Exhibit 10.15
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement")
effective as of the 1st day of July 1997, by and among MARKETING SERVICES GROUP,
INC., a Nevada corporation ("MSGI" or the "Purchaser"); PII MERGER CORP., a New
York corporation and a wholly-owned subsidiary of MSGI ("Merging Subsidiary");
PEGASUS INTERNET, INC., a New York corporation ("Pegasus" or "the Company");
XXXXXX XXXXXX, an individual ("RB"); J. XXXXXX XXXXXXX, an individual ("JJB");
XXXXXX X. XXXXXX, an individual; ("RKB"); and XXXXXXXX X. XXXXXX, an individual
("KRB"; together with RB, JJB, and RKB, the "Shareholders").
W I T N E S S E T H:
WHEREAS, MSGI, Merging Subsidiary, PII and the Shareholders
deem it to be desirable and in the best interests of each corporation that MSGI
acquire Pegasus such that all of the issued and outstanding shares of capital
stock of Pegasus be acquired by MSGI pursuant to a merger (the "Merger") as
described herein;
WHEREAS, MSGI has formed PII Corp. as a wholly-owned
subsidiary ("Merging Subsidiary") under the Business Corporation Law of the
State of New York (the "BCL") for the purpose of merging it with Pegasus
pursuant to the applicable provisions of the BCL and the terms of this Merger
Agreement;
WHEREAS, subject to the terms and conditions of this Merger
Agreement, MSGI and Pegasus desire to cause Merging Subsidiary to be merged with
and into Pegasus, Pegasus and Merging Subsidiary shall be referred to herein as
the "Constituent Corporations"; and
WHEREAS, it is the express intention of MSGI, Merging
Subsidiary and Pegasus that the Merger constitute a plan of reorganization
intended to qualify for federal income tax purposes as a "reorganization" within
the meaning of IRC Sections 368(a)(1)(A) and 368(a)(2)(E):
NOW, THEREFORE, in consideration of the premises,
representations, warranties and covenants contained herein, and intending to be
legally bound hereby, the parties hereto agree as follows:
1. THE MERGER.
1.1 The Merger.
At the Effective Time (as defined in Section 1.2), upon the terms and subject to
the conditions of this Agreement, Merging Subsidiary shall be merged with and
into Pegasus (the "Merger") in accordance with the BCL. Pegasus shall be the
surviving corporation (the "Surviving Corporation") in the Merger. As a result
of the Merger, the outstanding shares of capital stock of the Constituent
Corporations shall be converted or canceled in the manner provided in Article 2.
1.2 Effective Time.
At the Closing (as defined in Section 1.3), a certificate of merger (the
"Certificate of Merger") shall be duly prepared and executed by Pegasus and
Merging Subsidiary and thereafter delivered to the Secretary of State of the
State of New York (the "Secretary") on, or as soon as practicable after, the
Closing Date (as defined in Section 1.3). The Merger shall become effective at
the time of the filing of the Certificate of Merger with the Secretary (the date
and time of such filing being referred to herein as the "Effective Time").
1.3 Closing.
The closing of the Merger (the "Closing") will take place at the offices of
Camhy Karlinsky & Xxxxx LLP, 0000 Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000-0000, on
July 11, 1997 or at such other place as the parties hereto mutually agree, on a
date and at a time to be specified by the parties, which shall in no event be
later than 10:00 a.m., local time, provided that the closing conditions set
forth in Article 5 have been satisfied or, if permissible, waived in accordance
with this Merger Agreement, or on such other date as the parties hereto mutually
agree (the "Closing Date").
1.4 Certificate of Incorporation and Bylaws of the Surviving
Corporation.
At the Effective Time, (i) the Certificate of Incorporation of Pegasus as in
effect immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Certificate of Incorporation, and (ii) the Bylaws of Pegasus as
in effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter amended as provided by law, the
Certificate of Incorporation of the Surviving Corporation, and such Bylaws.
1.5 Directors of the Surviving Corporation.
From and after the Effective Time, the directors of the Surviving Corporation
shall be JJB and RB. The directors of the Surviving Corporation shall serve
until their successors shall have been duly elected or appointed and qualified
or until their earlier death, resignation, or removal in accordance with the
Surviving Corporation's Certificate of Incorporation and Bylaws.
1.6 Effects of the Merger.
Subject to the foregoing, the effects of the Merger shall be as provided in the
applicable provisions of the BCL.
2. STATUS AND CONVERSION OF SECURITIES.
2.1 Stock of Pegasus.
(a) Pegasus. Each share of common stock, without par value, of Pegasus
("Pegasus Common Stock") issued and outstanding at the Effective Time
shall, by virtue of the Merger and without any action on the part of the
holders thereof, be converted into the right to receive (i) 3,000 shares of
common stock, par value $0.01 per share, of MSGI ("MSGI Common Stock") for
a total of 600,000 shares of MSGI Common Stock (the "Stock Consideration"),
except that any shares of Pegasus Common Stock held in Pegasus' treasury or
owned by Pegasus or Merging Subsidiary at the Effective Time shall be
canceled without payment of any consideration thereof and (ii) $1,000 in
cash for a total of $200,000 in cash (the "Cash Consideration"). Each
Shareholder shall receive a portion of the Cash Consideration equal to the
product (x multiplied by y) of (x) $200,000 divided by the total number of
shares of Pegasus Common Stock outstanding, and (y) the number of shares of
Pegasus Common Stock held by such Shareholder.
(b) Exchange of Pegasus Common Stock. At the Effective Time, MSGI shall
deliver to its transfer agent instructions to forthwith issue from its
authorized but unissued shares and distribute to holders of certificates
representing shares of Pegasus Common Stock, upon surrender to MSGI of such
certificates for cancellation, together with a duly-executed stock power,
if applicable, one or more certificates representing the number of whole
shares of MSGI Common Stock into which the shares represented by the
certificate(s) shall have been converted pursuant to Sections 2.1(a) and
the certificate(s) so surrendered shall be canceled. Such instructions
shall be accompanied by an opinion of MSGI's counsel, sufficient in form
and scope to cause the transfer agent to comply with MSGI's instructions.
