 262 of the Delaware Law ("Section 262"), holders of
shares of Common Stock may demand an appraisal of the fair value of their shares
and payment in cash for their shares if they have not voted in favor of or
otherwise consented to the Merger. Section 262 is reprinted in its entirety as
Exhibit B to this Information Statement. All references in Section 262 and this
summary thereof to a "stockholder" are to the record holder of the shares as to
which appraisal rights are asserted. A person having a beneficial interest in
shares that are held of record in the name of another person, such as a broker
or nominee, and who desires to exercise appraisal rights, must act promptly to
cause the record holder to follow promptly the steps summarized below and in a
timely manner to perfect the appraisal rights the beneficial owner may have.
The Company must notify each of its stockholders, either before the
effective date of the Merger ("Effective Date") or within ten days thereafter,
that appraisal rights are available, together with a copy of Section 262 (this
Information Statement constitutes such notice). Stockholders of record who
desire to exercise their appraisal rights must: (i) hold shares on the date of
making a demand for appraisal; (ii) hold the shares continuously of record on
the
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Effective Date and the date of the making of the written demand; and (iii)
within 20 days after notice of appraisal rights from the Company, deliver a
written demand for appraisal to the Company at 1530 Brookhollow Drive, Suite C,
Santa Ana, California 92705, Attention: President. A request for appraisal
rights need not be made with respect to all shares owned by stockholder where
such stockholder holds shares of record as nominee for the beneficial owner
thereof. Although a stockholder must not have voted in favor of the Merger,
Section 262 does not require that a stockholder vote against the Merger in order
to preserve his appraisal rights.
Within 120 days after the Effective Date, the Company or any
stockholder who has satisfied the foregoing conditions and is otherwise entitled
to appraisal rights under Section 262 may file a petition in the Delaware Court
of Chancery demanding a determination of the value of the shares. The Company
does not intend to file a petition or initiate any negotiations with respect to
the fair value of these shares. Accordingly, stockholders of the Company who
wish to properly exercise appraisal rights should regard it as their obligation
to initiate all necessary action with respect to the perfection of their
appraisal rights within the time periods prescribed in Section 262.
Only a holder of record of shares is entitled to assert appraisal
rights for shares registered in that holder's name. The demand should be
executed by or for the holder of record, fully and correctly, as the holder's
name appears on the holder's stock certificates. If the shares are owned of
record in a fiduciary capacity, such as by a trustee, guardian or custodian,
execution of the demand should be made in that capacity, and if the shares are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, the demand should be executed by or for all joint owners. An authorized
agent, including one of two or more joint owners, may execute the demand for
appraisal for a holder of record; however, the agent must identify the record
owner or owners and expressly disclose the fact that, in executing the demand,
the agent is acting as authorized agent for the record owner.
A record holder, such as a broker, who holds shares as nominee for the
beneficial owner thereof, may exercise the holder's right of appraisal with
respect to the shares held for all or less than all of those beneficial owners.
In that case, the written demand should set forth the number of shares covered
by it. Where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares outstanding in the name of the applicable record
owner.
Within 120 days after the Effective Date, any stockholder who has
complied with the requirements for exercise of appraisal rights, as discussed
above, is entitled, upon written request, to receive from the Company a
statement setting forth the aggregate number of shares with respect to which
demands for appraisal have been made and the aggregate number of holders of
those shares. This statement must be mailed within ten days after the written
request therefor has been received by the Company, or within ten days after the
expiration of the period for delivery of demands for appraisal, whichever is
later.
If a petition for appraisal is timely filed, after a hearing on the
petition, the Delaware Court of Chancery will determine the stockholders
entitled to appraisal rights and will appraise the shares owned by those
stockholders, determining "fair value" exclusive of any element of
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value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value. Simple or compound interest may be paid. The judicial
determination of the "fair value" of the shares is required to be based on all
relevant factors involving the value of a company, including market value, asset
value, dividends, earnings prospects, the nature of the enterprise and any other
facts which could be ascertained as of the date of the Merger which throw any
light on future prospects of the merged corporation. The presiding Court shall
direct payment of the fair value of the shares by the Company to stockholders
entitled thereto.
Stockholders considering exercising their rights of appraisal
should bear in mind that the fair value of their shares determined under Section
262 could be more than, the same or less than the market price of their shares
of Common Stock. The cost of the appraisal proceeding may be determined by the
Delaware Court of Chancery and taxed against the parties as the Delaware Court
of Chancery deems equitable in the circumstances. Upon application of a
dissenting stockholder, the Delaware Court of Chancery may order that all or a
portion of the expenses of experts incurred by any dissenting stockholder in
connection with the appraisal proceedings, including, without limitation,
reasonable attorney's fees and the fees and expenses of such experts, be charged
pro rata against the value of all shares entitled to appraisal.
Any stockholder who has duly demanded appraisal in compliance with
Section 262 will not, after the Effective Date, be entitled to vote the shares
subject to such demand for any purpose or to receive payment of dividends or
distributions payable to stockholders of record at a date prior to the Effective
Date.
If any stockholder who demands appraisal of his shares under Section
262 fails to perfect, or effectively withdraws or loses, his right to appraisal,
the shares of that holder will continue to be shares of Common Stock of the
Company. A stockholder will fail to perfect, and will effectively lose his right
to appraisal, if no petition for appraisal is filed within 120 days after the
Effective Date, of if the stockholder delivers to the Company a written
withdrawal of his demand for an appraisal, except that any attempt to withdraw
made more than 60 days after the Effective Date requires the written approval of
the Company. Furthermore, no appraisal proceeding in the Delaware Court of
Chancery will be dismissed as to any stockholder without the approval of the
Court, which approval may be conditioned upon terms that the Court deems just.
Dissenters who elect to receive cash for their shares of Common Stock
may be subject to federal and/or state income tax on any gain resulting from the
transaction.
Reference is made to Exhibit B to this Information Statement for the
complete text of the provisions of Section 262 of the Delaware Law relating to
the rights of dissenting stockholders. The statements made in this summary are
qualified in their entirety by reference to such Exhibit B. THE PROVISIONS OF
SECTION 262 OF THE DELAWARE LAW ARE TECHNICAL IN NATURE AND COMPLEX. IT IS
SUGGESTED THAT ANY STOCKHOLDER WHO DESIRES TO AVAIL HIMSELF OF HIS/HER RIGHT TO
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DISSENT CONSULT INDEPENDENT LEGAL COUNSEL BECAUSE FAILURE TO COMPLY STRICTLY
WITH THE PROVISIONS OF SECTION 262 MAY PRECLUDE THE EXERCISE OF HIS/HER
DISSENTERS' RIGHTS.
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CERTAIN PRO FORMA FINANCIAL STATEMENTS
U.S.A. GROWTH, INC.
PRO FORMA BALANCE SHEET
(UNAUDITED)
MARCH 31, 1999
COMPANY WSN PRO FORMA PRO FORMA
HISTORICAL HISTORICAL ADJUSTMENTS* AFTER MERGER
----------- ---------- ------------ ------------
ASSETS
Cash $ 405,068 $ 49,564 ($ 405,068) $ 49,564
Accounts Receivable 1,150 16,641 (1,150) 16,641
Inventory 0 7,984 7,984
----------- ----------- -----------
Total Current Assets 406,218 74,189 74,189
Property & Equipment 0 10,347 10,347
Other Assets 0 1,955 1,955
----------- ----------- ----------- -----------
Total Assets $ 406,218 $ 86,491 ($ 406,218) $ 86,491
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
*ADJUSTMENTS POST MERGER
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities $ 0 $ 6,241 $ 6,241
----------- ----------- -----------
Stockholders' Equity:
Common Stock (Company: Common Stock, 11,100 1,035,218 (11,100) 1,035,218
par value $.001 per share, authorized
100,000,000 shares, issued and outstanding
11,100,000 shares; WSN common stock, par
value $.001 per share, authorized
500,000,000 shares, issued and outstanding
4,482,971 shares.)
Capital in excess of par value 723,243 (723,243)
Deficit accumulated during development
stage (328,125) (954,968) 328,125 (954,968)
----------- ----------- ----------- -----------
Total Stockholders' Equity 406,218 80,250 (406,218) 80,250
----------- ----------- ----------- -----------
Total Liabilities and Stockholders' Equity $ 406,218 $ 86,491 0 $ 86,491
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
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REVERSE STOCK SPLIT, NAME CHANGE AND SHARE AMENDMENT
GENERAL
The Company's Board of Directors has concluded that it would be
advisable to effect the Reverse Stock Split, the Name Change and the Share
Amendment. The Share Amendment was unanimously adopted by the Company's Board of
Directors and is subject to approval by the holders of a majority of the issued
and outstanding shares of Common Stock. On August 17, 1999 holders of a majority
of the issued and outstanding shares of Common Stock approved the Share
Amendment by written consent in accordance with, and as permitted by Section 228
of the Delaware Law. Management of the Company anticipates that the closing of
the Merger will occur on September 15, 1999.
The effect of the 12:1 Reverse Stock Split on holders of Common Stock
will be that the total number of shares of the Company's Common Stock held by
each stockholder will be automatically converted into the number of whole shares
of Common Stock equal to the number of shares of Common Stock owned immediately
prior to the Reverse Stock Split divided by 12, adjusted as described below for
any fractional shares. Each stockholder's percentage ownership interest in the
Company and proportional voting power will remain unchanged, except for minor
differences resulting from adjustments for fractional shares. The rights and
privileges of the holders of shares of Common Stock will be substantially
unaffected by the Reverse Stock Split.
No certificates or script representing fractional shares of the
Company's Common Stock will be issued to stockholders because of the Reverse
Stock Split. All fractional shares of one-half share or more will be increased
to the next higher whole number of shares and all fractional shares of less than
one-half share will be decreased to the next lower whole number of shares,
respectively.
The Company had an authorized capital of 100,000,000 shares of common
stock, par value $.001 per share, as of August 16, 1999. The authorized capital
stock of the Company will not be reduced or otherwise affected by the Reverse
Stock Split. The number of issued and outstanding shares of Common Stock of the
Company on that date was 93,450,000. Based on the Company's best estimate, the
aggregate number of shares of Common Stock that will be issued and outstanding
after giving effect to the Reverse Stock Split is 7,787,500.
