AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER is made as of the 4th day of August, 2005
AMONG:
NATIONAL DIVERSIFIED SERVICES, INC., a corporation formed
pursuant to the laws of the State of Delaware and having an office for
business located at 0000 Xxx Xxxxxxx Xxxx, Xxxxx 000, Xxxxxxxx, Xxx
Xxxx 00000
("NADS")
AND:
NADS ACQUISITION CORP., a body corporate formed pursuant to
the laws of the State of Delaware and a wholly owned subsidiary of
NADS
(the "Acquirer")
AND:
THE CERTO GROUP, INC., a body corporate formed pursuant to
the laws of the State of Delaware and having an office for business
located at 0000 Xxxx Xxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000
("Certo")
AND:
XXXXXXX XXXXX, an individual having an address at 0000 Xxxx
Xxxx, Xxxxxxxxxxxxx, Xxx Xxxxxx 00000
(the "Certo Shareholder")
WHEREAS:
X. Xxxxx is a Delaware corporation engaged in the business of providing food
services;
B. The Certo Shareholder owns 100 Certo Shares, being 100% of the presently
issued and outstanding Certo Shares;
C. NADS is a reporting company whose common stock is available for quotation
on the "Pink Sheets" although there are currently no market makers and which is
not presently engaged in any business;
D. The respective Boards of Directors of NADS, Certo and the Acquirer deem
it advisable and in the best interests of NADS, Certo and the Acquirer that
Certo merge with and into the Acquirer (the "Merger") pursuant to this Agreement
and the Certificate of Merger, and the applicable provisions of the laws of the
State of Delaware; and
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E. It is intended that the Merger shall qualify for United States federal
income tax purposes as a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended.
NOW THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the premises
and the mutual covenants, agreements, representations and warranties contained
herein, and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
DEFINITIONS
1.1 In this Agreement the following terms will have the following meanings:
(a) "ACQUISITION SHARES" means the 79,639,830 NADS Common Shares to
be issued to the Certo Shareholder at Closing pursuant to the terms of
the Merger;
(b) "AGREEMENT" means this agreement and plan of merger among NADS,
the Acquirer, Certo, and the Certo Shareholder;
(c) "CERTO ACCOUNTS PAYABLE AND LIABILITIES" means all accounts
payable and liabilities of Certo, due and owing or otherwise
constituting a binding obligation of Certo (other than a Certo
Material Contract) as was provided to NADS prior to the date hereof
and which if requested will be provided to NADS subsequent to the
Closing;
(d) "CERTO ACCOUNTS RECEIVABLE" means all accounts receivable and
other debts owing to Certo, as was provided to NADS prior to the date
hereof and which if requested will be provided to NADS subsequent to
the Closing;
(e) "CERTO ASSETS" means the undertaking and all the property and
assets of the Certo Business of every kind and description wheresoever
situated including, without limitation, Certo Equipment, Certo
Inventory, Certo Material Contracts, Certo Accounts Receivable, Certo
Cash, Certo Intangible Assets and Certo Goodwill, and all credit
cards, charge cards and banking cards issued to Certo;
(f) "CERTO BANK ACCOUNTS" means all of the bank accounts, lock boxes
and safety deposit boxes of Certo or relating to the Certo Business as
was provided to NADS prior to the date hereof and which if requested
will be provided to NADS subsequent to the Closing;
(g) "CERTO BUSINESS" means all aspects of the business conducted by
Certo and its subsidiary The Certo Group, LLC;
(h) "CERTO CASH" means all cash on hand or on deposit to the credit
of Certo on the Closing Date;
(i) "CERTO DEBT TO RELATED PARTIES" means the debts owed by Certo and
its subsidiaries to the Certo Shareholder or to any family member
thereof, or to any affiliate, director or officer of Certo or the
Certo Shareholder as described in Schedule "D";
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(j) "CERTO EQUIPMENT" means all machinery, equipment, furniture, and
furnishings used in the Certo Business as was provided to NADS prior
to the date hereof and which if requested will be provided to NADS
subsequent to the Closing;
(k) "CERTO FINANCIAL STATEMENTS" means collectively, the audited
consolidated financial statements of Certo dated December 31, 2004,
together with the unqualified auditors' report thereon, true copies of
which were provided to NADS prior to the date hereof and which if
requested will be provided to NADS subsequent to the Closing. Subject
to the consent of NADS, unaudited financial statements for the same
period shall be acceptable;
(l) "CERTO GOODWILL" means the goodwill of the Certo Business
together with the exclusive right of NADS to represent itself as
carrying on the Certo Business in succession of Certo subject to the
terms hereof, and the right to use any words indicating that the Certo
Business is so carried on including the right to use the name "Certo"
or any variation thereof as part of the name of or in connection with
the Certo Business or any part thereof carried on or to be carried on
by Certo, the right to all corporate, operating and trade names
associated with the Certo Business, or any variations of such names as
part of or in connection with the Certo Business, all telephone
listings and telephone advertising contracts, all lists of customers,
books and records and other information relating to the Certo
Business, all necessary licenses and authorizations and any other
rights used in connection with the Certo Business;
(m) "CERTO INSURANCE POLICIES" means the public liability insurance
and insurance against loss or damage to Certo Assets and the Certo
Business as was provided to NADS prior to the date hereof and which if
requested will be provided to NADS subsequent to the Closing;
(n) "CERTO INTANGIBLE ASSETS" means all of the intangible assets of
Certo, including, without limitation, Certo Goodwill, all trademarks,
logos, copyrights, designs, and other intellectual and industrial
property of Certo and its subsidiaries;
(o) "CERTO INVENTORY" means all inventory and supplies of the Certo
Business as was provided to NADS prior to the date hereof and which if
requested will be provided to NADS subsequent to the Closing;
(p) "CERTO MATERIAL CONTRACTS" means the burden and benefit of and
the right, title and interest of Certo in, to and under all trade and
non-trade contracts, engagements or commitments, whether written or
oral, to which Certo is entitled in connection with the Certo Business
whereunder Certo is obligated to pay or entitled to receive the sum of
$10,000 or more including, without limitation, any pension plans,
profit sharing plans, bonus plans, loan agreements, security
agreements, indemnities and guarantees, any agreements with employees,
lessees, licensees, managers, accountants, suppliers, agents,
distributors, officers, directors, attorneys or others which cannot be
terminated without liability on not more than one month's notice, and
those contracts which were provided to NADS prior to the date hereof
and which if requested will be provided to NADS subsequent to the
Closing; and
(q) "CERTO SHARES" means all of the issued and outstanding 100 shares
of Certo's common stock, no par value.