Upon surrender of his or her Pegasus shares, each shareholder of Pegasus
prior to the Effective Time shall be deemed the owner of the number of MSGI
shares into which such Pegasus shares are to be converted pursuant hereto.
(c) After the Effective Time, there shall be no further registration of
transfers on the stock transfer books of the Surviving Corporation of the
shares of Pegasus Common Stock that were outstanding immediately prior to
the Effective Time. As of the Effective Time, the holders of certificates
representing shares of Pegasus Common Stock shall cease to have any rights
as shareholders of Pegasus, except such rights, if any, as they may have
pursuant to New York law. Except as provided above, until such certificates
are surrendered for exchange, each such certificate shall, after the
Effective Time, represent for all purposes only the right to receive the
number of whole shares of MSGI Common Stock into which the shares of
Pegasus Common Stock have been converted by the Merger as provided in
Sections 2.1(a) hereof.
(d) Dissenters' Rights. All of the Shareholders hereby waive any
dissenters' rights under New York Law.
2.2 Stock of Merging Subsidiary.
Each share of common stock, par value $.01, of Merging Subsidiary shall, by
virtue of the Merger and without any action on the part of the holder thereof,
be converted into one share of Pegasus Common Stock, which will be registered in
the name of MSGI.
2.3 Other Transactions at Closing.
In addition to the transactions referred to in this Article 1 above, at the
Closing, Pegasus shall deliver to the Purchaser the following:
(a) The minute books, stock certificate books, stock transfer
ledgers, and corporate seals of the Company;
(b) Certificates of Good Standing, with "bring down" telegrams
or similar documentation, as to the Company issued by the appropriate
governmental authorities of the State of New York and each state in which the
Company is qualified to do business;
(c) Certified copy of the Certificate of Incorporation of the
Company, and all amendments thereto, certified by the Secretary of State of the
State of New York; and
(d) A copy of the Bylaws of the Company, certified by the
secretary or assistant secretary thereof as being true, complete, and correct.
3. REPRESENTATIONS AND WARRANTIES OF PEGASUS AND THE SHAREHOLDERS.
Pegasus and each of the Shareholders, jointly and severally,
represent and warrant to the Purchaser as follows:
3.1 Organization and Qualification.
The Company does not own any capital stock of any corporation or any interest in
any joint venture, partnership, association, trust, or other entity. The
business and operations of the Company are conducted solely by and through the
Company. Schedule 3.1 correctly sets forth the Company's place of incorporation,
principal place of business, and jurisdictions in which it is qualified to do
business. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of its jurisdiction of incorporation, with all
requisite power and authority, and all necessary consents, authorizations,
approvals, orders, licenses, certificates, and permits of and from, and
declarations and filings with, all federal, state, local, and other governmental
authorities, and all courts and other tribunals, to own, lease, license, and use
its properties and assets and to carry on the business in which it is now
engaged and the business in which it contemplates engaging. To the best of the
Shareholders' and the Company's knowledge, the Company is duly qualified to
transact the business in which it is now engaged and is in good standing as a
foreign corporation in every jurisdiction in which its ownership, leasing,
licensing, or use of property or assets or the conduct of its business makes
such qualification necessary.
3.2 Capitalization.
The authorized capital stock of the Company consists of 200 shares of Pegasus
Common Stock, all of which shares are outstanding. Each of such outstanding
shares of Pegasus Common Stock is validly authorized, validly issued, fully
paid, and nonassessable, has not been issued and is not owned or held in
violation of any preemptive right of stockholders, and is owned of record and
beneficially by the Shareholders as set forth on Schedule 3.2 attached hereto.
The Pegasus Common Stock is owned by the Shareholders free and clear of all
liens, security interests, pledges, charges, encumbrances, stockholders'
agreements, and voting trusts. There is no commitment, plan, or arrangement to
issue, and no outstanding option, warrant, or other right calling for the
issuance of, any share of capital stock of the Company or any security or other
instrument convertible into, exercisable for, or exchangeable for capital stock
of the Company. There is no outstanding security or other instrument convertible
into or exchangeable for capital stock of the Company.
3.3 Financial Condition.
Pegasus has delivered to the Purchaser true and correct copies of the following:
the balance sheets of the Company as of December 31, 1995 and 1996 and March 31,
1997, the statements of income, statements of retained earnings, and statements
of cash flows of the Company for the years ended December 31, 1995 and 1996, and
for the six months ended March 31, 1997. Each such balance sheet presents fairly
the financial condition, assets, liabilities, and stockholders' equity of the
Company as of its date; each such statement of income and statement of retained
earnings presents fairly the results of operations of the Company for the period
indicated and their retained earnings as of the date indicated; and each such
statement of cash flows presents fairly the information purported to be shown
therein. To the best of the Shareholders' and the Company's knowledge, the
Company understands that the financial statements referred to in this Section
3.3 have been prepared by management of the Company and are in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved, are in accordance with the books and records of the Company
and are capable of being audited by independent certified public accountants in
accordance with generally accepted accounting standards. Since March 31, 1997:
(a) There has at no time been a material adverse change in the financial
condition, results of operations, business, properties, assets, liabilities, or,
to the Shareholder's knowledge, the future prospects of the Company.
(b) The Company has not authorized, declared, paid, or effected any dividend or
liquidating or other distribution in respect of its capital stock or any direct
or indirect redemption, purchase, or other acquisition of any stock of the
Company.
(c) The operations and business of the Company have been conducted in all
material respects only in the ordinary course.
(d) The Company has not suffered an extraordinary loss (whether or not covered
by insurance) or waived any right of substantial value.
