EXHIBIT 10.3
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (this "AGREEMENT") is made
and entered into as of July 10, 2000 among B2B EURO WIRELESS.COM INC., a
Nevada corporation ("B2B"), MARGATE INDUSTRIES, INC., a Delaware
corporation ("Margate"), ______________________________, a Delaware
corporation to be formed by Margate ("Holding Company"),
____________________, a Delaware corporation to be formed as a direct
wholly owned subsidiary of Holding Company (the "Merger Sub 1"), and
____________________, a Delaware corporation to be formed as a direct
wholly owned subsidiary of Holding Company (the "Merger Sub 2") (each of
Holding Company, Merger Sub 1 and Merger Sub 2 to execute signature pages
hereto upon their formation).
RECITALS
A. The Boards of Directors of each of B2B and Margate believe it is
in the best interests of each company and their respective shareholders
that Margate form Holding Company and Merger Sub 1 and Merger Sub 2 for the
purposes of (i) effecting a reorganization of Margate pursuant to which
Holding Company will be the sole owner of all of the issued and outstanding
capital stock of Margate, and the current stockholders of Margate will
become the stockholders of Holding Company through the statutory merger of
Merger Sub 1 with and into Margate (the creation of the Holding Company,
Merger Sub 2 and such statutory merger hereinafter being referred to as
(the "REORGANIZATION"), and (ii) having Holding Company acquire B2B through
the statutory merger of Merger Sub 2 with and into B2B (the "MERGER").
B. In furtherance of the foregoing, the Board of Directors of
Margate has approved the Reorganization and the Boards of Directors of
Margate and B2B have each approved the Merger.
C. Pursuant to the Merger and subject to the terms and conditions of
this Agreement, Holding Company shall acquire from the shareholders of B2B
all of the issued and outstanding shares of common stock of B2B ("B2B
COMMON STOCK"), in exchange for shares of Common Stock of Holding Company
("HOLDING COMPANY SHARES").
D. Margate and B2B desire to make certain representations and
warranties and other agreements in connection with the Merger.
E. It is intended by the parties hereto that the Reorganization and
Merger shall constitute a reorganization within the meaning of Section 368
of the Internal Revenue Code of 1986, as amended (the "CODE").
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NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable
consideration, the parties agree as follows:
THE MERGER AND REORGANIZATION
1.1 THE MERGER AND REORGANIZATION. (a) At the Effective Time (as
defined in Section 1.2) and subject to and upon the terms and conditions of
this Agreement and the applicable provisions of the Nevada General
Corporation Law ("Nevada Law") and the Delaware General Corporation Law
("Delaware Law"), Merger Sub 2 shall be merged with and into B2B, the
separate corporate existence of Merger Sub 2 shall cease, and B2B shall
continue as the surviving corporation and as a wholly-owned subsidiary of
Holding Company. B2B as the surviving corporation after the Merger is
hereinafter sometimes referred to as the "SURVIVING CORPORATION."
(b) At the Effective Time and subject to and upon the terms and
conditions of this Agreement and the applicable provisions of Delaware Law,
Merger Sub 1 shall be merged with and into Margate, the separate corporate
existence of Merger Sub 1 shall cease, and Margate shall continue as the
surviving corporation and as a wholly-owned subsidiary of Holding Company.
1.2 EFFECTIVE TIME. Unless this Agreement is earlier terminated
pursuant to Section 7.1, the closing of the Merger and the Reorganization
(the "CLOSING") will take place at a place and time and on a date
reasonably agreed to by Margate and B2B which date shall be no later than
the business day following satisfaction or waiver of the conditions set
forth in Article VI, and in no event later than sixty days following the
date the Staff of the Securities and Exchange Commission will grant
effectiveness to the Form S-4 to be filed in connection with the
Reorganization and Merger, unless another date is agreed to by Margate and
B2B. The date upon which the Closing actually occurs is herein referred to
as the "CLOSING DATE." On the Closing Date, (i) the parties hereto shall
cause the Merger to be consummated by filing a Certificate of Merger (or
like instrument) with the Secretary of State of the State of Nevada (the
"CERTIFICATE OF MERGER"), in accordance with the relevant provisions of
applicable law (the time of acceptance by the Secretary of State of Nevada
of such filing being referred to herein as the "EFFECTIVE TIME") and by
filing a Certificate of Merger (or like instrument) with the Secretary of
State of the State of Delaware in accordance with applicable law, and (ii)
the parties hereto shall cause the Reorganization to be consummated by
filing a Certificate of Merger (or like instrument) with the Secretary of
State of the State of Delaware in accordance with applicable law .
1.3 EFFECT OF THE MERGER. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of Nevada and
Delaware Law. Without limiting the generality of the foregoing, and
subject thereto, at the Effective Time, all the property, rights,
privileges, powers and
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franchises of Merger Sub shall vest in the Surviving Corporation, and all
debts, liabilities and duties of Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 CERTIFICATE OF INCORPORATION; BYLAWS.
(a) At the Effective Time, the Certificate of Incorporation of
B2B as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation.
(b) The Bylaws of B2B, as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended.
1.5 DIRECTORS AND OFFICERS. The directors of B2B immediately prior to
the Effective Time shall be the directors of the Surviving Corporation,
each to hold office in accordance with the Certificate of Incorporation and
Bylaws of the Surviving Corporation. The officers of B2B immediately prior
to the Effective Time shall be the officers of the Surviving Corporation,
each to hold office in accordance with the Bylaws of the Surviving Corporation.
1.6 SHARES TO BE ISSUED; EFFECT ON COMMON STOCK. The aggregate number
of Holding Company Shares to be issued pursuant to the Merger in exchange
for the acquisition by Holding Company of all outstanding B2B Common Stock
shall be the Aggregate B2B Share Number (as defined in Section
1.6(h)(iii)). The aggregate number of Holding Company Shares to be issued
pursuant to the Reorganization in exchange for the acquisition by Holding
Company of all outstanding securities of Margate ("Margate Common Stock")
shall be the Aggregate Margate Share Number (as defined in Section
1.6(h)(iv)) Subject to the terms and conditions of this Agreement, as of
the Effective Time, by virtue of the Merger and without any action on the
part of Merger Sub 1, Merger Sub 2, Margate, B2B or the holder of any
shares of B2B Common Stock or Margate Common Stock, the following shall occur:
(a) EXCHANGE OF B2B COMMON STOCK. Each share of Common Stock,
par value $.001 per share, of B2B ("B2B COMMON STOCK"), issued and
outstanding immediately prior to the Effective Time will be exchanged for
that number of newly issued Holding Company Shares equal to the Exchange
Ratio (as defined in Section 1.6(h)(iii) below). All of such Holding
Company Shares shall be duly authorized, validly issued, fully paid and
non-assessable and, at the Effective Time, the recipients thereof shall be
sole owners of such Holding Company Shares, free and clear of all liens,
claims and encumbrances whatsoever.
(b) STOCK OPTIONS. At the Effective Time, all options to
purchase B2B Common Stock then outstanding shall be treated in accordance
with the provisions described below.
(i) Immediately prior to the Effective Time, each holder of
an outstanding option to purchase shares of B2B Common Stock (each a "B2B
OPTION") under an Option Plan or otherwise, whether vested or unvested,
shall be entitled to receive as of the Effective Time an option
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to purchase Holding Company Shares (a "Replacement Option"), with the
vesting schedule for the Replacement Option being the same as the vesting
schedule for the corresponding B2B Option with full credit being given by
Holding Company for such optionee's length of service with B2B. Following
the Effective Time, each holder of a Replacement Option, upon exercise of
such Replacement Option (if and when vested), shall be entitled to receive
that number of whole shares of Holding Company Shares equal to the product
of the number of shares of B2B Common Stock that were issuable upon
exercise of the corresponding B2B Option immediately prior to the Effective
Time (without regard to vesting) multiplied by the Exchange Ratio, rounded
up (in the case of Replacement Options) to the nearest whole number of
Holding Company Shares. In addition, following the Effective Time, the per
share exercise price for the Holding Company Shares issuable upon exercise
of such Replacement Options shall be equal to the quotient determined by
dividing the exercise price per share of B2B Common Stock at which the
corresponding B2B Option was exercisable immediately prior to the Effective
Time by the Exchange Ratio, rounded down to the nearest whole cent. It is
the intention of the parties that the Replacement Options be, following the
Effective Time, Nonqualified stock options. Promptly following the
Effective Time, Holding Company will issue to each holder of an Replacement
Option a document evidencing the foregoing.
(ii) Each B2B Option outstanding immediately prior to the
Effective Time shall be deemed canceled and extinguished without any
conversion thereof at the Effective Time, subject to issuance of the
Replacement Options as provided herein.
(c) OPTIONS IN MARGATE. Each option to purchase common stock
of Margate held by an employee, officer or director of Margate and as
disclosed on Schedule 2.2(c) below shall be assumed by the Holding Company
on identical terms to those which were in place on the date such options
were granted, provided, however the exercise price shall be $1.625 per
share and the options will be exercisable for shares of the Holding Company
rather than Margate.
(d) SECURITIES OF B2B. The issued and outstanding securities of
B2B shall remain outstanding and shall be unchanged as a result of the
Merger (except that ownership of the B2B shares shall pass to Holding
Company pursuant to Section 1.6(a)).
(e) SECURITIES OF HOLDING COMPANY. The issued and outstanding
securities of Holding Company immediately prior to the Effective Time shall
remain outstanding and shall be unchanged as a result of the Merger.
(f) ADJUSTMENTS TO EXCHANGE RATIO. The Exchange Ratio shall be
appropriately adjusted to reflect fully the effect of any stock split,
reverse stock split, stock dividend (including any dividend or distribution
of securities convertible into Holding Company Shares or B2B Common Stock),
reorganization, recapitalization or other like change with respect to
Holding Company Shares occurring after the date hereof and prior to the
Effective Time.
(g) FRACTIONAL SHARES. No fraction of a share of Holding
Company Shares will be issued, but in lieu thereof, each holder of shares
of B2B Common Stock who would otherwise be
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entitled to a fraction of a share of Holding Company Shares (after
aggregating all fractional shares of Holding Company Shares to be received
by such holder) shall be entitled to receive a whole Holding Company Share
from Holding Company.
(h) DEFINITIONS.
(i) AGGREGATE B2B SHARES. The "Aggregate B2B Shares" shall
mean the aggregate number of shares of B2B Common Stock outstanding
immediately prior to the Effective Time.
(ii) AGGREGATE MARGATE SHARES. The "Aggregate Margate
Shares" shall mean the aggregate number of shares of Margate Common Stock
(on a fully diluted basis assuming the exercise of all outstanding options
and warrants and the conversion of any and all instruments or securities
which are convertible into equity securities) outstanding immediately prior
to the Effective Time.
(iii) AGGREGATE B2B SHARE NUMBER. The "Aggregate B2B Share
Number" shall mean such number of newly issued Holding Company Shares that,
when issued to the shareholders of B2B at the Effective Time and including
all Replacement Options, will result in the shareholders of B2B owning, on
a fully-diluted basis, 89.4 percent of the total number of issued and
outstanding Holding Company Shares after giving effect to such issuance,
rounded to the nearest whole share (with all fractions of a share being
rounded up).
(iv) The "AGGREGATE MARGATE SHARE NUMBER" shall mean such
number of newly issued Holding Company Shares that, when issued to the
shareholders of Margate at the Effective Time and including all Holding
Company Shares issuable upon the exercise of the options described in
Section 1.6(c) above, will result in the shareholders, and upon exercise of
the options described in Section 1.6(c) current option holders, of Margate
owning, on a fully-diluted basis, 10.6 percent of the total number of
issued and outstanding Holding Company Shares after giving effect to such
issuance hereof, rounded to the nearest whole share (with all fractions of
a share being rounded up).
