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Agreement and Plan of Merger

 

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Title:

Agreement and Plan of Merger

Entities:

Paid Inc

Date:

2001

Size:

Preview shows 30KB of 179KB total

Price:

$67

ID:

#1238456

 

 

► Plans ► Agreements ► Agreements & Plans of Merger

 

 

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                          AGREEMENT AND PLAN OF MERGER


This AGREEMENT AND PLAN OF MERGER ("AGREEMENT") is made and entered into
this 23rd day of October, 2001, by and among Sales Online Direct, Inc., a
Delaware corporation ("Buyer"), ROTMAN collectibles, inc., a Massachusetts
corporation ("SELLER"), and leslie ROTMAN ("STOCKHOLDER").

RECITALS

WHEREAS, Buyer engages in the business of selling collectibles;

WHEREAS, Seller engages in the movie poster business (the "Business");

WHEREAS, Stockholder is the sole owner of all the issued and outstanding
securities of Seller, and is a creditor of Seller consistent with a Promissory
Note dated September 10, 2001, secured by an all assets Security Agreement of
even date (collectively, the "Obligations");

WHEREAS, the Board of Directors of each of Buyer and Seller has determined
it to be in their respective best interests for Buyer, and a subsidiary to be
formed by Buyer ("Buyer's Sub") to acquire Seller in accordance with the terms
and conditions hereinafter set forth; and

WHEREAS, it is intended that such acquisition qualify for federal income
tax purposes as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended;

NOW THEREFORE, for and in consideration of the foregoing recitals, which
shall be deemed a substantive part of this Agreement, and the mutual covenants
and agreements contained herein, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereby
agree as follows:

I. MERGER

1.1. The Transaction. Subject to each and all of the terms and conditions
of this Agreement, at the Effective Time (as defined in Section 1.3) Seller
shall be merged with and into Buyer's Sub and the separate corporate existence
of Seller shall thereupon cease (the "Merger"). Buyer's Sub shall be the
surviving corporation (the "Surviving Corporation") in the Merger and shall be
governed by the laws of the State of Delaware. The separate corporate existence
of Buyer's Sub with all of its rights, privileges, immunities, powers and
franchises shall continue, and Buyer's Sub shall succeed, without other
transfer, to all of the rights and properties of Seller and shall be subject to
all of the debts and liabilities of Seller. The Merger shall have the effects
specified in the Delaware General Corporation Law (the "DGCL") and Massachusetts
Business Corporation Law ("MBCL").

1.2. Closing. The closing of the Merger contemplated hereby (the "Closing")
shall take place at 10:00 a.m., local time, on November 7, 2001 (the "Closing
Date") at the offices of Buyer, 4 Brussels Street, Worcester, Massachusetts, or
at such other time, date or place as Buyer and Seller may mutually agree upon in
writing; provided, however, that prior to the Closing, all of the conditions in
Sections 5 and 6 of this Agreement shall have been satisfied or waived, as the
case may be.

1.3. Articles of Merger; Effective Time. As soon as practicable following
the Closing, Articles of Merger in the form or forms required by the DGCL and
MBCL (the "Articles of Merger") shall be promptly filed and recorded by Buyer in
accordance with the DGCL and MBCL. The Merger shall thereupon become effective
at the time and date of such filing or at such date and time otherwise specified
in the Articles of Merger, and such time is hereinafter referred to as the
"Effective Time".

1.4. Surviving Corporation. The Articles of Organization and Bylaws of
Buyer's Sub shall be the Articles of Organization and Bylaws of the Surviving
Corporation. The directors and officers of Buyer's Sub shall be the directors
and officers of the Surviving Corporation, and Buyer's Sub shall agree that it
may be sued in the

<PAGE>

Commonwealth of Massachusetts for any prior obligation of Seller and any
obligation thereafter incurred by the Surviving Corporation, including any
obligation created by Section 85 of the MBCL, so long as any liability remains
outstanding against Seller in the Commonwealth of Massachusetts. Buyer's Sub
shall irrevocably appoint the State Secretary of the Commonwealth of
Massachusetts as its agent to accept service of process in any action for the
enforcement of any such obligation, including taxes, in the same manner as
provided in Chapter 181 of the General Laws of Massachusetts.

