AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as
of the ___ day of July __, 2002 (the "Effective Date") by and among MetaSource
Group, Inc., a Nevada corporation ("MSG" or "Parent"), Kensington Consulting
Acquisition, Corporation., a Delaware corporation (the "Subsidiary"), and
Kensington Group, Inc., a Massachusetts corporation (the "Company"); and those
persons specified more particularly on that schedule attached to this Agreement
marked as Exhibit A, the provisions of which, by this reference, are made a part
of this Agreement as though specified completely and specifically at length in
this Agreement. For convenience, the persons specified in Exhibit A to this
Agreement shall be referred to in this Agreement, collectively, as the
"Shareholders" and any of them may be referred to in this Agreement,
individually, as a "Shareholder".
RECITALS
A. The Company has one hundred thousand (100,000) shares of the Company's
capital stock issued and outstanding (each a "Share" and collectively the
"Shares");
B. Subsidiary is a wholly-owned subsidiary of Parent and was formed to
acquire the Company through the Merger (as hereinafter defined) so that as a
result of the Merger, Subsidiary will survive as a wholly-owned subsidiary of
Parent and will own all the assets and be responsible for all the liabilities of
the Company and conduct the business of the Company;
C. The Boards of Directors of each of Parent, Subsidiary and the Company
have determined that this Agreement and the merger of the Company with and into
Subsidiary (the "Merger") in accordance with the provisions of the Delaware
General Corporation Law (the "DGCL") and the Massachusetts Business Corporation
Law (the "MBCL"), and subject to the terms and conditions of this Agreement, is
advisable and in the best interests of Parent, Subsidiary and the Company and
their respective stockholders;
E. It is the intent of the parties that the Merger and related transactions
qualify as a "reorganization" under Section 368(a) of the Internal Revenue Code
of 1986, as amended, (the "Code") and the regulations promulgated pursuant
thereto; and
F. The Merger is one in a series of transactions pursuant to which MSG will
acquire a number of entities including MetaSource Systems, Inc. a Delaware
Corporation ("MSS") by merger by and between MSS and Meta Source Acquisition
Corp., another wholly owned subsidiary of MSG pursuant to the terms of a certain
Agreement and Plan of Merger, dated as April 24, 2002 a copy of which is
attached hereto as Exhibit F (the "Buyer Merger").
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NOW, THEREFORE, in consideration of the recitals specified above that shall
be deemed to be a substantive part of this Agreement, and the mutual covenants,
promises, undertakings, agreements, representations and warranties specified in
this Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, with the intent to be obligated
legally and equitably, the parties do hereby covenant, promise, agree, represent
and warrant as follows:
ARTICLE I
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined in Section 1.2) in accordance with
the DGCL, and the MBCL, the Company shall be merged with and into Subsidiary and
the separate existence of the Company shall thereupon cease. Subsidiary shall be
the surviving corporation in the Merger and is hereinafter sometimes referred to
as the "Surviving Corporation."
1.2 Effective Time of the Merger. As soon as practicable after the Closing
(as hereinafter defined), MSG shall cause Articles of Merger/Consolidation to be
filed with the office of the Secretary of State of the Commonwealth of
Massachusetts in the manner required by the MBCL and in the form of Exhibit C
attached hereto and a Certificate of Merger to be filed with the office of the
Secretary of State of the State of Delaware in the manner required by the DGCL
and in the form of Exhibit D (said filings hereinafter the "Merger Filings").
The Merger shall become effective at such time (the "Effective Time") as shall
be stated in the Merger Filings. The parties acknowledge that it is their mutual
desire and intent to consummate the Merger as soon as practicable after the date
hereof. Accordingly, the parties shall use all reasonable efforts to consummate,
as soon as practicable, the transactions contemplated by this Agreement.
1.3 Tax-Free Reorganization. The Merger shall be treated as a tax-free
reorganization under Section 368(a) of the Code. The parties shall not take a
position on any tax return or before any taxing authority that is inconsistent
with this Section 1.3, unless otherwise required by a final and binding judicial
or governmental determination of competent jurisdiction. Each party herein will
promptly notify the other party, as provided by this Agreement in Section 7.3.8,
of any determination by a taxing authority of a position that is inconsistent
with this Section. Parent has delivered the opinion of Geller & Company to the
effect that the Merger and the other transactions contemplated herein and the
Exhibits hereto will qualify as a reorganization under Section 368(a) of the
Code. Other than as to the opinion provided by Geller & Company, neither Parent,
Subsidiary or any of their respective representatives, including their
attorneys, represent and/or warrant that the transactions contemplated herein
and the Exhibits attached hereto will qualify as a reorganization under Section
368(a) of the Code.
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ARTICLE II
THE SURVIVING AND PARENT CORPORATIONS
2.1 Certificate of Incorporation. The Certificate of Incorporation of the
Surviving Corporation shall be amended and restated at and as of the Effective
Time to be identical to the Certificate of Incorporation of Subsidiary as in
effect immediately prior to the Effective Time except that the name of
Subsidiary shall be changed to become Kensington Management Consulting, Inc.and
thereafter may be amended in accordance with its terms and as provided in the
DGCL.
2.2 By-Laws. The By-laws of the Surviving Corporation shall be amended at
and as of the Effective Time to be identical to the By-laws of Subsidiary as in
effect immediately prior to the Effective Time, and thereafter may be amended in
accordance with their terms and as provided by the Certificate of Incorporation
of the Surviving Corporation and the DGCL.
2.3 Directors. The directors of Subsidiary immediately prior to the
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-laws
of the Surviving Corporation.
2.4 Officers. Except as otherwise agreed, the officers of the Subsidiary in
office immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, to serve in accordance with the By-laws of the Surviving
Corporation until their respective successors are duly elected or appointed and
qualified.
2.5 Cash or other Consideration. No cash or other consideration will be
paid, is contemplated as part of any payment, or will be received in effecting
the Merger.
2.6 Assets. Upon the Effective Time, all assets of the Company shall become
the property of the Surviving Corporation.
2.7 Liabilities. Upon the Effective Time, the Company shall remain liable
for and obligated by all of its liabilities, including but not limited to: (i)
any and all litigation threatened and pending that may or has resulted in the
entry of judgment in damages or otherwise against the Company; (ii) any and all
outstanding secured and unsecured accounts of credit, bills of lading or other
uncollected debts now held by Company; (iii) any and all internal or employee
related disputes, arbitrations, or administrative proceedings threatened,
pending or otherwise outstanding; and (iv) any and all liens, foreclosures,
settlements, or other threatened, pending or otherwise outstanding financial,
legal or similar obligations of the Company.
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ARTICLE III
CONVERSION OF SHARES
3.1 Conversion of Company Shares in the Merger. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of Shares:
(a) each Share issued and out standing immediately prior to the Effective
Time other than Shares held by Parent or any subsidiary of Parent or held in
treasury by the Company or any subsidiary of the Company, if any, subject to the
provisions of Sections 3.4 and 3.5 following, shall be converted automatically
into the right to receive a number of shares of $0.01 par value common stock of
MSG ("Exchange Shares") as calculated pursuant to the formula specified on
Exhibit B hereto (the "Merger Consideration"). Certificates representing 50% of
the immediately issued Exchange Shares shall be delivered to the Escrow Agent
(as that term is defined in Section 3.3(b)) pursuant to the provisions of
Section 3.3(b) and certificates evidencing and representing the remaining 50% of
the immediately issued Exchange Shares shall be delivered to the Shareholders
pursuant to the provisions of Section 3.3(a). If the Shareholders and/or the
Company breach any of the representations or warranties specified in this
Agreement, the immediately issued Exchange Shares held by Escrow Agent will be
used to indemnify Subsidiary and Parent for any such breaches.
