AGREEMENT AND PLAN OF REORGANIZATION
This
Agreement and Plan of Reorganization (“Agreement”) is entered into by and
between Friendlyway Corporation, a Nevada corporation with offices at 0000
Xxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx Xxxxxxx, XX 00000 (“Friendlyway”),
and Big Fish Marketing Group, Inc., a Colorado Corporation with offices
at 0000
Xxxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxxxx Xxxxxxx, XX 00000 (“Big Fish”), and
is effective July 26, 2006.
WHEREAS,
Big
Fish was formed as a Colorado limited liability company by filing articles
of
organization with the Colorado Secretary of State on June 24, 2004;
WHEREAS,
the
form of entity for Big Fish was converted to a Colorado corporation by filing
a
Combined Statement of Conversion and Articles of Incorporation for a Profit
Corporation on July 26, 2006;
WHEREAS,
Big
Fish wishes to transfer its business and substantially all of its assets
(such
assets are identified on Schedule
A
of this
Agreement and hereafter referred to as the “Assets”) to Friendlyway, pursuant to
the terms and conditions of this Agreement, and in exchange for voting shares
of
Friendlyway Stock (defined below), cash and the assumption by Friendlyway
of
certain liabilities of Big Fish in a transaction intended to qualify as a
"reorganization" within the meaning of §368(a)(1)(C) of the Internal Revenue
Code of 1986, as amended; it being contemplated by the parties that Big Fish
will thereafter, as an integral part of the transaction, distribute the shares
of Friendlyway Stock pro rata to the shareholders of Big Fish, in complete
liquidation and dissolution of Big Fish; and
WHEREAS,
Friendlyway desires to acquire the Assets from Big Fish pursuant to the terms
and conditions of this Agreement.
THEREFORE,
the
parties agree as follows:
1.
Exchange
of Assets, Cash and Stock.
(a) On
the
Closing Date, Big Fish will transfer all of the Assets and the Assumed
Liabilities (“Assumed Liabilities” are defined below) to Friendlyway.
(b) Upon
Closing, Friendlyway shall pay to Big Fish cash in the amount of One Hundred
Fifty Thousand Dollars (US $150,000.00) (the “Cash Consideration”). The Cash
Consideration shall be paid to Big Fish in six (6) equal monthly installments;
each such payment to be made on or before the first day of each calendar
month.
The first installment shall be due in the second calendar month following
the
month in which the Closing occurs. The Cash Consideration may be prepaid
in
whole or in part, without penalty.
(c) At
Closing, Friendlyway will deliver to Big Fish a certificate or certificates
for
Friendlyway common stock (the “Stock”) representing shares having an agreed
aggregate value of One Million Three Hundred Fifty Thousand Dollars (US
$1,350,000.00) (the “Stock Consideration”). The number of shares to be issued
for the Stock Consideration shall be determined by dividing the foregoing
agreed
aggregate value by the adjusted closing bid price. For purposes of this
paragraph, “adjusted closing bid price” shall mean the closing bid price of the
Stock on the Closing Date, as reflected on the Over-the-Counter Bulletin
Board,
reduced by an amount equal to twenty percent (20%) of such closing bid price.
(d) At
the
Closing, Big Fish will deliver to Friendlyway (i) such instruments of transfer
(including consents and approvals of third parties) as will be sufficient
or
necessary in the opinion of counsel for Friendlyway to vest in Friendlyway,
its
successors and assigns, the full legal and equitable title of Big Fish to
the
Assets; (ii) an instrument satisfactory to counsel for Friendlyway appointing
Friendlyway as the true and lawful attorney in fact for Big Fish to institute
and prosecute (in its own name or in the name of Big Fish but for the benefit
of
Friendlyway) any proceedings deemed by Friendlyway to be necessary or
appropriate to collect, assert, or enforce its right, title, and interest
to the
Assets; and (iii) such other evidences as counsel for Friendlyway may reasonably
require as to compliance by Big Fish with provisions of the laws of the State
of
Colorado relating to the transfer of all or substantially all of its assets,
and
its liquidation and dissolution pursuant to the provisions of this
Agreement.
2.
