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AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

AGREEMENT AND PLAN OF MERGER | Document Parties: SECSYS ACQUISITION CORP | SECURE SYSTEM, INC GROUP, INC | Somerset International Group, Inc | SYSSEC ACQUISITION CORP You are currently viewing:
This Agreement and Plan of Merger involves

SECSYS ACQUISITION CORP | SECURE SYSTEM, INC GROUP, INC | Somerset International Group, Inc | SYSSEC ACQUISITION CORP

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: New Jersey     Date: 3/15/2005

AGREEMENT AND PLAN OF MERGER, Parties: secsys acquisition corp , secure system  inc group  inc , somerset international group  inc , syssec acquisition corp
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AGREEMENT AND PLAN OF MERGER

 

AGREEMENT AND PLAN OF MERGER entered into as of June 15, 2004 among SECURE

SYSTEM, INC., a New Jersey corporation ("Secure"), SOMERSET INTERNATIONAL GROUP,

INC., a Delaware corporation ("Somerset"), and SECSYS ACQUISITION CORP., a New

Jersey corporation ("Acquisition").

WHEREAS, the respective Boards of Directors of Secure, Somerset and

Acquisition desire that Secure should be acquired by Somerset pursuant to the

merger of Acquisition, which is a wholly-owned subsidiary of Somerset, with and

into Secure.

NOW, THEREFORE, it is agreed:

ARTICLE I: THE MERGER

1.1 Closing.

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The closing of the Merger (the "Closing") will take place at the offices of

Picinich & McClure, Esqs., counsel to Somerset, at 139 Harristown Road, Glen

Rock, NJ 07452, within one (1) business day following the satisfaction or waiver

of the conditions precedent set forth in Article V or at such other date as

Secure and Somerset shall agree (the "Closing Date").

1.2 Merger; Effective Time.

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The Effective Time shall occur upon the filing with the Secretary of State

of the State of New Jersey of a Certificate of Merger (the "Certificate of

Merger") executed in accordance with the applicable provisions of the New Jersey

Business Corporation Law (the "BCL"), or at such later time as may be agreed to

by Somerset and Secure and specified in the Certificate of Merger (the

"Effective Time"). The date on which the Effective Time occurs is referred to as

the "Effective Date." Provided that this Agreement has not been terminated

pursuant to Article VI, the parties will cause the Certificate of Merger to be

filed as soon as practicable after the Closing.

1.3 Surviving Corporation.

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a. Secure and Acquisition shall, pursuant to the provisions of the BCL, be

merged with and into a single corporation, to wit, Secure, which shall be the

surviving corporation from and after the effective time of the merger, and which

is sometimes hereinafter referred to as the "Surviving Corporation", and which

shall continue to exist as said surviving corporation under its present name

pursuant to the provisions of the BCL. The separate existence of Acquisition

shall cease at the Effective Time in accordance with the provisions of the BCL.

b. At the Effective Time, each share of the 3,428,576 shares of capital

stock of Acquisition outstanding immediately prior to the Effective Time shall

be converted into one

 

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share of the common stock of the Surviving Entity and the shares of common stock

of the Surviving Entity so issued in such conversion shall constitute the only

outstanding shares of capital stock of the Surviving Entity and the Surviving

Entity shall be a wholly owned subsidiary of Somerset.

c. The Certificate of Incorporation of Secure shall continue to be the

Certificate of Incorporation of said Surviving Corporation. The present by-laws

of Secure will be the by-laws of the Surviving Corporation and will continue in

full force and effect from and after the effective date of the merger.

d. The directors in office of Secure at the effective time of the merger

shall be the members of the first Board of Directors of the Surviving

Corporation, all of whom shall hold their directorships until the election and

qualification of their respective successors or until their tenure is otherwise

terminated in accordance with the by-laws of the surviving corporation.

e. The officers in office of Secure at the effective time of the merger

shall be the first officers of the Surviving Corporation, all of whom shall hold

their offices until the election of their respective successors or until their

tenure is otherwise terminated in accordance with the by-laws of the surviving

corporation.

1.4 Exchange of Shares, Profit Participation, and Working Capital

Adjustment.