(b) each Share owned by Parent or any subsidiary of Parent or held in
treasury by the Company or any subsidiary of the Company immediately prior to
the Effective Time, if any, shall be canceled and shall cease to exist from and
after the Effective Time.
3.2 Conversion of Subsidiary Shares. At the Effective Time, by virtue of
the Merger and without any action on the part of Parent as the sole shareholder
of Subsidiary, each issued and outstanding share of common stock, par value
$.001per share, of Subsidiary ("Subsidiary Common Stock") shall be converted
into one share of common stock, $.001 par value per share, of the Surviving
Corporation.
3.3 Exchange of Certificates.
(a) From and after the Effective Time, each holder of an outstanding
certificate that immediately prior to the Effective Time represented Shares
shall be entitled to receive in exchange therefor, upon surrender thereof to the
Surviving Corporation, the Merger Consideration to which such holder is entitled
pursuant to Section 3.l(a). Notwithstanding any other provision of this
Agreement, without regard to when such certificates representing Shares are
surrendered for exchange as provided herein, no interest shall be paid on any
payment of the Merger Consideration.
(b) At the Closing Date (as defined herein), Parent and Shareholders shall
jointly establish an independent escrow account with MC Law Group, as escrow
agent (the "Escrow Agent"), pursuant to the terms of an Escrow Agreement
substantially in the form set forth as Exhibit E attached hereto (the "Escrow
Agreement"). Parent shall deposit with the Escrow Agent certificates evidencing
and representing 50% of the immediately issued Exchange Shares (the "Escrowed
Shares"). As described more particularly in the Escrow Agreement, a portion of
the certificates evidencing and representing the Escrowed Shares shall be held
by the Escrow Agent for a period ending on the last to occur of (i) the one (1)
year anniversary of the Closing Date or (ii) the fifth (5th) business day
following the determination of the 2003 income and any required adjustment to
the Exchange Shares pursuant to Exhibit B attached hereto (the "Adjustment
Date"). The Adjustment Date is to be no later than August 30, 2003. Such
Escrowed Shares are to be held in order to indemnify Subsidiary and Parent for
breaches under this Agreement. Parent and Shareholders shall execute joint
escrow instructions.
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3.4 Dissenters Rights Shares.
(a) Notwithstanding any provision of this Agreement to the contrary, any
Shares held by a holder who has demanded and perfected his or her right for
payment of the fair value of such Shares in accordance with the MBCL and who, as
of the Effective Time, has not effectively withdrawn or lost such right to
payment, shall not be converted into or represent a right to receive the Merger
Consideration pursuant to Section 3.1, but the holder thereof shall only be
entitled to such rights as are granted by the MBCL. Notwithstanding the
provisions of this subsection (a), if any holder of Shares who demands payment
of the fair value of such Shares under the MBCL shall effectively withdraw or
lose (through failure to perfect or otherwise) his or her right to payment,
then, as of the later of Effective Time or the occurrence of such event, such
holder's Shares shall automatically be converted into and represent only the
right to receive the Merger Consideration as provided in Section 3.1, without
interest thereon, upon surrender of the certificate or certificates representing
such Shares.
(b) The Company shall give Parent (i) prompt notice of any written notice
of dissent, written demands for payment of the fair value of any Shares,
withdrawals of such demands, and any other instruments served pursuant to the
MBCL and received by the Company and (ii) the opportunity to participate in all
negotiations and proceedings with respect to demands for payment of the fair
value under the MBCL. The Company shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to any demands for
payment of the fair value of any Shares or offer to settle any such demands.
3.5 Fractional Shares. In determining the number of Exchange Shares issued
by MSG to effectuate the Merger, the parties to this Agreement have agreed that
the Merger Consideration shall be calculated pursuant to the formula and
schedules specified on Exhibit B hereto, and, in the case of issuance to each
Shareholder, rounded up to the next whole share such that no fractional shares
of Exchange Shares shall be issued in connection with the Merger.
3.6 Closing. The closing (the "Closing") of the transactions contemplated
by this Agreement shall take place at a location mutually agreeable to Parent
and the Company on the first business day immediately following the date on
which the last of the conditions set forth in Article IV is fulfilled or waived,
or at such other time and place as Parent and the Company shall agree (the date
on which the Closing occurs is referred to in this Agreement as the "Closing
Date").
3.7 Further Assurances. If, at any time after the Closing, the parties to
this Agreement consider or are advised that any further instruments, deeds,
assignments or assurances are reasonably necessary or desirable to consummate
the Merger, or to carry out the purposes of this Agreement at or after the
Closing, then the parties to this Agreement shall execute and deliver all such
proper deeds, assignments, instruments and assurances and do all other things
necessary or desirable to consummate the Merger and to carry out the purposes
and intent of this Agreement.
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ARTICLE IV
TERMS AND CONDITIONS
4.1 Conditions Precedent. Prior to Closing, the parties hereto (as
specified below) shall satisfy the following conditions:
4.1.1 Company Approval. The Company's Board of Directors shall adopt,
and the Company's Shareholders shall approve and ratify, by resolution duly
made, carried, and recorded in the Company's corporate minute book, the
Company's execution and performance of this Agreement, including the Merger and
all transactions related thereto.
4.1.2 Parent's Approval. Parent's Board of Directors shall approve,
adopt and ratify, by resolution duly made, carried, and recorded in the Parent's
corporate minute book, the Parent's execution and performance of this Agreement,
including the Merger and all transactions related thereto.
4.1.3 Subsidiary Approval. Subsidiary's Board of Directors shall
adopt, and Subsidiary's Shareholders shall approve and ratify, by resolutions
duly made, carried, and recorded in the Subsidiary's corporate minute book, the
Subsidiary's execution and performance of this Agreement, including the Merger
and all transactions related thereto.
4.1.4 Governmental Approvals. The parties hereto shall secure and/or
substantially comply with or file for any and all required permits, licenses,
certifications, or approvals from the appropriate local, state, or federal
governmental or regulatory agencies required for or related to the Closing and
the Merger, and all transactions related or necessary thereto (including without
limitation to the Buyer Merger), and required for or to ensure the continued
operations or ongoing business concerns of the Company consistent with the
operating or business history of the Company.
4.1.5 Buyer Merger. The Buyer Merger shall have been consummated
pursuant to the terms of the Agreement and Plan of Merger attached hereto as
Exhibit F, and the appropriate certificates or articles of merger shall have
been filed and accepted in the appropriate filing offices.
4.1.6 Material Changes. None of the Company, the Parent or the
Subsidiary shall undertake, effect or transact any contract, agreement, activity
or business function that has the effect or consequence of a Material Change as
defined herein, relative to the state of the Company, Parent , or the
Subsidiary, as the case may be, as of the Effective Date. A "Material Change"
shall be a change that adversely affects the business concerns, operations,
assets, customers, shareholders or prospects, present or future, of the Company,
Parent, or the Subsidiary as the case may be, prior to or concurrent with the
Closing Date, except those Material Changes expressly contemplated by this
Agreement. Further, the Company will notify Parent immediately of any
anticipated or actual Material Change, adverse or otherwise, known to it and the
Parent will notify the Company immediately of any anticipated or actual Material
Change, adverse or otherwise known to it, each in a manner prescribed by this
Agreement. Material Changes include, but are not limited to any event,
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occurrence or happenstance, public or otherwise, that in any way (i) adversely
affects the value of Company assets or holdings; (ii) substantially increases
the Company's, Parent's or the Subsidiary's, as the case may be, exposure to
liability or risk of litigation; (iii) substantially affects the Company's,
Parent's or the Subsidiary's, as the case may be, service, supplies, inventory,
customers and employees; (iv) changes, modifies or affects the Company, Parent's
or Subsidiary's, as the case may be, capital structure, accounting, other
business operations model, mergers, consolidations, acquisitions, stock or asset
purchases of other or subsidiary companies or where the Company, Parent's or
Subsidiary's, as the case may be has a legal obligation to make disclosures to
its shareholders and Board of Directors; and (v) changes, adjustments or
increases to employee or contracted compensations, salaries or wages, declared
or paid dividends or otherwise exercising or accepting warrant and option
exercises.