(v) EXCHANGE RATIO. The "Exchange Ratio" shall mean, in
the case of B2B a fraction, (a) the numerator of which is equal to the
Aggregate B2B Share Number, and (b) the denominator of which is equal to
the Aggregate B2B Shares and in the case of Margate a fraction (a) the
numerator of which is equal to the Aggregate Margate Share Number and (b)
the denominator of which is equal to the Aggregate Margate Shares.
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(i) RELATIVE PERCENTAGE OWNERSHIP. Notwithstanding
anything contained in this Section 1.6 to the contrary, the issuance of the
Aggregate Share Number of newly issued Holding Company Shares to the
shareholders of B2B in the Reorganization and Merger, but excluding any
Margate shares acquired by such persons in the open market prior to the
Effective Time, shall result in such persons having an ownership interest
at the Effective Time not exceeding 89.4 percent of the total number of
issued and outstanding Holding Company Shares on a fully-diluted basis.
1.7 INTENTIONALLY OMITTED
1.8 SURRENDER OF CERTIFICATES.
(a) HOLDING COMPANY TO PROVIDE COMMON STOCK. At the Closing,
Holding Company shall make available the aggregate number of shares of
Holding Company Shares issuable pursuant to Section 1.6.
(b) EXCHANGE PROCEDURES. At the Closing, B2B shall cause to be
surrendered the certificates representing outstanding shares of B2B Common
Stock in exchange for Holding Company Shares. At the Closing, Margate
shall cause to be surrendered the certificates representing outstanding
shares of Margate Common Stock in exchange for Holding Company Shares. In
each such case, upon surrender of such certificates ("CERTIFICATES") to
Holding Company, the holders of such Certificates shall be entitled to
receive in exchange therefor a number of whole shares of Holding Company
Shares to which such holder is entitled pursuant to Section 1.6 and the
Certificates so surrendered shall forthwith be canceled.
(c) TRANSFERS OF OWNERSHIP. If any share of Holding Company
Shares is to be issued in a name other than that in which the Certificate
surrendered in exchange therefor is registered, it will be a condition of
the issuance thereof that the Certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to Holding Company or any agent
designated by it any transfer or other taxes required by reason of the
issuance of shares of Holding Company Shares in any name other than that of
the registered holder of the Certificate surrendered, or established to the
reasonable satisfaction of Holding Company or any agent designated by it
that such tax has been paid or is not payable.
1.9 TAX AND ACCOUNTING CONSEQUENCES. It is intended by the parties
hereto that the Merger shall constitute a reorganization within the meaning
of Section 368 of the Code.
1.10 TAKING OF NECESSARY ACTION; FURTHER ACTION. If, at any time
after the Effective Time, any such further action is necessary or desirable
to carry out the purposes of this Agreement and to vest the Surviving
Corporation with full right, title and possession to all assets, property,
rights, privileges, powers and franchises of B2B and Merger Sub, the
officers and directors of B2B, Margate, Holding Company and Merger Sub are
fully authorized in the name of their respective corporations or otherwise
to take, and will take, all such lawful and necessary action.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF MARGATE
Margate, with respect to itself and each of its subsidiaries (all
references to Margate in this Article II to be deemed references to Margate
and its subsidiaries taken as a whole and all references to Merger Sub
shall be deemed to refer to Merger Sub 1 and Merger Sub 2), hereby
represents and warrants to B2B as follows:
2.1 ORGANIZATION OF MARGATE, HOLDING COMPANY AND MERGER SUB. (a)
Margate is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Margate has the
corporate power to own, lease and operate its properties and to carry on
its business as now being conducted. Margate is duly qualified to do
business and in good standing as a foreign corporation in each jurisdiction
in which the failure to be so qualified would or would reasonably be likely
to have a Material Adverse Effect on Margate. For purposes hereof, a
"MATERIAL ADVERSE EFFECT" means any event, effect or change that has, would
or would reasonably be likely to have a material adverse effect on the
business, assets (including intangible assets), condition (financial or
otherwise) or results of operations or prospects of an entity. Margate has
delivered a true and correct copy of its Certificate of Incorporation and
Bylaws, each as amended to date, to B2B. SCHEDULE 2.1 lists the current
directors and officers of Margate.
(b) On the Closing Date, each of Holding Company and Merger Sub
(i) will be a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware, with the corporate power
to own, lease and operate its properties and to carry on its business as
proposed to be conducted; and (ii) will be duly qualified to do business
and in good standing as a foreign corporation in each jurisdiction in which
the failure to be so qualified would or would reasonably be likely to have
a Material Adverse Effect. On or prior to the Closing Date, Margate will
deliver to B2B true and correct copies of the Certificate of Incorporation
and Bylaws of each of Holding Company and Merger Sub, each as amended to date.
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2.2 CAPITAL STRUCTURE OF MARGATE AND HOLDING COMPANY.
(a) The authorized capital stock of Margate consists of
5,000,000 shares of Common Stock, par value $.015 per share, of which
1,609,542 shares are issued and outstanding. As at May 29, 2000, such
Common Stock was held of record by the persons, with the record addresses
and in the amounts set forth on SCHEDULE 2.2(a). At the Closing, Margate
shall deliver a revised Schedule 2.2(a) which shall set forth updated
shareholder information as of a date not more than thirty (30) days prior
to the Closing Date. All outstanding shares of Margate Common Stock are
duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights, including without limitation, such rights
created by statute, the Certificate of Incorporation or Bylaws of Margate
or any agreement to which Margate is a party or by which it is bound.
After giving effect to the Reorganization, all of such shares of Common
Stock of Margate will be held of record and beneficially by the Holding Company.
(b) On the Closing Date, the authorized capital stock of the
Holding Company will consist of 5,000,000 shares of Common Stock, par value
$.015 per share, of which 1,609,542 shares will be issued and outstanding
after giving effect to the Reorganization; PROVIDED that if any shares of
Margate Common Stock are issued upon the valid exercise of Margate Options
(as defined below), then at the Closing Margate shall deliver a Schedule
2.2(b) setting forth the adjusted number of issued and outstanding Holding
Company shares (after giving effect to the Reorganization). All shares of
Holding Company Common Stock to be issued to holders of B2B Common Stock
and Margate Common Stock pursuant to the Merger will be duly authorized,
validly issued, fully paid and non-assessable and not subject to preemptive
rights, including without limitation, such rights created by statute, the
Certificate of Incorporation or Bylaws of Holding Company or any agreement
to which Holding Company is a party or by which it is bound, free and clear
of all liens, pledges, encumbrances, charges, security interests,
agreements or claims by or on the part of any person, firm, corporation, or
other entity ("LIENS") or any other limitation or restriction.
(c) Margate has issued options (the "Margate Options") to
purchase an aggregate of 280,000 shares of Margate Common Stock to certain
individuals identified in SCHEDULE 2.2(c). There are no other options,
warrants, calls, rights, commitments or agreements of any character,
written or oral, to which Margate is a party or by which it is bound
obligating Margate to issue, deliver, sell, repurchase or redeem, or cause
to be issued, delivered, sold, repurchased or redeemed, any shares of the
Common Stock of Margate or obligating Margate to grant, extend, accelerate
the vesting of, change the price of, otherwise amend or enter into any such
option, warrant, call, right, commitment or agreement. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to Margate. Schedule
2.2 (c) sets forth for each outstanding Margate Option, the name of the
holder of such option, the domicile address of such holder, the number of
shares of Margate Common Stock subject to such option, the exercise price
of such option and the vesting schedule for such option, including the
extent vested to date. Margate has never accelerated the vesting schedule
of any of the outstanding Margate Options and no Margate Option will be
accelerated and become exercisable by reason of the transactions
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contemplated by this Agreement. To the best knowledge of Margate, there
are no voting trusts, proxies, or other agreements with respect to the
voting stock of Margate. Except as disclosed herein, the consummation of
the Merger will not trigger, create or otherwise cause any entity or
individual (other than the B2B shareholders and the holders of B2B Options
on and subject to the terms and conditions of this Agreement) to have any
right, under the terms of Margate's Articles or Bylaws or pursuant to any
contract with Margate, to receive or acquire any securities of Margate,
Holding Company or Merger Sub.
(d) On the Closing Date: (i) all of the outstanding capital stock
of Merger Sub will be owned by Holding Company free and clear of all Liens;
(ii there will be no securities of Holding Company or its subsidiaries
convertible into or exchangeable for, no options or other rights to acquire
from Holding Company or its subsidiaries other than the existing Margate
options described in Schedule 2.2(c) above which shall convert to Holding
Company options as of the Effective Time pursuant to Section 1.6(b)(iii)
above, and no other contract, understanding, arrangement or obligation
(whether or not contingent) providing for the issuance or sale, directly or
indirectly, of any capital stock or other ownership interests in, or any
other securities of, Merger Sub. There are no outstanding contractual
obligations of Holding Company or Merger Sub to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other
ownership interests in Merger Sub.
2.3 SUBSIDIARIES. Except as set forth in SCHEDULE 2.3, Margate does
not have any subsidiaries and does not otherwise own any shares of common
stock or any other equity interest in, or control, directly or indirectly,
any other corporation, partnership, association, joint venture or other
business entity.
2.4 AUTHORITY. Subject only to the requisite approval of the
Reorganization, the Merger and this Agreement by Margate's stockholders,
Margate has and, on the Closing Date, each of Holding Company and Merger
Sub will have, all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby. The
vote required by Margate's stockholders to duly approve the Reorganization,
the Merger and this Agreement is fifty percent (50%) of the outstanding
shares. The execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Margate, subject only to the
approval of the Reorganization, the Merger and this Agreement by Margate's
stockholders. Margate's Board of Directors has approved the
Reorganization, the Merger and this Agreement. This Agreement has been
duly executed and delivered by Margate and, on the Closing Date, will be
duly executed and delivered by each of Holding Company and each Merger Sub.
This Agreement constitutes the valid and binding obligation of Margate and,
on the Closing Date, will constitute the valid and binding obligation of
each of Holding Company and each Merger Sub, in each case enforceable in
accordance with its terms, except as to the effect, if any, of (a)
applicable bankruptcy and similar laws affecting the rights of creditors
generally, and (b) rules of law governing specific performance, injunctive
relief and other equitable remedies.
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2.5 ABSENCE OF CONFLICTS. Subject only to the approval of the
Reorganization, the Merger and this Agreement by Margate's stockholders,
the execution and delivery of this Agreement by Margate, Holding Company
and Merger Sub does not, and the consummation of the transactions
contemplated hereby will not, conflict with, or result in any violation of,
or default under (with or without notice or lapse of time, or both), or
give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under (any such event, a "CONFLICT") (i)
any provision of the respective Certificate of Incorporation or Bylaws of
Margate, Holding Company or Merger Sub or (ii) any mortgage, indenture,
lease or other material contract, agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to any such party or its
properties or assets. Except as set forth in Schedule 2.5, no consent,
waiver, approval, order or authorization of, or registration, declaration
or filing with, any court, administrative agency or commission or other
federal, state, county, local or foreign governmental authority,
instrumentality, agency or commission ("GOVERNMENTAL ENTITY") or any third
party, including a party to any agreement with any of Margate, Holding
Company or Merger Sub (so as not to trigger any Conflict), is required by
or with respect to Margate, Holding Company or Merger Sub in connection
with the execution and delivery of this Agreement or the consummation by
any such party of the transactions contemplated hereby and thereby, except
for (i) the filing of the Certificate of Merger with the Secretary of State
of Delaware and the Secretary of State of Nevada, and (ii) such consents,
waivers, approvals, orders, authorizations, registrations, declarations and
filings as may be required under applicable federal and state securities laws.