(r) "CLOSING" means the completion, on the Closing Date, of the
transactions contemplated hereby in accordance with Article 9 hereof;
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(s) "CLOSING DATE" means the day on which all conditions precedent to
the completion of the transaction as contemplated hereby have been
satisfied or waived;
(t) "EFFECTIVE TIME" means the date of the filing of an appropriate
Certificate of Merger in the form required by the State of Delaware,
which certificate shall provide that the Merger shall become effective
upon such filing;
(u) "MERGER" means the merger, at the Effective Time, of Certo and
the Acquirer pursuant to this Agreement and Plan of Merger;
(v) "MERGER CONSIDERATION" means the Acquisition Shares;
(w) "NADS ACCOUNTS PAYABLE AND LIABILITIES" means all accounts
payable and liabilities of NADS, on a consolidated basis, due and
owing or otherwise constituting a binding obligation of NADS and its
subsidiaries (other than a NADS Material Contract) as of June 30, 2005
as set forth is Schedule "J" hereto;
(x) "NADS ACCOUNTS RECEIVABLE" means all accounts receivable and
other debts owing to NADS, on a consolidated basis, as of June 30,
2005 as set forth in Schedule "K" hereto;
(y) "NADS ASSETS" means the undertaking and all the property and
assets of the NADS Business of every kind and description wheresoever
situated including, without limitation, NADS Equipment, NADS
Inventory, NADS Material Contracts, NADS Accounts Receivable, NADS
Cash, NADS Intangible Assets and NADS Goodwill, and all credit cards,
charge cards and banking cards issued to NADS;
(z) "NADS BANK ACCOUNTS" means all of the bank accounts, lock boxes
and safety deposit boxes of NADS and its subsidiaries or relating to
the NADS Business as set forth in Schedule "L" hereto;
(aa) "NADS BUSINESS" means all aspects of any business conducted by
NADS and its subsidiaries;
(bb) "NADS CASH" means all cash on hand or on deposit to the credit of
NADS and its subsidiaries on the Closing Date;
(cc) "NADS COMMON SHARES" means the shares of common stock in the
capital of NADS;
(dd) "NADS DEBT TO RELATED PARTIES" means the debts owed by NADS and
its subsidiaries to any affiliate, director or officer of NADS as
described in Schedule "M" hereto;
(ee) "NADS EQUIPMENT" means all machinery, equipment, furniture, and
furnishings used in the NADS Business, including, without limitation,
the items more particularly described in Schedule "N" hereto;
(ff) "NADS FINANCIAL STATEMENTS" means, collectively, the audited
consolidated financial statements of NADS for the fiscal year ended
December 31, 2004, together with the unqualified auditors' report
thereon, and the unaudited consolidated financial statements of NADS
for the six month period ended June 30, 2005, true copies of which are
attached as Schedule "O" hereto;
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(gg) "NADS GOODWILL" means the goodwill of the NADS Business including
the right to all corporate, operating and trade names associated with
the NADS Business, or any variations of such names as part of or in
connection with the NADS Business, all books and records and other
information relating to the NADS Business, all necessary licenses and
authorizations and any other rights used in connection with the NADS
Business;
(hh) "NADS INSURANCE POLICIES" means the public liability insurance
and insurance against loss or damage to the NADS Assets and the NADS
Business as described in Schedule "P" hereto;
(ii) "NADS INTANGIBLE ASSETS" means all of the intangible assets of
NADS and its subsidiaries, including, without limitation, NADS
Goodwill, all trademarks, logos, copyrights, designs, and other
intellectual and industrial property of NADS and its subsidiaries;
(jj) "NADS INVENTORY" means all inventory and supplies of the NADS
Business as of June 30, 2005, as set forth in Schedule "Q" hereto;
(kk) "NADS MATERIAL CONTRACTS" means the burden and benefit of and the
right, title and interest of NADS and its subsidiaries in, to and
under all trade and non-trade contracts, engagements or commitments,
whether written or oral, to which NADS or its subsidiaries are
entitled whereunder NADS or its subsidiaries are obligated to pay or
entitled to receive the sum of $10,000 or more including, without
limitation, any pension plans, profit sharing plans, bonus plans, loan
agreements, security agreements, indemnities and guarantees, any
agreements with employees, lessees, licensees, managers, accountants,
suppliers, agents, distributors, officers, directors, attorneys or
others which cannot be terminated without liability on not more than
one month's notice, and those contracts listed in Schedule "R" hereto;
(ll) "PLACE OF CLOSING" means the offices of Sichenzia Xxxx Xxxxxxxx
Xxxxxxx LLP, or such other place as NADS and Certo may mutually agree
upon;
(mm) "STATE CORPORATION LAW" means the General Corporation Law of the
State of Delaware;
(nn) "SURVIVING COMPANY" means the Acquirer following the merger with
Certo;
Any other terms defined within the text of this Agreement will have the meanings
so ascribed to them.
CAPTIONS AND SECTION NUMBERS
1.2 The headings and section references in this Agreement are for convenience of
reference only and do not form a part of this Agreement and are not intended to
interpret, define or limit the scope, extent or intent of this Agreement or any
provision thereof.
SECTION REFERENCES AND SCHEDULES
1.3 Any reference to a particular "Article", "section", "paragraph", "clause" or
other subdivision is to the particular Article, section, clause or other
subdivision of this Agreement and any reference to a Schedule by letter will
mean the appropriate Schedule attached to this Agreement and by such reference
the appropriate Schedule is incorporated into and made part of this Agreement.
The Schedules to this Agreement are as follows:
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Information concerning Certo
Schedule "D" Certo Debts to Related Parties
Information concerning NADS
Schedule "J" NADS Accounts Payable and Liabilities
Schedule "K" NADS Accounts Receivable
Schedule "L" NADS Bank Accounts
Schedule "M" NADS Debts to Related Parties
Schedule "N" NADS Equipment
Schedule "O" NADS Financial Statements
Schedule "P" NADS Insurance Policies
Schedule "Q" NADS Inventory
Schedule "R" NADS Material Contracts
Agreements
Schedule "S" Form of Consulting Agreement for Xxxxxx Xxxxx and Xxxxx
Xxxxx
Schedule "T" Form of Registration Rights Agreement
SEVERABILITY OF CLAUSES
1.4 If any part of this Agreement is declared or held to be invalid for any
reason, such invalidity will not affect the validity of the remainder which will
continue in full force and effect and be construed as if this Agreement had been
executed without the invalid portion, and it is hereby declared the intention of
the parties that this Agreement would have been executed without reference to
any portion which may, for any reason, be hereafter declared or held to be
invalid.
ARTICLE 2
THE MERGER
THE MERGER
2.1 At Closing, Certo shall be merged with and into the Acquirer pursuant to
this Agreement and Plan of Merger and the separate corporate existence of Certo
shall cease and the Acquirer, as it exists from and after the Closing, shall be
the Surviving Company.
EFFECT OF THE MERGER
2.2 The Merger shall have the effect provided therefor by the State
Corporation Law. Without limiting the generality of the foregoing, and subject
thereto, at Closing (i) all the rights, privileges, immunities, powers and
franchises, of a public as well as of a private nature, and all property, real,
personal and mixed, and all debts due on whatever account, including without
limitation subscriptions to shares, and all other choses in action, and all and
every other interest of or belonging to or due to Certo or the Acquirer, as a
group, subject to the terms hereof, shall be taken and deemed to be transferred
to, and vested in, the Surviving Company without further act or deed; and all
property, rights and privileges, immunities, powers and franchises and all and
every other interest shall be thereafter as effectually the property of the
Surviving Company, as they were of Certo and the Acquirer, as a group, and (ii)
all debts, liabilities, duties and obligations of Certo and the Acquirer, as a
group, subject to the terms hereof, shall become the debts, liabilities and
duties of the Surviving Company and the Surviving Company shall thenceforth be
responsible and liable for all debts, liabilities, duties and obligations of
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Certo and the Acquirer, as a group, and neither the rights of creditors nor any
liens upon the property of Certo or the Acquirer, as a group, shall be impaired
by the Merger, and may be enforced against the Surviving Company.
CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS AND OFFICERS
2.3 The Certificate of Incorporation of the Surviving Company from and after
the Closing shall be the Certificate of Incorporation of the Acquirer until
thereafter amended in accordance with the provisions therein and as provided by
the applicable provisions of the State Corporation Law. The Bylaws of the
Surviving Company from and after the Closing shall be the Bylaws of Certo as in
effect immediately prior to the Closing, continuing until thereafter amended in
accordance with their terms, the Certificate of Incorporation of the Surviving
Company and as provided by the State Corporation Law. The Directors of the
Acquirer at the Effective Time shall continue to be the Directors of Certo.
CONVERSION OF SECURITIES
2.4 At the Effective Time, by virtue of the Merger and without any action on
the part of the Acquirer, Certo or the Certo Shareholder, the shares of capital
stock of each of Certo and the Acquirer shall be converted as follows:
(a) Capital Stock of the Acquirer. Each issued and outstanding share
of the Acquirer's capital stock shall continue to be issued and
outstanding and shall represent one share of validly issued, fully
paid, and non-assessable common stock of the Surviving Company owned
by NADS. Each stock certificate of the Acquirer evidencing ownership
of any such shares shall continue to evidence ownership of such shares
of capital stock of the Surviving Company.
(b) Conversion of Certo Shares. Each Certo Share that is issued and
outstanding at the Effective Time shall automatically be cancelled and
extinguished and converted, without any action on the part of the
holder thereof, into the right to receive at the time and in the
amounts described in this Agreement an amount of Acquisition Shares
equal to the number of Acquisition Shares divided by the number of
Certo Shares outstanding immediately prior to Closing. All such Certo
Shares, when so converted, shall no longer be outstanding and shall
automatically be cancelled and retired and shall cease to exist, and
each holder of a certificate representing any such shares shall cease
to have any rights with respect thereto, except the right to receive
the Acquisition Shares paid in consideration therefor upon the
surrender of such certificate in accordance with this Agreement.
