Acquisition Agreement
This Acquisition Agreement, dated as of 8th July, is by and between MetaSource
Systems, a Delaware company, hereinafter called "MSS"; and the Acquired
Company's stockholders, hereinafter called the "Stockholders", as listed in
Appendix A.
1. Acquisition
All of Prime Marketing Publications Limited's, company number 2429259,
(the Acquired Company), shares shall be acquired by MSS in exchange
solely for an amount of common stock of MSS (the "Exchange Shares") as
hereinafter defined. As of the Closing Date, hereinafter defined in
Article 5, the Exchange Shares will be issued to the Stockholders on a
pro rata basis of share ownership of the Acquired Company. Xxxx Xxxxx
specifically agrees that the number of Exchange Shares issued to Xxxx
Xxxxx will be reduced according to the number of shares to be issued to
Xxxx Xxxxxxx and Xxxxx Xxxxxxxx under the two Sale of Stock agreements
entered into by and between Xxxx Xxxxx and Xxxx Xxxxxxx and Xxxx Xxxxx
and Xxxxx Xxxxxxxx dated June 23, 2002.
MSS, the Acquired Company and the Stockholders agree that all of the
Exchange Shares shall be exchanged for the Acquired Company shares based
on the following formula: the average of 5 times calendar year 2000
Acquired Company net earnings and 5 times calendar year 2001 Acquired
Company net earnings and 5 times July 1, 2002 to June 30, 2003 Acquired
Company net earnings, where net earnings are calculated in a method
acceptable to the MSS auditor, based on the average trading price
(defined hereinafter) of MSS common stock on the first day of public
trading of MSS shares after MSS merges with a public company. The average
trading price of MSS shares will be calculated as the average of high,
low and closing prices on the first day of public trading as reported on
xxxxxxx.xxxxx.xxx, with the average trading price not to exceed $5.50.
All Exchange Shares will be held in escrow by MSS for a period of one
year from the Closing Date. Within 60 days of July 1, 2003, additional
shares will be added according to the formula above if July 1, 2002 to
June 30, 2003 Acquired Company earnings are greater than the average of
calendar years 2000 and 2001 Acquired Company earnings. If July 1, 2002
to June 30, 2003 Acquired Company earnings are less than the average of
calendar years 2000 and 2001 Acquired Company earnings, the appropriate
Exchange Shares will be subtracted according to the formula above.
Based on preliminary, unaudited pro forma earnings of the Acquired
Company, the valuation of the Acquired Company is approximately
(pound)2.75 million. The Acquired Company's pro forma earnings used to
calculate the valuation will be determined by the MSS auditor and may
result in a number different from the preliminary number stated above.
1
The Exchange Shares held in escrow by MSS will secure and indemnify MSS
against a breach of warranties detailed hereinafter in Article 3 of this
Agreement. In the event of an alleged breach of the warranties detailed
in Article 3, MSS and the Stockholders will negotiate in a timely manner
a reduction in the number of Exchange Shares which are to be issued to
Stockholders as compensation to MSS for such breach. In the event such
negotiations do not produce an agreed upon reduction in the number of
Exchange Shares, MSS and the Stockholders agree to submit the dispute to
the American Arbitration Association (AAA) no later than one year from
the date the breach was discovered. Excluding any Exchange Shares used as
loan collateral, at the end of one year from the Closing Date, the
Stockholders will be fully vested in the Exchange Shares less any amount
forfeited, disputed, agreed upon or resolved by the AAA for forfeiture
due to alleged breach of warranties described in Article 3. Resolution of
claims by the AAA will be binding on MSS, the Acquired Company and the
Stockholders.
2. Delivery of Acquired Company Shares
On the Closing Date, the Stockholders will deliver to MSS certificates
representing their Acquired Company shares duly endorsed with signatures
guaranteed and with documentary stamps affixed at the Stockholders'
expense so as to make MSS the sole owner thereof, free and clear of all
claims and encumbrances.
Delivery will be made at MC Law Group
0000 Xxxxxxx Xxxxx, Xxxxxxx Xxxxx
Xxxxx 000 XX 00000
3. Representations of Stockholders and the Acquired Company
Xxxx Xxxxx warrants to MSS as follows:
a) As of the Closing Date, the Stockholders will be the sole owners
of the Acquired Company shares appearing of record in their names;
such shares will be free from claims, liens or other encumbrances.
b) The Acquired Company shares will constitute validly issued shares
of the Acquired Company which are fully paid and nonassessable.
c) As of the Closing Date, there will be 90 ordinary shares
of(pound)1 each and 10 deferred shares of(pound)1 each in the
Acquired Company's stock issued and outstanding. There are no
options, warrants, convertible or other securities, calls,
commitments, conversion privileges, preemptive rights or other
rights or agreements outstanding to purchase or otherwise acquire
(whether directly or indirectly) any of the Acquired Company's
share capital or any security convertible into or exchangeable for
any shares of the Acquired Company's capital stock or obligating
the Acquired Company to grant, issue, extend, or enter into, any
such option, warrant, convertible or other security, call,
commitment, conversion privilege, preemptive right or other right
or agreement ("Interests"). The Company has no liability for any
dividends accrued but unpaid. No Acquired Company shares are
reserved for issuance under any stock purchase, stock option or
other benefit plan.
