Agreement and Plan of Merger - InternetStudios.com Inc. and OnlineTVSales.com Inc.
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of May 5, 2000, by and among InternetStudios.com, Inc., a
Nevada corporation (the "Parent"), OnlineTVSales.com, Inc., a California
corporation and wholly-owned subsidiary of Parent (the "Merger Sub"), TAMNW,
Inc., a California corporation (the "Company") and the shareholder of the
Company listed on the signature pages hereto (the "Shareholder").
RECITALS
WHEREAS, the Board of Directors of each of the Company, Parent and
the Merger Sub believe it is in the best interests of each company and their
respective shareholders that the Company and the Merger Sub combine into a
single company through the statutory merger of the Company with and into the
Merger Sub (the "Merger") and, in furtherance thereof, have approved the
Merger.
WHEREAS, pursuant to the Merger, among other things, the outstanding
shares of Common Stock of the Company ("Company Common Stock") shall be
converted into (a) 120,000 shares of Common Stock of the Parent ("Parent
Common Stock"), and (b) warrants (the "Warrants") to acquire up to an
additional 112,500 shares of Parent Common Stock (the "Warrant Shares").
WHEREAS, the Company, Parent, the Merger Sub and the Shareholder
desire to make certain representations and warranties and other agreements in
connection with the Merger.
WHEREAS, the parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 THE MERGER. At the Effective Time (as defined in Section 1.2)
and subject to and upon the terms and conditions of this Agreement, (a) the
Company shall be merged with and into the Merger Sub, (b) the separate
corporate existence of the Company shall cease, and (c) the Merger Sub shall
continue as the surviving corporation. The Merger Sub as the surviving
corporation after the Merger is hereinafter sometimes referred to as the
"Surviving Corporation."
1.2 EFFECTIVE TIME. As promptly as practicable after the
satisfaction or waiver of the conditions set forth in Article V, the parties
hereto shall cause the Merger to be consummated by filing an Agreement of
Merger with the Secretary of State of the State of California, in such form
as required by, and executed in accordance with the relevant provisions of,
California law (the time of such filing being the "Effective Time"). The
closing of the transactions contemplated
<PAGE>
hereby (the "Closing") shall take place at 10:00 a.m. at the offices of Loeb
& Loeb LLP, 1000 Wilshire Boulevard, Suite 1800, Los Angeles, California
90017-2475 on the date of the Effective Time (the "Closing Date"), but in no
event later than June 1, 2000.
1.3 EFFECT OF THE MERGER. From and after the Effective Time, the
effect of the Merger shall be as provided under California Law. Without
limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and the Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities and duties of the Company and the Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION; BYLAWS.
(a) Unless otherwise determined by Parent prior to the
Effective Time, at the Effective Time the Articles of Incorporation of the
Merger Sub, as in effect, immediately prior to the Effective Time, shall be
the Articles of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Articles of Incorporation.
(b) The Bylaws of the Merger Sub, as in effect immediately
prior to the Effective Time, shall be the Bylaws of the Surviving Corporation
until thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of the Merger Sub
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Articles of
Incorporation and Bylaws of the Surviving Corporation, and the officers of
the Merger Sub immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed and qualified.
1.6 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE COMPANY. At the
Effective Time, upon surrender of the certificates representing shares of
Company Common Stock in the manner provided in Section 1.9, the Parent will
issue and deliver an aggregate of 120,000 shares of the Parent Common Stock
and Warrants to acquire up to an additional 112,500 shares of Parent Common
Stock which shares of Parent Common Stock and Warrants shall be issued to the
Shareholder and to certain shareholders and employees of the Shareholder as
set forth on SCHEDULE 1.6 attached hereto. The Warrants will be substantially
in the form of EXHIBIT A.
1.7 EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE MERGER SUB.
Each share of common stock of the Merger Sub issued and outstanding
immediately prior to the Effective Time shall be converted into and exchanged
for one validly issued, fully paid and nonassessable share of common stock of
the Surviving Corporation. Each stock certificate of the Merger Sub
evidencing ownership of any such shares shall continue to evidence ownership
of such shares of capital stock of the Surviving Corporation.
1.8 CANCELLATION OF PARENT-OWNED AND COMPANY-OWNED STOCK. Each share
of Company Common Stock owned by the Merger Sub, Parent, the Company or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time shall be canceled and extinguished
without any conversion thereof.
2
<PAGE>
1.9 EXCHANGE OF CERTIFICATES.
(a) At the Closing, the Parent shall provide the
Shareholder with certificates representing the appropriate number of shares
of Parent Common Stock and the Warrants to be distributed by the Shareholder
to certain of its shareholders and employees as provided in SCHEDULE 1.6.
Upon surrender of the certificate which immediately prior to the Closing
represented shares of Company Common Stock (the "Certificate") by the
Shareholder to the Parent, the Certificates so surrendered shall forthwith be
canceled. Until so surrendered, each outstanding Certificate shall be deemed,
from and after the Effective Time, to represent solely the right to receive
upon such surrender that number of shares of Parent Common Stock and the
Warrants into which such shares of Company Common Stock shall have been
converted in accordance with this Agreement.
(b) Because the certificates for shares of Parent Common
Stock are to be issued in a name other than the name in which the Certificate
surrendered in exchange therefor are registered, it will be a condition of
the issuance thereof that the Certificate so surrendered shall be properly
endorsed and otherwise in proper form for transfer.
(c) If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such Certificate to be lost, stolen or destroyed satisfactory to the
Parent and complying with any other reasonable requirements imposed by the
Parent, the Parent will cause to be delivered in exchange for such lost,
stolen or destroyed Certificate the number of shares of Parent Common Stock
and the Warrants deliverable in respect thereof.
(d) No dividends or other distributions declared or made
after the Effective Time with respect to Parent Common Stock with a record
date after the Effective Time will be paid to the holder of any unsurrendered
Certificate with respect to the shares of Parent Common Stock represented
thereby until the holder of record of such Certificate shall surrender such
Certificate. Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the certificates
representing shares of Parent Common Stock issued in exchange therefor,
without interest, at the time of such surrender, the amount of dividends or
other distributions with a record date after the Effective Time theretofore
paid with respect to such shares of Parent Common Stock.
1.11 NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares
of Parent Common Stock and all Warrants issued upon surrender for exchange of
shares of Company Common Stock in accordance with the terms hereof (including
any cash paid in respect thereof) shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of Company Common Stock,
and there shall be no further registration of transfers on the records of the
Surviving Corporation of shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged as provided in this Article I.
3
<PAGE>
1.12 TAX CONSEQUENCES. It is intended by the parties hereto that the
Merger shall constitute a reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Parent and the Merger
Sub, subject to the exceptions specifically disclosed in the schedules
(anything disclosed in one schedule shall be deemed to be disclosed in all
other relevant schedules) supplied by the Company to the Parent, as follows:
2.1 ORGANIZATION OF THE COMPANY. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State
of California and has the requisite corporate powers and all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted and as proposed to be conducted. The Company is
duly qualified to do business as a foreign corporation and is in good
standing in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities make such qualification
necessary, except for those jurisdictions where failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect
on the Company. ("Material Adverse Effect" shall mean, with respect to the
Company and the Shareholder on the one hand and the Parent and the Merger Sub
on the other hand, the result of one or more events, changes or effects
which, individually or in the aggregate, would have a material adverse effect
or impact on the business, assets, results of operations, intellectual
property rights, prospects or financial condition of such party and its
subsidiaries, taken as a whole, or is reasonably likely to delay or prevent
the consummation of the transactions contemplated hereby). Copies of the
Articles of Incorporation and Bylaws of the Company have heretofore been
furnished to the Parent and such documents are true and correct copies
thereof and include all amendments thereto.