4.1.7 Good Faith. The Company, the Parent and the Subsidiary shall
each act in good faith to disclose, assist, cooperate and otherwise make
available or make efforts to ensure that the other receives all information,
data, charts, reports, audits, approvals, and other items, and that the actions,
documents and disclosures of each comply with Section 4.1 of this Agreement and
applicable law.
4.1.8 Books and Records. Prior to the Closing each of the Company and
the Parent will have delivered to the other all books and records as requested
by the Company or the Parent, as the case may be, or their agents or
representatives, including, but not limited to, their respective attorneys and
auditors.
4.1.8 Employment Agreement. Conditioned on to the Closing, Norma
LaRosa and the Surviving Corporation will execute and deliver an employment
agreement in a form substantially similar to the employment agreement attached
hereto as Exhibit G.
4.2 Exclusivity. Subject to the fiduciary duties of the Boards of Directors
of the Company and the Subsidiary, until the first to occur of the Closing or
the termination of this Agreement, neither the Company nor the Subsidiary shall
directly, or indirectly, through any director, officer, employee, agent,
representative, including but not limited to investment bankers, attorneys, and
accountants, or otherwise: (i) solicit, initiate, or encourage submission of
proposals or offers of any sort from any third party, relating to any
acquisition or purchase of all or a material portion of the Company's or the
Subsidiary's, as the case may be, assets, or any equity interest in it or any
transaction, consolidation or business combination with it; or (ii) participate
in any discussions or negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate in any way with, or assist
or participate in, facilitate or encourage, any effort or attempt by any person
to do or seek any of the foregoing.
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4.3 Conditions Subsequent. After Closing, the parties hereto, as specified
below, shall satisfy the following conditions:
4.3.1 Continued Business Operations. The Parent shall cause the
Surviving Corporation to retain the Company's business name and continue the
Company's ordinary, day-to-day operations.
4.3.2 Securities Law Issues. Parent contemplates issuing and
delivering the Exchange Shares in a transaction which satisfies the requirements
for an exemption from the registration and prospectus delivery requirements of
the Securities Act of 1933, as amended, as specified in Regulation D, Rule 506,
and in that regard, each Shareholder is an "accredited investor" within the
meaning of Rule 501 of Regulation D.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.1 Representations and Warranties of Company. The Company hereby
represents and warrants to the Parent and the Subsidiary that each of the
following representations and statements made in this Agreement and this Section
5.1 are true and correct in all material respects:
5.1.1 Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of
Massachusetts. The Company has the corporate power and authority to own, operate
and lease its properties and to carry on its business as now conducted and as
proposed to be conducted, and is duly qualified to transact business as a
foreign corporation in each jurisdiction in which its failure to be so qualified
would have a Material Adverse Effect. As used in this Agreement, the term
"Material Adverse Effect" when used with reference to the Company (either alone
or collectively with all the Company subsidiaries) means any event, change, or
effect that is or with the passage of time will be materially adverse to the
Company's condition, including, but not limited to, financial or otherwise,
properties, assets, liabilities, business, operations, or results of operations,
it being understood that any effect whether alone or in combination with any
other effect, arising out of or resulting from actions contemplated by the
parties in connection with this Agreement and the transactions contemplated
herein shall not constitute a Material Adverse Effect.
5.1.2 Power and Authorization of the Company. The Company has the
corporate right, power, legal capacity and authority to enter into, execute,
deliver and perform its obligations under this Agreement, subject to any and all
applicable regulatory approvals which may be required to effectuate the Merger
or any related transactions contemplated by, or necessary to effectuate, this
Agreement. Further, with the exception of the Merger Filings, no filing,
authorization, consent, approval or order, governmental or otherwise, required
by applicable state or federal law is necessary or required to be made or
obtained by the Company to enable the Company to lawfully enter into, and to
perform its obligations under this Agreement. Further, this Agreement, when
executed by the Company or its authorized representative, will constitute a
valid and binding obligation of the Company, enforceable in accordance with the
terms described herein, except as to the effect, if any of (i) applicable
bankruptcy and other similar laws affecting the rights of creditors generally
and (ii) rules of law governing specific performance, injunctive relief and
other equitable remedies.
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5.1.3 Validity. All representations, warranties, and other statements
made by the Company in this Agreement are true, complete, correct and accurate,
in all material respects, as of the Effective Date.
5.1.4 Capitalization of Company. The authorized share capital of
Company is two hundred thousand (200,000) shares of common stock, of which one
hundred thousand (100,000) shares are issued and outstanding, all of which are
now owned and held by the Shareholders. No other shares of the Company's common
stock, including, but not limited to, fractional shares, will be issued and
outstanding on the Effective Date. All issued and outstanding shares of common
stock of the Company have been duly authorized and validly issued, are fully
paid and nonassessable, are not subject to any claim, lien, preemptive right or
right of rescission (other than the rights of all companies organized under
applicable law to repurchase shares), and have been offered, issued and sold by
the Company (and, if applicable transferred), to the best of the Company's
knowledge, information and belief, in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of all
applicable securities laws, the Company's Articles of Incorporation or similar
governing documents, all other corporate or charter documents, and all
agreements to which the Company or the Shareholders are a party.
5.1.5 Options, Warrants or Rights. The Company represents there are no
options, warrants, convertible or other securities, calls, commitments,
conversion privileges, preemptive rights or other rights or agreements
outstanding to purchase or otherwise acquire (whether directly or indirectly)
any of the Company's share capital, described above, or any security convertible
into or exchangeable for any shares of the Company's capital stock or obligating
the Company to grant, issue, extend, or enter into, any such option, warrant,
convertible or other security, call, commitment, conversion privilege,
preemptive right or other right or agreement ("Interests"). The Company has no
liability for any dividends accrued but unpaid. No shares of the Company are
reserved for issuance under any stock purchase, stock option or other benefit
plan.
5.1.6 No Voting Arrangements or Registration Rights. There are no
voting agreements, voting trusts, rights of first refusal or other restrictions,
other than normal restrictions on transfer under the applicable securities laws,
applicable to any of the Company's issued and outstanding shares of capital
stock or to the conversion of any shares of the Company stock in the Merger. The
Company is not under any current obligation to register under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") or otherwise, or any other
securities regulation, any of its presently issued and outstanding securities or
any securities that may be subsequently issued, except as may be defined by this
Agreement.
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5.1.7 No Subsidiaries. The Company has never been a subsidiary of any
corporation, partnership, limited liability company, joint venture or other
business entity.
5.1.8 No Violation of Existing Agreements. To the knowledge of the
Company, neither the execution and delivery of this Agreement nor the
consummation of the Merger or any of the other transactions contemplated herein,
will conflict with, or (with or without notice or lapse of time, or both) result
in a termination, breach, impairment, or violation of: (i) any organizational,
corporate, or other resolution of the Company currently in effect; (ii) any
national, state, or local judgment, writ, decree, levy, order, statute, rule or
regulation applicable to the Company or its assets or properties; or (iii) any
material instrument, agreement, contract, letter of intent or commitment to
which the Company is a party or by which the Company or its assets or properties
are or were bound, except as such conflicts, terminations, breaches,
impairments, or violations as, in the opinion of management of the Company,
would not have a Material Adverse Effect on the Company, or the Company's
business or assets.
