EXHIBIT 2.1
Execution Copy
------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ZENASCENT, INC.,
ZENASCENT NEWCO, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ BOXING, INC.,
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
AND
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
DATED AS OF AUGUST 2, 2001
------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of August 2, 2001, by and among ZENASCENT, INC., a Delaware
corporation ("Acquiror"), ZENASCENT NEWCO, INC., a Delaware corporation and
wholly owned subsidiary of Acquiror ("Newco"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ BOXING, INC., a
Delaware corporation ("Boxing") and the holder of all of the issued and
outstanding capital stock of ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ PROMOTIONS, LTD., a New York
corporation ("CKP"), ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇") and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇▇▇"
and, together with ▇▇▇▇▇▇▇, the "Stockholders").
RECITALS
WHEREAS, Acquiror and Boxing have determined that it is in the best
interests of their respective stockholders for Newco to merge with and into
Boxing upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, the respective Boards of Directors of Acquiror, Newco and
Boxing have each approved this Agreement and the consummation of the
transactions contemplated hereby and approved the execution and delivery of this
Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the
merger shall qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1.
MERGER OF NEWCO WITH AND INTO BOXING
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at the
"Effective Time" (as defined herein), Newco shall be merged with and into Boxing
(the "Merger") in accordance with the provisions of the Delaware General
Corporation Law (the "DGCL"), the separate corporate existence of Newco shall
cease and Boxing shall continue as the surviving corporation (the "Surviving
Corporation") under the laws of the State of Delaware. The Merger shall have the
effects set forth in Section 251 of the DGCL.
(b) Subject to the provisions of this Agreement, a certificate of
merger (the "Certificate of Merger") shall be duly prepared, executed and
acknowledged by the Surviving Corporation and thereafter delivered to the
Secretary of State of the State of Delaware for filing, as provided in the DGCL,
as soon as practicable on or after the Merger Closing Date (as defined in
Section 2.3). The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware or at
such time thereafter as provided in the Certificate of Merger pursuant to the
mutual agreement of Acquiror and Boxing (the "Effective Time").
(c) At the Effective Time:
(i) Boxing shall continue its existence under the
laws of the State of Delaware as the Surviving Corporation;
(ii) the separate corporate existence of Newco shall cease;
(iii) all rights, title and interests to all assets, whether
tangible or intangible and any property or property rights owned by Newco or
Boxing shall be allocated to and vested in the Surviving Corporation without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of Boxing or Newco
shall be allocated to the Surviving Corporation, which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than the Surviving Corporation, shall be liable
therefor;
(iv) the Certificate of Incorporation of the Surviving
Corporation shall be the Certificate of Incorporation of Boxing as in effect
immediately prior to the consummation of the Merger;
(v) the By-Laws of the Surviving Corporation shall be the
By-Laws of Boxing as in effect immediately prior to the consummation of the
Merger, and shall continue in full force and effect until thereafter amended as
provided by law and such By-Laws;
(vi) the officers and directors of the Surviving
Corporation shall be the officers and directors of Boxing as of the time
immediately preceding the Effective Time and such persons shall serve in such
positions for their respective terms provided by law or in the By-Laws of the
Surviving Corporation and until their respective successors are elected and
qualified; and
(vii) the officers and directors of the Acquiror set forth
on Schedule 1.1(c)(vii)(x) shall resign upon the Effective Time and the officers
and directors of the Acquiror shall consist of those individuals identified on
Schedule 1.1(c)(vii)(y), and such persons shall serve in such positions for
their respective terms provided by law or in the By-Laws of the Acquiror and
until their respective successors are elected and qualified. For a period of at
least one year following the Effective Time, one person, who shall be reasonably
acceptable to the Stockholders, designated by the directors set forth on
Schedule 1.1(c)(vii)(x) shall serve as a director of the Acquiror (the
"Continuing Director"). In order to enable the persons set forth on
2
Schedule 1.1(c)(vii)(y) to serve as directors as of the Effective Time, at least
ten (10) days prior to the Effective Time, Acquiror shall, in compliance with
the rules and regulations promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), prepare and file with the Securities and
Exchange Commission (the "SEC") and cause to be transmitted to its stockholders
the information required under Regulation 14(f)-1.
1.2 Conversion of Stock; Conversion of Outstanding Options.
(a) Conversion of Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of any holder thereof:
(i) the shares representing 100% of the issued and
outstanding common stock, par value $.01 per share, of Boxing ("Boxing Common
Stock") as of the Merger Closing shall be converted into and represent the right
to receive, and shall be exchangeable for a pro rata portion of the merger
consideration identified at Section 1.3 hereafter (the "Merger Consideration")
(ii) the equity rights in Boxing of ▇▇▇▇▇▇▇▇▇▇
Investment, L.L.C., a Delaware limited liability company ("▇▇▇▇▇▇▇▇▇▇"),
shall be converted into and represent the right to receive, and shall be
exchangeable for, the ▇▇▇▇▇▇▇▇▇▇ Warrant (as defined in Section 1.3(a)(iii));
(iii) each share of capital stock of Boxing held in treasury
as of the Effective Time shall be canceled without payment of any consideration
therefor and without any conversion thereof;
(iv) each share of common stock, $0.01 par value per share,
of Newco (the "Newco Common Stock") issued and outstanding prior to the
Effective Time shall be converted into and become a like number of fully paid
and nonassessable shares of common stock, par value $.01 per share, of the
Surviving Corporation.
(b) Transfer; Delivery of Certificates after Effective Time. From
and after the Effective Time, there shall be no transfers on the stock transfer
books of Boxing of shares of Boxing Common Stock that were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
certificates for shares of Boxing Common Stock that were outstanding immediately
prior to the Effective Time shall be delivered to Boxing, they shall be canceled
and exchanged for the consideration to be received therefor in connection with
the Merger as provided in this Agreement.
1.3 Merger Consideration.
(a) The Merger Consideration, consisting of the total purchase price
payable to the Stockholders and other equity interest holders of Boxing in
connection with the acquisition by merger of Boxing, shall be delivered and
shall consist exclusively of:
(i) That number of newly issued shares of Series B Convertible
Preferred Stock, par value $0.001 per share, of the Acquiror (the "Series B
Stock") that convert into the number of shares of common stock, $0.001 par value
per share, of Acquiror (the "Acquiror Common Stock") as is equal to the Exchange
Number, rounded up to the nearest whole number.
3
The Series B Stock shall be convertible into shares of Acquiror Common Stock in
accordance with the terms of, and the Series B Stock shall have those rights,
preferences and designations set forth in, that certain Certificate of
Designation, Preferences and Rights of Series B Convertible Preferred Stock
(the "Certificate of Designation"), a true and correct copy of which is
attached hereto and made a part hereof as Exhibit 1.3(a)(i) and which will be
duly authorized, approved and filed with the State of Delaware by
Acquiror prior to the Effective Time; and
(ii) A warrant (the "Merger Warrant"), in the form attached
hereto as Exhibit 1.3(a)(ii), to acquire up to 6,000,000 shares of Acquiror
Common Stock. The per share exercise price of Merger Warrant shall be $0.40. The
Merger Warrant shall be issued at the Merger Closing.
(iii) A warrant (the "▇▇▇▇▇▇▇▇▇▇ Warrant"), in the form
attached hereto as Exhibit 1.3(a)(ii), to acquire up to 1,000,000 shares of
Acquiror Common Stock. The per share exercise price of the ▇▇▇▇▇▇▇▇▇▇ Warrant
shall be $0.40. The ▇▇▇▇▇▇▇▇▇▇ Warrant shall be issued at the Merger Closing.
(b) The Series B Stock to be delivered at the Merger Closing (the
"Preferred Merger Shares") shall constitute sixty-five percent (65%) of the
outstanding equity ownership of Acquiror immediately following the Effective
Time.
(c) It is intended that the delivery of the Merger
Consideration shall qualify as a tax-free exchange under the Code.
(d) The Preferred Merger Shares and, if issued, the shares of
Acquiror Common Stock issued (i) upon conversion of the Preferred Merger Shares
(the "Conversion Shares") and (ii) upon exercise of the Merger Warrant and the
▇▇▇▇▇▇▇▇▇▇ Warrant (the "Warrant Shares" and, together with the Conversion
Shares, the "Merger Shares"), shall be fully paid and non-assessable and shall
be free and clear of all liens, levies and encumbrances, except that such shares
shall be "restricted securities" pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended (the "Securities Act").
1.4 Certain Financings.
(a) As a condition precedent to Boxing's obligations under this
Agreement, Acquiror shall, no later than August 24, 2001, have (i) consummated a
sale of Acquiror Common Stock with gross proceeds to Acquiror of at least
$750,000 (the "First Acquiror Financing") and (ii) loaned to CKP, for a period
of one year and at an annual interest rate of ten percent (10%), at least
$575,000 (the "Bridge Loan Amount") of the proceeds of the First Acquiror
Financing (the "Bridge Loan"). The shares of Acquiror Common Stock sold in the
First Acquiror Financing are referred to herein as the "First Financing Shares."
(b) As a condition precedent to Boxing's obligations under this
Agreement, Acquiror shall, no later than the Merger Closing, have consummated a
sale of Acquiror Common Stock with gross proceeds to Acquiror of at least an
additional $1,750,000 (the "Second Acquiror Financing"). The shares of Acquiror
Common Stock sold in the Second Acquiror Financing are
4
referred to herein as the "Second Financing Shares" and, together with the First
Financing Shares, the "Financing Shares."
1.5 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, Newco, Boxing, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇,
respectively, shall use their best efforts to take all such action as may be
necessary and appropriate to effectuate the Merger under the DGCL as promptly as
possible.
1.6 No Further Rights or Transfers.
At and after the Effective Time, the Boxing Common Stock
outstanding immediately prior to the Effective Time shall cease to be issued and
outstanding or to provide the holder thereof any rights as a stockholder of
Boxing, except for the right to surrender the certificate or certificates
representing such shares and to receive the Merger Consideration to be received
in the Merger as provided in this Agreement.
ARTICLE 2.
THE CLOSINGS
2.1 Bridge Loan Closing Date.
Subject to satisfaction or waiver of all conditions precedent
set forth in Sections 6.1(a) and 6.2(a) of this Agreement, the closing of the
Bridge Loan (the "Bridge Loan Closing") shall take place at the offices of
▇▇▇▇▇▇▇▇▇ Traurig, LLP, at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on (a) the
day on which the last of the conditions precedent set forth in Sections 6.1(a)
and 6.2(a) of this Agreement are fulfilled or waived or (b) at such other time,
date and place as the parties may agree, but in no event shall such date be
later than August 24, 2001 unless such date is extended by the mutual agreement
of the parties. The date that the Bridge Loan Closing occurs is referred to
herein as the "Bridge Loan Closing Date."
2.2 Bridge Loan Closing.
At the Bridge Loan Closing, the following transactions shall
occur, all of such transactions being deemed to occur simultaneously:
(a) Boxing shall deliver, or cause to be delivered, to the Acquiror
and Newco, the following documents and shall take the following actions:
(i) A certificate of the Secretary of Boxing certifying that
the Stockholders have approved the Merger, this Agreement, and the transactions
contemplated hereby in accordance with applicable law and Boxing's Certificate
of Incorporation and By-Laws;
(ii) Boxing shall execute and deliver to its counsel,
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP ("GT"), a Certificate of Merger with such amendments
thereto as the parties hereto shall deem mutually acceptable;
5
(iii) A certificate shall be executed by an authorized officer
of Boxing attesting to the fact that all representations and warranties made by
Boxing in this Agreement are true and correct on and as of the Bridge Loan
Closing, as though originally given to Acquiror and Newco on said date;
(iv) A certificate of good standing shall be delivered by
Boxing from the Secretary of State of the State of Delaware, dated at or about
the Bridge Loan Closing Date;
(v) An incumbency certificate shall be delivered by Boxing
signed by all of the officers and directors thereof dated at or about the Bridge
Loan Closing Date;
(vi) The Certificate of Incorporation of Boxing, certified by
the Secretary of State of the State of Delaware at or about the Bridge Loan
Closing Date, and a copy of the By-Laws of Boxing certified by the Secretary of
Boxing, dated at or about the Bridge Loan Closing Date, shall be delivered by
Boxing;
(vii) Board and stockholder resolutions shall be delivered by
the Secretary of Boxing dated at or about the Bridge Loan Closing Date
authorizing the transactions contemplated by this Agreement; and
(viii) Such other documents and agreements as reasonably
requested by Acquiror and Newco to effectively consummate the transactions
contemplated under this Agreement.
