AGREEMENT OF MERGER AND PLAN OF REORGANIZATION BY AND AMONG OPTIONS MEDIA GROUP HOLDINGS, INC. OPTIONS ACQUISITION CORP. OPTIONS ACQUISITION SUB, INC. and CUSTOMER ACQUISITION NETWORK HOLDINGS, INC. Dated as of June 23, 2008
_____________________________________________________
AGREEMENT
OF MERGER AND
PLAN
OF REORGANIZATION
_____________________________________________________
BY
AND AMONG
OPTIONS
MEDIA GROUP HOLDINGS, INC.
OPTIONS
ACQUISITION CORP.
OPTIONS
ACQUISITION SUB, INC.
and
CUSTOMER
ACQUISITION NETWORK HOLDINGS, INC.
Dated as
of June 23, 2008
AGREEMENT
OF MERGER AND PLAN OF REORGANIZATION
THIS
AGREEMENT OF MERGER AND PLAN OF REORGANIZATION (this “Agreement”) is made
and entered into on June 23, 2008, by and among OPTIONS MEDIA GROUP HOLDINGS,
INC., a Nevada corporation (“Parent”), OPTIONS
ACQUISITION CORP., a Delaware corporation (“Acquisition Corp.”),
which is a wholly-owned subsidiary of Parent, OPTIONS ACQUISITION SUB, INC., a
Delaware corporation (the “Company”) and
CUSTOMER ACQUISITION NETWORK HOLDINGS, INC., a Delaware corporation and the sole
stockholder of the Company (“CAN”).
2
ARTICLE
I.
Section
1.01 Merger. Subject
to the terms and conditions of this Agreement and the Certificate of Merger,
Acquisition Corp. shall be merged with and into the Company in accordance with
Section 251 of the DGCL. At the Effective Time (as defined below), the separate
legal existence of Acquisition Corp. shall cease, and the Company shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
“Surviving
Corporation”) and shall continue its corporate existence under the laws
of the State of Delaware under the name “Options Acquisition Sub,
Inc.”
Section
1.02 Effective
Time. The Merger shall become effective upon the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware in
accordance with Section 251 of the DGCL. The time at which the Merger shall
become effective as aforesaid is referred to hereinafter as the “Effective
Time.”
Section
1.03 Closing. The closing
of the Merger (the “Closing”) shall occur
concurrently with the Effective Time (the “Closing Date”). The
Closing shall occur at the offices of Cane Xxxxx LLP referred to in Section
10.01 hereof. At the Closing, all of the documents, certificates, agreements,
opinions and instruments referenced in Article VII will be executed and
delivered as described therein. At the Effective Time, all actions to be taken
at the Closing shall be deemed to be taken simultaneously.
(a) The
Certificate of Incorporation of the Company, as in effect immediately prior to
the Effective Time, attached as Exhibit B hereto, as
amended by the Certificate of Merger, shall be the Certificate of Incorporation
of the Surviving Corporation from and after the Effective Time until amended in
accordance with applicable law and such Certificate of
Incorporation.
(b) The
By-laws of the Company, as in effect immediately prior to the Effective Time,
attached as Exhibit
C hereto, shall be the By-laws of the Surviving Corporation from and
after the Effective Time until amended in accordance with applicable law, the
Certificate of Incorporation of the Surviving Corporation and such
By-laws.
(c) The
directors and officers listed in Exhibit D hereto
shall be the directors and officers of the Surviving Corporation and Parent, and
each shall hold his respective office or offices from and after the Effective
Time until his successor shall have been elected and shall have qualified in
accordance with applicable law, or as otherwise provided in the Certificate of
Incorporation or By-laws of the Surviving Corporation or the Certificate of
Incorporation or By-laws of Parent, as the case may be.
Section
1.05 Assets and
Liabilities. At the Effective Time, the Surviving Corporation shall
possess all the rights, privileges, powers and franchises of a public as well as
of a private nature, and be subject to all the restrictions, disabilities and
duties of each of Acquisition Corp. and the Company (collectively, the “Constituent
Corporations”); and all the rights, privileges, powers and franchises of
each of the Constituent Corporations, and all property, real, personal
3
and
mixed, and all debts due to any of the Constituent Corporations on whatever
account, as well as all other things in action or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation; and all
property, rights, privileges, powers and franchises, and all and every other
interest shall be thereafter as effectively the property of the Surviving
Corporation as they were of the several and respective Constituent Corporations,
and the title to any real estate vested by deed or otherwise in either of such
Constituent Corporations shall not revert or be in any way impaired by the
Merger; but all rights of creditors and all liens upon any property of any of
the Constituent Corporations shall be preserved unimpaired, and all debts,
liabilities and duties of the Constituent Corporations shall thenceforth attach
to the Surviving Corporation, and may be enforced against it to the same extent
as if said debts, liabilities and duties had been incurred or contracted by
it.
Section
1.06 Manner and Basis of
Converting Shares.
(a) At the
Effective Time:
(i) each
share of common stock, par value $0.001 per share, of Acquisition Corp. that
shall be outstanding immediately prior to the Effective Time shall, by virtue of
the Merger and without any action on the part of the holder thereof, be
converted into the right to receive one (1) share of common stock, par value
$0.001 per share, of the Surviving Corporation, so that at the Effective Time,
Parent shall be the holder of all of the issued and outstanding shares of the
Surviving Corporation;
(ii) each
share of common stock, par value $0.001 per share, of the Company (the “Company Common
Stock”) shall, by virtue of the Merger and without any action on the part
of the holders thereof, be converted into the right to receive (A) an amount in
cash or evidenced by a secured promissory note or a combination thereof,
determined by dividing $4,000,000 (the “Cash Merger
Consideration”) by the total number of shares of Company Common Stock
issued and outstanding at the Effective Time (the “Company Common Stock
Outstanding”) and (B) that number of shares of common stock, par value
$0.001 of Parent (the “Parent Common Stock”)
determined by dividing 12,500,000 shares of Parent Common Stock (the “Stock Merger
Consideration” and together with the Cash Merger Consideration, the
“Merger
Consideration”) by the Company Common Stock Outstanding; and
(iii) each
share of Company Common Stock held in the treasury of the Company immediately
prior to the Effective Time shall be cancelled in the Merger and cease to
exist.
(b) After the
Effective Time, there shall be no further registration of transfers on the stock
transfer books of the Surviving Corporation of the shares of Company Common
Stock that were outstanding immediately prior to the Effective
Time.
Section
1.07 Surrender and Exchange of
Certificates. Promptly after the Effective Time and upon surrender of a
certificate or certificates representing shares of Company Common Stock that
were outstanding immediately prior to the Effective Time or an affidavit and
indemnification in form reasonably acceptable to counsel for Parent stating that
such Company stockholder has lost its certificate or certificates or that such
have been destroyed, Parent shall
4
deliver
to CAN, (i) a certificate or certificates registered in the name of CAN
representing that the Stock Merger Consideration and (ii) the Cash Merger
Consideration, payable by wire transfer to an account designated by such CAN.
Until the certificate, certificates or affidavit is or are surrendered by CAN,
each certificate or affidavit held by CAN that immediately prior to the
Effective Time represented any outstanding shares of Company Common Stock shall
be deemed at and after the Effective Time to represent only the right to receive
a pro rata portion of the Merger Consideration.
Section
1.08 Parent Common
Stock. Parent agrees that it will cause the Parent Common
Stock into which the Company Common Stock is converted at the Effective Time
pursuant to Section 1.06(a)(ii) to be available for such purposes. Parent
further covenants that immediately following the Effective Time, Parent will
effect cancellations of its outstanding shares of Parent Common Stock and that
there will be no more than 12,250,000 shares of Parent Common Stock issued and
outstanding, and that no other common or preferred stock or equity securities or
any options, warrants, rights or other agreements or instruments convertible,
exchangeable or exercisable into common or preferred stock or other equity
securities shall be issued or outstanding, except as described
herein.
Section
1.09 Operation of Surviving
Corporation. The Company acknowledges that upon the
effectiveness of the Merger, and the material compliance by Parent and
Acquisition Corp. with their respective duties and obligations hereunder, Parent
shall have the absolute and unqualified right to deal with the assets and
business of the Surviving Corporation as its own property without limitation on
the disposition or use of such assets or the conduct of such
business.
Section
1.10 Further
Assurances. From time to time, from and after the Effective
Time, as and when reasonably requested by Parent, the proper officers and
directors of the Company as of the Effective Time shall, for and on behalf and
in the name of the Company or otherwise, execute and deliver all such deeds,
bills of sale, assignments and other instruments and shall take or cause to be
taken such further actions as Parent, Acquisition Corp. or their respective
successors or assigns reasonably may deem necessary or desirable in order to
confirm or record or otherwise transfer to the Surviving Corporation title to
and possession of all of the properties, rights, privileges, powers, franchises
and immunities of the Company or otherwise to carry out fully the provisions and
purposes of this Agreement and the Certificate of Merger.
ARTICLE
II.
Each of
the Company and CAN hereby jointly and severally represents and warrants to
Parent and Acquisition Corp. as follows. Notwithstanding anything to the
contrary contained herein, disclosure of items in the draft Current Report on
Form 8-K of Parent with respect to the Merger and the Private Placement and all
exhibits thereto, a copy of which is attached hereto as Exhibit E
(collectively, the “Disclosures”) shall
be deemed to be disclosure of such items for all purposes under this Agreement,
including, without limitation, for all applicable representations and warranties
of the Company and CAN:
Section
2.01 Organization, Standing,
Subsidiaries, Etc.
5
(a) The
Company is a corporation duly organized and existing in good standing under the
laws of the State of Delaware and has all requisite power and authority
(corporate and other) to carry on its business, to own or lease its properties
and assets, to enter into this Agreement and the Certificate of Merger and to
carry out the terms hereof and thereof. Copies of the Certificate of
Incorporation and By-laws of the Company that have been delivered to Parent and
Acquisition Corp. prior to the execution of this Agreement are true and complete
and have not since been amended or repealed.
(b) The
Company has no subsidiaries or direct or indirect interest (by way of stock
ownership or otherwise) in any firm, corporation, limited liability company,
partnership, association or business.
Section
2.02 Qualification. The
Company is duly qualified to conduct business as a foreign corporation and is in
good standing in each jurisdiction wherein the nature of its activities or its
properties owned or leased makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
condition (financial or otherwise), properties, assets, liabilities, business
operations, results of operations or prospects of the Company taken as a whole
(the “Condition of the
Company”).
Section
2.03 Capitalization of the
Company. The authorized capital stock of the Company consists
of 3,000 shares of Company Common Stock, of which there are
1,000 shares of Company Common Stock issued and outstanding, and,
except as set forth on Schedule 2.03
hereto, such shares are duly authorized, validly issued, fully paid
and non-assessable, and none of such shares have been issued in violation of the
preemptive rights of any natural person, corporation, business trust,
association, limited liability company, partnership, joint venture, other
entity, government, agency or political subdivision (each, a “Person”). The offer,
issuance and sale of such shares of Company Common Stock were (a) exempt from
the registration and prospectus delivery requirements of the Securities Act of
1933, as amended (the “Securities Act”), (b)
registered or qualified (or were exempt from registration or qualification)
under the registration or qualification requirements of all applicable state
securities laws and (c) accomplished in conformity with all other applicable
securities laws. None of such shares of Company Common Stock are subject to a
right of withdrawal or a right of rescission under any federal or state
securities or “Blue Sky” law. Except as otherwise set forth in this Agreement or
any Schedule hereto, the Company has no outstanding options, rights or
commitments to issue Company Common Stock or other Equity Securities (as defined
below) of the Company, and there are no outstanding securities convertible or
exercisable into or exchangeable for Company Common Stock or other Equity
Securities of the Company. For purposes of this Agreement, “Equity Security”
shall mean any stock or similar security of an issuer or any security (whether
stock or Indebtedness for Borrowed Money (as defined below)) convertible, with
or without consideration, into any stock or other equity security, or any
security (whether stock or Indebtedness for Borrowed Money) carrying any warrant
or right to subscribe to or purchase any stock or similar security, or any such
warrant or right.