2.6 FINANCIAL STATEMENTS. SCHEDULE 2.6 sets forth Margate's audited
consolidated balance sheet as of December 31, 1999, December 31, 1998 and
December 31, 1997 and the related audited consolidated statements of
income, changes in stockholders' equity and cash flows for the periods then
ended (the "AUDITED FINANCIALS"). The Audited Financials have been
prepared in accordance with United States generally accepted accounting
principles ("GAAP") applied on a basis consistent throughout the periods
indicated and consistent with each other. The Audited Financials present
fairly the financial condition, operating results and cash flows of Margate
as of the dates and for the periods indicated therein. Margate's audited
Balance Sheet as of December 31, 1999 is sometimes referred to herein as
the "CURRENT BALANCE SHEET".
2.7 NO UNDISCLOSED LIABILITIES. (a) Margate does not have and, on
the Closing Date, neither Margate nor the Holding Company will have, any
material liability, indebtedness, obligation, expense, claim, deficiency,
guaranty or endorsement of any type, whether accrued, absolute, contingent,
matured, unmatured or other (whether or not required to be reflected in
financial statements in accordance with generally accepted accounting
principles), which individually or in the aggregate, (i) has not been
reflected in the Current Balance Sheet, or (ii) has not arisen in the
ordinary course of Margate's business since the date of the Current Balance
Sheet, consistent with past practices.
(b) On the Closing Date, Merger Sub will not have any material
liability, indebtedness, obligation, expense, claim, deficiency, guaranty
or endorsement of any type, whether accrued,
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absolute, contingent, matured, unmatured or other (whether or not required
to be reflected in financial statements in accordance with generally
accepted accounting principles).
2.8 SEC FILINGS; FINANCIAL STATEMENTS. SCHEDULE 2.8 contains a list
of all documents filed by Margate with the Securities and Exchange
Commission (the "SEC") from and after January 1, 1998, copies of which
Margate has made available to B2B, all in the form so filed (all of the
foregoing being collectively referred to as the "SEC Documents"). As of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act of 1933 (the
"Securities Act") or the Securities Exchange Act of 1934 (the "Exchange
Act"), as the case may be. The consolidated financial statements of
Margate, including the notes thereto, included in the SEC Documents comply
or (as of the date of filing) will comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been or (as of
the date of filing) will be prepared in accordance with U.S. GAAP applied
on a consistent basis throughout the periods indicated (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by the applicable rules and regulations of the SEC) and present
or will present (as of the date of filing) fairly the consolidated
financial position of Margate at the dates thereof and the consolidated
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
adjustments which on the basis of information available to Margate as of
the date hereof will not be material in amount or significance). There has
been no change in Margate's accounting policies except as described in the
notes to Margate's financial statements. As of the date hereof, Margate
has filed, and, at the Effective Time, Margate will have filed with the SEC
and the Nasdaq Stock Market all reports and other documents required to be
filed by it under applicable federal securities laws and regulations and
agreements with the SEC and the Nasdaq Stock Market. Neither the SEC
Documents, as of the date of filing thereof (except as subsequently amended
or superseded), nor any statement made in any certificate or other document
furnished by Margate or Holding Company pursuant to this Agreement
contained or will contain any untrue statement of a material fact or omits
or will omit to state a material fact necessary in order to make the
statements contained therein, in light of the circumstances under which
they were made, not misleading.
2.9 NO CHANGES. Except as disclosed in SCHEDULE 2.9, since December 31,
1999:
(1) There has, at no time, been a material adverse change in the
financial condition, results of operations, business, properties, assets,
liabilities, or future prospects of Margate;
(2) Margate has not authorized, declared, paid, effected or set
aside any dividend or liquidating or other distribution in respect of its
capital stock or any direct or indirect redemption, purchase, or other
acquisition of any of its capital stock, except as contemplated in Section 4.4;
(3) The operations and business of Margate have been conducted,
in all respects, only in the ordinary course in accordance and consistent
with past practices;
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(4) Margate has not suffered any loss of or damage to any
material assets (whether or not covered by insurance), business or
customers, or waived any right of material value;
(5) Margate has not, other than in the ordinary course of
business, sold, assigned, transferred, conveyed, leased or otherwise
disposed of, or agreed to sell, lease or otherwise dispose of, any of its
assets or entered into any other transaction, contract or commitment or
incurred any obligation or commitment;
(6) Margate has not engaged in any transaction involving more
than $50,000 in the aggregate, except in the ordinary course of business
and consistent with past practices;
(7) Margate has not made any amendments or changes to its
Articles of Incorporation or Bylaws or to the terms of any outstanding
securities;
(8) Margate has not made any capital expenditure or commitment,
either individually or in the aggregate, exceeding $50,000;
(9) There has not been any change in accounting methods or
practices (including any change in depreciation or amortization policies or
rates) by Margate;
(10) There has not been any increase in the salary or other
compensation payable or to become payable by Margate to any of its
officers, directors, employees or advisors, or the declaration, payment, or
commitment or obligation of any kind for the payment by Margate of, a bonus
or other additional salary or compensation to any such person;
(11) There has not been any termination, extension, amendment or
modification to the terms of any material agreement, contract, covenant,
instrument, lease, license or commitment to which Margate is a party or by
which it or any of its assets are bound;
(12) There has not been any sale, lease, license or other
disposition of any of the material assets or properties of the Margate, or
the creation of any security interest in such assets or properties;
(13) Margate has not waived or released any right or claim,
including any write-off or other compromise of any account receivable of
Margate exceeding $50,000 in the aggregate;
(14) There has not been any material change in the pricing
charged by Margate to its customers or in the pricing charged by any
suppliers or other entities from which Margate purchases products or services;
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(15) There is not and has not been issuance or sale, or contract
to issue or sell, by Margate of any of its Common Stock, or securities
exchangeable, convertible or exercisable therefor, or any securities,
warrants, options or rights to purchase any of the foregoing;
(16) There has not occurred any event or condition of any
character that has or would reasonably be expected to have a Material
Adverse Effect on Margate;
(17) There has not occurred any negotiation or agreement by
Margate or any officer or employee thereof to do any of the things
described in the preceding clauses (other than negotiations with B2B and
its representatives regarding the transactions contemplated by this
Agreement); and
(18) Margate has not entered into any agreement or commitment
to do any of the things described in the preceding clauses (1) through (17).
2.10 TAX MATTERS. Margate has paid all domestic, foreign and other
taxes, excise taxes, sales taxes, use taxes, gross receipts taxes,
franchise taxes, employment and payroll related taxes, property taxes and
import duties, whether or not measured in whole or in part by net income
(collectively, "Taxes"), required to be paid by it through the date hereof
and all deficiencies or other additions to tax, interest and penalties
thereon owed by it, and has withheld with respect to its employees all
federal and state taxes required to be withheld. Margate has timely filed
all domestic and foreign tax returns, estimates, information statements and
reports (collectively, "Returns") required to be filed by it and such
Returns have been completely and accurately prepared in accordance with
applicable law and regulations. Margate will cause to be filed in a timely
manner all Returns required to be filed after the date hereof and on or
before the Closing Date in connection with any Tax with respect to Margate.
Margate has not been delinquent in the payment of any Tax nor is there any
Tax deficiency outstanding, assessed or proposed against Margate, nor has
Margate executed any waiver of any statute of limitations on or extending
the period for the assessment or collection of any Tax. No audit or other
examination of any Return of Margate is presently in progress, nor has
Margate been notified of any request for such an audit or other
examination. Margate has made available to B2B true and complete copies of
all tax Returns for Margate, including all income tax Returns and all sales
and use tax Returns, filed for the 1997, 1998 and 1999 tax years. Margate
has no knowledge of any basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any
lien on the assets of Margate. Margate is not a party to any tax sharing,
tax indemnification or tax allocation agreement nor does Margate owe any
amount under any such agreement.
2.11 RESTRICTIONS ON BUSINESS ACTIVITIES. Other than as set forth on
SCHEDULE 2.11, there is no agreement (noncompete or otherwise), commitment,
judgment, injunction, order or decree to which Margate is a party or
otherwise binding upon Margate which has or reasonably would be expected to
have the effect of prohibiting or impairing any business practice of
Margate, any acquisition of property (tangible or intangible) by Margate or
the conduct of business by Margate. Margate has not entered into any
agreement under which Margate is restricted from selling, licensing
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or otherwise distributing any of its technology or products to or providing
services to, customers or potential customers or any class of customers, in
any geographic area, during any period of time or in any segment of the market.
2.12 TITLE OF PROPERTIES; ABSENCE OF LIENS AND ENCUMBRANCES.
(a) SCHEDULE 2.12(a) sets forth a list of all real property
currently owned or leased by Margate, the name of the lessor and the date
of the lease and each amendment thereto. All such current leases are in
full force and effect, are valid and effective in accordance with their
respective terms, and there is not, under any of such leases, any existing
default or event of default (or event which with notice or lapse of time,
or both, would constitute a default).
(b) Margate has good and valid title to, or, in the case of
leased properties and assets, valid leasehold interests in, all of its
material tangible properties and assets, real, personal and mixed, used or
held for use in its business, free and clear of any Liens, except as
reflected in the Current Balance Sheet or in SCHEDULE 2.12(b) and except
for liens for taxes not yet due and payable and such imperfections of title
and encumbrances, if any, which are not material in character, amount or
extent, and which do not materially detract from the value, or materially
interfere with the present use, of the property subject thereto or affected
thereby.
(c) SCHEDULE 2.12(c) lists all material items of equipment (the
"Equipment") owned or leased by Margate as of March 31, 2000, and such
Equipment is (i) adequate for the conduct of the business of Margate as
currently conducted and (ii) in good operating condition, regularly and
properly maintained, subject to normal wear and tear. At the Closing,
Margate shall deliver a revised Schedule 2.12(c) which shall set forth an
updated list of Equipment as of a date not more than thirty (30) days prior
to the Closing Date.
2.13 INTELLECTUAL PROPERTY. The patents, patent applications, patent
licenses, trade names, trademarks, service marks, copyrights and other
intellectual property rights identified on SCHEDULE 2.13 constitute all
such intellectual property rights owned or used by or licensed to Margate
(collectively, "INTELLECTUAL PROPERTY"). Margate owns or otherwise
possesses legally enforceable rights to use each item of the Intellectual
Property. Except as set forth in said Schedule, Margate is not a party to
any written or oral agreement whereby any third party is licensed or
otherwise permitted to use any Intellectual Property or any know-how,
formula, trade secret or proprietary right owned or used by it. To the
best of its knowledge, Margate is not violating or infringing any patent,
patent license, trade name, trademark, service mark, copyright, know-how,
formula or other proprietary right or trade secret of any third party, and
there is no claim, action or proceeding pending or, to the knowledge of
Margate threatened, with respect to any such violation or infringement.
Margate has no knowledge of any trade name, trademark, service mark,
copyright or other proprietary right that infringes upon any of the
Intellectual Property.