ADHERENCE WITH APPLICABLE SECURITIES LAWS
2.5 The Certo Shareholder agrees that he is acquiring the Acquisition Shares
for investment purposes and will not offer, sell or otherwise transfer, pledge
or hypothecate any of the Acquisition Shares issued to them (other than pursuant
to an effective Registration Statement under the Securities Act of 1933, as
amended) directly or indirectly unless:
(a) the sale is to NADS;
(b) the sale is made pursuant to the exemption from registration
under the Securities Act of 1933,as amended, provided by Rule 144
thereunder; or
(c) the Acquisition Shares are sold in a transaction that does not
require registration under the Securities Act of 1933, as amended, or
any applicable United States state laws and regulations governing the
offer and sale of securities, and the vendor has furnished to NADS an
opinion of counsel to that effect or such other written opinion as may
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be reasonably required by NADS.
The Certo Shareholder acknowledges that the certificates representing the
Acquisition Shares shall bear the following legend:
NO SALE, OFFER TO SELL, OR TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE SHALL BE MADE UNLESS A
REGISTRATION STATEMENT UNDER THE FEDERAL SECURITIES ACT
OF 1933, AS AMENDED, IN RESPECT OF SUCH SHARES IS THEN
IN EFFECT OR AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT IS THEN IN FACT APPLICABLE TO
SAID SHARES.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF NADS
REPRESENTATIONS AND WARRANTIES
3.1 NADS represents and warrants in all material respects to Certo, with the
intent that Certo will rely thereon in entering into this Agreement and in
approving and completing the transactions contemplated hereby, that:
NADS - CORPORATE STATUS AND CAPACITY
(a) Incorporation. NADS is a corporation duly incorporated and
validly subsisting under the laws of the State of Delaware, and is in
good standing with the office of the Secretary of State for the State
of Delaware. NADS has no subsidiaries except for the Acquirer;
(b) Carrying on Business. NADS does not currently conduct business,
except for the actual operations of the corporation which are carried
on in the State of New York and does carry on any other material
business activity in any other jurisdictions. NADS is duly authorized
to carry on such business in the State of New York. The nature of the
NADS Business does not require NADS to register or otherwise be
qualified to carry on business in any other jurisdictions;
(c) Corporate Capacity. NADS has the corporate power, capacity and
authority to own the NADS Assets and to enter into and complete this
Agreement;
(d) Reporting Status; Listing. NADS files current reports with the
Securities and Exchange Commission pursuant to section 15(d) of the
Securities - Exchange Act of 1934, the NADS Common Shares are
available for quotation on the "Pink Sheets" although there are
currently no market makers, and all reports required to be filed by
NADS with the Securities and Exchange Commission have been filed prior
to the date hereof;
ACQUIRER - CORPORATE STATUS AND CAPACITY
(e) Incorporation. The Acquirer is a corporation duly incorporated
and validly subsisting under the laws of the State of Delaware, and is
in good standing with the office of the Secretary of State for the
State of Delaware;
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(f) Carrying on Business. Other than corporate formation and
organization, the Acquirer has not carried on business activities to
date.
(g) Corporate Capacity. The Acquirer has the corporate power,
capacity and authority to enter into and complete this Agreement;
NADS - CAPITALIZATION
(h) Authorized Capital. The authorized capital of NADS consists of
100,000,000 NADS Common Shares, $0.001 par value, of which 8,848,870
NADS Common - Shares are presently issued and outstanding;
(i) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option for the
acquisition of NADS Common Shares or for the purchase, subscription or
issuance of any of the unissued shares in the capital of NADS;
(j) Capacity. NADS has the full right, power and authority to enter
into this Agreement on the terms and conditions contained herein. This
Agreement has been approved by NADS' board of directors;
ACQUIRER CAPITALIZATION
(k) Authorized Capital. The authorized capital of the Acquirer
consists of 100 shares of common stock, $0.001 par value, of which one
share of common stock is presently issued and outstanding;
(l) No Option. No person, firm or corporation has any agreement or
option or any right capable of becoming an agreement or option for the
acquisition of any common or preferred shares in Acquirer or for the
purchase, subscription or issuance of any of the unissued shares in
the capital of Acquirer;
(m) Capacity. The Acquirer has the full right, power and authority to
enter into this Agreement on the terms and conditions contained
herein;
NADS - RECORDS AND FINANCIAL STATEMENTS
(n) Charter Documents. The charter documents of NADS and the Acquirer
have not been altered since the incorporation of each, respectively,
except to increase NADS' authorized capital to 100,000,000 shares and
as filed in the record books of NADS or the Acquirer, as the case may
be;
(o) Corporate Minute Books. The corporate minute books of NADS and
its subsidiaries are complete and each of the minutes contained
therein accurately reflect the actions that were taken at a duly
called and held meeting or by consent without a meeting. All actions
by NADS and its subsidiaries which required director or shareholder
approval are reflected on the corporate minute books of NADS and its
subsidiaries. NADS and its subsidiaries are not in violation or breach
of, or in default with respect to, any term of their respective
Certificates of Incorporation (or other charter documents) or by-laws.
(p) NADS Financial Statements. The NADS Financial Statements present
fairly, in all material respects, the assets and liabilities (whether
accrued, absolute, contingent or otherwise) of NADS, on a consolidated
basis, as of the respective dates thereof, and the sales and earnings
of the NADS Business during the periods covered thereby, in all
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material respects and have been prepared in substantial accordance
with generally accepted accounting principles consistently applied;
(q) NADS Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of NADS or its subsidiaries
which are not disclosed in Schedule "J" hereto or reflected in the
NADS Financial Statements except for certain material liabilities
which are listed in Schedule "J" as having been incurred after June
30, 2005 and those incurred in the ordinary course of business since
the date of the said schedule and the NADS Financial Statements, and
neither NADS nor its subsidiaries have guaranteed or agreed to
guarantee any debt, liability or other obligation of any person, firm
or corporation. Without limiting the generality of the foregoing, all
accounts payable and liabilities of NADS and its subsidiaries as of
June 30, 2005 are described in Schedule "J" hereto;
(r) NADS Accounts Receivable. All the NADS Accounts Receivable result
from bona fide business transactions and services actually rendered
without, to the knowledge and belief of NADS, any claim by the obligor
for set-off or counterclaim;
(s) NADS Bank Accounts. All of the NADS Bank Accounts, their
location, numbers and the authorized signatories thereto are as set
forth in Schedule "L" hereto;
(t) No Debt to Related Parties. Except as disclosed in Schedule "M"
hereto, neither NADS nor its subsidiaries are, and on Closing will not
be, materially indebted to any affiliate, director or officer of NADS
except accounts payable on account of bona fide business transactions
of NADS incurred in normal course of the NADS Business, including
employment agreements, none of which are more than 30 days in arrears;
(u) No Related Party Debt to NADS. No director or officer or
affiliate of NADS is now indebted to or under any financial obligation
to NADS or its subsidiaries on any account whatsoever, except for
advances on account of travel and other expenses not exceeding $5,000
in total;
(v) No Dividends. No dividends or other distributions on any shares
in the capital of NADS have been made, declared or authorized since
the date of NADS Financial Statements;
(w) No Payments. Except for payments made of any items listed in
Schedule "J", including, without limitation, payment of Xxxxx Xxxxx'x
accrued salary of $58,750, consulting fees payable to Xxxxx Xxxxx and
Xxxxxx Xxxxx pursuant to their consulting agreements, accounting fees,
legal fees payable to NADS' attorneys in connection with the merger
and the payment of all NADS' liabilities as contemplated herein, no
payments of any kind have been made or authorized since the date of
the NADS Financial Statements to or on behalf of officers, directors,
shareholders or employees of NADS or its subsidiaries or under any
management agreements with NADS or its subsidiaries, except payments
made in the ordinary course of business and at the regular rates of
salary or other remuneration payable to them;
(x) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting NADS or its subsidiaries;
(y) No Adverse Events. NADS will make payment of all NADS Liabilities
incurred through the Closing Date, including, without limitation,
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accrued salaries, taxes, current liabilities, consulting fees
described in Schedule "S", transfer agent fees, accounting fees and
legal fees incurred, in connection with this transaction so that NADS
has no liabilities except those incurred on or after the Closing Date.