There is no fact known to the Shareholders, which materially and adversely
affects or in the future (as far as the Shareholders can reasonably foresee) may
materially and adversely affect the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company;
provided, however, that the Shareholders express no opinion as to political or
economic matters of general applicability.
3.4 Tax and Other Liabilities.
(a) The Company has no known liability of any nature, accrued or contingent,
including without limitation liabilities for Taxes (as defined in Section 3.4(f)
and liabilities to customers or suppliers, other than the following:
(i) Liabilities for which full provision has been
made, except Taxes, on the balance sheet (the
"Last Balance Sheet") as of March 31, 1997 (the
"Last Balance Sheet Date"); and
(ii)Other liabilities arising since the Last Balance
Sheet Date and prior to the Closing, including
Taxes, in the ordinary course of business which
are not materially inconsistent with the
representations and warranties of any
Shareholder or any other provision of this
Merger Agreement.
(b) Without limiting the generality of Section 3.4(a):
(i) The Company and any combined, consolidated,
unitary or affiliated group of which the Company
is or has been a member prior to the Closing
Date: (i) has paid all Taxes required to be paid
on or prior to the Closing Date (including,
without limitation, payments of estimated Taxes)
for which the Company could be held liable,
except for Taxes which are being contested in
good faith and by appropriate proceedings; and
(ii) has accurately and timely filed (or filed
an extension for), all federal, state, local,
and foreign tax returns, reports, and forms with
respect to such taxes required to be filed by
them on or before the Closing Date.
(ii)The amount set up as provisions for Taxes on the
Last Balance Sheet are sufficient for all
accrued and unpaid Taxes of the Company, whether
or not due and payable and whether or not in
dispute, under tax laws as in effect on the Last
Balance Sheet Date or now in effect, for the
period ended on such date and for all periods
prior thereto.
(c) There is no material dispute or claim concerning any liability for Taxes of
the Company either (i) claimed or raised by any authority in writing, or (ii) as
to which the Company has knowledge based upon personal contact with any agent of
such authority.
(d) Schedule 3.4 sets forth all federal, state, local and foreign income tax
returns filed with respect to the Company for taxable periods on or after
January 1, 1994 ("Tax Returns"), indicates those Tax Returns that currently are
subject to audit. The Company has delivered or made available to Purchaser
complete and correct copies of all Tax Returns, examination reports, and
statements of deficiencies assessed against, or agreed to by the Company since
January 1, 1994. The Company has not waived any statute of limitations in
respect of Taxes or agreed to any extension of time with respect to any Tax
assessment or deficiency.
(e) The Company has not filed a consent under Section 341(f) of the Internal
Revenue Code of 1986, as amended (the "Code"). The Company has not made any
payments, nor is it obligated to make any payments, nor is a party to any
agreement that under certain circumstances could obligate it to make any payment
that will not be deductible under Section 280G of the Code. The Company will not
have any liability on or after the Closing Date pursuant to any tax sharing or
tax allocation agreement. The Company has no liability for the Taxes of any
other person under Treasury Regulation 1.1502-6 (or any similar provision of
state, local or foreign law), as a transferee or successor, by contract, or
otherwise.
(f) For purposes of this Merger Agreement, "Taxes" shall mean all federal,
state, local or foreign taxes, assessments, duties which are payable or
remittable by the Company or levied upon the Company or any property of the
Company, or levied with respect to its assets, franchises, income, receipts,
including, without limitation, import duties, excise, franchise, gross receipts,
utility, real property, capital, personal property, withholding, FICA,
unemployment compensation, sales or use, withholding, governmental charges
(whether or not requiring the filing of a return), and all additions to tax,
penalties and interest relating thereto.
3.5 Litigation and Claims.
There is no litigation, arbitration, claim, governmental or other proceeding
(formal or informal), or investigation pending, threatened, or in prospect (or
any basis therefor known to the Shareholders) with respect to the Company, or
any of its respective businesses, properties, or assets. The Company is not
affected by any present or threatened strike or other labor disturbance nor to
the knowledge of the Shareholders is any union attempting to represent any
employee of the Company as collective bargaining agent. To the best of the
Shareholders' and the Company's knowledge, the Company is not in violation of,
or in default with respect to, any law, rule, regulation, order, judgment, or
decree; nor is the Company required to take any action in order to avoid such
violation or default.
3.6 Properties.
(a) The Company owns no real property. Set forth on Schedule 3.6(a) is a
list of all real property leased by the Company.
(b) Set forth in Schedule 3.6(b) is a true and complete list of all
personal properties and assets (other than real property) owned by the Company
or leased or licensed by the Company from or to a third party. All such
properties and assets owned by the Company are reflected on the Last Balance
Sheet (except for acquisitions subsequent to the Last Balance Sheet Date which
are noted on Schedule 3.6(b)). All such properties and assets owned, leased, or
licensed by the Company are in good and usable condition (reasonable wear and
tear which is not such as to affect adversely the operation of the business of
the Company excepted).
(c) All accounts and notes receivable reflected on the Last Balance Sheet,
or arising since the Last Balance Sheet Date, have been collected, or are
believed to be collectible in the ordinary course subject to adjustment
consistent with industry standards.
(d) No real property owned, leased, or licensed by the Company lies in an
area which is, or to the knowledge of Sellers will be, subject to zoning, use,
or building code restrictions that would prohibit the continued effective
ownership, leasing, licensing, or use of such real property in the business
which the Company is now engaged.
(e) The Company has not caused or permitted its respective businesses,
properties, or assets to be used to generate, manufacture, refine, transport,
treat, store, handle, dispose of, transfer, produce, or process any Hazardous
Substance (as such term is defined in this Section 3.6(e)) except in compliance
with all applicable laws, rules, regulations, orders, judgments, and decrees,
and has not caused or permitted the Release (as such term is defined in this
Section 3.6(e)) of any Hazardous Substance on or off the site of any property of
the Company. The term "Hazardous Substance" shall mean any hazardous waste, as
defined by 42 U.S.C. ss.6903(5), any hazardous substance, as defined by 42
U.S.C. ss.9601(14), any pollutant or contaminant, as defined by 42 U.S.C.
ss.9601(33), and all toxic substances, hazardous materials, or other chemical
substances regulated by any other law, rule, or regulation. The term "Release"
shall have the meaning set forth in 42 U.S.C. ss.9601(22).
