AGREEMENT AND PLAN OF MERGER
AND REORGANIZATION
BY AND AMONG
Gaming Venture Corp., U.S.A.,
GV Acquisition Co.,
And
SK2, Inc.
April 14, 2005
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TABLE OF CONTENTS
Article 1 Merger 1
1.1 The Merger 1
1.2 Effects of Merger 2
1.3 Effect on the Company's Capital Stock and Merger Sub
Capital Stock 3
1.4 Rights of Holders of Company Capital Stock 4
1.5 Procedure for Exchange of Company Capital Stock 4
1.6 Dissenting Shares 6
1.7 Directors and Officers of Surviving Company 6
1.8 Directors and Officers of Pubco 6
Article 2 Representations and Warranties of the Company 6
2.2 Organization and Qualification 6
2.3 Capitalization 7
2.4 Litigation 8
2.5 No Brokers or Finders 8
2.6 Tax matters 8
2.7 Compliance with Laws; Permits 9
2.8 Financial Statements 10
2.9 Books and Records 10
2.10 Real Property 10
2.11 Insurance 10
2.12 No Undisclosed Liabilities 10
2.13 Environmental Matters 10
2.14 Absence of Certain Developments 10
2.15 Employee Benefit Plans 11
2.16 Tax-Free Reorganization 12
2.17 Full Disclosure 12
Article 3 Representations and Warranties of Pubco and Merger Sub 12
3.1 Organization and Qualification 12
3.2 Authority Relative to this Agreement; Non-Contravention 13
3.3 Capitalization 13
3.4 Exchange Act Reports 14
3.5 Subsidiaries 15
3.6 Litigation 15
3.7 No Brokers or Finders 15
3.8 Tax Matters 15
3.9 Contracts and Commitments 16
3.10 Affiliate Transactions 16
3.11 Compliance with Laws; Permits 16
3.12 Financial Statements 17
3.13 Books and Records 17
3.14 Real Property 17
3.15 Insurance 17
3.16 Absence of Undisclosed Liabilities 17
3.17 Environmental Matters 18
3.18 Absence of Certain Developments 18
3.19 Employee Benefit Plans 19
3.20 Employees 19
3.21 Tax Free Reorganization 19
3.22 Intellectual Property 20
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3.23 Validity of Pubco Capital Stock 20
3.24 Full Disclosure 20
Article 4 Conduct of Business Pending the Merger 20
4.1 Conduct of Business by Pubco 20
4.2 Conduct of Business by the Company 21
Article 5 Additional Covenants and Agreements 21
5.1 Governmental Filings 21
5.2 Expenses 21
5.3 Due Diligence; Access to Information; Confidentiality 22
5.4 Private Placement 23
5.5 Stockholders' Meetings 24
5.6 Tax Treatment 24
5.7 Press Releases 24
5.8 Securities Reports 24
5.9 Merger Consideration 24
5.10 No Solicitation 24
5.11 Failure to Fulfill Conditions 25
5.12 Resignations and Appointment of Directors; Employees 25
5.13 Registration Rights 25
5.14 Preparation of Annual and Quarterly Reports 25
5.15 Notification of Certain Matters 25
Article 6 Conditions 26
6.1 Conditions to Obligations of Each Party 26
6.2 Additional Conditions to Obligations of Pubco and
Merger Sub 27
6.3 Additional Conditions to Obligations of the Company 27
Article 7 Termination, Amendment and Waiver 29
7.1 Termination 29
Article 8 General Provisions 29
8.1 Notices 29
8.2 Knowledge Convention 30
8.3 No Survival 30
8.4 Interpretation 30
8.5 Severability 30
8.6 Amendment 30
8.7 Waiver 30
8.8 Miscellaneous 31
8.9 Counterparts; Delivery 31
8.10 Third-Party Beneficiaries 31
8.11 Governing Law 31
8.12 Jurisdiction; Service of Process 31
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AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
THIS AGREEMENT AND PLAN OF MERGER AND REORGANIZATION (this "Agreement") is
entered into as of April 14, 2005, by and among SK2, Inc., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxxx
Xxxxxx, Xxxxx X-0, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Company"), Gaming
Venture Corp., U.S.A., a Nevada corporation having its principal place
of business at 000 Xxxxxxx Xxxx, Xxxxxxx, Xxx Xxxxxx 00000 ("Pubco"),
and GV Acquisition Co., a Delaware corporation that is wholly owned by
Pubco and has its principal place of business at 000 Xxxxxxx Xxxx,
Xxxxxxx, Xxx Xxxxxx 00000 (the "Merger Sub").
INTRODUCTION
A. The boards of directors of the Company, Pubco and Merger Sub
have determined that it is in the best interests of such corporations
and their respective stockholders to consummate a merger (the "Merger")
of Merger Sub with and into the Company, with the Company remaining as
the surviving corporation.
B. Pubco, as the sole stockholder of Merger Sub, has approved this
Agreement, the Merger and the other transactions contemplated by this
Agreement pursuant to action taken by unanimous written consent of its
board of directors in accordance with the requirements of Nevada
Revised Statutes, Chapter 78 (the "Nevada Act"), and the certificate of
incorporation and the bylaws of Merger Sub.
C. Pursuant to the Merger, the outstanding shares of common stock
of the Company shall be converted into the right to receive upon
Closing (as hereinafter defined) and thereafter, the Merger
Consideration (as defined in Section 1.2 below).
D. The parties to this Agreement intend to adopt this Agreement as
a plan of reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code"), and the
regulations promulgated thereunder, and intend that the Merger and the
transactions contemplated by this Agreement be undertaken pursuant to
that plan. Accordingly, the parties to this Agreement intend that the
Merger qualify as a "reorganization," within the meaning of Code
Section 368(a), and that, with respect to the Merger, Pubco, Merger Sub
and the Company will each be a "party to a reorganization," within the
meaning of Code Section 368(b).
E. Simultaneously with the Merger, the Company will sell shares of
common stock, $.001 par value per share (the "Company Common Stock"),
in a private placement to accredited investors for the purposes of
expanding the business of the Surviving Company (as defined below)
after the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises, and the
representations, warranties and covenants contained herein, the parties
hereto agree as follows:
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Article 1
Merger
1.1 The Merger. Subject to the satisfaction or waiver of the
conditions set forth in Article 6, at the Effective Time (as defined in
Section 1.2(d) below), (i) Merger Sub will merge with and into the
Company, and (ii) the Company will be the surviving corporation to the
Merger and will become a wholly owned subsidiary of Pubco. The term
"Surviving Company" as used herein shall mean the Company as a wholly
owned subsidiary of Pubco after giving effect to the Merger. The
Merger will be effected pursuant to the execution and filing of
certificate of merger in accordance with the provisions of, and with
the effect provided in the Delaware General Corporation Law (the
"DGCL"), and in substantially the form attached hereto as Exhibit A
(the "Certificate of Merger").
1.2 Effects of Merger.
(a) From and after the Effective Time and until further
altered, amended or repealed in accordance with law, (i) the
Company's certificate of incorporation as in effect immediately
prior to the Effective Time shall be the Surviving Company's
certificate of incorporation, and (ii) the Company's bylaws as in
effect immediately prior to the Effective Time shall be the
Surviving Company's bylaws.
(b) From and after the Effective Time and until further
altered or amended in accordance with law, (i) all of the rights,
privileges, immunities, powers, franchises and authority (both
public and private) of the Company and Merger Sub shall vest in
the Surviving Company; (ii) all of the assets and property of the
Company and Merger Sub of every kind, nature and description
(real, personal and mixed, and both tangible and intangible) and
every interest therein, wheresoever located, including without
limitation all debts or other obligations belonging or due to the
Company or Merger Sub, all claims and all causes of action, shall
be vested absolutely and unconditionally in the Surviving
Company; and (iii) all debts and obligations of the Company and
Merger Sub, all rights of creditors of the Company or Merger Sub
and all liens or security interests encumbering any of the
property of the Company or Merger Sub shall be vested in the
Surviving Company and shall remain in full force and effect
without modification or impairment and shall be enforceable
against the Surviving Company and its assets and properties with
the same full force and effect as if such debts, obligations,
liens or security interests had been originally incurred or
created by the Surviving Company in its own name and for its own
behalf. Without limiting the generality of the foregoing,
Surviving Company specifically assumes all continuing obligations
which the Company or Merger Sub would otherwise have to indemnify
its officers and directors, to the fullest extent currently
provided in the Surviving Company's certificate of incorporation,
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bylaws and pursuant to the DGCL, with respect to any and all
claims arising out of actions taken or omitted by the Company's
officers and directors prior to the Effective Date.
(c) Each of Pubco, the Company and Merger Sub shall each
use its best efforts to take all such action as may be necessary
or appropriate to effectuate the Merger in accordance with the
DGCL at the Effective Time. If at any time after the Effective
Time, any further action is necessary or desirable to carry out
the purposes of this Agreement and to vest the Surviving Company
with full right, title and possession to all properties, rights,
privileges, immunities, powers and franchises of either the
Company or Merger Sub, the officers of Pubco, and the officers of
Surviving Company on behalf of the Company and Merger Sub, shall
take all such lawful and necessary action.
(d) Subject to the provisions of Article 6 and Article 7
, the closing of the transactions contemplated hereby (the
"Closing") shall take place at such location, on such date and at
such time as the Company and Pubco mutually agree at the earliest
practicable time after the satisfaction or waiver of the
conditions in Article 6, but in no event later than five business
days after all such conditions have been satisfied or waived, or
on such other date as may be mutually agreed by the parties
hereto. On the Closing date, to effect the Merger, the parties
hereto will cause the Certificate of Merger to be filed with the
Delaware Secretary of State in accordance with the DGCL. The
Merger shall become effective upon such filing of the Certificate
of Merger or at such later date or time as is specified in the
Certificate of Merger (the "Effective Time"). As used herein,
the term "Effective Date" shall mean the date on which Merger
shall become effective pursuant to this Section 1.2(d).
1.3 Effect on the Company's Capital Stock and Merger Sub
Capital Stock. To effectuate the Merger, and subject to the terms and
conditions of this Agreement, at the Effective Time:
(a) Each issued and outstanding share of Company Common
Stock immediately prior to the Effective Time (including
subscribed rights to purchase Company Common Stock that will be
accepted in the Private Placement, as defined in Section 5.4
below), other than shares to be extinguished pursuant to Section
1.3(c) and Dissenting Shares (as defined in Section 1.6 below),
shall be converted into and exchangeable for fully paid and non-
assessable shares of Series A Preferred Stock of Pubco ("Pubco
Preferred Stock") on a one-for-one basis (the "Exchange Ratio");
and Pubco shall issue to each holder of Company Common Stock
(other than holders of shares extinguished pursuant to Section
1.3(c) and Dissenting Shares) the number of shares of Pubco
Preferred Stock equal to the number of shares of Company Common
Stock held by such shareholder multiplied by the Exchange Ratio,
with full effect given to fractional shares of Pubco Preferred
Stock.
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(b) All outstanding securities convertible into or
exchangeable for shares of Company Common Stock (including
without limitation options and warrants to purchase shares of
Company Common Stock; and including all such rights as are
subscribed in the Private Placement) that are outstanding
immediately prior to the Effective Time (the "Company Convertible
Securities") shall convert automatically into securities
convertible into or exchangeable for that number of shares of
Pubco Preferred Stock ("Pubco Convertible Securities") as the
holders thereof would have been entitled to receive if such
Company Convertible Securities had been converted into or
exercised for shares of Company Common Stock immediately prior to
the Effective Time, based on the Exchange Ratio; provided,
however, that the exercise price per share of Pubco Preferred
Stock under each such Pubco Convertible Security received by
holders of Company Convertible Securities will be equal to the
quotient obtained by dividing the purchase price per share of
Company Common Stock under each outstanding Company Convertible
Security by the Exchange Ratio, with full effect given to
fractional shares of Pubco Preferred Stock issuable upon exercise
or conversion of Pubco Convertible Securities issuable hereunder.
The Pubco Convertible Securities issuable upon the Merger under
this paragraph (b) and the Pubco Preferred Stock issuable upon
the Merger under paragraph (a) above are collectively referred to
as the "Merger Consideration."
(c) Each share of Company Common Stock issued and
outstanding immediately prior to the Effective Time and owned by
Merger Sub or Pubco, if any, shall be cancelled and extinguished
without any conversion thereof and no payment shall be made with
respect thereto.
(d) All issued and outstanding shares of common stock,
$.001 par value per share, of Merger Sub held by Pubco
immediately prior to the Effective Time will be converted into
and become one validly issued, fully paid and non-assessable
share of common stock, $.001 par value per share, of the
Surviving Company.
(e) The rights, preferences and privileges of Pubco
Preferred Stock shall be governed by the terms and conditions of
a Certificate of Designation in the form attached hereto as
Exhibit B.
1.4 Rights of Holders of Company Capital Stock.
(a) On and after the Effective Date and until surrendered
for exchange, each outstanding stock certificate that immediately
prior to the Effective Date represented shares of Company Common
Stock (except Dissenting Shares and shares cancelled or
extinguished pursuant to Section 1.3(c)) shall be deemed, for all
purposes, to evidence ownership of and to represent the number of
whole shares of Pubco Preferred Stock into which such shares of
Company Common Stock shall have been converted pursuant to
Section 1.3(a) above. The record holder of each such outstanding
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certificate representing shares of Company Common Stock shall,
after the Effective Date, be entitled to vote the shares of Pubco
Preferred Stock into which such shares of Company Common Stock
shall have been converted on any matters on which the holders of
record of Pubco capital stock having voting rights shall be
entitled to vote, as of any date after the Effective Date. In
any matters relating to such certificates of Company Common
Stock, Pubco may rely conclusively upon the record of
stockholders maintained by the Company containing the names and
addresses of the holders of record of Company Common Stock on the
Effective Date. The parties acknowledge that purchasers of
Company Common Stock in the Private Placement (as defined in
Section 5.4 below) shall not have certificates issued for such
Company Common Stock and shall not, therefore, be required to
exchange any certificates prior to receiving certificates
representing their Merger Consideration.
(b) On and after the Effective Date, Pubco shall reserve
a sufficient number of authorized but unissued shares of: (i)
Pubco Preferred Stock for issuance in connection with (A) the
conversion of Company Common Stock into Pubco Preferred Stock and
(B) the conversion or exercise of all Pubco Convertible
Securities into which Company Convertible Securities are
converted pursuant to Section 1.3(b); and (ii) common stock of
Pubco ("Pubco Common Stock") into which all of the foregoing
Pubco Preferred Stock shall be convertible.
1.5 Procedure for Exchange of Company Common Stock.
(a) Pubco shall act as exchange agent in the Merger (the
"Exchange Agent"). As soon as practicable following the
Effective Time, the Exchange Agent will mail or cause to be
mailed to each former holder of Company Common Stock (except
Dissenting Shares and shares cancelled or extinguished pursuant
to Section 1.3(c)), as recorded on the Company's books and
records immediately prior to the Merger, (i) a letter of
transmittal in customary form and containing such provisions to
effect transfer of title to the Company Common Stock as Pubco may
reasonably specify, and (ii) instructions for use in effecting
the surrender of certificates representing Company Common Stock
in exchange for the Merger Consideration described in Section
1.3(a).
