SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
[ X ] Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
for the fiscal year ended December 31, 1998
[ ] Transition Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from ________________ __, ____
to ___________________ __, ____
Commission File Number: 0-26651
SILVER KING RESOURCES, INC.
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(Name of small business issuer in its charter)
Delaware 65-0884085
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
6025 South Eaton Lane
Littleton, Colorado 80123
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(Address of Principal Executive Offices) (Zip Code)
Issuer's telephone number: (303) 798-2980
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class Name of Exchange on which Registered
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N/A N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
------------------------------
(Title of Class)
Check whether the Registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12
months (or for such shorter period that the Registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. (1) Yes X No ___ (2) Yes X No ____
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and will not be contained, to
the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
<PAGE>
Registrant's revenues for the year ended December 31, 1999: $0.
The aggregate market value of the voting stock held by non-affiliates
of the Registrant, as of April 10, 2000, was approximately $21,075,000 based
upon the closing sale price of the Registrant's Common Stock on the OTC Bulletin
Board of $1.00 per share of Common Stock on February 8, 2000, the date of the
last sale of Common Stock. See Footnote (1) below.
APPLICABLE ONLY TO CORPORATE REGISTRANTS
The number of shares outstanding of the Registrant's sole class of
Common Stock as of April 10, 2000 was 43,075,000 shares.
Transitional Small Business Disclosure Format (check one)
Yes ____ No X
--
DOCUMENTS INCORPORATED BY REFERENCE:
None.
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(1) The information provided shall in no way be construed as an admission
that any person whose holdings are excluded from the figure is not an
affiliate or that any person whose holdings are included is an
affiliate and any such admission is hereby disclaimed. The information
provided is included solely for recordkeeping purposes of the
Securities and Exchange Commission.
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PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT
When used in this Annual Report on Form 10-KSB and in other public
statements by the Company and Company officers, the words "expect", "estimate",
"project", "intend", and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial condition. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial condition to differ materially. Such factors
include, among others, the risk factors described under Item 1 in this Annual
Report. Additional factors are described in the Company's other public reports
filed with the Securities and Exchange Commission. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date made. The Company undertakes no obligation to publicly release the
result of any revision of these forward-looking statements to reflect events or
circumstances after the date they are made or to reflect the occurrence of
unanticipated events.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
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Possible Change of Business
Silver King Resources, Inc., a Delaware corporation ("Silver King" or
the "Company"), is presently an exploration stage mineral resource holding
company. From inception through 1998, the Company was inactive, having been
formed to identify private business opportunities that would capitalize on the
Company's status as a public corporation. Commencing in early 1999, the Company
began operations as an exploration-stage mineral resource holding company
operating through its Mexican subsidiary, International Capri Resources, S.A. de
C.V., a joint venture in which the Company owns a 60% interest ("ICRM"). During
1999, ICRM conducted initial stage exploration of silver-producing properties in
Mexico (the "Zacualpan Project"). Since recent geologic results at the Zacualpan
Project indicated concentration of potential mineral deposits less than the
amounts expected by management, the Company has elected to temporarily suspend
any further exploration activities and explore other business opportunities.
Toward that end, on March 21, 2000, the Company entered into an Agreement and
Plan of Merger (the "Merger Agreement") with eNexi Inc., a development stage
company that provides Internet-related services ("eNexi"). Pursuant to the terms
of the Merger Agreement, Silver King Acquisition, Inc., a newly formed Delaware
corporation and wholly owned subsidiary of the Company ("Sub"), intends to merge
(the "Merger") with and into eNexi. As the surviving entity of the Merger, eNexi
will be a wholly owned subsidiary of the Company. Upon completion of the Merger,
the Company will discontinue all mining operations in full and divest its
interest in ICRM through a sale or liquidation event.
Pursuant to the terms of the Merger Agreement, the Company will acquire
100% of the outstanding capital stock of eNexi for a purchase price consisting
of 6,000,000 newly-issued shares of the Company's Series A Convertible Preferred
Stock, par value $.0001 per share ("Series A Shares"), which are presently
convertible into 150,000,000 shares of the Company's common stock, par value
$.0001 per share ("Common Stock"), or approximately 61% of the outstanding
shares of Common Stock. In addition, as part of the Merger, the Company has
agreed to assume existing eNexi warrants which, following the Merger will permit
the issuance of 25,000,000 shares of Common Stock at an exercise price of $.10
per warrant (the "Assumed Warrants"). Subject to the right of the parties to
extend the closing date to June 15, 2000, the Merger is scheduled to close (the
"Merger Closing") on the earlier of May 15, 2000, or once certain conditions to
the Merger are satisfied or waived. The principal conditions to the Merger
Closing are: (i) the completion of a due diligence review by each of the parties
to the Merger; and (ii) the completion by the Company of a private placement
offering (the "Offering") for a minimum of 2,000,000 newly-issued shares of the
Company's Series B Convertible Preferred Stock, par value $.0001 per share
("Series B Shares"), which are convertible into an aggregate 50,000,000 shares
of Common Stock. The Company expects to offer the Series B Shares at a price of
$2.50 per share to accredited investors to raise gross proceeds of $5,000,000.
The proceeds of the Offering would be used to fund operations of eNexi following
the Merger.
Under the terms of the Offering, the Company will conduct a closing for
purchases of Series B Shares (the "Offering Closing") simultaneous with the
Merger Closing. Neither the Offering
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Closing or the Merger Closing can occur unless and until the Company receives
minimum aggregate subscriptions of $5,000,000 for the Series B Shares during the
offering period, which will expire on May 15, 2000 unless the parties to the
Merger Agreement elect to extend such date to June 15, 2000. Accordingly, there
can be no assurances that the Merger will occur. In the event that the Merger
Closing occurs, the Company will continue the operations of eNexi and proceed
with the divestiture of its interest in ICRM. See "Description of eNexi
Business." In the event that the Merger Closing does not occur, the Company may
likely phase out of its mining activities and investigate other possible
business opportunities to capitalize on its status as a public corporation.
eNexi
eNexi was incorporated in Delaware in May 1999. It is a development
stage Internet service provider (ISP) and intermediary for online advertising
and marketing. Through its VirtuallyFreeInternet.com division, eNexi provides
analog Internet access to its subscribers for a monthly fee. Subscribers to
VirtuallyFreeInternet.com can earn cash compensation for referrals to the
Internet access service. eNexi also provides free email accounts through its
Web-based email system, www.dollars4mail.com. In order to become a subscriber to
the system, each applicant must provide detailed information about his or her
demographics and interest. eNexi expects to make this data available to online
advertisers in the future to enable them to target specific groups within the
dollars4mail subscriber base depending on demographics, interests or both. The
advertisers pay eNexi based on the number of times the advertisements appear on
the users' screens or the number of times the users click on the advertisements
to view an advertiser's web site. In turn, eNexi shares its advertising revenue
with its dollars4mail subscribers, who receive cash compensation for referrals
to the dollars4mail system and for visits they and their referrals make to the
websites of advertisers on the system. VirtuallyFreeInternet.com and
dollars4mail.com are supported by eNexi's patent-pending proprietary software
that permits fully automated online sign-up, authentication of subscribers,
automated credit card billing and processing of multi-tiered referral
compensation.
Following the Merger Closing, if it occurs, eNexi will continue
operations as a wholly owned subsidiary of the Company. Its strategic objective
is to build on its ISP and Web-based email subscriber base and established
server, router and network infrastructure in order to become a leading Internet
intermediary connecting businesses and consumers online primarily through its
advertising systems.
Description of eNexi Business
Internet Service Provider
eNexi is a development stage business which provides analog Internet
access through its VirtuallyFreeInternet.com division, and acts as an
Internet-based intermediary for businesses to reach target audiences by means of
online advertising through its dollars4mail.com email system. Through
VirtuallyFreeInternet.com, eNexi delivers co-branded and private-branded
Internet access in 49 states for a monthly fee, which is currently $15. Although
there are currently only 5,000 subscribers to VirtuallyFreeInternet, eNexi hopes
to increase its subscriber bases by paying cash rewards for referrals to
VirtuallyFreeInternet's Internet access services. eNexi also co-brands
VirtuallyFreeInternet with existing online communities to increase its
subscriber base. Under a co-branding
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arrangement, eNexi and its partnering online community link their websites
together so that a visitor to one will be more likely to visit the other. To
accomplish this, the partnering online community places a link on its portal to
VirtuallyFreeInternet's site, uploads a VirtuallyFreeInternet graphic to its
website, or delivers email newsletters to its members with links to
VirtuallyFreeInternet. In exchange, eNexi places a link on its portal to the
co-branding partner's site or pays its partner cash compensation for subscriber
to VirtuallyFreeInternet who reached the site through the partner's link. To
facilitate VirtuallyFreeInternet and other applications, eNexi has developed
patent-pending software with the capability to allow automated customer sign-up,
authenticate the identification of subscribers, referral compensation
calculation and management and automated periodic credit card billing.
Advertiser Support
eNexi also utilizes its proprietary software system to operate
www.dollars4mail.com, an online community that offers its subscribers free email
accounts and cash payments for surfing the Internet, viewing online
advertisements and purchasing products and services from online advertisers.
This system is used as a vehicle to offer advertisers a method of presenting ads
to potential customers in the context of eNexi sharing the resultant ad revenues
with its dollars4mail.com subscribers. eNexi is paid on a per-click basis and
sometimes on a cost-per-thousand (CPM) basis for all such advertising viewed by
its subscribers. This system commenced operations in mid March 2000 and now has
over 45,000 subscribers.
As eNexi's subscriber base grows, the dollars4mail program will become
more valuable to advertisers. When subscribing to the program, a user must
voluntarily complete a detailed information form about interests and
socio-economic status. This information allows eNexi's advertisers to target
specific audiences for better response rates. eNexi's patent-pending proprietary
software is compatible with the program, including the multi-tiered compensation
aspect for each dollars4mail.com subscriber.
Private Branding of the Company's Proprietary Software
There exists an increasing number of online communities that offer
their members cash payments or redeemable points for engaging in a variety of
activities. For example, there are "get paid to surf" communities and those that
pay members to send emails and jokes online. All of these communities rely on
advertising to generate sufficient revenues to cover their costs and payments to
their members.
Another set of communities provides members with cash compensation for
purchases made through a specialized portal, a Web "supersite" that provides a
variety of services including Web searching, news, free e-mail, discussion
groups, online shopping and links to other sites. Although the term "portal"
originally referred to general purpose sites such as CompuServe and America
Online, it is increasingly being used to refer to vertical market sites that
offer the same services, but only to a particular industry such as banking,
insurance or computers. The online communities enter into agreements with the
portals so that when the communities' members navigate through the portal to
make purchases, the member receives a cash fee while the community receives a
referral fee. The community may also receive a fee when a non-member navigates
through the community to the portal to make purchases.
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Many of these online communities utilize a tiered compensation
structure where the community and its members receive bonuses based on the their
own activities, as well as the activities of their members and referrals. eNexi
has developed proprietary software for implementing such tiered compensation
systems.
RISK FACTORS
The following risk factors with respect to Silver King and its
operations may affect its strategy and business plan:
1. Silver King has suspended its exploration activity but has not
consummated the Merger with eNexi. Silver King has decided to suspend activity
at the Zacualpan Project pending the Merger with eNexi. There can be no
assurances that the Merger will be consummated, or that, if it is consummated,
that the Company will operate successfully. Moreover, due to the absence of an
established operating history, there is material uncertainty concerning the
ability of eNexi to operate successfully following the Merger, and there is no
basis upon which to presently evaluate eNexi's potential performance. In the
event that the Merger is not consummated, management will attempt to identify
other business opportunities at its discretion.
2. Silver King may not be able to continue as a going concern if it
does not generate revenues. Silver King's auditors have raised the issue that
Silver King may not be able to continue as a going concern as a result of a lack
of revenues. At December 31, 1999, Silver King had a working capital deficit of
$178,204 and an accumulated deficit of $790,538. Since a condition precedent to
the Merger Closing is that Silver King raise at least $5,000,000 in a private
offering of its preferred stock, in the event that the Merger is consummated,
Silver King will have working capital for the eNexi business, although there can
be no assurances that the funds raised will be sufficient to operate eNexi
beyond the short term.
3. Due to the limited market for Silver King's common stock and
possible volatility of stock prices, an investment in Silver King may be risky
and illiquid. The public trading market for shares of Silver King's common stock
on the OTC Bulletin Board is extremely limited. There is a minimal supply of
Silver King's shares eligible for public resale. There can be no assurances that
a regular trading market for the Silver King's common stock will develop, and if
it develops, whether it can be sustained. By its very nature, trading on the OTC
Bulletin Board provides only limited market liquidity. As a result of the
limited market, stockholders may have difficulty in effecting sales of their
shares and/or obtaining a satisfactory price for such shares. As of April 10,
2000, Silver King has outstanding 43,075,000 shares of common stock of which
approximately 200,000 are eligible for public trading. Until its trading market
develops, if at all, the market price for Silver King's common stock is likely
to be volatile, and factors such as success or lack thereof in acquiring
suitable strategic targets, including eNexi, and fluctuations in operating
results may all have a significant effect. In addition, the stock markets
generally have experienced, and continue to experience, extreme price and volume
fluctuations which have affected the market price of many small capitalization
companies and which have often been unrelated to the operating performance of
these companies. These broad market fluctuations, as well as general economic
and political conditions, may adversely affect the market price of Silver King's
common stock.
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4. Possible limitations upon trading activities and restrictions
imposed upon broker-dealers effecting transactions in penny stocks may depress
the market for Silver King's securities. The SEC has adopted regulations
imposing limitations upon the manner in which certain low priced securities
(referred to as a "penny stock") are publicly traded. Under these regulations, a
penny stock is defined as any equity security that has a market price of less
than $5.00 per share, subject to certain exceptions. Such exceptions include any
equity security listed on the Nasdaq National Market System or SmallCap Market
and any equity security issued by an issuer that has (i) net tangible assets of
at least $2,000,000, if such issuer has been in continuous operation for three
years, (ii) net tangible assets of at least $5,000,000, if such issuer has been
in continuous operation for less than three years, or (iii) average annual
revenue of at least $6,000,000 if such issuer has been in continuous operation
for less than three years. Unless an exception is available, the regulations
require the delivery, prior to any transaction involving a penny stock, of a
disclosure schedule explaining the penny stock market and the risks associated
therewith. Also, under these regulations, certain broker/dealers who recommend
such securities to persons other than established customers and certain
accredited investors must make a special written suitability determination for
the purchaser and receive the purchaser's written agreement to a transaction
prior to sale.
Silver King's common stock presently constitutes a "penny stock."
Accordingly, trading activities for Silver King's common stock will be made more
difficult for broker-dealers than in the case of securities not defined as
"penny stocks." This may have the result of depressing the market for Silver
King's securities and an investor may find it difficult to dispose of such
securities.
5. Silver King will likely issue a substantial number of additional
shares, which would dilute its common stock. Silver King is presently authorized
to issue 50,000,000 shares of common stock of which 43,075,000 are outstanding
as of April 10, 2000. In the event that the Merger and Offering are consummated,
there will be approximately 268,075,000 shares of Common Stock outstanding,
after giving effect to the recapitalization of the Company's common stock and
the exercise of the Assumed Warrants. In addition, Silver King may issue
additional shares of Silver King's common stock as part of the purchase price
consideration to acquire other businesses or operations. This would have the
effect of increasing the number of shares of common stock outstanding. In
addition, in order to continue operations, Silver King is likely to require
additional financing, which may entail the issuance of additional shares of
common stock or common stock equivalents, which would have the further effect of
increasing the number of shares outstanding. In connection with other business
matters, Silver King will likely undertake the issuance of more shares of common
stock. This may be done in order to, among others, facilitate a business
combination, acquire assets or stock of another business, compensate employees
or consultants or for other valid business reasons in the discretion of Silver
King's Board of Directors. Under Delaware law, Silver King can issue additional
shares without notice to, or approval of, existing stockholders. In addition,
during January 1999, in conjunction with private placements of its securities,
Silver King granted warrants to purchase an aggregate of 2,000,000 shares of
common stock.
6. Silver King is controlled by a small number of stockholders who have
the ability to control important corporate decisions without the input of
minority stockholders. On the date of this registration statement, Silver King's
principal stockholders own approximately 64% of the common
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stock of Silver King. Consequently, by virtue of Delaware law, these
stockholders will be in a position to elect all of Silver King's directors and
control the outcome of other corporate matters without the approval of Silver
King's other stockholders. In addition, applicable statutory provisions and the
ability of the Board of Directors to issue one or more series of preferred stock
without stockholder approval could deter or delay unsolicited changes in control
of Silver King by discouraging open market purchases of Silver King's stock or a
non-negotiated tender or exchange offer for such stock, which may be
disadvantageous to a majority of Silver King's stockholders who may otherwise
desire to participate in such a transaction and receive a premium for their
shares.
7. Silver King's indemnification of its officers and directors for
certain liabilities may result in significant expenditures. The Bylaws of Silver
King provide that Silver King may indemnify any director, officer, agent and/or
employee as to those liabilities and on those terms and conditions as are
specified in the Delaware General Corporation Law. Further, Silver King may
purchase and maintain insurance on behalf of any such persons whether or not the
corporation would have the power to indemnify such person against the liability
insured against. The foregoing could result in substantial expenditures by
Silver King and prevent any recovery from such directors, officers, agents and
employees for losses incurred by Silver King as a result of their actions.
Further, Silver King has been advised that in the opinion of the Securities and
Exchange Commission, indemnification is against public policy as expressed in
the Securities Act of 1933, as amended, and is, therefore, unenforceable.
8. Since shares of Silver King's common stock have no preemptive rights
or cumulative voting rights, stockholders are not protected against dilution and
may not obtain board representation. There are no preemptive rights in
connection with Silver King's common stock. Thus, no existing common stockholder
has the right to buy additional shares of any new stock issues to preserve his
proportionate share equity ownership in Silver King. In addition, cumulative
voting in the election of directors is not provided for. Accordingly, the
holders of a majority of the shares of common stock, present in person or by
proxy, will be able to elect all of Silver King's Board of Directors.
9. Silver King does not expect to pay dividends. The holders of the
common stock are entitled to receive dividends when, as and if declared by the
Board of Directors out of funds legally available therefor. To date, Silver King
has not paid any cash dividends. The Board does not intend to declare any
dividends in the foreseeable future, but instead intends to retain all earnings,
if any, for use in Silver King's business operations. As Silver King will be
required to obtain additional financing, it is likely that there will be
restrictions on Silver King's ability to declare any dividends.
10. Silver King's lack of insurance to cover mining risks may expose it
significant liability and expense. Since Silver King had remained in the
exploration stage and has not yet acquired any mining concessions or commenced
mining operations, it has not obtained, nor does it intend to obtain, insurance
covering mining risks. These risks can result in the damage and destruction of
mineral properties and processing facilities, as well as personal injury,
environmental damage, mining delays and monetary losses. There can be no
assurances that Silver King will not incur liability for its past exploration
activity.
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ITEM 2. DESCRIPTION OF PROPERTIES.
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Through ICRM, the Company currently has the rights to acquire under
purchase contracts the mining concessions listed below. All of the mining
concessions listed below are located in southern Mexico at the Zacualpan Project
and collectively cover more than 11,430 acres. The Company has suspended
payments under the purchase contracts pending the potential Merger with eNexi
and possible divestiture of its interest in ICRM. While it has not defaulted on
any installment payments under the purchase contracts to date, it is likely that
it may in the near term. If a default occurs under a purchase agreement, the
Company may lose the right to acquire the mining concession covered by the
particular agreement.
<TABLE>
<CAPTION>
Property Type of Concession Location Acres
-------- ------------------ -------- -----
<S> <C> <C> <C> <C>
1. El Quinto II Mining exploitation Municipality of Zacualpan, 22
(El Quinto Dos) concession State of Mexico
2. Los Compadres Mining exploitation Municipality of Tetipac, State 74
concession of Guerrero
3. El Cometa Navideno Mining exploitation concession Municipality of Tetipac, State 57
of Guerrero
4. La Cadena Mining exploitation concession Municipality of Zacualpan, 276
State of Mexico
5. El Volado Mining exploration concession Municipality of Zacualpan, 9
State of Mexico
6. Quinto Real Application for a mining exploration Municipality of Zacualpan, 10,992
concession State of Mexico
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
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There are currently no legal proceedings pending to which the Company
is a party or to which any of its properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
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No matters were submitted during the fourth quarter ended December 31,
1999, to a vote of the Company's security holders.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
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Since January 2000, Silver King's common stock was listed for quotation
on the OTC Electronic Bulletin Board under the symbol "SVKG"(1); however, the
market for such shares is extremely limited. No assurance can be given that a
significant trading market for Silver King's common stock will develop or, if
developed, will be sustained. Silver King's common stock previously traded on
the OTC Electronic Bulletin Board from May 20, 1998 to August 3, 1999, at which
time the shares became ineligible for trading under the OTC Bulletin Board
Eligibility Rule. When not traded on the OTC Bulletin Board, Silver King's
Common Stock traded on the National Quotation Bureau's Pink Sheets.
The following table sets forth the range of the high and low closing
bid prices of Silver King's common stock during each of the calendar quarters
identified below. These bid prices were obtained from the National Quotation
Bureau, Inc. and NASDAQ Trading & Market Services and do not necessarily reflect
actual transactions, retail markups, mark downs or commissions. The transactions
include inter-dealer transactions. Based on the very limited public float and
trading in Silver King's common stock, management of the company believes that
such data is anecdotal and may bear no relation to the true value of Silver
King's common stock or the range of prices that would prevail in a fluid market.
1997 High Low
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1st Quarter * *
2nd Quarter * *
3rd Quarter * *
4th Quarter * *
1998 High Low
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1st Quarter * *
2nd Quarter * *
3rd Quarter * *
4th Quarter * *
1999 High Low
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1st Quarter $2.75 $0.1875
2nd Quarter $6.00 $0.3125
3rd Quarter $5.00 $2.00
4th Quarter $4.00 $2.00
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2000 High Low
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1st Quarter $0.07 $0.01
2nd Quarter $0.04 $0.04
* No bids reported
(1) From April 8, 1999 to the present, Silver King has traded under symbol
"SVKG". From April 2, 1999 through April 7, 1999, Silver King traded
under the symbol "SKRI" on the OTC Bulletin Board. From May 20, 1998
through April 1, 1999, Silver King traded under the symbol "ANNE" on
the OTC Bulletin Board.
The last reported sales price of the Common Stock was $1.00 as reported
on the OTC Bulletin Board on February 8, 2000.
Shares Issuable Upon Exercise Of Warrants
Silver King has issued five year warrants to purchase an aggregate of
2,000,000 shares of its common stock at an exercise price of $4.00 per share.
All of these warrants have vested.
Shares Eligible For Public Resale
As of April 11, 2000, 200,000 shares of common stock of Silver King are
eligible for public resale pursuant to Rule 144 promulgated under the Securities
Act.
Record Holders
As of April 10, 2000, the number of stockholders of record of Silver
King's common stock was approximately 63, although management believes that
there are additional beneficial owners of the common stock who own their shares
in "street name."
Dividends
The Company has not paid any cash dividends, to date, and has no
intention to pay any cash dividends on its common stock in the foreseeable
future. The declaration and payment of dividends is subject to the discretion of
the Board of Directors and to certain limitations under the General Corporation
Law of the State of Delaware. The timing, amount and form of dividends, if any,
will depend, among other things, on the Company's results of operations,
financial condition, cash requirements and other factors deemed relevant by the
Board of Directors.