Contingent Stock Issuances
(a)
If,
on the first anniversary of the Closing Date, the closing bid price of the
Stock, as reflected on the Over-the-Counter Bulletin Board, is lower than
the
closing bid price on the Closing Date, Big Fish shall be entitled to receive
additional shares of Stock in exchange for the Assets. The number of additional
shares shall be determined using the following formula:
(1,350,000
/ “x”) - (1,350,000 / “y”)
where
x =
eighty percent (80%) of the closing bid price on the first anniversary of
the
Closing Date; and
where
y =
eighty percent (80%) of the closing bid price on the Closing Date.
Any
certificate(s) for shares to which Big Fish is entitled pursuant to this
sub-paragraph shall be issued by Friendlyway within thirty (30) days after
such
anniversary date.
(b)
Big
Fish shall also be entitled to receive one (1) share of Stock for every nine
(9)
dollars of target revenue generated by Friendlyway’s Big Fish division during
each of the twelve (12) months following the month in which the Closing occurs.
For purposes of this paragraph, “target revenue” means all revenues in excess of
$780,000.00. Any certificate(s) for shares to which Big Fish is entitled
pursuant to this sub-paragraph shall be issued by Friendlyway on a quarterly
(non-calendar) basis; such certificates to be issued on or before the fifteenth
(15th)
day of
the month following the end of the quarter.
(c)
Any
Stock issued to Big Fish pursuant to this paragraph shall hereafter be referred
to as “Contingent Stock Consideration.”
3.
Liabilities.
Friendlyway shall assume all accounts payable, notes payable and other payables
(the “Assumed Liabilities”) reflected on Big Fish’s balance sheet, as of the
Closing Date (a copy of which is attached hereto as Schedule
B).
Friendlyway assumes no other existing, contingent, future, known or unknown
liabilities of Big Fish (the “Excluded Liabilities”). The Excluded Liabilities
include, but are not limited to the following:
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(a)
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any
liability for federal, state or local taxes of Big Fish or Big
Fish’s
affiliates or owners;
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(b)
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any
liability of Big Fish related to any asset which is not acquired
pursuant
to this Agreement;
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(c)
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any
liability of Big Fish pursuant to any employee benefit
plan;
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(d)
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any
liability or obligation of Big Fish to affiliates of Big
Fish;
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(e)
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any
liability, or obligation of Big Fish as an employer, including,
without
limitation, liabilities for wages, supplemental unemployment benefits,
vacation benefits, severance benefits, retirement benefits, Federal
Consolidated Omnibus Budget Reconciliation Act of 1985 benefits,
Federal
Family and Medical Leave Act of 1993 benefits, Federal Workers
Adjustment
and Retraining Notification Act obligations and liabilities, or
any other
employee benefits, withholding tax liabilities, workers’ compensation, or
unemployment compensation benefits or premiums, hospitalization
or medical
claims, occupational disease or disability claims, or other claims
attributable in whole or in part to employment or termination by
Big Fish
or arising out of any labor matter involving Big Fish as an employer,
and
any claims, liabilities and obligations arising from or relating
to any
employee benefit plans; and
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(f)
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any
claims, liabilities, losses, damages, or expenses related to any
litigation, proceeding, dispute or investigation of any nature
arising out
of Big Fish’s ownership of the Assets on or before the Closing Date
including, without limitation, any claims or liabilities for injury
to, or
death of, persons or damage to or destruction of property, any
workers’
compensation claims, and any warranty
claims.
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4.
Accounts Receivable.
It is
the intention of the parties that all rights to, and the benefit of, the
accounts receivable from the business conducted by Big Fish prior to the
Closing
(the “Business”) shall be included in the Assets transferred by Big Fish to
Friendlyway. Accordingly, all accounts receivable outstanding on the
Closing Date shall be collected by Friendlyway. At or prior to the Closing,
Big
Fish shall deliver to Friendlyway a complete statement of each account
receivable as of the Closing Date. Big Fish agrees to cooperate with Friendlyway
to effect the purpose and intent of this paragraph, including, but not limited
to, immediately remitting to Friendlyway any and all monies collected by
Big
Fish on such accounts receivable.
5.
Representations
and Warranties of Big Fish.