5.1.9 Litigation. As of the date hereof, there is no material action,
suit, arbitration, mediation, proceeding, claim or investigation pending against
the Company or against any officer, director or shareholders of the Company, or
to the best of the knowledge of Company, against any employee or agent of the
Company in their capacity as such or relating to their employment or
relationship with the Company, before any court, administrative agency or
arbitrator that, if determined adversely, may reasonably be expected to have a
Material Adverse Effect on the Company, nor, to the best of the Company's
knowledge has any such action, suit, proceeding, arbitration, mediation, claim
or investigation been threatened. Except as would not have a Material Adverse
Effect, and save for the regulatory approvals required hereunder, if any, there
is no basis known to the Company for any person, firm, corporation or other
entity, to assert a claim against the Company or the Subsidiary based upon the
Company entering into this Agreement; and, further, there is no basis known to
the Company for any person, firm, corporation, or other entity, to assert a
claim against the Company based upon (i) any claims of ownership, rights to
ownership, or options, warrants or other rights to acquire ownership, of any of
the Shares; or (ii) any rights as a Company shareholder, including any option,
warrant or preemptive rights or rights to notice or vote. To the best of the
Company's knowledge, there is no judgment, decree, injunction, rule or order of
any governmental entity or agency, court or arbitrator outstanding against the
Company.
5.1.10 Taxes. The Company has timely filed all foreign (if
applicable), national, state, and local tax returns required to be filed the
failure of which to file would have had a Material Adverse Effect, has timely
paid or provided for all taxes required to be paid in respect of all periods for
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which returns have been filed, has established an adequate accrual or reserve
for the payment of all taxes payable in respect of the periods subsequent to the
periods covered by the most recent applicable tax returns, has made all
necessary estimated tax payments, and has no material liability for taxes in
excess of the amount so paid or accruals or reserves so established. The Company
is not delinquent in the filing of any tax returns, and no deficiencies for any
tax have been threatened, claimed, proposed or assessed. The Company is also not
delinquent in the payment of any tax. The Company has not received any
notification that any issues have been raised or are currently pending by any
taxing authority, including but not limited to any franchise, sales or use tax
authority, regarding the Company and no tax return of the Company has ever been
audited by any taxing authority. For the purposes of this Section, the terms
"tax" and "taxes" include income, alternative or add-on minimum income, gains,
franchise, excise, property, sales, use, employment, license, payroll, including
any taxes, deductions or similar payments required to be withheld from payments
of salary or other compensatory payments, ad valorem, payroll, stamp,
occupation, recording, value added or transfer taxes, governmental charges,
fees, customs duties, levies or assessments (whether payable directly or by
withholding) and, with respect to such taxes, any estimated tax, interest and
penalties or additions to tax and interest on such penalties and additions to
tax.
5.1.11 Financial Statements. The Company has provided
management-prepared financial statements to Parent and Subsidiary and those
financial statements, to the knowledge of the Company, represent the true and
correct financial condition of the Company as of that date and there are no
material liabilities, either fixed or contingent, not reflected in such
financial statements.
5.1.12 Title to Property. The Company has marketable title to all of
its assets, free and clear of all liens, mortgages, security interests, claims,
charges, restrictions, or encumbrances. Further, all machinery, vehicles,
planes, equipment, and other tangible personal property included in such assets
and properties are in operating condition and repair, normal wear and tear
excepted, and all material leases of real or personal property to which the
Company is a party are, to the knowledge of the Company, fully effective and
afford the Company peaceful and undisturbed possession of the real or personal
property which is the subject of the lease. To the knowledge of the Company, the
Company is not in violation of any zoning, building, safety or environmental
ordinance, regulation, requirement or other law applicable to the operation of
owned or leased properties, the violation of which would have a Material Adverse
Effect on the Company, nor has the Company received any notice of violation, the
violation of which would have a Material Adverse Effect on the Company with
which it has not complied.
5.1.13 No Default. The Company is not in breach or default of any
Company agreement or contract. The Company is not a party to any contract,
agreement or arrangement that has had, or could reasonably be expected to have a
Material Adverse Effect on the Company. The Company does not have any material
liability for re-negotiation of government contracts or subcontracts, if any.
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5.1.14 Intellectual Property. The Company owns, or has the irrevocable
right to use, sell or license all material Intellectual Property Rights (as
defined below, the "IP Rights") necessary or required for the conduct of its
business as presently conducted, and such rights to use, sell, or license are
sufficient for such conduct of its business. Further, the Company is the legal
and beneficial owner of all IP Rights contemplated herein. Any and all
intellectual property held by the Company is owned outright, free and clear of
any claims, liens, security interests, mortgages, encumbrances or obligations by
the Company. The Company is currently taking reasonable and practicable steps
designed to protect, preserve, and maintain the secrecy and confidentiality of
all material Company IP Rights and all the Company's proprietary rights therein.
IP Rights, as used herein, means, collectively, all worldwide industrial and
intellectual property rights, including but not limited to patents, patent
applications, patent rights, trademarks, trademark applications, trade names,
trade dress, service marks, service mark applications, copyrights, copyright
applications, franchises, licenses, inventions, trade secrets, know-how,
customer lists, proprietary processes and formulae, manuals, memoranda and
records.
5.1.15 Compliance with Laws. To the best knowledge of management of
the Company, the Company has complied with and is now in complete compliance, in
all material respects, with all applicable national, state, and local laws,
ordinances, regulations, rules, orders, writs, decrees, injunctions, awards,
judgments and decisions applicable to the Company or to the Company's assets,
properties, or business the non-compliance with which will have a Material
Adverse Effect on the Company. The Company holds all material permits, licenses,
and approvals from, and has made all filings with, third parties, including
government agencies and authorities, that are necessary in connection with the
Company's present business.
5.1.16 Employees. To the best knowledge of management of the Company,
the Company is in compliance in all material respects with all applicable laws,
agreements, and contracts relating to employment, employment practices,
reporting, wages, hours, and compensation matters, in all geographic areas where
it conducts business.
5.2 Representations and Warranties of Parent and Subsidiary. The Parent and
the Subsidiary hereby jointly and severally represent and warrant to the Company
that each of the following representations and statements made in this Agreement
are true and correct:
5.2.1 Organization and Good Standing. The Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of
Delaware. MSG is a corporation duly organized, validly existing and in good
standing under the laws of Nevada. Subsidiary and MSG each has the corporate
power and authority to own, operate and lease its respective properties and to
carry on its respective business as now conducted and as proposed to be
conducted, and is duly qualified to transact business as a foreign corporation
in each jurisdiction in which its failure to be so qualified would have a
material adverse effect. As used in this Agreement, the term "Material Adverse
Effect" when used with reference to the Subsidiary or MSG, as the case may be,
(either alone or collectively with all Subsidiary or MSG, as the case may be,
subsidiaries and shareholders) means any event, change, or effect that is or
with the passage of time will be materially adverse to the Subsidiary's
condition, including but not limited to financial or otherwise, properties,
assets, liabilities, business, operations, or results of operations, it being
understood that none of the following shall be deemed by itself or by
themselves, either alone or in combination, to constitute a Material Adverse
Effect, any effect arising out of or resulting from actions contemplated by the
parties in connection with the announcement of this Agreement and the
transactions contemplated herein.