(b) Upon surrender of a certificate representing Company
Common Stock to the Exchange Agent (or its representative) for
exchange (except as otherwise contemplated by the last sentence
of Section 1.4(a)), together with a duly executed letter of
transmittal and such other documents as may be reasonably
required by the Exchange Agent to effect transfer of title to the
Company Common Stock, each such former holder of Company Common
Stock shall be entitled to receive certificates representing the
number of whole shares of Pubco Preferred Stock into which shares
of Company Common Stock theretofore represented by the
certificates so surrendered shall have been converted as provided
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in Section 1.3(a). Pubco shall not be obligated to deliver the
Merger Consideration to which any former holder of shares of
Company Common Stock is entitled until such holder surrenders the
certificate or certificates representing such shares. Upon
surrender, each certificate evidencing Company Common Stock shall
be cancelled.
(c) If there is a transfer of Company Common Stock
ownership which is not registered in the Company's transfer
records, a certificate representing the proper number of shares
of Pubco Preferred Stock may be issued to a Person other than the
Person in whose name the certificate so surrendered is registered
if: (i) upon presentation to the corporate secretary of Pubco,
such certificate shall be properly endorsed or otherwise be in
proper form for transfer, (ii) the Person requesting such payment
shall pay any transfer or other taxes required by reason of the
issuance of shares of Pubco Preferred Stock to a Person other
than the registered holder of such certificate or establish to
the reasonable satisfaction of Pubco that such tax has been paid
or is not applicable, and (iii) the issuance of such Pubco
Preferred Stock shall not, in the sole discretion of Pubco,
violate the requirements of applicable securities laws and
regulations with respect to the private placement of Pubco
Preferred Stock that will result from the Merger. For all
purposes of this Agreement, the term "Person" means any
individual, corporation (including any non-profit corporation),
general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union,
governmental authority or other entity.
(d) All shares of Pubco Preferred Stock issued upon the
surrender for exchange of Company Common Stock in accordance with
the above terms and conditions shall be deemed to have been
issued and paid in full satisfaction of all rights pertaining to
such shares of Company Common Stock.
(e) Any shares of Pubco Preferred Stock issued in the
Merger will not be transferable except (i) pursuant to an
effective registration statement under the Securities Act of 1933
(the "Securities Act") or (ii) upon receipt by Pubco of a written
opinion of counsel reasonably satisfactory to Pubco to the effect
that the proposed transfer is exempt from the registration
requirements of the Securities Act and relevant state securities
laws. Restrictive legends shall be placed on all certificates
representing shares of Pubco Preferred Stock issued in the
Merger, in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO RESTRICTIONS ON TRANSFER AND CERTAIN OTHER CONDITIONS.
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS
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AMENDED, AND THE RULES AND REGULATIONS IN EFFECT THEREUNDER
AND ALL APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS
(SUCH FEDERAL AND STATE LAWS, THE "SECURITIES LAWS") OR (B)
THE COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL
FOR THE HOLDER, WHICH OPINION AND COUNSEL SHALL BE
REASONABLY SATISFACTORY TO THE COMPANY, TO THE EFFECT THAT
SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION IS EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES LAWS.
The failure, however, of such certificates to contain such a
legend shall not affect the enforceability of restrictions set
forth in this Section 1.5, except as otherwise provided by
applicable law.
(f) In the event any certificate for Company Common Stock
shall have been lost, stolen or destroyed, Pubco shall issue and
pay in exchange for such lost, stolen or destroyed certificate,
upon the making of an affidavit of that fact by the holder
thereof, such shares of Pubco Preferred Stock as may be required
pursuant to this Agreement.
1.6 Dissenting Shares. Shares of capital stock of the Company
held by stockholders of the Company who are entitled to exercise
dissenters' rights under DGCL Section 262 and have properly demanded
for the fair value of their shares of Company Common Stock in
accordance with the DGCL ("Dissenting Shares") shall not be converted
into or represent a right to receive shares of Pubco Preferred Stock
pursuant to Section 0, but the holders thereof shall be entitled only
to such rights as are granted by the applicable sections of the DGCL.
Each holder of Dissenting Shares who becomes entitled to fair payment
for such shares pursuant to the DGCL shall receive such payment from
the Surviving Company in accordance with the DGCL; provided, however,
that if any such holder of Dissenting Shares shall have effectively
withdrawn or failed to preserve such holder's dissenters' rights, such
holder shall forfeit the right to receive fair value for such
Dissenting Shares and each such Dissenting Share shall thereupon be
deemed to have been canceled, extinguished and converted, as of the
Effective Time, into and represent the right to receive payment from
Pubco of shares of Pubco Preferred Stock as provided in Section 1.3(a).
1.7 Directors and Officers of Surviving Company. From and
after the Effective Time, the directors and officers of the Surviving
Company shall be, respectively, the persons who were directors of the
Company immediately prior to the Effective Time and the officers of the
Company immediately prior to the Effective Time. Such directors and
officers of the Surviving Company shall hold office for the term
specified in, and subject to the provisions contained in, the Surviving
Company's certificate of incorporation and bylaws and applicable law.
If, at or after the Effective Time, a vacancy shall exist on the board
of directors or in any of the offices of the Surviving Company, such
vacancy shall be filled in the manner provided in the Surviving
Company's certificate of incorporation and bylaws and applicable law.
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1.8 Directors and Officers of Pubco. Immediately after the
Effective Time, Pubco's board of directors will consist of the
following persons: Xxxxx Xxxxxxx, Xxxx Xxxxx, Xxxxx Xxxxxx, Xxxxx
Xxxxxx and a Pubco continuing director designated by the Company, who
shall serve for the term specified in, and subject to the provisions
contained in, Pubco's certificate of incorporation and bylaws and
applicable law.
Article 2
Representations and Warranties of the Company
The Company hereby represents and warrants to Pubco and Merger Sub as
follows:
2.1 Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under
the laws of the State of Delaware, and has the requisite corporate
power to carry on its business as now conducted. The Company is
licensed or qualified to do business in every jurisdiction in which the
nature of its business or its ownership of property requires it to be
licensed or qualified, except where the failure to be so licensed or
qualified would not have a Material Adverse Effect on the Company or
the Surviving Company given the Company's current business operations.
For all purposes of this Agreement, the term "Material Adverse Effect"
shall, with respect to an entity, mean a material adverse effect on the
business, operations, results of operations or financial condition of
such entity on a consolidated basis.
2.2 Authority Relative to this Agreement; Non-Contravention.
The Company has the requisite corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated hereby
have been duly authorized by the Company's board of directors and,
except for approval of this Agreement and the Merger by the requisite
vote of the Company's shareholders (the "Required Company Stockholder
Vote"), no other corporate proceedings on the part of the Company are
necessary to authorize the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by the Company and,
assuming it is a valid and binding obligation of Pubco and Merger Sub,
constitutes a valid and binding obligation of the Company enforceable
in accordance with its terms, except as enforcement may be limited by
general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. Except as set
forth in Schedule 2.2, the Company is not subject to, or obligated
under, any provision of (a) its certificate of incorporation or bylaws,
(b) any agreement, arrangement or understanding, (c) any license,
franchise or permit or (d) subject to obtaining the approvals referred
to in the next sentence, any law, regulation, order, judgment or
decree, which would conflict with, be breached or violated, or in
respect of which a right of termination or acceleration or any security
interest, charge or encumbrance on any of its assets would be created,
by the execution, delivery or performance of this Agreement, or the
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consummation of the transactions contemplated hereby, other than any
such conflicts, breaches, violations, rights of termination or
acceleration or security interests, charges or encumbrances which, in
the aggregate, could not reasonably be expected to result in a Material
Adverse Effect on the Company or the Surviving Company. Except for (i)
approvals under applicable blue sky laws, (ii) the filing of the
Certificate of Merger with the Secretary of State of Delaware, and
(iii) such filings, authorizations or approvals as may be set forth in
Schedule 2.2, no authorization, consent or approval of, or filing with,
any public body, court or authority is necessary on the part of the
Company for the consummation by the Company of the transactions
contemplated by this Agreement, except for such authorizations,
consents, approvals and filings as to which the failure to obtain or
make the same would not, in the aggregate, reasonably be expected to
have a Material Adverse Effect on the Company or the Surviving Company
or adversely affect the consummation of the transactions contemplated
hereby.
2.3 Capitalization.
(a)The authorized, issued and outstanding shares of capital
stock of the Company, and Company Convertible Securities, as of
the date hereof are correctly set forth on Schedule 2.3(a). The
issued and outstanding shares of capital stock of the Company are
duly authorized, validly issued, fully paid and non-assessable
and have not been issued in violation of any preemptive rights
and, to the Company's Knowledge (as defined in Section 8.2
below), are free from any restrictions on transfer (other than
restrictions under the Securities Act or state securities laws)
or any option, lien, pledge, security interest, encumbrance or
charge of any kind except as may be described on Schedule 2.3(a).
Other than as described on Schedule 2.3(a), the Company has no
other equity securities or securities containing any equity
features (including Company Convertible Securities) authorized,
issued or outstanding. Except as set forth in Schedule 2.3(a)
hereto, there are no agreements or other rights or arrangements
existing which provide for the sale or issuance of capital stock
by the Company and there are no rights, subscriptions, warrants,
options, conversion rights or agreements of any kind outstanding
to purchase or otherwise acquire from the Company any shares of
capital stock or other securities of the Company of any kind.
Except as set forth on Schedule 2.3(a), there are no agreements
or other obligations (contingent or otherwise) which may require
the Company to repurchase or otherwise acquire any shares of its
capital stock.
(b) The Company does not own, and is not party to any
contract to acquire, any equity securities or other securities of
any entity or any direct or indirect equity or ownership interest
in any other entity. To the Company's Knowledge, there exist no
voting trusts, proxies, or other contracts with respect to the
voting of shares of capital stock of the Company.
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2.4 Litigation. Except as set forth on Schedule 2.4, there are
no actions, suits, proceedings, orders or investigations pending or, to
the Knowledge of the Company, threatened against the Company, at law or
in equity, or before or by any federal, state or other governmental
department, commission, board, bureau, agency or instrumentality,
domestic or foreign.
2.5 No Brokers or Finders. Except as disclosed on Schedule
2.5, there are no claims for brokerage commissions, finders' fees,
investment advisory fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement,
understanding, commitment or agreement made by or on behalf of the
Company.
2.6 Tax Matters.
(a) (i) The Company has timely filed (or has had timely
filed on its behalf) all returns, declarations, reports,
estimates, information returns, and statements, including any
schedules and amendments to such documents ("Company Returns"),
required to be filed or sent by it in respect of any Taxes or
required to be filed or sent by it by any taxing authority having
jurisdiction; (ii) all such Company Returns are complete and
accurate in all material respects; (iii) the Company has timely
and properly paid (or has had paid on its behalf) all Taxes
required to be paid by it; (iv) the Company has established on
the Company Latest Balance Sheet (as defined in Section 2.12
below), in accordance with United States generally accepted
accounting principles as in effect from time to time ("GAAP"),
reserves that are adequate for the payment of any Taxes not yet
due and payable; (v) the Company has complied with all applicable
laws, rules, and regulations relating to the collection or
withholding of Taxes from third parties, including without
limitation employees, and the payment thereof (including without
limitation withholding of Taxes under Code Sections 1441 and
1442, or similar provisions under any foreign laws).
(b) For all purposes of this Agreement, the terms "Tax"
and "Taxes" shall mean any federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise,
severance, stamp, occupation, premium, property or windfall
profits taxes, environmental taxes, customs duties, capital
stock, franchise, employees' income withholding, foreign or
domestic withholding, social security, unemployment, disability,
workers' compensation, employment-related insurance, real
property, personal property, sales, use, transfer, value added,
alternative or add-on minimum or other governmental tax,
fee, assessment or charge of any kind whatsoever including any
interest, penalties or additions to any Tax or additional amounts
in respect of the foregoing.
(c) There are no liens for Taxes upon any assets of the
Company, except liens for Taxes not yet due.
14
(d) No deficiency for any Taxes has been proposed,
asserted or assessed against the Company that has not been
resolved and paid in full or is not being contested in good
faith. Except as disclosed in Schedule 2.6, no waiver, extension
or comparable consent given by the Company regarding the
application of the statute of limitations with respect to any
Taxes or Returns is outstanding, nor is any request for any such
waiver or consent pending. Except as disclosed in Schedule 2.6,
there has been no Tax audit or other administrative proceeding or
court proceeding with regard to any Taxes or Company Returns, nor
is any such Tax audit or other proceeding pending, nor has there
been any notice to the Company by any Taxing authority regarding
any such Tax audit or other proceeding, or, to the Knowledge of
the Company, is any such Tax audit or other proceeding threatened
with regard to any Taxes or Company Returns. The Company does
not expect the assessment of any additional Taxes of the Company
for any period prior to the date hereof and has no Knowledge of
any unresolved questions, claims or disputes concerning the
liability for Taxes of the Company which would exceed the
estimated reserves established on its books and records.
(e) The Company is not liable with respect to any
indebtedness the interest of which is not deductible for
applicable federal, foreign, state or local income tax purposes.
The Company has not filed or been included in a combined,
consolidated or unitary Tax return (or the substantial equivalent
thereof) of any person.
(f) Except as set forth on Schedule 2.6, the Company has
not requested any extension of time within which to file any
Company Return, which return has not since been filed.
2.7 Compliance with Laws; Permits.
(a) Except for any noncompliance that would not
reasonably be expected to have a Material Adverse Effect on the
Company or the Surviving Company, the Company and its officers,
directors, agents and employees have complied with all applicable
laws, regulations and other requirements, including but not
limited to federal, state, local and foreign laws, ordinances,
rules, regulations and other requirements pertaining to equal
employment opportunity, employee retirement, affirmative action
and other hiring practices, occupational safety and health,
workers' compensation, unemployment and building and zoning
codes, and no claims have been filed against the Company, and the
Company has not received any notice, alleging a violation of any
such laws, regulations or other requirements. The Company is not
relying on any exemption from or deferral of any such applicable
law, regulation or other requirement that would not be available
to Pubco after it acquires the Company's properties, assets and
business.
(b) The Company has, in full force and effect, all
licenses, permits and certificates, from federal, state, local
and foreign authorities (including without limitation federal and
15
state agencies regulating occupational health and safety)
necessary to conduct its business and operate its properties
(collectively, the "Company Permits"). A true, correct and
complete list of all the Company Permits is set forth in Schedule
2.7 hereto. The Company has conducted its business in compliance
with all material terms and conditions of the Company Permits,
except for any noncompliance that would not reasonably be
expected to have a Material Adverse Effect on the Company or the
Surviving Company.
2.8 Financial Statements. Pubco acknowledges receipt of the
audited balance sheets of the Company as of December 31, 2004, along
with the related audited statements of income, changes in stockholders'
equity, and cash flows of the Company for the period then ended (the
"Company Financial Statements"). The Company Financial Statements have
been prepared in accordance with GAAP consistently applied with past
practice and on that basis present fairly, in all material respects,
the financial position and the results of operations, changes in
stockholders' equity, and cash flows of the Company as of the date of
and for the period referred to in the Company Financial Statements.