(b) Acquiror and Newco will deliver, or shall cause to be delivered,
to Boxing, the following documents and shall take the following actions:
(i) Acquiror shall deliver to CKP the Bridge Loan Amount;
(ii) Newco shall execute and deliver to GT the Certificate of
Merger with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(iii) A certificate shall be executed by an authorized officer
of Acquiror:
(A) attesting to the fact that all representations and
warranties made by Acquiror under this Agreement are true and correct on and as
of the Bridge Loan Closing, as though originally given to Boxing on said date;
(B) attesting to the fact that the total liabilities
of Acquiror are equal to or less than $100,000;
(C) attesting to the fact that the First Acquiror
Financing has been consummated and Acquiror has received the proceeds of such
financing; and
(D) stating the number of shares of Acquiror Common
Stock which may be purchased upon the valid exercise of warrants to purchase
Acquiror Common Stock outstanding immediately prior to the Effective Time (the
"Pre-Merger Warrant Number").
6
(iv) A certificate shall be executed by an authorized officer
of Newco to the effect that all representations and warranties made by Newco
under this Agreement are true and correct on and as of the Bridge Loan Closing,
as though originally given to Boxing on said date;
(v) A certificate of good standing shall be delivered by
Acquiror from the Secretary of State of the State of Delaware, dated at or about
the Bridge Loan Closing Date;
(vi) A certificate of good standing shall be delivered by
Newco from the Secretary of State of the State of Delaware, dated at or about
the Bridge Loan Closing Date;
(vii) An incumbency certificate shall be delivered by Acquiror
signed by all of its officers and directors dated at or about the Bridge Loan
Closing;
(viii) An incumbency certificate shall be delivered by Newco
signed by all of its officers and directors dated at or about the Bridge Loan
Closing;
(ix) A copy of the Certificate of Incorporation of Acquiror
and the Certificate of Designation certified by the Secretary of State of the
State of Delaware at or about the Bridge Loan Closing Date and a copy of the
By-Laws of Acquiror certified by the Secretary of Acquiror dated at or about the
Closing;
(x) A copy of the Certificate of Incorporation of Newco
certified by the Secretary of State of the State of Delaware at or about the
Bridge Loan Closing Date and a copy of the By-Laws of Newco certified by the
Secretary of Newco dated at or about the Bridge Loan Closing Date;
(xi) A certified Board resolution shall be delivered by the
Secretary of Acquiror dated at or about the Bridge Loan Closing authorizing the
transactions contemplated by this Agreement;
(xii) Certified Board and stockholder resolutions shall be
delivered by the Secretary of Newco dated at or about the Bridge Loan Closing
authorizing the transactions contemplated by this Agreement; and
(xiii) Such other documents and agreements as reasonably
requested by Boxing to effectively consummate the Bridge Loan.
2.3 Merger Closing Date.
Subject to satisfaction or waiver of all conditions precedent
set forth in Section 6 of this Agreement, the closing of the Merger (the "Merger
Closing") shall take place at the offices of GT at ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ on (a) the later of: (i) the first Business Day following the day
upon which all appropriate Acquiror, Newco and Boxing corporate action has been
taken in accordance with Section 3 of this Agreement; or (ii) the day on which
the last of the conditions precedent set forth in Sections 6.1(b) and 6.2(b) of
this Agreement is fulfilled or waived; or (b) at such other time, date and place
as the parties may agree, but in no event shall such date be later than October
12, 2001 unless such date is extended
7
by the mutual agreement of the parties. The date that the Merger Closing occurs
is referred to herein as the "Merger Closing Date."
2.4 Merger Closing.
At the Merger Closing, the following transactions shall occur,
all of such transactions being deemed to occur simultaneously:
(a) Boxing shall deliver, or cause to be delivered, to the Acquiror
and Newco, the following documents and shall take the following actions:
(i) A certificate of the President and Secretary of Boxing
certifying to the continuing validity in all respects of the certificates
delivered pursuant to Section 2.2(a)(i), (ii), (iii), (iv) and (v) as if such
certificates had been delivered, and the statements contained therein made, on
the Merger Closing Date with respect to the Merger;
(ii) Boxing shall cause to be filed with the Secretary of
State of the State of Delaware the Certificate of Merger with such amendments
thereto as the parties hereto shall deem mutually acceptable; and
(iii) Such other documents and agreements as reasonably
requested by Acquiror and Newco to effectively consummate the transactions
contemplated under this Agreement.
(b) Acquiror and Newco will deliver, or shall cause to be delivered,
to Boxing and the Stockholders, the following documents and shall take the
following actions:
(i) Acquiror shall deliver or shall cause to be delivered to
each of the Stockholders a certificate or certificates representing such
Stockholder's allocable portion of the Preferred Merger Shares and the Merger
Warrant in payment of the Merger Consideration;
(ii) A certificate shall be executed by an authorized officer
of Acquiror certifying to the continuing validity in all respects of the
certificates delivered pursuant to Section 2.2(b)(iii), (iv), (v), (vi), (vii),
(viii) as if such certificates had been delivered, and the statements contained
therein made, on the Merger Closing Date with respect to the Merger;
(iii) A certificate shall be executed by an authorized officer
of Acquiror attesting to the fact that the Second Acquiror Financing has been
consummated, Acquiror has received the proceeds of such financing and cash on
hand is equal to or exceeds $1,575,000;
(iv) Each of the officers and directors of Acquiror shall have
tendered their resignation in form and substance satisfactory to Boxing and
there shall not be any continuing obligation, financial or otherwise, to such
persons; and
(v) Such other documents and agreements as reasonably
requested by Boxing or the Stockholders to effectively consummate the
transactions contemplated under this Agreement.
8
ARTICLE 3.
CERTAIN CORPORATE ACTION
3.1 Boxing Action.
Boxing shall cause to occur all corporate and stockholder action
necessary to effect the Merger and to consummate the other transactions
contemplated hereby.
3.2 Acquiror and Newco Corporate Action.
Acquiror and Newco shall cause to occur all corporate and
stockholder action necessary to effect the Merger and to consummate the other
transactions contemplated hereby. Without limiting the generality of the
foregoing, prior to the Bridge Loan Closing, Acquiror shall have adopted and
filed with the Secretary of State of the State of Delaware the Certificate of
Designation.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of Boxing and the Stockholders
As a material inducement to Acquiror and Newco to execute this
Agreement and consummate the Bridge Loan, the Merger and other transactions
contemplated hereby, Boxing and the Stockholders hereby make the following
representations and warranties to Acquiror and Newco. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all material respects on each Closing Date as though made
on and as of such date.
(a) Corporate Existence and Power.
(i) Boxing is a corporation duly incorporated and in good
standing under the laws of the State of Delaware, and has all corporate powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except where the failure to have any
of the foregoing would not have a Material Adverse Effect. Except as set forth
on Schedule 4.1(a), Boxing is duly qualified to do business as a foreign
corporation in each jurisdiction where the character of the property owned or
leased by it or the nature of its activities makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, correct
and complete copies of the Articles of Incorporation and By-Laws of Boxing, as
amended to date, are attached hereto as Schedule 4.1(a) and are made a part
hereof.
(ii) Boxing owns no equity interest in any entity, other than
a 100% equity interest in (A) CKP and (B) ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Sports Network, Ltd, an
inactive New York corporation.
9
(iii) CKP is a corporation duly incorporated and validly
existing under the laws of the State of New York, and has all corporate powers
and all governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except where the failure to have any
of the foregoing would not have a Material Adverse Effect. CKP owns no interest
in any other entity other than a right to acquire the majority of the equity
interest in Big Content, Inc., a Delaware corporation ("Big Content").
(b) Due Authorization and Requisite Approvals.
(i) This Agreement has been duly authorized, executed and
delivered by Boxing and constitutes a valid and binding agreement of Boxing,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors rights generally
or by the application of equitable principles. As of the Bridge Loan Closing
Date, all corporate action on the part of Boxing required under applicable law
in order to consummate the Merger will have occurred; and
(ii) This Agreement has been duly authorized, executed and
delivered by each of the Stockholders and constitutes a valid and binding
agreement of each of the Stockholders, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws relating to, limiting or affecting the
enforcement of creditors rights generally or by the application of equitable
principles.
(iii) The Board of Directors of Boxing has approved the
execution of this Agreement and the consummation of the Merger and related
actions contemplated hereby.
(c) No Contravention. The execution and delivery of the
Agreement does not, and the consummation of the transactions contemplated
hereby will not:
(i) conflict with or result in any violation of any
provision of the Articles of Incorporation or By-Laws of Boxing;
(ii) conflict with or result in any violation or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of a right or obligation or
loss under, any loan or credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession, franchise, license,
judgment, order, decree, or, to the best of its Knowledge, statute, law,
ordinance, rule or regulation applicable to Boxing or CKP, or any of their
respective properties or assets, or result in the creation or imposition of any
mortgage, lien, pledge, charge or security interest of any kind ("Encumbrance")
on any assets of Boxing or CKP, except such as is not reasonably likely to have
a Material Adverse Effect or prevent Boxing from consummating the transactions
contemplated by this Agreement; or
(iii) except as set forth on Schedule 4.1(c), require any
consent, approval, order or authorization of, or registration, declaration or
filing with, any court, administrative agency or
10
commission or other governmental authority or instrumentality, domestic or
foreign, except the filing of the Certificate of Merger with the Secretary of
State of the State of Delaware.
(d) Capitalization and Share Ownership.
(i) The authorized capital stock of Boxing consists of 1,000
shares of Boxing Common Stock. There are currently 429.5 shares of Boxing Common
Stock outstanding, all of which are owned by the Stockholders. The outstanding
shares of capital stock of Boxing have been duly authorized and validly issued
and are fully paid and nonassessable and free of preemptive rights. Except as
set forth in this Section 4.1(d)(i) and Schedule 4.1(d)(i), there are
outstanding (A) no shares of capital stock or other voting securities of Boxing,
(B) no securities of Boxing convertible into or exchangeable for shares of
capital stock or voting securities of Boxing and (C) no options, warrants or
other rights to acquire from Boxing or any other person, and no obligation of
Boxing to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of Boxing, and there
are no agreements or commitments to do any of the foregoing. There are no voting
trusts or voting agreements applicable to any shares of capital stock of Boxing.
The Boxing Common Stock to be surrendered in the Merger will be owned of record
and beneficially by the Stockholders, free and clear of all liens and
encumbrances of any kind and nature, and have not been sold, pledged, assigned
or otherwise transferred. Except for a warrant issued by ▇▇▇▇▇▇▇ to Wilshire
Advisers LLC pursuant to which ▇▇▇▇▇▇▇ has agreed to sell 7.5 shares of Boxing
Common Stock, there are no agreements (other than this Agreement) to sell,
pledge, assign or otherwise transfer such securities.
(ii) The authorized capital stock of CKP consists solely of
200 shares of common stock, no par value per share ("CKP Common Stock"). There
are currently 151 shares of CKP Common Stock outstanding, all of which are owned
by Boxing free and clear of all liens and encumbrances of any kind and nature.
Such shares of CKP Common Stock have not been sold, pledged, assigned or
otherwise transferred, and there are no agreements to sell, pledge, assign or
otherwise transfer such securities. The outstanding shares of capital stock of
CKP have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as set forth in this Section
4.1(d)(ii), there are outstanding (A) no shares of capital stock or other voting
securities of CKP, (B) no securities of CKP convertible into or exchangeable for
shares of capital stock or voting securities of CKP and (C) no options, warrants
or other rights to acquire from CKP, Boxing or any other person, and no
obligation of CKP to issue, any capital stock, voting securities or securities
convertible into or exchangeable for capital stock or voting securities of CKP,
and there are no agreements or commitments to do any of the foregoing. There are
no voting trusts or voting agreements applicable to any shares of capital stock
of CKP.