Section
2.04 Indebtedness. The
Company has no Indebtedness for Borrowed Money, except as otherwise set forth in
this Agreement or disclosed on the Balance Sheet. For purposes of this
Agreement, “Indebtedness for Borrowed
Money” shall mean (a) all Indebtedness in respect of money borrowed
including, without limitation, Indebtedness which represents the
6
unpaid
amount of the purchase price of any property and is incurred in lieu of
borrowing money or using available funds to pay such amounts and not
constituting an account payable or expense accrual incurred or assumed in the
ordinary course of business of the Company, (b) all Indebtedness evidenced by a
promissory note, bond or similar written obligation to pay money or (c) all such
Indebtedness guaranteed by the Company or for which the Company is otherwise
contingently liable. Furthermore, for purposes of this Agreement, “Indebtedness” shall
mean any obligation of the Company which, under generally accepted accounting
principles in the United Stated (“GAAP”), is required
to be shown on the balance sheet of the Company as a liability. Any obligation
secured by a mortgage, pledge, security interest, encumbrance, lien or charge of
any kind (a “Lien”), shall be
deemed to be Indebtedness, even though such obligation is not assumed by the
Company.
Section
2.05 Company
Stockholders. Schedule 1.06 hereto
contains a true and complete list of the names of the record owners of all of
the outstanding shares of Company Common Stock and other Equity Securities of
the Company, together with the number of securities held or to which such Person
has rights to acquire. To the knowledge of the Company, there is no voting
trust, agreement or arrangement among any of the beneficial holders of Company
Common Stock affecting the nomination or election of directors or the exercise
of the voting rights of Company Common Stock.
Section
2.06 Corporate Acts and
Proceedings. The execution, delivery and performance of this
Agreement and the Certificate of Merger (together, the “Merger Documents”)
have been duly authorized by the Board of Directors of the Company and have been
approved by CAN, and all of the corporate acts and other proceedings required
for the due and valid authorization, execution, delivery and performance of the
Merger Documents and the consummation of the Merger have been validly and
appropriately taken, except for the filings referred to in Section
1.02.
Section
2.07 Governmental
Consents. All material consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state governmental authority on the part of the
Company required in connection with the consummation of the Merger shall have
been obtained prior to, and be effective as of, the Closing.
Section
2.08 Compliance with Laws and
Instruments. The business, products and operations of the
Company have been and are being conducted in compliance in all material respects
with all applicable laws, rules and regulations, except for such violations
thereof for which the penalties, in the aggregate, would not have a material
adverse effect on the Condition of the Company. The execution, delivery and
performance by the Company of the Merger Documents and the consummation by the
Company of the transactions contemplated by this Agreement: (a) will not cause
the Company to violate or contravene (i) any provision of law, (ii) any rule or
regulation of any agency or government, (iii) any order, judgment or decree of
any court, or (iv) any provision of the Certificate of Incorporation or By-laws
of the Company, (b) will not violate or be in conflict with, result in a breach
of or constitute (with or without notice or lapse of time, or both) a default
under, any indenture, loan or credit agreement, deed of trust, mortgage,
security agreement or other contract, agreement or instrument to which the
Company is a party or by which the Company or any of its properties is bound or
affected, except as would
7
not have
a material adverse effect on the Condition of the Company and (c) will not
result in the creation or imposition of any Lien upon any property or asset of
the Company. The Company is not in violation of, or (with or without notice or
lapse of time, or both) in default under, any term or provision of its
Certificate of Incorporation or By-laws or of any indenture, loan or credit
agreement, deed of trust, mortgage, security agreement or, except as would not
materially and adversely affect the Condition of the Company, any other material
agreement or instrument to which the Company is a party or by which the Company
or any of its properties is bound or affected.
Section
2.09 Binding
Obligations. The Merger Documents constitute the legal, valid
and binding obligations of the Company and are enforceable against the Company
in accordance with their respective terms, except as such enforcement is limited
by bankruptcy, insolvency and other similar laws affecting the enforcement of
creditors’ rights generally and by general principles of equity.
Section
2.10 Broker’s and Finder’s
Fees. Except for fees paid to the placement agents as set
forth in the Disclosures, no Person has, or as a result of the transactions
contemplated or described herein will have, any right or valid claim against the
Company, Parent, Acquisition Corp. or CAN for any commission, fee or other
compensation as a finder or broker, or in any similar capacity.
Section
2.11 Financial
Statements. Parent has previously been provided with the
Company’s audited balance sheet (the “Balance Sheet”) as of
December 31, 2007 (the “Balance Sheet Date”)
and the audited statements of operations and accumulated deficits and cash flows
for the year ended December 31, 2007. Such financial statements are collectively
referred to as the “Financial
Statements”. Such financial statements (a) are in accordance with the
books and records of the Company, (b) present fairly in all material respects
the financial condition of the Company at the dates therein specified and the
results of its operations and changes in financial position for the periods
therein specified and (c) have been prepared in accordance with GAAP applied on
a basis consistent with prior accounting periods.
Section
2.12 Absence of Undisclosed
Liabilities. The Company has no material obligation or liability (whether
accrued, absolute, contingent, liquidated or otherwise, whether due or to become
due), arising out of any transaction entered into at or prior to the Closing,
except (a) as disclosed in the Balance Sheet, (b) to the extent set forth on or
reserved against in the Balance Sheet or the notes to the Financial Statements,
(c) current liabilities incurred and obligations under agreements entered into
in the usual and ordinary course of business since the Balance Sheet Date, none
of which (individually or in the aggregate) has had or will have a material
adverse effect on the Condition of the Company and (d) by the specific terms of
any written agreement, document or arrangement identified in the
Disclosures.
Section
2.13 Changes. Since
the Balance Sheet Date, the Company has not (a) incurred any debts, obligations
or liabilities, absolute, accrued, contingent or otherwise, whether due or to
become due, except for fees, expenses and liabilities incurred in connection
with the Merger and related transactions and current liabilities incurred in the
usual and ordinary course of business, (b) discharged or satisfied any Liens
other than those securing, or paid any obligation or liability other than,
current liabilities shown on the Balance Sheet and current liabilities incurred
since the
8
Balance
Sheet Date, in each case in the usual and ordinary course of business, (c)
mortgaged, pledged or subjected to Lien any of its assets, tangible or
intangible other than in the usual and ordinary course of business, (d) sold,
transferred or leased any of its assets, except in the usual and ordinary course
of business, (e) cancelled or compromised any debt or claim, or waived or
released any right, of material value, (f) suffered any physical damage,
destruction or loss (whether or not covered by insurance) materially and
adversely affecting the Condition of the Company, (g) entered into any
transaction other than in the usual and ordinary course of business, (h)
encountered any labor union difficulties, (i) made or granted any wage or salary
increase or made any increase in the amounts payable under any profit sharing,
bonus, deferred compensation, severance pay, insurance, pension, retirement or
other employee benefit plan, agreement or arrangement, other than in the
ordinary course of business consistent with past practice, or entered into any
employment agreement, (j) issued or sold any shares of capital stock, bonds,
notes, debentures or other securities or granted any options (including employee
stock options), warrants or other rights with respect thereto, (k) declared or
paid any dividends on or made any other distributions with respect to, or
purchased or redeemed, any of its outstanding capital stock, (l) suffered or
experienced any change in, or condition affecting, the Condition of the Company
other than changes, events or conditions in the usual and ordinary course of its
business, none of which (either by itself or in conjunction with all such other
changes, events and conditions) has been materially adverse, (m) made any change
in the accounting principles, methods or practices followed by it or
depreciation or amortization policies or rates theretofore adopted, (n) made or
permitted any amendment or termination of any material contract, agreement or
license to which it is a party, (o) suffered any material loss not reflected in
the Balance Sheet or its statement of income for the period ended on the Balance
Sheet Date, (p) paid, or made any accrual or arrangement for payment of, bonuses
or special compensation of any kind or any severance or termination pay to any
present or former officer, director, employee, stockholder or consultant, (q)
made or agreed to make any charitable contributions or incurred any non-business
expenses in excess of $50,000 in the aggregate, or (r) entered into any
agreement, or otherwise obligated itself, to do any of the
foregoing.
Section
2.14 Assets and
Contracts.
(a) Schedule 2.14(a)
contains a true and complete list of all real property leased by the Company and
of all tangible personal property owned or leased by the Company having a cost
or fair market value of greater than $250,000. All the real property listed in
Schedule
2.14(a) is leased by the Company under valid leases enforceable in
accordance with their terms, and there is not, under any such lease, any
existing default or event of default or event which with notice or lapse of
time, or both, would constitute a default by the Company, and the Company has
not received any notice or claim of any such default by the Company. The Company
does not own any real property.
(b) Except as
expressly set forth in this Agreement, the Financial Statements or the notes
thereto, or as disclosed in Schedule 2.14(b)
hereto, the Company is not a party to any written or oral agreement not made in
the ordinary course of business that is material to the Company. Except as
disclosed in Schedule
2.14(b) hereto, the Company is not a party to any written or oral (i)
agreement for the purchase of fixed assets or for the purchase of materials,
supplies or equipment in excess of normal operating requirements, (ii) agreement
for the employment of any officer, individual employee or other Person on a
full-time basis or any
9
agreement
with any Person for consulting services, (iii) indenture, loan or credit
agreement, note agreement, deed of trust, mortgage, security agreement,
promissory note or other agreement or instrument relating to or evidencing
Indebtedness for Borrowed Money or subjecting any asset or property of the
Company to any Lien or evidencing any Indebtedness, (iv) guaranty of any
Indebtedness, (v) other than as set forth in Schedule 2.14(a)
hereto, lease or agreement under which the Company is lessee of or holds or
operates any property, real or personal, owned by any other Person under which
payments to such Person exceed $250,000 per year, (vi) agreement granting any
preemptive right, right of first refusal or similar right to any Person, (vii)
agreement or arrangement with any Affiliate or any “associate” (as such term is
defined in Rule 405 under the Securities Act) of the Company or any present or
former officer, director or stockholder of the Company, (viii) agreement
obligating the Company to pay any royalty or similar charge for the use or
exploitation of any tangible or intangible property, (ix) covenant not to
compete or other material restriction on its ability to conduct a business or
engage in any other activity, (x) agreement to register securities under the
Securities Act or (xi) collective bargaining agreement. Except as disclosed in
Schedule
2.14(b), none of the agreements, contracts, leases, instruments or other
documents or arrangements listed in Schedules 2.14(a) and
2.14(b)
requires the consent of any of the parties thereto other than the Company to
permit the contract, agreement, lease, instrument or other document or
arrangement to remain effective following consummation of the Merger and the
transactions contemplated hereby. For purposes of this Agreement, an “Affiliate” shall mean
any Person that directly or indirectly controls, is controlled by, or is under
common control with, the indicated Person.