2.9 Books and Records. The books of account, minute books,
stock record books, and other records of the Company, have been made
available to Pubco, have been properly kept and contain no inaccuracies
except for inaccuracies that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on
the Company or the Surviving Company. At the Closing, all of the
Company's records will be in the possession of the Company.
2.10 Real Property. The Company does not own any real
property. Schedule 2.10 contains an accurate list of all leaseholds
and other interests of the Company in any real property. The Company
has good and valid title to those leaseholds and other interests free
and clear of all liens and encumbrances, and the real property to which
those leasehold and other interests pertain constitutes the only real
property used in the Company's business.
2.11 Insurance. The insurance policies owned and maintained by
the Company that are material to the Company are in full force and
effect, all premiums due and payable thereon have been paid (other than
retroactive or retrospective premium adjustments that the Company is
not currently required, but may in the future be required, to pay with
respect to any period ending prior to the date of this Agreement), and
the Company has received no notice of cancellation or termination with
respect to any such policy that has not been replaced on substantially
similar terms prior to the date of such cancellation.
2.12 No Undisclosed Liabilities. Except as reflected in the
audited balance sheet of the Company at December 31, 2004 (the "Company
Latest Balance Sheet"), the Company has no liabilities (whether
accrued, absolute, contingent, unliquidated or otherwise) except (i)
liabilities which have arisen after the date of the Company Latest
Balance Sheet in the ordinary course of business, none of which is a
material uninsured
16
liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit, or (ii) as otherwise set forth in
Schedule 2.12.
2.13 Environmental Matters. None of the operations of the
Company involves the generation, transportation, treatment, storage or
disposal of hazardous waste, as defined under 40 C.F.R. Parts 260-270
or any state, local or foreign equivalent.
2.14 Absence of Certain Developments. Except as set forth in
Schedule 2.14 or as disclosed in the Company Financial Statements or as
otherwise contemplated by this Agreement, since the Company Latest
Balance Sheet, the Company has conducted its business only in the
ordinary course consistent with past practice and there has not
occurred (a) any event having a Material Adverse Effect on the Company
or likely to have a Material Adverse Effect on the Surviving Company,
(b) any event that would reasonably be expected to prevent or
materially delay the performance of the Company's obligations pursuant
to this Agreement, (c) any material change by the Company in its
accounting methods, principles or practices, (d) any declaration,
setting aside or payment of any dividend or distribution in respect of
the shares of capital stock of the Company or any redemption, purchase
or other acquisition of any of the Company's securities, (e) any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including without limitation the granting
of stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan
of the Company, or any other increase in the compensation payable or to
become payable to any employees, officers, consultants or directors of
the Company, (f) other than issuances of options pursuant to duly
adopted option plans, any issuance, grants or sale of any stock,
options, warrants, notes, bonds or other securities, or entry into any
agreement with respect thereto by the Company, (g) any amendment to the
Company's certificate of incorporation or bylaws, (h) other than in the
ordinary course of business consistent with past practice, any (i)
capital expenditures by the Company, (ii) purchase, sale, assignment or
transfer of any material assets by the Company, (iii) mortgage, pledge
or existence of any lien, encumbrance or charge on any material assets
or properties, tangible or intangible, of the Company, except for liens
for taxes not yet due and such other liens, encumbrances or charges
which do not, individually or in the aggregate, have a Material Adverse
Effect on the Company or the Surviving Company, or (iv) cancellation,
compromise, release or waiver by the Company of any rights of material
value or any material debts or claims, (i) any incurrence by the
Company of any material liability (absolute or contingent), except for
current liabilities and obligations incurred in the ordinary course of
business consistent with past practice, (j) damage, destruction or
similar loss, whether or not covered by insurance, materially affecting
the business or properties of the Company, (k) entry into any
agreement, contract, lease or license other than in the ordinary course
of business consistent with past practice, (l) any acceleration,
termination, modification or cancellation of any agreement, contract,
lease or license to which the Company is a party or by which it is
17
bound, (m) entry by the Company into any loan or other transaction with
any officers, directors or employees of the Company, (n) any charitable
or other capital contribution by the Company or pledge therefore, (o)
entry by the Company into any transaction of a material nature other
than in the ordinary course of business consistent with past practice,
or (p) any negotiation or agreement by the Company to do any of the
things described in the preceding clauses (a) through (p).
2.15 Employee Benefit Plans.
(a) Schedule 2.15(a) lists all material (i) "employee
benefit plans," within the meaning of Section 3(3) of Employee
Retirement Income Security Act of 1974 or any successor law and
the regulations thereunder ("ERISA"), of the Company, (ii) bonus,
stock option, stock purchase, stock appreciation right,
incentive, deferred compensation, supplemental retirement,
severance, and fringe benefit plans, programs, policies or
arrangements, and (iii) employment or consulting agreements, for
the benefit of, or relating to, any current or former employee
(or any beneficiary thereof) of the Company, in the case of a
plan described in (i) or (ii) above, that is currently maintained
by the Company or with respect to which the Company has an
obligation to contribute, and in the case of an agreement
described in (iii) above, that is currently in effect (the
"Company Plans"). The Company has heretofore been delivered to
Pubco true and complete copies of the Company Plans and any
amendments thereto, any related trust, insurance contract,
summary plan description, and, to the extent required under ERISA
or the Code, the most recent annual report on Form 5500 and
summaries of material modifications.
(b) No Company Plan is (i) a "multiemployer plan" within
the meaning of ERISA Sections 3(37) or 4001(a)(3), (ii) a
"multiple employer plan" within the meaning of ERISA Section
3(40) or Code Section 413(c), or (iii) is subject to ERISA Title
IV or Code Section 412.
(c) Except as set forth in Schedule 2.15c, there is no
proceeding pending or, to the Company's Knowledge, threatened
against the assets of any Company Plan or, with respect to any
Company Plan, against the Company other than proceedings that
would not reasonably be expected to result in a material
liability, and to the Company's Knowledge there is no proceeding
pending or threatened in writing against any fiduciary of any
Company Plan other than proceedings that would not reasonably be
expected to result in a material liability.
(d) Each of the Company Plans has been operated and
administered in all material respects in accordance with its
terms and applicable law, including but not limited to ERISA and
the Code.
18
(e) Each of the Company Plans that is intended to be
"qualified" within the meaning of Code Section 401(a) of the Code
has received a favorable determination, notification, or opinion
letter from the Internal Revenue Service.
(f) Except as set forth in Schedule 2.15(f), no director,
officer, or employee of the Company will become entitled to
retirement, severance or similar benefits or to enhanced or
accelerated benefits (including any acceleration of vesting or
lapsing of restrictions with respect to equity-based awards)
under any Company Plan solely as a result of consummation of the
transactions contemplated by this Agreement.
2.16 Tax-Free Reorganization. Neither the Company nor, to the
Company's Knowledge, any of its Affiliates has through the date of this
Agreement taken or agreed to take any action that would prevent the
Merger from qualifying as a reorganization under Code Section 368(a).
For all purposes of this Agreement, the term "Affiliate" shall have the
meaning as defined in Rule 12b-2 under the Securities Exchange Act of
1934, as such regulation is in effect on the date hereof.
2.17 Full Disclosure. The representations and warranties of
the Company contained in this Agreement (and in any schedule, exhibit,
certificate or other instrument to be delivered under this Agreement)
are true and correct in all material respects, and such representations
and warranties do not omit any material fact necessary to make the
statements contained therein, in light of the circumstances under which
they were made, not misleading. There is no fact of which the Company
has Knowledge that has not been disclosed to Pubco pursuant to this
Agreement, including the schedules hereto, all taken together as a
whole, which has had or could reasonably be expected to have a Material
Adverse Effect on the Company or the Surviving Company or materially
adversely affect the ability of the Company to consummate in a timely
manner the transactions contemplated hereby.
Article 3
Representations and Warranties of Pubco and Merger Sub
Pubco and Merger Sub hereby jointly and severally represent and
warrant to the Company as follows:
3.1 Organization and Qualification. Pubco and Merger Sub are
each corporations duly organized, validly existing and in good standing
under the laws of the States of Nevada and Delaware, respectively; and
each has the requisite corporate power to carry on their respective
businesses as now conducted. Each of the Pubco Subsidiaries (as
defined in Section 3.5 below) is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation. The copies of the certificate of incorporation and
bylaws of Pubco and Merger Sub which have been made available to the
Company on or prior to the date of this Agreement are correct and
complete copies of such documents as in effect as of the date of this
Agreement. Each of Pubco and the Pubco Subsidiaries is licensed or
qualified to do business in every jurisdiction which the nature of its
business or its ownership of property requires it to be licensed or
19
qualified, except where the failure to be so licensed or qualified
would not have a Material Adverse Effect on Pubco or any Pubco
Subsidiary.
3.2 Authority Relative to this Agreement; Non-Contravention.
Each of Pubco and Merger Sub has the requisite corporate power and
authority to enter into this Agreement, and to carry out its
obligations hereunder. The execution and delivery of this Agreement by
Pubco and Merger Sub, and the consummation by Pubco and Merger Sub of
the transactions contemplated hereby have been duly authorized by the
boards of directors of Pubco and Merger Sub. Except for approval of
the Merger by Pubco (as the sole stockholder of Merger Sub) in
accordance with the DGCL and the certificate of incorporation and
bylaws of Merger Sub, no other corporate proceedings on the part of
Pubco or Merger Sub are necessary to authorize the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby or will otherwise be sought by Pubco. This
Agreement has been duly executed and delivered by Pubco and Merger Sub
and, assuming it is a valid and binding obligation of the Company,
constitutes a valid and binding obligation of Pubco and Merger Sub
enforceable in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency and similar laws
affecting creditors' rights and remedies generally. Except as set forth
in Schedule 3.2, neither Pubco nor any of the Pubco Subsidiaries is
subject to, nor obligated under, any provision of (a) its articles or
certificate of incorporation or bylaws, (b) any agreement, arrangement
or understanding, (c) any license, franchise or permit, nor (d) subject
to obtaining the approvals referred to in the next sentence, any law,
regulation, order, judgment or decree, which would conflict with, be
breached or violated, or in respect of which a right of termination or
acceleration or any security interest, charge or encumbrance on any of
its assets would be created, by the execution, delivery or performance
of this Agreement or the consummation of the transactions contemplated
hereby, other than any such conflicts, breaches, violations, rights of
termination or acceleration or security interests, charges or
encumbrances which, in the aggregate, could not reasonably be expected
to have a Material Adverse Effect on Pubco or any Pubco Subsidiaries.
Except for (i) approvals under applicable blue sky laws, (ii) the
filing of the Certificate of Merger with the Delaware Secretary of
State, and (iii) such filings, authorizations or approvals as may be
set forth in Schedule 3.2, no authorization, consent or approval of, or
filing with, any public body, court or authority is necessary on the
part of Pubco or any Pubco Subsidiary for the consummation by Pubco or
Merger Sub of the transactions contemplated by this Agreement, except
for such authorizations, consents, approvals and filings as to which
the failure to obtain or make the same would not, in the aggregate,
reasonably be expected to have a Material Adverse Effect on Pubco or
Merger Sub.
20
3.3 Capitalization.
(a) The authorized, issued and outstanding shares of
capital stock of Pubco, and all securities convertible into or
exchangeable for capital stock of Pubco, as of the date hereof
are correctly set forth on Schedule 3.3(a). The issued and
outstanding shares of capital stock of Pubco are duly authorized,
validly issued, fully paid and non-assessable and have not been
issued in violation of any preemptive rights. Other than as
described on Schedule 3.3(a), Pubco has no other equity
securities or securities containing any equity features
(including Pubco Convertible Securities) authorized, issued or
outstanding. Except as set forth in Schedule 3.3(a), there are
no agreements or other rights or arrangements existing which
provide for the sale or issuance of capital stock by Pubco and
there are no rights, subscriptions, warrants, options, conversion
rights or agreements of any kind outstanding to purchase or
otherwise acquire from Pubco any shares of capital stock or other
securities of Pubco of any kind. Except as set forth on Schedule
3.3(a), there are no agreements or other obligations (contingent
or otherwise) which may require Pubco to repurchase or otherwise
acquire any shares of its capital stock.
(b) To Pubco's Knowledge, there exist no voting trusts,
proxies, or other contracts with respect to the voting of shares
of capital stock of Pubco, other than as set forth on Schedule
3.3(b).
(c) The authorized capital of Merger Sub consists of
1,000,000 shares of common stock, par value $.001 per share, one
share of which is issued and outstanding. As of the date hereof,
all such issued and outstanding shares of Merger Sub common stock
are held of record by Pubco. The issued and outstanding shares
of capital stock of Merger Sub are duly authorized, validly
issued, fully paid and non-assessable and have not been issued in
violation of any preemptive rights. There are no options,
warrants, conversion privileges or other rights, agreements,
arrangements or commitments obligating Merger Sub to issue, sell,
purchase or redeem any shares of its capital stock or securities
or obligations of any kind convertible into or exchangeable for
any shares of its capital stock.
3.4 Exchange Act Reports. Prior to the date of this
Agreement, Pubco has delivered or made available to the Company
complete and accurate copies of (a) Pubco's Annual Reports on Form 10-
KSB for the years ended December 31, 2004 (the "Pubco 10-K Reports") as
filed with the United States Securities and Exchange Commission (the
"SEC"), (b) all Pubco proxy statements and annual reports to
stockholders used in connection with meetings of Pubco stockholders
held since Pubco's incorporation, of which there are none; (c) Pubco's
Quarterly Reports on Form 10-QSB for the quarters ended June 30, 2003
through September 30, 2004 (the "Pubco 10-Q Reports"), as filed with
the SEC; (d) all current reports on Form 8-K filed with the SEC after
June 30, 2003 (the "Pubco 8-K Reports"); (e) all registration
statements (as amended) under the Securities Act and Securities
21
Exchange Act of 1934 filed by Pubco with the SEC (the "Pubco
Registration Statements," and together with the Pubco 10-K Reports and
Pubco 10-Q Reports, referred to as the "Pubco SEC Filings"). As of
their respective dates, or as subsequently amended prior to the date
hereof, to the Knowledge of Pubco, each of the Pubco SEC Filings (i)
did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which
they were made, not misleading and (ii) complied as to form in all
material respects with the applicable rules and regulations of the SEC.
Except as set forth on Schedule 3.4, since January 1, 2002, Pubco has
filed in a timely manner all reports that it was required to file with
the SEC pursuant to Section 13(a), 14(a), 14(c) and 15(d) of the
Securities Exchange Act of 0000 (xxx "Xxxxxxxx Xxx"). The financial
statements (including footnotes thereto) included in or incorporated by
reference into the Pubco 10-K Reports, Pubco 10-Q Reports and the Pubco
Registration Statements filed under the Securities Act were prepared in
accordance with GAAP applied on a consistent basis during the periods
involved (except as otherwise noted therein) and fairly present, in all
material respects, the financial condition of Pubco as of the dates
thereof and results of operations for the periods referred to therein.