1.5. Consideration.

(a) In consideration for the Merger, and the Stockholder releasing the lien
against Seller's assets and discharge of the Obligations, Buyer shall issue and
deliver to Stockholder 100 shares of common stock of Buyer, $.001 par value
("Common Stock"), and a Six Percent (6%) Convertible Promissory Note, the form
of which is attached as Exhibit A (the "Note"), which may be converted into
shares of Common Stock (collectively, the "Securities"), or, payable in cash, in
the event that Common Stock is not available for issuance, upon the terms and
conditions hereof and upon the terms and conditions in the Note. The total face
amount of the Note to be issued by Buyer (the "Face Value") is One Million
Dollars ($1,000,000), all in accordance with the terms of this Agreement and the
Note, based on the Appraised Value (as hereinafter defined) of the Tangible
Assets (as defined in Section 2.17).

(b) The "Appraised Value" shall mean the appraised wholesale value of the
Tangible Assets based on an appraisal conducted by an independent appraiser
prior to the Closing and within 90 days from the date of this Agreement.

(c) Contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing a Registration Rights Agreement (the
"Registration Rights Agreement") substantially in the form attached hereto as
Exhibit B pursuant to which Buyer has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and applicable state
securities laws, and the rules and regulations promulgated thereunder (the "1933
Act").

(d) To secure payment of the Note, the parties shall enter into a Security
Agreement at Closing substantially in the form attached hereto as Exhibit C.

1.6 Delivery of Consideration.

(a) Buyer shall issue and deliver to Stockholder the Note immediately upon
Closing.

(b) Subject to Buyer's obligations pursuant to Section 1.5(d), Stockholder
acknowledges that the Note and any shares of Common Stock convertible thereunder
(the "Securities") are not registered under the 1933 Act or any state securities
laws, and may not be offered for sale, sold, assigned or transferred unless
registered thereunder or Stockholder shall have delivered to Buyer an opinion by
counsel reasonably satisfactory to Buyer, in form, scope and substance
reasonably satisfactory to Buyer, to the effect that the Securities to be sold,
assigned or transferred may be sold, assigned or transferred pursuant to an
exemption from such registration. Stockholder further acknowledges that any sale
of the Securities made in reliance on Rule 144 (or any amendment or applicable
rule which operates to replace Rule 144), promulgated under the 1933 Act ("Rule
144") may be made only in accordance with the terms of Rule 144 and further, if
Rule 144 is not applicable, any resale of the Securities under circumstances in
which Stockholder (or the person through whom the sale is made) may be deemed to
be an underwriter (as that term is defined in the 1933 Act) may require
compliance with some other exemption under the 1933 Act or the rules and
regulations thereunder and applicable state securities laws.

(c) Unless and until the Securities have been registered under the 1933
Act, the stock certificates representing the Securities will bear a restrictive
legend (the "Legend") in substantially the following form:

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR APPLICABLE STATE SECURITIES LAWS
(COLLECTIVELY, THE "LAWS"). THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND

<PAGE>

MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
EITHER (I) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE
LAWS, OR (II) AN OPINION OF COUNSEL PROVIDED TO THE ISSUER IN FORM, SUBSTANCE
AND SCOPE REASONABLY ACCEPTABLE TO THE ISSUER TO THE EFFECT THAT REGISTRATION IS
NOT REQUIRED UNDER THE LAWS DUE TO AN AVAILABLE EXCEPTION TO OR EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE LAWS.

The Legend shall be removed and Buyer shall issue a certificate without such
Legend to the holder of any certificate evidencing the Securities upon which it
is stamped, and a certificate for the Securities shall be originally issued
without the Legend, if, unless otherwise required by state securities laws, (x)
the sale of such Securities is registered under the 1933 Act, or (y) such holder
provides Buyer with an opinion by counsel reasonably satisfactory to Buyer, that
is in form, substance and scope reasonably satisfactory to Buyer, to the effect
that a public sale or transfer of such Securities may be made without
registration under the 1933 Act. In the event the Legend is removed from any
certificate evidencing any the Securities or any certificate evidencing any
Securities is issued without the Legend and thereafter the effectiveness of a
registration statement covering the sale of such Securities is suspended or
Buyer determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to the holder of
such Securities, Buyer shall be entitled to require that the Legend be placed
upon any certificate evidencing such Securities which cannot then be sold
pursuant to an effective registration statement or an available exemption from
registration or with respect to which the opinion referred to in clause (y) next
above has not been rendered, which Legend shall be removed when such Securities
may be sold pursuant to an effective registration statement or an available
exemption from registration (or such holder provides the opinion with respect
thereto described in clause (y) next above).