(c) The
Company has made available to Parent and Acquisition Corp. true and complete
copies of all agreements and other documents and a description of all applicable
oral agreements disclosed or referred to in Schedules 2.14(a) and
2.14(b), as
well as any additional agreements or documents, requested by Parent or
Acquisition Corp. The Company has in all material respects performed all
obligations required to be performed by it to date and is not in default in any
material respect under any of the contracts, agreements, leases, documents,
commitments or other arrangements to which it is a party or by which it or any
of its property is otherwise bound or affected.
Section
2.15 Employees. The
Company has complied in all material respects with all laws relating to the
employment of labor, and the Company has encountered no material labor union
difficulties. Other than pursuant to ordinary arrangements of employment
compensation, the Company is not under any obligation or liability to any
officer, director or employee of the Company.
Section
2.16 Tax Returns and
Audits.
(a) All
required federal, state and local Tax Returns (as defined below) of the Company
have been accurately prepared and duly and timely filed, and all federal, state
and local Taxes (as defined below) required to be paid with respect to the
periods covered by such returns have been paid. The Company is not and has not
been delinquent in the payment of any Tax. The Company has not had a Tax
deficiency proposed or assessed against it and has not executed a waiver of any
statute of limitations on the assessment or collection of any Tax. None of the
Company’s federal income tax returns has been audited by any governmental
authority; and none of the Company’s state or local income or franchise tax
returns has been audited by any
10
governmental
authority. The reserves for Taxes reflected on the Balance Sheet are and will be
sufficient for the payment of all unpaid Taxes payable by the Company as of the
Balance Sheet Date. Since the Balance Sheet Date, the Company has made adequate
provisions on its books of account for all Taxes with respect to its business,
properties and operations for such period. The Company has withheld or collected
from each payment made to each of its employees the amount of all taxes
(including, but not limited to, federal, state and local income taxes, Federal
Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper Tax receiving officers or authorized depositaries. There are no federal,
state, local or foreign audits, actions, suits, proceedings, investigations,
claims or administrative proceedings relating to Taxes or any Tax Returns of the
Company now pending, and the Company has not received any notice of any proposed
audits, investigations, claims or administrative proceedings relating to Taxes
or any Tax Returns. The Company is not obligated to make a payment, nor is it a
party to any agreement that under certain circumstances could obligate it to
make a payment that would not be deductible under Section 280G of the Code. The
Company has not agreed, nor is it required, to make any adjustments under
Section 481(a) of the Code (or any similar provision of state, local and foreign
law), whether by reason of a change in accounting method or otherwise, for any
Tax period for which the applicable statute of limitations has not yet expired.
The Company (i) is not a party to, nor is it bound by or obligated under, any
Tax sharing agreement, Tax indemnification agreement or similar contract or
arrangement, whether written or unwritten (collectively, “Tax Sharing
Agreements”), and (ii) does not have any potential liability or
obligation to any Person as a result of, or pursuant to, any such Tax Sharing
Agreements.
(b) For
purposes of this Agreement, the following terms shall have the meanings provided
below:
(i) “Tax” or “Taxes” shall mean (A)
any and all taxes, assessments, customs, duties, levies, fees, tariffs, imposts,
deficiencies and other governmental charges of any kind whatsoever (including,
but not limited to, taxes on or with respect to net or gross income, franchise,
profits, gross receipts, capital, sales, use, ad valorem, value added, transfer,
real property transfer, transfer gains, transfer taxes, inventory, capital
stock, license, payroll, employment, social security, unemployment, severance,
occupation, real or personal property, estimated taxes, rent, excise, occupancy,
recordation, bulk transfer, intangibles, alternative minimum, doing business,
withholding and stamp), together with any interest thereon, penalties, fines,
damages costs, fees, additions to tax or additional amounts with respect
thereto, imposed by the United States (Federal, state or local) or other
applicable jurisdiction; (B) any liability for the payment of any amounts
described in clause (A) as a result of being a member of an affiliated,
consolidated, combined, unitary or similar group or as a result of transferor or
successor liability, including, without limitation, by reason of Regulation
section 1.1502-6; and (C) any liability for the payments of any amounts as a
result of being a party to any Tax Sharing Agreement or as a result of any
express or implied obligation to indemnify any other Person with respect to the
payment of any amounts of the type described in clause (A) or (B).
(ii) “Tax Return” shall
include all returns and reports (including elections, declarations, disclosures,
schedules, estimates and information returns (including Form 1099 and
partnership returns filed on Form 1065) required to be supplied to a Tax
authority relating to Taxes.
11
Section
2.17 Patents and Other Intangible
Assets.
(a) The
Company (i) owns or has the right to use, free and clear of all Liens, claims
and restrictions, all patents, trademarks, service marks, trade names,
copyrights, licenses and rights with respect to the foregoing used in or
necessary for the conduct of its business as now conducted or proposed to be
conducted without infringing upon or otherwise acting adversely to the right or
claimed right of any Person under or with respect to any of the foregoing and
(ii) is not obligated or under any liability to make any payments by way of
royalties, fees or otherwise to any owner or licensor of, or other claimant to,
any patent, trademark, service xxxx, trade name, copyright or other intangible
asset, with respect to the use thereof or in connection with the conduct of its
business or otherwise.
(b) To the
knowledge of the Company, the Company owns and has the unrestricted right to use
all trade secrets, if any, including know-how, negative know-how, formulas,
patterns, programs, devices, methods, techniques, inventions, designs,
processes, computer programs and technical data and all information that derives
independent economic value, actual or potential, from not being generally known
or known by competitors (collectively, “Intellectual
Property”) required for or incident to the development, operation and
sale of all products and services sold by the Company, free and clear of any
right, Lien or claim of others; provided, however, that the
possibility exists that other Persons, completely independently of the Company
or its employees or agents, could have developed Intellectual Property similar
or identical to that of the Company. The Company is not aware of any such
development of substantially identical trade secrets or technical information by
others. All Intellectual Property can and will be transferred by the Company to
the Surviving Corporation as a result of the Merger and without the consent of
any Person other than the Company.
Section
2.18 Employee Benefit Plans;
ERISA.
(a) Except as
disclosed on Schedule
2.18 hereto, there are no “employee benefit plans” (within the meaning of
Section 3(3) of ERISA) nor any other employee benefit or fringe benefit
arrangements, practices, contracts, policies or programs of every type other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by the Company, whether
written or unwritten and whether or not funded. The plans listed on Schedule 2.18 hereto
are hereinafter referred to as the “Employee Benefit
Plans.”
(b) All
current and prior material documents, including all amendments thereto, with
respect to each Employee Benefit Plan have been made available to Parent and
Acquisition Corp. or their advisors.
(c) To the
knowledge of the Company, all Employee Benefit Plans are in material compliance
with the applicable requirements of ERISA, the Code and any other applicable
state, federal or foreign law.
(d) There are
no pending claims or lawsuits that have been asserted or instituted against any
Employee Benefit Plan, the assets of any of the trusts or funds under the
Employee Benefit Plans, the plan sponsor or the plan administrator of any of the
Employee
12
Benefit
Plans or against any fiduciary of an Employee Benefit Plan with respect to the
operation of such plan, nor does the Company have any knowledge of any incident,
transaction, occurrence or circumstance that might reasonably be expected to
form the basis of any such claim or lawsuit.
(e) There is
no pending or, to the knowledge of the Company, contemplated investigation, or
pending or possible enforcement action by the Pension Benefit Guaranty
Corporation, the Department of Labor, the Internal Revenue Service or any other
government agency with respect to any Employee Benefit Plan and the Company has
no knowledge of any incident, transaction, occurrence or circumstance which
might reasonably be expected to trigger such an investigation or enforcement
action.
(f) No actual
or, to the knowledge of the Company, contingent liability exists with respect to
the funding of any Employee Benefit Plan or for any other expense or obligation
of any Employee Benefit Plan, except as disclosed on the financial statements of
the Company, and no contingent liability exists under ERISA with respect to any
“multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
(g) No events
have occurred or are expected to occur with respect to any Employee Benefit Plan
that would cause a material change in the costs of providing benefits under such
Employee Benefit Plan or would cause a material change in the cost of providing
for other liabilities of such Employee Benefit Plan.
Section
2.19 Title to Property and
Encumbrances. The Company has good, valid and indefeasible
marketable title to all properties and assets used in the conduct of its
business (except for property held under valid and subsisting leases that are in
full force and effect and which are not in default) free of all Liens and other
encumbrances, except Permitted Liens and such ordinary and customary
imperfections of title, restrictions and encumbrances as do not, individually or
in the aggregate, materially detract from the value of the property or assets or
materially impair the use made thereof by the Company in its business. Without
limiting the generality of the foregoing, the Company has good and indefeasible
title to all of its properties and assets reflected in the Balance Sheet, except
for property disposed of in the usual and ordinary course of business since the
Balance Sheet Date and for property held under valid and subsisting leases that
are in full force and effect and that are not in default. For purposes of this
Agreement, “Permitted
Liens” shall mean (a) Liens for taxes and assessments or governmental
charges or levies not at the time due or in respect of which the validity
thereof shall currently be contested in good faith by appropriate proceedings;
(b) Liens in respect of pledges or deposits under workmen’s compensation laws or
similar legislation, carriers’, warehousemen’s, mechanics’, laborers’ and
materialmens’ and similar Liens, if the obligations secured by such Liens are
not then delinquent or are being contested in good faith by appropriate
proceedings and (c) Liens incidental to the conduct of the business of the
Company that were not incurred in connection with the borrowing of money or the
obtaining of advances or credits and which do not in the aggregate materially
detract from the value of its property or materially impair the use made thereof
by the Company in its business.
Section
2.20 Condition of
Properties. All facilities, machinery, equipment, fixtures and
other properties owned, leased or used by the Company are in reasonably good
operating
13
condition
and repair, subject to ordinary wear and tear, and are adequate and sufficient
for the Company’s business.
Section
2.21 Insurance
Coverage. There is in full force and effect one or more
policies of insurance issued by insurers of recognized responsibility, insuring
the Company and its properties, products and business against such losses and
risks, and in such amounts, as are customary for corporations of established
reputation engaged in the same or similar business and similarly situated. The
Company has not been refused any insurance coverage sought or applied for, and
the Company has no reason to believe that it will be unable to renew its
existing insurance coverage as and when the same shall expire upon terms at
least as favorable to those currently in effect, other than possible increases
in premiums that do not result from any act or omission of the Company. No suit,
proceeding or action or, to the best current actual knowledge of the Company,
threat of suit, proceeding or action has been asserted or made against the
Company within the last five years due to alleged bodily injury, disease,
medical condition, death or property damage arising out of the function or
malfunction of a product, procedure or service designed, manufactured, sold or
distributed by the Company.
Section
2.22 Litigation. Except
as disclosed in Schedule 2.22, there
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of the Company, threatened
against or affecting the Company or its properties, assets or business, and
after reasonable investigation, the Company is not aware of any incident,
transaction, occurrence or circumstance that might reasonably be expected to
result in or form the basis for any such action, suit, arbitration or other
proceeding. The Company is not in default with respect to any order, writ,
judgment, injunction, decree, determination or award of any court or any
governmental agency or instrumentality or arbitration authority.
Section
2.23 Licenses. The
Company possesses from all appropriate governmental authorities all licenses,
permits, authorizations, approvals, franchises and rights necessary for the
Company to engage in the business currently conducted by it, all of which are in
full force and effect.
Section
2.24 Interested Party
Transactions. No officer, director or stockholder of the
Company or any Affiliate or “associate” (as such term is defined in Rule 405
under the Securities Act) of any such Person or the Company has or has had,
either directly or indirectly, (a) an interest in any Person that (i) furnishes
or sells services or products that are furnished or sold or are proposed to be
furnished or sold by the Company or (ii) purchases from or sells or furnishes to
the Company any goods or services, or (b) a beneficial interest in any contract
or agreement to which the Company is a party or by which it may be bound or
affected.