(e) Financial Statements. Boxing shall prepare and deliver to
Acquiror, no less than twenty (20) days prior to the Merger Closing Date, copies
of (i) unaudited consolidated financial statements of Boxing and CKP for the
six-month period ended June 30, 2001 (the "Interim Statement"); and (ii) audited
consolidated financial statements of Boxing and CKP for the fiscal years ended
December 31, 1999 and 2000 (the "Audited Statements" and, together with the
Interim Statement, the "Financial Statements"). The Financial Statements will
have been
11
prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods reported upon and will fairly
present in all material respects the consolidated financial position of Boxing
and CKP as of the dates thereof and the results of operations for the periods
then ended.
(f) Real Properties.
(i) (A) Boxing does not own or lease any real estate. CKP
currently leases real property at those locations identified on Schedule
4.1(f)(i)(B) hereto. CKP does not own or lease any other real estate. None of
the leasehold interests held by CKP is subject to any Encumbrance, except (a)
liens for ad valorem taxes not yet due or being contested in good faith; and (b)
contractual or statutory mechanics or materialmen's liens or other statutory or
common law Encumbrances relating to obligations of CKP that are not delinquent
or are being contested in good faith. There are no Encumbrances which materially
interfere with the present use of such leasehold interests.
(ii) Except as described on Schedule 4.1(f)(ii) hereto,
neither Boxing nor CKP has received any written notice from any governmental
entity having jurisdiction over Boxing or CKP or over any of the real property
leased by CKP of any violation by Boxing or CKP of any law, regulation or
ordinance relating to zoning, environmental matters, local building or fire
codes or similar matters relating to any of the real property leased by CKP or
of any condemnation or eminent domain proceeding.
(iii) All of the buildings leased by CKP, and all plumbing,
HVAC, electrical, mechanical and similar systems are in good repair and adequate
for their current use, ordinary wear and tear excepted.
(iv) Except as described on Schedule 4.1(f)(iv), neither
Boxing nor CKP is a party to any lease, sublease, lease assignment or other
agreement for the use or occupancy of any of the leasehold premises wherein
Boxing or CKP is the landlord, sub-landlord or assignor, whether by name, as
successor-in-interest or otherwise. There are no outstanding agreements with any
party to acquire the leasehold premises or any portion thereof or any interest
therein.
(v) All certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by CKP have been issued, are fully paid for and are in full force and
effect, will survive the Merger Closing and will not be invalidated, violated or
otherwise adversely affected by the Merger or the other transactions
contemplated by this Agreement.
(g) No Contingent Liabilities. Except contained within the
Financial Statements or otherwise as described on Schedule 4.1(g), at the
Closing, neither Boxing nor CKP shall have material liabilities, whether related
to tax or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise, and to the best Knowledge of Boxing, after due inquiry, there is no
existing condition, situation or set of circumstances which could reasonably be
expected to result in such a liability,
12
except as and to the extent reflected in this Agreement or any Schedule or
Exhibit hereto or which has been incurred in the ordinary course of business
and as accurately reflected on the books and records of Boxing or CKP.
(h) Litigation. Except as described on Schedule 4.1(h) hereto
there is no action, suit, investigation or proceeding (or, to the Knowledge of
Boxing, any basis therefor) pending against, or to the Knowledge of Boxing,
threatened against or affecting Boxing or CKP or any of their respective
properties before any court or arbitrator or any governmental body, agency or
official that (i) if adversely determined against Boxing or CKP, as applicable,
would have a Material Adverse Effect or (ii) in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the Merger or any of the other
transactions contemplated by the Agreement.
(i) Taxes. Except as disclosed on Schedule 4.1(i), each of Boxing and
CKP has timely filed all tax returns required to be filed by it, or will timely
file when due all tax returns required to be filed by it between the date hereof
and the Closing. Each of Boxing and CKP has paid in a timely fashion or will pay
when due in a timely fashion, all taxes required to be paid in respect of the
periods covered by such returns, and the books and the financial statements of
Boxing and CKP reflect, or will reflect, adequate reserves for all taxes payable
by it which have been, or will be, accrued but are not yet due. Neither Boxing
nor CKP is delinquent in the payment of any material tax, assessment or
governmental charge. No deficiencies for any taxes have been proposed, asserted
or assessed against Boxing or CKP. Boxing is not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending or threatened
against Boxing or CKP, asserting any deficiency in the payment of taxes. All
taxes which Boxing or CKP is required by law to withhold and collect have been
duly withheld and collected, and have been timely paid over to the proper
authorities to the extent due and payable. For the purposes of this Agreement,
the term "tax" shall include all federal state, local and foreign income,
property, sales, excise and other taxes of any nature whatsoever. Except as
disclosed on Schedule 4.1(i), neither Boxing nor CKP has been granted any
extension or waiver of the limitation period applicable to any tax returns.
There are no Encumbrances for taxes upon the assets of Boxing or CKP. There are
no tax sharing or tax allocation agreements to which Boxing or CKP is now or
ever has been a party. Neither Boxing nor CKP will be required under Section
481(c) of the Code to include any material adjustment in taxable income for any
period prior to the Merger. Neither Boxing nor CKP (a) has been a member of an
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was either Boxing or CKP) and (b) has any
liability for the taxes of any person (other than Boxing or CKP, as applicable)
under Treasury Regulation Section 1.1502-6 (or any similar provision of state,
local or foreign law), as a transferee or successor, by contract or otherwise.
(j) ERISA.
(i) Neither Boxing nor CKP maintains nor has it ever
maintained, administered or contributed to an "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA").
13
(ii) Neither Boxing nor CKP is a party to any multiemployer
plan as defined in Section 4001(a) (3) of ERISA ("Multiemployer Plans"), and
none of Boxing, CKP nor any of their respective affiliate has any outstanding
liability to contribute to any Multiemployer Plan, for delinquent contributions
or for withdrawal liability pursuant to Section 4201 of ERISA.
(iii) Neither Boxing nor CKP is a party to any material
employment, severance or other similar contract, arrangement or policy or any
plan or arrangement (written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit-sharing, bonuses, stock options,
stock appreciation rights or other forms of incentive compensation or
post-retirement insurance, compensation or benefits.
(k) Insurance Coverage. Each of Boxing and CKP maintains in effect
insurance (i) on its assets, and upon its business and operations, against loss
or damage, risks, hazards and liabilities of the kinds customarily insured
against by similar entities engaged in the same or similar businesses in
adequate amounts and (ii) required to be carried by it by law or by any contract
to which it is a party. All of such policies are in full force and effect and
all premiums payable have been paid in full and each of Boxing and CKP, as
applicable is in full compliance with the terms and conditions of such policies.
Neither Boxing nor CKP has received any notice from any issuer of such policies
of its intention to cancel or refusal to renew any policy issued by it or of its
intention to renew any such policy based on a material increase in premium rates
other than in the ordinary course of business. None of such policies are subject
to cancellation by virtue of the Merger or the consummation of the other
transactions contemplated by this Agreement. There is no claim by Boxing or CKP
pending under any of such policies as to which coverage has been questioned or
denied.
(l) Compliance with Laws. To the best of Boxing's or CKP's Knowledge,
neither Boxing nor CKP is in violation of, nor has it violated, any applicable
provisions of any laws, statutes, ordinances or regulations, other than as would
not be reasonably likely to have a Material Adverse Effect. Without limiting the
generality of the foregoing, to the best Knowledge of Boxing, each of Boxing and
CKP has all licenses, permits, certificates and authorizations needed or
required for the conduct of its business as presently conducted and for the use
of its properties and premises occupied by it, except where the failure to
obtain a licenses, permit, certificate or authorization would not have a
Material Adverse Effect.
(m) Investment Banking Fees. Except for a fee payable to Ashwood
Capital, Inc., there is no investment banker, broker, finder or other similar
intermediary which has been retained by Boxing or the Stockholders, or is
authorized by Boxing or the Stockholders to act on their behalf, who might be
entitled to any fee or commission from Boxing, the Stockholders, Acquiror, Newco
or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(n) Personal Property. Each of Boxing and CKP has good and valid
title to all of the personal property, tangible and intangible, reflected on the
Financial Statements and to all other personal property owned by it, free and
clear of any Encumbrance. Each of Boxing and CKP is
14
the owner of all of its personal property now located in or upon its leased
premises and of all personal property which is used in the operation of its
business. All such equipment, furniture and fixtures and other tangible personal
property are in good operating condition and repair and do not require any
repairs other than normal routine maintenance to maintain such property in good
operating condition and repair.
(o) Intellectual Property; Intangible Property. The corporate names of
Boxing and CKP and the trade names and service marks listed on Schedule 4.1(o)
are the only names and service marks which are used by either Boxing or CKP in
the operation of its business (the "Names and Service Marks"). Neither Boxing
nor CKP has done business or has been known by any other name other than by its
Names and Service Marks. Except for rights granted to Big Content, each of
Boxing and CKP owns and has the exclusive right within the states and countries
in which it operates to use all intellectual property presently in use by it and
necessary for the operation of its businesses as now being conducted, which
intellectual property includes, but is not limited to, any trademarks, trade
names, service marks, including the Names and Service Marks, copyrights, trade
secrets, customer lists, inventions, formulas, methods, processes and other
proprietary information. There are no outstanding licenses or consents granting
third parties the right to use any intellectual property, including any of the
Patents, owned by either Boxing or CKP, with the exception of CKP's obligation
to provide programming content to Big Content. No royalties or fees are payable
by Boxing or CKP to any third party by reason of the use of any of its
intellectual property, including, but not limited to, the Patents. Neither
Boxing nor CKP has received notice of any adversely held patent, invention,
trademark, copyright, service ▇▇▇▇ or tradename of any person, or any claims of
any other person relating to any of the intellectual property subject hereto,
and there is no reasonable basis for any such charge or claim. There is no
presently known or threatened use or encroachment of any such intellectual
property, including any of the Patents.
(p) Accounts Receivable. The accounts receivable of Boxing referred to
within the Financial Statements constitute valid claims in the full amount
thereof against the debtors charged therewith on the books of Boxing and have
been acquired in the ordinary course of business. Except as set forth in
Schedule 4.1(p), the accounts receivable are fully collectible to the extent of
the face value thereof (less the amount of the allowance for the doubtful
accounts reflected on the Financial Statements) in the due course of normal
commercial dealings. To the best Knowledge of Boxing, no account debtor has any
valid setoff, deduction or defense with respect thereto, and no account debtor
has asserted any such setoff, deduction or defense. There are no accounts
receivable which arise pursuant to an agreement with the United States
Government or any agency or instrumentality thereof.
(q) Contracts, Leases, Agreements and Other Commitments. Except as set
forth on Schedule 4.1(q), neither Boxing nor CKP is a party to or bound by any
oral, written or implied contracts, agreements, leases, powers of attorney,
guaranties, surety arrangements or other commitments excluding equipment and
furniture leases entered into in the ordinary course of business (which do not
exceed $25,000 in liabilities or commitments in the aggregate), except for the
following (which are hereinafter collectively called the "Material Contracts"):
15
(i) The leases and agreements described on Schedules 4.1(f),
4.1(q) and 4.1(r)(i); and
(ii) Agreements entered into in the ordinary course of
business involving a maximum possible expenditure or obligation on the part of
either Boxing or CKP of more than Ten Thousand Dollars ($10,000) individually.
The Material Contracts constitute all of the material agreements and
instruments which are necessary and desirable to operate the businesses as
currently conducted by Boxing and CKP. True, correct and complete copies of each
Material Contract described and listed under subsection 4.1(q) will be made
available to Acquiror within twenty (20) business days prior to the Closing
Date. The term "Material Contract" excludes purchase orders entered into in the
ordinary course for personal property or inventory which may be returned to the
vendor without penalty. With the exception of the promotional agreement with
▇▇▇▇▇ ▇▇▇▇▇▇ that is subject to litigation, all of the Material Contracts are
valid, binding and enforceable against the respective parties thereto in
accordance with their respective terms. Each of Boxing and CKP and, to the best
Knowledge of Boxing, all other parties to all of the Material Contracts have
performed all obligations required to be performed to date under such Material
Contracts, and neither Boxing nor CKP nor, to the best Knowledge of Boxing, any
other party, is in default or in arrears under the terms thereof, and no
condition exists or event has occurred which, with the giving of notice or lapse
of time or both, would constitute a default thereunder. Following the Merger,
the Surviving Corporation as the surviving entity shall become entitled to all
rights of Boxing under such of the Material Contracts. The consummation of this
Agreement and the Merger will not result in an impairment or termination of any
of the rights of Boxing or CKP under any Material Contract. None of the terms or
provisions of any Material Contract materially adversely affects the business,
financial condition or results of operations of Boxing or CKP.