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2.14 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(a) Except as set forth on SCHEDULE 2.14(a), Margate does not
have, is not a party to nor is it bound by:
(i) any contracts or agreements, to which Margate is a
party with respect to any Intellectual Property with a value or cost in
excess of $25,000;
(ii) any currently effective employment or consulting
agreement or contract (or commitment to enter into any such agreement or
contract) with an employee or individual consultant or salesperson or
currently effective consulting or sales agreement or contract (or
commitment to enter into any such agreement or contract) with a firm or
other organization,
(iii) any agreement or plan, including, without limitation,
any stock option plan, stock appreciation rights 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,
(iv) any fidelity or surety bond or completion bond,
(v) any lease of personal property having a value
individually in excess of $25,000,
(vi) any agreement of indemnification, agreement providing
for reimbursement of payments or providing a right of rescission, hold
harmless or guaranty; or any obligation or liability with respect to
infringement by Margate or any other person of the Intellectual Property
rights of another person,
(vii) any agreement, contract or commitment containing any
covenant limiting the freedom of Margate to engage in any line of business
or to compete with any person,
(viii) any agreement, contract or commitment relating to
capital expenditures and involving future payments in excess of $10,000
individually or $25,000 in the aggregate,
(ix) any agreement, contract or commitment relating to the
disposition or acquisition of assets or any interest in any business
enterprise outside the ordinary course of Margate's business,
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(x) any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments relating to the
borrowing of money or extension of credit,
(xi) any purchase order or contract for the purchase of
materials involving in excess of $10,000 individually or $25,000 in the
aggregate,
(xii) any construction contracts,
(xiii) any distribution, joint marketing or development
agreement, or
(xiv) any other agreement, contract or commitment that
involves $25,000 or more or is not cancelable without penalty within thirty
(30) days.
(b) Margate is in material compliance with and has not
materially breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or
conditions of any material agreement, contract, covenant, instrument,
lease, license or commitment to which Margate is a party or by which it is
bound (collectively a "CONTRACT"), nor is Margate aware of any event that
would constitute such a breach, violation or default with the lapse of
time, giving of notice or both. Each Contract is in full force and effect
and, except as otherwise disclosed on SCHEDULE 2.14(b), is not subject to
any material default thereunder by any party obligated to Margate pursuant
thereto. Margate has obtained, or will obtain prior to the Closing Date,
all necessary consents, waivers and approvals of parties to any Contract as
are required thereunder in connection with the Reorganization or the Merger
or for such Contracts to remain in effect without modification after the
Closing.
2.15 INTERESTED PARTY TRANSACTIONS. Except as set forth on SCHEDULE
2.15, no officer or director of Margate or holder of 5% or more of any
class or series of capital stock of Margate (nor any ancestor, sibling,
descendant or spouse of any of such persons, or any trust, partnership or
corporation in which any of such persons has or has had an interest), has
or has had, directly or indirectly, (i) an interest in any entity which
furnished or sold, or furnishes or sells, services or products that Margate
furnishes or sells, or proposes to furnish or sell, or (ii) any interest in
any entity that purchases from or sells or furnishes to Margate, any goods
or services or (iii) a beneficial interest in any Contract; provided, that
ownership of no more than one percent (1%) of the outstanding voting
securities of a publicly traded entity shall not be deemed an "interest in
any entity" for purposes of this Section 2.15.
2.16 GOVERNMENTAL AUTHORIZATION. SCHEDULE 2.16 accurately lists each
consent, license, permit, grant or other authorization issued to Margate by
a Governmental Entity (i) pursuant to which Margate currently operates or
holds any interest in any of its properties or (ii) which is required for
the operation of its business or the holding of any such interest (herein
collectively called "MARGATE AUTHORIZATIONS"). Margate Authorizations are
in full force and effect and constitute
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all Margate Authorizations required to permit Margate to operate or conduct
its business or hold any interest in its properties or assets.
2.17 LITIGATION. Except as set forth in SCHEDULE 2.17, there is no
action, suit or proceeding of any nature pending, or, to the best knowledge
of Margate, threatened, against Margate, its properties or any of its
officers or directors, nor, to the knowledge of Margate, is there any
reasonable basis therefor. There is no investigation pending or, to
Margate's knowledge, threatened against Margate, its properties or any of
its officers or directors (nor, to the best knowledge of Margate is there
any reasonable basis therefor) by or before any Governmental Entity. No
Governmental Entity has at any time challenged or questioned the legal
right of Margate to conduct its operations as presently or previously
conducted.
2.18 ACCOUNTS RECEIVABLE. Margate has made available to B2B a list
of all accounts receivable of Margate ("ACCOUNTS RECEIVABLE") as of July
10, 2000 and will make available at the Closing a list of Accounts
Receivable as of a date not more than thirty (30) days prior to the Closing
Date, in each case with a range of days elapsed since invoice. All Accounts
Receivable of Margate have arisen from bona fide transactions in the
ordinary course of business and are carried at values determined in
accordance with GAAP consistently applied, and Margate is not aware of any
claim of set-off or other dispute with respect to any such Accounts
Receivable. Except as set forth on Schedule 2.18 hereto, no person has any
Lien on any of such Accounts Receivable and no request or agreement for
deduction or discount has been made with respect to any of such Accounts
Receivable.
2.19 MINUTE BOOKS. The minutes of Margate made available to counsel
for B2B are the only minutes of Margate and contain a reasonably accurate
summary of all actions taken at meetings of the Board of Directors of
Margate and its stockholders or actions by written consent since the time
of incorporation of Margate.
2.20 ENVIRONMENTAL MATTERS.
(a) HAZARDOUS MATERIAL. Margate has not: (i) operated any
underground storage tanks at any property that Margate has at any time
owned, operated, occupied or leased; or (ii) illegally released any
material amount of any substance that has been designated by any
Governmental Entity or by applicable federal, state or local law to be
radioactive, toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos, petroleum, and
urea-formaldehyde and all substances listed as hazardous substances
pursuant to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, as amended, or defined as a hazardous waste pursuant
to the United States Resource Conservation and Recovery Act of 1976, as
amended, and the regulations promulgated pursuant to said laws (a
"HAZARDOUS MATERIAL"), but excluding office and janitorial supplies
properly and safely maintained. No Hazardous Materials are present as a
result of the deliberate actions of Margate or, to Margate's knowledge, as
a result of any actions of any third party or otherwise, in, on or under
any property, including the land and the
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improvements, ground water and surface water thereof, that Margate has at
any time owned, operated, occupied or leased.
(b) HAZARDOUS MATERIALS ACTIVITIES. Margate has not
transported, stored, used, manufactured, disposed of, released or exposed
its employees or others to Hazardous Materials in violation of any
applicable law in effect during its existence, nor has Margate disposed of,
transported, sold, or manufactured any product containing a Hazardous
Material (any or all of the foregoing being collectively referred to as
"HAZARDOUS MATERIALS ACTIVITIES") in violation of any applicable rule,
regulation, treaty or statute in effect during its existence and
promulgated by any Governmental Entity to prohibit, regulate or control
Hazardous Materials or any Hazardous Material Activity.
(c) PERMITS. Margate currently holds all environmental
approvals, permits, licenses, clearances and consents (the "ENVIRONMENTAL
PERMITS") necessary for the conduct of Margate's Hazardous Material
Activities and other businesses of Margate as such activities and
businesses are currently being conducted.
(d) ENVIRONMENTAL LIABILITIES. No action, proceeding,
revocation proceeding, amendment procedure, writ, injunction or claim is
pending, or to Margate's knowledge threatened, concerning any Environmental
Permit, Hazardous Material or any Hazardous Materials Activity of Margate.
To the best knowledge of Margate's current management, there exists no fact
or circumstance which could impose upon Margate any environmental liability.
2.21 BROKERS' AND FINDERS' FEES; THIRD PARTY EXPENSES. Margate has
not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with the Agreement or any transaction contemplated hereby.
2.22 EMPLOYEE BENEFIT PLANS AND COMPENSATION.
(a) Except as disclosed in SCHEDULE 2.22, Margate (a) does not
maintain or contribute to any "employee benefit plan" as defined in ERISA,
including without limitation, any profit-sharing, deferred compensation,
bonus, stock option, stock award, stock purchase or other equity-based
compensation, severance, salary continuation, life insurance, bonus,
employment, executive compensation, consulting, directors' benefit or other
compensation or incentive program, plan, agreement or arrangement, for
which Margate or any of its subsidiaries has any obligation to or
liability, contingent or otherwise and (b) does not maintain or contribute
to any plan, policy or arrangement providing for fringe benefits to its
employees, including but not limited to vacation, disability, sick leave,
severance, pension, medical, hospitalization, life, insurance plans, or
related or similar benefits (each, an "Employee Benefit Plan" and
collectively, the "Employee Benefit Plans"). There are no negotiations,
demands or proposals, which are now pending or have been made, which
concern matters now covered, or that would be covered, by agreements or
arrangements of the type described in this Section. Margate does not have
any plan or commitment, whether legally binding or not, to establish any
new Employee Benefit Plan or to modify any Employee Benefit Plan.
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(b) Margate has provided or made available to B2B, (i) correct
and complete copies of all documents embodying each Employee Benefit Plan
including all amendments thereto and copies of all forms of agreement and
enrollment used therewith; (ii) the three most recent annual reports, if
any, required under ERISA or the Code in connection with each Employee
Benefit Plan or related trust; (iii) the most recent summary plan
description together with the most recent summary of material
modifications, if any, required under ERISA with respect to each Employee
Benefit Plan; (iv) all IRS determination letters and rulings relating to
the Employee Benefit Plans; (v) all material agreements and contracts
relating to each Employee Benefit; and (viii) all communications material
to any employee or employees relating to any Employee Benefit Plan and any
proposed Employee Benefit Plans, in each case, relating to any amendments,
terminations, establishments, increases or decreases in benefits,
acceleration of payments or vesting schedules or other events which would
result in any material liability to Margate.
(c) Margate has performed all material obligations required to
be performed by it under each Employee Benefit Plan and each Employee
Benefit Plan has been established and maintained in accordance with its
terms and in material compliance with all applicable laws, statutes,
orders, rules and regulations, including ERISA and the Code. There are no
actions, suits or claims pending, or, to the knowledge of Margate
threatened or anticipated (other than routine claims for benefits) against
any Employee Benefit Plan or against the assets of any Employee Benefit
Plan. There are no inquiries or proceedings pending or, to the knowledge
of Margate, threatened by the IRS or Department of Labor with respect to
any Employee Benefit Plan, and Margate is not subject to any penalty or tax
with respect to any Employee Benefit Plan under ERISA or the Code.
(d) The execution of this Agreement and the consummation of the
transactions contemplated hereby will not constitute an event under any
Employee Benefit Plan or trust that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to
fund benefits with respect to any employee.
2.23 EMPLOYMENT MATTERS. Margate (i) is in material compliance with
all applicable laws, rules and regulations respecting employment,
employment practices, terms and conditions of employment and wages and
hours, in each case, with respect to current, former or retired employees
("Employees"); (ii) has withheld all amounts required by law or by
agreement to be withheld from the wages, salaries and other payments to
Employees or other persons who by virtue of their activities performed on
behalf of Margate may be deemed employees within the meaning of applicable
law; (iii) is not liable for any arrears of wages or any taxes or any
penalty for failure to comply with any of the foregoing; and (iv) is not
liable for any payment to any trust or other fund or to any governmental or
administrative authority, with respect to unemployment compensation
benefits, social security or other benefits or obligations for Employees or
other persons who by virtue of their activities performed on behalf of
Margate may be deemed employees within the meaning of applicable law (other
than routine payments to be made in the normal course of business and
consistent with past practice).
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2.24 INSURANCE. SCHEDULE 2.24 lists all insurance policies and
fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of Margate. There is no
claim by Margate pending under any of such policies or bonds as to which
coverage has been questioned, denied or disputed by the underwriters of
such policies or bonds. All premiums due and payable under all such
policies and bonds have been paid, and Margate is otherwise in compliance
with the terms of such policies and bonds (or other policies and bonds
providing substantially similar insurance coverage). Margate has no
knowledge of any threatened termination of, or premium increase with
respect to, any of such policies.