10
REASONS FOR THE SHARE AMENDMENT AND THE REVERSE STOCK SPLIT
The Company's Board of Directors is of the opinion that the current
price per share of the Common Stock has a tendency to diminish the effective
marketability of such stock because of the reluctance of many leading brokerage
firms to recommend lower-priced stocks to their clients. Additionally, the
policies and practices of a number of brokerage houses tend to discourage
individual brokers within those firms from dealing in lower-priced stocks. Some
of such policies and practices pertain to the payment of broker's commissions
and to time consuming procedures that operate to render the handling of
lower-priced stocks unattractive to brokers from an economic perspective. The
structure of trading commissions also tends to have an adverse impact upon
holders of lower-priced stocks because the brokerage commission payable on the
sale of a lower-priced stock generally represents a higher percentage of the
sales price than the commission on a relatively higher-priced stock. The
foregoing factors adversely affect not only the liquidity of the Common Stock
but also the Company's ability to raise additional capital through a sale of
equity securities. There can be no assurance that additional capital can be
raised on terms acceptable to the Company even after the Reverse Stock Split and
the Share Amendment are effected.
The Board of Directors is hopeful that the decrease in the number of
shares of Common Stock outstanding as a consequence of the Reverse Stock Split
and the anticipated corresponding increased price per share will stimulate
interest in the Common Stock and possibility promote greater liquidity for the
Company's stockholders with respect to those shares presently held by them.
However, the possibility does exist that such liquidity could be adversely
affected by the reduced number of shares which will be outstanding after the
Reverse Stock Split.
The Board of Directors is also hopeful that the Reverse Stock Split
will result in a price level for the shares that will mitigate the present
reluctance, policies and practices on the part of brokerage firms, as described
above, and diminish the adverse impact of trading commissions on the potential
market for the Company's shares. However, there can be no assurance that the
Reverse Stock Split will achieve the desired results which have been outlined
above, nor can there be any assurance that any increased price per share of the
Common Stock immediately after the Reverse Stock Split will continue to escalate
or even be sustained for any prolonged period of time.
MARKET FOR THE COMMON STOCK
The Common Stock is traded in the over-the-counter market and is quoted
by the National Association of Securities Dealers, Inc. Automated Quotation
System (NASDAQ) under the trading symbol "USAG." The following table sets forth,
(i) for the quarters presented through the second quarter of 1999, the high and
low closing bid prices of the Common Stock, as quoted by NASDAQ. The bid
quotations reflect inter-dealer prices without adjustment for retail markups,
markdowns or commissions and may not reflect actual transactions.
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HIGH LOW
1997
First Quarter $0.11 $0.10
Second Quarter 0.11 0.10
Third Quarter 1.59 0.10
Fourth Quarter 0.53 0.30
1998
First Quarter 0.30 0.10
Second Quarter 0.11 0.10
Third Quarter 0.11 0.10
Fourth Quarter 0.11 0.10
1999
First Quarter 0.11 0.10
Second Quarter 0.11 0.10
Third Quarter 0.64 0.10
Fourth Quarter N/A N/A
On the Record Date, there were approximately 110 record holders of the
Common Stock. The Company believes the Reverse Stock Split will not effect a
material reduction in the number of stockholders of the Company.
The Company has not declared any cash dividends and has no plan for the
payment of dividends on the Common Stock in the immediate future. Payment of
dividends in the future, if any, will depend on the applicable legal and
contractual restrictions, as well as the financial condition and requirements of
the Company and general business conditions.
EFFECT ON OUTSTANDING OPTIONS AND WARRANTS
The terms of the Company's outstanding Common Stock Purchase Warrants
(the "Warrants") provide, in effect, that in the event of a conversion of the
outstanding shares of Common Stock into a smaller number of shares, the number
of shares of Common Stock with respect to which the Warrants may be exercised
shall be proportionately reduced and the purchase price per share shall be
proportionately increased. Accordingly, the Reverse Stock Split will result in
the number of shares of Common Stock issuable pursuant to outstanding Class A
and Class B Warrants being reduced from 8,000,000 (Class A) and 8,000,000 (Class
B) to 666,666 and 666,666 shares, respectively , and the exercise price per
share of each Warrant being multiplied by 12, from $0.17 to $2.04 per share
(Class A) and from $0.25 to $3.00 per share (Class B), respectively.
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of the federal income tax consequences
of the Reverse Stock Split. This discussion is based upon present federal income
tax laws and does not purport to be a complete discussion of such consequences.
Accordingly, the stockholders
12
are advised to consult their own tax advisors for more detailed information
regarding the effects of the Reverse Stock Split on their individual tax status.
As to the Company and its stockholders, the Reverse Stock Split will be
a tax-free recapitalization to the extent shares of presently issued and
outstanding Common Stock are converted into shares of new Common Stock.
The shares of Common Stock issued to each stockholder will have an
aggregate basis for computing gain or loss equal to the aggregate basis of
shares of Common Stock held by such stockholder immediately prior to the Reverse
Stock Split.
A stockholder's holding period for shares of new Common Stock will
include the holder period for shares of Common Stock exchanged therefor,
provided that the shares of Common Stock were capital assets held by such
stockholder.
13
THE ELECTION OF DIRECTORS
The Board of Directors of the Company consists of three members. Three
of the present directors were appointed by the Board of Directors during the
most recent 12 months, for terms of office expiring in 2000.
Set forth below are the names of and certain information with respect
to the Directors of the Company.
PRESENT YEAR FIRST
TERM ELECTED
NAME AND PRINCIPAL OCCUPATIONS DURING THE PRIOR 5 YEARS AGE EXPIRES DIRECTOR
------------------------------------------------------- --- ------- --------
John J. Anton 70 2000 1999
President and Chief Executive Officer of the Company. Mr. Anton retired
from National Broadcasting Company, Inc. as its operations producer (sports)
in 1993 and since that time he has been active as an independent businessman
and consultant. He joined WSN on a fulltime basis in 1999 and became its
President in 1999.
John Moore 29 2000 1999
Since 1999, John Moore has been the Vice President of Information Systems
for WSN. Prior to that time he taught computer science at Glendale College.
Martin Bloomenstein 62 2000 1999
Since 1996, Mr. Bloomenstein has been the Vice President of Finance for
WSN. Prior to that time he was an officer, director and consultant of APN,
Inc., a SMR development company.
---------------------------
U.S.A. GROWTH, INC.
Santa Ana, California
September , 1999
---
14
EXHIBIT A
AGREEMENT AND PLAN OF MERGER BETWEEN
U.S.A. GROWTH INC.
AND
WORLD SHOPPING NETWORK, INC.
AGREEMENT AND PLAN OF MERGER
INDEX
Article 1. Exchange........................................................ 2
Article 2. Considerations.................................................. 2
Article 3. The Closing..................................................... 3
Article 4. Representations and Warranties of USAG.......................... 4
Article 5. Representations & Warranties of WSN & WSN Shareholders.......... 13
Article 6. Conditions Precedent to USAG's Obligations to Close............. 20
Article 7. Conditions Precedent to WSN's and WSN Shareholders'
Obligations to Close............................................ 22
Article 8. Mutual Undertakings............................................. 23
Article 9. Actions to be Taken at the Closing.............................. 24
Article 10. Termination, Amendment and Waiver............................... 25
Article 11. Survival of Representations, Warranties and Agreements.......... 25
Article 12. General Provisions.............................................. 27
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement") is made and entered
into as of the 15th day of September, 1999, among U.S.A. GROWTH INC., a
Delaware corporation ("USAG"), CERTAIN STOCKHOLDERS OF USAG ("USAG
Stockholders") and WORLD SHOPPING NETWORK, INC., a Wyoming corporation
("WSN").
RECITALS
A. USAG is a publicly traded Delaware corporation with authorized
capital stock of one hundred million (100,000,000) shares of Common Stock,
$0.001 par value per share, of which as of August 16, 1999, ninety-three
million four hundred fifty thousand (93,450,000) shares were issued and
outstanding and eight million (8,000,000) (Class A) ($0.17 share) and eight
million (8,000,000) (Class B) ($0.25 share) Warrants were issued and
outstanding.
B. WSN is a privately held Wyoming corporation with its principal place
of business in California with authorized capital stock of five hundred
million (500,000,000) shares of common Stock, $.001 par value per share, of
which one million seven hundred seventeen thousand nine hundred seventy-one
(1,717,971) shares were issued and outstanding as of August 16, 1999 ("WSN
Shares"). Each holder of record of WSN Shares is sometimes referred to herein
as a "WSN Shareholder."
C. The Board of Directors of both USAG and WSN and the USAG Stockholders
have each determined that it is advisable and in the best interest of their
respective shareholders to consummate, and have approved, the business
combination transaction provided for herein to which the respective companies
would merge.
D. USAG owns approximately 59% of the issued and outstanding shares of
common stock of WSN.
E. It is the intention of USAG, WSN and USAG Shareholders that the
transactions contemplated hereby constitute a tax-free "reorganization" as
defined in Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended
("B Reorganization") and that all the terms and provisions of this Agreement be
interpreted, construed and enforced to effectuate this intent.
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING AND THE MUTUAL
COVENANTS, PROMISES, REPRESENTATIONS AND WARRANTIES CONTAINED HEREIN, THE
PARTIES HERETO AGREE AS FOLLOWS:
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Article 1
EXCHANGE
Section 1. EXCHANGE OF STOCK OF WSN. At the Closing Date (as defined in
Article 3 hereof), in accordance with the provisions of this Agreement and
applicable law, USAG shall exchange USAG Shares for WSN Shares.
ARTICLE 2
CONSIDERATION
Section 2.1 EXCHANGE. Upon completion of the reverse stock split of
12:1 of current USAG shares, USAG will issue to the WSN Shareholders two and one
half (2.5) shares of USAG common stock for each share of WSN common stock. Such
stock shall be issued in certificates of such denominations, amounts and names
as may be requested by each WSN Shareholder.
Section 2.2 INVESTMENT INTENT. Each WSN Shareholder must represent and
warrant that he/she is acquiring said shares for investment purposes only and
not with a view towards resale or redistribution in violation of state and
federal securities laws. Each WSN Shareholder must agree to deliver to USAG at
the closing, a letter setting forth an agreement that said shares are being
acquired for investment purposes only and will not be sold except in compliance
with the Securities Act of 1933, as amended, and the Rules and Regulations
promulgated thereunder. Each of the certificates representing shares of USAG
Common Stock issued to WSN Shareholders as provided for herein shall bear
substantially the following legend:
The securities represented by this Certificate have not been
registered under the Securities Act of 1933 (the "Act") and are
"restricted securities" as that term is defined in Rule 144 under
the Act. The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration statement
under the Act or pursuant to an exemption from registration under
the Act, the availability of which is to be established to the
satisfaction of the Corporation.
Section 2.3 DELIVERY. At said closing, each WSN Shareholder shall
deliver certificates for the shares of WSN owned by it, duly endorsed in
negotiable form, with signatures guaranteed, free and clear from all claims and
encumbrances.