2. REPRESENTATIONS AND WARRANTIES OF SELLER AND STOCKHOLDER. Seller and
Stockholder hereby jointly and severally represent, warrant and agree, as of the
date hereof and as of the Closing Date, as follows:

2.1. Ownership of Securities of Seller. Stockholder is the record and
beneficial owner of all of the issued and outstanding common stock of the
Seller, and the 6% Convertible Promissory Note of Seller set forth as Schedule
2.1. Stockholder owns all such shares beneficially and of record, free and clear
of any and all liens, claims, pledges, security interests, preemptive rights,
rights of first refusal, encumbrances, or restrictions of any kind whatsoever
(collectively, the "Liens"). Stockholder holds the 6% Convertible Promissory
Note of Seller free and clear of any and all Liens. Stockholder is not a party
to or bound by any options, calls, contracts, or commitments of any character
relating to any issued or unissued stock or any other equity security issued or
to be issued by Seller.

2.2. Capitalization. The authorized common stock of Seller consists of
15,000 shares of common stock, no par value, of which 1,000 shares are
outstanding, plus a 6% Convertible Promissory Note. All such outstanding shares
are duly authorized, validly issued, fully paid and nonassessable, and the 6%
Convertible Promissory Note is duly authorized.

2.3. Outstanding Options or Warrants. There are no outstanding options or
warrants to acquire stock of Seller, and except for this Agreement and the 6%
Convertible Promissory Note, no other agreements or rights to purchase or
otherwise acquire, or securities convertible into, any shares of the capital
stock of Seller.

2.4. Organization and Authority of Seller. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Massachusetts and is duly qualified and in good standing as a
foreign corporation in all jurisdictions in which Seller is required to be so
qualified. Seller has no direct or indirect wholly or partially owned
subsidiaries.

2.5. Power and Authority. Seller and Stockholder have the absolute and
unrestricted right, power, authority and capacity to execute and deliver this
Agreement, and to perform the obligations hereunder. The execution, delivery and
performance of this Agreement have been duly authorized by Seller's Board of
Directors. The Agreement has been duly and validly executed and delivered by
Seller and Stockholder and (assuming the due authorization, execution and
delivery thereof by Buyer) constitutes the legal, valid and binding, joint and
several, obligation of Seller and Stockholder, enforceable against Seller and
Stockholder in accordance with its terms, except

<PAGE>

to the extent that enforceability may be limited by applicable bankruptcy,
insolvency or similar laws affecting the enforcement of creditors rights
generally and subject to general principles of equity.

2.6. No Violations. The execution and delivery of this Agreement by Seller
and Stockholder, and the consummation of the transactions contemplated hereunder
by Seller and Stockholder will not (i) violate any existing provision of any law
or violate any existing term or provision of any order, writ, judgment,
injunction or decree of any court, governmental department, commission, board,
agency or instrumentality applicable to Seller or Stockholder, or their
properties or assets; (ii) conflict with or violate any of the terms, conditions
or provisions of the Articles of Organization, Bylaws or any other
organizational documents of Seller; (iii) violate, result in any breach of, or
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under any contract, agreement, indenture, mortgage or deed of
trust, security agreement, license, instrument or obligation to which Seller or
Stockholder is a party or by which any are bound; or (iv) result in the creation
or imposition of any Liens upon Seller or Stockholder or any of their properties
or assets.

2.7. No Consent. Seller has the absolute and unrestricted legal right,
power and authority to enter into this Agreement and, upon approval of the
Merger by Stockholder, as the only stockholder of Seller, Seller shall have the
absolute and unrestricted legal right, power and authority to consummate the
transactions contemplated hereby. No consent, approval, authorization, permit or
order or action of, or filing with, any court, administrative agency or other
governmental or regulatory body or authority applicable to Seller or
Stockholder, is required for (i) the execution and delivery of this Agreement by
Seller and Stockholder and (ii) the consummation by Seller and Stockholder of
the transactions provided for herein.

2.8. Liabilities. Except for the liabilities and obligations set forth on
the Balance Sheet, as defined in Section 2.18, and liabilities incurred in the
ordinary course of business between September 30, 2001 and the Closing, and
liabilities and obligations for which Seller will be covered under Seller's
policies of insurance, Seller does not have any liabilities or obligations of
any nature (whether absolute, accrued, fixed, contingent, vicarious, secured or
unsecured, known or unknown or due or to become due), and neither Seller nor
Stockholder knows, and does not have any reasonable grounds to know, of any
basis for the assertion against Seller of any material liability, obligation or
claim.