(r) Labor Relations; Employees.
(i) Neither Boxing nor CKP is a party to any collective
bargaining agreements and other agreements requiring arbitration of employment
disputes. Set forth on Schedule 4.1(r)(i) is a list of all employment agreements
and all severance agreements which have not been fully performed to which either
Boxing or CKP is a party or by which it is bound.
(ii) Set forth on Schedule 4.1(r)(ii) is a list of all key
management employees of Boxing and CKP, together with their rate of compensation
and title.
(iii) Boxing will deliver to Acquiror true and correct copies
of all of the documents referred to on Schedule 4.1(r)(i) hereof and all of the
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications, if any, relating to the employees of Boxing and CKP
.
(iv) There is no union representing or purporting to represent
any of the employees of Boxing or CKP, and neither Boxing nor CKP is subject to
or currently negotiating any collective bargaining agreements with any union
representing or purporting to represent the employees of any of the foregoing.
16
(v) Except as set forth on Schedule 4.1(r)(v),
(A) Each of Boxing and CKP has complied in all material
respects with all laws relating to labor, employment and employment practices,
including without limitation, any provisions thereof relating to wages, hours
and other terms of employment, collective bargaining, nondiscrimination and the
payment of social security, unemployment compensation and similar taxes, and
neither Boxing nor CKP is (1) liable for any arrearages of wages or any taxes or
penalties for failure to comply with any of the foregoing or (2) delinquent in
the payment of any severance, salary, bonus, commission or other direct or
indirect compensation for services performed by any employee to the date hereof,
or any amount required to be reimbursed to any employee or former employee; and
(B) There are no charges, suits, actions, administrative
proceedings, investigations and/or claims pending or, to the Knowledge of
Boxing, threatened against Boxing or CKP, whether domestic or foreign, before
any court, governmental agency, department, board or instrumentality, or before
any arbitrator (collectively "Actions"), concerning or in any way relating to
the employees or employment practices of Boxing or CKP, including, without
limitation, Actions involving unfair labor practices, wrongful discharge and/or
any other restrictions on the right of Boxing or CKP to terminate its respective
employees, employment discrimination, occupational safety and health, and
workers' compensation.
(vi) There are no express or implied agreements, policies,
practices, or procedures, whether written or oral, pursuant to which any
employee of Boxing or CKP is not terminable at will and except as required by
law, no employee is entitled to any benefit or to participate in any employee
benefit plan of Boxing or CKP following such termination of employment.
(vii) Except as set forth in Schedule 4.1(r)(vii), neither
Boxing nor CKP is a party to any oral or written (A) agreement with any
executive officer or other key employee of Boxing or CKP (1) the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving Boxing or CKP of the nature of the
transactions contemplated by this Agreement, (2) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (3) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment; or (B) agreement or plan which
will remain in effect after the Closing, including, without limitation, any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(viii) Neither Boxing nor CKP has taken any action which
requires or, taken together with the transactions contemplated hereby, would
require the giving of any notice under the Worker Adjustment Retraining and
Notification Act or any comparable state or local law or regulation.
17
(s) Conflicting Interests. Except as set forth on Schedule 4.1(s) and
for the relationship between Boxing, CKP, the Stockholders and Big Content of
which the Acquiror is aware, (i) neither ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ or any of their
respective relatives or affiliates, nor any director, officer, employee or
affiliate of Boxing (A) sells or purchases goods or services from Boxing or CKP
or has any pecuniary interest in any supplier or client of any of the foregoing
or in any other business enterprise with which Boxing or CKP conducts business
or with which any of the foregoing is in competition, or (B) is indebted to
Boxing or CKP except for money borrowed and as set forth on the Financial
Statements, and (ii) neither Boxing, nor any director, officer, employee or
affiliate of CKP (A) sells or purchases goods or services from CKP or has any
pecuniary interest in any supplier or client of any of the foregoing or in any
other business enterprise with which CKP conducts business or with which any of
the foregoing is in competition, or (B) is indebted to CKP except for money
borrowed and as set forth on the Financial Statements.
(t) Suppliers and Customers. Set forth on Schedule 4.1(t) is a list of
the five largest customers of CKP based on the percentage of revenue represented
by those customers for the fiscal year ended December 31, 2000. The relationship
of CKP with its suppliers and customers is a good commercial working
relationship and no material supplier or customer of CKP has canceled, curtailed
or otherwise terminated or threatened to cancel or otherwise terminate its
relationship with CKP. Boxing has no Knowledge, or reason to believe, that the
Merger or any other transaction contemplated hereby would adversely affect any
such material supplier or customer relationship.
(u) Environmental Protection. Neither Boxing nor CKP has been notified
by any governmental authority, agency or third party, and Boxing has no
Knowledge of any violation by it or CKP of any Environmental Statute (as defined
below). All registrations by Boxing and CKP with, licenses from or permits
issued by governmental agencies pursuant to environmental, health and safety
laws are in full force and effect. The term "Environmental Statutes" means all
statutes, ordinances, regulations, orders and requirements of common law
concerning discharges to the air, soil, surface water or groundwater and
concerning the storage, treatment or disposal of any waste or hazardous
substance. There is no hazardous substance at any premises currently or
previously occupied by Boxing or CKP. Neither Boxing or CKP has received any
notice or any request for information, notice of claim, demand or other
notification that it may be potentially responsible with respect to any
investigation or clean-up of any threatened or actual release of hazardous
substances. All hazardous wastes and substances have been stored, treated,
disposed of and transported in conformance with all requirements applicable to
such hazardous substances and wastes.
(v) Absence of Certain Changes or Events. Except as and to the extent
set forth on the Financial Statements, to the extent contained in this Agreement
or any schedule hereto, or as set forth on Schedule 4.1(v), between December 31,
2000 and the Merger Closing, there has not been (i) any Material Adverse Change
in the business, assets, properties, results of operations or financial
condition of Boxing or CKP, (ii) any entry by Boxing or CKP into any material
commitment or transaction which is not in the ordinary course of business; (iii)
any change by Boxing or CKP except insofar as may be required by a change in
generally accepted accounting principles; (iv) any declaration, payment or
setting aside for payment of any dividends or other
18
distributions (whether in cash, stock or property) in respect of capital stock
of Boxing or CKP, or any direct or indirect redemption, purchase or any other
type of acquisition by Boxing or CKP, or any direct or indirect redemption,
purchase or any other type of acquisition by Boxing or CKP of any shares of its
capital stock or any other securities, (v) any agreement by Boxing or CKP,
whether in writing or otherwise, to take any action which, if taken prior to the
date of this Agreement, would have made any representation or warranty in this
Section 4.1 untrue or incorrect; (vi) any acquisition of the assets of Boxing or
CKP, other than in the ordinary course of business and consistent with past
practice; or (vii) any execution of any agreement with any executive officer of
Boxing or CKP providing for his or her employment, or any increase in the
compensation or in severance or termination benefits payable or to become
payable by Boxing or CKP to its officers or key employees, or any material
increase in benefits under any collective bargaining agreement or in benefits
under any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan or arrangement or understanding (whether or not legally
binding) providing benefits to any present or former employee of Boxing or CKP.
Since the date of the Financial Statements, there has not been and there is not
threatened, any material adverse change in financial condition, business or
results of operations of the business or any material physical damage or loss to
any of the properties or assets of the business or to the premises occupied in
connection with the business, whether or not such loss is covered by insurance.
(w) Investment.
Each of ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇:
(i) understands that the Preferred Merger Shares, the Merger
Warrants and the Merger Shares are not being registered under the Securities Act
and are not being registered under any state "blue sky" laws, and that all such
securities may not be transferred except in compliance with such laws;
(ii) understand that the Preferred Merger Shares, the Merger
Warrants and the Merger Shares are "restricted securities" as that term is
defined in Rule 144 under the Securities Act and that the Preferred Merger
Shares, the Merger Warrants and the Merger Shares must be held indefinitely
unless they are subsequently registered under the Securities Act or an exemption
from such registration is available; and
(iii) represents that he is purchasing the Preferred Merger
Shares and the Merger Warrants for his own account for investment and not with a
view to the public distribution thereof or with any present intention of
distributing or selling any of the Preferred Merger Shares, the Merger Warrants
and the Merger Shares.
(x) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Boxing to Acquiror in connection with the Bridge Loan and
the Merger or the other transactions contemplated hereby, contains or will
contain any untrue statement of any material fact or omit or will omit to
19
state any material fact required to be stated in order to make such statement,
information, document or other instruments, in light of the circumstances in
which they are made, not misleading. There is no fact known to Boxing or the
Stockholders which may have a Material Adverse Effect on the business financial
condition or results of operations of Boxing and CKP or of any of their
properties or assets which has not been set forth in this Agreement as an
exhibit or schedule hereto.
4.2 Representations and Warranties of Acquiror and Newco.
As a material inducement to Boxing and the Stockholders to
execute this Agreement and to consummate the Bridge Loan, the Merger and the
other transactions contemplated hereby, Acquiror hereby makes the following
representations and warranties:
(a) Corporate Existence and Power. Each of Acquiror and Newco is
presently a corporation duly incorporated, validly existing and in good
standing, as the case may be, under the laws of its jurisdiction of
incorporation. Each of Acquiror and Newco has all corporate powers and all
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted, except where the failure to have any of the
foregoing would not have a Material Adverse Effect. Each of Acquiror and Newco
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 makes such qualification necessary,
except for those jurisdictions where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. True, complete
and correct copies of the Certificate of Incorporation and By-Laws of Acquiror
and Newco, as amended to date, are attached hereto as Schedule 4.2(a) and are
made a part hereof.
(b) Due Authorization. This Agreement and the other agreements
described herein to which Acquiror or Newco will become a party at the Closing
have been, or as of the Closing will be, duly authorized, executed and delivered
by Acquiror or Newco, as applicable, and constitute, or as of the Closing will
constitute, a valid and binding agreement of Acquiror or Newco, as applicable,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors rights generally
or by the application of equitable principles. As of the Closing all corporate
action on the part of Acquiror and Newco required under applicable law in order
to consummate the Merger will have occurred, including, without limitation, the
approval and filing of the Amended Charter.
(c) No Contravention. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated hereby will
not:
(i) conflict with or result in any violation of any provision
of the Certificate of Incorporation or By-Laws of Acquiror or Newco;
(ii) conflict with or result in any violation or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation or to a
loss or a benefit under, any provision of the Certificate of
20
Incorporation or By-Laws of Acquiror or Newco or any loan or credit agreement,
note, bond, mortgage, indenture, lease or other agreement, instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Acquiror or Newco or their
properties or assets or result in the creation or imposition of any Encumbrance
on any asset of Acquiror or Newco: or
(iii) require any consent, approval, order or authorization
of, or registration, declaration or filing with, any court, administrative
agency or commission or other governmental authority or instrumentality,
domestic or foreign, is required by or with respect to Acquiror or Newco in
connection with the execution and delivery of this Agreement or the consummation
by them of the transactions contemplated hereby, except such filings as may be
needed in connection with the Acquiror Pre-Merger Financing and the filing of
the Certificate of Designation, all of which will be obtained or done by the
Bridge Loan Closing Date, and the filing of the Certificate of Merger with the
Secretary of the State of Delaware.
