Exhibit 10.1 Agreement and Plan of Merger
AGREEMENT AND PLAN OF MERGER
BETWEEN
NATIONAL BEAUTY CORP.
A NEVADA CORPORATION
AND
ZZYZX ZZAZX ZZOZX, INC.
A WYOMING CORPORATION
LIST OF SCHEDULES AND EXHIBITS
TO
AGREEMENT AND PLAN OF MERGER
SCHEDULES
Schedule 2.1 List of Zzyz Shareholders and Company Common Stock and
Company Preferred Stock to be Received
Schedule 4.1(b) Company Conflicts
Schedule 4.1(c) Company Capitalization
Schedule 4.1(g) Issuance of Company Securities
Schedule 4.1(i) Company Taxes
Schedule 4.1(l) Company Legal Proceedings
Schedule 4.1(m) Company Changes or Events
Schedule 4.2(i) Zzyz Legal Proceedings
Schedule 4.2(g) Zzyz Liabilities
EXHIBITS
Exhibit 2.1(c) Company Warrant
Exhibit 2.1(d) Certificate of Designation
Exhibit 2.2(a) Escrow Agreement
Exhibit 2.2(b) Conversion and Exercise Procedures
Exhibit 6.1(a) Company Certified Resolutions
Exhibit 6.1(b) Opinion of Weed & Co., LLP
Exhibit 6.1(c) Opinion of Hand & Hand re Rule 504
Exhibit 6.1(d) Company Instruction Letter to Transfer Agent
Exhibit 6.1(f) Company Officer's Certificate
Exhibit 6.2(a) Zzyz Certified Resolutions
Exhibit 6.2(b) Opinion of Hand & Hand, a professional corporation
Exhibit 6.2(d) Zzyz Officer's Certificate
AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 20, 2002, by
and between National Beauty Corp., a Nevada corporation (the "Company"), and
Zzyzx Zzazx Zzozx, Inc., a Wyoming corporation ("Zzyz").
RECITALS
WHEREAS, the Company and Zzyz desire to merge Zzyz with and into the
Company whereby the Company shall be the surviving entity pursuant to the terms
and conditions set forth herein and whereby the transaction shall qualify as a
tax free exchange pursuant to Section 351 of the Internal Revenue Code (the
"IRC");
WHEREAS, in furtherance of such combination, the Boards of Directors of the
Company and Zzyz have each approved the merger of Zzyz with and into the Company
(the "Merger"), upon the terms and subject to the conditions set forth herein,
in accordance with the applicable provisions of the Nevada General Corporation
Law (the "NGCL"), in the case of the Company, and the Wyoming Business
Corporation Act (the "WBCA"), in the case of Zzyz;
WHEREAS, the shareholders of Zzyz desire to exchange all of their shares of the
capital stock of Zzyz (the "Zzyz Capital Stock") for shares of the capital stock
of the Company (the "Company Capital Stock") in the respective amounts set forth
in Schedule 2.1 hereto as a tax free exchange pursuant to Section 351 of the
IRC;
WHEREAS, the holder of the warrant to purchase 3,000,000 shares of Zzyz's common
stock, no par value (the "Zzyz Common Stock"), at a purchase price of $.001 per
share (the "Zzyz Warrant") desires to exchange the Zzyz Warrant for a warrant to
purchase 3,000,000 shares of the Company's common stock, par value $.001 per
share (the "Company Common Stock"), at a purchase price of $.001 per share (the
"Company Warrant"); and
WHEREAS, all defined terms used herein not otherwise defined herein shall have
the meanings ascribed to such terms in the Convertible Preferred Stock Purchase
Agreement dated even date herewith between Zzyz and HEM Mutual Assurance LLC
(the "Purchase Agreement").
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to be legally bound hereby, the
parties agree as follows:
ARTICLE I
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined)
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and subject to and upon the terms and conditions of this Agreement, the NGCL and
the WBCA, Zzyz shall be merged with and into the Company pursuant to the Merger.
Following the Merger, the Company shall continue as the surviving corporation
(the "Surviving Corporation") and the separate corporate existence of Zzyz shall
cease. As part of the Merger and as more fully described in Section 2.1, (i)
the 1,000 issued and outstanding shares of the Zzyz Common Stock shall be
exchanged for 1,000 shares of the Company Common Stock, (ii) the 750 issued and
outstanding shares of Zzyz's Series A 2% Convertible Preferred Stock, no par
value (the "Zzyz Preferred Stock"), shall be exchanged for 750 shares of the
Company's Series B 2% Convertible Preferred Stock, par value $.001 per share
(the "Company Preferred Stock"), and (iii) the Zzyz Warrant shall be exchanged
for the Company Warrant.
1.2 Effective Time. The Merger shall be consummated as promptly
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as practicable after satisfaction of all conditions to the Merger set forth
herein, by filing with the Secretary of State of the States of Nevada and
Wyoming a certificate of merger (the "Certificate of Merger") or other
appropriate documents, executed in accordance with the relevant provisions of
the NGCL and WBCA. The Merger shall become effective upon the filing of the
Certificate of Merger. The time of such filing shall be referred to herein as
the "Effective Time."
1.3 Effects of the Merger. At the Effective Time, all the rights,
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privileges, immunities, powers and franchises of the Company and Zzyz and all
property, real, personal and mixed, and every other interest of, or belonging to
or due to each of the Company and Zzyz shall vest in the Surviving Corporation,
and all debts, liabilities, obligations and duties of the Company and Zzyz,
including, without limitation, the performance of all obligations and duties of
Zzyz pursuant to the Convertible Preferred Stock Purchase Agreement (the
"Purchase Agreement"), dated August 20, 2002, between Zzyz and the purchaser
listed therein, and the exhibits, schedules and all documents executed in
connection therewith, or any other Transaction Document (as defined in the
Purchase Agreement), shall become the debts, liabilities, obligations and duties
of the Surviving Corporation without further act or deed, all in the manner and
to the full extent provided by the NGCL and the WBCA. Whenever a conveyance,
assignment, transfer, deed or other instrument or act is necessary to vest any
property or right in the Surviving Corporation, the directors and officers of
the respective constituent corporations shall execute, acknowledge and deliver
such instruments and perform such acts, for which purpose the separate existence
of the constituent corporations and the authority of their respective directors
and officers shall continue, notwithstanding the Merger.
1.4 Certificate of Incorporation. The Certificate of
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Incorporation of the Company, as in effect immedi-ately prior to the Effective
Time, shall be the Certificate of Incorporation of the Surviving Corporation and
thereafter may be amended or repealed in accordance with its terms and
applicable law.
1.5 By-Laws. At the Effective Time and without any further action
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on the part of the Company and Zzyz, the By-laws of the Company shall be the
By-laws of the Surviving Cor-poration and thereafter may be amended or repealed
in accordance with their terms or the Certificate of Incorporation of the
Sur-viving Corporation and as provided by law.