Section
2.25 Environmental
Matters.
(a) To the
knowledge of the Company, the Company has never generated, used, handled,
treated, released, stored or disposed of any Hazardous Materials (as defined
below) on any real property on which it now has or previously had any leasehold
or ownership interest, except in compliance with all applicable Environmental
Laws (as defined below).
14
(b) To the
knowledge of the Company, the historical and present operations of the business
of the Company are in compliance with all applicable Environmental Laws, except
where any non-compliance has not had and would not reasonably be expected to
have a material adverse effect on the Condition of the Company.
(c) There are
no material pending or, to the knowledge of the Company, threatened, demands,
claims, information requests or notices of noncompliance or violation against or
to the Company relating to any Environmental Law; and, to the knowledge of the
Company, there are no conditions or occurrences on any of the real property used
by the Company in connection with its business that would reasonably be expected
to lead to any such demands, claims or notices against or to the Company, except
such as have not had, and would not reasonably be expected to have, a material
adverse effect on the Condition of the Company.
(d) To the
knowledge of the Company, (i) the Company has not sent or disposed of, otherwise
had taken or transported, arranged for the taking or disposal of (on behalf of
itself, a customer or any other party) or in any other manner participated or
been involved in the taking of or disposal or release of a Hazardous Material to
or at a site that is contaminated by any Hazardous Material or that, pursuant to
any Environmental Law, (A) has been placed on the “National Priorities List”,
the “CERCLIS” list, or any similar state or federal list, or (B) is subject to
or the source of a claim, an administrative order or other request to take
“removal”, “remedial”, “corrective” or any other “response” action, as defined
in any Environmental Law, or to pay for the costs of any such action at the
site; (ii) the Company is not involved in (and has no basis to reasonably expect
to be involved in) any suit or proceeding and has not received (and has no basis
to reasonably expect to receive) any notice, request for information or other
communication from any governmental authority or other third party with respect
to a release or threatened release of any Hazardous Material or a violation or
alleged violation of any Environmental Law, and has not received (and has no
basis to reasonably expect to receive) notice of any claims from any Person
relating to property damage, natural resource damage or to personal injuries
from exposure to any Hazardous Material; and (iii) the Company has timely filed
every report required to be filed, acquired all necessary certificates,
approvals and permits, and generated and maintained all required data,
documentation and records under all Environmental Laws, in all such instances
except where the failure to do so would not reasonably be expected to have,
individually or in the aggregate, a material adverse effect on the Condition of
the Company.
(e) For
purposes of this Agreement, the following terms shall have the meanings provided
below:
(i) “Environmental Laws”
shall mean the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. §§ 9601, et seq.; the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. §§ 11001, et seq.; the Resource
Conservation and Recovery Act, 42 U.S.C. §§ 6901, et seq.; the Toxic Substances
Control Act, 15 U.S.C. §§ 2601 et seq.; the Federal Insecticide, Fungicide, and
Rodenticide Act, 7 U.S.C. §§ 136, et seq. and comparable state statutes dealing
with the registration, labeling and use of pesticides and herbicides; the Clean
Air Act, 42 U.S.C. §§ 7401 et seq.; the Clean Water Act (Federal Water Pollution
Control Act), 33 U.S.C. §§ 1251 et seq.; the Safe Drinking Water Act, 42 U.S.C.
§§ 300f, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. §§ 1801,
15
et seq.;
as any of the above statutes have been amended as of the date hereof, all rules,
regulations and policies promulgated pursuant to any of the above statutes, and
any other foreign, federal, state or local law, statute, ordinance, rule,
regulation or policy governing environmental matters, as the same have been
amended as of the date hereof.
(ii) “Hazardous Material”
shall mean any substance or material meeting any one or more of the following
criteria: (a) it is or contains a substance designated as or meeting the
characteristics of a hazardous waste, hazardous substance, hazardous material,
pollutant, contaminant or toxic substance under any Environmental Law; (b) its
presence at some quantity requires investigation, notification or remediation
under any Environmental Law; or (c) it contains, without limiting the foregoing,
asbestos, polychlorinated biphenyls, petroleum hydrocarbons, petroleum derived
substances or waste, pesticides, herbicides, crude oil or any fraction thereof,
nuclear fuel, natural gas or synthetic gas.
Section
2.26 Questionable
Payments. Neither the Company nor any director, officer or, to
the knowledge of the Company, agent, employee or other Person associated with or
acting on behalf of the Company, has used any corporate funds for unlawful
contributions, gifts, entertainment or other unlawful expenses relating to
political activity; made any direct or indirect unlawful payments to government
officials or employees from corporate funds; established or maintained any
unlawful or unrecorded fund of corporate monies or other assets; made any false
or fictitious entries on the books of record of any such corporations; or made
any bribe, rebate, payoff, influence payment, kickback or other unlawful
payment.
Section
2.27 Obligations to or by
Stockholders. Except as set forth on Schedule 2.27 hereto,
the Company has no liability or obligation or commitment to CAN or any Affiliate
or “associate” (as such term is defined in Rule 405 under the Securities Act) of
CAN, nor does CAN or any such Affiliate or associate have any liability,
obligation or commitment to the Company.
Section
2.28 Duty to Make
Inquiry. To the extent that any of the representations or
warranties in this Article II are qualified by “knowledge” or “belief,” the
Company represents and warrants that it has made due and reasonable inquiry and
investigation concerning the matters to which such representations and
warranties relate, including, but not limited to, diligent inquiry of its
directors, officers and key personnel.
Section
2.29 Disclosure. There
is no fact relating to the Company that the Company has not disclosed to Parent
and Acquisition Corp. in writing that has had or is currently having a material
and adverse effect or, insofar as the Company can now foresee, will materially
and adversely affect the Condition of the Company. No representation or warranty
by the Company herein and no information disclosed in the schedules or exhibits
hereto by the Company contains any untrue statement of a material fact or omits
to state a material fact necessary to make the statements contained herein or
therein not misleading.
16
ARTICLE
III.
Parent
and Acquisition Corp. represent and warrant to the Company and CAN as follows.
Notwithstanding anything to the contrary contained herein, disclosure of items
in the Parent SEC Documents (as defined below) shall be deemed to be disclosure
of such items for all purposes under this Agreement, including, without
limitation, for all applicable representations and warranties of Parent and
Acquisition Corp.:
Section
3.01 Organization and
Standing. Parent is a corporation duly organized and existing
in good standing under the laws of the State of Delaware. Acquisition Corp. is a
corporation duly organized and existing in good standing under the laws of the
State of Delaware. Parent and Acquisition Corp. have heretofore delivered to the
Company complete and correct copies of their respective Certificates of
Incorporation and By-laws as now in effect. Parent and Acquisition Corp. have
full corporate power and authority to carry on their respective businesses as
they are now being conducted and as now proposed to be conducted and to own or
lease their respective properties and assets. Neither Parent nor Acquisition
Corp. has any subsidiaries (except Parent’s ownership of Acquisition Corp.) or
direct or indirect interest (by way of stock ownership or otherwise) in any
firm, corporation, limited liability company, partnership, association or
business. Parent owns all of the issued and outstanding capital stock of
Acquisition Corp. free and clear of all Liens, and Acquisition Corp. has no
outstanding options, warrants or rights to purchase capital stock or other
securities of Acquisition Corp., other than the capital stock owned by Parent.
Unless the context otherwise requires, all references in this Article III to
“Parent” shall be treated as being a reference to Parent and Acquisition Corp.
taken together as one enterprise.
Section
3.02 Qualification. Parent
is duly qualified to conduct business as a foreign corporation and are in good
standing in each jurisdiction wherein the nature of its activities or its
properties owned or leased makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
condition, properties, assets, liabilities or business operations of Parent (the
“Condition of the
Parent”).
Section
3.03 Corporate
Authority. Each of Parent and/or Acquisition Corp. (as the
case may be) has full corporate power and authority to enter into the Merger
Documents and the other agreements to be made pursuant to the Merger Documents,
and to carry out the transactions contemplated hereby and thereby. All corporate
acts and proceedings required for the authorization, execution, delivery and
performance of the Merger Documents and such other agreements and documents by
Parent and/or Acquisition Corp. (as the case may be) have been duly and validly
taken or will have been so taken prior to the Closing. Each of the Merger
Documents constitutes a legal, valid and binding obligation of Parent and/or
Acquisition Corp. (as the case may be), each is enforceable against it and/or
them in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency, reorganization or other similar laws affecting
creditors’ rights generally and by general principles of equity.
Section
3.04 Broker’s and Finder’s
Fees. No Person is entitled by reason of any act or omission
of Parent or Acquisition Corp. to any broker’s or finder’s fees, commission or
other similar compensation with respect to the execution and delivery of the
Merger Documents, or with respect to the consummation of the transactions
contemplated thereby, except as set forth in the Disclosures.
17
Section
3.05 Capitalization.
(a) The
authorized capital stock of Parent consists of (i) 100,000,000 shares of Parent
Common Stock, of which 30,398,148 shares are issued and outstanding, and (ii)
10,000,000 shares of preferred stock, par value $0.001 per share, of which no
shares have been issued or designated as any series of preferred stock (the
“Parent Preferred
Stock”). Parent has no outstanding options, rights or
commitments to issue shares of Parent Common Stock or any other Equity Security
of Parent or Acquisition Corp., and there are no outstanding securities
convertible or exercisable into or exchangeable for shares of Parent Common
Stock or any other Equity Security of Parent or Acquisition Corp. There is no
voting trust, agreement or arrangement among any of the beneficial holders of
Parent Common Stock affecting the nomination or election of directors or the
exercise of the voting rights of Parent Common Stock.
(b) The
authorized capital stock of Acquisition Corp. consists of 3,000 shares of common
stock, par value $.001 per share (the “Acquisition Corp. Common
Stock”), of which 1,000 shares are issued and outstanding. All of the
outstanding Acquisition Corp. Common Stock is owned by Parent. All outstanding
shares of the capital stock of Acquisition Corp. are validly issued and
outstanding, fully paid and non-assessable, and none of such shares have been
issued in violation of the preemptive rights of any Person. Acquisition Corp.
has no outstanding options, rights or commitments to issue shares of Acquisition
Corp. Common Stock or any other Equity Security of Acquisition Corp., and there
are no outstanding securities convertible or exercisable into or exchangeable
for shares of Acquisition Corp. Common Stock or any other Equity Security of
Acquisition Corp.
Section
3.06 Acquisition
Corp. Acquisition Corp. is a wholly-owned Delaware subsidiary
of Parent that was formed specifically for the purpose of the Merger and that
has not conducted any business or acquired any property, and will not conduct
any business or acquire any property prior to the Closing Date, except in
preparation for and otherwise in connection with the transactions contemplated
by the Merger Documents and the other agreements to be made pursuant to or in
connection with the Merger Documents.
Section
3.07 Validity of
Shares. The shares of Parent Common Stock to be issued at the
Closing pursuant to Section 1.06(a)(ii) hereof, when issued and delivered in
accordance with the terms of the Merger Documents, shall be duly and validly
issued, fully paid and non-assessable. Based in part on the representations and
warranties of CAN as contemplated by Article IV hereof and assuming the accuracy
thereof, the issuance of the Parent Common Stock upon consummation of the Merger
pursuant to Section 1.06(a)(ii) will be exempt from the registration and
prospectus delivery requirements of the Securities Act and from the
qualification or registration requirements of any applicable state “Blue Sky” or
securities laws.