2.25 COMPLIANCE WITH LAWS. To the best of its knowledge, Margate has
complied with in all material respects, is not in violation of, and has not
received any notices of violation with respect to, any foreign, federal,
state or local statute, law or regulation.
2.26 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by Margate, nor any statement made in any Schedule or
certificate furnished by Margate pursuant to this Agreement or furnished in
or in connection with documents mailed or delivered to the stockholders of
Margate for use in soliciting their consent to this Agreement, the
Reorganization and the Merger (a) contains or, with respect to such mailed
or delivered documents, will contain at the time of the vote taken by the
stockholders of Margate concerning the Reorganization and the Merger, any
untrue statement of a material fact, or (b) omits or, with respect to such
mailed or delivered documents, will omit at the time of the vote taken by
the stockholders of Margate concerning the Reorganization or the Merger, to
state any material fact necessary in order to make the statements contained
herein or therein, in light of the circumstances under which made, not
misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF B2B
B2B represents and warrants to Margate as follows:
3.1 ORGANIZATION, STANDING AND POWER. B2B is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Nevada. B2B has the corporate power to own, lease and operate its
properties and to carry on its business as now being conducted and is duly
qualified to do business and is in good standing in each jurisdiction in
which the failure to be so qualified would be reasonably likely to have a
Material Adversely Effect. B2B has delivered to Margate true and correct
copies of its Certificate of Incorporation and Bylaws, each as amended to date.
3.2 AUTHORITY. Subject to the approval of the Merger by B2B's
shareholders, B2B has all requisite corporate power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby
and the execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of B2B. This Agreement has been
duly executed and delivered by B2B
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and constitutes the valid and binding obligation of B2B, enforceable in
accordance with its terms, except as to the effect, if any, of (a)
applicable bankruptcy and similar laws affecting the rights of creditors
generally, and (b) rules of law governing specific performance in
injunctive relief and other equitable remedies. Subject to the requisite
shareholder approval, the execution and delivery of this Agreement by B2B
does not, and the consummation of the transactions contemplated hereby will
not conflict with any provision of the Certificate of Incorporation or
Bylaws of B2B or any material contract or agreement to which B2B is a party
or any law applicable to B2B. No consent, waiver, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity or any third party, including a party to any agreement
with B2B (so as not to trigger any Conflict), is required by or with
respect to B2B in connection with the execution and delivery of this
Agreement or the consummation by B2B of the transactions contemplated
hereby and thereby, except for (i) the filing of the Certificate of Merger
with the Nevada Secretary of State and the Delaware Secretary of State, and
(ii) approval by the shareholders of B2B of the transactions contemplated
hereby.
3.3 CAPITAL STRUCTURE.
(a) The authorized capital of B2B consists of 10,000,000 shares
of Common Stock, par value $.001 per share, of which 100,000 shares are
issued and outstanding. All such outstanding shares are duly authorized,
validly issued, fully paid and nonassessable and are free of any Liens
other than those created by or imposed upon the holders thereof.
(b) Except as set forth in the Stock Purchase Agreement dated
March 23, 2000 by and among B2B, the Founding Shareholders (as defined
therein) and the Investors (as defined therein), there are no options,
warrants, calls, rights, commitments or agreements of any character,
written or oral, to which B2B is a party or by which it is bound obligating
B2B to issue, deliver, sell, repurchase or redeem, or cause to be issued,
delivered, sold, repurchased or redeemed, any shares of the Common Stock of
B2B or obligating B2B to grant, extend, accelerate the vesting of, change
the price of, otherwise amend or enter into any such option, warrant, call,
right, commitment or agreement. There are no outstanding or authorized
stock appreciation, phantom stock, profit participation, or other similar
rights with respect to B2B. The consummation of the Merger will not
trigger, create or otherwise cause any entity or individual (other than the
Holding Company on and subject to the terms and conditions of this
Agreement) to have any right, under the terms of B2B's Articles or Bylaws
or pursuant to any contract with B2B, to receive or acquire any securities
of B2B.
3.4 FINANCIAL STATEMENTS. B2B is a newly formed entity and, through
the date hereof, has not been required to prepare financial statements.
3.5 NO UNDISCLOSED LIABILITIES. B2B does not have any material
liability, indebtedness or obligation of any nature, whether accrued,
absolute, contingent, matured, unmatured or other (whether or not required
to be reflected in financial statements in accordance with generally
accepted accounting principles), except those incurred in the ordinary
course of B2B's business which do not have a Material Adverse Effect.
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3.6 ABSENCE OF CHANGES. Since inception there has been no event,
effect or change which by itself or taken in conjunction with all other
such events, effects or changes has or would reasonably be expected to have
a Material Adverse Effect on the business of B2B.
3.7 PROVISION OF INFORMATION. None of the information supplied or to
be supplied by B2B for inclusion or incorporation by reference in the proxy
statement relating to the stockholder approval to be sought by the Holding
Company (the "Proxy Statement") will, at the date mailed to stockholders
and at the time of the meeting of stockholders, contain any untrue
statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading. If at
any time prior to the stockholder meeting any event with respect to B2B
should occur which is required to be described in an amendment of, or a
supplement to, the Proxy Statement, B2B shall promptly so advise the
Holding Company and such event shall be so described, and such amendment or
supplement shall be promptly filed with the SEC and, as required by law,
disseminated to the stockholders of the Holding Company.
3.8 REAL PROPERTY. B2B owns no fee interest in any real property.
SCHEDULE 3.8 sets forth a list of all real property currently leased by
B2B, the name of the lessor and the date of the lease and each amendment
thereto. All such current leases are in full force and effect, are valid
and effective in accordance with their respective terms, and there is not,
under any of such leases, any existing default or event of default (or
event which with notice or lapse of time, or both, would constitute a default).
3.9 LITIGATION. There is no action, suit or proceeding of any nature
pending, or, to the best knowledge of B2B, threatened, against B2B, its
properties or any of its officers or directors, nor, to the knowledge of
B2B, is there any reasonable basis therefor. There is no investigation
pending or, to B2B's knowledge, threatened against B2B, its properties or
any of its officers or directors (nor, to the best knowledge of B2B is
there any reasonable basis therefor) by or before any Governmental Entity.
No Governmental Entity has at any time challenged or questioned the legal
right of B2B to conduct its operations as presently or previously conducted.
3.10 GOVERNMENTAL AUTHORIZATIONS. No consent, license, permit,
grant or other authorization is required from any Governmental Entity to
permit B2B to operate or conduct its business or hold any interest in its
properties or assets.
3.11 EMPLOYEE PLANS. B2B (a) does not maintain or contribute to any
employee benefit plan, including without limitation, profit-sharing,
deferred compensation, bonus, stock option, stock purchase, or other
incentive compensation plan, agreement, or arrangement and (b) does not
maintain or contribute to any plan, policy or arrangement providing for
fringe benefits to its employees, including but not limited to vacation,
disability, sick leave, severance, medical, hospitalization, life,
insurance plans, or related or similar benefits.
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3.12 EMPLOYMENT MATTERS. B2B is in material compliance with all
applicable laws, rules and regulations respecting employment, employment
practices, terms and conditions of employment and wages and hours, and has
withheld all amounts required by law or by agreement to be withheld from
the wages, salaries and other payments to employees or other persons who by
virtue of their activities performed on behalf of B2B may be deemed
employees within the meaning of applicable law.
3.13 COMPLIANCE WITH LAWS. B2B has duly complied and is complying
with all applicable laws and regulations relating to the operation of its
business, the ownership and/or use of its properties and equipment, and the
sale or distribution of its services, including, without limitation, laws
and regulations relating to health and environmental protection.
3.14 TAXES. As of the date hereof, B2B has not been required to file
any tax Returns and has not paid, or been required to pay, any material
taxes and is not subject to, and has not been subject to, any audits,
administrative or court proceedings or claims with respect to Taxes. In
the event B2B files a Return or pays any material Taxes on or before the
Effective Date, B2B shall provide a true and complete copy of each such
Return to Margate and shall provide prompt written notice of any Taxes paid.
3.15 MATERIAL CONTRACTS. SCHEDULE 3.15 sets forth a list of all
contracts and agreements to which B2B is a party or by which any of its
properties or assets are bound, in each case that are material to the
business, properties or assets of B2B. Each such contract is in full force
and effect. There is no breach or default under any such contract either by
B2B or, to B2B's knowledge, by any other party thereto, and no event has
occurred that with the lapse of time or the giving of notice or both would
constitute a breach or default thereunder by B2B or, to B2B's knowledge,
any other party, except for any such breach or default as does not or would
not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on B2B.
3.16 INSURANCE. SCHEDULE 3.16 lists all insurance policies and
fidelity bonds covering the assets, business, equipment, properties,
operations, employees, officers and directors of B2B. There is no claim by
B2B pending under any of such policies or bonds as to which coverage has
been questioned, denied or disputed by the underwriters of such policies or
bonds. All premiums due and payable under all such policies and bonds have
been paid, and B2B is otherwise in compliance with the terms of such
policies and bonds (or other policies and bonds providing substantially
similar insurance coverage). B2B has no knowledge of any threatened
termination of, or premium increase with respect to, any of such policies.
3.17 REPRESENTATIONS COMPLETE. None of the representations or
warranties made by B2B, nor any statement made in any Schedule or
certificate furnished by B2B pursuant to this Agreement contains any untrue
statement of a material fact or omits to state any material fact necessary
in order
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to make the statements contained herein or therein, in light of the
circumstances under which made, not misleading.
ARTICLE IV
CONDUCT PRIOR TO THE EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF MARGATE.
(a) AFFIRMATIVE COVENANTS. Except as otherwise consented to in
writing in advance by B2B, from the date of execution of this Agreement
until the Closing or the date of termination of this Agreement, Margate shall:
(1) Maintain and operate its properties in a manner consistent with
the efficient operation of its business and conduct its business only in
the ordinary course in substantially the same manner as heretofore conducted.
(2) Punctually pay and discharge all taxes, assessments and
governmental charges lawfully imposed upon it or any of its respective
properties, or upon the income and profits thereof;
(3) Maintain its existence as a corporation validly existing and in
good standing under the laws of Delaware and comply in all respects with
all laws, governmental regulations, rules and ordinances, and judicial
orders, judgments and decrees applicable to its business, assets,
properties, and rights, except while contesting the validity of any of the
foregoing in good faith and by appropriate proceedings;
(4) Notify B2B of the commencement of any litigation against Margate
or of the occurrence or existence of any adverse business condition
threatening its continued, normal business operations, or of any agreement,
license, permit, authority, approval, operating certificate, other
certificate, consent, or order involving it;
(5) At all times maintain, preserve, and keep its properties and
equipment in good repair, working order, and condition in all respects so
that the business carried on in connection therewith may be properly and
advantageously conducted;
(6) Use its best effort to fulfill its contractual obligations, pay
or perform all other obligations when due, maintain in effect its
insurance, and preserve its business relations with its present clients,
carriers, suppliers and others having business dealings with it;
(7) Promptly make all filings with all governmental agencies required
by it in furtherance of the transactions contemplated hereby and required
to maintain in full force and effect all Governmental Authorizations set
forth in Schedule 2.16;
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(8) Provide to B2B's President, on a monthly basis, internally-
prepared financial statements which fairly present the financial condition,
operating results and cash flow of Margate for each calendar month
commencing with July 2000;
(9) Provide to B2B, as soon as practicable, (i) true and complete
copies of all litigation documents relating to the proceedings described on
Schedule 2.17 hereto, and (ii) updated lists of Equipment promptly after
each such list is prepared; and
(10) Use its best efforts to assure the satisfaction of the
conditions to the effectiveness of the transactions contemplated in this
Agreement.
