AGREEMENT AND PLAN OF MERGER

 

                          AGREEMENT AND PLAN OF MERGER

 

       AGREEMENT AND PLAN OF MERGER between SOMERSET INTERNATIONAL GROUP,

INC., a Delaware corporation ("Somerset Delaware"), and SOMERSET

INTERNATIONAL GROUP, INC., a New Jersey corporation ("Somerset New

Jersey"), Somerset Delaware and Somerset New Jersey being sometimes

referred to herein as the "Constituent Corporations."

 

       WHEREAS, the board of directors of each Constituent Corporation deems it

advisable that the Constituent Corporations merge into a single corporation in a

transaction intended to qualify as a reorganization within the meaning of

Section 368 (a)(1)(A) of the Internal Revenue Code of 1986, as amended ("the

Merger");

 

       NOW, THEREFORE, in consideration of the premises and the respective

mutual covenants, representations and warranties herein contained, the parties

agree as follows:

 

     1. SURVIVING CORPORATION. Somerset New Jersey shall be merged with and into

Somerset Delaware, which shall be the surviving corporation in accordance with

the applicable laws of its state of incorporation.

 

     2. MERGER DATE. The Merger shall become effective (the" Merger Date") upon

the completion of:

 

          2.1. Adoption of this agreement by Somerset Delaware pursuant to the

General Corporation Law of Delaware and by Somerset New Jersey pursuant to

General Corporation Law of the State of New Jersey.

 

          2.2. Execution and filing by Somerset New Jersey of Articles of Merger

with the Department of State of the State of New Jersey in accordance with the

General Corporation Law of New Jersey.

 

          2.3. Execution and filing by Somerset Delaware of a Certificate of

Merger with the Secretary of State of the State of Delaware in accordance with

the General Corporation Law of Delaware.

 

          2.4 The Articles of Merger shall be filed with the Department of State

of the State of New Jersey and the Certificate of Merger shall be filed with the

Secretary of State of Delaware upon the approval, as required by law, of this

agreement by the Constituent Corporations and the fulfillment or waiver of the

terms and conditions herein. These filings will be completed within the earlier

of the consummation by Somerset Delaware of its initial acquisition or June 30,

2004.

 

     3. GOVERNING LAW. The surviving corporation shall be governed by the laws

of the State of incorporation of Somerset Delaware.

 

     4. CERTIFICATE OF INCORPORATION. The Articles of Incorporation of Somerset

Delaware shall be the Articles of Incorporation of the surviving corporation

from and after the Merger Date.

 

     5. BYLAWS. The Bylaws of the surviving corporation shall be the Bylaws of

Somerset Delaware as in effect on the date of this agreement.

 

     6. BOARD OF DIRECTORS AND OFFICERS. The officers and directors of Somerset

Delaware, or such other persons as shall be selected by it, shall be the

officers and directors of the surviving corporation following the Merger Date.

 

     7. NAME OF SURVIVING CORPORATION. The name of the surviving corporation

will continue as "Somerset International Group, Inc." unless changed by Somerset

Delaware.

 

     8. CONVERSION. The mode of carrying the Merger into effect and the manner

and basis of converting the shares of Somerset New Jersey into shares of

Somerset Delaware are as follows:

 

          8.1 All of the shares of Somerset New Jersey Common Stock issued and

outstanding on the Merger Date shall, by virtue of the Merger and without any

action on the part of the holders thereof, be converted into 4,063,884 shares of

Somerset Delaware's Common Stock to be adjusted by any increase for fractional

shares and reduced by any Dissenting Shares (defined below) and shall be

distributed as shown opposite the Somerset New Jersey shareholder(s) names in

exhibit A.

 

The Somerset Delaware Common Stock to be issued hereunder ("the SGIG Shares")

will be issued pursuant to Section 4 (2) of the Securities Act of 1933 and/or

Rule 506 of the General Rules and Regulations of the Securities and Exchange

Commission, will be restricted as to the transferability pursuant to Rule 144

thereof, and will bear substantially the following legend:

 

 

"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER

THE UNITED STATES SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED

SECURITIES" AS THAT TERM IS DEFINED IN RULE 144 UNDER THE ACT. THE SECURITIES

MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN

EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM

REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO

THE SATISFACTION OF SOMERSET DELAWARE."