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a. Creation of Preferred Shares. Prior to the Effective Time, Somerset

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shall approve by way of resolution, and shall file as required by law, a

Certificate of Designations creating 3,000,004 shares of Series A Redeemable

Convertible Preferred Stock (the "Preferred Shares"). From those shares

2,747,404 will be used to satisfy Somerset's obligations under Section 1.4(b)

hereof and 252,600 will be used to satisfy Somerset's obligations under Section

1.7 hereof. The form of Certificate of Designations of the Preferred Stock is

annexed hereto as Appendix A.

b. Conversion of Secure Shares. At the Effective Time each of the

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3,956,742 shares of common stock of Secure that were issued and outstanding

immediately prior to the Effective Time, (hereinafter collectively referred to

as the "Secure Shares"), and specifically excluding any shares to be issued for

conversion of the Acquisition Shares pursuant to Section 1.3, shall be converted

into and represent the right to receive in exchange therefore 0.69436 Preferred

Shares. Any fractional share less than 0.5 that results from the conversion will

be eliminated; all other fractional shares will be rounded to the next integer.

c. Profit Participation. In addition to the conversion of Secure Shares

--------------------

to Preferred Shares as set forth above, the Secure shareholders entitled to

receive Preferred Shares shall also receive a Profit Participation Certificate

(the "Certificate") in the form annexed hereto as Appendix C. The "Participation

Percentage" that will be recited on the face of the Certificate will equal the

number of Preferred Shares issued to the holder in exchange for his/her Secure

Shares divided by the total number of Preferred Shares exchanged for Secure

Shares. The percentage shall be rounded to three decimal places.

 

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d. Working Capital Adjustment. In addition to the conversion of the

--------------------------

Secure Shares and the Profit Participation as set forth above, the Secure

Shareholders shall, on the "Working Capital Distribution Date" (defined below)

after the Effective Date, be entitled to receive compensation based upon

Secure's working capital immediately prior to the Effective Time.

(i) Each Secure Shareholder's individual participation percentage in

the Working Capital Adjustment (defined below) shall be equal to

the Secure Shareholder's Profit Participation Percentage (as

defined in the shareholder's Profit Participation Certificate).

(ii) Payment of the entire Working Capital Adjustment shall be made to

the Chief Financial Officer of Secure, who shall be obligated to

distribute the correct participation percentage to each Secure

Shareholder. Somerset's obligations under this paragraph shall be

deemed satisfied after payment of the Working Capital Adjustment

to the Chief Financial Officer of Secure. Somerset shall not be

liable for failure of the Chief Financial Officer of Secure to

correctly distribute the Working Capital Adjustment among the

Secure Shareholders.

(iii) "Working Capital Adjustment" shall mean the total amount of Net

Working Capital on hand as June 30, 2004.

(iv) "Net Working Capital" shall mean the difference between current

assets and current liabilities.

(v) "Working Capital Distribution Date" shall mean the date that is

120 days after the Effective Date, provided that if such date

falls on a Saturday, Sunday or legal holiday, said date shall be

extended to the next business day.

e. Pledge Agreement. The obligations of Somerset which shall accrue

----------------

pursuant to the Preferred Stock shall be secured by a pledge of certain capital

stock of Secure on the terms set forth in the form of Stock Pledge and Escrow

Agreement annexed hereto as Appendix B (the "Stock Pledge Agreement"); and

f. With the exception of Surviving Entity shares resulting from the

conversion of Acquisition Stock as set forth in Section 1.3, all Secure Shares

owned by the shareholders of Secure as of the Effective Date shall no longer be

outstanding and shall automatically be canceled and retired and shall cease to

exist, and each holder of a certificate representing any such shares shall cease

to have any rights with respect thereto, except the right to receive the

Preferred Stock and Certificate upon the surrender of such certificate in

accordance with Section 1.5 and the right to receive the Working Capital

Adjustment pursuant to Section 1.4(d).

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1.5. Exchange of Certificates. Somerset's corporate counsel, Picinich &

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McClure, Esqs., shall act as the exchange agent (the "Exchange Agent") for the

purpose of exchanging Secure Shares for the Preferred Stock and Certificates. At

or prior to the Closing, Somerset shall deliver to the Exchange Agent

certificates for the Preferred Stock and Profit Participation Certificates

issued in such names and quantities as are indicated on the stock records of

Secure immediately prior to the Closing. At the Closing or thereafter, the

shareholders of Secure shall be required to surrender to the Exchange Agent the

certificates for all of their Secure Shares (or affidavits attesting to the loss

of certificates). Each Secure Shareholder shall be entitled upon such surrender

to receive in exchange therefor a certificate representing such number of shares

of Preferred Stock, and a Profit Participation Certificate reciting the

appropriate Participation Percentage, all as calculated pursuant to Section 1.4

of this Agreement.