(d) Capitalization. As of the date of this Agreement, the authorized
capital stock of Acquiror consists solely of 20,000,000 shares of Acquiror
Common Stock and 5,000,000 shares of preferred stock, par value $.001 per share
("Acquiror Preferred Stock"). As of the date of this Agreement, there are
currently outstanding 6,988,341 shares of Acquiror Common Stock (the
"Outstanding Stock") and Acquiror has reserved for issuance 8,993,895 shares of
Acquiror Common Stock (the "Reserved Stock") to be issued upon the exercise or
conversion, if any, of all outstanding options, warrants, convertible notes and
other instruments convertible into or exercisable for Acquiror Common Stock
other than the Series B Stock. In addition, Acquiror has agreed to issue 206,666
shares of Series A Convertible Preferred Stock (Series A Stock") that are
convertible into 2,066,666 shares of Acquiror Common Stock (the "Series A Common
Shares") and warrants to acquire 206,666 shares of Series A Stock, which,
following exercise for Series A Stock, will be convertible into 2,066,666 shares
of Acquiror Common Stock (the "Series A Warrant Shares" and, together with the
Series A Common Number, the "Series A Conversion Shares"). As of the Merger
Closing, the outstanding capital stock of the Acquiror shall consist solely of
the Outstanding Stock, any issued shares of the Reserved Stock, the Financing
Shares, shares of Acquiror Common Stock reserved for issuance upon exercise of
the Merger Warrant, the ▇▇▇▇▇▇▇▇▇▇ Warrant, the Preferred Merger Shares and the
Series A Conversion Shares. All shares of capital stock of Acquiror outstanding
immediately following the Merger Closing will have been duly authorized and
validly issued, fully paid and nonassessable and free of preemptive rights.
Acquiror shall, as of the Merger Closing, have no outstanding options, warrants
convertible notes and other instruments convertible into or exercisable for
Acquiror Common Stock with the exception of the Merger Warrant, the Series A
Stock, the warrants to purchase Series A Stock and other warrants (the "Existing
Warrants") to purchase a number of shares of Acquiror Common Stock equal to the
Pre-Merger Warrant Number. The authorized capital stock of Newco consists solely
of 1,000, of which 1 share is issued and outstanding and owned of record and
beneficially by Acquiror. The outstanding share of Newco common stock has been
duly authorized and validly issued is fully paid and nonassessable and free of
preemptive rights.
(e) Financial Statements. Acquiror has delivered to Boxing copies of
(i) audited financial statements of Acquiror for the fiscal years ended December
31, 1999 and 2000 and (ii)
21
unaudited financial statements of Acquiror for the three-month period ended
March 31, 2001 (collectively, the "Acquiror Financial Statements"). The Acquiror
Financial Statements have been prepared in accordance with generally accepted
accounting principles consistently applied throughout the periods reported upon
and will fairly present in all material respects the financial position of
Acquiror as of the dates thereof and the results of operations for the periods
then ended.
(f) Real Properties. Neither Acquiror nor Newco owns or leases any
real property.
(g) Liabilities and Cash. At the Bridge Loan Closing and the Merger
Closing, Acquiror and Newco shall have total liabilities, whether related to tax
or non-tax matters, known or unknown, due or not yet due, liquidated or
unliquidated, fixed or contingent, determined or determinable in amount or
otherwise and whether or not included or required to be included in the Acquiror
Financial Statements (the "Acquiror Liabilities"), not exceeding $100,000 unless
otherwise agreed to by the Parties. As of the Merger Closing, Acquiror will have
cash on hand equal to or exceeding $1,575,000.
(h) Litigation. Except as described on Schedule 4.2(h) hereto there is
no action, suit, investigation or proceeding (or, to the Knowledge of Acquiror
or Newco any basis therefor) pending against, or to the Knowledge of Acquiror or
Newco threatened, against or affecting Acquiror, Newco or any of their
respective properties before any court or arbitrator or any governmental body,
agency or official that (i) if adversely determined against Acquiror or Newco,
would have a Material Adverse Effect or (ii) in any manner challenges or seeks
to prevent, enjoin, alter or materially delay the Merger or any of the other
transactions contemplated by the Agreement.
(i) Taxes. Except as disclosed on Schedule 4.2(i), Acquiror has timely
filed all tax returns required to be filed by it, or will timely file when due
all tax returns required to be filed by it between the date hereof and the
Closing. Acquiror has paid in a timely fashion or will pay when due in a timely
fashion, all taxes required to be paid in respect of the periods covered by such
returns, and the books and the financial statements of Acquiror reflect, or will
reflect, adequate reserves for all taxes payable by Acquiror which have been, or
will be, accrued but are not yet due. Acquiror is not delinquent in the payment
of any material tax, assessment or governmental charge. No deficiencies for any
taxes have been proposed, asserted or assessed against Acquiror. Acquiror is not
aware of any facts which would constitute the basis for the proposal or
assertion of any such deficiency and there is no action, suit, proceeding, audit
or claim now pending or threatened against Acquiror, asserting any deficiency in
the payment of taxes. All taxes which Acquiror is required by law to withhold
and collect have been duly withheld and collected, and have been timely paid
over to the proper authorities to the extent due and payable. For the purposes
of this Agreement, the term "tax" shall include all federal state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever. Acquiror has not been granted any extension or waiver of the
limitation period applicable to any tax returns. There are no Encumbrances for
taxes upon the assets of Acquiror. There are no tax sharing or tax allocation
agreements to which Acquiror is now or ever has been a party. Acquiror will not
be required under Section 481(c) of the Code to include any material adjustment
in taxable income for any period prior to the Merger. Acquiror (a) has not been
a member of an
22
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was Acquiror) and (b) has no liability for the
taxes of any person (other than Acquiror) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(j) ERISA.
(i) Acquiror does not nor has it ever maintained, administered
or contributed to an "employee benefit plan," as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA").
(ii) Acquiror is not a party to any multiemployer plan as
defined in Section 4001(a) (3) of ERISA ("Multiemployer Plans"), and neither
Acquiror nor any affiliate has any outstanding liability to contribute to any
Multiemployer Plan, for delinquent contributions or for withdrawal liability
pursuant to Section 4201 of ERISA.
(iii) Acquiror is not a party to any material employment,
severance or other similar contract, arrangement or policy or any plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits.
(k) Compliance with Laws. Neither Acquiror nor Newco is in violation
of, nor has either Acquiror or Newco violated, any applicable provisions of any
laws, statutes, ordinances or regulations, except for such violation that would
not cause a Material Adverse Effect.
(l) Reporting Company; Reports. The Common Stock of Acquiror is
eligible for trading on the OTC Electronic Bulletin Board. Acquiror is a
reporting company under the Exchange Act. All material filings required to be
made by Acquiror since January 1, 2000 under the Securities Act and the Exchange
Act have been filed with the SEC, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their respective dates, in
all material respects with all applicable requirements of the appropriate
statutes and the rules and regulations thereunder. Acquiror has made available
to Boxing a true and complete copy of each report, schedule, registration
statement and definitive proxy statement filed with the SEC by Acquiror pursuant
to the requirements of the Securities Act or Exchange Act since January 1, 2000
(as such documents have since the time of their filing been amended, the
"Acquiror SEC Reports"). As of their respective dates, the Acquiror SEC Reports
did not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(m) Investment Banking Fees. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by Acquiror or Newco to act on
23
its behalf who might be entitled to any fee or commission from Acquiror or Newco
or any of their respective affiliates upon consummation of the transactions
contemplated by this Agreement.
(n) Contracts, Leases, Agreements and Other Commitments. Except as set
forth on Schedule 4.2(n), Acquiror is not a party to or bound by any oral,
written or implied contracts, agreements, leases, powers of attorney,
guaranties, surety arrangements or other commitments (which are hereinafter
collectively called the "Acquiror Contracts"). All of the Acquiror Contracts are
terminable by Acquiror at will without payment or penalty.
(o) Employees. Set forth on Schedule 4.2(o) is a list of all employment
agreements and all severance agreements to which Acquiror and/or Newco is a
party or by which they are bound. Except as set forth on Schedule 4.2(o), all
such agreements are terminable by Acquiror at will without payment or penalty.
Except for the persons listed on Schedule 4.2(o), Acquiror has no employees.
(p) Financings. The First Acquiror Financing and the Second Acquiror
Financing will be exempt from the registration requirements of the Securities
Act, and, except for those made in accordance with the last sentence of this
Section 4.2(p), the qualification or registration requirements of applicable
"blue sky" laws and that no form of general solicitation or general advertising
will be used by Acquiror or its representatives in connection with such offers
and sales. The gross proceeds of the First and Second Acquiror Financings will
be at least $2,500,000 and the maximum number of shares of Acquiror Common Stock
that will be issued in the First and Second Acquiror Financings, in aggregate,
will be thirty-five (35%) percent of the total number of shares of Acquiror
Common Stock outstanding immediately following the Effective Time. Acquiror will
have taken all action necessary to comply with applicable "blue sky" laws in
connection with the First and Second Acquiror Financings.
(q) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Acquiror or Newco to Boxing in connection with the Merger
or the other transactions contemplated hereby, or any information furnished by
Acquiror or Newco taken as a whole contains or will contain any untrue statement
of any material fact or omit or will omit to state any material fact required to
be stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Acquiror or Newco taken as a whole which
may have a Material Adverse Effect on the business, prospects, financial
condition or results of operations of Acquiror or Newco taken as a whole or of
any of its properties or assets which has not been set forth in this Agreement
as an exhibit or schedule hereto.
24
ARTICLE 5.
AGREEMENTS OF THE PARTIES
5.1 Access to Information.
At all times prior to the Closing or the earlier termination
of this Agreement in accordance with the provisions of Section 8, and in each
case subject to Section 5.2 below, each of the parties hereto shall provide to
the other parties (and the other parties' authorized representatives) full
access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.2 Confidentiality; No Solicitation.
(a) Confidentiality of Boxing-Related Information. With respect to
information concerning Boxing or CKP that is made available to Acquiror pursuant
to the terms of this Agreement, Acquiror agrees that it shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating the Merger and related transactions and shall not
disseminate or disclose any of such information other than to its directors,
officers, employees, stockholders, affiliates, agents and representatives who
need to know such information for the sole purpose of evaluating the Merger and
the related transactions (each of whom shall be informed in writing by Acquiror
or its representatives of the confidential nature of such information and
directed by Acquiror in writing to treat such information confidentially). If
this Agreement is terminated pursuant to the provisions of Section 8, Acquiror
shall immediately return all such information, all copies thereof and all
information prepared by Acquiror based upon the same; provided, however, that
one copy of all such material may be retained by Acquiror's outside legal
counsel for purposes only of resolving any disputes under this Agreement. The
above limitations on use, dissemination and disclosure shall not apply to
information that (i) is learned by Acquiror from a third party entitled to
disclose it; (ii) becomes known publicly other than through Acquiror or any
party who received the same through Acquiror, provided that Acquiror has no
Knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
Acquiror; or (iv) is disclosed with the express prior written consent thereto of
Boxing and CKP. Acquiror shall undertake all necessary steps to ensure that the
secrecy and confidentiality of such information will be maintained in accordance
with the provisions of this paragraph (a). Notwithstanding anything contained
herein to the contrary, in the event a party is required by court order or
subpoena to disclose information which is otherwise deemed to be confidential or
subject to the confidentiality obligations hereunder, prior to such disclosure,
the disclosing party shall: (A) promptly notify the non-disclosing party and, if
having received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (B) cooperate with the non-disclosing party, at the
expense of the non-disclosing party in, obtaining a protective or similar order
with respect to such information; and (C) provide only such of the confidential
information
25
as the disclosing party is advised by its counsel is necessary to strictly
comply with such court order or subpoena.
(b) Confidentiality of Acquiror-Related Information. With respect to
information concerning Acquiror that is made available to Boxing and the
Stockholders pursuant to the provisions of this Agreement, each of Boxing,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ agrees that it/he shall hold such information in strict
confidence, shall not use such information except for the sole purpose of
evaluating the Merger and the related transactions, and shall not disseminate or
disclose any of such information other than to its directors, officers,
employees, stockholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Boxing or its
representatives of the confidential nature of such information and directed by
such party in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Section 8, each of Boxing,
▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇ agrees to return immediately all such information, all
copies thereof and all information prepared by Boxing based upon the same;
provided, however, that one copy of all such material may be retained by
Boxing's outside legal counsel for purposes only of resolving any disputes under
this Agreement. The above limitations on use, dissemination and disclosure shall
not apply to information that (i) is learned by Boxing or the Stockholders from
a third party entitled to disclose it; (ii) becomes known publicly other than
through Boxing or the Stockholders or any party who received the same through
Boxing or the Stockholders; provided that neither Boxing nor the Stockholders
have any Knowledge that the disclosing party was subject to an obligation of
confidentiality; (iii) is required by law or court order to be disclosed by
Boxing or the Stockholders; or (iv) is disclosed with the express prior written
consent thereto of Acquiror. Boxing agrees to undertake all necessary steps to
ensure that the secrecy and confidentiality of such information will be
maintained in accordance with the provisions of this paragraph (b).