2
d) The financial statements of the Acquired Company, as of March 31,
2002, which will be delivered to MSS prior to the Closing Date,
show a true and fair view of the financial condition of the
Acquired Company as of that date in accordance with generally
accepted accounting principles practiced in England; there are no
material liabilities, either fixed or contingent, not reflected in
such financial statements other than contracts of obligations in
the usual course of business; and no such contracts or obligations
in the usual course of business are liens or other liabilities
which, if disclosed, would alter substantially the financial
condition of the Acquired Company as reflected in such financial
statements.
e) Since March 31, 2002 there have not been, and prior to the Closing
Date there will not be, any material changes in the financial
condition of the Acquired Company, except changes arising in the
ordinary course of business.
f) Intellectual Property
i) The Acquired Company owns, or has the irrevocable right to
use, sell or license all of its Intellectual Property Rights
(as defined below, the "IP Rights"), necessary or required
for the conduct of its business as presently conducted, and
such rights to use, sell, or license are sufficient for such
conduct of its business;
ii) The Acquired Company is the legal and beneficial owner of all
its IP Rights;
iii) Any and all intellectual property held by the Acquired
Company is owned outright, free and clear of any claims,
liens, security interests, mortgages, encumbrances or
obligations by the Acquired Company;
iv) The Acquired Company is currently taking reasonable and
practicable steps designed to protect, preserve, and maintain
the secrecy and confidentiality of all material Acquired
Company IP Rights and all of Acquired Company's proprietary
rights therein;
v) All officers, employees, agents, and consultants of the
Acquired Company having access to proprietary information
agree not to disclose such information to any third parties.
IP Rights, as used herein, means, collectively, all worldwide
industrial and intellectual property rights, including but
not limited to patents, patent applications, patent rights,
trademarks, trademark applications, trade names, trade dress,
service marks, service xxxx applications, copyrights,
copyright applications, franchises, licenses, inventions,
trade secrets, know-how, customer lists, proprietary
processes and formulae, manuals, memoranda and records.
3
g) The Acquired Company is not involved in any litigation or
governmental investigation or proceeding not reflected in the
Acquired Company's financial statements or otherwise
disclosed in writing to MSS, and to the knowledge of Xxxx
Xxxxx, no litigation or governmental investigation or
proceeding is threatened against the Acquired Company.
h) As of the Closing Date, the Acquired Company will be in good
standing as an English Company.
i) As of the Closing Date, the Acquired Company will have in
effect all fire, casualty and liability and other relevant
insurance policies usual for a company carrying on a similar
business.
j) There will be no dividends of the Acquired Company declared
and unpaid on any shares of any class of capital stock as of
the Closing Date.
k) Prior to the Closing Date, the Acquired Company will not make
or become a party to any contract or commitment, or renew,
extend, amend or modify any contract or commitment, except in
the ordinary course of business.
l) The Stockholders and representatives signing on behalf of
Acquired Company are duly authorized to execute this
agreement.
4. Representations of MSS
MSS warrants as follows:
a) As of the Closing Date, the Exchange Shares to be delivered to the
Stockholders will constitute valid and legally issued shares of
MSS, fully paid and non assessable.
b) The officers of MSS executing this Agreement are duly authorized
to execute this Agreement.
c) MSS is not involved in any pending litigation or governmental
investigation or proceeding not reflected in such financial
statements or otherwise disclosed in writing to the Stockholders.
d) As of the Closing Date, MSS undertakes to Xxxx Xxxxx that it will
be in good standing as a Delaware corporation.
5. Closing Date
The Closing Date of this transaction will be no later than 60 days from
the date MSS begins trading as a listed security on the Nasdaq, Over the
Counter Bulletin Board, or other quotation service. Until such date
shares will not be exchanged.
4
6. Prohibited Act
From the date this Agreement is executed to the Closing Date, Xxxx Xxxxx
will use his reasonable endeavors to procure that the Acquired Company
does not do any of the following:
a) Declare or pay any dividends or other distributions on its stock
or purchase or redeem any of its stock;
b) Issue any stock or other securities, including any right or option
to purchase or otherwise acquire any of its stock, or issue any
notes or other evidences of indebtedness not in the usual course
of business.
c) Make capital expenditures in excess of that made in the normal
course of business, except with the consent of MSS.