Big Fish hereby represents and warrants to Friendlyway as follows:
(a) As
of the
Closing, Big Fish is a corporation duly organized and validly existing under
the
laws of the State of Colorado; Big Fish has full power and authority to execute
and deliver this Agreement and all other agreements to be executed and delivered
by Big Fish hereunder or in connection herewith (the “Ancillary Agreements”) and
to consummate the transactions hereby or thereby contemplated; all necessary
corporate action has been taken to authorize Big Fish to enter into this
Agreement and the Ancillary Agreements;
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(b) This
Agreement and the Ancillary Agreements have been duly executed and delivered
by
Big Fish and each such agreement constitutes the legal, valid and binding
obligations of Big Fish enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency or other
laws
for the protection of debtors;
(c) Neither
the execution, delivery or performance of this Agreement, the Ancillary
Agreements, nor the transactions contemplated hereby or thereby will violate
Big
Fish’s operating agreement, shareholder agreement or any other agreements or
instruments, law, regulation, judgment or order by which Big Fish is
bound;
(d) At
the
Closing, Big Fish will transfer to Friendlyway good and valid title to all
the
Assets, free and clear of all liens, claims or other encumbrances.
(e) Except
as otherwise identified herein, no 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, and no consent or waiver of any party to any contract to which
Big
Fish is a party is required or declaration to or filing with any governmental
or
regulatory authority, or any other third party is required to: (i) execute
this
Agreement or any Ancillary Agreement, (ii) consummate this Agreement or any
Ancillary Agreement and the transactions contemplated hereby or thereby,
or
(iii) permit Big Fish to assign or transfer the Assets (including without
limitation, the Material Contracts, as defined below) to Friendlyway.
(f)
Litigation.
There are no actions, suits, proceedings, orders or claims pending or threatened
against Big
Fish,
or pending or threatened by Big Fish against any third party, at law or in
equity, or before or by any governmental department, commission, board, bureau,
agency or instrumentality which relate to, or in any way affect, the Business
or
the Assets (including, without limitation, any actions, suits, proceedings
or
investigations with respect to the transactions contemplated by this Agreement
or any Ancillary Agreement). Big Fish is not subject to any judgment, order
or
decree of any court or other governmental agency, and Big Fish has received
no
written opinion or memorandum from legal counsel to the effect that it is
exposed, from a legal standpoint, to any liability which relates to the Business
or the Assets.
(g)
Intellectual
Property.
Big Fish does not use any third party patent, trademark, copyright, trade
secrets or other intellectual or industrial property rights, other than
non-exclusively licensed use of commercially available software, in the
Business.
(h)
Material
Contracts.
Each contract included as part of the Assets (each a “Material Contract”) is
valid and binding on and enforceable against Big Fish and, to the knowledge
of
Big Fish, each other party thereto and is in full force and effect. Big
Fish is not in breach or default under any Material Contract. Big Fish
does not know of, and has not received notice of, any violation or default
under
(nor, to the knowledge of Big Fish, does there exist any condition which
with
the passage of time or the giving of notice or both would result in such
a
violation or default under) any Material Contract by any other party
thereto. Prior to the date hereof, Big Fish has made available to
Friendlyway true and complete copies of all Material Contracts.
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6.
Representations
and Warranties of Friendlyway.
Friendlyway represents and warrants to Big Fish as follows:
(a)
Friendlyway is a corporation duly organized and validly existing under the
laws
of the State of Nevada; Friendlyway has full power and authority to execute
and
deliver this Agreement and all other agreements to be executed and delivered
by
Friendlyway hereunder or in connection herewith the “Ancillary Agreements” and
to consummate the transactions hereby or thereby contemplated; all necessary
corporate action has been taken to authorize Friendlyway to enter into this
Agreement and the Ancillary Agreements;
(b)
This
Agreement and the Ancillary Agreements have been duly executed and delivered
by
Friendlyway and each such agreement constitutes the legal, valid and binding
obligations of Friendlyway enforceable against it in accordance with its
terms,
except as enforceability may be limited by bankruptcy, insolvency or other
laws
for the protection of debtors; and
(c)
Neither the execution, delivery or performance of this Agreement, the Ancillary
Agreements, nor the transactions contemplated hereby or thereby will violate
Friendlyway’s Articles of Incorporation or by-laws or any other agreements or
instruments, law, regulation, judgment or order by which Friendlyway is
bound.
7.
Closing.
The closing of the transactions contemplated hereby (the “Closing”) shall occur
on or before 5:00 p.m. on August 7, 2006 (the “Closing Date”).
Unless both parties agree in writing, this agreement shall not
survive past August 31, 2006 and shall become null and void without recourse
(except as noted herein).
8. Termination
and Unwinding of Transaction.