3.5 Subsidiaries. Schedule 3.5 correctly sets forth the name
and jurisdiction of incorporation of each subsidiary of Pubco (each a
"Pubco Subsidiary" and collectively, the "Pubco Subsidiaries"). Except
as disclosed on Schedule 3.5, all of the issued and outstanding shares
of capital stock of each Pubco Subsidiary are owned directly by Pubco
free and clear of any option, lien, pledge, security interest,
encumbrance or charge of any kind. All of the outstanding shares of
capital stock of each Pubco Subsidiary have been duly and validly
authorized and issued and are fully paid and non-assessable. Except as
set forth in Schedule 3.5, Pubco does not own any stock, partnership
interest, joint venture interest or any other security or ownership
interest issued by any other corporation, organization or entity.
3.6 Litigation. Except as set forth in Schedule 3.6, as of the
date hereof, there are no actions, suits, proceedings, orders or
investigations pending or, to the Knowledge of Pubco, threatened
against Pubco, at law or in equity, or before or by any federal, state
or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign.
3.7 No Brokers or Finders. Except as disclosed on Schedule
3.7, there are no claims for brokerage commissions, finders' fees,
investment advisory fees or similar compensation in connection with the
transactions contemplated by this Agreement based on any arrangement,
understanding, commitment or agreement made by or on behalf of Pubco.
3.8 Tax Matters.
(a) (i) Pubco and each Pubco Subsidiary has timely filed
(or has had timely filed on its behalf) all returns,
declarations, reports, estimates, information returns, and
statements, including any schedules and amendments to such
22
documents (the "Pubco Returns"), required to be filed or sent by
it in respect of any Taxes or required to be filed or sent by it
by any taxing authority having jurisdiction; (ii) all such Pubco
Returns are complete and accurate in all material respects; (iii)
Pubco and each Pubco Subsidiary has timely and properly paid (or
has had paid on its behalf) all Taxes required to be paid by it;
(iv) Pubco has established on the Pubco Latest Balance Sheet (as
defined in Section 3.16 below), in accordance with GAAP, reserves
that are adequate for the payment of any Taxes not yet due and
payable; (v) Pubco and each Pubco Subsidiary has complied with
all applicable laws, rules, and regulations relating to the
collection or withholding of Taxes from third parties, including
without limitation employees, and the payment thereof (including,
without limitation, withholding of Taxes under Code Sections 1441
and 1442, or similar provisions under any foreign laws).
(b) There are no liens for Taxes upon any assets of Pubco
or any Pubco Subsidiary, except liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed,
asserted or assessed against Pubco or any Pubco Subsidiary that
has not been resolved and paid in full or is not being contested
in good faith. Except as disclosed in Schedule 3.8, no waiver,
extension or comparable consent given by Pubco or any Pubco
Subsidiary regarding the application of the statute of
limitations with respect to any Taxes or Returns is outstanding,
nor is any request for any such waiver or consent pending.
Except as disclosed in Schedule 3.8, there has been no Tax audit
or other administrative proceeding or court proceeding with
regard to any Taxes or Pubco Returns, nor is any such Tax audit
or other proceeding pending, nor has there been any notice to
Pubco or any Pubco Subsidiary by any Taxing authority regarding
any such Tax audit or other proceeding, or, to the Knowledge of
Pubco, is any such Tax audit or other proceeding threatened with
regard to any Taxes or Pubco Returns. Pubco does not expect the
assessment of any additional Taxes of Pubco or any Pubco
Subsidiary for any period prior to the date hereof and has no
Knowledge of any unresolved questions, claims or disputes
concerning the liability for Taxes of Pubco or any Pubco
Subsidiary which would exceed the estimated reserves established
on its books and records.
(d) Except as set forth on Schedule 3.8, neither Pubco
nor any Pubco Subsidiary has requested any extension of time
within which to file any Pubco Return, which return has not since
been filed.
3.9 Contracts and Commitments.
(a) Schedule 3.9 lists all material agreements, whether
oral or written, to which Pubco or any Pubco Subsidiary is a
party, which are currently in effect, and which relate to the
operation of Pubco's business or where applicable, the business
of any Pubco Subsidiary.
23
(b) Pubco and each Merger Subsidiary has performed all
obligations required to be performed by them in connection with
the contracts or commitments required to be disclosed in Schedule
3.9 and is not in receipt of any claim of default under any
contract or commitment required to be disclosed under such
caption; Pubco and each Pubco Subsidiary, where applicable, have
no present expectation or intention of not fully performing any
material obligation pursuant to any contract or commitment
required to be disclosed under such caption; and Pubco has no
Knowledge of any breach or anticipated breach by any other party
to any contract or commitment required to be disclosed under such
caption.
3.10 Affiliate Transactions. Except as set forth in Schedule
3.10, and other than pursuant to this Agreement, no officer, director
or employee of Pubco, any Pubco Subsidiary or any member of the
immediate family of any such officer, director or employee, or any
entity in which any of such persons owns any beneficial interest (other
than any publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than one
percent of the stock of which is beneficially owned by any of such
persons) (collectively "Pubco Insiders"), has any agreement with Pubco
(other than normal employment arrangements) or any interest in any
property, real, personal or mixed, tangible or intangible, used in or
pertaining to the business of Pubco (other than ownership of capital
stock of Pubco). Pubco is not indebted to any Pubco Insider (except
for amounts due as normal salaries and bonuses and in reimbursement of
ordinary business expenses) and no Pubco Insider is indebted to Pubco)
except for cash advances for ordinary business expenses). None of the
Pubco Insiders has any direct or indirect interest in any competitor,
supplier or customer of Pubco or in any person, firm or entity from
whom or to whom Pubco leases any property, or in any other person, firm
or entity with whom Pubco transacts business of any nature. For
purposes of this Section 3.10, the members of the immediate family of
an officer, director or employee shall consist of the spouse, parents
and children of such officer, director or employee.
3.11 Compliance with Laws; Permits.
(a) Except for any noncompliance that would not
reasonably be expected to have a Material Adverse Effect on
Pubco, Pubco each Pubco Subsidiary and their respective officers,
directors, agents and employees have complied with all applicable
laws, regulations and other requirements, including but not
limited to federal, state, local and foreign laws, ordinances,
rules, regulations and other requirements pertaining to equal
employment opportunity, employee retirement, affirmative action
and other hiring practices, occupational safety and health,
workers' compensation, unemployment and building and zoning
codes, and no claims have been filed against Pubco, and Pubco has
not received any notice, alleging a violation of any such laws,
regulations or other requirements. Pubco is not relying on any
exemption from or deferral of any such applicable law, regulation
24
or other requirement that would not be available to the Company
after it acquires Pubco's properties, assets and business.
(b) Each of Pubco and the Pubco Subsidiaries has, in full
force and effect, all licenses, permits and certificates from
federal, state, local and foreign authorities (including without
limitation federal and state agencies regulating occupational
health and safety) necessary to permit it to conduct its business
and own and operate its properties (collectively, the "Pubco
Permits"). A complete list of all the Permits is set forth in
Schedule 3.11. Each of Pubco and the Pubco Subsidiaries has
conducted its business in compliance with terms and conditions of
the Pubco Permits.
3.12 Financial Statements. The Company has received from Pubco
the audited financial statements of Pubco for the year ended December
31, 2003, and the audited financial statements of Pubco for the period
ended December 31, 2004, along with the related audited statements of
income, changes in stockholders' equity, and cash flows of the Company
for the period then ended (the "Pubco Financial Statements"). The
Pubco Financial Statements have been prepared in accordance with GAAP
consistently applied with past practice (except that the unaudited
financial statements may not contain all notes and may not contain
prior period comparative data) and on that basis present fairly, in all
material respects, the financial position and the results of
operations, changes in stockholders' equity, and cash flows of Pubco as
of the date of and for the period referred to in the Pubco Financial
Statements.
3.13 Books and Records. The books of account, minute books,
stock record books, and other records of Pubco, all of which have been
delivered to the Company, have been properly kept and contain no
inaccuracies except for inaccuracies that would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect
on Pubco. At the Closing, all of Pubco's records will be in the
possession of Pubco.
3.14 Real Property. Neither Pubco nor any Pubco Subsidiary
owns any real property. Schedule 3.14 contains an accurate list of all
leaseholds and other interests of Pubco any each Pubco Subsidiary in
any real property. Pubco and such Pubco Subsidiaries have good and
valid title to those leaseholds and other interests free and clear of
all liens and encumbrances, and the real property to which those
leasehold and other interests pertain constitutes the only real
property used in Pubco's business.
3.15 Insurance. The insurance policies owned and maintained
by Pubco that are material to Pubco are in full force and effect, all
premiums due and payable thereon have been paid (other than retroactive
or retrospective premium adjustments that Pubco is not currently
required, but may in the future be required, to pay with respect to any
period ending prior to the date of this Agreement), and Pubco has
received no notice of cancellation or termination with respect to any
such policy that has not been replaced on substantially similar terms
prior to the date of such cancellation.
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3.16 Absence of Undisclosed Liabilities. Except as reflected
in the unaudited balance sheet of Pubco at September 30, 2004 included
in Pubco's Quarterly Report on Form 10-QSB for such period (the "Pubco
Latest Balance Sheet"), Pubco has no liabilities (whether accrued,
absolute, contingent, unliquidated or otherwise) except (i) liabilities
which have arisen after the date of the Pubco Latest Balance Sheet in
the ordinary course of business, none of which is a material uninsured
liability for breach of contract, breach of warranty, tort,
infringement, claim or lawsuit, or (ii) as otherwise set forth in
Schedule 3.16 attached hereto.
3.17 Environmental Matters. None of the operations of Pubco or
any Pubco Subsidiary involves the generation, transportation,
treatment, storage or disposal of hazardous waste, as defined under 40
C.F.R. Parts 260-270 or any state, local or foreign equivalent.
3.18 Absence of Certain Developments. Except as set forth in
Schedule 3.18 or as disclosed in the Pubco SEC Filings or as otherwise
contemplated by this Agreement, since Pubco's Latest Balance Sheet,
Pubco and each Pubco Subsidiary have conducted their business only in
the ordinary course consistent with past practice and there has not
occurred (a) any event having a Material Adverse Effect on Pubco or any
Pubco Subsidiary, (b) any event that would reasonably be expected to
prevent or materially delay the performance of Pubco's obligations
pursuant to this Agreement, (c) any material change by Pubco or any
Pubco Subsidiary in its accounting methods, principles or practices,
(d) any declaration, setting aside or payment of any dividend or
distribution in respect of the shares of capital stock of Pubco or any
Pubco Subsidiary or any redemption, purchase or other acquisition of
any of Pubco's or any of Pubco Subsidiary's securities, (e) any
increase in the compensation or benefits or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement,
profit sharing, stock option (including without limitation the granting
of stock options, stock appreciation rights, performance awards or
restricted stock awards), stock purchase or other employee benefit plan
of Pubco or any Pubco Subsidiary, or any other increase in the
compensation payable or to become payable to any employees, officers,
consultants or directors of Pubco or any Pubco subsidiary, (f) any
issuance, grants or sale of any stock, options, warrants, notes, bonds
or other securities, or entry into any agreement with respect thereto
by Pubco or any Pubco Subsidiary, (g) any amendment to the certificate
of incorporation or bylaws of Pubco or any Pubco Subsidiary, (h) other
than in the ordinary course of business consistent with past practice,
any (i) capital expenditures by Pubco or any Pubco Subsidiary, (ii)
purchase, sale, assignment or transfer of any material assets by Pubco
or any Pubco Subsidiary, (iii) mortgage, pledge or existence of any
lien, encumbrance or charge on any material assets or properties,
tangible or intangible of Pubco or any Pubco Subsidiary, except for
liens for taxes not yet due and such other liens, encumbrances or
charges which do not, individually or in the aggregate, have a Material
Adverse Effect on Pubco, or (iv) cancellation, compromise, release or
waiver by Pubco or any Pubco Subsidiary of any rights of material value
or any material debts or claims, (i) any incurrence by Pubco or any
Pubco Subsidiary of any material liability (absolute or contingent),
26
except for current liabilities and obligations incurred in the ordinary
course of business consistent with past practice, (j) damage,
destruction or similar loss, whether or not covered by insurance,
materially affecting the business or properties of Pubco, (k) entry by
Pubco or any Pubco Subsidiary into any agreement, contract, lease or
license other than in the ordinary course of business consistent with
past practice, (l) any acceleration, termination, modification or
cancellation of any agreement, contract, lease or license to which
Pubco or any Pubco Subsidiary is a party or by which any of them is
bound, (m) entry by Pubco or any Pubco Subsidiary into any loan or
other transaction with any officers, directors or employees of Pubco or
any Pubco Subsidiary, (n) any charitable or other capital contribution
by Pubco or any Pubco Subsidiary or pledge therefore, (o) entry by
Pubco or any Pubco Subsidiary into any transaction of a material nature
other than in the ordinary course of business consistent with past
practice, or (p) any negotiation or agreement by the Pubco or any Pubco
Subsidiary to do any of the things described in the preceding clauses
(a) through (p).
3.19 Employee Benefit Plans.
(a) Schedule 3.19(a) lists all material (i) "employee
benefit plans," within the meaning of ERISA Section 3(3), of
Pubco, (ii) bonus, stock option, stock purchase, stock
appreciation right, incentive, deferred compensation,
supplemental retirement, severance, and fringe benefit plans,
programs, policies or arrangements, and (iii) employment or
consulting agreements, for the benefit of, or relating to, any
current or former employee (or any beneficiary thereof) of Pubco,
in the case of a plan described in (i) or (ii) above, that is
currently maintained by Pubco or with respect to which Pubco has
an obligation to contribute, and in the case of an agreement
described in (iii) above, that is currently in effect (the "Pubco
Plans"). Pubco has heretofore delivered to the Company true and
complete copies of the Pubco Plans and any amendments thereto,
any related trust, insurance contract, summary plan description,
and, to the extent required under ERISA or the Code, the most
recent annual report on Form 5500 and summaries of material
modifications.
(b) No Pubco Plan is (1) a "multiemployer plan" within
the meaning of ERISA Sections 3(37) or 4001(a)(3), (2) a
"multiple employer plan" within the meaning of ERISA Section
3(40) or Code Section 413(c), or (3) is subject to ERISA Title IV
or Code Section 412.
(c) Except as set forth in Schedule 3.19(c), there is no
proceeding pending or, to Pubco's Knowledge, threatened against
the assets of any Pubco Plan or, with respect to any Pubco Plan,
against Pubco other than proceedings that would not reasonably be
expected to result in a material liability, and to Pubco's
Knowledge there is no proceeding pending or threatened in writing
27
against any fiduciary of any Pubco Plan other than proceedings
that would not reasonably be expected to result in a material
liability.
(d) Each of the Pubco Plans has been operated and
administered in all material respects in accordance with its
terms and applicable law, including but not limited to ERISA and
the Code.
(e) Each of the Pubco Plans that is intended to be
"qualified" within the meaning of Code Section 401(a) has
received a favorable determination, notification, or opinion
letter from the Internal Revenue Service.
(f) Except as set forth in Schedule 3.19(f), no director,
officer, or employee of Pubco will become entitled to retirement,
severance or similar benefits or to enhanced or accelerated
benefits (including any acceleration of vesting or lapsing of
restrictions with respect to equity-based awards) under any Pubco
Plan solely as a result of consummation of the transactions
contemplated by this Agreement.
3.20 Employees. Pubco has two employees who shall both resign
as of the Effective Time.