Recent Sales Of Unregistered Securities
1. On January 27, 1999, Silver King issued and sold an aggregate of
14,500,000 shares of common stock to raise gross proceeds of $14,500. This
offering was undertaken by Silver King prior to the execution and closing of the
definitive joint venture agreement with ICRM. At that time Silver King was an
inactive company with no assets or liabilities. Investors in such offering were,
therefore, subject to a number of risks and uncertainties, including the
material contingencies
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associated with the execution of the joint venture agreement. These shares were
issued directly by Silver King without payment of any commissions to the
following accredited investors in a private placement transaction exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof and Rule 506 of Regulation D promulgated thereunder:
Name Number of Shares
---- ----------------
Appel, Gerald R. 25,000
Bartlett, Bruce Edwin 20,000
Bartlett, David and Louann 20,000
Bartlett, Ruth 50,000
Big Brothers, Big Sisters of Northwest Arkansas 10,000
Borenstein, Howard and Shari 100,000
Boyett Investments Limited 1,500,000
Brennon, Bobby 50,000
Campbell, Bruce or Paige 25,000
Capital Growth Trust 1,500,000
Cranbourne Investments Ltd. 1,000,000
Diversified Investment Fund, L.P. 155,000
FAC Enterprises, Inc. 1,500,000
Flick, Inc. 10,000
Founders Equity Group, Inc. 100,000
Gatkin Limited 1,500,000
Good, Henry H. III 75,000
Good, Henry H., M.D. 25,000
GWR Trust 1,500,000
Ibsen, Michael D. 100,000
Ivester, Carolyn 10,000
KAB Investments, Inc. 1,500,000
Keith, Kevin and Tracie 25,000
Knight, George 100,000
Matrix Capital Management Ltd. 500,000
McCracken Brothers 50,000
Moorehead Charitable Trust, George and Nancy 75,000
Moorehead Charitable Trust, Donald and Shelley 75,000
Petillo, Delores 5,000
Quattrochi, Joseph 25,000
Romano, Mario 100,000
Rosner Money Purchase Plan, Steven B. 150,000
Sands, Sidney and Edythe 50,000
Schuyhart, Bill W. 100,000
SPH Investments Inc. 1,000,000
Stoltz, J. Michael 100,000
The D.A.R. Group 125,000
Vogel Enterprises Inc. Pension Trust 30,000
13
<PAGE>
Name Number of Shares
---- ----------------
Vogel, Robert A. 30,000
Vogel, Samuel M. 30,000
West Tropical Investments Corp. 930,000
Weston Investors, Inc. 25,000
Wilson, Fred IRA Rollover 200,000
-------
Total: 14,500,000
2. On January 27, 1999, Silver King issued and sold an aggregate of
2,000,000 units, each unit consisting of one share of common stock and five year
warrants to purchase four shares of common stock at an exercise price of $4.00
per share to raise gross proceeds of $16,000. This offering was undertaken by
Silver King prior to the execution and closing of the definitive joint venture
agreement with ICRM. At that time Silver King was an inactive company with no
assets or liabilities. Investors in such offering were, therefore, subject to a
number of risks and uncertainties, including the material contingencies
associated with the execution of the joint venture agreement. These units were
issued directly by Silver King without payment of any commissions to the
following accredited investors in a private placement transaction exempt from
the registration requirements of the Securities Act pursuant to Section 4(2)
thereof and Rule 506 of Regulation D promulgated thereunder:
<TABLE>
<CAPTION>
Number of Number of Number of
Name Units Shares Warrants
---- ----- ------ --------
<S> <C> <C> <C>
Clifton Capital Ltd. 1,000,000 1,000,000 1,000,000
FAC Enterprises, Inc. 1,000,000 1,000,000 1,000,000
Total: 2,000,000 2,000,000 2,000,000
</TABLE>
3. On April 14, 1999, Silver King issued and sold an aggregate of
525,000 shares of common stock to raise gross proceeds of $525,000. This
offering was undertaken by Silver King prior to vesting in a 60% equity interest
in ICRM. At that time there were no assurances that Silver King would become a
shareholder of ICRM. Investors in such offering were, therefore, subject to a
number of risks and uncertainties, including the material contingencies
associated with vesting in majority ownership of ICRM. These shares were issued
directly by Silver King without payment of any commissions to the following
accredited investors in a private placement transaction exempt from the
registration requirements of the Securities Act pursuant to Section 4(2) thereof
and Rule 506 of Regulation D promulgated thereunder:
Name Number of Shares
---- ----------------
Clanstar International Ltd. 200,000
Garvey, Martin 5,000
Hauser, Eric 5,000
Hill Samuel Pacific Trust Company (BVI)
as Trustees of The Renascence Trust 100,000
IFIGA Company 25,000
Lauer, Michael 40,000
The Orbiter Fund, Ltd. 150,000
-------
Total: 525,000
14
<PAGE>
4. On April 15, 1999, Silver King issued 50,000 shares of common stock
to Founders Equity Group, Inc., as consideration for a $100,000 loan made to
Silver King, which was repaid in full on May 25, 1999. These shares were issued
directly by Silver King without payment of any commissions to Founders Equity in
a private placement transaction exempt from the registration requirements of the
Securities Act pursuant to Section 4(2) thereof and Rule 506 of Regulation D
promulgated thereunder.
5. On February 3, 2000, Silver King sold an aggregate 25,000,000 units,
each unit consisting of one share of common stock and three year warrants to
purchase two shares of common stock at an exercise price of $0.01 per share. The
purchase price of a unit was $.005 per unit. The units were sold to the
accredited investors identified below in a private placement transaction exempt
from registration pursuant to Section 4(2) of the Act and Rule 506 of Regulation
D. All of the warrants granted in this unit placement were subsequently
forfeited.
Number of Warrants
Name Number of Shares (all forfeited)
---- ---------------- ------------------
KAB Investments, Inc. 1,500,000 3,000,000
Millworth Investments, Inc. 22,000,000 44,000,000
SPH Investments, Inc. 1,500,000 3,000,000
Total: 25,000,000 50,000,000
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS.
- ------ ----------------------------------------------------------
Year Ended December 31, 1999 Compared To Year Ended December 31, 1998
Results Of Operations
Revenues; Losses. Silver King has not yet produced silver or any other
mineral products and has not had any revenues from product sales. The net loss
for the year ended December 31, 1999 was $758,704, compared to a net loss of
$26,834 for the year ended December 31, 1998. The net loss for 1999 is primarily
attributable to exploration costs of $362,042, and includes an impairment loss
of $116,404 as a result of suspension of exploration activities.
15
<PAGE>
Administrative. Administrative expenses were $46,097 for the year ended
December 31, 1999, as compared to $1,834 for the year ended December 31, 1998.
This increase in administrative expenses from 1998 is the result of office and
travel expenses.
Consulting. Consulting fees were $23,500 for fiscal 1999, compared to
$5,000 for fiscal 1998. The increased consulting fees were due to retaining an
administrative consultant.
Legal and Accounting. Legal and accounting fees were $105,635 for
fiscal 1999, as compared to $20,000 for fiscal 1998. This increase from 1998 was
due to costs associated with the private placement offerings of Silver King's
securities and the preparation of securities filings in compliance with
securities disclosure regulations.
Interest expenses. Interest expenses for fiscal 1999 were $2,918, the
first time Silver King incurred an interest expense. The interest expense was
due to a $100,000 loan taken by Silver King in April 1999 at an annual interest
rate of 12%, and other loans repaid in April 1999.
Right of First Refusal. Silver King incurred a $131,250 expense for the
year ended December 31, 1999 for a subscription payment made on behalf of
Zaculapan Minerals, LLC ("Zacualpan") for Zacualpan's 20% interest in ICRM, in
consideration for which Mark Isaacs, a principal of Zacualpan, granted Silver
King certain rights of first refusal to participate in future mining and natural
resource opportunities identified by Mr. Isaacs. Silver King had not previously
incurred a similar type of expense.
Exploration Costs. Exploration expenses for fiscal 1999 were $362,042,
the first time Silver King incurred an exploration expense. The exploration
expense was due to costs for an induced polarization survey and drilling program
at the Zacualpan Project. The exploration expense also includes $219,433, the
excess of the $397,750 purchase price for Silver King's equity interest in ICRM
over the fair value of net tangible assets, which was charged to operations as
costs toward exploration.
Liquidity And Capital Resources
As of December 31, 1999, Silver King had current assets of $667,853,
consisting of $2,853 in cash and a $665,000 loan receivable. Silver King had no
assets as of December 31, 1998. The increase in 1999 relative to the prior year
was due to the receipt of net proceeds from private placements of securities and
the loan receivable from a related party. Silver King received an aggregate of
$555,500 in net proceeds from private placements completed in January and April
of 1999. In January 1999, Silver King issued: (i) 14,500,000 shares of its
common stock at price of $.001 per share and received $14,500 in net proceeds;
and (ii) 2,000,000 units, each unit consisting of one share of common stock and
one common stock purchase warrant, at a price of $4.00 per unit and received
$16,000 in net proceeds. In April 1999, Silver King issued 525,000 shares of its
common stock at a price of $1.00 per share and received $525,000 in net
proceeds. In February 2000, Silver King received $125,000 in net proceeds from a
unit private placement, each unit consisting of one share of common stock and
two common stock purchase warrants, at a price of $.005 per unit. In the
February 2000 placement, Silver King issued 25,000,000 shares of its common
stock and warrants to purchase 50,000,000 shares of common stock at $.01 per
share; however, all of the warrants were subsequently forfeited and cancelled in
April 2000.
16
<PAGE>
The net cash used in operating activities for the year ended December
31, 1999 was $537,234, compared to $25,000 for the year ended December 31, 1998.
The costs incurred in 1998 reflect funding for pre-operating costs, while the
costs incurred in 1999 reflect operating costs for the Zacualpan Project.
The net cash provided by financing activities was $816,404 for the
fiscal year ended December 31, 1999, compared to $25,000 for the year ended
December 31, 1998. Prior to 1998, Silver King had no net cash from financing
activities. The net cash in 1998 was due to a cash overdraft. The net cash in
1999 was due principally to the private placements of $555,500 completed in
January and April of 1999, as well as proceeds from loans.
The net cash used in investing activities during fiscal 1999 was
$276,317. Of this amount, $40,000 was paid by Silver King toward the purchase
price of mining concessions and $236,317 was used to acquire Silver King's
equity interest in ICRM.
Silver King does not currently have a line of credit with any financial
institutions. Silver King currently owes $820,000 on a short-term loan to a
related party. Silver King has a working capital deficit and is not generating
revenues. As a condition precedent to the proposed Merger with eNexi, Silver
King is attempting to raise $5,000,000 through the private offering of
convertible preferred stock. In the event that the Merger is consummated, the
net proceeds from the sale of the preferred stock would be used to fund the
operations of eNexi and Silver King would proceed to divest its interest in
ICRM, for which it may receive only a nominal sum. There can be no assurances
that Silver King will raise $5,000,000 in the offering, or that, if it does and
the Merger is consummated, that the funds received through the offering will be
sufficient to operate the business of eNexi. Silver King may therefore be
required to seek additional financing in the future, which may be accomplished
through traditional debt financing or the placement of debt and equity
securities.
Impact Of Inflation
The effects of inflation on the Company's operations were not
significant during the periods presented.
Recently Issued Accounting Standards
17
<PAGE>
The Company adopted Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income", beginning January 1, 1999.
Comprehensive income is more inclusive financial reporting methodology that
includes disclosure of certain financial information that historically has not
been recognized in the calculation of net income. Since the Company has no items
of other comprehensive income, no separate statement of comprehensive income has
been presented.
Effective January 1, 1999, the Company adopted Statement of Positions
98-5, "Reporting on the Costs of Start-up Activities" ("SOP 98-5"), which
provides guidance on the financial reporting of start-up costs and organization
costs. It requires costs of start-up activities and organization costs to be
expensed as incurred. The adoption of SOP 98-5 did not result in any cumulative
effect of a change in accounting principle.
ITEM 7. FINANCIAL STATEMENTS.
- ------ --------------------
Financial Statements of the Company for the years ended December 31,
1999 and 1998 are included within Item 13(a) and 13(b) of this Report and may be
found at pages F-1 through F-_.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
- ------ ---------------------------------------------------------------
FINANCIAL DISCLOSURE.
---------------------
There are no matters to be reported hereunder.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
- ------ -------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
--------------------------------------------------
Directors And Executive Officers
The following table sets forth certain information with respect to each
of the executive officers and directors of the Company.
18
<PAGE>
Name Age Position
---- --- --------
Alan Stier 43 President, Treasurer and Director
Stewart Jackson 58 Vice President - Mining Operations
and Secretary
The following is a brief summary of the business experience of each of
the above-named individuals:
ALAN STIER became the President and Treasurer and a Director of Silver
King in June 1999. From 1995 through the present, Mr. Stier has been the
President and Chief Executive Officer of International Capri Resources Ltd.
("ICR"), a British Columbian company engaged primarily in the mining and
exploration business whose shares are traded on the Vancouver Stock Exchange.
Mr. Stier has been a member of the board of directors of ICR since 1993. ICR has
focused its mining and exploration activities in Baffin Island in Canada's
Northwest Territory and in northwestern Ontario. ICR is a 20% owner of ICRM,
Silver King's Mexican operating subsidiary. From March 1996 to August 1998, Mr.
Stier was the President, Chief Executive Officer and a Director of Landore
Resources, Inc., a public company engaged in the gold mining business in
northwestern Ontario. Mr. Stier is a certified Power Engineer in British
Columbia and Alberta, Canada.
DR. STEWART JACKSON became Vice President - Mining Operations and
Secretary of Silver King in June 1999. Dr. Jackson has over 39 years of
experience in the mining industry. From 1987 through the present, Dr. Jackson
has been an independent consultant, officer, director and principal of several
U.S. and Canadian public mining companies involved in the exploration and
development of diamonds, base metals, precious minerals, industrial minerals and
oil and gas, including Continental Precious Minerals Ltd., Monument Resources,
Inc., Little Squaw Gold Mining Corporation and Nu-Dawn Resources Ltd. From 1981
through 1987, Dr. Jackson was the founder and President of Crown Resource Corp.
(now known as Crown Resources Corporation), a public company developing gold and
silver targets in northeastern Washington. Dr. Jackson has also published
several articles on geological topics. He received his doctorate degree in
Stratigraphy and Economic Geology in 1969 from the University of Alberta.
Upon the Merger Closing, the existing director and officers named above
are expected to resign and shall be replaced by the following individuals, as
well as three additional directors yet to be identified.
Name Age Anticipated Position with Company
---- --- ---------------------------------
Larry Mayle 57 Co-Chairman, Chief Executive
Officer and Director
Dr. Roger LeRoy Miller 56 Co-Chairman, President and Director
Michael Ames 39 Chief Financial Officer
19
<PAGE>
LARRY MAYLE co-founded eNexi and has served as its Co-Chairman and
Chief Executive Officer since its formation in May 1999. During the five years
prior to co-founding eNexi, Mr. Mayle owned and managed Rally Chevrolet and
other General Motors' dealerships in Southern California, where he developed
automated management systems for the operation of his dealerships . Mr. Mayle
holds a Bachelor of Science degree from the University of Southern California.
DR. ROGER LEROY MILLER co-founded eNexi and has served as its
Co-Chairman and President since its formation in May 1999. During the five years
prior to founding eNexi, Dr. Miller owned and managed Unicor, Inc., a Florida
corporation that provides manuscripts and marketing materials for college
textbooks in economics, business law and political science. Through Unicor, Dr.
Miller developed interactive CD-ROM and Web-based educational systems for
several publishers, including HarperCollins, West and McGraw-Hill. Dr. Miller
holds a Ph.D. in economics and business from the University of Chicago and a
Bachelor of Arts degree in economics from the University of California at
Berkeley.
MICHAEL AMES has served as Chief Financial Officer of eNexi since June
1999. From 1998 to June 1999, Mr. Ames served as the Vice President/Controller
of Systems Management Specialists, Inc., a technology outsourcing company based
in Santa Ana, California. From 1990 to 1998, Mr. Ames ran his own financial
consulting business. Mr. Ames received a Bachelor of Science in Accounting and
Management Information Systems from California State University, Fullerton, in
1985. He is a Certified Public Accountant in the State of California.
Directors' Compensation
Directors who are officers of Silver King receive no additional
compensation for serving on the board of directors, other than reimbursement of
reasonable expenses incurred in attending meetings.
ITEM 10. EXECUTIVE COMPENSATION
- -------- ----------------------
Summary Compensation Table
<TABLE>
<CAPTION>
RESTRICTED
NAME AND PRINCIPAL FISCAL OTHER ANNUAL STOCK OPTIONS/ SARS
POSITION YEAR SALARY BONUS COMPENSATION AWARDS (#)
- -------- ---- ------ ----- ------------ -------------- ----
<S> <C> <C> <C> <C> <C> <C>
Alan Stier 1999 -- -- -- -- --
President and Chairman of 1998 N/A N/A N/A N/A N/A
the Board 1997 N/A N/A N/A N/A N/A
Stephen P. Harrington 1999 -- -- -- -- --
Former President 1998 -- -- -- -- --
1997 N/A N/A N/A N/A N/A
Mark A. Kuperman 1999 N/A N/A N/A N/A N/A
Former President 1998 -- -- -- -- --
1997 -- -- -- -- --
</TABLE>
20
<PAGE>
Compliance With Section 16(a) Of The Securities Exchange Act
Based solely on its review of copies of forms filed pursuant to Section
16(a) of the Securities Exchange Act of 1934, and written representations from
certain reporting persons, the Company believes that during fiscal 1999 all
reporting persons timely complied with all filing requirements applicable to
them.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- -------- --------------------------------------------------------------
The following table sets forth, as of April 10, 2000, information with
respect to the securities holdings of all persons which the Company, pursuant to
filings with the Securities and Exchange Commission, has reason to believe may
be deemed the beneficial owners of more than 5% of the Company's outstanding
Common Stock. Also set forth in the table is the beneficial ownership of all
shares of the Company's outstanding stock, as of such date, of all officers and
directors, individually and as a group.
<TABLE>
<CAPTION>
Shares Owned
Beneficially and of Percentage of
Name and Address Record (1) Outstanding Shares
- ---------------- ------------------- ------------------
<S> <C> <C>
Alan Stier 0 0%
4372 44B Avenue
Delta, British Columbia
Canada V4K 1H1
Dr. Stewart Jackson 0 0%
6025 S. Eaton Lane
Littleton, CO 80123
Millworth Investments, Inc. 22,000,000 51%
4960 South Virginia Street
Suite 300
Reno, NV 89502
KAB Investments, Inc. 3,000,000 7%
24224 Kanis Road
Little Rock, AR 72223
SPH Investments, Inc. 2,500,000 5.8%
648 Post Road
Wakefield, RI 02879
All Directors and Officers as a group (2 persons) 0 0%
</TABLE>
21
<PAGE>
- ---------------------
(1) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in
the regulations promulgated under the Securities Exchange Act of 1934,
and, accordingly, may include securities owned by or for, among others,
the spouse and/or minor children of an individual and any other
relative who has the same home as such individual, as well as other
securities as to which the individual has or shares voting or
investment power or which each person has the right to acquire within
60 days through the exercise of options, or otherwise. Beneficial
ownership may be disclaimed as to certain of the securities. This table
has been prepared based on 43,075,000 shares of Common Stock
outstanding as of April 10, 2000.
- -----------------------
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of April 10, 2000 and as
adjusted to reflect the issuance of the Series A Shares in the Merger and the
Series B Shares in the Offering by (i) each person who, to the knowledge of the
Company, beneficially owns more than 5% of the Company's Common Stock; (ii) each
director and executive officer of the Company upon the Merger Closing; and (iii)
all executive officers and directors of the Company upon the Merger Closing as a
group:
<TABLE>
<CAPTION>
Applicable Percentage
-----------------------------
Amount of Amount of Before Merger After
Name and Address of Beneficial Beneficial and Merger and
Beneficial Owner Ownership(1)(2) Ownership(1)(3) Offering Offering
- ---------------- --------------- --------------- -------- --------
<S> <C> <C> <C> <C>
Larry Mayle -0- 67,340,615 0% 25.1%
c/o eNexi Inc.
20 Corporate Park, Suite 110
Irvine, CA 92606
Dr. Roger LeRoy Miller -0- 45,014,102 0% 16.8%
c/o eNexi Inc.
20 Corporate Park, Suite 110
Irvine, CA 92606
Michael Ames -0- 300,897 0% *
c/o eNexi Inc.
20 Corporate Park, Suite 110
Irvine, CA 92606
Millworth Investments, Inc. 22,000,000 22,000,000 51% 8.2%
4960 South Virginia Street
Suite 300
Reno, NV 89502
KAB Investments, Inc. 3,000,000 3,000,000 7% 1.1%
24224 Kanis Road
Little Rock, AR 72223
SPH Investments, Inc. 2,500,000 2,500,000 5.8% *
648 Post Road
Wakefield, RI 02879
All Directors and Executive Officers 112,655,614 0% 41.9%
as a Group (3 persons)
</TABLE>
22
<PAGE>
- ----------------------
* Less than 1%.
(1) The securities "beneficially owned" by a person are determined in
accordance with the definition of "beneficial ownership" set forth in
the rules and regulations promulgated under the Securities Exchange Act
of 1934, as amended, and accordingly, may include securities owned by
and for, among others, the spouse and/or minor children of an
individual and any other relative who has the same home as such
individual, as well as other securities as to which the individual has
or shares voting or investment power or which such person has the right
to acquire within 60 days after the date of this Offering Memorandum
pursuant to the exercise of options, or otherwise. Beneficial ownership
may be disclaimed as to certain of the securities.
(2) Based upon 43,075,000 shares of Common Stock outstanding as of April 10,
2000.
(3) Based upon 268,075,000 shares of Common Stock outstanding as of the
date of the Merger Closing, assuming no other changes in the beneficial
ownership of the Company's securities except those associated with the
Merger Closing and the Offering. Assumes the issuance of 25,000,000
shares of Common Stock pursuant to the exercise of the Assumed
Warrants. Also, assumes the conversion into Common Stock of 2,000,000
Series B Shares to be sold in the Offering.
Anticipated Recapitalization
As soon as practicable after the Merger Closing, the Company shall
solicit stockholder approval for a recapitalization (the "Recapitalization") of
its outstanding Common Stock so as to permit the issuance of a sufficient number
of shares of Common Stock to cover the full conversion of the Series A Shares
and the Series B Shares and the full exercise of the Assumed Warrants. The
Recapitalization shall take the form of either a reverse split of the Common
Stock or an increase in the number of authorized shares of Common Stock. Once
the Recapitalization occurs, the Series A Shares and the Series B Shares shall
automatically convert into Shares of Common Stock. To facilitate the requisite
stockholder approval for the Recapitalization, at the Merger Closing, the
holders of a majority of the outstanding shares of Common Stock shall deliver to
eNexi voting proxies in favor of the Recapitalization.
23
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
Sale Of Shares To An Entity Affiliated With A Former Officer And Director
On January 27, 1999, Silver King sold 1,000,000 shares of its common
stock to SPH Investments, Inc., for a total purchase price of $1,000. Stephen
Harrington, the former President of Silver King, is also the President of SPH
Investments, Inc. These shares were sold in a private placement transaction
exemption registration under Section 4(2) and Regulation D of the Securities
Act.
Loans from Principal Stockholders
In September 1999, Silver King borrowed $120,00 from FAC Enterprises,
Inc., a principal stockholder, on a short-term basis. The loan is due on demand
and the principal amount bears interest at the rate of 10% per annum.
On April 16, 1999, Silver King borrowed $100,000 from Founders Equity
Group, Inc., a stockholder of Silver King. The principal amount of the loan
bears interest at 12% per annum. The entire principal and interest accrued
thereon was originally due on May 15, 1999. Silver King repaid $50,000 on May
20, 1999 and $50,000 on May 25, 1999. Silver King issued 50,000 shares of its
Common Stock to Founders Equity as payment of a financing fee. The Common Stock
was valued at $1.00 per share.
In a series of transactions during 1999, Silver King borrowed $820,000
from FAC Enterprises, Inc., a principal stockholder, on a short term basis at no
interest.
Loan to Related Corporation
In a series of transactions during 1999, Silver King lent $665,000 to
Rozel International, Inc., a stockholder of Silver King, on a short-term,
non-interest bearing basis.
24
<PAGE>
PART IV
ITEM 13. FINANCIAL STATEMENTS AND EXHIBITS AND REPORTS ON FORM 8-K.
- -------- ----------------------------------------------------------
(a) The following documents are filed as part of this Report:
<TABLE>
<CAPTION>
1. Financial Statements filed as part of this Report: Page
----
<S> <C>
Report of Cogen Sklar LLP.................................................................................. F-2
Consolidated Balance Sheets as of December 31, 1999 and 1998.......................................... F-3
Consolidated Statements of Operations Years Ended December 31, 1999 and
1998 and for the period from August 23, 1988
(inception) through December 31, 1999............................................................. F-4
Consolidated Statements of Stockholders' Equity (Deficit)
August 23, 1988 (inception) through December 31, 1999............................................. F-5
Consolidated Statements of Cash Flows
Years Ended December 31, 1999 and 1998 and for the period
from August 23, 1988 (inception) through December 31, 1999........................................ F-6
Notes to Financial Statements......................................................................... F-7
</TABLE>
2 The following Exhibits are filed as part of this Report:
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated as of June 23, 1999, Incorporated by reference to Exhibit
between Silver King Resources (Delaware), Inc. and 8.1 of the Form 10-SB
Silver King Resources, Inc.
3.1 Certificate of Incorporation, as amended Incorporated by reference to Exhibit
2.1 to the Registrant's Registration
Statement on Form 10-SB filed July
8, 1999 ("Form 10-SB")
3.2 Certificate of Merger Incorporated by reference to Exhibit
2.2 of the Form 10-SB
3.3 Bylaws Incorporated by reference to Exhibit
3.3 of the Form 10-SB
</TABLE>
25
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<S> <C> <C>
10.1 Joint Venture Agreement dated March 19, 1999, among Incorporated by reference to Exhibit
Silver King Resources, Inc. (f/k/a Arngre, Inc.), 6.1 of the Form 10-SB
International Capri Resources Ltd., International Capri
Resources S.A. de C.V., Zacualpan Minerals, LLC and Alan
Stier
10.2 Right of First Refusal Agreement dated March 19, 1999, Incorporated by reference to Exhibit
between Silver King Resources, Inc. (f/k/a Arngre, Inc.) 6.2 of the Form 10-SB
and Mark S. Isaacs
10.3 Contract of Assignment of Rights dated as of December Incorporated by reference to Exhibit
11, 1998 between Polo Y Ron Minerales, S.A. de C.V. and 6.3 of the Form 10-SB
International Capri Resources, S.A. de C.V.