At Closing, it is anticipated that NADS will have no cash or other
assets except its ownership interest in the Acquirer, which will own
the business and assets of Certo by virtue of the transactions
contemplated herein. Except as contemplated above, since the date of
the NADS Financial Statements
(i) there has not been any material adverse change in the
financial position or condition of NADS, its subsidiaries, its
liabilities or the NADS Assets or any damage, loss or other
change in circumstances materially affecting NADS, the NADS
Business or the NADS Assets or NADS' right to carry on the NADS
Business, other than changes in the ordinary course of business,
(ii) there has not been any damage, destruction, loss or other
event (whether or not covered by insurance) materially and
adversely affecting NADS, its subsidiaries, the NADS Business or
the NADS Assets,
(iii) there has not been any material increase in the
compensation payable or to become payable by NADS to any of NADS'
officers, employees or agents or any bonus, payment or
arrangement made to or with any of them,
(iv) the NADS Business has been and continues to be carried on in
the ordinary course,
(v) NADS has not waived or surrendered any right of material
value,
(vi) Neither NADS nor its subsidiaries have discharged or
satisfied or paid any lien or encumbrance or obligation or
liability other than current liabilities in the ordinary course
of business, and
(vii) no capital expenditures in excess of $10,000 individually
or $30,000 in total have been authorized or made.
NADS - INCOME TAX MATTERS
(z) Tax Returns. All tax returns and reports of NADS and its
subsidiaries required by law to be filed have been filed and are true,
complete and correct, and any taxes payable in accordance with any
return filed by NADS and its subsidiaries or in accordance with any
notice of assessment or reassessment issued by any taxing authority
have been so paid;
(aa) Current Taxes. Adequate provisions have been made for taxes
payable for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers, or other
arrangements providing for an extension of time with respect to the
filing of any tax return by, or payment of, any tax, governmental
charge or deficiency by NADS or its subsidiaries. NADS is not aware of
any contingent tax liabilities or any grounds which would prompt a
reassessment including aggressive treatment of income and expenses in
filing earlier tax returns;
NADS - APPLICABLE LAWS AND LEGAL MATTERS
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(bb) Licenses. NADS and its subsidiaries hold all licenses and permits
as may be requisite for carrying on the NADS Business in the manner in
which it has heretofore been carried on, which licenses and permits
have been maintained and continue to be in good standing except where
the failure to obtain or maintain such licenses or permits would not
have a material adverse effect on the NADS Business;
(cc) Applicable Laws. Neither NADS nor its subsidiaries have been
charged with or received notice of breach of any laws, ordinances,
statutes, regulations, by-laws, orders or decrees to which they are
subject or which apply to them the violation of which would have a
material adverse effect on the NADS Business, and to NADS' knowledge,
neither NADS nor its subsidiaries are in breach of any laws,
ordinances, statutes, regulations, bylaws, orders or decrees the
contravention of which would result in a material adverse impact on
the NADS Business;
(dd) Pending or Threatened Litigation. There is no material litigation
or administrative or governmental proceeding pending or threatened
against or relating to NADS, its subsidiaries, the NADS Business, or
any of the NADS Assets nor does NADS have any knowledge of any
deliberate act or omission of NADS or its subsidiaries that would form
any material basis for any such action or proceeding;
(ee) No Bankruptcy. Neither NADS nor its subsidiaries have made any
voluntary assignment or proposal under applicable laws relating to
insolvency and bankruptcy and no bankruptcy petition has been filed or
presented against NADS or its subsidiaries and no order has been made
or a resolution passed for the winding-up, dissolution or liquidation
of NADS or its subsidiaries;
(ff) Labor Matters. Neither NADS nor its subsidiaries are party to any
collective agreement relating to the NADS Business with any labor
union or other association of employees and no part of the NADS
Business has been certified as a unit appropriate for collective
bargaining or, to the knowledge of NADS, has made any attempt in that
regard;
(gg) Finder's Fees. Neither NADS nor its subsidiaries are party to any
agreement which provides for the payment of finder's fees, brokerage
fees, commissions or other fees or amounts which are or may become
payable to any third party in connection with the execution and
delivery of this Agreement and the transactions contemplated herein;
EXECUTION AND PERFORMANCE OF AGREEMENT
(hh) Authorization and Enforceability. The execution and delivery of
this Agreement, and the completion of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of NADS and the Acquirer;
(ii) No Violation or Breach. The execution and performance of this
Agreement will not:
(i) violate the charter documents of NADS or the Acquirer or
result in any breach of, or default under, any loan agreement,
mortgage, deed of trust, or any other agreement to which NADS or
its subsidiaries are party,
(ii) give any person any right to terminate or cancel any
agreement including, without limitation, the NADS Material
Contracts, or any right or rights enjoyed by NADS or its
subsidiaries,
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(iii) result in any alteration of NADS' or its subsidiaries'
obligations under any agreement to which NADS or its subsidiaries
are party including, without limitation, the NADS Material
Contracts,
(iv) result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever in favor of a
third party upon or against the NADS Assets,
(v) result in the imposition of any tax liability to NADS or its
subsidiaries relating to the NADS Assets, or
(vi) violate any court order or decree to which either NADS or
its subsidiaries are subject;
THE NADS ASSETS - OWNERSHIP AND CONDITION
(jj) Business Assets. The NADS Assets comprise all of the property and
assets of the NADS Business, and no other person, firm or corporation
owns any assets used by NADS or its subsidiaries in operating the NADS
Business, whether under a lease, rental agreement or other
arrangement, other than as disclosed in Schedules "N" or "R" hereto;
(kk) Title. NADS or its subsidiaries are the legal and beneficial
owner of the NADS Assets, free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances or other claims
whatsoever, save and except as disclosed in Schedules "N" or "R"
hereto;
(ll) No Option. No person, firm or corporation has any agreement or
option or a right capable of becoming an agreement for the purchase of
any of the NADS Assets;
(mm) NADS Insurance Policies. NADS and its subsidiaries do not
maintain public liability insurance and insurance against loss or
damage to the NADS Assets and the NADS Business as described in
Schedule "P" hereto;
(nn) NADS Material Contracts. The NADS Material Contracts listed in
Schedule "R" constitute all of the material contracts of NADS and its
subsidiaries;
(oo) No Default. There has not been any default in any material
obligation of NADS or any other party to be performed under any of the
NADS Material Contracts, each of which is in good standing and in full
force and effect and unamended (except as disclosed in Schedule "R"
hereto), and NADS is not aware of any default in the obligations of
any other party to any of the NADS Material Contracts;
(pp) No Compensation on Termination. There are no agreements,
commitments or understandings relating to severance pay or separation
allowances on termination of employment of any employee of NADS or its
subsidiaries. Neither NADS nor its subsidiaries are obliged to pay
benefits or share profits with any employee after termination of
employment except as required by law;
NADS ASSETS - NADS EQUIPMENT
(qq) NADS Equipment. NADS has no Equipment;
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NADS ASSETS - NADS GOODWILL AND OTHER ASSETS
(rr) NADS Goodwill. NADS and its subsidiaries do not carry on the NADS
Business under any other business or trade names. NADS has no
intangible assets and does not have any knowledge of any infringement
by NADS or its subsidiaries of any patent, trademark, copyright or
trade secret;
THE NADS BUSINESS
(ss) Maintenance of Business. Since the date of the NADS Financial
Statements, NADS and its subsidiaries have not entered into any
material agreement or commitment except otherwise as disclosed herein;
(tt) Subsidiaries. Except for the Acquirer, NADS does not own any
subsidiaries and does not otherwise own, directly or indirectly, any
shares or interest in any other corporation, partnership, joint
venture or firm; and
NADS - ACQUISITION SHARES
(uu) Acquisition Shares. The Acquisition Shares when delivered to the
holders of Certo Shares pursuant to the Merger shall be validly issued
and outstanding as fully paid and non-assessable shares and the
Acquisition Shares shall be transferable upon the books of NADS, in
all cases subject to the provisions and restrictions of all applicable
securities laws.
NON-MERGER AND SURVIVAL
3.2 The representations and warranties of NADS contained herein will be true
at and as of Closing in all material respects as though such representations and
warranties were made as of such time. Notwithstanding the completion of the
transactions contemplated hereby, the waiver of any condition contained herein
(unless such waiver expressly releases a party from any such representation or
warranty) or any investigation made by Certo or the Certo Shareholder, the
representations and warranties of NADS shall survive the Closing.
INDEMNITY
3.3 NADS agrees to indemnify and save harmless Certo and the Certo
Shareholder from and against any and all claims, demands, actions, suits,
proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of NADS to defend any such claim), resulting from the breach by it of
any representation or warranty made under this Agreement or from any
misrepresentation in or omission from any certificate or other instrument
furnished or to be furnished by NADS to Certo or the Certo Shareholder
hereunder.