2.2 AUTHORITY.
(a) The execution, delivery and performance of this
Agreement and the consummation by the Company of the transactions
contemplated hereby are within the Company's corporate powers and have been
duly authorized by all necessary corporate action of the Company. This
Agreement constitutes the valid and binding obligation of the Company
enforceable in accordance with its terms, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights and by general principles of equity.
(b) Except for the filing of the Agreement of Merger with
the California Secretary of State and except as set forth in SCHEDULE 2.2(b),
(i) no action by or in respect of, or filing with, any governmental body,
agency, official authority; and (ii) no consent, approval, waiver or other
action by any Person under any contract, agreement, indenture, lease,
instrument or other document to which the Company is a party, is required or
necessary for the execution, delivery and performance of this Agreement by
the Company, the merger of the Company with
4
<PAGE>
and into the Merger Sub and the consummation of the other transactions
contemplated by this Agreement.
(c) The execution, delivery and performance by the Company
of this Agreement and the consummation of the transactions contemplated
hereby do not and will not (i) contravene or conflict with the Articles of
Incorporation or Bylaws of the Company; (ii) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company, the
failure to comply with which would have a Material Adverse Effect; (iii)
assuming the receipt of all required consents as set forth in SCHEDULE
2.2(b), constitute a default under or give rise to any right of termination,
cancellation or acceleration of any material right or obligation of the
Company or any material permit held by the Company; or (iv) assuming the
receipt of all required consents as set forth in SCHEDULE 2.2(b), result in
the creation or imposition of any Lien (as defined in Section 2.7) on any
asset of the Company.
2.3 COMPANY CAPITAL STRUCTURE. The authorized capital stock of the
Company consists of 100,000 shares of common stock, no par value, of which
1,000 shares are issued and outstanding. All outstanding shares of capital
stock of the Company have been duly authorized and validly issued and are
fully paid and are owned by the Shareholder as set forth in SCHEDULE 2.3.
Except as set forth in SCHEDULE 2.3, there are no outstanding (i) shares of
capital stock, other securities or phantom or other equity interests of the
Company; (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or other securities of the Company; or (iii) options
or other rights to acquire from the Company any capital stock, other
securities or phantom or other equity interests of the Company (the items in
clauses (i), (ii) and (iii) being referred to collectively as the "Company
Securities"). There are no outstanding obligations of the Company, actual or
contingent, to issue or deliver or to repurchase, redeem or otherwise acquire
any Company Securities.
2.4 FINANCIAL STATEMENTS. The balance sheet of the Company (the
"Company Balance Sheet") as of March 31, 2000 and the statements of income
for the period ended March 31, 2000 (collectively, the "Company Financial
Statements") prepared by the Company fairly present, as of such date, the
financial condition of the Company in all material respects. The Company
Financial Statements have been prepared in accordance with generally accepted
accounting principles ("GAAP").
2.5 COMPLIANCE. Except for such non-compliance as would not have a
Material Adverse Effect on the Company, the Company has complied, in all
material respects, with the terms and provisions of all agreements to which
it is a party and all laws, rules, regulations and orders to which it or its
assets are subject.
2.6 LITIGATION. The Company is not involved in any pending or, to
the knowledge of the Company, threatened litigation affecting the Company,
and there is no dispute, claim, arbitration, proceeding pending against or,
to the knowledge of the Company, threatened against the Company affecting any
of its properties or assets that might have, either in any case or in the
aggregate, a Material Adverse Effect on the Company or that might call into
question the validity of this Agreement, or any action taken or to be taken
pursuant hereto.
5
<PAGE>
2.7 TITLE OF PROPERTIES; ABSENCE OF LIENS. The Company has good and
marketable title to, or in the case of leased property has valid leasehold
interests in, all the properties and assets owned by it, free and clear of
all liens, mortgages, pledges, charges, security interests, restrictions or
encumbrances of any kind ("Liens") except for such Liens which do not
materially detract from the value of such property or assets as now used, or
materially interfere with any present or intended use of such property or
assets. The Company is not a party to or subject to any agreement, contract
or commitment that substantially limits the freedom of the Company to own,
operate, sell, transfer, pledge or otherwise dispose of or encumber any of
the properties or assets owned by it or that would so limit the freedom of
the Parent after the Closing Date.
2.8 SUBSIDIARIES. The Company does not have any subsidiary or hold
directly or indirectly any equity interest in any third party.
2.9 INTELLECTUAL PROPERTIES. The Company does not use any processes
or products and is not engaged in any activities which infringe any patents,
copyrights, trademarks, service marks, designs, trade or business names or
other registrable or unregistrable intellectual property rights of any third
party.
2.10 ABSENCE OF CHANGE. Since March 31, 2000, except as set forth on
SCHEDULE 2.10 attached hereto, the Company has conducted its business in the
ordinary course consistent with past practices and there has not been:
(a) any event, occurrence, development or state of
circumstances or facts which could reasonably be expected to result in a
Material Adverse Effect to the Company;
(b) any declaration, setting aside or payment of any
dividend or other distribution with respect to any Company Securities or any
repurchase, redemption or other acquisition by the Company of any outstanding
shares of capital stock or other securities of, or other ownership interests
in, the Company;
(c) any amendment of the rights, preferences or privileges
of any outstanding Company Securities;
(d) any incurrence, assumption or guarantee by the Company
of any indebtedness for borrowed money other than in the ordinary course of
business and in amounts and on terms consistent with past practices;
(e) any creation or assumption by the Company of any Lien
on any asset;
(f) any making of any loan, advance or capital
contributions to or investment in any individual, corporation, partnership,
association, trust or other entity or organization, including a government or
political subdivision or an agency or instrumentality thereof ("Person");
(g) any damage, destruction or other casualty loss (whether
or not covered by insurance) affecting the business or assets of the Company
which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect;
6
<PAGE>
(h) any transaction or commitment made, or any contract or
agreement entered into, by the Company relating to its assets or business
(including the acquisition or disposition of any assets) or any
relinquishment by the Company of any contractual or other right, in either
case, material to the Company, other than transactions and commitments in the
ordinary course of business consistent with past practices and those
contemplated by this Agreement;
(i) any material change in any method of accounting
practice by the Company; or
(j) any (i) grant of any severance or termination pay to
any director, officer or employee of the Company; (ii) entering into of any
employment, deferred compensation or other similar agreement (or any
amendment to any such existing agreement) with any director, officer or
employee of the Company; (iii) change in benefits payable under existing
severance or termination pay policies or employment agreements; or (iv)
change in compensation, bonus or other benefits payable to directors, officer
or employees of the Company, in each case other than in the ordinary course
of business consistent with past practice.
2.11 BENEFIT PLANS. The Company does not have any pension plan,
profit sharing plan, or stock-purchase plan for any of its employees.