3.7 Contracts and Other Instruments.
Schedule 3.7 accurately and completely sets forth a list of all material
contracts, agreements, loan agreements, instruments, leases, licenses,
arrangements, or understandings with respect to the Company not otherwise
identified in this Agreement or on any other Schedule hereto. To the best of the
Shareholders' and the Company's knowledge, each such contract, agreement, loan
agreement, instrument, lease, or license is in full force and is the legal,
valid, and binding obligation of the Company and (subject to applicable
bankruptcy, insolvency, and other laws affecting the enforceability of
creditors' rights generally) is enforceable as to it in accordance with its
terms. To the best of the Shareholders' and the Company's knowledge, the Company
is not in violation, in breach of, or in default with respect to any material
terms of any such contract, agreement, loan agreement, instrument, lease, or
license. Except for employment agreements and as disclosed in Schedule 3.7, the
Company is not a party to any contract, agreement, loan agreement, instrument,
lease, license, arrangement, or understanding with, any Shareholder or any
director, officer, or employee of the Company, or any relative or affiliate of
any Shareholder or of any such director, officer, or employee. The stock ledgers
and stock transfer books and the minute book records of the Company relating to
all issuances and transfers of the shareholders of the Board of Directors and
committees thereof of the Company since its incorporation made available to the
Purchaser are the original stock ledgers and stock transfer books and minute
book records of the Company or exact copies thereof.
3.8 Employees.
(a) The Company does not have and it does not contribute to, any pension,
profit sharing, option, other incentive plan, or any other type of Employee
Benefit Plan (as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and does not have any obligation to
or non-customary arrangement with employees for bonuses, incentive compensation,
vacations, severance pay, insurance, or other benefits, other than a 401(k) plan
as described on Schedule 3.8(a) hereof.
(b) Schedule 3.8(b) contains a true and correct statement of the names,
relationship with the Company, present rates of compensation (whether in the
form of salary, bonuses, commissions, or other supplemental compensation now or
hereafter payable), and aggregate compensation for the twelve month period
ending June 30, 1997 of each employee of the Company. Since June 30, 1997, the
Company has not changed the rate of compensation of any of its directors,
officers, employees, agents, dealers, or distributors, nor has any Employee
Benefit Plan or program been instituted or amended to increase benefits
thereunder.
3.9 Patents, Trademarks, Et Cetera.
Except as disclosed on Schedule 3.9, the Company does not own or have pending,
or is licensed under, any patent, patent application, trademark, trademark
application, trade name, service xxxx, copyright, franchise, or other intangible
property or asset (all of the foregoing being herein called "Intangibles").
Those Intangibles listed on Schedule 3.9 are in good standing and uncontested.
Neither any Shareholder, any director, officer, or employee of the Company, nor
any relative or affiliate of any Shareholder or of any such director, officer,
or employee, possesses any Intangible which relates to the business of the
Company. There is no right under any Intangible necessary to the business of the
Company as presently conducted, except such as are so designated in Schedule
3.9. To the best of the Shareholders' and the Company's knowledge, the Company
has not infringed, is not infringing, and has not received notice of
infringement with regard to asserted Intangibles of others. To the knowledge of
the Shareholders, there is no infringement by others of Intangibles of the
Company.
3.10 Questionable Payments.
To the best of the Shareholders' and the Company's knowledge, none of the
Company, any director, officer, agent, employee, or other person associated with
or acting on behalf of the Company has, directly, or indirectly: used any
corporate funds for unlawful contributions, gifts, entertainment, or other
unlawful expenses relating to political activity; made any unlawful payment to
foreign or domestic government officials or employees or to foreign or domestic
political parties or campaigns from corporate funds; established or maintained
any unlawful or unrecorded fund of corporate monies or other assets; made any
false or fictitious entry on the books or records of the Company; or made any
bribe, kickback, or other payment of a similar or comparable nature, whether
lawful or not, to any person or entity, private or public, regardless of form,
whether in money, property, or services, to obtain favorable treatment in
securing business or to obtain special concessions, or to pay for favorable
treatment for business secured or for special concessions already obtained.
3.11 Authority to Merge.
(a) The Company and each of the Shareholders has the capacity to execute,
deliver, and perform this Merger Agreement. This Merger Agreement has been duly
executed and delivered by the Company and each of the Shareholders, is the
legal, valid, and binding obligation of each of the Shareholders, and is
enforceable as to each of them in accordance with its terms. None of the Company
nor any of the Shareholders is under any contractual restriction or obligation
which is inconsistent with the execution and performance of this Merger
Agreement. Neither the Company nor any of the Shareholders has any knowledge of
any consent, authorization, approval, order, license, certificate, or permit of
or from, or declaration or filing with, any federal, state, local, or other
governmental authority or any court or other tribunal that is required by the
Company, or any Shareholder for the execution, delivery, or performance of this
Merger Agreement by the Company and the Shareholders.