ARTICLE 4
COVENANTS OF NADS
COVENANTS
4.1 NADS covenants and agrees with Certo that it will:
(a) Conduct of Business. Until the Closing, conduct its business
diligently and in the ordinary course consistent with the manner in
which it generally has been operated up to the date of execution of
this Agreement;
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(b) [Left blank intentionally.]
(c) Access. Until the Closing, give Certo, the Certo Shareholder, and
their representatives full access to all of the properties, books,
contracts, commitments and records of NADS, and furnish to Certo, the
Certo Shareholder and their representatives all such information as
they may reasonably request;
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party consents
required to permit the Merger; and
(e) Name Change. Forthwith after the Closing, take such steps are
required to change the name of NADS to "The Certo Group, Inc." or such
similar name as may be acceptable to the board of directors of Certo.
(f) Reverse Stock Split. Forthwith after the Closing, take such steps
are required to approve a one for five reverse stock split so that
there are outstanding approximately 17,697,740 post split common
shares of NADS, consisting of 1,769,774 shares held by present NADS
stockholders and 15,927,966 shares held by the Certo Shareholder
(and/or his authorized transferees).
AUTHORIZATION
4.2 NADS hereby agrees to authorize and direct any and all federal, state,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting NADS and its subsidiaries to release any and all
information in their possession respecting NADS and its subsidiaries to Certo.
NADS shall promptly execute and deliver to Certo any and all consents to the
release of information and specific authorizations which Certo reasonably
requires to gain access to any and all such information.
SURVIVAL
4.3 The covenants set forth in this Article shall survive the Closing for
the benefit of Certo and the Certo Shareholder.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF
CERTO AND THE CERTO SHAREHOLDER
REPRESENTATIONS AND WARRANTIES
5.1 Certo and the Certo Shareholder jointly and severally represent and
warrant in all material respects to NADS, with the intent that it will rely
thereon in entering into this Agreement and in approving and completing the
transactions contemplated hereby, that Certo Shareholder does not directly or
indirectly own any entities or companies that are in the same or similar line of
business as the Certo Business and, thus, there are no conflicts of interest and
that:
CERTO - CORPORATE STATUS AND CAPACITY
(a) Incorporation. Certo is a corporation duly incorporated and
validly subsisting under the laws of the State of Delaware, and is in
good standing with the office of the Secretary of State for the State
of Delaware;
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(b) Carrying on Business. Certo carries on business primarily in the
State of New Jersey and does not carry on any material business
activity in any other jurisdiction. Certo has an office in
Stewartsville, New Jersey and in no other locations. The nature of the
Certo Business does not require Certo to register or otherwise be
qualified to carry on business in any other jurisdiction;
(c) Corporate Capacity. Certo has the corporate power, capacity and
authority to own Certo Assets, to carry on the Business of Certo and
to enter into and complete this Agreement;
CERTO - CAPITALIZATION
(d) Authorized Capital. The authorized capital of Certo consists of
100 shares of common stock, no par value per share;
(e) Ownership of Certo Shares. The issued and outstanding share
capital of Certo will on Closing, and before the Effective Time,
consist of 100 common shares (being the Certo Shares), which shares on
Closing shall be validly issued and outstanding as fully paid and
non-assessable shares. The Certo Shareholder will be at Closing the
registered and beneficial owner of 100 Certo Shares. The Certo Shares
owned by the Certo Shareholder will on Closing be free and clear of
any and all liens, charges, pledges, encumbrances, restrictions on
transfer and adverse claims whatsoever;
(f) No Option. No person, firm or corporation has any agreement,
option, warrant, preemptive right or any other right capable of
becoming an agreement or option for the acquisition of Certo Shares
held by the Certo Shareholder or for the purchase, subscription or
issuance of any of the unissued shares in the capital of Certo;
(g) No Restrictions. There are no restrictions on the transfer, sale
or other disposition of Certo Shares contained in the charter
documents of Certo or under any agreement;
CERTO - RECORDS AND FINANCIAL STATEMENTS
(h) Charter Documents. The charter documents of Certo have not been
altered since its incorporation date, except as filed in the record
books of Certo;
(i) Corporate Minute Books. The corporate minute books of Certo are
complete and each of the minutes contained therein accurately reflect
the actions that were taken at a duly called and held meeting or by
consent without a meeting. All actions by Certo which required
director or shareholder approval are reflected on the corporate minute
books of Certo. Certo is not in violation or breach of, or in default
with respect to, any term of its Certificates of Incorporation (or
other charter documents) or by-laws.
(j) Certo Financial Statements. The Certo Financial Statements
present fairly, in all material respects, the assets and liabilities
(whether accrued, absolute, contingent or otherwise) of Certo, on
consolidated basis, as of the respective dates thereof, and the sales
and earnings of the Certo Business during the periods covered thereby,
in all material respects, and have been prepared in substantial
accordance with generally accepted accounting principles consistently
applied;
(k) Certo Accounts Payable and Liabilities. There are no material
liabilities, contingent or otherwise, of Certo which were not provided
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to NADS -- prior to the date hereof or reflected in the Certo
Financial Statements except those incurred in the ordinary course of
business since the date of the said schedule and the Certo Financial
Statements, and Certo has not guaranteed or agreed to guarantee any
debt, liability or other obligation of any person, firm or
corporation. Without limiting the generality of the foregoing, all
accounts payable and liabilities of Certo were provided to NADS prior
to the date hereof and which if requested will be provided to NADS
subsequent to the Closing;
(l) Certo Accounts Receivable. All Certo Accounts Receivable set
forth in the Certo Financial Statements result from bona fide business
transactions and services actually rendered without, to the knowledge
and belief of Certo, any claim by the obligor for set-off or
counterclaim;
(m) Certo Bank Accounts. All of the Certo Bank Accounts, their
location, numbers and the authorized signatories thereto are as
provided to NADS prior to the date hereof;
(n) No Debt to Related Parties. Except as disclosed in Schedule "D"
hereto, Certo is not, and on Closing will not be, materially indebted
to the Certo Shareholder nor to any family member thereof, nor to any
affiliate, director or officer of Certo or the Certo Shareholder
except accounts payable on account of bona fide business transactions
of Certo incurred in normal course of Certo Business, including
employment agreements with the Certo Shareholder, none of which are
more than 30 days in arrears;
(o) No Related Party Debt to Certo. Neither the Certo Shareholder nor
any director, officer or affiliate of Certo are now indebted to or
under any financial obligation to Certo on any account whatsoever,
except for advances on account of travel and other expenses not
exceeding $5,000 in total;
(p) No Dividends. No dividends or other distributions on any shares
in the capital of Certo have been made, declared or authorized since
the date of the Certo Financial Statements;
(q) No Payments. No payments of any kind have been made or authorized
since the date of the Certo Financial Statements to or on behalf of
the Certo Shareholder or to or on behalf of officers, directors,
shareholders or employees of Certo or under any management agreements
with Certo, except payments made in the ordinary course of business
and at the regular rates of salary or other remuneration payable to
them;
(r) No Pension Plans. There are no pension, profit sharing, group
insurance or similar plans or other deferred compensation plans
affecting Certo;
(s) No Adverse Events. Since the date of the Certo Financial
Statements:
(i) there has not been any material adverse change in the
consolidated financial position or condition of Certo, its
liabilities or the Certo Assets or any damage, loss or other
change in circumstances materially affecting Certo, the Certo
Business or the Certo Assets or Certo's right to carry on the
Certo Business, other than changes in the ordinary course of
business,
(ii) there has not been any damage, destruction, loss or other
event (whether or not covered by insurance) materially and
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adversely affecting Certo, the Certo Business or the Certo
Assets,
(iii) there has not been any material increase in the
compensation payable or to become payable by Certo to the Certo
Shareholder or to any of Certo's officers, employees or agents or
any bonus, payment or arrangement made to or with any of them,
(iv) the Certo Business has been and continues to be carried on
in the ordinary course,
(v) Certo has not waived or surrendered any right of material
value,
(vi) Certo has not discharged or satisfied or paid any lien or
encumbrance or obligation or liability other than current
liabilities in the ordinary course of business, and
(vii) no capital expenditures in excess of $10,000 individually
or $30,000 in total have been authorized or made;
CERTO - INCOME TAX MATTERS
(t) Tax Returns. All tax returns and reports of Certo required by law
to be filed have been filed and are true, complete and correct, and
any taxes payable in accordance with any return filed by Certo or in
accordance with any notice of assessment or reassessment issued by any
taxing authority have been so paid;
(u) Current Taxes. Adequate provisions have been made for taxes
payable for the current period for which tax returns are not yet
required to be filed and there are no agreements, waivers, or other
arrangements providing for an extension of time with respect to the
filing of any tax return by, or payment of, any tax, governmental
charge or deficiency by Certo. Certo is not aware of any contingent
tax liabilities or any grounds which would prompt a reassessment
including aggressive treatment of income and expenses in filing
earlier tax returns;
CERTO - APPLICABLE LAWS AND LEGAL MATTERS
(v) Licenses. Certo holds all licenses and permits as may be
requisite for carrying on the Certo Business in the manner in which it
has heretofore been carried on, which licenses and permits have been
maintained and continue to be in good standing except where the
failure to obtain or maintain such licenses or permits would not have
a material adverse effect on the Certo Business;
(w) Applicable Laws. Certo has not been charged with or received
notice of breach of any laws, ordinances, statutes, regulations,
by-laws, orders or decrees to which it is subject or which applies to
it the violation of which would have a material adverse effect on the
Certo Business, and, to Certo's knowledge, Certo is not in breach of
any laws, ordinances, statutes, regulations, by-laws, orders or
decrees the contravention of which would result in a material adverse
impact on the Certo Business;
(x) Pending or Threatened Litigation. There is no material litigation
or administrative or governmental proceeding pending or threatened
against or relating to Certo, the Certo Business, or any of the Certo
Assets, nor does Certo have any knowledge of any deliberate act or
omission of Certo that would form any material basis for any such
action or proceeding;
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(y) No Bankruptcy. Certo has not made any voluntary assignment or
proposal under applicable laws relating to insolvency and bankruptcy
and no bankruptcy petition has been filed or presented against Certo
and no order has been made or a resolution passed for the winding-up,
dissolution or liquidation of Certo;
(z) Labor Matters. Certo is not a party to any collective agreement
relating to the Certo Business with any labor union or other
association of employees and no part of the Certo Business has been
certified as a unit appropriate for collective bargaining or, to the
knowledge of Certo, has made any attempt in that regard and Certo has
no reason to believe that any current employees will leave Certo's
employ as a result of this Merger.