2.12 MATERIAL CONTRACTS. Except for contracts, agreements, leases,
licenses, arrangements, commitments or undertakings set forth on SCHEDULE
2.12 attached hereto or any other schedule to this Agreement, the Company is
not a party to or subject to any contracts, agreements, leases, licenses,
arrangements, commitments or other undertakings which (i) provide for
payments in the aggregate of $10,000 or more or (ii) have a remaining term of
more than one year (collectively, the "Company Contracts"). The Company is
not in material default, and has not received notice in writing alleging that
it is in material default, under any Company Contract and, to the knowledge
of the Company, no other party to any Company Contract is in default
thereunder, nor to the knowledge of the Company, does there exist any
condition or event which, after notice or lapse of time or both, would
constitute a default by any party to any such Company Contract.
2.13 AFFILIATE TRANSACTIONS. Except as set forth on SCHEDULE 2.13
attached hereto, there are no contracts, agreements, arrangements or other
transactions between the Company and any officer, director or 5% shareholder,
any member of any such officer, director or 5% shareholder's family, or any
affiliate of any such officer, director or 5% shareholder.
2.14 NO UNDISCLOSED LIABILITIES. Except as set forth on SCHEDULE
2.14 attached hereto, to the knowledge of the Company there are no material
liabilities of the Company of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, including,
without limitation, any liability related to the Company's participation in
the MATPE trade show, and there is no existing condition, situation or set of
circumstances which could reasonably be expected to result in such a
liability, other than:
(a) liabilities disclosed or provided for in the Company
Balance Sheet; and
7
<PAGE>
(b) liabilities incurred in the ordinary course of business
consistent with past practice since the date of the Company Balance Sheet,
which in the aggregate are not material to the Company, taken as a whole.
2.15 TAX AND OTHER RETURNS AND REPORTS. All tax returns, reports,
declarations of estimated tax and forms required to be filed on or before the
Closing Date by or on behalf of the Company with respect to any income,
properties or operations of the Company with any taxing authority have been
filed through the date hereof, or will be filed on or before the Closing Date
in accordance with all applicable laws, and all taxes, fees, penalties,
interest and other governmental charges due under applicable law on such
returns, reports, declarations and forms have been paid, and there are no
deficiencies for any taxes owed to any governmental entity. As of the time of
filing or, in the case of an amended filing, as of the time of the amended
filing, the foregoing returns correctly reflected in all material respects
the facts regarding the income, business, assets, operations and status of
any entity required to be shown thereon. There is no action, suit,
proceeding, investigation, audit or claim now pending against, or with
respect to any tax or assessment, nor is any claim for additional tax or
assessment asserted by any such authority relating to the taxes of, the
Company. There are no Liens for federal, state or local income taxes upon the
assets of the Company, except Liens for current federal, state or local
income taxes not yet due. The Company is not subject to withholding tax with
respect to any transaction contemplated hereby. There are no agreements for
the extension of the time for the assessments of any taxes of the Company
with respect to any income, properties or operations of the Company. The
Company is not a party to any tax sharing or similar agreement with any
Person.
2.16 EMPLOYEES. SCHEDULE 2.16 attached hereto sets forth a true and
complete list of (a) the names, titles, annual salaries and other material
forms of compensation of all employees of the Company whose annual base
salary exceeds $50,000 and (b) the wage rates for non-salaried employees of
the Company. None of such employees and no other key employee of the Company
has indicated in writing to the Company or a Shareholder that he or she
intends to resign or retire as a result of the transactions contemplated by
this Agreement or otherwise.
2.17 BROKER'S FEES. Neither the Company nor any of its directors or
officers has incurred any direct or indirect liability for any broker's fees,
commissions, or financial advisory or finder's fees in connection with any of
the transactions contemplated by this Agreement, and neither the Company nor
any of its directors or officers has employed any other broker, finder or
financial advisor in connection with any of the transactions contemplated by
this Agreement.
2.18 REPRESENTATIONS COMPLETE. To the knowledge of the Company, none
of the documents or information delivered to the Parent in connection with
the transactions contemplated by this Agreement contains any untrue statement
of material fact or omits to state a material fact necessary in order to make
the statements contained therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER
The Shareholder represents and warrants to the Parent as follows:
8
<PAGE>
(a) Such Shareholder has the legal power, right and authority to
enter into and perform this Agreement, and to perform each of its obligations
hereunder. The execution, delivery and performance of this Agreement by such
Shareholder (i) require no action by or in respect of, or filing with, or
consent of, any governmental body, agency or official or any other Person and
(ii) do not contravene or constitute a default under, any provision of
applicable law or regulation or of any agreement, judgment, injunction,
order, decree or any other instrument binding upon such Shareholder in each
case which would have a Material Adverse Effect on such Shareholder. This
Agreement has been duly executed and delivered by such Shareholder and
constitutes a valid and binding obligation of such Shareholder, enforceable
in accordance with its terms, except as the enforceability thereof may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights and by general principles of equity.
(b) Such Shareholder understands that the Parent is relying upon an
exemption from registration under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable regulations promulgated by the Securities
and Exchange Commission (the "SEC") thereunder, with respect to the issuance
of the Parent Common Stock and the Warrant.
(c) The Parent has made available to such Shareholder the
opportunity to ask questions of and receive answers from the Parent
concerning the terms and conditions of the Merger and to obtain any
additional information desired by such Shareholder concerning the Parent.
(d) The investment by such Shareholder in the Parent Common Stock
and the Warrant is a suitable investment for such Shareholder, given the
investment goals and objectives of such Shareholder.
(e) Such Shareholder, either individually or together with its
purchaser representative, if one has been retained, has such knowledge and
experience in financial and business matters that such Shareholder is capable
of evaluating the merits and risks of an investment in the Parent Common
Stock and Warrant Shares.
(f) Such Shareholder is acquiring the Parent Common Stock and the
Warrant for its own account, for investment purposes only, and not with a
view to the sale, pledge, hypothecation, or other distribution or disposition
thereof or of any interest therein.
(g) Such Shareholder understands that resale or transfer of the
Parent Common Stock and the Warrant Shares will be prohibited indefinitely
unless either (i) the Parent causes the Parent Common Stock and the Warrant
Shares to be registered under the Securities Act, or (ii) an exemption from
such registration is available and such resale or transfer will not otherwise
violate any applicable federal or state securities laws. Such Shareholder
further understands that a legend will be affixed to the certificates
representing the Parent Common Stock setting forth the foregoing limitations.
9
<PAGE>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
The Parent and the Merger Sub represent and warrant to the
Company, subject to the exceptions specifically disclosed in the schedules
(anything disclosed in one schedule shall be deemed to have been disclosed in
all other relevant schedules) supplied by the Parent to the Company, as
follows:
4.1 ORGANIZATION. The Parent is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada
and has the requisite corporate powers and all governmental licenses,
authorizations, consents and approvals required to carry on its business as
now conducted and as proposed to be conducted. The Merger Sub is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California and has the requisite corporate powers and
all governmental licenses, authorizations, consents and approvals required to
carry on its business as now conducted and as proposed to be conducted. Each
of the Parent and the Merger Sub is duly qualified to do business as foreign
corporations and are in good standing in each jurisdiction where the
character of the property owned or leased by them or the nature of their
activities make such qualification necessary, except for those jurisdictions
where failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect on the Parent or the Merger Sub. Copies of the
Articles of Incorporation and Bylaws of each of the Parent and the Merger Sub
have heretofore been furnished to the Company and such documents are true and
correct copies thereof and include all amendments thereto.