 

          8.2. Upon completion of the Merger, there shall be approximately

5,100,000 shares of Somerset Delaware Common Stock issued and outstanding,

subject to such adjustments.

 

          8.3. All outstanding Common Stock of Somerset New Jersey and all

warrants, options or other rights to its Common Stock shall be retired and

canceled as of the Merger Date.

 

          8.4. Each share of Somerset New Jersey Common Stock that is owned by

Somerset New Jersey as treasury stock shall, by virtue of the Merger and without

any action on the part of Somerset New Jersey, be retired and canceled as of the

Merger Date.

 

          8.5. Each certificate evidencing ownership of shares of Somerset

Delaware Common Stock issued and outstanding on the Merger Date or held by

Somerset Delaware in its treasury shall continue to evidence ownership of the

same number of shares of Somerset Delaware Common Stock.

 

          8.6. Somerset Delaware Common Stock shall be issued to the holders of

Somerset New Jersey Common Stock in exchange for their shares on a pro rata

bases in accordance with each holder's relative ownership of the Somerset New

Jersey Common Stock that is being exchanged.

 

           8.7. The shares of Somerset Delaware Common Stock to be issued in

exchange for Somerset New Jersey Common Stock hereunder shall be proportionately

reduced by any shares owned by Somerset New Jersey shareholders who shall have

timely objected to the Merger (the" Dissenting Shares") in accordance with the

provisions of the General Corporation Law of New Jersey, as provided therein.

 

          8.8. Somerset Delaware Common Stock held by Somerset New Jersey shall

be transferred proportionately to the shareholders of Somerset New Jersey as set

forth on Exhibit A.

 

     9. EXCHANGE OF CERTIFICATES. As promptly as practicable after the Merger

Date, each holder of an outstanding certificate or certificates theretofore

representing shares of Somerset New Jersey Common Stock (other than certificates

representing Dissenting Shares) shall surrender such certificate(s) for

cancellation to the party designated herein to handle such exchange (the

"Exchange Agent"), and shall receive in exchange a certificate or certificates

representing the number of full shares of Somerset Delaware Common Stock into

which the shares of Somerset New Jersey Common Stock represented by the

certificate or certificates so surrendered shall have been converted. Any

exchange of fractional shares will be rounded up to the next highest number of

full shares. Somerset Delaware may, in its discretion, require a bond in

customary form before issuing any share certificate where a corresponding share

certificate has not been delivered by a shareholder of Somerset New Jersey

because of loss or other reason.

 

     10. UNEXCHANGED CERTIFICATES. Until surrendered, each outstanding

certificate that prior to the Merger Date represented Somerset New Jersey Common

Stock (other than certificates representing Dissenting Shares) shall be deemed

for all purposes, other than the payment of dividends or other distributions, to

evidence ownership of the number of shares of Somerset Delaware Common Stock

into which it was converted. No dividend or other distribution payable to

holders of Somerset New Jersey Common Stock as of any date subsequent to the

Merger Date shall be paid to the holders of outstanding certificates of Somerset

New Jersey Common Stock; provided, however, that upon surrender and exchange of

such outstanding certificates (other than certificates representing Dissenting

Shares), there shall be paid to the record holders of the certificates issued in

exchange therefore the amount, without interest thereon, of dividends and other

distributions that would have been payable subsequent to the Merger Date with

respect to the shares of Somerset Delaware Common Stock represented thereby.

 

     11. EFFECT OF THE MERGER. On the Merger Date, the separate existence of

Somerset New Jersey shall cease (except insofar as continued by statute), and it

shall be merged with and into Somerset Delaware. All the property, real,

personal and mixed, of each of the Constituent Corporations, and all debts due

to either of them, shall be transferred to and vested in Somerset Delaware,

without further act or deed. Somerset Delaware shall thenceforth be responsible

and liable for all the liabilities and obligations, including liabilities to

holders of Dissenting Shares, of each of the Constituent Corporations, and any

claim or judgment against either of the Constituent Corporations maybe enforced

against Somerset Delaware.