3.21 Tax Free Reorganization. Neither Pubco nor, to Pubco's
Knowledge, any of its Affiliates has through the date of this Agreement
taken or agreed to take any action that would prevent the Merger from
qualifying as a reorganization under Code Section 368(a).
3.22 Intellectual Property. Set forth on Schedule 3.22 is a
complete and accurate list of all Intellectual Property owned or
licensed by Pubco, and accurately identifies all Persons from which or
to which Pubco licenses all such listed Intellectual Property. For all
purposes of this Agreement, the term "Intellectual Property" shall
mean: (a) patents (including any registrations, continuations,
continuations in part, renewals and any applications for any of the
foregoing); (b) registered and unregistered copyrights and copyright
applications; (c) registered and unregistered trademarks, service
marks, trade names, slogans, logos, designs and general intangibles of
the like nature, together with all registrations and applications
therefor; (d) trade secrets, confidential or proprietary technical
information, know-how, designs, processes, research in progress,
inventions and invention disclosures (whether patentable or
unpatentable); and (e).
3.23 Validity of the Pubco Capital Stock. The shares of Pubco
Preferred Stock to be issued to holders of Company Common Stock
pursuant to this Agreement will be, when issued, duly authorized,
validly issued, fully paid and non-assessable. Similarly, the shares
of Pubco Common Stock to be issued upon conversion of Pubco Preferred
Stock issued as Merger Consideration under this Agreement will be, when
issued, duly authorized, validly issued, fully paid and non-assessable.
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3.24 Full Disclosure. The representations and warranties of
Pubco and Merger Sub contained in this Agreement (and in any schedule,
exhibit, certificate or other instrument to be delivered under this
Agreement) are true and correct in all material respects, and such
representations and warranties do not omit any material fact necessary
to make the statements contained therein, in light of the circumstances
under which they were made, not misleading. There is no fact of which
Pubco or Merger Sub has Knowledge that has not been disclosed to the
Company pursuant to this Agreement, including the schedules hereto, all
taken together as a whole, which has had or could reasonably be
expected to have a Material Adverse Effect on Pubco or Merger Sub, or
materially adversely affect the ability of Pubco or Merger Sub to
consummate in a timely manner the transactions contemplated hereby.
Article 4
Conduct of Business Pending the Merger
4.1 Conduct of Business by Pubco. From the date of this
Agreement to the Effective Date, unless the Company shall otherwise
agree in writing or as otherwise expressly contemplated or permitted by
other provisions of this Agreement, including but not limited to this
Section 4.1, Pubco shall not, directly or indirectly, (a) amend its
certificate of incorporation or bylaws, except as set forth on Schedule
4.1, (b) split, combine or reclassify any outstanding shares of capital
stock of Pubco, except as set forth on Schedule 4.1, (c) declare, set
aside, make or pay any dividend or distribution in cash, stock,
property or otherwise with respect to the capital stock of Pubco, (d)
default in its obligations under any material debt, contract or
commitment which default results in the acceleration of obligations due
thereunder, except for such defaults arising out of Pubco's entry into
this Agreement for which consents, waivers or modifications are
required to be obtained as set forth on Schedule 3.2, (e) conduct its
business other than in the ordinary course on an arms-length basis and
in accordance in all material respects with all applicable laws, rules
and regulations and Pubco's past custom and practice, except as set
forth on Schedule 4.1, (f) issue or sell any additional shares of, or
options, warrants, conversions, privileges or rights of any kind to
acquire any shares of, any of its capital stock, (g) acquire (by
merger, exchange, consolidation, acquisition of stock or assets or
otherwise) any corporation, partnership, joint venture or other
business organization or division or material assets thereof or (h)
make or change any material tax elections, settle or compromise any
material tax liability or file any amended tax return.
4.2 Conduct of Business by the Company. From the date of this
Agreement to the Effective Date, unless Pubco shall otherwise agree in
writing or as otherwise expressly contemplated or permitted by other
provisions of this Agreement, including but not limited to this Section
4.2, the Company shall not, directly or indirectly, (a) amend its
certificate of incorporation or bylaws, (b) split, combine or
reclassify any outstanding shares of capital stock of the Company, (c)
declare, set aside, make or pay any dividend or distribution in cash,
stock, property or otherwise with respect to the capital stock of the
Company, (d) default in its obligations under any material debt,
contract or commitment which default results in the acceleration of
29
obligations due thereunder, except for such defaults arising out of the
Company's entry into this Agreement for which consents, waivers or
modifications are required to be obtained as set forth on Schedule 2.2,
(e) conduct its business other than in the ordinary course on an arms-
length basis and in accordance in all material respects with all
applicable laws, rules and regulations and the Company's past custom
and practice, (f) issue or sell any additional shares of, or options,
warrants, conversions, privileges or rights of any kind to acquire any
shares of, any of its capital stock, except issuances or sales made in
connection with the Private Placement or in connection with exercise or
conversion of the Company securities outstanding on the date of this
Agreement, (g) acquire (by merger, exchange, consolidation, acquisition
of stock or assets or otherwise) any corporation, partnership, joint
venture or other business organization or division or material assets
thereof or (h) make or change any material tax elections, settle or
compromise any material tax liability or file any amended tax return.
Article 5
Additional Covenants and Agreements
5.1 Governmental Filings. Each party will use all reasonable
efforts and will cooperate with the other party in the preparation and
filing, as soon as practicable, of all filings, applications or other
documents required under applicable laws, including but not limited to
the Exchange Act, to consummate the transactions contemplated by this
Agreement. Prior to submitting each filing, application, registration
statement or other document with the applicable regulatory authority,
each party will, to the extent practicable, provide the other party
with a meaningful opportunity to review and comment on each such
application, registration statement or other document to the extent
permitted by applicable law. Each party will use all reasonable efforts
and will cooperate with the other party in taking any other actions
necessary to obtain such regulatory or other approvals and consents at
the earliest practicable time, including participating in any required
hearings or proceedings. Subject to the terms and conditions herein
provided, each party will use all reasonable efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as
promptly as practicable the transactions contemplated by this
Agreement.
5.2 Expenses. Except as otherwise provided in this Agreement,
all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby by each party shall be borne
solely by such party; provided, however, that subject to the
consummation of the Merger as contemplated by this Agreement, the
parties agree that such costs and expenses may be accrued and paid
after the Merger by the Surviving Company.
5.3 Due Diligence; Access to Information; Confidentiality.
(a) Between the date hereof and the Effective Date, the
Company and Pubco shall afford to the other party and their
authorized representatives the opportunity to conduct and
30
complete a due diligence investigation of the other party as
described herein. In light of the foregoing, each party shall
permit the other party full access on reasonable notice and at
reasonable hours to its properties and shall disclose and make
available (together with the right to copy) to the other party
and its officers, employees, attorneys, accountants and other
representatives, all books, papers and records relating to the
assets, stock, properties, operations, obligations and
liabilities of such party and its subsidiaries, including without
limitation all books of account (including, without limitation,
the general ledger), tax records, minute books of directors' and
stockholders' meetings, organizational documents, bylaws,
contracts and agreements, filings with any regulatory authority,
accountants' work papers, litigation files (including, without
limitation, legal research memoranda), attorney's audit response
letters, documents relating to assets and title thereto
(including without limitation abstracts, title insurance
policies, surveys, environmental reports, opinions of title and
other information relating to the real and personal property),
plans affecting employees, securities transfer records and
stockholder lists, and any books, papers and records relating to
other assets or business activities in which such party may have
a reasonable interest, and otherwise provide such assistance as
is reasonably requested in order that each party may have a full
opportunity to make such investigation and evaluation as it shall
reasonably desire to make of the business and affairs of the
other party; provided, however, that the foregoing rights granted
to each party shall, whether or not and regardless of the extent
to which the same are exercised, in no way affect the nature or
scope of the representations, warranties and covenants of the
respective party set forth herein. In addition, each party and
its officers and directors shall cooperate fully (including
providing introductions, where necessary) with such other party
to enable the party to contact third parties, including
customers, prospective customers, specified agencies or others as
the party deems reasonably necessary to complete its due
diligence; provided further, that such party agrees not to
initiate such contacts without the prior approval of the other
party, which approval will not be unreasonably withheld.
(b) Prior to Closing and if, for any reason, the
transactions contemplated by this Agreement are not consummated,
neither Pubco nor the Company nor any of their officers,
employees, attorneys, accountants and other representatives shall
disclose to third parties or otherwise use any confidential
information received from the other party in the course of
investigating, negotiating, and performing the transactions
contemplated by this Agreement; provided, however, that nothing
shall be deemed to be confidential information which:
29
(i) is known to the party receiving the information
at the time of disclosure, unless any individual who knows
the information is under an obligation to keep that
information confidential;
(ii) becomes publicly known or available without
the disclosure thereof by the party receiving the
information in violation of this Agreement; or
(iii) is received by the party receiving the
information from a third party not under an obligation to
keep that information confidential.
This provision shall not prohibit the disclosure of information
required to be made under federal or state securities laws, rules and
regulations or by order of any federal, state or local regulatory
agency or as otherwise required to be disclosed under applicable law.
If any disclosure is so required, the party making such disclosure
shall consult with the other party prior to making such disclosure, and
the parties shall use all reasonable efforts, acting in good faith, to
agree upon a text for such disclosure which is satisfactory to both
parties.
5.4 Private Placement.
(a) The Company shall use its reasonable best efforts to
raise net proceeds of at least $5,000,000 through a private
placement of Company Common Stock together with warrants to
purchase additional shares of Company Common Stock (the "Private
Placement"). The Company shall be entitled to grant registration
rights to investors in the Private Placement such that, following
the Merger, Pubco shall be obligated to file a registration
statement with respect to the conversion of the Pubco Preferred
Stock (received as Merger Consideration and issuable in exchange
for Company Convertible Securities, sold and issued in the
Private Placement) into Pubco Common Stock, subject to the terms
and conditions set forth in a registration rights agreement which
shall contain such provisions as are customarily contained in
registration rights agreements with respect to secondary
distributions. Pubco shall not be required to maintain the
effectiveness of such registration statement beyond the period
ending on the earlier of the following dates: (i) the date one
year after the effective date of such registration statement; and
(ii) the date on which all Pubco Common Stock issued upon
conversion of the aforementioned Pubco Preferred Stock and
covered by such registration statement have been sold. In
connection with the Private Placement, the Company shall prepare
an appropriate offering memorandum (such offering memorandum,
together with any and all amendments or supplements thereto,
being herein referred to as the "Offering Memorandum"), and Pubco
agrees to cooperate in the preparation thereof. The Company and
its agent(s) shall conduct the Private Placement in compliance
with all applicable federal and state securities laws, rules and
regulations. The Company shall place the net proceeds from the
Private Placement in an escrow account to be released into the
32
Company's operating bank account (or, at the election of the
Company, Pubco's operating bank account) promptly following the
Effective Time.
(b) Pubco shall furnish such information concerning Pubco
as is necessary in order to cause the Offering Memorandum,
insofar as it relates to Pubco, to be prepared in accordance with
Section 5.4(a). Pubco shall also furnish to the Company, for
purposes of the Company's preparation of the Offering Memorandum
in accordance with Section 5.4(a), any required information
regarding Pubco, its business activities, risks, contracts,
commitments, any Pubco shareholders or Affiliates, and any other
information typically found in an Offering Memorandum. Such
information must be true and correct in all material respects and
must not omit any material fact necessary to make that
information not misleading. Pubco agrees promptly to advise the
Company if at any time prior to the completion of the Private
Placement any information provided by Pubco and appearing in the
Offering Memorandum becomes incorrect or incomplete in any
material respect, and to provide the Company the information
needed to correct such inaccuracy or omission.
(c) At the time the Offering Memorandum is delivered to
potential investors in the Private Placement and at all times
subsequent to such delivery until the consummation of the Private
Placement, the Offering Memorandum, with respect to all
information set forth therein relating to Pubco and its
stockholders, this Agreement, the Certificate of Merger, and all
other transactions contemplated hereby, will not contain any
untrue statement of material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements contained therein, in light of the circumstances under
which they are made, not misleading.
5.5 Stockholders' Meetings. As promptly as practicable after the
date hereof, each of the Company and Merger Sub shall, in accordance
with the applicable provisions of the DGCL and their respective
certificates of incorporation and bylaws, duly call, give notice of,
convene and hold a special meeting of their respective stockholders for
the purpose of considering and taking action upon this Agreement and
the Merger, or, obtain written consents in lieu thereof in accordance
with the DGCL from stockholders of the Company or Merger Sub, as
applicable, that hold not less than the minimum number of votes that
would be necessary to take action and authorize this Agreement and the
Merger (in any case and regardless of whether pursued through a meeting
or written consent in lieu thereof, the "Company Stockholder Meeting"
and the "Merger Sub Stockholder Meeting," respectively).
5.6 Tax Treatment. None of Pubco, Merger Sub or the Company,
or the Surviving Company after the Effective Date, shall knowingly take
any action which could reasonably be expected to disqualify the Merger
as a "reorganization" within the meaning of Code Section 368(a).
33
5.7 Press Releases. The Company and Pubco shall agree with
each other as to the form and substance of any press release or public
announcement related to this Agreement or the transactions contemplated
hereby; provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making
any disclosure which is required by law or regulation. If any such
press release or public announcement is so required, the party making
such disclosure shall consult with the other party prior to making such
disclosure, and the parties shall use all reasonable efforts, acting in
good faith, to agree upon a text for such disclosure which is
satisfactory to both parties.
5.8 Securities Reports. Pubco agrees to provide to the Company
copies of all reports and other documents filed under the Securities
Act or Exchange Act with the SEC by it between the date hereof and the
Effective Date within two days after the date such reports or other
documents are filed with the SEC.
5.9 Merger Consideration. Each of the Company and Pubco shall
take all necessary action on its part such that the issuance of the
Merger Consideration to the Company's stockholders (and holders of
Company Convertible Securities) constitutes a valid "private placement"
under the Securities Act.
5.10 No Solicitation.
(a) Unless and until this Agreement shall have been
terminated pursuant to Section 7.1, neither Pubco nor its
officers, directors or agents shall, directly or indirectly,
encourage, solicit or initiate discussions or negotiations with,
or engage in negotiations or discussions with, or provide non-
public information to, any corporation, partnership, person or
other entity or groups concerning any merger, sale of capital
stock, sale of substantial assets or other business combination;
provided, however, that Pubco may engage in such discussion in
response to an unsolicited proposal from an unrelated and non-
Affiliated party if Pubco's board of directors determines, in
good faith, after consultation with counsel, that the failure to
engage in such discussions may constitute a breach of the
fiduciary or legal obligations of Pubco's board of directors.
Pubco will promptly advise the Company if it receives a proposal
or inquiry with respect to the matters described above.
(b) Unless and until this Agreement shall have been
terminated pursuant to Section 7.1, neither the Company nor its
officers, directors or agents shall, directly or indirectly,
encourage, solicit or initiate discussions or negotiations with,
or engage in negotiations or discussions with, or provide non-
public information to, any corporation, partnership, person or
other entity or groups concerning any merger, sale of capital
stock, sale of substantial assets or other business combination;
provided, however, that the Company may engage in such discussion
in response to any unsolicited proposal from an unrelated and
non-Affiliated party if the Company's board of directors
determines, in good faith, after consultation with counsel, that
34
the failure to engage in such discussions may constitute a breach
of the fiduciary or legal obligations of the Company's board of
directors. The Company will promptly advise Pubco if it receives
a proposal or inquiry with respect to the matters described
above.