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5.2.2 Power and Authorization of Subsidiary and MSG. The Subsidiary
and MSG each have the right, power, legal capacity and authority to enter into,
execute, deliver and perform such or their respective obligations under this
Agreement and has the requisite power and authority to consummate the Merger
and, in the case of Parent, the Buyer Merger, in each case, subject only to the
regulatory approval set forth herein. Further, with the exception of the Merger
Filings, no filing, authorization, consent, approval or order, governmental or
otherwise, required by Delaware or Nevada law is necessary or required to be
made or obtained by the Subsidiary or MSG to enable the Subsidiary and MSG to
lawfully enter into, and to perform the respective obligations under this
Agreement and with respect to Parent under Agreement and Plan of Merger with
respect to the Buyer Merger. Further, this Agreement, when executed by the
Subsidiary and the Parent, will constitute a valid and binding obligation of
Subsidiary, enforceable in accordance with the terms described herein, except as
to the effect, if any of (i) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (ii) rules of law governing
specific performance, injunctive relief and other equitable remedies.
5.2.3 Validity. All representations, warranties, and other statements
made by the Subsidiary or Parent in this Agreement, and all other agreements,
reports, audits included herein, executed prior to, concurrent or subsequent to
the Closing hereto are i) true and correct, and ii) shall be deemed to be
representations and warranties made pursuant to this Section for all purposes of
this Agreement.
5.2.4 Capitalization of Subsidiary and MSG.
(A) As of July 11, 2002, the authorized common stock of the Subsidiary
consisted entirely of 50,000,000 shares of $.001 par value common stock of which
1000 shares were issued and outstanding. All issued and outstanding shares of
the Subsidiary have been duly authorized and validly issued, are fully paid and
non-assessable, are not subject to any claim, lien, preemptive right or right of
rescission, and have been offered, issued, sold and delivered by the Subsidiary
(and, if applicable transferred) in compliance with all registration or
qualification requirements (or applicable exemptions therefrom) of all
applicable securities laws, the Subsidiary's Certificate of Incorporation, all
other corporate or charter documents, and all agreements to which Subsidiary or
the Subsidiary's shareholders are a party.
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(B) As of July 11, 2002, the authorized common stock of MSG consisted
entirely of 100,000,000 shares of $.001 par value common stock of which
12,891,200 were issued and outstanding. At any time either before or after date
of the Buyer Merger, MSG may authorize additional shares if so approved by its
shareholders as required by applicable law and MSG may issue additional
authorized shares in which case the Shareholders may suffer dilution of the
percentage of ownership of MSG that they will own immediately after the Closing.
All issued and outstanding shares of MSG have been duly authorized and validly
issues, are fully paid and non-assessable, are not subject to any claim, lien,
preemptive right of rescission, and have been offered, issued, sold and
delivered by MSG (and, if applicable transferred) in compliance with the
registration or qualification requirements (or applicable exemptions there from)
of all applicable securities laws, MSG's Certificate of Incorporation, all other
corporate or charter documents, and all agreements to which MSG is a party.
5.2.5 No Violation of Existing Agreements. Neither the execution and
delivery of this Agreement nor the consummation of the Merger or the Buyer
Merger or any of the other transactions contemplated herein, will conflict with,
or (with or without notice or lapse of time, or both) result in a termination,
breach, impairment, or violation of: i) any organizational, corporate, or other
resolution of the Subsidiary or MSG currently in effect; ii) any national,
state, or local judgment, writ, decree, levy, order, statute, rule or regulation
applicable to the Subsidiary or its assets or properties; or iii) any material
instrument, agreement, contract, letter of intent or commitment to which the
Subsidiary or MSG is a party or by which the Subsidiary or MSG or their
respective assets or properties are or were bound, except as such conflicts,
terminations, breaches, impairments, or violations as would not have a Material
Adverse Effect.
5.2.6 Litigation. As of the date hereof, there is no action, suit,
arbitration, mediation, proceeding, claim or investigation pending against the
Subsidiary or against any officer or director of the Subsidiary or MSG, or to
the best of the knowledge of Parent and Parent's shareholders, against any
employee, agent, service or in their capacity as such or relating to their
employment, services or relationship with the Subsidiary or MSG, before any
court, administrative agency or arbitrator that, if determined adversely, or
brought against any of the above may reasonably be expected to have a Material
Adverse Effect on the Subsidiary or MSG, nor, to the best of Parent's knowledge
has any such action, suit, proceeding, arbitration, mediation, claim or
investigation been threatened. Except as would not have a Material Adverse
Effect, and save for the regulatory approvals required hereunder, there is no
basis for any person, firm, corporation or other entity, to assert a claim
against the Subsidiary or MSG based upon Parent or the Subsidiary entering into
this Agreement or Parent entering into the Buyer Merger or consummating the
Merger or the Buyer Merger; and, further, there is no basis for any person,
firm, corporation, or other entity, to assert a claim against the Subsidiary or
MSG based upon i) any claims of ownership, rights to ownership, or options,
warrants or other rights to acquire ownership, of any shares of the capital
stock of the Subsidiary or MSG; or ii) any rights as a shareholder of either the
Subsidiary or MSG, including any option, warrant or preemptive rights or rights
to notice or vote. To the best of Parent's knowledge, there is no judgment,
decree, injunction, rule or order of any governmental entity or agency, court or
arbitrator outstanding against the Subsidiary or MSG.
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5.2.7 Validity of Shares. Other than that portion of Exchange Shares
deposited in escrow, the Exchange Shares shall, when issued; (i) be duly
authorized, validly issued, fully paid and non-assessable and free of liens and
encumbrances; (ii) be free and clear of any transfer restrictions, liens and
encumbrances except for restrictions on transfer under applicable securities
laws.
5.2.8 Reports and Financial Statements. At least since January 1,
2001, MSG has filed with the SEC all material forms, statements, reports and
documents (including all exhibits, amendments and supplements thereto) required
to be filed by it under each of the Securities Act of 1933, as amended (the
"Securities Act"), the Exchange Act and the respective rules and regulations
thereunder, all of which, as amended if applicable, complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. MSG has previously made available to the Company and
the Shareholders copies of MSG's (a) Annual Reports on Form 10-K as filed with
the SEC, (b) proxy and information statements relating to (i) any meetings of
its shareholders (whether annual or special) and (ii) actions by written consent
in lieu of a shareholders' meeting, each from January 1, 2001 until the date
hereof, and (c) all other reports, including quarterly reports, or registration
statements filed by MSG with the SEC, in each case, since January 1, 2001 (the
documents referred to in clauses (a), (b) and (c), together with any exhibits,
any amendments thereto, and any information incorporated by reference therein,
are collectively referred to as the "MSG SEC Reports"). At the time of filing,
the MSG SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited financial statements and unaudited interim
financial statements of MSG included in MSG SEC Reports (collectively, the "MSG
Financial Statements") have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis (except as may be indicated
therein or in the notes thereto) and fairly present in all material respects the
financial position of MSG and its subsidiaries as of the dates thereof and the
results of their operations and changes in financial position for the periods
then ended, subject, in the case of the unaudited interim financial statements,
to normal year-end audit adjustments and any other adjustments described
therein.