4.2 AUTHORITY.
(a) The execution, delivery and performance of this
Agreement and the consummation by the Parent and the Merger Sub of the
transactions contemplated hereby are within the Parent and the Merger Sub's
corporate powers and have been duly authorized by all necessary corporate
action of the Parent and Merger Sub. This Agreement constitutes the valid and
binding obligation of the Parent and the Merger Sub enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
and by general principles of equity.
(b) Except for the filing of the Agreement of Merger with
the California Secretary of State and except as set forth in SCHEDULE 4.2(b),
(i) no action by or in respect of, or filing with, any governmental body,
agency, official authority; and (ii) no consent, approval, waiver or other
action by any Person under any contract, agreement, indenture, lease,
instrument or other document to which the Parent or the Merger Sub is a
party, is required or necessary for the execution, delivery and performance
of this Agreement by the Parent and the Merger Sub, the merger of the Company
with and into the Merger Sub and the consummation of the other transactions
contemplated by this Agreement.
(c) The execution, delivery and performance by the Parent
and the Merger Sub of this Agreement and the consummation of the transactions
contemplated hereby do not and
10
<PAGE>
will not (i) contravene or conflict with the Articles of Incorporation or
Bylaws of the Parent or the Merger Sub; (ii) contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Parent or the
Merger Sub, the failure to comply with which would have a Material Adverse
Effect on the Parent or the Merger Sub; (iii) assuming the receipt of all
required consents as set forth in SCHEDULE 4.2(b), constitute a default under
or give rise to any right of termination, cancellation or acceleration of any
material right or obligation of the Parent or the Merger Sub or any material
permit held by the Parent or the Merger Sub; or (iv) assuming the receipt of
all required consents as set forth in SCHEDULE 4.2(b), result in the creation
or imposition of any Lien (as defined in Section 2.7) on any asset of the
Parent or the Merger Sub.
4.3 CAPITAL STRUCTURE.
(a) The authorized stock of Parent consists of 100,000, 000
shares of Parent Common Stock, par value $0.0001 per share, of which
13,750,000 shares were issued and outstanding as of March 24, 2000. The
authorized capital stock of the Merger Sub consists of 1,000 shares of common
stock, no par value per share, 1,000 shares of which, as of the date hereof,
are issued and outstanding and held by the Parent. All such shares have been
duly authorized, and all such issued and outstanding shares have been validly
issued, are fully paid and are nonassessable and are free of any Liens other
than any Liens created by the holders thereof. The Parent has also reserved
1,000,000 shares of Parent Common Stock for issuance to its employees under
the 1999 US Stock Incentive Plan and 500,000 shares of Parent Common Stock
for issuance to its employees under the 1999 Non-US Stock Incentive Plan.
Except as set forth on SCHEDULE 4.3 attached hereto, there are no other
options, warrants, calls, rights, commitments or agreements of any character
to which Parent is a party or by which it is bound obligating Parent to
issue, deliver, sell, repurchase or redeem, or cause to be issued, delivered,
sold, repurchased or redeemed, any shares of the capital stock of Parent or
obligating Parent to grant, extend or enter into any such option, warrant,
call, right, commitment or agreement.
(b) The shares of Parent Common Stock and the Warrant
Shares to be issued pursuant to the Merger will be duly authorized, validly
issued, fully paid and nonassessable.
(c) The Parent Common Stock is currently listed for trading
on the OTC Bulletin Board, and the Parent has received no notice that the
Parent Common Stock is subject to being delisted therefrom.
4.4 FILINGS. The Parent has complied with all applicable
requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). None of the filings made by the Parent under the Exchange
Act make any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
4.5 BROKER'S FEES. Neither the Parent nor the Merger Sub nor any of
their respective directors or officers has incurred any direct or indirect
liability for any broker's fees, commissions, or financial advisory or
finder's fees in connection with any of the transactions contemplated by this
Agreement, and neither the Parent, nor the Merger Sub, nor any of their
11
<PAGE>
respective directors or officers has employed any other broker, finder or
financial advisor in connection with any of the transactions contemplated by
this Agreement.
4.6 ABSENCE OF CHANGE. Since March 30, 2000, the filing date of the
Parent's 1999 Annual Report on Form 10-K, except as set forth on SCHEDULE 4.6
attached hereto, the Parent has conducted its business in the ordinary course
consistent with past practices and there has not been any event, occurrence,
development or state of circumstances or facts which could reasonably be
expected to result in a Material Adverse Effect to the Parent.
ARTICLE V
CONDITIONS TO THE MERGER
5.1 CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Time of the following conditions:
(a) No proceeding challenging this Agreement or the
transactions contemplated hereby or seeking to prohibit, alter, prevent or
materially delay the Merger shall have been instituted by any Person before
any court, arbitrator or governmental body, agency or official and be
pending; and
(b) This Agreement and the Merger and other transactions
contemplated hereby (including without limitation the Employment Agreements
as defined in Section 5.3) shall have been approved and adopted by the
requisite vote of the shareholders of the Company and the Merger Sub.
5.2 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE COMPANY AND THE
SHAREHOLDER.
The obligations of the Company and the Shareholder to
consummate and effect the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, exclusively by the Company or the Shareholder:
(a) The representations and warranties made by the Parent
and the Merger Sub shall be accurate in all material respects as of the date
hereof and as of the Effective Time and the terms and conditions of this
Agreement to be performed and complied with by the Parent or the Merger Sub
on or prior to the Effective Time shall have been performed and complied with
by the Parent or the Merger Sub on or prior to the Closing Date, and the
Company will have received a certificate, in form reasonably acceptable to
the Company, signed by an authorized officer of the Parent and the Merger Sub
dated the Closing Date, certifying to such effect;
(b) The Parent and the Merger Sub shall have received all
of the regulatory, shareholder and other third party consents, permits,
approvals and authorizations necessary to consummate the Merger;
12
<PAGE>
(c) The Parent shall have executed a Warrant in the form of
EXHIBIT A from the Parent to the Shareholder;
(d) The Parent shall have executed a Registration Rights
Agreement in the form of EXHIBIT B by and among the Parent and the
Shareholder;
(e) The Shareholder shall have paid all expenses of the
Company accrued through the Effective Time;
(f) The Company shall have obtained a tax clearance
certificate (the "Tax Clearance Certificate") from the California Franchise
Tax Board and the Merger Sub shall have executed an Assumption Agreement in
the form of EXHIBIT C, pursuant to which the Merger Sub shall assume the tax
liability assumed by Takes On Production, Inc. as a condition to obtaining
the Tax Clearance Certificate;
(g) Nick Witkowski and the Surviving Corporation shall have
executed the Employment Agreement in the form of EXHIBIT D attached hereto
(the "Witkowski Employment Agreement");
(h) The Shareholder and Nick Witkowski shall have executed
the LLC Assignment Letter in the form of EXHIBIT E attached hereto;
(i) Ann Plageman and the Surviving Corporation shall have
executed the Employment Agreement in the form of EXHIBIT F attached hereto
(together with the Withkowski Employment Agreement, the "Employment
Agreements"); and
(j) The Parent shall have paid $232,273.66 to Derby Street
Investments, LLC (f/k/a itstv.com, LLC) as reimbursement for its costs in
connection with this Agreement and the transactions contemplated herein.