Section
3.08 SEC Reporting and
Compliance.
(a) Parent
filed a registration statement on Form SB-2 under the Securities Act, which
became effective on or about November 26, 2007. Since that date, Parent has
timely filed with the U.S. Securities and Exchange Commission (the “Commission”) all
registration statements, proxy statements, information statements and reports
required to be filed pursuant to
18
the
Securities Exchange Act of 1934, as amended (the “Exchange Act”).
Parent has not filed with the Commission a certificate on Form 15 pursuant to
Rule 12h-3 of the Exchange Act.
(b) Parent
has made available to the Company true and complete copies of the registration
statements, information statements and other reports (collectively, the “Parent SEC
Documents”) filed by Parent with the Commission. None of the Parent SEC
Documents, as of their respective dates, contained any untrue statement of a
material fact or omitted to state a material fact necessary in order to make the
statements contained therein not misleading.
(c) Prior to
and until the Closing, Parent will provide to the Company copies of any and all
amendments or supplements to the Parent SEC Documents filed with the Commission
and all subsequent registration statements and reports filed by Parent
subsequent to the filing of the Parent SEC Documents with the Commission and any
and all subsequent information statements, proxy statements, reports or notices
filed by Parent with the Commission or delivered to the stockholders of
Parent.
(d) Parent is
not an investment company within the meaning of Section 3 of the Investment
Company Act of 1940, as amended.
(e) The
shares of Parent Common Stock are quoted on the Over-the-Counter (OTC) Bulletin
Board under the symbol “HVYM.OB” and Parent is in compliance in all material
respects with all rules and regulations of the OTC Bulletin Board applicable to
it and the Parent Common Stock.
(f) Between
the date hereof and the Closing Date, Parent shall continue to satisfy the
filing requirements of the Exchange Act and all other requirements of applicable
securities laws and of the OTC Bulletin Board.
(g) The
Parent SEC Documents include all certifications and statements required of it,
if any, by (i) Rule 13a-14 or 15d-14 under the Exchange Act, and (ii) 18 U.S.C.
Section 1350 (Section 906 of the Xxxxxxxx-Xxxxx Act of 2002), and each of such
certifications and statements contain no qualifications or exceptions to the
matters certified therein other than a knowledge qualification, permitted under
such provision, and have not been modified or withdrawn and neither Parent nor
any of its officers has received any notice from the Commission questioning or
challenging the accuracy, completeness, form or manner of filing or submission
of such certifications or statements.
Section
3.09 Financial
Statements. The balance sheets and statements of operations,
stockholders’ equity and cash flows contained in the Parent SEC Documents (the
“Parent Financial
Statements”) (a) have been prepared in accordance with GAAP applied on a
basis consistent with prior periods (and, in the case of unaudited financial
information, on a basis consistent with year-end audits), (b) are in accordance
with the books and records of Parent and (c) present fairly in all material
respects the financial condition of Parent at the dates therein specified and
the results of its operations and changes in financial position for the periods
therein specified. The financial statements included in Parent’s SB-2 were
audited by Xxxxxxx Xxxxxxx LLP, Parent’s independent registered public
accounting firm
19
Section
3.10 Governmental
Consents. All material consents, approvals, orders, or
authorizations of, or registrations, qualifications, designations, declarations,
or filings with any federal or state governmental authority on the part of
Parent or Acquisition Corp. required in connection with the consummation of the
Merger shall have been obtained prior to, and be effective as of, the
Closing.
Section
3.11 Compliance with Laws and
Other Instruments. The execution, delivery and performance by
Parent and/or Acquisition Corp. of the Merger Documents and the other agreements
to be made by Parent or Acquisition Corp. pursuant to or in connection with the
Merger Documents and the consummation by Parent and/or Acquisition Corp. of the
transactions contemplated by the Merger Documents will not cause Parent and/or
Acquisition Corp. to violate or contravene any provision of their respective
charters or By-laws as amended and in effect on and as of the Closing Date and
will not violate or be in conflict with, result in a breach of or constitute
(with or without notice or lapse of time, or both) a default under any material
indenture, loan or credit agreement, deed of trust, mortgage, security agreement
or other agreement or contract to which Parent or Acquisition Corp. is a party
or by which Parent and/or Acquisition Corp. or any of their respective
properties is bound.
Section
3.12 No General
Solicitation. In issuing Parent Common Stock in the Merger
hereunder, neither Parent nor anyone acting on its behalf has offered to sell
the Parent Common Stock by any form of general solicitation or
advertising.
Section
3.13 Binding
Obligations. The Merger Documents constitute the legal, valid
and binding obligations of Parent and Acquisition Corp., and are enforceable
against Parent and Acquisition Corp., in accordance with their respective terms,
except as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors’ rights generally and by
general principles of equity.
Section
3.14 Absence of Undisclosed
Liabilities. Neither Parent nor Acquisition Corp. has any
material obligation or liability (whether accrued, absolute, contingent,
liquidated or otherwise, whether due or to become due), arising out of any
transaction entered into at or prior to the Closing, except (a) as disclosed in
the Parent SEC Documents, (b) to the extent set forth on or reserved against in
the balance sheet of Parent in the most recent Parent SEC Document filed by
Parent (the “Parent
Balance Sheet”) or the notes to the Parent Financial Statements, (c)
current liabilities incurred and obligations under agreements entered into in
the usual and ordinary course of business since the date of the Parent Balance
Sheet (the “Parent
Balance Sheet Date”), none of which (individually or in the aggregate)
materially and adversely affects the Condition of Parent and (d) by the specific
terms of any written agreement, document or arrangement attached as an exhibit
to the Parent SEC Documents.
Section
3.15 Changes. Since
the Parent Balance Sheet Date, except as disclosed in the Parent SEC Documents,
Parent has not (a) incurred any debts, obligations or liabilities, absolute,
accrued or, to Parent’s knowledge, contingent, whether due or to become due,
except for current liabilities incurred in the usual and ordinary course of
business, (b) discharged or satisfied any Liens other than those securing, or
paid any obligation or liability other than, current liabilities shown on the
Parent Balance Sheet and current liabilities incurred since the Parent Balance
Sheet Date, in each case in the usual and ordinary course of business, (c)
mortgaged, pledged or
20
subjected
to Lien any of its assets, tangible or intangible, other than in the usual and
ordinary course of business, (d) sold, transferred or leased any of its assets,
except in the usual and ordinary course of business, (e) cancelled or
compromised any debt or claim, or waived or released any right of material
value, (f) suffered any physical damage, destruction or loss (whether or not
covered by insurance) that could reasonably be expected to have a material
adverse effect on the Condition of the Parent, (g) entered into any transaction
other than in the usual and ordinary course of business, (h) encountered any
labor union difficulties, (i) made or granted any wage or salary increase or
made any increase in the amounts payable under any profit sharing, bonus,
deferred compensation, severance pay, insurance, pension, retirement or other
employee benefit plan, agreement or arrangement, other than in the ordinary
course of business consistent with past practice, or entered into any employment
agreement, (j) issued or sold any shares of capital stock, bonds, notes,
debentures or other securities or granted any options (including employee stock
options), warrants or other rights with respect thereto, (k) declared or paid
any dividends on or made any other distributions with respect to, or purchased
or redeemed, any of its outstanding capital stock, (l) suffered or experienced
any change in, or condition affecting, the Condition of the Parent other than
changes, events or conditions in the usual and ordinary course of its business,
none of which (either by itself or in conjunction with all such other changes,
events and conditions) could reasonably be expected to have a material adverse
effect on the Condition of the Parent, (m) made any change in the accounting
principles, methods or practices followed by it or depreciation or amortization
policies or rates theretofore adopted, (n) made or permitted any amendment or
termination of any material contract, agreement or license to which it is a
party, (o) suffered any material loss not reflected in the Parent Balance Sheet
or its statement of income for the year ended on the Parent Balance Sheet Date,
(p) paid, or made any accrual or arrangement for payment of, bonuses or special
compensation of any kind or any severance or termination pay to any present or
former officer, director, employee, stockholder or consultant, (q) made or
agreed to make any charitable contributions or incurred any non-business
expenses in excess of $5,000 in the aggregate or (r) entered into any agreement,
or otherwise obligated itself, to do any of the foregoing.
Section
3.16 Tax Returns and
Audits. All required federal, state and local Tax Returns of
Parent have been accurately prepared in all material respects and duly and
timely filed, and all federal, state and local Taxes required to be paid with
respect to the periods covered by such returns have been paid to the extent that
the same are material and have become due, except where the failure so to file
or pay could not reasonably be expected to have a material adverse effect upon
the Condition of the Parent. Parent is not and has not been delinquent in the
payment of any Tax. Parent has not had a Tax deficiency assessed against it.
None of Parent’s federal income, state and local income and franchise tax
returns has been audited by any governmental authority. The reserves for Taxes
reflected on the Parent Balance Sheet are sufficient for the payment of all
unpaid Taxes payable by Parent with respect to the period ended on the Parent
Balance Sheet Date. There are no federal, state, local or foreign audits,
actions, suits, proceedings, investigations, claims or administrative
proceedings relating to Taxes or any Tax Returns of Parent now pending, and
Parent has not received any notice of any proposed audits, investigations,
claims or administrative proceedings relating to Taxes or any Tax
Returns.
21
Section
3.17 Employee Benefit Plans;
ERISA.
(a) Except as
disclosed in the Parent SEC Documents, there are no “employee benefit plans”
(within the meaning of Section 3(3) of ERISA) nor any other employee benefit or
fringe benefit arrangements, practices, contracts, policies or programs other
than programs merely involving the regular payment of wages, commissions, or
bonuses established, maintained or contributed to by Parent. Any plans listed in
the Parent SEC Documents are hereinafter referred to as the “Parent Employee Benefit
Plans.”
(b) Any
current and prior material documents, including all amendments thereto, with
respect to each Parent Employee Benefit Plan have been given to the Company or
its advisors.
(c) All
Parent Employee Benefit Plans are in material compliance with the applicable
requirements of ERISA, the Code and any other applicable state, federal or
foreign law.
(d) There are
no pending, or to the knowledge of Parent, threatened, claims or lawsuits which
have been asserted or instituted against any Parent Employee Benefit Plan, the
assets of any of the trusts or funds under the Parent Employee Benefit Plans,
the plan sponsor or the plan administrator of any of the Parent Employee Benefit
Plans or against any fiduciary of a Parent Employee Benefit Plan with respect to
the operation of such plan.
(e) There is
no pending, or to the knowledge of Parent, threatened, investigation or pending
or possible enforcement action by the Pension Benefit Guaranty Corporation, the
Department of Labor, the Internal Revenue Service or any other government agency
with respect to any Parent Employee Benefit Plan.
(f) No actual
or, to the knowledge of Parent, contingent liability exists with respect to the
funding of any Parent Employee Benefit Plan or for any other expense or
obligation of any Parent Employee Benefit Plan, except as disclosed on the
financial statements of Parent or the Parent SEC Documents, and to the knowledge
of Parent, no contingent liability exists under ERISA with respect to any
“multi-employer plan,” as defined in Section 3(37) or Section 4001(a)(3) of
ERISA.
Section
3.18 Litigation. There
is no legal action, suit, arbitration or other legal, administrative or other
governmental proceeding pending or, to the knowledge of Parent, threatened
against or affecting Parent or Acquisition Corp. or any of their respective
properties, assets or businesses. To the knowledge of Parent, neither Parent nor
Acquisition Corp. is in default with respect to any order, writ, judgment,
injunction, decree, determination or award of any court or any governmental
agency or instrumentality or arbitration authority.