5.2.8 Absence of Undisclosed Liabilities. Neither MSG nor any
of its subsidiaries had at March 31, 2002, or has incurred since that date, any
liabilities or obligations (whether absolute, accrued, contingent or otherwise)
of any nature, except (a) liabilities, obligations or contingencies (i) which
are accrued or reserved against in MSG Financial Statements or reflected in the
notes thereto or (ii) which were incurred after March 31, 2002, and, were
incurred in the ordinary course of business and consistent with past practices,
15
(b) liabilities, obligations or contingencies which (i) would not, in the
aggregate, have a Material Adverse Effect, or (ii) have been discharged or paid
in full prior to the date hereof, and (c) liabilities and obligations which are
of a nature not required to be reflected in the consolidated financial
statements of MSG and its subsidiaries prepared in accordance with generally
accepted accounting principles consistently applied and which were incurred in
the normal course of business.
5.2.9 Absence of Certain Changes or Events. Since the date of the most
recent MSG SEC Report, there has not been a Material Adverse Effect with respect
to MSG.
5.2.10 Certain Relationships; Transactions with Management.
(a) The documents listed as exhibits to the MSG's Form 10-K filed with
the SEC on April 15, 2002, accurately describe all relationships between or
among MSG, its directors, its officers or its significant shareholders.
(b) The documents listed as exhibits to the MSG's Form 10-K filed with
the SEC on April 15, 2002, MSG is not a party to any contract, lease or
commitment with any officer, director or significant shareholder (or any
affiliate of any such officer, director or shareholder) of MSG.
(c) Neither MSG nor any of the directors, officers or significant
shareholders of MSG (and/or any member of their respective families) has a
financial interest (direct or indirect) in any competitor, supplier or customer
of the Company.
5.3 Representations and Warranties of Shareholders. Each Shareholder hereby
represents and warrants to Parent and the Subsidiary that each of the following
representations and statements made in this Agreement are true and correct:
5.3.1 No Encumbrances or Liens. Each Shareholder, for himself, herself
or itself, warrants and represents that those Shares held of record by such
Shareholder are fully paid, non-assessable and free of liens and encumbrances,
and are free and clear of any transfer restrictions except for restrictions on
transfer under applicable securities laws.
5.3.2 Acquisition Intent of Shareholders. The Shareholders are
acquiring the Exchange Shares for their own accounts and not with an intention
of distribution within the meaning of Section 2(a)(11) of the Securities Act and
each Shareholder (i) is aware of the limits on resale of the Exchange Shares
imposed because of the nature of the Merger and the transactions contemplated
thereby, including but not limited to restrictions specified by Rule 144
promulgated by the Securities and Exchange Commission; and (iii) is receiving
the Exchange Shares without registration pursuant to the Securities Act of 1933,
as amended ("Securities Act"), in reliance on the exemption from registration
specified in Rule 506 of Regulation D of the Securities Act for investment, and
without any intent to sell, resell, or otherwise distribute the Exchange Shares
in any manner that is in violation of the Securities Act. The certificate
representing the Exchange Shares, when delivered to the Shareholders, may have
appropriate orders restricting transfer placed against them on the records of
the transfer agent for such securities, and may have placed upon them the
following legend:
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THE SHARES THIS CERTIFICATE REPRESENTS HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"). SUCH SHARES HAVE BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND MAY NOT BE OFFERED FOR SALE, SOLD,
DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT FILED BY THE ISSUER WITH THE SECURITIES AND
EXCHANGE COMMISSION COVERING SUCH SHARES UNDER THE SECURITIES ACT OR AN OPINION
OF COUNSEL SATISFACTORY TO THE ISSUER THAT SUCH REGISTRATION IS NOT REQUIRED.
Each Shareholder agrees not to attempt any transfer of any of the
Exchange Shares without first complying with the substance of that legend and
agrees that the satisfaction of the Subsidiary may, if the Subsidiary so
requests, depend in part upon an opinion of counsel acceptable in form and
substance to the Subsidiary, a no-action letter of the United States Securities
and Exchange Commission, or equivalent evidence. Each of the Shareholders
acknowledges, without limitation, that the foregoing agreement and
representation shall apply to the Exchange Shares issued to such Shareholders.
In the event that the Subsidiary agrees that an opinion contemplated by this
Section 5.3.2 is appropriate but is not willing to pay for such an opinion.
Subsidiary agrees and covenants that MSG will agree that Buchanan Ingersoll
Professional Corporation is satisfactory counsel for purposes of rendering an
opinion under such circumstances.
ARTICLE VI
MUTUAL COVENANTS.
6.1 Fulfillment of Closing Conditions. At and prior to the Closing, each
party shall use commercially reasonable efforts to fulfill, and to cause each
other to fulfill, as soon as practicable after the Effective Date of this
Agreement, the conditions specified in Article IV hereinabove to the extent that
the fulfillment of such conditions are within its control. In connection with
the foregoing, each party will (a) refrain from any actions that would cause any
of its representations and warranties to be inaccurate as of the Closing, and
take any reasonable actions within its control that would be necessary to
prevent its representations and warranties from being inaccurate as of the
Closing, (b) execute and deliver the applicable agreements and other documents
referred to in this Agreement, (c) comply with all applicable laws in connection
with its execution, delivery and performance of this Agreement and the Merger,
(d) use commercially reasonable efforts to obtain in a timely manner all
necessary waivers, consents and approvals required under any laws, contracts or
otherwise, including any Company required consents in the case of Company and
(e) use commercially reasonable efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things reasonably necessary,
proper or advisable to consummate and make effective as promptly as practicable
the Merger.
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6.2 Disclosure of Certain Matters. Each party to this Agreement shall
promptly notify every other party of any event or development that occurs that
(a) had it existed or been known on the date hereof would have been required to
be disclosed by such party under this Agreement, (b) would cause any of the
representations and warranties of such party contained herein to be inaccurate
or otherwise misleading, except as contemplated by the terms hereof or (c) gives
any such party any reason to believe that any of the conditions set forth in
Article IV will not be satisfied prior to the Closing Date.
6.3 Public Announcements. The parties shall consult with each other before
issuing any press release or making any public statement with respect to this
Agreement and the Merger and, except as may be required by applicable law, none
of the parties nor any other party shall issue any such press release or make
any such public statement without the prior written consent of the other party.
6.4 Confidentiality. If the Merger is not consummated, each party shall
treat all information obtained in its investigation of another party or any
affiliate thereof, and not otherwise known to them or already in the public
domain, as confidential and shall return to such other party or affiliate all
copies made by it or its representatives of confidential information provided by
such other party or affiliate.
6.5 Expenses. Except as otherwise provided herein, the parties shall each
pay all of their respective legal, accounting and other expenses incurred by
such party in connection with the Merger.
ARTICLE VII
MISCELLANEOUS PROVISIONS
7.1 Indemnification. From and after the Closing Date, each party to this
Agreement shall indemnify and hold harmless each and every other party, jointly
and severally, and (if any) each other party's respective successors and
assigns, and their respective officers, directors, employees, stockholders,
agents, affiliates and any person who controls any of such persons within the
meaning of the Securities Act or the Securities Exchange Act of 1934 (each, an
"Indemnified Person") from and against any liabilities, claims, demands,
judgments, losses, costs, damages or expenses whatsoever (including reasonable
attorneys', consultants' and other professional fees and disbursements of every
kind, nature and description incurred by such Indemnified Person in connection
therewith, including consequential and punitive damages) (collectively,
"Damages") that such Indemnified Person may sustain, suffer or incur and that
result from, arise out of or relate to any breach of any of the respective
representations, warranties, covenants or agreements contained in this
Agreement.
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7.1.1 Survival. The indemnity provisions set forth in Section 7.1,
above, shall survive the Closing and continue for two (2) years.