1.6 Directors. The directors of the Company at the Effective Time
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shall be the directors of the Surviving Corpora-tion, until the earlier of their
resignation or removal or until their respective successors are duly elected and
qualified, as the case may be.
1.7 Officers. The officers of the Company at the Effective Time
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shall be the officers of the Surviving Corpora-tion, until the earlier of their
resignation or removal or until their respective successors are duly appointed
and qualified, as the case may be.
1.8 Tax-Free Reorganization. The parties intend that the Merger
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shall be treated as a tax-free exchange pursuant to Section 351 of the Internal
Revenue Code of 1986, as amended (the "Code"). No party shall take any action
or fail to take any action that would adversely affect the treatment of the
Merger as a tax-free exchange.
ARTICLE II
CONVERSION OF SHARES AND WARRANTS
2.1 Exchange and Cancellation of Zzyz Common Stock, Zzyz Preferred Stock and
Zzyz Warrant; Certificate of Designation of the Company Preferred Stock.
(a) All 1,000 issued and outstanding shares of the Zzyz Common
Stock (the "Zzyz Common Stock Shares") outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, be exchanged, on a one for one
basis, in accordance with Schedule 2.1 hereof, for 1,000 duly issued, fully paid
and nonassessable, shares of the Company Common Stock (the Company Common Stock
Shares"), whereupon the Zzyz Common Stock Shares shall be cancelled.
(b) All 750 issued and outstanding shares of the Zzyz Preferred
stock (the "Zzyz Preferred Stock Shares") outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, be exchanged, on a one for one
basis, in accordance with Schedule 2.1 hereof, for 750 duly issued, fully paid
and nonassessable shares of the Company Preferred Stock (the "Company Preferred
Stock Shares"), whereupon the Zzyz Preferred Stock Shares shall be cancelled.
(c) the Zzyz Warrant outstanding immediately prior to the
Effective Time shall, by virtue of the Merger, be exchanged for the Company
Warrant annexed hereto and made a part hereof as EXHIBIT 2.1(C), whereupon the
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Zzyz Warrant shall be cancelled.
(d) At the Effective Time, the Company shall file with the
Secretary of State of the State of Nevada the Certificate of Designation of the
Rights and Preferences of the Series B 2% Convertible Preferred Stock of the
Company, annexed hereto and made a part hereof as EXHIBIT 2.1(D) (the
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"Certificate of Designation").
2.2 Escrow Materials. (a) At the Closing, the Company shall
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deposit into escrow with Kaplan Gottbetter & Levenson, LLP, as escrow agent (the
"Escrow Agent") the following, which are hereinafter collectively referred to as
the "Escrow Materials," (i) the Company Common Stock Shares, (ii) the Company
Preferred Stock Shares, (iii) the Company Warrant, (iv) certificates
representing 30,000,000 shares of duly issued Company Common Stock, without
restriction and freely tradable upon resale pursuant to Rule 504 of Regulation D
of the Securities Act (the "Company Escrow Shares"), in share denominations of
ten thousand (10,000) shares, registered in the name of the Purchaser and/or its
assigns; 3,000,000 of which shares shall be held in escrow with respect to the
Company Warrant (the "Company Warrant Shares") and the remainder for shares of
the Company Common Stock, into which the Company Preferred Stock Shares are
convertible in accordance with the terms of the Certificate of Designation (the
"Company Underlying Shares"), and (v) a power of attorney with respect to the
Company Common Stock Shares, the Company Preferred Stock Shares, the Company
Warrant and the Company Escrow Shares, in the form annexed to the Escrow
Agreement (as defined below) as Appendix I. The Escrow Materials shall be held
in escrow in accordance with the escrow agreement annexed hereto and made a part
hereof as EXHIBIT 2.2(A) (the "Escrow Agreement"). The Escrow Materials shall
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be released from escrow only in accordance with this Section 2.2 and the Escrow
Agreement. At the Closing, the Company shall also deliver a certified copy of
the Certificate of Designation to the Escrow Agent.
(b) Upon conversion of the Company Preferred Stock Shares by the
holder or holders thereof, in accordance with the terms of the Certificate of
Designation, and the exercise of the Company Warrant by the holder or holders
thereof, in accordance with the terms of the Company Warrant, the Escrow Agent
shall release the Company Underlying Shares and the Company Warrant Shares to
such holder or holders in accordance with the Conversion and Exercise Procedures
annexed hereto as EXHIBIT 2.2(B).
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2.3 Rule 504 Securities. The Zzyz Preferred Stock Shares and the
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Zzyz Warrant (which includes the Escrow Shares for the Underlying Shares and the
Warrant Shares) were sold in accordance with Rule 504 of Regulation D of the
Securities Act of 1933, as amended (the "Securities Act"), and Article 51 and
related regulations of the Colorado Securities Act, to an accredited investor
residing in the State of Colorado. Accordingly, pursuant to Rule 504, the
applicable Colorado statutes, and Section 3(a)(9) of the Securities Act, the
Zzyz Preferred Stock Shares and the Zzyz Warrant (which include the Escrow
Shares for the Underlying Shares and the Warrant Shares) and subsequently the
Company Preferred Stock Shares and the Company Warrant (which includes the
Company Escrow Shares for the Company Underlying Shares and the Company Warrant
Shares) shall be issued without restriction and shall be freely tradable upon
resale in accordance with Rule 504.
ARTICLE III
CLOSING
Subject to satisfaction of the conditions to closing set forth in this
Agreement and unless this Agreement is otherwise terminated in accordance with
the provisions contained herein, the closing of the Merger and the Contemplated
Transactions (the "Closing") shall take place at the offices of Kaplan
Gottbetter & Levenson, LLP, 630 Third Avenue, New York, New York as promptly as
practicable after satisfaction of the conditions set forth in this Agreement,
which in no event shall be more than five business days after the Effective Date
(the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of the Company. The Company
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represents and warrants to Zzyz as follows:
(a) Organization and Good Standing. The Company is a corporation
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duly organized, validly existing and in good standing under the laws of the
State of Nevada, with full corporate power and authority to conduct its business
as it is now being conducted, to own or use the properties and assets that it
owns or uses, and to perform all its obligations under the Applicable Contracts.
The Company is duly qualified to do business as a foreign corporation and is in
good standing under the laws of each state or other jurisdiction in which either
the ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) Authority; No Conflict.