(aa) Finder's Fees. Each of Certo and Certo Shareholder is not a party
to any agreement which provides for the payment of finder's fees,
brokerage fees, commissions or other fees or amounts which are or may
become payable to any third party in connection with the execution and
delivery of this Agreement and the transactions contemplated herein.
All finders' fees of Knightsbridge Capital and/or its related or
associated parties, if any, whether payable in cash or stock, will be
paid for by Certo or the Certo Shareholder;
EXECUTION AND PERFORMANCE OF AGREEMENT
(bb) Authorization and Enforceability. The execution and delivery of
this Agreement, and the completion of the transactions contemplated
hereby, have been duly and validly authorized by all necessary
corporate action on the part of Certo;
(cc) No Violation or Breach. The execution and performance of this
Agreement will not
(i) violate the charter documents of Certo or result in any
breach of, or default under, any loan agreement, mortgage, deed
of trust, or any other agreement to which Certo is a party,
(ii) give any person any right to terminate or cancel any
agreement including, without limitation, Certo Material
Contracts, or any right or rights enjoyed by Certo,
(iii) result in any alteration of Certo's obligations under any
agreement to which Certo is a party including, without
limitation, the Certo Material Contracts,
(iv) result in the creation or imposition of any lien,
encumbrance or restriction of any nature whatsoever in favor of a
third party upon or against the Certo Assets,
(v) result in the imposition of any tax liability to Certo
relating to Certo Assets or the Certo Shares, or
(vi) violate any court order or decree to which either Certo is
subject;
CERTO ASSETS - OWNERSHIP AND CONDITION
(dd) Business Assets. The Certo Assets comprise all of the property
and assets of the Certo Business, and neither the Certo Shareholder
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nor any other person, firm or corporation owns any assets used by
Certo in operating the Certo Business, whether under a lease, rental
agreement or other arrangement, other than as disclosed in Schedules
"E" or "I" hereto;
(ee) Title. Certo is the legal and beneficial owner of the Certo
Assets, free and clear of all mortgages, liens, charges, pledges,
security interests, encumbrances or other claims whatsoever, save and
except as disclosed in Schedules "E" or "I" hereto;
(ff) No Option. No person, firm or corporation has any agreement or
option or a right capable of becoming an agreement for the purchase of
any of the Certo Assets;
(gg) Certo Insurance Policies. Certo maintains the public liability
insurance and insurance against loss or damage to the Certo Assets and
the Certo Business as was provided to NADS prior to the date hereof;
(hh) Certo Material Contracts. The Certo Material Contracts constitute
all of the material contracts of Certo;
(ii) No Default. There has not been any default in any material
obligation of Certo or any other party to be performed under any of
Certo Material Contracts, each of which is in good standing and in
full force and effect and unamended (except as disclosed to NADS prior
to the date hereof), and Certo is not aware of any default in the
obligations of any other party to any of the Certo Material Contracts;
(jj) No Compensation on Termination. There are no agreements,
commitments or understandings relating to severance pay or separation
allowances on termination of employment of any employee of Certo.
Certo is not obliged to pay benefits or share profits with any
employee after termination of employment except as required by law;
CERTO ASSETS - CERTO EQUIPMENT
(kk) Certo Equipment. The Certo Equipment has been maintained in a
manner consistent with that of a reasonably prudent owner and such
equipment is in good working condition;
CERTO ASSETS - CERTO GOODWILL AND OTHER ASSETS
(ll) Certo Goodwill. Certo carries on the Certo Business only under
the name "Certo Incorporated" and variations thereof and under no
other business or trade names. Certo does not have any knowledge of
any infringement by Certo of any patent, trademark, copyright or trade
secret;
THE BUSINESS OF CERTO
(mm) Maintenance of Business. Since the date of the Certo Financial
Statements, the Certo Business has been carried on in the ordinary
course and Certo has not entered into any material agreement or
commitment except in the ordinary course; and
(nn) Subsidiaries. Except for The Certo Group, LLC, Certo does not own
any subsidiaries and does not otherwise own, directly or indirectly,
any shares or interest in any other corporation, partnership, joint
venture or firm and Certo does not own any subsidiary and does not
otherwise own, directly or indirectly, any shares or interest in any
other corporation, partnership, joint venture or firm.
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NON-MERGER AND SURVIVAL
5.2 The representations and warranties of Certo and the Certo Shareholder
contained herein will be true at and as of Closing in all material respects as
though such representations and warranties were made as of such time.
Notwithstanding the completion of the transactions contemplated hereby, the
waiver of any condition contained herein (unless such waiver expressly releases
a party from any such representation or warranty) or any investigation made by
NADS, the representations and warranties of Certo and the Certo Shareholder
shall survive the Closing.
INDEMNITY
5.3 Certo and the Certo Shareholder jointly and severally agree to indemnify
and save harmless NADS from and against any and all claims, demands, actions,
suits, proceedings, assessments, judgments, damages, costs, losses and expenses,
including any payment made in good faith in settlement of any claim (subject to
the right of Certo and the Certo Shareholder to defend any such claim),
resulting from the breach by any of them of any representation or warranty of
such party made under this Agreement or from any misrepresentation in or
omission from any certificate or other instrument furnished or to be furnished
by Certo or the Certo Shareholder to NADS hereunder.
ARTICLE 6
COVENANTS OF CERTO AND
THE CERTO SHAREHOLDER
COVENANTS
6.1 Certo and the Certo Shareholder covenant and agree with NADS that they
will:
(a) Conduct of Business. Until the Closing, conduct the Certo
Business diligently and in the ordinary course consistent with the
manner in which the Certo Business generally has been operated up to
the date of execution of this Agreement;
(b) Preservation of Business. Until the Closing, use their best
efforts to preserve the Certo Business and the Certo Assets and,
without limitation, preserve for NADS Certo's relationships with their
suppliers, customers and others having business relations with them;
(c) Access. Until the Closing, give NADS and its representatives full
access to all of the properties, books, contracts, commitments and
records of Certo relating to Certo, the Certo Business and the Certo
Assets, and furnish to NADS and its representatives all such
information as they may reasonably request;
(d) Procure Consents. Until the Closing, take all reasonable steps
required to obtain, prior to Closing, any and all third party consents
required to permit the Merger and to preserve and maintain the Certo
Assets, including the Certo Material Contracts, notwithstanding the
change in control of Certo arising from the Merger;
(e) Reporting and Internal Controls. From and after the Effective
Time, the Certo Shareholder shall forthwith take all required actions
to implement internal controls on the business of the Surviving
Company to ensure that the Surviving Company and NADS comply with
Section 13(b)(2) of the Securities and Exchange Act of 1934;
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(f) Audited Financial Statements. Immediately upon execution of this
Agreement, cause to be prepared audited financial statements of Certo
in compliance with the requirements of Regulation SB as promulgated by
the Securities and Exchange Commission; and
(g) Name Change. Forthwith after the Closing, take such steps are
required to change the name of NADS to "The Certo Group, Inc." or such
similar name as may be acceptable to the board of directors of NADS.