Section 2.4 MERGER. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Ssection 2.5) WSN shall be
merged with and into USAG and the separate corporate existence of WSN shall
cease (the "Merger"). USAG shall be the surviving corporation in the Merger
(sometimes referred to as the "Surviving Corporation") and shall
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continue to be governed by the laws of the State of Delaware, and the
separate corporate existence of USAG with all its rights, privleges,
immunities and franchises shall continue unaffected by the Merger.
Section 2.5 EFFECTIVE TIME. As soon as practicable following
fulfillment of the conditions, including the reverse stock split by USAG and
provided that this Agreement has not been terminated or abandoned, WSN and
USAG will cause the Articles of Merger (the "Articles of Merger") to be
executed and filed with the Secretary of State of Delaware. The Merger shall
become effective on the date on which the Secretary of State of Delaware
issues a Certificate of Merger and such time is referred to as the "Effective
Time".
Section 2.6 POST-MERGER.
2.6.1 It is contemplated by the parties herein that after
the Effective Time, the new management will arrange for filing a
post-effective amendment to permit USAG warrants, as stated in the RECITALS,
to be exercised providing for additional funding for the expansion of the
corporation.
2.6.2 It is expressly agreed that USAG (post-merger) will
have no assets or liabilities. Any current assets will be transferred prior
to the Effective Time to an affiliated entity and will be for the benefit of
the pre-merger (current) shareholders of USAG. WSN shareholders will have no
interest in the affiliated entity.
2.6.3 Surviving Corporation will be responsible for
attorneys' fees directly related to the Agreement only. Any attorneys' fees
and/or costs related to the "affiliated entity" will be borne by the
pre-merger (current) shareholders of USAG.
ARTICLE 3
THE CLOSING
Section 3.1 THE CLOSING. The Closing of the transactions provided for
herein (the "Closing") shall take place at the offices of WSN, 1530 Brookhollow
Dr., Suite C, Santa Ana, CA 92705 on a date to be mutually agreed upon by the
parties, which date shall be on or before September 15, 1999 or at such other
time and place as the parties shall mutually agree (the "Closing Date").
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ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF USAG
As an inducement to WSN and WSN Shareholders to enter into this
Agreement and to consummate the transactions contemplated herein, and with
knowledge that WSN and the WSN Shareholders will rely thereon, USAG
represents and warrants as follows to WSN and the WSN Shareholders as follows:
Section 4.1 ORGANIZATION. USAG is a corporation duly organized,
validly existing and in good standing under the laws of the State of
Delaware, is duly qualified to transact business as a foreign corporation and
is in good standing in each jurisdiction in which its failure to be so
qualified and in good standing would have a materially adverse effect on its
financial condition or business, and it has the corporate power and authority
to own, lease or operate its properties and to carry on its business as now
conducted.
Section 4.2 CAPITAL STRUCTURE. The authorized capital of USAG is as
set forth in the RECITALS above ("USAG Common Stock"). All of the outstanding
shares of USAG Common Stock are and will be validly issued, fully paid and
nonassessable and were issued in transactions that were either exempt from
registration under the Securities Act of 1933, as amended (the "Securities
Act") or were properly registered thereunder. Except for 8,000,000 Class A
warrants and 8,000,000 Class B warrants, totaling 16,000,000 warrants issued
and outstanding, there are no existing options, warrants, calls, preemptive
rights or commitments of any kind relating to the capital stock of USAG. The
USAG Common Stock to be issued to WSN Shareholders as contemplated by this
Agreement, when issued, will be legally and validly issued, fully paid and
nonassessable, free of all claims, liens and encumbrances of any kind.
Section 4.3 ARTICLES OF INCORPORATION, BYLAWS AND MINUTES. USAG has
heretofore delivered to WSN and WSN Shareholders true and complete copies of its
(i) Certificate of Incorporation (certified by the Secretary of State of
Delaware); (ii) Bylaws (certified by its corporate secretary) as in effect on
the date hereof, and (iii) minutes of all meetings of its Board of Directors and
shareholders.
Section 4.4 BOOKS AND RECORDS. The corporate minute books, stock
certificate books, stock registers and other corporate records of USAG are
correct and complete in all material respects, and the signatures appearing
on all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in said books and
records were duly and validly taken in compliance with the laws of the State
of Delaware. USAG does not have any of its records, systems, controls, data
or information recorded, stored, maintained, operated or otherwise wholly or
partially dependent upon or held by any means, including any electronic,
mechanical or photographic process, whether computerized or not, which,
including
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all means of access thereto and therefrom, are not under the
exclusive ownership and direct control of USAG.
Section 4.5 TITLE TO THE USAG COMMON STOCK. USAG has full power and
authority to issue and convey, free and clear of all liens, encumbrances,
restrictions and claims of every kind, the USAG Common Stock issuable to WSN
Shareholders as contemplated by this Agreement and, when issued, said USAG
Common Stock shall be validly issued, fully paid and nonassessable.
Section 4.6 AUTHORITY. USAG has full power and authority to execute
and deliver this Agreement and the other agreements required to be executed
and delivered hereunder (this Agreement and such other agreements being
hereinafter referred to as the "Closing Documents") and to carry out the
transactions contemplated hereby and USAG has taken all requisite corporate
action to authorize the execution, delivery and performance of the Closing
Documents. The Closing Documents, when executed, will be valid and binding
agreements of USAG enforceable in accordance with the terms thereof. No
consent, authorization or approval of, or declaration, filing or registration
with, any governmental or regulatory authority or any consent, authorization
or approval of any other third party is required to enable USAG to enter into
and perform any of its obligations under the Closing Documents, and neither
the execution and delivery of the Closing Documents nor the consummation of
the transactions contemplated thereby will:
(i) Violate the Certificate of Incorporation or
Bylaws or constitute a breach of any evidence of indebtedness
or agreement to which USAG is a party or by which it is bound;
(ii) Cause a default under any mortgage or deed
of trust or other lien, charge or encumbrance to which USAG is
subject or under any contract to which USAG is a party, or
permit the termination of any such contract by another person;
(iii) Result in the creation or imposition of any
security interest, lien, charge or other encumbrance upon the
property or assets of USAG under any agreement or commitment
to which USAG is bound;
(iv) Accelerate, or constitute an event
entitling, or which would, on notice or lapse of time or both,
entitle the holder of any indebtedness of USAG to accelerate
the maturity of any such indebtedness;
(v) Conflict with or result in the breach of any
writ, injunction or decree of any court or governmental
instrumentality;
(vi) Violate any statute, law or regulation of
any jurisdiction as such statute, law or regulation relates to
USAG or the securities, properties or business of USAG; or
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(vii) Violate or cause any revocation of or
limitation on any Permit (as defined in Section 4.17.
Section 4.7 FINANCIAL STATEMENTS. USAG has furnished, or will
prior to the Closing Date furnish WSN and WSN Shareholders with the following
financial statements:
(a) True and complete copies of the balance
sheets, related statements of operations and retained earnings
and related statements of shareholders' deficiency cash flows
of USAG as of and for the fiscal year ended July 31, 1998,
prepared in accordance with generally accepted accounting
principles ("GAAP") and audited by USAG's independent public
accountants; and
(b) True and complete copies of the unaudited
balance sheet as of April 30, 1999 and related statements of
operations and retained earnings and related statements of
cash flows of USAG as of April 30, 1999.
Hereinafter, the financial statements referred to in subsections (a)
and (b), together with the footnotes and supporting schedules thereto, are
referred to as the "USAG Financial Statements." The audited USAG Financial
Statements, including the footnotes thereto, have been prepared by USAG in
accordance with GAAP and present fairly the financial condition of USAG at
the dates thereof and reflect all material claims against, and all material
debts and liabilities of, USAG, fixed or contingent, as at the dates thereof
and the statements of income and retained earnings which are a part of the
audited USAG Financial Statements present fairly the results of the
operations of USAG and cash flows for the periods indicated except as
otherwise disclosed in this Agreement, the USAG Financial Statements and the
Exhibits and Schedules hereto. Such audited USAG Financial Statements shall
have been audited by USAG's independent certified public accountants in
accordance with generally accepted auditing standards. USAG shall make
available to WSN and WSN Shareholders and their independent public
accountants its work papers and those of its independent public accountants
related to the USAG Financial Statements.
Section 4.8 NO UNDISCLOSED LIABILITIES. USAG does not have any material
liability or obligation, absolute or contingent, including without limitation,
liabilities for federal, state, local or foreign taxes which (i) is not
reflected on the USAG Financial Statements, or (ii) has arisen since April 30,
1999 and which is materially adverse to the business, assets or operations of
USAG, or (iii) is not referred to elsewhere in this Agreement or the Schedules
hereto.
Section 4.9 TITLE TO ASSETS; PERMITTED ENCUMBRANCES. USAG has good and
indefeasible title, or valid leasehold rights in the case of leased assets, to
all of its assets reflected on the USAG Financial Statements and all of the
assets thereafter acquired by it (except to the extent that such assets have
thereafter been disposed of in the ordinary course of business or otherwise in
accordance with this Agreement), subject to no mortgages, liens, security
interests or encumbrances (B) minor defects in title and encumbrances, none of
which, individually or in the
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aggregate, materially interferes with the use or value of such property, (C)
liens and security interests under operating agreements for amounts not yet
delinquent or which are being contested in good faith, (D) liens for fees,
taxes, levies, imposts, duties or other governmental charges of any kind
which are not yet delinquent or are being contested in good faith by
appropriate proceedings which suspend the collection thereof, (E) liens for
mechanics, materialmen, laborers, employees, suppliers or similar liens
created in the ordinary course of business and arising by operation of law
for sums which are not yet delinquent or are being contested in good faith by
appropriate proceedings, (F) liens created in the ordinary course of business
in connection with the leasing or financing of office, computer and related
equipment and supplies.
Section 4.10 CONDITION OF PROPERTY. All of the tangible personal
property of USAG is, in accordance with industry standards, in operating
condition and repair, reasonable wear and tear excepted except for such property
the condition of which does not materially adversely affect the business of
USAG.
Section 4.11 INSURANCE. As of the closing date herein, there is no
insurance policies in affect for USAG.
Section 4.12 PATENTS AND TRADEMARKS. USAG owns or possesses adequate
and enforceable licenses or other rights to use all patents, trademarks, trade
names and copyrights now used in the conduct of its business.