(b) No consent of any party to any material lease, license, distribution,
agency, consulting, employment, financing, lending, installment sale or
conditional sale, security, pledge, guarantee, or other agreement, arrangement,
or understanding to which the Company or any Shareholder is a party, or to which
any of its or his properties or assets are subject, is required for the
execution, delivery, or performance of this Merger Agreement, except as
disclosed in Schedule 3.11. Neither the Company nor any Shareholder has made any
agreement or understanding not approved in writing by the Purchaser as a
condition for obtaining any consent, authorization, approval, order, license,
certificate, or permit required for the consummation of the transactions
contemplated by this Merger Agreement. The execution, delivery, and performance
of this Merger Agreement by the Company and the Shareholders will not violate,
result in a breach of, conflict with, or (with or without the giving of notice
or the passage of time or both) entitle any party to terminate or call a default
under such lease, license, distribution, agency, consulting, employment,
financing, lending, installment sale or conditional sale, security, pledge,
guarantee, or other agreement, or understanding, or violate or result in a
breach of any term of the certificate of incorporation (or other charter
document) or bylaws of the Company or, to the Shareholders knowledge, violate,
result in a breach of, or conflict with any law, rule, regulation, order,
judgment, or decree binding on the Company, or to which any of its operations,
business, properties, or assets are subject.
3.12 Nondistributive Intent.
Each Shareholder is acquiring the shares of MSGI Stock to be issued hereunder to
him for his own account (and not for the account of others) for investment and
not with a view to the distribution thereof. No Shareholder will sell or
otherwise dispose of such shares without registration under the Securities Act
of 1933, as amended (the "Securities Act"), or an exemption therefrom, and the
certificate or certificates representing such shares may contain a legend to the
foregoing effect. Each Shareholder understands that he may not sell or otherwise
dispose of such shares in the absence of either a registration statement under
the Securities Act or an exemption from the registration provisions of the
Securities Act.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER.
The Purchaser represents and warrants to Pegasus and the
Shareholders as follows:
4.1 Organization.
MSGI is a corporation duly organized, validly existing and in good standing
under the laws of Nevada. Merging Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of New York. MSGI and
Merging Subsidiary have all requisite power and authority, corporate or
otherwise, to carry on and conduct its business as it is now being conducted and
to own or lease its properties and assets, and is duly qualified and in good
standing in every state of the United States in which the conduct of the
business of MSGI or Merging Subsidiary, as the case may be, or the ownership of
such properties and assets requires it to be so qualified, except where the
failure to be so qualified would not have a material adverse effect on the
business, assets or financial condition of MSGI and its subsidiaries taken as a
whole.
4.2 Validity of Shares.
The Shares of MSGI Stock to be delivered to the Shareholders pursuant to this
Merger Agreement, when issued in accordance with the terms and provisions of
this Merger Agreement, will be validly authorized, validly issued, fully paid,
and nonassessable.
4.3 Authority to Merge.
The Purchaser and Merging Subsidiary have all requisite power and authority to
execute, deliver, and perform this Merger Agreement. All necessary corporate
proceedings of the Purchaser and Merging Subsidiary have been duly taken to
authorize the execution, delivery, and performance of this Merger Agreement by
the Purchaser. This Merger Agreement has been duly authorized, executed and
delivered by the Purchaser and Merging Subsidiary, is the legal, valid, and
binding obligation of the Purchaser and Merging Subsidiary, and is enforceable
as to them in accordance with its terms.
4.4 SEC Reports.
Since April 25, 1995, MSGI has filed all reports, registrations, proxy or
information statements and all other material documents, together with any
amendments or supplements required to be made thereto ("SEC Reports"), required
to be filed with the Securities and Exchange Commission (the "SEC") under the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and MSGI has heretofore made available to the Shareholders true copies of
all such reports. As of their respective dates, such reports referred to herein
complied, as of their respective dates, in all material respects with all rules
and regulations promulgated by the SEC and did not, or will not, as the case may
be, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or omit to state any fact necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not materially misleading. With respect to the SEC Reports filed by
MSGI with the SEC prior to April 25, 1995, MSGI has no knowledge that such
reports contained any material misstatements or omissions.
5. CONDITIONS TO OBLIGATIONS OF THE PURCHASER.
The obligations of the Purchaser under this Merger Agreement
are subject, at the option of the Purchaser, to the following conditions:
5.1 Accuracy of Representations and Compliance With
Conditions.
All representations and warranties of the Company and the Shareholders contained
in this Merger Agreement shall be accurate as of the Closing as though such
representations and warranties were then made in exactly the same language by
the Company and the Shareholders and regardless of knowledge or lack thereof on
the part of the Company and the Shareholders or changes beyond its or their
control; as of the Closing, the Company and the Shareholders shall have
performed and complied with all covenants and agreements and satisfied all
conditions required to be performed and complied with by any of them at or
before such time by this Merger Agreement; and the Purchaser shall have received
a certificate executed by the Company and each of the Shareholders, dated the
date of the Closing, to that effect.
5.2 Opinion of Counsel.
The Company and the Shareholders shall have delivered to the Purchaser on the
date of the Closing the opinion of counsel to the Company and the Shareholders,
dated as of the Closing Date, in form and substance satisfactory to counsel for
the Purchaser, substantially to the effect that:
(a) The Company is a corporation validly existing and in good standing
under the laws of the State of New York, with all requisite corporate power and
authority to own, lease, license, and use its properties and assets and to carry
on the business in which it is now engaged.
(b) The Company is duly qualified to transact the business in which it is
now engaged.
(c) The authorized and outstanding capital stock of the Company is as set
forth in Section 3.2 of this Merger Agreement, and all the outstanding shares of
capital stock of the Company are validly authorized, validly issued, fully paid,
and nonassessable.
(d) This Merger Agreement has been duly authorized, executed, and delivered
by the Company and the Shareholders, constitutes the legal, valid, and binding
obligation of the Shareholders, and (subject to applicable bankruptcy,
insolvency, and other laws affecting the enforceability of creditors' rights
generally) is enforceable as to the Company and the Shareholders in accordance
with its terms.
5.3 Other Closing Documents.
The Company and the Shareholders shall have delivered to the Purchaser at or
prior to the Closing such other documents as the Purchaser may reasonably
request in order to enable the Purchaser to determine whether the conditions to
its obligations under this Merger Agreement have been met and otherwise to carry
out the provisions of this Merger Agreement.