 

     12. REPRESENTATIONS AND WARRANTIES OF SOMERSET DELAWARE. Somerset Delaware

represents and warrants that:

 

          12.1. CORPORATE ORGANIZATION AND GOOD STANDING. Somerset Delaware is a

corporation duly organized, validly existing, and in good standing under the

laws of the State of Delaware, and is qualified to do business as a foreign

corporation in each jurisdiction, if any, in which its property or business

requires such qualification.

 

          12.2. REPORTING COMPANY STATUS. Somerset Delaware is a reporting

company pursuant to Section (g) of the Securities Exchange Act of 1934.

 

          12.3. REPORTING COMPANY FILINGS. Somerset Delaware has timely filed

and is current on all reports required to be filed by it pursuant to Section 13

of the Securities Exchange Act of 1934.

 

          12.4. CAPITALIZATION. Somerset Delaware's authorized capital stock

consists of 200,000,000 shares of Common Stock, $.001 par value, of which

1,036,116 shares will be issued and outstanding after the 1-21 reverse split to

be undertaken by Somerset Delaware.

 

          12.5. ISSUED STOCK. All the outstanding shares of its Common Stock are

duly authorized and validly issued, fully paid and non-assessable.

 

          12.6. STOCK RIGHTS. Except as set out by attached schedule, there are

no stock grants, options, rights, warrants or other rights to purchase or obtain

Somerset Delaware Common or Preferred Stock issued or committed to be issued.

 

          12.7. CORPORATE AUTHORITY. Somerset Delaware has all requisite

corporate power and authority to own, operate and lease its properties, to carry

on its business as it is now being conducted and to execute, deliver, perform

and conclude the transactions contemplated by this agreement and all other

agreements and instruments related to this agreement

 

          12.8   ABSENCE OF UNDISCLOSED LIABILITIES. Except to the extent

reflected or reserved against in the Somerset Delaware Financial Statements,

Somerset Delaware did not have at that date any liabilities or obligations

(secured, unsecured, contingent, or otherwise) of a nature customarily reflected

in a corporate balance sheet prepared in accordance with generally accepted

accounting principles.

 

          12.9. NO MATERIAL CHANGES. There has been no material adverse change

in the business, properties or financial condition of Somerset Delaware since

the date of the Somerset Delaware Financial Statements.

 

          12.10. LITIGATION. There is not, to the knowledge of Somerset

Delaware, any pending, threatened, or existing litigation, bankruptcy, criminal,

civil, or regulatory proceeding or investigation, threatened or contemplated

against Somerset Delaware or against any of its officers.

 

          12.11. CONTRACTS. Somerset Delaware is not a party to any material

contract not in the ordinary course of business that is to be performed in whole

or in part at or after the date of this agreement.

 

          12.12. TITLE. Somerset Delaware has good and marketable title tall the

real property and good and valid title to all other property included in the

Somerset Delaware Financial Statements. The properties of Somerset Delaware are

not subject to any mortgage, encumbrance or lien of any kind except minor

encumbrances that do not materially interfere with the use of the property in

the conduct of the business of Somerset Delaware.

 

          12.13. TAX RETURNS. All required tax returns for federal, state,

county, municipal, local, foreign and other taxes and assessments have been

properly prepared and filed by Somerset Delaware for all years for which such

returns are due unless an extension for filing any such return has been filed.

Any and all federal, state, county, municipal, local, foreign and other taxes

and assessments, including any and all interest, penalties and additions imposed

with respect to such amounts have been paid or provided for. The provisions for

federal and state taxes reflected in the Somerset Delaware Financial Statements

are adequate to cover any such taxes that may be assessed against Somerset

Delaware in respect of its business and its operations during the periods

covered by the Somerset Delaware Financial Statements and all prior periods.

 

          12.14. NO VIOLATION. Consummation of the Merger will not constitute or

resu