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i. This Agreement and any agreement executed in connection
herewith constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their respective terms. The
Company has the absolute and unrestricted right, power, authority and capacity
to execute and deliver this Agreement and any agreement executed in connection
herewith and to perform its obligations hereunder and thereunder.
ii. Except as set forth in Schedule 4.1(b), neither the execution
and delivery of this Agreement nor the consummation or performance of any of the
Contemplated Transactions will, directly or indirectly (with or without notice
or lapse of time):
a. contravene, conflict with or result in a violation of
(x) any provision of the Organizational Documents of the Company or (y) any
resolution adopted by the board of directors or the shareholders of the Company;
b. contravene, conflict with or result in a violation
of, or give any governmental body or other Person the right to challenge any of
the Contemplated Transactions or to exercise any remedy or obtain any relief
under, any Legal Requirement or any Order to which the Company or any of the
assets owned or used by the Company may be subject;
c. contravene, conflict with or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or performance of, or
to cancel, terminate or modify, any Applicable Contract;
d. result in the imposition or creation of any material
encumbrance upon or with respect to any of the assets owned or used by the
Company;
e. cause the Company to become subject to, or to become
liable for the payment of, any tax; or
f. cause any of the assets owned by the Company to be
reassessed or revalued by any taxing authority or other governmental body,
except in connection with the transfer of real estate pursuant to this Agreement
or the Contemplated Transactions.
(c) Capitalization. The entire authorized Company Capital Stock
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consists of 100,000,000 shares of Company Common Stock, of which 4,400,062
shares are issued and outstanding and 50,000,000 shares of Company Preferred
Stock, of which 750,000 shares of Series A Voting Convertible Preferred Stock
are issued and outstanding. There are no other outstanding equity securities of
the Company. No legend or other reference to any purported encumbrance appears
upon any certificate representing the Company Capital Stock other than a
standard Securities Act legend. All of the issued and outstanding shares of the
Company Capital Stock have been duly authorized and validly issued and are fully
paid and non-assessable. Except for this Agreement and as disclosed in Schedule
4.1(c), there are no outstanding options, warrants, script, rights to subscribe
to, registration rights, calls or commitments of any character whatsoever
relating to, or, securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Company Common Stock, or contracts, commitments, understandings,
or arrangements by which the Company or any Subsidiary is or may become bound to
issue additional shares of the Company Common Stock, or securities or rights
convertible or exchangeable into shares of the Company Common Stock. None of
the outstanding Company Capital Stock were issued in violation of the Securities
Act or any other legal requirement.
(d) Financial Statements. The Company has delivered to Zzyz a
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copy of its Form 10-KSB Annual Report for the fiscal year ended December 31,
2001 filed with the SEC (the "Company's Form 10-KSB Report"). The financial
statements contained in the Company Form 10-KSB Report are in all material
respects in accordance with the books and records of the Company and have been
prepared in accordance with GAAP applied on a consistent basis throughout the
periods indicated, all as more particularly set forth in the notes to such
statements. The consolidated balance sheets (the "Company Balance Sheets")
present fairly as of their dates the consolidated financial condition of the
Company and its subsidiaries. Except as and to the extent reflected or reserved
against in the Company Balance Sheets (including the notes thereto), the Company
did not have, as of the date of any such Company Balance Sheet, any material
liabilities or obligations (absolute or contingent) of a nature customarily
reflected in a balance sheet or the notes thereto. The Consolidated Statements
of Operations, Consolidated Statements of Shareholders' Equity and changes in
Consolidated Statements of Cash Flows present fairly the results of operations
and changes in financial position of the Company and its subsidiaries for the
periods indicated.
(e) SEC Filings. The Company has delivered to Zzyz a copy of the
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Company's Form 10-KSB Report for the year ended December 31, 2001. Since
December 31, 2001, the Company has timely filed all reports required to be filed
with the SEC under the rules and regulations of the SEC and all such reports
have complied in all material respects, as of their respective filing dates and
effective dates, as the case may be, with all the applicable requirements of the
Securities Exchange Act of 1934, as amended. As of the respective filing and
effective dates, none of such reports (including without limitation, the
Company's Form 10-KSB Report) contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(f) Absence of Material Adverse Change. Since the date of the
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Company Balance Sheets, there have been no events, changes or occurrences which
have had or are reasonably likely to have, individually or in the aggregate, a
material adverse effect on the Company's business or financial condition.
(g) Issuance of Company Securities. The Company Preferred Stock
--------------------------------
Shares, the Company Warrant, the Company Underlying Shares, the Company Warrant
Shares and the Company Escrow Shares, when issued in accordance with this
Agreement, shall be duly authorized, validly issued, fully-paid and
nonassessable. The Company has and at all times while the Company Preferred
Stock Shares and the Company Warrant are outstanding will continue to maintain
an adequate reserve of shares of the Company Common Stock to enable it to
perform its obligations under this Agreement, the Certificate of Designation and
the Company Warrant. Except as set forth in Schedule 4.1(g) hereto, there is no
equity or equity equivalent security outstanding that is substantially similar
to the Company Preferred Stock Shares, including any security having a floating
conversion price substantially similar to the Shares; provided, however, that
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nothing contained in this Section 4.1(g) shall be deemed to permit any equity or
-
equity equivalent security of the Company to provide for a floating conversion
price, other than any security issued or that may be issued to HEM Mutual
Assurance LLC or any of its Affiliates or assigns.
(h) Undisclosed Liabilities Neither the Company nor any of its
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subsidiaries has any obligations or liabilities (contingent or otherwise) except
obligations and liabilities (i) that are fully accrued or provided for in all
material respects in the Company Balance Sheets in accordance with GAAP, or
disclosed in the notes therein in accordance with GAAP or (ii) that were
incurred after the date of the Company Balance Sheets in the Ordinary Course of
Business (none of which results from, arises out of, relates to, is in the
nature of, or was caused by any breach of contract, breach of warranty, tort,
infringement, or violation of law) or that would not reasonably be expected to
have a material adverse effect on the business or financial condition of the
Company.
(i) Taxes.
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i. The Company has filed or caused to be filed on a timely
basis all tax returns that are or were required to be filed by it pursuant to
applicable Legal Requirements. The Company has paid, or made provision for the
payment of, all taxes that have or may have become due pursuant to those tax
returns or otherwise, or pursuant to any assessment received by the Company,
except such taxes, if any, as are listed in Schedule 4.1(i) and are being
contested in good faith as to which adequate reserves have been provided in the
Company Balance Sheets.
ii. All tax returns filed by the Company are true, correct
and complete in all material respects.
(j) Employee Benefits. The Company does not sponsor or otherwise
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maintain a "pension plan" within the meaning of Section 3(2) of ERISA or any
other retirement plan other than the Company Profit Sharing and 401(k) Plan and
Trust that is intended to qualify under Section 401 of the Code, nor do any
unfunded liabilities exist with respect to any employee benefit plan, past or
present. No employee benefit plan, any trust created thereunder or any trustee
or administrator thereof has engaged in a "prohibited transaction," as defined
in Section 4975 of the Code, which may have a material adverse effect on the
condition, financial or otherwise, of the Company.
(k) Governmental Authorizations. The Company has all permits that
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are or will be legally required to enable it to conduct its business in all
material respects as now conducted.
(l) Legal Proceedings; Orders.