5.4 Legal Action.
There shall not have been instituted or threatened any legal proceeding relating
to, or seeking to prohibit or otherwise challenge the consummation of, the
transactions contemplated by this Merger Agreement, or to obtain substantial
damages with respect thereto.
5.5 No Governmental Action.
There shall not have been any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered, enforced, or deemed
applicable to the transactions contemplated by this Merger Agreement by any
federal, state, local, or other governmental authority or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the sole judgment of the Purchaser, (a) makes any of the transactions
contemplated by this Merger Agreement illegal, (b) results in a delay in the
ability of the Purchaser to consummate any of the transactions contemplated by
this Merger Agreement, (c) requires the divestiture by the Purchaser of any of
the shares of the Company to be acquired pursuant to this Merger Agreement or of
a material portion of the business of either the Purchaser and its subsidiaries
taken as a whole, or of the Company, (d) imposes material limitations on the
ability of the Purchaser effectively to exercise full rights of ownership of
such shares including the right to vote such shares on all matters properly
presented to the stockholders of the Company, or (e) otherwise prohibits,
restricts, or delays consummation of any of the transactions contemplated by
this Merger Agreement or impairs the contemplated benefits to the Purchaser of
any of the transactions contemplated by this Merger Agreement.
5.6 Contractual Consents Needed.
The parties to this Merger Agreement shall have obtained at or prior to the
Closing all consents required for the consummation of the transactions
contemplated by this Merger Agreement from any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which any of them
is a party, or to which any of them or any of their respective businesses,
properties, or assets are subject.
5.7 Material Adverse Change.
Since March 31, 1997, there has been no event or development or combinations of
changes or developments, individually or in the aggregate, that could be
reasonably expected to have a material adverse effect on the business,
operations, or future prospects of the Company.
6. CONDITIONS TO OBLIGATIONS OF THE COMPANY AND THE SHAREHOLDERS.
The obligations of the Company and the Shareholders under the
Merger Agreement are subject, at the option of the Company and the Shareholders,
to the following conditions.
6.1 Accuracy of Representations and Compliance With
Conditions.
All representations and warranties of the Purchaser contained in this Merger
Agreement shall be accurate when made and, in addition, shall be accurate as of
the Closing as though such representations and warranties were then made in
exactly the same language by the Purchaser and regardless of the knowledge or
lack thereof on the part of the Purchaser or changes beyond its control; as of
the Closing, the Purchaser shall have performed and complied with all conditions
required to be performed and complied with by it at or before such time by this
Merger Agreement, and the Company and the Shareholders shall have received a
certificate executed by an executive officer of the Purchaser, dated the date of
the Closing, to that effect.
6.2 Legal Action.
There shall not have been instituted or threatened any legal proceeding relating
to, or seeking to prohibit or otherwise challenge the consummation of, the
transactions contemplated by this Merger Agreement, or to obtain substantial
damages with respect thereto.
6.3 Other Closing Documents.
The Purchaser and Merging Subsidiary shall have delivered to the Company and the
Shareholders at or prior to the Closing such other documents as the Shareholders
may reasonably request in order to enable the Shareholders to determine whether
the conditions to their obligations under this Merger Agreement have been met
and otherwise to carry out the provisions of this Merger Agreement.
6.4 No Governmental Action.
There shall not have been any action taken, or any law, rule, regulation, order,
judgment, or decree proposed, promulgated, enacted, entered, enforced, or deemed
applicable to the transactions contemplated by this Merger Agreement by any
federal, state, local or other governmental authority or by any court or other
tribunal, including the entry of a preliminary or permanent injunction, which,
in the sole judgment of the Shareholders, (a) makes any of the transactions
contemplated by this Merger Agreement illegal, (b) results in a delay in the
ability of the Shareholders to consummate any of the transactions contemplated
by this Merger Agreement, or (c) otherwise prohibits, restricts, or delays
consummation of any of the transactions contemplated by this Merger Agreement or
impairs the contemplated benefits to the Shareholders of any of the transactions
contemplated by this Merger Agreement.
6.5 Contractual Consents.
The parties to this Merger Agreement shall have obtained at or prior to the
Closing all consents required for the consummation of the transactions
contemplated by this Merger Agreement from any party to any contract, agreement,
instrument, lease, license, arrangement, or understanding to which any of them
is a party, or to which any of them or any of their respective businesses,
properties, or assets are subject.
6.6 Opinion of Counsel.
The Purchaser shall have delivered to Pegasus and the Shareholders on the date
of the Closing the opinion of counsel to the Purchaser and Merging Subsidiary,
dated as of the Closing Date, in form and substance satisfactory to counsel for
Pegasus and the Shareholders, substantially to the effect that:
(a) MSGI and Merging Subsidiary are corporations validly existing and in
good standing under the laws of their states of incorporation, with all
requisite corporate power and authority to own, lease, license, and use their
properties and assets and to carry on the businesses in which they are now
engaged.
(b) This Merger Agreement has been duly authorized, executed, and delivered
by the Purchaser and Merging Subsidiary, constitutes the legal, valid, and
binding obligation of the Purchaser and Merging Subsidiary, and (subject to
applicable bankruptcy, insolvency, and other laws affecting the enforceability
of creditors' rights generally) is enforceable as to Purchaser and Merging
Subsidiary in accordance with its terms.
(c) The shares of MSGI Common Stock to be delivered to the Shareholders
pursuant to this Merger Agreement when issued in accordance with the terms and
provisions of this Merger Agreement, will be validly authorized, validly issued,
fully paid and nonassessable.
6.7 Registration Rights.
On the date of the Closing, MSGI shall grant the Shareholders certain
registration rights with respect to the MSGI Common Stock received by them
pursuant to the terms of an agreement in the form attached hereto as Exhibit C.
6.8 Employment Agreement.
On the date of the Closing, the Company shall have entered into an employment
agreement with RB (the "Employment Agreement"), in the form of Exhibit B hereto.