Section
3.19 Licenses. Parent
possesses from all appropriate governmental authorities all licenses, permits,
authorizations, approvals, franchises and rights necessary for the Company to
engage in the business currently conducted by it, all of which are in full force
and effect.
Section
3.20 Interested Party
Transactions. Except as disclosed in the Parent SEC Documents,
no officer, director or stockholder of Parent or any Affiliate or “associate”
(as such term is defined in Rule 405 under the Securities Act) of any such
Person or of Parent has or has had, either directly or indirectly, (a) an
interest in any Person that (i) furnishes or sells services or
22
products
that are furnished or sold or are proposed to be furnished or sold by Parent or
(ii) purchases from or sells or furnishes to Parent any goods or services, or
(b) a beneficial interest in any contract or agreement to which Parent is a
party or by which it or any of its assets may be bound or affected.
Section
3.21 Questionable
Payments. Neither Parent, Acquisition Corp. nor, to the
knowledge of Parent, any director, officer, agent, employee or other Person
associated with or acting on behalf of Parent or Acquisition Corp. has used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity; made any direct or indirect
unlawful payments to government officials or employees from corporate funds;
established or maintained any unlawful or unrecorded fund of corporate monies or
other assets; made any false or fictitious entries on the books of record of any
such corporations; or made any bribe, rebate, payoff, influence payment,
kickback or other unlawful payment.
Section
3.22 Obligations to or by
Stockholders. Except as disclosed in the Parent SEC Documents,
Parent has no liability or obligation or commitment to any stockholder of Parent
or any Affiliate or “associate” (as such term is defined in Rule 405 under the
Securities Act) of any stockholder of Parent, nor does any stockholder of Parent
or any such Affiliate or associate have any liability, obligation or commitment
to Parent.
Section
3.23 Assets and
Contracts. Except as expressly set forth in this Agreement,
the Parent Balance Sheet or the notes thereto, or the Parent SEC Documents,
Parent is not a party to any written or oral agreement not made in the ordinary
course of business that is material to Parent. Parent does not own any real
property. Except as expressly set forth in this Agreement, the Parent Balance
Sheet or the notes thereto, or the Parent SEC Documents, Parent is not a party
to or otherwise barred by any written or oral (a) agreement with any labor
union, (b) agreement for the purchase of fixed assets or for the purchase of
materials, supplies or equipment in excess of normal operating requirements, (c)
agreement for the employment of any officer, individual employee or other Person
on a full-time basis or any agreement with any Person for consulting services,
(d) bonus, pension, profit sharing, retirement, stock purchase, stock option,
deferred compensation, medical, hospitalization or life insurance or similar
plan, contract or understanding with respect to any or all of the employees of
Parent or any other Person, (e) indenture, loan or credit agreement, note
agreement, deed of trust, mortgage, security agreement, promissory note or other
agreement or instrument relating to or evidencing Indebtedness for Borrowed
Money or subjecting any asset or property of Parent to any Lien or evidencing
any Indebtedness, (f) guaranty of any Indebtedness, (g) lease or agreement under
which Parent is lessee of or holds or operates any property, real or personal,
owned by any other Person, (h) lease or agreement under which Parent is lessor
or permits any Person to hold or operate any property, real or personal, owned
or controlled by Parent, (i) agreement granting any preemptive right, right of
first refusal or similar right to any Person, (j) agreement or arrangement with
any Affiliate or any “associate” (as such term is defined in Rule 405 under the
Securities Act) of Parent or any present or former officer, director or
stockholder of Parent, (k) agreement obligating Parent to pay any royalty or
similar charge for the use or exploitation of any tangible or intangible
property, (1) covenant not to compete or other restriction on its ability to
conduct a business or engage in any other activity, (m) distributor, dealer,
manufacturer’s representative, sales agency, franchise or advertising contract
or commitment, (n) agreement to register securities under the Securities Act,
(o) collective bargaining agreement or (p) agreement or other
23
commitment
or arrangement with any Person continuing for a period of more than three months
from the Closing Date that involves an expenditure or receipt by Parent in
excess of $1,000. Parent maintains no insurance policies or insurance coverage
of any kind with respect to Parent, its business, premises, properties, assets,
employees and agents. No consent of any bank or other depository is required to
maintain any bank account, other deposit relationship or safety deposit box of
Parent in effect following the consummation of the Merger and the transactions
contemplated hereby.
Section
3.24 Employees. Other
than pursuant to ordinary arrangements of employment compensation, Parent is not
under any obligation or liability to any officer, director, employee or
Affiliate of Parent.
Section
3.25 Disclosure. There
is no fact relating to Parent that Parent has not disclosed to the Company in
writing that materially and adversely affects nor, insofar as Parent can now
foresee, will materially and adversely affect, the condition (financial or
otherwise), properties, assets, liabilities, business operations, results of
operations or prospects of Parent. No representation or warranty by Parent
herein and no information disclosed in the schedules or exhibits hereto by
Parent contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein or therein not
misleading.
ARTICLE
IV.
(a) CAN
has full right, power and authority to deliver the Company Common Stock, (b) the
delivery of the Company Common Stock will not violate or be in conflict with,
result in a breach of or constitute a default under, any indenture, loan or
credit agreement, deed of trust, mortgage, security agreement or other agreement
or instrument to which CAN is bound or affected, (c) CAN has good, valid and
marketable title to all shares of Company Common Stock and CAN is not affected
by any voting trust, agreement or arrangement affecting the voting rights of
such Company Common Stock, (d) CAN is an “accredited investor,” as such term is
defined in Regulation D under the Securities Act and CAN is acquiring Parent
Common Stock for investment purposes, and not with a view to selling or
otherwise distributing such Parent Common Stock in violation of the Securities
Act or the securities laws of any state and (e) CAN has had an opportunity to
ask and receive answers to any questions CAN may have had concerning the terms
and conditions of the Merger and the Parent Common Stock and has obtained any
additional information that CAN has requested.
ARTICLE
V.
Section
5.01 Conduct of Business by the
Company Pending the Merger. Prior to the Effective Time,
unless Parent or Acquisition Corp. shall otherwise agree in writing or as
otherwise contemplated by this Agreement:
(a) the
business of the Company shall be conducted only in the ordinary
course;
24
(b) the
Company shall not (i) directly or indirectly redeem, purchase or otherwise
acquire or agree to redeem, purchase or otherwise acquire any shares of its
capital stock; (ii) amend its Certificate of Incorporation or By-laws except to
effectuate the transactions contemplated in the Disclosures or (iii) split,
combine or reclassify the outstanding Company Stock or declare, set aside or pay
any dividend payable in cash, stock or property or make any distribution with
respect to any such stock;
(c) the
Company shall not (i) issue or agree to issue any additional shares of, or
options, warrants or rights of any kind to acquire any shares of, Company Common
Stock, except to issue shares of Company Common Stock in connection with any
matter relating to the Disclosures (ii) acquire or dispose of any fixed assets
or acquire or dispose of any other substantial assets other than in the ordinary
course of business; (iii) incur additional Indebtedness or any other liabilities
or enter into any other transaction other than in the ordinary course of
business; (iv) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing or (v) except as contemplated by this
Agreement, enter into any contract, agreement, commitment or arrangement to
dissolve, merge, consolidate or enter into any other material business
combination;
(d) the
Company shall use its best efforts to preserve intact the business organization
of the Company, to keep available the service of its present officers and key
employees, and to preserve the good will of those having business relationships
with it;
(e) the
Company will not, nor will it authorize any director or authorize or permit any
officer or employee or any attorney, accountant or other representative retained
by it to, make, solicit, encourage any inquiries with respect to, or engage in
any negotiations concerning, any Acquisition Proposal (as defined below for
purposes of this paragraph). The Company will promptly advise Parent orally and
in writing of any such inquiries or proposals (or requests for information) and
the substance thereof. As used in this paragraph, “Acquisition Proposal”
shall mean any proposal for a merger or other business combination involving the
Company or for the acquisition of a substantial equity interest in it or any
material assets of it other than as contemplated by this Agreement. The Company
will immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any Person conducted heretofore with respect to
any of the foregoing; and
(f) the
Company will not enter into any new employment agreements with any of its
officers or employees or grant any increases in the compensation or benefits of
its officers and employees or amend any employee benefit plan or
arrangement.
Section
5.02 Conduct of Business by
Parent and Acquisition Corp. Pending the Merger. Prior to the Effective
Time, unless the Company and CAN shall otherwise agree in writing or as
otherwise contemplated by this Agreement:
(a) the
business of Parent and Acquisition Corp. shall be conducted only in the ordinary
course; provided, however, that Parent
shall take the steps necessary to have discontinued its existing business
without liability to Parent or Acquisition Corp. immediately following the
Effective Time;
25
(b) neither
Parent nor Acquisition Corp. shall (i) directly or indirectly redeem, purchase
or otherwise acquire or agree to redeem, purchase or otherwise acquire any
shares of its capital stock; (ii) amend its charter or by-laws other than to
effectuate the transactions contemplated hereby; or (iii) split, combine or
reclassify its capital stock or declare, set aside or pay any dividend payable
in cash, stock or property or make any distribution with respect to such
stock;
(c) neither
Parent nor Acquisition Corp. shall (i) issue or agree to issue any additional
shares of, or options, warrants or rights of any kind to acquire shares of, its
capital stock; (ii) acquire or dispose of any assets other than in the ordinary
course of business (except for dispositions in connection with Section 5.02(a)
hereof); (iii) incur additional Indebtedness or any other liabilities or enter
into any other transaction except in the ordinary course of business; (iv) enter
into any contract, agreement, commitment or arrangement with respect to any of
the foregoing or (v) except as contemplated by this Agreement, enter into any
contract, agreement, commitment or arrangement to dissolve, merge, consolidate
or enter into any other material business contract or enter into any
negotiations in connection therewith;
(d) neither
Parent nor Acquisition Corp. will, nor will they authorize any director or
authorize or permit any officer or employee or any attorney, accountant or other
representative retained by them to, make, solicit, encourage any inquiries with
respect to, or engage in any negotiations concerning, any Acquisition Proposal
(as defined below for purposes of this paragraph). Parent will promptly advise
the Company orally and in writing of any such inquiries or proposals (or
requests for information) and the substance thereof. As used in this paragraph,
“Acquisition
Proposal” shall mean any proposal for a merger or other business
combination involving Parent or Acquisition Corp. or for the acquisition of a
substantial equity interest in either of them or any material assets of either
of them other than as contemplated by this Agreement. Parent will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any Person conducted heretofore with respect to any of the
foregoing; and
(e) neither
Parent nor Acquisition Corp. will enter into any new employment agreements with
any of their officers or employees or grant any increases in the compensation or
benefits of their officers and employees.
ARTICLE
VI.