10.4 Contracts of Mining Exploration and of Promise of Incorporated by reference to Exhibit
Assignment of Rights dated as of November 19, 1998 6.4 of the Form 10-SB
between Felix Gomez Garcia and Polo Y Ron Minerales,
S.A. de C.V. (Los Compadres lot)
10.5 Contracts of Mining Exploration and of Promise of Incorporated by reference to Exhibit
Assignment of Rights dated as of November 19, 1998 6.5 of the Form 10-SB
between Felix Gomez Garcia and Polo Y Ron Minerales,
S.A. de C.V. (El Quinto and El Cometa Navideno lots)
10.6 Contracts of Mining Exploration and of Promise of Incorporated by reference to Exhibit
Assignment of Rights dated as of November 30, 1998 6.6 of the Form 10-SB
between Hector Esquivel Esparza and Polo Y Ron
Minerales, S.A. de C.V. (La Cadena and El Volado lots)
10.7 Form of Securities Purchase Agreement dated January 27, Incorporated by reference to Exhibit
1999 to purchase shares of common stock at $.001 per 6.7 of the Form 10-SB
share
10.8 Form of Securities Purchase Agreement dated January 27, Incorporated by reference to Exhibit
1999 to purchase units at $.008 per unit 6.8 of the Form 10-SB
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<S> <C> <C>
10.9 Form of Warrant to Purchase Shares of Common Stock of Incorporated by reference to Exhibit
Silver King Resources, Inc. granted to unit subscribers 6.9 of the Form 10-SB
10.10 Form of Securities Purchase Agreement dated April 14, Incorporated by reference to Exhibit
1999 to purchase shares of common stock at $1.00 per 6.10 of the Form 10-SB
share
10.11 Amendment to Contracts of Assignment of Rights dated as Incorporated by reference to Exhibit
of November 19, 1998 between Felix Gomex Garcia and Polo 6.11 of Amendment No. 1 to the Form
Y Ron Minerales, S.A. de C.V. (Los Compadres lot) 10-SB, filed on September 23, 1999
("Amendment No. 1")
10.12 Amendment to Contracts of Mining Exploration and of Incorporated by reference to Exhibit
Promise of Assignment of Rights dated as of November 19, 6.12 of Amendment No. 1
1998 between Felix Gomex Garcia and Polo Y Ron
Minerales, S.A. de C.V. (El Quinto and El Cometa
Navideno lots)
10.13 Amendment to Contracts of Mining Exploration and of Incorporated by reference to Exhibit
Promise of Assignment of Rights dated as of November 30, 6.13 of Amendment No. 1
1998 between Hector Esquivel Esparza and Polo Y Ron
Minerals, S.A. de C.V. (La Cadena and El Volado lots)
10.14 Report on Zacualpan Area Holdings, Mexico and Guerro Incorporated by reference to Exhibit
States, Mexico, dated December, 1998, prepared by Juan 15.1 of Amendment No. 1
Cabuto Vidrio, Mining Engineer, and Alex Burton, P.
Eng., P. Geo.
10.15 Induced Polarization Survey, dated March, 1999, prepared Incorporated by reference to Exhibit
byJoseph R. Anzman, Exploration Geophysicist 15.2 of Amendment No. 1
10.16 Induced Polarization and Apparent Resistivity Survey in Incorporated by reference to Exhibit
the Zaculpan Project, dated April, 1999, prepared by 15.3 of Amendment No. 1
Compania Minera San Eugenio, Santa Rosa Y Santa Ines,
S.A. de C.V.
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<S> <C> <C>
10.17 Form of Securities Purchase Agreement dated February 3, Filed herewith
2000 to purchase units at $.005 per unit
10.18 Agreement and Plan of Merger dated March 21, 2000 by and Filed herewith
among Silver King Resources, Inc., Silver King
Acquisition, Inc. eNexi Inc. and the Principal
Stockholders of eNexi Inc.
21.1 Subsidiaries of the Registrant Filed herewith.
27.1 Financial Data Schedule Filed herewith.
</TABLE>
(b) The Company did not file any reports on Form 8-K during the quarter ended
December 31, 1999.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant certifies that it has reasonable grounds to believe that it meets
all the requirements of filing on Form 10-KSB, and has duly caused this Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly authorized
on the 14th day of April 2000.
SILVER KING RESOURCES, INC.
By: /s/ Alan Stier
--------------------------------
Alan Stier
Chairman of the Board, President
and Principal Accounting Officer
29
<PAGE>
SILVER KING RESOURCES, INC.
AND SUBSIDIARY
(Formerly Arnge, Inc.)
(An Exploration Stage Company)
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
C O N T E N T S
PAGE
----
INDEPENDENT AUDITORS' REPORT F-2
CONSOLIDATED BALANCE SHEETS F-3
CONSOLIDATED STATEMENTS OF OPERATIONS F-4
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7--F-12
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Silver King Resources, Inc.
Littleton, Colorado
We have audited the accompanying consolidated balance sheets of Silver King
Resources, Inc. and Subsidiary (an exploration stage company) as of December 31,
1998 and 1999, and the related consolidated statements of operations,
stockholders' equity (deficit) and cash flows for the years then ended, and for
the period from August 23, 1988 (inception) through December 31, 1999. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that out audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Silver King
Resources, Inc. and Subsidiary as of December 31, 1998 and 1999, and the results
of their operations and cash flows for the years then ended, and for the period
from August 23, 1988 (inception) through December 31, 1999, in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has discontinued its present
activities and has no established source of revenue. This raises substantial
doubt about its ability to continue as a going concern. Management's plan in
regard to these matters are also described in Note 2. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ Cogen Sklar LLP
---------------
COGEN SKLAR LLP
February 18, 2000, except for Note 10
as to which the date is March 21, 2000
Bala Cynwyd, Pennsylvania
F-2
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1998 1999
---------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ - $ 2,853
Loan receivable from related party - 665,000
-------- ---------
TOTAL ASSETS $ - $ 667,853
======== =========
LIABILITIES
CURRENT LIABILITIES
Cash overdraft $ 25,000 $ -
Loan payable to related party - 820,000
Accounts payable - 26,057
-------- ---------
TOTAL LIABILITIES 25,000 846,057
-------- ---------
STOCKHOLDERS' EQUITY (DEFICIT)
PREFERRED STOCK - $0.0001 par value, authorized 15,000,000
shares; none issued and outstanding - -
COMMON STOCK - $0.0001 par value, authorized 50,000,000
shares; issued and outstanding 1,000,000 at December 31 1998
and 18,075,000 shares at December 31, 1999 100 1,807
ADDITIONAL PAID IN CAPITAL 6,734 596,527
WARRANTS OUTSTANDING - 14,000
DEFICIT ACCUMULATED DURING THE EXPLORATION
STAGE (31,834) (790,538)
-------- ---------
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) (25,000) (178,204)
-------- ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) $ - $ 667,853
======== =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-3
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended August 23,1988
December 31, Inception
--------------------------- Through
December 31,
1998 1999 1999
---------- ----------- ------------
(Unaudited)
<S> <C> <C> <C>
COSTS AND EXPENSES
Exploration costs $ - $ 362,042 $ 362,042
Right of first refusal - 131,250 131,250
Impairment loss - 116,404 116,404
Administrative expenses 1,834 46,097 52,931
Consulting expenses 5,000 23,500 28,500
Financing fees - 50,000 50,000
Depreciation - 800 800
Legal and accounting 20,000 105,635 125,635
Minority interest - (79,942) (79,942)
Interest expense - 2,918 2,918
---------- ----------- ---------
NET LOSS $ (26,834) $ (758,704) $(790,538)
========== =========== =========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.03) $ (0.05)
========== ===========
WEIGHTED AVERAGE
NUMBER OF SHARES 1,000,000 16,532,292
========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
AUGUST 23, 1988 (INCEPTION) THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Deficit
Accumulated Total
Additional During the Stockholders'
Common Paid In Warrants Exploration Equity
Stock Capital Outstanding Stage (Deficit)
----------- ---------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE, AUGUST 23, 1988 (INCEPTION) THROUGH
DECEMBER 31, 1997 $ 5,000 $ - $ - $ (5,000) $ -
Reincorporation fee paid by stockholders - 1,834 - - 1,834
Recapitalization upon reincorporation (4,995) 4,995 - - -
Two hundred-for-one stock split 995 (995) - - -
Net loss for the year ended December 31, 1998 - - - (26,834) (26,834)
-------- -------- ------- --------- ---------
BALANCE AT DECEMBER 31, 1998 1,000 5,834 - (31,834) (25,000)
Issuance of common stock 17,025 524,475 14,000 - 555,500
Issuance of 50,000 shares of common stock as
financing fee 50 49,950 - - 50,000
Recapitalization upon reincorporation in the
state of Delaware (16,268) 16,268 - -
Net loss for the year ended, December 31, 1999 - - - (758,704) (758,704)
-------- -------- ------- -------- ---------
BALANCE AT DECEMBER 31, 1999 $ 1,807 $596,527 $14,000 $(790,538) $(178,204)
======== ======== ======= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended August 23, 1988
December 31, (Inception)
--------------------------- Through
1998 1999 December 31, 1999
----------- ----------- -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(26,834) $(758,704) $(790,538)
Adjustments to reconcile net loss to net cash
used in operating activities
Issuance of common stock as financing fee - 50,000 50,000
Reincorporation fee paid by stockholder 1,834 - 1,834
Depreciation - 800 800
Impairment loss - 116,404 116,404
Changes in net assets and liabilities, net of
effects from acquisition
Increase in tax receivable - (16,266) (16,266)
Increase in accounts payable - 70,532 70,532
-------- --------- ---------
Net cash used in operating activities (25,000) (537,234) (567,234)
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Mining concessions - (40,000) (40,000)
Cost of acquisition - (236,317) (236,317)
-------- --------- ---------
Net cash used in investing activities - (276,317) (276,317)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Minority interest - 10,820 10,820
Loan receivable - (665,000) (665,000)
Repayment of stockholder loans - 120,084 120,084
Proceeds from loan payable - 820,000 820,000
Proceeds from issuance of common stock - 555,500 560,500
Cash overdraft 25,000 (25,000) -
-------- --------- ---------
Net cash provided by financing activities 25,000 816,404 846,404
-------- --------- ---------
NET INCREASE IN CASH - 2,853 2,853
-------- --------- ---------
CASH - BEGINNING OF PERIOD - - -
CASH - END OF PERIOD $ - $ 2,853 $ 2,853
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
CASH PAID DURING THE PERIOD FOR:
Interest $ - $ 2,918 $ 2,918
======== ========= =========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of common stock as financing fee $ - $ 50,000 $ 50,000
======== ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
The Company was incorporated August 23, 1988 in the state of Florida as Arnge,
Inc. On March 25, 1999, the Company amended its articles of incorporation in
order to change its name to Silver King Resources, Inc. Since planned principal
operations have not commenced, the Company is considered an exploration stage
company, as defined in the Statement of Financial Accounting Standards No. 7
(SFAS 7).
Principles of Consolidation
The consolidated financial statements include the amounts of the Company and its
60% owned Mexican subsidiary. All significant intercompany transactions have
been eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid instruments with a maturity of three
months or less to be cash equivalents.
Fair Value of Financial Instruments
Financial instruments consist of cash, receivables and accounts payable. The
carrying amount approximates fair value because of the short maturity of these
instruments.
Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires the use of estimates based on management's
knowledge and experience. Accordingly, actual results could differ from those
estimates.
Recoverability of Long Lived Assets
The Company follows SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of." The Statement requires that
long-lived assets and certain identifiable intangibles be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. The Company is aware of
events which indicate the existence of an impairment which would be material to
the Company's financial statements. (Note 2)
Mining Concessions
The cost incurred to acquire mining concessions are capitalized when incurred.
Exploration Costs
Exploration costs will be expensed as incurred.
Income Taxes
The Company accounts for its income taxes under SFAS 109, "Accounting for Income
Taxes", which requires an asset and liability approach to financial accounting
and reporting for income taxes. Deferred income tax assets and liabilities are
computed annually for temporary differences between the financial statement and
tax bases of assets and liabilities that will result in taxable or deductible
amounts in the future based on enacted tax laws and rates applicable to the
periods in which the differences are expected to affect taxable income.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. Income tax expense is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.
F-7
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loss Per Share
Effective the year ended December 31, 1997, the Company adopted SFAS No. 128,
"Earnings Per Share" (EPS). This statement establishes standards for computing
and presenting EPS, replacing the presentation of currently required primary EPS
with a presentation of Basic EPS. For entities with complex capital structures,
the statement requires the dual presentation of both Basic EPS and Diluted EPS
on the face of the statement of operations. Under this new standard, Basic EPS
is computed based on weighted average shares outstanding and excludes any
potential dilution; Diluted EPS reflects potential dilution from the exercise or
conversion of securities into common stock or from other contracts to issue a
common stock and is similar to the currently required fully diluted EPS.
Basic earnings (loss) per share include the weighted average number of shares
outstanding during the year. Diluted earnings (loss) per share include the
weighted average number of shares outstanding and dilutive potential common
shares, such as warrants. Assumed conversion of the warrants would be
antidilutive, therefore, basic and diluted earnings (loss) per share are the
same.
Comprehensive Income
The Company adopted Statement of Financial Accounting Standards (SFAS) No. 130,
"Reporting Comprehensive Income", beginning January 1, 1998. Comprehensive
income is a more inclusive financial reporting methodology that includes
disclosure of certain financial information that historically has not been
recognized in the calculation of net income. Since the Company has no items of
other comprehensive income, no separate statement of comprehensive income has
been presented.
Cost of Start-up Activities
Effective January 1, 1999, the Company adopted Statement of Positions 98-5,
"Reporting on the Costs of Start-up Activities" ("SOP 98-5"), which provides
guidance on the financial reporting of start-up costs and organization costs. It
requires costs of start-up activities and organization costs to be expensed as
incurred. The adoption of SOP 98-5 did not result in any cumulative effect of a
change in accounting principle.
NOTE 2 - GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis which contemplates the realization of assets and the satisfaction of
liabilities and commitments in the normal course of business. As discussed in
Note 2, the Company has suspended its exploration activities and upon completion
of its proposed merger (Note 10) will discontinue its exploration activities.
The Company has not commenced its proposed business activities, nor has it
received any revenues from operations. These factors raise substantial doubt
about the ability of the Company to continue as a going concern.
The Company intends to raise additional capital through a private offering in
order to complete its proposed merger.
The balance sheet does not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classifications of liabilities that might be necessary in the event the Company
cannot continue in existence.
F-8
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 3 - IMPAIRMENT LOSS
During 1999, the Company conducted initial stage exploration of silver-producing
properties in Mexico through its subsidiary (Note 4). Since recent geologic
results indicated concentration of potential mineral deposits less than amounts
expected by management, the Company has elected to suspend any further
exploration activities and, shortly after completion of the merger (Note 10),
plans to discontinue all such operations.
In accordance with SFAS No. 121, the Company recorded an impairment loss of
$116,404 related to the write-down of its recorded net assets as follows:
Tax receivable $ 60,211
Equipment, net 5,200
Mining concessions 160,500
--------
225,911
Less: liabilities (44,477)
Minority interest (65,030)
--------
Impairment loss $116,404
========
NOTE 4 - ACQUISITION
The Company entered into an agreement on March 19, 1999 to purchase a 60%
interest for $393,750 in a Mexican company which has received the rights to
purchase exclusive royalty-free exploration and/or exploitation concessions
covering properties in Mexico that may be silver producing.
The purchase of the 60% interest in the Mexican company will be accounted for
under the purchase method of accounting. The excess of the purchase price over
the fair value of net tangible assets acquired amounting to $219,433 was charged
to operations as costs toward exploration.
Effective May 1, 1999, the financial position and results of operation of the
Mexican company have been reported under the consolidation method. All
significant intercompany transactions have been eliminated in consolidation.
As part of this agreement, the Company is obligated for future geological
consulting fees not to exceed $100,000 commencing August 31, 1999.
NOTE 5 - RIGHT OF FIRST REFUSAL
On March 19, 1999, the Company entered into an agreement with a principal of a
company, in which the company is also a stockholder of the Mexican company
described in Note 4, to obtain a right of first refusal with respect to certain
future mineral projects. The consideration for this right of first refusal with
a term of three years was $131,250. Since the probable future inflows of cash is
not determinable by management, the $131,250 has been expensed.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company loaned $665,000 on a short-term basis to a related corporation.
The Company borrowed $100,000 from a related corporation, bearing interest at
12%. The entire principal and applicable interest was originally due on May 15,
1999. The Company repaid $50,000 on May 20, 1999, with the remaining $50,000
repaid on May 25, 1999. The Company issued 50,000 shares of common stock to this
corporation as payment of a financing fee. The common stock was valued at $1.00
per share.
The Company borrowed $820,000 on a short-term basis from a shareholder.
F-9
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 7 - CAPITAL STOCK
Common Stock
In May 1998, the State of Florida approved the Company's restated Articles of
Incorporation, which increased its capitalization from 7,500 common shares
authorized to 50,000,000 common shares. The par value changed from $1.00 per
share to $0.001 per share.
Upon recapitalization, the Company forward split its common stock on a two
hundred for one basis. This stock split increased the number of outstanding
common stock shares from 5,000 shares to 1,000,000 shares.
In January 1999, the Company sold 14,500,000 shares of its common stock under a
subscription agreement at a price of $0.001 per share.
In January 1999, the Company also sold 2,000,000 shares of its common stock
under a subscription agreement at a price of $0.008.
In April 1999, the Company sold 525,000 shares of its common stock under a
subscription agreement at a price of $1.00 per share.
On June 24, 1999, the Company merged with its wholly-owned subsidiary, Silver
King Resources (Delaware), Inc. After the merger, Silver King Resources
(Delaware), Inc., the surviving corporation, changed its name to Silver King
Resources, Inc. In conjunction with the merger, the par value of the common
stock was changed to $.0001 and the Company is authorized to issue up to
15,000,000 shares of preferred stock, $.0001 par value per share, in one or more
series, and to fix, as to any such series, the dividend rate, redemption prices,
preferences on liquidation or dissolution, sinking fund terms, conversions
rights, voting rights, and any other preference or special rights and
qualifications. There are presently no shares of preferred stock issued.
All references to number of shares and per share amounts on the balance sheet
have been adjusted to give retroactive effect to the recapitalizations and stock
splits.
Warrants
From time to time, the Board of Directors of the Company may issue warrants to
purchase its common stock to parties other than employees and directors.
Warrants may be issued as an incentive to help the Company achieve its goals, or
in consideration for cash or services rendered to the Company, or a combination
of the above.
In January 1999, as part of the subscription for 2,000,000 shares of common
stock, the Company issued warrants to purchase 2,000,000 shares of its common
stock at a price of $4.00 per share. The warrants were valued at $0.007 per
warrant.
NOTE 8 - INCOME TAXES
There is no income tax benefit for operating losses for the years ended December
31, 1999 and 1998 due to the following:
o Current tax benefit - the operating losses cannot be carried back to
earlier years.
o Deferred tax benefit - the deferred tax assets were offset by a valuation
allowance. Management believes that a valuation allowance is considered
necessary since it is more likely than not that the deferred tax asset will
not be realized through future taxable income.
F-10
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 8 - INCOME TAXES (Continued)
The reconciliation of the statutory federal rate to the Company's effective
income tax rate is as follows:
1998 1999
------ ------
Statutory tax benefit $ (9,100) $(256,700)
Increase in valuation allowance 9,100 256,700
-------- ---------
$ - $ -
======== =========
The components of the net deferred tax assets (liabilities) are as follows:
1998 1999
------ ------
Net operating loss carryforwards $ 2,300 $ 220,700
Organization cost 1,700 1,400
Acquisition costs 6,800 5,400
Impairment loss - 40,000
Valuation allowance (10,800) (267,500)
-------- ----------
$ - $ -
======== ==========
The use of net operating loss carryforwards is limited when there has been a
substantial change in ownership (as defined) during a three year period. Because
of the recent and contemplated changes in common stock and warrants, such a
change may occur in the future. In this event, the use of net operating losses
each year would be restricted to the value of the Company on the date of such
change multiplied by the federal long-term tax exempt rate ("annual
limitation"); unused annual limitations may then be carried forward without this
limitation.
At December 31, 1999 the Company had net operating loss carryforwards of
approximately $530,000 for U.S. income tax purposes which if not used, will
expire through 2014. At December 31, 1999, the Company had net operating loss
carryforwards of approximately $120,000 for Mexican income tax purposes, which
if not used will expire in 2009.
NOTE 9 - SUBSEQUENT EVENT
In February, 2000, the Company sold 25,000,000 units at $.005 per unit
represented by one share of common stock and two warrants, each warrant
entitling the holder to purchase one share of its common stock at a price of
$.01 per share. The total gross proceeds amounted to $125,000.
F-11
<PAGE>
SILVER KING RESOURCES, INC. AND SUBSIDIARY
(An Exploration Stage Company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1999
NOTE 10 - PLAN OF MERGER AND PRIVATE PLACEMENT OFFERING
On March 21, 2000 the Company agreed to acquire eNexi Inc. though its
newly-formed subsidiary, Silver King Acquisition, Inc. in consideration for
6,000,000 newly-issued shares of the Company's Series A Convertible Preferred
Stock, par value $.0001 per share, convertible into 150,000,000 shares of the
Company's common stock, par value $.0001 per share. In addition, the Company
will assume existing common stock purchase warrants (the "Assumed Warrants")
from eNexi, which will be exercisable for shares of the Company's Common Stock
at an exercise price of $.10 per share. A principal condition to the merger
closing is that the Company receive in escrow at least $5,000,000 in
subscription funds for the Series B Convertible Preferred Stock pursuant to a
private placement offering of 2,000,000 shares at $2.50 per share, convertible
into 50,000,000 shares of common stock. Since the former shareholders of eNexi
Inc. will acquire control of the Company upon the merger closing, the merger
will be accounted for as a reverse acquisition. Accordingly, for financial
statement purposes, eNexi Inc. will be considered the accounting acquiror and
the related business combination will be considered as a recapitalization of
eNexi Inc., rather than an acquisition by the Company. The Company plans to
recapitalize its Common Stock shortly following the Merger. The recapitalization
will take the form of either a reverse split or an increase in the authorized
capital stock sufficient to fully convert the Series A Shares and the Series B
Shares and fully honor the exercise of the Assumed Warrants.
F-12
Exhibit 10.17
The following form of Securities Purchase Agreement was entered into with
Millworth Investments, Inc., KAB Investments Inc. and SPH Investments, Inc. on
February 3, 2000.
SILVER KING RESOURCES, INC.
-------------------------------------------------------------
Securities Purchase Agreement
-------------------------------------------------------------
Units consisting of one (1) share of Common Stock
and two (2) Common Stock Purchase
Warrants offered at $.005 per Unit
-------------------------------------------------------------
February 3, 2000
<PAGE>
SECURITIES PURCHASE AGREEMENT
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is entered into as
of the day and year appearing on the signature page hereof by and between Silver
King Resources, Inc., a Delaware corporation (the "Company"), and the investor
whose name appears at the end of this Agreement (the "Purchaser").
R E C I T A L S:
The Company wishes to issue, and the Purchaser wishes to purchase units
(the "Units"), each consisting of one (1) share of the Company's common stock,
$.001 par value per share (the "Common Stock") and two (2) three-year warrants,
each warrant entitling the holder to purchase one (1) share of the Common Stock
at an exercise price of $.01 per share (the "Warrants").
NOW, THEREFORE, in consideration of the premises hereof and the
agreements set forth herein below, the parties hereto hereby agree as follows:
1. Sale and Purchase of Units.
(a) Subject to the terms and conditions hereof, on the date of
the Closing, as defined in Section 3 hereof, the Company agrees to issue and
sell, and the Purchaser agrees to purchase, that number of Units as are
indicated on the last page of this Agreement at a purchase price (the "Purchase
Price") of $.005 per Unit.
(b) Restricted Securities. The shares of Common Stock of the
Company, the Warrants and the shares of Common Stock issuable upon exercise of
the Warrants that are being offered hereby (collectively, the "Securities") are
"restricted securities" as that term is defined under Rule 144 of the Securities
Act of 1933, as amended (the "Act"), and, accordingly, may not be offered for
sale or sold or otherwise transferred in a transaction which would constitute a
sale thereof within the meaning of the Act unless: (i) such security has been
registered for sale under the Act and registered or qualified under applicable
state securities laws relating to the offer and sale of securities; or (ii)
exemptions from the registration requirements of the Act and the registration or
qualification requirements of all such state securities laws are available and
the Company shall have received an opinion of counsel that the proposed sale or
other disposition of such securities may be effected without registration under
the Act and would not result in any violation of any applicable state securities
laws relating to the registration or qualification of securities for sale, such
counsel and such opinion to be satisfactory to the Company. As restricted
securities, the resale of the Securities is subject to significant restrictions
upon resale. See Section 6 hereafter, "Understanding of Investment Risks."
(i) Each Unit will consist of one (1) share of the
Company's Common Stock and two (2) Warrants. Each Warrant entitles the holder to
purchase one (1) share of Common Stock at an exercise price of $.01 per share
for a three-year period from the date of this Agreement.
<PAGE>
(ii) The Company currently does not have a sufficient
number of shares of Common Stock authorized for issuance upon exercise of the
Warrants. Therefore, ten percent (10%) of the Warrants issued hereunder shall
vest on the date of Closing (the "Vested Warrants"), with the remaining ninety
percent (90%) of the Warrants issued hereunder (the "Contingent Warrants")
vesting upon the date on which the Company's stockholders approve an amendment
to the Company's certificate of incorporation either (1) increasing the number
of shares of Common Stock the Company is authorized to issue; or (2)
effectuating a reverse split of the Company's Common Stock so that the Company
will have a sufficient number of shares of authorized Common Stock to issue upon
the exercise of the Warrants (the "Stockholder Approval"). The Company makes no
assurances that the Stockholder Approval will be obtained. Any aggregate
proceeds received by the Company prior to obtaining Stockholder Approval as
payment of the exercise price under the Contingent Warrants will be treated as a
demand loan to the Company; provided, however, that upon securing Stockholder
Approval, the outstanding amount of any such loan will automatically convert
into the right to receive shares of Common Stock under the Contingent Warrants
at $.01 per share.
(iii) Prior to the exercise of the Warrants for
shares of Common Stock, holders of the Warrants will be entitled to no voting
rights or other rights provided by law to security holders of the Company.
(iv) Holders of Common Stock of the Company have
equal rights to receive dividends when, as, and if declared by the Board of
Directors out of funds legally available therefor. Holders of Common Stock of
the Company have one vote for each share held of record and do not have
cumulative voting rights.
(v) Holders of Common Stock of the Company are
entitled upon liquidation of the Company to share ratably in the net assets
available for distribution, subject to the rights, if any of holders of any
preferred stock of the Company then outstanding. Shares of Common Stock of the
Company are not redeemable and have no preemptive or similar rights. All
outstanding shares of Common Stock of the Company are fully paid and
nonassessable.
