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Agreement and Plan of Merger

 

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Title:

Agreement and Plan of Merger

Entities:

Jackson Rivers Co

Date:

2005

Size:

Preview shows 26KB of 141KB total

Price:

$46

ID:

#1360159

 

 

► Plans ► Agreements ► Agreements & Plans of Merger

 

 

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                          AGREEMENT AND PLAN OF MERGER


THIS AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of December 1, 2005, by and among THE JACKSON RIVERS COMPANY, a
Florida corporation (the "Parent"), JKRC SUB, INC., a Texas corporation (the
"Merger Sub"), DIVERSE NETWORKS, INC., a Texas corporation (the "Company"), and
the shareholders of the Company who are signatories hereto (each, a
"Shareholder" and collectively, the "Shareholders"). Capitalized terms used in
this Agreement without definition shall have the meanings set forth or
referenced in Article XI.

W I T N E S S E T H:

WHEREAS, the Shareholders are collectively the beneficial and record
owners of all of the issued and outstanding capital stock of the Company,
comprised of 5,105,000 shares of common stock, no par value per share
(collectively, the "Company Shares");

WHEREAS, the respective Boards of Directors of the Parent, Merger
Sub, and the Company have approved the merger (the "Merger") of the Company into
Merger Sub on the terms and subject to the conditions set forth in this
Agreement, whereby each issued Company Share not owned by the Parent, Merger
Sub, or the Company shall be converted into the right to receive the Merger
Consideration (as defined in Section 2.1 below); and

WHEREAS, the Parent, as the sole stockholder of Merger Sub, will
approve this Agreement immediately following the execution of this Agreement;

WHEREAS, for Federal income tax purposes it is intended that the
Merger qualify as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"); and

WHEREAS, the Parent, Merger Sub, and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger and also to prescribe various conditions to the Merger;

NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:

ARTICLE I

MERGER

1.1 The Merger. On the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Texas Business Corporation Act (the
"TBCA"), the Company shall be merged with and into Merger Sub at the Effective
Time. At the Effective Time and as a result of the Merger, the separate
corporate existence of the Company shall cease and Merger Sub shall continue as
the surviving entity (the "Surviving Entity"). The Merger, the issuance of
promissory notes issued by Parent in connection with the Merger, the issuance by
the Parent of shares of preferred stock, par value $0.001 per share, of the
Parent (the "Parent Preferred Stock") in connection with the Merger (the "Share
Issuance") and the other transactions contemplated by this Agreement are
referred to in this Agreement as the "Transactions."


<PAGE>

1.2 Closing. The closing (the "Closing") of the Merger shall take place at
the offices of Spectrum Law Group, 1900 Main Street, Suite 125, Irvine, CA 92614
at 10:00 a.m., Pacific Daylight Time, on the third (3rd) Business Day following
the satisfaction (or, to the extent permitted by Law, waiver by the party or
parties entitled to the benefits thereof) of the conditions set forth in
Sections 4.1 and 4.2 (other than those conditions that by their nature are to be
satisfied at the Closing, but subject to the fulfillment or waiver of those
conditions), or at such other place, time and date as shall be agreed in writing
by the Parent and the Company. The date on which the Closing occurs is referred
to in this Agreement as the "Closing Date."

1.3 Effective Time. Prior to the Closing, the Parent shall prepare, and on
the Closing Date, the Surviving Entity shall file with the Secretary of State of
the State of Texas, a certificate of merger or other appropriate documents (in
any such case, the "Certificate of Merger") executed in accordance with the
relevant provisions of the TBCA and shall make all other filings or recordings
required under the TBCA. The Merger shall become effective at such time as the
Certificate of Merger is duly filed with such Secretary of State on the Closing
Date, or at such later time as the Parent and the Company shall agree and
specify in the Certificate of Merger (the time the Merger becomes effective
being the "Effective Time").

1.4 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided herein and in the applicable provisions of the TBCA.

1.5 Articles of Incorporation and By-laws.

(a) The articles of incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the articles of incorporation
of the Surviving Entity until thereafter changed or amended as provided therein
or by the TBCA or applicable Law.

(b) The by-laws of Merger Sub, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Entity until thereafter
changed or amended as provided therein or by applicable Law.

1.6 Directors. The directors of the Surviving Entity shall be James E.
Nelson and Jeffrey Flannery, until the earlier of their resignation or removal
or until their respective successors are duly elected and qualified, as the case
may be.

1.7 Officers. The officers of the Surviving Entity shall be James E.
Nelson as Chairman of the Board and Chief Operating Officer and President, until
the earlier of their resignation or removal or until their respective successors
are duly elected or appointed and qualified, as the case may be.