AUTHORIZATION
6.2 Certo hereby agrees to authorize and direct any and all federal, state,
municipal, foreign and international governments and regulatory authorities
having jurisdiction respecting Certo to release any and all information in their
possession respecting Certo to NADS. Certo shall promptly execute and deliver
to NADS any and all consents to the release of information and specific
authorizations which NADS reasonably require to gain access to any and all such
information.
SURVIVAL
6.3 The covenants set forth in this Article shall survive the Closing for
the benefit of NADS.
ARTICLE 7
CONDITIONS PRECEDENT
CONDITIONS PRECEDENT IN FAVOR OF NADS
7.1 NADS' obligations to carry out the transactions contemplated hereby are
subject to the fulfillment of each of the following conditions precedent on or
before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to NADS hereunder will have been so executed and delivered;
(b) all of the terms, covenants and conditions of this Agreement to
be complied with or performed by Certo or the Certo Shareholder at or
prior to the Closing will have been complied with or performed;
(c) NADS shall have completed its review and inspection of the books
and records of Certo and shall be satisfied with same in all material
respects;
(d) title to the Certo Shares held by the Certo Shareholder and to
the Certo Assets will be free and clear of all mortgages, liens,
charges, pledges, security interests, encumbrances or other claims
whatsoever, save and except as disclosed herein;
(e) the Certificate of Merger shall be executed by Certo in form
acceptable for filing with the Delaware Secretary of State;
(f) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of Certo, its liabilities or the Certo Assets or any
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damage, loss or other change in circumstances materially and
adversely affecting the Certo Business or the Certo Assets or
Certo's right to carry on the Certo Business, other than changes
in the ordinary course of business, none of which has been
materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to Certo or the Certo
Business (whether or not covered by insurance) materially and
adversely affecting Certo, the Certo Business or the Certo
Assets;
(g) the transactions contemplated hereby shall have been approved by
all other regulatory authorities having jurisdiction over the subject
matter hereof, if any;
(h) $85,000 shall have been wired, in accordance with the wire
instructions set forth below, for subsequent delivery of such funds to
Xxxxx X. Xxxxx as payment of the accrued salary of $58,750 and $26,250
as partial payment for the consulting fees due under his Consulting
Agreement, which will be wired to Xx. Xxxxx'x account in accordance
with wire instructions to be supplied prior to or at closing
Citibank 000 Xxxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000
Telephone: (000) 000-0000
Branch: 199
ABA# 000000000
For Account of Xxxxx & Xxxxx PLLC
Account No. 00000000;
(i) the consulting agreement in the form attached hereto as Schedule
"S" shall be executed by NADS and the other parties thereto; and
(j) the registration rights agreement in the form attached hereto as
Schedule "T" shall be executed by NADS and the other parties thereto.
WAIVER BY NADS
7.2 The conditions precedent set out in the preceding section are inserted
for the exclusive benefit of NADS and any such condition may be waived in whole
or in part by NADS at or prior to Closing by delivering to Certo a written
waiver to that effect signed by NADS. In the event that the conditions precedent
set out in the preceding section are not satisfied on or before the Closing,
NADS shall be released from all obligations under this Agreement.
CONDITIONS PRECEDENT IN FAVOR OF CERTO AND THE CERTO SHAREHOLDER
7.3 The obligation of Certo and the Certo Shareholder to carry out the
transactions contemplated hereby is subject to the fulfillment of each of the
following conditions precedent on or before the Closing:
(a) all documents or copies of documents required to be executed and
delivered to Certo hereunder will have been so executed and delivered;
(b) all of the terms, covenants and conditions of this Agreement to
be complied with or performed by NADS at or prior to the Closing will
have been complied with or performed;
(c) Certo shall have completed its review and inspection of the books
and records of NADS and its subsidiaries and shall be satisfied with
same in all material respects;
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(d) NADS will have delivered the Acquisition Shares to be issued
pursuant to the terms of the Merger to Certo at the Closing and the
Acquisition Shares will be registered on the books of NADS in the name
of the holder of Certo Shares at the Effective Time;
(e) title to the Acquisition Shares will be free and clear of all
mortgages, liens, charges, pledges, security interests, encumbrances
or other claims whatsoever;
(f) the Certificate of Merger shall be executed by the Acquirer in
form acceptable for filing with the Delaware Secretary of State;
(g) subject to Article 8 hereof, there will not have occurred
(i) any material adverse change in the financial position or
condition of NADS, its subsidiaries, their liabilities or any
damage, loss or other change in circumstances materially and
adversely affecting NADS, the NADS Business or NADS' right to
carry on the NADS Business, other than changes in the ordinary
course of business, none of which has been materially adverse, or
(ii) any damage, destruction, loss or other event, including
changes to any laws or statutes applicable to NADS or the NADS
Business (whether or not covered by insurance) materially and
adversely affecting NADS, its subsidiaries, or the NADS Business;
(h) the transactions contemplated hereby shall have been approved by
all other regulatory authorities having jurisdiction over the subject
matter hereof, if any; and
(k) the satisfaction of all liabilities of NADS on or prior to the Closing
Date.
WAIVER BY CERTO AND THE CERTO SHAREHOLDER
7.4 The conditions precedent set out in the preceding section are inserted
for the exclusive benefit of Certo and the Certo Shareholder and any such
condition may be waived in whole or in part by Certo or the Certo Shareholder at
or prior to the Closing by delivering to NADS a written waiver to that effect
signed by Certo and the Certo Shareholder. In the event that the conditions
precedent set out in the preceding section are not satisfied on or before the
Closing Certo and the Certo Shareholder shall be released from all obligations
under this Agreement.
NATURE OF CONDITIONS PRECEDENT
7.5 The conditions precedent set forth in this Article are conditions of
completion of the transactions contemplated by this Agreement and are not
conditions precedent to the existence of a binding agreement. Each party
acknowledges receipt of the sum of $1.00 and other good and valuable
consideration as separate and distinct consideration for agreeing to the
conditions of precedent in favor of the other party or parties set forth in this
Article.
TERMINATION
7.6 Notwithstanding any provision herein to the contrary, if the Closing
does not occur on or before August 15, 2005, this Agreement will be at an end
and will have no further force or effect, unless otherwise agreed upon by the
parties in writing.
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CONFIDENTIALITY
7.7 Notwithstanding any provision herein to the contrary, the parties hereto
agree that the existence and terms of this Agreement are confidential and that
if this Agreement is terminated pursuant to the preceding section the parties
agree to return to one another any and all financial, technical and business
documents delivered to the other party or parties in connection with the
negotiation and execution of this Agreement and shall keep the terms of this
Agreement and all information and documents received from Certo and NADS and the
contents thereof confidential and not utilize nor reveal or release same,
provided, however, that NADS will be required to issue news releases regarding
the execution and consummation of this Agreement and file a Current Report on
Form 8-K with the Securities and Exchange Commission respecting the proposed
Merger contemplated hereby together with such other documents as are required to
maintain the currency of NADS' filings with the Securities and Exchange
Commission.
ARTICLE 8
RISK
MATERIAL CHANGE IN THE BUSINESS OF CERTO
8.1 If any material loss or damage to the NADS Business occurs prior to
Closing and such loss or damage, in Certo's reasonable opinion, cannot be
substantially repaired or replaced within sixty (60) days, Certo shall, within
two (2) days following any such loss or damage, by notice in writing to NADS, at
its option, either:
(a) terminate this Agreement, in which case no party will be under
any further obligation to any other party; or
(b) elect to complete the Merger and the other transactions
contemplated hereby, in which case the proceeds and the rights to
receive the proceeds of all insurance covering such loss or damage
will, as a condition precedent to Certo's obligations to carry out the
transactions contemplated hereby, be vested in NADS or otherwise
adequately secured to the satisfaction of Certo on or before the
Closing Date.