7. Limitation on Claim
The aggregate amount of the liability of Xxxx Xxxxx for all claims under
this Agreement shall not in any event exceed (pound)2,750,000. Xxxx Xxxxx
shall not be liable for any claim under this Agreement unless he receives
from MSS written notice containing reasonable details of the nature of
the claim in question as soon as practicable after MSS has become aware
of the same and in any event by or before the first anniversary of the
date of this Agreement. The aggregate liability of Xxxx Xxxxx and Xxxx
Xxxxx (as trustees of the Tudor Trust) shall be further limited (so far
as such liability would otherwise arise in consequence of the exchange of
shares with MSS) to the amount of the relevant trust fund or estate for
the time being held by them and available to satisfy such liability. This
Agreement sets out the entire agreement and understanding between the
parties in respect of the subject matter of this Agreement and in respect
of any other documents referred to in this Agreement and MSS:
(a) irrevocably and unconditionally waives any right it may have to
rescind this Agreement and/or claim damages for any breach of
warranty or untrue representation, undertaking or statement of
fact or opinion made to him prior to the date hereof in connection
with the subject matter of this Agreement or the Acquired Company
which is not contained in this Agreement;
(b) agrees that the liability of Xxxx Xxxxx under the warranties is in
lieu of and in substitution for any liability of to MSS under any
other head of loss that could arise in respect of any facts stated
in the warranties; and
(c) agrees that MSS has not been induced to enter into this Agreement
by any representation warranty or assurance other than those
contained herein provided always that this clause shall not seek
to exclude or restrict the liability of Xxxx Xxxxx for fraudulent
misrepresentation.
5
8. Delivery of Records
The Stockholders and Acquired Company agree that on or before the Closing
Date they will cause to be delivered to MSS such corporate records or
other documents as MSS may reasonably request in order to effectuate the
transaction contemplated by this Agreement.
9. Dilution of Shares
Xxxx Xxxxx consents and acknowledges that MSS may authorize and/or issue
additional common shares, preferred shares, or warrants to purchase
common shares of MSS prior to, at or subsequent to the Closing Date. The
Stockholders acknowledge that Exchange Shares held by the Stockholders
may experience a dilution in their percentage of ownership in MSS as a
result of issuance by MSS of additional shares.
10. Tax-Free Reorganization
The transactions contemplated herein shall be treated as a tax-free plan
of reorganization under Section 368(a) of the Internal Revenue Code, the
Exchange Shares issued in this transaction will be issued solely in
exchange for the Acquired Company shares held by the Stockholders, and no
other transaction shall be an adjustment to the consideration between the
parties to this Agreement for the transactions contemplated herein.
Further, no consideration which would constitute "other property" within
the meaning of Section 356(a) of the Internal Revenue Code is being
transferred by the parties as consideration pursuant to this Agreement.
The parties shall not take a position on any tax return or before any
taxing authority that is inconsistent with this Article 10, unless
otherwise required by a final and binding judicial or governmental
determination of competent jurisdiction. Neither MSS nor the Acquired
Company represents or warrants that the transactions contemplated herein
will qualify as a reorganization under the Internal Revenue Code.
11. Good and Marketable Title
After acquiring the Acquired Company, MSS shall have good and marketable
title and/or licenses or rights to use all of the Acquired Company's
tangible and intangible assets including, but not limited to,
intellectual properties necessary or required to successfully develop and
commercially exploit the Acquired Company's business.
6
12. Acquisition Intent of Shareholders
Stockholders are acquiring the MSS shares for their own accounts and not
with an intention of distribution within the meaning of Section 2(11) of
the Securities Act of 1933, as amended ("Securities Act"). Each of the
Stockholders represents and confirms to MSS that he or she (i) is an
accredited investor within the meaning of Rule 501(a) pursuant to the
Securities Act or, if not such an accredited investor, has, alone or
together with a purchaser representative within the meaning of Rule
501(h) pursuant to the Securities Act, such knowledge and experience in
financial and business matters as to be capable of evaluating the merits
and risks of an investment in the MSS's securities; (ii) is aware of the
limits on resale of the Exchange Shares imposed because of the nature of
the transactions contemplated herein, including, but not limited to,
restrictions specified by Rule 144 promulgated by the Securities and
Exchange Commission; and (iii) is receiving the Exchange Shares without
registration pursuant to the Securities Act, in reliance on the exemption
from registration specified in Section 4(2) of the Securities Act for
investment, and without any intent to sell, resell, or otherwise
distribute the Exchange Shares in any manner that is in violation of the
Securities Act. The certificates representing the Exchange Shares, when
delivered to the Stockholders, may have appropriate orders restricting
transfer placed against them on the records of the transfer agent for
such securities, and may have placed upon them the following legend:
"THE SECURITIES REPRESENTED HEREBY HAVE BEEN ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION PURSUANT TO THE SECURITIES ACT OF 1933. THOSE
SECURITIES MAY NOT BE TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF, UNLESS THE TRANSFEROR FIRST SATISFIES THE ISSUER AND ITS
COUNSEL THAT THE PROPOSED TRANSFER, IN THE MANNER PROPOSED, DOES NOT
VIOLATE THE REGISTRATION REQUIREMENTS OF THAT ACT."