6.9 Tax Opinion.
On the date of the Closing, Pegasus and the Shareholders shall have received an
opinion from Xxxxxx Xxxxxx Xxxxx Xxxxxx Xxxxxxx & Xxxxxxxxxx to the effect that
the Merger constitutes a reorganization within the meaning of IRC Section 368
and will result in the tax-free acquisition of shares of MSGI by the
Shareholders.
7. COVENANTS OF THE PURCHASER.
The Purchaser covenants and agrees as follows:
7.1 Confidentiality.
The Purchaser shall insure that all confidential information which the
Purchaser, any of its respective officers, directors, employees, counsel,
agents, investment bankers, or accountants, may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the Company
shall not be published, disclosed, or made accessible by any of them to any
other person or entity at any time or used by any of them without the prior
written consent of the Company; provided, however, that the restrictions of this
sentence shall not apply (a) to the extent required to enforce this Merger
Agreement or (b) to the extent the information shall have otherwise become
publicly available.
7.2 SEC Filings.
For a period of five years from the Effective Time the Purchaser shall use its
best efforts to timely file all reports required to be filed by it under the
Exchange Act.
7.3 NASDAQ Listing.
For a period of five years from the Effective Time the Purchaser shall use its
best efforts to maintain the listing of the MSGI Stock on the NASDAQ SmallCap
Market or on another inter-dealer quotation system or stock exchange.
7.4 Voting of Securities.
MSGI covenants and agrees to vote its securities of the Company which they are
entitled to vote so as to effectuate the provisions and intent of this Merger
Agreement.
7.5 Lock-Up Agreements.
The Shareholders agree to execute and deliver to MSGI agreements with respect to
limiting their ability to sell their shares of MSGI Stock upon the same terms
and conditions as agreements being executed by other executive officers and
directors of MSGI in connection with a potential public offering of securities
of MSGI.
8. INDEMNIFICATION; SURVIVAL; LIMITATIONS ON LIABILITY.
8.1 Indemnification.
(a) Subject to the terms and conditions set forth in Section 8.2, the
Shareholders jointly and severally agree to indemnify and hold harmless the
Purchaser, its officers, directors, employees, counsel, and agents,
(collectively, the "Indemnitees"), against and in respect of any and all claims,
suits, actions, proceedings (formal or informal), investigations, judgments,
deficiencies, damages, settlements, liabilities, and reasonable legal and other
expenses related thereto (collectively, "Claims"), as and when incurred, arising
out of or based upon any breach of any representation, warranty, covenant, or
agreement of any Shareholder contained in this Merger Agreement or any document
or instrument delivered in connection with this Merger Agreement.
(b) Each Indemnitee shall give the Shareholders prompt notice of any claim
asserted or threatened against such Indemnitee on the basis of which such
Indemnitee intends to seek indemnification (but the obligations of the
Shareholders shall not be conditioned upon receipt of such notice, except to the
extent that the indemnifying party is actually prejudiced by such failure to
give notice). The Shareholders shall promptly assume the defense of any
Indemnitee, with counsel reasonably satisfactory to such Indemnitee, and the
fees and expenses of such counsel shall be at the sole cost and expense of the
Shareholders. Notwithstanding the foregoing, any Indemnitee shall be entitled,
at his or its expense, to employ counsel separate from counsel for the
Shareholders and from any other party in such action, proceeding, or
investigation. No Indemnitee may agree to a settlement of a claim without the
prior written approval of the Shareholders, which approval shall not be
unreasonably withheld. Notwithstanding the above, if the claim for
indemnification arises out of a breach of the representations set forth in
Section 3.4, the Purchaser, at its option, shall have the sole right to
represent the Company in any federal, state, local or foreign tax matter,
including any audit or administrative or judicial proceeding or the filing of an
amended return. The Shareholders agree that they will cooperate fully with
Purchaser and its counsel in the defense or compromise of any such tax matter.
8.2 Survival.
(a) Subject to the provisions of Section 8.2(b), the covenants, agreements,
representations, and warranties contained in or made pursuant to this Merger
Agreement shall survive the Closing and the delivery of the purchase price by
the Purchaser, irrespective of any investigation made by or on behalf of any
party.
(b) The liabilities and obligations of the Shareholders under this Merger
Agreement shall be subject to the following limitations:
(i) The Shareholders shall have no liability or
obligation with respect to any claim for a
breach of a representation or warranty under
this Merger Agreement made after one (1) year
from the Closing Date except for claims arising
out of a breach of the representations as to tax
liabilities under Section 2.4, with respect to
which the Shareholders shall remain liable until
ninety (90) days after the expiration of the
applicable statute of limitations relating to
such tax liabilities; and
(ii) The Shareholders shall not be responsible for
any claims until the cumulative aggregate amount
thereof shall exceed Fifty Thousand ($50,000.00)
Dollars (the "Minimum Amount") in which case the
Shareholders shall then be jointly and severally
liable for all amounts in excess of the Minimum
Amount.
9. MISCELLANEOUS.
9.1 Brokerage Fees.
Each of the parties hereto represent and warrant to each other that no person
has been engaged as a broker or finder in connection with this Merger Agreement.
If any person shall assert a claim to a fee, commission, or other compensation
on account of alleged employment as a broker or finder, in connection with or as
a result of any of the transactions contemplated by this Merger Agreement, the
person who is purported to have engaged such broker or finder shall indemnify
and hold harmless the other party against any and all Claims as and when
incurred, arising out of, based upon, or in connection with such Claim by such
person, except to the extent that it is determined in any suit, action, or
proceeding that the other party had engaged such broker or finder.
Notwithstanding anything in the preceding sentence to the contrary, MSGI
acknowledges that Heinemann & Co., Inc., Xxxxxxxxx Xxxxxx & Xxxxxx LLP and Xxxxx
Xxxxxx, MBA have provided professional advisory and consulting services to
Pegasus in connection with the transactions contemplated by this Agreement, and
that the fees due to such entities and individual are the responsibility of
Pegasus, and that such fees will be paid by Pegasus in the ordinary course of
business.