1.6. Closing Of Transfer Books. On the Effective Date, the stock transfer

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book of Secure shall be deemed to be closed and no transfer of Secure Shares

shall thereafter be recorded thereon.

1.7 Other Equity Interests. On the Effective Date, Somerset shall issue

----------------------

12,600 Preferred Shares in exchange for the outstanding options for Secure stock

recited on Schedule 2.2 hereto and will issue 240,000 Preferred Shares pursuant

to the agreement with Woodland Group recited in Schedule 2.11 hereto.

ARTICLE II

REPRESENTATIONS AND WARRANTIES OF SECURE

Except as set forth in the schedules to this Agreement, disclosure in any

one of which shall apply to any and all representations and warranties made in

this Agreement, Secure hereby represents and warrants to Somerset, as of the

date of this Agreement and as of the Effective Time, as follows:

2.1 Organization, Standing And Power. Secure is a corporation duly

--------------------------------

incorporated, validly existing and in good standing under the laws of the State

of New Jersey. Secure has corporate power and authority to conduct its business

as presently conducted by it and to enter into and perform this Agreement and to

carry out the transactions contemplated by this Agreement. Secure is duly

qualified to do business as a foreign corporation doing business in each state

in which it owns or leases real property and where the failure to be so

qualified and in good standing would have a material adverse effect on Secure or

its business. Secure does not have an ownership interest in any corporation,

partnership (general or limited), limited liability company or other entity,

whether foreign or domestic (collectively such ownership interests including

capital stock).

2.2 Capitalization. There are 70,000,000 shares of capital stock of Secure

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authorized, consisting of 63,000,000 shares of common stock, no par value per

share, and 7,000,000 shares of preferred stock. As of the date of this

Agreement, there are 3,956,742 Secure Shares issued and outstanding and no

shares of preferred stock issued and outstanding. Except as disclosed on

 

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Schedule 2.2 hereto, no Secure Shares have been reserved for issuance to any

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person, and there are no outstanding rights, warrants, options or agreements for

the purchase of Secure Shares. All outstanding Secure Shares are validly issued,

fully paid, non-assessable, not subject to pre-emptive rights and have been

issued in compliance with all state and federal securities laws or other

applicable laws.

2.3 Financial Statements.

--------------------

(i) Secure has made available to Somerset copies of its audited financial

statements for the year ended December 31, 2003 and its unaudited financial

statements for the three months ended March 31, 2004 (collectively, "Secure

Financial Statements"). The Secure Financial Statements were prepared in

accordance with GAAP applied on a consistent basis throughout the periods

involved (except as may be indicated in the notes thereto). Such financial

statements fairly present the financial position of Secure as at the dates

thereof and the results of its operations and its cash flows for the periods

then ended.

(ii) To the knowledge of Secure, except as disclosed in the Secure

Financial Statements or on Schedule 2.3 hereof, there has been no material

------------

change in the financial condition, operations or business of Secure since March

31, 2004.

(iii) Except as otherwise disclosed in the Secure Financial Statements,

Secure does not have any material liabilities.

2.4 Intellectual Property And Intangible Assets. To the knowledge of

-------------------------------------------

Secure, Secure has full legal right, title and interest in and to all of the

intellectual property utilized in the operation of its business. No rights of

any other person are violated by the use by Secure of the intellectual property.

Except as set forth on Schedule 2.4, none of the intellectual property has ever

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been declared invalid or unenforceable, or is the subject of any pending or, to

the knowledge of Secure, threatened action for opposition, cancellation,

declaration, infringement, or invalidity, unenforceability or misappropriation

or like claim, action or proceeding.

2.5 Litigation. There is no action, suit, investigation, audit or

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proceeding pending against, or to the best knowledge of Secure threatened

against or affecting, Secure or any of its assets or properties before any court

or arbitrator or any governmental body, agency or official.