(b) NEGATIVE COVENANTS. Prior to the Closing, except as otherwise
consented to in writing in advance by B2B, Margate shall not:
(1) Amend its Certificate of Incorporation or Bylaws, except to the
extent necessary to effect the transactions contemplated by this Agreement;
(2) Issue, sell or otherwise dispose of any shares of capital stock
or any securities convertible into or representing a right or option to
purchase any such shares of capital stock, or enter into other agreements
to issue or sell any capital stock or any other securities of Margate, or
split, combine or reclassify any of its capital stock;
(3) Purchase, redeem, retire or otherwise acquire, or sell,
hypothecate, pledge or otherwise encumber, any of its securities;
(4) Declare, set aside, make or pay any distributions to any security
holder except as contemplated in Section 4.4;
(5) Enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with the
obligations of Margate arising under this Agreement;
(6) Make any loan, advance or commitment to extend credit to any of
its officers, directors or employees, or shareholders, or any affiliated or
related persons of such officers, directors, employees or shareholders; or
enter into any agreement, understanding or commitment, written or oral,
which obligates Margate, its successors or assigns, to make any loan or
advance or payment to any of its officers, directors, employees or
shareholders or to any affiliated or related persons of any such officers,
directors, employees or shareholders, except for loans on commercially
reasonable terms in amounts not exceeding the exercise price of any options
disclosed on Schedule 2.2 that have vested and are being exercised by an
officer, employee or director;
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(7) Acquire, or enter into an agreement to acquire direct or indirect
ownership or control of shares of any other corporation, or of any interest
in any partnership, joint venture, limited liability company, association
or similar organization;
(8) Sell, transfer, dispose of, license or grant any right to utilize
any of its material assets or properties, except in the ordinary course of
business consistent with past practice;
(9) Enter into any commitment, activity or transaction not in the
ordinary course of business;
(10) Amend or otherwise modify (or agree to do so), except in the
ordinary course of business, or violate the terms of, any of the Contracts
set forth or described in Schedule 2.14(a);
(11) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of Margate or guarantee
any debt securities of others, except that Margate may incur indebtedness
for valid business purposes in amounts and upon terms and conditions
consistent with past practice;
(12) Grant any severance or termination pay to any director, officer
or other employee or consultant, except in the ordinary course of business
consistent with past practice or as required under any collective
bargaining agreement disclosed on Schedule 2.14;
(13) Adopt or amend any employee benefit plan, program, policy or
arrangement, or enter into any employment contract, pay or agree to pay any
special bonus or special remuneration to any director, employee or
consultant, increase the salaries or wage rates of its employees or, except
in the ordinary course of business and consistent with past practices,
extend any employment offer;
(14) Take any action that could jeopardize the tax-free
reorganization hereunder;
(15) Pay, discharge or satisfy, any material claim, liability or
obligation (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities of the type reflected or
reserved against in the Current Balance Sheet;
(16) Waive or commit to waive any material rights, except for amounts
payable to Margate by New Haven Foundry Inc. representing accounts
receivable in respect of prior periods not exceeding 90 days at any one
time, which payments may be deferred on terms and conditions consistent
with past practice; and
(17) Cancel, materially amend or renew any insurance policy other than
in the ordinary course of business.
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With respect to the matters described in clauses (7) through (13) and
clauses (15) and (16) of this Section 4.1(b), B2B agrees that it shall not
unreasonably withhold any request to grant its consent to an action
specified therein.
4.2 CONDUCT OF BUSINESS OF B2B. (a) Except as otherwise consented
to in writing in advance by Margate, from the date of execution of this
Agreement until the Closing or the date of termination of this Agreement,
B2B will not:
(1) Amend its Certificate of Incorporation or Bylaws, except to the
extent necessary to effect the transactions contemplated by this Agreement;
(2) Issue, sell or otherwise dispose of any shares of capital stock or
any securities convertible into or representing a right or option to
purchase any such shares of capital stock, or enter into other agreements
to issue or sell any capital stock or any other securities of B2B, or
split, combine or reclassify any of its capital stock, except to the extent
required to raise the Funding Commitment (as defined below);
(3) Purchase, redeem, retire or otherwise acquire, or sell,
hypothecate, pledge or otherwise encumber, any of its securities;
(4) Declare, set aside, make or pay any distributions to any security
holder;
(5) Enter into any agreement, understanding or commitment, written or
oral, with any other person which is in any manner inconsistent with the
obligations of Margate arising under this Agreement; or
(6) take any action that would prevent or impede the Reorganization
and Merger from qualifying as a reorganization under Section 368(a) of the
Code.
(b) B2B will use its best efforts to perform all covenants and
agreements required to be performed by it under this Agreement.
4.3 NO SOLICITATION. Until the earlier of the Closing or the date of
termination of this Agreement pursuant to the provisions of Section 7.1
hereof, each of Margate and B2B agrees that it will not, and will not
permit any of its respective officers, directors, stockholders, agents,
representatives or affiliates (any of the foregoing, a "REPRESENTATIVE")
to, directly or indirectly, take any of the following actions with any
person or entity other than a party to this Agreement: (a) solicit,
initiate, entertain, or encourage any proposals or offers from, or conduct
discussions with or engage in negotiations with, any person relating to any
possible acquisition of Margate or B2B, whether by way of merger, purchase
of Common Stock or any equity interest, purchase of assets or otherwise,
(b) except as required by law, provide information with respect to it to
any person, other than a party hereto and its designees, relating to, or
otherwise cooperate with, facilitate or encourage any effort or attempt by
any such person with regard to, any possible acquisition of Margate or B2B,
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whether by way of merger, purchase of Common Stock or any equity interest,
purchase of assets or otherwise, (c) enter into an agreement with any
person, other than a party hereto and its designees, providing for the
acquisition of Margate or B2B, whether by way of merger, purchase of Common
Stock or any equity interest, purchase of assets or otherwise, or (d) make
or authorize any statement, recommendation or solicitation in support of
any possible acquisition of Margate or B2B by any person other than a party
hereto, whether by way of merger, purchase of Common Stock or any equity
interest, purchase of assets or otherwise. The taking of any action
described in clauses (a) through (d) above by any Representative shall be
deemed a material breach by the corresponding party of this Agreement.
4.4 DIVIDEND AUTHORIZATION. Notwithstanding the foregoing provisions
of this Article IV, so long as management confirms in writing that it
believes, taking into account Margate's historical performance as well as
its current business and future prospects, that Margate will have
sufficient funds from cash flow to meet all of its day to day operating
expenses and costs of doing business for the next eighteen months, prior to
the effectiveness of the Reorganization and Merger Margate may declare and
pay a dividend to its shareholders prior to the Effective Time in an amount
not exceeding fifty cents ($.50) per share.
4.5 EXTRAORDINARY ACTIONS. Notwithstanding anything contained in
this Article IV to the contrary, if Margate proposes to take any
Extraordinary Action (as defined below) and if B2B does not consent
thereto, then Margate shall have the option to proceed with such
Extraordinary Action without B2B's consent, PROVIDED that if Margate so
elects to proceed, B2B may in its absolute discretion terminate this
Agreement upon notice to Margate. The term "Extraordinary Action" shall
mean (i) any relocation, discontinuation or termination of a material
portion of the operations of Margate or any of its subsidiaries, or (ii)
any capital expenditure in an amount exceeding $600,000 which is incurred
in order to comply with a requirement of law or an order of a governmental
authority, or (iii) any deferral or restructuring of payments due from New
Haven Foundry Inc. in an amount exceeding $500,000 if, in the good faith
judgment of Margate's Board of Directors, the failure to defer or
restructure such payment would have a Material Adverse Effect.
4.6 REQUESTS FOR CONSENT. If either party provides the other with a
written request for a consent to any action specified in Sections 4.1 or
4.2 herein, the such other party shall promptly provide a written response
indicating whether or not it consents to the action specified in the
initial request.
4.7 FAILURE TO COMPLY WITH LAW. In the event that Margate fails to
comply with any law, governmental regulation, rule, ordinance, judicial
order, judgment or decree applicable to its business, assets or properties,
Margate shall indemnify and hold Holding Company harmless from and against
any and all losses, claims, damages or liabilities to which Holding Company
may be subject resulting from or relating to Margate's failure to so comply.
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ARTICLE V
ADDITIONAL AGREEMENTS
5.1 INCORPORATION OF HOLDING COMPANY AND MERGER SUB 1 AND MERGER SUB 2.
Promptly after the execution of this Agreement, Margate shall cause
each of Holding Company, Merger Sub 1 and Merger Sub 2 to be formed as a
Delaware corporation, provided that the Certificate of Incorporation and
Bylaws of each of Holding Company, Merger Sub 1 and Merger Sub 2 shall be
substantially in the form provided to and approved by B2B prior to Closing.
5.2 STOCKHOLDER MEETINGS.
(a) Margate shall take all lawful action to (i) cause a special
meeting of its stockholders to be duly called and held as soon as
practicable after the effectiveness of the Form S-4 to be filed in
connection with the Reorganization and the Merger, for the purpose of
voting on the approval and adoption of the terms of this Agreement, the
Reorganization and the Merger and (ii) solicit proxies from its
stockholders to obtain the requisite vote for the approval and adoption of
this Agreement, the Reorganization and the Merger. The Board of Directors
of Margate shall recommend approval and adoption of this Agreement, the
Reorganization and the Merger by its stockholders and the Board of
Directors shall not withdraw, amend or modify in a manner adverse to B2B
such recommendation (or announce publicly its intention to do so).
(b) B2B shall take all lawful action to (i) cause the
stockholders of B2B to execute a unanimous written consent approving the
terms of this Agreement, or (ii) cause a special meeting of its
stockholders to be duly called and held as soon as practicable after the
date of this Agreement for the purpose of voting on the approval and
adoption of this Agreement and the Merger and solicit proxies from its
stockholders to obtain the requisite vote for the approval and adoption of
this Agreement and the Merger. The Board of Directors of B2B shall
recommend approval and adoption of this Agreement and the Merger by its
stockholders and the Board of Directors shall not withdraw, amend or modify
in a manner adverse to Margate such recommendation (or announce publicly
its intention to do so).
(c) Holding Company, as sole stockholder of Merger Subsidiary,
shall execute a written consent or otherwise take such steps as may be
necessary (i) to satisfy applicable stockholder approval requirements
relating to the Merger and (ii) to maintain the existing management of
Margate for not less than three years.
5.3 REGISTRATION OF Securities. As soon as practicable after the
date hereof, Holding Company shall file with the Securities and Exchange
Commission a registration statement (the "Registration Statement") on Form
S-4, or such other form as may be appropriate for the purpose of
registering the Holding Company Shares to be issued to the B2B shareholders
pursuant to the
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Merger. Holding Company shall use all reasonable efforts to cause the
Registration Statement to become effective as soon as possible. Prior to
filing, Holding Company shall consult with B2B and provide B2B with a full
opportunity to review and comment on all portions of the Prospectus/Proxy
Statement and Registration Statement. B2B shall cooperate with Holding
Company and its counsel in the preparation of the Registration Statement
and shall provide all information and documents reasonably requested,
including financial statements as shall be required, in connection with
preparation of such Registration Statement.
5.4 HOLDING COMPANY MANAGEMENT. Following the Reorganization and the
Merger, the Board of Directors for the Holding Company shall consist of
five members, two of which shall be designees of Margate reasonably
acceptable to B2B and the remainder of which shall be designees of B2B.