7.1.2 Procedure for Claims. Any Indemnified Person who desires to seek
indemnification under any part of this Section 7.1 shall give written notice in
accordance with Section 7.3.8 in reasonable detail (a "Claim Notice") to each
party responsible or alleged to be responsible for indemnification hereunder (an
"Indemnitor"). Such notice shall briefly explain the nature of the claim and the
parties known to be involved, and shall specify the amount thereof. If the
matter to which a claim relates shall not have been resolved as of the date of
the Claim Notice, the Indemnified Person shall estimate the amount of the claim
in the Claim Notice, but also specify therein that the claim has not yet been
liquidated (an "Unliquidated Claim"). If an Indemnified Party gives a Claim
Notice for an Unliquidated Claim, the Indemnified Party shall also give a second
Claim Notice (the "Liquidated Claim Notice") within sixty (60) days after the
matter giving rise to the claim becomes finally resolved, and the Second Claim
Notice shall specify the amount of the claim. Each Indemnitor to which a Claim
Notice is given shall respond to any Indemnified Party that has given a Claim
Notice (a "Claim Response") within thirty (30) days (the "Response Period")
after the later of (i) the date that the Claim Notice is given or (ii) if a
Claim Notice is first given with respect to an Unliquidated Claim, the date on
which the Liquidated Claim Notice is given. Any Claim Response shall specify
whether or not the Indemnitor giving the Claim Response disputes the claim
described in the Claim Notice. If any Indemnitor fails to give a Claim Response
within the Response Period, such Indemnitor shall be deemed not to dispute the
claim described in the related Claim Notice. If any Indemnitor elects not to
dispute a claim described in a Claim Notice, whether by failing to give a timely
Claim Response in accordance with the terms hereof or otherwise, then the amount
of such claim shall be conclusively deemed to be an obligation of such
Indemnitor.
7.1.3 Indemnity Obligations. If any Indemnitor shall be obligated to
indemnify an Indemnified Person pursuant to Section 7.1, such Indemnitor shall
pay to such Indemnified Person the amount to which such Indemnified Person shall
be entitled within fifteen (15) Business Days after (i) a disputed claim is
determined in favor of the Indemnified Person or (ii) the Response Period has
expired without a response. If any Indemnitor fails to pay all or part of any
indemnification obligation when due, then such Indemnitor shall also be
obligated to pay to the applicable Indemnified Person interest on the unpaid
amount for each day during which the obligation remains unpaid at an annual rate
equal to the Prime Rate plus 5%.
7.1.4 Third Party Claims. An Indemnified Person that desires to seek
indemnification under any part of this Section 7.1 with respect to any actions,
suits or other administrative or judicial proceedings (each, an "Action") that
may be instituted by a third party shall give each Indemnitor prompt notice of a
third party's institution of such Action. After such notice, any Indemnitor may,
or if so requested by such Indemnified Person, any Indemnitor shall, participate
in such Action or assume the defense thereof, with counsel satisfactory to such
Indemnified Person; provided, however, that such Indemnified Person shall have
the right to participate at its own expense in the defense of such Action; and
provided, further, that the Indemnified Person shall not consent to the entry of
any judgment or enter into any settlement, except with the written consent of
the Indemnitor (which consent shall not be unreasonably withheld). Any failure
to give prompt notice under this Section 7.1.4 shall not bar an Indemnified
Party's right to claim indemnification under this Section 7.1, except to the
extent that an Indemnitor shall have been harmed by such failure.
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7.1.5 Effect of Investigation or Knowledge. Any claim by any party for
indemnification shall not be adversely affected by any investigation by or
opportunity to investigate afforded to any such person, nor shall such a claim
be adversely affected by any such person's knowledge on or before the Closing
Date of any breach or of any state of facts that may give rise to such a breach.
The waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not adversely affect the right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants or
obligations.
7.1.6 Contingent Claims. Nothing herein shall be deemed to prevent an
Indemnified Person from making a claim hereunder for potential or contingent
claims or demands (a "Contingent Claim") provided the Claim Notice sets forth
the specific basis for any such Contingent Claim to the extent then feasible and
the Indemnified Person has reasonable grounds to believe that such a claim may
be made.
7.2 Termination. The parties may terminate this Agreement at any time
before the Closing, as provided below:
(a) by mutual written consent of each of the parties hereto; or
(b) by any party hereto if for any reason except for a breach by the party
seeking to so terminate, the Closing has not occurred by August 15, 2002; or
(c) by any party to this Agreement, if a court of competent jurisdiction or
governmental, regulatory or administrative agency or commission shall have
issued a Court Order (which Court Order the parties shall use commercially
reasonable efforts to lift) that permanently restrains, enjoins or otherwise
prohibits the Merger, and such Court Order shall have become final and
nonappealable; or
(d) by Parent or Subsidiary, if Company shall have breached, or failed to
comply with, any of its obligations under this Agreement or any representation
or warranty made by Company shall have been incorrect when made, and such
breach, failure or misrepresentation is not cured within twenty (20) days after
notice thereof, and in either case, any such breaches, failures or
misrepresentations, individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse Effect on the Business;
or
20
(e) by Company, if Parent or Subsidiary shall have breached, or failed to
comply with any of its obligations under this Agreement or any representation or
warranty made by it shall have been incorrect when made, and such breach,
failure or misrepresentation is not cured within twenty (20) days after notice
thereof, and in either case, any such breaches, failures or misrepresentations,
individually or in the aggregate, results or would reasonably be expected to
affect materially and adversely the benefits to be received by Company
hereunder; or
(f) by any Shareholder, if Parent or Subsidiary shall have breached, or
failed to comply with any of their respective obligations under this Agreement
or any representation or warranty made by Subsidiary shall have been incorrect
when made, and such breach, failure or misrepresentation is not cured within
twenty (20) days after notice thereof, and in either case, any such breaches,
failures or misrepresentations, individually or in the aggregate, results or
would reasonably be expected to affect materially and adversely the benefits to
be received by any Shareholder.
7.2.1 Effect of Termination. If this Agreement is terminated pursuant
to Section 7.2, any party to this Agreement may pursue any legal or equitable
remedies that may be available if such termination is based on a breach of
another party to this Agreement.
7.3 General Matters.
7.3.1 Amendment, Parties in Interest, Assignment, Etc. This Agreement
may be amended, modified or supplemented only by a written instrument duly
executed by each of the parties to this Agreement. This Agreement shall be
binding upon and inure to the benefit of and be enforceable by the respective
heirs, legal representatives, successors and permitted assigns of the parties
hereto. Nothing in this Agreement shall confer any rights upon any person other
than the parties hereto and their respective heirs, legal representatives,
successors and permitted assigns, except as provided in elsewhere in this
Agreement. No party shall assign this Agreement or any right, benefit or
obligation hereunder. Any term or provision of this Agreement may be waived at
any time by the party entitled to the benefit thereof by a written instrument
duly executed by such party.
7.3.2 Interpretation. Unless the context of this Agreement clearly
requires otherwise, (a) references to the plural include the singular, the
singular the plural, the part the whole, (b) references to any gender include
all genders, (c) "including" has the inclusive meaning frequently identified
with the phrase "but not limited to" and (d) references to "hereunder" or
"herein" relate to this Agreement. Any determination as to whether a situation
is material shall be made by taking into account the effect of all other
provisions of this Agreement that contain a qualification with respect to
materiality so that the determination is made after assessing the aggregate
effect of all such situations. The Section and other headings contained in this
Agreement are for reference purposes only and shall not control or affect the
construction of this Agreement or the interpretation thereof in any respect.
Article, Section, Subsection, Schedule and Exhibit references are to this
Agreement unless otherwise specified. Each accounting term used herein that is
not specifically defined herein shall have the meaning given to it under GAAP.