Each Stockholder agrees not to attempt any transfer of any of the MSS
shares without first complying with the substance of that legend and
agrees that the satisfaction of MSS may, if MSS so requests, depend in
part upon an opinion of counsel acceptable in form and substance to MSS,
a no-action letter of the United States Securities and Exchange
Commission, or equivalent evidence. Each of the Stockholders
acknowledges, without limitation, that the foregoing agreement and
representation shall apply to the MSS shares issued to such Stockholders.
13. Notices
Any notice which any of the parties hereto may desire to serve upon any
of the other parties hereto shall be in writing and shall be conclusively
deemed to have been received by the party to whom addressed, if mailed,
postage prepaid, united states certified mail, to the following
addresses:
7
MetaSource Systems, Inc.
00 Xxxxxxxx Xxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attention of Xxxxxxxx Xxxxx, President
Stockholders: x/x Xxxxx Xxx, 0 Xxxxx Xxxxxxxxx, Xxxxxxx'x Xxx, Xxxxxx
XX0X 3TH (marked for the attention of Xxxxx Xxxxx).
If to Acquired Company:
PMP Ltd, Xxxxxxx Xxxxx
Xxxxx Xxxx
Xxxxxxxxxxx
Xxxxxxxxxxxxx
XX0 0XX
14. Successors
This Agreement shall be binding upon and inure to the benefit of the
heirs, personal representatives, successors, and assigns of the parties.
15. Indemnification
The Stockholders shall save MSS harmless from and against and shall
indemnify MSS for any liability, loss, costs, expenses, or damages
howsoever caused by reason of any injury (whether to body, property, or
personal or business character or reputation) sustained by any person or
to property by reason of any act, neglect, default or omission of
Acquired Company or any of Acquired Company's agents, employees, or other
representatives, committed prior to the subject acquisition, and the
Stockholders shall pay all amounts to be paid or discharged in case of an
action or any such damages or injuries. If MSS is sued in any court for
damages by reason of any of the acts of Acquired Company or its
Stockholders, Stockholders or such other party shall defend the resulting
action (or cause same to be defended) at Stockholder's expense and shall
pay and discharge any judgment that may be rendered in any such action;
if the Stockholders fail or neglect to so defend in such action, MSS may
defend such action and any expenses, including reasonable attorneys'
fees, which MSS may pay or incur in defending such action and the amount
of any judgment which MSS may be required to pay shall be promptly
reimbursed by the Stockholders upon demand by MSS.
8
16. Governing Law
This agreement shall be construed and interpreted in accordance with the
laws of England and Wales without regard to its provisions concerning
choice of laws or choice of forum. The parties hereby irrevocably submit
themselves to the non-exclusive jurisdiction of England and Wales and
agree and consent that services of process may be made upon it in any
legal proceedings relating hereto by any means allowed under English
laws.
9
Executed in multiple counterparts, each of which shall be deemed a
duplicate original, as of the date first above written.
MetaSource Systems, Inc.
Corporate seal
Attest: by: /s/Xxxxxxxx Xxxxx
----------------------
Xxxxxxxx Xxxxx
/s/Xxxxxxxx Xxxxx
-------------------------------------
Secretary
Xxxx Xxxx Xxxxx (as trustee of the Tudor Trust)
/s/Xxxx Xxxx Xxxxx
-------------------------------------
Xxxxxxx Xxxxxx Xxxxx Price (as trustee of the Tudor Trust)
/s/Xxxxxxx Xxxxxx Xxxxx Price
-------------------------------------
Xxxxxxx Xxxxxx Xxxxx Price(Director of Prime Marketing Publications Ltd)
/s/Xxxxxxx Xxxxxx Xxxxx Price
-------------------------------------
10
Appendix A
Shares Outstanding of Company: 90 ordinary shares and 10 deferred
Shares Held in Treasury: n/a
Stockholders of Record: Shares Owned: 5 ordinary
Name: Xxxx Xxxx Xxxxx and shares held jointly as
Xxxxxxx Xxxxxx Xxxxx as trustee of the Tudor Trust trustee
Name: Xxxxxxx Xxxxxx Xxxxx Shares Owned: 85 ordinary
and 10 deferred shares