5.11 Failure to Fulfill Conditions. In the event that either
of the parties hereto determines that a condition to its respective
obligations to consummate the transactions contemplated hereby cannot
be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party.
5.12 Resignations and Appointment of Directors; Employees.
Before the Effective Time, Pubco shall deliver the voluntary
resignations of each officer and employee of Pubco and each director of
Pubco not continuing to serve in that capacity following the Effective
Time. Such resignations shall be effective upon the Effective Time.
Immediately after the Effective Time, the remaining director of Pubco,
designated by the Company to continue serving as a director pursuant to
Section 1.8, shall appoint the persons identified in Section 1.8 to
serve as directors of Pubco following the Effective Time.
5.13 Registration Rights. If, following the Merger, Pubco
files a registration statement with respect to Pubco Common Stock under
the Securities Act in a primary or a secondary registration (including
any registration required by the terms of the registration rights
agreement referred to in Section 5.4), the holders of the shares of
Pubco Common Stock issuable upon conversion of the Pubco Preferred
Stock issued or issuable as Merger Consideration under Article 1 shall
be entitled to have such shares included in such registration
statement; provided, however, that prior to the inclusion of such
shares in the registration statement, those stockholders of the Company
who held shares of Company Common Stock prior to the Private Placement,
and those stockholders of Pubco who are Pubco Insiders, shall execute
and deliver a Leak-Out Agreement with Pubco in substantially the form
attached hereto as Exhibit C (the "Leak-Out Agreement").
5.14 Preparation of Annual and Quarterly Reports. Prior to the
Effective Date, Pubco shall prepare (but not file without the prior
approval of the Company or its representatives) Pubco's Quarterly
Report on Form 10-QSB for the period ended March 31, 2005.
5.15 Notification of Certain Matters. On or prior to the
Effective Date, each party shall give prompt notice to the other party
of (i) the occurrence or failure to occur of any event or the discovery
of any information, which occurrence, failure or discovery would be
likely to cause any representation or warranty on its part contained in
this Agreement to be untrue, inaccurate or incomplete after the date
hereof in any material respect or, in the case of any representation or
warranty given as of a specific date, would be likely to cause any such
representation or warranty on its part contained in this Agreement to
be untrue, inaccurate or incomplete in any material respect as of such
35
specific date, and (ii) any material failure of such party to comply
with or satisfy any covenant or agreement to be complied with or
satisfied by it hereunder.
Article 6
Conditions
6.1 Conditions to Obligations of Each Party. The respective
obligations of each party to effect the transactions contemplated
hereby are subject to the fulfillment or waiver at or prior to the
Effective Date of the following conditions:
(a) There shall have been no law, statute, rule or
regulation, domestic or foreign, enacted or promulgated which
would prohibit or make illegal the consummation of the
transactions contemplated hereby.
(b) This Agreement and all of the transactions
contemplated hereby shall have been duly authorized by the boards
of directors of the Company, Pubco and Merger Sub. The Merger
and this Agreement shall have been approved by the Required
Company Stockholder Vote and by Pubco as the sole stockholder of
Merger Sub.
(c) There shall not be threatened, instituted or pending
any action or proceeding before any court or governmental
authority or agency (i) challenging or seeking to make illegal,
or to delay or otherwise directly or indirectly restrain or
prohibit, the consummation of the transactions contemplated
hereby or seeking to obtain material damages in connection with
such transactions, (ii) seeking to prohibit direct or indirect
ownership or operation by Pubco or Merger Sub of all or a
material portion of the business or assets of the Company, or to
compel Pubco or Merger Sub or any of their respective
subsidiaries or the Company to dispose of or to hold separately
all or a material portion of the business or assets of Pubco or
any Pubco Subsidiary or of the Company, as a result of the
transactions contemplated hereby; (iii) seeking to invalidate or
render unenforceable any material provision of this Agreement or
any of the other agreements attached as exhibits hereto or
contemplated hereby, or (iv) otherwise relating to and materially
adversely affecting the transactions contemplated hereby.
(d) There shall not be any action taken, or any statute,
rule, regulation, judgment, order or injunction proposed,
enacted, entered, enforced, promulgated, issued or deemed
applicable to the transactions contemplated hereby, by any
federal, state or other court, government or governmental
authority or agency, that would reasonably be expected to result,
directly or indirectly, in any of the consequences referred to in
Section 6.1(c).
36
(e) There shall not have occurred any general suspension
of trading on the New York Stock Exchange, the Nasdaq Stock
Markets or American Stock Exchange, or any general bank
moratorium or closing or any war, national emergency or other
event affecting the economy or securities trading markets
generally that would make completion of the Merger impractical,
in the reasonable discretion of the Company.
(f) There shall be available exemptions from the
registration requirements of the Securities Act and all
applicable blue sky laws for the offer and issuance of the Pubco
Preferred Stock pursuant to the Merger.
(g)The parties to the Leak-Out Agreement shall have
executed and delivered the same with Pubco.
6.2 Additional Conditions to Obligations of Pubco and Merger
Sub. The obligations of Pubco and Merger Sub to effect the
transactions contemplated hereby in accordance with the terms of this
Agreement are also subject to the fulfillment or waiver of the
following conditions:
(a) Delivery to Pubco of financial statements for any
interim quarterly periods subsequent to the Company Financial
Statements evidencing the financial and operational performance
of the Company.
(b) Since the date of this Agreement, the Company shall
have continued to conduct its operations in accordance with the
provisions of Section 4.2.
(c) The representations of the Company contained in this
Agreement shall be accurate as of the date of this Agreement and
as of the Effective Time, in all respects (in the case of any
representation containing any materiality qualification) or in
all material respects (in the case of any representation without
any materiality qualification). The Company shall in all material
respects have performed each obligation and agreement and
complied with each covenant to be performed and complied with by
it hereunder at or prior to the Effective Date.
(d) The Company shall have obtained all consents and
approvals necessary to consummate the transactions contemplated
by this Agreement, including without limitation those set forth
on Schedule 2.2, in order that the transactions contemplated
herein not constitute a breach or violation of, or result in a
right of termination or acceleration of, or creation of any
encumbrance on any of the Company's assets pursuant to the
provisions of, any agreement, arrangement or undertaking of or
affecting the Company or any license, franchise or permit of or
affecting the Company.
(e) The Company shall have executed the Certificate of
Merger.
(f) The Company shall have furnished to Pubco a
certificate of the Chief Executive Officer and the Chief
Financial of the Company, dated as of the Effective Date, in
which such officers shall certify that, to their best Knowledge,
the conditions set forth in Sections 6.2(a), (c) and (d) have
been fulfilled.
(g) The Company shall have furnished to Pubco (i) copies
of the text of the resolutions by which the corporate action on
the part of the Company necessary to approve this Agreement, the
Certificate of Merger and the transactions contemplated hereby
and thereby were taken, (ii) a copy of the Company's certificate
of incorporation, certified by the Secretary of State of
Delaware, and (iii) a certificate dated as of the Effective Date
executed on behalf of the Company by its corporate secretary or
one of its assistant corporate secretaries certifying to Pubco
that such copies are true, correct and complete copies of such
resolutions and that such resolutions were duly adopted and have
not been amended or rescinded, and certifying that the certified
copy of the Company's certificate of incorporation is true,
correct and complete as received from such governmental office.
6.3 Additional Conditions to Obligations of the Company. The
obligations of the Company to effect the transactions contemplated
hereby in accordance with the terms of this Agreement are also subject
to the fulfillment or waiver of the following conditions:
(a) Since the date of this Agreement, Pubco and all Pubco
Subsidiaries shall have continued to conduct their operations in
accordance with the provisions of Section 4.1; and the amendments
to Pubco's articles of incorporation and stock combination
contemplated on Schedule 4.1 shall have been effected, and the
Certificate of Designation contemplated in Section 1.3(e) shall
have been adopted and approved by Pubco's board of directors and
filed with appropriate authorities in the State of Nevada.
(b) The representations of Pubco and Merger Sub contained
in this Agreement shall be accurate as of the date of this
Agreement and as of the Effective Time, in all respects (in the
case of any representation containing any materiality
qualification) or in all material respects (in the case of any
representation without any materiality qualification). Pubco and
Merger Sub, respectively, shall in all material respects have
performed each obligation and agreement and complied with each
covenant to be performed and complied with by them hereunder at
or prior to the Effective Date.
(c) Pubco and Merger Sub shall have obtained all consents
and approvals necessary to consummate the transactions
contemplated by this Agreement, including without limitation
those set forth on Schedule 3.2, in order that the transactions
contemplated herein not constitute a breach or violation of, or
result in a right of termination or acceleration of, or creation
of any encumbrance on any of Pubco's or Merger Sub's assets
pursuant to the provisions of, any agreement, arrangement or
38
undertaking of or affecting Pubco or any Pubco Subsidiary or any
license, franchise or permit of or affecting Pubco or any Pubco
Subsidiary.
(d) Pubco shall have at least $300,000 in cash available
to the Surviving Company; and neither Pubco nor any Pubco
Subsidiary (including Merger Sub) shall have any obligations or
liabilities other than those obligations or liabilities required
by law or specifically contemplated by this Agreement and
represented to the Company in Article 3.
(e) The Pubco Common Stock shall remain eligible for
quotation on The National Association of Securities Dealers'
over-the-counter bulletin board service and there shall not have
occurred any suspension of trading in the Pubco Common Stock.
(f) Pubco shall have complied with the covenant in
Section 5.14.
(g) Pubco shall have filed with the SEC and transmitted
to its holders of capital stock, at least 20 days prior to the
Effective Date, (i) the information required under Regulation 14C
of the Exchange Act with regard to the amendment of its articles
or certificate of incorporation as contemplated on Schedule 4.1;
and (ii) the information required under Rule 14f-1 of the
Exchange Act with regard to the change in control of Pubco's
board of directors, as contemplated in Section 1.8.
(h) Merger Sub shall have executed the Certificate of
Merger.
(i) Pubco shall have furnished to the Company a
certificate of the Chief Executive Officer and the Chief
Financial Officer of Pubco, dated as of the Effective Date, in
which such officers shall certify that, to their best Knowledge,
the conditions set forth in Sections 6.3(a), (b), (c), (d) and
(e) have been fulfilled.
(j) Pubco shall have furnished to the Company (i) copies
of the text of the resolutions by which the corporate action on
the part of Pubco necessary to approve this Agreement and the
Certificate of Merger, the election of the directors of Pubco to
serve following the Effective Time and the transactions
contemplated hereby and thereby were taken, (ii) a copy of the
certificate of incorporation of Pubco, certified by the Secretary
of State of Nevada, and one or more certificates from the
Secretary of State of Nevada evidencing the good standing of
Pubco in such jurisdiction, and (iii) a certificate of the
corporate secretary of Pubco dated as of the Effective Date
certifying to the Company that copies of the resolution referred
to in clause (i)above are true, correct and complete copies of
such resolutions and that such resolutions were duly adopted and
39
have not been amended or rescinded, and certifying that the
certificates furnished pursuant to clause (ii) above are true,
correct and complete as received from such governmental offices.
Article 7
Termination, Amendment and Waiver
7.1 Termination. This Agreement may be terminated prior to the
Effective Date:
(a) by mutual consent of the Company and Pubco, if the
board of directors of each so determines by vote of a majority of
the members of its entire board;
(b) by Pubco, if the Company shall have breached any of
its representations, or failed to perform any of its covenants,
in either case as contained in this Agreement, which breach or
failure to perform (i) causes the condition set forth in Section
6.2(c) not to be satisfied, and (ii) is incapable of being cured
or has not been cured within 20 business days after the giving of
written notice of such breach or failure to perform; provided,
however, that Pubco may only terminate this Agreement pursuant
this Section 7.1(b) if the subject breach or failure to perform
would be reasonably likely to have a Material Adverse Effect on
Pubco and the Surviving Company taken as a whole;
(c) by Pubco if there has been a Material Adverse Effect
on the Company reflected in the interim financial statements
delivered by the Company under Section 6.2(a), judged with
respect to Company's the interim financial statements for the
corresponding interim period of the Company's prior fiscal year;
(d) by the Company, if Pubco or Merger Sub shall have
breached any of their representations, or failed to perform any
of their covenants, in either case as contained in this
Agreement, which breach or failure to perform (i) causes the
condition set forth in Section 6.3(b) not to be satisfied, and
(ii) is incapable of being cured or has not been cured within 20
business days after the giving of written notice of such breach
or failure to perform; provided, however, that the Company may
only terminate this Agreement pursuant this Section 7.1(d) if the
subject breach or failure to perform would be reasonably likely
to have a Material Adverse Effect on and the Surviving Company
taken as a whole; or
(e) by either the Company or Pubco if the Effective Date
is not on or before June 30, 2005, or such later date as the
Company and Pubco may mutually agree (unless the failure to
consummate the Merger by such date shall be due to the action or
failure to act of the party seeking to terminate this Agreement
in breach of such party's obligations under this Agreement).
40
Any party desiring to terminate this Agreement shall give prior
written notice of such termination and the reasons therefor to the
other parties.
Article 8
General Provisions
8.1 Notices. All notices and other communications hereunder
shall be in writing and shall be sufficiently given if made by hand
delivery, by fax, by telecopier, by overnight delivery service, or by
registered or certified mail (postage prepaid and return receipt
requested) to the parties at the following addresses (or at such other
address for a party as shall be specified by it by like notice):
If to the Company: SK2, Inc.
000 Xxxxx Xxxxx Xxxxxx, Xxxxx X-0
Xxxxxxxxxxx, Xxxxxxxxx 00000
Attention: Xxxxx Xxxxxxx
With copies to: Xxxxxx Xxxxxxx Xxxxxx & Brand, LLP
00 Xxxxx Xxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxxxxx X. Xxxxx
If to Pubco or Merger Sub: Gaming Venture Corp, U.S.A.
000 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
Facsimile:
Attn: Xxxx Xxxxxxx
All such notices and other communications shall be deemed to have
been duly given as follows: when delivered by hand, if personally
delivered, when received, if delivered by registered or certified mail
(postage prepaid and return receipt requested), when receipt
acknowledged; if faxed or telecopied, on the day of transmission or, if
that day is not a business day, on the next business day; and the next
day delivery after being timely delivered to a recognized overnight
delivery service.
8.2 Knowledge Convention. For all purposes of this Agreement,
the term "Knowledge" means, with respect to an individual, that such
individual is actually aware of a particular fact or other matter, with
no obligation to conduct any inquiry or other investigation to
determine the accuracy of such fact or other matter. A Person other
than an individual shall be deemed to have Knowledge of a particular
fact or other matter if the officers, directors or other management
personnel of such Person had Knowledge of such fact or other matter.
8.3 No Survival. The representations and warranties and
obligations contained in this Agreement will terminate at the Effective
Time or on termination of this Agreement in accordance with Section
7.1, except that the obligations contained in Article 1 and any other
41
obligation contained in this Agreement explicitly requiring performance
or compliance after the Effective Time will survive the Effective Time
indefinitely.