Section
6.01 Access and
Information. The Company, on the one hand, and Parent and
Acquisition Corp., on the other hand, shall each afford to the other and to the
other’s accountants, counsel and other representatives full access during normal
business hours throughout the period prior to the Effective Time to all of its
properties, books, contracts, commitments and records (including but not limited
to tax returns) and during such period, each shall furnish promptly to the other
all information concerning its business, properties and personnel as such other
party may reasonably request, provided that no investigation pursuant to this
Section 6.01 shall affect any representations or warranties made herein. Each
party shall hold, and shall cause its employees and agents to hold, in
confidence all such information (other than such information that (a) is already
in such party’s possession or (b) becomes generally
26
available
to the public other than as a result of a disclosure by such party or its
directors, officers, managers, employees, agents or advisors or (c) becomes
available to such party on a non-confidential basis from a source other than a
party hereto or its advisors, provided that such source is not known by such
party to be bound by a confidentiality agreement with or other obligation of
secrecy to a party hereto or another party until such time as such information
is otherwise publicly available; provided, however, that (i) any
such information may be disclosed to such party’s directors, officers, employees
and representatives of such party’s advisors who need to know such information
for the purpose of evaluating the transactions contemplated hereby (it being
understood that such directors, officers, employees and representatives shall be
informed by such party of the confidential nature of such information), (ii) any
disclosure of such information may be made as to which the party hereto
furnishing such information has consented in writing and (iii) any such
information may be disclosed pursuant to a judicial, administrative or
governmental order or request; provided, further, that the
requested party will promptly so notify the other party so that the other party
may seek a protective order or appropriate remedy and/or waive compliance with
this Agreement and if such protective order or other remedy is not obtained or
the other party waives compliance with this provision, the requested party will
furnish only that portion of such information that is legally required and will
exercise its best efforts to obtain a protective order or other reliable
assurance that confidential treatment will be accorded the information
furnished. If this Agreement is terminated, each party will deliver to the other
all documents and other materials (including copies) obtained by such party or
on its behalf from the other party as a result of this Agreement or in
connection herewith, whether so obtained before or after the execution
hereof.
Section
6.02 Additional
Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its commercially reasonable
efforts to take, or cause to be taken, all action and to do, or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
this Agreement, including using its commercially reasonable efforts to satisfy
the conditions precedent to the obligations of any of the parties hereto, to
obtain all necessary waivers, and to lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible). In order to obtain any necessary governmental or regulatory action or
non-action, waiver, consent, extension or approval, each of Parent, Acquisition
Corp. and the Company agrees to take all reasonable actions and to enter into
all reasonable agreements as may be necessary to obtain timely governmental or
regulatory approvals and to take such further action in connection therewith as
may be necessary. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of Parent, Acquisition Corp. and the
Company shall take all such necessary action.
Section
6.03 Publicity. No
party shall issue any press release or public announcement pertaining to the
Merger that has not been agreed upon in advance by Parent, the Company and CAN,
except as Parent and CAN reasonably determine to be necessary in order to comply
with the rules of the Commission, provided, that in such case each of Parent and
CAN will use its best efforts to allow the other party to review and reasonably
approve any such press release or public announcement prior to its
release.
27
Section
6.04 Appointment of Directors and
Officers. Immediately at the Effective Time, Parent shall
accept the resignations of the current officers and directors of Parent, and
shall cause the persons listed as directors in Exhibit F hereto to
be elected to the Board of Directors of Parent. At the first annual meeting of
Parent stockholders and thereafter, the election of members of Parent’s Board of
Directors shall be accomplished in accordance with the By-laws of Parent and the
rules of the Commission.
Section
6.05 Exchange Listing.
Promptly following the Effective Time, Parent shall take all required actions,
upon satisfaction of the original listing requirements, to list the Parent
Common Stock for trading on the American Stock Exchange or the NASDAQ Stock
Market.
Section
6.06 Assumption of
Agreements. At the Effective Time, Parent shall affirmatively
assume any all liabilities and obligations of the Company with respect to the
Private Placement and the Merger.
Section
6.07 Future
Indebtedness. Reference
is hereby made to that certain amendment agreement dated as of June 17, 2008, by
and between CAN and Longview Marquis Master Fund, L.P. (the “Amendment
Agreement”). The Company agrees to abide by the terms and
conditions as set forth in Section 2, Part (viii) of the Amendment Agreement,
attached as Exhibit
G hereto.
ARTICLE
VII.
Section
7.01 Conditions to Parent and
Acquisition Corp. Obligations. The obligations of Parent and
Acquisition Corp. under the Merger Documents are subject to the fulfillment, at
or prior to the Closing, of the following conditions, any of which may be waived
in whole or in part by Parent.
(a) The
representations and warranties of the Company under this Agreement shall be
deemed to have been made again on the Closing Date and shall then be true and
correct in all material respects.
(b) The
Company shall have performed and complied in all material respects with all
agreements and conditions required by this Agreement to be performed or complied
with by it on or before the Closing Date.
(c) There
shall not exist on the Closing Date any Default (as defined below) or Event of
Default (as defined below) or any event or condition that, with the giving of
notice or lapse of time or both, would constitute a Default or Event of Default
and, since the Balance Sheet Date, there shall have been no material adverse
change in the Condition of the Company. For purposes of this Agreement, “Default” shall mean a
default or failure in the due observance or performance of any covenant,
condition or agreement on the part of a party to be observed or performed under
the terms of the Merger Documents, if such default or failure in performance
shall remain un-remedied for five (5) days. Furthermore, for purposes of this
Agreement, “Event of
Default” shall mean (i) the failure to pay any Indebtedness for Borrowed
Money, or any interest or premium thereon, within five (5) days after the same
shall become due, whether such Indebtedness shall become due by scheduled
maturity, by required prepayment, by acceleration,
28
by demand
or otherwise, (ii) an event of default under any agreement or instrument
evidencing or securing or relating to any such Indebtedness or (iii) the failure
to perform or observe any material term, covenant, agreement or condition on its
part to be performed or observed under any agreement or instrument evidencing or
securing or relating to any such Indebtedness when such term, covenant or
agreement is required to be performed or observed.
(d) No action
or proceeding before any court, governmental body or agency shall have been
threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, the Merger Documents or the carrying out of
the transactions contemplated by the Merger Documents.
(e) Parent
and Acquisition Corp. shall have received the following:
(i) copies of
resolutions of the Board of Directors and CAN, certified by the Secretary of the
Company, authorizing and approving the execution, delivery and performance of
the Merger Documents and all other documents and instruments to be delivered
pursuant thereto;
(ii) a
certificate of incumbency executed by the Secretary of the Company certifying
the names, titles and signatures of the officers authorized to execute any
documents referred to in this Agreement and further certifying that the
Certificate of Incorporation and By-laws of the Company delivered to Parent and
Acquisition Corp. at the time of the execution of this Agreement have been
validly adopted and have not been amended or modified;
(iii) a
certificate, dated the Closing Date, executed by the President and Chief
Executive Officer of the Company certifying that the undersigned officers have
no knowledge of any plan to issue any securities of the Company, and the Company
has not entered into any agreement, written or oral, to issue any securities of
the Company except as described in the Disclosures or this
Agreement;
(iv) evidence
as of a recent date of the good standing and corporate existence of the Company
issued by the Secretary of State of the State of Delaware and evidence that the
Company is qualified to transact business as a foreign corporation and is in
good standing in each state of the United States and in each other jurisdiction
where the character of the property owned or leased by it or the nature of its
activities makes such qualification necessary;
(v) letter of
resignation from Xxxxxxx Xxxxxxx as a director of the Company; and
(vi) such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as Parent and Acquisition Corp. may reasonably
request.
(f) All
corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be reasonably satisfactory
29
in form
and substance to Parent and Acquisition Corp. The Company shall furnish to
Parent and Acquisition Corp. such supporting documentation and evidence of the
satisfaction of any or all of the conditions precedent specified in this Section
7.01 as Parent or its counsel may reasonably request.
Section
7.02 Conditions to the Company’s
and CAN’s Obligations. The obligations of the Company and CAN
under the Merger Documents are subject to the fulfillment, at or prior to the
Closing, of the following conditions, any of which may be waived in whole or in
part by the Company.
(a) The
representations and warranties of Parent and Acquisition Corp. under this
Agreement shall be deemed to have been made again on the Closing Date and shall
then be true and correct in all material respects.
(b) Parent
and Acquisition Corp. shall have performed and complied in all material respects
with all agreements and conditions required by the Merger Documents to be
performed or complied with by them on or before the Closing Date.
(c) There
shall not exist on the Closing Date any Default or Event of Default or any event
or condition that, with the giving of notice or lapse of time or both, would
constitute a Default or Event of Default and, since the Parent Balance Sheet
Date, there shall have been no material adverse change in the Condition of the
Parent.
(d) The
Company and CAN shall have received the following:
(i) copies of
resolutions of Parent’s and Acquisition Corp.’s respective boards of directors
and the sole stockholder of Acquisition Corp., certified by their respective
Secretaries, authorizing and approving, to the extent applicable, the execution,
delivery and performance of the Merger Documents and all other documents and
instruments to be delivered by them pursuant thereto;
(ii) a
certificate of incumbency executed by the respective Secretaries of Parent and
Acquisition Corp. certifying the names, titles and signatures of the officers
authorized to execute the documents referred to in this Agreement and further
certifying that the Certificates or Articles of Incorporation and By-laws of
Parent and Acquisition Corp. appended thereto have not been amended or
modified.
(iii) a
certificate, dated the Closing Date, executed by the President and Chief
Financial Officer of each of the Parent and Acquisition Corp., certifying that
(A) except for the filing of the Certificate of Merger, all consents,
authorizations, orders and approvals of, and filings and registrations with, any
court, governmental body or instrumentality that are required for the execution
and delivery of the Merger Documents and the consummation of the Merger shall
have been duly made or obtained, and all material consents by third parties
required for the Merger have been obtained and (B) no action or proceeding
before any court, governmental body or agency has been threatened, asserted or
instituted to restrain or prohibit, or to obtain substantial damages in respect
of, the Merger Documents or the carrying out of the transactions contemplated by
any of the Merger Documents;
30
(iv) a
certificate of Island Stock Transfer, Parent’s transfer agent and registrar,
certifying, as of the business day prior to the Closing Date, a true and
complete list of the names and addresses of the record owners of all of the
outstanding shares of Parent Common Stock, together with the number of shares of
Parent Common Stock held by each record owner and the total number of shares of
Parent Common Stock then outstanding;
(v) the
executed resignations of all directors and officers of Parent, with the director
resignations to take effect at the Closing Date;
(vi) evidence
as of a recent date and within five (5) days of the Effective Date of the good
standing and corporate existence of each of Parent and Acquisition Corp. issued
by the Secretary of State of the State of Nevada and by the Secretary of State
of the State of Delaware, respectively, and evidence that Parent and Acquisition
Corp. are qualified to transact business as foreign corporations and are in good
standing in each state of the United States and in each other jurisdiction where
the character of the property owned or leased by them or the nature of their
activities makes such qualification necessary; and
(vii) an
opinion from Noble International Investments, Inc. to the effect that the Merger
is fair to CAN, and its stockholders, from a financial point of
view.
(viii) such
additional supporting documentation and other information with respect to the
transactions contemplated hereby as the Company may reasonably
request.
(e) All
corporate and other proceedings and actions taken in connection with the
transactions contemplated hereby and all certificates, opinions, agreements,
instruments and documents mentioned herein or incident to any such transactions
shall be satisfactory in form and substance to the Company. Parent and
Acquisition Corp. shall furnish to the Company such supporting documentation and
evidence of satisfaction of any or all of the conditions specified in this
Section 7.02 as the Company may reasonably request.
(f) No action
or proceeding before any court, governmental body or agency shall have been
threatened, asserted or instituted to restrain or prohibit, or to obtain
substantial damages in respect of, the Merger Documents or the carrying out of
the transactions contemplated by the Merger Documents.
(g) Parent
shall have accepted and assumed, and CAN and its subsidiaries shall have been
released from, all of the obligations and liabilities of any nature of the
Company or otherwise related to the business of the Company or the assets of the
Company, whether fixed or unfixed, known or unknown, secured or unsecured,
absolute, accrued, contingent or otherwise and whether due or to become due,
except for any “earn-out” obligations incurred in connection with CAN’s initial
acquisition of the business of the Company pursuant to that certain Agreement
and Plan of Merger, dated as of January 4, 2008, among CAN, the Company, Options
Newsletter, Inc. and Xxxxx Xxxxxxxx.