5.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF THE PARENT AND THE
MERGER SUB.
The obligations of the Parent and the Merger Sub to
consummate and effect the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Effective
Time of each of the following conditions, any of which may be waived, in
writing, exclusively by Parent:
(a) The representations and warranties made by the Company
shall be accurate in all material respects as of the date hereof and as of
the Effective Time and the terms and conditions of this Agreement to be
performed and complied with by the Company on or prior to the Effective Time
shall have been performed and complied with by the Company on or prior to the
Effective Time, and the Parent will have received a certificate, in form
reasonably acceptable to the Parent, signed by the Company dated the
Effective Time, certifying to such effect;
(b) The Company shall have received all of the regulatory,
shareholder and other third party consents, permits, approvals and
authorizations (other than the consent of Parent as the sole shareholder of
the Merger Sub) necessary to consummate the Merger;
13
<PAGE>
(c) The Company and the Surviving Corporation shall have
executed the Assignment Agreement by and between the Company and the Parent
in the form of EXHIBIT G attached hereto pursuant to which the Surviving
Corporation shall, as of the Effective Time, assign to the Shareholder all of
its rights to the name "Its TV.com" (the "Name") subject to an agreement of
the Shareholder not to use the Name until after the first anniversary of the
Effective Time and thereafter not use the Name in a business competitive with
that of "OnlineFilmSales.com" as constituted on the date of the Closing;
(d) The Company and Takes on Distribution shall have
executed the letter agreement from the Company to Takes on Distribution in
the form of EXHIBIT H attached hereto;
(e) Allan McKeown and the Parent shall have determined the
terms and conditions of the election of Mr. McKeown to the Board of Directors
or Advisory Board of the Parent or, in the alternative, shall have determined
that Mr. McKeown shall not be appointed to either the Board of Directors of
the Parent or the Advisory Board;
(f) The Shareholder shall have paid all of their own costs
and expenses associated with the Merger, including, without limitation, the
fees and expense of any counsel, accountants and financial advisors in
connection therewith;
(g) The Shareholder shall have waived its appraisal rights
in connection with this Agreement and the transactions contemplated hereby;
(h) The Shareholder shall have changed its name from
Itstv.com, LLC to Derby Street Investments, LLC; and
(i) Each of the individuals listed on SCHEDULE 1.6 attached
hereto shall have signed an investor representation letter in the form of
EXHIBIT I attached hereto.
ARTICLE VI
CONFIDENTIAL INFORMATION; DELIVERY; RETURN; NON-DISCLOSURE
6.1 DELIVERY OF INFORMATION. Until the earlier of the Closing Date
or the termination of this Agreement pursuant to Article XI of this Agreement
(such date hereinafter the "Termination Date"):
(a) Subject to the terms of this Article VI, the Company
will provide the Parent, the Merger Sub and their respective officers,
directors, employees, agents, counsel, accountants, financial advisors,
consultants and other representatives (together the "Parent Representatives")
with reasonable access, upon reasonable prior notice, to all officers,
employees and accountants of the Company and to its assets, properties,
contracts, books, records and all such other information and data concerning
the business and operations of the Company as the Parent Representatives
reasonably may request in connection with such investigation. Notwithstanding
the foregoing, the Parent Representatives shall not unreasonably interfere
with the operations of the Company in connection with such investigation.
(b) Subject to the terms of this Article VI, the Parent and
the Merger Sub will provide the Company, the Shareholder, and their respective
officers, directors, employees,
14
<PAGE>
agents, counsel, accountants, financial advisors, consultants and other
representatives (together the "Company Representatives") with reasonable
access, upon reasonable prior notice, to all officers, employees and
accountants of the Parent and the Merger Sub and to their assets, properties,
contracts, books, records and all such other information and data concerning
the business and operations of the Parent and the Merger Sub as the Company
Representatives reasonably may request in connection with such investigation.
Notwithstanding the foregoing, the Company Representatives shall not
unreasonably interfere with the operations of the Parent or the Merger Sub in
connection with such investigation.
6.2 ACKNOWLEDGEMENTS; DEFINITIONS.
(a) The Parent and the Merger Sub have been and, pursuant
to the terms of this Section, shall continue to be privy to certain
proprietary and confidential information of the Company (the "Company
Confidential Information"). As used herein, the term "Company Confidential
Information" shall include, but not be limited to, any and all information or
documentation whatsoever which has been disclosed or made available to the
Parent Representatives by Company, regarding the Company's services,
activities, businesses, properties, operations, clients, customers,
prospective clients, price lists, suppliers, Trade Secrets, computer
software, payroll and financial statements and any other information or
materials disclosed or delivered to the Parent Representatives which the
disclosing party may from time to time designate and treat as confidential,
proprietary or as a trade secret.
(b) The Company has been and, pursuant to the terms of this
Section, shall continue to be privy to certain proprietary and confidential
information of the Parent and the Merger Sub (the "Parent Confidential
Information"). As used herein, the term "Parent Confidential Information"
shall include, but not be limited to, any and all information or
documentation whatsoever which has been disclosed or made available to the
Company Representatives by the Parent or the Merger Sub regarding services,
activities, businesses, properties, operations, clients, customers,
prospective clients, price lists, suppliers, business associates, Trade
Secrets, computer software, payroll and financial statements thereto and any
other information or materials disclosed or delivered to the Parent
Representatives which the disclosing party may from time to time designate
and treat as confidential, proprietary or as a trade secret.
(c) Reference to "Confidential Information" herein shall
include and relate to both the Company Confidential Information and the
Parent Confidential Information.
(d) As used herein, the term "Trade Secret" shall mean the
whole or any portion of any formula, pattern, device, combination of devices,
or compilation of information which is for use, or is used in the operation
of the other party's businesses and which provides such party's business as
advantage, or an opportunity to obtain an advantage, over those who do not
know or use it.
6.3 NON-DISCLOSURE: PARENT AND MERGER SUB.
(a) The Parent and the Merger Sub, for themselves, their
respective officers, employees, directors, agents, affiliates, subsidiaries,
independent contractors, and related parties
15
<PAGE>
(all of whom are to be deemed included in any reference herein to the Parent)
agree that they will not at any time during or after the termination or
expiration of this Agreement, except as authorized or directed herein or in
writing by the Company, use for the Parent or the Merger Sub's own benefit,
copy, reveal, sell, exchange or give away, disclose, divulge or make known or
available in any manner to any person, firm, corporation or other entity
(whether or not the Parent or the Merger Sub receives any benefit therefrom),
any Company Confidential Information.
(b) The Parent and the Merger Sub will take all actions
necessary to ensure that the Company Confidential Information is maintained
as secret and confidential and its disclosure shall only be made to the
extent necessary, to a limited group of the Parent and the Merger Sub's
employees, officers, directors and professional advisers who are actually
engaged in the evaluation of the Company Confidential Information; provided
however, the Parent and the Merger Sub acknowledge and agree that they shall
be responsible and held liable for the actions or inactions of such
employees, officers, directors and professional advisers (regardless whether
or not such actions or inactions are within their scope of employment or
engagement) with respect to the maintenance of the secrecy and
confidentiality of the Company Confidential Information.