Management of Holding Company shall be designated by B2B. The By-laws of
the Holding Company shall provide that a majority of the members of the
Board of Directors, including one of Margate's designees, shall be required
(i) to approve (in Holding Company's capacity as sole stockholder of the
entity that survives the merger of Merger Sub 1 into Margate) any of the
transactions contemplated by Section 5.21 hereof and (ii) to amend the
bylaw provision referred to in clause (I).
5.5 MARGATE MANAGEMENT. Following the Reorganization and the Merger,
the Holding Company shall cause the Board of Directors of Margate to
consist of the same five persons who serve as directors as of the date
hereof plus one director appointed by B2B.
5.6 LOCKUP. (a) During the period commencing on the date hereof and
ending on the earlier of a termination of this Agreement or 90 days
following the Closing Date, the officers and directors of Margate agree
that they will not, without the prior written consent of B2B, directly or
indirectly, sell, offer, offer to sell, grant an option for the sale of,
transfer, assign, pledge, hypothecate or otherwise encumber any securities
of Margate, the Holding Company or any other successor of Margate, or
otherwise dispose of any interest therein; provided, however, that officers
and directors of Margate may make gifts of stock to or for the benefit of
family members provided that such transferee executes an agreement pursuant
to which such transferee agrees to remain bound by the lockup period
described herein as if such transferee were an officer or director of Margate.
(b) During the period commencing on the date hereof and ending
on the earlier of a termination of this Agreement or 90 days following the
Closing Date, the officers and directors of B2B agree that they will not,
without the prior written consent of Margate, directly or indirectly, sell,
offer, offer to sell, grant an option for the sale of, transfer, assign,
pledge, hypothecate or otherwise encumber any securities of Margate, the
Holding Company or any other successor of Margate, or otherwise dispose of
any interest therein; provided, however, that officers and directors of B2B
may make gifts of stock to or for the benefit of family members provided
that such transferee executes an agreement pursuant to which such
transferee agrees to remain bound by the lockup period described herein as
if such transferee were an officer or director of B2B.
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5.7 BEST EFFORTS. Subject to the terms and conditions of this
Agreement, each of the parties hereto shall use its best efforts to ensure
that its representations and warranties remain true and correct in all
material respects, and to take promptly, or cause to be taken, all actions,
and to do promptly, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated hereby, to obtain all necessary
waivers, consents and approvals, and to effect all necessary registrations
and filings, and to remove any injunctions or other impediments or delays,
legal or otherwise, in order to consummate and make effective the
transactions contemplated by this Agreement for the purpose of securing to
the parties hereto the benefits contemplated by this Agreement each party
will use its best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws to consummate the Reorganization, the Merger and the other
transactions contemplated by this Agreement.
5.8 ACCESS TO INFORMATION. Until the earlier of the Effective Time
or the termination of this Agreement pursuant to Section 7.1, Margate shall
afford B2B and its accountants, counsel and other representatives,
reasonable access during normal business hours to (a) all of Margate's
properties, books, contracts, commitments and records, (b) all other
information concerning the business, properties and personnel (subject to
restrictions imposed by applicable law) of Margate as B2B may reasonably
request and (c) all key employees of Margate as identified by B2B. Margate
agrees to provide to B2B and its accountants, counsel and other
representatives copies of internal financial statements (including
supporting documentation) promptly upon request. B2B shall provide Margate
with copies of such information about B2B as Margate may reasonably request
and shall provide Margate with reasonable access to appropriate members of
its management in this regard. No information or knowledge obtained in any
investigation pursuant to this Section 5.8 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to
the obligations of the parties to consummate the Merger.
5.9 CONFIDENTIALITY. Each of the parties hereto hereby agrees to
keep the terms of this Agreement (except to the extent contemplated hereby)
and such information or knowledge obtained in any investigation pursuant to
Section 5.8, or pursuant to the negotiation and execution of this Agreement
or the effectuation of the transactions contemplated hereby, confidential
for a period of five (5) years following any termination of this Agreement;
provided, however, that the foregoing shall not apply to information or
knowledge which (a) a party can demonstrate was already lawfully in its
possession prior to the disclosure thereof by the other party, (b) is
generally known to the public and did not become so known through any
violation of law, (c) became known to the public through no fault of such
party, (d) is later lawfully acquired by such party without confidentiality
restrictions from other sources, (e) is required to be disclosed by order
of court or government agency with subpoena powers (provided that such
party shall have provided the other party with prior notice of such order
and an opportunity to object or take other available action) or (f) which
is disclosed in the course of any litigation between any of the parties
hereto. Notwithstanding the foregoing, it is acknowledged that Holding
Company may publicly disclose the material terms of this
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Agreement following the date hereof to the extent required under applicable
securities laws, in a manner reasonably satisfactory to B2B.
5.10 EXPENSES. Subject to the consummation of the Merger, all fees
and expenses incurred in connection with the Merger including, without
limitation, all legal fees, accounting fees, registration fees, printing
costs, transfer agent fees, listing fees and all other fees and expenses of
third parties shall be borne equally by Margate and B2B. If the Merger is
not consummated, each party shall bear its own fees and expenses in
connection with this Agreement.
5.11 PUBLIC DISCLOSURE. Each of Holding Company, Merger Sub 1,
Merger Sub 2 , Margate and B2B will consult with one another before issuing
any press release or otherwise making any public statements with respect to
the transactions contemplated by this Agreement, including, without
limitation, the Merger, and shall not issue any such press release or make
any such public statement prior to such consultation, except as may be
required by applicable law or by obligations pursuant to any listing
agreement with the Nasdaq Stock Market, Inc..
5.12 CONSENTS. Margate shall use its best efforts to obtain the
consents, waivers and approvals under any of the Contracts as may be
required in connection with the Merger so as to preserve all rights of and
benefits to Margate thereunder.
5.13 NOTIFICATION OF CERTAIN MATTERS. Margate shall give prompt
notice to B2B, and B2B shall give prompt notice to Margate, of (i) the
occurrence or non-occurrence of any event which is likely to cause any
representation or warranty of Margate or B2B, respectively, contained in
this Agreement to be untrue or inaccurate at or prior to the Effective Time
and (ii) any failure of Margate or B2B, respectively, to comply with or
satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any
notice pursuant to this Section 5.13 shall not limit or otherwise affect
any remedies available to the party receiving such notice.
5.14 REGISTRATION STATEMENT. As promptly as practicable following
the Closing Date, Holding Company shall take all required actions, if any,
to file a registration statement on Form S-8 with the SEC with respect to
the shares of Holding Company Common Stock issuable with respect to
Replacement Options.
5.15 INTENTIONALLY OMITTED.
5.16 EMPLOYMENT AGREEMENTS. Each of David Widlak, Ken Hopton and
William Hopton will enter into an employment agreement with Margate
substantially in the form of Exhibit A attached hereto, which employment
agreements shall become effective prior to the Effective Time.
5.17 NASDAQ RULES. Margate shall comply with all rules and
regulations of the Nasdaq Stock Market, Inc. applicable to it in connection
with the Reorganization and the Merger.
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5.18 SEC REPORTS. Between the date of this agreement and the Closing
Date, Margate and Holding Company shall file all reports and other filings
required to be filed by them under the Securities Exchange Act of 1934 and
shall deliver to B2B, promptly after they become available, all
registration statements, proxy statements, reports and other filings, and
all amendments thereto, that Margate files with the SEC.
5.19 ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES. Each party hereto,
at the reasonable request of the other party hereto, shall execute and
deliver such other instruments and do and perform such other acts and
things as may be necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated hereby.
5.20 ISSUANCE OF ADDITIONAL HOLDING COMPANY SHARES. As provided in
Section 1.6 above, except as set forth below, for a period of twelve months
from the Effective Time of the Reorganization and Merger, the Margate
shareholders as of the date of this Agreement ("Pre-Existing Margate
Shareholders") shall own at least 10.06 percent of the issued and
outstanding shares of stock in the Holding Company. B2B, the Holding
Company and Margate agree that said ownership percentage of the Pre-Existing
Margate Shareholders shall not be diluted from and after the
Closing through such twelve month period, whether by the issuance of
additional Holding Company Shares or options or securities convertible into
Holding Company Shares, unless: (a) upon the majority vote of the Holding
Company board of directors including the affirmative vote of at least one
of Margate's representatives; (b) the issuance of additional shares of
stock in the Holding Company is for cash consideration equal to the fair
market value of the stock issued in an exempt or non-exempt offering
exceeding $500,000, or (c) the issuance of Holding Company Common Stock or
options to purchase such common stock at the fair market value thereof to
newly hired management or employees as a term of their employment (it being
understood that no person employed by B2B as of the date hereof shall be
deemed a newly hired employee of Holding Company for purposes of this Section).
5.21 FUNDAMENTAL CHANGES EFFECTING MARGATE. Holding Company, B2B and
Margate agree that from and after the Effective Time, Margate shall
continue as an independently operated and managed subsidiary of the Holding
Company managed by its current board of directors plus the director to be
appointed by B2B pursuant to Section 5.5, and that any of the following
actions or events (hereinafter referred to as "Fundamental Changes") shall
require the affirmative vote of a majority of the board of directors of the
Holding Company including the affirmative vote of at least one of the
Margate representatives:
(a) Any sale, transfer, assignment or encumbrance of any of the
shares of Margate or any successor subsidiary corporation of the Holding
Company containing the Margate assets and business operations.
(b) Any sale, transfer, assignment or encumbrance of the assets
of Margate (except for sales in the ordinary course of business as
conducted by Margate's board of directors
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and/or officers) or the assets of any successor subsidiary corporation of
the Holding Company which owns the assets and business operations currently
conducted by Margate.
(c) Any merger, reorganization or recapitalization involving
shares of stock of Margate or any other transaction which would otherwise
result in Margate ceasing to be a wholly owned subsidiary of the Holding
Company.
(d) Any transfer of funds, cash or other assets from Margate to
the Holding Company or any affiliated entity of the Holding Company whether
in the form of a dividend, distribution or otherwise or any transfer of
funds, cash or other assets from the Holding Company to Margate whether in
the form of a loan or an investment therein.
(e) Any charge against the assets or books of Margate of any
cost, expenses or burden of the Holding Company.
5.22 B2B FUNDING COMMITMENT. B2B shall cause a minimum amount of
$8,000,000 cash to be deposited as a capital contribution with, and be
available for use by, the Holding Company at least one day prior to the
Closing ("Funding Commitment"); PROVIDED, HOWEVER, that (i) prior to the
Closing B2B shall be entitled to expend up to $500,000 of the Funding
Commitment for legitimate costs and expenses relating to B2B's business,
and (ii) to the extent the Closing does not take place within a period of
one hundred twenty (120) days after the date of this Agreement, B2B shall
be entitled to expend an additional $75,000 of the Funding Commitment (over
and above the $500,000 referred to in clause (i) above) for each 30-day
period (or portion thereof) that the Closing is delayed beyond such 120-day
period. All such amounts expended in accordance with clauses (i) and (ii)
of the preceding sentence shall be deemed part of the Funding Commitment
and shall be fully credited on a dollar for dollar basis.
5.23 UPDATING OF SCHEDULES. Margate shall, to the extent
necessary or appropriate, update all of the Schedules to this Agreement on
or prior to the Closing and deliver such updated Schedules at the Closing.
Such updated Schedules shall be deemed the Schedules to this Agreement as
of the Closing Date.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect the
Merger shall be subject to the satisfaction at or prior to the Closing of
the following conditions:
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(a) B2B STOCKHOLDER APPROVAL. This Agreement and the Merger
shall have been approved and adopted by the stockholders of B2B by the
requisite vote under applicable law and B2B's Certificate of Incorporation.