8.4 Interpretation. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. References to Sections
and Articles refer to Sections and Articles of this Agreement unless
otherwise stated.
8.5 Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall
remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties shall negotiate in good faith
to modify this Agreement and to preserve each party's anticipated
benefits under this Agreement.
8.6 Amendment. This Agreement may not be amended or modified
except by an instrument in writing approved by the parties to this
Agreement and signed on behalf of each of the parties hereto.
8.7 Waiver. At any time prior to the Effective Date, any party
hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto or (b) waive
compliance with any of the agreements of the other party or with any
conditions to its own obligations, in each case only to the extent such
obligations, agreements and conditions are intended for its benefit.
Any such extension or waiver shall only be effective if made in writing
and duly executed by the party giving such extension or waiver.
8.8 Miscellaneous. This Agreement (together with all other
documents and instruments referred to herein): (a) constitutes the
entire agreement, and supersedes all other prior agreements and
undertakings, both written and oral, among the parties, with respect to
the subject matter hereof; and (b) shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and
assigns, but shall not be assignable by either party hereto without the
prior written consent of the other party hereto.
8.9 Counterparts; Delivery. This Agreement may be executed in
any number of counterparts, and each such counterparts shall be deemed
to be an original instrument, but all such counterparts together shall
constitute but one agreement. In addition, executed counterparts may
be delivered by means of facsimile or other electronic transmission;
and signatures so delivered shall be fully and validly binding to the
same extent as the delivery of original signatures.
8.10 Third-Party Beneficiaries. Except as provided in the next
following sentence, each party hereto intends that this Agreement shall
not benefit or create any right or cause of action in or on behalf of
any person other than the parties hereto; provided, however, that in
42
the event that the Merger is consummated, the Company stockholders
shall be third-party beneficiaries under the provisions of this
Agreement giving them the right to the Merger Consideration.
8.11 Governing Law. This Agreement is governed by the internal
laws of the State of Delaware without regard to its conflicts-of-law
principles, except to the extent the mandatory law of the State of
Nevada applies to corporate matters of Pubco.
8.12 Jurisdiction; Service of Process. Any action or
proceeding seeking to enforce any provision of, or based on any right
arising out of, this Agreement must be brought against any of the
parties in the courts of the State of Minnesota, County of Hennepin,
or, if it has or can acquire jurisdiction, in the United States
District Court for the District of Minnesota, and each of the parties
consents to the jurisdiction of those courts (and of the appropriate
appellate courts) in any such action or proceeding and waives any
objection to venue laid therein. Process in any such action or
proceeding may be served by sending or delivering a copy of the process
to the party to be served at the address and in the manner provided for
the giving of notices in Section 8.1. Nothing in this Section 8.12,
however, affects the right of any party to serve legal process in any
other manner permitted by law.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed effective as of the date first written above.
SK2, INC.:
By: /s/Xxxxx Xxxxxxx
---------------------
Name: Xxxxx Xxxxxxx
Title: President and CEO
GAMING VENTURE CORP., U.S.A.:
By: /s/Xxxx Xxxxxxx
-----------------
Name: Xxxx Xxxxxxx
Title: President
GV ACQUISITION CO.:
By: /s/Xxxx Xxxxxxx
------------------
Name: Xxxx Xxxxxxx
Title: President
43
Exhibit A
The Form of Certificate of Merger is attached hereto
44
Exhibit B
GAMING VENTURE CORP., U.S.A.
CERTIFICATE OF DESIGNATION OF
SERIES A PREFERRED STOCK
Gaming Venture Corp., U.S.A., a Nevada corporation (the
"Corporation"), hereby certifies that the following resolutions were
adopted by the Corporation's Board of Directors (the "Board"),
effective ___________, 2005, pursuant to the authority conferred upon
the Board by the Corporation's Articles of Incorporation, as amended,
and in accordance with Section 78.1955 of the Nevada Business
Corporation Act (the "Act"):
RESOLVED: That pursuant to the authority granted to and vested
in the Board in accordance with the provisions of the
Corporation's Articles of Incorporation, as amended, a series of
preferred stock of the Corporation is hereby created and
designated with the following relative rights, preferences,
privileges, qualifications, limitations and restrictions:
1. Designation. The designation of this series, which consists of
____________shares of preferred stock, is Series A Preferred Stock (the
"Series A Preferred Stock") with a par value of $0.001 per share.
2. Rank. In the event of the Corporation's liquidation under the
Act, the Series A Preferred Stock shall rank senior to (i) the
Corporation's common stock; and (ii) any class or series of capital
stock of the Corporation hereafter created that ranks junior to the
Series A Preferred Stock (collectively, the "Junior Securities"); pari
passu with any class or series of capital stock of the Corporation
hereafter created that ranks on parity with the Series A Preferred
Stock; and junior to any class or series of capital stock of the
Corporation hereafter created that ranks senior to the Series A
Preferred Stock.
3. Voting Rights.
(a) The holders of Series A Preferred Stock shall be entitled
to vote on all matters respecting the affairs of the Corporation that
are submitted to the holders of the Corporation's common stock.
(b) Each share of Series A Preferred Stock outstanding at the
record date for determination of the stockholders entitled to vote or,
if no record date is established, at the date on which such vote is
taken or any written consent of stockholders is first solicited, shall
entitle its holder to the number of votes equal to the number of shares
of common stock into which such share is then convertible, as adjusted
from time to time as set forth herein.
(c) Without the affirmative vote of the holders of at least a
majority of the Series A Preferred Stock then outstanding, voting as a
separate class, given in person or by proxy at any annual or special
meeting, or, if permitted by law, in writing without a meeting, the
45
Corporation shall not alter, change or amend the designation,
preferences, limitations, or relative rights of the Series A Preferred
Stock as stated in this Certificate of Designation.
4. Dividends. No dividends shall accrue on the Series A
Preferred Stock. Nevertheless, holders of shares of Series A Preferred
Stock shall be entitled to dividends, if an when declared by the Board,
on an as-if converted basis. Without the consent of holders of a
majority of the Series A Preferred Stock then outstanding, the Board
may not declare any dividends on any Junior Securities so long as there
is outstanding Series A Preferred Stock.
5. No Preemptive Rights. Holders of Series A Preferred Stock
shall not be entitled, as a matter of right, to subscribe for, purchase
or receive any part of any stock of the Corporation of any class
whatsoever, or of securities convertible into or exchangeable for any
stock of any class whatsoever, whether now or hereafter authorized and
whether issued for cash or other consideration or by way of dividend by
virtue of the Series A Preferred Stock.
6. Liquidation Rights. In the event of a liquidation of the
Corporation under the Act, the holders of Series A Preferred Stock then
outstanding shall not be entitled to receive a liquidation preference
before any distribution is made to the holders of the Corporation's
common stock. Instead, holders of Series A Preferred Stock shall be
entitled to participate in the proceeds of such liquidation as if all
such holders had converted their shares of Series A Preferred Stock
immediately prior to the event or corporate action (including any
record date) giving holders of shares of the Corporation's common stock
the right to receive liquidation proceeds.
7. Conversion Rights.
(a) Automatic Conversion. The Series A Preferred Stock shall
automatically convert into such number of fully paid and non-assessable
shares of Corporation's common stock (as set forth in Section 7(b)
below) upon the earlier of the effectiveness of a registration
statement covering the conversion of such preferred stock into common
stock, or the date that is one year after the first issuance of Series
A Preferred Stock.
(b) Series A Conversion Ratio. Each share of Series A
Preferred Stock shall be convertible into one share of the
Corporation's common stock (the "Conversion Ratio"), subject to
adjustment from time to time as hereinafter provided:
(i) If the Corporation, at any time while any shares of
Series A Preferred Stock are outstanding, (i) shall pay a stock
dividend or otherwise make a distribution payable on its common stock
in shares of its capital stock, (ii) divide outstanding shares of
common stock into a larger number of shares, (iii) combine outstanding
shares of common stock into a smaller number of shares, or (iv) issue
by reclassification of shares of common stock any shares of capital
stock of the Corporation; then, in any such event the Conversion Ratio
46
in effect immediately prior thereto shall be adjusted so that the
holder of any Series A Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of common
stock which such holder would have owned or been entitled to receive
had such shares of Series A Preferred Stock been converted immediately
prior to such event or the record date therefor, whichever is earlier.
Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such dividend or distribution, or immediately after
the effective date in the case of a subdivision, combination or
reclassification.
(ii) In case the Corporation shall reclassify its capital
stock, consolidate or merge with or into another entity (where the
Corporation is not the survivor or where there is a change in, or
distribution with respect to, the Corporation's common stock), sell,
convey, transfer or otherwise dispose of all or substantially all its
property, assets or business to another person or entity, or effectuate
a transaction or series of related transactions in which more than 50%
of the voting power of the Corporation is disposed of (each a
"Fundamental Corporate Change") and, pursuant to the terms of such
Fundamental Corporate Change, shares of common stock of the successor
or acquiring corporation, or any cash , shares of stock or other
securities or property of any nature whatsoever (including warrants or
other subscription or purchase rights) in addition to or in lieu of
common stock of the successor or acquiring corporation (collectively,
"Other Property"), are to be received by or distributed to the holders
of Corporation's common stock, then each holder of shares of Series A
Preferred Stock shall have the right thereafter to receive the number
of shares of common stock of the successor or acquiring corporation or
of the Corporation and/or Other Property as is receivable upon or as a
result of such Fundamental Corporate Change by a holder of the number
of shares of Common Stock into which such Series A Preferred Stock may
be converted at the Conversion Ratio applicable immediately prior to
such Fundamental Corporate Change.
(c) Fractional Shares. Shares of common stock to be issued
upon any conversion of Series A Preferred Stock shall be rounded to the
nearest full share and no fractional shares of common stock shall be
issued upon such conversion.
(d) Common Stock Reserved. The Corporation shall reserve and
keep available out of its authorized but unissued common stock such
number of shares of common stock as shall from time to time be
sufficient to effect the conversion of the Series A Preferred Stock
then outstanding.
8. Loss, Theft, Destruction of Certificates. Upon receipt of
evidence satisfactory to the Corporation of the loss, theft,
destruction or mutilation of certificates representing shares of Series
A Preferred Stock and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security reasonably
satisfactory to the Corporation, or, in the case of any such
mutilation, upon surrender and cancellation of the shares of Series A
47
Preferred Stock, the Corporation shall make, issue and deliver, in lieu
of such lost, stolen, destroyed or mutilated certificates representing
shares of Series A Preferred Stock, new certificates representing
shares of Series A Preferred Stock of like tenor.
9. Who Deemed Absolute Owner. The Corporation may deem the
person, whether an individual or an entity, in whose name the Series A
Preferred Stock is registered upon the books of the Corporation to be,
and may treat it as, the absolute owner of the Series A Preferred Stock
for all purposes, and the Corporation shall not be affected or bound by
any notice to the contrary.
10. Stock-Transfer Register. The Corporation shall keep at its
principal office an original or copy of a register in which the
Corporation shall provide for the registration of the Series A
Preferred Stock. Upon any transfer of the Series A Preferred Stock in
accordance with the provisions hereof, the Corporation shall register
such transfer on its stock-transfer register.
11. Headings. The headings of the Sections and Subsections of
this Certificate of Designation are inserted for the convenience of the
reader only and shall not affect the interpretation of the terms and
provisions of this Certificate of Designation.
12. Severability. If any provision of this Certificate of
Designation, or the application thereof to any person or any
circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefore in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid
or unenforceable provision, and (ii) the remainder of this Certificate
of Designation and the application of such provision to other persons,
entities or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect
the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
13. Governing Law. The terms of this Certificate of Designation
shall be governed by the laws of the State of Nevada, without regard to
its conflicts-of-law principles.
48
IN WITNESS WHEREOF, Gaming Venture Corp., U.S.A. has caused this
Certificate of Designation to be duly executed in its corporate name on
this ___ day of __________, 2005.
GAMING VENTURE CORP., U.S.A.:
By:
Name:
Title:
49
Exhibit C
Leak-Out Agreement
THIS LEAK-OUT AGREEMENT (the "Agreement") is made and entered into as of
the ____ day of _________, 2005 between Gaming Venture Corp., U.S.A., a
Nevada corporation (the "Corporation"), and the individual shareholders
of the Corporation identified on the attached Exhibit A (each a
"Shareholder" and collectively the "Shareholders").
INTRODUCTION
The Corporation, and its wholly owned Delaware subsidiary, GV
Acquisition Co. ("GV Acquisition"), entered into a Merger Agreement
with SK2, Inc., a Delaware corporation ("SK2"), of even date herewith
(the "Merger Agreement"). Pursuant to the terms of the Merger
Agreement, GV Acquisition, will merge with and into SK2, with SK2
surviving as the wholly owned subsidiary of the Corporation (the
"Merger"). Contingent upon the consummation of the Merger, the
Corporation will change its name to Xxxxxxx Company.
All shares of SK2 common stock issued or issuable immediately prior to
the Merger shall be cancelled and exchanged for shares of the
Corporation's Series A Preferred Stock (the "Preferred Stock"), which
shares of Preferred Stock are convertible into shares of the
Corporation's common stock (the "Common Stock").
Upon consummation of the Merger, the Shareholders shall own Preferred
Stock and/or Common Stock in the manner set forth in the attached
Exhibit A.
To facilitate the consummation of financing transactions anticipated by
the Corporation following the Merger, and to provide for an orderly
market for the Common Stock following the Merger, the undersigned
desire to enter into this Agreement and restrict the Transfer (as
defined below) of the Common Stock owned and the Common Stock issuable
to such Shareholders upon conversion of the Preferred Stock
(collectively, the "Shares"), on the terms and conditions set forth
below.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants contained herein, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Except as expressly permitted in the following paragraphs (a)
through (c), each Shareholder agrees not to Transfer (as defined below)
any Shares for the two-year period from the date of this Agreement (the
"Restricted Period"):
(a) At any time, a Shareholder may, for bona fide estate-planning
purposes, Transfer Shares to its affiliates (as defined under the
Securities and Exchange Act of 1934), partners in a partnership,
subsidiaries and trusts, spouses or lineal descendants; provided,
however, that the transferee (or the legal representative thereof)
50
executes this Agreement or evidence of intent to be bound by the terms
and conditions hereof (as determined by the Corporation's board of
directors, in its sole and absolute discretion);
(b) During the Restricted Period, Shareholders will be allowed to
Transfer, subject to the conditions set forth in Section 2 below, up to
5,000(1) Shares per calendar month (the "Monthly Limit"); provided,
however, that a Shareholder may Transfer, in addition to the Monthly
Limit, such number of Shares equal to the difference of (i) the Monthly
Limit multiplied by the number of then fully elapsed calendar months
during which the Restricted Period has been in effect, less (ii) the
total number of Shares actually Transferred during such period of time;
and
In addition to the restriction contained in paragraph (b) above,
during the first three months of the Restricted Period, Shareholders
will be allowed to Transfer Shares, on any given trading day, only if,
on such trading day, there is trading volume (excluding the Transfer of
any Shares subject to this Agreement) exceeding 12,000 shares of Common
Stock.
2. Any Shares Transferred under Section 1(b) above shall be sold at
the "offer" or "ask" price stated by the relevant market maker (i.e.,
never at the then-current "bid" price).