2.9. Real Property. Seller does not own and has never owned fee simple
interest in real property.

2.10. Leases. Seller is not and has never been a party to any lease of any
real or personal property.

2.11. Accounts Receivable. Any and all accounts receivable, as set forth on
the Balance Sheet, (a) represent arm's-length transactions actually made in the
ordinary course of business, (b) are collectible in the ordinary course of
business, and (c) to the knowledge of Stockholder and Seller, are subject to no
counterclaim or setoff and are not in dispute.

2.12. Contracts. A list and copy of all contracts, commitments and
agreements to which Seller is a party is attached as Schedule 2.12. All of the
contracts, commitments or agreements (the "Contracts") to which Seller is a
party or is bound, whether written or oral and whether or not listed on Schedule
2.12 are valid, binding and enforceable by Seller against the other party(ies)
thereto, in accordance with the terms thereof, and have been fully complied with
by all of the parties thereto, and none of the parties thereto is in breach
thereof or in default thereunder, nor has any event occurred which, with the
lapse of time, notice or election, may become a breach or default by any of the
parties thereunder. All payments required to be made pursuant to the Contracts
have been paid in full. Upon conclusion of the transactions contemplated by this
Agreement, Buyer's Sub shall have and succeed in all of the rights of Seller
under the Contracts.

2.13. Taxes. Seller has, as appropriate, timely filed, or will timely file
when due, all federal, state, and local tax returns and reports required to be
filed by Seller with respect to all periods ending before the Closing Date, all
of which returns are or will be true and correct in all material respects,
except where the failure to timely file such returns and reports has no adverse
effect. No tax elections have been made, and, no tax elections shall be made for
any period after December 31, 2000 that could affect Seller's tax liability for
any period after Closing. For all periods ending prior to the Closing Date,
Seller has timely paid, or will timely pay when due, all federal, state, local

<PAGE>

and foreign taxes (and all interest, penalties or additions to tax thereon, if
any), including, without limitation, all income, franchise, transfer, real
property, unemployment, withholding, occupation, gross receipts, value added,
excise and estimated taxes required to be paid or collected. Seller has not
granted any unexpired waiver of restrictions on assessment or collections of
taxes or extension of any statute of limitation in connection with or in respect
of the examination of any federal, state, local or foreign tax return or
liability of Seller. All taxes that Seller is or was required by law to withhold
or collect have been duly withheld or collected and, to the extent required,
have been paid to the proper governmental body or person. There are no
proceedings or actions pending for the assessment or collection of additional
federal, state, or local taxes and there are no outstanding deficiencies
formally asserted by the Internal Revenue Service or any state, or local taxing
authority against Seller.

2.14. Litigation. There is no litigation, proceeding, investigation, claim,
administrative or regulatory proceeding, complaint or accusation, pending in
court or before any governmental, regulatory or administrative board, agency or
commission, or any arbitration pending against Seller or against any employee or
agent of Seller; and there is no litigation, proceeding, investigation, claim,
complaint, or accusation, formal or informal, or arbitration pending or
threatened or any contingent liability which would give rise to any right of
indemnification or similar right on the part of any past or present director,
officer, employee or agent of Seller.

2.15. Compliance with Law. To the knowledge of Seller and Stockholder,
Seller and all officers, directors, and agents of Seller have complied with all
applicable laws, rules, regulations and other legal requirements; and, without
limiting the generality of the foregoing, (i) there is not pending or, to the
knowledge of Stockholder or Seller, threatened, any notification of any
governmental or regulatory body, agency or authority that Seller is not in
compliance in all material respects with any and all applicable federal, state,
regional, county, local or foreign laws, statutes, rules, regulations,
ordinances, decrees, directives or orders concerning public health, safety or
the environment now existing and regulations respecting employment and
employment practices, occupational safety and health laws and regulations, and
(ii) neither Stockholder nor Seller have received any notification of past
violations of such laws or regulations that can reasonably be expected to result
in future claims against Seller, and Stockholder and Seller do not know, or do
not have any reasonable ground to know, of any basis therefor.

2.16. Insurance. Seller presently carries or causes to be carried all
insurance coverage against such casualties, risks and contingencies, and in such
amounts, types and forms (including without limitation fidelity bonds), as are
customarily carried by corporations engaged in the businesses and activities in
which Seller is engaged and which is for the operations and assets of Seller.
All of the insurance coverage described in Schedule 2.16 is in full force and
effect and is fully paid as to all premiums heretofore billed or due. Neither
Stockholder nor Seller have received any notification of the cancellation of any
such policies or that any such policies will not be renewed. There are no
claims, demands or offsets that would tend to impair the full value of said
insurance policies. Schedule 2.16 contains a complete list of all the policies
of insurance that Seller carries. All such policies of insurance listed on
Schedule 2.16 shall continue to be in full force and effect and Buyer's Sub
shall succeed in all of Seller rights under such policies of insurance after the
conclusion of the transactions contemplated by this Agreement.