2.6 Interested Party Transactions. Except as disclosed in the Secure

-----------------------------

Financial Statements, Secure is not indebted to any officer or director of

Secure (except for compensation and reimbursement of expenses incurred in the

ordinary course of business), and no such person is indebted to Secure.

2.7 Compliance With Applicable Laws. To the knowledge of Secure, the

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business of Secure has not been, and is not being, conducted in violation of any

law, except for possible violations which individually or in the aggregate have

not had and are not reasonably likely to have a material adverse effect on

Secure. To the knowledge of Secure, no investigation or

 

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review by any governmental entity with respect to Secure is pending nor has any

governmental entity indicated an intention to conduct the same, except for

investigations or reviews which individually or in the aggregate would not have,

nor be reasonably likely to have, a material adverse effect on Secure.

2.8 No Undisclosed Liabilities. Except as set forth in the Secure

--------------------------

Financial Statements, there are no liabilities or debts of Secure of any kind

whatsoever, whether accrued, contingent, absolute, determined, determinable or

otherwise, and there is no existing condition, situation or set of circumstances

which could reasonably be expected to result in such a liability or debt.

2.9 Tax Returns And Payment. Secure has duly and timely filed all tax

-----------------------

returns required to be filed by it and has duly and timely paid all taxes shown

thereon to be due, except as reflected in the Secure Financial Statements and

except for taxes being contested in good faith. Except as disclosed in the

Secure Financial Statements, there is no material claim for taxes that is a Lien

against the property of Secure other than liens for taxes not yet due and

payable, none of which taxes is material. Secure has not received written

notification of any audit of any tax return of Secure being conducted or pending

by a tax authority where an adverse determination could have a material adverse

effect on Secure, no extension or waiver of the statute of limitations on the

assessment of any taxes has been granted by Secure which is currently in effect,

and Secure is not a party to any agreement, contract or arrangement with any tax

authority or otherwise, which may result in the payment of any material amount

in excess of the amount reflected on the Secure Financial Statements.

2.10 Title And Related Matters. Secure has good and marketable title to all

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of its properties, inventory, interests in properties, and assets, real and

personal, which are reflected in the most recent balance sheet in the Secure

Financial Statements or acquired after that date (except properties, interests

in properties, and assets sold or otherwise disposed of since such date in the

ordinary course of business). Secure owns, free and clear of any liens, any and

all of its assets, except that Valley National Bank has a security interest in

all of Secure's assets, which security interest shall be released and discharged

on the Closing Date.

2.11 Finders. Secure has not incurred any liability to any broker, finder

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or agent for fees or commissions in connection with this Agreement and the

transactions contemplated hereby, except that Secure is party to an agreement

dated September 11, 2003 with The Woodland Group, Inc. pursuant to which a

commission will be due if the transactions contemplated by this Agreement are

concluded. The material terms of Secure's agreement with The Woodland Group,

including disclosure of all amounts paid, or to be paid, in cash or in kind, are

set forth on Schedule 2.11.

 

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ARTICLE III

REPRESENTATIONS AND WARRANTIES OF SOMERSET

Except as set forth in the schedules to this Agreement, disclosure in any

one of which shall apply to any and all representations and warranties made in

this Agreement, and except as otherwise disclosed in writing to Secure, Somerset

hereby represents and warrants to Secure, as of the date of this Agreement and

as of the Effective Time (except as otherwise indicated), as follows:

3.1 Organization, Standing And Power. Somerset is a corporation duly

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incorporated, validly existing and in good standing under the laws of the State

of Delaware. It has full corporate power and authority to conduct its business

as presently conducted by it and to enter into and perform this Agreement and to

carry out the transactions contemplated by this Agreement.

3.2 SEC Filings. The Report on Form 10-QSB filed by Somerset with respect

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to the period ended March 31, 2004 was true and accurate, and complied in all

respects with the applicable Rules of the Securities and Exchange Commission.

3.3 Merger with Somerset-NJ. Somerset is party to an Agreement and Plan of

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Merger with Somerset International Group, Inc., a New Jersey corporation

("Somerset-NJ"). A true copy of the Agreement and Plan of Merger has been

delivered to Secure. The said Agreement remains in full force and effect. As

used herein, "Completion of the Somerset Merger" means the effectuation of the

merger of Somerset-NJ with Somerset.

3.4 Capitalization. There are 300,000,000 shares of Som


 
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