Section 4.13 CONDUCT OF BUSINESS.On or about June 29,1999 the
Corporation (USAG) transferred to Growth Net, Inc. a wholly owned subsidiary
of the Corporation, all of the current assets of the Corporation for the
purpose of making a distribution of the stock of said subsidiary to the
shareholders of the Corporation on the record date of June 30, 1999. Other
then the foregoing, Since June 30, 1999, there has not occurred any of the
following events, other than changes in the ordinary course of business, none
of which has had a material adverse effect on such business, operations or
financial condition of USAG:
(i) Any change in the business, operations or
financial condition or the manner of conducting the business
of USAG;
(ii) Any damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting
the business operations or financial condition of USAG;
(iii) Any authorization or issuance of any shares
of capital stock of USAG;
(iv) Any declaration, setting aside or payment of
dividends or other distribution in respect of the capital
stock of USAG;
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(v) Any direct or indirect redemption, purchase
or other acquisition of any shares of capital stock of USAG;
(vi) Any increase in the compensation by USAG of
its directors, officers or employees over their compensation
as disclosed in the USAG Financial Statements;
(vii) Any employment agreement for a fixed term or
any deferred compensation agreement entered into between USAG
and any of its directors, officers or other employees or
consultants;
(viii) Any amendment or termination by USAG of any
material contract, agreement, license, or other agreement
other than in the ordinary course of business; or
(ix) Any indebtedness incurred by USAG or any
commitment to borrow money entered into by USAG.
Section 4.14 LITIGATION. There is no action, suit or proceeding pending
before any court, administrative agency or other governmental body or
arbitrator, or threatened against USAG. USAG is not a party or subject to, or
bound by, any injunction, judgment, order or decree, whether or not still
subject to appeal, of any court, administrative agency or other governmental
body or arbitrator.
Section 4.15 TAX MATTERS. USAG has paid all federal, state, county,
local, foreign and other taxes, including, without limitation, income taxes,
estimated taxes, excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, employment and payroll related taxes, property taxes and
import duties, whether or not measured in whole or in part by net income
(individually, a "Tax" and collectively, the "Taxes"), and all deficiencies
or other additions to any Tax, interest and penalties owed by it in
connection with any Tax required to be paid by it relating to USAG or any of
its assets or business through the date hereof. USAG shall have paid timely,
prior to the Closing Date, all Taxes relating to it or its business or
assets, including additions, interest, penalties and estimated payments,
required to be paid by it under applicable law after the date hereof.
Section 4.16 NO TAX LIENS. None of the assets of USAG is subject to
any lien in favor of the United States pursuant to Section 6321 of the
Internal Revenue Code of 1986, as amended (the "Code") for nonpayment of
federal taxes, or any lien in favor of any state under any comparable
provision of state law.
Section 4.17 COMPLIANCE WITH LAWS; PERMITS. USAG is not in violation
of any applicable order, judgment, injunction, award or decree relating to
its business or assets. USAG is not in violation of any federal, state, local
or foreign law, ordinance or regulation or any other requirement of any
governmental or regulatory body, court or arbitrator applicable to its
business
8
or assets. Without limiting the generality of the foregoing, (a) there is not
pending or threatened, any notification of any governmental authority that
USAG is not in compliance with applicable laws and regulations respecting
employment and employment practices, occupational safety and health laws and
regulations, and laws or regulations relating to the quality of the
environment and USAG knows of no basis therefor, and (b) USAG has not
received any such notification of past violations of such laws or
regulations. USAG holds all licenses, permits, orders and approvals of any
federal, state or local governmental or regulatory bodies (collectively,
"Permits") that are material to or necessary for the conduct of its business.
All Permits are in full force and effect and no proceeding to revoke or limit
any of such Permits is pending or, to the knowledge of USAG, threatened.
Section 4.18 CONTRACTS AND OTHER AGREEMENTS. There are no contracts to
which USAG is party or by or to which it or its assets or properties are bound
or subject, including, without limitation, any (a) contract for the employment
of any officer or individual employee, (b) contract with any union, (c) bank
loan or other credit agreement, (d) bonus, deferred compensation, profit
sharing, pension or retirement arrangement, (e) partnership or joint venture
agreement, or (f) other material contract, agreement or commitment. USAG is not
in the process of negotiating or entering into any agreements described in this
Section 4.18.
Section 4.19 REAL PROPERTY. (i) USAG does not own or possess any land,
(ii) is not a party to any leases, subleases or other agreements under which
USAG is lessor or lessee of, or uses or occupies or allows the use or occupancy
of, any real property, and (iii) is not a party to any options or contractual
obligations on the part of USAG to purchase or acquire any interest in real
property.
Section 4.20 TANGIBLE PROPERTY. There is no machinery, equipment,
furniture, leasehold improvements, fixtures, vehicles, or any related
capitalized items and other tangible property owned by USAG located and/or used
by USAG as of the date hereof (other than inventory) (the "USAG Tangible
Property"), all of which is reflected in the USAG Financial Statements and all
of which is in good operating condition and repair, subject only to normal wear
and tear. USAG has not received notice that any of the USAG Tangible Property is
in violation of any existing law or any building, zoning, health, safety or
other ordinance, code or regulation. All leases, conditional sales contracts,
franchises or licenses pursuant to which USAG may hold any interest in or to the
USAG Tangible Property are in full force and effect and, with respect to the
performance of USAG, there is no default or event of default or event which with
notice or lapse of time or both would constitute a default.
Section 4.21 INTANGIBLE PROPERTY. . All USAG Intangible Property is
owned outright by USAG, free and clear of any lien or encumbrance and there
exist no obligations with respect to any USAG Intangible Property requiring
USAG to make any payment in respect of its use or otherwise. USAG has not
agreed to indemnify any person for or against any interference, infringement,
misappropriation or other conflict with respect to the USAG Intangible
Property.
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USAG has no notice of any patent, invention, trademark,
service mark or trade name of any other person that infringes upon, or is
infringed upon by, any of the USAG Intangible Property or notice of any claim
of any other persons relating to any of the USAG Intangible Property or any
process or confidential information of USAG and USAG knows of no basis for
any such charge or claim.
Section 4.22 ACCOUNTS AND NOTES RECEIVABLE. As of the closing date
there are no accounts receivable or notes receivable owned by USAG.
Section 4.23 LIABILITIES. Except as otherwise set forth in this
Agreement or any Schedule hereto, USAG has no direct or indirect indebtedness,
liability, claim, loss, damage, deficiency, obligation or responsibility, known
or unknown, asserted or unasserted, fixed or unfixed, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise
which have or could have a material adverse effect on USAG or its assets or
business ("Liabilities"), other than (a) Liabilities fully and adequately
reflected or reserved against in the USAG Financial Statements, and (b)
Liabilities incurred since January 1, 1999 in the ordinary course of business.
All trade and other payables will continue to be paid in accordance with USAG's
past business practices.
Section 4.24 SUPPLIERS AND CUSTOMERS. All presently opened purchase
orders were issued by USAG in the normal and customary course of business and
contains terms which result from arm's length negotiations.
Section 4.25 EMPLOYEE BENEFIT PLANS. USAG does not maintain or
contribute to, and has never maintained or contributed to, any employee pension
benefit plan subject to the Employee Retirement Income Security Act of 1974.
Section 4.26 CURTAILMENT OF OPERATIONS. No labor disputes or work
stoppages involving USAG are pending or threatened which, either singly or in
the aggregate, will have a material adverse effect on the business of USAG. To
the knowledge of USAG, no material customer of or supplier to the USAG is
involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceedings which could materially adversely affect its business,
operations, properties, assets or condition, financial or otherwise.
Section 4.27 EMPLOYEE RELATIONS. USAG is not a party to a collective
bargaining agreement and is in compliance with all applicable federal, state
or other laws, domestic or foreign, respecting employment and employment
practices, terms and conditions of employment (including issues related to
independent contractor status of personnel) and wages and hours, and has not
and is not engaged in any unfair labor practice. There have been no
organization efforts by any trade unions within the last 12 months.
Section 4.28 RESTRICTIVE DOCUMENTS. Except as otherwise disclosed in
this Agreement or any Schedule or Exhibit hereto, USAG is not subject to, or
a party to, any charter, bylaw, mortgage, lien, lease, license, permit,
agreement, contract, instrument, or any law, rule,
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ordinance, regulation, order, judgment or decree, or any other restriction of
any kind or character, which materially adversely affects the business
practices, operations or condition of USAG, or which would prevent
consummation of the transactions contemplated by this Agreement, or the
continued operation of the business on substantially the same basis as
heretofore operated.
Section 4.29 RELATIONSHIPS. No officer or director of USAG possesses,
directly or indirectly, any financial interest in, or is a director, officer,
shareholder or employee of, any corporation, firm, association or business
organization which is a manufacturer for, or client, supplier, customer, lessor,
lessee, or competitor or potential competitor of, USAG. USAG is not indebted to
any officer, director or employee of USAG or to any entity in which any such
person has a financial interest.
Section 4.30 NO CHANGES PRIOR TO CLOSING DATE. During the period from
the date of this Agreement to and including the Closing Date, other than as
expressly set forth on one or more of the Schedules hereto, USAG will not have:
(i) Incurred any liability or other obligations
of any nature (whether accrued, absolute, contingent or
otherwise) which affects or may affect its assets or business,
except in the ordinary course of business;
(ii) Permitted any of its assets to be subjected
to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind;
(iii) Sold, transferred or otherwise disposed of
any of its assets, except in the ordinary course of business;
(iv) Made any capital expenditure or commitment
therefor in excess of $5,000;
(v) Made any bonus or profit sharing
contribution or distribution, except in the ordinary course of
business;
(vi) Increased its indebtedness for borrowed
money, except current borrowings from banks in the ordinary
course of business, or made any loan to any person;
(vii) Written off as uncollectible any notes or
accounts receivable, except write-offs in the ordinary course
of business charged to applicable reserves, none of which,
individually or in the aggregate, materially and adversely
affects its assets or business;
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(viii) Granted any increase in the rate of wages,
salaries, bonuses or other compensation of any executive
employee or other employees of USAG, except in the ordinary
course of business;
(ix) Canceled or waived any claims or rights,
except in the ordinary course of business;
(x) Made any change in any method of accounting
or auditing practice;
(xi) Otherwise conducted its business or entered
into any transaction, except in the usual and ordinary manner
and in the ordinary course of business;
(xii) Entered into any agreements with any
affiliates; or
(xiii) Agreed, whether or not in writing, to do any
of the foregoing.
Section 4.31 DISCLOSURE. Neither this Agreement nor any Schedule,
Exhibit or certificate delivered in accordance with the terms hereof, or any
document or statement in writing which has been supplied by or on behalf of
USAG or by any of USAG's directors or officers, in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits any statement of a material fact necessary in order to make
the statements contained herein or therein not misleading. There is no fact
or circumstance known to USAG which materially and adversely affects or which
may materially and adversely affect its business, prospects or financial
condition or its assets, which has not been set forth in this Agreement, the
Schedules, Exhibits, certificates or statements furnished in writing to WSN
and WSN Shareholders in connection with the transactions contemplated by this
Agreement.