2.17. Title to Assets. The tangible assets and personal property owned by
Seller include, without limitation, the items listed on Schedule 2.17 (the
"Tangible Assets"). The assets reflected on the Balance Sheet, as hereinafter
defined, are all of the assets of Seller used by Seller in the conduct of its
business, Seller has good and marketable title to all of their assets. At
Closing, all of the assets owned by Seller shall be free and clear of any and
all Liens, and all of the Tangible Assets will be in good operating condition
and repair, free from defects.

2.18. Balance Sheet. Seller has previously delivered a Balance Sheet of
Seller as of September 30, 2001 (the "Balance Sheet"). The Balance Sheet
presents fairly the financial position of Seller at September 30, 2001.

2.19. No Material Adverse Change. Since September 30, 2001 there has not
been:

(a) any change in the business, financial condition or results of
operations of Seller which has had or could reasonable be expected to have a
material adverse effect on Seller taken as a whole, except in the ordinary
course of the Business (including claims under any policy of insurance or
reinsurance);

<PAGE>

(b) any damage, destruction or other casualty loss with respect to the
Tangible Assets or other assets or property owned by Seller (whether or not
covered by insurance) which has had or could reasonably be expected to have a
material adverse effect;

(c) any transaction or commitment made by Seller relating to its
assets or business (including the acquisition or disposition of any substantial
assets) material to Seller taken as a whole other than transactions and
commitments in the ordinary course of business consistent with past practice or
those contemplated by this Agreement;

(d) any change in any method of accounting or accounting practice by
Seller;

(e) any incurrence, assumption or guarantee by Seller of any
indebtedness for borrowed money;

(f) any Lien created or assumed by Seller on any asset of Seller to
secure indebtedness for borrowed money;

(g) any change in the number of shares of capital stock of Seller
issued and outstanding.

2.20. Employee Benefit Plans. Seller does not have, nor has it ever been, a
party to, a sponsor of, or a contributor to (i) any employee pension benefit
plan (as defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974 ("ERISA")) (a "Retirement Plan"), (ii) any employee welfare benefit plan
(as defined in Section 3(1) of ERISA) (a "Welfare Plan"), or (iii) any plan,
contract, program, practice, or arrangement (written or unwritten) under which
benefits may be provided to one or more employees or former employees (an "Other
Plan"). All Retirement Plans, Welfare Plans and Other Plans are hereinafter
collectively referred to as "Employee Benefit Plans." The assets of Seller are
not subject to any Liens under ERISA or the Internal Revenue Code, and no event
has occurred, and no condition exists, which could subject Seller or their
assets to a future liability, obligation or lien on account of any Controlled
Group Benefit Plan. For purposes of this subsection, a Controlled Group Benefit
Plan means any Employee Benefit Plan which Seller or any affiliated entity,
within the meaning of Section 414(b), (c), (m) or (o) of the Internal Revenue
Code, maintains or at any time maintained, or to which Seller or any Affiliate
has at any time contributed or been obligated to contribute.

2.21. Employees. Seller does not have, and has never had, any paid
employees.

2.22. Consultants. Seller does not have any formal or informal arrangement,
contract or understanding with any consultant whose current annual rate of
compensation exceeds $10,000.

2.23. Corporate Documents. On or before ten days before Closing, Seller
shall deliver to Buyer true and complete copies of the Articles of Organization,
Bylaws, share registers, minute books and all other books and records of Seller.
All such documents are correct and complete, have been maintained in accordance
with the laws of the Commonwealth of Massachusetts and in accordance with good
business practices, and accurately reflect all material transactions involving
the businesses and affairs of Seller.

2.24. Corporate Name and Logo. To the knowledge of Seller and Stockholder,
Seller's use of its name and Seller's use of any logo or mark is and has at all
times been in compliance with all applicable federal and state statutory and
common laws, rules, rights of third parties and regulations. To the knowledge of
Stockholder and Seller, Seller is not infringing or otherwise acting adversely
to the right of any person under or in respect to any patent, license,
trademark, trade name, service mark, copyright or similar intangible right and
there is no claim for damages or any proceeding pending or threatened against
Seller, with respect thereto.


 

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