Any reference to a party's being satisfied with any particular item or to a
party's determination of a particular item presumes that such standard will not
be achieved unless such party shall be satisfied or shall have made such
determination in its sole or complete discretion.
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7.3.3 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be binding as of the date first written above,
and all of which shall constitute one and the same instrument. Each such copy
shall be deemed an original, and it shall not be necessary in making proof of
this Agreement to produce or account for more than one such counterpart.
Facsimile signatures shall be deemed sufficient and shall have the same force
and effect as an original signature.
7.3.4 Entire Agreement. This Agreement, together with all Exhibits and
Attachments described herein, constitute the final and complete understanding of
the parties with respect to the subject matter hereof, superseding all prior and
contemporaneous promises, inducements, representations, agreements, and
understandings, whether written or oral, pertaining hereto. This Agreement
cannot be amended, modified or supplemented in any respect except as provided in
Section 7.3.1.
7.3.5 Severability. Should any one or more of the provisions of this
Agreement or of any agreement entered into pursuant to this Agreement be deemed
to be illegal or unenforceable, all other provisions of this Agreement and of
each other agreement entered into pursuant to this Agreement shall be given
effect separately from the provision or provisions determined to be illegal or
unenforceable and shall not be affected thereby. Nothing in this Section shall
prevent the parties from interpreting any provision or part of this Agreement in
a way consistent with current and future judicial determinations and modifying
this Agreement as provided to concur with such determination.
7.3.6 Remedies. The indemnification rights under Section 7.1 are
independent of and in addition to such rights and remedies as the parties may
have at law or in equity or otherwise for any misrepresentation, breach of
warranty or failure to fulfill any agreement or covenant hereunder on the part
of any party, including the right to seek specific performance, rescission or
restitution, none of which rights or remedies shall be affected or diminished by
Section 7.1.
7.3.7 No Implied Waiver. No course of dealing between the parties
hereto and no failure or delay in exercising any such right, power, or remedy
conferred hereby or now or hereafter existing at law, in equity, by statute or
otherwise shall operate as a waiver of, or otherwise prejudice, any such right,
power or remedy. No waiver by any party hereto of any breach of this Agreement
shall be deemed to be a waiver of any preceding or subsequent breach of the same
or any other provision hereof.
22
7.3.8 Notices. All notices that are required or permitted hereunder
shall be in writing and shall be sufficient if personally delivered or sent by
registered or certified mail, facsimile message or Federal Express or other
nationally recognized overnight delivery service. Any notices shall be deemed
given upon the earlier of the date when received at, or the third day after the
date when sent by registered or certified mail or the day after the date when
sent by Federal Express to the address or facsimile to the facsimile number set
forth below, unless such address or facsimile number is changed by notice to the
other parties:
If to Company:
Kensington Group, Inc
61 Presidio Avenue
Corte Madera, California 94925
With a copy to:
Richard D. Rose, Esq.
Buchanan Ingersoll Professional Corporation
301 Grant Street, 20th Floor
Pittsburgh, PA 15219
Fax: (412) 562-1041
If to Parent or Subsidiary:
40 Exchange Place
Suite 1607
New York, New York 10005
With a copy to:
Deron M. Colby
MC Law Group
4100 Newport Place, Suite 830
Newport Beach, California 92660
Fax: (942) 250-8656
If to Shareholders:
[see addresses on Exhibit A]
7.3.9 Governing Law. This Agreement shall be construed and interpreted
in accordance with the laws of the State of New York without regard to its
provisions concerning choice of laws or choice of forum. The parties hereby
irrevocably submit themselves to the non-exclusive jurisdiction of the state and
federal courts sitting in New York and agree and consent that services of
process may be made upon it in any legal proceedings relating hereto by any
means allowed under state or federal law.
23
7.3.10 Arbitration. Subject to Section 7.3.9 of this Agreement, the
parties hereto agree to submit any dispute arising hereunder to the American
Arbitration Association ("AAA"). Resolution of claims by the AAA will be binding
on all parties involved in such dispute.
IN WITNESS WHEREOF, the parties hereto as of the day and year first written
above have executed this Agreement.
KENSINGTON GROUP, INC.
Company
/s/ Norma T. LaRosa
By: ------------------------------
Its: President
/s/ Norma T. LaRosa
By: ------------------------------
Its: Secretary
KENSINGTON CONSULTING ACQUISITION CORPORATION
Subsidiary
/s/ Joe Cheung
By: ------------------------------
Its: President
/s/ Joe Cheung
By: ------------------------------
Its: Secretary
METASOURCE GROUP, INC.
Parent
/s/ Joe Cheung
By: ------------------------------
Its President
/s/ Joe Cheung
By: ------------------------------
Its Secretary
24
EXHIBIT A
SHAREHOLDERS:
------------
1. Norma LaRosa
61 Presidio Avenue
Corte Madera, California 94925
25
EXHIBIT B
EXCHANGE FORMULA
----------------
Each Shareholder will be issued that number of Exchange Shares equal to:
The Company's net income for the calendar year ended December 31, 2001 (the
"2001 Income"), multiplied by five (5), divided by the average between the high,
low and closing price of shares of MSG common stock on the second day following
the filing of the Certificate of Merger effectuating the Merger unless that day
falls on a Friday then use the following Tuesday (the "Average Price"). Under no
circumstances shall the Average Price be deemed to exceed $5.50 per share. As
used in this Exhibit B, "net income" shall be determined by Parent's auditor in
accordance with U.S. GAAP applying the accounting policies and procedures
historically used by the Company.
Exchange Rate Adjustments. On or before August 30, 2003, the shares issued to
- -------------------------
the Shareholders will be adjusted according to the following:
As soon as practicable after June 30, 2003, the Company will determine its net
income for the period from July 1, 2002 to June 30, 2003 (the " 2003 Income").
If the average of the 2003 Income and the 2001 Income exceeds, by more than 10%,
the 2001 Income, then the Shareholders will be issued additional MSG shares
determined by multiplying (A) the difference between (i) the average of the 2003
Income and the 2001 Income and (ii) the 2001 Income by (B) 5 and dividing that
product by the Average Price.
If the average of the Company's 2003 Income and the 2001 Income is more than 10%
less than the 2001 Income, then the Shareholders shall return to MSG that number
of MSG shares determined by multiplying (A) the difference between (i) the 2001
Income and (ii) the average of the 2001 Income and the 2003 Income by (B) 5 and
dividing that product by the Average Price.
In the event that the average of 2003 Income and the 2001 Income exceeds the
2001 Income by more than 10%, MSG shall issue the additional shares of MSG
determined in accordance with this Exhibit B within 5 business days of the
determination of the 2003 Income but in no event later than August 30, 2003. In
the event that the 2001 Income exceeds the average of the 2001 Income and 2003
Income by more than 10%, the Escrow Agent will return to MSG from the Escrowed
Shares that number of shares of MSG determined in accordance with this Exhibit B
within 5 business days of the determination of the 2003 Income but in no event
later than August 30, 2003. In the event that the average of the 2003 Income and
2001 Income is within 10% of (either plus or minus) the 2001 Income, there shall
be no adjustment.
26
EXHIBIT C
MASSACHUSETTS ARTICLES OF MERGER/CONSOLIDATION
----------------------------------------------
EXHIBIT D
DELAWARE CERTIFICATE OF MERGER
------------------------------
EXHIBIT E
ESCROW AGREEMENT
----------------
EXHIBIT F
AGREEMENT AND PLAN OF MERGER FOR BUYER MERGER
---------------------------------------------
EXHIBIT G
LAROSA EMPLOYMENT AGREEMENT
---------------------------