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i. Except as set forth in Schedule 4.1(l), there is no
material pending Proceeding:
a. that has been commenced by or against the Company or
that otherwise relates to or may affect the business of, or any of the assets
owned or used by, the Company; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
ii. Except as set forth in Schedule 4.1(l):
a. there is no material Order to which the Company, or
any of the assets owned or used by the Company, is subject; and
b. no officer, director, agent, or employee of the
Company is subject to any material Order that prohibits such offer, director,
agent or employee from engaging in or continuing any conduct, activity or
practice relating to the business of the Company.
(m) Absence of Certain Changes and Events. Except as set forth in
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Schedule 4.1(m), since the date of the Company Balance Sheets, the Company has
conducted its business only in the Ordinary Course of Business, there has not
been any material adverse effect on the Company's business or operations, and
there has not been any:
i. change in the authorized or issued Company Capital Stock
of the Company; grant of any stock option or right to purchase shares of capital
stock of the Company; issuance of any security convertible into such capital
stock; grant of any registration rights; purchase, redemption, retirement, or
other acquisition or payment of any dividend or other distribution or payment in
respect of shares of capital stock;
ii. amendment to the Organizational Documents of the
Company;
iii. damage to or destruction or loss of any asset or
property of the Company, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of the Company, taken as a whole;
iv. receipt of notice that any of its substantial customers
has terminated or intends to terminate its relationship, which termination would
have a material adverse effect on its financial condition, results or
operations, business assets or properties;
v. entry into any transaction other than in the Ordinary
Course of Business;
vi. entry into, termination of, or receipt of written notice
of termination of any material (i) license, distributorship, dealer, sales
representative, joint venture, credit, or similar agreement, or (ii) contract or
transaction;
vii. sale (other than sales of inventory in the Ordinary
Course of Business), lease, or other disposition of any asset or property of the
Company or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of the Company;
viii. cancellation or waiver of any claims or rights with a
value to the Company in excess of $10,000;
ix. material change in the accounting methods used by the
Company; or
x. agreement, whether oral or written, by the Company to do
any of the foregoing.
(n) No Defaults. The Company is, and at all times since the
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Company Balance Sheets date has been, in material compliance with all applicable
terms and requirements of each contract under which the Company has or had any
obligation or liability or by which the Company or any of the assets owned or
used by the Company is or was bound.
(o) Certain Payments. Since the date of the Company Balance
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Sheets, neither the Company nor any director, officer, agent or employee of the
Company has directly or indirectly (a) made any contribution, gift, bribe,
rebate, payoff, influence payment, kickback or other payment to any Person,
private or public, regardless of form, whether in money, property or services
(i) to obtain favorable treatment in securing business, (ii) to pay for
favorable treatment for business secured, (iii) to obtain special concessions or
for special concessions already obtained, for or in respect of the Company or
(iv) in violation of any Legal Requirement, or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
(p) Brokers or Finders. The Company has not incurred any
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obligation or liability, contingent or otherwise, for brokerage or finders' fees
or agents' commissions or other similar payment in connection with this
Agreement.
4.2 Representations and Warranties of Zzyz. Zzyz represents and
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warrants to the Company as follows:
(a) Organization and Good Standing. Zzyz is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
Wyoming with full power and authority to conduct its businesses as it is now
being conducted, to own or use the properties and assets that it owns or uses,
and to perform all of its obligations under this Agreement and the Applicable
Contracts. Zzyz was formed to engage in the business of ranching and boarding
horses, but to date has not engaged in any significant business operations.
(b) Authority; No Conflict.
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i. This Agreement constitutes the legal, valid and binding
obligation of Zzyz, enforceable against Zzyz in accordance with its terms. Upon
the execution and delivery by Zzyz of this Agreement, the Agreement will
constitute the legal, valid and binding obligation of Zzyz, enforceable against
Zzyz in accordance with its terms. Zzyz has the absolute and unrestricted
right, power and authority to execute and deliver this Agreement and to perform
its obligations hereunder.
ii. Neither the execution and delivery of this Agreement by
Zzyz nor the consummation or performance of any obligations contained in this
Agreement by Zzyz will give any Person the right to prevent, delay, or otherwise
interfere with this Agreement and any of the Contemplated Transactions.
iii. Zzyz is not required to obtain any consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions.
(c) Capitalization. The number of shares of capital stock that
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Zzyz is authorized to issue is unlimited and its issued and outstanding capital
stock consists of 1,000 shares of Common Stock and 750 shares of Preferred
Stock. With the exception of the Zzyz Common Stock Shares and the Zzyz Preferred
Stock Shares, there are no other outstanding equity securities of the Company.
No legend or other reference to any purported encumbrance appears upon any
certificate representing the Zzyz Common Stock Shares or the Zzyz Preferred
Stock Shares. The Zzyz Common Stock Shares and the Zzyz Preferred Stock Shares
have been duly authorized and validly issued and are fully paid and
non-assessable. Except as set forth in the Purchase Agreement and for the Zzyz
Warrant, there are no outstanding options, warrants, script, rights to subscribe
to, registration rights, calls or commitments of any character whatsoever
relating to, or, securities, rights or obligations convertible into or
exchangeable for, or giving any Person any right to subscribe for or acquire,
any shares of Zzyz Common Stock, or contracts, commitments, understandings, or
arrangements by which Zzyz is or may become bound to issue additional shares of
Zzyz Common Stock, or securities or rights convertible or exchangeable into
shares of Zzyz Common Stock. None of the outstanding Zzyz Common Stock Shares
or the Zzyz Preferred Stock Shares were issued in violation of the Securities
Act or any other legal requirement. Zzyz does not own, and has no contract to
acquire, any equity securities or other securities of any Person or any direct
or indirect equity or ownership interest in any other business.
(d) Financial Statements. Zzyz has delivered to the Company a
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balance sheet of Zzyz as at June 30, 2002 (the "Zzyz Balance Sheet"), and a
profit and loss statement for the six month period ended June 30, 2002. Such
financial statements fairly present the financial condition and the results of
operations of Zzyz as at the respective dates of and for the periods referred to
in such financial statements.
(e) Absence of Material Adverse Change. Since the date of the
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most recent Zzyz Balance Sheet provided under Section 4.2(d) hereof, there have
been no events, changes or occurrences which have had or are reasonably likely
to have, individually or in the aggregate, a material adverse effect on the
Company.
(f) Books and Records. The books of account, minute books, stock
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record books, and other records of Zzyz, all of which have been made available
to the Company, are complete and correct and have been maintained in accordance
with sound business practices, including the maintenance of an adequate system
of internal controls. The minute books of Zzyz contain accurate and complete
records of all meetings held of, and corporate action taken by, the
shareholders, the Board of Directors, and any committees of the Board of
Directors of Zzyz.