Notwithstanding anything contained herein to the contrary, in the event a party
is required by court order or subpoena to disclose information which is
otherwise deemed to be confidential or subject to the confidentiality
obligations hereunder, prior to such disclosure, the disclosing party shall: (i)
promptly notify the non-disclosing party and, if having received a court order
or subpoena, deliver a copy of the same to the non-disclosing party; (ii)
cooperate with the non-disclosing party at the expense of the non-disclosing
party in obtaining a protective or similar order with respect to such
information; and (iii) provide only such of the confidential information as the
disclosing party is advised by its counsel is necessary to strictly comply with
such court order or subpoena.
(c) Nondisclosure. Neither Boxing, the Stockholders, Acquiror nor Newco
shall disclose to the public or to any third party the existence of this
Agreement or the transactions contemplated hereby or any other material
non-public information concerning or relating to any other party hereto, other
than with the express prior written consent of the other parties hereto, except
as may be required by law or court order or to enforce the rights of such
disclosing party under this Agreement, in which event the contents of any
proposed disclosure shall be discussed with the other party before release;
provided, however, that notwithstanding anything to the contrary contained in
this Agreement, any party hereto may disclose this Agreement to any of its
directors, officers, employees, stockholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger, and to any person whose
26
consent is required in connection with the Merger or this Agreement. The parties
anticipate issuing a mutually acceptable, joint press release announcing the
execution of this Agreement and the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial expenditure
of time, effort and money to be undertaken by Acquiror in connection with the
transactions contemplated by this Agreement, neither Boxing nor any of its
affiliates will, prior to the earlier of the Closing or the termination of this
Agreement directly or indirectly, through any officer, director, agent or
otherwise: (i) solicit, initiate or encourage the submission of inquiries,
proposals or offers from any person or entity relating to any acquisition or
purchase of assets of or any equity interest in Boxing or CKP or any of their
respective affiliates or any tender offer (including a self-tender offer),
exchange offer, merger, consolidation, business combination, sale of a
substantial amount of assets or sale of securities, liquidation, dissolution or
similar transaction involving Boxing or CKP or any of their respective
affiliates (a "Transaction Proposal"); (b) enter into or participate in any
discussions or negotiations regarding a Transaction Proposal, or furnish to any
other person or entity any information with respect to the business, properties
or assets of Boxing or CKP or any of their respective affiliates in connection
with a Transaction Proposal; or (c) otherwise cooperate in any way with, or
assist or participate in, facilitate or encourage any effort or attempt by any
other person to do or seek a Transaction Proposal. Boxing shall promptly notify
Acquiror if any such proposal or offer, or any inquiry or contact with any
person or entity with respect thereto is made.
5.3 Interim Operations.
During the period from the date of this Agreement and
continuing until the earlier of the Merger Closing or the termination of this
Agreement:
(a) Interim Operations of CKP. Boxing agrees (except as expressly
contemplated by this Agreement, including any Exhibits and Schedules hereto, or
to the extent that Acquiror shall otherwise consent in writing) that:
(i) Ordinary Course. Each of Boxing and CKP shall carry on its
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent consistent with such business,
use all reasonable efforts to preserve intact its present business
organizations, keep available the services of its present officers and employees
and preserve its relationships with customers, suppliers and others having
business dealings with it;
(ii) Dividends; Changes in Stock. Neither Boxing nor CKP shall
(a) declare, set aside or pay any dividend, on, or make other distributions in
respect of, any of its capital stock, (b) split, combine or reclassify any of
its capital stock or issue, authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (c) redeem, repurchase or otherwise acquire any shares of its
capital stock, (d) otherwise change its capitalization or (e) propose to do any
of the foregoing.
(iii) Issuance of Securities. Except as contemplated by this
Agreement, neither Boxing nor CKP shall sell, issue, pledge, authorize or
propose the sale or issuance of, pledge or
27
purchase or propose the purchase of, any shares of its capital stock of any
class or securities convertible into, or rights, warrants or options to acquire,
any such shares or other convertible securities.
(iv) Governing Documents. Neither Boxing nor CKP shall amend
its Articles of Incorporation or its By-Laws.
(v) No Dispositions. Neither Boxing nor CKP shall sell, lease,
pledge, encumber or otherwise dispose of or agree to sell, lease, pledge,
encumber or otherwise dispose of, any of its material assets except in the
ordinary course of business consistent with prior practice.
(vi) Indebtedness. Neither Boxing nor CKP shall incur any
indebtedness for borrowed money or guarantee any such indebtedness or issue or
sell any debt securities or guarantee any debt securities of others other than
in the ordinary course of business consistent with prior practice and in no
event amounting in the aggregate to more than $20,000 except as may be necessary
in obtaining the CKP Bridge Amount.
(vii) Benefit Plans; Etc. Nether Boxing nor CKP shall adopt or
amend in any material respect any collective bargaining agreement or employee
benefit plan.
(viii) Executive Compensation. Neither Boxing nor CKP shall
grant to any executive officer any increase in compensation or in severance or
termination pay, or enter into any employment agreement with any executive
officer.
(ix) Acquisitions. Neither Boxing nor CKP shall acquire (by
merger, consolidation or acquisition of stock or assets or otherwise) any
corporation, partnership or other business organization or subdivision thereof,
or make any investment by either purchase of stock or securities, contributions
to capital, property transfer or, except in the ordinary course of business,
purchase of any property or assets, of any other individual or entity.
(x) Tax Elections. Neither Boxing nor CKP shall make any
material tax election or settle or compromise any material federal, state, local
or foreign tax liability.
(xi) Waivers and Releases. Neither Boxing nor CKP shall waive,
release, grant or transfer any rights of material value or modify or change in
any material respect any Material Agreement other than in the ordinary course of
business and consistent with past practice.
(xii) Other Actions. Neither Boxing nor CKP shall enter into
any agreement or arrangement to do any of the foregoing. Neither Boxing nor CKP
shall take any action, or fail to take any action, that is reasonably likely to
result in any of the representations and warranties of them set forth in this
Agreement becoming untrue in any material respect.
(b) Interim Operations of Acquiror and Newco. Acquiror and Newco
agree (except as expressly contemplated by this Agreement, including any
Exhibits and Schedules hereto, or to the extent that Boxing and the Stockholders
shall otherwise consent) that:
28
(i) Ordinary Course. Acquiror and Newco shall conduct no
business activity other than in connection with the transactions contemplated by
this Agreement.
(ii) Dividends; Changes in Stock. Neither Acquiror nor Newco
shall (and neither shall propose to) (a) declare or pay any dividend, on, or
make other distributions in respect of, any of its capital stock, (b) split,
combine or reclassify any of its capital stock or issue, authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (c) repurchase or otherwise
acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(iii) No Dispositions. Neither Acquiror nor Newco shall sell,
lease, pledge, encumber or otherwise dispose of, or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of its assets that are material,
or any other assets except in the ordinary course of business consistent with
prior practice.
(iv) Other Actions. Acquiror shall not take any action, or
fail to take any action, that is reasonably likely to result in any of its
representations and warranties set forth in this Agreement becoming untrue in
any material respect.
5.4 Consents.
Acquiror and Boxing shall cooperate and use their best efforts
to obtain, prior to the Closing, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts as are necessary for the consummation of the transactions
contemplated by this Agreement; provided, however, that no loan agreement or
contract for borrowed monies shall be repaid and no contract shall be amended
materially to increase the amount payable thereunder or otherwise to be
materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto.
5.5 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to
the fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective stockholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonably practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.6 Public Announcements.
Acquiror, Newco and Boxing shall consult with each other
before issuing any press release or otherwise making any public statements with
respect to the Merger, this Agreement or the other transactions contemplated by
this Agreement and shall not issue any other press release or make any other
public statement without prior consent of the other parties, except as may be
required by law or, with respect to Acquiror, by obligations pursuant to rule or
29
regulation of the Exchange Act, the Securities Act, any rule or regulation
promulgated thereunder or any rule or regulation of the NASD.
5.7 Notification of Certain Matters.
Boxing shall give prompt notice to Acquiror, and Acquiror
shall give prompt notice to Boxing of (a) the occurrence or non-occurrence of
any event, the occurrence or non-occurrence of which would cause any of its
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect, as to Boxing, at or prior to any Closing, and, as to
Acquiror or Newco, as of any Closing and (b) any material failure of Boxing, on
the one hand, or Acquiror and Newco, on the other hand, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by them under this Agreement; provided, however, the delivery of
any notice pursuant to this Section shall not limit or otherwise affect the
remedies available to the party receiving such notice under this Agreement as
expressly provided in this Agreement.
5.8 Expenses.
All costs and expenses incurred in connection with the
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated. In the event
that the Merger is consummated, Boxing shall be responsible for legal or other
expenses incurred by itself, but not for those incurred by Acquiror, in
connection with the preparation and negotiation of this Agreement
5.9 Prohibition on Short Sales.
The Stockholders shall not make any short sales of Acquiror
Common Stock following the date hereof through the Merger Closing or earlier
termination of this Agreement.
5.10 Actions by Acquiror Following the Merger Closing.
(a) Acquiror shall promptly prepare, file and mail to its
stockholders, a Proxy Statement containing such information as required by the
Exchange Act seeking approval of the following actions and such other actions
requested by the Stockholders:
(i) Amending its Certificate of Incorporation to (x)
increase the authorized number of shares of Acquiror Common Stock to
100,000,000 and (y) change the name of Acquiror from "Zenascent, Inc." to
"CKP, Inc."; and
(ii) the implementation of an incentive stock option plan
reserving ten (10%) percent of the fully-diluted capital stock of Acquiror for
issuance to officers and employees of the Surviving Corporation on such terms as
approved by the Board of Directors of Acquiror (the "Option Plan").
(b) Following the meeting of Acquiror's stockholders related to the
actions described in Section 5.10(a) (the "Meeting Date"), Acquiror shall use
its reasonable best efforts to prepare and file with the SEC within 45 days
after the Meeting Date and have declared effective under the Securities Act
within 150 days following the Meeting Date a registration statement on Form
30
SB-2 or S-1 or such other form as is appropriate in order to register the
reoffer and redistribution of the Financing Shares.
5.11 Documents at Closing.
Each party to this Agreement agrees, subject to the terms and
conditions of this Agreement, to execute and deliver at each Closing those
documents identified in Sections 2.2 and 2.4 that are required to be delivered
by each such party.
5.12 Prohibition on Trading in Acquiror Stock.
(a) Each of the Stockholders acknowledges that the United States
securities laws prohibit any person who has received material non-public
information concerning the matters which are the subject matter of this
Agreement from purchasing or selling the securities of the Acquiror, or from
communicating such information to any person under circumstances in which it is
reasonably foreseeable that such person is likely to purchase or sell securities
of the Acquiror. Accordingly, until the Closing, each of the Stockholders agrees
that he shall not and shall instruct his representatives not to purchase or sell
any securities of the Acquiror, or communicate such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities of the Acquiror, until counsel
for Acquiror believes that any such non-public information has been adequately
disseminated to the public.
(b) Following the Merger Closing, each of the Stockholders agrees
that for a period of (i) one year he will not sell, dispose, convey or otherwise
transfer any shares of Series B Stock or the Acquiror Common Stock into which it
is convertible and (ii) eighteen months he will maintain its ownership of at
least fifty percent (50%) of the Series B Stock or the shares of Acquiror Common
Stock into which it is convertible.
5.13 Reservation of Shares; Post-Closing Amendments to Acquiror's
Certificate of Incorporation.
As of the Merger Closing, Acquiror shall have authorized and
reserved for issuance sufficient shares of Series B Stock to permit the issuance
of the Series B Stock. Acquiror shall use best efforts to secure approval by its
stockholders as promptly as is practicable following the Effective Date of an
amendment to its Certificate of Incorporation that effectuates: (a) a change in
its name to "CKP, Inc." and (b) an increase in the number of shares of Acquiror
Common Stock authorized thereunder so as to have authorized and available for
issuance a sufficient number of shares of Acquiror Common Stock to fully cover
conversion of the Series B Stock, the exercise of the Merger Warrants and
exercise of options which may be issued under the Option Plan. Upon securing
such stockholder approval, Acquiror shall promptly file an appropriate amendment
to its Certificate of Incorporation with the Secretary of State of the State of
Delaware.