(c) The Parent and the Merger Sub understand that if they
disclose to others, use for their own benefit (other than as part of an
agreement with the Company, which expressly provides for such use) or for the
benefit of any person or entity other than the Company, copies or notes of
any such Company Confidential Information, such conduct will constitute a
breach of the confidence and trust bestowed upon the Parent and the Merger
Sub by the Company and will constitute a breach of this Agreement and render
the Parent and the Merger Sub responsible for any and all damages suffered by
the Company or the Shareholder as a result thereof.
(d) Provided, however, notwithstanding the foregoing, the
terms of this Section 6.3 shall not be applicable to (A) any information
which the Parent or the Merger Sub are compelled to disclose by judicial or
administrative process or by other requirements of law (including, without
limitation, in connection with obtaining the necessary approvals of the
Merger of governmental or regulatory authorities), (B) information that is
publicly available, (C) information previously in possession of the Parent or
the Merger Sub or (D) information obtained independently from third parties.
6.4 NON-DISCLOSURE: COMPANY.
(a) The Company, for itself, its officers, employees,
directors, agents, affiliates, subsidiaries, independent contractors, and
related parties (all of whom are to be deemed included in any reference
herein to the Company) agrees that it will not at any time during or after
the termination or expiration of this Agreement, except as authorized or
directed herein or in writing by the Parent or the Merger Sub, use for the
Company's own benefit, copy, reveal, sell, exchange or give away, disclose,
divulge or make known or available in any manner to any person, firm,
corporation or other entity (whether or not the Company receives any benefit
therefrom), any Parent Confidential Information.
16
<PAGE>
(b) The Company agrees to take all actions necessary to
ensure that the Parent Confidential Information is maintained as secret and
confidential and its disclosure shall only be made, to the extent necessary,
to a limited group of the Company's own employees, officers, directors and
professional advisors who are actually engaged in the evaluation of the
Parent Confidential Information; provided, however, the Company acknowledges
and agrees that it shall be responsible and held liable for the actions or
inactions of such employees, officers, directors and professional advisors
(regardless whether or not such actions or inactions are within their scope
of employment or engagement) with respect to the maintenance of the secrecy
and confidentiality of the Parent Confidential Information.
(c) The Company understands that if it discloses to others,
uses for its own benefit (other than as part of an agreement with the Parent
or the Merger Sub, which contemplates such use) or for the benefit of any
person or entity other than the Parent or the Merger Sub, copies or notes of
any such Parent Confidential Information, such conduct will constitute a
breach of the confidence and trust bestowed upon the Company by the Parent
and the Merger Sub and will constitute a breach of this Agreement and render
the Company responsible for any and all damages suffered by the Parent or the
Merger Sub as a result thereof.
(d) Provided, however, notwithstanding the foregoing, the
terms of this Section 6.4 shall not be applicable to (A) any information
which the Company is compelled to disclose by judicial or administrative
process or by other requirements of law (including, without limitation, in
connection with obtaining the necessary approvals of the Merger of
governmental or regulatory authorities), (B) information that is publicly
available, (C) information previously in the possession of the Company or (D)
information obtained independently from third parties.
6.5 RETURN OF INFORMATION.
(a) At any time after the Termination Date, upon request of
the Company, the Parent and the Merger Sub will, and will cause the Parent
Representatives to promptly (and in no event later than five (5) days after
such request) redeliver or cause to be redelivered to the Company all Company
Confidential Information and all copies thereof, and destroy or cause to be
destroyed all notes, memoranda, summaries, analyses, compilations and other
writings relating thereto or based thereon prepared by the Parent, the Merger
Sub or any Parent Representatives. Such destruction shall be certified in
writing to the Company by an authorized officer supervising such destruction.
(b) At any time after the Termination Date, upon request of
the Parent or the Merger Sub, the Company will, and will cause the Company
Representatives to, promptly (and in no event later than five days after such
request) redeliver or cause to be redelivered to the Parent all original
Parent Confidential Information.
6.6 EQUITABLE RELIEF.
The Parent, the Merger Sub and the Company agree that money
damages would not be a sufficient remedy for any breach or threatened breach
of any provision set forth in Article VI and Article VIII by the other, and
that, in addition to all other remedies which any party hereto may have, each
party will be entitled to specific performance and injunctive or other
17
<PAGE>
equitable relief as a remedy for any such breach or threatened breach. No
failure or delay by any party hereto in exercising any right, power or
privilege hereunder will operate as a waiver thereof, nor will any single or
partial exercise thereof preclude any other or further exercise thereof or
the exercise of any right, power or privilege hereunder.
ARTICLE VII
CONDUCT OF BUSINESS
7.1 CONDUCT AND BUSINESS. Between the date hereof and the Closing
Date, the Company shall conduct its business in substantially the same manner
in which it has heretofore been conducted, and the Company shall not without
the consent of the Parent: (i) enter into any contracts, agreements or
arrangements, other than in the ordinary course of business; (ii) make any
expenditures, other than in the ordinary course of business or (iii) declare
or make any distribution of any kind to the shareholders of the Company.
ARTICLE VIII
NO PUBLIC DISCLOSURE
8.1 NO PUBLIC DISCLOSURE. Without the prior written consent of the
other, none of the Company, the Parent nor the Merger Sub will, and will each
cause their respective representatives not to, make any release to the press
or other public disclosure with respect to either the fact that discussions
or negotiations have taken place concerning the Merger, the existence or
contents of this Agreement or any prior correspondence relating to this
transaction, except for such public disclosure as may be necessary, in the
written opinion of outside counsel (reasonably satisfactory to the other
party) for the party proposing to make the disclosure not to be in violation
of or default under any applicable law, regulation or governmental order. If
either party proposes to make any disclosure based upon such an opinion, that
party will deliver a copy of such opinion to the other party, together with
the text of the proposed disclosure, as far in advance of its disclosure as
is practicable, and will in good faith consult with and consider the
suggestions of the other party concerning the nature and scope of the
information it proposes to disclose.
ARTICLE IX
SURVIVAL; INDEMNIFICATION
9.1 SURVIVAL. The representations and warranties of the Company, the
Shareholder, the Parent and the Merger Sub contained in this Agreement shall
survive the Closing until two (2) years from the Closing; provided, however,
that the representations and warranties set forth in Section 2.15 (Taxes) of
this Agreement shall survive until the applicable statute of limitations with
respect to Taxes shall have expired (as to each date in the foregoing
sentence, a "Cut-Off Date"). Notwithstanding the preceding sentence, any
representation or warranty in respect of which a claim of indemnity may be
brought under this Article IX shall survive the time at which it would
otherwise terminate pursuant to the preceding sentence, if written notice of
the inaccuracy or breach thereof giving rise to such right to a claim of
indemnity shall have been given to the party against whom such indemnity may
be sought prior to the Cut-Off Date, and any obligation of indemnity shall
survive until such written claim of indemnity is finally resolved, even if
the final resolution is after the Cut-Off Date.
18
<PAGE>
The covenants and agreements of the parties contained in this
Agreement or in any agreement delivered pursuant hereto and indemnification
in respect thereof shall survive the Closing Date without time limit.