2. Units Offered In A Private Placement Transaction.
(a) The Units subject to this Agreement are to be offered as
part of a private placement transaction pursuant to Section 4(2) and Regulation
D of the Act (the "Offering") by the Company on a "best efforts" basis of up to
25,000,000 Units to be offered to a number of sophisticated and accredited
investors. Accordingly, as of the date hereof, there can be no assurances as to
the number of Units that will be sold in the Offering. The Company reserves the
right to increase the number of Units sold without notice to or consent of the
subscribers or existing Unit holders.
(b) The Units are being offered to a limited number of
accredited and other sophisticated investors by the Company directly, without
sales commission.
(c) The purchase price per Unit is $.005 payable in cash upon
subscription.
2
<PAGE>
(d) The Offering will generally be maintained by the Company
until the earlier of: (i) the sale of all of the Units offered pursuant to such
Securities Purchase Agreements (or such greater number of Units as the Company
elects to offer); or (ii) such date that the Company chooses to terminate the
Offering (hereinafter the "Offering Period").
3. Binding Effect of Securities Purchase Agreement; The Closing.
(a) This Agreement shall not be binding on the Company unless
and until the Company has accepted the offer represented by an executed
signature page at the end hereof. The Company may accept or reject this
Agreement in the Company's sole discretion, if the Purchaser does not meet the
suitability standards established herein or for any other reason. In the event
the Company rejects this Agreement, the Purchaser's funds will be promptly
returned without deduction of any costs and with at interest.
(b) The closing of the purchase and sale of the Units
hereunder (the "Closing") shall occur concurrently upon acceptance by the
Company of this Agreement and deposit with the Company of funds representing the
Purchase Price. Notwithstanding the above, the Company reserves the right to
reject a subscription within ten (10) days of receipt of the Purchase Price
should the Company determine during that period that the Subscriber does not
satisfy the subscriber qualifications or suitability standards established
hereafter.
4. Deliveries by the Company.
The Company shall deliver to the Purchaser within ten (10)
days after the Closing:
(a) A stock certificate bearing applicable restrictive
legends, duly executed by the appropriate officer (s) and registered in
Purchaser's name or its nominee, representing the number of shares of Common
Stock purchased hereunder; and
(b) The Warrants in the form set forth at Exhibit "A" duly
executed by the appropriate officer(s) and registered in the Purchaser's name or
any nominee thereof.
5. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Company as follows:
(a) Accredited Investor. The Purchaser has such knowledge and
experience in business and financial matters such that the Purchaser is capable
of evaluating the merits and risks of purchasing the Units. The Purchaser is an
"accredited investor" as that term is defined in Rule 501 of Regulation D of the
Act and represents that he satisfies the suitability standards identified in
Section 8 hereof;
(b) Loss of Investment. The Purchaser(s) (i) overall
commitment to investments which are not readily marketable is not
disproportionate to his net worth; (ii) investment in the Company will not cause
such overall commitment to become excessive; (iii) can afford to bear the loss
of his entire investment in the Company; and (iv) has adequate means
3
<PAGE>
of providing for his current needs and personal contingencies and has no need
for liquidity in his investment in the Company;
(c) Special Suitability. The Purchaser satisfies any special
suitability or other applicable requirements of his state of residence and/or
the state in which the transaction by which the Securities are purchased occurs;
(d) Investment Intent.
(i) The Purchaser hereby acknowledges that the
Purchaser has been advised that this Offering has not been registered with, or
reviewed by, the Securities and Exchange Commission ("SEC") because this
Offering is intended to be a non-public offering pursuant to Section 4(2) and
Rule 506 of Regulation D of the Act. The Purchaser represents that the Units are
being purchased for the Purchaser's own account and not on behalf of any other
person, for investment purposes only and not with a view towards distribution or
resale to others. The Purchaser agrees that the Purchaser will not attempt to
sell, transfer, assign, pledge or otherwise dispose of all or any portion of the
Securities unless they are registered under the Act or unless in the opinion of
counsel an exemption from such registration is available, such counsel and such
opinion to be satisfactory to the Company. The Purchaser understands that the
Securities have not been registered under the Act by reason of a claimed
exemption under the provisions of the Act which depends, in part, upon the
Purchaser's investment intention; and
(ii) The Securities and any certificates issued in
replacement therefor shall bear the following legend, in addition to any other
legend required by law or otherwise:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"). THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
BEEN TAKEN BY THE REGISTERED OWNER FOR INVESTMENT, AND WITHOUT
A VIEW TO RESALE OR DISTRIBUTION THEREOF, AND MAY NOT BE
TRANSFERRED OR DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER THE ACT, OR WITHOUT AN OPINION OF COUNSEL SATISFACTORY
TO THE ISSUER THAT SUCH TRANSFER OR DISPOSITION DOES NOT
VIOLATE THE ACT, OR THE RULES AND REGULATIONS THEREUNDER."
(e) State Securities Laws. The Purchaser understands that no
securities administrator of any state has made any finding or determination
relating to the fairness of this investment and that no securities administrator
of any state has recommended or endorsed, or will recommend or endorse, the
offering of the Units;
(f) Authority; Power; No Conflict. The execution, delivery and
performance by the Purchaser of the Agreement are within the powers of the
Purchaser, have been duly authorized and will not constitute or result in a
breach or default under, or conflict with, any
4
<PAGE>
order, ruling or regulation of any court or other tribunal or of any
governmental commission or agency, or any agreement or other undertaking, to
which the Purchaser is a party or by which the Purchaser is bound, and, if the
Purchaser is not an individual, will not violate any provision of the charter
documents, By-Laws, indenture of trust or partnership agreement, as applicable,
of the Purchaser. The signatures on the Agreement are genuine, and the
signatory, if the Purchaser is an individual, has legal competence and capacity
to execute the same, or, if the Purchaser is not an individual, the signatory
has been duly authorized to execute the same; and the Agreement constitutes the
legal, valid and binding obligations of the Purchaser, enforceable in accordance
with its terms;
(g) No General Solicitation. The Purchaser acknowledges that
no general solicitation or general advertising (including communications
published in any newspaper, magazine or other broadcast) has been received by
him and that no public solicitation or advertisement with respect to the
offering of the Units has been made to him;
(h) Advice of Tax and Legal Advisors. The Purchaser has relied
solely upon the advice of its own tax and legal advisors with respect to the tax
and other legal aspects of this investment; and
(i) Access to Information. The Purchaser has had access to all
material and relevant information concerning the Company, its management,
financial condition, capitalization, market information, properties and
prospects necessary to enable Purchaser to make an informed investment decision
with respect to its investment in the Units. The Company is subject to the
periodic reporting requirements of the Securities Exchange Act of 1934, as
amended, and the Purchaser has reviewed or received copies of any such reports
that have been requested by it. The Purchaser represents that it has carefully
reviewed the Company's Form 10-SB, as amended, and Form 10-QSB filed on November
19, 1999. Purchaser has carefully read and reviewed, and is familiar with and
understands the contents thereof and hereof, including, without limitation, the
risk factors described in this Agreement. See "Understanding of Investment
Risks." Purchaser acknowledges that he has had the opportunity to ask questions
of and receive answers from, and to obtain additional information from,
representatives of the Company concerning the terms and conditions of the
acquisition of the Units and the present and proposed business and financial
condition of the Company, and has had all such questions answered to his
satisfaction and has been supplied all information requested.
6. Understanding of Investment Risks. An investment in the Units should
not be made by a Purchaser who cannot afford the loss of its entire Purchase
Price. The Purchaser acknowledges that the Units offered hereby have not been
approved or disapproved by the Securities and Exchange Commission, or any state
securities commissions, nor has the Securities and Exchange Commission or any
state securities commission passed upon the adequacy or accuracy of this
Securities Purchase Agreement or any exhibit hereto. An investment in the Units
should not be made until the Purchaser has considered the following risk
factors:
5
<PAGE>
(a) Arbitrary Offering Price. The price of the Units offered
hereby has been arbitrarily determined by the Company without the benefit of an
arm's-length negotiation and is not based upon generally-recognized criteria,
such as earnings, price per share, net book value, etc. There can be no
assurances that the offering price is representative of the actual value of the
Units.
(b) Dividends. The payment of dividends by the Company is not
contemplated in the foreseeable future.
(c) Registration Rights; Restrictions Upon Resale. The
Securities have not been registered under the Act or any state securities or
blue-sky law and subscribers may not sell or otherwise transfer such securities
except pursuant to registration under the Act and any applicable state
securities laws or exemptions therefrom. Because of such restrictions, a
subscriber for the Units must bear the economic risks of such investment for an
indefinite period of time.
(d) Limited Public Market. Although the Company's Common Stock
is listed on the OTC Electronic Bulletin Board, there is currently a very
limited public trading market for the Common Stock. There can be no assurances
that a regular trading market will ever develop for the Common Stock of the
Company.
(e) Possible Change of Business. The Company is an
exploration-stage mineral resource holding company, with option agreements to
acquire certain mining concessions in Mexico that may be silver-producing. As an
exploration-stage company, the Company must expend significant amounts of money
before it can make a profit, if ever. Mineral exploration, particularly for
silver, is highly speculative in nature, frequently is nonproductive, and
involves many risks, often greater than those involved in the actual mining of
mineralization. The Company has incurred substantial expenditures to determine
the location and extent of mineralization through surveys, drilling programs and
other geological sampling techniques. Based on the geological reports on the
mining concessions to date, the Company may determine that it is in the best
interests of its stockholders to change its line of business. There can be no
assurance that the Company will be successful or profitable, either as a mining
holding company or another type of venture.
7. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as follows:
(a) Organizational Standing of the Company. The Company is a
validly existing corporation in good standing under the laws of the State of
Delaware with adequate power and authority to conduct the business in which it
is now engaged and has the corporate power and authority to enter into this
Agreement, and is duly qualified and licensed to do business as a foreign
corporation in such other states or jurisdictions as is necessary to enable it
to carry on its business, except where failure to do so would not have a
material adverse effect on its business;
6
<PAGE>
(b) Corporate Power and Authority. The execution and delivery
of this Agreement and the transactions contemplated hereby have been duly
authorized by the Board of Directors of the Company. No other corporate act or
proceeding on the part of the Company is necessary to authorize this Agreement
or the consummation of the transactions contemplated hereby. When duly executed
and delivered by the parties hereto, this Agreement will constitute a valid and
legally binding obligation of the Company enforceable against it in accordance
with its terms, except as such enforceability may be limited by: (i) bankruptcy,
insolvency, moratorium, reorganization or other similar laws and legal and
equitable principles limiting or affecting the rights of creditors generally;
and/or (ii) general principles of equity, regardless of whether considered in a
proceeding in equity or at law;
(c) Noncontravention. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not,
to the best of the Company's knowledge and belief: (i) permit the termination or
acceleration of the maturity of any material indebtedness or material obligation
of the Company; (ii) permit the termination of any material note, mortgage,
indenture, license, agreement, contract, or other instrument to which the
Company is a party or by which it is bound or the Certificate of Incorporation
or By-Laws of the Company; (iii) except as expressly provided in this Agreement
and except for state "blue sky" approvals that may be required and those
consents and waivers which already have been obtained by the Company, require
the consent, approval, waiver or authorization from or registration or filing
with any party, including but not limited to any party to a material agreement
to which the Company is a party or by which it is bound, or any regulatory or
governmental agency, body or entity except where failure to obtain such consent,
approval, waiver or authorization would not have a material adverse effect on
the Company's business; (iv) result in the creation or imposition of any lien,
claim or encumbrance of any kind or nature on any material properties or assets
of the Company; or (v) violate in any material aspect any statute, law, rule,
regulation or ordinance, or any judgment, decree, order, regulation or rule of
any court, tribunal, administrative or governmental agency, body or entity to
which the Company or its properties is subject except where such violation would
not have a material adverse effect on the Company's business.
(d) Authorized Shares of Common Stock Issuable upon Exercise
of Warrants. The Company currently has a sufficient number of shares of Common
Stock authorized to issue the shares under the Units and the shares issuable
upon exercise of the Vested Warrants. The Company currently does not have
authorized a sufficient number of shares of Common Stock for issuance upon
exercise of the Contingent Warrants. The Board of Directors expects to seek
Stockholder Approval to increase the number of shares of Common Stock it is
authorized to issue or to effectuate a reverse split of its Common Stock in
order to have a sufficient number of shares of authorized Common Stock to issue
upon the exercise of the Contingent Warrants; however, the Company makes no
assurances that the requisite Stockholder Approval will be obtained.
7
<PAGE>
8. IMPORTANT CONSIDERATIONS: SUITABILITY STANDARDS - WHO
SHOULD INVEST.
INVESTMENT IN THE UNITS INVOLVES A HIGH DEGREE OF RISK AND IS
SUITABLE ONLY FOR PERSONS OF SUBSTANTIAL FINANCIAL RESOURCES WHO HAVE NO NEED
FOR LIQUIDITY IN THEIR INVESTMENT.
A substantial number of state securities commissions have
established investor suitability standards for the marketing within their
respective jurisdictions of restricted securities. Some have also established
minimum dollar levels for purchases in their states. The reasons for these
standards appear to be, among others, the relative lack of liquidity of
securities of such programs as compared with other securities investments.
Investment in the Units involves a high degree of risk and is suitable only for
persons of substantial financial means who have no need for liquidity in their
investments.
The Company has adopted as a general investor suitability
standard the requirement that each Purchaser of Units represents in writing that
he: (a) is acquiring the Units for investment and not with a view to resale or
distribution; (b) can bear the economic risk of losing his entire investment;
(c) his overall commitment to investments which are not readily marketable is
not disproportionate to his net worth, and an investment in the Units will not
cause such overall commitment to become excessive; (d) has adequate means of
providing for his current needs and personal contingencies and has no need for
liquidity in this investment in the Units; (e) has evaluated all the risks of
investment in the Company; and (f) has such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of investing in the Company or is relying on his own purchaser
representative, in making an investment decision.
In addition, all of the Purchasers for Units must be: (1) a
sophisticated investor with substantial net worth and experience in making
investments of this nature; and (2) an "accredited investor," as defined in Rule
501 of Regulation D under the Act, by meeting any of the following conditions:
(i) he has an individual income in excess of $200,000 in each
of the two most recent years or joint income with his spouse in excess of
$300,000 in each of those years, and he reasonably expects an income in excess
of the aforesaid levels in the current year, or
(ii) he has an individual net worth, or a joint net worth with
his spouse, at the time of his purchase, in excess of $1,000,000 (net worth for
these purposes includes homes, home furnishings and automobiles), or
(iii) he otherwise satisfies the Company that he is an
accredited investor, as defined in Rule 501 under the Act.
Other categories of investors included within the definition
of accredited investor include the following: certain institutional investors,
including certain banks, whether acting in their individual or fiduciary
capacities; certain insurance companies; federally registered
8
<PAGE>
investment companies; business development companies (as defined under the
Investment Company Act of 1940); Small Business Investment Companies licensed by
the Small Business Administration; certain employee benefit plans; private
business development companies (as defined in the Investment Advisers Act of
1940); tax exempt organizations (as defined in Section 501(c)(3) of the Internal
Revenue Code) with total assets in excess of $5,000,000; entities in which all
the equity owners are accredited investors; and certain affiliates of the
Company.
A partnership subscriber, which satisfies the requirements set
forth in clauses (a) through (f) above shall satisfy the suitability standards
if it is an accredited investor by reason of clause (iii) above, or if all of
its partners are accredited investors. A corporate subscriber, which satisfies
the requirements set forth in clauses (a) through (f) above shall satisfy the
investor suitability standards if it is an accredited investor by reason of
clause (iii) above, or if all of its shareholders are accredited investors.
Corporate subscribers must have net worth of at least three (3) times the amount
of their investment in the Units.
The suitability standards referred to above represent minimum
suitability requirements for prospective purchasers and the satisfaction of such
standards by a prospective purchaser does not necessarily mean that the Units
are a suitable investment for such purchaser. The Company may, in circumstances
it deems appropriate, modify such requirements. The Company may also reject
subscriptions for whatever reasons, in its sole discretion, it deems
appropriate.
A Purchaser who is a resident of certain state may be required
to meet certain additional suitability standards.
THE ACCEPTANCE OF A SUBSCRIPTION FOR UNITS BY THE COMPANY DOES
NOT CONSTITUTE A DETERMINATION BY THE COMPANY THAT AN INVESTMENT IN THE UNITS IS
SUITABLE FOR A PROSPECTIVE PURCHASER. THE FINAL DETERMINATION OF THE SUITABILITY
OF INVESTMENT IN THE UNITS MUST BE MADE BY THE PROSPECTIVE PURCHASER AND HIS
ADVISERS.
9. State Law Considerations.
IN MAKING AN INVESTMENT DECISION, THE PURCHASER MUST RELY ON
HIS OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE
MERITS AND RISKS INVOLVED. THESE UNITS HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL
OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE
FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY
OF THE DESCRIPTION OF BUSINESS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE SECURITIES ACT AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION
9
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THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE
FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.
10. Notices. All notices, requests, consents or other communications
required or permitted hereunder shall be in writing and shall be hand delivered,
mailed first class postage prepaid, registered or certified mail, or sent via
nationally recognized overnight courier such as federal express, to the
following addresses:
If to the Company:
Silver King Resources, Inc.
6025 South Eaton Lane
Littleton, Colorado 80123
Attn: Alan Stier, President
With a copy to:
Stephen M. Cohen, Esquire
Buchanan Ingersoll Professional Corporation
Eleven Penn Center
1835 Market Street, 14th Floor
Philadelphia, PA 19103
In the case of Purchaser:
To the address set forth at the end of this Agreement or to
such other addresses as may be specified in accordance herewith from time to
time.
Unless specified otherwise, such notices and other
communications shall for all purposes of this Agreement be treated as being
effective upon being delivered personally or, if sent by mail, five days after
the same has been deposited in a regularly maintained receptacle for the deposit
of United States mail, addressed as set forth above, and postage prepaid.
11. Survival of Representations and Warranties. Representations and
warranties contained herein shall survive the execution and delivery of this
Agreement.
12. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and permitted assigns of the parties hereto, provided that
this Agreement and the interests herein may not be assigned by either party
without the express written consent of the other party.
13. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to principles
of conflicts of laws.
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14. Sections and Other Headings. The section and other headings
contained in this Agreement are for the convenience of reference only, do not
constitute part of this Agreement or otherwise affect any of the provisions
hereof.
15. Counterpart and Facsimile Signatures. This Agreement may be signed
in counterparts and all counterparts together shall become effective only when
the counterpart(s) have been executed and delivered by and on behalf of the
Company and the Purchaser. Facsimile signatures to this Agreement shall be
deemed to be original signatures.
IN WITNESS WHEREOF, intending to be legally bound, each of the parties
hereto has caused this Agreement to be duly signed as of February __, 2000.
Purchaser:
By:_________________________________
Units/$
- ------------------------ ____________________________________
Number and dollar amount Name:
of Units purchased - Title:
Purchase Price
Address of Purchaser:
____________________________________
____________________________________
Tax Identification/
Social Security Number: ____________
Accredited Investor Certification
---------------------------------
(Place initials on the appropriate line(s))
___ (i) I am a natural person who had individual income of
more than $200,000 in each of the most recent two
years or joint income with my spouse in excess of
$300,000 in each of the most recent two years and
reasonably expect to reach that same income level for
the current year ("income", for purposes hereof,
should be computed as follows: individual adjusted
gross income, as reported (or to be reported) on a
federal income tax return, increased by (1) any
deduction of long-term capital gains under section
1202 of the Internal Revenue Code of 1986 (the
"Code"), (2) any deduction for depletion under
Section 611 et seq. of the Code, (3) any exclusion
11
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for interest under Section 103 of the Code and (4)
any losses of a partnership as reported on Schedule E
of Form 1040);
___ (ii) I am a natural person whose individual net worth
(i.e., total assets in excess of total liabilities),
or joint net worth with my spouse, will at the time
of purchase of the Units be in excess of $1,000,000;
___ (iii) The Purchaser is a "Qualified Institutional Buyer" as
the term is defined under Rule 144A of the Act.
___ (iv) The Purchaser is an investor satisfying the
requirements of Section 501(a)(1), (2) or (3) of
Regulation D promulgated under the Securities Act,
which includes but is not limited to, a self-directed
employee benefit plan where investment decisions are
made solely by persons who are "accredited investors"
as otherwise defined in Regulation D;
___ (v) The Purchaser is a trust, which trust has total
assets in excess of $5,000,000, which is not formed
for the specific purpose of acquiring the Units
offered hereby and whose purchase is directed by a
sophisticated person as described in Rule 506(b)(ii)
of Regulation D and who has such knowledge and
experience in financial and business matters that it
is capable of evaluating the risks and merits of an
investment in the Units;
___ (vi) I am a director or executive officer of the Company;
or
___ (vii) The Purchaser is an entity (other than a trust) in
which all of the equity owners meet the requirements
of at least one of the above subparagraphs.
Agreed and Accepted by
SILVER KING RESOURCES, INC.
By:___________________________________
Alan Stier, President
DATED:_______________________
12
Exhibit 10.18
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SILVER KING RESOURCES, INC.,
SILVER KING ACQUISITION, INC.
AND
ENEXI INC.
AND
PRINCIPAL STOCKHOLDERS OF ENEXI INC.
Dated: March 21, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I: MERGER OF NEWCO WITH AND INTO ENEXI AND RELATED MATTERS...............................................1
1.1 The Merger...............................................................................................1
1.2 Conversion of Stock; Conversion of Outstanding Options...................................................2
1.3 Merger Consideration.....................................................................................3
1.4 Additional Rights; Taking of Necessary Action; Further Action............................................4
1.5 No Further Rights or Transfers...........................................................................5
ARTICLE II: THE CLOSING..........................................................................................5
2.1 Closing Date.............................................................................................5
2.2 Closing Transactions.....................................................................................5
ARTICLE III: CERTAIN CORPORATE ACTION............................................................................8
3.1 eNexi Corporate Action; Stockholder Consent..............................................................8
3.2 Acquiror and Newco Corporate Action......................................................................8
ARTICLE IV: REPRESENTATIONS AND WARRANTIES.......................................................................8
4.1 Representations and Warranties of eNexi..................................................................8
4.2 Representations and Warranties of the Principal Stockholders............................................19
4.3 Representations and Warranties of Acquiror and Newco....................................................20
ARTICLE V: AGREEMENTS OF THE PARTIES............................................................................23
5.1 Access to Information...................................................................................23
5.2 Confidentiality; No Solicitation........................................................................23
5.3 Interim Operations......................................................................................25
5.4 Consents................................................................................................27
5.5 Employee Stock Option Plan..............................................................................28
5.6 All Reasonable Efforts..................................................................................28
5.7 Public Announcements....................................................................................28
5.8 Notification of Certain Matters.........................................................................28
5.9 Expenses................................................................................................28
5.10 Lock-Up; Prohibition on Short Sales..................................................................29
5.11 Voting Proxy.........................................................................................29
5.12 Private Placement....................................................................................29
5.13 Registration of Resale of Certain Shares of Common Stock.............................................30
5.14 Documents at Closing.................................................................................30
5.15 Prohibition on Trading in Acquiror Stock.............................................................30
5.16 Reservation of Shares; Post-Closing Amendments to Acquiror's Certificate of Incorporation............31
5.17 Indemnification: Directors' and Officers' Insurance..................................................31
</TABLE>
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<TABLE>
<S> <C>
5.18 Acknowledgment of Approvals; Approval of eNexi Stockholders..........................................32
5.19 Matters of Corporate Governance......................................................................32
5.20 Disposition of Assets................................................................................33
5.21 Production of Schedules and Exhibits.................................................................33
ARTICLE VI: CONDITIONS TO CONSUMMATION OF THE MERGER............................................................34
6.1 Conditions to Obligations of eNexi......................................................................34
6.2 Conditions to Acquiror's Obligations....................................................................35
ARTICLE VII: INDEMNIFICATION....................................................................................36
7.1 Indemnification.........................................................................................36
ARTICLE VIII: TERMINATION.......................................................................................37
8.1 Termination.............................................................................................37
8.2 Notice and Effect of Termination........................................................................38
8.3 Extension; Waiver.......................................................................................38
8.4 Amendment and Modification..............................................................................38
ARTICLE IX: MISCELLANEOUS.......................................................................................38
9.1 Survival of Certain Representations and Warranties; Remedies............................................38
9.2 Notices.................................................................................................39
9.3 Agreement; Assignment...................................................................................39
9.4 Binding Effect; Benefit.................................................................................40
9.5 Headings................................................................................................40
9.6 Counterparts............................................................................................40
9.7 Governing Law...........................................................................................40
9.8 Arbitration.............................................................................................40
9.9 Severability............................................................................................40
9.10 Release and Discharge................................................................................40
9.11 Certain Definitions..................................................................................41
</TABLE>
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EXHIBITS AND SCHEDULES
EXHIBITS
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Exhibit 1.1(c)(v) - Form of Certificate of Merger
Exhibit 1.2(c) - Form of Assumed Warrant
Exhibit 1.3(a) - Certificate of Designation of Series A Convertible Preferred
Stock
Exhibit 1.3(b) - Allocation of Merger Consideration
Exhibit 1.3(d) - Form of Investment Letter
Exhibit 2.2(a)(xii) - Employment Agreements
Exhibit 5.5 - Employee Stock Option Plan
Exhibit 5.11 - Form of Voting Proxy
Exhibit 5.13 - Registration Rights Agreement
Exhibit 5.19(a) - Form of Post-Closing Board Resolutions
SCHEDULES
- ---------
1.1(c)(vii) Officers and Directors of the Surviving Corporation
1.2(c) Schedule of Option Holders
1.2(c) eNexi Warrant
4.1(a) Articles of Incorporation and Bylaws of eNexi and each Subsidiary
4.1(c) Consents
4.1(d) Capitalization and Share Ownership
4.1(e) Financial Statements
4.1(f)(i) Location of Leased Property
4.1(f)(ii) Written Notice
4.1(g) No Contingent Liabilities
4.1(h) Litigation
4.1(i) Taxes
4.1(j)(i) Employee Benefit Plan
4.1(j)(ii) Employee Benefit Plan (for which eNexi has obligation to
contribute)
4.1(j)(iv) Material Employment Arrangements, Contracts, etc.