31
5.14 Indemnification: Directors' and Officers' Insurance.
(a) Acquiror shall, to the fullest extent permitted under applicable
law, and for six years from and after the Effective Time, to the fullest extent
permitted under applicable law, indemnify, defend and hold harmless each person
who is now, or has been at any time prior to the date hereof or who becomes
prior to the Effective Time, an officer, director or employee of the Acquiror
(the "Indemnified Parties") from and against (i) all losses, claims, damages,
costs, expenses, liabilities or judgments or amounts that are paid in settlement
with the approval of the indemnifying party (which approval shall not be
unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director, officer or
employee of the Acquiror, whether pertaining to any matter existing or occurring
at or prior to the Effective Time and whether asserted or claimed prior to, or
at or after, the Effective Time ("Indemnified Liabilities") and (ii) all
Indemnified Liabilities based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the full extent permitted under the DGCL. Acquiror will
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the full extent permitted by law.
Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and Acquiror; (ii) Acquiror shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefore are received; (iii) the Acquiror will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that Acquiror shall not be liable for any settlement of any claim
effected without its written consent, which consent, however, shall not be
unreasonably withheld. Any Indemnified Party wishing to claim indemnification
under this Section 5.14, upon learning of any such claim, action, suit,
proceeding or investigation, shall notify the Acquiror (but the failure so to
notify an indemnifying party shall not relieve it from any liability which it
may have under this Section 5.14 except to the extent such failure prejudices
such party); provided, however, that the Indemnified Party to whom any expenses
are advanced must provide an undertaking to Acquiror to repay such advance if it
is ultimately determined that such person is not entitled to indemnification
under the DGCL. The Indemnified Parties as a group may retain only one law firm
to represent them with respect to such matter (in addition to local counsel)
unless there is, under applicable standards of professional conduct, a conflict
on any significant issue between the positions of any two or more Indemnified
Parties.
(b) For a period of six years after the Effective Time, the Acquiror
or the Surviving Corporation shall cause to be maintained in effect the current
policies of directors' and officer's liability insurance maintained by the
Acquiror (provided that Acquiror or the Surviving Corporation may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims or matters
existing or occurring before the Effective Time.
(c) This Section 5.14 shall survive the consummation of the Merger.
The provisions of this Section 5.14 are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party, his heirs and his
representatives. The rights provided Indemnified Parties
32
shall be in addition to, and not in lieu of, any rights to indemnity which such
parties may have under the Certificate or By-Laws of the Acquiror or the
Surviving Corporation or any other agreements or otherwise.
5.15 Acknowledgment of Approvals; Approval of the Stockholders.
By virtue of their respective signatures to this Agreement,
Acquiror, Newco, Boxing and the Stockholders acknowledge their approval of this
Agreement and their consent to the consummation of the transactions identified
herein.
5.16 Matters of Corporate Governance.
(a) Concurrent with the Merger Closing, all members of Acquiror's
Board of Directors shall resign and shall be replaced with a Board of Directors
of five (5) members, consisting of: (i) one designee of Acquiror's Board of
Directors immediately prior to the Closing (the "Acquiror Designee"); and (ii)
four (4) designees of the Stockholders. Immediately following the Effective
Date, Acquiror's Board of Directors shall execute and deliver to the Secretary
of Acquiror the form of board resolutions attached hereto as Exhibit 5.16(a)
authorizing the transactions contemplated in this Agreement.
(b) Each of the Stockholders agrees that he will vote all
voting securities of Acquiror owned beneficially or of record by him in a manner
consistent with the approval of Acquiror's post-closing obligations under this
Agreement.
5.17 Production of Schedules and Exhibits.
Each of the parties hereto shall utilize its reasonable best
efforts to produce all Schedules and Exhibits required to be produced by it
under this Agreement upon the execution hereof. In the event that any party has
not produced all Schedules and Exhibits required to be produced by it hereunder
upon the execution of this Agreement, all such Schedules and Exhibits shall be
produced by such party within fifteen (15) business days thereafter but in no
event shall such Schedules and Exhibits be delivered less than twenty (20)
business days prior to the Bridge Loan Closing Date. The Schedules and Exhibits
produced subsequent to the execution of this Agreement, shall be given such
force and effect as though such Schedules and Exhibits which were produced upon
execution of this Agreement.
5.18 Agreement Not to Compete.
For so long as the Stockholders own, in the aggregate, in
excess of twenty percent of the outstanding shares of Acquiror Common Stock
(determined on a fully-converted and fully diluted basis), each of ▇▇▇▇▇▇
▇▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ agrees that he will not, other than on behalf of the
Surviving Corporation and its affiliates:
(a) solicit any business, entity or individual with whom Boxing or
CKP has done or will do business with, including, but not limited to, past,
present or future fighters, licensors, licensees, vendees or strategic partners,
in any way relating to the business of promoting live boxing events, packaging
bouts for distribution through various media, licensing rights to both
33
past and future boxing events for commercial use, and other activities related
to or involving the boxing industry (the "Business");
(b) induce or actively attempt to influence any other employee or
consultant of Boxing or CKP to terminate his or her employment or engagement
with Boxing or CKP; or
(c) directly or indirectly engage in the Business or own any interest
in a competing venture.
ARTICLE 6.
CONDITIONS TO CONSUMMATION OF THE BRIDGE LOAN AND THE MERGER
6.1 Conditions to Obligations of the Stockholders and Boxing.
(a) Bridge Loan. The obligations of Boxing to cause CKP to consummate
the Bridge Loan and the other transactions contemplated to be consummated by
Boxing at the Bridge Loan Closing are subject to the satisfaction (or waiver by
Boxing) at or prior to the Bridge Loan Closing (or at such other time prior
thereto as may be expressly provided in this Agreement) of each of the following
conditions:
(i) The representations and warranties of Acquiror and Newco
set out in this Agreement shall be true and correct in all material respects
(other than representations and warranties that contain materiality
qualifications which shall be true and correct in all respects) as of the date
when made and at and as of the Bridge Loan Closing Date, with the same force and
effect as though made as of the Bridge Loan Closing Date, except for changes
expressly permitted by this Agreement or where such representations or
warranties are expressly limited by their terms to a prior date.
(ii) The representation contained in Section 4.2(g) shall be
true and correct except with respect to the amount of cash on hand.
(iii) Acquiror shall have complied (i) in a timely manner and
in all material respects with the respective covenants and agreements set out in
this Agreement and (ii) fully with its obligations under Sections 1.4(a), (b)
and (c) and 3.2 of this Agreement.
(iv) The Merger shall have been approved by Newco in
accordance with the provisions of the DGCL. The Board of Directors of Newco and
Acquiror shall have approved the execution of this Agreement and the Merger
thereby.
(v) There shall be delivered to Boxing an officer's
certificate of Acquiror attesting (i) to the satisfaction of the conditions
contained in paragraphs (i) and (ii) of this Section 6.1(a) and (ii) the other
matters required by Section 2.2(a)(ii)(C).
(vi) All director, stockholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state
34
and local governmental authorities and agencies, as are required under this
Agreement, applicable law or any applicable contract or agreement (other than as
contemplated by this Agreement) to complete the Merger shall have been secured.
(vii) Acquiror shall have adopted and filed with the Secretary
of State of Delaware the Certificate of Designation.
(viii) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
(b) The Merger. The obligations of the Boxing to consummate the
Merger and the other transactions contemplated to be consummated by it at the
Merger Closing are subject to the satisfaction (or waiver by Boxing) at or prior
to the Merger Closing (or at such other time prior thereto as may be expressly
provided in this Agreement) of each of the following conditions:
(i) The Bridge Loan shall have been consummated.
(ii) The representations and warranties of Acquiror and Newco
set out in this Agreement shall be true and correct in all material respects
(other than representations and warranties that contain materiality
qualifications which shall be true and correct in all respects) as of the date
when made and at and as of the Effective Time, with the same force and effect as
though made as of the Effective Time, except for changes expressly permitted by
this Agreement or where such representations or warranties are expressly limited
by their terms to a prior date.
(iii) The representation contained in Section 4.2(g) shall be
true and correct.
(iv) Acquiror shall have and caused its directors to comply
with Section 5.16(a) of this Agreement.
(v) There shall be delivered to Boxing an officer's
certificate of Acquiror as required by Section 2.4(1)(ii)(C).
(vi) All director, stockholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured.
(vii) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
35
6.2 Conditions to Acquiror's Obligations.
(a) Bridge Loan. The obligation of Acquiror to consummate the Bridge
Loan and the other transactions contemplated to be consummated by it at the
Bridge Loan Closing are subject to the satisfaction (or waiver by Acquiror) at
or prior to the Bridge Loan Closing (or at such other time prior thereto as may
be expressly provided in this Agreement) of each of the following conditions:
(i) The representations and warranties of Boxing and the
Stockholders set out in this Agreement shall be true and correct in all material
respects (other than representations and warranties that contain materiality
qualifications which shall be true and correct in all respects) as of the date
when made and at and as of the Bridge Loan Closing Date, with the same force and
effect as though made as of the Bridge Loan Closing Date, except for changes
expressly permitted by this Agreement or where such representations or
warranties are expressly limited by their terms to a prior date;
(ii) Boxing shall have complied in a timely manner and in all
material respects with its covenants and agreements set out in this Agreement;
(iii) There shall be delivered to Acquiror an officer's
certificate of Boxing to the effect that all of the representations and
warranties of Boxing set forth herein are true and complete in all material
respects as of the Bridge Loan Closing, and that Boxing has complied in all
material respects with the covenants and agreements set forth herein that it is
required to comply with by the Bridge Loan Closing;
(iv) Boxing shall have secured the approval of its
stockholders necessary under the DGCL, its Certificate of Incorporation and
By-Laws to approve the Merger, this Agreement and the transactions contemplated
hereby, and shall have delivered a certificate of an authorized officer of
Boxing to this effect;
(v) All director, stockholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured;
(vi) The Board of Directors of Boxing shall have approved the
Merger in accordance with the DGCL; and
(vii) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
(b) Merger. The obligation of Acquiror to consummate the Merger and
the other transactions contemplated to be consummated by it at the Merger
Closing are subject to the
36
satisfaction (or waiver by Acquiror) at or prior to the Merger Closing (or at
such other time prior thereto as may be expressly provided in this Agreement) of
each of the following conditions:
(i) The Bridge Loan shall have been consummated;
(ii) The representations and warranties of Boxing and the
Stockholders set out in this Agreement shall be true and correct in all material
respects (other than representations and warranties that contain materiality
qualifications which shall be true and correct in all respects) as of the date
when made and at and as of the Effective Time, with the same force and effect as
though made as of the Effective Time, except for changes expressly permitted by
this Agreement or where such representations or warranties are expressly limited
by their terms to a prior date;
(iii) Boxing shall have complied in a timely manner and in all
material respects with its covenants and agreements set out in this Agreement;
(iv) There shall be delivered to Acquiror an officer's
certificate of Boxing as required by Section 2.4(a)(i)(A);
(v) All director, stockholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured; and
(vi) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
ARTICLE 7.
INDEMNIFICATION
7.1 Indemnification.
(a) Acquiror, on the one hand, and the Stockholders, on the other
hand (as applicable, the "Indemnitor"), shall indemnify, defend and hold
harmless the other (the "Indemnitee") from and against any and all demands,
claims, actions or causes of action, judgments, assessments, losses,
liabilities, damages or penalties and reasonable attorneys' fees and related
disbursements (collectively, "Claims") incurred by the Indemnitee which arise
out of or result from a misrepresentation or breach of warranty contained in
Article IV hereof or the breach of any covenant, obligation or agreement of an
Indemnitor contained in this Agreement.