(g) No Undisclosed Liabilities. There are no material liabilities
--------------------------
of Zzyz other than:
i. Liabilities set forth on, reserved against or reflected in
the Zzyz Balance Sheet and notes thereto;
ii. Liabilities disclosed in this Agreement, the Exhibits
attached hereto, and in Schedule 4.2(g) or lists furnished pursuant hereto (and
for this purpose, the disclosure of facts, circumstances, situations and
conditions in the Schedules shall be deemed disclosure of liabilities which
arise from such facts, circumstances, situations and conditions regardless of
whether, when or in what form such liabilities may arise in the future); or
iii. Liabilities incurred in the Ordinary Course of Business
since the Zzyz Balance Sheet date, none of which had a material adverse effect
on the business, financial condition or results of operations of Zzyz, and none
of which is required to be recorded under GAAP in respect of any period prior to
the Zzyz Balance Sheet date, and none of which is in respect of a material claim
for damages, fines or other legal relief.
(h) Title to Properties; Encumbrances. Zzyz has good and
------------------------------------
marketable title to all the properties, interest in such properties and assets,
real and personal, reflected in the Zzyz Balance Sheet or acquired after the
date of such balance sheet (except properties, interests and assets sold or
otherwise disposed of since such date, in the Ordinary Course of Business), free
and clear of all mortgages, liens, pledges, charges or encumbrances except (i)
mortgages and other encumbrances referred to in the notes to such balance sheet,
(ii) liens for current taxes not yet due and payable and (iii) such
imperfections of title and easements as do not materially detract from or
interfere with the present use of the properties subject thereto or affected
thereby, or otherwise materially impair present business operations at such
properties.
(i) Legal Proceedings; Orders.
-------------------------
i. Except as set forth in Schedule 4.2(i), there is no
material pending Proceeding:
a. that has been commenced by or against Zzyz or that
otherwise relates to or may affect the business of, or any of the assets owned
or used by, Zzyz; or
b. that challenges, or that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with, any
Contemplated Transaction.
ii. Except as set forth in Schedule 4.2(i):
a. there is no material Order to which Zzyz, or any of
the assets owned or used by Zzyz, is subject; and
b. no officer, director, agent, or employee of Zzyz is
subject to any material Order that prohibits such offer, director, agent or
employee from engaging in or continuing any conduct, activity or practice
relating to the business of Zzyz.
(j) Brokers or Finders. Zzyz has incurred no liability,
--------------------
contingent or otherwise, for brokerage or finders' fees or agents' commissions
or other similar payment in connection with this Agreement.
ARTICLE V
COVENANTS
5.1 Covenants of the Company.
---------------------------
(a) Conduct of Business. Prior to and through the Closing Date,
---------------------
the Company shall:
i. conduct its business only in the Ordinary Course of
Business;
ii. use its commercially reasonable efforts to preserve
intact the current business organization of the Company, keep available the
services of the current officers, employees and agents of the Company, and
maintain the relations and good will with suppliers, customers, landlords,
creditors, employees, agents and others having business relationships with the
Company;
iii. not pay, incur or declare any dividends or distributions
with respect to its shareholders or amend its Certificate of Incorporation or
By-Laws, without the prior written consent of the Zzyz Preferred Stock
shareholder;
iv. not authorize, issue, sell, purchase or redeem any shares
of its capital stock or any options or other rights to acquire ownerships
interests without the prior written consent of the Zzyz Preferred Stock
shareholder;
v. not incur any indebtedness for money borrowed or issue and
debt securities, or incur or suffer to be incurred any liability or obligation
of any nature whatsoever, or cause or permit any lien, encumbrance or security
interest to be created or arise on or in respect of any of its properties or
assets;
vi. not make any investment of a capital nature either by
purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
vii. not do any other act which would cause representation or
warranty of the Company in this Agreement to be or become untrue in any material
respect or that is not in the ordinary course of business consistent with past
practice;
viii. report periodically to the Zzyz Preferred Stock
shareholder concerning the status of the business and operations of the Company;
and
ix. confer with the Zzyz Preferred Stock shareholder
concerning operational matters of a material nature.
(b) Proposals; Other Offers. Commencing on the date of execution
------------------------
of this Agreement through the Closing Date, the Company shall not, directly or
indirectly (whether through an employee, a representative, an agent or
otherwise) solicit or encourage any inquiries or proposals, engage in
negotiations for or consent to or enter into any agreement providing for the
acquisition of its business. The Company shall not, directly or indirectly
(whether through an employee, a representative, an agent or otherwise) disclose
any nonpublic information relating to the Company or afford access to any of the
books, records or other properties of the Company to any person or entity that
is considering, has considered or is making any such acquisition inquiry or
proposal relating to the Company's business.
(c) Further Assurances. Prior to the Closing Date, with the
-------------------
cooperation of Zzyz where appropriate, the Company shall use commercially
reasonable efforts to:
i. promptly comply with all filing requirements which
federal, state or local law may impose on the Company with respect to the
Contemplated Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing
and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by the Company in connection
with the Contemplated Transactions by this Agreement.
(d) Access to Additional Agreements and Information. Prior to the
-----------------------------------------------
Closing Date, the Company shall make available to Zzyz (as well as its
shareholders, counsel, accountants and other representatives) any and all
agreements, contracts, documents, other instruments and personnel material to
the Company's business, including without limitation, those contracts to which
the Company is a party and those by which its business or any of the Company's
assets are bound.
5.2 Covenants of Zzyz.
-------------------
(a) Third Party Consents. Zzyz shall use all reasonable efforts
----------------------
to obtain any consent, authorization or approval of, or exemption by, any
governmental authority or agency or other third party required to be obtained or
made by it in connection with this Agreement or the consummation of the
Contemplated Transactions.
(b) Further Assurances. Prior to the Closing Date, with the
-------------------
cooperation of the Company where appropriate, Zzyz shall:
i. promptly comply with all filing requirements which
federal, state or local law may impose on Zzyz with respect to the Contemplated
Transactions by this Agreement; and
ii. take all actions necessary to be taken, make any filing
and obtain any consent, authorization or approval of or exemption by any
governmental authority, regulatory agency or any other third party (including
without limitation, any landlord or lessor of the Company and any party to whom
notification is required to be delivered or from whom any form of consent is
required) which is required to be filed or obtained by Zzyz in connection with
the Contemplated Transactions by this Agreement.
(c) Actions by Zzyz. Zzyz shall take no action or enter into any
----------------
agreements or arrangements except as may be required by this Agreement.
(d) No Change in Capital Stock. Prior to the Effective Time, no
----------------------------
change will be made in the authorized, issued or outstanding capital stock of
Zzyz, and no subscriptions, options, rights, warrants, calls, commitments or
agreements relating to the authorized, issued or outstanding capital stock of
Zzyz will be entered into, issued, granted or created, except in the Ordinary
Course of Business or with the prior written approval of the Company.