Section 4.32 BROKER'S OR FINDER'S FEES. Except for the finder's fee
payable to Havkit Corporation, no broker, finder or similar intermediary is
entitled to fees in connection with the transactions contemplated by this
Agreement by virtue of any action or agreement of USAG.
Section 4.33 SEC DOCUMENTS. USAG's Common Stock is registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and it has filed on a current basis all reports required to
be filed with the Securities and Exchange Commission (the "SEC") under the
Exchange Act. USAG has delivered to WSN and WSN Shareholders true, accurate
and complete copies of all reports filed under the Exchange Act since the
date of inception of USAG and all registration statements filed under the
Securities Act. Hereinafter, all documents filed by USAG under the Securities
Act and the Exchange Act are collectively referred to as the "SEC Documents."
The SEC Documents contain all material information regarding USAG and contain
no misstatement of any material fact or omit any statement of a material fact
necessary in order to make the statements contained therein not misleading
and, as of their respective filing dates, comply in all material respects
with the requirements of the Securities Act and the Exchange Act, as
applicable.
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ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF WSN
As an inducement to USAG to enter into this Agreement and to
consummate the transactions contemplated herein, and with knowledge that USAG
will rely thereon, WSN represents and warrants as follows to USAG:
Section 5.1 ORGANIZATION. WSN is a corporation duly organized,
validly existing and in good standing under the laws of the State of Wyoming,
is duly qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which its failure to be so qualified
and in good standing would have a materially adverse effect on its financial
condition or business, and it has the corporate power and authority to own,
lease or operate its properties and to carry on its business as now conducted.
Section 5.2 CAPITAL STRUCTURE. The authorized capital of WSN (the
"WSN Common Stock") is as set forth in the RECITALS above. All of the
outstanding shares of WSN Common Stock are validly issued, fully paid and
nonassessable and were issued in transactions that were exempt from
registration under the Securities Act.
Section 5.3 ARTICLES OF INCORPORATION, BYLAWS AND MINUTES. WSN has
heretofore delivered to USAG true and complete copies of its (i) Articles of
Incorporation (certified by the Secretary of State of Wyoming); (ii) Bylaws
(certified by its corporate secretary) as in effect on the date hereof, and
(iii) minutes of all meetings of its Board of Directors and shareholders.
Section 5.4 BOOKS AND RECORDS. The corporate minute books, stock
certificate books, stock registers and other corporate records of WSN are
correct and complete in all material respects, and the signatures appearing
on all documents contained therein are the true signatures of the persons
purporting to have signed the same. All actions reflected in said books and
records were duly and validly taken in compliance with the laws of the State
of Wyoming. WSN does not have any of its records, systems, controls, data or
information recorded, stored, maintained, operated or otherwise wholly or
partially dependent upon or held by any means, including any electronic,
mechanical or photographic process, whether computerized or not, which,
including all means of access thereto and therefrom, are not under the
exclusive ownership and direct control of WSN.
Section 5.5 TITLE TO THE WSN COMMON STOCK. Each WSN Shareholder will
warrant that he/she has full power and authority to transfer and convey, free
and clear of all liens, encumbrances, restrictions and claims of every kind,
the WSN Shares to USAG as contemplated by this Agreement.
Section 5.6 AUTHORITY. WSN has full power and authority to execute
and deliver this Agreement and the other Closing Documents and to carry out
the transactions contemplated
13
hereby and WSN has taken all requisite corporate action to authorize the
execution, delivery and performance of the Closing Documents. The Closing
Documents, when executed, will be valid and binding agreements of WSN
enforceable in accordance with the terms thereof. No consent, authorization
or approval of, or declaration, filing or registration with, any governmental
or regulatory authority or any consent, authorization or approval of any
other third party is required to enable WSN to enter into and perform any of
its obligations under the Closing Documents, and neither the execution and
delivery of the Closing Documents nor the consummation of the transactions
contemplated thereby will:
(i) Violate the Articles of Incorporation or
Bylaws or constitute a breach of any evidence of indebtedness
or agreement to which WSN is a party or by which it is bound;
(ii) Cause a default under any mortgage or deed
of trust or other lien, charge or encumbrance to which WSN is
subject or under any contract to which WSN is a party, or
permit the termination of any such contract by another person;
(iii) Result in the creation or imposition of any
security interest, lien, charge or other encumbrance upon the
property or assets of WSN under any agreement or commitment to
which WSN is bound;
(iv) Accelerate, or constitute an event
entitling, or which would, on notice or lapse of time or both,
entitle the holder of any indebtedness of WSN to accelerate
the maturity of any such indebtedness;
(v) Conflict with or result in the breach of any
writ, injunction or decree of any court or governmental
instrumentality;
(vi) Violate any statute, law or regulation of
any jurisdiction as such statute, law or regulation relates to
WSN or the securities, properties or business of WSN; or
(vii) Violate or cause any revocation of or
limitation on any Permit (as defined in Section 5.17).
Section 5.7 FINANCIAL STATEMENTS. WSN has furnished, or will prior
to the Closing Date furnish USAG with (i) true and complete copies of the
unaudited balance sheet and related statements of operations and retained
earnings and related statements of cash flows of WSN since its inception, and
(ii) true and complete copies of the unaudited balance sheet as of June 30,
1999 and related statements of operations and retained earnings and related
statements of cash flows of WSN as of June 30, 1999
Hereinafter, the financial statements referred to above, together
with the footnotes and supporting schedules thereto, are referred to as the
"WSN Financial Statements."
14
The WSN Financial Statements, including the footnotes thereto, present fairly
the financial condition of WSN at the date thereof and reflect all material
claims against, and all material debts and liabilities of, WSN, fixed or
contingent, as at the date thereof and the statement of operations and
retained earnings which are a part of the WSN Financial Statements present
fairly the results of the operations of WSN and cash flows for the period
indicated except as otherwise disclosed in this Agreement, the WSN Financial
Statements and the Exhibits and Schedules hereto.
Section 5.8 NO UNDISCLOSED LIABILITIES. WSN does not have any
material liability or obligation, absolute or contingent, including without
limitation, liabilities for federal, state, local or foreign taxes which (i)
is not reflected on the WSN Financial Statements, or (ii) has arisen since
January 1, 1999 and which is materially adverse to the business, assets or
operations of USAG or (iii) is not referred to elsewhere in this Agreement or
the Schedules hereto.
Section 5.9 TITLE TO ASSETS; PERMITTED ENCUMBRANCES. WSN has good
and indefeasible title, or valid leasehold rights in the case of leased
assets, to all of its assets reflected on the WSN Financial Statements and
all of the assets thereafter acquired by it (except to the extent that such
assets have thereafter been disposed of in the ordinary course of business or
otherwise in accordance with this Agreement), subject to no mortgages, liens,
security interests or encumbrances other than (A) minor defects in title and
encumbrances, none of which, individually or in the aggregate, materially
interferes with the use or value of such property, (B) liens and security
interests under operating agreements for amounts not yet delinquent or which
are being contested in good faith, (C) liens for fees, taxes, levies,
imposts, duties or other governmental charges of any kind which are not yet
delinquent or are being contested in good faith by appropriate proceedings
which suspend the collection thereof, (D) liens for mechanics, materialmen,
laborers, employees, suppliers or similar liens created in the ordinary
course of business and arising by operation of law for sums which are not yet
delinquent or are being contested in good faith by appropriate proceedings,
(E) liens created in the ordinary course of business in connection with the
leasing or financing of office, computer and related equipment and supplies.
Section 5.10 CONDITION OF PROPERTY. All of the tangible personal
property of WSN is, in accordance with industry standards, in operating
condition and repair, reasonable wear and tear excepted except for such property
the condition of which does not materially adversely affect the business of WSN.
Section 5.11 INSURANCE. Set forth in SCHEDULE 5.11, is a list of all
insurance policies carried by WSN (showing as to each policy, the carrier,
policy number, coverage limits, expiration dates, and a general description
of the type of coverage provided) and such policies are in full force and
effect and the premiums due and owing therefor have been paid in full and
will be so paid to the Closing Date.
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Section 5.12 PATENTS AND TRADEMARKS. WSN owns or possesses adequate
and enforceable licenses or other rights to use all patents, trademarks,
trade names and copyrights now used in the conduct of its business.
Section 5.13 CONDUCT OF BUSINESS. Since January 1, 1999 there has
not occurred any of the following events, other than changes in the ordinary
course of business, none of which has had a material adverse effect on such
business, operations or financial condition of WSN:
(i) Any change in the business, operations or
financial condition or the manner of conducting the business
of WSN;
(ii) Any damage, destruction or loss (whether or
not covered by insurance) materially and adversely affecting
the business operations or financial condition of WSN;
(iii) Any authorization or issuance of any shares
of capital stock of WSN;
(iv) Any declaration, setting aside or payment of
dividends or other distribution in respect of the capital
stock of WSN;
(v) Any direct or indirect redemption, purchase
or other acquisition of any shares of capital stock of WSN; or
(vi) Any amendment or termination by WSN of any
material contract, agreement, license, or other agreement
other than in the ordinary course of business.
Section 5.14 LITIGATION. There is no action, suit or proceeding pending
before any court, administrative agency or other governmental body or
arbitrator, or threatened against WSN. WSN is not a party or subject to, or
bound by, any injunction, judgment, order or decree, whether or not still
subject to appeal, of any court, administrative agency or other governmental
body or arbitrator.
Section 5.15 TAX MATTERS. WSN has paid all Taxes and all
deficiencies or other additions to any Tax, interest and penalties owed by it
in connection with any Tax required to be paid by it relating to WSN or any
of its assets or business through the date hereof. WSN shall have paid
timely, prior to the Closing Date, all Taxes relating to it or its business
or assets, including additions, interest, penalties and estimated payments,
required to be paid by it under applicable law after the date hereof.
Section 5.16 NO TAX LIENS. None of the assets of WSN is subject to
any lien in favor of the United States pursuant to Section 6321 of the Code
for nonpayment of federal taxes, or any lien in favor of any state under any
comparable provision of state law.
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Section 5.17 COMPLIANCE WITH LAWS; PERMITS. WSN is not in violation of
any applicable order, judgment, injunction, award or decree relating to its
business or assets. WSN is not in violation of any federal, state, local or
foreign law, ordinance or regulation or any other requirement of any
governmental or regulatory body, court or arbitrator applicable to its business
or assets. Without limiting the generality of the foregoing, (a) there is not
pending or threatened, any notification of any governmental authority that WSN
is not in compliance with applicable laws and regulations respecting employment
and employment practices, occupational safety and health laws and regulations,
and laws or regulations relating to the quality of the environment and WSN knows
of no basis therefor, and (b) WSN has not received any such notification of past
violations of such laws or regulations. WSN holds all Permits that are material
to or necessary for the conduct of its business. All Permits are in full force
and effect and no proceeding to revoke or limit any of such Permits is pending
or, to the knowledge of WSN, threatened.