31
ARTICLE
VIII.
Section
8.01 Indemnification by
Parent. Parent shall indemnify and hold harmless CAN and its officers,
directors, agents, attorneys and employees, and each Person, if any, who
controls or may control CAN within the meaning of the Securities Act, (the
“CAN Indemnified
Parties”), and shall reimburse the CAN Indemnified Parties for, any loss,
liability, claim, damage, expense (including, but not limited to, costs of
investigation and defense and reasonable attorneys’ fees) or diminution of value
(collectively, “Damages”) arising
from or in connection with (a) any inaccuracy, in any material respect, in any
of the representations and warranties of Parent and Acquisition Corp. in this
Agreement or in any certificate delivered by Parent and Acquisition Corp. to CAN
pursuant to this Agreement, or any actions, omissions or statements of fact
inconsistent with any such representation or warranty, (b) any failure by Parent
or Acquisition Corp. to perform or comply in any material respect with any
covenant or agreement in this Agreement, (c) any claim for brokerage or finder’s
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by any such party with Parent or
Acquisition Corp. in connection with any of the transactions contemplated by
this Agreement, (d) taxes attributable to any transaction or event occurring on
or prior to the Closing, (e) any claim relating to or arising out of any
liabilities reflected in the Parent or Company Financial Statement or with
respect to accounting fees arising thereafter, (f) any litigation, action,
claim, proceeding or investigation by any third party relating to or arising out
of the business or operations of Parent, the Company or the Surviving
Corporation, or the actions of Parent, the Company or the Surviving Corporation,
whether before or after the Effective Time, or (g) any claim assumed by Parent
in accordance with that certain Assignment and Assumption Agreement dated the
date hereof by and among CAN, Parent and Xxxxx Xxxxxxxx.
Section
8.02 Indemnification by
CAN. CAN shall indemnify and hold harmless Parent and the
Surviving Corporation and their respective officers, directors, agents,
attorneys and employees, and each Person, if any, who controls or may control
Parent or the Surviving Corporation within the meaning of the Securities Act
(the “Parent
Indemnified Parties”), and shall reimburse the Parent Indemnified Parties
for, any Damages arising from or in connection with (a) any inaccuracy, in any
material respect, in any of the representations and warranties of CAN and the
Company in this Agreement or in any certificate delivered by CAN or the Company
to Parent pursuant to this Agreement, or any actions, omissions or statements of
fact inconsistent with any such representation or warranty or (b) any failure by
CAN or the Company to perform or comply in any material respect with any
covenant or agreement in this Agreement.
Section
8.03 Survival. All
representations, warranties, covenants and agreements of parties contained in
this Agreement shall survive the Effective Time for a period of two years
following the Effective Time (the “Claims Deadline”),
provided, however, that any
claim made pursuant to clause (g) of Section 8.01 may be made at any time even
after the Claims Deadline.
Section
8.04 Notice of
Claims.
(a) If, at
any time on or prior to the Claims Deadline, a party entitiled to
indemnification hereunder (an “Indemnified Party”)
shall assert a claim for indemnification under this Agreement, such Indemnified
Party shall submit to to the indemifying party (the “Indemnifying Party”)
a written claim in good faith signed by an authorized officer of the Company
Indemnified Party, as applicable, stating (i) that the Indemnified Party
incurred or reasonably believes it may incur Damages and the reasonable estimate
of the amount of any such
32
Damages;
(ii) in reasonable detail, the facts alleged as the basis for such claim and the
section or sections of this Agreement alleged as the basis or bases for the
claim; and (iii) if the Damages have actually been incurred, the amount of such
Damages.
(b) In the
event that any action, suit or proceeding is brought against any Indemnified
Party with respect to which an Indemnifying Party may have liability under this
Article VIII, the Indemnifying Party shall have the right, at its cost and
expense, to defend such action, suit or proceeding in the name and on behalf of
the Indemnified Party; provided, however, that an
Indemnified Party shall have the right to retain its own counsel, with fees and
expenses paid by the Indemnifying Party, if representation of the Indemnified
Party by counsel retained by the Indemnifying Party would be inappropriate
because of actual or potential differing interests between the Idemnifying Party
and the Indemnified Party. In connection with any action, suit or proceeding
subject to Article VIII, each Indemnifying Party and each Indemnified Party
agree to render to each other such assistance as may reasonably be required in
order to ensure proper and adequate defense of such action, suit or proceeding.
The Indemnifying Party shall not, without the prior written consent of the
applicable Indemnified Party, which consent shall not be unreasonably withheld
or delayed, settle or compromise any claim or demand if such settlement or
compromise does not include an irrevocable and unconditional release of such
Indemnified Party for any liability arising out of such claim or
demand.
ARTICLE
IX.
Section
9.01 Termination of
Agreement. This Agreement may be terminated at any time prior
to the Closing:
(a) by the
mutual written consent of CAN, the Company, Acquisition Corp. and
Parent;
(b) by the
Company, if Parent or Acquisition Corp. (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by it on
or prior to the Closing Date, or (ii) materially breach any of their
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after the Company has notified
Parent and Acquisition Corp. of its intent to terminate this Agreement pursuant
to this paragraph (b);
(c) by Parent
and Acquisition Corp. if the Company or CAN (i) fails to perform in any material
respect any of its agreements contained herein required to be performed by it on
or prior to the Closing Date or (ii) materially breaches any of its
representations, warranties or covenants contained herein, which failure or
breach is not cured within thirty (30) days after Parent or Acquisition Corp.
has notified the Company and CAN of its intent to terminate this Agreement
pursuant to this paragraph (c);
(d) by either
the Company and CAN, on the one hand, or Parent and Acquisition Corp., on the
other hand, if there shall be any order, writ, injunction or decree of any court
or governmental or regulatory agency binding on Parent, Acquisition Corp., CAN
or the Company that prohibits or materially restrains any of them from
consummating the transactions
33
contemplated
hereby, provided that the parties hereto shall have used their best efforts to
have any such order, writ, injunction or decree lifted and the same shall not
have been lifted within ninety (90) days after entry by any such court or
governmental or regulatory agency; or
(e) by either
the Company or CAN, on the one hand, or Parent and Acquisition Corp., on the
other hand, if the Closing has not occurred on or prior to July 31, 2008 for any
reason other than delay or nonperformance of the party seeking such
termination.
Section
9.02 Termination of
Obligations. Termination of this Agreement pursuant to this
Article IX shall terminate all obligations of the parties hereunder, except for
the obligations under Sections 6.1, 10.03 and 10.11; provided, however, that
termination pursuant to paragraphs (b) or (c) of Section 9.01 shall not relieve
the defaulting or breaching party or parties from any liability to the other
parties hereto.
ARTICLE
X.
Section
10.01 Notices. Any
notice, request or other communication hereunder shall be given in writing and
shall be served either personally, by overnight delivery or delivered by mail,
certified return receipt and addressed to the following addresses:
(a) If
to Parent or Acquisition Corp.:
Options
Media Group Holdings, Inc.
0000 000X
Xxxxxx
Xxxxxxx,
Xxxxxxx Xxxxxxxx X0X 0X0
Xxxxxx
Attention:
Xxxxx Harapiak
With a copy to:
Cane
Xxxxx LLP
0000 Xxxx
Xxxx Xxxxxxx Xxxx
Xxx
Xxxxx, Xxxxxx 00000
Attention:
Xxxxxx X. Xxxx, Esq.
.
(b) If to the
Company:
Options
Acquisition Sub, Inc.
000 Xxx
Xxxxxxx Xxxxxxx
Xxxxx
000
Xxxxxxxxxx,
Xxxxxxx 00000
Attention: Xxxxx Xxxxxxx
(c) If to
CAN:
Customer
Acquisition Network Holdings, Inc.
000 Xxxx Xxxxxx Xxxxx
34
Xxxxx 000-000
Xxx Xxxx, Xxx
Xxxx 00000
Attention: Xxxxxxx
Xxxxxxx
With a copy to:
Xxxxxx and Xxxxx, LLP
000 Xxxx 00xx Xxxxxx
Xxxxx 0000
Xxx Xxxx, Xxx
Xxxx 00000
Attention: Xxxxxx X. Xxxxxx,
Esq
Notices
shall be deemed received at the earlier of actual receipt or three (3) business
days following mailing. Counsel for a party (or any authorized representative)
shall have authority to accept delivery of any notice on behalf of such
party.
Section
10.02 Entire
Agreement. This Agreement, including the schedules and
exhibits attached hereto and other documents referred to herein, contains the
entire understanding of the parties hereto with respect to the subject matter
hereof. This Agreement supersedes all prior agreements and undertakings between
the parties with respect to such subject matter.
Section
10.03 Expenses. Each
party shall bear and pay all of the legal, accounting and other expenses
incurred by it in connection with the transactions contemplated by this
Agreement.
Section
10.04 Time. Time
is of the essence in the performance of the parties’ respective obligations
herein contained.
Section
10.05 Severability. Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
Section
10.06 Successors and
Assigns. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and
heirs; provided, however, that neither party shall directly or indirectly
transfer or assign any of its rights hereunder in whole or in part without the
written consent of the others, which may be withheld in its sole discretion, and
any such transfer or assignment without said consent shall be void.
Section
10.07 No Third Parties
Benefited. This Agreement is made and entered into for the
sole protection and benefit of the parties hereto, their successors, assigns and
heirs, and no other Person shall have any right or action under this
Agreement.
Section
10.08 Counterparts. This
Agreement may be executed in one or more counterparts, with the same effect as
if all parties had signed the same document. Each such
35
counterpart
shall be an original, but all such counterparts together shall constitute a
single agreement.
Section
10.09 Recitals, Schedules and
Exhibits. The Recitals, Schedules and Exhibits to this
Agreement are incorporated herein and, by this reference, made a part hereof as
if fully set forth herein.
Section
10.10 Section Headings and
Gender. The Section headings used herein are inserted for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement. All personal pronouns used in this Agreement
shall include the other genders, whether used in the masculine, feminine or
neuter gender, and the singular shall include the plural, and vice versa,
whenever and as often as may be appropriate.
Section
10.11 Governing
Law. This Agreement shall be governed by and construed and
enforced in accordance with the internal laws of the State of New York without
regard to principles of conflicts of laws, except that the applicable terms of
Section 1 shall be governed by the DGCL.
[Signature
Page Follows]
36
PARENT:
OPTIONS
MEDIA GROUP HOLDINGS, INC.
By:/s/Xxxxx Harapiak
Name:
Xxxxx Harapiak
Title:
President and Chief Executive Officer
ACQUISITION
CORP:
OPTIONS
ACQUISITION CORP.
By:/s/Xxxxx Harapiak
Name:
Xxxxx Harapiak
Title:
Chief Executive Officer
CAN:
CUSTOMER
ACQUSITION NETWORK HOLDINGS, INC.
By:/s/Xxxxxxx Xxxxxxxx
Name:
Xxxxxxx Xxxxxxx
Title:
Chief Executive Officer
THE
COMPANY:
OPTIONS
ACQUISITION SUB, INC.
By:/s/Xxxxx Xxxxxxx
Name:
Xxxxx Xxxxxxx
Title:
Chief Executive Officer
[SIGNATURE
PAGE TO AGREEMENT OF MERGER AND PLAN OF
REORGANIZATION]