4.1(k) Insurance Coverage
4.1(o) Intellectual Property
4.1(p) Accounts Receivable
4.1(r)(i) Labor Relations; Employees
4.1(r)(ii) List of Employees
4.1(r)(v) Strikes, grievance proceedings, arbitrations, etc.
4.1(r)(vii) Employment and Benefit Arrangements
4.1(s) Suppliers and Clients
4.1(t) Conflicting Interests
4.1(u) Absence of Certain Changes or Events
4.2(a) Certificate of Incorporation and Bylaws of Acquiror
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EXHIBITS AND SCHEDULES
4.2(e) Acquiror Financial Statements
4.2(g) Contingent Liabilities
4.2(h) Litigation
ii
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (the "Agreement"), is made and
entered into as of March 21, 2000, by and among SILVER KING RESOURCES, INC., a
Delaware corporation ("Acquiror"), SILVER KING ACQUISITION, INC., a Delaware
corporation and wholly owned subsidiary of Acquiror ("Newco"), ENEXI INC., a
Delaware corporation ("eNexi"), and Dr. Roger LeRoy Miller and Larry Mayle, the
principal stockholders of eNexi (collectively, the "Principal Stockholders").
Recitals
WHEREAS, Acquiror and eNexi have determined that it is in the best
interests of their respective stockholders for Newco to merge with and into
eNexi upon the terms and subject to the conditions set forth in this Agreement;
and
WHEREAS, the respective Boards of Directors of Acquiror, eNexi and
Newco have each approved this Agreement and the consummation of the transactions
contemplated hereby and approved the execution and delivery of this Agreement;
and
WHEREAS, for federal income tax purposes, it is intended that the
merger shall qualify as a reorganization under the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the foregoing premises and
representations, warranties and agreements contained herein, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
ARTICLE I
MERGER OF NEWCO WITH AND INTO ENEXI
AND RELATED MATTERS
1.1 The Merger.
(a) Upon the terms and conditions of this Agreement, at the
"Effective Time" (as defined herein), Newco shall be merged with and into eNexi
(the "Merger") in accordance with the provisions of the General Corporation Law
of the State of Delaware (the "DGCL"), the separate corporate existence of Newco
shall cease and eNexi shall continue as the surviving corporation (the
"Surviving Corporation") under the laws of the State of Delaware.
(b) The Merger shall become effective upon the filing of a
certificate of merger with the Secretary of State of the State of Delaware (the
"Certificate of Merger") in accordance with the provisions of Section 252 of the
DGCL and the confirmation by the
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Certificate of Merger that the Merger is effective as of such filing date. The
date and time when the Merger shall become effective is referred to herein as
the "Effective Time."
(c) At the Effective Time:
(i) eNexi shall continue its existence under the laws of the
State of Delaware as the surviving corporation;
(ii) the separate corporate existence of Newco shall cease;
(iii) all rights, title and interests to all assets, whether
tangible or intangible and any property or property rights owned by Newco or
eNexi shall be allocated to and vested in the Surviving Corporation without
reversion or impairment, without further act or deed, and without any transfer
or assignment having occurred, but subject to any existing liens or other
encumbrances thereon, and all liabilities and obligations of eNexi or Newco
shall be allocated to the Surviving Corporation, which shall be the primary
obligor therefor and, except as otherwise provided by law or contract, no other
party to the Merger, other than the Surviving Corporation, shall be liable
therefor;
(iv) the Certificate of Incorporation of the Surviving
Corporation shall be the Certificate of Incorporation of eNexi as in effect
immediately prior to the consummation of the Merger;
(v) Each of Newco and eNexi shall execute and deliver, and
file or cause to be filed with the Secretary of State of the State of Delaware,
a Certificate of Merger, in form and substance acceptable to all parties hereto,
and in the form attached hereto as Exhibit 1.1(c)(v);
(vi) the Bylaws of the Surviving Corporation shall be the
Bylaws of eNexi as in effect immediately prior to the consummation of the
Merger, and shall continue in full force and effect until thereafter amended as
provided by law and such Bylaws; and
(vii) the officers and directors of eNexi set forth on
Schedule 1.1(c)(vii) shall resign upon the Effective Time and the officers and
directors of the Surviving Corporation shall consist of those individuals
identified on Schedule 1.1(c)(vii), and such persons shall serve in such
positions for their respective terms provided by law or in the Bylaws of the
Surviving Corporation and until their respective successors are elected and
qualified.
1.2 Conversion of Stock; Conversion of Outstanding Options.
(a) Conversion of Stock. At the Effective Time:
(i) the shares representing 100% of the issued and outstanding
common stock, $0.01 par value per share, of eNexi ("eNexi Common Stock") as of
the Closing shall, by virtue of the Merger and without any action on the part of
the eNexi Stockholders be converted into and represent the right to receive, and
shall be exchangeable for the merger consideration identified at Section 1.3
hereafter (the "Merger Consideration");
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(ii) each share of capital stock of eNexi held in treasury as
of the Effective Time shall, by virtue of the Merger, be canceled without
payment of any consideration therefor and without any conversion thereof;
(iii) each share of Common Stock of eNexi outstanding as of
the Effective Time, by virtue of the Merger, shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist.
(b) Transfer; Delivery of Certificates after Effective Time. From
and after the Effective Time, there shall be no transfers on the stock transfer
books of eNexi of shares of eNexi Common Stock that were outstanding immediately
prior to the Effective Time. If, after the Effective Time, certificates for
shares of eNexi Common Stock that were outstanding immediately prior to the
Effective Time shall be delivered to eNexi, they shall be canceled and exchanged
for the consideration to be received therefor in connection with the Merger as
provided in this Agreement.
(c) Assumption of Outstanding Warrants. At the Effective Time, each
common stock purchase warrant of eNexi (the "eNexi Warrants") that is
outstanding, shall be assumed by Acquiror and the holder(s) of such warrants
shall be obligated to consent to such assumption. Following the Effective Time,
the eNexi Warrants as assumed by Acquiror (the "Assumed Warrants") shall be
exercisable for that number of shares of Acquiror's Common Stock equal to the
number of shares of eNexi Common Stock issuable upon exercise of the eNexi
Warrants multiplied by the Exchange Ratio, rounded down to the nearest whole
number of shares, and the per share exercise price for Acquiror's Common Stock
issuable upon exercise of such Assumed Warrants shall be determined by dividing
the exercise price per share of the eNexi Warrants, as in effect as of the date
hereof, by the Exchange Ratio and rounding the resulting exercise price per
share up to the nearest whole cent. All restrictions on the exercise of each
such Assumed Warrant shall continue in full force and effect, and the term,
exercisability, vesting schedule and other provisions of the eNexi Warrants
shall otherwise remain unchanged from the terms of the eNexi Warrants attached
hereto and made a part hereof as Schedule 1.2(c), provided, however: (i) the
Assumed Warrants shall not be exercisable in any event until the capitalization
of Acquiror has been restated in the manner set forth at Section 5.16 hereof and
in a manner which enables the issuance of shares of Acquiror Common Stock
sufficient to cover the exercise and conversion of all derivative securities
outstanding immediately following the Effective Time; and (ii) the Assumed
Warrants shall be subject to further adjustment, as stated therein, to reflect
any stock split, reverse stock split, stock dividend, recapitalization or other
similar transaction effected by Acquiror after the Effective Time. Prior to the
Effective Time, Acquiror will provide each holder of an eNexi Warrant a written
notice setting forth: (x) the number of shares of Acquiror Common Stock subject
to such Assumed Warrants; and (y) the exercise price per share of Acquiror
Common Stock issuable upon exercise of such Assumed Warrants. The form of the
Assumed Warrants shall be in substantially the form attached as Exhibit 1.2(c).
1.3 Merger Consideration.
(a) Subject to the provisions of Section 1.3(d) and Section 1.4(a)
hereafter, the Merger Consideration, consisting of the total purchase price
payable to the eNexi Stockholders in
3
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connection with the acquisition by merger of eNexi, shall be delivered and shall
consist exclusively of newly issued shares of Series A Convertible Preferred
Stock, $.001 par value per share, of Acquiror (the "Preferred Shares") that
convert into that number of shares of Acquiror Common Stock as are equal to the
shares of eNexi Common Stock outstanding as of the Effective Time multiplied by
the Exchange Rate, rounded up to the nearest whole number of shares. The
Preferred Shares shall be convertible into shares of Common Stock of Acquiror in
accordance with the terms of, and the Preferred Shares shall have those rights,
preferences and designations set forth in, that certain Certificate of
Designation, Preferences and Rights of Series A Convertible Preferred Stock (the
"Certificate Of Designation"), a true and correct copy of which is attached
hereto and made a part hereof as Exhibit 1.3(a).
(b) The Merger Consideration shall be allocated among the eNexi
Stockholders in the proportion of their share ownership of the outstanding
shares of eNexi Common Stock at the Closing as set forth on Exhibit 1.3(b). It
is intended that the delivery of the Merger Consideration shall qualify as a
tax-free exchange under the Code.
(c) Subject to Section 1.4, the Preferred Shares to be delivered at
the Closing shall be fully paid and non-assessable and shall be free and clear
of all liens, levies and encumbrances except that such shares shall be
"restricted securities" pursuant to Rule 144, promulgated under the Securities
Act of 1933, as amended (the "Securities Act").
(d) Acquiror shall deliver certificates evidencing the Preferred
Shares to eNexi Stockholders upon (x) the surrender and delivery to Acquiror of
certificates representing all of such stockholder's issued and outstanding
shares of eNexi Common Stock; and (y) the execution and delivery of a copy of an
investment letter in the form attached hereto as Exhibit 1.3(d) (the "Investment
Letter") to comply with applicable federal and state securities laws. In the
event that any one or more eNexi Stockholders have not complied with the terms
identified in subparagraphs (x) or (y) above within six months following the
Effective Time (a "Non-Complying Stockholder"), Acquiror reserves the right in
its sole discretion at any time thereafter to cancel the Merger Consideration
allocable to such Non-Complying Stockholder without notice, by payment to such
Non-Complying Stockholder of the cash amount such Non-Complying Stockholder
would have been entitled to receive had he exercised his right of dissent to the
Merger under Delaware law.
1.4 Additional Rights; Taking of Necessary Action; Further Action.
Each of Acquiror, eNexi and Newco, respectively, shall use their
best efforts to take all such action as may be necessary and appropriate to
effectuate the Merger under the DGCL as promptly as possible, including, without
limitation, the filing of the Certificate of Merger consistent with the terms of
this Agreement. If at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement, the officers
of such corporations are fully authorized in the name of their corporations or
otherwise, and notwithstanding the Merger, to take, and shall take, all lawful
and necessary action.
4
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1.5 No Further Rights or Transfers.
At and after the Effective Time, the eNexi capital stock
outstanding immediately prior to the Effective Time shall cease to provide the
holder thereof any rights as a stockholder of eNexi, except for the right to
surrender the certificate or certificates representing such shares and to
receive the Merger Consideration to be received in the Merger as provided in
this Agreement.
ARTICLE II
THE CLOSING
2.1 Closing Date.
Subject to satisfaction or waiver of all conditions precedent set
forth in Section 6 of this Agreement, the closing of the Merger (the "Closing")
shall take place at the offices of Buchanan Ingersoll Professional Corporation,
counsel to Acquiror, at Eleven Penn Center, 14th Floor, 1835 Market Street,
Philadelphia, PA 19103 on (a) the later of: (i) the first Business Day following
the day upon which all appropriate Acquiror, Newco and eNexi corporate action
has been taken in accordance with Section 3 of this Agreement; or (ii) the day
on which the last of the conditions precedent set forth in Article 6 of this
Agreement is fulfilled or waived; or (b) at such other time, date and place as
the parties may agree, but in no event shall such date be later than April 30,
2000 unless such date is extended by the mutual agreement of the parties.
2.2 Closing Transactions.
At the Closing, the following transactions shall occur, all of such
transactions being deemed to occur simultaneously:
(a) eNexi shall deliver, or cause to be delivered, to the Acquiror
and Newco, the following documents and shall take the following actions:
(i) A certificate of the Secretary of eNexi certifying that
the eNexi Stockholders have approved the Merger, this Agreement, and the
transactions contemplated hereby in accordance with the DGCL, eNexi's
Certificate of Incorporation and Bylaws;
(ii) The eNexi Warrants and any certificate or agreement
evidencing the eNexi Warrants shall have been surrendered to eNexi for
cancellation in accordance with Section 1.2(c) hereof and the holders thereof
shall have consented to the assumption of such Warrants by Acquiror;
(iii) Any outstanding stockholder agreements relating to the
eNexi capital stock shall have been terminated and evidence of such termination
satisfactory to Acquiror shall have been delivered to Acquiror;
(iv) eNexi shall execute and deliver, and file or cause to be
filed with the Secretary of State of the State of Delaware, a Certificate of
Merger with such amendments thereto as the parties hereto shall deem mutually
acceptable;
5
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(v) A certificate shall be executed by an authorized officer
of eNexi to the effect that all representations and warranties made by eNexi in
this Agreement are true and correct on and as of the Closing, as though
originally given to Acquiror and Newco on said date;
(vi) A certificate of good standing shall be delivered by
eNexi from the Secretary of State of the State of Delaware, dated at or about
the Closing, to the effect that such corporation is in good standing under the
laws of said state, similar good standing certificates shall be provided for
each of the Subsidiaries (as that term is defined in Section 4.1(a)(ii) hereof);
(vii) An incumbency certificate shall be delivered by eNexi
signed by all of the officers thereof dated at or about the Closing;
(viii) The Certificate of Incorporation of eNexi, as amended
and certified by the Secretary of State of the State of Delaware at or about the
Closing Date, and a copy of the Bylaws of eNexi certified by the Secretary of
eNexi dated at or about the Closing shall be delivered by eNexi; similar
Certificates, Bylaws or other governing instruments will be delivered by each of
the Subsidiaries;
(ix) Board and stockholder resolutions shall be delivered by
the Secretary of eNexi dated at or about the Closing authorizing the
transactions contemplated by this Agreement;
(x) A certificate shall be executed by each of the Principal
Stockholders to the effect that all representations and warranties made by them
in this Agreement are true and correct on and as of the Closing, as though
originally given to Acquiror and Newco on said date;
(xi) Voting Proxies in the form attached hereto as Exhibit
5.11 shall be executed and delivered by each of the Principal Stockholders;
(xii) The employment agreements by and between the Acquiror
and each of the Principal Stockholders in the form attached hereto as Exhibit
2.2(a)(xii) (the "Employment Agreements") shall be executed and delivered by
each of the Principal Stockholders; and
(xiii) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and taken all such actions as are required under this Agreement.
(b) Acquiror will deliver, or shall cause to be delivered, to
eNexi, the following documents and shall take the following actions:
(i) Subject to Section 1.4(a) and Section 1.3(d), Acquiror
shall deliver or shall cause to be delivered to the eNexi Stockholders
certificates evidencing the Preferred Shares in payment of the Merger
Consideration;
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(ii) Acquiror shall deliver certificates evidencing the
Assumed Warrants to the persons and in the amounts set forth on Schedule 1.2(c);
(iii) Newco shall execute and deliver, and file or cause to be
filed with the Secretary of State of the State of Delaware, the Certificate of
Merger with such amendments thereto as the parties hereto shall deem mutually
acceptable;
(iv) A certificate shall be executed by an authorized officer
of Acquiror to the effect that all representations and warranties of Acquiror
under this Agreement are true and correct as of the Closing, as though
originally given to eNexi on said date;
(v) A certificate shall be executed by an authorized officer
of Newco to the effect that all representations and warranties of Newco under
this Agreement are true and correct as of the Closing, as though originally
given to eNexi on said date;
(vi) A certificate of good standing shall be delivered by
Acquiror from the Secretary of State of the State of Delaware dated at or about
the Closing that Acquiror is in good standing under the laws of said state;
(vii) A certificate of good standing shall be delivered by
Newco from the Secretary of State of the State of Delaware dated at or about the
Closing that Newco is in good standing under the laws of said state;
(viii) An incumbency certificate shall be delivered by
Acquiror signed by all of its officers dated at or about the Closing;
(ix) An incumbency certificate shall be delivered by Newco
signed by all of its officers dated at or about the Closing;
(x) Certificate of Incorporation of Acquiror certified by the
Secretary of State of the State of Delaware at or about the Closing Date and a
copy of the Bylaws of Acquiror certified by the Secretary of Acquiror dated at
or about the Closing;
(xi) Certificate of Incorporation of Newco certified by the
Secretary of State of the State of Delaware at or about the Closing Date and a
copy of the Bylaws of Newco certified by the Secretary of Newco dated at or
about the Closing;
(xii) A certified Board resolution shall be delivered by the
Secretary of Acquiror dated at or about the Closing authorizing the transactions
contemplated by this Agreement;
(xiii) Certified Board and stockholder resolutions shall be
delivered by the Secretary of Newco dated at or about the Closing authorizing
the transactions contemplated by this Agreement;
(xiv) Each of the officers and directors of Acquiror shall
have tendered their resignation in form and substance satisfactory to eNexi; and
7
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(xv) Each of the parties to this Agreement shall have
otherwise executed whatever documents and agreements, provided whatever consents
or approvals and shall have taken all such actions as are required under this
Agreement.
ARTICLE III
CERTAIN CORPORATE ACTION
3.1 eNexi Corporate Action; Stockholder Consent.
(a) eNexi, acting through its Board of Directors, shall, in
accordance with applicable Delaware law, its Certificate of Incorporation and
Bylaws conduct a special meeting of its stockholders in order to obtain the
approval of the eNexi Stockholders to the transactions contemplated hereby,
including the Merger, in accordance with the DGCL.
(b) eNexi shall cause to occur all other corporate action necessary
to effect the Merger and to consummate the other transactions contemplated
hereby.
3.2 Acquiror and Newco Corporate Action.
Acquiror and Newco shall cause to occur all corporate action
necessary to effect the Merger and to consummate the other transactions
contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of eNexi
As a material inducement to Acquiror and Newco to execute this
Agreement and consummate the Merger and other transactions contemplated hereby,
eNexi hereby make the following representations and warranties to Acquiror and
Newco. The representations and warranties are true and correct in all material
respects at this date, and will be true and correct in all material respects on
the Closing as though made on and as of such date.
(a) Corporate Existence and Power.
(i) eNexi is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Delaware, and has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
Except as set forth on Schedule 4.1(a), eNexi is duly qualified to do business
as a foreign corporation and is in good standing in California and in each other
jurisdiction where the character of the property owned or leased by it or the
nature of its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect. True, correct and complete
8
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copies of the Articles of Incorporation and Bylaws of eNexi, as amended to date,
are attached hereto as Schedule 4.1(a) and are made a part hereof.
(ii) eNexi owns no interest in any other entity other than
those listed on Schedule 4.1(a)(ii) (collectively the "Subsidiaries" and
individually a "Subsidiary"). Each Subsidiary is a corporation duly
incorporated, validly existing and in good standing under the laws of the state
or country of its incorporation, and has all corporate powers and all government
licenses, authorizations, consents and approvals required to carry on its
business as now conducted, except where the failure to have any of the foregoing
would not have a Material Adverse Effect. Each Subsidiary is duly qualified to
do business as a foreign corporation and is in good standing in each
jurisdiction where the character of the property owned or leased by it or the
nature of its activities make such qualification necessary, except for those
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect.
(b) Due Authorization and Requisite Approvals. (i) This Agreement
has been duly authorized, executed and delivered by eNexi and constitutes a
valid and binding agreement of eNexi, enforceable in accordance with its terms,
except as such enforcement may be limited by applicable bankruptcy, insolvency,
moratorium, and other similar laws relating to, limiting or affecting the
enforcement of creditors rights generally or by the application of equitable
principles. As of the Closing all corporate action on the part of eNexi required
under applicable law in order to consummate the Merger will have occurred; and
(ii) the Board of Directors of eNexi has approved the execution of this
Agreement and the consummation of the Merger and related actions contemplated
hereby.
(c) No Contravention. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated hereby will not:
(i) conflict with or result in any violation of any provision of the Articles of
Incorporation or Bylaws of eNexi or any of the Subsidiaries; or (ii) conflict
with or result in any violation or default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, cancellation or
acceleration of a right or obligation or loss under, any loan or credit
agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise, license, judgment, order, decree, or,
to the best of its knowledge, statute, law, ordinance, rule or regulation
applicable to eNexi, any of the Subsidiaries or the Stockholder, or any of their
respective properties or assets, or result in the creation or imposition of any
mortgage, lien, pledge, charge or security interest of any kind ("Encumbrance")
on any assets of eNexi or the Subsidiaries, except such as is not reasonably
likely to have a Material Adverse Effect or prevent eNexi or the Stockholder
from consummating the transactions contemplated by this Agreement. Except as set
forth on Schedule 4.1(c), no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by or with respect to eNexi or any Subsidiary in connection
with the execution and delivery of this Agreement by eNexi and the Stockholder
or the consummation by eNexi and the Stockholder of the transactions
contemplated hereby, except the filing of the Articles of Merger and Certificate
of Merger.
9
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(d) Capitalization and Share Ownership. The authorized capital
stock of eNexi consists solely of One Million Two Hundred Thousand (1,200,000)
shares of common stock, $..01 par value per share. There are currently 1,048,868
shares of eNexi Common Stock outstanding, all of which are owned by the eNexi
Stockholders in the amounts set forth on Schedule 4.1(d) hereof. The outstanding
shares of capital stock of eNexi have been duly authorized and validly issued
and are fully paid and nonassessable and free of preemptive rights. There are
currently Warrants outstanding which upon exercise permit the issuance of
174,811 shares of eNexi Common Stock at an exercise price per share of $14.301
(the "eNexi Warrants"). Except as set forth in this Section 4.1(d) and on
Schedule 4.1(d), there are outstanding (A) no shares of capital stock or other
voting securities of eNexi, (B) no securities of eNexi convertible into or
exchangeable for shares of capital stock or voting securities of eNexi and (C)
no options, warrants or other rights to acquire from eNexi, the eNexi
Stockholders or any other person, and no obligation of eNexi to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of eNexi, and there are no agreements or
commitments to do any of the foregoing. There are no voting trusts or voting
agreements applicable to any shares of capital stock of eNexi. The eNexi Common
Stock to be surrendered in the Merger will be owned of record and beneficially
by the eNexi Stockholders, free and clear of all liens and encumbrances of any
kind and nature, and have not been sold, pledged, assigned or otherwise
transferred. There are no agreements (other than this Agreement) to sell,
pledge, assign or otherwise transfer such securities. Except as set forth on
Schedule 4.1(d), all of the issued and outstanding shares of capital stock of
the Subsidiaries are owned by eNexi.
(e) Financial Statements. eNexi shall prepare and deliver to
Acquiror, no less than five (5) days prior to Closing, copies of (i) unaudited
consolidated financial statements of eNexi and any Subsidiaries for the
three-month period ended March 31, 2000; and (ii) audited consolidated financial
statements of eNexi and any Subsidiaries for the fiscal year ended December 31,
1999 (collectively, the "Financial Statements"). Such Financial Statements will
have been prepared in accordance with generally accepted accounting principles
consistently applied throughout the periods reported upon and will fairly
present in all material respects the financial position of eNexi and its
Subsidiaries as of the dates thereof and the results of operations for the
periods then ended.
(f) Real Properties.
(i) eNexi and the Subsidiaries currently lease real property
at those locations identified on Schedule 4.1(f)(i) hereto pursuant to the true,
correct and complete copies of the lease agreements attached to Schedule
4.1(f)(i). eNexi and the Subsidiaries own or lease no other real estate. None of
the leasehold interests held by eNexi or the Subsidiaries is subject to any
Encumbrance, except (a) liens for ad valorem taxes not yet due or being
contested in good faith; and (b) contractual or statutory mechanics or
materialmen's liens or other statutory or common law Encumbrances relating to
obligations of eNexi that are not delinquent or are being contested in good
faith. There are no Encumbrances which materially interfere with the present use
of such leasehold interests.
(ii) Except as described on Schedule 4.1(f)(ii) hereto,
neither eNexi nor any Subsidiary has received any written notice from any
governmental entity having
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jurisdiction over eNexi or the Subsidiaries or over any of the real property
leased by eNexi or the Subsidiaries of any violation by eNexi or the
Subsidiaries of any law, regulation or ordinance relating to zoning,
environmental matters, local building or fire codes or similar matters relating
to any of the real property leased by eNexi or the Subsidiaries or of any
condemnation or eminent domain proceeding.
(iii) All of the buildings leased by eNexi or the Subsidiaries
and all plumbing, HVAC, electrical, mechanical and similar systems are in good
repair and adequate for their current use, ordinary wear and tear excepted.
(iv) Except as described on Schedule 4.1(f)(iv), neither eNexi
nor any Subsidiary is a party to any lease, sublease, lease assignment or other
agreement for the use or occupancy of any of the leasehold premises wherein
eNexi or the Subsidiary is the landlord, sub-landlord or assignor, whether by
name, as successor-in-interest or otherwise. There are no outstanding agreements
with any party to acquire the leasehold premises or any portion thereof or any
interest therein.
(v) All certificates of occupancy and all other licenses,
permits, authorizations, consents, certificates and approvals required by all
governmental authorities having jurisdiction over the leasehold premises
occupied by eNexi or the Subsidiaries have been issued, are fully paid for and
are in full force and effect, will survive the Closing and will not be
invalidated, violated or otherwise adversely affected by the Merger or the other
transactions contemplated by this Agreement.