MATERIAL CHANGE IN THE NADS BUSINESS
8.2 If any material loss or damage to the NADS Business occurs prior to
Closing and such loss or damage, in Certo's reasonable opinion, cannot be
substantially repaired or replaced within sixty (60) days, Certo shall, within
two (2) days following any such loss or damage, by notice in writing to NADS, at
its option, either:
(c) terminate this Agreement, in which case no party will be under
any further obligation to any other party; or
(d) elect to complete the Merger and the other transactions
contemplated hereby, in which case the proceeds and the rights to
receive the proceeds of all insurance covering such loss or damage
will, as a condition precedent to Certo's obligations to carry out the
transactions contemplated hereby, be vested in NADS or otherwise
adequately secured to the satisfaction of Certo on or before the
Closing Date.
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ARTICLE 9
CLOSING
CLOSING
9.1 The Merger and the other transactions contemplated by this Agreement
will be closed at the Place of Closing in accordance with the closing procedure
set out in this Article.
DOCUMENTS TO BE DELIVERED BY CERTO
9.2 On or before the Closing, Certo and the Certo Shareholder will deliver
or cause to be delivered to NADS:
(a) the original or certified copies of the charter documents of
Certo and all corporate records documents and instruments of Certo,
the corporate seal of Certo and all books and accounts of Certo;
(b) all reasonable consents or approvals required to be obtained by
Certo for the purposes of completing the Merger and preserving and
maintaining the interests of Certo under any and all Certo Material
Contracts and in relation to Certo Assets;
(c) certified copies of such resolutions of the shareholder and
director of Certo as are required to be passed to authorize the
execution, delivery and implementation of this Agreement;
(d) an acknowledgement from Certo and the Certo Shareholder of the
satisfaction of the conditions precedent set forth in section 7.3
hereof;
(e) the Certificate of Merger, duly executed by Certo; and
(f) such other documents as NADS may reasonably require to give
effect to the terms and intention of this Agreement.
DOCUMENTS TO BE DELIVERED BY NADS
9.3 On or before the Closing, NADS shall deliver or cause to be delivered to
Certo and the Certo Shareholder:
(a) share certificates representing the Acquisition Shares duly
registered in the names of the holders of shares of Certo Common
Stock;
(b) certified copies of such resolutions of the directors of NADS as
are required to be passed to authorize the execution, delivery and
implementation of this Agreement;
(c) a certified copy of a resolution of the directors of NADS dated
as of the Closing Date appointing the nominees of Certo as directors
of NADS;
(d) the resignations of all of the directors and officers of NADS;
(e) an acknowledgement from NADS of the satisfaction of the
conditions precedent set forth in section 7.1 hereof;
(f) the Certificate of Merger, duly executed by the Acquirer;
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(g) documentation evidencing the conversion of all outstanding
warrants into 2,300,000 NADS Common Shares, in form satisfactory to
Certo; and
(h) such other documents as Certo may reasonably require to give
effect to the terms and intention of this Agreement.
ARTICLE 10
POST-CLOSING MATTERS
10.1 Forthwith after the Closing, NADS, Certo and the Certo Shareholder
agree to use all their best efforts to:
(a) file the Certificate of Merger with Secretary of State of the State of
Delaware;
(b) issue a news release reporting the Closing;
(c) file a Form 8-K with the Securities and Exchange Commission
disclosing the terms of this Agreement and, not more than 60 days
following the filing of such Form 8-K, to file an amended Form 8-K
which includes audited financial statements of Certo as well as pro
forma financial information of Certo and NADS as required by
Regulation SB as promulgated by the Securities and Exchange
Commission;
(d) take such steps are required to approve a one for five reverse
stock split so that there are outstanding approximately 17,697,740
post split common shares of NADS;
(e) take such steps are required to change the name of NADS to "The
Certo Group, Inc." a name as may be acceptable to the board of
directors of NADS; and
(f) file a registration statement in accordance with the registration
rights agreement in the form attached hereto as Schedule "T."
ARTICLE 11
GENERAL PROVISIONS
ARBITRATION
11.1 The parties hereto shall attempt to resolve any dispute, controversy,
difference or claim arising out of or relating to this Agreement by negotiation
in good faith. If such good negotiation fails to resolve such dispute,
controversy, difference or claim within fifteen (15) days after any party
delivers to any other party a notice of its intent to submit such matter to
arbitration, then any party to such dispute, controversy, difference or claim
may submit such matter to arbitration in the City of New York, New York.
NOTICE
11.2 Any notice required or permitted to be given by any party will be
deemed to be given when in writing and delivered to the address for notice of
the intended recipient by personal delivery, prepaid single certified or
registered mail, or facsimile. Any notice delivered by mail shall be deemed to
have been received on the fourth business day after and excluding the date of
mailing, except in the event of a disruption in regular postal service in which
event such notice shall be deemed to be delivered on the actual date of receipt.
Any notice delivered personally or by facsimile shall be deemed to have been
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received on the actual date of delivery. If delivered by facsimile, the party
transmitting the facsimile shall retain proof of the transmission by facsimile
and shall send by regular mail a copy to the other party.
ADDRESSES FOR SERVICE
11.3 The address for service of notice of each of the parties hereto is as
follows:
(a) NADS or the Acquirer:
National Diversified Services, Inc.
c/x Xxxxx & Xxxxx, PLLC
0000 Xxx Xxxxxxx Xxxx, Xxxxx 000
Xxxxxxxx, Xxx Xxxx 00000
Attn: Xxxxx X. Xxxxx, Chief Executive Officer
Phone: (000) 000-0000
Telecopier: (000) 000-0000
With a copy to:
Xxxxxx Xxxxx
Telecopier: (000) 0000000
(b) Certo or the Certo Shareholder
The Certo Group, Inc.
0000 Xxxx Xxxx
Xxxxxxxxxxxxxx, Xxx Xxxxxx 00000
Attn: Xxxxxxx Xxxxx, Chief Executive Officer
Phone: (000) 000-0000
Telecopier: (000) 000-0000
CHANGE OF ADDRESS
11.4 Any party may, by notice to the other parties change its address for
notice to some other address in North America and will so change its address for
notice whenever the existing address or notice ceases to be adequate for
delivery by hand. A post office box may not be used as an address for service.
FURTHER ASSURANCES
11.5 Each of the parties will execute and deliver such further and other
documents and do and perform such further and other acts as any other party may
reasonably require to carry out and give effect to the terms and intention of
this Agreement.
TIME OF THE ESSENCE
11.6 Time is expressly declared to be the essence of this Agreement.
ENTIRE AGREEMENT
11.7 The provisions contained herein constitute the entire agreement among
Certo, the Certo Shareholder, the Acquirer and NADS respecting the subject
matter hereof and supersede all previous communications, representations and
agreements, whether verbal or written, among Certo, the Certo Shareholder, the
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Acquirer and NADS with respect to the subject matter hereof.
ENUREMENT
11.8 This Agreement will enure to the benefit of and be binding upon the
parties hereto and their respective heirs, executors, administrators, successors
and permitted assigns.
ASSIGNMENT
11.9 This Agreement is not assignable without the prior written consent of
the parties hereto.
COUNTERPARTS
11.10 This Agreement may be executed in counterparts, each of which when
executed by any party will be deemed to be an original and all of which
counterparts will together constitute one and the same Agreement. Delivery of
executed copies of this Agreement by telecopier will constitute proper delivery,
provided that originally executed counterparts are delivered to the parties
within a reasonable time thereafter.
APPLICABLE LAW
11.11 This Agreement is subject to the laws of the State of New York.
[Remainder of page intentionally left blank.]
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IN WITNESS WHEREOF the parties have executed this Agreement effective as of the
day and year first above written.
NATIONAL DIVERSIFIED SERVICES, INC.
By: /s/Xxxxx X. Xxxxx
------------------
Xxxxx X. Xxxxx,
Chief Executive Officer
THE CERTO GROUP, INC.
By: /s/Xxxxxxx Xxxxx
------------------
Xxxxxxx Xxxxx,
Chief Executive Officer
NADS ACQUISITION CORP.
By: /s/ Xxxxx X. Xxxxx
--------------------
Xxxxx X. Xxxxx,
Chief Executive Officer
/s/ Xxxxxxx Xxxxx
-----------------
XXXXXXX XXXXX