2
<PAGE>

ARTICLE II

EFFECT ON THE CAPITAL STOCK OF THE CONSTITUENT CORPORATIONS; EXCHANGE OF
CERTIFICATES

2.1 Effect on Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of the holder of any Company Shares or
any shares of capital stock of Merger Sub:

(a) Capital Stock of Merger Sub. Each issued and outstanding share
of capital stock of Merger Sub shall continue to be issued and outstanding and
shall constitute the only issued and outstanding shares of the Surviving Entity.

(b) Cancellation of Treasury Stock and Parent-Owned Stock. Each of
Company Share that is owned by the Company, Parent or Merger Sub (or any direct
or indirect wholly-owned subsidiary of Parent or Merger Sub) shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and no cash, Parent Common Stock or other consideration shall be
delivered or deliverable in exchange therefor.

(c) Conversion of Company Shares.

(1) Subject to Sections 2.1(b), 2.1(d) and 2.3(e), each issued
and outstanding Company Share outstanding prior to the Effective Time shall be
converted into the right to receive , at the election of the holder thereof, one
of the following:

(i) for each such Company Share with respect to which an
election to receive stock consideration (a "Stock Election") has
effectively been made , and not revoked or lost, pursuant to Section 2.3
(each, an "Electing Share"), the right to receive one (1) share (the
"Exchange Ratio") of Parent Series B Preferred Stock (the "Stock
Consideration") with substantially the rights, privileges and preferences
set forth on Exhibit A hereto (the "Series B_Preferred Stock"); and

(ii) for each such Company Share other than Electing
Shares (each, a "Non-Electing Share") the right to receive $0.21 in the
form of a promissory note made by the Parent (the "Note Consideration")
payable within one (1) year of the closing date, bearing interest at 8%
per annum, with installments of principal and interest payable on a
quarterly basis, and containing such other terms as are set forth in the
form of promissory note attached hereto as Exhibit B (the "Note"), and
each stockholder of the Company that holds Non-Electing Shares shall be
deemed to have made a Note election (a "Note Election") with respect to
such Non-Electing Shares.

(2) The Notes payable and the shares of the Parent's Series B
Preferred Stock to be issued, upon the conversion of Company Shares pursuant to
this Section 2.1(c), are referred to collectively as "Merger Consideration." As
of the Effective Time, all such Company Shares shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist, and
each holder of a certificate representing any such Company Shares shall cease to
have any rights with respect thereto, except the right to receive Merger
Consideration upon surrender of such certificate in accordance with Section 2.2.


3
<PAGE>

(d) Dissenters Rights. Notwithstanding anything in this Agreement to
the contrary, Company Shares ("Dissenter Shares") that are outstanding
immediately prior to the Effective Time and that are held by any person who is
entitled to demand and properly demands payment for such Dissenter Shares
pursuant to, and who complies in all respects with, Articles 5.12 and 5.13, et.
seq. of the TBCA (the "Dissenter Rights") shall not be converted into Merger
Consideration as provided in Section 2.1(c)(1), but rather the holders of
Dissenter Shares shall be entitled to payment for such Dissenter Shares in
accordance with the Dissenter Rights; provided, however, that if any such holder
shall fail to perfect or otherwise shall waive, withdraw or lose the right to
receive payment under the Dissenter Rights, then the right of such holder to be
paid in accordance with the Dissenter Rights shall cease and such Dissenter
Shares shall be deemed to have been converted as of the Effective Time into, and
to have become exchangeable solely for the right to receive, Merger
Consideration as provided in Section 2.1(c)(1). The Company shall serve prompt
notice to the Parent of any written notice of intent to demand payment, or any
written demand for payment, received by the Company in respect of any Company
Shares, and the Parent shall have the right to participate in and direct all
negotiations and proceedings with respect to such demands. Prior to the
Effective Time, the Company shall not, without the prior written consent of the
Parent, make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.

2.2 Exchange of Certificates.

(a) Exchange Agent. Spectrum Law Group LLP shall serve as Exchange
Agent (the "Exchange Agent") for payment of Merger Consideration upon surrender
of certificates representing Company Shares. The Exchange Agent shall also act
as the agent for the Company's stockholders for the purpose of receiving and
holding their Forms of Election and Certificates and shall obtain no rights or
interest in such shares. Promptly following the Effective Time, Parent shall
deposit with the Exchange Agent, for the benefit of the holders of Company
Shares, for exchange in accordance with this Article II, through the Exchange
Agent: (i) certificates representing the number of shares of Parent Series B
Preferred Stock issuable and (ii) Notes representing the amount of Note
Consideration payable, in each case, pursuant to Section 2.1(c) in exchange for
outstanding Company Shares (such shares of Parent Series B Preferred Stock and
Notes being hereinafter referred to as the "Exchange Fund"). The Exchange Agent
shall, pursuant to irrevocable instructions, deliver the Merger Consideration
contemplated to be issued pursuant to Section 2.1 out of the Exchange Fund.