Section 5.18 CONTRACTS AND OTHER AGREEMENTS. There are no contracts to
which WSN is party or by or to which it or its assets or properties are bound or
subject, including, without limitation, any (a) contract for the employment of
any officer or individual employee, (b) contract with any union, (c) bank loan
or other credit agreement, (d) bonus, deferred compensation, profit sharing,
pension or retirement arrangement, (e) partnership or joint venture agreement,
or (f) other material contract, agreement or commitment. WSN is not in the
process of negotiating or entering into any agreements.
Section 5.19 REAL PROPERTY. (I) WSN does not own or possess any land,
(ii) All of the WSN Leases, true and complete copies of which have been
delivered to USAG, and WSN is not in default under or with respect to any
thereof and WSN has not received or sent any notice of any default under or with
respect to any thereof and, to the knowledge of WSN, no other party to any
thereof is in default under or with respect to any thereof. WSN enjoys a right
of quiet possession of the premises covered by each Lease as against all other
persons and entities.
Section 5.20 TANGIBLE PROPERTY. All machinery, equipment, furniture,
leasehold improvements, fixtures, vehicles, or any related capitalized items
and other tangible property owned by WSN located and/or used by WSN as of the
date hereof (other than inventory) (the "WSN Tangible Property"), all of
which is reflected in the WSN Financial Statements and all of which is in
good operating condition and repair, subject only to normal wear and tear.
WSN has not received notice that any of the WSN Tangible Property is in
violation of any existing law or any building, zoning, health, safety or
other ordinance, code or regulation. All leases, conditional sales contracts,
franchises or licenses pursuant to which WSN hold any interest in or to the
WSN Tangible Property are in full force and effect and, with respect to the
performance of WSN, there is no default or event of default or event which
with notice or lapse of time or both would constitute a default.
Section 5.21 INTANGIBLE PROPERTY. All trademarks, service marks,
trade names and franchises used by WSN, all applications for any of the
foregoing (collectively, "WSN Intangible Property"), and all permits, grants
and licenses or other rights running to or from WSN relating
17
to any of the foregoing, complete copies of which have been delivered to
USAG. WSN owns or possesses the requisite licenses or other rights to use the
WSN Intangible Property.
WSN has no notice of any patent, invention, trademark,
service mark or trade name of any other person that infringes upon, or is
infringed upon by, any of the WSN Intangible Property or notice of any claim
of any other persons relating to any of the WSN Intangible Property or any
process or confidential information of WSN and WSN knows of no basis for any
such charge or claim.
Section 5.22 ACCOUNTS AND NOTES RECEIVABLE. As of the date of
closing, WSN does not possess any accounts receivables or notes receivables
other than those listed in the current financial statements.
Section 5.23 LIABILITIES. Except as otherwise set forth in this
Agreement or any Schedule hereto, WSN has no direct or indirect Liabilities,
other than (a) Liabilities fully and adequately reflected or reserved against
in the WSN Financial Statements, and (b) Liabilities incurred since January
1, 1999 in the ordinary course of business. All trade and other payables will
continue to be paid in accordance with WSN's past business practices.
Section 5.24 SUPPLIERS AND CUSTOMERS. All presently open purchase
orders were issued by WSN in the normal and customary course of business and
contain terms, which result from arm's length negotiations.
Section 5.25 EMPLOYEE BENEFIT PLANS. WSN does not maintain or
contribute to, and has never maintained or contributed to, any employee
pension benefit plan subject to the Employee Retirement Income Security Act
of 1974.
Section 5.26 CURTAILMENT OF OPERATIONS. No labor disputes or work
stoppages involving WSN are pending or threatened which, either singly or in
the aggregate, will have a material adverse effect on the business of WSN. To
the knowledge of WSN, no material customer of or supplier to the WSN is
involved in, or affected by, any dispute, arbitration, lawsuit, or
administrative proceedings which could materially adversely affect its
business, operations, properties, assets or condition, financial or otherwise.
Section 5.27 EMPLOYEE RELATIONS. WSN is not a party to a collective
bargaining agreement and is in compliance with all applicable federal, state or
other laws, domestic or foreign, respecting employment and employment practices,
terms and conditions of employment (including issues related to independent
contractor status of personnel) and wages and hours, and has not and is not
engaged in any unfair labor practice. There have been no organization efforts by
any trade unions within the last 12 months.
Section 5.28 RESTRICTIVE DOCUMENTS. Except as otherwise disclosed in
this Agreement or any Schedule or Exhibit hereto, WSN is not subject to, or a
party to, any charter, bylaw, mortgage, lien, lease, license, permit, agreement,
contract, instrument, or any law, rule,
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ordinance, regulation, order, judgment or decree, or any other restriction of
any kind or character, which materially adversely affects the business
practices, operations or condition of WSN, or which would prevent
consummation of the transactions contemplated by this Agreement, or the
continued operation of the business on substantially the same basis as
heretofore operated.
Section 5.29 RELATIONSHIPS. No officer or director of WSN possesses,
directly or indirectly, any financial interest in, or is a director, officer,
shareholder or employee of, any corporation, firm, association or business
organization which is a manufacturer for, or client, supplier, customer,
lessor, lessee, or competitor or potential competitor of, WSN. WSN not
indebted to any officer, director or employee of WSN or to any entity in
which any such person has a financial interest.
Section 5.30 NO CHANGES PRIOR TO CLOSING DATE. During the period
from the date of this Agreement to and including the Closing Date, other than
as expressly set forth on one or more of the Schedules hereto, WSN will not
have:
(i) Incurred any liability or other obligations
of any nature (whether accrued, absolute, contingent or
otherwise) which affects or may affect its assets or business,
except in the ordinary course of business;
(ii) Permitted any of its assets to be subjected
to any mortgage, pledge, lien, security interest, encumbrance,
restriction or charge of any kind;
(iii) Sold, transferred or otherwise disposed of
any of its assets, except in the ordinary course of business;
(iv) Made any capital expenditure or commitment
therefor in excess of $5,000;
(v) Made any bonus or profit sharing
contribution or distribution, except in the ordinary course of
business;
(vi) Increased its indebtedness for borrowed
money, except current borrowings from banks in the ordinary
course of business, or made any loan to any person;
(vii) Written off as uncollectible any notes or
accounts receivable, except write-offs in the ordinary course
of business charged to applicable reserves, none of which,
individually or in the aggregate, materially and adversely
affects its assets or business;
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(viii) Granted any increase in the rate of wages,
salaries, bonuses or other compensation of any executive
employee or other employees of USAG, except in the ordinary
course of business;
(ix) Canceled or waived any claims or rights,
except in the ordinary course of business;
(x) Made any change in any method of accounting
or auditing practice;
(xi) Otherwise conducted its business or entered
into any transaction, except in the usual and ordinary manner
and in the ordinary course of business;
(xii) Entered into any agreements with any
affiliates; or
(xiii) Agreed, whether or not in writing, to do any
of the foregoing.
Section 5.31 DISCLOSURE. Neither this Agreement nor any Schedule,
Exhibit or certificate delivered in accordance with the terms hereof, or any
document or statement in writing which has been supplied by or on behalf of
WSN or by any of WSN's directors or officers, in connection with the
transactions contemplated hereby, contains any untrue statement of a material
fact, or omits any statement of a material fact necessary in order to make
the statements contained herein or therein not misleading. There is no fact
or circumstance known to WSN which materially and adversely affects or which
may materially and adversely affect its business, prospects or financial
condition or its assets, which has not been set forth in this Agreement, the
Schedules, Exhibits, certificates or statements furnished in writing to USAG
in connection with the transactions contemplated by this Agreement.
Section 5.32 BROKER'S OR FINDER'S FEES. Except for the finder's fee
payable to Havkit Corporation, no broker, finder or similar intermediary is
entitled to fees in connection with the transactions contemplated by this
Agreement by virtue of any action or agreement of WSN or WSN Shareholders.
ARTICLE 6
CONDITIONS PRECEDENT TO USAG'S OBLIGATIONS TO CLOSE
The obligation of USAG to enter into and to complete the transactions
contemplated by this Agreement is subject to the fulfillment on or prior to the
Closing Date of the following conditions, any one or more of which may be waived
only in writing by USAG:
Section 6.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of WSN and WSN Shareholders
contained in this Agreement shall be true on and as of the Closing Date with
the same force and effect as though made on and as of the Closing Date. WSN
and WSN Shareholders shall have performed and complied with in
20
all material respects all covenants and agreements required by this Agreement
required by this Agreement to be performed or compiled with by them on or
prior to the Closing Date.
Section 6.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and
approvals from any governmental or regulatory body required for the lawful
consummation of the transactions which are the subject of this Agreement
shall have been obtained.
Section 6.3 THIRD PARTY CONSENTS. All consents, permits and
approvals from parties to any leases, contracts or other agreements with WSN
and/or WSN Shareholders that may be required in connection with the
performance by any of them of their obligations under this Agreement or the
continuance of such leases, contracts or other agreements without material
modification after the Closing Date shall have been obtained. USAG also shall
have received all required waivers or consents under any material debt
instrument or other material agreement to which WSN or WSN Shareholder is a
party or by which any of them is bound.
Section 6.4 INVESTMENT LETTERS. Each person receiving USAG Common
Stock hereunder shall have delivered to USAG an investment letter and
represent that he/she is acquiring the shares for investment and not for
resale.
Section 6.5 NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the business or the assets of WSN taken as a whole,
financial or otherwise, regardless of reason, including, but not limited to,
those changes that are as a result of any legislative or regulatory change,
revocation of any Permits, licenses or rights to do business, failure to
obtain any Permit at the normal time or in the manner applied for by WSN,
fire, explosion, accident, casualty, labor trouble, flood, riot, storm,
condemnation or act of God or otherwise.
Section 6.6 LITIGATION. No action, suit or proceeding shall have
been instituted before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to restrain,
modify or prevent the carrying out of the transactions contemplated by this
Agreement or to seek damages in connection with such transactions, or that
has or could reasonably be expected to have, in the opinion of USAG, a
materially adverse effect on WSN.
Section 6.7 APPROVAL BY USAG BOARD OF DIRECTORS. The Board of Directors
of USAG shall have approved this Agreement and the transactions contemplated
hereunder.
Section 6.8 APPROVAL BY USAG'S COUNSEL. All actions and proceedings
hereunder and all documents and other papers required to be delivered by USAG
hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters shall have been reasonably
approved by counsel to USAG.