(g) No Contingent Liabilities. Except contained within the
Financial Statements or otherwise as described on Schedule 4.1(g), at the
Closing, eNexi and the Subsidiaries shall have no material liabilities, whether
related to tax or non-tax matters, known or unknown, due or not yet due,
liquidated or unliquidated, fixed or contingent, determined or determinable in
amount or otherwise, and to the best knowledge of eNexi, after due inquiry,
there is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, except as and to the
extent reflected on this Agreement or any Schedule or Exhibit hereto or which
has been incurred in the ordinary course of business and as accurately reflected
on the books and records of eNexi or the Subsidiaries.
(h) Litigation. Except as described on Schedule 4.1(h) hereto there
is no action, suit, investigation or proceeding (or, to the knowledge of eNexi,
any basis therefor) pending against, or to the knowledge of eNexi, threatened
against or affecting eNexi or the Subsidiaries or any of their properties before
any court or arbitrator or any governmental body, agency or official that (i) if
adversely determined against eNexi or the Subsidiaries, would have a Material
Adverse Effect or (ii) in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the Merger or any of the other transactions
contemplated by the Agreement.
(i) Taxes. Except as disclosed on Schedule 4.1(i), eNexi and the
Subsidiaries have timely filed all tax returns required to be filed by them, or
will timely file when due all tax returns required to be filed by them between
the date hereof and the Closing. eNexi and the Subsidiaries have paid in a
timely fashion or will pay when due in a timely fashion, all taxes
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required to be paid in respect of the periods covered by such returns, and the
books and the financial statements of eNexi reflect, or will reflect, adequate
reserves for all taxes payable by eNexi and the Subsidiaries which have been, or
will be, accrued but are not yet due. Neither eNexi nor any of the Subsidiaries
is delinquent in the payment of any material tax, assessment or governmental
charge. No deficiencies for any taxes have been proposed, asserted or assessed
against eNexi or any Subsidiary. eNexi is not aware of any facts which would
constitute the basis for the proposal or assertion of any such deficiency and
there is no action, suit, proceeding, audit or claim now pending or threatened
against eNexi or the Subsidiaries, asserting any deficiency in the payment of
taxes. All taxes which eNexi or the Subsidiaries are required by law to withhold
and collect have been duly withheld and collected, and have been timely paid
over to the proper authorities to the extent due and payable. For the purposes
of this Agreement, the term "tax" shall include all federal state, local and
foreign income, property, sales, excise and other taxes of any nature
whatsoever. Neither eNexi nor the Subsidiaries nor any member of any affiliated
or combined group of which eNexi is or has been a member has granted any
extension or waiver of the limitation period applicable to any tax returns.
There are no Encumbrances for taxes upon the assets of eNexi or the
Subsidiaries. There are no tax sharing or tax allocation agreements to which
eNexi is now or ever has been a party. eNexi will not be required under Section
481(c) of the Code to include any material adjustment in taxable income for any
period subsequent to the Merger. eNexi (a) has not been a member of an
affiliated group filing a consolidated federal income tax return (other than a
group the common parent of which was eNexi) and (b) has no liability for the
taxes of any person (other than eNexi) under Treasury Regulation Section
1.1502-6 (or any similar provision of state, local or foreign law), as a
transferee or successor, by contract or otherwise.
(j) ERISA.
(i) Schedule 4.1(j)(i) identifies each "employee benefit
plan," as defined in Section 3(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA"), that is subject to any provision of ERISA, and
either (i) is maintained, administered or contributed to by eNexi or any
affiliate (as defined below), (ii) covers any employee or former employee of
eNexi or any affiliate or (iii) under which eNexi or any affiliate has any
liability. Copies of such plans and, if applicable, related trust agreements)
and all amendments thereto and any written interpretations thereof have been
furnished to Acquiror, together, if applicable, with (A) the most recent annual
reports (Form 5500 including, if applicable, Schedule B thereto) prepared in
connection with any such plan and (B) the most recent actuarial valuation report
prepared in connection with any such plan. Such plans are referred to
collectively herein as the "Employee Plans." Any Form 5500 for any plan year of
any Employee Plan that has not been filed, but for which the filing date has
passed on the date of this Agreement, shall be filed prior to the date of the
Merger. For purposes of this Section, "affiliate" of any Person means any other
Person which, together with such Person, would be treated as a single employer
for any purpose under Section 414 of the Code.
(ii) Schedule 4.1(j)(ii) identifies all Employee Plans to
which eNexi currently has any obligation to contribute. eNexi is not a party to
any multiemployer plan as defined in Section 4001(a) (3) of ERISA
("Multiemployer Plans"), and neither eNexi nor any
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affiliate has any outstanding liability to contribute to any Multiemployer Plan,
for delinquent contributions or for withdrawal liability pursuant to Section
4201 of ERISA.
(iii) There are no Employee Plans that are intended to be
qualified plans under Section 401(a) of the Code, except as may have been shown
and identified as such on the list referred to in subparagraphs (i) or (ii)
above. Each Employee Plan has been maintained in compliance with its terms and
with the requirements prescribed by any and all statutes, orders, rules and
regulations that are applicable to such Plan, other than any failure to comply
that is not reasonably likely to have a Material Adverse Effect.
(iv) Schedule 4.1(j)(iv) identifies each material employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (written or oral) providing for insurance coverage (including any
self-insured arrangements), workers' compensation, disability benefits,
supplemental unemployment benefits, vacation benefits, retirement benefits or
for deferred compensation, profit-sharing, bonuses, stock options, stock
appreciation rights or other forms of incentive compensation or post-retirement
insurance, compensation or benefits that is not an Employee Plan and (A) is
entered into, maintained or contributed to, as the case may be by eNexi, any
Subsidiary or any of their respective affiliates or (B) covers any employee or
former employee of eNexi, or any Subsidiary or any of their respective
affiliates or (C) under which eNexi, any Subsidiary or any of their respective
affiliates has liability. Such contracts, plans and arrangements as are
described above, copies of all of which have been furnished previously to
Acquiror, are referred to collectively herein as the "Benefit Arrangements."
Each Benefit Arrangement has been maintained in substantial compliance with its
terms and with the requirements prescribed by any and all statutes, orders,
rules and regulations that are applicable to such Benefit Arrangement other than
any failure to comply that is not reasonably likely to have a Material Adverse
Effect.
(v) Neither eNexi nor any affiliate has or maintains nor has
maintained any Employee Plan or Benefit Arrangement providing post-retirement
health or medical benefits in respect of any active or former employee of eNexi
or any affiliate or former affiliate, except as may be required pursuant to the
provisions of COBRA.
(k) Insurance Coverage. Schedule 4.1(k) sets forth a list of all
eNexi key-man life insurance policies and other insurance policies material to
the current and proposed business of eNexi and the Subsidiaries. eNexi and the
Subsidiaries maintain insurance covering their assets, business, equipment,
properties, operations, employees, officers and directors with such coverage, in
such amounts, and with such deductibles and premiums as are consistent with
insurance coverage provided for other companies of comparable size and in
comparable industries. All of such policies are in full force and effect and all
premiums payable have been paid in full and eNexi and the Subsidiaries are in
full compliance with the terms and conditions of such policies. Neither eNexi
nor any Subsidiary has received any notice from any issuer of such policies of
its intention to cancel or refusal to renew any policy issued by it or of its
intention to renew any such policy based on a material increase in premium rates
other than in the ordinary course of business. None of such policies are subject
to cancellation by virtue of the Merger or the consummation of the other
transactions contemplated by this Agreement. There is
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no claim by eNexi pending under any of such policies as to which coverage has
been questioned or denied.
(l) Compliance with Laws. To the best of eNexi's knowledge, neither
eNexi nor any Subsidiary is in violation of, nor has any such entity violated,
any applicable provisions of any laws, statues, ordinances or regulations, other
than as would not be reasonably likely to have a Material Adverse Effect.
Without limiting the generality of the foregoing, to the best knowledge of the
Stockholder, eNexi and the Subsidiaries have all licenses, permits, certificates
and authorizations needed or required for the conduct of business of eNexi and
the Subsidiaries as presently conducted and for the use of its properties and
premises occupied by it, except where the failure to obtain a licenses, permit,
certificate or authorization would not have a Material Adverse Effect.
(m) Investment Banking Fees. There is no investment banker, broker,
finder or other similar intermediary which has been retained by, or is
authorized by eNexi to act on its behalf who might be entitled to any fee or
commission from eNexi, Acquiror, Newco or any of their respective affiliates
upon consummation of the transactions contemplated by this Agreement.
(n) Personal Property. eNexi and the Subsidiaries have good and
valid title to all of their personal property, tangible and intangible,
reflected on the Financial Statements and to all other personal property owned
by them, free and clear of any Encumbrance. eNexi and the Subsidiaries are the
owner of all of its personal property now located in or upon their leased
premises and of all personal property which is used in the operation of their
business. All such equipment, furniture and fixtures and other tangible personal
property are in good operating condition and repair and do not require any
repairs other than normal routine maintenance to maintain such property in good
operating condition and repair.
(o) Intellectual Property; Intangible Property. The corporate names
of eNexi and the trade names and service marks listed on Schedule 4.1(o) are the
only names and service marks which are used by eNexi in the operation of its
business (the "Names and Service Marks"). eNexi and the Subsidiaries have not
done business and have not been known by any other name other than by its Names
and Service Marks. Schedule 4.1(o) also includes all patents and patent
applications held by or filed by or on behalf of eNexi (collectively, the
"Patents"). eNexi owns and has the exclusive right within the states and
countries in which it and its Subsidiaries operate, to use all intellectual
property presently in use by it and its Subsidiaries and necessary for the
operation of its businesses as now being conducted, which intellectual property
includes, but is not limited to, the Patents, any trademarks, trade names,
service marks, including the Names and Service Marks, copyrights, trade secrets,
customer lists, inventions, formulas, methods, processes and other proprietary
information. There are no outstanding licenses or consents granting third
parties the right to use any intellectual property, including any of the
Patents, owned by eNexi or the Subsidiaries. No royalties or fees are payable by
eNexi to any third party by reason of the use of any of its intellectual
property, including, but not limited to, the Patents. Neither eNexi nor any
subsidiary has received notice of any adversely held patent, invention,
trademark, copyright, service mark or tradename of any person, or any claims of
any other person relating to any of the intellectual property subject hereto,
and there is no reasonable basis for any such charge or claim.
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There is no presently known or threatened use or encroachment of any such
intellectual property, including any of the Patents.
(p) Accounts Receivable. The accounts receivable of eNexi and its
Subsidiaries referred to within the Financial Statements constitute valid claims
in the full amount thereof against the debtors charged therewith on the books of
eNexi and its Subsidiaries to which each such account is payable and has been
acquired in the ordinary course of business. Except as set forth in Schedule
4.1(p), the accounts receivable are fully collectible to the extent of the face
value thereof (less the amount of the allowance for the doubtful accounts
reflected on the Financial Statements) in the due course of normal commercial
dealings. To the best knowledge of the Stockholder, no account debtor has any
valid setoff, deduction or defense with respect thereto, and no account debtor
has asserted any such setoff, deduction or defense. There are no accounts
receivable which arise pursuant to an agreement with the United States
Government or any agency or instrumentality thereof.
(q) Contracts, Leases, Agreements and Other Commitments. Neither
eNexi nor any Subsidiary is a party to or bound by any oral, written or implied
contracts, agreements, leases, powers of attorney, guaranties, surety
arrangements or other commitments excluding equipment and furniture leases
entered into in the ordinary course of business (which do not exceed $100,000 in
liabilities or commitments in the aggregate), except for the following (which
are hereinafter collectively called the "Material Contracts"):
(i) The leases and agreements described on Schedules 4.1(f),
4.1(j)(i) and (ii) and 4.1(r)(i); and
(ii) Agreements involving a maximum possible expenditure or
obligation on the part of eNexi or any Subsidiary to expend more than
Twenty-Five Thousand Dollars ($25,000) separately or less than Fifty Thousand
Dollars ($50,000) in the aggregate.
The Material Contracts constitute all of the material agreements and
instruments which are necessary and desirable to operate the business as
currently conducted by eNexi and the Subsidiaries. True, correct and complete
copies of each Material Contract described and listed under subsection 4.1(q)
will be made available to Acquiror within ten (10) business days prior to the
Closing Date. The term "Material Contract" excludes purchase orders entered into
in the ordinary course for personal or inventory which may be returned to the
vendor without penalty. All of the Material Contracts are valid, binding and
enforceable against the respective parties thereto in accordance with their
respective terms. Following the Merger, the Acquiror as the surviving entity
shall become entitled to all rights of eNexi under such of the Material
Contracts as if the Acquiror were the original party to such Material Contracts.
All parties to all of the Material Contracts have performed all obligations
required to be performed to date under such Material Contracts, and neither
eNexi, the Subsidiaries, and, to the best of their knowledge, nor any other
party, is in default or in arrears under the terms thereof, and no condition
exists or event has occurred which, with the giving of notice or lapse of time
or both, would constitute a default thereunder. The consummation of this
Agreement and the Merger will not result in an impairment or termination of any
of the rights of eNexi or the Subsidiaries under any Material
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Contract. None of the terms or provisions of any Material Contract materially
adversely affects the business, prospects, financial condition or results of
operations of eNexi or the Subsidiaries.
(r) Labor Relations; Employees.
(i) Set forth on Schedule 4.1(r)(i) is a list of:
(A) All collective bargaining agreements and other
agreements requiring arbitration of employment disputes, and any written
amendments thereto, as well as all arbitration awards decided under any such
agreements, and all oral assurances or modifications, past practices, and/or
arrangements made in relation thereto, to which eNexi or any Subsidiary is a
party or by which it is bound; and
(B) All employment agreements, and all severance
agreements which have not been fully performed, to which eNexi or any Subsidiary
is a party or by which it is bound.
(ii) Set forth on Schedule 4.1(r)(ii) is a list of all key
management employees of eNexi or any Subsidiary, broken down by location,
together with their rate of compensation and title.
(iii) eNexi will deliver to Acquiror true and correct copies
of all of the documents referred to on Schedule 4.1(r)(i) hereof and all of the
personnel policies, employee and/or supervisor handbooks, procedures and forms
of employment applications relating to the employees of eNexi and its
Subsidiaries.
(iv) There is no union representing or purporting to represent
any of the employees of eNexi or any Subsidiary, and neither eNexi nor any
Subsidiary is subject to or currently negotiating any collective bargaining
agreements with any union representing or purporting to represent the employees
of any of the foregoing.
(v) Except as set forth on Schedule 4.1(r)(v):
(A) There are no strikes, slow downs or other work
stoppages, grievance proceedings, arbitrations, labor disputes or representation
questions pending or, to the best knowledge of eNexi and the Stockholder,
threatened;
(B) eNexi and the Subsidiaries have complied in all
material respects with all laws relating to labor, employment and employment
practices, including without limitation, any provisions thereof relating to
wages, hours and other terms of employment, collective bargaining,
nondiscrimination and the payment of social security, unemployment compensation
and similar taxes, and neither eNexi nor any Subsidiary is (1) liable for any
arrearages of wages or any taxes or penalties for failure to comply with any of
the foregoing or (2) delinquent in the payment of any severance, salary, bonus,
commission or other direct or indirect compensation for services performed by
any employee to the date hereof, or any amount required to be reimbursed to any
employee or former employee; and
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(C) There are no charges, suits, actions, administrative
proceedings, investigations and/or claims pending or threatened against eNexi or
any Subsidiary, whether domestic or foreign, before any court, governmental
agency, department, board or instrumentality, or before any arbitrator
(collectively "Actions"), concerning or in any way relating to the employees or
employment practices of eNexi or any Subsidiary, including, without limitation,
Actions involving unfair labor practices, wrongful discharge and/or any other
restrictions on the right of eNexi or any Subsidiary to terminate its respective
employees, employment discrimination, occupational safety and health, and
workers' compensation.
(vi) There are no express or implied agreements, policies,
practices, or procedures, whether written or oral, pursuant to which any
employee of eNexi or any Subsidiary is not terminable at will and except as
required by law, no employee is entitled to any benefit or to participate in any
employee benefit plan of eNexi following such termination of employment.
(vii) Except as set forth in Schedule 4.1(r)(vii), eNexi or
any Subsidiary is not a party to any oral or written (A) agreement with any
executive officer or other key employee of eNexi or any Subsidiary (1) the
benefits of which are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving eNexi of the nature of the
transactions contemplated by this Agreement, (2) providing any term of
employment or compensation guarantee extending for a period longer than one
year, or (3) providing severance benefits or other benefits after the
termination of employment of such executive officer or key employee regardless
of the reason for such termination of employment; or (B) agreement or plan which
will remain in effect after the Closing, including, without limitation, any
stock option plan, stock appreciation right plan, restricted stock plan or stock
purchase plan, any of the benefits of which will be increased, or the vesting of
benefits of which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement or the value of any of the benefits
of which will be calculated on the basis of any of the transactions contemplated
by this Agreement.
(viii) eNexi has not taken any action which requires or, taken
together with the transactions contemplated hereby, would require the giving of
any notice under the Worker Adjustment Retraining and Notification Act or any
comparable state or local law or regulation.
(s) Suppliers and Customers. Set forth on Schedule 4.1(s) is a list
of the ten largest customers of eNexi and its Subsidiaries based on the
percentage of revenue represented by those customers for the fiscal year ended
December 31, 1999. The relationship of eNexi and its Subsidiaries with their
suppliers and customers are good commercial working relationships and no
material supplier or customer of eNexi and its Subsidiaries has canceled,
curtailed or otherwise terminated or threatened to cancel or otherwise
terminate, his or its relationship with eNexi or any of its Subsidiaries. eNexi
and the Stockholder have no knowledge, or reason to believe, that the Merger or
any other transaction contemplated hereby would adversely affect any such
material supplier or customer relationship.
(t) Conflicting Interests. Except as set forth on Schedule 4.1(t),
neither the Stockholder nor any director, officer or employee of eNexi nor
relative or affiliate of any of the foregoing (i) sells or purchases goods or
services from eNexi or has any pecuniary interest in any
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supplier or client of any of the foregoing or in any other business enterprise
with which eNexi conducts business or with which any of the foregoing is in
competition, or (ii) is indebted to eNexi except for money borrowed and as set
forth on the Financial Statements.
(u) Environmental Protection. Neither eNexi nor any Subsidiary has
been notified by any governmental authority, agency or third party, and eNexi
and the Stockholder have no knowledge, of any violation by such person of any
Environmental Statute (as defined below). All registrations by eNexi with,
licenses from or permits issued by governmental agencies pursuant to
environmental, health and safety laws are in full force and effect. The term
"Environmental Statutes" means all statutes, ordinances, regulations, orders and
requirements of common law concerning discharges to the air, soil, surface water
or groundwater and concerning the storage, treatment or disposal of any waste or
hazardous substance. There is no hazardous substance at any premises currently
or previously occupied by eNexi or the Subsidiaries. Neither eNexi nor any
Subsidiary has received any notice or any request for information, notice of
claim, demand or other notification that it may be potentially responsible with
respect to any investigation or clean-up of any threatened or actual release of
hazardous substances. All hazardous wastes and substances have been stored,
treated, disposed of and transported in conformance with all requirements
applicable to such hazardous substances and wastes.
(v) Absence of Certain Changes or Events. Except as and to the
extent set forth on the Financial Statements, to the extent contained in this
Agreement, or as set forth on Schedule 4.1(v), between March 31, 2000 (the date
of the most recent Financial Statements) and the Closing, there will not be (i)
any Material Adverse Change in the business, assets, properties, results of
operations, financial condition or prospects of eNexi or any of its
Subsidiaries, (ii) any entry by eNexi or any of its Subsidiaries into any
material commitment or transaction which is not in the ordinary course of
business; (iii) any change by eNexi or any of its Subsidiaries in accounting
principles or methods except insofar as may be required by a change in generally
accepted accounting principles; (iv) any declaration, payment or setting aside
for payment of any dividends or other distributions (whether in cash, stock or
property) in respect of capital stock of eNexi or any Subsidiary, or any direct
or indirect redemption, purchase or any other type of acquisition by eNexi, or
any direct or indirect redemption, purchase or any other type of acquisition by
eNexi of any shares of its capital stock or any other securities for an
aggregate sum not in excess of $5,000, (v) any agreement by eNexi, whether in
writing or otherwise, to take any action which, if taken prior to the date of
this Agreement, would have made any representation or warranty in this Section
4.1 untrue or incorrect; (vi) any acquisition of the assets of eNexi, other than
in the ordinary course of business and consistent with past practice and not in
excess of $5,000 in the aggregate; or (vii) any execution of any agreement with
any executive officer of eNexi providing for his or her employment, or any
increase in the compensation or in severance or termination benefits payable or
to become payable by eNexi to its officers or key employees, or any material
increase in benefits under any collective bargaining agreement or in benefits
under any bonus, pension, profit sharing, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
retirement, vacation, severance, disability, death benefit, hospitalization,
insurance or other plan or arrangement or understanding (whether or not legally
binding) providing benefits to any present or former employee of eNexi. Since
the date of the Financial Statements, there has not been and there is not
threatened, any material adverse change in financial condition, business,
results of operations or prospects of the
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business or any material physical damage or loss to any of the properties or
assets of the business or to the premises occupied in connection with the
business, whether or not such loss is covered by insurance.
(w) Prospects of eNexi. eNexi has agreements with approximately
6,000 subscribers for VirtuallyFreeInternet.com, and approximately 15,000
subscribers for dollars4mail.com, representing in the aggregate approximately
$20,000 in revenues for fiscal 1999 and approximately $50,000 in revenues for
the three month period ending March 31, 2000.
(x) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by eNexi to Acquiror in connection with the Merger or the
other transactions contemplated hereby, contains or will contain any untrue
statement of any material fact or omit or will omit to state any material fact
required to be stated in order to make such statement, information, document or
other instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to eNexi which may have a Material Adverse
Effect on the business, prospects, financial condition or results of operations
of eNexi or of any of its properties or assets which has not been set forth in
this Agreement as an exhibit or schedule hereto.
4.2 Representations and Warranties of the Principal Stockholders
As a material inducement to Acquiror and Newco to execute this
Agreement and consummate the Merger and other transactions contemplated hereby,
the Principal Stockholders hereby jointly and severally make the following
representations and warranties to Acquiror and Newco. The representations and
warranties are true and correct in all material respects at this date, and will
be true and correct in all material respects on the Closing as though made on
and as of such date.
(a) The authorized capital stock of eNexi consists solely of One
Million Two Hundred Thousand (1,200,000) shares of common stock, $.01 par value
per share. There are currently 1,048,868 shares of eNexi Common Stock
outstanding, all of which are owned by the eNexi Stockholders in the amounts set
forth on Schedule 4.1(d) hereof. The outstanding shares of capital stock of
eNexi have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights. Except as set forth in this Section
4.1(d) and on Schedule 4.1(d), there are outstanding (A) no shares of capital
stock or other voting securities of eNexi, (B) no securities of eNexi
convertible into or exchangeable for shares of capital stock or voting
securities of eNexi and (C) other than the eNexi Warrants, no options, warrants
or other rights to acquire from eNexi, the eNexi Stockholders or any other
person, and no obligation of eNexi to issue, any capital stock, voting
securities or securities convertible into or exchangeable for capital stock or
voting securities of eNexi, and there are no agreements or commitments to do any
of the foregoing. There are no voting trusts or voting agreements applicable to
any shares of capital stock of eNexi. The eNexi Common Stock to be surrendered
in the Merger will be owned of record and beneficially by the eNexi
Stockholders, free and clear of all liens and encumbrances of any kind and
nature, and have not been sold, pledged, assigned or otherwise transferred.
There are no agreements (other than this Agreement) to sell, pledge, assign or
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otherwise transfer such securities. Except as set forth on Schedule 4.1(d), all
of the issued and outstanding shares of capital stock of the Subsidiaries are
owned by eNexi.
(b) All consents, approvals, authorizations and orders necessary
for the execution, delivery and performance by each of the Principal
Stockholders have been duly and lawfully obtained. This Agreement has been duly
executed and delivered by each of the Principal Stockholders, and each Principal
Stockholder has, and at the Closing will have, full right, power, authority and
capacity to execute, deliver and perform this Agreement. This Agreement
constitutes a valid and binding agreement of each of the Principal Stockholders,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors rights generally
or by the application of equitable principles.
4.3 Representations and Warranties of Acquiror and Newco.
As a material inducement to eNexi to execute this Agreement and to
consummate the Merger and the other transactions contemplated hereby, Acquiror
and Newco hereby jointly and severally make the following representations and
warranties:
(a) Corporate Existence and Power. Each of Acquiror and Newco is
presently a corporation duly incorporated, validly existing and in good standing
under the laws of the State of Delaware. Each of Acquiror and Newco has all
corporate powers and all governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted, except where the
failure to have any of the foregoing would not have a Material Adverse Effect.
Each of Acquiror and Newco is duly qualified to do business as a foreign
corporation and is in good standing in each jurisdiction where the character of
the property owned or leased by it or the nature of its activities makes such
qualification necessary, except for those jurisdictions where the failure to be
so qualified would not, individually or in the aggregate, have a Material
Adverse Effect. True, complete and correct copies of the Certificate of
Incorporation and Bylaws of Acquiror and Newco, as amended to date, are attached
hereto as Schedule 4.2(a) and are made a part hereof.
(b) Due Authorization. This Agreement and the other agreements
described herein to which Acquiror or Newco will become a party at the Closing
have been, or as of the Closing will be, duly authorized, executed and delivered
by Acquiror or Newco, as applicable, and constitute, or as of the Closing will
constitute, a valid and binding agreement of Acquiror or Newco, as applicable,
enforceable in accordance with its terms, except as such enforcement may be
limited by applicable bankruptcy, insolvency, moratorium, and other similar laws
relating to, limiting or affecting the enforcement of creditors rights generally
or by the application of equitable principles. As of the Closing all corporate
action on the part of Acquiror and Newco required under applicable law in order
to consummate the Merger will have occurred.