(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent, or its designee, shall mail to each holder of a
certificate or certificates (the "Certificates") that immediately prior to the
Effective Time represented outstanding shares of Company Shares whose shares
were converted into the right to receive Merger Consideration pursuant to
Section 2.1(c) who did not complete a Form of Election pursuant to Section 2.3,
(i) a letter of transmittal (which shall specify that delivery shall be effected
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as Parent shall reasonably specify) and (ii) instructions for
use in effecting the surrender of the Certificates in exchange for Merger
Consideration. Upon surrender of a Certificate for cancellation to the Exchange
Agent or to such other agent or agents as may be appointed by Parent, together
with such letter of transmittal, duly executed, and such other documents as may
reasonably be required by the Exchange Agent, the holder of such Certificate
shall be entitled to receive in exchange therefore the amount of Notes, if any,
and the number of shares of Parent Series B Preferred Stock in to which the
aggregate number of Company Shares previously represented by such Certificate
shall have been converted pursuant to Section 2.1(c), and the Certificate so
surrendered shall forthwith be canceled.


4
<PAGE>

(c) Restricted Securities. The shares of Parent Preferred Stock (and
the shares issuable upon conversion thereof) (i) shall not be registered under
the Securities Act or any state securities laws, (ii) will be offered and sold
in reliance upon exemptions provided in the Securities Act and state securities
laws for transactions not involving any public offering, and (iii) therefore,
shall constitute "restricted securities" within the meaning of the Securities
Act and cannot be resold or transferred unless they are subsequently registered
under the Securities Act and such applicable state securities laws or unless an
exemption from such registration is available.

(d) Investment Representation Letters. On or before the Closing
Date, each of the Shareholders shall execute and deliver an Investment
Representation Letter, in the form attached hereto as Exhibit C (the "Investor
Representation Letter"), which contains certain representations designed to
confirm the availability to the Parent of the exemption from registration under
Section 4(2) of the Securities Act in connection with the issuance of the Parent
Common Stock pursuant to this Agreement. Notwithstanding anything to the
contrary in this Agreement, in the event that any Shareholder (a "Defaulting
Shareholder") is unable or fails to execute and deliver an Investor
Representation Letter in favor of the Parent, or the Parent has a reasonable
basis to believe that the representations of such Shareholder in the Investor
Representation Letter are not true and correct in any material respects, then
the Parent may in its sole and absolute discretion refuse to issue the Merger
Consideration allocable to the Defaulting Shareholder.

(e) No Further Ownership Rights in Company Shares. The Merger
Consideration paid and/or issued in accordance with the terms of this Article II
upon conversion of any Company Shares shall be deemed to have been paid and/or
issued in full satisfaction of all rights pertaining to such Company Shares,
subject, however, to the Surviving Entity's obligation to pay any dividends or
make any other distributions with a record date prior to the Effective Time that
may have been declared or made by the Company on such Company Shares in
accordance with the terms of this Agreement or prior to the date of this
Agreement and which remain unpaid at the Effective Time, and after the Effective
Time there shall be no further registration of transfers on the stock transfer
books of the Surviving Entity of Company Shares that were outstanding
immediately prior to the Effective Time. If, after the Effective Time, any
Certificates formerly representing Company Shares are presented to the Surviving
Entity or the Exchange Agent for any reason, they shall be canceled and
exchanged as provided in this Article II.


5
<PAGE>

(f) No Liability. None of Parent, Merger Sub or the Company or the
Exchange Agent shall be liable to any person in respect of any Merger
Consideration (or dividends or distributions with respect thereto) delivered to
a public official pursuant to any applicable abandoned property, escheat or
similar Law. If any Certificate has not been surrendered prior to five years
after the date on which the final Merger Considerationl becomes due (or
immediately prior to such earlier date on which Merger Consideration in respect
of such Certificate would otherwise escheat to or become the property of any
Governmental Entity), any such cash, shares, dividends or distributions in
respect of such Certificate shall, to the extent permitted by applicable Law,
become the property of the Surviving Entity, free and clear of all claims or
interest of any person previously entitled thereto.

(h) Income Tax Treatment. It is intended by the parties hereto that
the Merger qualify as a "reorganization" within the meaning of Section 368(a) of
the Code. The parties hereto hereby adopt this Agreement as a "plan of
reorganization" within the meanings of Sections 1.368-2(g) and 1.368-3(a) of the
U.S. Treasury Regulations promulgated under the Code.