5.3 Governmental Filings and Consents. The Company and Zzyz shall
---------------------------------
cooperate with one another in filing any necessary applications, reports or
other documents with any federal or state agencies, authorities or bodies having
jurisdiction with respect to the business of the Company or the by this
Agreement and in seeking any necessary approval, consultation or prompt
favorable action of, with or by any of such agencies, authorities or bodies.
5.4 Publicity. Any public announcement or press release relating
---------
to this Agreement or the Contemplated Transactions must be approved by the Zzyz
Preferred Stock shareholder, in writing before being made or released. The
Company shall have the right to issue a press release without the Zzyz Preferred
Stock shareholder's written approval if in the opinion of the Company's counsel
such a release is necessary to comply with SEC Rules and Regulations provided
--------
that, the Zzyz Preferred Stock shareholder receives a copy of such prepared
--
press release for purposes of review at least 24 hours before it is issued.
--
This 24 hour period may be shortened if in the opinion of the Company's counsel
-
it is required by law, provided that, the Zzyz Preferred Stock shareholder
-------- ----
receives a copy of such release as long as reasonably practical before it is
issued.
5.5 Tax Returns. The current officers of the Company shall have
------------
the right to prepare any tax returns of the Company with respect to any period
that ends on or before the Closing Date, which tax returns shall be prepared in
a manner consistent with prior tax returns. Such tax returns shall be timely
filed by the Company. Zzyz and the Company shall cooperate with said officers
in the preparation of such tax returns. The Company may not amend any Company
tax return relating to a period through or including the Closing Date without
the prior written consent of the Zzyz Preferred Stock shareholder immediately
prior to the Closing Date.
ARTICLE VI
CONDITIONS
6.1 Conditions to Obligations of Zzyz. The obligation of Zzyz to
----------------------------------
consummate the Contemplated Transactions is subject to the fulfillment of each
of the following conditions:
(a) Copies of Resolutions. At the Closing, the Company shall have
---------------------
furnished Zzyz with a certificate of its President, in the form of EXHIBIT
-------
6.1(A) annexed hereto, certifying that attached thereto are copies of
-
resolutions duly adopted by the board of directors of the Company authorizing
-
the execution, delivery and performance of this Agreement and all other
necessary or proper corporate action to enable the Company to comply with the
terms of this Agreement.
(b) Opinion of Company's Counsel. The Company shall have
-------------------------------
furnished to Zzyz, at the Closing, with an opinion of Weed & Co., LLP, counsel
to the Company, dated as of the Closing Date, substantially in the form of
EXHIBIT 6.1(B) annexed hereto.
----------
(c) Opinion of Company's Counsel. The Company shall have
-------------------------------
furnished to Zzyz, at the Closing, with an opinion of Hand & Hand, a
professional corporation, counsel to the Company, dated as of the Closing Date,
substantially in the form of EXHIBIT 6.1(C) annexed hereto.
---------------
(d) Instruction Letter to Transfer Agent. The Company shall have
-------------------------------------
furnished to Zzyz, at the Closing, with a letter from the Company to its
transfer agent, to accept the legal opinion set forth in Section 6.1(c), dated
as of the Closing Date, substantially in the form of EXHIBIT 6.1(D) annexed
--------------
hereto.
(e) Accuracy of Representations and Warranties; Performance of
--------------------------------------------------------------
Covenants. Each of the representations and warranties of the Company set forth
------
in this Agreement was true, correct and complete in all material respects when
made and shall also be true, correct and complete in all material respects at
and as of the Closing Date, with the same force and effect as if made at and as
of the Closing Date. The Company shall have performed and complied in all
material respects with all agreements and covenants required by this Agreement
to be performed by the Company at or prior to the Closing Date.
(f) Delivery of Certificate. The Company shall have delivered to
------------------------
Zzyz a certificate, in the form of EXHIBIT 6.1(F) annexed hereto, dated the
--------------
Closing Date, and signed by an executive officer of the Company affirming that
the representations and warranties as set forth in Section 4.1 were and are
true, correct and complete as required by Section 6.1(e).
(g) Consents and Waivers. At the Closing, any and all necessary
----------------------
consents, authorizations, orders or approvals shall have been obtained, except
as the same shall have been waived by the Zzyz Preferred Stock shareholder.
(h) Litigation. On the Closing Date, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to the Company issued by a court or governmental agency
(or other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making consummation thereof unduly burdensome to Zzyz. On the Closing Date and
immediately prior to consummation of the Contemplated Transactions, no
proceeding or lawsuit shall have been commenced, be pending or have been
threatened by any governmental or regulatory agency or authority or any other
Person with respect to the Contemplated Transactions.
(i) Delivery of Documents and Other Information. Prior to the
-----------------------------------------------
Closing Date, the Company shall have made available or delivered to Zzyz all of
the agreements, contracts, documents and other instruments required to be
delivered pursuant to the provisions of this Agreement.
6.2 Conditions to Obligations of the Company. The obligations of
-----------------------------------------
the Company to consummate the Contemplated Transactions are subject to the
fulfillment of each of the following conditions:
(a) Copies of Resolutions. At the Closing, Zzyz shall have
-----------------------
furnished the Company with a certificate of its President, in the form of
EXHIBIT 6.2(A) annexed hereto, certifying that attached thereto are copies of
---------
resolutions duly adopted by the board of directors of Zzyz authorizing the
execution, delivery and performance of the terms of this Agreement and all other
necessary or proper corporate action to enable Zzyz to comply with the terms of
this Agreement.
(b) Opinion of Zzyz's Counsel. Zzyz shall have furnished the
----------------------------
Company at the Closing, with an opinion of Hand & Hand, a professional
corporation, counsel to Zzyz, dated as of the Closing Date, substantially in the
form of EXHIBIT 6.2(B) annexed hereto.
---------------
(c) Accuracy of Representations and Warranties; Performance of
--------------------------------------------------------------
Covenants. Each of the representations and warranties of Zzyz was true, correct
------
and complete in all material respects when made and shall also be true, correct
and complete in all material respects at and as of the Closing Date, with the
same force and effect as if made at and as of the Closing Date. Zzyz shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed by Zzyz at or prior to the
Closing Date.
(d) Delivery of Certificate. Zzyz shall have delivered to the
-------------------------
Company a certificate, in the form of EXHIBIT 6.2(D) annexed hereto, dated the
--------------
Closing Date and signed by an executive officer of Zzyz, affirming that the
representations and warranties of Zzyz as set forth in Section 4.2 were and are
true, correct and complete as required by Section 6.2(c).
(e) Consents and Waivers. On or prior to the Closing Date, any
----------------------
and all necessary consents, authorizations, orders or approvals shall have been
obtained, except as the same shall have been waived by the Company.