(c) No Contravention. The execution and delivery of the Agreement
does not, and the consummation of the transactions contemplated thereby will not
(i) conflict with or result in any violation of any provision of the Certificate
of Incorporation or Bylaws of Acquiror or
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Newco or (ii) conflict with or result in any violation or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation or to a
loss or a benefit under, any provision of the Certificate of Incorporation or
Bylaws of Acquiror or Newco or any loan or credit agreement, note, bond,
mortgage, indenture, lease or other agreement, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance, rule or
regulation applicable to Acquiror or Newco or their properties or assets or
result in the creation or imposition of any Encumbrance on any asset of Acquiror
or Newco, except, only as to clause (ii) above: (i) the Right of First Refusal
Agreement between the Acquiror and Mark S. Isaacs dated as of March 19, 1999;
(ii) the Joint Venture and Subscription Agreement by and among Acquiror,
International Capri Resources Ltd., International Capri Resources S.A. de C.V.
("ICRM"), Alan Stier and Zacualpan Minerals, LLC dated as of March 19, 1999;
(iii) any other agreement related to or in connection with Acquiror's interest
in ICRM or its former mining business interests; and (iv) such as is not
reasonably likely to have a Material Adverse Effect or prevent Acquiror or Newco
from consummating the transactions contemplated by this Agreement. No consent,
approval, order or authorization of, or registration, declaration or filing
with, any court, administrative agency or commission or other governmental
authority or instrumentality, domestic or foreign, is required by or with
respect to Acquiror or Newco in connection with the execution and delivery of
this Agreement or the consummation by them of the transactions contemplated
hereby, except the filing of a Certificate of Merger with the Secretary of the
State of Delaware.
(d) Capitalization. The authorized capital stock of Acquiror
consists of 50,000,000 shares of common stock, $.0001 par value per share and
15,000,000 shares of preferred stock, $.0001 par value per share. As of the
Closing, the outstanding capital stock of the Acquiror shall consist solely of
43,075,000 shares of common stock. All shares of capital stock of Acquiror
outstanding as of the Closing, will have been duly authorized and validly
issued, fully paid and nonassessable and free of preemptive rights. Subject to
Section 1.4(a), upon the issuance of the Preferred Shares, such shares will be
duly authorized, validly issued, fully paid and nonassessable shares of
preferred stock of Acquiror. Acquiror does not have a sufficient number of
shares of Common Stock authorized for the full conversion of the Preferred
Shares. Except for the Assumed Warrants and warrants to purchase 2,000,000
shares of common stock, Acquiror shall as of the Closing, have no outstanding
options, warrants or other convertible securities. The authorized capital stock
of Newco consists solely of 1,000 shares of common stock, par value $.0001 per
share, of which 1 share is issued and outstanding and owned of record and
beneficially by Acquiror. The outstanding share of Newco common stock has been
duly authorized and validly issued is fully paid and nonassessable and free of
preemptive rights.
(e) Financial Statements. Acquiror shall deliver to eNexi (I) on or
before March 30, 2000, copies of audited financial statements of Acquiror for
the fiscal year ended December 31, 1999 and December 31, 1998, and (II) on or
before the Closing copies of unaudited financial statements of Acquiror for the
three-month period ended March 31, 2000 (collectively, the "Acquiror Financial
Statements"). Such Acquiror Financial Statements will have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods reported upon and will fairly present in all material
respects the financial position of Acquiror as of the dates thereof and the
results of operations for the periods then ended.
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(f) Real Properties. Neither Acquiror nor Newco owns or leases any
real property.
(g) No Contingent Liabilities. Except contained within the Acquiror
Financial Statements or otherwise as described on Schedule 4.2(g) or agreed to
by the parties hereto, at the Closing, Acquiror and Newco shall have no material
liabilities, whether related to tax or non-tax matters, known or unknown, due or
not yet due, liquidated or unliquidated, fixed or contingent, determined or
determinable in amount or otherwise, and to the knowledge of the Acquiror, there
is no existing condition, situation or set of circumstances which could
reasonably be expected to result in such a liability, except as and to the
extent reflected on this Agreement or any Schedule or Exhibit hereto or which
has been incurred in the ordinary course of business and as accurately reflected
on the books and records of Acquiror.
(h) Litigation. Except as described on Schedule 4.2(h) hereto there
is no action, suit, investigation or proceeding (or, to the knowledge of
Acquiror or Newco any basis therefor) pending against, or to the knowledge of
Acquiror or Newco threatened, against or affecting Acquiror, Newco or any of
their respective properties before any court or arbitrator or any governmental
body, agency or official that (i) if adversely determined against Acquiror or
Newco, would have a Material Adverse Effect or (ii) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the Merger or any of the
other transactions contemplated by the Agreement.
(i) Compliance with Laws. To the knowledge of Acquiror and Newco,
neither Acquiror nor Newco is in violation of, nor has either Acquiror or Newco
violated, any applicable provisions of any laws, statues, ordinances or
regulations, other than as would not be reasonably likely to have a Material
Adverse Effect.
(j) Reporting Company. The Common Stock of Acquiror is eligible for
trading on the OTC Electronic Bulletin Board. Acquiror is a reporting company
under the Securities and Exchange Act of 1934, as amended (the "Exchange Act").
(k) Investment Banking Fees. Other than with respect to the Private
Placement expected to close during the second quarter of 2000, there is no
investment banker, broker, finder or other similar intermediary which has been
retained by, or is authorized by Acquiror or Newco to act on its behalf who
might be entitled to any fee or commission from Acquiror or Newco or any of
their respective affiliates upon consummation of the transactions contemplated
by this Agreement.
(l) Statements And Other Documents Not Misleading. Neither this
Agreement, including all exhibits and schedules and other closing documents, nor
any other financial statement, document or other instrument heretofore or
hereafter furnished by Acquiror or Newco to eNexi in connection with the Merger
or the other transactions contemplated hereby, or any information furnished by
Acquiror or Newco taken as a whole contains or will contain any untrue statement
of any material fact or omit or will omit to state any material fact required to
be stated in order to make such statement, information, document or other
instruments, in light of the circumstances in which they are made, not
misleading. There is no fact known to Acquiror
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or Newco taken as a whole which may have a Material Adverse Effect on the
business, prospects, financial condition or results of operations of Acquiror or
Newco taken as a whole or of any of its properties or assets which has not been
set forth in this Agreement as an exhibit or schedule hereto.
ARTICLE V
AGREEMENTS OF THE PARTIES
5.1 Access to Information.
At all times prior to the Closing or the earlier termination
of this Agreement in accordance with the provisions of Section 8, and in each
case subject to Section 5.2 below, each of the parties hereto shall provide to
the other parties (and the other parties' authorized representatives) full
access during normal business hours and upon reasonable prior notice to the
premises, properties, books, records, assets, liabilities, operations,
contracts, personnel, financial information and other data and information of or
relating to such party (including without limitation all written proprietary and
trade secret information and documents, and other written information and
documents relating to intellectual property rights and matters), and will
cooperate with the other party in conducting its due diligence investigation of
such party.
5.2 Confidentiality; No Solicitation.
(a) Confidentiality of eNexi-Related Information. With respect to
information concerning eNexi that is made available to Acquiror pursuant to the
terms of this Agreement, Acquiror agrees that it shall hold such information in
strict confidence, shall not use such information except for the sole purpose of
evaluating the Merger and related transactions and shall not disseminate or
disclose any of such information other than to its directors, officers,
employees, stockholders, affiliates, agents and representatives who need to know
such information for the sole purpose of evaluating the Merger and the related
transactions (each of whom shall be informed in writing by Acquiror or its
representatives of the confidential nature of such information and directed by
Acquiror in writing to treat such information confidentially). If this Agreement
is terminated pursuant to the provisions of Section 8, Acquiror shall
immediately return all such information, all copies thereof and all information
prepared by Acquiror based upon the same; provided, however, that one copy of
all such material may be retained by Acquiror's outside legal counsel for
purposes only of resolving any disputes under this Agreement. The above
limitations on use, dissemination and disclosure shall not apply to information
that (i) is learned by Acquiror from a third party entitled to disclose it; (ii)
becomes known publicly other than through Acquiror or any party who received the
same through Acquiror, provided that Acquiror has no knowledge that the
disclosing party was subject to an obligation of confidentiality; (iii) is
required by law or court order to be disclosed by Acquiror; or (iv) is disclosed
with the express prior written consent thereto of eNexi. Acquiror shall
undertake all necessary steps to ensure that the secrecy and confidentiality of
such information will be maintained in accordance with the provisions of this
paragraph (a). Notwithstanding anything contained herein to the contrary, in the
event a party is required by court order or subpoena to disclose information
which is otherwise deemed to be confidential or subject to the
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confidentiality obligations hereunder, prior to such disclosure, the disclosing
party shall: (A) promptly notify the non-disclosing party and, if having
received a court order or subpoena, deliver a copy of the same to the
non-disclosing party; (B) cooperate with the non-disclosing party, at the
expense of the non-disclosing party in, obtaining a protective or similar order
with respect to such information; and (C) provide only such of the confidential
information as the disclosing party is advised by its counsel is necessary to
strictly comply with such court order or subpoena.
(b) Confidentiality of Acquiror-Related Information. With respect
to information concerning Acquiror that is made available to eNexi pursuant to
the provisions of this Agreement, eNexi agrees that it shall hold such
information in strict confidence, shall not use such information except for the
sole purpose of evaluating the Merger and the related transactions, and shall
not disseminate or disclose any of such information other than to its directors,
officers, employees, stockholders, affiliates, agents and representatives who
need to know such information for the sole purpose of evaluating the Merger and
the related transactions (each of whom shall be informed in writing by eNexi or
its representatives of the confidential nature of such information and directed
by such party in writing to treat such information confidentially). If this
Agreement is terminated pursuant to the provisions of Section 8, eNexi agrees to
return immediately all such information, all copies thereof and all information
prepared by eNexi based upon the same; provided, however, that one copy of all
such material may be retained by eNexi's outside legal counsel for purposes only
of resolving any disputes under this Agreement. The above limitations on use,
dissemination and disclosure shall not apply to information that (i) is learned
by eNexi from a third party entitled to disclose it; (ii) becomes known publicly
other than through eNexi or any party who received the same through eNexi
provided that eNexi has no knowledge that the disclosing party was subject to an
obligation of confidentiality; (iii) is required by law or court order to be
disclosed by eNexi; or (iv) is disclosed with the express prior written consent
thereto of Acquiror. eNexi agrees to undertake all necessary steps to ensure
that the secrecy and confidentiality of such information will be maintained in
accordance with the provisions of this paragraph (b). Notwithstanding anything
contained herein to the contrary, in the event a party is required by court
order or subpoena to disclose information which is otherwise deemed to be
confidential or subject to the confidentiality obligations hereunder, prior to
such disclosure, the disclosing party shall: (i) promptly notify the
non-disclosing party and, if having received a court order or subpoena, deliver
a copy of the same to the non-disclosing party; (ii) cooperate with the
non-disclosing party at the expense of the non-disclosing party in obtaining a
protective or similar order with respect to such information; and (iii) provide
only such of the confidential information as the disclosing party is advised by
its counsel is necessary to strictly comply with such court order or subpoena.
(c) Nondisclosure. Neither eNexi, Acquiror nor Newco shall disclose
to the public or to any third party the existence of this Agreement or the
transactions contemplated hereby or any other material non-public information
concerning or relating to any other party hereto, other than with the express
prior written consent of the other parties hereto, except as may be required by
law or court order or to enforce the rights of such disclosing party under this
Agreement, in which event the contents of any proposed disclosure shall be
discussed with the other party before release; provided, however, that
notwithstanding anything to the contrary
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contained in this Agreement, any party hereto may disclose this Agreement to any
of its directors, officers, employees, stockholders, affiliates, agents and
representatives who need to know such information for the sole purpose of
evaluating the Merger, and to any person whose consent is required in connection
with the Merger or this Agreement. The parties anticipate issuing a mutually
acceptable, joint press release announcing the execution of this Agreement and
the consummation of the Merger.
(d) No Solicitation. In consideration of the substantial
expenditure of time, effort and money to be undertaken by Acquiror in connection
with the transactions contemplated by this Agreement, neither eNexi nor any of
its affiliates will, prior to the earlier of the Closing or ninety (90) days
after the termination of this Agreement directly or indirectly, through any
officer, director, agent or otherwise: (i) solicit, initiate or encourage the
submission of inquiries, proposals or offers from any person or entity relating
to any acquisition or purchase of assets of or any equity interest in eNexi or
any affiliate thereof or any tender offer (including a self-tender offer),
exchange offer, merger, consolidation, business combination, sale of a
substantial amount of assets or sale of securities, liquidation, dissolution or
similar transaction involving eNexi or its affiliates (a "Transaction
Proposal"); (b) enter into or participate in any discussions or negotiations
regarding a Transaction Proposal, or furnish to any other person or entity any
information with respect to the business, properties or assets of eNexi or its
affiliates in connection with a Transaction Proposal; or (c) otherwise cooperate
in any way with, or assist or participate in, facilitate or encourage any effort
or attempt by any other person to do or seek a Transaction Proposal. eNexi shall
promptly notify Acquiror if any such proposal or offer, or any inquiry or
contact with any person or entity with respect thereto is made.
5.3 Interim Operations.
During the period from the date of this Agreement and
continuing until the earlier of the Closing or the termination of this
Agreement:
(a) Interim Operations of eNexi and Subsidiaries. eNexi agrees
(except as expressly contemplated by this Agreement, including any Exhibits and
Schedules hereto, or to the extent that Acquiror shall otherwise consent in
writing) that:
(i) Ordinary Course. eNexi and its Subsidiaries shall carry on
their business in the usual, regular and ordinary course in substantially the
same manner as heretofore conducted and, to the extent consistent with such
business, use all reasonable efforts to preserve intact their present business
organizations, keep available the services of their present officers and
employees and preserve their relationships with customers, suppliers and others
having business dealings with them;
(ii) Dividends; Changes in Stock. eNexi and its Subsidiaries
shall not and shall not propose to (a) declare, set aside or pay any dividend,
on, or make other distributions in respect of, any of their capital stock, (b)
split, combine or reclassify any of their capital stock or issue, authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for shares of their capital stock (c) redeem, repurchase or
otherwise acquire any shares of their capital stock or (d) otherwise change
their capitalization.
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(iii) Issuance of Securities. Except as contemplated by this
Agreement, eNexi shall not sell, issue, pledge, authorize or propose the sale or
issuance of, pledge or purchase or propose the purchase of, any shares of its
capital stock of any class or securities convertible into, or rights, warrants
or options to acquire, any such shares or other convertible securities.
(iv) Governing Documents. eNexi shall not amend its Articles
of Incorporation or its Bylaws. None of the Subsidiaries shall amend their
respective corporate charters or governing documents.
(v) No Dispositions. eNexi and its Subsidiaries shall not
sell, lease, pledge, encumber or otherwise dispose of or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of their material assets except in
the ordinary course of business consistent with prior practice and in no event
amounting in the aggregate to more than $20,000 in value of such assets.
(vi) Indebtedness. eNexi and its Subsidiaries shall not incur
any indebtedness for borrowed money or guarantee any such indebtedness or issue
or sell any debt securities or guarantee any debt securities of others other
than in the ordinary course of business consistent with prior practice and in no
event amounting in the aggregate to more than $20,000.
(vii) Benefit Plans; Etc. eNexi and its Subsidiaries shall not
adopt or amend in any material respect any collective bargaining agreement or
Employee Benefit Plan (as defined herein).
(viii) Executive Compensation. eNexi and its Subsidiaries
shall not grant to any executive officer any increase in compensation or in
severance or termination pay, or enter into any employment agreement with any
executive officer.
(ix) Acquisitions. eNexi and its Subsidiaries shall not
acquire (by merger, consolidation or acquisition of stock or assets or
otherwise) any corporation, partnership or other business organization or
subdivision thereof, or make any investment by either purchase of stock or
securities, contributions to capital, property transfer or, except in the
ordinary course of business, purchase of any property or assets, of any other
individual or entity.
(x) Tax Elections. eNexi and its Subsidiaries shall not make
any material tax election or settle or compromise any material federal, state,
local or foreign tax liability.
(xi) Waivers and Releases. eNexi and its Subsidiaries shall
not waive, release, grant or transfer any rights of material value or modify or
change in any material respect any Material Agreement other than in the ordinary
course of business and consistent with past practice.
(xii) Other Actions. eNexi and its Subsidiaries shall not
enter into any agreement or arrangement to do any of the foregoing. eNexi and
its Subsidiaries shall not take any action, or fail to take any action, that is
reasonably likely to result in any of the
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representations and warranties of them set forth in this Agreement becoming
untrue in any material respect.
(b) Interim Operations of Acquiror and Newco. Acquiror and Newco
agree (except as expressly contemplated by this Agreement, including any
Exhibits and Schedules hereto, or to the extent that eNexi and the Stockholder
shall otherwise consent) that:
(i) Ordinary Course. Other than Acquiror's mining business
operated through ICRM, Acquiror and Newco shall conduct no business activity
other than in connection with the transactions contemplated by this Agreement in
connection with the Merger.
(ii) Dividends; Changes in Stock. Neither Acquiror nor Newco
shall (and neither shall propose to) (a) declare or pay any dividend, on, or
make other distributions in respect of, any of its capital stock, (b) split,
combine or reclassify any of its capital stock or issue, authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock, (c) repurchase or otherwise
acquire any shares of its capital stock or (d) otherwise change its
capitalization.
(iii) No Dispositions. Other than Acquiror's planned
disposition of its interest in ICRM, neither Acquiror nor Newco shall sell,
lease, pledge, encumber or otherwise dispose of, or agree to sell, lease,
pledge, encumber or otherwise dispose of, any of its assets that are material,
or any other assets except in the ordinary course of business consistent with
prior practice.
(iv) Placement Activities. Prior to the Closing, Acquiror
shall have commenced the Private Placement that as of the Closing yields gross
proceeds of no less than $5,000,000 to Acquiror.
(v) Other Actions. Acquiror shall take any action, or fail to
take any action, that is reasonably likely to result in any of its
representations and warranties set forth in this Agreement becoming untrue in
any material respect.
5.4 Consents.
Acquiror and eNexi shall cooperate and use their best efforts to
obtain, prior to the Closing, all licenses, permits, consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts as are necessary for the consummation of the transactions
contemplated by this Agreement; provided, however, that no loan agreement or
contract for borrowed monies shall be repaid and no contract shall be amended
materially to increase the amount payable thereunder or otherwise to be
materially more burdensome in order to obtain any such consent, approval or
authorization without first obtaining the written approval of the other parties
hereto.
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5.5 Employee Stock Option Plan.
As promptly as practicable following the Effective Date,
Acquiror shall adopt the employee stock option plan attached hereto as Exhibit
5.5 (the "Plan"), and shall thereafter issue under the Plan that number of
options to purchase Acquiror Common Stock to the persons and pursuant to the
terms identified on Schedule 5.5 hereto. The number of shares of Acquiror Common
Stock authorized for issuance upon the exercise of options granted under the
Plan shall be up to 37,500,000 (or 1,500,000 shares after giving effect to a
contemplated 25:1 reverse stock split).
5.6 All Reasonable Efforts.
Subject to the terms and conditions of this Agreement and to
the fiduciary duties and obligations of the boards of directors of the parties
hereto to their respective stockholders, as advised by their counsel, each of
the parties to this Agreement shall use all reasonable efforts to take, or cause
to be taken, all action and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations, or to remove any
injunctions or other impediments or delays, legal or otherwise, as soon as
reasonable practicable, to consummate the Merger and the other transactions
contemplated by this Agreement.
5.7 Public Announcements.
Acquiror, Newco and eNexi shall consult with each other before
issuing any press release or otherwise making any public statements with respect
to the Merger, this Agreement or the other transactions contemplated by this
Agreement and shall not issue any other press release or make any other public
statement without prior consent of the other parties, except as may be required
by law or, with respect to Acquiror, by obligations pursuant to rule or
regulation of the Exchange Act, the Securities Act, any rule or regulation
promulgated thereunder or any rule or regulation of the NASD.
5.8 Notification of Certain Matters.
eNexi shall give prompt notice to Acquiror, and Acquiror shall
give prompt notice to eNexi of (a) the occurrence or non-occurrence of any
event, the occurrence or non-occurrence of which would cause any of its
representations or warranties in this Agreement to be untrue or inaccurate in
any material respect, as to eNexi, at or prior to the Closing, and, as to
Acquiror or Newco, as of the Closing and (b) any material failure of eNexi, on
the one hand, or Acquiror and Newco, on the other hand, as the case may be, to
comply with or satisfy any covenant, condition or agreement to be complied with
or satisfied by them under this Agreement; provided, however, the delivery of
any notice pursuant to this Section shall not limit or otherwise affect the
remedies available to the party receiving such notice under this Agreement as
expressly provided in this Agreement.
5.9 Expenses.
All costs and expenses incurred in connection with the
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expenses whether or not the Merger is consummated. In the event
that the Merger is consummated, eNexi shall be
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responsible for legal or other expenses incurred by itself, but not for those
incurred by Acquiror, in connection with the preparation and negotiation of this
Agreement.
5.10 Lock-Up; Prohibition on Short Sales.
(a) During the Restricted Period, the Principal Stockholders
may not transfer, sell, or otherwise dispose of the aggregate number of
Preferred Shares that are equal to one-half of the total number of Preferred
Shares issued as Merger Consideration (the "Lock-Up Shares"). The term "Lock-Up
Shares" also includes the shares of common stock issuable upon conversion of the
Preferred Shares originally constituting the Lock-Up Shares. Certificates
representing the Lock-Up Shares shall bear a legend referencing the restrictions
set forth in this Section 5.19.
(b) The Principal Stockholders may not transfer, sell, or
otherwise dispose of the Preferred Shares issued to them as Merger Consideration
that are not Lock-Up Shares until such transfer or sale may be made in
accordance with the provisions of Rule 144 promulgated under the Securities Act
of 1933, as amended.
(c) The eNexi Stockholders shall not make any short sales of
Acquiror's Common Stock during the Restricted Period.
5.11 Voting Proxy.
In the event that the Surviving Corporation has not provided
written evidence satisfactory to the Acquiror Designees (as such term is defined
in Section 5.19(a)) or their designees that the Surviving Corporation has
attained, on or before the date that is two years after the date of Closing,
500,000 subscribers for its Online Communities whose accounts remain current and
in compliance with the subscription standards established by the Surviving
Corporation, then the holders of the Lock-Up Shares shall give the Acquiror
Designees a voting proxy with respect to the Lock-Up Shares in the form attached
hereto as Exhibit 5.11 ("Voting Proxy") until the earlier to occur of: (x) 90
days thereafter; and (y) the date on which the Surviving Corporation provides
written evidence satisfactory to Acquiror's Designees that it has attained
500,000 subscribers for its Online Communities.
5.12 Private Placement.
After the date hereof, Acquiror shall undertake the Private
Placement offering to accredited, sophisticated and institutional investors
which is intended to yield gross proceeds of no less than $5,000,000 through the
sale of shares of Acquiror's preferred and/or common stock. The closing of at
least $5,000,000 in subscriptions under the Private Placement shall occur
concurrently with the Closing under this Agreement. Acquiror's obligation to
complete the Private Placement is conditioned upon (i) there being no material
adverse change, or any development involving a prospective material adverse
change in or affecting the condition,
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financial or otherwise, of eNexi or its Subsidiaries, or the earnings, business
affairs, management or business prospects of eNexi or its Subsidiaries, in the
discretion of either the placement agent engaged to conduct the Private
Placement or the Acquiror Designees, whether or not arising in the ordinary
course of business or otherwise; and (ii) there being no pending material
indemnification claim hereunder regarding the breach of any of the
representations, warranties, agreements or covenants of eNexi hereunder on and
as of the date of the closing of the Private Placement. The proceeds of the
Private Placement shall be utilized for working capital purposes of the
Surviving Corporation. The Private Placement may be completed through the use of
a placement agent which is a broker-dealer registered with the Securities and
Exchange Commission ("SEC") and in good standing with the NASD, upon payment of
sales commissions, expenses and warrants which are reasonable and customary in
transactions of this nature.
5.13 Registration of Resale of Certain Shares of Common Stock.
Acquiror shall use best efforts to prepare and file within 120
days following the Effective Time a registration statement on Form SB-2 or S-1
with the SEC under the Securities Act in order to register the reoffer and
redistribution of certain shares of Acquiror Common Stock in accordance with the
terms of a registration rights agreement in form and substance to be agreed upon
by the parties thereto in substantially the form attached hereto as Exhibit 5.13
(the "Registration Rights Agreement"). The shares of Acquiror's Common Stock to
be included for public reoffer and redistribution as part of the registration
statement shall include: (i) the shares sold in the Private Placement; (ii) the
25,000,000 shares of Common Stock previously issued by Acquiror as part of the
private placement transactions identified on Schedule 5.13 hereof; (iii) the
shares of Common Stock issuable upon the exercise of the Assumed Warrants; and
(iv) up to 30,000,000 shares of Common Stock issuable upon the conversion of
Preferred Shares that are not Lock-Up Shares. For the purposes hereof, the
number of shares of Acquiror Common Stock to be included in the registration
statement shall be adjusted by a stock split, division or recapitalization that
occurs after the Effective Time.
5.14 Documents at Closing.
Each party to this Agreement agrees to execute and deliver at
the Closing those documents identified in Section 2.2.
5.15 Prohibition on Trading in Acquiror Stock.
eNexi acknowledges that the United States securities laws
prohibit any person who has received material non-public information concerning
the matters which are the subject matter of this Agreement from purchasing or
selling the securities of the Acquiror, or from communicating such information
to any person under circumstances in which it is reasonably foreseeable that
such person is likely to purchase or sell securities of the Acquiror.