9.2 Further Actions.
At any time and from time to time, each party agrees, as its or his expense, to
take such actions and to execute and deliver such documents as may be reasonably
necessary to effectuate the purposes of this Merger Agreement.
9.3 Submission to Jurisdiction.
Each of the parties hereto irrevocably submits to the exclusive jurisdiction of
the courts of the County and State of New York, and of any federal court located
in the County and State of New York, in connection with any action or proceeding
arising out of or relating to, or a breach of, this Merger Agreement, or of any
document or instrument delivered pursuant to, in connection with, or
simultaneously with this Merger Agreement. Each of the parties hereto agrees
that such court may award reasonable legal fees and expenses to the prevailing
party.
9.4 Merger; Modification.
This Merger Agreement and the Schedules and Exhibits attached hereto set forth
the entire understanding of the parties with respect to the subject matter
hereof, supersede all existing agreements among them concerning such subject
matter, and may be modified only by a written instrument duly executed by each
party to be charged.
9.5 Notices.
Any notice or other communication required or permitted to be given hereunder
shall be in writing and shall be mailed by certified mail, return receipt
requested by Federal Express, or Express Mail or delivered (in person or by
telecopy, or similar telecommunications equipment) against receipt to the party
to whom it is to be given at the address set forth in this Section 9.5 (or to
such other address as the party shall have furnished in writing in accordance
with the provisions of this Section 9.5). Any notice given to the Purchaser or
Merging Subsidiary shall be addressed to Marketing Services Group, Inc., 000
Xxxxxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000 attention of the President
and a copy of such notice (which copy shall not constitute notice) shall also be
sent to Camhy Xxxxxxxxx & Xxxxx LLP, 0000 Xxxxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx
Xxxx 00000-0000, Attention: Xxxx X. Annex, Esq. Any notice given to the Company
shall be addressed to Pegasus Internet, Inc., 000 Xxxx 00xx Xxxxxx, Xxxxx 0X,
Xxx Xxxx, Xxx Xxxx 00000, Attn: Mr. Xxxxxx Xxxxxx. Any notice given to RB shall
be addressed to him at 00 Xxxxxxx Xxxxx, Xxx. 0X, Xxx Xxxx, Xxx Xxxx 00000. Any
notice given to JJB shall be addressed to him at 00 Xxxx 00xx Xxxxxx, Xxx Xxxx,
Xxx Xxxx 00000. Any notice given to RKB shall be addressed to him at 000
Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000. Any notification to KRB shall be
addressed to her at 000 Xxxxxxxx Xxxxx, Xxxxxx, Xxxxxxxx 00000. A copy of any
notice given to the Company or the Shareholders (which copy shall not constitute
notice) shall also be sent to Xxxxxxxxx, Xxxxxx & Xxxxxx LLP, 00 Xxxx 00xx
Xxxxxx, Xxxxx 000, Xxx Xxxx, XX 00000, Attention: Xxxx X. Xxxxxx, Xx. Notice to
the estate of any party shall be sufficient if addressed to the party as
provided in this Section 9.5.
9.6 Waiver.
Any waiver by any party of a breach of any terms of this Merger Agreement shall
not operate as or be construed to be a waiver of any other breach of that term
or of any breach of any other term of this Merger Agreement. The failure of a
party to insist upon strict adherence to any term of this Merger Agreement on
one or more occasions will not be considered a waiver or deprive that party of
the right thereafter to insist upon strict adherence to that term or any other
term of this Merger Agreement. Any waiver must be in writing.
9.7 Guaranty.
MSGI hereby unconditionally and irrevocably guarantees the obligations of
Merging Subsidiary under this Agreement.
9.8 Binding Effect.
The provisions of this Merger Agreement shall be binding upon and inure to the
benefit of the Purchaser, and its successors and assigns Pegasus, and its
successors and assigns, and each Shareholder and his respective assigns, heirs,
and personal representatives, and shall inure to the benefit of each Indemnitee
and its successors and assigns (if not a natural person) and his assigns, heirs,
and personal representatives (if a natural person).
9.9 No Third-Party Beneficiaries.
This Merger Agreement does not create, and shall not be construed as creating,
any rights enforceable by any person not a party to this Merger Agreement
(except as provided in 10.8).
9.10 Separability.
If any provision of this Merger Agreement is invalid, illegal, or unenforceable,
the balance of this Merger Agreement shall remain in effect, and if any
provision is inapplicable to any person or circumstance, it shall nevertheless
remain applicable to all other persons and circumstances.
9.11 Headings.
The headings in this Merger Agreement are solely for convenience of reference
and shall be given no effect in the construction or interpretation of this
Merger Agreement.
9.12 Counterparts; Governing Law.
This Merger Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. It shall be governed by, and construed in
accordance with, the laws of the State of New York, without giving effect to the
rules governing the conflict of laws.
IN WITNESS WHEREOF, the parties have duly executed this Merger
Agreement on July 11, 1997.
MARKETING SERVICES GROUP, INC.
By: /s/ J. Xxxxxx Xxxxxxx
Name: J. Xxxxxx Xxxxxxx
Title: Chairman
PII MERGER CORP.
By: /s/ J. Xxxxxx Xxxxxxx
Name: J. Xxxxxx Xxxxxxx
Title: President
PEGASUS INTERNET, INC.
By: /s/ Xxxxxx Xxxxxx
Name: Xxxxxx Xxxxxx
Title: President
/s/ Xxxxxx Xxxxxx
XXXXXX XXXXXX
/s/ J. Xxxxxx Xxxxxxx
J. XXXXXX XXXXXXX
/s/ Xxxxxx X. Xxxxxx
XXXXXX X. XXXXXX
/s/ Xxxxxxxx X. Xxxxxx
XXXXXXXX X. XXXXXX