2.3 Elections.

(a) Each person who, on or prior to the Election Date referred to in
paragraph (b) below, is a record holder of Company Shares shall be entitled,
with respect to all or any portion of such shares, to make an unconditional
Stock Election on or prior to such Election Date, on the basis hereinafter set
forth.

(b) Parent shall prepare a form of election, which form shall be
subject to the reasonable approval of the Company (the "Form of Election") and
shall be mailed to the record holders of Company Shares as of the date of this
Agreement, which Form of Election shall be used by each record holder of shares
of Company Shares who wishes to elect to receive the stock consideration
pursuant to Section 2.1(c)(1) for any or all Company Shares held by such holder.
Any such holder's election to receive the stock consideration pursuant to
Section 2.1(c)(1) shall have been properly made only if the Exchange Agent shall
have received at its designated office, by 5:00 p.m., Pacific Standard Time, on
the Business Day immediately preceding the Closing Date (the "Election Date"), a
Form of Election properly completed and signed and accompanied by Certificates
for the Company Shares to which such Form of Election relates, duly endorsed in
blank or otherwise in form acceptable for transfer on the books of the Company.
If the Closing is delayed to a subsequent date, the Election Date shall be
similarly delayed and Parent will promptly announce such rescheduled Election
Date and Closing.

(c) Any Form of Election may be revoked by the stockholder who
submitted such Form of Election to the Exchange Agent only by written notice
received by the Exchange Agent (i) prior to 5:00 p.m., Pacific Time, on the
Election Date or (ii) after such time, if (and only to the extent that) the
Exchange Agent is legally required to permit revocations and only if the
Effective Time shall not have occurred prior to such date. In addition, all
Forms of Election shall automatically be revoked if the Exchange Agent is
notified in writing by Parent and the Company that the Merger has been
abandoned. If a Form of Election is revoked, the Certificate or Certificates for
the shares of Company Shares to which such Form of Election relates shall be
promptly returned to the stockholder submitting the same to the Exchange Agent
and any such shares shall be treated as Non-Electing Shares (unless and until
another duly completed Form of Election (and the Certificate or Certificates, or
guarantees of delivery, as applicable, to which such Form of Election relates)
has been submitted to the Exchange Agent in accordance with this Agreement).


6
<PAGE>

(d) The determination of the Exchange Agent in its sole discretion
shall be binding as to whether or not elections to receive the stock
consideration pursuant to Section 2.1(c)(1) have been properly made or revoked
pursuant to this Section 2.3 with respect to shares of Company Shares and when
elections and revocations were received by it. If no Form of Election is
received with respect to shares of Company Shares, or if the Exchange Agent
determines that any election to receive the stock consideration pursuant to
Section 2.1(c)(1) was not properly made with respect to shares of Company
Shares, such shares shall be treated by the Exchange Agent as Non-Electing
Shares at the Effective Time, and such shares shall be converted into the right
to receive the Note Consideration in accordance with Section 2.1(c)(1)(ii). The
Exchange Agent may, with the mutual agreement of Parent and the Company, make
such rules as are consistent with this Section 2.03 for the implementation of
the elections provided for herein as shall be necessary or desirable fully to
effect such elections.

2.4 Company Equity Awards.

(a) At the Effective Time, other than stock options issued under the
Company's 2000 Omnibus Stock Incentive Plan that have an exercise price of $1.00
per share (which shall expire) or $.50 per share (which, pursuant to the terms
of the Company's 2000 Omnibus Stock Incentive Plan shall receive in lieu thereof
from the Company an equitable substitution for such options), each Company Stock
Option then outstanding under any Company Stock Plan, whether or not then
exercisable, shall be assumed by Parent and converted into an option to purchase
Parent Series B Preferred Stock in accordance with this Section 2.4(a). Each
Company Stock Option so converted shall continue to have, and be subject to, the
same terms and conditions as set forth in the applicable Company Stock Plan and
any agreements thereunder immediately prior to the Effective Time, provided,
however, that all of such stock options shall be deemed to be fully vested as of
the Effective Time. Notwithstanding the foregoing, the conversion of any Company
Stock Options which are "incentive stock options," within the meaning of Section
422 of the Code, into options to purchase Parent Series B Preferred Stock shall
be made so as not to constitute a "modification" of such Company Stock Options
within the meaning of Section 424 of the Code.

(b) Parent shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Parent Series B Preferred Stock for
delivery upon exercise or settlement of the Company Stock Options being assumed
or settled in accordance with this Section 2.4.


7
<PAGE>

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties concerning the Company. The Company
hereby represents and warrants to the Parent as follows:


 

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