Accordingly, until the Closing, eNexi agrees that it will not and shall instruct
its officers, directors, employees and representatives not to purchase or sell
any securities of the Acquiror, or communicate such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell securities of the Acquiror, until counsel
for Acquiror believes that any such non-public information has been adequately
disseminated to the public.
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5.16 Reservation of Shares; Post-Closing Amendments to Acquiror's
Certificate of Incorporation.
As of the Closing, Acquiror shall have authorized and reserved
for issuance sufficient shares of Preferred Stock to permit the issuance of the
Preferred Shares. Acquiror shall use best efforts to secure approval by its
stockholders as promptly as is practicable following the Effective Date of an
amendment to its Certificate of Incorporation that effectuates (I) a change in
its name to "eNexi Holdings, Inc."; (II) either (x) a reverse split of its
shares of Common Stock; or (y) an increase in the number of shares of Common
Stock authorized thereunder, in each case so as to have authorized and available
for issuance a sufficient number of shares of Acquiror Common Stock to fully
cover conversion of the Preferred Shares, exercise of the Assumed Warrants and
exercise of the Shares covered by the Plan; and (III) ratification of the Plan.
Upon securing such stockholder approval, Acquiror shall promptly file an
appropriate amendment to its Certificate of Incorporation with the Secretary of
State of the State of Delaware.
5.17 Indemnification: Directors' and Officers' Insurance.
(a) Acquiror shall, to the fullest extent permitted under
applicable law, and for six years from and after the Effective Time, to the
fullest extent permitted under applicable law, indemnify, defend and hold
harmless each person who is now, or has been at any time prior to the date
hereof or who becomes prior to the Effective Time, an officer, director or
employee of the Acquiror (the "Indemnified Parties") from and against (i) all
losses, claims, damages, costs, expenses, liabilities or judgments or amounts
that are paid in settlement with the approval of the indemnifying party (which
approval shall not be unreasonably withheld) of or in connection with any claim,
action, suit, proceeding or investigation based in whole or in part on or
arising in whole or in part out of the fact that such person is or was a
director, officer or employee of the Acquiror, whether pertaining to any matter
existing or occurring at or prior to the Effective Time and whether asserted or
claimed prior to, or at or after, the Effective Time ("Indemnified Liabilities")
and (ii) all Indemnified Liabilities based in whole or in part on, or arising in
whole or in part out of, or pertaining to this Agreement or the transactions
contemplated hereby, in each case to the full extent permitted under the DGCL.
Acquiror will pay expenses in advance of the final disposition of any such
action or proceeding to each Indemnified Party to the full extent permitted by
law. Without limiting the foregoing, in the event any such claim, action, suit,
proceeding or investigation is brought against any Indemnified Party (whether
arising before or after the Effective Time), (i) the Indemnified Parties may
retain counsel satisfactory to them and Acquiror; (ii) Acquiror shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefore are received; (iii) the Acquiror will use all
reasonable efforts to assist in the vigorous defense of any such matter,
provided that Acquiror shall be liable for any settlement of any claim effected
without its written consent, which consent, however, shall not be unreasonably
withheld. Any Indemnified Party wishing to claim indemnification under this
Section 5.17, upon learning of any such claim, action, suit, proceeding or
investigation, shall notify the Acquiror (but the failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
under this Section 5.17 except to the extent such failure prejudices such
party). The Indemnified Parties as a group may retain only one law firm to
represent them with respect to such matter (in addition to local counsel) unless
there is,
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under applicable standards of professional conduct, a conflict on any
significant issue between the positions of any two or more Indemnified Parties.
(b) For a period of six years after the Effective Time, the
Acquiror or the Surviving Corporation shall cause to be maintained in effect the
current policies of directors' and officer's liability insurance maintained by
the Acquiror (provided that Acquiror or the Surviving Corporation may substitute
therefor policies of at least the same coverage and amounts containing terms and
conditions which are no less advantageous) with respect to claims or matters
existing or occurring before the Effective Time.
(c) This Section 5.17 shall survive the consummation of the Merger.
The provisions of this Section 5.17 are intended to be for the benefit of, and
shall be enforceable by, each Indemnified Party, his heirs and his
representatives. The rights provided Indemnified Parties shall be in addition
to, and not in lieu of, any rights to indemnity which such parties may have
under the Certificate or By-Laws of the Acquiror or the Surviving Corporation or
any other agreements or otherwise.
5.18 Acknowledgment of Approvals; Approval of eNexi Stockholders.
By virtue of their respective signatures to this Agreement,
Acquiror, Newco, eNexi and the Principal Stockholders acknowledge their approval
of this Agreement and their consent to the consummation of the transactions
identified herein. eNexi shall hold a meeting of its stockholders prior to the
Closing to approve the Merger and this Agreement in accordance with the DGCL.
5.19 Matters of Corporate Governance.
(a) Concurrent with the Closing, members of Acquiror's Board of
Directors shall resign and shall be replaced with a Board of Directors of five
(5) members, consisting of: (i) two designees of Acquiror's Board of Directors
immediately prior to the Closing (the "Acquiror Designees"); and (ii) three (3)
designees of eNexi's Board of Directors. If the size of Acquiror's Board of
Directors increases or decrease during the Restricted Period, then the
representation on Acquiror's Board of Directors by the Acquiror Designees shall
be at least 40% of the total board representation during the Restricted Period.
Immediately following the Effective Date, Acquiror's Board of Directors shall
execute and deliver to the secretary of Acquiror the form of board resolutions
attached hereto as Exhibit 5.19(a) authorizing the transactions contemplated in
this Agreement.
(b) Each of the Principal Stockholders agrees that, during the
Restricted Period, he will vote all voting securities of Acquiror owned
beneficially or of record by him at every Annual Meeting of Stockholders, at any
Special Meeting of Stockholders called for the purpose of electing members to
the Board of Directors, or will act by written consent or otherwise take such
action as is required to vote for and elect a Board of Directors in the manner
identified in Section 5.19(a). Each of the Principal Stockholders further agrees
not to take any action inconsistent with this Section 5.19, including voting any
voting securities of Acquiror to amend the Certificate of Incorporation or the
Bylaws of the Surviving Corporation or Acquiror.
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(c) Each of the Principal Stockholders agrees that, during the
Restricted Period, he will vote all voting securities of Acquiror owned
beneficially or of record by him at every Annual Meeting of Stockholders, at any
Special Meeting of Stockholders, or will act by written consent or otherwise
take such action as is required to vote for a name change, reverse split or
amendment to Acquiror's Certificate of Incorporation to increase the authorized
capital stock as contemplated in Section 5.16.
(d) During the Restricted Period, approval of any of the following
transactions shall require the affirmative vote of 80% of the members of
Acquiror's Board of Directors: (i) any merger, consolidation, sale of all or
substantially all of the assets of Acquiror or recapitalization involving
Acquiror; (ii) transactions between Acquiror or the Surviving Corporation and
any interested party (including all directors, executive officers, employees or
principal (i.e., over 5%) stockholders); (iii) any modification to the terms of
this Agreement or any other agreements entered into upon the Closing; (iv) any
issuance of shares of Acquiror's Common Stock, Preferred Stock or securities
exercisable or convertible into shares of Acquiror's Common Stock or Preferred
Stock, equal to or exceeding 10% of the Acquiror's then outstanding shares of
Common Stock or voting power; (v) any recapitalization of the capital stock of
Acquiror or the Surviving Corporation (other than the reverse split or increase
in the number of authorized shares of Acquiror's Common Stock pursuant to
Section 5.16 hereof); (vi) any borrowing by Acquiror or the Surviving
Corporation in excess of $250,000; and (vii) any amendment to the Acquiror's or
Surviving Corporation's By-laws or Certificate of Incorporation. Notwithstanding
anything contained in this Agreement to the contrary, commencing one year after
the Closing, a super-majority vote of the Acquiror's Board of Directors shall
not be required to approve any transaction except as may be required under
applicable Delaware law.
5.20 Disposition of Assets
Acquiror shall use best efforts following the Closing to
dispose of its interest in ICRM.
5.21 Production of Schedules and Exhibits.
Each of the parties hereto shall utilize its reasonable best
efforts to produce all Schedules and Exhibits required to be produced by it
under this Agreement upon the execution hereof. In the event that any party has
not produced all Schedules and Exhibits required to be produced by it hereunder
upon the execution of this Agreement, all such Schedules and Exhibits shall be
produced by such party within fifteen (15) business days thereafter but in no
event shall such Schedules and Exhibits be delivered less than five (5) business
days prior to the Closing Date. The Schedules and Exhibits produced subsequent
to the execution of this Agreement, shall be given such force and effect as
though such Schedules and Exhibits which were produced upon execution of this
Agreement.
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ARTICLE VI
CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 Conditions to Obligations of eNexi.
The obligations of eNexi to consummate the Merger and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by eNexi) at or prior to the Closing (or
at such other time prior thereto as may be expressly provided in this Agreement)
of each of the following conditions:
(a) The representations and warranties of Acquiror and Newco
set out in this Agreement shall be true and correct in all material respects at
and as of the time of the Closing as though such representations and warranties
were made at and as of such time.
(b) Acquiror shall have complied in a timely manner and in all
material respects with the respective covenants and agreements set out in this
Agreement.
(c) The Merger shall have been approved by Newco in accordance
with the provisions of the DGCL. The Board of Directors of Newco and Acquiror
shall have approved the execution of this Agreement and the Merger thereby.
(d) Acquiror shall deliver certificates evidencing the Asuumed
Warrants to the persons and in the amounts set forth on Schedule 1.2(c);
(e) There shall be delivered to eNexi an officer's certificate
of Acquiror to the effect that all of the representations and warranties of
Acquiror set forth herein are true and complete in all material respects as of
the Closing, and the Acquiror has complied in all material respects with the
covenants and agreements set forth herein that are required to be complied with
by the Closing.
(f) There shall be delivered to eNexi an officer's certificate
of Newco to the effect that all of the representations and warranties of Newco
set forth herein are true and complete in all material respects as of the
Closing, and Newco has complied in all material respects with the covenants and
agreements set forth herein that are required to be complied with by the
Closing.
(g) The Private Placement investors shall have deposited in
escrow a minimum of $5,000,000 in subscription funds.
(h) All director, stockholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured.
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(i) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions.
6.2 Conditions to Acquiror's Obligations.
The obligation of Acquiror to consummate the Merger and the
other transactions contemplated to be consummated by it at the Closing are
subject to the satisfaction (or waiver by Acquiror) at or prior to the Closing
(or at such other time prior thereto as may be expressly provided in this
Agreement) of each of the following conditions:
(a) The representations and warranties of eNexi set out in
this Agreement shall be true and correct in all material respects at and as of
the time of the Closing as though such representations and warranties were made
at and as of such time;
(b) eNexi shall have complied in a timely manner and in all
material respects with its covenants and agreements set out in this Agreement;
(c) There shall be delivered to Acquiror an officer's
certificate of eNexi to the effect that all of the representations and
warranties of eNexi set forth herein are true and complete in all material
respects as of the Closing, and that eNexi has complied in all material respects
with the covenants and agreements set forth herein that it is required to comply
with by the Closing;
(d) eNexi shall have secured the approval of its stockholders
necessary under the DGCL, its Certificate of Incorporation and Bylaws to approve
the Merger this Agreement and the transactions contemplated hereby, and shall
have delivered a certificate of an authorized officer of eNexi to this effect;
(e) None of the holders of the eNexi Common Stock issued and
outstanding immediately prior to the Effective Time shall have demanded an
appraisal of the fair market value of their shares under Section 262 of the
DGCL;
(f) eNexi shall have paid in full or restructured the terms of
any and all other outstanding indebtedness which is accelerated, in whole or in
part upon consummation of the Merger or any of the transactions contemplated by
this Agreement to the satisfaction of Acquiror;
(g) All director, stockholder, lender, lessor and other
parties' consents and approvals, as well as all filings with, and all necessary
consents or approvals of, all federal, state and local governmental authorities
and agencies, as are required under this Agreement, applicable law or any
applicable contract or agreement (other than as contemplated by this Agreement)
to complete the Merger shall have been secured;
(h) The Acquiror shall have completed a due diligence review
of the business, operations, financial condition and prospects of eNexi and its
Subsidiaries and shall have been satisfied with the results of its due diligence
review in its sole and absolute discretion;
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(i) The Board of Directors of eNexi and the eNexi Stockholders
shall have approved the Merger in accordance with the DGCL;
(j) No statute, rule, regulation, executive order, decree,
injunction or restraining order shall have been enacted, entered, promulgated or
enforced by any court of competent jurisdiction or governmental authority that
prohibits or restricts the consummation of the Merger or the related
transactions; and
(k) The holder(s) of all eNexi Warrants have consented to the
assumption of such Warrants by Acquiror.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification.
(a) The Principal Stockholders shall jointly and severally
indemnify, defend and hold harmless Acquiror from and against any and all
demands, claims, actions or causes of action, judgments, assessments, losses,
liabilities, damages or penalties and reasonable attorneys' fees and related
disbursements (collectively, "Claims") incurred by Acquiror which arise out of
or result from a misrepresentation or breach of warranty contained in Section
4.2 hereof.
(b) Methods of Asserting Claims for Indemnification. All
claims for indemnification under this Agreement shall be asserted as follows:
(i) Third Party Claims. In the event that any Claim
for which a party (the "Indemnitee") would be entitled to indemnification under
this Agreement is asserted against or sought to be collected from the Indemnitee
by a third party the Indemnitee shall promptly notify the other party (the
"Indemnitor") of such Claim, specifying the nature thereof, the applicable
provision in this Agreement or other instrument under which the Claim arises,
and the amount or the estimated amount thereof (the "Claim Notice"). The
Indemnitor shall have thirty (30) days (or, if shorter, a period to a date not
less than ten (10) days prior to when a responsive pleading or other document is
required to be filed but in no event less than ten (10) days from delivery or
mailing of the Claim Notice) (the "Notice Period") to notify the Indemnitee (a)
whether or not it disputes the Claim and (b) if liability hereunder is not
disputed, whether or not it desires to defend the Indemnitee. If the Indemnitor
elects to defend by appropriate proceedings, such proceedings shall be promptly
settled or prosecuted to a final conclusion in such a manner as to avoid any
risk of damage to the Indemnitee; and all costs and expenses of such proceedings
and the amount of any judgment shall be paid by the Indemnitor.
If the Indemnitee desires to participate in, but not control,
any such defense or settlement, it may do so at its sole cost and expense. If
the Indemnitor has disputed the Claim, as provided above, and shall not defend
such Claim, the Indemnitee shall have the right to control the defense or
settlement of such Claim, in its sole discretion, and shall be reimbursed by the
Indemnitor for its reasonable costs and expenses of such defense. Neither
Indemnitee nor
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Indemnitor shall be liable for any settlement of any Claim without the prior
written consent of the other party.
(c) Non-Third Party Claims. In the event that the Indemnitee
should have a Claim for indemnification hereunder which does not involve a Claim
being asserted against it or sought to be collected by a third party, the
Indemnitee shall promptly send a Claim Notice with respect to such Claim to the
Indemnitor. If the Indemnitor does not notify the Indemnitee within the Notice
Period that it disputes such Claim, the Indemnitor shall pay the amount thereof
to the Indemnitee. If the Indemnitor disputes the amount of such Claim, the
controversy in question shall be submitted to arbitration pursuant to Section
9.8 hereafter.
ARTICLE VIII
TERMINATION
8.1 Termination.
This Agreement may be terminated and the Merger may be
abandoned at any time prior to or at the Closing:
(a) by mutual written consent of Acquiror and eNexi;
(b) by either Acquiror or eNexi:
(i) if the Closing shall not have occurred on or
before April 30, 2000, unless otherwise extended in writing by all of the
parties hereto; provided, however, that the right to terminate this Agreement
under this Section 8.1(b)(i) shall not be available to any party whose failure
to fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Closing to occur on or before that date; or
(ii) if any court of competent jurisdiction, or any
governmental body, regulatory or administrative agency or commission having
appropriate jurisdiction shall have issued an order, decree or filing or taken
any other action restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable.
(c) by eNexi if any of the conditions specified in Section 6.1
have not been met or if satisfaction of such a condition is or becomes
impossible (other than through the failure of eNexi to comply with their
respective obligations under this Agreement) and eNexi has not waived such
conditions on or before the Closing; or
(d) by Acquiror if any of the conditions specified in Section
6.2 have not been met or if satisfaction of such a condition is or becomes
impossible (other than through the failure of Acquiror to comply with their
respective obligations under this Agreement) and Acquiror has not waived such
condition on or before the Closing.
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8.2 Notice and Effect of Termination.
In the event of the termination and abandonment of this
Agreement pursuant to Section 8.1, written notice thereof shall forthwith be
given to the other party or parties specifying the provision pursuant to which
such termination is made. Upon termination, this Agreement shall forthwith
become void and all obligations of the parties under this Agreement will
terminate without any liability on the part of any party or its directors,
officers or stockholders and none of the parties shall have any claim or action
against any other party, except that the provisions of this Section 8.2 and
Sections 5.2, 5.7 and 5.9, shall survive any termination of this Agreement.
Nothing contained in this Section 8.2 shall relieve any party from any liability
for any breach of this Agreement other than in the event of a termination
pursuant to Section 8.1.
8.3 Extension; Waiver.
Any time prior to the Closing, the parties may (a) extend the
time for the performance of any of the obligations or other acts of any other
party under or relating to this Agreement; (b) waive any inaccuracies in the
representations or warranties by any other party or (c) waive compliance with
any of the agreements of any other party or with any conditions to its own
obligations. Any agreement on the part of any other party to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed on
behalf of such party.
8.4 Amendment and Modification.
This Agreement may be amended by written agreement of
Acquiror, Newco and eNexi.
ARTICLE IX
MISCELLANEOUS
9.1 Survival of Certain Representations and Warranties; Remedies.
All representations and warranties of the Principal
Stockholders contained in or made pursuant to Section 4.2 of this Agreement
shall survive the Closing for a period of twelve (12) months from the Closing
Date. The right to indemnification, payment of damages or other remedy based on
such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any Knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. The waiver of any condition based on the
accuracy of any representation or warranty, or on the performance of or
compliance with any covenant or obligation, will not affect the right to
indemnification, payment of damages, or other remedy based on such
representations, warranties, covenants, and obligations. The rights and remedies
of the parties to this Agreement are cumulative, not alternative. In addition to
their respective rights to damages or other remedies they may have, and without
limitation thereof, Acquiror shall have the right to obtain injunctive relief to
restrain any breach or otherwise to specifically enforce the provisions of this
Agreement, it being agreed by the parties that money
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damages alone would be inadequate to compensate Acquiror for such breach or
other failure to perform the obligations of eNexi and the eNexi Stockholders
under this Agreement.
The rights and remedies of the parties to this Agreement are
cumulative, not alternative. In addition to their respective rights to damages
or other remedies they may have, and without limitation thereof, Acquiror shall
have the right to obtain injunctive relief to restrain any breach or otherwise
to specifically enforce the provisions of this Agreement, it being agreed by the
parties that money damages alone would be inadequate to compensate Acquiror for
such breach or other failure to perform the obligations of eNexi and the eNexi
Stockholders under this Agreement.
9.2 Notices.
All notices requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given on the date if delivered
personally, or upon the second business day after it shall have been deposited
by certified or registered mail with postage prepaid, or upon the next business
day after it shall have been deposited with a nationally recognized overnight
courier such as federal express, or sent by telex, telegram or telecopier, as
follows (or at such other address or facsimile number for a party as shall be
specified by like notice):
(a) if to eNexi, to it at: with a copy to:
20 Corporate Circle Gregory Sichenzia, Esquire
Irvine, CA 92601 Sichenzia, Ross & Friedman LLP
Attn: Dr. Roger Miller 135 West 50th Street, 20th Floor
New York, NY 10020
Fax: (212) 664-7329
(b) if to Acquiror or Newco, to it at: with a copy to:
Silver King Resources, Inc. Stephen M. Cohen, Esquire
4372 44B Avenue Buchanan Ingersoll, P.C.
Delta, British Columbia Eleven Penn Center
Canada V4K 1H1 14th Floor
Attn: Alan Stier, President Philadelphia, PA 19103
Fax: (604) 946-4560 Fax: (215) 665-8760
9.3 Agreement; Assignment.
This Agreement, including all Exhibits and Schedules hereto,
constitutes the entire Agreement among the parties with respect to its subject
matter and supersedes all prior agreements and understandings, both written and
oral, among the parties or any of them with respect to such subject matter and
shall not be assigned by operation of law or otherwise.
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9.4 Binding Effect; Benefit.
This Agreement shall inure to the benefit of and be binding
upon the parties and their respective successors and assigns. Nothing in this
Agreement is intended to confer on any person other than the parties to this
Agreement or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.5 Headings.
The descriptive headings of the sections of this Agreement are
inserted for convenience only, do not constitute a part of this Agreement and
shall not affect in any way the meaning or interpretation of this Agreement.
9.6 Counterparts.
This Agreement may be executed in two or more counterparts and
delivered via facsimile, each of which shall be deemed to be an original, and
all of which together shall be deemed to be one and the same instrument.
9.7 Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the laws
that might otherwise govern under principles of conflicts of laws applicable
thereto.
9.8 Arbitration.
If a dispute arises as to the interpretation of this
Agreement, it shall be decided finally in an arbitration proceeding conforming
to the Rules of the American Arbitration Association applicable to commercial
arbitration then in effect at the time of the dispute. The arbitration shall
take place in Philadelphia, Pennsylvania. The decision of the Arbitrators shall
be conclusively binding upon the parties and final, and such decision shall be
enforceable as a judgment in any court of competent jurisdiction. The parties
shall share equally the costs of the arbitration.
9.9 Severability.
If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction or other authority to be
invalid, void, unenforceable or against its regulatory policy, the remainder of
this Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.
9.10 Release and Discharge.
By virtue of their execution of this Agreement, as of the
Closing and thereafter, each of the eNexi Stockholders hereby agrees to release,
remise and forever discharge eNexi from and against any and all debts,
obligations, liabilities and amounts owing from eNexi to the
40
<PAGE>
eNexi Stockholders prior to the Closing, and eNexi is not obligated to take any
action or make any payments to third parties on behalf of the eNexi
Stockholders.
9.11 Certain Definitions.
As used herein:
(a) "Affiliate" shall have the meanings ascribed to such term
in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange
Act of 1934, as amended to date (the "Exchange Act");
(b) "Business Day" shall mean any day other than a Saturday,
Sunday or a day on which federally chartered financial institutions are not open
for business in the City of Irvine, California.
(c) "Encumbrance" shall mean any lien, encumbrance, pledge,
hypothecation, claim or charge.
(d) "eNexi Stockholders" shall mean the Principal
Stockholders, together with the other stockholders of eNexi.
(e) "Exchange Ratio" shall equal 143.011 shares of Acquiror's
Common Stock for each share of eNexi Common Stock outstanding as of the
Effective Time.
(f) "Knowledge" shall mean the actual current knowledge of the
party , and/or the executive management of the party to this Agreement, as the
case may be, to whom knowledge is ascribed.
(g) "Material Adverse Effect" shall mean any adverse effect on
the business, condition (financial or otherwise) or results of operation of the
relevant party and its subsidiaries, if any, which is material to such party and
its subsidiaries, if any, taken as a whole;
(h) "Online Communities" means the following online websites
of eNexi: (i) VirtuallyFreeInternet.com, which provides internet access services
to subscribers for a monthly fee; and (ii) dollars4mail, which provides
subscribers with free web-based e-mail accounts and derives revenue from selling
information about its subscribers to web advertisers.
(i) "Person" means any individual, corporation, partnership,
association, trust or other entity or organization, including a governmental or
political subdivision or any agency or institution thereof;
(j) "Private Placement" means the private placement offering
of Acquiror's convertible preferred stock and/or common stock to accredited
and/or sophisticated investors commencing as soon as practicable after the date
hereof; and
(k) "Restricted Period" means the period commencing on the
Closing and ending on the earlier to occur of (x) the date on which the
Surviving Corporation provides
41
<PAGE>
written evidence satisfactory to the Acquiror Designees that the Surviving
Corporation has 500,000 subscribers in the aggregate for its Online Communities
whose accounts remain current and in compliance with the subscription standards
established by the Surviving Corporation; and (y) 2 years and 90 days after the
Closing.
42
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has signed or has caused
this Agreement to be signed by their respective officers hereunto duly
authorized, all as of the date first written above.
SILVER KING RESOURCES, INC.,
a Delaware Corporation
By: /s/ Alan Stier
-----------------------------------
Name: Alan Stier
Title: President
SILVER KING ACQUISITION, INC.,
a Delaware Corporation
By: /s/ Alan Stier
-----------------------------------
Name: Alan Stier
Title: President
ENEXI INC., a Delaware Corporation
By: /s/ Roger LeRoy Miller
-----------------------------------
Name: Roger LeRoy Miller
Title: President
/s/ Roger LeRoy Miller
-----------------------------------
Roger LeRoy Miller
/s/ Larry Mayle
-----------------------------------
Larry Mayle
Exhibit 21.1
SUBSIDIARIES
International Capri Resources S.A. de C.V.
Silver King Acquisition, Inc.
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,853
<SECURITIES> 0
<RECEIVABLES> 665,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 667,853
<PP&E> 0
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<TOTAL-ASSETS> 667,853
<CURRENT-LIABILITIES> 846,057
<BONDS> 0
0
0
<COMMON> 1,807
<OTHER-SE> (180,011)
<TOTAL-LIABILITY-AND-EQUITY> 667,853
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 758,704
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (758,704)
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<INCOME-CONTINUING> (758,704)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (758,704)
<EPS-BASIC> (.05)
<EPS-DILUTED> (.05)
</TABLE>