9.2 AGREEMENT TO INDEMNIFY.
(a) Subject to the terms and conditions of this Section,
the Parent hereby agrees to indemnify, defend and hold the Shareholder
harmless from and against all demands, claims, actions or causes of action,
assessments, losses, damages, liabilities, costs and expenses, including
without limitation, interest, penalties, court costs and reasonable
attorneys' fees (including paralegal and law clerk fees and other legal
expenses and costs) and expenses, asserted against, relating to, imposed upon
or incurred by the Company by reason of or resulting from a breach of (i) any
covenant or agreement set forth in this Agreement by the Parent or (ii) any
representation or warranty given by the Parent or the Merger Sub contained in
or made pursuant to this Agreement.
(b) Subject to the terms and conditions of this Section,
the Shareholder hereby agrees to indemnify, defend and hold the Parent and
the Merger Sub harmless from and against all demands, claims, actions or
causes of action, assessments, losses, damages, liabilities, costs and
expenses, including without limitation, interest, penalties, court costs and
reasonable attorneys' fees (including paralegal and law clerk fees and other
legal expenses and costs) and expenses, asserted against, relating to,
imposed upon or incurred by the Company by reason of or resulting from a
breach of (i) any covenant or agreement set forth in this Agreement by the
Company, or (ii) any representation or warranty given by the Company
contained in or made pursuant to this Agreement.
All of the foregoing are hereinafter collectively referred
to as "Claims" and singularly as a "Claim."
9.3 CONDITIONS OF INDEMNIFICATION.
The obligations and liabilities of the Parent, the Merger
Sub and the Shareholder, with respect to Claims resulting from the assertion
of liability by any of them, shall be subject to the following terms and
conditions:
(a) The party hereto seeking indemnification (the
"Indemnitee") will give the other party hereto from whom indemnification is
sought (the "Indemnitor") notice of any such Claim reasonably promptly after
the Indemnitee receives notice thereof, and the Indemnitor will have the
right to undertake the defense thereof by representatives of its own
choosing. The failure of any Indemnitee to give notice as provided herein
shall not relieve the Indemnitor of its obligations under this Article IX,
except to the extent that the Indemnitor is prejudiced by the failure to give
such notice. When the Indemnitor undertakes the defense of any claim, the
Indemnitee shall have the right to participate in contesting such claim at
its own costs and expense.
(b) In the event that the Indemnitor, within ten (10)
business days after notice of any such Claim, fails to provide written notice
of its election to defend such Claim, the Indemnitee will (upon giving
written notice to the Indemnitor) have the right, but not the
19
<PAGE>
obligation, to undertake the defense, compromise or settlement of such Claim
on behalf of and for the account and risk of the Indemnitor, subject to the
right of the Indemnitor to assume the defense of such Claim at any time prior
to settlement, compromise or final determination thereof.
(c) The Indemnitor shall not, without the Indemnitee's
written consent, settle or compromise any Claim or consent to entry of any
judgment which does not include an unconditional release from all liability
in respect of such Claim, other than liability specified in the settlement,
from the claimant or plaintiff to the Indemnitee. To the greatest extent
reasonably possible, the parties shall attempt to obtain general releases
from such plaintiff or claimant.
9.4 LIMITATIONS ON INDEMNITY.
(a) No party shall be obligated to make any payments to the
another party under Sections 9.2 or 9.3 except to the extent that the Claims
indemnified under Sections 9.2 or 9.3 exceed $50,000 and only for those
amounts in excess of such $50,000 aggregate amount.
(b) The liability of any party to indemnify another under
Sections 9.2 or 9.3 shall be limited, in the aggregate, to a maximum amount
equal to $1,000,000.
(c) No claim for indemnification under this Agreement shall
be limited as to time or amount if such claim is based on fraud, intentional
misconduct or intentional misrepresentation.
9.5 SOLE REMEDY. Absent material evidence of fraud, intentional
misconduct or intentional misrepresentation by a party, the parties' right to
indemnification under this Article IX shall be the parties' sole and
exclusive remedy for any breach of any representation or warranty by another
party under this Agreement.
ARTICLE X
CERTAIN COVENANTS
10.1 Allan McKeown agrees to allow the Parent and Merger Sub to use
at no cost to the Parent and Merger Sub a spare office space in the London,
England office located at Brook Green House, 4 Rowan Road, London W6 7DV
until July 1, 2000 and, for a period not to exceed four months, the spare
office space of Anne Plageman located at 1547 18th Street, Santa Monica,
California.
10.2 From the date hereof until the earlier of the Closing Date or
the Termination Date, neither the Company nor any of its respective agents or
representatives, shall, directly or indirectly, encourage, solicit or engage
in any discussions or negotiations with, or provide any information to, any
Person or group concerning the possible acquisition by such third party of
all or any part of the business of the Company, whether by purchase of
assets, stock, merger or otherwise, other than as contemplated or permitted
by this Agreement. The Company agrees promptly to notify the Parent of any
expression of interest by any Person with respect to any such possible
acquisition which is received by the Company.
10.3 From time to time prior to the Closing, the Company shall
promptly provide to the Parent proposed supplements or amendments to any
Schedule to this Agreement with respect
20
<PAGE>
to any matter hereafter arising which, if existing or occurring on the date
hereof, would have been required to be set forth or described on such
Schedule ("Post-Signing Matters"). The Parent shall have the right to approve
or disapprove any such proposed supplement or amendment relating to
Post-Signing Matters provided that, unless the Parent delivers to the Company
written notice of its disapproval within five (5) business days after receipt
of such proposed supplement or amendment, the Parent shall be deemed to have
approved such supplement or amendment for all purposes hereunder. If the
Parent disapproves such proposed supplement or amendment in a timely manner,
the Company shall not be in default hereunder and the Parent's sole remedy
shall be to terminate this Agreement within ten (10) business days after the
Company receives written notice of the Parent's disapproval. Unless otherwise
agreed in writing by the parties, the Closing shall automatically be extended
to the earliest business day sufficient to permit the time periods set forth
in Section 10.3 to expire in the event such time periods would not otherwise
expire on or prior to the Closing Date.
10.4 Subject to the terms and conditions of this Agreement, each
party will use commercially reasonable efforts to take, or cause to be taken,
all actions and to do, or cause to be done, all things necessary or desirable
under applicable laws and regulations to consummate the transactions
contemplated by this Agreement.
10.5 Parent agrees that, to the extent it is legally able to do so,
the Surviving Corporation will pay all real property transfer, gains and
other similar taxes and all documentary stamps, filing fees, recording fees
and sales and use taxes, if any, and any penalties and interest with respect
thereto, payable in connection with the consummation of the Merger.
10.6 For a period of five (5) years after the Closing Date, the
Shareholder and its agents and representatives shall have reasonable access
to the books and records of the business operated by the Company.
10.7 To the extent the Surviving Corporation receives written notice
of any event or circumstance that materially affects the Shareholder, the
Surviving Corporation shall promptly (but in any event within ten (10) days
after receipt) notify the Shareholder of such matter, information or event,
and shall provide them with copies of all relevant documentation or
correspondence in connection therewith.
10.8 The Surviving Corporation shall pay the salary (including
fringe benefits) of Mr. Witkowski from the Closing Date until the end of Mr.