Section 6.9 CERTIFICATES, ETC. OF WSN AND WSN SHAREHOLDER. WSN and WSN
Shareholders each shall have delivered all certificates, documents or
instruments and such other matters as USAG's counsel may have reasonably
requested prior to the Closing Date, including, without limitation, a copy of
the resolutions duly adopted by WSN's board of directors and
21
shareholders authorizing and approving the execution and delivery by WSN of
this Agreement and the other Closing Documents, and the consummation by WSN
of the transactions contemplated hereby, certified by the secretary of WSN
dated as of the Closing Date.
Section 6.10 TAX-FREE REORGANIZATION. The transaction contemplated
by this Agreement shall have been accomplished on a tax-free basis.
ARTICLE 7
CONDITIONS PRECEDENT TO WSN'S AND WSN SHAREHOLDERS'
OBLIGATIONS TO CLOSE
The obligation of WSN and WSN Shareholders to enter into and to
complete the transactions contemplated by this Agreement is subject to the
fulfillment on or prior to the Closing Date of the following conditions, any one
or more of which may be waived only in writing by WSN and WSN Shareholders.
Section 7.1 REPRESENTATIONS, WARRANTIES AND OTHER AGREEMENTS. The
representations, warranties and other agreements of USAG contained in this
Agreement shall be true on and as of the Closing Date with the same force and
effect as though made on and as of the Closing Date. USAG shall have
performed and complied with in all material respects all covenants and
agreements required by this Agreement to be performed or complied with by it
on or prior to the Closing Date.
Section 7.2 GOVERNMENTAL PERMITS AND APPROVALS. All permits and
approvals from any governmental or regulatory body required for the lawful
consummation of the transactions which are the subject of this Agreement
shall have been obtained.
Section 7.3 THIRD PARTY CONSENTS. All consents, permits and
approvals from parties to any leases, contracts or other agreements with USAG
that may be required in connection with the performance by USAG of its
obligations under this Agreement or the continuance of such leases, contracts
or other agreements without material modification after the Closing Date
shall have been obtained. WSN and WSN Shareholders also shall have received
all required waivers or consents under any material debt instrument or other
material agreement to which USAG is a party or by which USAG is bound.
Section 7.4 NO MATERIAL ADVERSE CHANGE. There shall be no material
adverse change in the business or the assets of USAG, taken as a whole,
financial or otherwise, regardless of reasons, including, but not limited to,
those changes that are as a result of any legislative or regulatory change,
revocation of any Permits, licenses or rights to do business, failure to
obtain any Permit at the normal time or in the manner applied for by USAG,
fire, explosion, accident, casualty, labor trouble, flood, riot, storm
condemnation or act of God or otherwise.
22
Section 7.5 LITIGATION. No action, suit or proceeding shall have
been instituted before any court or governmental or regulatory body, or
instituted or threatened by any governmental or regulatory body, to restrain,
modify or prevent the carrying out of the transactions contemplated by this
Agreement or to seek damages in connection with such transactions, or that
has or could reasonably be expected to have, in the opinion of WSN and WSN
Shareholders, a materially adverse effect on USAG.
Section 7.6 APPROVAL BY WSN'S BOARD OF DIRECTORS AND WSN SHAREHOLDERS.
The Board of Directors and the shareholders of WSN shall have approved this
Agreement and the transactions contemplated hereunder.
Section 7.7 APPROVAL BY WSN'S COUNSEL. All actions and proceedings
hereunder and all documents and other papers required to be delivered by WSN
hereunder or in connection with the consummation of the transactions
contemplated hereby, and all other related matters shall have been reasonably
approved by counsel to WSN.
Section 7.8 CERTIFICATES, ETC. OF USAG. USAG shall have delivered
all certificates, documents or instruments with respect to its authority and
such other matters as WSN and WSN Shareholders' counsel may have reasonably
requested prior to the Closing Date, including, without limitation, a copy of
the resolutions duly adopted by USAG's board of directors and shareholders,
authorizing and approving the execution and delivery by USAG of this
Agreement and the other Closing Documents, and the consummation by USAG, of
the transactions contemplated hereby, certified by the secretary of USAG,
dated as of the Closing Date.
Section 7.9 TAX-FREE REORGANIZATION. The transaction contemplated by
this Agreement shall have been accomplished on a tax-free basis.
ARTICLE 8
MUTUAL UNDERTAKINGS
Section 8.1 NOTICE OF EVENTS. Each party shall promptly notify each
other party of (a) any event, condition or circumstance occurring from the
date hereof through the Closing Date that would constitute a violation or
breach of this Agreement, or (b) any event, occurrence, transaction or other
item which would have been required to have been disclosed on any Schedule,
Exhibit or statement delivered hereunder, had such event, occurrence,
transaction or item existed on the date hereof, other than items arising in
the ordinary course of business which would not render materially inaccurate
any of the representations, warranties or other agreements of said party.
Section 8.2 ACCESS TO INFORMATION, ETC. Each party will permit the
officers and authorized representatives of the other parties access to its
properties, books and records and those of its subsidiaries, if applicable,
and will furnish to the other parties additional financial and operating data
and other information as to its business and properties and those of its
subsidiaries,
23
if applicable, as the other parties from time to time may reasonably request.
If for any reason the reorganization is not consummated each party shall
treat in strict confidence all confidential information regarding the other
parties obtained hereunder.
Section 8.3 STANDSTILL AGREEMENT AND EXPENSES. From and after the
date of this Agreement and up to and including the Closing Date all parties
agree to conduct their respective businesses in the ordinary course and USAG
will not issue or agree to issue any additional securities without the
consent of WSN and WSN Shareholders. Without the consent of WSN and WSN
Shareholders, USAG will not, except in the ordinary course of business,
transfer assets or create liabilities. All reasonable expenses incurred in
connection with the completion of the transactions contemplated herein shall
be deemed to be in the ordinary course of business. Except as otherwise
provided herein in Article 10 (termination), each party shall be responsible
for expenses incurred by it in connection with the transactions contemplated
herein.
ARTICLE 9
ACTIONS TO BE TAKEN AT THE CLOSING
The following actions shall be taken at the Closing, each of which
shall be conditioned on completion of all the others and all of which shall be
deemed to have taken place simultaneously:
Section 9.1 THE INVESTMENT LETTERS. The persons receiving USAG Common
Stock hereunder shall have executed and delivered to USAG an investment letter
as provided in Section 6.4.
Section 9.2 THE CONSIDERATION - USAG COMMON STOCK. USAG shall issue and
deliver to WSN Shareholders stock certificates representing shares of USAG
Common Stock in accordance with Section 2.1.
Section 9.3 CLOSING CERTIFICATES OF USAG. USAG shall deliver to WSN and
WSN Shareholder a closing certificate and any other certificates, as required by
Section 7.8, dated the Closing Date, in form reasonably satisfactory to WSN and
WSN ShareholderS.
Section 9.4 CLOSING CERTIFICATES OF WSN AND WSN SHAREHOLDER. WSN and
WSN ShareholderS shall deliver to USAG a closing certificate and any other
certificates as required by Section 6.9, dated the Closing Date, in form
reasonably satisfactory to USAG.
Section 9.5 RESIGNATION OF USAG BOARD. The Board of Directors of USAG
will resign and be replaced by the Board of WSN.
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ARTICLE 10
TERMINATION, AMENDMENT AND WAIVER
Section 10.1 TERMINATION.
(a) This Agreement may be terminated at any time prior to
the Closing Date, whether before or after approval and adoption of this
Agreement by the USAG shareholders and the WSN shareholders, by mutual written
consent of the parties.
(b) This Agreement will terminate on its own terms on
September 30, 1999, if the Closing has not occurred by said date, unless
extended by the parties.
Section 10.2 EFFECT OF TERMINATION. If this Agreement is terminated
pursuant to Section 10.1, the rights and obligations of the parties hereto
shall be of no further force and effect, except for the provisions of Section
12.1 (relating to public statements), the last sentence of Section 8.2
(relating to confidential information) and Section 8.3 (relating to
expenses), and none of the parties hereto shall have any liability in respect
of such termination, except that any party shall be liable to the extent that
failure to satisfy the conditions contained herein results from the
intentional or willful violation of the representations, warranties,
covenants or agreements of such party under this Agreement.
ARTICLE 11
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS
Section 11.1 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.
All of the representations and warranties of the parties contained in this
Agreement shall survive the Closing for a period of two years after the Closing
Date with the exception of Sections 4.15, 4.16, 5.15, and 5.16 which shall
survive for a period of time which is equal to the statute of limitations period
applicable to any respective Tax liability being asserted.
Section 11.2 INDEMNITY AGREEMENT OF USAG. USAG shall indemnify,
defend, reimburse and hold harmless WSN and WSN Shareholders from and against
any and all claims, demands, penalties, fines, liabilities, obligations,
losses, settlements, damages, costs and expenses, including, without
limitation, reasonable fees and disbursements of counsel incident to any of
the foregoing (collectively, "Losses") resulting from:
(a) Any inaccuracy in, or breach of, any representation
and warranty or nonfulfillment of any covenant on the part of USAG
contained in this Agreement.
(b) Any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of USAG contained in any
other agreement, certificate or other
25
instrument furnished or to be furnished to WSN and/or WSN Shareholders
by USAG pursuant to this Agreement.
(c) Any filing made with the Securities and Exchange
Commission or state securities commissions prepared on behalf of USAG
or any amendment or supplement thereto filed prior to the Closing Date.
Section 11.3 INDEMNITY AGREEMENT OF WSN. WSN shall indemnify, defend,
reimburse and hold USAG from and against any and all Losses resulting
from:
(a) Any inaccuracy in, or breach of, any representation
and warranty or nonfulfillment of any covenant on the part of WSN or
WSN Shareholders, respectively, contained in this Agreement.
(b) Any misrepresentation in or omission from or
nonfulfillment of any covenant on the part of WSN or WSN Shareholders,
respectively, contained in any other agreement, certificate or other
instrument furnished or to be furnished to USAG by them pursuant to
this Agreement.
Section 11.4 INDEMNIFICATION PROCEDURE FOR THIRD PARTY CLAIMS.