(f) Litigation. On the Closing Date, there shall be no effective
----------
injunction, writ or preliminary restraining order or any order of any kind
whatsoever with respect to Zzyz issued by a court or governmental agency (or
other governmental or regulatory authority) of competent jurisdiction
restraining or prohibiting the consummation of the Contemplated Transactions or
making the consummation thereof unduly burdensome to the Company. On the
Closing Date, no proceeding or lawsuit shall have been commenced, threatened or
be pending or by any governmental or regulatory agency or authority or any other
person with respect to the Contemplated Transactions.
(g) Delivery of Documents and Other Information. Prior to the
-----------------------------------------------
Closing Date, Zzyz shall have made available or delivered to the Company all of
the agreements, contracts, documents and other instruments required to be
delivered pursuant to the provisions of this Agreement.
ARTICLE VII
TERMINATION
7.1 Termination by Mutual Agreement. This Agreement may be
----------------------------------
terminated at any time by mutual consent of the parties hereto, provided that
such consent to terminate is manifested in writing and is signed by each of the
parties hereto.
7.2 Termination for Failure to Close. This Agreement shall be
------------------------------------
automatically terminated if the Closing shall not have occurred by September 4,
2002.
7.3 Termination by Operation of Law. This Agreement may be
-----------------------------------
terminated by any party hereto if there shall be any statute, rule or regulation
that renders consummation of the Contemplated Transactions illegal or otherwise
prohibited, or a court of competent jurisdiction or any government (or
governmental authority) shall have issued an order, decree or ruling, or has
taken any other action restraining, enjoining or otherwise prohibiting the
consummation of such transactions and such order, decree, ruling or other action
shall have become final and nonappealable.
7.4 Termination for Failure to Perform Covenants or Conditions.
-------------------------------------------------------------
This Agreement may be terminated prior to the Closing Date:
(a) by Zzyz if: (i) any of the representations and warranties
made in this Agreement by the Company shall not be materially true and correct,
when made or at any time prior to consummation of the Contemplated Transactions
as if made at and as of such time; (ii) any of the conditions set forth in
Section 6.1 hereof have not been fulfilled by the Closing Date; (iii) the
Company shall have failed to observe or perform any of its material obligations
under this Agreement; or (iv) as otherwise set forth herein; or
(b) by the Company if: (i) any of the representations and
warranties of Zzyz shall not be materially true and correct when made or at any
time prior to consummation of the Contemplated Transactions as if made at and as
of such time; (ii) any of the conditions set forth in Section 6.2 hereof have
not been fulfilled by the Closing Date; (iii) Zzyz shall have failed to observe
or perform any of their material respective obligations under this Agreement; or
(iv) as otherwise set forth herein.
7.5 Effect of Termination or Default; Remedies. In the event of
--------------------------------------------
termination of this Agreement as set forth above, this Agreement shall forthwith
become void and there shall be no liability on the part of any party hereto,
provided that such party is a Non-Defaulting Party (as defined below). The
foregoing shall not relieve any party from liability for damages actually
incurred as a result of such party's breach of any term or provision of this
Agreement.
7.6 Remedies; Specific Performance. In the event that any party
--------------------------------
shall fail or refuse to consummate the Contemplated Transactions or if any
default under or beach of any representation, warranty, covenant or condition of
this Agreement on the part of any party (the "Defaulting Party") shall have
occurred that results in the failure to consummate the Contemplated
Transactions, then in addition to the other remedies provided herein, the
non-defaulting party (the "Non-Defaulting Party") shall be entitled to seek and
obtain money damages from the Defaulting Party, or may seek to obtain an order
of specific performance thereof against the Defaulting Party from a court of
competent jurisdiction, provided that the Non-Defaulting Party seeking such
protection must file its request with such court within forty-five (45) days
after it becomes aware of the Defaulting Party's failure, refusal, default or
breach. In addition, the Non-Defaulting Party shall be entitled to obtain from
the Defaulting Party court costs and reasonable attorneys' fees incurred in
connection with or in pursuit of enforcing the rights and remedies provided
hereunder.
ARTICLE VIII
SURVIVAL; INDEMNIFICATION
8.1 Survival of Representations and Warranties of the Company.
-------------------------------------------------------------
All representations and warranties of the Company shall survive the execution
and delivery of this Agreement and the Closing hereunder and shall thereafter
continue in full force and effect until the second anniversary of the Closing
Date and shall thereafter terminate except to the extent that notice of the
Company's liability in respect of any inaccuracy in or breach of any
representation or warranty shall have been given on or prior to such second
anniversary.
8.2 Survival of Representations and Warranties of Zzyz. All
--------------------------------------------------------
representations and warranties of Zzyz shall terminate upon the Closing.
8.3 Obligation of the Company to Indemnify. The Company agrees to
--------------------------------------
indemnify, defend and hold harmless Zzyz (and its directors, officers,
employees, affiliates, shareholders, agents, attorneys, successors and assigns)
from and against all losses, liabilities, damages, deficiencies, costs or
expenses (including interest, penalties and reasonable attorneys' and
consultants' fees and disbursements) (collectively, "Losses") based upon,
arising out of or otherwise in respect of any (i) inaccuracy in any
representation or warranty of the Company contained in this Agreement or in the
Schedules and Exhibits hereto or (ii) breach of any covenant or agreement
contained in this Agreement or the Contemplated Transactions.
8.4 Obligation of and Zzyz to Indemnify. Zzyz agrees to
----------------------------------------
indemnify, defend and hold harmless the Company (and its directors, officers,
employees, affiliates, shareholders, agents, attorneys, successors and assigns)
from and against any Losses based upon, arising out of or otherwise in respect
of any (i) inaccuracy in any representation or warranty of Zzyz contained in
this Agreement or (ii) breach of any covenant or agreement contained in this
Agreement or the Contemplated Transactions.
8.5 Notice and Opportunity to Defend. (a) Promptly after receipt
--------------------------------
by any Person entitled to indemnity under this Agreement (an "Indemnitee") of
notice of any demand, claim or circumstances which, with the lapse of time,
would or might give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation (an "Asserted
Liability") that may result in a Loss, the Indemnitee shall give notice thereof
(the "Claims Notice") to any other party (or parties) who is or may be obligated
to provide indemnification pursuant to Section 8.3 or 8.4 (the "Indemnifying
Party"). The Claims Notice shall describe the Asserted Liability in reasonable
detail and shall indicate the amount (estimated, if necessary and to the extent
feasible) of the Loss that has been or may be suffered by the Indemnitee.