Witkowski's term of employment by the Surviving Corporation.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated at any time prior to the Closing:
(a) By written agreement of the Parent and the Company;
(b) By either the Parent or the Company by written notice to
the other party if the Merger shall not have been consummated on or before June
1, 2000; or
21
<PAGE>
(c) By the Parent if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of the Company and such breach has not been cured within fifteen
(15) days after notice to the Company; or
(d) By the Company if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of Parent or the Merger Sub and such breach has not been cured
within fifteen (15) days after notice to the Parent.
(e) If this Agreement is terminated and the transactions
contemplated hereby are abandoned as described in this Article XI, this
Agreement shall become null and void and of no further force and effect;
provided, however, that (i) the provisions of Section 5.3(j) and Article VI
above shall survive such termination and (ii) in the case of a termination
pursuant to Sections 11.1(c) or 11.1(d) above, the non-terminating party
shall remain liable for the action or omission which resulted in such
termination.
ARTICLE XII
MISCELLANEOUS
12.1 WAIVER; STRICT CONSTRUCTION. No change or modification of this
Agreement shall be valid unless the same is in writing and signed by all the
parties hereto. No waiver of any provision of this Agreement shall be valid
unless in writing and signed by the person against whom sought to be
enforced. The failure of any party at any time to insist upon strict
performance of any condition, promise, agreement or understanding set forth
herein shall not be construed as a waiver of relinquishment of the right to
insist upon strict performance of the same condition, promise, agreement or
understanding at a future time.
12.2 ENTIRE AGREEMENT. This Agreement, together with all schedules
and exhibits hereto sets forth all of the promises, agreements, conditions,
understandings, warranties and representations among the parties hereto, and
there are no promises, agreements, conditions, understandings, warranties or
representations, oral or written, express or implied, among them other than
as set forth herein. This Agreement is, and is intended by the parties to be,
an integration of any and all prior agreements or understandings, oral or
written, regarding the subject matter hereof.
12.3 HEADINGS. The headings in this Agreement are inserted for
convenience of reference only and are not to be used in construing or
interpreting the provisions of this Agreement.
12.4 COUNTERPARTS. This Agreement may be executed in two or more
identical counterparts, each of which will be deemed an original and all of
which will constitute one instrument.
12.5 CONSTRUCTION. Unless the context clearly otherwise requires the
use of the singular will include the plural and the use of the plural will
include the singular, and the use of any gender will include the other two
genders.
22
<PAGE>
12.6 SEVERABILITY. If a covenant or provision provided in this
Agreement is deemed to be contrary to law, that covenant or provision will be
deemed ineffective and will not affect the validity, interpretation, or
effect of the other provisions of either this Agreement or any agreement
executed pursuant to it or the application of that covenant or provision to
other circumstances not contrary to law.
12.7 COMPUTATION OF TIME. Whenever the last day for the exercise of
any privilege or the discharge of any duty hereunder falls upon Saturday,
Sunday, or any public or legal holiday, whether California or federal, the
party having the privilege or duty will have until 5:00 p.m. California time
on the next succeeding regular business day to exercise the privilege or
discharge the duty.
12.8 INTERPRETATION. No provision of this Agreement will be
construed against or interpreted to the disadvantage of any party by any
court or other governmental or judicial authority by reason of such party
having or being deemed to have structured or dictated such provision.
12.9 GOVERNING LAW. This Agreement and the obligations of the
parties hereunder will be interpreted, construed, and enforced in accordance
with the laws of the State of California without reference to such state's
principles of conflict of laws.
12.10 ATTORNEYS' FEES. In the event a lawsuit is brought by any
party to enforce or interpret the terms hereof, or for any dispute arising
out of this transaction, the party prevailing in any such lawsuit shall be
entitled to recover from the non-prevailing party its costs and expenses
thereof, including its legal fees in reasonable amount and prejudgment and
post-judgment interest at the highest rate allowable under California law.
12.12 ASSIGNMENT. This Agreement shall not be assignable by any
party without the prior written consent of the other, except that either the
Parent or the Shareholder (each an "Assigning Party") may assign its rights
hereunder at any time without the consent of the other to any person directly
or indirectly controlling, controlled by or under direct or indirect common
control with the Assigning Party, as long as the Assigning Party remains
fully liable hereunder.
12.13 REPRESENTATIONS AND WARRANTIES. Any representation or warranty
stated to be made "to the knowledge" of the Company shall mean the actual
knowledge of Allan McKeown, Nick Witkowski and Anne Plageman.
12.14 NOTICES. All notices, requests, instructions or other
documents to be given hereunder shall be in writing and sent by registered
mail or overnight courier or shall be personally delivered:
If to the Company or the Shareholder, then:
TAMNW, Inc.
1547 18th Street
Santa Monica, CA 90404
Attn.: Allan McKeown
23
<PAGE>
with copies to:
Daniel Wolff, Esq.
Weissman, Wolff, Bergman, Coleman & Silverman, LLP
9665 Wilshire Blvd., Suite 900
Beverly Hills, CA 90212-2316
If to the Parent or the Merger Sub, then:
InternetStudios.com, Inc
1351 4th Street, Suite 227
Santa Monica, CA 90401
with copies to:
David L. Ficksman, Esq.
Loeb & Loeb
1000 Wilshire Boulevard
Suite 1800
Los Angeles, California 90017-2475
All notices are effective upon receipt.
12.15 BENEFIT AND BURDEN. Subject to restrictions on assignment
contained elsewhere in this Agreement, this Agreement shall inure to the benefit
of, and shall be binding upon, the parties hereto and their legatees,
distributees, estates, executors or administrators, successors and assigns, and
personal and legal representatives.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
24
<PAGE>
IN WITNESS WHEREOF, on the date first written above, the
parties hereto have duly executed this Agreement and the Company and the
Parent have caused their corporate seal to be affixed hereto as of the date
and year first above written.
INTERNETSTUDIOS.COM, INC., A NEVADA CORPORATION
By:
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
ONLINETVSALES.COM, INC., A CALIFORNIA CORPORATION
By:
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
TAMNW, INC., A CALIFORNIA CORPORATION
By:
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
ITSTV.COM, LLC
By:
-----------------------------------------
Name:
-----------------------------------------
Its:
-----------------------------------------
FOR THE PURPOSES OF SECTION 10.1:
-----------------------------------------
Allan McKeown
25
<PAGE>
SCHEDULE 1.6
ISSUANCE OF SHARES AND WARRANTS
A. ISSUANCE OF SHARES OF PARENT COMMON STOCK TO CERTAIN SHAREHOLDERS OF THE
SHAREHOLDER:
NAME NO. OF SHARES OF PARENT COMMON STOCK
Derby Street Investments, LLC 100,000
(f/k/a itstv.com, LLC)
Nick Witkowski 20,000
B. ISSUANCE OF THE WARRANTS TO CERTAIN SHAREHOLDERS AND EMPLOYEES OF THE
SHAREHOLDER:
NAME NO. OF WARRANT SHARES
Derby Street Investments, LLC 50,000
(f/k/a itstv.com, LLC)
Nick Witkowski 40,000
Anne Plageman 7,500
Chris Fuller 7,500
Joanna Stephens 7,500
26