The
parties acknowledge that Big Fish is engaging in this transaction expecting
that
Friendlyway will achieve certain financial objectives with respect to sales
and
gross revenues. Accordingly, the parties agree that, if Friendlyway’s total
gross revenues as of the first anniversary of the Closing Date (the “Performance
Date”) are less than $2,858,345.00, Big Fish shall have the limited unilateral
right to terminate and unwind this transaction. In the event Big Fish elects
to
terminate this transaction, it shall, within thirty (30) days after the
Performance Date, provide Friendlyway with written notice of such election.
The
date on which such election notice is received by Friendlyway is hereafter
referred to as the “Notice Date.” Within sixty (60) days after the Notice Date,
(i) Friendlyway shall return all of the Assets to Big Fish, (ii) Big Fish
shall
return the Stock Consideration and any Contingent Stock Consideration to
Friendlyway; and (iii) each party will execute and deliver all other documents
required by paragraph 12 of this Agreement.
9.
Indemnification by Big Fish.
Big Fish agrees to indemnify, defend and hold Friendlyway and its affiliates
harmless from and against any and all losses, liabilities, obligations, suits,
proceedings, demands, judgments, damages, claims, expenses and costs, including,
without limitation, reasonable fees, expenses and disbursements of counsel
(collectively, “Damages”) to which any of them may be subjected, or which are
actually suffered, incurred or paid in connection with (i) any breach of
a
representation or warranty made by Big Fish, (ii) any liability accruing
prior
to the Closing Date incurred in connection with the Business or Assets, other
than any liability expressly assumed by Friendlyway pursuant to this Agreement,
(iii) the non-fulfillment by Big Fish of any covenant contained herein or
in the
Ancillary Agreements, or (iv) any Excluded Liabilities.
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10.
Indemnification
by Friendlyway.
Friendlyway agrees to indemnify, defend and hold Big Fish and its affiliates
harmless from and against any and all Damages to which any of them may be
subjected, or which are actually suffered, incurred or paid in connection
with
(i) any breach of a representation or warranty made by Friendlyway herein,
(ii)
any liability arising in connection with the use and/or ownership of the
Assets
after the Closing, (iii) the non-fulfillment by Friendlyway of any covenant
contained herein or in the Ancillary Agreements or (iv) any liabilities
expressly assumed by Friendlyway.
11.
Securities Registration.
Big
Fish acknowledges that the
Stock
issued by Friendlyway pursuant to this Agreement is not currently, and may
not
in the future be, registered under federal or state securities laws but will
be,
instead, issued in reliance on exemptions from federal and state registration
requirements. Big Fish further acknowledges that no portion of such
Stock
may be
sold, offered for sale, pledged or hypothecated by Big Fish in the absence
of an
effective registration statement under applicable federal or state securities
laws or an opinion of counsel reasonably satisfactory to Friendlyway, that
such
registration is not required.
12.
Further Assurances.
Each
Party agrees that they will execute and deliver any and all documents,
including, but not limited to, bills of sale, stock certificates and other
instruments of transfer and conveyance, as are reasonably necessary or advisable
for the purpose of carrying out the terms of this Agreement and the intent
of
the parties hereto.
13.
Survival.
The representations, warranties, indemnification, covenants and agreements
of
Big Fish and Friendlyway contained in this Agreement shall survive the execution
and delivery hereof for a period of three years.
14.
Severability.
If any provision of this Agreement is determined to be invalid, illegal or
incapable of being enforced by reason of any rule of law or public policy,
all
other provisions of this agreement shall nevertheless remain in full force
and
effect.
15.
No Waiver.
No waiver by any party of any breach or nonperformance of any provision or
obligation of this Agreement shall be deemed to be a waiver of any preceding
or
succeeding breach of the same or any other provision of this
agreement.
16.
Entire Agreement.
This Agreement constitutes the entire agreement of the parties with respect
to
the subject matter hereof, supersedes all prior agreements and understandings,
oral and/or written, relating to the subject matter hereof, and may not be
amended, supplemented, or modified, except by written instrument executed
by all
parties hereto. This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their successors and permitted assigns.
Where the context so requires, the singular shall include the plural and
vice
versa.
17.
Execution in Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall
constitute an original and all of which shall constitute one and the same
document.
18.
Governing Law; Counsel.