(a) NOTICE OF CLAIM AND DEFENSE. The party seeking
indemnification under this Article 11 shall give the party from whom
indemnification is sought prompt written notice of the assertion of any
third party claim of which said party has knowledge which is covered by
the indemnity agreements set forth in Section 11.2 or Section 11.3. The
party obligated to indemnify will undertake the defense thereof by
counsel reasonably acceptable to the party seeking indemnification. If
the party obligated to indemnify, within a reasonable period of time
after notice of any such claim fails to defend, the party seeking
indemnification will have the right to undertake the defense,
compromise or settlement of such claim on behalf of and for the account
and risk of the party obligated to indemnify, subject to the right of
the party seeking indemnification to assume the defense of such claim
at any time prior to settlement, compromise or final determination
thereof. Anything in this Section 11.4 to the contrary notwithstanding,
if there is a reasonable probability that a claim may adversely affect
the party seeking indemnification, other than as a result of money
damages or other payments, the party seeking indemnification shall have
the right, at the cost and expense of the party obligated to indemnify,
to defend, compromise or settle such claim.
(b) PAYMENT OF SUMS DUE. After any final judgment or
award shall have been rendered by a court, arbitration board or
administrative agency having jurisdiction over the matter related
thereto, or a settlement shall have been consummated, or the parties
shall have arrived at a mutually binding agreement, with respect to
each separate third party claim indemnified by the party obligated to
indemnify, the party seeking indemnification shall forward to the party
obligated to indemnify notice of any sums due
26
and owing by the party seeking indemnification with respect to such
claim and the party obligated to indemnify shall pay such sums to
the party seeking indemnification in cash, within 30 days after the
date of such notice.
Section 11.5 GOOD FAITH EFFORTS TO SETTLE DISPUTES. Each of the parties
agrees that, prior to commencing any litigation against the other concerning any
matter with respect to which such party intends to claim a right of
indemnification in such proceedings, such parties shall meet in a timely manner
and attempt in good faith to negotiate a settlement of such dispute during which
time such parties shall disclose to the others all relevant information relating
to such dispute.
Section 11.6 FEES AND EXPENSES. Notwithstanding any other provision in
this Article 11, in the event of any dispute or controversy, in addition to any
other remedies the prevailing party may obtain in such dispute, the prevailing
party in such dispute shall, be entitled to recover from the other party all of
its reasonable legal fees and out-of-pocket costs incurred by such party in
enforcing or defending its rights hereunder.
Section 11.7 LITIGATION SUPPORT. If, and for so long as, any party
actively is contesting or defending against any action, suit, proceeding,
hearing, investigation, charge, complaint, claim, or demand in connection
with (a) any transaction contemplated hereunder, or (b) any fact, situation,
circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing
Date, the other party will cooperate with the contesting or defending party
and its counsel in the contest or defense, make available its personnel and
provide such testimony and access to its books and records as shall be
necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending party, unless the contesting or
defending party is entitled to indemnification therefor under this Article 11.
ARTICLE 12
GENERAL PROVISIONS
Section 12.1 PUBLIC DISCLOSURE. None of the parties hereto shall
issue any press release or otherwise make any public statement with respect
to the transactions contemplated hereby not required by law except upon the
written consent of each of the other parties hereto.
Section 12.2 GOVERNING LAW AND JURISDICTION. This Agreement shall be
governed by and interpreted in accordance with the laws of the State of
Delaware. Each of the Parties hereto consents to such jurisdiction for the
enforcement of this Agreement and matters pertaining to the transaction and
activities contemplated hereby.
Section 12.3 NOTICES. All notices and other communications provided
for or permitted hereunder shall be made by hand delivery, first class mail,
telex or telecopies, addressed as follows:
27
PARTY ADDRESS
----- -------
WSN World Shopping Network, Inc.
1530 Brookhollow Dr., Suite C
Santa Ana, CA 92705
Attn: Mr. John Anton, President
Fax: 714-427-0763
with copies to: Harry S. Stahl, Esq.
2603 Main Street Suite 1050
Irvine, CA 92614
Fax: 949-794-4041
USAG U.S.A. Growth Inc.
1530 Brookhollow Dr., Suite C
Santa Ana, CA 92705
Attn: Mr. John Anton, President
Fax: 714-427-0763
with copies to: Tri Star Diversified Ventures,LLC
575 Anton Blvd, Suite 400
Costa Mesa, CA. 92626
All such notices and communications shall be deemed to have been duly given:
when delivered by hand, if personally delivered; five (5) business days after
deposit in any United States Post Office in the continental United States,
postage prepaid, if mailed; when answered back, if telexed; and when receipt
is acknowledged or confirmed, if telecoped.
Section 12.4 ATTORNEYS' FEES. In the event a dispute arises with
respect to this Agreement, the party prevailing in such dispute shall be
entitled to recover all expenses, including, without limitation, reasonable
attorneys' fees and expenses incurred in ascertaining such party's rights, in
preparing to enforce or in enforcing such party's rights under this
Agreement, whether or not it was necessary for such party to institute suit.
Section 12.5 COMPLETE AGREEMENT. This Agreement supersedes any and all
of the other agreements, either oral or in writing, between the Parties with
respect to the subject matter hereof and contains all of the covenants and
agreements between the Parties with respect to such subject matter in any manner
whatsoever. Each Party to this Agreement acknowledges that no representations,
inducements, promises or agreements, oral or otherwise, have been made by any
28
Party, or anyone herein, and that no other agreement, statement or promise not
contained in this Agreement shall be valid or binding. This Agreement may be
changed or amended only by an amendment in writing signed by all of the Parties
or their respective successors-in-interest.
Section 12.6 BINDING. This Agreement shall be binding upon and inure to
the benefit of the successors-in-interest, assigns and personal representatives
of the respective Parties.
Section 12.7 UNENFORCEABLE TERMS. Any provision hereof prohibited by
law or unenforceable under the law of any jurisdiction in which such provision
is applicable shall as to such jurisdiction only be ineffective without
affecting any other provision of this Agreement. To the full extent, however,
that such applicable law may be waived to the end that this Agreement be deemed
to be a valid and binding agreement enforceable in accordance with its terms,
the Parties hereto hereby waive such applicable law knowingly and understanding
the effect of such waiver.
Section 12.8 EXECUTION IN COUNTERPARTS. This Agreement may be executed
in several counterparts and when so executed shall constitute one agreement
binding on all the Parties, notwithstanding that all the Parties are not
signatory to the original and same counterpart.
Section 12.9 FURTHER ASSURANCE. From time to time each Party will
execute and deliver such further instruments and will take such other action as
any other Party may reasonable request in order to discharge and perform their
obligations and agreements hereunder and to give effect to the intentions
expressed in this Agreement.
Section 12.10 INCORPORATION BY REFERENCE. All exhibits referred to in
this Agreement are incorporated herein in their entirety by such reference.
29
Section 12.11 MISCELLANEOUS PROVISIONS. The various headings and
numbers herein and the grouping of provisions of this Agreement into separate
articles and paragraphs are for the purpose of convenience only and shall not be
considered a party hereof. The language in all parts of this agreement shall in
all cases by construed in accordance with its fair meaning as if prepared by all
Parties to the Agreement and not strictly for or against any of the Parties.
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as
of the day and year first above written.
U.S.A. GROWTH INC.
By: /s/ John J. Anton
----------------------------------
Its: President
WORLD SHOPPING NETWORK, INC.
By: /s/ John J. Anton
----------------------------------
Its: President
USAG STOCKHOLDERS
/s/ John J. Anton
--------------------------------------
/s/ Nick Markulis
--------------------------------------
/s/ Tri Star Diversified Ventures, LLC
--------------------------------------
30
EXHIBIT B
262 APPRAISAL RIGHTS
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to Section 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251(g) of this title), Section 252, Section 254, Section 258, Section
263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record date fixed to determine
the stockholders entitled to receive notice of and to vote at the meeting of
stockholders to act upon the agreement of merger or consolidation, were either
(i) listed on a national securities exchange or designated as a national market
system security on an interdealer quotation system by the National Association
of Securities Dealers, Inc. or (ii) held of record by more than 2,000 holders;
and further provided that no appraisal rights shall be available for any shares
of stock of the constituent corporation surviving a merger if the merger did not
require for its approval the vote of the stockholders of the surviving
corporation as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series of
stock of a constituent corporation if the holders thereof are required by the
terms of an agreement of merger or consolidation pursuant to Sections 251, 252,
254, 257, 258, 263 and 264 of this title to accept for such stock any thing
except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (OR DEPOSITORY RECEIPTS IN RESPECT
THEREOF) or depository receipts at the effective date of the merger or
consolidation will be either listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall be
available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation
that appraisal rights under this section shall be available for the shares of
any class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
his shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or
all shares of such class or series of stock of such constituent corporation, and
shall include in such notice a copy of this section; provided that, if the
notice shall be given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or resulting
corporation to all such holders of any class or series of stock of a constituent
corporation that are entitled to appraisal rights. Such notice may, and, if
given on or after the effective date of the merger or consolidation, shall,
also notify such stockholders of the effective date of the merger or
consolidation. Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of such notice, demand in writing from the surviving
or resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and
that the stockholder intends thereby to demand the appraisal of such holder's
shares. If such notice did not notify stockholders of the effective date of
the merger or consolidation, either (i) each such constituent corporation
shall send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series of stock
of such constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date. If no record date is
fixed and the notice is given prior to the effective date, the record date
shall be the close of business on the day next preceding the day on which the
notice is given.
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who
has complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of Chancery
demanding a determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the
merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall
be entitled to receive from the corporation surviving the merger or resulting
from the consolidation a statement setting forth the aggregate number of
shares not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after his written request for such a statement is
received by the surviving or resulting corporation or within 10 days after
expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of
a copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the
Court, and the costs thereof shall be borne by the surviving or resulting
corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair
rate of interest, the Court may consider all relevant factors, including the
rate of interest which the surviving or resulting corporation would have had to
pay to borrow money during the pendency of the proceeding. Upon application by
the surviving or resulting corporation or by any stockholder entitled to
participate in the appraisal proceeding, the Court may, in its discretion,
permit discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to an
appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this section
and who has submitted his certificates of stock to the Register in Chancery, if
such is required, may participate fully in all proceedings until it is finally
determined that he is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the
shares, together with interest, if any, by the surviving or resulting
corporation to the stockholders entitled thereto. Interest may be simple or
compound, as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith, and the
case of holders of shares represented by certificates upon the surrender to the
corporation of the certificates representing such stock. The Court's decree may
be enforced as other decrees in the Court of Chancery may be enforced, whether
such surviving or resulting corporation be a corporation of this State or of any
state.
(j) The costs of the proceeding may be determined by the Court and
taxed upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation,
no stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting
corporation a written withdrawal of his demand for an appraisal and an
acceptance of the merger or consolidation, either within 60 days after the
effective date of the merger or consolidation as provided in subsection (e)
of this section or thereafter with the written approval of the corporation,
then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of
Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court
deems just.
(1) The shares of the surviving or resulting corporation to which the
shares of such objecting shareholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.