(b) The Indemnifying Party may elect to compromise or defend, at
its own expense and by its own counsel, any Asserted Liability. If the
Indemnifying Party elects to compromise or defend such Asserted Liability, it
shall within 30 days after the date the Claims Notice is given (or sooner, if
the nature of the Asserted Liability so requires) notify the Indemnitee of its
intent to do so, and the Indemnitee shall cooperate, at the expense of the
Indemnifying Party, in the compromise of, or defense against, such Asserted
Liability. If the Indemnifying Party elects not to compromise or defend the
Asserted Liability, fails to notify the Indemnitee of its election as herein
provided or contests its obligation to indemnify under this Agreement, the
Indemnitee may pay, compromise or defend such Asserted Liability and all
reasonable expenses incurred by the Indemnitee in defending or compromising such
Asserted Liability, all amounts required to be paid in connection with any such
Asserted Liability pursuant to the determination of any court, governmental or
regulatory body or arbitrator, and amounts required to be paid in connection
with any compromise or settlement consented to by the Indemnitee, shall be borne
by the Indemnifying Party. Except as otherwise provided in the immediately
preceding sentence, neither the Indemnifying Party nor the Indemnitee may settle
or compromise any claim over the objection of the other, provided, however, that
consent to settlement or compromise shall not be unreasonably withheld. In any
event, the Indemnitee and the Indemnifying Party may participate, at their own
expense, in the defense of such Asserted Liability. If the Indemnifying Party
chooses to defend any claim, the Indemnitee shall make available to the
Indemnifying Party any books, records or other documents within its control that
are necessary or appropriate for such defense.
ARTICLE IX
DEFINITIONS
The following terms, which are capitalized in this Agreement, shall have
the meanings set forth below for the purpose of this Agreement.
"Applicable Contract" means any Contract (a) under which the Company has or
-------------------
may acquire any rights, (b) under which the Company has or may become subject to
any obligation or liability or (c) by which the Company or any of the assets
owned or used by it is or may become bound.
"Contemplated Transactions" means all of the Contemplated Transactions by this
--------------------------
Agreement, including:
(1) the Merger; and
(2) the performance by the parties of their respective covenants and
obligations under this Agreement.
"ERISA" means the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to such law or any
successor law.
"GAAP" means generally accepted accounting principles in the United States,
applied on a consistent basis.
"Knowledge" means actual awareness by a Person of a fact or other matter after
all due inquiry; references to "Company's Knowledge" shall be deemed to include
the actual awareness after all due inquiry of each of the directors, executive
officers and principal shareholders of the Company.
"Legal Requirement" means any federal, state, local, municipal, foreign,
------------------
international, multinational or other administrative law, ordinance, principle
of common law, regulation, statute or treaty.
"Order" means any award, decision, injunction, judgment, order, ruling, subpoena
or verdict entered, issued, made or rendered by any court, administrative agency
or other governmental body or by any arbitrator.
"Ordinary Course of Business" means an action taken by a Person where:
------------------------------
(1) such action is consistent with the past practices of such Person and is
taken in the ordinary course of the normal day-to-day operations of such Person;
(2) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority); and
(3) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
"Organizational Documents" means the articles or certificate of incorporation
-------------------------
and the by-laws of a corporation and any amendment thereto.
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union or other entity
or governmental body.
"Proceeding" means any action, arbitration, audit, hearing, investigation,
litigation or suit (whether civil, criminal, administrative, investigative or
informal) commenced, brought, conducted or heard by or before, or otherwise
involving, any governmental body or arbitrator.
"SEC" means the U.S. Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
---------------
ARTICLE X
MISCELLANEOUS
10.1 Fees and Expenses. Except as otherwise provided in this
-------------------
Agreement, each party hereto will bear its own legal, accounting and other fees
and expenses incident to the Contemplated Transactions herein.
10.2 Modification, Amendments and Waiver. The parties hereto may
------------------------------------
amend, modify or otherwise waive any provision of this Agreement by mutual
consent, provided that such consent and any amendment, modification or waiver is
in writing and is signed by each of the parties hereto.
10.3 Assignment. Neither the Company nor Zzyz shall have the
----------
authority to assign its respective rights or obligations under this Agreement
without the prior written consent of the other party hereto.
10.4 Successors. This Agreement shall be binding upon and, to the
----------
extent permitted in this Agreement, shall inure to the benefit of the parties
and their respective successors and permitted assigns.
10.5 Entire Agreement. This Agreement and the exhibits, lists and
----------------
other documents referred to herein contain the entire agreement among the
parties hereto with respect to the Contemplated Transactions and supersede all
prior agreements with respect thereto, whether written or oral.
10.6 Governing Law. This Agreement shall be governed by and
--------------
construed in accordance with the laws of the State of New York, without giving
effect to principles of conflicts or choice of laws thereof.
10.7 Notices. Any notice, request, instruction or other document
-------
to be given hereunder by any party hereto shall be in writing and delivered
personally or sent by registered or certified mail (return receipt requested),
postage prepaid, or by recognized overnight carrier, addressed as follows:
If to Zzyz: Zzyzx Zzazx Zzozx, Inc.
24351 Pasto Road, Suite B
Dana Point, California 92629
Phone: (954) 733-5785
Attn: Jay Hand
Tel: (949) 489-2400
Fax: (949) 489-0034
If to the Company: National Beauty Corp.
4818 West Commercial Boulevard
Ft. Lauderdale, Florida 33319
Attn: Edward A. Roth, President
Tel: (954) 733-5785
Fax: (954) 345-3847
with copies to:
Weed & Co., L.L.P.
4695 MacArthur Court, Suite 1430
Newport Beach, California 92660
Attn.: Richard O. Weed, Esq.
Tel: (949) 475-9086
Fax: (949) 475-9087
Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, New York 10017
Attn.: Adam S. Gottbetter, Esq.
Tel: (212) 983-6900
Fax: (212) 983-9210
or to such other persons or addresses as may be designated in writing by the
party to receive such notice. If mailed as aforesaid, the day of mailing or
transmission shall be the date any such notice shall be deemed to have been
delivered.
10.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be an original, but all of which shall
constitute but one agreement.
10.9 Rights Cumulative. All rights, powers and privileges
------------------
conferred hereunder upon the parties, unless otherwise provided, shall be
cumulative and shall not be restricted to those given by law. Failure to
exercise any power given any party hereunder or to insist upon strict compliance
by any other party shall not constitute a waiver of any party's right to demand
exact compliance with any of the terms or provisions hereof.
10.10 Severability of Provisions. The provisions of this
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Agreement shall be considered severable in the event that any of such provisions
are held by a court of competent jurisdiction to be invalid, void or otherwise
unenforceable. Such invalid, void or otherwise unenforceable provisions shall
be automatically replaced by other provisions which are valid and enforceable
and which are as similar as possible in term and intent to those provisions
deemed to be invalid, void or otherwise unenforceable. Notwithstanding the
foregoing, the remaining provisions hereof shall remain enforceable to the
fullest extent permitted by law.
10.11 Headings. The headings set forth in the articles and
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sections of this Agreement and in the exhibits and the schedules to this
Agreement are inserted for convenience of reference only and shall not be deemed
to constitute a part hereof.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered on the date and year first above written.
NATIONAL BEAUTY CORP.
By: /s/ Edward A. Roth
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Edward A. Roth, President
ZZYZX ZZAZX ZZOZX, INC.
By: /s/ Jay Hand
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Jay Hand, President