This Agreement shall be governed by and construed in accordance with the
laws of
the State of Nevada, without giving effect to any conflict-of-laws
provisions. The parties acknowledge that they have each had an opportunity
to be represented by legal counsel of their choice and that they enter into
this
Agreement and the transactions contemplated hereby freely and voluntarily
with
full knowledge and understanding of its contents.
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19.
Conflict-of-Interest
Disclosure.
Friendlyway
and Big Fish each acknowledge that this Agreement has been substantially
drafted
by the law firm of Xxxxxxxxxxx X. Xxxxxxx, P.C. (the “Firm”), in the Firm’s
capacity as legal counsel for Friendlyway and its affiliates. Pursuant to
the
Rules of Professional Conduct governing the ethics and practice of the legal
profession in the State of Colorado, attorneys may not represent conflicting
or
adverse interests without advising the parties of such conflict and receiving
the permission of each party to proceed. The Firm does not believe that the
drafting of this Agreement on behalf of both Friendlyway and Big Fish will
have
a detrimental effect to either party. However, because the parties’ respective
interests in the transaction generally conflict, the Firm will not advise
Big
Fish as to the specific legal and/or tax consequences of engaging in this
transaction. Big Fish is encouraged to consult with independent legal and
financial/tax counsel to be absolutely certain of the legal and financial
consequences of entering into this Agreement. Each party is further advised
that
if a future dispute concerning this Agreement and/or the contemplated
transaction arises between the parties, the Firm will likely be unable to
represent either of the parties. Big Fish hereby acknowledges that the Firm
has
made no representations or warranties to Big Fish concerning this Agreement
or
the contemplated transaction. Each principal and/or officer of a party signing
this Agreement, acknowledges, on behalf of their respective party, that they
(i)
have read, understood, and accept the provisions set forth in this paragraph,
(ii) have granted the Firm permission to draft this Agreement on behalf of
each
party, and (iii) hereby waive any right to bring any action against the Firm
based upon a conflict of interest.
[Signatures
on next page]
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IN
WITNESS WHEREOF,
the
parties hereto have executed this Agreement as of the date first written
above.
BIG
FISH
MARKETING
GROUP,
INC.
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FRIENDLYWAY
CORPORATION
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By:
/s/ Xxx
Xxxxxxx
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By:
/s/ Xxx
Xxxxxxx
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Name:
Xxx Xxxxxxx
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Name:
Xxx Xxxxxxx
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Title:
Shareholder
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Title: Chief
Executive Officer
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By:
/s/ Xxxxx
Xxxxxx
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Xxxxx Xxxxxx
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By
: Z,
INC.
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Title:
Shareholder
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By:
/s/ Xxxxx
Xxxxxx
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Name:
Xxxxx Xxxxxx
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Title:
Shareholder
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SCHEDULE
A
ASSETS
TO BE TRANSFERRED
1.
All
outstanding quotes presented by Big Fish within the last 180 days and their
potential to close
2.
All
customer contracts and other contracts and licenses with other entities (to
the
extent assignable)
3.
All
outstanding Accounts Receivables as of the closing date
4.
All of
Big Fish’s copyrights, trademarks, trade names or other trade designations used
in or for its business, including the name “Big Fish Marketing”
5.
All
goodwill associated with Big Fish’s business and any other intangible asset of
Big Fish
6. All
cash on hand and cash equivalents derived from the Business
7.
Big Fish’s files, books and other records relating to the Business, including
without limitation, all customers’ lists, suppliers’ lists, merchants’ lists,
sales data, revenue data, and standard operational procedure and technical
manuals
8. The
telephone numbers, e-mail addresses and the domain name (xxx.Xxxxxxxxxxxx.xxx)
of Big Fish
9. The
furniture, equipment, computer servers, proprietary software and other personal
property used in the Business
10. Big
Fish’s intellectual property used or useful in the business, including rights
to
all screen designs and media development files
11.
All
deposits or advance payments by customers for services not yet rendered by
Big
Fish and relating to the Business
12.
All
deposits and advance payments of Big Fish for services not yet rendered to
Big
Fish or covering periods after the Closing Date and which relate to the
Business
13.
All
rights
under or pursuant to any representations, warranties and guarantees made
to Big
Fish in connection with the Assets or services furnished to Big Fish to the
extent assignable
14.
All
accrued, asserted or unasserted claims of Big Fish against third parties
relating to Big Fish’s business
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SCHEDULE
B
SELLER
BALANCE SHEET
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