(b) MARGATE SHAREHOLDER APPROVAL. This Agreement, the
Reorganization, the Merger and the other transactions contemplated hereby
shall have been approved by the shareholders of Margate by the requisite
vote under applicable law and Margate's Certificate of Incorporation.
(c) EMPLOYMENT AGREEMENTS. Each of David Widlak, Ken Hopton and
William Hopton shall have executed and delivered to Margate an Employment
Agreement substantially in the form of Exhibit A and such Employment
Agreement shall be in full force and effect.
(d) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order
issued by any court of competent jurisdiction or other legal or regulatory
restraint or prohibition preventing the consummation of the Merger shall be
in effect, nor shall any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor shall there be any
action taken, or any statute, rule, regulation or order enacted, entered,
enforced or deemed applicable to the Merger, which makes the consummation
of the Merger illegal.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF B2B. The obligations of
B2B to consummate the Merger and the transactions contemplated by this
Agreement shall be subject to the satisfaction at or prior to the Closing
of each of the following conditions, any of which may be waived, in
writing, exclusively by B2B:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Margate contained in this Agreement shall have been true and
correct in all material respects when made on and as of the Effective Time,
with the same force and effect as if made on and as of the Effective Time.
(b) AGREEMENTS AND COVENANTS. Margate, Holding Company and
Merger Sub shall have performed or complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by them on or prior to the Effective Time.
(c) EXECUTION OF AGREEMENT. Each of Holding Company and Merger
Sub shall have duly executed and delivered this Agreement to B2B.
(d) REGISTRATION STATEMENT. Holding Company shall have filed
with the SEC the Registration Statement on Form S-4, or such other form as
may be appropriate for the purpose of registering the Holding Company
Shares to be issued to the B2B shareholders pursuant to the Merger and such
Registration Statement shall have been declared effective by the SEC.
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(e) STATE SECURITIES LAW REQUIREMENTS. Holding Company shall
have made all filings and done all other things necessary to cause the
issuance of the Holding Company Shares pursuant to the Merger to be
qualified or exempt from registration under all applicable state securities
laws.
(f) MATERIAL ADVERSE EFFECT. There shall not have occurred any
event, effect or change that has or would reasonably be expected to have a
Material Adverse Effect on Margate and its subsidiaries taken as a whole.
(g) CONSENTS. B2B shall have been furnished with evidence
satisfactory to it that Margate has obtained the consents, approvals and
waivers required from any Governmental Entity or any party to an agreement
with Margate or other third party, all as set forth in Schedule 2.5.
(h) CERTIFICATE OF MARGATE. B2B shall have been provided with
a certificate executed on behalf of Margate by an executive officer to the
effect that, as of the Effective Time the conditions set forth in this
Section 6.2 have been satisfied.
(i) LEGAL OPINION. B2B shall have received a legal opinion from
O'Reilly, Rancilio, Nitz, Andrews, Turnbull & Scott, P.C., counsel to
Margate, in form and substance reasonably acceptable to B2B and its counsel.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF MARGATE. The
obligation of Margate to consummate the Merger and the transactions
contemplated by this Agreement shall be subject to the satisfaction at or
prior to the Closing of each of the following conditions, any of which may
be waived, in writing, exclusively by Margate:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of B2B contained in this Agreement shall be true and correct in
all material respects when made and on and as of the Effective Time, except
for changes contemplated by this Agreement, with the same force and effect
as if made on and as of the Effective Time.
(b) AGREEMENTS AND COVENANTS. B2B shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it on or
prior to the Effective Time.
(c) FAIRNESS OPINION. The Board of Directors of Margate shall
have received a written opinion from an investment banking or financial
services firm to the effect that the terms of the Merger are fair to the
shareholders of Margate from a financial point of view, it being understood
that Margate shall use its best efforts to obtain such opinion.
(d) LEGAL OPINION. Margate shall have received a legal opinion
from Zevnik Horton Guibord McGovern Palmer & Fognani, L.L.P., counsel to
B2B, in form and substance reasonably acceptable to Margate and its counsel.
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(e) CERTIFICATE OF B2B. Margate shall have been provided with
a certificate on behalf of B2B by an executive officer to the effect that,
as of the Effective Time, the conditions set forth in Section 6.3(a) and
6.3(b) have been satisfied.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
7.1 TERMINATION. Except as provided in Section 7.2 below, this
Agreement may be terminated and the Merger abandoned at any time prior to
the Effective Time:
(a) by mutual consent of Margate and B2B;
(b) by Margate or B2B if: (i) there shall be a final
nonappealable order of a foreign, federal or state court in effect
preventing consummation of the Merger; or (ii) there shall be any statute,
rule, regulation or order enacted, promulgated or issued by any
Governmental Entity that would make consummation of the Merger illegal;
(c) by either Margate or B2B if such party is not in material
breach of its obligations under this Agreement and if the Effective Time
has not occurred before 5:00 p.m. (New York City time) on January 16, 2001;
PROVIDED that the right to terminate this Agreement under this clause
7.1(c) shall not be available to any party if its failure to fulfill any
obligation hereunder has been a principal cause of the failure of the
Effective Time to occur on or before such date of termination; PROVIDED,
FURTHER, that if the Form S-4 to be filed in connection with the
Reorganization and Merger is declared effective within 45 days prior to
January 16, 2001, then the right to terminate under this clause 7.1(c)
shall not be available to any party until the 46th day after such effective
date.
(d) by Margate if it is not in material breach of its
obligations under this Agreement and there has been a material breach of
any representation, warranty, covenant or agreement contained in this
Agreement on the part of B2B and such breach has not been cured within ten
(10) business days after written notice to B2B; PROVIDED, HOWEVER, that, no
cure period shall be required for a breach which by its nature cannot be
cured;
(e) by B2B if it is not in material breach of its obligations
under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement
on the part of Margate, Holding Company or Merger Sub and such breach has
not been cured within ten (10) business days after written notice to
Margate; PROVIDED, HOWEVER, that, no cure period shall be required for a
breach which by its nature cannot be cured;
(f) by B2B if an event, effect or change having or which
reasonably would be expected to have a Material Adverse Effect on Margate
shall have occurred after the date of this Agreement;
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(g) by Margate if an event, effect or change having a Material
Adverse Effect on B2B shall have occurred after the date of this Agreement; or
(h) by B2B pursuant to Section 4.5 herein.
EFFECT OF TERMINATION. In the event of termination of this Agreement
as provided in Section 7.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of B2B, Margate,
Holding Company or Merger Sub, or their respective officers, directors or
stockholders, provided that each party shall remain liable for any breaches
of this Agreement prior to its termination; and provided further that, the
provisions of Sections 5.9, 5.10 and 5.11 and this Section 7.2 of this
Agreement shall remain in full force and effect and survive any termination
of this Agreement.
AMENDMENT. Except as is otherwise required by applicable law after
the stockholders of Margate approve this Agreement, this Agreement may be
amended by the parties hereto at any time by execution of an instrument in
writing signed on behalf of each of the parties hereto.
EXTENSION; WAIVER. At any time prior to the Effective Time, Margate,
on the one hand, and B2B, on the other hand, may, to the extent legally
allowed, (i) extend the time for the performance of any of the obligations
of the other party hereto, (ii) waive any inaccuracies in the
representations and warranties made to such party contained herein or in
any document delivered pursuant hereto, and (iii) waive compliance with any
of the agreements or conditions for the benefit of such party contained
herein. Any agreement on the part of a party hereto to any such extension
or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
GENERAL PROVISIONS
SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All of the
representations, warranties, covenants and agreements contained in this
Agreement or in any instrument delivered pursuant to this Agreement shall
survive the Merger and the Closing hereunder.
(a) NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by
commercial messenger or courier service, or mailed by registered or
certified mail (return receipt requested) or sent via facsimile (with
acknowledgment of complete transmission) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice) PROVIDED, HOWEVER, that notices sent by mail
will not be deemed given until received:
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if to Margate, Holding Company or merger Sub, to:
Margate Industries, Inc.
129 N. Main
Yale, MI 48097
Attention: David A. Widlak
Facsimile No.: 810-387-3719
with a copy to:
O'Reilly, Rancilio, Nitz, Andrews, Turnbull & Scott, P.C.
12900 Hall Road, Suite 350
Sterling Heights, Michigan 48313-1151
Attention: Charles E. Turnbull, Esq.
Facsimile No: 810-726-1560
if to B2B, to:
B2B Euro Wireless.com, Inc.
599 Broadway, Suite 803
New York, NY 10002
Attention: President
Facsimile No.: 212-226-6791
with a copy to:
Zevnik Horton Guibord McGovern
Palmer & Fognani, L.L.P.
1330 Avenue of the Americas
Eleventh Floor
New York, NY 10019
Attention: Scott A. Ziegler, Esq.
Facsimile No.: (212) 319-7605
INTERPRETATION. The words "include," "includes" and "including" when
used herein shall be deemed in each case to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement
and shall become effective when one or more
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counterparts have been signed by each of the parties and delivered to the
other party, it being understood that all parties need not sign the same
counterpart.
ENTIRE AGREEMENT; ASSIGNMENT. This Agreement, the Schedules and
Exhibits hereto, and the documents and instruments and other agreements
among the parties hereto referenced herein: (a) constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral,
among the parties with respect to the subject matter hereof; (b) are not
intended to confer upon any other person any rights or remedies hereunder;
and (c) shall not be assigned prior to the Effective Time.
SEVERABILITY. In the event that any provision of this Agreement or
the application thereof becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of
such provision to other persons or circumstances will be interpreted to
effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid
and enforceable provision that will achieve, to the extent possible, the
economic, business and other purposes of such void or unenforceable provision.
OTHER REMEDIES. Except as otherwise provided herein, any and all
remedies herein expressly conferred upon a party will be deemed cumulative
with and not exclusive of any other remedy conferred hereby, or by law or
equity upon such party, and the exercise by a party of any one remedy will
not preclude the exercise of any other remedy.
GOVERNING LAW.
This Agreement shall be governed by and construed in accordance
with the laws of the State of New York, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto agrees that process may be served upon them in
any manner authorized by the laws of the State of New York for such persons
and waives and covenants not to assert or plead any objection which they
might otherwise have to such jurisdiction and such process.
Any legal action or proceeding with respect to this Agreement and
any action for enforcement of any judgment in respect thereof shall be
brought in any Federal Court located in the State of New York and, by
execution and delivery of this Agreement, each of the parties hereto hereby
accepts for itself and in respect of its property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts and
appellate courts. Each of the parties hereto irrevocably consents to the
service of process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth
herein. Each of the parties hereto hereby irrevocably waives any objection
which it may now or hereafter have to be laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with this
Agreement brought in the courts referred to
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above and hereby further irrevocably waives and agrees not to plead or
claim in any such court that any such action or proceeding brought in any
such court has been brought in an inconvenient forum.
RULES OF CONSTRUCTION. The parties hereto agree that they have been
represented by counsel during the negotiation and execution of this
Agreement and, therefore, waive the application of any law, regulation,
holding or rule of construction providing that ambiguities in an agreement
or other document will be construed against the party drafting such
agreement or document.
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IN WITNESS WHEREOF, B2B, Margate, Holding Company, Merger Sub 1 and
Merger Sub 2 have caused this Agreement to be signed by their duly
authorized respective officers, all as of the date first written above.
B2B EURO WIRELESS.COM, INC. MARGATE INDUSTRIES, INC.
By:___________________________ By:___________________________
Name:_________________________ Name:_________________________
Title:________________________ Title:________________________
HOLDING COMPANY MERGER SUB 1
By:___________________________ By:___________________________
Name:_________________________ Name:_________________________
Title:________________________ Title:________________________
MERGER SUB 2
By:___________________________
Name:_________________________
Title:________________________