(b) Methods of Asserting Claims for Indemnification. All claims for
indemnification under this Agreement shall be asserted as follows:
37
(i) Third Party Claims. In the event that any Claim for which
the Indemnitee would be entitled to indemnification under this Agreement is
asserted against or sought to be collected from the Indemnitee by a third party
the Indemnitee shall promptly notify the Indemnitor of such Claim, specifying
the nature thereof, the applicable provision in this Agreement or other
instrument under which the Claim arises, and the amount or the estimated amount
thereof (the "Claim Notice"). The Indemnitor shall have thirty (30) days (or, if
shorter, a period to a date not less than ten (10) days prior to when a
responsive pleading or other document is required to be filed but in no event
less than ten (10) days from delivery or mailing of the Claim Notice) (the
"Notice Period") to notify the Indemnitee (a) whether or not it disputes the
Claim and (b) if liability hereunder is not disputed, whether or not it desires
to defend the Indemnitee. If the Indemnitor elects to defend by appropriate
proceedings, such proceedings shall be promptly settled or prosecuted to a final
conclusion in such a manner as to avoid any risk of damage to the Indemnitee;
and all costs and expenses of such proceedings and the amount of any judgment
shall be paid by the Indemnitor.
(ii) Participation. If the Indemnitee desires to participate
in, but not control, any such defense or settlement, it may do so at its sole
cost and expense. If the Indemnitor has disputed the Claim, as provided above,
and shall not defend such Claim, the Indemnitee shall have the right to control
the defense or settlement of such Claim, in its sole discretion, and shall be
reimbursed by the Indemnitor for its reasonable costs and expenses of such
defense.
(iii) Non-Third Party Claims. In the event that the Indemnitee
should have a Claim for indemnification hereunder which does not involve a Claim
being asserted against it or sought to be collected by a third party, the
Indemnitee shall promptly send a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice
Period that the Indemnitor disputes such Claim, the Indemnitor shall pay the
amount thereof to the Indemnitee. If the Indemnitor disputes the amount of such
Claim, the controversy in question shall be submitted to arbitration pursuant to
Section 9.8 hereafter.
(c) Method of Satisfying Indemnification Claims. At any time it is
determined pursuant to this Article VII that Acquiror or the Stockholders are
owed any amount for indemnification (as applicable, the "Acquiror Owed
Definitive Amount" or the "Shareholder Owed Definitive Amount"), such amount
shall be paid by delivery to the Indemnitee by the Indemnitor of the number of
shares of Acquiror Common Stock (or Series B Stock convertible into such number
of shares of Acquiror Common Stock) determined as follows:
(i) If delivery is to be made by Acquiror to the Stockholders:
N equals: X minus D where:
o N equals: the number of shares of Acquiror Common Stock to be
delivered to the Stockholders.
o X equals: 4,285,714 divided by P.
o P equals: (2,200,000 minus the Acquiror Owed Definitive
Amount) divided by the Total Pre-Merger Share Number.
38
o D equals: the number of Conversion Shares.
(ii) If delivery is to be made by the Stockholders to
Acquiror:
N equals: D minus X where:
o N equals: the number of shares of Acquiror Common Stock (or,
at the election of the Stockholders, Preferred Merger Shares
convertible into such number of shares of Acquiror Common
Stock) to be delivered to Acquiror.
o X equals: 2,200,000 divided by P.
o P equals: (2,200,000 plus the Shareholder Owed Definitive
Amount) divided by the Total Pre-Merger Share Number.
o D equals: the Total Pre-Merger Share Number.
If any amount becomes owed to the Stockholders pursuant to this Section 7.1,
such amount will be deemed to be an adjustment to the total purchase price
payable to the Stockholders in connection with the acquisition by merger of
Boxing and any shares of Acquiror Common Stock delivered pursuant to this
Section 7.1 shall be deemed to be Merger Consideration. If any amount becomes
owed to Acquiror pursuant to this Section 7.1, each of the Stockholders will be
responsible solely for his pro rata portion of such amount, up to a maximum of
the total number of shares of Acquiror Common Stock (or Series B Stock
convertible into such number of shares of Acquiror Common Stock) received by
such Stockholder in the Merger. All calculations under this Section 7.1 shall be
made cumulatively.
7.2 Continuing Director.
All decisions to be made by Acquiror pursuant to this Article VII shall
be made by the Continuing Director. If there is no Continuing Director as
defined in this Agreement, Acquiror shall appoint an independent member of the
Board of Directors to serve as the "Continuing Director" for purposes of this
Article VII.
ARTICLE 8.
TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be abandoned
at any time prior to or at the Closing:
(a) by mutual written consent of Acquiror and Boxing;
(b) by either Acquiror or Boxing:
39
(i) if the Bridge Loan Closing shall not have occurred on or
before August 24, 2001, unless otherwise extended in writing by all of the
parties hereto; provided, however, that the right to terminate this Agreement
under this Section 8.1(b)(i) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Bridge Loan Closing to occur on or before that
date; provided further, however, if (A) the Bridge Loan Closing does not occur
solely as a result of the inability of Acquiror to consummate the First Acquiror
Financing and (B) Acquiror has used reasonable commercial efforts to consummate
the First Acquiror Financing, such failure to consummate the Bridge Loan shall
not be considered the cause of the failure of the Bridge Loan Closing to occur
for purposes of this paragraph (i); or
(ii) if the Merger Closing shall not have occurred on or
before October 12, 2001, unless otherwise extended in writing by all of the
parties hereto; provided, however, that the right to terminate this Agreement
under this Section 8.1(b)(ii) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before that date;
provided, however, if (A) the Merger Closing does not occur solely as a result
of the inability of Acquiror to consummate the Second Acquiror Financing and (B)
Acquiror has used reasonable commercial efforts to consummate the Second
Acquiror Financing, such failure to consummate the Merger shall not be
considered the cause of the failure of the Merger Closing to occur for purposes
of this paragraph (ii); or
(iii) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; or
(c) by Boxing if any of the conditions specified in Section 6.1 have
not been met or if satisfaction of such a condition is or becomes impossible
(other than through the failure of Boxing to comply with its obligations under
this Agreement) and Boxing has not waived such conditions on or before the
applicable Closing; or
(d) by Acquiror:
(i) if any of the conditions specified in Section 6.2 have not
been met or if satisfaction of such a condition is or becomes impossible (other
than through the failure of Acquiror or Newco to comply with their respective
obligations under this Agreement) and Acquiror has not waived such condition on
or before the applicable Closing; or
(ii) on or before August 20, 2001 if Acquiror is not satisfied
with the results of its due diligence investigation of Boxing and CKP.
40
8.2 Notice and Effect of Termination.
(i) In the event of the termination and abandonment of this
Agreement pursuant to Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision pursuant to which
such termination is made. Upon termination, this Agreement shall forthwith
become void and all obligations of the parties under this Agreement will
terminate without any liability on the part of any party or its directors,
officers or stockholders and none of the parties shall have any claim or action
against any other party, except that the provisions of this Section 8.2 and
Sections 5.2 and 5.8, shall survive any termination of this Agreement. Nothing
contained in this Section 8.2 shall relieve any party from any liability for any
breach of this Agreement other than in the event of a termination pursuant to
Section 8.1.
8.3 Extension; Waiver.
Any time prior to any Closing, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
8.4 Amendment and Modification.
This Agreement may be amended only by written agreement signed
by each of Acquiror, Newco, Boxing, ▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇▇▇.
ARTICLE 9.
MISCELLANEOUS
9.1 Survival; Remedies.
All representations, warranties, covenants and agreements of
Acquiror, Newco, Boxing and the Stockholders contained in or made pursuant to
this Agreement shall survive the Merger Closing for a period of two (2) years.
The right to indemnification, payment of damages or other remedy based on such
representations, warranties, covenants, and obligations will not be affected by
any investigation conducted with respect to, or any Knowledge acquired (or
capable of being acquired) at any time, whether before or after the execution
and delivery of this Agreement or the Closing Date, with respect to the accuracy
or inaccuracy of or compliance with, any such representation, warranty,
covenant, or obligation. The waiver of any condition based on the accuracy of
any representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
damages, or other remedy based on such representations, warranties, covenants,
and obligations. The rights and remedies of the parties to this Agreement are
cumulative, not alternative. In addition to their
41
respective rights to damages or other remedies they may have, and without
limitation thereof, Acquiror, Newco, Boxing and the Stockholders shall have the
right to obtain injunctive relief to restrain any breach or otherwise to
specifically enforce the provisions of this Agreement, it being agreed by the
parties that money damages alone would be inadequate to compensate any party
hereto for such breach or other failure to perform the obligations of any other
party to this Agreement.
9.2 Notices.
All notices requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given on the date if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or upon the next business
day after it shall have been deposited with a nationally recognized overnight
courier such as federal express, or sent by telex, telegram or telecopier, as
follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to Boxing, to it at: with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Boxing, Inc. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(a) if to ▇▇▇▇▇▇▇ or ▇▇▇▇▇▇▇▇▇, with a copy to:
to him at:
1 Montauk Highway ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esquire
Southampton, New York 11968 ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, LLP
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to Acquiror or Newco, with a copy to:
to it at:
Zenascent, Inc. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esquire
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇▇, LLP
▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇ Suite 628
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇, President ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇ Fax: (▇▇▇) ▇▇▇-▇▇▇▇
9.3 Agreement; Assignment.
42
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns. Nothing in this
Agreement is intended to confer on any person other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.6 Counterparts.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.7 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to the laws
that might otherwise govern under principles of conflicts of laws applicable
thereto.
9.8 Arbitration.
If a dispute arises as to the interpretation of this
Agreement, it shall be decided finally in an arbitration proceeding conforming
to the Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in New York, New York. The decision of the Arbitrators shall be
conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.
9.9 Severability.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
43
9.10 Certain Definitions.
As used herein:
(a) "Affiliate" shall have the meanings ascribed to such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
(b) "Business Day" shall mean any day other than a Saturday, Sunday
or a day on which federally chartered financial institutions are not open for
business in the City of New York, New York.
(c) "Closing Date" shall mean the Bridge Loan Closing Date or
the Merger Closing Date, as applicable.
(d) "Continuing Director" shall have the meaning ascribed to such
term in Section 1.1(c)(vi).
(e) "Definitive Amount" shall have the meaning ascribed to such term
in Section 7.1(d).
(f) "Encumbrance" shall mean any lien, encumbrance, pledge,
hypothecation, claim or charge except for minor imperfections of title and
encumbrances, if any, which either individually or in aggregate, are not
material in amount and do not cause a Material Adverse Effect.
(g) "Exchange Number" shall equal such number ("N") of shares of
Acquiror Common Stock, rounded up to the nearest whole number, determined
according to the following formula: N = the Total Pre-Merger Share Number x
1.857143.
(h) "Existing Warrants" shall have the meaning ascribed to such term
in Section 4.2(d).
(i) "Knowledge" shall mean the actual current knowledge of the party,
and/or the executive management of the party to this Agreement, as the case may
be, to whom knowledge is ascribed.
(j) "▇▇▇▇▇▇▇▇▇▇ Warrant" shall have the meaning ascribed to such term
in Section 1.3(a)(iii).
(k) "Material Adverse Effect" shall mean any adverse effect on the
business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole.
(l) "Merger Warrant" shall have the meaning ascribed to such term in
Section 1.3(a)(ii).
44
(m) "Outstanding Stock" shall have the meaning ascribed to such term
in Section 4.2(d).
(n) "Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof.
(o) "Pre-Merger Warrant Number" shall have the meaning ascribed to
such term in Section 2.2(b)(iii)(D).
(p) "Reserved Stock" shall have the meaning ascribed to such term in
Section 4.2(d).
(q) "Total Pre-Merger Share Number" means the total number of shares
of Acquirer Common Stock outstanding immediately prior to the Effective Time,
including, without limitation, the Outstanding Stock, any shares the Reserved
Stock issued between the date hereof and the Effective Time, the Series A
Conversion Shares and the Financing Shares.
(r) "Warrant Shares" shall have the meaning ascribed to such term in
Section 1.3(d).
45
IN WITNESS WHEREOF, each of the undersigned has signed or has caused this
Agreement to be signed by their respective officers hereunto duly authorized,
all as of the date first written above.
ZENASCENT, INC.,
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: Secretary
ZENASCENT NEWCO, INC.,
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇
--------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇
Title: President
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ BOXING, INC.,
a Delaware Corporation
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: President
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
----------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