3. For all purposes of this Agreement, the term "Transfer" means, as
a noun, any voluntary or involuntary transfer (by operation of law,
bankruptcy, court order or otherwise), sale, exchange, assignment,
pledge, forfeiture or other encumbrance, foreclosure or other
disposition of an item; or, as a verb, to voluntarily or involuntarily
cause a Transfer of an item. "Transferred" means, as a past participle
or participial adjective, that an item has been the subject of a
Transfer.
4. Notwithstanding any other provision hereof, no Shareholder will
engage in any short selling of Shares.
5. By executing hereof, each Shareholder represents that the Shares
set forth in Exhibit A are all of the Shares that he, she or it
beneficially owns as of the date hereof. In addition, this Agreement
shall apply to and restrict all shares of Common Stock with respect to
which any Shareholder acquires beneficial ownership during the term
hereof (i.e., such shares shall be considered "Shares" for all purposes
hereunder).
--------------
(1)A higher Monthly Limit of 8,712 Shares shall apply solely to Xx. Xxxx
Xxxxxxx. The Monthly Limit applicable to all Shareholders hereunder
shall be appropriately adjusted in the event of any stock combination,
division or recapitalization of the Corporation.
51
6. Notwithstanding anything to the contrary set forth herein, the
Corporation may, in its sole and complete discretion at any time and
from time to time, waive any of the conditions or restrictions
contained herein.
7. Except as otherwise provided in this Agreement or any other
agreements between the parties, the Shareholders shall be entitled to
their respective beneficial rights of ownership of the Shares,
including without limitation the right to vote the Shares for any and
all purposes.
8. The Shares and per-Share price restrictions covered by this
Agreement shall be appropriately adjusted should the Corporation make a
dividend or distribution, undergo a stock division or combination or
otherwise reclassify its shares of Common Stock.
9. In addition to the other restrictions herein, no Transfer of any
Shares in any transaction other than a "broker's transaction" shall be
made unless the transferee executes and delivers a counterpart to this
Agreement prior to the Transfer and re-registration of any stock
certificate representing any of the Shares so transferred.
10. This Agreement may be executed in any number of counterparts with
the same force and effect as if all parties had executed the same
document.
11. All notices, instructions or other communications required or
permitted to be given pursuant to this Agreement shall be given in
writing and delivered by certified mail, return-receipt requested,
overnight delivery or hand-delivered to all parties to this Agreement
at the addresses set forth above. All notices shall be deemed to be
given on the same day if delivered by hand or on the following business
day if sent by overnight delivery or the second business day following
the date of mailing.
12. The restrictions set forth in this Agreement shall be in addition
to all other restrictions on transfer imposed by applicable federal and
state securities laws, rules and regulations.
13. This Agreement sets forth the entire understanding of the parties
hereto with respect to the subject matter hereof, and may not be
amended except by a written instrument executed by the parties hereto,
except that additional parties may be added to this Agreement after the
date hereof.
14. This Agreement shall be governed by and construed in accordance
with the laws of the State of Nevada without regard to its conflicts-
of-law principles.
15. After the date hereof, the Corporation may, in its discretion,
cause additional shareholders of the Corporation to become parties to
this Agreement.
[Signature Page Follows]
52
IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Agreement as of the date first above written.
GAMING VENTURE CORP., U.S.A.:
By:
Its:
[Shareholder Signature Page Follows]
53
SHAREHOLDERS:
Shareholder Name (print):
Signature:
Title (if Shareholder is an entity):
54
EXHIBIT A Leakout Agreement
Shareholder Shares
Xxxx Xxxxxxx 209,109
Xxx Xxxxxx 63,620
Xxxx Xxxxxx 170,000
Xxx Xxxxxxx 3,000
Lucky Management, Inc. 22,200
55
Schedules to that certain
Agreement and Plan of Merger
and Reorganization
by and among
GV Acquisition Co.,
Gaming Venture Corp., U.S.A.
and
SK2, Inc.
Any event or condition specifically disclosed in any of the attached
Schedules shall be deemed disclosed and incorporated into any of the
other Schedules with the same degree of specificity to the extent such
disclosure is reasonably apparent for such representation or warranty.
Nevertheless, the Company has made a good-faith effort to make
appropriate disclosures on each Schedule. The Schedules are qualified
in their entirety by reference to the specific provisions of the above
Merger Agreement, are not intended to constitute and shall not be
construed as indicating that any matter disclosed herein is required to
be disclosed pursuant to the Merger Agreement, and such disclosure
shall not be construed as an admission that any of the information set
forth herein is material with respect to the Company. All capitalized
terms contained herein and not otherwise defined shall have the
meanings set forth in the reference Merger Agreement.
56
Schedule 2.2
No Conflicts; Non-Contravention
No exceptions.
57
Schedule 2.3(a)
Capitalization
Authorized shares of capital stock: 50,000,000
(40,000,000 common stock; 10,000,000 preferred stock)
Issued and outstanding shares of capital stock: 13,969,228
Issued and outstanding Company Convertible Securities: 491,461
The Company has outstanding warrants to Purchase Company Common Stock
as follows:
Warrantholder Shares
------------- ------
Xxxx Advisors 195,000
Xxxxxxxx X. Xxxxxx 85,956
Xxxxxx X. Xxxxx 67,755
Xxxx X. Xxxxxxx 29,000
Apex Capital, LLC 9,625
Xxxxxx X. Xxxxxx 87,250
Xxxxx X. Xxxxxxxx 6,875
Xxxxx X. Xxxxxx 10,000
--------
Total 491,461
========
In addition to the foregoing, the Company has an obligation, upon the
closing of any private placement offering raising gross proceeds of at
least $5 million, to issue a five-year warrant to a former placement
agent for the purchase of 40,000 shares of Company Common Stock at a
per-share price equal to that involved in the related private placement
offering.
The Company has no outstanding options to purchase Company Common
Stock.
58
Schedule 2.4
Litigation
No exceptions.
59
Schedule 2.5
Brokers and Finders
No exceptions.
60
Schedule 2.6
Tax Matters
No exceptions.
61
Schedule 2.7
Company Permits
None.
62
Schedule 2.10
Real Property
The following is a list of leaseholds:
Gaviidae I
000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxx XX 00000
Galleria
0000 Xxxxxxxx Xxxxx XX 00000
South Coast Plaza
0000 Xxxxxxx Xxxxxx
Xxxxx 0000
Xxxxx Xxxx XX 00000
Xxxxxxx row
000 Xxxxxxx Xxx
Xxxxx 0000
Xxx Xxxx XX 00000
Gaviidae II
000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxx XX 00000
Northbrook
0000 Xxxxxxxxxx Xx
Xxxxxxxxxx XX 00000
Harborplace
000 X Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxxxx XX 00000
K-Space - Great Lakes Crossing
0000 Xxxxxxx Xx
Xxxxx 000
Xxxxxx Xxxxx XX 00000
Scottsdale Fashion Square
0000 X Xxxxxxxxx XX
Xxxxx 0000
Xxxxxxxxxx XX 00000
Willowbend
0000 Xxxx Xxxx Xxxx
Xxxxx X 000X
Xxxxx XX 00000
63
Schedule 2.10 continued
Real Property
Village of Xxxxxxx Park
000 Xxx Xxxxxxx Xxx
Xxxxx 0000
Xxxxx Xxxxxx XX 00000
Beachwood Place
00000 Xxxxx Xxxx
Xxxxx 0000
Xxxxxxxxx XX 00000
Woodfield
000 Xxxxxxxxx Xxxx Xx
Xxxxxxxxxx XX 00000
Company Headquarters
000 Xxxxx Xxxxx Xx
Xxxxx X 0
Xxxxxxxxxxx XX 00000
The Galleria - Houston
0000 Xxxxxxxxxx
Xxxxx X0000
Xxxxxxx XX 00000
Ridgedale
00000 X Xxxxxxx Xxxx
Xxxxxxxxxxx XX 00000
Fashion Show Mall
0000 X Xxx Xxxxx Xxxx
Xxxxx 0000
Xxx Xxxxx XX 00000
South Port
0000 X Xxxxxxxxx Xx
Xxxxxxx XX 00000
Sunset Place
0000 Xxxxxx Xxxxx
Xxxxx 000
Xxxxx Xxxxx XX 00000
The Fashion Mall at Keystone
0000 Xxxxxxxx Xxxxxxxx Xxxx
Xxxxx # 00
Xxxxxxxxxxxx XX 00000
Xxxxxx Plaza
0000 Xxxxxxxxx Xxxx XX
Xxxxx # X0
Xxxxxxx XX 00000
64
Schedule 2.10 continued
Real Property
The Shops at Liberty Place
0000 Xxxxxxxx Xxxxxx
Xxxxx # 000
Xxxxxxxxxxxx XX 00000
Xxxxxxx Women - Gaviidae
000 Xxxxxxxx Xxxx
Xxxxx 000
Xxxxxxxxxxx XX 00000
Dallas - Galleria
00000 Xxxxxx Xxxxxxx
Xxxxx 0000 to 3445
Xxxxxx XX 00000
Xxxxxxxxxx Xxxx
0000 X Xx XX
Xxxxx X-000
Xxxxxxxxxx, X.X. 00000
Xxxxxxx Women - Galleria
0000 Xxxxxxxx
Xxxxx XX 00000
The shops at Houston Center
0000 XxXxxxxx Xx
Xxxxx 000
Xxxxxxx XX 00000
Stanford Shopping Center
000X Xxxxxxxx Xxxx Xx
Xxxx Xxxx XX 00000
Court of King of Prussia
000 X. Xxxxx Xxxx # 0000
Xxxx xx X XX 00000
Rockefeller Plaza
00 Xxxxxxxxxxx Xxxxx Xxxxx #X
Xxx Xxxx XX 00000
65
Schedule 2.12
Undisclosed Liabilities
The Company has an obligation to make a $87,500 payment to a former
placement agent in the event it closes a private placement offering
raising gross proceeds of at least $5 million.
66
Schedule 2.14
Absence of Certain Developments
Since the Latest Balance Sheet Date:
(1) On February 15, 2005, a former founder of the Company
transferred 630,000 shares of Company Common Stock.
(2) On February 28, 2005, the Company issued 300,000 shares of
Company Common Stock to Gulf Coast Balanced Fund, LP; and 200,000
shares of Company Common Stock to Xxxxx X. Xxxxxxx.
(3) On March 17, 2005, MCS Development, LLC acquired 25,000 shares
of Company Common Stock from a Company stockholder.
(4) On March 24, 2005, the Company entered into an obligation,
upon closing of any private placement offering raising gross proceeds
of at least $5 million, to issue a five-year warrant to a former
placement agent for the purchase of 40,000 shares of Company Common
Stock at a per-share price equal to that involved in the related
private placement offering.
(5) On April 4, 2005, the Company issued 200,000 shares of Company
Common Stock to C&L, Inc.
(6) On April 5, 2005, the Company issued 60,000 shares of Company
Common Stock to Xxxxxx X. Xxxxxxxx.
(7) On April 7, 2005, the Company issued 70,000 shares of Company
Common Stock to PK Enterprises.
(8) On April 8, 2005, the Company issued 100,000 shares of Company
Common Stock to Xxxxx Xxxxx.
(9) On April 11, 2005, the Company issued 50,000 shares of Company
Common Stock to Xxxxx Xxxxxxxxx.
(10) On March 31, 2005, 2,976,000 shares of Company Common Stock
were issued in connection with the exercise of then-outstanding
warrants.
(11) On March 31, 2005, 500,000 shares of Company Common Stock
were transferred by Xxxxx and Xxxxx Xxxxxxx to Xxxxxxxxxxx Xxxxxx.
67
Schedule 2.15(a)
Company Plans - List
The Company maintains a 401(k) plan.
The Company is negotiating employment agreements with Xxxxx Xxxxxxx
and Xxxxx Xxxxxxx, both of which the Company anticipates will be
finalized, executed and delivered prior to the Closing.
The Company intends to adopt a 2005 Stock Option Plan prior to the
Closing.
The disclosures contained in Schedule 2.3 with regard to stock-
purchase rights are incorporated herein by reference.
68
Schedule 2.15(c)
Employee Benefit Plans - Proceedings
No exceptions.
69
Schedule 2.15(f)
Employee Benefit Plans - Compensation
No exceptions.
70
Schedule 3.2
Authority Relative to Agreement
None.
71
Schedule 3.3
Capitalization
(a)
50 million shares of Pubco Common Stock authorized (as defined in the
Agreement and Plan of Merger and Reorganization by and among Gaming
Venture Corp., U.S.A., GV Acquisition Co., and SK2, Inc., dated April
13, 2005, hereinafter referred to as the "Merger Agreement")
6,514,427 issued and outstanding
(b)
Xxxx Xxxxxxx has voting proxy on 953,026 shares held by Xxxxx Xxxx
72
Schedule 3.4
Exchange Act Reports
No Exceptions.
73
Schedule 3.5
Subsidiaries
Merger Sub - GV Acquisition Co.
74
Schedule 3.6
Litigation
No Exceptions.
75
Schedule 3.7
Brokers or Finders
Consulting fees to be determined at Closing, all of which will be paid
by Pubco at or prior to Closing (as defined in the Merger Agreement) in
full compliance with Section 6.3(d) of the Merger Agreement.
76
Schedule 3.8
Tax Matters
Extension filed for 2004 Tax Return. The preparation of the return is
in progress.
77
Schedule 3.9
Contracts and Commitments
No Exceptions.
78
Schedule 3.10
Affiliate Transactions
Office is leased from Lucky Management Corp., a company majority owned
by Xxxx Xxxxxxx. Remaining lease term is 8 months, but will be paid
off prior to Effective Time (as defined in the Merger Agreement).
79
Schedule 3.11
Compliance with Laws; Permits
None
80
Schedule 3.14
Real Property
None
81
Schedule 3.16
Undisclosed Liabilities
None
82
Schedule 3.18
Absence of Certain Developments
The board of directors of Pubco (as defined in the Merger Agreement)
has approved a severance package for two officers of Pubco, pursuant to
which such officers will receive, in one lump-sum payment at or prior
to the Closing, 12 months of compensation and the remainder of this
year's health and life insurance premiums paid.
83
Schedule 3.19
Employee Benefit Plans
See Schedule 3.18.
84
Schedule 3.22
Intellectual Property
No exceptions.
85
Schedule 4.1
Pubco will cause the following transactions to be effected prior to the
Closing:
(1) engage in a stock combination (i.e., reverse split) of its capital
stock on a 1-for-5 basis, and obtain stockholder approval to maintain
the number of Pubco's authorized shares of capital stock at 50,000,000;
(2) obtain stockholder approval to amend its articles of incorporation
to (a) change Pubco's name, contingent upon the Closing, to "Xxxxxxx
Corporation," and (b) provide Pubco's board of directors with power to
create and designate different classes and series of preferred stock
(i.e., blank check preferred);
(3) following the transaction described in paragraph (2) above, obtain
approval of Pubco's board of directors of the Certificate of
Designation, and cause the same to be filed with the Nevada Secretary
of State; and
(4) cease the operations of Pubco as conducted prior to the Merger
(i.e., wind up the operation of Pubco's provision of reports and
newsletters to the gaming and hospitality industries as well as
consulting and advisory services to such industries).
379587.5 - Execution Version
